CHICAGO, Nov. 21, 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 first quarter end of fiscal year 2016.
As previously announced on September 29, 2015, the Company had received regulatory approval to acquire and merge PNA Bank into Royal Savings Bank. The transaction closed on September 30, 2015 resulting in total combined assets of $207 million.
In conjunction with the bank merger, the bulk asset sale of $29.1 million, consisting of $25.5 million in distressed assets owned by PNA Bank and $3.6 million in distressed and other assets owned by the Company and/or the Bank, was consummated on September 30, 2015.
For the first quarter ended September 30, 2015, the Company reported net income of $4.6 million, or $1.82 per common share, primarily related to the recognition of negative goodwill of $4.6 million, a direct result of the bank merger, net of expenses.
Comparison of Financial Condition at September 30, 2015 and June 30, 2015
As a result of the merger of PNA Bank into Royal Savings Bank as of September 30, 2015, the Company’s total assets increased $88.7 million, or 74.8%, to $207.2 million at September 30, 2015, from $118.5 million at June 30, 2015.
Cash and cash equivalents increased $17.8 million, or 777%, to $20.1 million at September 30, 2015 from $2.3 million at June 30, 2015.
Securities available for sale increased $10.2 million, or 70.5%, to $24.8 million at September 30, 2015 from $14.2 million at June 30, 2015.
Loans, net of allowance, increased $56.5 million, or 64.2%, to $144.6 million at September 30, 2015 from $88.1 million at June 30, 2015.
Premises and equipment increased $1.8 million, or 38.3%, to $6.5 million at September 30, 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; included in the bulk asset sale. 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.
Other real estate owned decreased $1.6 million, or 86.4%, to $249,400 at September 30, 2015 from $1.8 million at June 30, 2015, as two properties were included in the bulk asset sale.
Total deposits increased $79.4 million, or 88.0%, to $169.6 million at September 30, 2015 from $90.3 million at June 30, 2015.
The line of credit increased $3.5 million, or 100%, from June 30, 2015, as the Company initiated a draw on its line of credit with The PrivateBank, 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; the remaining $500,000 was allocated for merger expenses. The Company has since paid down the line $500,000 and plans to reduce the remaining $3 million over a three year period, or sooner.
Total stockholders’ equity increased $4.7 million, or 17.6%, to $31.1 million at September 30, 2015 from $26.5 million at June 30, 2015, which was primarily a result of the net income of $4.6 million earned for the period.
In the quarter ended September 30, 2015, the Bank paid a cash dividend to the Company of $186,000.
The allowance for loan losses was $1.4 million, or 0.94% of total loans, at September 30, 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 September 30, 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 1.46%. The Company believes, as of September 30, 2015, its allowance for loan losses was adequate to cover probable incurred losses. Nonperforming assets, including restructured loans, were $1.2 million, or 0.59%, at September 30, 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 September 30, 2015, the Bank exceeded each of its capital requirements with ratios of 24.17%, 22.82%, 22.82% and 23.94%, respectively.
At September 30, 2015, the tangible book value per common share, shares outstanding 2,507,112, was $12.29 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 Months Ended September 30, 2015 and 2014
The Company reported net income of $4.6 million for the first three months of fiscal 2016, compared to $141,000 in the same period of fiscal 2015, an increase of $4.4 million. The increase is primarily related to an increase of $4.6 million in non-interest income, an increase of $130,000 in credit provision for loan losses, a decrease of $103,000 in the provision for income taxes, partially offset by an increase in non-interest expense of $459,000. The increase in non-interest income is primarily a result of the recognition of negative goodwill of $4.6 million related to the bank merger, and the recognition of a gain on the sale of premises and equipment of $177,000, primarily 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, partially offset by a decrease of $46,000 in the gain on the sale of investment securities recognized in the previous period, and a decrease of $71,000 related to a decrease in income on other real estate owned, due to the sale of the office building in Homewood, Illinois, having an economic contract date of April 30, 2015, which resulted in a decrease of rental income in the period. A credit for loan losses of $130,000 was recorded in the period, of which were partially related to recoveries of previously charged off bad debt. The decrease of $103,000 in the provision for income taxes was primarily related to prior period tax adjustments. The increase in non-interest expense of $459,000 was primarily related to the increase of $648,000 in professional services, in which the increase was primarily related to merger and acquisition costs incurred in the period, which include a contingent liability of $368,000 related to core conversion and de-conversion fees, an increase of $185,000 in salaries and employee benefits, a result of increasing the professional staff for support with the merger, partially offset by a decrease of $343,000 in foreclosed asset expense, primarily due to the recognition of the gain of $229,000 on the sale of other real estate owned property which was included in the bulk asset sale and a decrease of $68,000 in occupancy and equipment.
The complete audited consolidated financial statements for 2015 and 2014 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 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 | ||||||||
| September 30, 2015 and June 30, 2015 | ||||||||
| (Unaudited) | ||||||||
| September 30, 2015 | June 30, 2015 | |||||||
| Assets | ||||||||
| Cash and non-interest bearing balances in financial institutions | $ | 1,412,467 | $ | 928,925 | ||||
| Interest bearing balances in financial institutions | 18,620,511 | 1,311,552 | ||||||
| Federal funds sold | 18,890 | 46,624 | ||||||
| Total cash and cash equivalents | 20,051,868 | 2,287,101 | ||||||
| Securities available for sale | 24,781,700 | 14,533,805 | ||||||
| Loans receivable, net of allowance for loan losses of | ||||||||
| $1,375,536 at September 30, 2015, $1,431,680 at June 30, 2015 | 144,586,973 | 88,074,812 | ||||||
| Federal Home Loan Bank stock, at cost | 1,441,000 | 415,500 | ||||||
| Premises & equipment, net | 6,509,977 | 4,665,200 | ||||||
| Land held for sale | - | 265,000 | ||||||
| Accrued interest receivable | 653,150 | 370,314 | ||||||
| Other real estate owned | 249,400 | 1,829,000 | ||||||
| Deferred tax asset | 8,112,620 | 5,712,589 | ||||||
| Core deposit intangible | 303,225 | - | ||||||
| Other assets | 544,946 | 385,300 | ||||||
| Total assets | $ | 207,234,859 | $ | 118,538,621 | ||||
| Liabilities & Stockholders' Equity | ||||||||
| Deposits | $ | 169,637,247 | $ | 90,254,560 | ||||
| Advances from borrowers for taxes and insurance | 1,721,037 | 1,118,905 | ||||||
| Line of credit | 3,500,000 | - | ||||||
| Accrued interest payable and other liabilities | 1,255,183 | 709,876 | ||||||
| Total liabilities | 176,113,467 | 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 | 23,849,683 | 23,834,020 | ||||||
| Retained earnings | 8,013,249 | 3,451,689 | ||||||
| Treasury stock, 137,888 shares, at cost | (1,012,924 | ) | (1,012,924 | ) | ||||
| Accumulated other comprehensive income | 244,935 | 156,045 | ||||||
| Total stockholders' equity | 31,121,392 | 26,455,280 | ||||||
| Total liabilities and stockholders' equity | $ | 207,234,859 | $ | 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 | |||||||
| Consolidated Statements of Operations | |||||||
| Three Months Ended September 30, 2015 and 2014 | |||||||
| (Unaudited) | |||||||
| 2015 | 2014 | ||||||
| Interest income | |||||||
| Loans | $ | 1,216,230 | $ | 1,068,635 | |||
| Securities | 89,508 | 220,756 | |||||
| Federal funds sold and other | 1,634 | 3,335 | |||||
| Total interest income | 1,307,372 | 1,292,726 | |||||
| Interest expense | |||||||
| Deposits | 87,178 | 72,257 | |||||
| Borrowings | 1,316 | 10,362 | |||||
| Total interest expense | 88,494 | 82,620 | |||||
| Net interest income | 1,218,878 | 1,210,107 | |||||
| Provision (Credit) for loan losses | (130,000 | ) | - | ||||
| Net interest income after provision (credit) for loan losses | 1,348,878 | 1,210,107 | |||||
| Non-interest income | |||||||
| Service charges on deposit accounts | 49,805 | 49,967 | |||||
| Secondary mortgage market fees | 5,370 | 5,001 | |||||
| Income on other real estate owned | (16,413 | ) | 54,976 | ||||
| Negative Goodwill | 4,578,838 | - | |||||
| Gain on sale of premises and equipment | 177,049 | - | |||||
| Gain on sale of investment securities | - | 46,345 | |||||
| Other | 189 | 267 | |||||
| Total non-interest income | 4,794,838 | 156,557 | |||||
| Non-interest expense | |||||||
| Salaries and employee benefits | 680,016 | 495,386 | |||||
| Occupancy and equipment | 129,919 | 197,680 | |||||
| Data processing | 95,659 | 91,593 | |||||
| Professional services | 831,066 | 182,924 | |||||
| Director fees | 32,400 | 32,400 | |||||
| Marketing | 3,761 | 428 | |||||
| FDIC insurance expense | 18,600 | 16,501 | |||||
| Insurance premiums | 12,690 | 16,358 | |||||
| Foreclosed asset expense | (317,752 | ) | 25,077 | ||||
| Other | 106,798 | 75,422 | |||||
| Total non-interest expense | 1,593,157 | 1,133,769 | |||||
| Income before income taxes | 4,550,559 | 232,894 | |||||
| Provision (benefit) for income taxes | (11,000 | ) | 92,100 | ||||
| Net income | $ | 4,561,559 | $ | 140,794 | |||
| Basic and diluted earnings per share | $ | 1.82 | $ | 0.06 | |||
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.