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:

The following directors continue to serve after the Annual Meeting:

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

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.