Royal Financial, Inc. Announces Audited Year To Date Earnings For Fiscal Year 2016

CHICAGO, Nov. 08, 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 the audited earnings for the fiscal year ended 2016.

For the three months ended June 30, 2016, the Company reported a net loss $16,000, or -$.01 per common share, compared to $477,000, or $.19 per common share, for the three months ended June 30, 2015. The decrease in net income is primarily the result of recording a $1.0 million valuation allowance against the expiring Illinois Net Loss Deduction (NLD) carryforwards acquired in bank acquisitions during the fiscal year.

For the fiscal year ended June 30, 2016, the Company reported net income of $5.4 million, or $2.15 per common share, compared to $941,000, or $.38 per common share, for the fiscal year ended June 30, 2015.  The increase in net income for the fiscal year ended June 30, 2016 was primarily the result of two acquisitions that were completed within the fiscal year. The acquisition of PNA Bank and Park Federal Bancorp and Park Federal Savings Bank were finalized on September 30, 2015 and April 29, 2016, respectively.

Comparison of Financial Condition at June 30, 2016 and June 30, 2015

As a result of the mergers in the fiscal year, the Company's total assets increased $185.5 million, or 156.5%, to $304.0 million at June 30, 2016, from $118.5 million at June 30, 2015.

Cash and cash equivalents increased $4.0 million, or 172.8%, to $6.2 million at June 30, 2016, from $2.3 million at June 30, 2015.

Investments in FDIC insured certificates of deposits increased $2.6 million, or 100%, at June 30, 2016, as the assets were acquired in one of the acquisition transactions completed in the fiscal year.

Securities available for sale increased $52.3 million, or 359.7%, to $66.8 million at June 30, 2016 from $14.5 million at June 30, 2015.  The increase in the securities portfolio was primarily due to the bank acquisitions in the fiscal year, in addition, $33.0 million of government sponsored non-callable U.S. Government Agency bonds purchased to strategically build the maturity cash flow ladder.

Loans, net of allowance, increased $111.5 million, or 126.6%, to $199.6 million at June 30, 2016, from $88.1 million at June 30, 2015.

Premises and equipment increased $7.6 million, or 162.3%, to $12.2 million at June 30, 2016 from $4.7 million at June 30, 2015. As a result of the acquisitions, six additional branch locations, located in Chicago, Niles and Westmont, Illinois, with a fair value of $9.2 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 and the sale of one branch location in Chicago on May 3, 2016, with a book value of $1.2 million. The Bank continues to retain a leased space in the Homewood property to serve as a lending center.

Total deposits increased $171.3 million, or 189.7%, to $261.5 million at June 30, 2016 from $90.3 million at June 30, 2015. The increase is primarily a result of the two bank acquisitions completed during the fiscal year.

Federal Home Loan Bank advances increased $500,000, an increase of $500,000 as there were no advances outstanding as of June 30, 2015. The Company borrows short term advances as necessary.

The note payable, which represents the line of credit with The PrivateBank, increased $5.3 million, or 100%, as draws totaling $5.8 million were initiated within the fiscal year, reduced by $550,000 which was paid down in the period. Of the draws, $5.0 million was pushed down to the Bank to supplement capital for the planned mergers completed in the fiscal year and to serve as a cushion for commercial real estate exposure.

Total stockholders' equity increased $5.7 million, or 21.4%, to $32.1 million at June 30, 2016 from $26.5 million at June 30, 2015. The increase is primarily a result of net income of $5.4 million.

For the fiscal year ended June 30, 2016, the Bank has paid cash dividends of $1.5 million to the Company. The upstream of funds has enabled the Company to pay merger and acquisition costs associated with the two acquisitions that were completed during the fiscal year.

The allowance for loan losses was $1.4 million, or 0.70% of total loans, at June 30, 2016, 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 June 30, 2016 were recorded at the fair value, and accordingly have a satisfactory rating. Excluding the newly acquired loans, the allowance for loan losses, was at 1.30%. The Company believes, as of June 30, 2016, its allowance for loan losses was adequate to cover probable incurred losses.  Nonperforming assets, including restructured loans, were $751,000, or 0.25%, at June 30, 2016 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, 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 June 30, 2016, the Bank exceeded each of its capital requirements with ratios of 8.27%, 15.11%, 15.11% and 15.97%, respectively.

At June 30, 2016, the book value per common share, shares outstanding 2,507,112, was $12.81 compared to the book value per common share, shares outstanding 2,507,112, of $10.55 at June 30, 2015. The tangible book was $12.40 at June 30, 2016.

The audited consolidated financial statements for 2016 and 2015 are available at www.royal-bank.us. 

Comparison of Results of Operations for the Fiscal Years Ended June 30, 2016 and 2015

At June 30, 2016, the Company had federal net operating loss carry forwards of approximately $25.4 million and $12.7 million expiring between fiscal year 2029 and 2036 and state net operating loss carry forwards of approximately $80.7 million and $15.3 expiring between 2017 and 2028. A $1.0 million valuation allowance was allocated to the acquired Illinois Net Loss Deduction (NLD) carryforwards. Of this valuation allowance, $580,000 was related to the IL NLD acquired from Park Federal Savings Bank and the remaining $420,000 of valuation allowance was related to the IL NLD acquired from PNA Bank.

Primarily due to the aforementioned valuation allowance of $1.0 million, the net loss the three months ended June 30, 2016 was $16,000, a decrease of $477,000 for the three months ended June 30, 2015.

The net income for the fiscal year ended June 30, 2016 was $5.4 million, an increase in net income of $4.4 million, from June 30, 2015.

The decrease in net income for the three months ended June 30, 2016 resulted primarily from an increase in non-interest expense of $1.3 million, a decrease of $1.0 million in non-interest income, partially offset by an increase in net interest income of $1.7 million.

The increase in net income for the fiscal year ended June 30, 2016 was primarily due to an increase in net interest income of $3.1 million, an increase in non-interest income of $4.0 million, an increase of $220,000 in the credit for loan losses, and a decrease of $137,000 in provision for income taxes, partially offset by an increase in non-interest expense of $3.0 million. The increase in net interest income is related to an increase of $3.5 million in loan interest income of which is directly related to acquisitions in the fiscal year which increased the loan portfolio The increase in non-interest income is primarily a result of the recognition of the gain on acquisitions of $4.6 million which is directly related to the two bank mergers completed within the fiscal year, partially offset by a decrease of $542,000 in the gain on sale of investment securities and a decrease of $264,000 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  was 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 increase in non-interest expense is primarily due a $1.2 million increase in acquisition expenses directly related to the two bank acquisitions completed within the fiscal year, an increase of $892,000 in salaries and employee benefits, a result of increasing the bank staff associated with the bank mergers.

About Royal Financial, Inc. Royal Financial, Inc. is the holding company for Royal Savings Bank which was founded in 1887. 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 Chicago since 1887, and currently has five branches in Chicago, a branch in Niles and Westmont, Illinois and lending centers in Homewood and St. Charles, Illinois.

Visit Royal Financial, Inc. and Royal Savings Bank at www.royal-bank.us

Safe-Harbor 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  
Years ended June 30, 2016 and 2015  
   
         
    2016       2015    
         
Assets        
Cash and non-interest bearing balances in financial institutions $   2,880,807     $   928,925    
Interest bearing balances in financial institutions   3,276,628       1,311,552    
Federal funds sold     81,583         46,624    
Total cash and cash equivalents   6,239,018       2,287,101    
         
Investment certificates of deposit   2,591,000         -     
Securities available for sale   66,810,148       14,533,805    
Loans receivable, net of allowance for loan losses of        
 $1,402,993 in 2016 and $1,431,680 in 2015     199,605,997         88,074,812    
Federal Home Loan Bank stock, at cost     1,786,500         415,500    
Premises & equipment, net   12,238,322         4,665,200    
Land held for sale     -        265,000    
Accrued interest receivable   994,342       370,314    
Other real estate owned   15,307       1,829,000    
Deferred tax asset   12,206,928       5,712,589    
Core deposit intangibles   1,024,612         -     
Other assets     536,240         385,300    
         
Total assets $   304,048,414     $   118,538,621    
         
Liabilities & Stockholders' Equity        
Deposits 261,506,502     $   90,254,560    
Advances from borrowers for taxes and insurance   3,400,382         1,118,905    
Federal Home Loan Bank advances   500,000         -     
Note payable   5,250,000         -     
Accrued interest payable and other liabilities   1,283,162       709,876    
Total liabilities     271,940,046         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   23,896,672       23,834,020    
Retained earnings   8,843,608       3,451,689    
Treasury stock, 137,888 shares, at cost   (1,012,924 )     (1,012,924 )  
Accumulated other comprehensive income   354,562       156,045    
Total stockholders' equity   32,108,368       26,455,280    
         
Total liabilities and stockholders' equity $   304,048,414     $   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 Twelve months ended June 30, 2016 and 2015  
   
                 
  Three Months Ended   Twelve Months Ended  
  June 30   June 30  
    2016       2015       2016       2015    
                 
Interest income                
Loans $   2,878,221     $   1,153,055     $   8,072,225     $   4,593,494    
Securities     221,125         89,697         565,091         602,611    
Federal funds sold and other     27,933         2,208         45,210         18,232    
Total interest income     3,127,279         1,244,960         8,682,527         5,214,337    
                 
Interest expense                
Deposits     207,854         79,209         546,182         309,782    
Borrowings     52,782         1,579         132,503         25,211    
Total interest expense     260,636         80,788         678,686         334,993    
                 
Net interest income     2,866,643         1,164,172         8,003,841         4,879,344    
                 
Provision/(Credit) for loan losses     -          -          (130,000 )       90,000    
                 
Net interest income after provision/(credit) for loan losses     2,866,643         1,164,172         8,133,841         4,789,344    
                 
Non-interest income                
Service charges on deposit accounts     127,118         50,049         321,293         204,172    
Secondary mortgage market fees     3,928         9,191         20,647         29,191    
Gain (loss) on sale of other real estate owned     -          -          237,071         (26,985 )  
Income on other real estate owned, net     10,798         51,524         75,178         82,824    
Gain on sale of investment securities     -          -          -          541,988    
Gain on sale of premises and equipment     -          620,625         177,049         620,625    
Gain (loss) on acquisitions     (394,578 )       -          4,575,785         -     
Other     859         134         2,373         783    
Total non-interest income     (251,875 )       731,523         5,409,396         1,452,598    
                 
Non-interest expense                
Salaries and employee benefits     894,714         537,776         2,988,777         2,096,336    
Occupancy and equipment     342,831         182,920         952,727         781,699    
Data processing     213,282         96,929         634,897         373,138    
Professional services     144,778         60,118         367,661         363,722    
Director fees     52,400         32,400         149,600         129,600    
Marketing     12,702         15,416         35,847         21,451    
FDIC insurance expense     49,411         15,014         102,843         77,657    
Insurance premiums     28,650         17,104         82,356         68,301    
Acquisition expense     451,581         51,571         1,659,875         426,541    
Other     228,104         88,898         688,735         337,196    
Total non-interest expense     2,418,453         1,098,146         7,663,318         4,675,641    
                 
Income before income taxes     196,315         797,549         5,879,919         1,566,301    
                 
Provision for income taxes     212,000         324,000         488,000         625,100    
Net income/(Loss) $   (15,685 )   $   473,549     $   5,391,919     $   941,201    
                 
Basic earnings per share $   (0.01 )   $   0.19     $   2.15     $   0.38    
Diluted earnings per share $   (0.01 )   $   0.19     $   2.13     $   0.38    
                                 
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.  
Mr. Leonard SzwajkowskiPresident and CEOTelephone: (773) 382-2111E-mail: lszwajkowski@royal-bank.us