Royal Financial, Inc. Announces Third Quarter and Year to Date Earnings for Fiscal Year 2017 and 2016 Annual Meeting Results

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| Source: Royal Financial, Inc.

CHICAGO, April 20, 2017 (GLOBE NEWSWIRE) -- Royal Financial, Inc. (the “Company”) (OTCQX:RYFL), incorporated under the laws of Delaware on March 15, 2004, for the purpose of serving as the holding company of Royal Savings Bank (the “Bank”), announced earnings for the third quarter end of fiscal year 2017 and the results of its 2016 Annual Meeting.

For the third quarter ended March 31, 2017, the Company reported net income of $387,000, or $0.15 per common share, compared to $52,000, or $0.02 per common share, for the third quarter ended March 31, 2016. Net income for the nine months ended March 31, 2017 was $1.3 million, or $0.51 per common share, compared to $5.4 million, or $2.16 per common share, for the nine months ended March 31, 2016. The decrease in net income for the nine months ended March 31, 2017 was primarily due to the PNA Bank merger which was finalized on September 30, 2015 and generated a $5.0 million of bargain purchase gain.

Comparison of Financial Condition at March 31, 2017 and June 30, 2016

The Company’s total assets increased $12.1 million, or 4.0%, to $316.2 million at March 31, 2017, from $304.1 million at June 30, 2016.

Cash and cash equivalents increased $4.7 million, or 74.6%, to $10.9 million at March 31, 2017 from $6.2 million at June 30, 2016. The increased liquidity is the result of increased deposit funding for the quarter.

Securities available for sale increased $1.3 million, or 2.0%, to $68.2 million at March 31, 2017 from $66.8 million at June 30, 2016. During the nine months ended March 31, 2017, the Company has purchased $29.5 million in federal and state taxable securities while selling $21 million of state non-taxable bonds and allowing another $6.5 million of non-taxable bonds to run-off through maturity or call. Management’s intent is to accelerate the use of net operating losses to reduce the related deferred tax asset.    

Loans, net of allowance for loan losses, increased $6.8 million, or 3.4%, to $206.4 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 (FHLB) stock decreased $1.1 million, to $0.7 million at March 31, 2017 as the Company redeemed all excess stock not required for borrowing FHLB advances.

Premises and equipment increased $481,000, or 3.9%, to $12.7 million at March 31, 2017 from $12.2 million at June 30, 2016.

Other real estate owned increased to $100,000 at March 31, 2017 from $16,000 at June 30, 2016.     

Total deposits increased $14.8 million, or 5.7%, to $276.3 million at March 31, 2017 from $261.5 million at June 30, 2016.  Much of the growth in deposits was during the third quarter. Non-interest bearing deposits increased $2.0 million and money market accounts increased $11.9 million.

There were no FHLB advances at March 31, 2017.  FHLB advances of $500,000 outstanding at June 30, 2016 were repaid during the quarter ended March 31, 2017.   

Management converted $4.0 million of the line of credit to an amortizing note payable during the nine month period. The terms call for principal payments of $142,857 per quarter based on a seven year amortization period.

Total stockholders’ equity increased $250,000, to $32.4 million at March 31, 2017 from $32.1 million at June 30, 2016, which was primarily the result of an increase in net income of $1.3 million for the period offset by a decrease in accumulated other comprehensive income of $1.1 million for the period.

For the nine months ended March 31, 2017, the Bank paid cash dividends to the Company of $815,000.

The allowance for loan losses was $1.5 million, or 0.70% of gross loans at March 31, 2017, 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 March 31, 2017 were recorded at fair value and reflect a purchase discount of $1.4 million. The allowance for loan losses as a percent of gross loans, excluding acquired loans, is 1.14%. The Company believes that as of March 31, 2017, its allowance for loan losses was adequate to cover probable incurred losses.  Nonperforming assets, including restructured loans, were $1.0 million, or 0.33% of gross loans, at March 31, 2017 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. The Bank’s capital conservation buffer on common equity tier 1 capital is 0.625% for calendar year 2016. At March 31, 2017, the Bank exceeded each of its capital requirements with ratios of 8.84%, 14.85%, 14.85% and 15.67%, respectively.

At March 31, 2017, the tangible book value per common share based on shares outstanding of 2,507,112, was $12.53 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 Nine Months Ended March 31, 2017 and 2016

Net income for the three months ended March 31, 2017 was $387,000, an increase of net income of $335,000 from the same period in 2016. The increase in net income for the three months ended March 31, 2017 resulted primarily from an increase in net interest income of $777,000 and an increase in non-interest income of $36,000, offset by an increase in non-interest expense of $225,000 and additional provision for income tax of $223,000.

Net income for the nine months ended March 31, 2017 was $1.3 million, a decrease of $4.1 million, from the same period in 2016. The decrease in net income for the nine months ended March 31, 2017 was primarily related to a $5.1 million decrease in non-interest income, an increase of $1.5 million in non-interest expense, a decrease of $205,000 in the credit for loan losses, an increase of $491,000 in provision for income taxes, partially offset by an increase in net interest income of $3.1 million.

The decrease in non-interest income is primarily a result of the recognition of a $5.0 million bargain purchase gain related to the PNA Bank merger recognized in September 2015, partially offset by an increase of $112,000 in the sale of investment securities and an increase of $204,000 in service charges on deposit accounts.

The increase in non-interest expense of $2.0 million was primarily the result of having PNA Bank and Park Federal Savings Banks’ expenses incorporated in 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 nine months ended March 31, 2017, salaries and employee benefits increased $1.1 million, occupancy and equipment increased $687,000, and data processing expenses increased $224,000. The increases in non-interest expense were offset by a decrease of $1.1 million in merger and acquisition expenses. 

For the nine months ended March 31, 2017, the provision for loan losses was increased by $75,000 to address growth in the loan portfolio. For the same period ended March 31, 2016, 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 $491,000 in the provision for income taxes for the nine months ended March 31, 2016 is primarily related to increased core earnings of the Bank. 

2016 Annual Meeting Results

The 2016 Annual Meeting of Stockholders was held on January 31, 2017, at the Company’s main location. Mr. Fitch, Chairman of the Board of Directors, led the meeting and highlighted the recent growth through the two acquisitions, PNA Bank and Park Bancorp, and the financial operating results of the second quarter of fiscal year 2017.

Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Stockholders, the following matters were submitted to and approved by a vote of the stockholders:

1)     The election of two Class III directors for a three-year term expiring at the Annual Meeting of Stockholders to be held in 2019:

Directors  John T. Dempsey Leonard Szwajkowski
     
Total votes for  1,613,633 1,613,633
     
Total votes withheld 7,000 7,000
     
The following directors continue to serve after the Annual Meeting:
     
Continuing Director    Term Expires
     
C. Michael McLaren   2017
     
Philip J. Timyan   2017
     
James A. Fitch, Jr.    2018
     
Roger L. Hupe   2018

2)     Ratification of the appointment of Crowe Horwath LLP as the Company’s independent accountants for the fiscal year ending June 30, 2017:

Total votes for  2,175,086
   
Total votes against 95,523
   
Total votes abstaining 427

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
March 31, 2017 and June 30, 2016
(Unaudited)
    
 March 31, 2017 June 30, 2016
    
Assets   
Cash and non-interest bearing balances in financial institutions$2,666,196  $2,880,807 
Interest bearing balances in financial institutions 7,098,403   3,276,628 
Federal funds sold 1,126,957   81,583 
Total cash and cash equivalents 10,891,556   6,239,018 
    
Investment Certificates of Deposit 2,591,000   2,591,000 
Securities available for sale 68,154,784   66,810,148 
Loans receivable, net of allowance for loan losses of   
$1,460,214 at March 31, 2017; $1,402,993 at June 30, 2016 206,414,864   199,605,997 
Federal Home Loan Bank stock, at cost 704,300   1,786,500 
Premises & equipment, net 12,719,431   12,238,322 
Accrued interest receivable 1,207,188   994,342 
Other real estate owned 100,008   15,307 
Deferred tax asset 11,995,749   12,206,928 
Core deposit intangible 945,114   1,024,612 
Other assets 469,467   536,240 
    
Total assets$316,193,461  $304,048,414 
    
Liabilities & Stockholders' Equity   
Deposits$276,294,981  $261,506,502 
Advances from borrowers for taxes and insurance 1,876,960   3,400,382 
Federal Home Loan Bank advances -   500,000 
Line of Credit 1,200,000   5,250,000 
Note Payable 3,857,143   - 
Accrued interest payable and other liabilities 606,227   1,283,162 
Total liabilities 283,835,310   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 23,943,661   23,896,672 
Retained earnings 10,124,379   8,843,608 
Treasury stock, 137,888 shares, at cost (1,012,924)  (1,012,924)
Accumulated other comprehensive income (deficit) (723,415)  354,562 
Total stockholders' equity 32,358,151   32,108,368 
    
Total liabilities and stockholders' equity$316,193,461  $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 Nine months ended March 31, 2017 and 2016
(Unaudited)
        
 Three Months Ended Nine Months Ended
 March 31, March 31,
  2017   2016   2017   2016 
        
Interest income       
Loans, including fees$2,695,089  $1,988,295  $8,152,989  $5,194,004 
Securities 314,234   128,185   904,127   343,967 
Federal funds sold and other 15,816   6,088   32,836   17,277 
Total interest income 3,025,139   2,122,568   9,089,952   5,555,248 
        
Interest expense       
Deposits 239,357   120,261   643,220   338,329 
Borrowings 54,005   47,585   163,458   79,721 
Total interest expense 293,363   167,846   806,679   418,050 
        
Net interest income 2,731,776   1,954,722   8,283,273   5,137,198 
        
Provision/(credit) for loan losses -   -   75,000   (130,000)
        
Net interest income after provision/ (credit) for loan losses 2,731,776   1,954,722   8,208,273   5,267,198 
        
Non-interest income       
Service charges on deposit accounts 123,843   74,402   398,450   194,175 
Secondary mortgage market fees 4,306   5,807   13,803   16,718 
Income (loss) on other real estate owned, net (17,428)  10,028   (21,896)  422,258 
Bargain purchase gain (loss) (98,250)  -   25,282   4,969,907 
Gain on sale of securities available for sale 111,865   -   111,865   - 
Gain on sale of premises and equipment -   -   -   29,202 
Other 380   (1,265)  1,029   1,968 
Total non-interest income 124,716   88,972   528,533   5,634,228 
        
Non-interest expense       
Salaries and employee benefits 1,119,907   742,091   3,165,460   2,094,062 
Occupancy and equipment 425,320   214,751   1,269,972   582,857 
Data processing 165,458   160,822   645,618   421,615 
Professional services 86,794   3,317   336,450   225,133 
Director fees 36,000   32,400   108,000   97,200 
Marketing 1,461   2,953   54,259   23,144 
FDIC insurance expense 24,670   9,121   64,986   53,432 
Insurance premiums 27,087   22,995   100,839   53,705 
Merger and acquisition expense 8,516   542,728   144,946   1,206,045 
Other 274,380   183,804   799,007   460,630 
Total non-interest expense 2,169,594   1,914,982   6,689,537   5,217,823 
        
Income before income taxes 686,898   128,712   2,047,270   5,683,603 
        
Provision for income taxes 300,000   77,000   766,500   276,000 
Net income$386,898  $51,712  $1,280,770  $5,407,603 
        
Basic and diluted earnings per share$0.15  $0.02  $0.51  $2.16 
        
        
        
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