Royal Financial, Inc. Announces Second Quarter and Year to

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 .

Contact:  Mr. Leonard Szwajkowski President and CEO Royal Financial, Inc. Telephone:  (773) 382-2111 E-mail:  lszwajkowski@royal-bank.us