Royal Financial, Inc. Announces Year to Date Earnings for Fiscal Year 2015

CHICAGO, Sept. 09, 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 fiscal year ended 2015.

For the fiscal year ended June 30, 2015, the Company reported net income of $941,000, or $0.38 per common share, compared to $7.7 million, or $3.07 per common share, for the fiscal year ended June 30, 2014.  The decrease in net income for the fiscal year ended June 30, 2015 was primarily the result of the Company’s reversal of its deferred tax asset (“DTA”) valuation allowance of $6.9 million in the first quarter of fiscal year 2014.

Comparison of Financial Condition at June 30, 2015 and June 30, 2014

The Company’s total assets decreased $9.5 million, or 7.4%, to $118.5 million at June 30, 2015, from $128.0 million at June 30, 2014.

Securities available for sale decreased $17.7 million, or 54.9%, to $14.5 million at June 30, 2015 from $32.2 million at June 30, 2014.  The decrease in the securities portfolio was due to the sale of $25.3 million of investment bonds sold, partially offset by the purchase of $8.0 million of government sponsored agency bonds. Security sales consisted of $12.0 million of government sponsored agency bonds and $13.3 million of municipal securities. The securities portfolio was intentionally reduced for liquidity purposes to fund the growing loan portfolio and to reduce short-term FHLB borrowings, which was inclusive of management’s strategy to prepare for the acquisition of PNA Bank and the combination of the pro-forma balance sheets. Bonds sold were strategically selected to shorten the duration of the portfolio.

Loans, net of allowance, increased $8.8 million, or 11.1%, to $88.1 million at June 30, 2015, from $79.3 million at June 30, 2014.  The loan portfolio continues to increase as a result of funding loans that are locally originated commercial loan growth, primarily consisting of commercial real estate.

As previously disclosed, management executed a purchase contract, on April 14, 2015, with a local business owner for the sale of the branch building and the mid-block parking lot, located on the southeast side of Chicago. The sale was finalized on May 20, 2015. The gain recognized on the sale of the property was $611,000. As the Bank had previously received regulatory approval to close the branch, the last day of the branch operations was June 30, 2015. The banking office was replaced during the fiscal year with a leased retail micro-branch, located approximately one mile from the current branch.

Total deposits increased $8.5 million, or 10.4%, to $90.3 million at June 30, 2015 from $81.8 million at June 30, 2014. The increase is primarily due to the growth in money market deposit accounts related to local commercial depositors.

At June 30, 2015, there were no Federal Home Loan Bank advances outstanding, resulting in a decrease of $19.0 million, or 100%, compared to June 30, 2014.

Total stockholders’ equity increased $753,000, or 2.9%, to $26.5 million at June 30, 2015 from $25.7 million at June 30, 2014. The increase is primarily a result of net income of $941,000 partially offset by a decrease of $220,000 in accumulated other comprehensive income.

For the fiscal year ended June 30, 2015, the Bank has paid cash dividends of $950,000 to the Company. The upstream of funds will allow the Company to pay merger and acquisition costs, primarily associated with the acquisition of PNA Bank. The sale order was approved by the U.S. Bankruptcy Court, as announced in the press release dated December 23, 2014. An Interagency Bank Merger Act Application was filed on January 27, 2015 and is pending regulatory approval.

The allowance for loan losses was $1.4 million, or 1.60% of total loans, at June 30, 2015, as compared to $1.4 million, or 1.75% of total loans, at June 30, 2014.  The Company believes, as of June 30, 2015, its allowance for loan losses was adequate to cover probable incurred losses.  Non-performing assets, including Restructured Loans, were $2.8 million, or 2.46%, at June 30, 2015 compared to $3.2 million, or 2.56%, at June 30, 2014.

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 June 30, 2015, the Bank exceeded each of its capital requirements with ratios of 17.73%, 23.95%, 23.95% and 25.24%, respectively.

At June 30, 2015, the book value per common share, shares outstanding 2,507,112, was $10.55 compared to the book value per common share, shares outstanding 2,507,112, of $10.25 at June 30, 2014.

The complete audited consolidated financial statements for 2015 and 2014 will be available at www.royalsavingsbank.com

Comparison of Results of Operations for the Fiscal Years Ended June 30, 2015 and 2014

The net income for the fiscal year ended June 30, 2015 was $941,000, a decrease in net income of $6.8 million, from the same period in 2014.

The decrease in net income for the fiscal year ended June 30, 2015 was primarily related to an increase in the provision for income taxes of $6.8 million, a direct result of the one-time recognition of the reversal of the tax valuation allowance against deferred tax assets of $6.9 million in fiscal year 2014, a decrease in credit for loan losses of $325,000, an increase in non-interest expense of $748,000, partially offset by an increase in net interest income of $256,000, and an increase in non-interest income of $1.0 million.

The decrease in credit for loan losses of $325,000 is primarily the result of a $90,000 provision for loan loss recorded in the third quarter of fiscal year 2015 and the recognition of a credit provision of $370,000 in fiscal year 2014. The increase in non-interest expense is primarily due to the increase in professional services of $242,000, which is primarily related to merger and acquisition costs, an increase in salaries and benefits of $371,000, primarily related to increasing staff to adequately manage and support the anticipated bank acquisition and adding to manage the new retail micro-branch which opened during the period, and an increase in occupancy and equipment of $86,400, which is primarily related to rent expense of $60,000 and an increase in depreciation expense of $28,000 related to the new micro-branch. Upon closure of the branch building on southeast side of Chicago, it is estimated that operating expenses will be reduced by approximately $200,000 annually. The increase in net interest income is primarily related to the increase in loan interest income of $356,000, a direct result of the growth of the loan portfolio, partially offset by a decrease on interest income on securities of $191,000, a direct result of the shrinkage of the bond portfolio. The increase in non-interest income is primarily related to the $620,000 gain on the sale of the branch building and the $542,000 gain recognized on the sale of investment securities in the period.

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 the south and southeast communities of Chicago since 1887, and currently has two branches in Chicago, with lending centers in Homewood and St. Charles, Illinois.

Visit Royal Financial, Inc. and Royal Savings Bank at www.royalsavingsbank.com

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
June 30, 2015 and 2014
 
    2015       2014    
         
Assets        
Cash and non-interest bearing balances in financial institutions $   928,925     $   871,687    
Interest bearing balances in financial institutions   1,311,552       743,302    
Federal funds sold     46,624         180,281    
Total cash and cash equivalents   2,287,101       1,795,270    
         
Securities available for sale   14,533,805       32,205,458    
Loans receivable, net of allowance for loan losses of $1,431,680 in 2015 and $1,416,899 in 2014     88,074,812         79,259,804    
Federal Home Loan Bank stock, at cost     415,500         975,000    
Premises & equipment, net   4,665,200       4,443,309    
Land held for sale   265,000       265,000    
Accrued interest receivable   370,314       500,561    
Other real estate owned   1,829,000       1,986,850    
Deferred tax asset   5,723,920         6,349,020    
Other assets     373,969         226,574    
         
Total assets $   118,538,621     $   128,006,846    
         
Liabilities & Stockholders’ Equity        
Deposits $   90,254,560     $   81,782,980    
Advances from borrowers for taxes and insurance     1,118,905         976,456    
Federal Home Loan Bank advances     –          19,000,000    
Accrued interest payable and other liabilities   709,876       545,559    
Total liabilities     92,083,341         102,304,995    
         
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 at June 30, 2015 and 2014     26,450         26,450    
Additional paid-in capital   23,834,020         23,801,866    
Retained deficit   3,451,689       2,510,488    
Treasury stock, 137,888 shares, at cost   (1,012,924 )     (1,012,924 )  
Accumulated other comprehensive income   156,045       375,971    
Total stockholders’ equity   26,455,280       25,701,851    
         
Total liabilities and stockholders’ equity $   118,538,621     $   128,006,846    
         
         
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 Income
Years ended June 30, 2015 and 2014
 
    2015       2014    
         
Interest income        
Loans $   4,593,494     $   4,054,316    
Securities     602,611         793,380    
Federal funds sold and other     18,232         11,028    
Total interest income     5,214,337         4,858,724    
         
Interest expense        
Deposits     309,782         207,232    
Borrowings     25,211         27,714    
Total interest expense     334,993         234,946    
         
Net interest income     4,879,344         4,623,778    
         
Provision/(Credit) for loan losses     90,000         (234,785 )  
         
Net interest income after provision/ (credit) for loan losses     4,789,344         4,858,563    
         
Non-interest income        
Service charges on deposit accounts     204,172         171,070    
Secondary mortgage market fees     29,191         71,323    
Income on other real estate owned     239,793         170,069    
Gain on sale of investment securities     541,988         188,484    
Gain on sale of premises and equipment     620,625         –     
Other     783         1,323    
Total non-interest income     1,636,552         602,269    
         
Non-interest expense        
Salaries and employee benefits     2,096,336         1,725,616    
Occupancy and equipment     781,699         695,289    
Data processing     373,138         333,461    
Professional services     790,263         548,375    
Director fees     129,600         115,000    
Marketing     21,451         10,379    
FDIC insurance expense     77,657         90,818    
Insurance premiums     68,301         67,046    
Foreclosed asset expense     183,954         208,858    
Other     337,196         316,929    
Total non-interest expense     4,859,595         4,111,771    
         
Income before income taxes     1,566,301         1,349,061    
         
Provision for income taxes     625,100         (6,349,020 )  
Net income $   941,201     $   7,698,081    
         
Basic and diluted earnings per share $   0.38     $   3.07    
         
         
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
Telephone: (773) 382-2111
E-mail: lszwajkowski@royal-bank.us

Left Menu Icon
Right Menu Icon