Market Overview

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

Share:

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. 
 
Mr. Leonard Szwajkowski President and CEO Telephone: (773) 382-2111 E-mail: lszwajkowski@royal-bank.us
View Comments and Join the Discussion!