RYFL

Royal Financial, Inc.

 
Common Stock U.S. Bank/Thrift Reporting
OTCQX U.S. Premier
 

OTC Disclosure & News Service

 

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

May 05, 2015

OTC Disclosure & News Service

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CHICAGO, May 5, 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 third quarter and for the first nine months of fiscal year 2015.

For the third quarter ended March 31, 2015, the Company reported net income of $111,000, or $0.04 per common share, compared to $173,000, or $0.07 per common share, for the third quarter ended March 31, 2014. Net income for the nine months ended March 31, 2015 was $468,000, or $0.19 per common share, compared to $7.6 million, or $3.03 per common share, for the first nine months ended March 31, 2014. The decrease in net income for the nine months ended March 31, 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 March 31, 2015 and June 30, 2014

The Company's total assets decreased $9.6 million, or 7.5%, to $118.4 million at March 31, 2015, from $128.0 million at June 30, 2014.

Securities available for sale decreased $17.5 million, or 54.4%, to $14.7 million at March 31, 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 $7.2 million, or 9.0%, to $86.4 million at March 31, 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 and multi-family properties.

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 is projected to close by May 31, 2015. The Bank recently received regulatory approval to close the branch. The closure date is set for June 30, 2015. The gain on the sale of the property is estimated to be $600,000. The banking office was replaced during the fiscal year with a retail micro-branch, located approximately one mile from the current branch.

Total deposits increased $5.2 million, or 6.3%, to $86.9 million at March 31, 2015 from $81.8 million at June 30, 2014. The increase is primarily related to the growth in local commercial deposits.

Federal Home Loan Bank advances decreased $15.0 million, or 79.0%, to $4.0 million at March 31, 2015 from $19.0 million at June 30, 2014. FHLB advances are all short term, not exceeding three months.

Total stockholders' equity increased $379,000, or 1.5%, to $26.1 million at March 31, 2015 from $25.7 million at June 30, 2014. The increase is primarily a result of net income of $468,000 partially offset by a decrease of $113,000 in accumulated other comprehensive income.

For the nine months ended March 31, 2015, the Bank has paid cash dividends of $460,000 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 1.62% of total loans, at March 31, 2015, as compared to $1.4 million, or 1.75% of total loans, at June 30, 2014. The Company believes, as of March 31, 2015, its allowance for loan losses was adequate to cover probable incurred losses. Non-performing assets, including Restructured Loans, were $2.8 million, or 2.43%, at March 31, 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 March 31, 2015, the Bank exceeded each of its capital requirements with ratios of 16.82%, 24.70%, 24.70% and 26.00%, respectively.

At March 31, 2015, the book value per common share, shares outstanding 2,507,112, was $10.40 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 2014 and 2013 are available at www.royal-bank.us.

Comparison of Results of Operation for the Three and Nine Months Ended March 31, 2015 and 2014

The net income for the three months ended March 31, 2015 was $111,000, a decrease in net income of $63,000, from the same period in 2014. The net income for the nine months ended March 31, 2015 was $468,000, a decrease of net income of $7.1 million, from the same period in 2014.

The decrease in net income for the three months ended March 31, 2015 resulted primarily from an increase in non-interest expense of $122,000, an increase in provision for loan loss of $90,000 and an increase in the provision for income taxes of $25,000, partially offset by an increase in net interest income of $51,000 and an increase in non-interest income of $123,000.

The decrease in net income for the nine months ended March 31, 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 $445,000, an increase in non-interest expense of $749,000, partially offset by an increase in net interest income of $261,000, and an increase in non-interest income of $586,000.

The decrease in credit for loan losses of $445,000 resulted from 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 $304,000, which is primarily related to merger and acquisition costs, an increase in salaries and benefits of $322,000, primarily due to additional staffing needs incurred in relation to the retail micro-branch which opened during the period, and an increase in occupancy and equipment of $80,100, which is primarily related to rent expense of $45,000 and depreciation expense of $29,000 related to the new micro-branch. Upon closure of the branch building on southeast side of Chicago, it is estimated that 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 $410,000, a direct result of the growth of the loan portfolio, partially offset by a decrease on interest income on securities of $61,000, a direct result of the shrinkage of the bond portfolio. The increase in non-interest income is primarily related to 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 three branches in Chicago, with 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
March 31, 2015 and June 30, 2014
(Unaudited)
     
  March 31, 2015 June 30, 2014
     
Assets    
Cash and non-interest bearing balances in financial institutions  $ 1,197,955  $ 871,687
Interest bearing balances in financial institutions 1,545,597 743,302
Federal funds sold  6,166  180,281
Total cash and cash equivalents 2,749,718 1,795,270
     
Securities available for sale 14,699,672 32,205,458
Loans receivable, net of allowance for loan losses of $1,424,823 at March 31, 2015, $1,416,899 at June 30, 2014  86,427,066  79,259,804
Federal Home Loan Bank stock, at cost  750,000  975,000
Premises & equipment, net  4,684,282  4,443,309
Land held for sale  265,000 265,000
Accrued interest receivable  429,250 500,561
Other real estate owned  1,859,000 1,986,850
Deferred tax asset  6,047,920 6,349,020
Other assets  450,215  226,574
     
Total assets  $ 118,362,123  $ 128,006,846
     
Liabilities & Stockholders' Equity    
Deposits $ 86,941,852  $ 81,782,980
Advances from borrowers for taxes and insurance  742,086  976,456
Federal Home Loan Bank advances  4,000,000 19,000,000
Accrued interest payable and other liabilities 597,285 545,559
Total liabilities  92,281,223  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  26,450  26,450
Additional paid-in capital  23,825,983 23,801,866
Retained earnings  2,978,141 2,510,488
Treasury stock, 137,888 shares, at cost  (1,012,924) (1,012,924)
Accumulated other comprehensive income 263,250 375,971
Total stockholders' equity 26,080,900 25,701,851
     
Total liabilities and stockholders' equity  $ 118,362,123  $ 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 Operations
Three and Nine months ended March 31, 2015 and 2014
(Unaudited)
         
  Three Months Ended Nine Months Ended
  March 31, March 31,
  2015 2014 2015 2014
         
Interest income        
Loans  $ 1,211,013  $ 1,014,683  $ 3,440,439  $ 3,030,090
Securities  92,991  218,082  512,943  573,888
Federal funds sold and other  6,733  2,617  15,995  7,125
Total interest income  1,310,737  1,235,382  3,969,377  3,611,103
         
Interest expense        
Deposits  80,236  51,539  230,572  138,027
Borrowings  3,681  7,950  23,632  18,900
Total interest expense  83,917  59,489  254,204  156,927
         
Net interest income  1,226,820  1,175,893  3,715,173  3,454,176
         
Provision/(Credit) for loan losses  90,000  --   90,000  (354,785)
         
Net interest income after provision/ (credit) for loan losses  1,136,820  1,175,893  3,625,173  3,808,961
         
Non-interest income        
Service charges on deposit accounts  47,930  39,645  154,123  125,254
Secondary mortgage market fees  7,050  5,768  20,000  63,694
Income on other real estate owned  60,499  29,751  174,797  115,431
Gain on sale of investment securities  83,279  --   541,988  -- 
Other  232  448  648  849
Total non-interest income  198,990  75,612  891,556  305,228
         
Non-interest expense        
Salaries and employee benefits  501,538  379,900  1,558,559  1,236,642
Occupancy and equipment  207,336  196,040  598,779  518,679
Data processing  94,845  83,751  276,209  235,314
Professional services  156,371  111,978  678,573  374,817
Director fees  32,400  28,600  97,200  86,200
Marketing  2,000  100  2,722  8,124
FDIC insurance expense  21,588  16,685  62,642  79,055
Insurance premiums  17,189  28,013  51,196  51,934
Foreclosed asset expense  30,242  128,237  170,483  172,246
Other  94,724  62,469  251,613  236,357
Total non-interest expense  1,158,233  1,035,773  3,747,976  2,999,368
         
Income before income taxes  177,577  215,733  768,753  1,114,821
         
Provision (Benefit) for income taxes  67,000  42,500  301,100  (6,493,520)
Net income  $ 110,577  $ 173,233  $ 467,653  $ 7,608,341
         
Basic and diluted earnings per share  $ 0.04  $ 0.07  $ 0.19  $ 3.03
         
         
         
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

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