OREANDA-NEWS. June 06, 2016. 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 2016.

For the third quarter ended March 31, 2016, the Company reported net income of \\$52,000, or \\$0.02 per common share, compared to \\$111,000, or \\$0.04 per common share, for the third quarter ended March 31, 2015. Net income for the nine months ended March 31, 2016 was \\$5.4 million, or \\$2.16 per common share, compared to \\$468,000, or \\$0.19 per common share, for the nine months ended March 31, 2015. The increase in net income for the nine months ended March 31, 2016 was primarily due to the PNA Bank merger which was finalized on September 30, 2015, in which \\$5.0 million of negative goodwill has been recognized.

Comparison of Financial Condition at March 31, 2016 and June 30, 2015

As a result of the merger of PNA Bank into Royal Savings Bank as of March 31, 2016, the Company’s total assets increased \\$88.7 million, or 74.8%, to \\$207.2 million at March 31, 2016, from \\$118.5 million at June 30, 2015.

Cash and cash equivalents increased \\$1.1 million, or 47.8%, to \\$3.4 million at March 31, 2016 from \\$2.3 million at June 30, 2015.

Securities available for sale increased \\$15.7 million, or 108.3%, to \\$30.3 million at March 31, 2016 from \\$14.5 million at June 30, 2015.  

Loans, net of allowance, increased \\$68.1 million, or 77.4%, to \\$156.2 million at March 31, 2016 from \\$88.1 million at June 30, 2015.

Premises and equipment increased \\$1.9 million, or 40%, to \\$6.5 million at March 31, 2016 from \\$4.7 million at June 30, 2015. As a result of the merger, two additional banking centers, located in Chicago and Niles, Illinois, with a fair value of \\$2.5 million, were integrated into the Bank’s branch network, partially offset by the sale of the Bank owned three-story office building located in Homewood, Illinois, with a book value of \\$792,000 which was included in the bulk asset sale of September 30, 2015. The Bank has retained leased space in the Homewood property to serve as a lending center and disaster recovery site.

Land held for sale decreased \\$265,000, or 100%, from June 30, 2015, as one acre of land located in Frankfort, Illinois, owned by the Company, was included in the bulk asset sale of September 30, 2015.

Other real estate owned decreased \\$1.8 million, or 100%, as the bank did not currently hold any foreclosed properties at March 31, 2016.

Total deposits increased \\$72.7 million, or 80.5%, to \\$162.9 million at March 31, 2016 from \\$90.3 million at June 30, 2015.

Federal home loan bank advances increased \\$5.2 million, or 100%, from June 30, 2015, as the Company borrowed short term advances in an effort to offer the option of early withdrawal of higher yielding certificates of deposit.

The line of credit increased \\$5.0 million, or 100%, from June 30, 2015, as the Company initiated two draws on its line of credit with The PrivateBank. The first draw of \\$3.5 million, initiated in the first quarter, of which \\$3 million was pushed down to the Bank to supplement capital as a cushion for commercial real estate exposure, as part of the merger with PNA Bank; \\$500,000 was allocated for merger expenses. The second draw of \\$2.0 million, initiated in the second quarter, was pushed down to the Bank for capital enhancement for the planned Park Bancorp, Inc. merger. The Company paid down the line \\$500,000 in the second quarter.

Total stockholders’ equity increased \\$5.6 million, or 21.1%, to \\$32.0 million at March 31, 2016 from \\$26.5 million at June 30, 2015, which was primarily a result of the net income of \\$5.4 million earned for the period.

For the nine months ended March 31, 2016, the Bank paid cash dividends to the Company of \\$1.1 million.

The allowance for loan losses was \\$1.4 million, or 0.87% of total loans, at March 31, 2016, as compared to \\$1.4 million, or 1.60% of total loans, at June 30, 2015.  The acquired loans included in the loan portfolio as of March 31, 2016 were recorded at the fair value, and accordingly have a satisfactory rating. The allowance for loan losses, excluding the newly acquired loans, is at 1.25%. The Company believes, as of March 31, 2016, its allowance for loan losses was adequate to cover probable incurred losses.  Nonperforming assets, including restructured loans, were \\$1.0 million, or 0.49%, at March 31, 2016 compared to \\$2.9 million, or 2.46%, at June 30, 2015.

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, 2016, the Bank exceeded each of its capital requirements with ratios of 14.64%, 22.75%, 22.75% and 23.82%, respectively.

At March 31, 2016, the tangible book value per common share, shares outstanding 2,507,112, was \\$12.66 compared to the tangible book value per common share, shares outstanding 2,507,112, was \\$10.55 at June 30, 2015.

Comparison of Results of Operation for the Three and Nine Months Ended March 31, 2016 and 2015

The net income for the three months ended March 31, 2016 was \\$52,000, a decrease of net income of \\$59,000 from the same period in 2015. The net income for the nine months ended March 31, 2016 was \\$5.4 million, an increase of \\$4.9 million, from the same period in 2015.

The decrease in net income for the three months ended March 31, 2016 resulted primarily from an increase in non-interest expense of \\$685,000, a decrease of \\$120,000 in non-interest income, partially offset by an increase in net-interest income of \\$728,000 and the provision for loan loss of \\$90,000 recorded in 2015.

The increase in net income for the nine months ended March 31, 2016 was primarily related to a \\$4.3 million increase in non-interest income, an increase of \\$1.4 million in net interest income, an increase of \\$220,000 in the credit for loan losses, a decrease of \\$25,000 in provision for income taxes, partially offset by an increase in non-interest expense of \\$1.0 million. The increase in non-interest income is primarily a result of the recognition of negative goodwill of \\$5.0 million related to the bank merger, partially offset by a decrease of \\$542,000 in the gain on sale of investment securities and a decrease of \\$208,000 in income on other real estate owned, related to the loss of rental income, a direct result of the sale of the office building in Homewood, Illinois and a bank branch building in Chicago, Illinois, both owned by the Bank.  A credit for loan losses of \\$130,000 was recorded in the first three months of the period, which was partially related to recoveries of previously charged off bad debt. The decrease of \\$25,000 in the provision for income taxes was primarily related to prior period tax adjustments. The increase in non-interest expense of \\$1.0 million was primarily related to the increase of \\$974,000 in merger and acquisition expenses. Of the merger and acquisition costs, \\$896,000 is related to the merger of PNA Bank, finalized in the second quarter and \\$310,000 is related to the merger of Park Bancorp and Park Federal Savings Bank that was in process. In addition, there was an increase of \\$536,000 in salaries and employee benefits, a result of increasing the bank staff due to the bank merger, partially offset by a decrease of \\$478,000 in foreclosed asset expense, primarily due to the recognition of the gain of \\$229,000 on the sale of other real estate owned property  included in the bulk asset sale of September 30, 2015 and the reimbursement of expenses related to those properties, which per the purchase agreement was retroactive to May 1, 2015.

The complete audited consolidated financial statements for 2015 and 2014 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 Chicago since 1887, and currently has eight branches in Chicagoland 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, 2016 and June 30, 2015
(Unaudited)
    
 March 31, 2016 June 30, 2015
    
Assets   
Cash and non-interest bearing balances in financial institutions\\$1,509,467  \\$928,925 
Interest bearing balances in financial institutions 1,761,412   1,311,552 
Federal funds sold 109,687   46,624 
Total cash and cash equivalents 3,380,566   2,287,101 
    
Securities available for sale 30,269,146   14,533,805 
Loans receivable, net of allowance for loan losses of \\$1,382,571 at March 31, 2016, \\$1,431,680 at June 30, 2015 156,196,287   88,074,812 
Federal Home Loan Bank stock, at cost 1,441,000   415,500 
Premises & equipment, net 6,532,149   4,665,200 
Land held for sale -   265,000 
Accrued interest receivable 691,829   370,314 
Other real estate owned -   1,829,000 
Deferred tax asset 8,108,912   5,712,589 
Core deposit intangible 288,064   - 
Other assets 287,109   385,300 
    
Total assets\\$207,195,062  \\$118,538,621 
    
Liabilities & Stockholders' Equity   
Deposits\\$162,937,781  \\$90,254,560 
Advances from borrowers for taxes and insurance 1,321,601   1,118,905 
Federal Home Loan Bank advances 5,150,000   - 
PrivateBank line of credit 5,000,000   - 
Accrued interest payable and other liabilities 748,820   709,876 
Total liabilities 175,158,202   92,083,341 
    
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 23,881,009   23,834,020 
Retained earnings 8,859,294   3,451,689 
Treasury stock, 137,888 shares, at cost (1,012,924)  (1,012,924)
Accumulated other comprehensive income 283,032   156,045 
Total stockholders' equity 32,036,860   26,455,280 
    
Total liabilities and stockholders' equity\\$207,195,062  \\$118,538,621 
    
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, 2016 and 2015
(Unaudited)
        
 Three Months Ended Nine Months Ended
 March 31, March 31,
  2016   2015   2016   2015 
        
Interest income       
Loans\\$1,988,295  \\$1,211,013  \\$5,194,004  \\$3,440,439 
Securities 128,185   92,991   343,967   512,943 
Federal funds sold and other 6,088   6,733   17,277   15,995 
Total interest income 2,122,568   1,310,737   5,555,248   3,969,377 
        
Interest expense       
Deposits 120,261   80,236   338,329   230,572 
Borrowings 47,585   3,681   79,721   23,632 
Total interest expense 167,846   83,917   418,050   254,204 
        
Net interest income 1,954,722   1,226,820   5,137,198   3,715,173 
        
Provision/(Credit) for loan losses -   90,000   (130,000)  90,000 
        
Net interest income after provision/ (credit) for loan losses 1,954,722   1,136,820   5,267,198   3,625,173 
        
Non-interest income       
Service charges on deposit accounts 74,402   47,930   194,175   154,123 
Secondary mortgage market fees 5,807   7,050   16,718   20,000 
Income on other real estate owned -   60,499   (32,948)  174,797 
Gain on sale of investment securities -   83,279   -   541,988 
Gain on sale of fixed assets -   -   29,202   - 
Negative goodwill -   -   4,969,907   - 
Other (1,265)  232   1,968   648 
Total non-interest income 78,944   198,990   5,179,022   891,556 
        
Non-interest expense       
Salaries and employee benefits 742,091   501,538   2,094,062   1,558,559 
Occupancy and equipment 214,751   207,336   582,857   598,779 
Data processing 160,822   94,845   421,615   276,209 
Professional services 3,317   6,924   225,133   446,785 
Director fees 32,400   32,400   97,200   97,200 
Marketing 2,953   2,000   23,144   2,722 
FDIC insurance expense 9,121   21,588   53,432   62,642 
Insurance premiums 22,995   17,189   53,705   51,196 
Foreclosed asset expense (10,028)  30,242   (307,359)  170,483 
Loss on property valuation -   -   (147,847)  - 
Merger and acquisition expense 542,728   149,447   1,206,045   231,788 
Other 183,804   94,724   460,630   251,613 
Total non-interest expense 1,904,954   1,158,233   4,762,617   3,747,976 
        
Income before income taxes 128,712   177,577   5,683,603   768,753 
        
Provision (Benefit) for income taxes 77,000   67,000   276,000   301,100 
Net income\\$51,712  \\$110,577  \\$5,407,603  \\$467,653 
        
Basic and diluted earnings per share\\$0.02  \\$0.04  \\$2.16  \\$0.19 
        
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.