Royal Financial, Inc. Announces Earnings for First Quarter of Fiscal Year 2018

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CHICAGO, Oct. 12, 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 first quarter end of fiscal year 2018. 

Net Income for the first quarter of fiscal year 2018 was $1.4 million, or $0.54 per common share, compared to $264,000, or $0.11 per common share, in the same period of fiscal 2017.

The Company reported net income of $1.4 million for the first three months of fiscal 2018 compared to $264,000 in the same period of fiscal 2017, an increase of $1.1 million. The increase was caused by the change in the State of Illinois tax rate having a positive effect on the Company’s DTA, increases in loan interest income offset by increases in deposit cost of funds, and a decrease in non-interest expense.

Total interest income for the quarter ended September 30, 2017, increased $431,000 from September 30, 2016. Total interest income for loans, including fees, for the quarter ended September 30, 2017, increased $521,000 from the quarter ended September 30, 2016, which was offset by the decrease in interest income from securities. The Company liquidated securities to fund loan growth in fiscal year 2017. This increase in interest income is offset by the increase in total interest expense due to higher cost of funds for borrowings and deposit accounts.

Total non-interest expense decreased $170,000 from September 30, 2016. The decrease in non-interest expense is due to the change in data processing fees of $127,000 and in acquisition expenses of $60,000 from September 30, 2016. Data processing fees and acquisition expenses were higher in 2016 as a result of the acquisition of Park Federal Savings Bank, the conversion of data processing systems which ended in September 2016, and general research and analysis of other potential merger and acquisition candidates.

The provision for loan losses at the quarter end of September 30, 2017, was $180,000, an increase of $150,000 from the prior year. The increase in the allowance for loan losses was to provide for the increased growth in the loan portfolio. 

For quarter end September 30, 2017, the benefit for income taxes was $511,000 compared to the provision for income taxes at the quarter end of September 30, 2016, of $264,000, a decrease of $717,000. In the first quarter of fiscal year 2018, the State of Illinois enacted its first budget since 2015, which increased the corporate income tax rate from 5.25% to 7.00%.  The Illinois replacement tax remains unchanged at 2.50%.  Therefore, effective July 1, 2017, the combined corporate tax rate in Illinois increased from 7.75% to 9.50%.  Based on a Federal tax rate of 34.00%, the effective state income tax rate is 6.27%. Based on the increase to the effective state income tax rate, the Company’s DTA increased $909,000 which was offset by an increase to the DTA valuation allowance of $100,000. The Company recognized $809,000 into income on July 1, 2017.

The Company’s total assets increased $9.2 million, or 2.90%, to $326.3 million at September 30, 2017, from $317.1 million at June 30, 2017.

Cash and cash equivalents decreased $7.7 million to $7.0 million at September 30, 2017, from $14.7 million at June 30, 2017, due to the increase in funding for loan growth.

Loans, net of allowance, increased $16.0 million, or 6.54%, to $261.7 million at September 30, 2017, from $245.7 million at June 30, 2017, primarily due to an increase in commercial loan growth. The Company also experienced growth in mortgage loans and local one bank commercial participations.  

The allowance for loan losses was $1.8 million, or 0.69% of total loans, at September 30, 2017, as compared to $1.7 million, or 0.67% of total loans, at June 30, 2017.  In addition to the allowance for loan losses, net purchase discount on acquired loans was $1.3 million at September 30, 2017 compared to $1.4 million at June 30, 2017.  Individual loan discounts are being accreted into interest income over the life of the loans; however, they can offset loan losses upon loan default. Nonperforming loans totaled $135,000, or 0.05% of outstanding loans, at September 30, 2017 compared to $327,000 or 0.13%, at June 30, 2017. 

Other real estate owned (OREO) increased $136,000 to $588,000 at September 30, 2017, from $452,000 at June 30, 2017. The change was due to the sale of one property and the addition of another. The OREO that sold was a one-to-four family residential property. The OREO that was acquired during the quarter was a one-to-four family residential property that was acquired because of job loss.  All properties are recorded at fair value, less estimated costs to sell.  

The Deferred Tax Asset (DTA) increased $540,000, or 4.49%, to $12.6 million at September 30, 2017, from $12.0 million at June 30, 2017, due to the increase in the Illinois State Tax rate, which was offset by the increase in the valuation allowance and actual taxes for the first quarter of fiscal 2018.

Total deposits increased $8.2 million, or 3.07%, to $274.6 million at September 30, 2017, from $266.5 million at June 30, 2017. The increase was primarily due to the increase in certificates of deposit which was the result of promotional CD rates run throughout the quarter, offset by a decrease in non-interest checking and savings accounts.  

Federal Home Loan Bank advances increased $1.5 million, or 18.75%, to $9.5 million at September 30, 2017, from $8.0 million at June 30, 2017. The increase in borrowings was to fund the increase in loan growth throughout the quarter. All FHLB advances are limited to short term maturities. Notes payable decreased $308,000 due to principal repayments on holding company debt, which totaled $4.6 million at quarter end.

Total stockholders’ equity increased $1.3 million, or 3.89%, to $35.0 million at September 30, 2017, from $33.7 million at June 30, 2017, which was primarily a result of the net income of $1.4 million earned in the period.

In the quarter ended September 30, 2017, the Bank paid a cash dividend to the Company of $415,000.

The Bank is “well capitalized” under prompt corrective action regulations. This classification requires the Bank to maintain regulatory capital that meets or exceeds the following ratios: Tier 1 Capital leverage of 5.00%, Common Equity Tier 1 Capital of 6.50%, Tier 1 Capital of 8.00%, and Total Capital of 10.00%.  At September 30, 2017, the Bank exceeded each of these requirements with ratios of 9.07%, 13.92%, 13.92% and 14.84%, respectively.

At September 30, 2017, the book value per common share was $13.97 compared to the book value per common share of $13.45 at June 30, 2017, for shares outstanding of 2,507,112 for both periods.  The tangible book value per share was $13.62 at September 30, 2017, compared to tangible book value per share of $13.08 at June 30, 2017. 

The complete audited consolidated financial statements for 2017 and 2016 are available at

Contact:  Mr. Leonard SzwajkowskiPresident and CEORoyal Financial, Inc.Telephone:  (773) 382-2111E-mail: 

More news and information about Royal Financial, Inc.

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Globe Newswire: 21:30 GMT Thursday 12th October 2017

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