CHICAGO, Oct. 15, 2019 (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 2020.
Net Income for the first quarter of fiscal year 2020 was $797,000, or $0.31 per common share, compared to $968,000, or $0.39 per common share, in the same period of fiscal 2019.
The Company also reported total assets of $397.2 million and stockholders’ equity of $41.1 million as of September 30, 2019. As of the same date, the Company’s book value per share was $16.04 and tangible book value per share was $15.05.
Comparison of Results of Operation for the Three Months Ended September 30, 2019 and 2018
The Company reported net income of $797,000 for the first three months of fiscal 2020 compared to $968,000 in the same period of fiscal 2019, a decrease of $171,000 (18%). The decrease was caused by an increase in interest expense due to rising interest rates over the year, offset by an increase in interest income and a decrease in the provision for taxes.
Total interest income for the quarter ended September 30, 2019, increased $33,000 (1%) from September 30, 2018. Total interest income from federal funds sold increased $73,000 (446%) from the prior year, and was offset by decreased interest income from loans, including fees, of $21,000 (1%) and a decrease in interest income from securities of $19,000 (7%).
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 balances. Total deposit interest expense increased $364,000 (58%) from the prior year due to the rising rate environment during fiscal year 2019. Total borrowing expense decreased $73,000 (34%) due to pay down of the additional borrowings at the holding company level and the elimination of borrowings from the Federal Home Loan Bank (“FHLB”).
Total non-interest income decreased $27,000 (10%) from September 30, 2018. This decrease was due to decreases in service charges on deposit accounts of $12,000 (7%) and in secondary mortgage market fees of $42,000 (82%), offset by an increase of $28,000 (89%) in rental income.
Total non-interest expense increased $102,000 (4%) from September 30, 2018. The increase in non-interest expense is due to the increase in salaries and employee benefits of $66,000 (6%) as a result of the stock options and grants awarded during fiscal year 2019, an increase in data processing costs of $45,000 (26%), an increase in marketing of $7,000 (44%), an increase in acquisition expenses of $5,000 (72%), and an increase in other expenses of $63,000 (29%). During the first quarter of fiscal year 2020, the Company incurred a loss of $47,000 as a result of federal and state tax payments not being made by the Company’s former payroll provider. These taxes have since been paid and the Company has filed a claim to recover this loss. These increases were offset by decreases in occupancy and equipment of $10,000 (2%), professional services of $25,000 (13%), director’s fees of $4,000 (9%), and in Federal Deposit Insurance Company (“FDIC”) expenses of $42,000 (108%) as a result of the FDIC assessment credits issued as the reserve requirement was met as of June 30, 2019.
The Company did not fund the allowance for loan losses this quarter.
For quarter end September 30, 2019, the provision for income taxes was $360,000, a decrease of $67,000 from the prior year.
Comparison of Financial Condition at September 30, 2019 and June 30, 2019
The Company’s total assets decreased $7.8 million (2%), to $397.2 million at September 30, 2019, from $405.0 million at June 30, 2019.
Cash and cash equivalents increased $9.0 million (62%) to $23.7 million at September 30, 2019, from $14.6 million at June 30, 2019, due to the pay-down of loans, offset by a decrease in deposits.
Loans, net of allowance, decreased $17.1 million (5%) to $302.2 million at September 30, 2019, from $319.3 million at June 30, 2019. These decreases were $$7.1 million in mortgage loans, of which $4.2 million was from the ARM participation loans, and $9.9 million in commercial loans.
The allowance for loan losses was $2.6 million, or 0.86% of total loans, at September 30, 2019, as compared to $2.6 million, or 0.82% of total loans, at June 30, 2019. In addition to the allowance for loan losses, net purchase discount on acquired loans was $654,000 at September 30, 2019 compared to $772,000 at June 30, 2019. 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 $2.1 million, or 0.70% of outstanding loans, at September 30, 2019 compared to $1.2 million or 0.37%, at June 30, 2019.
Other real estate owned (“OREO”) did not change from $297,000 at June 30, 2019. The property is recorded at fair value, less estimated costs to sell.
The Deferred Tax Asset (“DTA”) decreased $458,000 (6%) to $7.7 million at September 30, 20190, from $8.2 million at June 30, 2019. The Bank has a $330,000 valuation allowance for the State of Illinois DTA as of September 30, 2019. The Company increased the DTA valuation allowance an additional $30,000 for the quarter as a result of the first quarter performance and updated forecasting.
Total deposits decreased $7.0 million (2%) to $340.9 million at September 30, 2019, from $347.9 million at June 30, 2019. The decrease was $5.0 million in certificates of deposit maturing and a decrease in $1.4 million of money market accounts.
Notes payable decreased $375,000 (3%) due to principal repayments on holding company debt, which totaled $10.9 million at quarter end. The note is amortizing in full over eight years with quarterly payments of $375,000 in principal reduction and interest at the rate of 0.15% below the Wall Street Journal Prime Rate.
Total stockholders’ equity increased $1.2 million (3%), to $41.1 million at September 30, 2019, from $39.8 million at June 30, 2019, which was primarily a result of the net income of $797,000 earned in the period and the increase in the unrealized gain in equity of $371,000 (151%).
In the quarter ended September 30, 2019, the Bank paid a cash dividend to the Company of $1.3 million.
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, 2019, the Bank exceeded each of these requirements with ratios of 10.18%, 15.61%, 15.61% and 16.64%, respectively.
At September 30, 2019, the book value per common share was $16.04 compared to the book value per common share of $15.65 at June 30, 2019, for shares outstanding of 2,561,651 and 2,507,112, respectively. The tangible book value per share was $15.05 at September 30, 2019, compared to tangible book value per share of $14.64 at June 30, 2019.
The complete audited consolidated financial statements for fiscal years ended 2019 and 2018 are available at www.royalbankweb.com
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 Chicagoland area since 1887, and currently has nine branches 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.
Mr. Leonard Szwajkowski
President and CEO
Telephone: (773) 382-2111
E-mail: [email protected]
| Royal Financial, Inc. and Subsidiary | ||||||
| Consolidated Statements of Financial Condition | ||||||
| September 30, 2019 and June 30, 2019 | ||||||
| (Unaudited) | ||||||
| September 30, 2019 | June 30, 2019 | |||||
| Assets | ||||||
| Cash and non-interest bearing balances in financial institutions | $ | 3,052,098 | $ | 3,092,057 | ||
| Interest bearing balances in financial institutions | 20,543,679 | 11,242,481 | ||||
| Federal funds sold | 109,229 | 271,189 | ||||
| Total cash and cash equivalents | $ | 23,705,007 | $ | 14,605,727 | ||
| Investment certificates of deposit | $ | 1,840,000 | $ | 1,840,000 | ||
| Securities available for sale | 39,776,177 | 39,310,395 | ||||
| Loans Receivable, net of Allowance for loan losses of $2,618,268 at September 30, 2019 and $2,645,045 at June 30, 2019 | 302,186,768 | 319,325,977 | ||||
| Federal Home Loan Bank Stock | 836,300 | 836,300 | ||||
| Premises and equipment, net | 15,513,619 | 14,856,772 | ||||
| Accrued interest receivable | 1,462,865 | 1,464,514 | ||||
| Other real estate owned | 297,544 | 297,544 | ||||
| Deferred tax asset | 7,701,704 | 8,159,750 | ||||
| Core deposit intangibles | 784,626 | 819,833 | ||||
| Goodwill | 1,755,189 | 1,755,189 | ||||
| Other assets | 1,364,920 | 1,715,633 | ||||
| Total Assets | $ | 397,224,720 | $ | 404,987,634 | ||
| Liabilities & Stockholders Equity | ||||||
| Deposits | $ | 340,893,912 | $ | 347,897,715 | ||
| Advances from borrowers for taxes and insurance | $ | 2,524,881 | 4,777,979 | |||
| Notes payable | $ | 10,875,000 | 11,250,000 | |||
| Accrued interest payable and other liabilities | $ | 1,846,005 | 1,225,537 | |||
| Total Liabilities | $ | 356,139,798 | $ | 365,151,231 | ||
| Stockholder’s 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, 2019 and 2018 | 26,450 | 26,450 | ||||
| Additional Paid-In Capital | 23,666,572 | 23,676,229 | ||||
| Retained Earnings | 17,110,304 | 16,313,278 | ||||
| Treasury Stock, 83,349 shares as of September 30, 2019 and 99,948 shares as of June 30, 2019, at cost | (333,956 | ) | (424,384 | ) | ||
| Unrealized Gain in Equity | 615,551 | 244,830 | ||||
| Total Capital | $ | 41,084,922 | $ | 39,836,403 | ||
| Total Liabilities and Stockholder’s Equity | $ | 397,224,720 | $ | 404,987,634 | ||
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 Months Ended September 30, 2019 and 2018 | ||||||
| (Unaudited) | ||||||
| Quarters Ended September 30, | ||||||
| 2019 | 2018 | |||||
| Interest income | ||||||
| Loans, including fees | $ | 4,211,376 | $ | 4,232,844 | ||
| Securities | 250,985 | 269,713 | ||||
| Federal funds sold and other | 89,297 | 16,342 | ||||
| Total interest income | 4,551,658 | 4,518,899 | ||||
| Interest expense | ||||||
| Deposits | 992,277 | 628,095 | ||||
| Borrowings | 142,924 | 216,206 | ||||
| Total interest expense | 1,135,201 | 844,301 | ||||
| Net interest income | $ | 3,416,457 | $ | 3,674,598 | ||
| Provision for loan losses | – | 150,000 | ||||
| Net interest income after provision for loan losses | $ | 3,416,457 | $ | 3,524,598 | ||
| Non-interest income | ||||||
| Service charges on deposit accounts | 167,261 | 179,668 | ||||
| Secondary mortgage market fees | 9,022 | 51,411 | ||||
| Rental Income | 59,135 | 31,371 | ||||
| Other | 162 | 292 | ||||
| Total non-interest income | 235,580 | 223,957 | ||||
| Non-interest expense | ||||||
| Salaries and employee benefits | 1,183,077 | 1,116,804 | ||||
| Occupancy and equipment | 503,000 | 513,172 | ||||
| Data processing | 218,873 | 174,279 | ||||
| Professional services | 163,313 | 188,786 | ||||
| Director fees | 42,000 | 46,200 | ||||
| Marketing | 24,235 | 16,870 | ||||
| FDIC insurance expense (income) | (3,187 | ) | 38,275 | |||
| Insurance premiums | 22,548 | 23,994 | ||||
| Other real estate owned expense, net | 7,879 | 9,821 | ||||
| Acquisition expense | 12,885 | 7,510 | ||||
| Core deposit intangibles amortization | 35,207 | 35,207 | ||||
| Other | 285,681 | 222,098 | ||||
| Total non-interest expense | 2,495,511 | 2,393,015 | ||||
| Income before income taxes | $ | 1,156,526 | $ | 1,394,325 | ||
| Provision for income taxes | 359,500 | 426,530 | ||||
| Net Income | $ | 797,026 | $ | 967,795 | ||
| Basic earnings per share | $ | 0.31 | $ | 0.39 | ||
| Diluted earnings per share | $ | 0.31 | $ | 0.38 | ||
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.