Markets Wired

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:  lszwajkowski@royal-bank.us

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.