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Royal Financial, Inc. Announces Second Quarter Earnings for Fiscal Year 2020

CHICAGO, Jan. 14, 2020 (GLOBE NEWSWIRE) -- Royal Financial, Inc. (the “Company”) (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 second quarter end of fiscal year 2020.

Net Income for the second quarter of fiscal year 2020 was $782,000 or $0.31 per common share, compared to net income of $1.0 million, or $0.40 per common share, in the same period of fiscal 2019.

The Company also reported total assets of $407.5 million and stockholders’ equity of $41.6 million as of December 31, 2019.  As of the same date, the Company’s book value per share was $16.28 and tangible book value per share was $15.30.

Comparison of Results of Operation for the Three Months Ended December 31, 2019 and 2018

The Company reported net income of $782,000 for the second quarter of fiscal 2020, a decrease of $223,000 (22%) compared to net income of $1.0 million for the second quarter of fiscal 2019. Net income for the six months ended December 31, 2019 was $1.6 million, a decrease of $394,000 (20%) from the same period of fiscal 2019. The decrease in net income is a result of lower interest income and increases in interest expense and non-interest expense.

Net interest income for the quarter ended December 31, 2019 was $3.4 million, a decrease of $132,000 (4%) from the prior fiscal year. This decrease in net interest income is a result of a decrease in interest income for loans, including fees, by $133,000 (3%) due to decreases in the loan portfolio and a decrease in interest income for securities of $29,000 (10%) due to maturities in the securities portfolio from the prior fiscal year. These decreases in interest income were offset by an increase of $64,000 (350%) in interest income from federal funds sold due to larger cash balances retained by the Company leading to a net decrease in total interest income of $98,000 (2%). Total interest expense also increased by $34,000 (4%) for the three months ended December 31, 2019.  Interest expense for deposits increased $138,000 (18%) but was offset by a decrease in borrowings of $103,000 (47%). The decrease in borrowings is due to the Company having no outstanding FHLB borrowings and a reduction in the holding company loan. 

Total non-interest income decreased $52,000 (20%) from December 31, 2018. The decrease was caused by decreases in service charges on deposit accounts of $21,000 (12%), decreases in secondary mortgage market fees of $43,000 (76%) as a result of the Company retaining more one-to-four family mortgages, and a loss on the sale of two Company vehicles of $8,000, offset by an increase in rental income of $20,000 (64%).

The Company did not fund the allowance for loan losses this quarter.

Total non-interest expense was $2.4 million at the end of December 31, 2019, an increase of $136,000 (6%) from the prior fiscal year. This increase in expense is the result of an increase in acquisition expense of $87,000 (449%), an increase in data processing charges of $32,000 (16%), and an increase in marketing expenditures of $22,000 (333%). These increases were offset by a credit for the Federal Deposit Insurance Corporation Assessment fees during the second quarter of fiscal year 2020, which decreased the expense by $44,000 (121%) from the prior year.

For quarter end December 31, 2019, the provision for income taxes was $379,500, a decrease of $22,000 (5%) from the prior year.

Comparison of Financial Condition at December 31, 2019 and June 30, 2019

The Company’s total assets increased $2.5 million (1%) to $407.5 million at December 31, 2019, from $404.9 million at June 30, 2019.

Cash and cash equivalents increased $15.6 million (107%), to $30.2 million at December 31, 2019 from $14.6 million at June 30, 2019.  The increase in cash and cash equivalents is the result of loan pay-offs, the maturity of investment certificates of deposit throughout the quarter, and an increase in deposits.

Investment Certificates of Deposit decreased $988,000 (54%) to $852,000 at December 31, 2019 as a result of normal maturities.

Loans, net of allowance for loan losses, decreased $11.7 million (4%), to $307.6 million at December 31, 2019 from $319.3 million at June 30, 2019. Mortgage loans decreased $11.2 million, of which $9.8 million were participation loans, and commercial loans decreased $1.1 million, which was offset by an increase in commercial participations of $688,000.

The allowance for loan losses was $2.5 million, or 0.81% of total loans, at December 31, 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 $582,000 at December 31, 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 $1.2 million, or 0.38% of outstanding loans, at December 31, 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 $773,000 (9%) to $7.4 million at December 31, 2019, from $8.2 million at June 30, 2019. The Bank has a $378,000 valuation allowance for the State of Illinois DTA as of December 31, 2019. The Company increased the DTA valuation allowance an additional $48,000 for the quarter as a result of the current year to date performance and updated forecasting.

The Core Deposit Intangibles (“CDI”) held by the Company decreased $70,000 (9%) to $749,000 as of December 31, 2019.

Total deposits increased $1.7 million to $349.6 million at December 31, 2019, from $347.9 million at June 30, 2019. The increase was primarily due to the increase in certificate of deposits of $3.4 million as a result of the Company’s new certificate product, an increase of $1.3 million in money markets, offset by a decrease of $2.0 million in non-interest checking accounts and $1.6 million in individual retirement accounts.

Notes payable decreased $1.75 million (16%) due to a special $1.0 million principal payment and normal principal repayments on holding company debt, which totaled $9.5 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 $1.8 million, to $41.6 million at December 31, 2019 from $39.8 million at June 30, 2019, which was primarily the result of an increase of $1.6 million in retained earnings and an increase of $129,000 in unrealized gain in equity.

For the six months ended December 2019, the Bank paid cash dividends of $2.2 million.  The upstream of funds enabled the Company to make debt and interest payments on its notes payable, as well as pay general business expenses for fiscal 2020.

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 December 31, 2019, the Bank exceeded each of these requirements with ratios of 10.33%, 15.78%, 15.78% and 16.77%, respectively.

In August, 2019, the Board of Directors authorized a stock repurchase program for up to 76,849 shares of its outstanding common stock. No repurchases were made in the first quarter of fiscal year 2020. In the second quarter of fiscal year 2020, the Company repurchased 7,633 shares at a weighted average price of $16.12 which is an average of 106.3% of tangible book value as of December 31, 2019. The repurchased shares are held in treasury stock.

In addition, during the quarter, Mr. Szwajkowski, the Company President and CEO, exercised 2,500 vested options from the 2018 Equity Plan.  The 2019 exercise of Mr. Szwajkowski’s 2,500 options was issued from the Company treasury which now totals 88,482 shares and Company outstanding shares now total 2,556,518 as of December 31, 2019.

In October, 2019, the Company announced the definitive purchase and assumption agreement to acquire two Illinois State Bank branch banking centers located in Lake in the Hills, Illinois, and McHenry, Illinois. The Company has completed the required regulatory applications and continues to work on the transaction, which is anticipated to be completed in first quarter 2020.

At December 31, 2019, the book value per common share, shares outstanding of 2,556,518, was $16.28 compared to the book value per common share of $15.65 at June 30, 2019, for shares outstanding of 2,507,112.  The tangible book value per share was $15.30 at December 31, 2019, compared to tangible book value per share of $14.64 at June 30, 2019. 

The complete audited consolidated financial statements for 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
.

Contact:  Mr. Leonard Szwajkowski
President and CEO
Royal Financial, Inc.
Telephone:  (773) 382-2111
E-mail:  lszwajkowski@royal-bank.us

Royal Financial, Inc. and Subsidiary
Consolidated Statements of Financial Condition
December 31, 2019 and June 30, 2019
(Unaudited)
     
  December 31, 2019 June 30, 2019
     
Assets    
     
Cash and non-interest bearing balances in financial institutions $ 3,681,568   $ 3,092,057  
Interest Bearing Financial Institutions   26,368,740     11,242,481  
Federal Funds Sold   147,058     271,189  
Total Cash and Cash Equivalents $ 30,197,367   $ 14,605,727  
     
Investment Certificates of Deposit $ 852,000   $ 1,840,000  
Securities available for sale   39,191,828     39,310,395  
Loans Receivable, net of Allowance for loan losses   307,628,866     319,325,977  
of $2,527,551 at December 31, 2019, $2,654,045 at June 30, 2019    
Federal Home Loan Bank Stock   836,300     836,300  
Premises & Equipment, net   15,585,983     14,856,772  
Accrued Interest Receivable   1,431,523     1,464,514  
Other Real Estate Owned   297,544     297,544  
Deferred Tax Asset   7,386,422     8,159,750  
Core Deposit Intangible   749,419     819,833  
Goodwill   1,755,189     1,755,189  
Other Assets   1,620,780     1,715,633  
Total Assets $ 407,533,222   $ 404,987,634  
     
     
Liabilities & Stockholders Equity    
Total Deposits $ 349,555,800   $ 347,897,715  
Advances from Borrowers for Taxes and Insurance   5,042,810     4,777,979  
Notes Payable   9,500,000     11,250,000  
Accrued Interest Payable and Other Liabilities   1,818,387     1,225,537  
Total Liabilities $ 365,916,997   $ 365,151,231  
     
Stockholder's Equity    
Common Stock $ 26,450   $ 26,450  
Additional Paid-In Capital   23,773,586     23,676,229  
Retained Earnings   17,892,590     16,313,278  
Treasury Stock   (450,370 )   (424,384 )
Unrealized G/L in Equity   373,969     244,830  
Total Capital $ 41,616,225   $ 39,836,403  
     
Total Liabilities and Stockholder's Equity $ 407,533,222   $ 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 and Six months ended December 31, 2019 and 2018
(Unaudited)
               
  Three Months Ended
December 31,

  Six Months Ended
December 31,

  2019
  2018   2019
  2018
               
Interest income              
Loans, including fees $ 4,060,435     $ 4,193,572   $ 8,271,812     $ 8,426,417
Securities   245,387       273,944     496,371       543,658
Federal funds sold and other   82,156       18,259     171,453       34,601
Total interest income   4,387,978       4,485,776     8,939,636       9,004,675
               
Interest expense              
Deposits   904,666       766,867     1,896,943       1,394,963
Borrowings   116,258       219,596     259,182       435,801
Total interest expense   1,020,924       986,463     2,156,125       1,830,764
               
Net interest income   3,367,054       3,499,313     6,783,511       7,173,911
               
Provision for loan losses   -       75,000     -       225,000
               
Net interest income after provision for loan losses   3,367,054       3,424,313     6,783,511       6,948,911
               
Non-interest income              
Service charges on deposit accounts   153,730       175,095     320,991       354,763
Secondary mortgage market fees   13,598       56,186     22,620       107,596
Rental Income   51,900       31,727     111,035       63,098
Gain (Loss) on sale of fixed assets   (8,185 )     -     (8,185 )     -
Other   304       255     466       547
Total non-interest income   211,347       263,262     446,927       526,004
               
Non-interest expense              
Salaries and employee benefits   1,100,559       1,086,814     2,283,636       2,203,618
Occupancy and equipment   512,225       499,213     1,015,225       1,012,385
Data processing   228,770       196,987     447,642       371,265
Professional services   123,551       120,427     286,865       309,212
Director fees   42,000       46,200     84,000       92,400
Marketing   29,059       6,706     53,294       23,576
FDIC insurance expense (income)   (7,508 )     36,412     (10,695 )     74,687
Insurance premiums   23,093       24,344     45,641       48,339
Other Real Estate Owned Expense (income), net   11,390       5,862     19,269       12,970
Acquisition Expense   106,571       19,403     119,456       26,913
Core Deposit Intangibles Amortization   35,207       35,207     70,413       70,413
Other   211,699       203,483     497,380       428,292
Total non-interest expense   2,416,616       2,281,057     4,912,127       4,674,071
               
Income before income taxes   1,161,785       1,406,519     2,318,312       2,800,844
               
Provision for income taxes   379,500       401,000     739,000       827,530
Net Income (Loss) $ 782,285     $ 1,005,519   $ 1,579,312     $ 1,973,314
               
Basic earnings per share $ 0.31     $ 0.40   $ 0.62     $ 0.78
Diluted earnings per share $ 0.30     $ 0.39   $ 0.61     $ 0.77
               
               
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.