CHICAGO, July 26, 2019 (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"), announces the preliminary earnings results and statement of condition for the fiscal year ended 2019.
Net income for the fourth quarter of fiscal 2019 was $874,000, or $0.34 per share, compared to $1.2 million, or $0.50 per share, for the same period in 2019. Net income for the year ended June 30, 2019, was $3.7 million, or $1.46 per share, compared to $1.7 million, or $0.69 per share in 2019.
The Company also reported total assets of $404.9 million and stockholders' equity of $39.8 million as of June 30, 2019. As of the same date, the Company's book value per share was $15.65 and tangible book value per share was $14.64.
Comparison of Results of Operations for the Quarters Ended June 30, 2019 and June 30, 2018
Net income for the quarter ended June 30, 2019 was $874,000 or $0.34 per share, a decrease in net income of $371,000 (30%) from June 30, 2018.
Net interest income decreased by $196,000 (5%) from the quarter ended June 30, 2018. The decrease in net interest income was the result of an increase in loan income by $286,000 (7%) to $4.3 million, offset by an increase in deposit and borrowings cost of funds of $432,000 (58%) to $1.2 million.
Total non-interest income increased $11,000 (5%) to $235,000, from the same period last year. The Company recognized an increase in rental income of $16,000 (44%) as a result of the rental of unused office space at the branches.
The Company did not fund the allowance for loan losses for the quarter ended June 30, 2019.
Total non-interest expense increased $64,000 (3%) compared to the same period last year. The increase in non-interest expense was driven by increases in data processing of $41,000 (22%) to $232,000, professional services of $60,000 (57%) to $167,000 and acquisition expense of $49,000 (149%) to $16,000. These increases were offset by decreases in occupancy and equipment of $104,000 (21%) to $401,000 and FDIC insurance expense of $11,000 (24%) to $36,000.
During the quarter ended June 30, 2019, the Company increased the State of Illinois Deferred Tax Asset ("DTA") valuation allowance by $100,000, for a total valuation allowance of $300,000. The Company increased the valuation allowance based on the fiscal 2019 performance and updated forecasting.
Comparison of Results of Operations for the Fiscal Years Ended June 30, 2019 and 2018
Net income for the fiscal year ended June 30, 2019 was $3.7 million, an increase of $1.9 million (113%) from June 30, 2018. Net interest income for the fiscal year ended 2019 increased $847,000 (6%) to $14.0 million. The primary driver for the increase in net interest income was a $2.7 million (19%) increase in loan interest income and fees. The increase in interest income was offset by a $1.4 million (74%) increase in interest expense on deposits and a $212,000 (37%) increase in interest expense on borrowings due to rising cost of funds.
The provision for loan losses in 2019 decreased $495,000 (69%) from the prior year. In 2018, the Company increased the provisions for the allowance for loan losses to provide for the increased growth in the loan portfolio due to the purchase of one-to-four family participation loans.
Non-interest income for the year ended 2019 was $984,000, an increase of $111,000 (13%) from the previous year. The increase in non-interest income was primarily a result of the increase in service charges of $84,000 (14%) to $676,000, secondary mortgage market income of $32,000 (26%) to $155,000, and rental income of $14,000 (10%) to $151,000. Services charges increased as the result of an increase in fees and rental income increased as the Company rented out unused space in the Bank's branches. Non-interest income for the year ended 2018 included $36,000 of net losses on the sale of securities available for sale which the Company did not incur in fiscal 2019.
Non-interest expense decreased $267,000 (3%) for fiscal year 2019. The decrease in non-interest expense is primarily due to a decrease of $624,000 (93%) in acquisition expenses and a decrease of $39,000 (59%) in foreclosed asset expense, offset by increases in occupancy and equipment of $86,000 (5%) as the result of two additional branches to maintain, an increase in data processing of $55,000 (7%) is the result of the increase in customer base from the recent acquisition and additional users of the Company's online banking platform, as well as improvements to the Company's banking products and technology, and an increase in professional services of $186,000 (43%) related to an increase in audit fees, an increase in legal services, ongoing outside consultant work related to marketing and information technology (IT), and an increase in supervisory exam fees.
For the fiscal year ended 2019, the provision for income taxes was $1.7 million compared to $1.9 million for the same period in 2018.
Comparison of Financial Condition at June 30, 2019 and June 30, 2018
The Company's total assets decreased $8.2 million (2%), to $404.9 million at June 30, 2019, from $413.2 million at June 30, 2018.
Securities available for sale decreased $3.6 million (8%), to $39.3 million at June 30, 2019 from $42.9 million at June 30, 2018. The decrease is the result of a $5.0 million agency bond maturing, offset by the increase of $1.3 million in the unrealized gain in the portfolio.
Loans, net of allowance for loan losses, decreased $3.5 million (1%), to $319.3 million at June 30, 2019, from $322.9 million at June 30, 2018. The decrease was the result of pay downs in the mortgage loan portfolio, offset by increased lending in the commercial loan portfolio.
The allowance for loan losses was $2.6 million, or 0.82% of total loans, at June 30, 2019, as compared to $2.4 million, or 0.73% of total loans, at June 30, 2018. In addition to the allowance for loan losses, net purchase discount on acquired loans was $772,000 at June 30, 2019 compared to $1.0 million at June 30, 2018. Individual loan discounts are being accreted into interest income over the life of the loan; however, they can offset loan losses upon loan default. Nonperforming loans totaled $1.2 million, or 0.37% of outstanding loans, at June 30, 2019 compared to $899,000, or 0.28%, at June 30, 2018.
Other real estate owned (OREO) decreased $8,000 to $297,000 at June 30, 2019, from $305,000 at June 30, 2018. The property is recorded at fair value, less estimated costs to sell.
The DTA decreased by $2.0 million (20%) from $10.4 million on June 30, 2018, to $8.4 million on June 30, 2019. The Company increased the valuation allowance for State of Illinois DTA during the quarter ended June 30, 2019 an additional $100,000 based on the fiscal 2019 performance and updated forecasting. The valuation allowance as of June 30, 2019 is $300,000.
The Core Deposit Intangibles ("CDI") held by the Company decreased $324,000 (28%) as of June 30, 2019. The decrease was the result of a full year of amortization of the CDI of $141,000 and due to the fair value re-measurement of the acquisition Washington Federal Bank for Savings deposits which decreased the CDI by $183,000 and increased Goodwill by $183,000 to $1.8 million.
Total deposits increased $6.6 million (2%), to $347.9 million at June 30, 2019 from $341.3 million at June 30, 2018. The increase was primarily due to the increase in money market accounts, offset by a decrease in time deposits.
As of June 30, 2019, the Company had no Federal Home Loan Bank advances outstanding.
Notes payable decreased by $2.3 million (17%) to $11.3 million as of June 30, 2019. In October, the loan was restructured from two separate notes payable into one note. The new note will amortize 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 $5.3 million (15%), to $39.8 million at June 30, 2019 from $34.5 million at June 30, 2018. The increase is primarily a result of net income of $3.7 million (29%) and an increase in unrealized gain in equity of $1.3 million (122%).
For the fiscal year ended June 30, 2019, the Bank paid cash dividends of $4.5 million to the Company. The upstream of funds enabled the Company to make debt and interest payments on its notes payable, as well as pay general business expenses and retain cash for fiscal 2020.
To meet the minimum requirement to be well capitalized under prompt corrective action regulations, the Bank is required to maintain regulatory capital sufficient to meet Tier 1 capital leverage ratio, and risk-based ratios for Common Equity Tier 1 capital, Tier 1 capital and Total capital of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. At June 30, 2019, the Bank exceeded each of its capital requirements with ratios of 9.93%, 15.04%, 15.04% and 16.06%, respectively.
At June 30, 2019, the book value per common share, shares outstanding of 2,545,052, was $15.65 compared to the book value per common share of $13.77 at June 30, 2018, for shares outstanding of 2,507,112. The tangible book value per share was $14.64 at June 30, 2019, compared to tangible book value per share of $12.69 at June 30, 2018.
The audited consolidated financial statements for 2018 and 2017 are available at www.royal-bank.us. We expect the audited consolidated financial statements for 2019 to be available early September 2019.
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 the south and southeast communities of Chicago since 1887, and currently has nine 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.
Contact: Mr. Leonard Szwajkowski
President and CEO
Telephone: (773) 382-2111
E-mail: lszwajkowski@royal-bank.us
| Royal Financial, Inc. and Subsidiary | |||||||||||||
| Consolidated Statements of Operations | |||||||||||||
| Quarters and Year Ended June 30, 2019 and 2018 | |||||||||||||
| (Unaudited) | |||||||||||||
| Quarters Ended June 30, | Years Ended June 30, | ||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||
| Interest income | |||||||||||||
| Loans, including fees | $ | 4,276,352 | $ | 3,990,242 | $ | 16,958,011 | $ | 14,250,158 | |||||
| Securities | 248,811 | 353,806 | 1,050,924 | 1,197,494 | |||||||||
| Federal funds sold and other | 73,047 | 17,523 | 137,360 | 220,046 | |||||||||
| Total interest income | 4,598,210 | 4,361,571 | 18,146,295 | 15,667,698 | |||||||||
| Interest expense | |||||||||||||
| Deposits | 1,024,957 | 507,908 | 3,331,098 | 1,911,337 | |||||||||
| Borrowings | 151,101 | 235,879 | 781,926 | 570,116 | |||||||||
| Total interest expense | 1,176,058 | 743,787 | 4,113,024 | 2,481,453 | |||||||||
| Net interest income | 3,422,153 | 3,617,784 | 14,033,271 | 13,186,245 | |||||||||
| Provision for loan losses | - | 75,000 | 225,000 | 720,000 | |||||||||
| Net interest income after provision for loan losses | 3,422,153 | 3,542,784 | 13,808,271 | 12,466,245 | |||||||||
| Non-interest income | |||||||||||||
| Service charges on deposit accounts | 161,150 | 162,311 | 676,538 | 592,389 | |||||||||
| Secondary mortgage market fees | 23,224 | 26,402 | 155,203 | 123,466 | |||||||||
| Rental income | 50,493 | 34,987 | 151,232 | 137,443 | |||||||||
| Gain on sale of other real estate owned | - | - | - | 5,442 | |||||||||
| Loss on sale of investment securities | - | - | - | (36,067 | ) | ||||||||
| Other | 267 | 257 | 1,082 | 55,934 | |||||||||
| Total non-interest income | 235,135 | 223,957 | 984,055 | 878,607 | |||||||||
| Non-interest expense | |||||||||||||
| Salaries and employee benefits | 1,078,460 | 1,070,409 | 4,452,645 | 4,427,479 | |||||||||
| Occupancy and equipment | 401,329 | 505,747 | 1,933,001 | 1,846,528 | |||||||||
| Data processing | 231,535 | 190,349 | 807,035 | 752,162 | |||||||||
| Professional services | 166,836 | 106,507 | 618,623 | 433,016 | |||||||||
| Director fees | 52,800 | 45,000 | 196,800 | 172,000 | |||||||||
| Marketing | 9,816 | 11,623 | 43,158 | 49,824 | |||||||||
| FDIC insurance expense | 36,412 | 47,794 | 152,049 | 155,595 | |||||||||
| Insurance premiums | 21,308 | 23,994 | 97,396 | 101,098 | |||||||||
| Foreclosed Asset expense | 7,732 | 4,882 | 27,478 | 71,697 | |||||||||
| Acquisition Expense | 16,242 | (33,132 | ) | 49,772 | 673,968 | ||||||||
| Core Deposit Intangibles Amortization | 35,207 | 35,207 | 140,827 | 123,412 | |||||||||
| Other | 237,447 | 223,148 | 911,832 | 890,877 | |||||||||
| Total non-interest expense | 2,295,125 | 2,231,528 | 9,430,615 | 9,697,656 | |||||||||
| Income before income taxes | 1,362,162 | 1,535,213 | 5,361,711 | 3,647,196 | |||||||||
| Income tax expense | 488,000 | 289,831 | 1,657,530 | 1,909,195 | |||||||||
| Net Income | $ | 874,162 | $ | 1,245,382 | $ | 3,704,181 | $ | 1,738,001 | |||||
| Basic earnings per share | $ | 0.34 | $ | 0.50 | $ | 1.46 | $ | 0.69 | |||||
| Diluted earnings per share | $ | 0.34 | $ | 0.49 | $ | 1.43 | $ | 0.68 | |||||
| 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 Financial Condition | ||||||
| Fiscal Years Ending June 30, 2019 and 2018 | ||||||
| (Unaudited) | ||||||
| June 30, 2019 | June 30, 2018 | |||||
| Assets | ||||||
| Cash and non-interest bearing balances in financial institutions | $ | 3,092,057 | $ | 2,825,543 | ||
| Interest bearing balances in financial institutions | 11,242,481 | $ | 11,357,538 | |||
| Federal funds sold | 271,189 | $ | 45,159 | |||
| Total cash and cash equivalents | $ | 14,605,727 | $ | 14,228,240 | ||
| Investment certificates of deposit | $ | 1,840,000 | $ | 1,844,000 | ||
| Securities available for sale | 39,310,395 | 42,863,407 | ||||
| Loans Receivable, net of Allowance for loan losses | 319,325,977 | 322,859,548 | ||||
| of $2,645,045 at June 30, 2019, $2,388,428 at June 30, 2018 | ||||||
| Federal Home Loan Bank Stock | 836,300 | 724,100 | ||||
| Premises and equipment, net | 14,856,772 | 14,810,797 | ||||
| Accrued interest receivable | 1,464,514 | 1,354,267 | ||||
| Other real estate owned | 297,544 | 305,311 | ||||
| Deferred tax asset | 8,359,005 | 10,406,528 | ||||
| Core deposit intangibles | 819,833 | 1,143,504 | ||||
| Goodwill | 1,755,189 | 1,572,344 | ||||
| Other assets | 1,516,378 | 1,116,626 | ||||
| Total Assets | $ | 404,987,634 | $ | 413,228,672 | ||
| Liabilities & Stockholders Equity | ||||||
| Deposits | $ | 347,897,715 | $ | 341,320,935 | ||
| Advances from borrowers for taxes and insurance | 4,777,979 | 3,691,202 | ||||
| Federal Home Loan Bank advances | - | 19,000,000 | ||||
| Notes payable | 11,250,000 | 13,500,000 | ||||
| Accrued interest payable and other Lliabilities | 1,225,537 | 1,298,479 | ||||
| Total Liabilities | $ | 365,151,231 | $ | 378,810,616 | ||
| 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 | 23,676,229 | 24,012,821 | ||||
| Retained Earnings | 16,313,278 | 12,609,097 | ||||
| Treasury Stock, 99,948 shares in 2019 and | ||||||
| 137,888 shares in 2018, at cost | (424,384 | ) | (1,012,925 | ) | ||
| Unrealized G/L in Equity | 244,830 | (1,104,337 | ) | |||
| Total Capital | $ | 39,836,403 | $ | 34,531,106 | ||
| Total Liabilities and Stockholder's Equity | $ | 404,987,634 | $ | 413,228,672 | ||
| 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. | ||||||
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