Market Overview

Royal Financial, Inc. Announces Third Quarter and Year to Date Earnings for Fiscal Year 2019


CHICAGO, April 12, 2019 (GLOBE NEWSWIRE) -- Royal Financial, Inc. (the "Company") (OTCQX:RYFL), incorporated under the laws of Delaware on March 15, 2004, for the purpose of serving as the holding company of Royal Savings Bank (the "Bank"), announced earnings for the third quarter of fiscal year 2019.

The Company reported net income of $857,000, or $0.34 per common share, for the quarter and $2.8 million or $1.11 per common share, for the nine-month year-to-date ("YTD") period, respectively, ended March 31, 2019. 

The Company also reported total assets of $407.3 million and stockholders' equity of $38.3 million as of March 31, 2019.  As of the same date, the Company's book value per share was $15.06 and tangible book value per share was $14.03.

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

Net income of $857,000 for the quarter decreased by $8,000 from $865,000 during the same period last year, and net income of $2.8 million for the YTD period increased by $2.3 million from $493,000 during the same period last year.

Net interest income for the quarter decreased by $68,000 (2%) to $3.4 million from the same period last year resulting from an increase in interest income on loans (including fees) by $635,000 (18%) to $4.2 million, offset by decreases in interest income on investment securities by $205,000 (44%), decreases in federal funds sold and other sources by $113,000 (79%), and an increase in interest expense by $385,000 (53%). The increase in loan interest income and fees resulted from organic loan growth, as well as, the prior year's purchases of participations in one-to-four family loans and adjustable-rate mortgages. The Company recognized an entire year's worth of the income from these participations. The decrease in interest income on investment securities was the result of taxable agency securities and municipals maturing. The increase in interest expense resulted from an increased cost of funds for customer deposits and other liabilities.

Non-interest income for the quarter increased by $31,000 (16%) to $223,000 from the same period last year resulting from an increase in income from service charges on deposit accounts of $8,000 (5%) to $161,000 off set by a decrease in secondary mortgage market fees of $10,000 (30%) to $24,000, and a decrease in rental income of $3,000 (7%) to $38,000 from $41,000. However, total non-interest income did increase $100,000 for the nine-months ended March 31, 2019. This was a result of an increase in service charge income of $85,000 (20%), an increase in secondary mortgage market fees of $35,000 (36%), offset by a decrease in other income of $55,000 related to a one-time reversal of fees related to the PNA Bank acquisition and a loss on the sale of securities of $36,000 which the Bank did not incur in the current fiscal year. 

The Company provided $375,000 to the ALLL in response to growth in the loan portfolio for the quarter ended March 31, 2018. This quarter, the Company did not fund the ALLL due to the minimal risk in the loan portfolio and the decrease in loan growth.   

Non-interest expense for the quarter decreased by $71,000 (3%) to $2.5 million from the same period last year resulting from the elimination of added expenses due to the Washington Federal ("WaFed") acquisition and integration expenses that were incurred last year: data processing expense decreased by $43,000 (17%) to $204,000; one-time merger-related expenses decreased by $44,000 (87%), salaries and employee benefits decreased $17,000 (1%) and building occupancy costs by $19,000 (3%) which was the result of lower rent expense, offset by increases in real estate taxes and building depreciation related to the two new locations.  The Bank completed the conversion of core data processing systems on April 20, 2018, which has improved customer service and eliminated the expense associated with the operation of duplicate data processing systems. These decreases were offset by an increase in professional services of $59,000 (71%) related to an increase in audit fees, ongoing outside consultant work related to marketing and information technology (IT), and an increase in supervisory exam fees.   

Comparison of Financial Condition at March 31, 2019 and June 30, 2018

The Company's total assets decreased by $5.9 million (1%) from $413.2 million on June 30, 2018, to $407.3 million on March 31, 2019.

Cash and cash equivalents decreased by $976,000 (7%) from $14.2 million on June 30, 2018, to $13.3 million on March 31, 2019.

Securities available for sale decreased by $4.0 million (10%) from $42.9 million at June 30, 2018, to $38.7 million at March 31, 2019, resulting from the maturity of a $5.0 million taxable agency, offset by a $1.0 improvement in the valuation reserves for the agencies and municipals.   

Loans, net of allowance for loan losses, increased $498,000, to $323.4 million at March 31, 2019 from $322.9 million at June 30, 2018, primarily due to an increase in commercial loan growth offset by pre-payments and normal payments of one-to-four family mortgage loans.

The allowance for loan losses was $2.7 million, or 0.83% of total loans, at March 31, 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 $856,000 at March 31, 2019 compared to $1.0 million at June 30, 2018.  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 $705,000, or 0.22% of outstanding loans, at March 31, 2019 compared to $899,000 or 0.28%, at June 30, 2018. 

Other real estate owned ("OREO") decreased by $8,000 (3%) from $305,000 on June 30, 2018, to $298,000 on March 31, 2019. As of March 31, 2019, the OREO portfolio consists of one property recorded at fair value, less estimated costs to sell.

The Deferred Tax Asset ("DTA") decreased by $1.4 million (13%) from $10.4 million on June 30, 2018, to $9.0 million on March 31, 2019. The Bank has a $200,000 valuation allowance for the State of Illinois DTA.

The Core Deposit Intangible decreased by $288,000 (25%) from $1.1 million on June 30, 2018, to $855,000 on March 31, 2019.  The decrease in the CDI was due to monthly amortization of the CDI and due to the fair value re-evaluation of the acquisition of WaFed during the quarter ended December 31, 2018 which resulted in a write-down of the CDI and increase in Goodwill of $183,000 (12%).   

Total deposits increased by $11.9 million (4%) from $341.2 million on June 30, 2018, to $353.2 million on March 31, 2019. The increase was primarily due to the increase in money market accounts, offset by a decrease in time deposits.

The note payable decreased $1.9 million to $11.6 million at March 31, 2019 from $13.5 million at June 30, 2018. In addition to the normal $450,000 quarterly principal payment, an additional payment of $1.0 million was made in efforts to pay-down the loan and restructure the note. 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.

The Company had no Federal Home Loan Bank advances outstanding as of March 31, 2019.

Stockholders' equity increased by $3.8 million (11%) from $34.5 million on June 30, 2018, to $38.3 million on March 31, 2019, which was primarily the result of an increase of $2.8 million in retained earnings and the decrease in unrealized loss in equity of $764,000 (69%).

For the nine months ended March 2019, the Bank paid cash dividends of $2.8 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 2019.

The Bank is required to maintain regulatory capital sufficient to meet the Tier 1 capital leverage ratio and risk-based ratios for Common Equity Tier 1 capital, Tier 1 capital, and Total capital of at least 4.0%, 4.5%, 6.0%, and 8.0%, respectively.  At March 31, 2019, the Bank satisfied all regulatory capital requirements with ratios of 9.93%, 15.37%, 15.37% and 16.42%, respectively.

At March 31, 2019, the book value per common share, shares outstanding of 2,545,052, was $15.06 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 $14.03 at March 31, 2019, compared to tangible book value per share of $12.69 at June 30, 2018. 

The complete audited consolidated financial statements for 2018 and 2017 are available at

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


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

Royal Financial, Inc. and Subsidiary
Consolidated Statements of Operations
Three and Nine Months Ended March 31, 2019 and 2018
  Three Months Ended
March 31,
  Nine Months Ended
March 31,
    2019     2018       2019     2018  
Interest income              
Loans, including fees $   4,255,242   $   3,620,246     $   12,681,659   $   10,259,916  
Securities     258,455       463,461         802,112       843,688  
Federal funds sold and other     29,712       143,380         64,313       202,524  
Total interest income     4,543,409       4,227,087         13,548,084       11,306,128  
Interest expense              
Deposits     911,178       551,339         2,306,141       1,403,429  
Borrowings     195,024       170,305         630,825       334,237  
Total interest expense     1,106,202       721,644         2,936,966       1,737,667  
Net interest income     3,437,207       3,505,443         10,611,118       9,568,461  
Provision/(Credit) for loan losses     -        375,000         225,000       645,000  
Net interest income after provision/ (credit) for loan losses     3,437,207       3,130,443      
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