CHICAGO, July 26, 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”), 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.