Royal Financial, Inc. Announces Earnings for First Quarter of Fiscal Year 2022

CHICAGO, Nov. 08, 2021 (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 2022.

Net Income for the first quarter of fiscal year 2022 was $1.5 million, or $0.58 per common share, compared to $785,000, or $0.31 per common share, in the same period of fiscal 2021.

The Company also reported total assets of $555.5 million and stockholders’ equity of $49.7 million as of September 30, 2021. As of the same date, the Company’s book value per share was $19.15 and tangible book value per share was $18.26.

Comparison of Results of Operation for the Three Months Ended September 30, 2021 and 2020

The Company reported net income of $1.5 million for the first three months of fiscal 2022 compared to $785,000 in the same period of fiscal 2021, an increase of $715,000 (91.0%).

Total interest income for the quarter ended September 30, 2021, increased $621,000 (13.3%) from September 30, 2020. Total interest income from loans, including fees, increased $629,000 (14.1%), offset by decreases in interest income from securities of $9,000 (4.8%) from the prior year.

Total interest expense decreased $372,000 (49.9%) due to lower cost of funds for borrowings and deposit account balances. Total deposit interest expense decreased $363,000 (53.1%) from the prior year due to the falling rate environment during fiscal year 2020. Total borrowing expense decreased $8,000 (13.2%) due to the regular scheduled payments on the notes payable.

The Company reversed the allowance for loan losses this quarter $125,000 due to the well performing loan portfolios.

Total non-interest income increased $15,000 (6.8%) from September 30, 2020. This increase was due to increases in secondary mortgage market fees of $10,000 (100%) and an increase of $5,000 (2.7%) in service charges on deposit accounts.

Total non-interest expense increased $581,000 (22.5%) from September 30, 2020. This increase in non-interest expense is due to the increase in salaries and employee benefits of $198,000 (17.0%), occupancy and equipment costs of $62,000 (11.5%), data processing costs of $16,000 (6.6%), professional services of $79,000 (68.1%), Federal Deposit Insurance Company (“FDIC”) expenses of $27,000 due to the increase in asset size of the Bank, marketing expense increased $29,000 (111.0%) due to increased ads in newspaper and community events, and an increase in acquisition expenses of $156,000 (216.2%) due to the ongoing merger with Finward Bancorp.

For quarter end September 30, 2021, the provision for income taxes was $598,000, an increase of $337,000 (129.1%) from the prior year.

Comparison of Financial Condition at September 30, 2021 and June 30, 2021

The Company’s total assets increased $21.8 million (4.1%), to $555.5 million at September 30, 2021, from $533.7 million at June 30, 2021.

Cash and cash equivalents increased $16.6 million (129.3%) to $29.4 million at September 30, 2021, from $12.8 million at June 30, 2021, due to the increase in deposits.

Securities available for sale decreased $54,000, to $31.8 million at September 30, 2021 from $31.9 million at June 30, 2021.

Loans, net of allowance, increased $6.0 million (1.3%) to $466.4 million at September 30, 2021, from $460.4 million at June 30, 2021.

The allowance for loan losses was $3.8 million, or 0.81% of total loans, at September 30, 2021, as compared to $3.9 million, or 0.84% of total loans, at June 30, 2021. Nonperforming loans totaled $1.7 million, or 0.36% of outstanding loans, at September 30, 2021 compared to $2.2 million or 0.47%, at June 30, 2021. 

Other real estate owned (“OREO”) did not change from $157,000 at June 30, 2021.

The Deferred Tax Asset (“DTA”) decreased $594,000 (11.2%) to $4.7 million at September 30, 2021, from $5.3 million at June 30, 2021. The Bank has a $100,000 valuation allowance for the State of Illinois DTA as of September 30, 2021.

The Core Deposit Intangibles (“CDI”) held by the Company decreased $35,000 (5%) as of September 30, 2021. The decrease was the result of a full quarter of amortization of the CDI of $35,000.

Total deposits increased $22.1 million (4.7%) to $488.4 million at September 30, 2021, from $466.3 million at June 30, 2021.

As of September 30, 2021, the Company had $5.0 million Federal Home Loan Bank advances outstanding. The advance is 0% interest and has a maturity of May 31, 2022.

Notes payable decreased by $250,000 (3.6%) to $6.7 million as of June 30, 2021. The note will amortize in full over 7.75 years until October 2023 with quarterly payments of $250,000 in principal reduction and interest at the rate of 0.25% below the Wall Street Journal Prime Rate; however, the interest rate will not be below 3% per annum.

Total stockholders’ equity increased $1.5 million (3.2%), to $49.7 million at September 30, 2021 from $48.1 million at June 30, 2021. The increase is primarily a result of net income of $1.5 million for the quarter ended September 30, 2021. The Bank paid cash dividends of $145000 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 2022. The Bank has up streamed to the Holding Company $610,000 in tax payments.

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, 2021, the Bank exceeded each of its capital requirements with ratios of 9.14%, 12.94%, 12.94% and 13.95%, respectively.

Total treasury shares as of September 30, 2021 is 77,427 shares, no change from June 30, 2021.

The audited consolidated financial statements for 2021 and 2020 are available at www.royal-bank.us. 

Finward Bancorp and Royal Financial, Inc. Announce Signing of Definitive Merger Agreement

On July 28, 2021, Finward Bancorp (NASDAQ: FNWD) (“FNWD”), the parent of Peoples Bank, and the Company entered into an executed definitive merger agreement pursuant to which FNWD will acquire the Company and the Bank, in a stock and cash transaction. A copy of the definitive agreement is available as Exhibit 2.1 to the Form 8-K filed by FNWD with the Securities Exchange Commission (the “SEC”) at the SEC’s internet site (http://www.sec.gov).

Under the terms of the merger agreement, stockholders of the Company who hold 101 or more shares of RYFL common stock will have the right to elect to receive $20.14 per share in cash or 0.4609 shares of FNWD common stock, or a combination of both, for each outstanding share of RYFL common stock, subject to allocation provisions to assure that, in the aggregate, 65% of RYFL’s outstanding shares of common stock will receive FNWD common stock and 35% will receive cash. Stockholders of the Company holding less than 101 shares of RYFL common stock will have the right to receive $20.14 in cash and no stock consideration for each share of RYFL common stock. Based on FNWD’s closing stock price of $44.00 as of July 28, 2021, the merger consideration has an aggregate value of approximately $52.9 million, which represents approximately 115% of RYFL’s tangible book value, and which includes approximately $0.9 million paid to RYFL’s stock option holders.

The merger is expected to be completed in the first quarter of 2022, subject to approval by bank regulatory authorities and the shareholders of both FNWD and RYFL, as well as the satisfaction of other customary closing conditions. Additionally, Royal Savings Bank will be merged with and into Peoples Bank, and the combined operations will be continued under the Peoples Bank name. Integration is expected to be complete in the second quarter of 2022.

FNWD is being advised by, and received a fairness opinion from, Stephens Inc., and is being advised by Barnes & Thornburg LLP as legal counsel. The Company is being advised by, and received a fairness opinion from, Boenning & Scattergood, Inc., and is being advised by Howard & Howard Attorneys PLLC as legal counsel.

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. 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, including but not limited to the coronavirus outbreak; 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
Three Months Ended September 30, 2021 and 2020
(Unaudited)
	Quarters Ended September 30,
	2021				2020
Interest income
Loans, including fees	$	5,091,855			$	4,462,945
Securities		169,968				178,571
Federal funds sold and other		11,368				10,649
Total interest income		5,273,191				4,652,165
Interest expense
Deposits		320,963				684,888
Borrowings		51,699				59,593
Total interest expense		372,662				744,481
Net interest income	$	4,900,529			$	3,907,684
Provision (benefit) for loan losses		(125,000	)			500,000
Net interest income after provision for loan losses	$	5,025,529			$	3,407,684
Non-interest income
Service charges on deposit accounts		171,666				167,152
Secondary mortgage market fees		10,143				–
Rental Income		48,198				48,225
Other		324				215
Total non-interest income		230,331				215,591
Non-interest expense
Salaries and employee benefits		1,356,932				1,159,376
Occupancy and equipment		599,356				537,615
Data processing		266,975				250,523
Professional services		196,199				116,730
Director fees		47,250				45,000
Marketing		54,284				25,728
FDIC insurance expense (income)		97,143				70,400
Insurance premiums		21,258				24,293
Other real estate owned expense (income)		4,895				(2,156	)
Acquisition expense		228,485				72,253
Core deposit intangibles amortization		35,207				35,207
Other		250,278				242,251
Total non-interest expense		3,158,261				2,577,221
Income before income taxes	$	2,097,599			$	1,046,055
Provision for income taxes		598,000				261,000
Net Income	$	1,499,599			$	785,055
Basic earnings per share	$	0.58			$	0.31
Diluted earnings per share	$	0.58			$	0.31
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
Quarters Ending September 30, 2021 and June 30 2021
(Unaudited)
	September 30, 2021			June 30, 2021
Assets
Cash and non-interest bearing balances in financial institutions	$	3,546,340		$	3,470,428
Interest bearing balances in financial institutions		25,808,869			9,259,546
Federal funds sold		75,613			102,418
Total cash and cash equivalents	$	29,430,823		$	12,832,392
Investment certificates of deposit		492,000			492,000
Securities available for sale		31,834,378			31,888,847
Loans Receivable, net of Allowance for loan losses
of $3,799,592 at September 30, 2021, $3,858,124 at June 30, 2021		466,428,455			460,366,062
Federal Home Loan Bank Stock, at cost		1,302,900			1,302,900
Premises and equipment, net		15,256,448			15,411,588
Accrued interest receivable		2,288,221			2,219,654
Other real estate owned		156,580			156,580
Deferred tax asset		4,685,426			5,279,265
Core deposit intangibles		502,973			538,179
Goodwill		1,755,189			1,755,189
Other assets		1,390,439			1,480,314
Total Assets	$	555,523,831		$	533,722,970
Liabilities & Stockholders Equity
Deposits	$	488,378,241		$	466,312,856
Advances from borrowers for taxes and insurance	$	4,472,612			6,060,645
Federal Home Loan Bank advances	$	5,000,000			5,000,000
Notes payable	$	6,750,000			7,000,000
Accrued interest payable and other liabilities	$	1,261,208			1,235,469
Total Liabilities	$	505,862,061		$	485,608,970
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, 2021 and 2020		26,450			26,450
Additional Paid-In Capital		24,498,325			24,434,505
Retained Earnings		25,018,944			23,519,345
Treasury Stock, 77,427 shares as of September 30, 2021,
and June 30, 2021, at cost		(665,954	)		(665,954	)
Accumulated other comprehensive income		784,004			799,654
Total Capital	$	49,661,770		$	48,114,000
Total Liabilities and Stockholder’s Equity	$	555,523,831		$	533,722,970
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.