Investors are running out of patience with Royal Financial Inc. in Chicago.
The $132 million-asset company has not had a quarterly profit since the second quarter of last year, its stock price has dropped 21% this year, and now it is coming under pressure from its largest investors to sell itself.
Because Royal was a mutual thrift that went public in 2005, regulations prevent it from selling until January. But two investors — Riggs Qualified Partners LLC of Western Springs, Ill., and PL Capital LLC of Naperville — say it is not too soon to start shopping for a buyer.
"Royal Financial's current and prospective earnings growth are not sufficient to justify Royal Financial remaining independent," PL Capital said last week.
Philip J. Timyan, the managing member of Riggs, agreed with that assessment. "It's clear to me that on their own, they can't get their stock anywhere close to where they could if they sold it," he said in an interview.
PL Capital and its affiliates hold about 9.7% of Royal's stock, and Riggs and its affiliates hold about 9.1%. In an July 31 letter to Royal chairman, Alan Bird, PL Capital said it was "disappointed" that Royal's board declined PL Capital's request to appoint one of its principals, John Palmer, to the board. The firm promised to wage a proxy contest at next year's annual meeting if Royal does not reconsider.
Richard Lashley, another PL Capital principal, said in an interview this week that Royal officials have not responded to the letter.
Royal's fiscal year ended June 30, but it has not yet reported its earnings for its fourth fiscal quarter or its full fiscal year. For the first nine months of its last fiscal year it reported a loss of $612,000, which it attributed to rises in interest expense and costs of salaries and employee benefits, occupancy and equipment, and advertising.
The shares closed near a 52-week low Thursday and have dropped 18% since June 22, when Royal revealed that it had suspended Donald A. Moll, its president and chief executive, while it investigates "irregularities" in its audit controls.
Leonard Szwajkowski, Royal's chief financial officer, was appointed the interim CEO, and Andrew Morua, the senior vice president of loans, was named the interim president.
On top of their displeasure with the financial performance, both PL Capital and Riggs questioned whether Mr. Moll's suspension was warranted.
"I met him a couple of times, and I just can't believe that there was any cause to fire the man. This is just my speculation … but he seemed as honest as the day was long," Mr. Timyan said. He speculated that Mr. Moll was suspended because he wanted to sell the company, while other executives and board members did not.
Mr. Szwajkowksi did not return calls for comment. Attempts to reach Mr. Moll were unsuccessful.
In its letter, PL Capital said that Mr. Moll should not have been suspended until the investigation was complete.
"The thing that bothers us is that the younger management team that is in place seemed destined to remove Donald Moll and run the company," Mr. Lashley said in a follow-up interview. "They appear to have moved way too quickly to publicly suspend him, particularly as a director."
