CHICAGO, June 19, 2015 (GLOBE NEWSWIRE) -- Royal Financial, Inc. (“Royal”) (OTCQX:RYFL) today announced the signing of a definitive agreement with a New York based asset management firm to sell $29.1 million of distressed assets consisting of $25.5 million in distressed assets currently owned by PNA Bank and $3.6 million in distressed and other assets currently owned by Royal Financial (the “Company”) and/or its subsidiary, Royal Savings Bank (the “Bank”).
In November 2014, the Company announced that it had entered into an agreement to purchase PNA Bank subject to the approval of the United States Bankruptcy Court and both banks’ banking regulators. In December 2014, the Company announced that the U.S. Bankruptcy Court approved the purchase agreement. The Company’s agreement to purchase PNA Bank was conditioned on the execution of an agreement to sell PNA Bank’s distressed assets on satisfactory terms.
The Company conducted a controlled auction of PNA Bank’s distressed assets. FTN Financial Capital Assets, Memphis, Tennessee, advised and assisted the Company in this activity. The auction attracted multiple bids from qualified and capable parties. Currently, PNA Bank’s distressed assets consist of $25.5 million in unpaid principal balances (“UPB”) on loans secured by single-family, multi-family, and commercial real estate, which will be sold at a 34% discount to UPB. The distressed assets also include three small parcels of Other Real Estate Owned (“OREO”) totaling $285,000, which will be sold at an 8% premium to the book value.
The agreement also includes the sale of underperforming ($2.0 million) and other assets ($792,000) currently owned by the Company and/or the Bank. These assets consist of: one acre of land in Frankfort, Illinois, which has a book value of $265,000 and will be sold for a $148,000 gain (or 56% premium); a three-story office building in Homewood, Illinois, which has a book value of $792,000 and will be sold for a $29,000 gain (or 4% premium); and two OREO parcels which have a collective book value of $1.7 million and will be sold for a $229,000 gain (or 13% premium). On a combined basis, the Company and the Bank will sell assets with a current value of $2.8 million for a $406,000 gain (or 15% premium) and reduce annual real estate operating expense (net of revenue) by $35,000.
The Bank operates a loan production office and disaster recovery site in the office building in Homewood, Illinois, and entered into a short-term lease, with optional extensions, of 1,010 square feet to continue operations.
The sale satisfies the condition established in the Company’s agreement to purchase PNA Bank, and it advances the Company’s attainment of its previously-announced strategic objective to strengthen its balance sheet and dispose of underperforming assets. It is subject to regulatory approval, will close upon receipt of that approval, and is accretive to shareholder value. Upon closing, the Bank expects to have little or no OREO assets.
As previously announced, the Bank recently relocated its branch office operations on Chicago’s southeast side from a traditional, aged facility to a 600-square foot modern, in-store banking center, which enabled the Bank to sell the real estate that housed the branch (including a nearby parking lot) for a $611,000 gain. The Bank expects to exit from that facility by June 30, 2015, and to terminate all related commitments by July 15, 2015. In May 2015, the Bank’s Board of Directors declared and paid a special dividend of $600,000 payable to the Company.
“We pursued the sale of PNA Bank’s distressed assets to complete our purchase of PNA Bank. We continue to look forward to serving PNA Bank’s customers and expanding our services to the markets they serve,” said Leonard Szwajkowski, President and CEO. “The purchase of PNA Bank will add significant value for our shareholders, and we are pleased that this asset sale will create even more value by including our underperforming assets in the sale of PNA’s distressed assets. The sale will accelerate the improvement of our risk profile, and it will do so at a very nice premium for our stockholders.”
The Company was advised by Vedder Price P.C. as legal counsel.
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 three branches in Chicago, with lending centers in Homewood and St. Charles, Illinois. Visit Royal Financial, Inc. and Royal Savings Bank at www.royal-bank.us
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; our ability to integrate the operations of PNA Bank successfully and cost-effectively; 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.