10-Q

+

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended:          September 30, 2014         

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: to

Commission file number:  0-26366

ROYAL BANCSHARES OF PENNSYLVANIA, INC.

(Exact name of the registrant as specified in its charter)

PENNSYLVANIA	23-2812193
(State or other jurisdiction of incorporation or organization)	(IRS  Employer identification No.)

732 Montgomery Avenue, Narberth, PA 19072

(Address of principal Executive Offices)

(610)  668-4700

(Registrant’s telephone number, including area code)

 N/A 

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

Applicable only to corporate issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class A Common Stock	Outstanding at October 31, 2014
$2.00 par value	27,801,904

Class B Common Stock	Outstanding at October 31, 2014
$0.10 par value	1,931,692

TABLE OF CONTENTS

		PAGE
PART I	FINANCIAL STATEMENTS
Item 1	Financial Statements
	Consolidated Balance Sheets-unaudited	2
	Consolidated Statements of Operations-unaudited	3
	Statements of Consolidated Comprehensive Income (Loss)-unaudited	4
	Consolidated Statements of Changes in Shareholders’ Equity-unaudited	5
	Consolidated Statements of Cash Flows-unaudited	7
	Notes to Consolidated Financial Statement (Unaudited)	9
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3	Quantitative and Qualitative Disclosures about Market Risk	76
Item 4	Controls and Procedures	76
PART II	OTHER INFORMATION	77
Item 1	Legal Proceedings	77
Item 1A	Risk Factors	77
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3	Defaults Upon Senior Securities	77
Item 4	Mine Safety Disclosures	77
Item 5	Other Information	77
Item 6	Exhibits	78
	SIGNATURES	79

1

PART I — FINANCIAL STATEMENTS

Item 1.Financial Statements

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets-unaudited

	September 30,		December 31,
	2014		2013
ASSETS	(In thousands, except share data)
Cash and due from banks	$	8,850	$	9,154
Interest bearing deposits		13,083		7,690
Total cash and cash equivalents		21,933		16,844
Investment securities available-for-sale (“AFS”), at fair value		265,390		308,727
Other investment, at cost		2,250		2,250
Federal Home Loan Bank (“FHLB”) stock		3,678		4,204
Loans and leases held for sale (“LHFS”)		1,018		1,446
Loans and leases (“LHFI”)		397,176		366,481
Less allowance for loan and lease losses		11,482		13,671
Net loans and leases		385,694		352,810
Bank owned life insurance		15,508		15,124
Accrued interest receivable		5,554		7,054
Other real estate owned (“OREO”), net		9,593		9,617
Premises and equipment, net		4,803		4,475
Other assets		8,048		9,703
Total assets	$	723,469	$	732,254
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Non-interest bearing	$	67,901	$	60,473
Interest bearing		447,885		468,491
Total deposits		515,786		528,964
Short-term borrowings		—		10,000
Long-term borrowings		97,540		97,881
Subordinated debentures		25,774		25,774
Accrued interest payable		2,305		965
Other liabilities		19,531		20,865
Total liabilities		660,936		684,449
Shareholders’ equity
Royal Bancshares of Pennsylvania, Inc. equity:
Preferred stock, Series A perpetual, $1,000 liquidation value, 500,000 shares authorized, 18,856 and 30,407 shares outstanding at September 30, 2014 and December 31, 2013, respectively		18,856		29,950
Class A common stock, par value $2.00 per share, authorized 40,000,000 shares; issued, 28,200,269 and 11,469,940 at September 30, 2014 and December 31, 2013, respectively		56,400		22,940
Class B common stock, par value $0.10 per share; authorized 3,000,000 shares; issued, 1,931,692 and 1,987,142 at September 30, 2014 and December 31, 2013, respectively		193		199
Additional paid in capital		111,095		127,299
Accumulated deficit		(116,676)		(120,396)
Accumulated other comprehensive loss		(1,815)		(6,122)
Treasury stock - at cost, shares of Class A, 414,384 and 453,077 at September 30, 2014 and December 31, 2013		(5,795)		(6,336)
Total Royal Bancshares of Pennsylvania, Inc. shareholders’ equity		62,258		47,534
Noncontrolling interest		275		271
Total equity		62,533		47,805
Total liabilities and shareholders’ equity	$	723,469	$	732,254

The accompanying notes are an integral part of these consolidated financial statements.

2

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations-unaudited

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands, except per share data)	2014		2013		2014		2013
Interest Income
Loans and leases, including fees	$	5,451	$	5,426	$	15,925	$	16,331
Investment securities AFS		1,734		1,528		5,610		4,103
Deposits in banks		6		6		16		21
Total Interest Income		7,191		6,960		21,551		20,455
Interest Expense
Deposits		900		983		2,712		3,061
Short-term borrowings		1		6		13		17
Long-term borrowings		722		901		2,145		2,589
Total Interest Expense		1,623		1,890		4,870		5,667
Net Interest Income		5,568		5,070		16,681		14,788
(Credit) provision for loan and lease losses		(51)		218		(765)		(196)
Net Interest Income after (Credit) Provision for Loan and Lease Losses		5,619		4,852		17,446		14,984
Non-interest Income
Service charges and fees		248		363		779		1,001
Net gains on sales of loans and leases		80		241		223		257
Net gains on sales of other real estate owned		173		629		633		1,209
Income from bank owned life insurance		129		134		384		401
Gains on sales of premises and equipment		107		526		107		1,204
Net gains (losses) on the sale of AFS investment securities		238		(1)		330		69
Other income		229		45		336		165
Total Non-interest Income		1,204		1,937		2,792		4,306
Non-interest Expense
Employee salaries and benefits		2,704		2,547		7,505		7,998
Loss contingency		—		—		—		1,650
Occupancy and equipment		614		566		1,865		1,682
Professional and legal fees		570		569		1,562		2,037
OREO expenses and impairment		154		844		892		1,741
Pennsylvania shares tax		138		283		406		840
FDIC and state assessments		261		253		770		781
Communications and data processing		166		166		485		439
Directors’ fees		129		138		360		356
Marketing and advertising		86		64		325		175
Insurance		89		144		289		317
Loan collection expenses		70		130		227		408
Impairment on loans held for sale		—		—		—		153
Restructuring charges		—		119		—		230
Other operating expenses		394		467		1,042		1,190
Total Non-interest Expense		5,375		6,290		15,728		19,997
Income (Loss) Before Tax Expense (Benefit)		1,448		499		4,510		(707)
Income Tax Expense (Benefit)		—		—		—		—
Net Income (Loss)	$	1,448	$	499	$	4,510	$	(707)
Less Net Income (Loss) Attributable to Noncontrolling Interest	$	25	$	157	$	212	$	(364)
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.	$	1,423	$	342	$	4,298	$	(343)
Less Preferred Stock Series A Accumulated Dividend and Accretion	$	152	$	520	$	1,644	$	1,553
Net Income (Loss) Available to Common Shareholders	$	1,271	$	(178)	$	2,654	$	(1,896)
Per Common Share Data:
Net Income (Loss) — Basic and Diluted	$	0.05	$	(0.01)	$	0.15	$	(0.14)

The accompanying notes are an integral part of these consolidated financial statements.

3

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Statements of Consolidated Comprehensive Income (Loss)-unaudited

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2014		2013		2014		2013
Net income (loss)	$	1,448	$	499	$	4,510	$	(707)
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising during period, net of tax effect		(80)		(1,687)		4,469		(5,705)
Less reclassification adjustment for gains realized in net income (loss) (1)		157		—		218		46
Unrealized gains (losses) on investment securities		(237)		(1,687)		4,251		(5,751)
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization (2), net of tax effect		(18)		(94)		(56)		(283)
Other comprehensive income (loss)		(219)		(1,593)		4,307		(5,468)
Comprehensive income (loss)	$	1,229	$	(1,094)	$	8,817	$	(6,175)
Less net income (loss) attributable to noncontrolling interest		25		157		212		(364)
Comprehensive income (loss) attributable to Royal Bancshares of Pennsylvania, Inc.	$	1,204	$	(1,251)	$	8,605	$	(5,811)

The accompanying notes are an integral part of these consolidated financial statements.

1. Amounts are included in net gains on the sale of AFS investment securities on the Consolidated Statements of Operations in total non-interest income, net of taxes.

2. Amounts are included in salaries and benefits on the Consolidated Statements of Operations in non-interest expense.

4

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity

Nine months ended September 30, 2014-unaudited

													Accumulated
	Preferred								Additional				other						Total
	stock		Class A common stock			Class B common stock			paid in		Accumulated		comprehensive		Treasury		Noncontrolling		Shareholders’
(In thousands, except share data)	Series A		Shares	Amount		Shares	Amount		capital		deficit		(loss)		stock		Interest		Equity
Balance January 1, 2014	$	29,950	11,470	$	22,940	1,987	$	199	$	127,299	$	(120,396)	$	(6,122)	$	(6,336)	$	271	$	47,805
Net income												4,298						212		4,510
Other comprehensive income, net of reclassifications and taxes														4,307						4,307
Distributions to noncontrolling interests																		(208)		(208)
Common stock conversion from Class B to Class A			64		127	(55)		(6)				(121)								—
Redemption of 11,551 shares of preferred stock		(11,551)								(2,392)										(13,943)
Accretion of discount on preferred stock		457										(457)								—
Common shares issued			16,666		33,333					(13,333)										20,000
Treasury shares issued for compensation										(463)						541				78
Other adjustment to additional paid in capital										(28)										(28)
Stock option expense										12										12
Balance September 30, 2014	$	18,856	28,200	$	56,400	1,932	$	193	$	111,095	$	(116,676)	$	(1,815)	$	(5,795)	$	275	$	62,533

5

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity

Nine months ended September 30, 2013-unaudited

													Accumulated
	Preferred								Additional				other						Total
	stock		Class A common stock			Class B common stock			paid in		Accumulated		comprehensive		Treasury		Noncontrolling		Shareholders’
(In thousands, except share data)	Series A		Shares	Amount		Shares	Amount		capital		deficit		loss		stock		Interest		Equity
Balance January 1, 2013	$	29,396	11,432	$	22,863	2,020	$	202	$	126,287	$	(117,080)	$	(142)	$	(6,971)	$	3,860	$	58,415
Net loss												(343)						(364)		(707)
Other comprehensive loss, net of reclassifications and taxes														(5,468)						(5,468)
Distributions to noncontrolling interests																		(182)		(182)
Accretion of discount on preferred stock		412										(412)								—
Treasury shares issued for compensation										(377)						421				44
Stock option expense										20										20
Balance September 30, 2013	$	29,808	11,432	$	22,863	2,020	$	202	$	125,930	$	(117,835)	$	(5,610)	$	(6,550)	$	3,314	$	52,122

The accompanying notes are an integral part of these consolidated financial statements.

6

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows-unaudited

Nine months ended September 30,

(In thousands)	2014		2013
Cash flows from operating activities:
Net income (loss)	$	4,298	$	(343)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		348		311
Stock compensation expense		12		20
Credit for loan and lease losses		(765)		(196)
Impairment charge for OREO		399		953
Net amortization of investment securities		1,495		3,492
Net accretion on loans		(303)		(263)
Net gains on sales of premises and equipment		(107)		(1,204)
Net gains on sales of OREO		(633)		(1,209)
Proceeds from sales of loans and leases		3,838		4,042
Gains on sales of loans and leases		(223)		(257)
Net gains on sales of investment securities		(330)		(69)
Income from bank owned life insurance		(384)		(401)
Share-based compensation		105		75
Impairment on loans held for sale		—		153
Changes in assets and liabilities:
Decrease in accrued interest receivable		1,500		2,387
Increase in other assets		(121)		(540)
Increase (decrease) in accrued interest payable		1,340		(1,289)
Decrease in other liabilities		(1,334)		(498)
Net cash provided by operating activities	$	9,135	$	5,164
Cash flows from investing activities:
Proceeds from maturities, calls and paydowns of AFS investment securities	$	33,272	$	77,237
Proceeds from sales of AFS investment securities		55,290		20,428
Purchase of AFS investment securities		(40,150)		(52,131)
Redemption of Federal Home Loan Bank stock		526		1,647
Net increase in loans		(37,001)		(41,043)
Additions to OREO		(1,292)		—
Proceeds from the sales of premises and equipment		303		1,651
Purchase of premises and equipment		(872)		(296)
Proceeds from sales of OREO		3,548		6,213
Net cash provided by investing activities	$	13,624	$	13,706

7

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows-unaudited (continued)

Nine months ended September 30,

	2014		2013
Cash flows from financing activities:
Increase in demand and NOW accounts	$	3,854	$	1,384
Decrease in money market and savings accounts		(952)		(17,726)
Decrease in certificates of deposit		(16,080)		(15,955)
Repayments of short-term borrowings		(10,000)		—
Repayments of long-term borrowings		(341)		(50,339)
Proceeds from short-term borrowings		—		14,000
Proceeds from long-term borrowings		—		40,000
Payments to noncontrolling interest		(208)		(182)
Issuance of common stock, net		20,000		—
Redemption of preferred stock		(13,943)		—
Net cash used in financing activities	$	(17,670)	$	(28,818)
Net increase (decrease) in cash and cash equivalents		5,089		(9,948)
Cash and cash equivalents at the beginning of the period		16,844		28,802
Cash and cash equivalents at the end of the period	$	21,933	$	18,854
Supplemental Disclosure
Interest paid	$	3,530	$	6,802
Transfers to OREO	$	1,998	$	6,428
Transfers to LHFS	$	3,187	$	2,283

The accompanying notes are an integral part of these consolidated financial statements.

8

ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1.Summary of Significant Accounting Policies

Basis of Financial Presentation

The accompanying unaudited consolidated financial statements include the accounts of Royal Bancshares of Pennsylvania, Inc. (“Royal Bancshares” or the “Company”) and its wholly-owned subsidiaries, Royal Investments of Delaware, Inc., including Royal Investments of Delaware, Inc.’s wholly owned subsidiary, Royal Preferred, LLC, and Royal Bank America (“Royal Bank”), including Royal Bank’s subsidiaries, Royal Real Estate of Pennsylvania, Inc., Royal Investments America, LLC, RBA Property LLC, Narberth Property Acquisition LLC, Rio Marina LLC, and Royal Tax Lien Services, LLC (“RTL”).  Royal Bank also has an 80% and 60% ownership interest in Crusader Servicing Corporation (“CSC”) and Royal Bank America Leasing, LP, respectively. At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%.  Effective December 31, 2013, Royal Bank acquired the ownership interest of the former President of CSC and RTL. The two Delaware trusts, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II are not consolidated per requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC Topic 810”). These consolidated financial statements reflect the historical information of the Company. All significant intercompany transactions and balances have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Applications of the principles in the Company’s preparation of the consolidated financial statements in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  These estimates and assumptions are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates. The interim financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods.  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.  The results of operations for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain items in the 2013 consolidated financial statements and accompanying notes have been reclassified to conform to the current year’s presentation format.  There was no effect on net income or net loss for the periods presented herein as a result of the reclassification.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

In January 2014, FASB issued ASU No. 2014-04, Receivables (Topic 310): Troubled Debt Restructurings by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-04”). ASC Topic 310 includes guidance that states that a creditor should reclassify a collateralized mortgage loan such that the loan should be derecognized and the collateral asset recognized when it determines that there has been in substance a repossession or foreclosure by the creditor, that is, the creditor receives physical possession of the debtor’s assets regardless of whether formal foreclosure proceedings take place. However, the terms in substance a repossession or foreclosure and physical possession are not defined in the accounting literature and there is diversity about when a creditor should derecognize the loan receivable and recognize the real estate property. That diversity has been highlighted by recent extended foreclosure timelines and processes related to residential real estate properties.

The objectives in ASU 2014-04 are intended to reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real

9

estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate property recognized. Holding foreclosed real estate property presents different operational and economic risk to creditors compared with holding an impaired loan. Therefore, consistency in the timing of loan derecognition and presentation of foreclosed real estate properties is of qualitative significance to users of the creditor’s financial statements. Additionally, the disclosure of the amount of foreclosed residential real estate properties and of the recorded investment in consumer mortgage loans secured by residential real estate properties that are in the process of foreclosure is expected to provide decision-useful information to many users of the creditor’s financial statements. The amendments in ASU 2014-04 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in ASU 2014-04 using either a modified retrospective transition method or a prospective transition method.  Early adoption is permitted. The adoption of ASU 2014-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

In April 2014, FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”).  The amendments in ASU 2014-08 change the criteria for reporting discontinued operations for all public and nonpublic entities. Currently, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for discontinued operations presentation.  Once the amendments of ASU 2014-08 take effect, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements. The amendments also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption of ASU 2014-08 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12,  Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”).  The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU 2014-12 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”), which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in  ASU 2014-11 and disclosure for certain transactions accounted for as a sale are effective for the first interim or annual period beginning after December

10

15, 2014. The disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Earlier application is prohibited. The adoption of ASU 2014-11 is not expected to have a material impact on the Company’s financial condition and results of operations.

Note 2.Regulatory Matters and Significant Risks or Uncertainties

FDIC and Department of Banking Memorandum of Understanding

During the fourth quarter of 2011, Royal Bank entered into an informal agreement, known as a memorandum of understanding (“MOU”) with each of the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities (the “Department”). Included in the MOU is the requirement of maintaining a ratio of Tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8% and a total risk-based capital ratio equal to or greater than 12%. At September 30, 2014, based on capital levels calculated under regulatory principles (“RAP”), Royal Bank’s leverage and total risk-based capital ratios were 9.96% and 15.99%, respectively.  Please refer to “Note 11 — Regulatory Capital Requirements” to the Consolidated Financial Statements. Under the MOU, Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.

Federal Reserve Agreement

As previously disclosed, in March 2010, the Company agreed to enter into a written agreement (the “Federal Reserve Agreement”) with the Federal Reserve Bank of Philadelphia (the “Federal Reserve Bank”).  In July 2013, the Board of Governors of the Federal Reserve System terminated the enforcement action under the Federal Reserve Agreement, and it was replaced with an informal non-public agreement, an MOU, with the Federal Reserve Bank, effective July 17, 2013.  Included in this MOU are certain continued reporting requirements and a requirement that the Company receive the prior approval of the Federal Reserve Bank and the Director of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System prior to declaring or paying any dividends on the Company’s capital stock, making interest payments related to the Company’s outstanding trust preferred securities or subordinate securities, incurring or guaranteeing certain debt with an original maturity date greater than one year, and purchasing or redeeming any shares of stock. Please refer to “Dividend and Interest Restrictions”  belowfor a discussion on the partial redemption of the Series A Preferred Stock. The MOU will remain in effect until stayed, modified, terminated or suspended in writing by the Federal Reserve Bank.

Our success as a Company is dependent upon pursuing various alternatives in not only achieving the growth and expansion of our banking franchise but also in managing our day to day operations. The existence of the two MOUs may limit or impact our ability to pursue all previously available alternatives in the management of the Company. Our ability to retain existing retail and commercial customers as well as the ability to attract potentially new customers may be impacted by the existence of the MOUs. Additionally, the Company’s ability to raise capital in the current economic environment could be potentially limited or impacted as a result of the MOUs. Attracting new management talent is critical to the success of our business and could be potentially affected due to the existence of the MOUs.

Net Income (Loss)

The Company had recorded significant losses over the five years prior to 2013 which were primarily related to charge-offs on the loan and lease portfolio, other-than-temporary impairment (“OTTI”) charges on investment securities, impairment charges on OREO, credit related expenses and the establishment of a deferred tax valuation allowance.  In addition to reducing the total shareholders’ equity, the accumulated deficit impacts the Company’s ability to pay cash dividends to its shareholders now and in future years.  For the third quarter of 2014, the Company recorded net income of $1.4 million compared to $342,000 for the comparable period in 2013. The quarter over quarter improvement was mainly related to growth in net interest income of $498,000 and declines in credit related expenses of$750,000. Credit related expenses include loan collection expenses, OREO expenses, OREO impairment, and impairment on loans held for sale. For the first nine months of 2014, the Company recorded net income of $4.3 million compared to a net loss of $343,000 for the comparable period in 2013. The noteworthy improvement was mainly related to a $1.9 million increase in net interest income, a $493,000 decrease in salaries and benefits, a $475,000 reduction in professional and legal fees, a $1.2 million

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decrease in credit related expenses, and a $569,000 improvement in the credit for loans and lease losses. Additionally, the first nine months of 2013 included a $1.65 million loss contingency accrual for a settlement of the class action lawsuit related to Royal Bank’s tax lien subsidiaries. After adjusting for the noncontrolling interest, the Company’s 60% share of the loss contingency amounted to $990,000 on a pre-tax basis. Partially offsetting these positive items was a $1.1 million decline in gains on the sale of premises and equipmentand a $576,000decrease in net gains on the sale of OREO.

Credit Quality

The financial services and real estate industries were hit particularly hard during the “Great Recession” and as a result the Company’s loan and investment portfolios were directly affected.  The Company’s commercial real estate loans, including construction and land development loans, saw a decline in the collateral values and a reduction in the borrowers’ ability to meet the payment terms of their loans due to reduced cash flow.  Further declines in collateral values and borrowers’ liquidity may lead to additional increases in foreclosures and delinquencies.  The Company is less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of more diverse economies.

Royal Bank was successful in reducing net classified assets, which includes special mention, substandard and impaired loans and OREO, from $61.4 million at December 31, 2013 to $37.7 million at September 30, 2014.  Royal Bank’s delinquent loans held for investment (30 to 90 days) amounted to $445,000 at September 30, 2014 versus $2.6 million at December 31, 2013. Material advances on any classified or delinquent loan must be approved by the Board of Directors and determined to be in Royal Bank’s best interest.  The Company recorded  $271,000 and $1.7 million, in charge-offs for the three and nine months ended September 30, 2014, respectively, compared to $837,000 and $3.2 million in charge-offs and write-downs for the comparable periods of 2013, respectively.

Liquidity and Funds Management

As of September 30, 2014, Royal Bank had $180.0 million of available borrowing capacity at the FHLB.  Royal Bank also has availability to borrow from the Federal Reserve Discount Window, which was approximately $5.7 million at September 30, 2014, based on collateral pledged.  Borrowings were $97.5 million and $107.9 million at September 30, 2014 and December 31, 2013, respectively.  During the first quarter of 2014, Royal Bank secured an additional $10.0 million line of credit, of which $0 is outstanding at September 30, 2014, with a local financial institution.

At September 30, 2014, the liquidity to deposits ratio was 67.9% compared to Royal Bank’s 12% policy target and the liquidity to total liabilities ratio was 53.5% compared to Royal Bank’s 10% policy target. The Company also has unfunded pension plan obligations, which potentially could impact liquidity, of $14.3 million as of September 30, 2014 compared to $14.5 million at December 31, 2013.  The Company plans to fund the pension plan obligations through existing Company owned life insurance policies.

Dividend and Interest Restrictions

Due to the MOU, our ability to obtain lines of credit, to receive attractive collateral treatment from funding sources, and to pursue all attractive funding alternatives in this current low interest rate environment could be impacted and thereby limit liquidity alternatives. On August 13, 2009, the Company’s Board suspended the regular quarterly cash dividends on the 30,407 shares of Series A Preferred Stock.  The Company made the decision to suspend the preferred cash dividends in order to support the liquidity position of Royal Bank. 

The Company received approval from the Federal Reserve Bank to bid up to $14.0 million, which was raised in a private placement, to purchase shares of the Series A Preferred Stock in an auction of such shares to be conducted by the United States Department of Treasury (“Treasury”).On June 20, 2014, Treasury announced that it had priced auctions of preferred stock of six institutions, including all of the 30,407 shares of the Series A Preferred Stock, issued by the Company to the Treasury in 2009. The Series A Preferred Stock was priced in the auction at $1,207.11 per share for all 30,407 shares of Series A Preferred Stock outstanding. As previously disclosed, the Company was a bidder in the auction and was allocated 11,551 shares of Series A Preferred Stock for repurchase at the clearing price of $1,207.11. Closing for the sale of the Series A Preferred Stock by Treasury, including the repurchase of 11,551 shares of Series A Preferred Stock by the Company, occurred on July 2, 2014.  The dividend in arrears on the remaining 18,856 shares of Series A preferred stock

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is approximately $6.1 million.  In the event the Company declared the preferred dividend in arrears the Company’s equity and capital ratios would be negatively affected; however, they would remain above the required minimum ratios.

Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.  Under the Federal Reserve Agreement the Company may not declare or pay any dividends on the Company’s capital stock or make interest payments related to the Company’s outstanding trust preferred securities or subordinate securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System. During the third quarter of 2014, the Company received approval from the Federal Reserve Bank and paid the third quarter interest payment on the trust preferred securities in September 2014.

Capital Adequacy

In connection with a prior bank regulatory examination, the FDIC concluded, based upon its interpretation of the Call Report instructions and under RAP, that income from Royal Bank’s tax lien business should be recognized on a cash basis, not an accrual basis. Royal Bank’s current accrual method is in accordance with U.S. GAAP.  Royal Bank disagrees with the FDIC’s conclusion and filed the Call Report for September 30, 2014 and the previous 16 quarters in accordance with U.S. GAAP.  However, the change in the manner of revenue recognition for the tax lien business for regulatory accounting purposes affects Royal Bank’s and potentially the Company’s capital ratios as disclosed in “Note 11 - Regulatory Capital Requirements” to the Consolidated Financial Statements.  The resolution of this matter will be decided by additional joint regulatory agency guidance which includes the Federal Reserve Bank, the FDIC, and the OCC.

Under the MOU, Royal Bank must maintain a minimum Tier 1 leverage ratio and a minimum total risk-based capital ratio of 8% and 12%, respectively. At September 30, 2014, based on capital levels calculated under RAP, Royal Bank’s leverage and total risk-based capital ratios were 9.96% and 15.99%, respectively.

Company Plans and Strategy

During the past few years, the Company recorded significant impairment charges and carrying costs on non-accrual loans and OREO which have weighed heavily on earnings and were the largest contributing factors to the Company’s losses.  The Company’s strategic plan included improving the overall level of credit quality, maintaining reduced credit risk within the investment portfolio, reducing the overall level of expenses, returning to profitability, and meeting the capital level requirements for Royal Bank as set forth in the FDIC and Department MOU.

While sustaining capital ratios above the required minimum, the Company has made progress in improving credit quality, reducing the CRE concentration, strengthening the Board and maintaining liquidity. As a result of the decline in level of classified assets, there have been credits rather than provisions to loan and lease losses and a reduction in the overall carrying costs associated with classified assets.  The deleveraging of the balance sheet reduced earning assets, which resulted in a decline in net interest income and had a significant impact on overall earnings. To improve net interest margin and net interest income, management is diligently working on changing the mix of earning assets and interest-bearing liabilities.

During 2013, the strategic plan evolved into transitioning Royal Bank into a community bank built on a solid commercial revenue and retail delivery foundation.  During the first quarter of 2013, to support the strategic goals, management announced a set of sweeping initiatives through the Company’s “Profitability Improvement Plan” (“PIP”) designed to enhance company-wide efficiency, productivity and modernization.  During 2013, the Company realized a 22% reduction in the workforce, which included reorganizing and relocating certain personnel to improve departmental synergies and better align managers and staff so they can work together in cohesive teams to accomplish their objectives.  Additionally, pursuant to the real estate rationalization plan under PIP, two branches were consolidated and four Company-owned buildings were sold.

During 2014, the Company reorganized the retail division to better serve existing customers, develop the retail sales teams, and promote attainment of new customer relationships. The Company continued a successful 50th anniversary campaign by offering a Kindle to new customers who met certain deposit account opening criteria. During the first nine months of

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2014, the Villanova, Phoenixville and Fairmount branches were relocated to more convenient, high-traffic locations within the same markets. In October 2014, the Sicklerville, New Jersey branch was relocated to Blackwood, New Jersey.  Additionally, the Company opened a limited service office in Princeton, New Jersey to  better serve our commercial customers in central New Jersey.  In July, we introduced Royal Bank’s exciting fresh logo and an enhanced website.The redesigned products and contemporary technology are the future platform for enhanced banking convenience for commercial, consumer and retail customers.

Note 3.Investment Securities

The carrying value and fair value of investment securities available-for-sale (“AFS”) at September 30, 2014and December 31, 2013 are as follows:

As of September 30, 2014			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	34,092	$	—	$	(1,551)	$	32,541
Mortgage-backed securities-residential		27,000		377		(250)		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		2,521		(1,533)		172,684
Non-agency		3,965		7		(34)		3,938
Corporate bonds		15,630		68		(65)		15,633
Municipal bonds		9,030		51		(54)		9,027
Other securities		2,829		1,597		(36)		4,390
Common stocks		33		17		—		50
Total available for sale	$	264,275	$	4,638	$	(3,523)	$	265,390

As of December 31, 2013			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	68,207	$	—	$	(6,171)	$	62,036
Mortgage-backed securities-residential		32,769		210		(882)		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		188,194		2,887		(1,978)		189,103
Non-agency		4,454		25		—		4,479
Corporate bonds		9,669		25		(256)		9,438
Municipal bonds		7,163		—		(263)		6,900
Other securities		3,363		1,405		(143)		4,625
Common stocks		33		16		—		49
Total available for sale	$	313,852	$	4,568	$	(9,693)	$	308,727

*Accumulated other comprehensive loss

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The amortized cost and fair value of investment securities at September 30, 2014, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	As of September 30, 2014
	Amortized
(In thousands)	cost		Fair value
Within 1 year	$	2,003	$	1,987
After 1 but within 5 years		10,345		10,324
After 5 but within 10 years		29,322		28,653
After 10 years		17,082		16,237
Mortgage-backed securities-residential		27,000		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		172,684
Non-agency		3,965		3,938
Total available for sale debt securities		261,413		260,950
No contractual maturity		2,862		4,440
Total available for sale securities	$	264,275	$	265,390

Proceeds from the sales of AFS investments during the three months ended September 30, 2014 and 2013 were $19.3 and $0 million, respectively. Proceeds from the sales of AFS investments during the nine months endedSeptember 30, 2014 and 2013 were $55.3 and $20.4 million, respectively.  The following table summarizes gross realized gains and losses on the sale of securities recognized in earnings in the periods indicated:

	For the three months				For the nine months ended
	ended September 30,				ended September 30,
(In thousands)	2014		2013		2014		2013
Gross realized gains	$	446	$	—	$	1,143	$	181
Gross realized losses		(208)		(1)		(813)		(112)
Net realized gains (losses)	$	238	$	(1)	$	330	$	69

The Company evaluates securities for OTTI at least on a quarterly basis.  The Company assesses whether OTTI is present when the fair value of a security is less than its amortized cost.  All investment securities are evaluated for OTTI under FASB ASC Topic 320, “Investments-Debt & Equity Securities” (“ASC Topic 320”).  Non-agency collateralized mortgage obligations maybe evaluated under FASB ASC Topic 325 Subtopic 40, “Beneficial Interests in Securitized Financial Assets”.  In determining whether OTTI exists, management considers numerous factors, including but not limited to: (1) the length of time and the extent to which the fair value is less than the amortized cost, (2) the Company’s intent to hold or sell the security, (3) the financial condition and results of the issuer including changes in capital, (4) the credit rating of the issuer, (5) analysts’ earnings estimate, (6) industry trends specific to the security, and (7) timing of debt maturity and status of debt payments.

Under ASC Topic 320, OTTI is considered to have occurred with respect to debt securities (1) if an entity intends to sell the security; (2) if it is more likely than not an entity will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis.  If an entity intends to sell the security or will be required to sell the security, the OTTI is recognized in earnings equal to the entire difference between the fair value and the amortized cost basis at the balance sheet date.  If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before the recovery of its amortized cost basis, the OTTI is separated into two amounts, the credit-related loss and the noncredit-related loss. The credit-related loss is based on the present value of the expected cash flows and is recognized in earnings.

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The noncredit-related loss is based on other factors such as illiquidity and is recognized in other comprehensive income (loss).  The Company did not record OTTI charges to earnings during the first three quarters of 2014 and 2013.

There was no credit-related impairment losses on debt securities held at September 30, 2014 for which a portion of OTTI was recognized in other comprehensive income.  The following table presents a roll-forward of the balance of credit-related impairment losses on debt securities held at September 30,2013 for which a portion of OTTI was recognized in other comprehensive income (loss).

(In thousands)	2013
Balance at January 1,	$	173
Reductions for securities sold during the period (realized)		(173)
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the Company intends to sell the security		—
Balance at September 30,	$	—

The tables below indicate the length of time individual AFS securities have been in a continuous unrealized loss position at September 30, 2014 and December 31, 2013:

September 30, 2014	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	—	$	—	$	32,541	$	(1,551)	$	32,541	$	(1,551)
Mortgage-backed securities-residential		7,619		(38)		9,017		(212)		16,636		(250)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		49,360		(376)		37,312		(1,157)		86,672		(1,533)
Non-agency		1,464		(34)		—		—		1,464		(34)
Corporate bonds		9,027		(56)		991		(9)		10,018		(65)
Municipal bonds		623		(15)		3,539		(39)		4,162		(54)
Other securities		—		—		268		(36)		268		(36)
Total available-for-sale	$	68,093	$	(519)	$	83,668	$	(3,004)	$	151,761	$	(3,523)

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December 31, 2013	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	48,919	$	(5,035)	$	12,267	$	(1,136)	$	61,186	$	(6,171)
Mortgage-backed securities-residential		18,045		(518)		6,276		(364)		24,321		(882)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		67,240		(1,446)		9,974		(532)		77,214		(1,978)
Corporate bonds		4,848		(221)		965		(35)		5,813		(256)
Municipal bonds		3,019		(102)		3,881		(161)		6,900		(263)
Other securities		—		—		301		(143)		301		(143)
Total available-for-sale	$	142,071	$	(7,322)	$	33,664	$	(2,371)	$	175,735	$	(9,693)

In determining the Company’s intent not to sell and whether it is more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, management considers the following factors: current liquidity and availability of other non-pledged assets that permits the investment to be held for an extended period of time but not necessarily until maturity, capital planning, and any specific asset liability committee goals or guidelines related to the disposition of specific investments. The Company did not record OTTI charges in the first three quarters of 2014 or 2013.

Common stocks:  As of September 30, 2014, the Company had two common stocks of financial institutions with a total fair value of $50,000 and an unrealized gain of $17,000.

For all debt security types discussed below the fair value is based on prices provided by brokers and safekeeping custodians.

U.S. government-sponsored agencies (“U.S. Agency”):  As of September 30, 2014, the Company had 10 U.S. Agency securities with a fair value of $32.5 million and gross unrealized losses of $1.6 million.  All 10 bonds had been in an unrealized loss position for twelve months or longer at September 30, 2014. Management believes that the unrealized losses on these debt securities are a function of changes in investment spreads.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

Mortgage-backed securities issued by U.S. government agencies and U.S. government sponsored enterprises: As of September 30, 2014, the Company had six mortgage-backed securities with a fair value of $16.6 million and gross unrealized losses of $250,000.  Three of the mortgage-backed securities had been in an unrealized loss position of twelve months or longer and three of the mortgage-backed securities had been in an unrealized loss position for less than twelve months. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it isnot more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

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U.S. government issued or sponsored collateralized mortgage obligations (“Agency CMOs”):  As of September 30, 2014, the Company had 28 Agency CMOs with a fair value of $86.7 million and gross unrealized losses of $1.5 million.  Eleven of the Agency CMOs had been in an unrealized loss position for twelve months or longer and the remaining 17 Agency CMOs have been in an unrealized loss position for less than twelve months.  The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase.  The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

Non-agency collateralized mortgage obligations (“Non-agency CMOs”):  As of September 30, 2014, the Company had one non-agency CMO with a fair value of $1.5 million and a  gross unrealized loss of $34,000.  The bond had been in an unrealized loss position for less than twelve months.  The Company does not intend to sell this security before recovery of its cost basis, and it is not more likely than not that the Company be required to sell this security before recovery of its cost basis.  Therefore, management has determined that this security is  not other-than-temporarily impaired at September 30, 2014.

Corporate bonds:  As of September 30, 2014, the Company had seven corporate bonds with a fair value of $10.0 million and gross unrealized losses of $65,000.  One of the corporate bonds had been in an unrealized loss position for twelve months or longer and six bonds had been in an unrealized loss position for less than twelve months. These bonds are investment grade.  The Company’s unrealized losses in investments in these corporate bonds represent interest rate risk and not credit risk of the underlying issuers. As previously mentioned management also considered (1) the length of time and the extent to which the fair value is less than the amortized cost, (2) the Company’s intent to hold or sell the security, (3) the financial condition and results of the issuer including changes in capital, (4) the credit rating of the issuer, (5) analysts’ earnings estimates, (6) industry trends specific to the security, and (7) timing of debt maturity and status of debt payments.  Based on the analysis, there was no credit-related loss on the bonds.  Because the Company does not intend to sell the corporate bonds and it is not more likely than not that the Company will be required to sell the bonds before recovery of their amortized cost basis, which may be maturity, the Company does not consider any of the seven bonds to be other-than-temporarily impaired at September 30, 2014.

Municipal bonds:  As of September 30, 2014, the Company had five municipal bonds with a fair value $4.2 million and gross unrealized losses of $54,000.  One of the municipal bonds had been in an unrealized loss position for less than twelve months and four municipal bonds had been in an unrealized loss position for twelve months or longer.   Because the Company does not intend to sell the bonds and it is not more likely than not that the Company will be required to sell the bond before recovery of its amortized cost basis, which may be maturity, the Company does not consider the bonds to be other-than-temporarily impaired at September 30, 2014.

Other securities:  As of September 30, 2014, the Company had six investments in private equity funds which were predominantly invested in real estate.  In determining whether or not OTTI exists, the Company reviews the funds’ financials, asset values, and near-term projections.  At September 30, 2014,oneof the private equity fund investments had a fair value of $268,000 and an unrealized loss of $36,000.  OTTI charges were recorded in a prior period on this fund.  Management concluded that there was no additional impairment on thisinvestment as of September 30, 2014.

The Company will continue to monitor these investments to determine if the discounted cash flow analysis, continued negative trends, market valuations or credit defaults result in impairment that is other than temporary.

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Note 4.Loans and Leases

Major classifications of LHFI are as follows:

	September 30,		December 31,
(In thousands)	2014		2013
Commercial real estate	$	164,522	$	148,293
Construction and land development		41,676		45,261
Commercial and industrial		70,743		79,589
Multi-family		16,893		11,737
Residential real estate		44,261		25,535
Leases		48,588		42,524
Tax certificates		8,230		12,716
Consumer		2,263		826
Total LHFI, net of unearned income	$	397,176	$	366,481

The Company originates commercial and real estate loans, including construction and land development loans primarily in the greater Philadelphia metropolitan area as well as selected locations throughout the mid-Atlantic region.  The Company also has participated with other financial institutions in selected construction and land development loans outside our geographic area. The Company has a concentration of credit risk in commercial real estate, construction and land development loans at September 30, 2014.  The Company originates mainly small business, owner-occupied commercial real estate, middle market business and consumer loans.  Additionally, after thorough due diligence, the Company has purchased small residential loan pools. A substantial portion of its debtors’ ability to honor their contracts is dependent upon the housing sector specifically and the economy in general.

Loans and leases are classified as LHFI when management has the intent and ability to hold the loan or lease for the foreseeable future or until maturity or payoff.  LHFI are stated at their outstanding unpaid principal balances, net of an allowance for loan and leases losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

At September 30, 2014 and December 31, 2013, the Company’s LHFS were $1.0 million and $1.4 million, respectively. LHFS at September 30, 2014 were comprised of one non-accrual loan.  The three loans that constituted the balance at December 31, 2013 were sold during the first quarter of 2014. During 2014, the Company transferred $3.2 million to LHFS from LHFI at fair value using expected net sales proceeds.  For the nine months ended September 30, 2014, the Company received net proceeds of $3.8 million and recorded net gains of $223,000 as a result of loan sales.

The Company classifies its leases as finance leases, in accordance with FASB ASC Topic 840, “Leases”. The difference between the Company’s gross investment in the lease and the cost or carrying amount of the leased property, if different, is recorded as unearned income, which is amortized to income over the lease term by the interest method.

The Company uses a nine point grading risk classification system commonly used in the financial services industry as the credit quality indicator.  The first four classifications are rated Pass.  The riskier classifications include Pass-Watch, Special Mention, Substandard, Doubtful and Loss. The risk rating is related to the underlying credit quality and probability of default.  These risk ratings are used in the calculationof the allowance for loan and lease losses.

· Pass: includes credits that demonstrate a low probability of default;

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· Pass-watch: a warning classification which includes credits that are beginning to demonstrate above average risk through declining earnings, strained cash flows, increased leverage and/or weakening market fundamentals;

· Special mention: includes credits that have potential weaknesses that if left uncorrected could weaken the credit or result in inadequate protection of the Company’s position at some future date. While potentially weak, credits in this classification are marginally acceptable and loss of principal or interest is not anticipated;

· Substandard accrual: includes credits that exhibit a well-defined weakness which currently jeopardizes the repayment of debt and liquidation of collateral even though they are currently performing. These credits are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;

· Non-accrual (substandard non-accrual, doubtful, loss): includes credits that demonstrate serious problems to the point that it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement.

All loans, at the time of presentation to the appropriate loan committee, are given an initial loan risk rating by the Chief Credit Officer (“CCO”). From time to time, and at the general direction of any of the various loan committees, the ratings may be changed based on the findings of that committee. Items considered in assigning ratings include the financial strength of the borrower and/or guarantors, the type of collateral, the collateral lien position, the type of loan and loan structure, any potential risk inherent in the specific loan type, higher than normal monitoring of the loan or any other factor deemed appropriate by any of the various committees for changing the rating of the loan. Any such change in rating is reflected in the minutes of that committee.

The following tables present risk ratings for each loan portfolio classification at September 30, 2014 and December 31, 2013, excluding LHFS.

As of September 30, 2014
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	128,983	$	25,167	$	5,062	$	1,578	$	3,732	$	164,522
Construction and land development		12,685		25,051		3,125		—		815		41,676
Commercial & industrial		56,385		7,688		750		3,337		2,583		70,743
Multi-family		16,050		321		522		—		—		16,893
Residential real estate		43,278		—		—		—		983		44,261
Leases		47,863		197		3		—		525		48,588
Tax certificates		7,102		—		—		—		1,128		8,230
Consumer		2,207		56		—		—		—		2,263
Total LHFI, net of unearned income	$	314,553	$	58,480	$	9,462	$	4,915	$	9,766	$	397,176

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As of December 31, 2013
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	99,525	$	32,267	$	11,572	$	2,604	$	2,325	$	148,293
Construction and land development		14,677		16,270		11,095		569		2,650		45,261
Commercial & industrial		50,478		10,508		5,735		9,239		3,629		79,589
Multi-family		10,792		410		535		—		—		11,737
Residential real estate		24,903		—		—		—		632		25,535
Leases		41,325		485		247		—		467		42,524
Tax certificates		12,262		—		—		—		454		12,716
Consumer		750		76		—		—		—		826
Total LHFI, net of unearned income	$	254,712	$	60,016	$	29,184	$	12,412	$	10,157	$	366,481

The following tables present an aging analysis of past due payments for each loan portfolio classification at September 30, 2014 and December 31, 2013, excluding LHFS.

As of September 30, 2014	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	—	$	—	$	—	$	3,732	$	160,790	$	164,522
Construction and land development		—		—		—		815		40,861		41,676
Commercial & industrial		41		40		—		2,583		68,079		70,743
Multi-family		—		—		—		—		16,893		16,893
Residential real estate		47		116		—		983		43,115		44,261
Leases		198		3		—		525		47,862		48,588
Tax certificates		—		—		—		1,128		7,102		8,230
Consumer		—		—		—		—		2,263		2,263
Total LHFI, net of unearned income	$	286	$	159	$	—	$	9,766	$	386,965	$	397,176

As of December 31, 2013	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	996	$	—	$	—	$	2,325	$	144,972	$	148,293
Construction and land development		—		—		—		2,650		42,611		45,261
Commercial & industrial		115		49		—		3,629		75,796		79,589
Multi-family		—		—		—		—		11,737		11,737
Residential real estate		458		262		—		632		24,183		25,535
Leases		485		247		—		467		41,325		42,524
Tax certificates		—		—		—		454		12,262		12,716
Consumer		—		—		—		—		826		826
Total LHFI, net of unearned income	$	2,054	$	558	$	—	$	10,157	$	353,712	$	366,481

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The following tables detail the composition of the non-accrual loans at September 30, 2014 and December 31, 2013.

	As of September 30, 2014				As of December 31, 2013
	Loan		Specific		Loan		Specific
(In thousands)	balance		reserves		balance		reserves
Non-accrual loans held for investment
Commercial real estate	$	3,732	$	205	$	2,325	$	331
Construction and land development		815		172		2,650		—
Commercial & industrial		2,583		5		3,629		452
Residential real estate		983		30		632		19
Leases		525		62		467		60
Tax certificates		1,128		19		454		24
Total non-accrual LHFI	$	9,766	$	493	$	10,157	$	886
Non-accrual loans held for sale
Construction and land development	$	1,018	$	—	$	—	$	—
Total non-accrual LHFS	$	1,018	$	—	$	—	$	—
Total non-accrual loans	$	10,784	$	493	$	10,157	$	886

Impaired Loans

The Company identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. For all classes of loans receivable, with the exception of tax certificates, the accrual of interest is discontinued on a loan when management believes that the borrower’s financial condition is such that collection of principal and interest is doubtful or when a loan becomes 90 days past due. Impaired loans include troubled debt restructurings (“TDRs”). Excess proceeds received over the principal amounts due on impaired non-accrual loans are recognized as income on a cash basis. The Company recognizes income under the accrual basis when the principal payments on the loans become current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company.  If these factors do not exist, the Company does not recognize income.

Total cash collected on non-accrual and impaired loans during the nine months endedSeptember 30, 2014 and 2013 was $5.0 million and $10.6 million respectively, of which $4.5 million and $9.9 million was credited to the principal balance outstanding on such loans, respectively.

The following is a summary of information pertaining to impaired loans:

	September 30,		December 31,
(In thousands)	2014		2013
Impaired LHFI with a valuation allowance	$	4,232	$	3,835
Impaired LHFI without a valuation allowance		11,909		14,671
Impaired LHFS		1,018		—
Total impaired loans and leases	$	17,159	$	18,506
Valuation allowance related to impaired LHFI	$	493	$	886

Troubled Debt Restructurings

A loan modification is deemed a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made by the Company that would not otherwise be considered for a borrower or collateral with

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similar credit risk characteristics.  All loans classified as TDRs are considered to be impaired.  TDRs are returned to an accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a reasonable period of time (generally six months) and the ultimate collectibility of the total contractual restructured principal and interest is no longer in doubt.  At September 30, 2014, the Company had twelve TDRs, with a total carrying value of $9.4 million. At the time of the modifications, three of the loans were already classified as impaired non-accrual loans.  At December 31, 2013, the Company had twelve TDRs with a total carrying value of $12.1 million.  The Company’s policy for TDRs is to recognize income on currently performing restructured loans under the accrual method.

The following table details the Company’s TDRs that are on an accrual status and non-accrual status at September 30, 2014 and December 31, 2013.

	As of September 30, 2014
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	2	$	2,883	$	—	$	2,883
Construction and land development	3		378		815		1,193
Commercial & industrial	6		3,672		1,497		5,169
Residential real estate	1		—		105		105
Total	12	$	6,933	$	2,417	$	9,350

	As of December 31, 2013
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	3	$	3,847	$	—	$	3,847
Construction and land development	4		1,257		479		1,736
Commercial & industrial	3		4,420		1,960		6,380
Residential real estate	2		—		121		121
Total	12	$	9,524	$	2,560	$	12,084

At September 30, 2014, all of the TDRs were in compliance with their restructured terms.

The following tables present newly restructured loans that occurred during the nine months endedSeptember 30, 2014.  The Company did not classify any loan modifications as TDRs during the third quarter of 2013.

	Modifications by type for the three months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189
Total	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189

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	Modifications by type for the nine months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262
Total	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262

	Modifications by type for the nine months ended September 30, 2013
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial real estate	2	$	—	$	—	$	—	$	3,705	$	3,705	$	3,761	$	3,761
Commercial & industrial	1		—		—		—		82		82		87		87
Total	3	$	—	$	—	$	—	$	3,787	$	3,787	$	3,848	$	3,848

Note 5.Allowance for Loan and Lease Losses

The following tables present the detail of the allowance and the loan portfolio disaggregated by loan portfolio classification as of September 30, 2014, December 31, 2013 and September 30, 2013.

Allowance for Loan and Lease Losses

For the three months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	4,971	$	2,033	$	1,525	$	416	$	690	$	1,352	$	408	$	24	$	150	$	11,569
Charge-offs		—		—		—		—		—		(206)		(65)		—		—		(271)
Recoveries		—		205		12		—		5		13		—		—		—		235
(Credit) provision		(266)		3		(106)		(63)		25		325		29		9		(7)		(51)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

Allowance for Loan and Lease Losses

For the nine months endedSeptember 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Charge-offs		(349)		—		(452)		—		—		(568)		(330)		—		—		(1,699)
Recoveries		—		205		23		—		11		35		1		—		—		275
(Credit) provision		(444)		(280)		(1,146)		(49)		236		794		146		18		(40)		(765)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

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Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	164,522	$	41,676	$	70,743	$	16,893	$	44,261	$	48,588	$	8,230	$	2,263	$	—	$	397,176
Ending balance: individually evaluated for impairment	$	6,877	$	1,192	$	5,897	$	—	$	983	$	64	$	1,128	$	—	$	—	$	16,141
Ending balance: collectively evaluated for impairment	$	157,645	$	40,484	$	64,846	$	16,893	$	43,278	$	48,524	$	7,102	$	2,263	$	—	$	381,035

Allowance for Loan and Lease Losses and Loans Held for Investment

For the year ended December 31, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,684)		(820)		(383)		—		(46)		(382)		(578)		—		—		(3,893)
Recoveries		600		297		17		—		158		29		74		—		—		1,175
(Credit) provision		(2,168)		(148)		1,448		(252)		(737)		468		587		(14)		(56)		(872)
Ending balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Ending balance: related to loans individually evaluated for impairment	$	331	$	—	$	452	$	—	$	19	$	60	$	24	$	—	$	—	$	886
Ending balance: related to loans collectively evaluated for impairment	$	5,167	$	2,316	$	2,554	$	402	$	454	$	1,163	$	531	$	15	$	183	$	12,785
LHFI
Ending balance	$	148,293	$	45,261	$	79,589	$	11,737	$	25,535	$	42,524	$	12,716	$	826	$	—	$	366,481
Ending balance: individually evaluated for impairment	$	5,325	$	3,907	$	8,049	$	—	$	632	$	139	$	454	$	—	$	—	$	18,506
Ending balance: collectively evaluated for impairment	$	142,968	$	41,354	$	71,540	$	11,737	$	24,903	$	42,385	$	12,262	$	826	$	—	$	347,975

Allowance for Loan and Lease Losses

For the three months ended September 30, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	7,952	$	2,017	$	2,465	$	588	$	353	$	999	$	586	$	18	$	201	$	15,179
Charge-offs		(605)		—		(34)		—		(32)		(40)		(126)		—		—		(837)
Recoveries		1		106		4		—		2		4		2		—		—		119
Provision (credit)		(1,159)		72		1,080		(114)		175		133		41		(3)		(7)		218
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

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Allowance for Loan and Lease Losses

For the nine months endedSeptember 30, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,440)		(820)		(228)		—		(32)		(149)		(410)		—		—		(3,079)
Recoveries		127		297		14		—		157		24		74		—		—		693
Provision (credit)		(1,248)		(269)		1,805		(180)		(725)		113		367		(14)		(45)		(196)
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	158,223	$	39,594	$	86,401	$	11,678	$	24,830	$	40,408	$	15,364	$	831	$	—	$	377,329
Ending balance: individually evaluated for impairment	$	10,045	$	4,019	$	8,112	$	—	$	520	$	190	$	532	$	—	$	—	$	23,418
Ending balance: collectively evaluated for impairment	$	148,178	$	35,575	$	78,289	$	11,678	$	24,310	$	40,218	$	14,832	$	831	$	—	$	353,911

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The following tables detail the LHFI that were evaluated for impairment by loan classification at September 30, 2014 and December 31, 2013.

	At September 30, 2014
	Unpaid
	principal		Recorded		Related
(In thousands)	balance		investment		allowance
With no related allowance recorded:
Commercial real estate	$	7,410	$	5,986	$	—
Construction and land development		2,690		633		—
Commercial & industrial		8,133		4,400		—
Residential real estate		—		—		—
Tax certificates		5,376		890		—
Total:	$	23,609	$	11,909	$	—

With an allowance recorded:
Commercial real estate	$	1,137	$	891	$	205
Construction and land development		559		559		172
Commercial & industrial		1,721		1,497		5
Residential real estate		1,080		983		30
Leasing		64		64		62
Tax certificates		4,244		238		19
Total:	$	8,805	$	4,232	$	493

	At and for the year ended December 31, 2013
	Unpaid						Average		Interest
	principal		Recorded		Related		recorded		income
(In thousands)	balance		investment		allowance		investment		recognized
With no related allowance recorded:
Commercial real estate	$	4,429	$	4,158	$	—	$	7,956	$	73
Construction and land development		9,850		3,907		—		3,933		209
Commercial & industrial		6,693		6,491		—		5,960		250
Residential real estate		—		—		—		84		27
Tax certificates		179		115		—		167		—
Total:	$	21,151	$	14,671	$	—	$	18,100	$	559

With an allowance recorded:
Commercial real estate	$	1,435	$	1,435	$	331	$	1,879	$	—
Construction and land development		—		—		—		381		—
Commercial & industrial		2,592		1,290		452		2,456		—
Residential real estate		827		631		19		492		—
Leases		139		139		60		106		—
Tax certificates		4,322		340		24		341		—
Total:	$	9,315	$	3,835	$	886	$	5,655	$	—

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The following tables present the average recorded investment in impaired LHFI and the related interest income recognized for the three and nine months ended September 30, 2014 and 2013.

	For the three months ended September 30, 2014				For the nine months ended September 30, 2014
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	5,571	$	33	$	5,258	$	65
Construction and land development		1,673		11		2,823		68
Commercial & industrial		6,085		52		6,658		159
Residential real estate		993		—		833		—
Leasing		75		—		112		—
Tax certificates		1,134				918
Total:	$	15,531	$	96	$	16,602	$	292

	For the three months ended September 30, 2013				For the nine months ended September 30, 2013
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	11,676	$	59	$	4,556	$	45
Construction and land development		4,047		18		10,779		129
Commercial & industrial		8,050		92		8,988		241
Residential real estate		523		—		580		27
Leasing		168		—		105		—
Tax certificates		433		—		509		—
Total:	$	24,897	$	169	$	25,517	$	442

Note 6.Other Real Estate Owned

OREO slightly decreased $24,000 and was $9.6 million at December 31, 2013dSeptember 30, 2014.  OREO is comprised of three real estate properties acquired through, or in lieu of foreclosure in settlement of loans and 73 real estateproperties

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acquired through foreclosure related to tax liens.  Set forth below are tables which detail the changes in OREO from December 31, 2013 to September 30, 2014 and December 31, 2012 to December 31, 2013.

	For the nine months ended September 30, 2014
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	1,725	$	7,892	$	9,617
Net proceeds from sales		(1,214)		(2,334)		(3,548)
Net gains on sales		22		611		633
Transfers in		—		1,998		1,998
Cash additions		—		1,292		1,292
Impairment charge		(100)		(299)		(399)
Ending balance	$	433	$	9,160	$	9,593

	For the year ended December 31, 2013
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	11,365	$	2,070	$	13,435
Net proceeds from sales		(8,869)		(3,910)		(12,779)
Net gain on sales		228		1,199		1,427
Transfers in		100		8,951		9,051
Cash additions		—		—		—
Impairment charge		(1,099)		(418)		(1,517)
Ending balance	$	1,725	$	7,892	$	9,617

At September 30, 2014, OREO was comprised of $229,000 in land, $9.2 million in tax liens, and residential real estate, relatedto a condominium construction project in Minneapolis, Minnesota in which the Company is a participant with a fair value of $204,000.  During the first nine months of 2014, the Company sold ten condominiums related to the construction project. The Company received its pro rata share of net proceeds in the amount of $193,000 and recorded a net gain of $37,000. Additionally, during the third quarter of 2014, the Company sold a parcel of land and a commercial real estate building.  As a result of these sales the Company received $1.0 million in net proceeds and recorded a net loss of $15,000.  During the first quarter of 2014, the Company recorded impairment charges of $75,000 on the remaining, larger condominium units and $25,000 on the commercial real estate which was sold in the third quarter. 

As shown in the tables above, the composition of the OREO assets has evolved to properties primarily acquired through the tax lien portfolio. During the first nine months of 2014, the Company transferred $2.0 million to OREO which represents 40 properties and added $1.3 million in lien redemptions on existing properties.  During the same period the Company sold 30 tax lien properties, received proceeds of $2.3 million, and recorded net gains of $611,000 as a result of these sales. Additionally, the Company recorded impairment charges of $299,000 during the first nine months of 2014 related to the tax lien properties.  At December 31, 2013, OREO assets acquired through the tax lien portfolio were $7.9 million and were comprised of 59 properties.

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Note 7.Deposits

The Company’s deposit composition as of September 30, 2014 and December 31, 2013 is presented below:

	September 30,		December 31,
(In thousands)	2014		2013
Demand	$	67,901	$	60,473
NOW		41,801		45,375
Money Market		162,177		164,678
Savings		19,142		17,593
Time deposits (over $100)		85,603		92,763
Time deposits (under $100)		139,162		148,082
Total deposits	$	515,786	$	528,964

Note 8.Borrowings and Subordinated Debentures

1. Advances from the Federal Home Loan Bank

As of September 30, 2014, Royal Bank had $180.0 million of available borrowing capacity at the FHLB, which is based on qualifying collateral.  Total advances from the FHLB were $55.0 million at September 30, 2014 and $65.0 million at December 31, 2013.  The advances and the line of credit are collateralized by FHLB stock, government agencies and mortgage-backed securities.  As of September 30, 2014, investment securities with a market value of $51.5 million were pledged as collateral to the FHLB.

Presented below are the Company’s FHLB borrowings allocated by the year in which they mature with their corresponding weighted average rates:

	As of				As of
	September 30, 2014				December 31, 2013
(Dollars in thousands)	Amount		Rate		Amount		Rate
Advances maturing in
2014	$	—	—	%	$	10,000	0.24	%
2015		10,000	0.71	%		10,000	0.71	%
2016		10,000	1.11	%		10,000	1.11	%
2017		25,000	1.46	%		25,000	1.46	%
2018		10,000	2.01	%		10,000	2.01	%
Total FHLB borrowings	$	55,000			$	65,000

2. Other borrowings

The Company has a note payable with PNC Bank (“PNC”) at September 30, 2014 in the amount of $2.5 million compared to $2.9 million at December 31, 2013.  The note’s maturity date is August 25, 2016.  The interest rate is a variable rate equal to one month LIBOR + 15 basis points and adjusts monthly.  The interest rate at September 30, 2014 was 0.31%.

At September 30, 2014 and December 31, 2013, the Company had additional borrowings of $40.0 million from PNC which will mature on January 7, 2018.  These borrowings have a weighted average interest rate of 3.65%. The note payable and the borrowings are secured by government agencies and mortgage-backed securities.

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3. Subordinated debentures

The Company has outstanding $25.0 million of Trust Preferred Securities issued through two Delaware trust affiliates, Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”).  The Company issued an aggregate principal amount of $12.9 million of floating rate junior subordinated debt securities to Trust I and an aggregate principal amount of $12.9 million of fixed/floating rate junior subordinated debt securities to Trust II.  Both debt securities bear an interest rate of 2.38% at September 30, 2014, and reset quarterly at 3-month LIBOR plus 2.15%.

Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387,000 of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Company.  The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

Under the Federal Reserve Agreement as described in “Note 2 — Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company and its non-bank subsidiaries may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System.  The Company received approval and paid all accumulated deferred interest in 2013 and the required interest payments through the first nine months of 2014.

Note 9.Commitments, Contingencies, and Concentrations

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the financial statements when they become payable.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The contract amounts are as follows:

	September 30,		December 31,
(In thousands)	2014		2013
Financial instruments whose contract amounts represent credit risk:
Open-end lines of credit	$	47,455	$	21,182
Commitments to extend credit		6,430		200
Standby letters of credit and financial guarantees written		847		2,679

Legal Proceedings

From time to time, the Company is a party to routine legal proceedings within the normal course of business.  Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.

On or about March 15, 2012, CSC, RTL and the Company were named defendants, among others, in a complaint filed by Marina Bay Towers Urban Renewal II, LP (“MBT”) in the Superior Court of New Jersey, Law Division, Cape May County.  The complaint alleges a conspiracy to rig bids in municipal tax lien auctions.  MBT does not seek to represent

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a class and only seeks remedies related to itself.  As of the date of this filing, the Company cannot reasonably estimate the possible loss or range of loss that may result from this proceeding.

Note 10.Shareholders’ Equity

1. Preferred Stock

On February 20, 2009, as part of the Capital Purchase Program (“CPP”) established by the Treasury, the Company issued to Treasury 30,407 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, without par value per share (the “Series A Preferred Stock”), and a liquidation preference of $1,000 per share.  In conjunction with the purchase of the Series A Preferred Stock, Treasury received a warrant to purchase 1,104,370 shares of the Company’s Class A common stock.  The aggregate purchase price for the Series A Preferred Stock and warrant was $30.4 million in cash.  The Series A Preferred Stock qualifies as Tier 1 capital and originally paid cumulative dividends at a rate of 5% per annum.  In February 2014, the cumulative dividend rate on the Series A Preferred Stock increased to 9% per annum.  The Series A Preferred Stock may generally be redeemed by the Company at any time following consultation with its primary banking regulators.  The warrant issued to Treasury has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $4.13 per share of the common stock.  As a result of the shareholders’ right offering described below,the number of warrantsto purchase the Company’s Class A common stock adjusted to 1,368,040 and the warrant exercise price decreased to $3.33per share of the common stock.

The Company received approval from the Federal Reserve Bank to bid up to $14.0 million, which was raised in a private placement, to purchase shares of the Series A Preferred Stock in an auction of such shares to be conducted by the Treasury.  The auction closed on June 19, 2014.  The Series A Preferred Stock was priced in the auction at $1,207.11 per share for all 30,407 shares of Series A Preferred Stock outstanding. The Company was allocated 11,551 shares of Series A Preferred Stock for repurchase at the clearing price of $1,207.11. Closing for the sale of the Series A Preferred Stock by the Treasury, including the repurchase of 11,551 shares of Series A Preferred Stock by the Company occurred, on July 2, 2014. As part of this redemption, the Company eliminated nearly $3.5 million in preferred dividend in arrears.

2. Common Stock

The Company’s Class A common stock trades on the NASDAQ Global Market under the symbol RBPAA.  There is no market for the Company’s Class B common stock.  The Class B shares may not be transferred in any manner except to the holder’s immediate family.  Class B shares may be converted to Class A shares at the rate of 1.15 to 1.  Shareholders are entitled to one vote for each Class A share and ten votes for each Class B share held.  Holders of either class of common stock are entitled to conversion equivalent per share dividends when declared.

To fund the purchase of the Series A Preferred Stock, described above, the Company sold 11,666,667 shares of its Class A common stock in a private placement transaction at a price of $1.20 per share. Additionally, during the third quarter of 2014, the Company conducted a shareholder rights offering to existing shareholders to limit their ownership dilution from the sale of Class A common stock to the other investors in the private placement. The Company issued approximately 5.0 million shares and received gross proceeds of approximately $6.0 million. The private placement and the shareholders rights offering combined to increase tangible common equity by nearly $17.6 million.

3. Payment of Dividends

Under the Pennsylvania Business Corporation Law, the Company may pay dividends only if it is solvent and would not be rendered insolvent by the dividend payment. There are also restrictions set forth in the Pennsylvania Banking Code of 1965 (the “Code”) and in the Federal Deposit Insurance Act (“FDIA”) affecting the payment of dividends to the Company by Royal Bank.  Under the Code, no dividends may be paid by a bank except from “accumulated net earnings” (generally retained earnings).  In addition, dividends paid by Royal Bank to the Company would be prohibited if the effect thereof would cause Royal Bank’s capital to be reduced below applicable minimum capital requirements. Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.

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On August 13, 2009, the Company’s Board suspended the regular quarterly cash dividends on the $30.4 million in Series A Preferred Stock.  The Company’s Board took this action in consultation with the Federal Reserve Bank of Philadelphia as required by regulatory policy guidance.  In February 2014, the preferred cumulative dividend rate prospectively increased to 9% per annum.As a result of the Company’s repurchase of 11,551 shares of Series A Preferred Stock, approximately $3.5 million of the Series A Preferred stockdividend in arrears was eliminated.As of September 30, 2014, the Series A Preferred stock dividend in arrears was approximately $6.1million and has not been recognized in the consolidated financial statements.  In the event the Company declared the preferred dividend the Company’s capital ratios would be negatively affected; however, they would remain above the required minimum ratios.  Under the Federal Reserve MOU as described in “Note 2 — Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company may not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System.

Note 11.Regulatory Capital Requirements

The Company and Royal Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Royal Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.  Under the informal agreement referenced in “Note 2 — Regulatory Matters and Significant Risks And Uncertainties” to the Consolidated Financial Statements, Royal Bank is required to maintain a minimum Tier 1 leverage ratio of 8% and a Total risk-based capital ratio of 12%.  As of September 30, 2014, the Company and Royal Bank met all capital adequacy requirements to which it is subject and Royal Bank met the criteria for a well-capitalized institution.

In connection with a prior bank regulatory examination, the FDIC concluded, based upon its interpretation of the Call Report instructions and under RAP, that income from Royal Bank’s tax lien business should be recognized on a cash basis, not an accrual basis.  Royal Bank’s current accrual method is in accordance with U.S. GAAP.  Royal Bank disagrees with the FDIC’s conclusion and filed the Call Report for September 30, 2014 and the previous 16 quarters in accordance with U.S. GAAP.  The change in the method of revenue recognition for the tax lien business for regulatory accounting purposes affects Royal Bank’s and the Company’s capital ratios as shown below.  The resolution of this matter will be decided by additional joint regulatory agency guidance which includes the Federal Reserve Bank, the FDIC, and the OCC.

The table below sets forth Royal Bank’s capital ratios under RAP based on the FDIC’s interpretation of the Call Report instructions:

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	76,403	15.99	%	$	38,237	8.00	%	$	47,796	10.00	%
Tier I capital (to risk-weighted assets)	$	70,970	14.85	%	$	19,118	4.00	%	$	28,677	6.00	%
Tier I capital (to average assets, leverage)	$	70,970	9.96	%	$	28,492	4.00	%	$	35,615	5.00	%

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The tables below reflect the adjustments to the net income as well as the capital ratios for Royal Bank under U.S. GAAP:

	For the nine
	months ended
(In thousands)	September 30, 2014
RAP net income	$	682
Tax lien adjustment, net of noncontrolling interest		3,556
U.S. GAAP net income	$	4,238

	At September 30, 2014
	As reported		As adjusted
	under RAP		for U.S. GAAP
Total capital (to risk-weighted assets)	15.99	%	16.61	%
Tier I capital (to risk-weighted assets)	14.85	%	15.49	%
Tier I capital (to average assets, leverage)	9.96	%	10.42	%

The tables below reflect the Company’s capital ratios:

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
Total capital (to risk-weighted assets)	$	94,205	19.37	%	$	38,899	8.00	%	N/A	N/A
Tier I capital (to risk-weighted assets)	$	85,328	17.55	%	$	19,449	4.00	%	N/A	N/A
Tier I capital (to average assets, leverage)	$	85,328	11.78	%	$	28,975	4.00	%	N/A	N/A

The Company has filed the Consolidated Financial Statements for Bank Holding Companies-FR Y-9C (“FR Y-9C”) as of September 30, 2014 consistent with U.S. GAAP and the FR Y-9C instructions.  In the event that a similar adjustment for RAP purposes would be required by the Federal Reserve on the holding company level, the adjusted ratios are shown in the table below.

	For the nine
	months ended
(In thousands)	September 30, 2014
U.S. GAAP net income	$	4,298
Tax lien adjustment, net of noncontrolling interest		(3,556)
RAP net income	$	742

	At September 30, 2014
	As reported		As adjusted
	under U.S. GAAP		for RAP
Total capital (to risk-weighted assets)	19.37	%	18.78	%
Tier I capital (to risk-weighted assets)	17.55	%	16.68	%
Tier I capital (to average assets, leverage)	11.78	%	11.17	%

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Note 12.Pension Plan

The Company has a noncontributory nonqualified defined benefit pension plan (“Pension Plan”) covering certain eligible employees.  The Company’s Pension Plan provides retirement benefits under pension trust agreements.  The benefits are based on years of service and the employee’s compensation during the highest three consecutive years during the last 10 years of employment.

Net periodic defined benefit pension expense for the three and nine months ended September 30, 2014 and 2013 included the following components:

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands)	2014		2013		2014		2013
Service cost	$	15	$	19	$	45	$	56
Interest cost		155		133		466		399
Amortization of prior service cost		22		22		66		67
Amortization of actuarial loss		32		122		96		367
Net periodic benefit cost	$	224	$	296	$	673	$	889

The Company has unfunded pension plan obligations of $14.3 million as of September 30, 2014 compared to $14.5 million at December 31, 2013.  The Company plans to fund the pension plan obligations through existing Company owned life insurance policies.

Note 13.Earnings (Loss) Per Common Share

The Company follows the provisions of FASB ASC Topic 260, “Earnings per Share” (“ASC Topic 260”).  Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period.  The Company has two classes of common stock currently outstanding. The classes are A and B, of which one share of Class B is convertible into 1.15 shares of Class A.  Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury stock method. For the three and nine months ended September 30, 2014 and 2013,  168,907 options to purchase shares of common stock, respectively, were anti-dilutive in the computation of diluted EPS, as the exercise price exceeded average market price in each of those periods.  For the three and nine months ended September 30, 2013,  202,408 options to purchase shares of common stock, respectively, were anti-dilutive in the computation of diluted EPS, as the exercise price exceeded average market price and as a result of the net loss for the the three and nine months ended September 30, 2013.  Additionally warrants to purchase 1,368,040 shares of Class A common stock were also anti-dilutive.

Basic and diluted EPS are calculated as follows:

	Three months ended  September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	1,271	27,329	$	0.05

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	Three months ended  September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(178)	13,286	$	(0.01)

	Nine months ended September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	2,654	18,042	$	0.15

	Nine months ended September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(1,896)	13,272	$	(0.14)

Note 14.Comprehensive Income (Loss)

FASB ASC Topic 220, “Comprehensive Income” (“ASC Topic 220”), requires the reporting of all changes in equity during the reporting period except investments from and distributions to shareholders.  Net income (loss) is a component of comprehensive income (loss) with all other components referred to in the aggregate as other comprehensive income.  Unrealized gains and losses on AFS securities is an example of another comprehensive income (loss) component.

	Nine months ended September 30, 2014
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized gains on investment securities:
Unrealized holding gains arising during period	$	6,570	$	2,101	$	4,469
Less reclassification adjustment for gains
realized in net income		330		112		218
Unrealized gains on investment securities		6,240		1,989		4,251
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(85)		(29)		(56)
Other comprehensive income, net	$	6,325	$	2,018	$	4,307

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	Nine months ended September 30, 2013
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized losses on investment securities:
Unrealized holding losses arising during period	$	(8,833)	$	(3,128)	$	(5,705)
Less reclassification adjustment for gains
realized in net loss		69		23		46
Unrealized losses on investment securities		(8,902)		(3,151)		(5,751)
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(429)		(146)		(283)
Other comprehensive loss, net	$	(8,473)	$	(3,005)	$	(5,468)

Note 15.Fair Value of Financial Instruments

Under FASB ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”), fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, management uses quoted market prices to determine fair value.  If quoted prices are not available, fair value is based upon valuation techniques such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates. If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments using discounted cash flow methodologies.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period end and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

ASC Topic 820 provides guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly declined and for identifying circumstances when a transaction is not orderly.ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC Topic 820 are as follows:

Level 1:	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:	Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 includes debt securities with quoted prices that are traded less frequently then exchange-traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.
Level 3:	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Company did not have transfers of financial instruments within the fair value hierarchy during the three and nine months ended September 30, 2014 and 2013.

Items Measured on a Recurring Basis

The Company’s available for sale investment securities are recorded at fair value on a recurring basis.

Fair value for Level 1 securities are determined by obtaining quoted market prices on nationally recognized securities exchanges.  Level 1 securities include common stocks.

Level 2 securities include obligations of U.S. government-sponsored agencies and debt securities with quoted prices, which are traded less frequently than exchange-traded instruments, whose value is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  The prices were obtained from third party vendors.  This category generally includes the Company’s mortgage-backed securities and CMOs issued by U.S. government and government-sponsored agencies, non-agency CMOs, and corporate and municipal bonds.

Level 3 securities include investments in seven private equity funds which are predominantly invested in real estate.  The value of the private equity funds are derived from the funds’ financials and K-1 filings.  The Company also reviews the funds’ asset values and its near-term projections.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2014 and December 31, 2013 are as follows:

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	32,541	$	—	$	32,541
Mortgage-backed securities-residential		—		27,127		—		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		172,684		—		172,684
Non-agency		—		3,938		—		3,938
Corporate bonds		—		15,633		—		15,633
Municipal bonds		—		9,027		—		9,027
Other securities		—		—		4,390		4,390
Common stocks		50		—		—		50
Total investment securities available-for-sale	$	50	$	260,950	$	4,390	$	265,390

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	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	62,036	$	—	$	62,036
Mortgage-backed securities-residential		—		32,097		—		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		189,103		—		189,103
Non-agency		—		4,479		—		4,479
Corporate bonds		—		9,438		—		9,438
Municipal bonds		—		6,900		—		6,900
Other securities		—		—		4,625		4,625
Common stocks		49		—		—		49
Total investment securities available-for-sale	$	49	$	304,053	$	4,625	$	308,727

The following tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value for the nine months endedSeptember 30, 2014 and 2013:

(In thousands)	Other securities
Investment Securities Available for Sale	2014		2013
Beginning balance January 1,	$	4,625	$	4,164
Total gains/(losses) - (realized/unrealized):
Included in earnings		251		5
Included in other comprehensive income		299		361
Purchases		14		32
Sales and calls		(799)		(300)
Transfers in and/or out of Level 3		—		—
Ending balance September 30,	$	4,390	$	4,262

Items Measured on a Nonrecurring Basis

Non-accrual loans and TDRs are evaluated for impairment on an individual basis under FASB ASC Topic 310 “Receivables”.  The impairment analysis includes current collateral values, known relevant factors that may affect loan collectability, and risks inherent in different kinds of lending.  When the collateral value or discounted cash flows less costs to sell is less than the carrying value of the loan a specific reserve (valuation allowance) is established. Loans held for sale are carried at the lower of cost or fair value. OREO is carried at the lower of cost or fair value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the real estate.  Additionally, for collateral acquired from tax liens, fair value may be established using brokers opinions due to their lower carrying value.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

39

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2014 and December 31, 2013 are as follows:

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	3,739	$	3,739
Other real estate owned		—		—		2,624		2,624
Loans and leases held for sale		—		—		1,018		1,018

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	4,073	$	4,073
Other real estate owned		—		—		9,182		9,182
Loans and leases held for sale		—		—		1,446		1,446

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair valueat September 30, 2014 and December 31, 2013:

	Qualitative Information about Level 3 Fair Value Measurements
As of September 30, 2014			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	3,739	Appraisal of	Appraisal adjustments	0.0%	-	-28.9%	(-20.9%)
			collateral (1)	Liquidation expenses	0.0%	-	-21.1%	(-7.5%)
Other real estate owned		2,624	Appraisal of	Appraisal adjustments	0.0%	-	-69.7%	(-11.3%)
			collateral (1)	Liquidation expenses			-14.7%	(-14.7%)
Loans and leases held for sale		1,018	Appraisal of	Agreement of sale			0.0%
			collateral (1)

40

	Qualitative Information about Level 3 Fair Value Measurements
As of December 31, 2013			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	4,073	Appraisal of	Appraisal adjustments	0.0%	-	-25.0%	(-2.0%)
			collateral (1)	Liquidation expenses	0.0%	-	-23.2%	(-6.7%)
Other real estate owned		9,182	Appraisal of	Appraisal adjustments	0.0%	-	-62.5%	(-11.2%)
			collateral (1)	Liquidation expenses	-2.8%	-	-6.8%	(-5.0%)
Loans and leases held for sale		1,446	Appraisal of	Agreement of sale			0.0%
			collateral (1)

(1) Appraisals may be adjusted for qualitative factors such as interior condition of the property and liquidation expenses.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2014 and December 31, 2013. The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The methodologies for estimating the fair value of financial instruments that are measured on a recurring or nonrecurring basis are discussed above.

Cash and cash equivalents (carried at cost):

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities:

Management uses quoted market prices to determine fair value of securities (level 1).  If quoted prices are not available, fair value is based upon valuation techniques such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates (level 2). If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments by reviewing the private equities funds’ financials and K-1 filings (level 3).

Other Investment (carried at cost):

This investment includes the Solomon Hess SBA Loan Fund, which the Company invested in to partially satisfy its community reinvestment requirement.  Shares in this fund are not publicly traded and therefore have no readily determinable fair market value.  An investor can have their investment in the Fund redeemed for the balance of their capital account at any quarter end with 60 days notice to the Fund.  The investment in this Fund is recorded at cost.  The Company does not record this investment at fair value on a recurring basis, as this investment’s carrying amount approximates fair value.

Restricted investment in bank stock (carried at cost):

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

41

Loans held for sale (carried at lower of cost or fair value):

The fair values of loans held for sale are based upon appraised values of the collateral less costs to sell, management’s estimation of the value of the collateral or expected net sales proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Loans receivable (carried at cost):

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.   Generally, for variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values.

Impaired loans (generally carried at fair value):

Impaired loans are accounted for under ASC Topic 310. Impaired loans are those in which the Company has measured impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based on the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Accrued interest receivable and payable (carried at cost):

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings (carried at cost):

The carrying amounts of short-term borrowings approximate their fair values.

Long-term debt (carried at cost):

Fair values of FHLB advances and other long-term borrowings are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Subordinated debt (carried at cost):

Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity.

Off-balance sheet financial instruments (disclosed at cost):

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of

42

the agreements and the counterparties’ credit standing.  They are not shown in the table because the amounts are immaterial.

The tables below indicate the fair value of the Company’s financial instruments at September 30, 2014 and December 31, 2013.

					Fair Value Measurements
					At September 30, 2014
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	21,933	$	21,933	$	21,933	$	—	$	—
Investment securities available-for-sale		265,390		265,390		50		260,950		4,390
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		3,678		3,678		—		—		3,678
Loans held for sale		1,018		1,018		—		—		1,018
Loans, net		385,694		383,088		—		—		383,088
Accrued interest receivable		5,554		5,554		—		5,554		—
Financial Liabilities:
Demand deposits		67,901		67,901		—		67,901		—
NOW and money markets		203,978		203,978		—		203,978		—
Savings		19,142		19,142		—		19,142		—
Time deposits		224,765		223,270		—		223,270		—
Long-term borrowings		97,540		94,885		—		94,885		—
Subordinated debt		25,774		24,209		—		24,209		—
Accrued interest payable		2,305		2,305		—		2,305		—

					Fair Value Measurements
					At December 31, 2013
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	16,844	$	16,844	$	16,844	$	—	$	—
Investment securities available-for-sale		308,727		308,727		49		304,053		4,625
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		4,204		4,204		—		—		4,204
Loans held for sale		1,446		1,446		—		—		1,446
Loans, net		352,810		349,336		—		—		349,336
Accrued interest receivable		7,054		7,054		—		7,054		—
Financial Liabilities:
Demand deposits		60,473		60,473		—		60,473		—
NOW and money markets		210,053		210,053		—		210,053		—
Savings		17,593		17,593		—		17,593		—
Time deposits		240,845		239,102		—		239,102		—
Short-term borrowings		10,000		10,000		10,000		—		—
Long-term borrowings		97,881		94,896		—		94,896		—
Subordinated debt		25,774		26,000		—		26,000		—
Accrued interest payable		965		965		—		965		—

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Limitations

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments.  Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.  Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially all of the financial instruments were offered for sale.  This is due to the fact that no market exists for a sizable portion of the loan, deposit and off balance sheet instruments.

In addition, the fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Other significant assets that are not considered financial assets include premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments.  This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

Note 16.Segment Information

FASB ASC Topic 280, “Segment Reporting” (“ASC Topic 280”) established standards for public business enterprises to report information about operating segments in their annual financial statements and requires that those enterprises report selected information about operating segments in subsequent interim financial reports issued to shareholders.  It also established standards for related disclosure about products and services, geographic areas, and major customers.  Operating segments are components of an enterprise, which are evaluated regularly by the chief operating decision makers in deciding how to allocate and assess resources and performance.  The Company’s chief operating decision makers are the CEO and the Chief Administrative and Risk Officer (“CARO”). The Company has identified its reportable operating segments as “Community Banking” and “Tax Liens”.

Community banking

The Company’s community banking segment which includes Royal Bank consists of commercial and retail banking and equipment leasing. The community banking business segment is managed as a single strategic unit which generates revenue from a variety of products and services provided by Royal Bank and Royal Bank Leasing.  For example, commercial lending is dependent upon the ability of Royal Bank to fund cash needed to make loans with retail deposits and other borrowings and to manage interest rate and credit risk.

Tax liens

At September 30, 2014, Royal Bank’s tax liens segment includes its 80% and 100% ownership interest in CSC and RTL, respectively.  At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%.  The Company’s tax liens segment consisted of purchasing delinquent tax certificates from local municipalities at auction and then processing those liens to either encourage the property holder to pay off the lien, or to foreclose and sell the property.  The tax liens segment earns income based on interest rates (determined at auction) and penalties assigned by the municipality along with gains on sale of foreclosed properties. CSC is liquidating its assets under an orderly, long term plan.  RTL ceased acquiring tax certificates at public auctions in 2010.

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The following table presents selected financial information for reportable business segments forthe three and nine months ended September 30, 2014 and 2013.

	Three months ended  September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	6,889	$	302	$	7,191
Interest expense		1,367		256		1,623
Net interest income	$	5,522	$	46	$	5,568
(Credit) provision for loan and lease losses		(79)		28		(51)
Total non-interest income		987		217		1,204
Total non-interest expense		4,916		459		5,375
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,672	$	(224)	$	1,448
Noncontrolling interest	$	69	$	(44)	$	25
Net income (loss) attributable to Royal Bancshares	$	1,603	$	(180)	$	1,423

	Three months ended  September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	6,485	$	475	$	6,960
Interest expense		1,560		330		1,890
Net interest income	$	4,925	$	145	$	5,070
Provision for loan and lease losses		178		40		218
Total non-interest income		1,344		593		1,937
Total non-interest expense		5,683		607		6,290
Income tax expense (benefit)		—		—		—
Net income	$	408	$	91	$	499
Noncontrolling interest	$	121	$	36	$	157
Net income attributable to Royal Bancshares	$	287	$	55	$	342

45

	Nine months ended September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	20,549	$	1,002	$	21,551
Interest expense		4,030		840		4,870
Net interest income	$	16,519	$	162	$	16,681
(Credit) provision for loan and lease losses		(911)		146		(765)
Total non-interest income		2,019		773		2,792
Total non-interest expense		14,221		1,507		15,728
Income tax expense (benefit)		—		—		—
Net income (loss)	$	5,228	$	(718)	$	4,510
Noncontrolling interest	$	337	$	(125)	$	212
Net income (loss) attributable to Royal Bancshares	$	4,891	$	(593)	$	4,298

	Nine months ended September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	18,556	$	1,899	$	20,455
Interest expense		4,525		1,142		5,667
Net interest income	$	14,031	$	757	$	14,788
(Credit) provision for loan and lease losses		(563)		367		(196)
Total non-interest income		3,056		1,250		4,306
Total non-interest expense		16,348		3,649		19,997
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,302	$	(2,009)	$	(707)
Noncontrolling interest	$	422	$	(786)	$	(364)
Net income (loss) attributable to Royal Bancshares	$	880	$	(1,223)	$	(343)

Interest income earned by the community banking segment related to the tax liens segment was approximately $256,000 and $330,000 for the three month periods ended September 30, 2014 and 2013, respectively and$840,000 and $1.1 million for the nine months endedSeptember 30, 2014 and 2013, respectively.

Note 17.Federal Home Loan Bank Stock

As a member of the FHLB, the Company is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements.  The stock can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, there is no active market for the FHLB stock. As of September 30, 2014 and December 31, 2013, FHLB stock totaled $3.7 million and $4.2 million, respectively.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. The Company evaluates impairment quarterly. The decision of whether impairment exists is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: (1) its operating performance, (2) the severity and duration of declines in the fair value of its net assets related to its capital stock amount, (3) its liquidity position, and (4) the impact of legislative and regulatory changes on the FHLB.  Based on the capital adequacy and the liquidity position of the FHLB, management believes that the par value of its investment in FHLB stock will be recovered.  Accordingly, there is no other-than-temporary impairment related to the carrying amount of the Company’s FHLB stock as of September 30, 2014.

46

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to assist in understanding and evaluating the changes in the financial condition and earnings performance of the Company and its subsidiaries for the the three and nine months ended September 30, 2014 and 2013. This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2013, included in the Company’s Form 10-K for the year ended December 31, 2013.

FORWARD-LOOKING STATEMENTS

From time to time, Royal Bancshares of Pennsylvania, Inc. (the “Company”) may include forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters in this and other filings with the Securities and Exchange Commission. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. When we use words such as “believes,” “expects,” “anticipates” or similar expressions, we are making forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company’s business include the following: general economic conditions, including their impact on capital expenditures; interest rate fluctuations; business conditions in the banking industry; the regulatory environment: the nature, extent, and timing of governmental actions and reforms; rapidly changing technology and evolving banking industry standards; competitive factors, including increased competition with community, regional and national financial institutions; changes in generally accepted accounting principles; new service and product offerings by competitors and price pressures and similar items.

All forward-looking statements contained in this report are based on information available as of the date of this report.  These statements speak only as of the date of this report, even if subsequently made available by the Company on its website, or otherwise.  The Company expressly disclaims any obligation to update any forward-looking statement to reflect future events or developments.

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry.  Applications of the principles in the Company’s preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  These estimates and assumptions are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.

Note 1 to the Company’s Consolidated Financial Statements (included in Item 8 of the Form 10-K for the year ended December 31, 2013) lists significant accounting policies used in the development and presentation of the Company’s consolidated financial statements.  The following discussion and analysis, the significant accounting policies, and other financial statement disclosures identify and address key variables and other quantitative and qualitative factors that are necessary for an understanding and evaluation of the Company and its results of operations.  We completed an internal review of this financial information.  This review requires substantive judgment and estimation. As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, we have identified other-than-temporary impairment on investment securities, accounting for allowance for loan and lease losses, valuation allowance of deferred tax assets, loans held for sale, the valuation of other real estate owned, net periodic pension costs and the pension benefit obligation as among the most critical accounting policies and estimates.  These critical accounting policies and estimates are important to the presentation of the Company’s financial condition and results of operations, and they require difficult, subjective or complex judgments as a result of the need to make estimates.

47

Financial Highlights and Business Results

On June 29, 1995, pursuant to the plan of reorganization approved by the shareholders of Royal Bank America, formerly Royal Bank of Pennsylvania (“Royal Bank”), all of the outstanding shares of common stock of Royal Bank were acquired by Royal Bancshares and were exchanged on a one-for-one basis for common stock of Royal Bancshares. The principal activities of the Company are supervising Royal Bank, which engages in a general banking business principally in Montgomery, Chester, Bucks, Philadelphia and Berks counties in Pennsylvania and in central and southern New Jersey and Delaware. The Company also has a wholly owned non-bank subsidiary, Royal Investments of Delaware, Inc., which is engaged in investment activities.

The Company’s results of operations depend primarily on net interest income, which is the difference between interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities.  Interest-earning assets consist principally of loans and investment securities, while interest-bearing liabilities consist primarily of deposits and borrowings. Refer to the “Net Interest Income and Net Interest Margin” section in Management’s Discussion and Analysis of Financial Condition and Results of Operation below for additional information on interest yield and cost. Royal Bank principally generates commercial real estate loans primarily secured by first mortgage liens, construction loans for commercial real estate projects and residential home development, land development loans, tax liens and leases. At September 30, 2014, commercial real estate and multi-family loans, commercial and industrial loans, leases, and construction and land development loans comprised 46%, 18%, 12%, and 10%, respectively, of the total loan portfolio. Construction loans and land development loans can have more risk associated with them, especially when a weakened economy, such as we have experienced the past few years, adversely impacts the commercial rental or home sales market.   Net income is also affected by the provision for loan and lease losses and the level of non-interest income as well as by non-interest expenses, including salary and benefits, occupancy expenses and other operating expenses.

From 2008 through 2012, the Company recorded significant impairment charges on non-accrual loans, OREO and investment securities, which weighed heavily on earnings and was the largest contributing factor to the Company’s losses in those years.  Also contributing to the losses were increased costs associated with the historically high level of non-performing assets and legal expenses related to credit quality issues and the tax lien subsidiaries.  Finally, the establishment of a deferred tax asset valuation allowance in 2008 and subsequent years that currently amounts to $37.2 million, has prevented the Company from utilizing tax credits from losses during the past five years. 

Management successfully executed the Company’s strategic plan which included improving the overall level of credit quality, maintaining reduced credit risk within the investment portfolio, cutting the overall level of expenses, and returning to profitability.  While the Company’s past deleveraging strategy improved the risk profile of the Company by shedding higher risk assets and paying off higher cost brokered CDs, it has had a negative impact on income. The deleveraging has resulted in lower average loan balances and a higher proportion of lower yielding investment securities, which have negatively impacted net interest income, a principal source of income. While credit quality costs associated with non-performing assets negatively affect financial results, their impact has diminished as the overall level of non-performing assets has declined.

The financial results for the first nine months of 2014 illustrate the further progress of the Company’s current multi-faceted strategic plan with the goal of consistent profitability. A key strategy in 2014 has been to refresh Royal Bank’s retail products and branch network. During 2014, the Company reorganized the retail division to better serve existing customers, develop the retail sales teams, and attain new customer relationships. Royal Bank held a successful 50th anniversary campaign, offering a Kindle to new customers who met certain deposit account opening criteria. Early in 2014, the Villanova and Phoenixville branches were relocated to more visible, high-traffic locations within their markets. During the third quarter of 2014,  the Company relocated the Fairmount branch to a state of the art customer convenience center in the Northern Liberties section of Philadelphia and opened a limited service office in Princeton, New Jersey to more effectively work with our commercial customers in central New Jersey.  Most recently the Sicklerville, New Jersey branch was moved to busy Blackwood, New Jersey.  Additionally, customers now have access to 55,000 ATMs nationwide from a new arrangement.  During 2014, six highly experienced industry veterans joined the Company.  These included two commercial relationship managers, two retail sales managers, the head of sales and product training and a new Chief Credit Officer.  Their collective experience spans community and regional banks.  The hiring of these individuals was funded through the rightsizing of the organization and is fully integrated into the Company’s budget.In July, we introduced Royal

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Bank’s enhanced website and exciting fresh logo, which highlights our four key constituents: customers, shareholders, co-workers, and community.The redesigned products and contemporary technology are the future platform for enhanced banking convenience for commercial, consumer and retail customers.  Overall positive financial results have benefited from our rebranding and the ability to attract and retain commercial and consumer customers.

Consolidated Net Income (Loss)

Net income for the third quarter of 2014 amounted to $1.4 million, or earnings attributable to the Company of $0.05 per diluted common share,compared to a net income of $342,000, or a loss attributable to the Company of $0.01 per diluted common share, for the comparable quarter in 2013.  Factors that positively contributed to the $1.1 million improvement for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 were:

· Net interest income grew $498,000, or 9.8%.

· Due to the improvement in overall credit quality, the Company was able to record a credit for loan and lease losses of $51,000 compared to a provision for loan and lease losses of $218,000 for the comparable period in 2013.

· Other real estate owned (“OREO”) expenses and impairment decreased $690,000, or 81.8%.

· Problem loan expenses declined $60,000, or 46.2%.

· Gains on sales of AFS investment securities were $238,000.

Partially offsetting these positive items was a $419,000 reductioningains on the sale of premises and equipment and a $456,000 decrease in net gains on the sale of OREO.

For the nine months ended2014, net income amounted to $4.3 million, or earnings attributable to the Company of $0.15per diluted common share compared to a net loss of $343,000, or a loss attributable to the Company of $0.14 per diluted common share for the comparable period in 2013. The $4.6 million improvement for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 was mainly related to the following items:

· Net interest income grew $1.9 million, or 12.8%.

· The credit for loan and lease losses improved $569,000 (from a credit of $196,000 to a credit of $765,000) due to the continued positive progress in loan credit quality.

· Professional and legal fees decreased $475,000, or 23.3%.

· Salaries and benefits declined $493,000, or 6.2%.

· OREO expenses and impairment fell $849,000, or 48.8%.

· Problem loan expenses declined $334,000, or 59.5%.

· The 2013 period included legal settlement expense related to a tax lien subsidiary, of which the Company’s share was $990,000 after adjusting for noncontrolling interest.

Partially offsetting these positive items was a $1.1 million decline ingains on the sale of premises and equipment and a $576,000 decrease in net gains on the sale of OREO.

Interest Income

Total interest income of $7.2 million for the third quarter of 2014 grew $231,000, or 3.3%, from the comparable quarter of 2013. The improvement was primarily driven by an increase of $206,000 quarter versus quarter in interest income on investment securities and a smaller increase of $25,000 in interest income on loans and leases. Average interest-earning assets amounted to $679.0 million in the third quarter of 2014, which resulted in a decrease of $5.9 million, or 0.9%, from the level of $684.9 million in the third quarter of 2013.Average loans and leases grew $12.6 million to $386.3 million, while average investment securities dropped $24.6 million to $280.6 million for the quarter ended September 30, 2014.  Average cash equivalents increased $6.1 million quarter over quarter. Despite the decline in average investments, the interest income earned on the portfolio grew 13.5% and partially resulted from a $447,000 decrease in premium amortization due to a reduction in principal prepayments.

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Total interest income of $21.6 million for the first nine months of 2014 grew $1.1 million or 5.4%, from the comparable period in 2013. The improvement was primarily driven by an increase of $1.5 million in interest income on investment securities. Average interest-earning assets amounted to $686.7 million for the first nine months of 2014, which resulted in a decline of $5.7 million, or 0.8%, from the level of $692.5 million in the first nine months of 2013. The decrease in average interest-earning assets was due to a $13.0 million decline in average investment securities and a $3.1 million decrease in average cash equivalents which were partially offset by an increase of $10.4 million in average loan balances for the nine months ended September 30, 2014.  While average loan balances increased to $374.3 million for the first nine months of 2014, the associated interest income declined $406,000 and was directly related to thetax lien portfolio.  Interest income related to tax liens fell $897,000 year over year due to a $9.6 million, or 45.1% decline in average balances.  Interest income on the remaining loan portfolio increased $491,000.

For the third quarter of 2014, the yield on average interest-earning assets of 4.20% amounted to an enhancement of 17  basis points from the yield of 4.03% for the prior year’s third quarter. Driving the improvement in yield quarter over quarter was an increase of 46 basis points in the average yield on investments (2.45% versus 1.99%) which contributed an increase of  $206,000 to interest income. The investment yield in the third quarter of 2013 was negatively impacted by the accelerated amortization of premiums due to prepayments of government agency mortgage-backed (“MBS”) and collateralized mortgage obligation (“CMO”) securities.The average yield on loans declined 16 basis points (5.60% versus 5.76%).  The decrease in loan yields reflects the decline in average balances of higher yielding tax liens quarter versus quarter which adversely affected interest income by $159,000. 

For the nine months ended September 30, 2014, the yield on average interest-earning assets of 4.20%  amounted to an enhancement of 25 basis points from the yield of 3.95% for the comparable 2013 period. Spurring the improvement in yield period over period was an increase of 74 basis points in the average yield on investments (2.47% versus 1.73%) which contributed  a $1.5 million increase to interest income.  The average yield on loans declined 31 basis points (5.69% versus 6.00%). The investment yield in the first nine months of 2013 was negatively impacted by the accelerated amortization of premiums due to prepayments of government agency MBS and CMO securities.  The decrease in loan yields reflects the decline in average balances of higher yielding tax liens year over year which adversely affected interest income by $897,000.

Interest Expense

Total interest expense of $1.6 million in the third quarter of 2014 declined $267,000, or 14.1%, from the comparable quarter of 2013. The reduction in interest expense was primarily associated with a decline in the average interest rates paid on average interest-bearing liabilities as well as slightly lower average balances of such liabilities.  For the third quarter of 2014, average interest-bearing liabilities of $576.6 million decreased $16.4 million, or 2.8%, from $593.0 million for the comparable period in 2013.  For the three months ended September 30, 2014, average certificates of deposit amounted to $225.7 million which reflected a decline of $12.0 million, or 5.1% from the comparable quarter of 2013.  The decline in this average balance combined with a reduction in the average interest rate resulted in a decrease in interest expense of $94,000.  Average borrowings amounted to $123.7 million which represented an decrease of $10.4 million, or 7.8% from the comparable quarter of 2013. For the third quarter of 2014, the interest paid on the average borrowings declined $184,000 from the comparable quarter of 2013.  The majority of this decline is attributable to a $174,000 penalty that was assessed when the interest payment in arrears on the trust preferred securities was paid in the third quarter of 2013.

Total interest expense of $4.9 million for the first three quarters of 2014 declined $797,000, or 14.1%, from the comparable period in 2013. The reduction in interest expense was primarily associated with a decline in the average interest rates paid on average interest-bearing liabilities as well as lower average balances of such liabilities.  For the first nine months of 2014, average interest-bearing liabilities of $589.5 million decreased $13.5 million, or 2.2%, from $603.0 million for the comparable period in 2013.  For the nine months ended September 30, 2014, average certificates of deposit, average NOW and money market accounts and average borrowings amounted to $230.7 million, $209.8 million and $130.5 million, respectively, and reflected declines of $8.8 million, or 3.7%, $1.8 million, or 0.8% and $3.6 million, or 2.7%, respectively, from the comparable period of 2013.  These declines in average balances combined with interest rate reductions resulted in interest expense decreases of $375,000 and $448,000 for average CDs and borrowings, respectively. Additionally, the 2013 period included a $174,000 penalty on the trust preferred securities which was cited in the previous paragraph.

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The average interest rate paid on average total interest-bearing liabilities during the third  quarter of 2014 amounted to 1.12%, which represented an improvement of 14 basis points from the average interest rate paid during the comparable quarter of 2013. During the third quarter of 2014 the average interest rate paid on average interest-bearing deposits was 0.79%  which resulted in a decline of 6 basis points from the level of 0.85% during the comparable quarter of 2013. Quarter versus quarter lower average interest rates were paid on CDs (1.29% in 2014 versus 1.38% in 2013), while NOW and money market rates slightly increased 2 basis points (0.31% in 2014 versus 0.29% in 2013). The decline in average interest rates paid on CDs was attributed to lower rates on new accounts and the continued run off of maturing retail CDs. The average interest rate paid for borrowings during the third quarter of 2014 was 2.32%, which amounted to a reduction of 36 basis points from the average rate paid of 2.68% during the third quarter of 2013. 

The average interest rate paid on average total interest-bearing liabilities during the first three quarters of 2014 amounted to 1.10%, which represented an improvement of 16 basis points from the average interest rate paid during the comparable quarters of 2013. During the first nine months of 2014 the average interest rate paid on average interest-bearing deposits was 0.79% which resulted in a decline of 8 basis points from the level of 0.87% during the comparable period of 2013. Year over year lower average interest rates were paid on CDs (1.27% in 2014 versus 1.43% in 2013), while NOW and money market rates slightly increased 2 basis points (0.31% in 2014 versus 0.29% in 2013). The decline in average interest rates paid on CDs was attributed to lower rates on new accounts and the continued run off of maturing retail CDs. The average interest rate paid for borrowings during the first nine months of 2014 was 2.21%, which amounted to a reduction of 39 basis points from the average rate paid of 2.60% during the first nine months of 2013.

Net Interest Income and Margin

Net interest income for the quarter ended September 30, 2014 amounted to $5.6 million resulting in an increase of $498,000, or 9.8%, from the comparable quarter of 2013.  The improvement in net interest income was primarily attributed to an increase in the average yield on investment securities and a net reduction in the average rates paid on average interest-bearing liabilities quarter versus quarter. The increase in the average yield on investment securities was due to higher yields on new purchases of approximately $13.9 million in the third quarter of 2014. Additionally, the prepayments on government agency MBS and CMO investment securities declined, which had a positive effect of $447,000 on the amortization of premiums.  The decrease in average CD and borrowing balances combined with their respective interest rate reductions contributed $278,000 to the decline in interest expense.

Net interest income for the nine months ended September 30, 2014 amounted to $16.7 million resulting in an increase of $1.9 million, or 12.8%, from the comparable period of 2013.  The improvement in net interest income was primarily attributed to the same factors mentioned above, an increase in the average yield on investment securities and a net reduction in the average rates paid on average interest-bearing liabilities. The increase in the average yield on investment securities was due to higher yields on new purchases.  Additionally, the prepayments on government agency MBS and CMO investment securities declined, which had a positive effect of $2.0 million in premium amortization.  The decrease in average CD and borrowing balances combined with their respective interest rate reductions contributed $823,000 to the decline in interest expense.

The net interest margin for the third quarter of 2014 was 3.25%, which grew 31 basis points from 2.94% for the comparable quarter of 2013.  Quarter over quarter, the contribution from the 46 basis point improvement in the average yield on investment securities (2.45% versus 1.99%) was partially offset by the 16 basis point reduction in the average yield on loans and leases (5.60% versus 5.76%).  The average yield on interest-earning assets for the third quarter of 2014 was 4.20% compared to 4.03% for the same period in 2013.  Funding costs improved from an average interest rate paid of 1.26% for the third quarter of 2013 to 1.12% for the third quarter of 2014.  The Company continued to redeem and re-price maturing retail CDs which led to a 9 basis point reduction in average interest rates paid quarter over quarter (1.29% in 2014 versus 1.38% in 2013).  Additionally the average rates paid on borrowings declined 36 basis points (2.32% in 2014 versus 2.68% in 2013). 

The net interest margin for the first nine months of 2014 was 3.25%, which grew 39 basis points from 2.86% for the comparable period of 2013.  For the year over year period, the contribution from the 74 basis point improvement in the average yield on investment securities (2.47% versus 1.73%) was partially offset by the 31 basis point reduction in the average yield on loans and leases (5.69% versus 6.00%).  The average yield on interest-earning assets for the first nine

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months of 2014 was 4.20% compared to 3.95% for the same period in 2013.  Funding costs improved from an average interest rate paid of 1.26% for the first nine months of 2013 to 1.10% for the first nine months of 2014.  The Company continued to redeem and re-price maturing retail CDs which led to a 16 basis point reduction in average interest rates paid quarter over quarter (1.27% in 2014 versus 1.43% in 2013).  Additionally the average rates paid on borrowings declined 39 basis points (2.21% in 2014 versus 2.60% in 2013).

The following table represents the average daily balances of assets, liabilities and shareholders’ equity and the respective interest-earning assets and interest-bearing liabilities, as well as average rates for the periods indicated.  The loans outstanding include non-accruing loans.  The yields are presented on an annualized basis.

	For the three months ended						For the three months ended
	September 30, 2014						September 30, 2013
(In thousands, except percentages)	Average Balance		Interest		Yield			Average Balance		Interest	Yield
Cash equivalents	$	12,152	$	6	0.20	%	$	6,072	$	6	0.39	%
Investment securities		280,579		1,734	2.45	%		305,152		1,528	1.99	%
Loans		386,308		5,451	5.60	%		373,722		5,426	5.76	%
Total interest earning assets		679,039		7,191	4.20	%		684,946		6,960	4.03	%
Non-earning assets		45,335						52,532
Total average assets	$	724,374					$	737,478
Interest-bearing deposits
NOW and money markets	$	207,731	$	161	0.31	%	$	203,189	$	149	0.29	%
Savings		19,449		8	0.16	%		17,958		9	0.20	%
Time deposits		225,679		731	1.29	%		237,689		825	1.38	%
Total interest bearing deposits		452,859		900	0.79	%		458,836		983	0.85	%
Borrowings		123,743		723	2.32	%		134,186		907	2.68	%
Total interest bearing liabilities		576,602		1,623	1.12	%		593,022		1,890	1.26	%
Non-interest bearing deposits		66,251						61,513
Other liabilities		23,150						30,669
Shareholders' equity		58,371						52,274
Total average liabilities and equity	$	724,374					$	737,478
Net interest margin			$	5,568	3.25	%			$	5,070	2.94	%

	For the nine months ended						For the nine months ended
	September 30, 2014						September 30, 2013
(In thousands, except percentages)	Average Balance		Interest		Yield			Average Balance		Interest	Yield
Cash equivalents	$	8,964	$	16	0.24	%	$	12,083	$	21	0.23	%
Investment securities		303,485		5,610	2.47	%		316,474		4,103	1.73	%
Loans		374,270		15,925	5.69	%		363,909		16,331	6.00	%
Total interest earning assets		686,719		21,551	4.20	%		692,466		20,455	3.95	%
Non-earning assets		46,165						55,782
Total average assets	$	732,884					$	748,248
Interest-bearing deposits
NOW and money markets	$	209,772	$	494	0.31	%	$	211,529	$	464	0.29	%
Savings		18,620		24	0.17	%		17,911		28	0.21	%
Time deposits		230,688		2,194	1.27	%		239,460		2,569	1.43	%
Total interest bearing deposits		459,080		2,712	0.79	%		468,900		3,061	0.87	%
Borrowings		130,452		2,158	2.21	%		134,068		2,606	2.60	%
Total interest bearing liabilities		589,532		4,870	1.10	%		602,968		5,667	1.26	%
Non-interest bearing deposits		64,832						59,595
Other liabilities		24,316						29,579
Shareholders' equity		54,204						56,106
Total average liabilities and equity	$	732,884					$	748,248
Net interest margin			$	16,681	3.25	%			$	14,788	2.86	%

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Rate Volume Analysis

The following table sets forth a rate/volume analysis, which segregates in detail the major factors contributing to the change in net interest income forthe three and nine months ended September 30, 2014, as compared to the respective period in 2013, into amounts attributable to both rates and volume variances.

	For the three months ended						For the nine months ended
	September 30,						September 30,
	2014 vs. 2013						2014 vs. 2013
		Increase (decrease)						Increase (decrease)
(In thousands)	Volume		Rate		Total		Volume		Rate		Total
Interest income
Interest-bearing deposits	$	5	$	(5)	$	—	$	(5)	$	—	$	(5)
Total short term earning assets		5		(5)		—		(5)		—		(5)
Investments securities		(152)		358		206		(245)		1,752		1,507
Loans
Commercial demand loans		(125)		—		(125)		(343)		223		(120)
Commercial mortgages		(12)		(24)		(36)		3		(300)		(297)
Residential and home equity		187		2		189		624		(112)		512
Leases receivables		180		(15)		165		445		(13)		432
Tax certificates		(215)		56		(159)		(824)		(73)		(897)
Other loans		11		(1)		10		6		(5)		1
Loan fees		(19)		—		(19)		(37)		—		(37)
Total loans		7		18		25		(126)		(280)		(406)
Total (decrease) increase in interest income	$	(140)	$	371	$	231	$	(376)	$	1,472	$	1,096
Interest expense
Deposits
NOW and money market	$	4	$	8	$	12	$	(4)	$	34	$	30
Savings		1		(2)		(1)		1		(5)		(4)
Time deposits		(41)		(53)		(94)		(91)		(284)		(375)
Total deposits		(36)		(47)		(83)		(94)		(255)		(349)
Borrowings and subordinated debentures		(63)		(121)		(184)		(64)		(384)		(448)
Total decrease in interest expense	$	(99)	$	(168)	$	(267)	$	(158)	$	(639)	$	(797)
Total (decrease) increase in net interest income	$	(41)	$	539	$	498	$	(218)	$	2,111	$	1,893

Credit Risk Management

The Company’s loan and lease portfolio (the “credit portfolio”) is subject to varying degrees of credit risk. The Company maintains an allowance for loan and lease losses (the “allowance”) to absorb losses in the loan and lease portfolio.  The allowance is based on the review and evaluation of the loan and lease portfolio, along with ongoing, quarterly assessments of the probable losses inherent in that portfolio. The allowance represents an estimation made pursuant to FASB ASC Topic 450, “Contingencies” (“ASC Topic 450”) or FASB ASC Topic 310, “Receivables” (“ASC Topic 310”).  The adequacy of the allowance is determined through evaluation of the credit portfolio, and involves consideration of a number of factors, as outlined below, to establish a prudent level. Determination of the allowance is inherently subjective and requires significant estimates, including estimated losses on pools of homogeneous loans and leases based on historical loss experience and consideration of current economic trends, which may be susceptible to significant change. Loans and leases deemed uncollectible are charged against the allowance, while recoveries are credited to the allowance. Management adjusts the level of the allowance through the provision for loan and lease losses, which is recorded as a current period expense. The Company’s systematic methodology for assessing the appropriateness of the allowance includes: (1) general

53

reserves reflecting historical loss rates by loan type, (2) specific reserves for risk-rated credits based on probable losses on an individual or portfolio basis and (3) qualitative reserves based upon current economic conditions and other risk factors.

The loan portfolio is stratified into loan classifications that have similar risk characteristics. The general allowance is based upon historical loss rates using a weighted three-year rolling average of the historical loss experienced within each loan segment.  The qualitative factors used to adjust the historical loss experience address various risk characteristics of the Company’s loan and lease portfolio include evaluating: (1) trends in delinquencies and other non-performing loans, (2) changes in the risk profile related to large loans in the portfolio, (3) changes in the growth trends of categories of loans comprising the loan and lease portfolio, (4) concentrations of loans and leases to specific industry segments, and (5) changes in economic conditions on both a local and national level, (6) quality of loan review and board oversight, (7) changes in lending policies and procedures, and (8) changes in lending staff.  Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a report accompanying the allowance calculation. 

The specific reserves are determined utilizing standards required under ASC Topic 310. A loan is considered impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. Non-accrual loans and loans restructured under a troubled debt restructuring are evaluated for impairment on an individual basis considering all known relevant factors that may affect loan collectability such as the borrower’s overall financial condition, resources and payment record, support available from financial guarantors and the sufficiency of current collateral values (current appraisals or rent rolls for income producing properties), and risks inherent in different kinds of lending (such as source of repayment, quality of borrower and concentration of credit quality). Non-accrual loans that experience insignificant payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan by loan basis for commercial and industrial loans, commercial real estate loans and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral if the loan is collateral dependent.  The estimated fair values of substantially all of the Company’s impaired loans are measured based on the estimated fair value of the loan’s collateral. The Company obtains third-party appraisals on the fair value of real estate collateral.  Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Once a loan is determined to be impaired it will be deducted from the portfolio and the net remaining balance will be used in the general and qualitative analysis.  A specific reserve is established for an impaired loan if its carrying value exceeds its estimated fair value.

The amount of the allowance is reviewed and approved by the Chief Financial Officer (“CFO”), Chief Administrative and Risk Officer (“CARO”), Chief Lending Officer (“CLO”), and Chief Credit Officer (“CCO”) on at least a quarterly basis. Management believes that the allowance at September 30, 2014 is adequate. However, its determination requires significant judgment, and estimates of probable losses inherent in the credit portfolio can vary significantly from the amounts actually observed. While management uses available information to recognize probable losses, future changes to the allowance may be necessary based on changes in the credits comprising the portfolio and changes in the financial condition of borrowers, such as may result from changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the credit portfolio and the allowance. Such review may result in additional provisions based on their judgment of information available at the time of each examination.

Due to the continuing improvement in the credit quality of the loan portfolio and the decline in impaired loan balances, the Company recorded credits to the allowance of $51,000 and $765,000 forthe three and nine months ended September 30, 2014, respectively, compared to a provision of $218,000 and a credit of $196,000 for the the three and nine months ended

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September 30, 2013, respectively. The allowance decreased $2.2 million from $13.7 million at December 31, 2013 to $11.5 million at September 30, 2014. The decline in the allowance was directly related to the charge-off of specific reserves and a reduction of approximately $29.1 million in classified and impaired loans. The allowance was 2.89% of total loans and leases held for investment at September 30, 2014 compared to 3.73% at December 31, 2013. 

Changes in the allowance were as follows:

	For the three months ended				For the nine months ended
	September 30,				September 30,
(In thousands)	2014		2013		2014		2013
Balance at period beginning	$	11,569	$	15,179	$	13,671	$	17,261
Charge-offs
Commercial real estate		—		(605)		(349)		(1,440)
Construction and land development		—		—		—		(820)
Commercial & industrial		—		(34)		(452)		(228)
Residential real estate		—		(32)		—		(32)
Leases		(206)		(40)		(568)		(149)
Tax certificates		(65)		(126)		(330)		(410)
Total charge-offs		(271)		(837)		(1,699)		(3,079)
Recoveries
Commercial real estate		—		1		—		127
Construction and land development		205		106		205		297
Commercial & industrial		12		4		23		14
Residential real estate		5		2		11		157
Leases		13		4		35		24
Tax certificates		—		2		1		74
Total recoveries		235		119		275		693
Net charge offs		(36)		(718)		(1,424)		(2,386)
Credit for loan and lease losses		(51)		218		(765)		(196)
Balance at period end	$	11,482	$	14,679	$	11,482	$	14,679

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An analysis of the allowance by loan type is set forth below:

	September 30, 2014				December 31, 2013
			Percent of				Percent of
			outstanding				outstanding
			loans in each				loans in each
	Allowance		category to		Allowance		category to
(In thousands, except percentages)	amount		total loans		amount		total loans
Commercial real estate	$	4,705	41.4	%	$	5,498	40.5	%
Construction and land development		2,241	10.5	%		2,316	12.3	%
Commercial and industrial		1,431	17.8	%		3,006	21.7	%
Multi-family		353	4.3	%		402	3.2	%
Residential real estate		720	11.1	%		473	7.0	%
Leases		1,484	12.2	%		1,223	11.6	%
Tax certificates		372	2.1	%		555	3.5	%
Consumer		33	0.6	%		15	0.2	%
Unallocated		143	—	%		183	—	%
Total allowance	$	11,482	100.00	%	$	13,671	100.0	%

The following table presents the principal amounts of non-accrual loans and other real estate owned:

	September 30,			December 31,
(Amounts in thousands)	2014			2013
Non-accrual LHFI (1)	$	9,766		$	10,157
Non-accrual LHFS		1,018			—
Other real estate owned		9,593			9,617
Total nonperforming assets	$	20,377		$	19,774
Nonperforming assets to total assets		2.82	%		2.70	%
Total non-accrual loans to total loans		2.71	%		2.76	%
ALLL to non-accrual LHFI		117.57	%		134.60	%
ALLL to total LHFI		2.89	%		3.73	%

(1) Generally, a loan is placed on non-accruing status when it has been delinquent for a period of 90 days or more. This excludes non-accrual loans held for sale of $1.0 million at September 30, 2014.

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The composition of non-accrual loans is as follows:

	As of September 30, 2014				As of December 31, 2013
	Loan		Specific		Loan		Specific
(In thousands)	balance		reserves		balance		reserves
Non-accrual loans held for investment
Commercial real estate	$	3,732	$	205	$	2,325	$	331
Construction and land development		815		172		2,650		—
Commercial & industrial		2,583		5		3,629		452
Residential real estate		983		30		632		19
Leases		525		62		467		60
Tax certificates		1,128		19		454		24
Total non-accrual LHFI	$	9,766	$	493	$	10,157	$	886
Non-accrual loans held for sale
Construction and land development	$	1,018	$	—	$	—	$	—
Total non-accrual LHFS	$	1,018	$	—	$	—	$	—
Total non-accrual loans	$	10,784	$	493	$	10,157	$	886

Non-accrual loan activity for the first three quarters of 2014 is set forth below:

			1st Quarter Activity
(In thousands)	Balance at January 1, 2014		Additions		Payments and other decreases		Charge-offs/Impairment*		Transfer to OREO		Balance at March 31, 2014
Non-accrual loans held for investment
Commercial real estate	$	2,325	$	—	$	(395)	$	(350)	$	—	$	1,580
Construction and land development		2,650		—		(332)		—		—		2,318
Commercial & industrial		3,629		99		(339)		(452)		—		2,937
Residential real estate		632		114		—		—		—		746
Leases		467		278		—		(118)		—		627
Tax certificates		454		1,521		—		(265)		(573)		1,137
Total non-accrual LHFI	$	10,157	$	2,012	$	(1,066)	$	(1,185)	$	(573)	$	9,345
Non-accrual loans held for sale
Construction and land development	$	—	$	215	$	(215)	$	—	$	—	$	—
Total non-accrual LHFS	$	—	$	215	$	(215)	$	—	$	—	$	—
Total non-accrual loans	$	10,157	$	2,227	$	(1,281)	$	(1,185)	$	(573)	$	9,345

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			2nd Quarter Activity
(In thousands)	Balance at March 31, 2014		Additions		Payments and other decreases		Charge-offs/Impairment*		Transfer to OREO		Balance at June 30, 2014
Non-accrual loans held for investment
Commercial real estate	$	1,580	$	—	$	(245)	$	—	$	—	$	1,335
Construction and land development		2,318		—		(1,416)		—		—		902
Commercial & industrial		2,937		—		(52)		—		—		2,885
Residential real estate		746		258		—		—		—		1,004
Leases		627		15		—		(244)		—		398
Tax certificates		1,137		312		—		—		(309)		1,140
Total non-accrual LHFI	$	9,345	$	585	$	(1,713)	$	(244)	$	(309)	$	7,664
Non-accrual loans held for sale
Construction and land development(1)	$	—	$	1,396	$	—	$	—	$	—	$	1,396
Total non-accrual LHFS	$	—	$	1,396	$	—	$	—	$	—	$	1,396
Total non-accrual loans	$	9,345	$	1,981	$	(1,713)	$	(244)	$	(309)	$	9,060

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			3rd Quarter Activity
(In thousands)	Balance at June 30, 2014		Additions		Payments and other decreases		Charge-offs/Impairment*		Transfer to OREO		Balance at September 30, 2014
Non-accrual loans held for investment
Commercial real estate	$	1,335	$	2,409	$	(12)	$	—	$	—	$	3,732
Construction and land development		902		559		(646)		—		—		815
Commercial & industrial		2,885		—		(302)		—		—		2,583
Residential real estate		1,004		—		(21)		—		—		983
Leases		398		348		(15)		(206)		—		525
Tax certificates		1,140		1,181		(12)		(65)		(1,116)		1,128
Total non-accrual LHFI	$	7,664	$	4,497	$	(1,008)	$	(271)	$	(1,116)	$	9,766
Non-accrual loans held for sale
Construction and land development(1)	$	1,396	$	631	$	(1,009)	$	—	$	—	$	1,018
Total non-accrual LHFS	$	1,396	$	631	$	(1,009)	$	—	$	—	$	1,018
Total non-accrual loans	$	9,060	$	5,128	$	(2,017)	$	(271)	$	(1,116)	$	10,784

*Charge-offs on LHFI were recorded in the allowance.

(1) Additions column shows the transfer from non-accrual LHFI to non-accrual LHFS.

Total non-accrual loans at September 30, 2014 were $10.8 million and includes $1.0 million in LHFS.  Total non-accrual loans were $10.2 million at December 31, 2013.  The increase of $627,000 was the result of $1.7 million in charge-offs mostly related to specific reserves, $2.8 million reduction in existing non-accrual loan balances through payments and payoffs, and $2.0 million in transfers to OREO, which were partially offset by additions to non-accrual loans of $7.1 million.  During the third quarter of 2014, two commercial real estate loans totaling $2.4 million and one construction and land development loan for $559,000 were placed on non-accrual.  The leasing and tax certificate portfolios accounted for the remainder of the new non-accrual activity and transfers to OREO.  If interest had been accrued, such income would have been approximately $290,000 and $830,000 for the three and nine months ended September 30, 2014, respectively. The Company had no loans past due 90 days or more on which it has continued to accrue interest during the quarter. Typically, loans are restored to accrual status when the loan is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

Impaired Loans

The Company identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement.  Impaired loans include troubled debt restructurings (“TDRs”). The Company does not accrue interest income on impaired non-accrual loans. Excess proceeds received over the principal amounts due on impaired non-accrual loans are recognized as income on a cash basis.  The Company recognizes interest income under the accrual basis when the principal payments on the loans become current and the collateral on the loan is

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sufficient to cover the outstanding obligation to the Company.  If these factors do not exist, the Company does not recognize income.

The following is a summary of information pertaining to impaired loans and leases:

	September 30,		December 31,
(In thousands)	2014		2013
Impaired LHFI with a valuation allowance	$	4,232	$	3,835
Impaired LHFI without a valuation allowance		11,909		14,671
Impaired LHFS		1,018		—
Total impaired loans and leases	$	17,159	$	18,506
Valuation allowance related to impaired LHFI	$	493	$	886

	For the nine months ended
	September 30,
(In thousands)	2014		2013
Average investment in impaired loans	$	17,412	$	26,572
Interest income recognized on impaired loans and leases	$	292	$	442
Interest income recognized on a cash basis on impaired loans and leases	$	292	$	27

Troubled Debt Restructurings

A loan modification is deemed a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made by the Company that would not otherwise be considered for a borrower or collateral with similar credit risk characteristics.  All loans classified as TDRs are considered to be impaired.  TDRs are returned to an accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual restructured principal and interest is no longer in doubt.  At September 30, 2014, the Company had twelve TDRs, with a total carrying value of $9.4 million. At the time of the modifications, three of the loans were already classified as impaired non-accrual loans.  At December 31, 2013, the Company had twelve TDRs with a total carrying value of $12.1 million.  The Company’s policy for TDRs is to recognize income on currently performing restructured loans under the accrual method. 

Other Real Estate Owned

OREO slightly decreased $24,000 and was $9.6 million at December 31, 2013 and September 30, 2014.  OREO is comprised of three real estate properties acquired through, or in lieu of foreclosure in settlement of loans and 73 real estate properties acquired through foreclosure related to tax liens.  Set forth below is a table which details the changes in OREO from December 31, 2013 to September 30, 2014.

	For the nine months ended September 30, 2014
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	1,725	$	7,892	$	9,617
Net proceeds from sales		(1,214)		(2,334)		(3,548)
Net gains on sales		22		611		633
Transfers in		—		1,998		1,998
Cash additions		—		1,292		1,292
Impairment charge		(100)		(299)		(399)
Ending balance	$	433	$	9,160	$	9,593

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At September 30, 2014,  OREO was comprised of $229,000 in land, $9.2 million in tax liens, and residential real estate, related to a condominium construction project in Minneapolis, Minnesota in which the Company is a participant with a fair value of $204,000.  During the first nine months of 2014, the Company sold ten condominiums related to the construction project. The Company received its pro rata share of net proceeds in the amount of $193,000 and recorded a net gain of $37,000. Additionally, during the third quarter of 2014, the Company sold a parcel of land and a commercial real estate building. As a result of these sales the Company received $1.0 million in net proceeds and recorded a net loss of $15,000. During the first quarter of 2014, the Company recorded impairment charges of $75,000 on the remaining, larger condominium units and $25,000 on the commercial real estate which was sold in the third quarter. 

The composition of the OREO assets has evolved to properties primarily acquired through the tax lien portfolio.  During the first nine months of 2014, the Company transferred $2.0 million to OREO which represents 40 properties and added $1.3 million in lien redemptions on existing properties.  During the same period the Company sold 30 tax lien properties, received proceeds of $2.3 million, and recorded net gains of $611,000 as a result of these sales. Additionally, the Company recorded impairment charges of $299,000 during the first nine months of 2014 related to the tax lien properties.  At December 31, 2013, OREO assets acquired through the tax lien portfolio were $7.9 million and were comprised of 59 properties.

Credit Classification Process

The Company uses a nine point risk rating classification system commonly used in the financial services industry.  The first four risk rating classifications are rated Pass.  The riskier classifications include Pass-Watch, Special Mention, Substandard, Doubtful and Loss.  During the underwriting process, the CCO assigns each loan with an initial risk rating, which is approved by the appropriate loan committee. From time to time, and at the general direction of any of the various loan committees, the ratings may be changed based on the findings of that committee. Items considered in assigning ratings include the financial strength of the borrower and/or guarantors, the type of collateral, the collateral lien position, the type of loan and loan structure, any potential risk inherent in the specific loan type, higher than normal monitoring of the loan or any other factor deemed appropriate by any of the various committees for changing the rating of the loan. Any such change in rating is reflected in the minutes of that committee.

The loan review function is outsourced to a third party vendor which examines credit quality and portfolio management.  The loan review vendor applies the Company’s loan rating system to specific credits and reviews approximately 50% of the total commercial loan portfolio. Emphasis is on the larger new and seasoned loan relationships and includes criticized and classified loans. Additionally, the loan review vendor ensures that all critical industry segments are adequately represented in their review. The loan review vendor will also review loans specifically requested by management. Upon completion of a loan review, a copy of any review receiving an adverse classification by the reviewer is presented to the Classified, Charge-off and Impairment Committee (“CCIC”) for discussion. The CCO is the primary bank officer dealing with the third party vendor during the reviews.

Loans on the Company’s Special Assets Committee list are also subject to loan review even though they are receiving the daily attention of an assigned officer and monthly attention of the Special Assets Committee.  A watch list is maintained and reviewed at each meeting of CCIC. CCIC was formed to formalize the process and documentation required to classify, remove from classification, impair or charge-off a loan. The CCIC, which is comprised of the CEO, CARO, CFO, CCO, and CLO meet as required and provide regular updated reports to the Board of Directors. Loans are added to the watch list, even though the loans may be current or less than 30 days delinquent if they exhibit elements of substandard creditworthiness. The watch list contains a statement for each loan as to why it merits special attention, and this list is distributed to the Board of Directors on a monthly basis. Loans may be removed from the watch list if the CCIC determines that exception items have been resolved or creditworthiness has improved. Additionally, if loans become serious collection matters and are listed on the Company’s monthly delinquent loan or Special Assets Committee lists, they may be removed from the watch list.  Minutes outlining the CCIC’s findings and recommendations are issued after each meeting for follow-up by individual loan officers.

Potential Problem Loans

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Potential problem loans are loans not currently classified as non-performing loans, but for which management has doubts as to the borrowers’ ability to comply with present repayment terms. The loans are usually delinquent more than 30 days but less than 90 days and include non-impaired substandard loans. Potential problem loans amounted to approximately $2.0 million and $9.1 million at September 30, 2014 and December 31, 2013.  The $7.1 million decline in potential problem loans included one $4.9 million relationship which paid off in full during the second quarter of 2014.  Additionally, two loans totaling $1.1 million were placed on non-accrual during 2014.

Non-interest Income

Non-interest income for the third quarter of 2014 was $1.2 million compared to $1.9 million for the comparable quarter of 2013 resulting in a decrease of $733,000.  Net gains on the sale of OREO declined $456,000 ($173,000 in 2014 versus $629,000 in 2013).  Gains on the sales of premises and equipment fell $419,000 ($107,000 in 2014 versus $526,000 in 2013).Additionally, net gains on the sales of loans and leases decreased $161,000 ($80,000 in 2014 versus $241,000 in 2013).  Partially mitigating these reductions was an increase of $239,000 in net gains on the sale of AFS investment securities ($238,000 in 2014 versus a loss of $1,000in 2013).   Because the 10-year US Treasury rate retreated during the quarter,  the Company was able to sell certain investment securities which had extension risk in a rising interest rate environment for a net gain.

For the nine months ended September 30, 2014, non-interest income was $2.8 million compared to $4.3 million for the comparable period in 2013 resulting in a decrease of $1.5 million.  During the first nine months of 2013, the Company recorded $1.2 million in gains on the sale of premises and equipment predominantly related to the sale of three Company owned properties. Gains on the sale of premises and equipment were $107,000 for 2014.  Additionally, net gains on the sale of OREO declined $576,000 ($633,000 in 2014 versus $1.2 million in 2013) and service charges and fees declined $222,000 ($779,000 in 2014 versus $1.1 million in 2013) of which the majority was related to the leasing subsidiary.  Partially offsetting these items was a $261,000 increase in net gains on the sale of AFS investment securities ($330,000 in 2014 versus $69,000 in 2013).  

Non-interest Expense

Non-interest expense improved $915,000, or 14.5%, from $6.3 million for the third quarter of 2013 to $5.4 million for the third quarter of 2014. As credit quality has improved,  OREO expenses and impairment fell $690,000 ($154,000 in 2014 versus $844,000 in 2013), and loan collection expenses decreased $60,000 ($70,000 in 2014 versus $130,000 in 2013). In the third quarter of 2013, the Company recorded restructuring charges of $119,000 related to an effective lease termination.  There were no restructuring charges recorded in 2014. Partially offsetting these declines was a $157,000 increase in salaries and benefits ($2.7 million in 2014 versus $2.5 million in 2013), which was impacted by a contractual payment due to an executive retirement.

Non-interest expense significantly improved by $4.3 million, or 21.3%, from $20.0 million for the nine months ended September 30, 2013 to $15.7 million for the first nine months of 2014.  The 2013 period included a $1.65 million legal settlement expense related to a tax lien subsidiary, of which the Company’s share was $990,000.  Additional improvements include a $493,000 decrease in salaries and benefits ($7.5 million in 2014 versus $8.0 million in 2013) due to a reduction in the workforce, a $1.2 million decrease in credit quality expenses,  and a $475,000 reduction in professional and legal fees ($1.6 million in 2014 versus $2.0 million in 2013).  Credit related expenses include loan collection expenses, OREO expenses, OREO impairment, and impairment on loans held for sale. As asset credit quality continued to improve, OREO expenses and impairment declined $849,000 ($892,000 in 2014 versus $1.7 million in 2013), loan collection expenses decreased $181,000 ($227,000 in 2014 versus $408,000 in 2013) and impairment on LHFS fell $153,000 ($0 in 2014 versus $153,000 in 2013).  In addition, the Company did not record restructuring charges in 2014 ($0 in 2014 versus $230,000 in 2013).  The 2013 restructuring charges were related to the reduction in work force of twelve employees which occurred during the first quarter of 2013 and a lease termination.  Partially offsetting these declines was a $183,000 increase in occupancy and equipment expenses ($1.9 million in 2014 versus $1.7 million in 2013) and was due to branch relocations and minor renovations, along with higher utility costs. Additionally, marketing and advertising expenses increased $150,000 ($325,000 in 2014 versus $175,000 in 2013) for promotion of the Company’s new and enhanced products and services. 

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Income Tax Expense

Total income tax expense for the first three quarters of 2014 and the comparable quarters of 2013 was $0. Despite net income of $4.3 million for the first nine months of 2014, the Company did not record a tax expense due to the net operating loss carryforward from prior years. 

The Company concluded at September 30, 2014 and December 31, 2013 that it was more likely than not that the Company would not generate sufficient future taxable income to realize all of the deferred tax assets. Management’s conclusion was based on consideration of the relative weight of the available evidence and the uncertainty of future market conditions on results of operations. As a result the Company has recorded a cumulative non-cash charge of $37.2 million in the consolidated statement of operations that began in the period ended December 31, 2008 related to the establishment of a valuation allowance for the deferred tax asset for the portion of the future tax benefit that more likely than not will not be utilized in the future. The effective tax rate for the first nine months of both 2014 and 2013 was 0%.

Results of Operations by Business Segments

Operating segments are components of an enterprise, which are evaluated regularly by the chief operating decision makers in deciding how to allocate and assess resources and performance.  The Company’s chief operating decision makers are the CEO and the CARO. The Company has identified two reportable operating segments, “Community Banking” and “Tax Liens”. 

	Three months ended  September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	6,889	$	302	$	7,191
Interest expense		1,367		256		1,623
Net interest income	$	5,522	$	46	$	5,568
(Credit) provision for loan and lease losses		(79)		28		(51)
Total non-interest income		987		217		1,204
Total non-interest expense		4,916		459		5,375
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,672	$	(224)	$	1,448
Noncontrolling interest	$	69	$	(44)	$	25
Net income (loss) attributable to Royal Bancshares	$	1,603	$	(180)	$	1,423

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	Three months ended  September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	6,485	$	475	$	6,960
Interest expense		1,560		330		1,890
Net interest income	$	4,925	$	145	$	5,070
Provision for loan and lease losses		178		40		218
Total non-interest income		1,344		593		1,937
Total non-interest expense		5,683		607		6,290
Income tax expense (benefit)		—		—		—
Net income	$	408	$	91	$	499
Noncontrolling interest	$	121	$	36	$	157
Net income attributable to Royal Bancshares	$	287	$	55	$	342

	Nine months ended September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	20,549	$	1,002	$	21,551
Interest expense		4,030		840		4,870
Net interest income	$	16,519	$	162	$	16,681
(Credit) provision for loan and lease losses		(911)		146		(765)
Total non-interest income		2,019		773		2,792
Total non-interest expense		14,221		1,507		15,728
Income tax expense (benefit)		—		—		—
Net income (loss)	$	5,228	$	(718)	$	4,510
Noncontrolling interest	$	337	$	(125)	$	212
Net income (loss) attributable to Royal Bancshares	$	4,891	$	(593)	$	4,298

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	Nine months ended September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	18,556	$	1,899	$	20,455
Interest expense		4,525		1,142		5,667
Net interest income	$	14,031	$	757	$	14,788
(Credit) provision for loan and lease losses		(563)		367		(196)
Total non-interest income		3,056		1,250		4,306
Total non-interest expense		16,348		3,649		19,997
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,302	$	(2,009)	$	(707)
Noncontrolling interest	$	422	$	(786)	$	(364)
Net income (loss) attributable to Royal Bancshares	$	880	$	(1,223)	$	(343)

Community Bank Segment

Royal Bank America

Royal Bank was incorporated in the Commonwealth of Pennsylvania on July 30, 1963, was chartered by the Commonwealth of Pennsylvania Department of Banking and commenced operation as a Pennsylvania state-chartered bank on October 22, 1963. Royal Bank is the successor of the Bank of King of Prussia, the principal ownership of which was acquired by the Tabas family in 1980. The deposits of Royal Bank are insured by the FDIC to the highest amount permitted by law.  Royal Real Estate LLC, RBA Property LLC, Narberth Property Acquisition LLC, and Rio Marina LLC are wholly owned subsidiaries of Royal Bank.  These four entities were established to hold other real estate owned acquired through foreclosure of collateral associated with non-performing loans.  Royal Bank also owns 60% of Royal Bank America Leasing, LP.  At September 30, 2014, Royal Bank owns 80% of its subsidiary, Crusader Servicing Corporation and wholly owns Royal Tax Lien Services, LLC, each of which was formed to purchase and service delinquent tax liens.  At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%. 

Royal Bank derives its income principally from interest charged on loans and leases, interest earned on investment securities, and fees received in connection with the origination of loans and other services.  Royal Bank’s principal expenses are interest expense on deposits and borrowings and operating expenses.  Operating revenues, deposit growth, investment maturities, loan sales and the repayment of outstanding loans provide the majority of funds for activities.

Royal Bank conducts business operations as a commercial bank offering checking, money market and savings accounts and time deposits, and commercial and consumer loans, including residential mortgages, home equity and SBA loans.  Royal Bank also offers safe deposit boxes, collections, internet banking and bill payment along with other customary bank services (excluding trust) to its customers.  Drive-up, ATM, and night depository facilities are available.  Services may be added or deleted from time to time.  Royal Bank’s business and services are not subject to significant seasonal fluctuations.  Royal Bank is a member of the Federal Reserve FedLine Wire Transfer System.

Service Area:  Royal Bank’s primary service area includes Pennsylvania, primarily Montgomery, Chester, Bucks, Delaware, Berks and Philadelphia counties, and central and southern New Jersey.  This area includes residential areas and industrial and commercial businesses of the type usually found within a major metropolitan area.  Royal Bank serves this area from thirteen retail branches located throughout Montgomery, Philadelphia, Delaware and Berks counties and Camden County, New Jersey. Additionally, during the third quarter of 2014, Royal Bank opened a limited service office in Princeton, New Jersey to offer more convenience to its central New Jersey customers. Royal Bank also considers New York, Maryland, and Delaware as a part of its service area for certain products and services.  In the past, Royal Bank had frequently conducted business with clients located outside of its service area.  Royal Bank has loans in thirteen states via loan originations and/or participations with other lenders who have broad experience in those respective markets. Royal Bank’s headquarters are located at 732 Montgomery Avenue, Narberth, Pennsylvania 19072.

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Competition:  The financial services industry in our service area is extremely competitive.  Competitors within our service area include banks and bank holding companies with greater resources.  Many competitors have substantially higher legal lending limits.  In addition, savings banks, savings and loan associations, credit unions, money market and other mutual funds, brokerage firms, mortgage companies, leasing companies, finance companies and other financial services companies offer products and services similar to those offered by Royal Bank, on competitive terms.

Employees: Royal Bank employed approximately 118 people on a full-time equivalent basis as of September 30, 2014.

Deposits: At September 30, 2014, total deposits of Royal Bank were distributed among demand deposits (14%), money market deposit, savings and NOW accounts (43%) and time deposits (43%). At September 30, 2014, deposits of $523.6 million decreased $8.0 million from $531.6 million at year end 2013. Included in Royal Bank’s deposits are approximately $7.8 million of intercompany deposits that are eliminated through consolidation.

Lending: At September 30, 2014, Royal Bank, including its subsidiaries, had a total net loan portfolio of $385.7 million, representing 54% of total assets. The loan portfolio is categorized into commercial and industrial, commercial mortgages, residential mortgages (including home equity lines of credit), construction, tax liens, small business leases and consumer loans.  At September 30, 2014, net loans increased $32.9 million from year end 2013 due to new loan originations coupled with residential loan pool purchases, which were partially offset by pay downs, payoffs, charge-offs, transfers to OREO and a decline in the allowance.

Business results: Total assets of Royal Bank were $714.7 million at September 30, 2014 compared to $724.7 million at year end 2013.  Royal Bank recorded net income of $1.3 million for the third quarter of 2014 compared to $587,000 for the comparable quarter of 2013. For the first nine months of 2014, Royal Bank recorded net income of $4.2 million compared to$92,000 for the first nine months of 2013.  The 2013 period was negatively impacted by a $1.65 million legal settlement expense related to the tax lien subsidiaries.  After adjusting for noncontrolling interest, Royal Bank’s share of the loss contingency amounted to $990,000.  Total interest income of Royal Bank for the quarter ended and nine months ended September 30, 2014 was $7.1 million and $21.5 million, respectively compared to $6.9 million and $20.4 million for the quarter and nine months ended September 30, 2013, respectively.  The growth in interest income was primarily attributed to an increase in the yield on investment securities, which was partially offset by a decline in interest income on loans and leases.  The increase in investment interest income was due to a decline in the prepayments of government agency MBS and CMO securities which had a positive effect on the amortization of premiums coupled with higher yields on new purchases. Interest expense was $1.6 million and $4.9 million for the third quarter and nine months ended September 30, 2014, respectively, compared to $1.7 million and $5.5 million for the quarter and nine months ended September 30, 2013. The $707,000 improvement in net income quarter versus quarter was mainly attributable to a $328,000 million increase in net-interest income and a $51,000 credit to the allowance in the 2014 period compared to a$218,000 provision in the 2013 period.  The $4.1 million improvement in net income year over year was related to the legal settlement expense mentioned above, a $1.7 million increase in net interest income, and a $1.2 million decline in credit related expenses, which were partially offset by a $1.1 million decline in gains on the sale premises and equipment. The above amounts reflect the consolidation totals for Royal Bank and its subsidiaries.  The subsidiaries included in these amounts are Royal Investments America, Royal Real Estate, Royal Bank America Leasing, Royal Tax Lien Services, Crusader Servicing Corporation, RBA Property LLC, Narberth Property Acquisitions, and Rio Marina LLC.

Royal Investments of Delaware

On June 30, 1995, the Company established a special purpose Delaware investment company, Royal Investments of Delaware (“RID”), as a wholly owned subsidiary. Legal headquarters are at 1105 N. Market Street, Suite 1300, Wilmington, Delaware. RID buys, holds and sells investment securities.

Business results: For the three months endedSeptember 30, 2014, RID reported net income of $362,000, compared to net income of $159,000 for the three months endedSeptember 30,. The quarter versus quarter increase was primarily related to an increase in gains on the sale of investment securities of $219,000.  For the first nine months of 2014, RID reported net income of $718,000 compared to net income of $476,000 for the first nine months of 2013.  At September 30, 2014 total assets of RID were $31.1 million, of which $3.4 million was held both in cash and cash equivalents and in investment securities. The amounts shown above include the activity related to RID’s wholly owned subsidiary Royal Preferred LLC. 

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Royal Bank previously extended loans to RID, secured by securities and as per the provisions of Regulation W.  At September 30, 2014 no loans were outstanding.

Royal Preferred LLC

On June 16, 2006, the Company, through its wholly owned subsidiary RID, established Royal Preferred LLC as a wholly owned subsidiary. Royal Preferred LLC was formed to purchase a subordinated debenture from Royal Bank America.  At September 30, 2014, Royal Preferred LLC had total assets of $24.6 million.

Royal Bancshares Capital Trust I and II

On October 27, 2004, the Company formed two Delaware trust affiliates, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II, in connection with the sale of an aggregate of $25.0 million of a private placement of trust preferred securities. The interest rates for the debt securities associated with the Trusts at September 30, 2014 were 2.38%.

Under the Federal Reserve Agreement as described in “Note 2 – Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company and its non-bank subsidiaries may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System.  The Company received approval and paid the required interest payments in 2014.

Royal Bank America Leasing, LP

On July 25, 2005, the Company, through its wholly owned subsidiary Royal Bank, formed Royal Bank America Leasing, LP (“Royal Leasing”). Royal Bank holds a 60% ownership interest in Royal Leasing. Legal headquarters are 550 Township Line Road, Blue Bell, Pennsylvania. Royal Leasing was formed to originate small business financing leases. Royal Leasing originates the leases through its internal sales staff and through independent brokers located throughout its business area. In general, Royal Leasing will portfolio individual leases in amounts up to $250,000. Leases originated in amounts in excess of $250,000 are sold to other leasing companies.

Business results: At September 30, 2014, total assets of Royal Leasing were $48.5 million, and includes $48.4 million in net leases.  Total assets were $42.3 million at December 31, 2013.  For the quarter ended September 30, 2014, Royal Leasing had net interest income of $676,000 compared to $577,000 for the comparable period of 2013; provision for lease losses of $325,000 versus $134,000 in the comparable quarter of 2013; non-interest income of $87,000 as compared to $168,000 in the third quarter of 2013; and non-interest expense of $68,000 compared to $309,000 quarter over quarter.  Prior to partner distributions, net income for the quarter ended September 30, 2014 was $370,000, a decrease of $147,000 from $517,000 for the three months ended September 30, 2013.  For the first nine months of 2014, Royal Leasing recorded net income prior to management distributions of $1.3 million compared to $1.7 million for the first nine months of 2013.  The decline in net income prior to partner distributions was mainly due to the increase in provision for lease losses.  

Royal Bank has extended loans to RBA Leasing at market interest rates, secured by the lease portfolio of RBA Leasing and as per the provisions of Regulation W. At September 30, 2014, the amount due Royal Bank from RBA Leasing was $44.8 million.

Royal Investments America

On June 23, 2003, the Company, through its wholly owned subsidiary Royal Bank, established Royal Investments America, LLC (“RIA”) as a wholly owned subsidiary. Legal headquarters are at 732 Montgomery Avenue, Narberth, Pennsylvania. RIA was formed to invest in equity real estate ventures subject to limitations imposed by the FDIC and Pennsylvania Department of Banking by regulation.

Business results: At September 30, 2014 and December 31, 2013, total assets of RIA were $5.9 million.  For the quarter ended September 30, 2014, RIA recorded a net loss of $6,000 compared to $9,000 for the comparable period of 2013. For the first nine months of 2014, RIA recorded a net loss of $9,000 compared to $13,000 for the same period in 2013.  Royal

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Bank had previously extended loans to RIA at market interest rates, secured by the loan portfolio of RIA and as per the provisions of Regulation W. At September 30, 2014, there were no outstanding loans from Royal Bank to RIA.

Tax Lien Segment

Crusader Servicing Corporation

The Company, through its wholly owned subsidiary Royal Bank, holds an 80% ownership interest in Crusader Servicing Corporation (“CSC”). Effective December 31, 2013, Royal Bank acquired the ownership interest of the former President of CSC. At September 30, 2013 Royal Bank’s ownership interest was 60%.  Its legal headquarters are at 732 Montgomery Avenue, Narberth, Pennsylvania.  CSC acquired, through auction, delinquent property tax liens in various jurisdictions, assuming a lien position that is generally superior to any mortgage liens on the property, and obtaining certain foreclosure rights as defined by local statute. CSC is currently being liquidated under an orderly, long term plan adopted by CSC management. 

Business results:  CSC had net interest expense of $59,000 for the quarter ended September 30, 2014 compared to $85,000 for the comparable quarter in 2013.  The $26,000 improvement was primarily related to the decline in average lien balances. CSC recorded net losses of $219,000 and $625,000 forthe three and nine months ended September 30, 2014, respectively, compared to $227,000 and $552,000, respectively, for the comparable periods of 2013. The $73,000 year over year increase in net loss was primarily related to a $200,000 drop in net gains on the sales of OREO, which was partially offset by a $76,000 decline in the provision for lien losses.  At September 30, 2014, total assets of CSC were $5.1 million, of which $650,000 was held in tax liens and $4.4 million was in OREO while at December 31, 2013 total assets were $4.8 million, of which $896,000 was held in tax liens and $3.8 million was held in OREO. Royal Bank has extended loans to CSC at market interest rates, secured by the tax lien portfolio of CSC and as per the provisions of Regulation W.  At September 30, 2014, the amount due Royal Bank from CSC was $5.7 million.

Royal Tax Lien Services, LLC

On November 17, 2006, the Company, through its wholly owned subsidiary Royal Bank, formed Royal Tax Lien Services, LLC (“RTL”). Effective December 31, 2013, Royal Bank acquired the ownership interest of the former President of RTL and now holds 100% of the ownership interests.  At September 30, 2013 Royal Bank held a 60% ownership interest in RTL. Its legal headquarters is located at 732 Montgomery Avenue, Narberth, Pennsylvania 19072.  RTL was formed to purchase and service delinquent tax certificates.  RTL typically acquired delinquent property tax liens through public auctions in various jurisdictions, assuming a lien position that is generally superior to any mortgage liens that are on the property, and obtaining certain foreclosure rights as defined by local statute.  RTL ceased acquiring tax certificates at public auctions in 2010.

Business results:  RTL’s net interest income of $105,000, for the quarter ended September 30, 2014, significantly decreased from$230,000 for the comparable quarter of 2013.  The decrease in net interest income was largely due to a quarter-versus-quarter substantial decline in tax liens outstanding.  For the quarter and nine months ended September 30, 2014, RTL recorded a net loss of $5,000 and $92,000, respectively, compared to net income of $317,000 and a net loss of $1.4 million, respectively for the comparable periods in 2013. The majority of the 2013 loss was related to the $1.65 million legal settlement accrual previously mentioned.  At September 30, 2014, total assets of RTL were $16.6 million, of which $7.6 million was held in tax liens and $4.8 million was held in OREO as compared to total assets at December 31, 2013 of $21.7 million, of which $11.8 million was held in tax liens and $4.1 million was held in OREO. 

Royal Bank has extended loans to RTL at market interest rates, secured by the tax lien portfolio of RTL and as per the provisions of Regulation W.  At September 30, 2014, the amount due Royal Bank from RTL was $9.4 million.

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FINANCIAL CONDITION

Consolidated Assets

Total consolidated assets at September 30, 2014 were $723.5 million, a decrease of $8.8 million, or 1.2%, from December 31, 2013.  This slight decrease was mainly attributed to a $43.3 million reduction in investment securities and was partially offset by increases of $32.9 million and $5.1 million in net loans and leases and cash and cash equivalents, respectively.  Cash flows from investment securities sales and payments were partially invested in loans and held in cash due to expected redeployment into new loan originations.

Cash and Cash Equivalents

Total cash and cash equivalents of $21.9 million at September 30, 2014 grew $5.1 million from $16.8 million atDecember 31, 2013 due to cash flows from the investment portfolio. It is anticipated that some of the cash will fund new loan originations.

Investment Securities

AFS investment securities of $265.4 million at September 30, 2014, dropped  $43.3 million from the level at December 31, 2013.  The decline was primarily due to the sales of investment securities to fund loan growth.  FHLB stock was $3.7 million at September 30, 2014 and $4.2 million at December 31, 2013. 

The AFS portfolio had gross unrealized losses of $3.5 million at September 30, 2014 compared to $9.7 million at December 31, 2013.  The $6.2 million improvement in the gross unrealized loss was directly related to decreases of $4.6 million, $445,000 and $632,000 in gross unrealized losses on U.S. government agency debt securities, Agency CMOs, and MBS, respectively. These securities carry lower coupons and their market value was positively impacted by the 51 basis point decrease in the 10-year Treasury yield from 3.03% at December 31, 2013 to 2.52% at September 30, 2014. Additionally, during the second and third quarters, the Company was able to sell some bonds with either lower yields or extension risk which also positively contributed to the improvement in the unrealized loss.The AFS portfolio contained a net unrealized gain of $1.1 million at September 30, 2014, which recovered $6.2 million from a net unrealized loss of $5.1 million at December 31, 2013 for the reasons mentioned above. There was no OTTI impairment for any of the investments during the first three quarters of 2014 or the first three quarters of 2013. 

Investment securities within the AFS portfolio are marked to market quarterly and any resulting gains or losses are recorded in other comprehensive income, net of taxes, within the equity section of the balance sheet as shown in “Note 14 - Comprehensive Income (Loss)” to the Consolidated Financial Statements. When a loss is deemed to be other-than-temporary but the Company does not intend to sell the security and it is not more likely than not that the Company will have to sell the security before recovery of its cost basis, the Company will recognize the credit component of an OTTI charge in earnings and the remaining portion in other comprehensive income.

The Company will continue to monitor these investments to determine if the continued negative trends, market valuations or credit defaults result in impairment that is other than temporary.

Loans and Leases

Total loans and leases held for investment of $397.2 million increased $30.7 million, or 8.4%, from the level at December 31, 2013.  The Company has shifted its lending focus to diversifying the loan portfolio through the origination of small business loans, owner occupied commercial real estate, middle market business lending and consumer loans.  Additionally, after thorough due diligence, the Company has purchased small residential loan pools.The net growth in loans and leases was directly impacted by an approximate $28.7 million reduction in classified loans due to payoffs and pay downs coupled with payoffs of out of market loans and a $4.5 million decline in tax certificates from the balance at December 31, 2013. 

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The following table represents loan balances by type:

	September 30,		December 31,
(In thousands)	2014		2013
Commercial real estate	$	164,522	$	148,293
Construction and land development		41,676		45,261
Commercial and industrial		70,743		79,589
Multi-family		16,893		11,737
Residential real estate		44,261		25,535
Leases		48,588		42,524
Tax certificates		8,230		12,716
Consumer		2,263		826
Total LHFI, net of unearned income	$	397,176	$	366,481

Deposits

Total deposits, the Company’s primary source of funds, declined $13.2 million, or 2.5%, from $529.0 million at December 31, 2013 to $515.8 million at September 30, 2014.  The decrease in deposits reflects a focused change in the deposit product composition.  Checking and savings accounts increased $9.0 million while NOW and money market accountsand certificates of deposit declined $22.2 million.

The following table represents ending deposit balances by type:

	September 30,		December 31,
(In thousands)	2014		2013
Demand	$	67,901	$	60,473
NOW		41,801		45,375
Money Market		162,177		164,678
Savings		19,142		17,593
Time deposits (over $100)		85,603		92,763
Time deposits (under $100)		139,162		148,082
Total deposits	$	515,786	$	528,964

Borrowings

Total borrowings, which include long-term borrowings and trust preferred securities, amounted to $123.3 million at September 30, 2014 compared to $133.7 million at December 31, 2013. The $10.3 million decline is attributable to a $10.0 million decrease in short-term borrowings and payments made on an amortizing loan with another financial institution. 

Shareholders’ Equity

Consolidated shareholders’ equity of $62.5 million at September 30, 2014 increased $14.7 million, or 30.8%, from $47.8 million at December 31, 2013. The increase was related to $6.0 million raised in a shareholder rights offering through the issuance of class A common stock; an increase of $4.3 million in other comprehensive income mostly related to improvement in the valuation of the investment portfolio and net income of $4.3 million for the first nine months of 2014.

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The Company received approval from the Federal Reserve Bank to bid up to $14.0 million to purchase shares of the Company’s Series A Preferred Stock in an auction of such shares to be conducted by the Treasury.  The auction closed on June 19, 2014.  The Series A Preferred Stock was priced in the auction at $1,207.11 per share for all 30,407 shares of Series A Preferred Stock outstanding. The Company was allocated 11,551 shares of Series A Preferred Stock for repurchase at the clearing price of $1,207.11. Closing for the sale of the Series A Preferred Stock by Treasury, including the repurchase of 11,551 shares of Series A Preferred Stock by the Company, occurred on July 2, 2014. As part of this redemption, the Company eliminated nearly $3.5 million in preferred dividend in arrears.

To fund the purchase of the Series A Preferred Stock, described above, the Company sold 11,666,667 shares of its Class A common stock in a private placement transaction at a price of $1.20 per share.  Additionally, during the third quarter of 2014, the Company conducted a shareholder rights offering to all existing shareholders to increase liquidity at the holding company and to limit their ownership dilution from the sale of Class A common stock to the other investors in the private placement. The Company issued approximately 5.0 million shares and received gross proceeds of approximately $6.0 million. The private placement and the shareholders rights offering combined to increase tangible common equity by nearly $17.6 million.

CAPITAL ADEQUACY

The Company and Royal Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Royal Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The capital adequacy guidelines require the Company and Royal Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).  Under the informal agreement referenced in “Note 2 – Regulatory Matters and Significant Risks And Uncertainties” to the Consolidated Financial Statements, Royal Bank is required to maintain a minimum Tier 1 leverage ratio of 8% and a Total risk-based capital ratio of 12%.  At September 30, 2014 and December 31, 2013, the Company and Royal Bank met and compared favorably to the minimum capital adequacy requirements of Tier 1 and total capital to risk-weighted assets and the minimum Tier 1 leverage ratio, as defined by banking regulation.  Royal Bank also met the criteria for a well-capitalized institution. Management believes that, under current regulations, the Company will continue to meet its minimum capital requirements in the foreseeable future.

In July 2013, the federal bank regulatory agencies adopted final rules to revise the agencies’ capital adequacy guidelines and prompt corrective action rules, which were designed to enhance such requirements and implement the revised standards of the Basel Committee on Banking Supervision, commonly referred to as Basel III. The July 2013 final rules generally implement higher minimum capital requirements, add a new common equity tier 1 capital requirement, and establish criteria that instruments must meet to be considered common equity tier 1 capital, additional tier 1 capital or tier 2 capital. The new minimum capital to risk-adjusted assets requirements are a common equity tier 1 capital ratio of 4.5% (6.5% to be considered “well capitalized”) and a tier 1 capital ratio of 6.0%, increased from 4.0% (and increased from 6.0% to 8.0% to be considered “well capitalized”); the total capital ratio remains at 8.0% under the new rules (10.0% to be considered “well capitalized”). Under the new rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity tier 1 capital above its minimum risk-based capital requirements in an amount greater than 2.5% of total risk-weighted assets. The new minimum capital requirements are effective on January 1, 2015. The capital contribution buffer requirements phase in over a three-year period beginning January 1, 2016.

In December 2013, Federal banking regulators issued rules for complying with the Volcker Rule provision of the Dodd-Frank Act. The Bank does not engage in, and does not expect to engage in, any transactions that are considered “covered activities” as defined by the Volcker Rule. Therefore, the Bank does not have any additional compliance obligations under the Volcker Rule.

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The Company and the Bank will continue to analyze these new rules and their effects on the business, operations and capital levels of the Company and the Bank.

In connection with a prior bank regulatory examination, the FDIC concluded, based upon its interpretation of the Consolidated Reports of Condition and Income (the “Call Report”) instructions and under regulatory accounting principles (“RAP”), that income from Royal Bank’s tax lien business should be recognized on a cash basis, not an accrual basis.  Royal Bank’s current accrual method is in accordance with U.S. GAAP.  Royal Bank disagrees with the FDIC’s conclusion and filed the Call Report for September 30, 2014 and the previous 16 quarters in accordance with U.S. GAAP.  A change in the method of revenue recognition for the tax lien business for regulatory accounting purposes affects Royal Bank’s capital ratios as shown below.  The resolution of this matter will be decided by additional joint regulatory agency guidance which includes the Federal Reserve Bank, the FDIC, and the OCC.

The table below sets forth Royal Bank’s capital ratios under RAP, based on the FDIC’s interpretation of the Call Report instructions:

	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)
At September 30, 2014	$	76,403	15.99	%	$	38,237	8.00	%	$	47,796	10.00	%
At December 31, 2013	$	71,417	15.61	%	$	36,590	8.00	%	$	45,737	10.00	%
Tier I capital (to risk-weighted assets)
At September 30, 2014	$	70,970	14.85	%	$	19,118	4.00	%	$	28,677	6.00	%
At December 31, 2013	$	65,602	14.34	%	$	18,295	4.00	%	$	27,442	6.00	%
Tier I capital (to average assets, leverage)
At September 30, 2014	$	70,970	9.96	%	$	28,492	4.00	%	$	35,615	5.00	%
At December 31, 2013	$	65,602	9.13	%	$	28,739	4.00	%	$	35,924	5.00	%

The tables below reflect the adjustments to the net loss as well as the capital ratios for Royal Bank under U.S. GAAP:

	For the nine months ended		For the year ended
(In thousands)	September 30, 2014		December 31, 2013
RAP net income (loss)	$	682	$	(139)
Tax lien adjustment, net of noncontrolling interest		3,556		2,844
U.S. GAAP net income	$	4,238	$	2,705

	At September 30, 2014				At December 31, 2013
	As reported		As adjusted		As reported		As adjusted
	under RAP		for U.S. GAAP		under RAP		for U.S. GAAP
Total capital (to risk-weighted assets)	15.99	%	16.61	%	15.61	%	16.49	%
Tier I capital (to risk-weighted assets)	14.85	%	15.49	%	14.34	%	15.22	%
Tier I capital (to average assets, leverage)	9.96	%	10.42	%	9.13	%	9.73	%

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The tables below reflect the Company’s capital ratios:

	Actual				For capital adequacy purposes				To be well capitalized under prompt corrective action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)
At September 30, 2014	$	94,205	19.37	%	$	38,899	8.00	%		N/A	N/A
At December 31, 2013	$	84,384	18.09	%	$	37,315	8.00	%		N/A	N/A
Tier I capital (to risk-weighted assets)
At September 30, 2014	$	85,328	17.55	%	$	19,449	4.00	%		N/A	N/A
At December 31, 2013	$	71,432	15.31	%	$	18,658	4.00	%		N/A	N/A
Tier I capital (to average assets, leverage)
At September 30, 2014	$	85,328	11.78	%	$	28,975	4.00	%		N/A	N/A
At December 31, 2013	$	71,432	9.79	%	$	29,178	4.00	%		N/A	N/A

The Company has filed the Consolidated Financial Statements for Bank Holding Companies-FR Y-9C (“FR Y-9C”) as of September 30, 2014 consistent with U.S. GAAP and the FR Y-9C instructions.  In the event that a similar adjustment for RAP purposes would be required by the Federal Reserve on the holding company level, the adjusted ratios are shown in the table below. 

	For the nine months ended		For the year ended
(In thousands)	September 30, 2014		December 31, 2013
U.S. GAAP net income	$	4,298	$	2,109
Tax lien adjustment, net of noncontrolling interest		(3,556)		(2,844)
RAP net income (loss)	$	742	$	(735)

	At September 30, 2014				At December 31, 2013
	As reported under U.S. GAAP		As adjusted for RAP		As reported under U.S. GAAP		As adjusted for RAP
Total capital (to risk-weighted assets)	19.37	%	18.78	%	18.09	%	17.24	%
Tier I capital (to risk-weighted assets)	17.55	%	16.68	%	15.31	%	14.10	%
Tier I capital (to average assets, leverage)	11.78	%	11.17	%	9.79	%	8.98	%

LIQUIDITY & INTEREST RATE SENSITIVITY

Liquidity is the ability to ensure that adequate funds will be available to meet the Company’s financial commitments as they become due.  In managing its liquidity position, all sources of funds are evaluated, the largest of which is deposits.  Also taken into consideration are securities maturing in one year or less, other short-term investments and the repayment of loans. These sources provide alternatives to meet the Company’s short-term liquidity needs.  Longer liquidity needs may be met by issuing longer-term deposits and by raising additional capital.  The liquidity ratios are specifically defined as the ratio of net cash, available FHLB and other lines of credit, and unpledged marketable securities relative to both total deposits and total liabilities.   The Company’s policy is to maintain a liquidity ratio as a percentage of total deposits of at least 12% and a liquidity ratio as a percentage of total liabilities of at least 10%.  At September 30, 2014, the Company’s liquidity ratios were more than five times the policy minimums. 

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Our funding decisions can be influenced by unplanned events, which include, but are not limited to, the inability to fund asset growth, difficulty renewing or replacing funds that mature, the ability to maintain or draw down lines of credit with other financial institutions, significant customer withdrawals of deposits, and market disruptions. The Company has a liquidity contingency plan in the event liquidity falls below an acceptable level, however in today’s economic environment, events could arise that may render sources of liquid funds unavailable in the future when required.  The Company’s ALCO meets monthly to monitor liquidity management. 

On August 13, 2009, the Company’s Board of Directors suspended the regular quarterly cash dividends on the $30.4 million in Series A Preferred Stock issued to the United States Department of the Treasury (“Treasury”) as part of the Capital Purchase Program (“CPP”) established by the Treasury.  The Company’s Board of Directors took this action in consultation with the Federal Reserve Bank of Philadelphia as required by recent regulatory policy guidance. As described under “Shareholders’ Equity”, on July 2, 2014, the Company redeemed 11,551 of the Series A Preferred stock and eliminated nearly $3.5 million in preferred dividends in arrears. As of September 30, 2014 the Series A Preferred stock dividend in arrears was approximately $6.1 million and has not been recognized in the consolidated financial statements. 

Interest rate sensitivity is a function of the re-pricing characteristics of the Company’s assets and liabilities.  These include the volume of assets and liabilities re-pricing, the timing of re-pricing, and the interest rate sensitivity gaps, which are a continual challenge in a changing rate environment.  In managing its interest rate sensitivity positions, the Company seeks to develop and implement strategies to control exposure of net interest income to risks associated with interest rate movements.  The interest rate sensitivity report examines the positioning of the interest rate risk exposure in a changing interest rate environment.  Ideally, the rate sensitive assets and liabilities will be maintained in a matched position to minimize interest rate risk.  The interest rate sensitivity analysis is an important management tool; however, it does have some inherent shortcomings.  It is a “static” analysis.  Although certain assets and liabilities may have similar maturities or re-pricing, they may react in different degrees to changes in market interest rates.  Additionally, re-pricing characteristics of certain assets and liabilities may vary substantially within a given period.

The following table summarizes re-pricing intervals for interest earning assets and interest bearing liabilities as of September 30, 2014, and the difference or “gap” between them on an actual and cumulative basis for the periods indicated. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities.  During a period of falling interest rates, a positive gap would tend to adversely affect net interest income, while a negative gap would tend to result in an increase in net interest income.  During a period of rising interest rates, a positive gap would tend to result in an increase in net interest income while a negative gap would tend to affect net interest income adversely.  At September 30, 2014, the Company is in a liability sensitive position of $45.0 million, which indicates that within one year the re-pricing of liabilities is sooner than the re-pricing of assets.  Additionally, the Company has exposure to rising rates as $196.0 million in assets re-price after five years.

74

(In millions)	Days						1 to 5		Over 5		Non-rate
Assets (1)	0 – 90			91 – 365			Years		Years		Sensitive		Total
Interest-earning deposits in banks	$	13.1		$	—		$	—	$	—	$	8.8	$	21.9
Investment securities AFS		12.2			25.9			151.8		74.4		1.1		265.4
Loans: (2)
Fixed rate		23.4			34.0			134.3		121.6		(11.5)		301.8
Variable rate		52.6			32.3			—		—		—		84.9
Total loans		76.0			66.3			134.3		121.6		(11.5)		386.7
Other assets (3)		—			21.5			—		—		28.0		49.5
Total Assets	$	101.3		$	113.7		$	286.1	$	196.0	$	26.4	$	723.5
Liabilities & Capital
Deposits:
Non-interest bearing deposits	$	—		$	—		$	—	$	—	$	67.9	$	67.9
Interest bearing deposits		24.4			73.2			125.5		—		—		223.1
Certificate of deposits		29.0			95.1			86.9		13.8		—		224.8
Total deposits		53.4			168.3			212.4		13.8		67.9		515.8
Borrowings		28.3			10.0			85.0		—		—		123.3
Other liabilities		—			—			—		—		21.9		21.9
Capital		—			—			—		—		62.5		62.5
Total liabilities & capital	$	81.7		$	178.3		$	297.4	$	13.8	$	152.3	$	723.5
Net  interest rate  GAP	$	19.6		$	(64.6)		$	(11.3)	$	182.2	$	(125.9)
Cumulative interest rate  GAP	$	19.6		$	(45.0)		$	(56.3)	$	125.9
GAP to total  assets		3	%		(9)	%
GAP to total equity		31	%		(103)	%
Cumulative GAP to total assets		3	%		(6)	%
Cumulative GAP to total equity		31	%		(72)	%

(1) Interest earning assets are included in the period in which the balances are expected to be repaid and/or re-priced as a result of anticipated prepayments, scheduled rate adjustments, and contractual maturities.

(2) Reflects principal maturing within the specified periods for fixed rate loans and re-pricing for variable rate loans; includes non-performing loans.

(3) Includes FHLB stock.

The method of analysis of interest rate sensitivity in the table above has a number of limitations.  Certain assets and liabilities may react differently to changes in interest rates even though they re-price or mature in the same time periods. The interest rates on certain assets and liabilities may change at different times than changes in market interest rates, with some changes in advance of changes in market rates and some lagging behind changes in market rates.  Also, certain assets have provisions, which limit changes in interest rates each time the interest rate changes and for the entire term of the loan.  Prepayments and withdrawals experienced in the event of a change in interest rates may deviate significantly from those assumed in the interest rate sensitivity table.  Additionally, the ability of some borrowers to service their debt may decrease in the event of an interest rate increase.

The Company’s exposure to interest rate risk is mitigated somewhat by a portion of the Company’s loan portfolio consisting of floating rate loans, which are tied to the prime lending rate but which have interest rate floors and no interest rate ceilings.  Although the Company is originating fixed rate loans, a portion of the loan portfolio continues to be comprised of floating rate loans with interest rate floors. At September 30, 2014, floating rate loans with floors and without floors were $67.9million and $17.0 million, respectively.

75

REGULATORY ACTIONS

FDIC and Department of Banking Memorandum of Understanding

During the fourth quarter of 2011, Royal Bank entered into an informal agreement, known as a memorandum of understanding (“MOU”) with each of the FDIC and the Department. Included in the MOU is the requirement of maintaining a ratio of tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8% and a total risk-based capital ratio equal to or greater than 12%.  At September 30, 2014, based on capital levels calculated under regulatory accounting purposes (“RAP”), Royal Bank’s leverage and total risk-based capital ratios were 9.96% and 15.99%, respectively.  Please refer to “Capital Adequacy” under “Financial Condition”.

Federal Reserve Memorandum of Understanding

As previously disclosed, in March 2010, the Company agreed to enter into a written agreement (the “Federal Reserve Agreement”) with the Federal Reserve Bank of Philadelphia (the “Federal Reserve Bank”).  Effective July 17, 2013, the Board of Governors of the Federal Reserve System terminated the enforcement action under the Federal Reserve Agreement, and it was replaced with an informal non-public agreement, an MOU, with the Federal Reserve Bank.  Included in the MOU are certain continued reporting requirements and a requirement that the Company receive the prior approval of the Federal Reserve Bank prior to declaring or paying any dividends on the Company’s capital stock, making interest payments related to the Company’s outstanding trust preferred securities or subordinate securities, incurring or guaranteeing certain debt with an original maturity date greater than one year, and purchasing or redeeming any shares of stock.  The MOU will remain in effect until stayed, modified, terminated or suspended in writing by the Federal Reserve Bank.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information presented in the Liquidity and Interest Rate Sensitivity section of the Management’s Discussion and Analysis of Financial Condition and Results Operations of this Report is incorporated herein by reference.

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Commission’s rules and forms. As of the end of the period covered by this report, the Company evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act. Based on that evaluation, except as described below, our CEO and CFO concluded, subject to the limitations on effectiveness described in Item 9A in our Annual Report on Form 10-K for the year ended December 31, 2013, that the Company’s disclosure controls and procedures were effective at September 30, 2014.

As described in Item 9A in our Annual Report on Form 10-K for the year-ended December 31, 2013, management had identified a material weakness associated with internal controls over financial reporting for income taxes. The Company is making improvements to the accounting procedures related to income taxes to remediate this weakness. 

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the third quarter of 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There are inherent limitations to the effectiveness of any controls system. A controls system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that its objectives are met. Further, the design of a

76

control system must reflect the fact that there are limits on resources, and the benefits of controls must be considered relative to their costs and their impact on the business model. We intend to continue to improve and refine our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings.

From time to time, the Company is a party to routine legal proceedings within the normal course of business.  Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company's financial condition or results of operations.  All non-routine legal proceedings are described in Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Item 1A.Risk Factors.

There have been no material changes from risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

On July 1, 2014, the Company completed the issuance and sale of 11,264,037 shares of its Class A common stock in a private placement.  The shares were sold to accredited investors under Rule 506 promulgated by the United States Securities and Exchange Commission.  Each share was sold at a price of $1.20 per share, and no underwriting discounts or commissions were paid in connection with the sale of such shares. 

On September 4, 2014, the Company sold an additional 402,630 shares of its Class A common stock to two of the institutional investors that purchased shares in the private placement pursuant to top-up rights granted to such investors in connection with their purchases in the private placement.  Such shares were sold at a price of $1.20 per share, and no underwriting discounts or commissions were paid in connection with the issuance and sale of such additional shares.  The total gross proceeds, before related expenses, from the sale of shares in the private placement were approximately $14,000,000.  The proceeds from the sale of shares in the private placement were used to fund the repurchase by the Company of 11,551 shares of its Series A Preferred Stock from the U.S. Treasury as described Item 2 of Part I of this Report under “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Shareholders’ Equity.”

Item 3.Defaults Upon Senior Securities.

None

Item 4.Mine Safety Disclosures.

None

Item 5.Other Information.

None

77

Item 6.Exhibits.  

(a)

3.1	Articles of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013.)
3.21	Bylaws of the Company (Incorporated by reference to Exhibit 3(ii) to the Company’s report on Form 10-K filed with the Commission on March 30, 2009.)
31.1	Section 302 Certification Pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 signed by F. Kevin Tylus, Principal Executive Officer of Royal Bancshares of Pennsylvania on November 12, 2014.
31.2	Section 302 Certification Pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 signed by Michael S. Thompson, Principal Financial Officer of Royal Bancshares of Pennsylvania on November 12, 2014.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by F. Kevin Tylus, Principal Executive Officer of Royal Bancshares of Pennsylvania on November 12, 2014.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Michael S. Thompson, Principal Financial Officer of  Royal Bancshares of Pennsylvania on November 12, 2014.
101	Interactive Data File

78

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ROYAL BANCSHARES OF PENNSYLVANIA, INC

(Registrant)

Dated: November 12, 2014

/s/ Michael S. Thompson

Michael S. Thompson

Principal Financial and Accounting Officer

79

EX-31.1

Exhibit 31.1

CERTIFICATION

I, F. Kevin Tylus, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Royal Bancshares of Pennsylvania, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial  statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal  control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The  registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November  12, 2014

/s/ F. Kevin Tylus

Principal Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Michael S. Thompson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Royal Bancshares of Pennsylvania, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial  statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal  control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The  registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November  12, 2014

/s/ Michael S. Thompson

Principal Financial and Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT 2002

In connection with this Quarterly Report of Royal Bancshares of Pennsylvania, Inc. (“Royal”) on Form 10-Q for the period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, F. Kevin Tylus, Principal Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) as applicable of the Securities Exchange Act of 1934, as amended; and

2. The information  contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal as of the dates and for the periods expressed in the Report.

The foregoing certification is being furnish solely pursuant to 18 U.S. C. Section 1350 and is not being filed as part of this Report or as a separate disclosure document.

/s/ F. Kevin Tylus

F. Kevin Tylus

Principal Executive Officer

November12, 2014

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT 2002

In connection with this Quarterly Report of Royal Bancshares of Pennsylvania, Inc. (“Royal”) on Form 10-Q for the period endedSeptember 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael S. Thompson, Principal Financial and Accounting Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) as applicable of the Securities Exchange Act of 1934, as amended; and

2.The information  contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Royal as of the dates and for the periods expressed in the Report.

The foregoing certification is being furnish solely pursuant to 18 U.S. C. Section 1350 and is not being filed as part of this Report or as a separate disclosure document.

/s/ Michael S. Thompson

Michael S. Thompson

Principal Financial and Accounting Officer

November12, 2014

XML

Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2014 trust	Sep. 30, 2014 Royal Bank [Member] Crusader Servicing Corporation [Member]	Sep. 30, 2013 Royal Bank [Member] Crusader Servicing Corporation [Member]	Sep. 30, 2013 Royal Bank [Member] Royal Tax Lien [Member]	Sep. 30, 2014 Royal Bank [Member] Royal Bank America Leasing LP
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership interest (as a percent)	60.00%	80.00%	60.00%	60.00%	60.00%
Number of Delaware trust affiliates	2

XML

Allowance for Loan and Lease Losses - Changes in Allowance for Loan and Lease Losses (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	$ 11,569,000	$ 15,179,000	$ 13,671,000	$ 17,261,000	$ 17,261,000
Charge-offs	(271,000)	(837,000)	(1,699,000)	(3,079,000)	(3,893,000)
Recoveries	235,000	119,000	275,000	693,000	1,175,000
(Credit) provision	(51,000)	218,000	(765,000)	(196,000)	(872,000)
Ending balance	11,482,000	14,679,000	11,482,000	14,679,000	13,671,000
Ending balance: related to loans individually evaluated for impairment	493,000	660,000	493,000	660,000	886,000
Ending balance: related to loans collectively evaluated for impairment	10,989,000	14,019,000	10,989,000	14,019,000	12,785,000
LHFI [Abstract]
Ending balance	397,176,000	377,329,000	397,176,000	377,329,000	366,481,000
Ending balance: individually evaluated for impairment	16,141,000	23,418,000	16,141,000	23,418,000	18,506,000
Ending balance: collectively evaluated for impairment	381,035,000	353,911,000	381,035,000	353,911,000	347,975,000
Commercial real estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	4,971,000	7,952,000	5,498,000	8,750,000	8,750,000
Charge-offs		(605,000)	(349,000)	(1,440,000)	(1,684,000)
Recoveries		1,000		127,000	600,000
(Credit) provision	(266,000)	(1,159,000)	(444,000)	(1,248,000)	(2,168,000)
Ending balance	4,705,000	6,189,000	4,705,000	6,189,000	5,498,000
Ending balance: related to loans individually evaluated for impairment	205,000	230,000	205,000	230,000	331,000
Ending balance: related to loans collectively evaluated for impairment	4,500,000	5,959,000	4,500,000	5,959,000	5,167,000
LHFI [Abstract]
Ending balance	164,522,000	158,223,000	164,522,000	158,223,000	148,293,000
Ending balance: individually evaluated for impairment	6,877,000	10,045,000	6,877,000	10,045,000	5,325,000
Ending balance: collectively evaluated for impairment	157,645,000	148,178,000	157,645,000	148,178,000	142,968,000
Construction and land development [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	2,033,000	2,017,000	2,316,000	2,987,000	2,987,000
Charge-offs				(820,000)	(820,000)
Recoveries	205,000	106,000	205,000	297,000	297,000
(Credit) provision	3,000	72,000	(280,000)	(269,000)	(148,000)
Ending balance	2,241,000	2,195,000	2,241,000	2,195,000	2,316,000
Ending balance: related to loans individually evaluated for impairment	172,000		172,000
Ending balance: related to loans collectively evaluated for impairment	2,069,000	2,195,000	2,069,000	2,195,000	2,316,000
LHFI [Abstract]
Ending balance	41,676,000	39,594,000	41,676,000	39,594,000	45,261,000
Ending balance: individually evaluated for impairment	1,192,000	4,019,000	1,192,000	4,019,000	3,907,000
Ending balance: collectively evaluated for impairment	40,484,000	35,575,000	40,484,000	35,575,000	41,354,000
Commercial and industrial [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,525,000	2,465,000	3,006,000	1,924,000	1,924,000
Charge-offs		(34,000)	(452,000)	(228,000)	(383,000)
Recoveries	12,000	4,000	23,000	14,000	17,000
(Credit) provision	(106,000)	1,080,000	(1,146,000)	1,805,000	1,448,000
Ending balance	1,431,000	3,515,000	1,431,000	3,515,000	3,006,000
Ending balance: related to loans individually evaluated for impairment	5,000	209,000	5,000	209,000	452,000
Ending balance: related to loans collectively evaluated for impairment	1,426,000	3,306,000	1,426,000	3,306,000	2,554,000
LHFI [Abstract]
Ending balance	70,743,000	86,401,000	70,743,000	86,401,000	79,589,000
Ending balance: individually evaluated for impairment	5,897,000	8,112,000	5,897,000	8,112,000	8,049,000
Ending balance: collectively evaluated for impairment	64,846,000	78,289,000	64,846,000	78,289,000	71,540,000
Multi-family [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	416,000	588,000	402,000	654,000	654,000
(Credit) provision	(63,000)	(114,000)	(49,000)	(180,000)	(252,000)
Ending balance	353,000	474,000	353,000	474,000	402,000
Ending balance: related to loans collectively evaluated for impairment	353,000	474,000	353,000	474,000	402,000
LHFI [Abstract]
Ending balance	16,893,000	11,678,000	16,893,000	11,678,000	11,737,000
Ending balance: collectively evaluated for impairment	16,893,000	11,678,000	16,893,000	11,678,000	11,737,000
Residential real estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	690,000	353,000	473,000	1,098,000	1,098,000
Charge-offs		(32,000)		(32,000)	(46,000)
Recoveries	5,000	2,000	11,000	157,000	158,000
(Credit) provision	25,000	175,000	236,000	(725,000)	(737,000)
Ending balance	720,000	498,000	720,000	498,000	473,000
Ending balance: related to loans individually evaluated for impairment	30,000	16,000	30,000	16,000	19,000
Ending balance: related to loans collectively evaluated for impairment	690,000	482,000	690,000	482,000	454,000
LHFI [Abstract]
Ending balance	44,261,000	24,830,000	44,261,000	24,830,000	25,535,000
Ending balance: individually evaluated for impairment	983,000	520,000	983,000	520,000	632,000
Ending balance: collectively evaluated for impairment	43,278,000	24,310,000	43,278,000	24,310,000	24,903,000
Leases [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	1,352,000	999,000	1,223,000	1,108,000	1,108,000
Charge-offs	(206,000)	(40,000)	(568,000)	(149,000)	(382,000)
Recoveries	13,000	4,000	35,000	24,000	29,000
(Credit) provision	325,000	133,000	794,000	113,000	468,000
Ending balance	1,484,000	1,096,000	1,484,000	1,096,000	1,223,000
Ending balance: related to loans individually evaluated for impairment	62,000	138,000	62,000	138,000	60,000
Ending balance: related to loans collectively evaluated for impairment	1,422,000	958,000	1,422,000	958,000	1,163,000
LHFI [Abstract]
Ending balance	48,588,000	40,408,000	48,588,000	40,408,000	42,524,000
Ending balance: individually evaluated for impairment	64,000	190,000	64,000	190,000	139,000
Ending balance: collectively evaluated for impairment	48,524,000	40,218,000	48,524,000	40,218,000	42,385,000
Tax certificates [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	408,000	586,000	555,000	472,000	472,000
Charge-offs	(65,000)	(126,000)	(330,000)	(410,000)	(578,000)
Recoveries		2,000	1,000	74,000	74,000
(Credit) provision	29,000	41,000	146,000	367,000	587,000
Ending balance	372,000	503,000	372,000	503,000	555,000
Ending balance: related to loans individually evaluated for impairment	19,000	67,000	19,000	67,000	24,000
Ending balance: related to loans collectively evaluated for impairment	353,000	436,000	353,000	436,000	531,000
LHFI [Abstract]
Ending balance	8,230,000	15,364,000	8,230,000	15,364,000	12,716,000
Ending balance: individually evaluated for impairment	1,128,000	532,000	1,128,000	532,000	454,000
Ending balance: collectively evaluated for impairment	7,102,000	14,832,000	7,102,000	14,832,000	12,262,000
Consumer [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	24,000	18,000	15,000	29,000	29,000
(Credit) provision	9,000	(3,000)	18,000	(14,000)	(14,000)
Ending balance	33,000	15,000	33,000	15,000	15,000
Ending balance: related to loans collectively evaluated for impairment	33,000	15,000	33,000	15,000	15,000
LHFI [Abstract]
Ending balance	2,263,000	831,000	2,263,000	831,000	826,000
Ending balance: collectively evaluated for impairment	2,263,000	831,000	2,263,000	831,000	826,000
Unallocated [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning balance	150,000	201,000	183,000	239,000	239,000
(Credit) provision	(7,000)	(7,000)	(40,000)	(45,000)	(56,000)
Ending balance	143,000	194,000	143,000	194,000	183,000
Ending balance: related to loans collectively evaluated for impairment	$ 143,000	$ 194,000	$ 143,000	$ 194,000	$ 183,000

XML

Loans and Leases - Major classifications of LHFI (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	$ 397,176,000	$ 377,329,000	$ 366,481,000
Loans and leases held for sale ("LHFS")	1,018,000		1,446,000
Amount of loans transferred from non-accrual LHFI to LHFS	3,200,000
Proceeds from sales of loans and leases	3,838,000	4,042,000
Commercial real estate [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	164,522,000	158,223,000	148,293,000
Construction and land development [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	41,676,000	39,594,000	45,261,000
Commercial and industrial [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	70,743,000	86,401,000	79,589,000
Multi-family [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	16,893,000	11,678,000	11,737,000
Residential real estate [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	44,261,000	24,830,000	25,535,000
Leases [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	48,588,000	40,408,000	42,524,000
Tax certificates [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	8,230,000	15,364,000	12,716,000
Consumer [Member]
Major classifications of loans held for investment [Abstract]
Total LHFI, net of unearned income	$ 2,263,000	$ 831,000	$ 826,000

XML

Fair Value of Financial Instruments - Measurement (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans and leases held for sale	$ 1,018	$ 1,446
Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans and leases	3,739	4,073
Other real estate owned	2,624	9,182
Loans and leases held for sale	1,018	1,446
Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impaired loans and leases	3,739	4,073
Other real estate owned	2,624	9,182
Loans and leases held for sale	$ 1,018	$ 1,446

XML

Allowance for Loan and Lease Losses - Loans that were Evaluated for Impairment by Loan Segment (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Sep. 30, 2014
Unpaid principal balance [Abstract]
With no related allowance recorded	$ 21,151	$ 23,609
With an allowance recorded	9,315	8,805
Recorded investment [Abstract]
With no related allowance recorded	14,671	11,909
With an allowance recorded	3,835	4,232
Related allowance [Abstract]
Related allowance	886	493
Average recorded investment [Abstract]
With no related allowance recorded	18,100
With an allowance recorded	5,655
Interest income recognized [Abstract]
With no related allowance recorded	559
Commercial real estate [Member]
Unpaid principal balance [Abstract]
With no related allowance recorded	4,429	7,410
With an allowance recorded	1,435	1,137
Recorded investment [Abstract]
With no related allowance recorded	4,158	5,986
With an allowance recorded	1,435	891
Related allowance [Abstract]
Related allowance	331	205
Average recorded investment [Abstract]
With no related allowance recorded	7,956
With an allowance recorded	1,879
Interest income recognized [Abstract]
With no related allowance recorded	73
Construction and land development [Member]
Unpaid principal balance [Abstract]
With no related allowance recorded	9,850	2,690
With an allowance recorded		559
Recorded investment [Abstract]
With no related allowance recorded	3,907	633
With an allowance recorded		559
Related allowance [Abstract]
Related allowance		172
Average recorded investment [Abstract]
With no related allowance recorded	3,933
With an allowance recorded	381
Interest income recognized [Abstract]
With no related allowance recorded	209
Commercial and industrial [Member]
Unpaid principal balance [Abstract]
With no related allowance recorded	6,693	8,133
With an allowance recorded	2,592	1,721
Recorded investment [Abstract]
With no related allowance recorded	6,491	4,400
With an allowance recorded	1,290	1,497
Related allowance [Abstract]
Related allowance	452	5
Average recorded investment [Abstract]
With no related allowance recorded	5,960
With an allowance recorded	2,456
Interest income recognized [Abstract]
With no related allowance recorded	250
Residential real estate [Member]
Unpaid principal balance [Abstract]
With an allowance recorded	827	1,080
Recorded investment [Abstract]
With an allowance recorded	631	983
Related allowance [Abstract]
Related allowance	19	30
Average recorded investment [Abstract]
With no related allowance recorded	84
With an allowance recorded	492
Interest income recognized [Abstract]
With no related allowance recorded	27
Leases [Member]
Unpaid principal balance [Abstract]
With an allowance recorded	139	64
Recorded investment [Abstract]
With an allowance recorded	139	64
Related allowance [Abstract]
Related allowance	60	62
Average recorded investment [Abstract]
With an allowance recorded	106
Tax certificates [Member]
Unpaid principal balance [Abstract]
With no related allowance recorded	179	5,376
With an allowance recorded	4,322	4,244
Recorded investment [Abstract]
With no related allowance recorded	115	890
With an allowance recorded	340	238
Related allowance [Abstract]
Related allowance	24	19
Average recorded investment [Abstract]
With no related allowance recorded	167
With an allowance recorded	$ 341

XML

Company Plans and Strategy (Details)	12 Months Ended
	Dec. 31, 2013 item
Company Plans and Strategy [Abstract]
Reduction in workforce (in hundredths)	22.00%
Number of branches consolidated under rationalization	2
Number of buildings sold under rationalization	4

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Regulatory Capital Requirements (Tables)

9 Months Ended

Sep. 30, 2014

Regulatory Capital Requirements [Abstract]

Royal Bank's capital ratios

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	76,403	15.99	%	$	38,237	8.00	%	$	47,796	10.00	%
Tier I capital (to risk-weighted assets)	$	70,970	14.85	%	$	19,118	4.00	%	$	28,677	6.00	%
Tier I capital (to average assets, leverage)	$	70,970	9.96	%	$	28,492	4.00	%	$	35,615	5.00	%

Adjustments to net loss as well as the capital ratios

	For the nine
	months ended
(In thousands)	September 30, 2014
RAP net income	$	682
Tax lien adjustment, net of noncontrolling interest		3,556
U.S. GAAP net income	$	4,238

	At September 30, 2014
	As reported		As adjusted
	under RAP		for U.S. GAAP
Total capital (to risk-weighted assets)	15.99	%	16.61	%
Tier I capital (to risk-weighted assets)	14.85	%	15.49	%
Tier I capital (to average assets, leverage)	9.96	%	10.42	%

Company capital ratios

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
Total capital (to risk-weighted assets)	$	94,205	19.37	%	$	38,899	8.00	%	N/A	N/A
Tier I capital (to risk-weighted assets)	$	85,328	17.55	%	$	19,449	4.00	%	N/A	N/A
Tier I capital (to average assets, leverage)	$	85,328	11.78	%	$	28,975	4.00	%	N/A	N/A

Adjustment to Company's capital ratio under RAP

	For the nine
	months ended
(In thousands)	September 30, 2014
U.S. GAAP net income	$	4,298
Tax lien adjustment, net of noncontrolling interest		(3,556)
RAP net income	$	742

	At September 30, 2014
	As reported		As adjusted
	under U.S. GAAP		for RAP
Total capital (to risk-weighted assets)	19.37	%	18.78	%
Tier I capital (to risk-weighted assets)	17.55	%	16.68	%
Tier I capital (to average assets, leverage)	11.78	%	11.17	%

XML

Segment Information (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Segment Reporting Information [Line Items]
Ownership interest (as a percent)	60.00%		60.00%
Selected Segment Information and Reconciliations to Consolidated Financial Information [Abstract]
Total assets	$ 723,469,000	$ 737,000,000	$ 723,469,000	$ 737,000,000	$ 732,254,000
Total deposits	515,786,000	522,620,000	515,786,000	522,620,000	528,964,000
Interest income	7,191,000	6,960,000	21,551,000	20,455,000
Interest expense	1,623,000	1,890,000	4,870,000	5,667,000
Net Interest Income	5,568,000	5,070,000	16,681,000	14,788,000
(Credit) provision for loan and lease losses	(51,000)	218,000	(765,000)	(196,000)
Total non-interest Income	1,204,000	1,937,000	2,792,000	4,306,000
Noninterest Expense	5,375,000	6,290,000	15,728,000	19,997,000
Net Income (Loss)	1,448,000	499,000	4,510,000	(707,000)
Noncontrolling interest	25,000	157,000	212,000	(364,000)
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.	1,423,000	342,000	4,298,000	(343,000)
Royal Bank [Member]
Selected Segment Information and Reconciliations to Consolidated Financial Information [Abstract]
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.			4,238,000
Royal Bank [Member] | Crusader Servicing Corporation [Member]
Segment Reporting Information [Line Items]
Ownership interest (as a percent)	80.00%	60.00%	80.00%	60.00%
Royal Bank [Member] | Royal Tax Lien [Member]
Segment Reporting Information [Line Items]
Ownership interest (as a percent)		60.00%		60.00%
Community Banking Segment [Member]
Selected Segment Information and Reconciliations to Consolidated Financial Information [Abstract]
Total assets	701,803,000	708,864,000	701,803,000	708,864,000
Total deposits	515,786,000	522,620,000	515,786,000	522,620,000
Interest income	6,889,000	6,485,000	20,549,000	18,556,000
Interest expense	1,367,000	1,560,000	4,030,000	4,525,000
Net Interest Income	5,522,000	4,925,000	16,519,000	14,031,000
(Credit) provision for loan and lease losses	(79,000)	178,000	(911,000)	(563,000)
Total non-interest Income	987,000	1,344,000	2,019,000	3,056,000
Noninterest Expense	4,916,000	5,683,000	14,221,000	16,348,000
Net Income (Loss)	1,672,000	408,000	5,228,000	1,302,000
Noncontrolling interest	69,000	121,000	337,000	422,000
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.	1,603,000	287,000	4,891,000	880,000
Tax Lien Segment [Member]
Selected Segment Information and Reconciliations to Consolidated Financial Information [Abstract]
Total assets	21,666,000	28,136,000	21,666,000	28,136,000
Interest income	302,000	475,000	1,002,000	1,899,000
Interest expense	256,000	330,000	840,000	1,142,000
Net Interest Income	46,000	145,000	162,000	757,000
(Credit) provision for loan and lease losses	28,000	40,000	146,000	367,000
Total non-interest Income	217,000	593,000	773,000	1,250,000
Noninterest Expense	459,000	607,000	1,507,000	3,649,000
Net Income (Loss)	(224,000)	91,000	(718,000)	(2,009,000)
Noncontrolling interest	(44,000)	36,000	(125,000)	(786,000)
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.	(180,000)	55,000	(593,000)	(1,223,000)
Tax Lien Segment [Member] | Royal Bank [Member] | Crusader Servicing Corporation [Member]
Segment Reporting Information [Line Items]
Ownership interest (as a percent)	80.00%	60.00%	80.00%	60.00%
Tax Lien Segment [Member] | Royal Bank [Member] | Royal Tax Lien [Member]
Segment Reporting Information [Line Items]
Ownership interest (as a percent)	100.00%	60.00%	100.00%	60.00%
Intersegment Eliminations [Member]
Selected Segment Information and Reconciliations to Consolidated Financial Information [Abstract]
Interest income	$ 256,000	$ 330,000	$ 840,000	$ 1,100,000

XML

Other Real Estate Owned - Changes in OREO (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Real Estate Owned Disclosure [Line Items]
Other real estate owned decreased			$ 24,000
Foreclosed Property [Roll Forward]
Beginning balance			9,617,000	13,435,000	13,435,000
Net proceeds from sales			(3,548,000)	(6,213,000)	(12,779,000)
Net gains (losses) on sales	173,000	629,000	633,000	1,209,000	1,427,000
Transfers in			1,998,000	6,428,000	9,051,000
Cash additions			1,292,000
Impairment charge			(399,000)	(953,000)	(1,517,000)
Ending balance	9,593,000		9,593,000		9,617,000
Loans [Member]
Foreclosed Property [Roll Forward]
Beginning balance			1,725,000	11,365,000	11,365,000
Net proceeds from sales			(1,214,000)		(8,869,000)
Net gains (losses) on sales			22,000		228,000
Transfers in					100,000
Impairment charge			(100,000)		(1,099,000)
Ending balance	433,000		433,000		1,725,000
Tax Lien [Member]
Foreclosed Property [Roll Forward]
Beginning balance			7,892,000	2,070,000	2,070,000
Net proceeds from sales			(2,334,000)		(3,910,000)
Net gains (losses) on sales			611,000		1,199,000
Transfers in			1,998,000		8,951,000
Cash additions			1,292,000
Impairment charge			(299,000)		(418,000)
Ending balance	$ 9,160,000		$ 9,160,000		$ 7,892,000

XML

Fair Value of Financial Instruments - Quantitative Information (Details) (Appraisal of collateral valuation technique [Member], Significant Unobservable Inputs Level 3 [Member], USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Impaired loans and leases [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Assets, Fair Value	$ 3,739	$ 4,073
Other real estate owned [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Assets, Fair Value	2,624	9,182
Loans and leases held for sale [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Assets, Fair Value	$ 1,018	$ 1,446
Minimum [Member] | Other real estate owned [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Range (Weighted Average) of Liquidation expenses (in hundredths		(2.80%)
Maximum [Member] | Impaired loans and leases [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Range (Weighted Average) of Appraisal adjustments (in hundredths)	(28.90%)	(25.00%)
Range (Weighted Average) of Liquidation expenses (in hundredths	(21.10%)	(23.20%)
Maximum [Member] | Other real estate owned [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Range (Weighted Average) of Appraisal adjustments (in hundredths)	(69.70%)	(62.50%)
Range (Weighted Average) of Liquidation expenses (in hundredths	(14.70%)	(6.80%)
Weighted Average [Member] | Impaired loans and leases [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Range (Weighted Average) of Appraisal adjustments (in hundredths)	(20.90%)	(2.00%)
Range (Weighted Average) of Liquidation expenses (in hundredths	(7.50%)	(6.70%)
Weighted Average [Member] | Other real estate owned [Member]
Additional quantitative information about assets measured at fair value on a nonrecurring basis [Abstract]
Range (Weighted Average) of Appraisal adjustments (in hundredths)	(11.30%)	(11.20%)
Range (Weighted Average) of Liquidation expenses (in hundredths	(14.70%)	(5.00%)

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies [Abstract]

Basis of Financial Presentation

Basis of Financial Presentation

The accompanying unaudited consolidated financial statements include the accounts of Royal Bancshares of Pennsylvania, Inc. (“Royal Bancshares” or the “Company”) and its wholly-owned subsidiaries, Royal Investments of Delaware, Inc., including Royal Investments of Delaware, Inc.’s wholly owned subsidiary, Royal Preferred, LLC, and Royal Bank America (“Royal Bank”), including Royal Bank’s subsidiaries, Royal Real Estate of Pennsylvania, Inc., Royal Investments America, LLC, RBA Property LLC, Narberth Property Acquisition LLC, Rio Marina LLC, and Royal Tax Lien Services, LLC (“RTL”).  Royal Bank also has an 80% and 60% ownership interest in Crusader Servicing Corporation (“CSC”) and Royal Bank America Leasing, LP, respectively. At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%.  Effective December 31, 2013, Royal Bank acquired the ownership interest of the former President of CSC and RTL. The two Delaware trusts, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II are not consolidated per requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC Topic 810”). These consolidated financial statements reflect the historical information of the Company. All significant intercompany transactions and balances have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Applications of the principles in the Company’s preparation of the consolidated financial statements in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  These estimates and assumptions are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates. The interim financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods.  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.  The results of operations for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain items in the 2013 consolidated financial statements and accompanying notes have been reclassified to conform to the current year’s presentation format.  There was no effect on net income or net loss for the periods presented herein as a result of the reclassification.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

Reclassifications

Certain items in the 2013 consolidated financial statements and accompanying notes have been reclassified to conform to the current year’s presentation format.  There was no effect on net income or net loss for the periods presented herein as a result of the reclassification.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

In January 2014, FASB issued ASU No. 2014-04, Receivables (Topic 310): Troubled Debt Restructurings by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-04”). ASC Topic 310 includes guidance that states that a creditor should reclassify a collateralized mortgage loan such that the loan should be derecognized and the collateral asset recognized when it determines that there has been in substance a repossession or foreclosure by the creditor, that is, the creditor receives physical possession of the debtor’s assets regardless of whether formal foreclosure proceedings take place. However, the terms in substance a repossession or foreclosure and physical possession are not defined in the accounting literature and there is diversity about when a creditor should derecognize the loan receivable and recognize the real estate property. That diversity has been highlighted by recent extended foreclosure timelines and processes related to residential real estate properties.

The objectives in ASU 2014-04 are intended to reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate property recognized. Holding foreclosed real estate property presents different operational and economic risk to creditors compared with holding an impaired loan. Therefore, consistency in the timing of loan derecognition and presentation of foreclosed real estate properties is of qualitative significance to users of the creditor’s financial statements. Additionally, the disclosure of the amount of foreclosed residential real estate properties and of the recorded investment in consumer mortgage loans secured by residential real estate properties that are in the process of foreclosure is expected to provide decision-useful information to many users of the creditor’s financial statements. The amendments in ASU 2014-04 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in ASU 2014-04 using either a modified retrospective transition method or a prospective transition method.  Early adoption is permitted. The adoption of ASU 2014-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

In April 2014, FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”).  The amendments in ASU 2014-08 change the criteria for reporting discontinued operations for all public and nonpublic entities. Currently, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for discontinued operations presentation.  Once the amendments of ASU 2014-08 take effect, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements. The amendments also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption of ASU 2014-08 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12,  Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”).  The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU 2014-12 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”), which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in  ASU 2014-11 and disclosure for certain transactions accounted for as a sale are effective for the first interim or annual period beginning after December 15, 2014. The disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Earlier application is prohibited. The adoption of ASU 2014-11 is not expected to have a material impact on the Company’s financial condition and results of operations.

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Loans and Leases - Aging Analysis of Past Due Payments for Each Loan Portfolio Segment (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013
Aging analysis of past due payments for each loan portfolio segment [Abstract]
30-59 Days Past Due	$ 286	$ 2,054
60-89 Days Past Due	159	558
Non-accrual	9,766	10,157
Current	386,965	353,712
Total	397,176	366,481	377,329
Commercial real estate [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
30-59 Days Past Due		996
Non-accrual	3,732	2,325
Current	160,790	144,972
Total	164,522	148,293	158,223
Construction and land development [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
Non-accrual	815	2,650
Current	40,861	42,611
Total	41,676	45,261	39,594
Commercial and industrial [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
30-59 Days Past Due	41	115
60-89 Days Past Due	40	49
Non-accrual	2,583	3,629
Current	68,079	75,796
Total	70,743	79,589	86,401
Multi-family [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
Current	16,893	11,737
Total	16,893	11,737	11,678
Residential real estate [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
30-59 Days Past Due	47	458
60-89 Days Past Due	116	262
Non-accrual	983	632
Current	43,115	24,183
Total	44,261	25,535	24,830
Leases [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
30-59 Days Past Due	198	485
60-89 Days Past Due	3	247
Non-accrual	525	467
Current	47,862	41,325
Total	48,588	42,524	40,408
Tax certificates [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
Non-accrual	1,128	454
Current	7,102	12,262
Total	8,230	12,716	15,364
Consumer [Member]
Aging analysis of past due payments for each loan portfolio segment [Abstract]
Current	2,263	826
Total	$ 2,263	$ 826	$ 831

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Credit Quality (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Financing Receivable, Recorded Investment [Line Items]
Non performing loans, charge offs	$ 271,000	$ 837,000	$ 1,699,000	$ 3,079,000	$ 3,893,000
Royal Bank [Member]
Financing Receivable, Recorded Investment [Line Items]
Net classified loans and foreclosed property	37,700,000		37,700,000		61,400,000
Royal Bank [Member] | Nonperforming Financing Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Delinquent loans held for investment	$ 445,000,000,000		$ 445,000,000,000		$ 2,600,000

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value of Financial Instruments [Abstract]

Schedule of Financial Assets Measured at Fair Value on Recurring Basis

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	32,541	$	—	$	32,541
Mortgage-backed securities-residential		—		27,127		—		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		172,684		—		172,684
Non-agency		—		3,938		—		3,938
Corporate bonds		—		15,633		—		15,633
Municipal bonds		—		9,027		—		9,027
Other securities		—		—		4,390		4,390
Common stocks		50		—		—		50
Total investment securities available-for-sale	$	50	$	260,950	$	4,390	$	265,390

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	62,036	$	—	$	62,036
Mortgage-backed securities-residential		—		32,097		—		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		189,103		—		189,103
Non-agency		—		4,479		—		4,479
Corporate bonds		—		9,438		—		9,438
Municipal bonds		—		6,900		—		6,900
Other securities		—		—		4,625		4,625
Common stocks		49		—		—		49
Total investment securities available-for-sale	$	49	$	304,053	$	4,625	$	308,727

Additional Information About Assets Measured at Fair Value on a Recurring Basis, Level 3 Inputs

(In thousands)	Other securities
Investment Securities Available for Sale	2014		2013
Beginning balance January 1,	$	4,625	$	4,164
Total gains/(losses) - (realized/unrealized):
Included in earnings		251		5
Included in other comprehensive income		299		361
Purchases		14		32
Sales and calls		(799)		(300)
Transfers in and/or out of Level 3		—		—
Ending balance September 30,	$	4,390	$	4,262

Financial Assets Measured at Fair Value on Nonrecurring Basis

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	3,739	$	3,739
Other real estate owned		—		—		2,624		2,624
Loans and leases held for sale		—		—		1,018		1,018

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	4,073	$	4,073
Other real estate owned		—		—		9,182		9,182
Loans and leases held for sale		—		—		1,446		1,446

Schedule of quantitative information about assets measured at fair value on nonrecurring basis

	Qualitative Information about Level 3 Fair Value Measurements
As of September 30, 2014			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	3,739	Appraisal of	Appraisal adjustments	0.0%	-	-28.9%	(-20.9%)
			collateral (1)	Liquidation expenses	0.0%	-	-21.1%	(-7.5%)
Other real estate owned		2,624	Appraisal of	Appraisal adjustments	0.0%	-	-69.7%	(-11.3%)
			collateral (1)	Liquidation expenses			-14.7%	(-14.7%)
Loans and leases held for sale		1,018	Appraisal of	Agreement of sale			0.0%
			collateral (1)

	Qualitative Information about Level 3 Fair Value Measurements
As of December 31, 2013			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	4,073	Appraisal of	Appraisal adjustments	0.0%	-	-25.0%	(-2.0%)
			collateral (1)	Liquidation expenses	0.0%	-	-23.2%	(-6.7%)
Other real estate owned		9,182	Appraisal of	Appraisal adjustments	0.0%	-	-62.5%	(-11.2%)
			collateral (1)	Liquidation expenses	-2.8%	-	-6.8%	(-5.0%)
Loans and leases held for sale		1,446	Appraisal of	Agreement of sale			0.0%
			collateral (1)

(1) Appraisals may be adjusted for qualitative factors such as interior condition of the property and liquidation expenses.

Fair Value by Balance Sheet Grouping Instruments

					Fair Value Measurements
					At September 30, 2014
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	21,933	$	21,933	$	21,933	$	—	$	—
Investment securities available-for-sale		265,390		265,390		50		260,950		4,390
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		3,678		3,678		—		—		3,678
Loans held for sale		1,018		1,018		—		—		1,018
Loans, net		385,694		383,088		—		—		383,088
Accrued interest receivable		5,554		5,554		—		5,554		—
Financial Liabilities:
Demand deposits		67,901		67,901		—		67,901		—
NOW and money markets		203,978		203,978		—		203,978		—
Savings		19,142		19,142		—		19,142		—
Time deposits		224,765		223,270		—		223,270		—
Long-term borrowings		97,540		94,885		—		94,885		—
Subordinated debt		25,774		24,209		—		24,209		—
Accrued interest payable		2,305		2,305		—		2,305		—

					Fair Value Measurements
					At December 31, 2013
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	16,844	$	16,844	$	16,844	$	—	$	—
Investment securities available-for-sale		308,727		308,727		49		304,053		4,625
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		4,204		4,204		—		—		4,204
Loans held for sale		1,446		1,446		—		—		1,446
Loans, net		352,810		349,336		—		—		349,336
Accrued interest receivable		7,054		7,054		—		7,054		—
Financial Liabilities:
Demand deposits		60,473		60,473		—		60,473		—
NOW and money markets		210,053		210,053		—		210,053		—
Savings		17,593		17,593		—		17,593		—
Time deposits		240,845		239,102		—		239,102		—
Short-term borrowings		10,000		10,000		10,000		—		—
Long-term borrowings		97,881		94,896		—		94,896		—
Subordinated debt		25,774		26,000		—		26,000		—
Accrued interest payable		965		965		—		965		—

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Loans and Leases - Impaired Loans (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Impaired Loans [Abstract]
Cash collected on non accrual and impaired loan	$ 5,000,000	$ 10,600,000
Amount credited to principal balance outstanding	4,500,000	9,900,000
Summary of impaired loans [Abstract]
Impaired loans with a valuation allowance	4,232,000		3,835,000
Impaired loans without a valuation allowance	11,909,000		14,671,000
Impaired LHFS	1,018,000
Total impaired loans and leases	17,159,000		18,506,000
Valuation allowance related to impaired loans	$ 493,000		$ 886,000

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Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Unrealized gains on investment securities [Abstract]
Unrealized holding gains arising during period, before tax					$ 6,570		$ (8,833)
Less reclassification adjustment for gains realized in net income, before tax					330		69
Unrealized gains on investment securities, before tax					6,240		(8,902)
Unrecognized benefit obligation expense [Abstract]
Less reclassification adjustment for amortization, before tax					(85)		(429)
Other comprehensive income net, before tax					6,325		(8,473)
Unrealized gains on investment securities [Abstract]
Unrealized holding gains arising during period, tax					2,101		(3,128)
Less reclassification adjustment for gains realized in net income, tax					112		23
Unrealized gains on investment securities, tax					1,989		(3,151)
Unrecognized benefit obligation expense [Abstract]
Less reclassification adjustment for amortization, tax					(29)		(146)
Other comprehensive income net, tax					2,018		(3,005)
Unrealized gains on investment securities [Abstract]
Unrealized holding gains arising during period, net of tax	(80)		(1,687)		4,469		(5,705)
Less reclassification adjustment for gains realized in net income (loss) (1)	157	[1]			218	[1]	46	[1]
Unrealized gains (losses) on investment securities	(237)		(1,687)		4,251		(5,751)
Unrecognized benefit obligation expense [Abstract]
Less reclassification adjustment for amortization (2), net of tax effect	(18)	[2]	(94)	[2]	(56)	[2]	(283)	[2]
Other comprehensive income (loss)	$ (219)		$ (1,593)		$ 4,307		$ (5,468)

[1] Amounts are included in net gains on the sale of AFS investment securities on the Consolidated Statements of Operations in total non-interest income, net of taxes.

[2] Amounts are included in salaries and benefits on the Consolidated Statements of Operations in non-interest expense.

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Borrowings and Subordinated Debentures, Subordinated Debentures (Details) (USD $)	9 Months Ended
	Sep. 30, 2014 trust	Dec. 31, 2013
Subordinated Debentures [Line Items]
Junior subordinated debenture owed to unconsolidated subsidiary trust	$ 25,774,000	$ 25,774,000
Number of Delaware trust affiliates	2
Aggregate principal amount, common securities	20,000,000
Royal Bancshares Capital Trust I [Member] | Common Stock [Member]
Subordinated Debentures [Line Items]
Aggregate principal amount, common securities	387,000
Royal Bancshares Capital Trust I [Member] | Trust Preferred Securities [Member]
Subordinated Debentures [Line Items]
Aggregate principal amount, capital securities	12,500,000
Trust I [Member]
Subordinated Debentures [Line Items]
Junior subordinated debenture owed to unconsolidated subsidiary trust	12,900,000
Interest rate on notes payable (as a percent)	2.38%
Trust I [Member] | London Interbank Offered Rate (LIBOR) [Member]
Subordinated Debentures [Line Items]
Description of variable rate basis on notes payable	3-month LIBOR
Trust preferred securities basis spread on variable rate (as a percent)	2.15%
Trust II [Member]
Subordinated Debentures [Line Items]
Junior subordinated debenture owed to unconsolidated subsidiary trust	$ 12,900,000
Interest rate on notes payable (as a percent)	2.38%
Trust II [Member] | London Interbank Offered Rate (LIBOR) [Member]
Subordinated Debentures [Line Items]
Description of variable rate basis on notes payable	3-month LIBOR

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Investment Securities (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	$ 264,275,000		$ 264,275,000		$ 313,852,000
Gross unrealized gains	4,638,000		4,638,000		4,568,000
Gross unrealized losses	(3,523,000)		(3,523,000)		(9,693,000)
Investment securities available-for-sale (“AFS”), at fair value	265,390,000		265,390,000		308,727,000
Amortized cost [Abstract]
Within 1 year	2,003,000		2,003,000
After 1 but within 5 years	10,345,000		10,345,000
After 5 but within 10 years	29,322,000		29,322,000
After 10 years	17,082,000		17,082,000
Total available for sale debt securities	261,413,000		261,413,000
No contractual maturity	2,862,000		2,862,000
Total available for sale securities	264,275,000		264,275,000		313,852,000
Fair value [Abstract]
Within 1 year	1,987,000		1,987,000
After 1 but within 5 years	10,324,000		10,324,000
After 5 but within 10 years	28,653,000		28,653,000
After 10 years	16,237,000		16,237,000
Total available for sale debt securities	260,950,000		260,950,000
No contractual maturity	4,440,000		4,440,000
Fair value	265,390,000		265,390,000		308,727,000
Proceeds from sales of AFS investment securities	19,300,000		55,290,000	20,428,000
Gross realized gains and losses on the sale of securities recognized in earnings [Abstract]
Gross realized gains	446,000		1,143,000	181,000
Gross realized losses	(208,000)	(1,000)	(813,000)	(112,000)
Net realized gains	238,000	(1,000)	330,000	69,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	68,093,000		68,093,000		142,071,000
12 months or longer, Fair value	83,668,000		83,668,000		33,664,000
Total, Fair value	151,761,000		151,761,000		175,735,000
Less than 12 months, Gross unrealized losses	(519,000)		(519,000)		(7,322,000)
12 months or longer, Gross unrealized losses	(3,004,000)		(3,004,000)		(2,371,000)
Total, Gross unrealized losses	(3,523,000)		(3,523,000)		(9,693,000)
Credit related impairment losses on debt securities held for which a portion of OTTI was recognized in other comprehensive income [Roll Forward]
Balance at beginning of year				173,000
Reductions for securities sold during the period (realized)				(173,000)
U.S. Government Agencies [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	34,092,000		34,092,000		68,207,000
Gross unrealized losses	(1,551,000)		(1,551,000)		(6,171,000)
Investment securities available-for-sale (“AFS”), at fair value	32,541,000		32,541,000		62,036,000
Amortized cost [Abstract]
Total available for sale securities	34,092,000		34,092,000		68,207,000
Fair value [Abstract]
Fair value	32,541,000		32,541,000		62,036,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value					48,919,000
12 months or longer, Fair value	32,541,000		32,541,000		12,267,000
Total, Fair value	32,541,000		32,541,000		61,186,000
Less than 12 months, Gross unrealized losses					(5,035,000)
12 months or longer, Gross unrealized losses	(1,551,000)		(1,551,000)		(1,136,000)
Total, Gross unrealized losses	(1,551,000)		(1,551,000)		(6,171,000)
Number of investment securities	10		10
Number of securities in an unrealized loss position for more than twelve months	10		10
Mortgage-backed Securities-residential [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	27,000,000		27,000,000		32,769,000
Gross unrealized gains	377,000		377,000		210,000
Gross unrealized losses	(250,000)		(250,000)		(882,000)
Investment securities available-for-sale (“AFS”), at fair value	27,127,000		27,127,000		32,097,000
Amortized cost [Abstract]
No contractual maturity	27,000,000		27,000,000
Total available for sale securities	27,000,000		27,000,000		32,769,000
Fair value [Abstract]
No contractual maturity	27,127,000		27,127,000
Fair value	27,127,000		27,127,000		32,097,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	7,619,000		7,619,000		18,045,000
12 months or longer, Fair value	9,017,000		9,017,000		6,276,000
Total, Fair value	16,636,000		16,636,000		24,321,000
Less than 12 months, Gross unrealized losses	(38,000)		(38,000)		(518,000)
12 months or longer, Gross unrealized losses	(212,000)		(212,000)		(364,000)
Total, Gross unrealized losses	(250,000)		(250,000)		(882,000)
Number of investment securities	6		6
Number of securities in an unrealized loss position for more than twelve months	3		3
Collateralized Mortgage Obligations, Issued or Guaranteed by U.S. Government Agencies [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	171,696,000		171,696,000		188,194,000
Gross unrealized gains	2,521,000		2,521,000		2,887,000
Gross unrealized losses	(1,533,000)		(1,533,000)		(1,978,000)
Investment securities available-for-sale (“AFS”), at fair value	172,684,000		172,684,000		189,103,000
Amortized cost [Abstract]
No contractual maturity	171,696,000		171,696,000
Total available for sale securities	171,696,000		171,696,000		188,194,000
Fair value [Abstract]
No contractual maturity	172,684,000		172,684,000
Fair value	172,684,000		172,684,000		189,103,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	49,360,000		49,360,000		67,240,000
12 months or longer, Fair value	37,312,000		37,312,000		9,974,000
Total, Fair value	86,672,000		86,672,000		77,214,000
Less than 12 months, Gross unrealized losses	(376,000)		(376,000)		(1,446,000)
12 months or longer, Gross unrealized losses	(1,157,000)		(1,157,000)		(532,000)
Total, Gross unrealized losses	(1,533,000)		(1,533,000)		(1,978,000)
Number of investment securities	28		28
Number of securities in an unrealized loss position for less than twelve months	17		17
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	3,965,000		3,965,000		4,454,000
Gross unrealized gains	7,000		7,000		25,000
Gross unrealized losses	(34,000)		(34,000)
Investment securities available-for-sale (“AFS”), at fair value	3,938,000		3,938,000		4,479,000
Amortized cost [Abstract]
Total available for sale debt securities	3,965,000		3,965,000
Total available for sale securities	3,965,000		3,965,000		4,454,000
Fair value [Abstract]
No contractual maturity	3,938,000		3,938,000
Fair value	3,938,000		3,938,000		4,479,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	1,464,000		1,464,000
Total, Fair value	1,464,000		1,464,000
Less than 12 months, Gross unrealized losses	(34,000)		(34,000)
Total, Gross unrealized losses	(34,000)		(34,000)
Number of securities with unrealized gains	1		1
Corporate Bonds [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	15,630,000		15,630,000		9,669,000
Gross unrealized gains	68,000		68,000		25,000
Gross unrealized losses	(65,000)		(65,000)		(256,000)
Investment securities available-for-sale (“AFS”), at fair value	15,633,000		15,633,000		9,438,000
Amortized cost [Abstract]
Total available for sale securities	15,630,000		15,630,000		9,669,000
Fair value [Abstract]
Fair value	15,633,000		15,633,000		9,438,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	9,027,000		9,027,000		4,848,000
12 months or longer, Fair value	991,000		991,000		965,000
Total, Fair value	10,018,000		10,018,000		5,813,000
Less than 12 months, Gross unrealized losses	(56,000)		(56,000)		(221,000)
12 months or longer, Gross unrealized losses	(9,000)		(9,000)		(35,000)
Total, Gross unrealized losses	(65,000)		(65,000)		(256,000)
Number of investment securities	7		7
Number of securities in an unrealized loss position for less than twelve months	6		6
Number of securities in an unrealized loss position for more than twelve months	1		1
Number of securities considered not to be other than temporarily impaired	7		7
Municipal Bonds [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	9,030,000		9,030,000		7,163,000
Gross unrealized gains	51,000		51,000
Gross unrealized losses	(54,000)		(54,000)		(263,000)
Investment securities available-for-sale (“AFS”), at fair value	9,027,000		9,027,000		6,900,000
Amortized cost [Abstract]
Total available for sale securities	9,030,000		9,030,000		7,163,000
Fair value [Abstract]
Fair value	9,027,000		9,027,000		6,900,000
Available for sale securities, continuous unrealized loss position [Abstract]
Less than 12 months, Fair value	623,000		623,000		3,019,000
12 months or longer, Fair value	3,539,000		3,539,000		3,881,000
Total, Fair value	4,162,000		4,162,000		6,900,000
Less than 12 months, Gross unrealized losses	(15,000)		(15,000)		(102,000)
12 months or longer, Gross unrealized losses	(39,000)		(39,000)		(161,000)
Total, Gross unrealized losses	(54,000)		(54,000)		(263,000)
Number of investment securities	5		5
Number of securities in an unrealized loss position for less than twelve months	1		1
Number of securities in an unrealized loss position for more than twelve months	4		4
Private Equity Funds [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	2,829,000		2,829,000		3,363,000
Gross unrealized gains	1,597,000		1,597,000		1,405,000
Gross unrealized losses	(36,000)		(36,000)		(143,000)
Investment securities available-for-sale (“AFS”), at fair value	4,390,000		4,390,000		4,625,000
Amortized cost [Abstract]
Total available for sale securities	2,829,000		2,829,000		3,363,000
Fair value [Abstract]
Fair value	4,390,000		4,390,000		4,625,000
Available for sale securities, continuous unrealized loss position [Abstract]
12 months or longer, Fair value	268,000		268,000		301,000
Total, Fair value	268,000		268,000		301,000
12 months or longer, Gross unrealized losses	(36,000)		(36,000)		(143,000)
Total, Gross unrealized losses	(36,000)		(36,000)		(143,000)
Number of securities invested in real estate funds	6		6
Number of securities recording an impairment charge	1		1
Common Stock [Member]
Carrying value and fair value of available for sale investment securities [Abstract]
Total available for sale securities	33,000		33,000		33,000
Gross unrealized gains	17,000		17,000		16,000
Investment securities available-for-sale (“AFS”), at fair value	50,000		50,000		49,000
Amortized cost [Abstract]
Total available for sale securities	33,000		33,000		33,000
Fair value [Abstract]
Fair value	$ 50,000		$ 50,000		$ 49,000
Available for sale securities, continuous unrealized loss position [Abstract]
Number of investment securities	2		2

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Regulatory Matters and Significant Risks or Uncertainties

9 Months Ended

Sep. 30, 2014

Regulatory Matters and Significant Risks or Uncertainties [Abstract]

Regulatory Matters and Significant Risks or Uncertainties

Note 2.Regulatory Matters and Significant Risks or Uncertainties

FDIC and Department of Banking Memorandum of Understanding

During the fourth quarter of 2011, Royal Bank entered into an informal agreement, known as a memorandum of understanding (“MOU”) with each of the Federal Deposit Insurance Corporation (“FDIC”) and the Pennsylvania Department of Banking and Securities (the “Department”). Included in the MOU is the requirement of maintaining a ratio of Tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8% and a total risk-based capital ratio equal to or greater than 12%. At September 30, 2014, based on capital levels calculated under regulatory principles (“RAP”), Royal Bank’s leverage and total risk-based capital ratios were 9.96% and 15.99%, respectively.  Please refer to “Note 11 — Regulatory Capital Requirements” to the Consolidated Financial Statements. Under the MOU, Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.

Federal Reserve Agreement

As previously disclosed, in March 2010, the Company agreed to enter into a written agreement (the “Federal Reserve Agreement”) with the Federal Reserve Bank of Philadelphia (the “Federal Reserve Bank”).  In July 2013, the Board of Governors of the Federal Reserve System terminated the enforcement action under the Federal Reserve Agreement, and it was replaced with an informal non-public agreement, an MOU, with the Federal Reserve Bank, effective July 17, 2013.  Included in this MOU are certain continued reporting requirements and a requirement that the Company receive the prior approval of the Federal Reserve Bank and the Director of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System prior to declaring or paying any dividends on the Company’s capital stock, making interest payments related to the Company’s outstanding trust preferred securities or subordinate securities, incurring or guaranteeing certain debt with an original maturity date greater than one year, and purchasing or redeeming any shares of stock. Please refer to “Dividend and Interest Restrictions” below for a discussion on the partial redemption of the Series A Preferred Stock. The MOU will remain in effect until stayed, modified, terminated or suspended in writing by the Federal Reserve Bank.

Our success as a Company is dependent upon pursuing various alternatives in not only achieving the growth and expansion of our banking franchise but also in managing our day to day operations. The existence of the twoMOUs may limit or impact our ability to pursue all previously available alternatives in the management of the Company. Our ability to retain existing retail and commercial customers as well as the ability to attract potentially new customers may be impacted by the existence of the MOUs. Additionally, the Company’s ability to raise capital in the current economic environment could be potentially limited or impacted as a result of the MOUs. Attracting new management talent is critical to the success of our business and could be potentially affected due to the existence of the MOUs.

Net Income (Loss)

The Company had recorded significant losses over the five years prior to 2013 which were primarily related to charge-offs on the loan and lease portfolio, other-than-temporary impairment (“OTTI”) charges on investment securities, impairment charges on OREO, credit related expenses and the establishment of a deferred tax valuation allowance.  In addition to reducing the total shareholders’ equity, the accumulated deficit impacts the Company’s ability to pay cash dividends to its shareholders now and in future years.  For the third quarter of 2014, the Company recorded net income of $1.4 million compared to $342,000 for the comparable period in 2013. The quarter over quarter improvement was mainly related to growth in net interest income of $498,000 and declines in credit related expenses of $750,000. Credit related expenses include loan collection expenses, OREO expenses, OREO impairment, and impairment on loans held for sale. For the first nine months of 2014, the Company recorded net income of $4.3 million compared to a net loss of $343,000 for the comparable period in 2013. The noteworthy improvement was mainly related to a $1.9 million increase in net interest income, a $493,000 decrease in salaries and benefits, a $475,000 reduction in professional and legal fees, a $1.2 million decrease in credit related expenses, and a $569,000 improvement in the credit for loans and lease losses. Additionally, the first nine months of 2013 included a $1.65 million loss contingency accrual for a settlement of the class action lawsuit related to Royal Bank’s tax lien subsidiaries. After adjusting for the noncontrolling interest, the Company’s 60% share of the loss contingency amounted to $990,000 on a pre-tax basis. Partially offsetting these positive items was a $1.1 million decline in gains on the sale of premises and equipment and a $576,000 decrease in net gains on the sale of OREO.

Credit Quality

The financial services and real estate industries were hit particularly hard during the “Great Recession” and as a result the Company’s loan and investment portfolios were directly affected.  The Company’s commercial real estate loans, including construction and land development loans, saw a decline in the collateral values and a reduction in the borrowers’ ability to meet the payment terms of their loans due to reduced cash flow.  Further declines in collateral values and borrowers’ liquidity may lead to additional increases in foreclosures and delinquencies.  The Company is less able than a larger institution to spread the risks of unfavorable local economic conditions across a large number of more diverse economies.

Royal Bank was successful in reducing net classified assets, which includes special mention, substandard and impaired loans and OREO, from $61.4 million at December 31, 2013 to $37.7 million at September 30, 2014.  Royal Bank’s delinquent loans held for investment (30 to 90 days) amounted to $445,000 at September 30, 2014 versus $2.6 million at December 31, 2013. Material advances on any classified or delinquent loan must be approved by the Board of Directors and determined to be in Royal Bank’s best interest.  The Company recorded $271,000and $1.7 million, in charge-offs for the three and nine months ended September 30, 2014, respectively, compared to $837,000 and $3.2 million in charge-offs and write-downs for the comparable periods of 2013, respectively.

Liquidity and Funds Management

As of September 30, 2014, Royal Bank had $180.0 million of available borrowing capacity at the FHLB.  Royal Bank also has availability to borrow from the Federal Reserve Discount Window, which was approximately $5.7 million at September 30, 2014, based on collateral pledged.  Borrowings were $97.5 million and $107.9 million at September 30, 2014 and December 31, 2013, respectively.  During the first quarter of 2014, Royal Bank secured an additional $10.0 million line of credit, of which $0 is outstanding at September 30, 2014, with a local financial institution.

At September 30, 2014, the liquidity to deposits ratio was 67.9% compared to Royal Bank’s 12% policy target and the liquidity to total liabilities ratio was 53.5% compared to Royal Bank’s 10% policy target. The Company also has unfunded pension plan obligations, which potentially could impact liquidity, of $14.3 million as of September 30, 2014 compared to $14.5 million at December 31, 2013.  The Company plans to fund the pension plan obligations through existing Company owned life insurance policies.

Dividend and Interest Restrictions

Due to the MOU, our ability to obtain lines of credit, to receive attractive collateral treatment from funding sources, and to pursue all attractive funding alternatives in this current low interest rate environment could be impacted and thereby limit liquidity alternatives. On August 13, 2009, the Company’s Board suspended the regular quarterly cash dividends on the 30,407 shares of Series A Preferred Stock.  The Company made the decision to suspend the preferred cash dividends in order to support the liquidity position of Royal Bank. 

The Company received approval from the Federal Reserve Bank to bid up to $14.0 million, which was raised in a private placement, to purchase shares of the Series A Preferred Stock in an auction of such shares to be conducted by the United States Department of Treasury (“Treasury”).On June 20, 2014, Treasury announced that it had priced auctions of preferred stock of six institutions, including all of the 30,407 shares of the Series A Preferred Stock, issued by the Company to the Treasury in 2009. The Series A Preferred Stock was priced in the auction at $1,207.11 per share for all 30,407 shares of Series A Preferred Stock outstanding. As previously disclosed, the Company was a bidder in the auction and was allocated 11,551 shares of Series A Preferred Stock for repurchase at the clearing price of $1,207.11. Closing for the sale of the Series A Preferred Stock by Treasury, including the repurchase of 11,551 shares of Series A Preferred Stock by the Company, occurred on July 2, 2014.  The dividend in arrears on the remaining 18,856 shares of Series A preferred stock is approximately $6.1 million.  In the event the Company declared the preferred dividend in arrears the Company’s equity and capital ratios would be negatively affected; however, they would remain above the required minimum ratios.

Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.  Under the Federal Reserve Agreement the Company may not declare or pay any dividends on the Company’s capital stock or make interest payments related to the Company’s outstanding trust preferred securities or subordinate securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System. During the third quarter of 2014, the Company received approval from the Federal Reserve Bank and paid the third quarter interest payment on the trust preferred securities in September 2014.

Capital Adequacy

In connection with a prior bank regulatory examination, the FDIC concluded, based upon its interpretation of the Call Report instructions and under RAP, that income from Royal Bank’s tax lien business should be recognized on a cash basis, not an accrual basis. Royal Bank’s current accrual method is in accordance with U.S. GAAP.  Royal Bank disagrees with the FDIC’s conclusion and filed the Call Report for September 30, 2014 and the previous 16 quarters in accordance with U.S. GAAP.  However, the change in the manner of revenue recognition for the tax lien business for regulatory accounting purposes affects Royal Bank’s and potentially the Company’s capital ratios as disclosed in “Note 11 - Regulatory Capital Requirements” to the Consolidated Financial Statements.  The resolution of this matter will be decided by additional joint regulatory agency guidance which includes the Federal Reserve Bank, the FDIC, and the OCC.

Under the MOU, Royal Bank must maintain a minimum Tier 1 leverage ratio and a minimum total risk-based capital ratio of 8% and 12%, respectively. At September 30, 2014, based on capital levels calculated under RAP, Royal Bank’s leverage and total risk-based capital ratios were 9.96%and 15.99%,  respectively.

Company Plans and Strategy

During the past few years, the Company recorded significant impairment charges and carrying costs on non-accrual loans and OREO which have weighed heavily on earnings and were the largest contributing factors to the Company’s losses.  The Company’s strategic plan included improving the overall level of credit quality, maintaining reduced credit risk within the investment portfolio, reducing the overall level of expenses, returning to profitability, and meeting the capital level requirements for Royal Bank as set forth in the FDIC and Department MOU.

While sustaining capital ratios above the required minimum, the Company has made progress in improving credit quality, reducing the CRE concentration, strengthening the Board and maintaining liquidity. As a result of the decline in level of classified assets, there have been credits rather than provisions to loan and lease losses and a reduction in the overall carrying costs associated with classified assets.  The deleveraging of the balance sheet reduced earning assets, which resulted in a decline in net interest income and had a significant impact on overall earnings. To improve net interest margin and net interest income, management is diligently working on changing the mix of earning assets and interest-bearing liabilities.

During 2013, the strategic plan evolved into transitioning Royal Bank into a community bank built on a solid commercial revenue and retail delivery foundation.  During the first quarter of 2013, to support the strategic goals, management announced a set of sweeping initiatives through the Company’s “Profitability Improvement Plan” (“PIP”) designed to enhance company-wide efficiency, productivity and modernization.  During 2013, the Company realized a 22% reduction in the workforce, which included reorganizing and relocating certain personnel to improve departmental synergies and better align managers and staff so they can work together in cohesive teams to accomplish their objectives.  Additionally, pursuant to the real estate rationalization plan under PIP, two branches were consolidated and four Company-owned buildings were sold.

During 2014, the Company reorganized the retail division to better serve existing customers, develop the retail sales teams, and promote attainment of new customer relationships. The Company continued a successful 50th anniversary campaign by offering a Kindle to new customers who met certain deposit account opening criteria. During the first nine months of 2014, the Villanova, Phoenixville and Fairmount branches were relocated to more convenient, high-traffic locations within the same markets. In October 2014, the Sicklerville, New Jersey branch was relocated to Blackwood, New Jersey.  Additionally, the Company opened a limited service office in Princeton, New Jersey to  better serve our commercial customers in central New Jersey.  In July, we introduced Royal Bank’s exciting fresh logo and an enhanced website.The redesigned products and contemporary technology are the future platform for enhanced banking convenience for commercial, consumer and retail customers.

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Commitments, Contingencies, and Concentrations (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Unused lines of Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments whose contract amounts represent credit risk	$ 47,455	$ 21,182
Commitments to Extend Credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments whose contract amounts represent credit risk	6,430	200
Standby letters of credit and financial guarantees written [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Financial instruments whose contract amounts represent credit risk	$ 847	$ 2,679

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Liquidity and Funds Management (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Short-term Debt [Line Items]
Unfunded pension plan obligations	$ 14.3	$ 14.5
Royal Bank [Member]
Short-term Debt [Line Items]
Available borrowing capacity at the federal home loan bank	180.0
Borrowings	97.5	107.9
Line of credit maximum borrowing capacity	10.0
Liquidity to deposits ratio (as a percent)	67.90%
Liquidity to deposits policy target (as a percent)	12.00%
Liquidity to total liabilities ratio (as a percent)	53.50%
Liquidity to liabilities policy target (as a percent)	10.00%
Royal Bank [Member] | Federal Reserve Bank Advances [Member]
Short-term Debt [Line Items]
Unpledged agency securities were available to be pledged as collateral	$ 5.7

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Other Real Estate Owned (Tables)

9 Months Ended

Sep. 30, 2014

Other Real Estate Owned [Abstract]

Details of changes in other real estate owned

	For the nine months ended September 30, 2014
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	1,725	$	7,892	$	9,617
Net proceeds from sales		(1,214)		(2,334)		(3,548)
Net gains on sales		22		611		633
Transfers in		—		1,998		1,998
Cash additions		—		1,292		1,292
Impairment charge		(100)		(299)		(399)
Ending balance	$	433	$	9,160	$	9,593

	For the year ended December 31, 2013
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	11,365	$	2,070	$	13,435
Net proceeds from sales		(8,869)		(3,910)		(12,779)
Net gain on sales		228		1,199		1,427
Transfers in		100		8,951		9,051
Cash additions		—		—		—
Impairment charge		(1,099)		(418)		(1,517)
Ending balance	$	1,725	$	7,892	$	9,617

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Allowance for Loan and Lease Losses (Tables)

9 Months Ended

Sep. 30, 2014

Allowance for Loan and Lease Losses [Abstract]

Detail of the allowance and loan portfolio disaggregated by loan portfolio segment

Allowance for Loan and Lease Losses

For the three months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	4,971	$	2,033	$	1,525	$	416	$	690	$	1,352	$	408	$	24	$	150	$	11,569
Charge-offs		—		—		—		—		—		(206)		(65)		—		—		(271)
Recoveries		—		205		12		—		5		13		—		—		—		235
(Credit) provision		(266)		3		(106)		(63)		25		325		29		9		(7)		(51)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

Allowance for Loan and Lease Losses

For the nine months endedSeptember 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Charge-offs		(349)		—		(452)		—		—		(568)		(330)		—		—		(1,699)
Recoveries		—		205		23		—		11		35		1		—		—		275
(Credit) provision		(444)		(280)		(1,146)		(49)		236		794		146		18		(40)		(765)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	164,522	$	41,676	$	70,743	$	16,893	$	44,261	$	48,588	$	8,230	$	2,263	$	—	$	397,176
Ending balance: individually evaluated for impairment	$	6,877	$	1,192	$	5,897	$	—	$	983	$	64	$	1,128	$	—	$	—	$	16,141
Ending balance: collectively evaluated for impairment	$	157,645	$	40,484	$	64,846	$	16,893	$	43,278	$	48,524	$	7,102	$	2,263	$	—	$	381,035

Allowance for Loan and Lease Losses and Loans Held for Investment

For the year ended December 31, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,684)		(820)		(383)		—		(46)		(382)		(578)		—		—		(3,893)
Recoveries		600		297		17		—		158		29		74		—		—		1,175
(Credit) provision		(2,168)		(148)		1,448		(252)		(737)		468		587		(14)		(56)		(872)
Ending balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Ending balance: related to loans individually evaluated for impairment	$	331	$	—	$	452	$	—	$	19	$	60	$	24	$	—	$	—	$	886
Ending balance: related to loans collectively evaluated for impairment	$	5,167	$	2,316	$	2,554	$	402	$	454	$	1,163	$	531	$	15	$	183	$	12,785
LHFI
Ending balance	$	148,293	$	45,261	$	79,589	$	11,737	$	25,535	$	42,524	$	12,716	$	826	$	—	$	366,481
Ending balance: individually evaluated for impairment	$	5,325	$	3,907	$	8,049	$	—	$	632	$	139	$	454	$	—	$	—	$	18,506
Ending balance: collectively evaluated for impairment	$	142,968	$	41,354	$	71,540	$	11,737	$	24,903	$	42,385	$	12,262	$	826	$	—	$	347,975

Allowance for Loan and Lease Losses

For the three months ended September 30,2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	7,952	$	2,017	$	2,465	$	588	$	353	$	999	$	586	$	18	$	201	$	15,179
Charge-offs		(605)		—		(34)		—		(32)		(40)		(126)		—		—		(837)
Recoveries		1		106		4		—		2		4		2		—		—		119
Provision (credit)		(1,159)		72		1,080		(114)		175		133		41		(3)		(7)		218
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

Allowance for Loan and Lease Losses

For the nine months endedSeptember 30,2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,440)		(820)		(228)		—		(32)		(149)		(410)		—		—		(3,079)
Recoveries		127		297		14		—		157		24		74		—		—		693
Provision (credit)		(1,248)		(269)		1,805		(180)		(725)		113		367		(14)		(45)		(196)
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	158,223	$	39,594	$	86,401	$	11,678	$	24,830	$	40,408	$	15,364	$	831	$	—	$	377,329
Ending balance: individually evaluated for impairment	$	10,045	$	4,019	$	8,112	$	—	$	520	$	190	$	532	$	—	$	—	$	23,418
Ending balance: collectively evaluated for impairment	$	148,178	$	35,575	$	78,289	$	11,678	$	24,310	$	40,218	$	14,832	$	831	$	—	$	353,911

Financing receivable evaluated for impairment by portfolio segment

The following tables detail the LHFI that were evaluated for impairment by loan classification at September 30, 2014 and December 31, 2013.

	At September 30, 2014
	Unpaid
	principal		Recorded		Related
(In thousands)	balance		investment		allowance
With no related allowance recorded:
Commercial real estate	$	7,410	$	5,986	$	—
Construction and land development		2,690		633		—
Commercial & industrial		8,133		4,400		—
Residential real estate		—		—		—
Tax certificates		5,376		890		—
Total:	$	23,609	$	11,909	$	—

With an allowance recorded:
Commercial real estate	$	1,137	$	891	$	205
Construction and land development		559		559		172
Commercial & industrial		1,721		1,497		5
Residential real estate		1,080		983		30
Leasing		64		64		62
Tax certificates		4,244		238		19
Total:	$	8,805	$	4,232	$	493

	At and for the year ended December 31, 2013
	Unpaid						Average		Interest
	principal		Recorded		Related		recorded		income
(In thousands)	balance		investment		allowance		investment		recognized
With no related allowance recorded:
Commercial real estate	$	4,429	$	4,158	$	—	$	7,956	$	73
Construction and land development		9,850		3,907		—		3,933		209
Commercial & industrial		6,693		6,491		—		5,960		250
Residential real estate		—		—		—		84		27
Tax certificates		179		115		—		167		—
Total:	$	21,151	$	14,671	$	—	$	18,100	$	559

With an allowance recorded:
Commercial real estate	$	1,435	$	1,435	$	331	$	1,879	$	—
Construction and land development		—		—		—		381		—
Commercial & industrial		2,592		1,290		452		2,456		—
Residential real estate		827		631		19		492		—
Leases		139		139		60		106		—
Tax certificates		4,322		340		24		341		—
Total:	$	9,315	$	3,835	$	886	$	5,655	$	—

The following tables present the average recorded investment in impaired LHFI and the related interest income recognized for the three and nine months ended September 30, 2014 and 2013.

	For the three months ended September 30, 2014				For the nine months ended September 30, 2014
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	5,571	$	33	$	5,258	$	65
Construction and land development		1,673		11		2,823		68
Commercial & industrial		6,085		52		6,658		159
Residential real estate		993		—		833		—
Leasing		75		—		112		—
Tax certificates		1,134				918
Total:	$	15,531	$	96	$	16,602	$	292

	For the three months ended September 30, 2013				For the nine months ended September 30, 2013
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	11,676	$	59	$	4,556	$	45
Construction and land development		4,047		18		10,779		129
Commercial & industrial		8,050		92		8,988		241
Residential real estate		523		—		580		27
Leasing		168		—		105		—
Tax certificates		433		—		509		—
Total:	$	24,897	$	169	$	25,517	$	442

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Allowance for Loan and Lease Losses - Impaired LHFI - Average Recorded Investment and Interest Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Average recorded investment [Abstract]
Average recorded investment	$ 15,531	$ 24,897	$ 16,602	$ 25,517
Interest income recognized [Abstract]
Interest income recognized	96	169	292	442
Commercial real estate [Member]
Average recorded investment [Abstract]
Average recorded investment	5,571	11,676	5,258	4,556
Interest income recognized [Abstract]
Interest income recognized	33	59	65	45
Construction and land development [Member]
Average recorded investment [Abstract]
Average recorded investment	1,673	4,047	2,823	10,779
Interest income recognized [Abstract]
Interest income recognized	11	18	68	129
Commercial and industrial [Member]
Average recorded investment [Abstract]
Average recorded investment	6,085	8,050	6,658	8,988
Interest income recognized [Abstract]
Interest income recognized	52	92	159	241
Residential real estate [Member]
Average recorded investment [Abstract]
Average recorded investment	993	523	833	580
Interest income recognized [Abstract]
Interest income recognized				27
Leases [Member]
Average recorded investment [Abstract]
Average recorded investment	75	168	112	105
Tax certificates [Member]
Average recorded investment [Abstract]
Average recorded investment	$ 1,134	$ 433	$ 918	$ 509

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Dividend and Interest Restrictions (Details) (USD $)				0 Months Ended	9 Months Ended
	Sep. 30, 2014	Jun. 20, 2014 item	Dec. 31, 2013	Jun. 20, 2014 Series A Preferred Stock [Member]	Sep. 30, 2014 Series A Preferred Stock [Member]	Jul. 02, 2014 Series A Preferred Stock [Member]	Jun. 20, 2014 Series A Preferred Stock [Member]	Feb. 20, 2009 Series A Preferred Stock [Member]
Class of Stock [Line Items]
Trust preferred securities with suspended interest payments	$ 25,774,000		$ 25,774,000
Preferred stock dividend in arrears					6,100,000
Amount approved					14,000,000
Number of institutions under priced auction		6
Preferred stock, shares issued (in shares)								30,407
Auction price (in dollars per share)							$ 1,207.11
Shares allocated for repurchase (in shares)				11,551
Dividends in arrears eliminated						$ 6,100,000

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Deposits (Tables)

9 Months Ended

Sep. 30, 2014

Deposits [Abstract]

Deposits summary

	September 30,		December 31,
(In thousands)	2014		2013
Demand	$	67,901	$	60,473
NOW		41,801		45,375
Money Market		162,177		164,678
Savings		19,142		17,593
Time deposits (over $100)		85,603		92,763
Time deposits (under $100)		139,162		148,082
Total deposits	$	515,786	$	528,964

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Borrowings and Subordinated Debentures (Tables)

9 Months Ended

Sep. 30, 2014

Borrowings and Subordinated Debentures [Abstract]

FHLB borrowings allocated by the year in which they mature with their corresponding weighted average rates

	As of				As of
	September 30, 2014				December 31, 2013
(Dollars in thousands)	Amount		Rate		Amount		Rate
Advances maturing in
2014	$	—	—	%	$	10,000	0.24	%
2015		10,000	0.71	%		10,000	0.71	%
2016		10,000	1.11	%		10,000	1.11	%
2017		25,000	1.46	%		25,000	1.46	%
2018		10,000	2.01	%		10,000	2.01	%
Total FHLB borrowings	$	55,000			$	65,000

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1.Summary of Significant Accounting Policies

Basis of Financial Presentation

The accompanying unaudited consolidated financial statements include the accounts of Royal Bancshares of Pennsylvania, Inc. (“Royal Bancshares” or the “Company”) and its wholly-owned subsidiaries, Royal Investments of Delaware, Inc., including Royal Investments of Delaware, Inc.’s wholly owned subsidiary, Royal Preferred, LLC, and Royal Bank America (“Royal Bank”), including Royal Bank’s subsidiaries, Royal Real Estate of Pennsylvania, Inc., Royal Investments America, LLC, RBA Property LLC, Narberth Property Acquisition LLC, Rio Marina LLC, and Royal Tax Lien Services, LLC (“RTL”).  Royal Bank also has an 80% and 60% ownership interest in Crusader Servicing Corporation (“CSC”) and Royal Bank America Leasing, LP, respectively. At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%.  Effective December 31, 2013, Royal Bank acquired the ownership interest of the former President of CSC and RTL. The two Delaware trusts, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II are not consolidated per requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC Topic 810”). These consolidated financial statements reflect the historical information of the Company. All significant intercompany transactions and balances have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Applications of the principles in the Company’s preparation of the consolidated financial statements in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes.  These estimates and assumptions are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates. The interim financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to present a fair statement of the results for the interim periods.  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013.  The results of operations for the three and nine month periods ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year.

Reclassifications

Certain items in the 2013 consolidated financial statements and accompanying notes have been reclassified to conform to the current year’s presentation format.  There was no effect on net income or net loss for the periods presented herein as a result of the reclassification.

Accounting Policies Recently Adopted and Pending Accounting Pronouncements

In January 2014, FASB issued ASU No. 2014-04, Receivables (Topic 310): Troubled Debt Restructurings by Creditors (Subtopic 310-40) Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (“ASU 2014-04”). ASC Topic 310 includes guidance that states that a creditor should reclassify a collateralized mortgage loan such that the loan should be derecognized and the collateral asset recognized when it determines that there has been in substance a repossession or foreclosure by the creditor, that is, the creditor receives physical possession of the debtor’s assets regardless of whether formal foreclosure proceedings take place. However, the terms in substance a repossession or foreclosure and physical possession are not defined in the accounting literature and there is diversity about when a creditor should derecognize the loan receivable and recognize the real estate property. That diversity has been highlighted by recent extended foreclosure timelines and processes related to residential real estate properties.

The objectives in ASU 2014-04 are intended to reduce diversity in practice by clarifying when an in substance repossession or foreclosure occurs, that is, when a creditor should be considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan such that the loan should be derecognized and the real estate property recognized. Holding foreclosed real estate property presents different operational and economic risk to creditors compared with holding an impaired loan. Therefore, consistency in the timing of loan derecognition and presentation of foreclosed real estate properties is of qualitative significance to users of the creditor’s financial statements. Additionally, the disclosure of the amount of foreclosed residential real estate properties and of the recorded investment in consumer mortgage loans secured by residential real estate properties that are in the process of foreclosure is expected to provide decision-useful information to many users of the creditor’s financial statements. The amendments in ASU 2014-04 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in ASU 2014-04 using either a modified retrospective transition method or a prospective transition method.  Early adoption is permitted. The adoption of ASU 2014-04 is not expected to have a significant impact on the Company’s consolidated financial statements.

In April 2014, FASB issued ASU No. 2014-08 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”).  The amendments in ASU 2014-08 change the criteria for reporting discontinued operations for all public and nonpublic entities. Currently, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group is eligible for discontinued operations presentation.  Once the amendments of ASU 2014-08 take effect, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results will be reported as discontinued operations in the financial statements. The amendments also require new disclosures about discontinued operations and disposals of components of an entity that do not qualify for discontinued operations reporting. The amendments in ASU 2014-08 are effective for public companies for annual periods, and interim periods within those annual periods, beginning after December 15, 2014.  Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The adoption of ASU 2014-08 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12,  Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”).  The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. The amendments in ASU 2014-12 are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted.Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial statements.

In June 2014, the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures (“ASU 2014-11”), which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in  ASU 2014-11 and disclosure for certain transactions accounted for as a sale are effective for the first interim or annual period beginning after December 15, 2014. The disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Earlier application is prohibited. The adoption of ASU 2014-11 is not expected to have a material impact on the Company’s financial condition and results of operations.

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Commitments, Contingencies, and Concentrations (Tables)

9 Months Ended

Sep. 30, 2014

Commitments, Contingencies, and Concentrations [Abstract]

Contracts of financial instruments represent credit risk

	September 30,		December 31,
(In thousands)	2014		2013
Financial instruments whose contract amounts represent credit risk:
Open-end lines of credit	$	47,455	$	21,182
Commitments to extend credit		6,430		200
Standby letters of credit and financial guarantees written		847		2,679

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Regulatory Matters and Significant Risks or Uncertainties (Details)	9 Months Ended
	Sep. 30, 2014 item	Sep. 30, 2014 Royal Bank [Member]	Dec. 31, 2011 Royal Bank [Member]
Federal Deposit Insurance Corporation and Department of Banking Orders [Abstract]
Minimum Tier one leverage ratio required (as a percent)		8.00%	8.00%
Minimum total capital to risk weighted assets ratio required (as a percent)			12.00%
Tier I capital (to average assets, leverage) (as a percent)		9.96%
Total capital (to risk-weighted assets) (as a percent)		15.99%
Number of MOU	2

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Loans and Leases - Troubled Debt Restructuring (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2014 loan	Sep. 30, 2014 loan	Sep. 30, 2013 loan	Dec. 31, 2013 loan
Financing Receivable, Modifications [Line Items]
Number of loans	12,000	12,000		12
Total TDRs	$ 9,350	$ 9,350		$ 12,084
Financing Receivable New Modifications for the Period [Abstract]
Number of loans	1	3	3
Term	188	233
Combination of types		28	3,787
Total	188	261	3,787
Pre-Modification Outstanding Recorded Investment	189	262	3,848
Post-Modification Outstanding Recorded Investment	189	262	3,848
Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	6,933	6,933		9,524
Non Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Number of TDRs already classified as impaired	3	3
Total TDRs	2,417	2,417		2,560
Commercial real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	2,000	2,000		3
Total TDRs	2,883	2,883		3,847
Financing Receivable New Modifications for the Period [Abstract]
Number of loans			2
Combination of types			3,705
Total			3,705
Pre-Modification Outstanding Recorded Investment			3,761
Post-Modification Outstanding Recorded Investment			3,761
Commercial real estate [Member] | Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	2,883	2,883		3,847
Construction and land development [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	3,000	3,000		4
Total TDRs	1,193	1,193		1,736
Construction and land development [Member] | Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	378	378		1,257
Construction and land development [Member] | Non Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	815	815		479
Commercial and industrial [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	6,000	6,000		3
Total TDRs	5,169	5,169		6,380
Financing Receivable New Modifications for the Period [Abstract]
Number of loans	1	3	1
Term	188	233
Combination of types		28	82
Total	188	261	82
Pre-Modification Outstanding Recorded Investment	189	262	87
Post-Modification Outstanding Recorded Investment	189	262	87
Commercial and industrial [Member] | Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	3,672	3,672		4,420
Commercial and industrial [Member] | Non Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	1,497	1,497		1,960
Residential real estate [Member]
Financing Receivable, Modifications [Line Items]
Number of loans	1,000	1,000		2
Total TDRs	105	105		121
Residential real estate [Member] | Non Accrual Status [Member]
Financing Receivable, Modifications [Line Items]
Total TDRs	$ 105	$ 105		$ 121

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Fair Value of Financial Instruments - Balance Sheet Grouping (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Financial Assets [Abstract]
Investment securities available-for-sale (“AFS”), at fair value	$ 265,390,000	$ 308,727,000
Quoted Prices in Active Markets for Identical Assets Level 1 [Member]
Financial Assets [Abstract]
Cash and cash equivalents	21,933,000	16,844,000
Investment securities available-for-sale (“AFS”), at fair value	50,000	49,000
Financial Liabilities [Abstract]
Short-term borrowings		10,000,000
Significant Other Observable Inputs Level 2 [Member]
Financial Assets [Abstract]
Investment securities available-for-sale (“AFS”), at fair value	260,950,000	304,053,000
Accrued interest receivable	5,554,000	7,054,000
Financial Liabilities [Abstract]
Demand deposits	67,901,000	60,473,000
NOW and money markets	203,978,000	210,053,000
Savings	19,142,000	17,593,000
Time deposits	223,270,000	239,102,000
Long-term borrowings	94,885,000	94,896,000
Subordinated debt	24,209,000	26,000,000
Accrued interest payable	2,305,000	965,000
Significant Unobservable Inputs Level 3 [Member]
Financial Assets [Abstract]
Investment securities available-for-sale (“AFS”), at fair value	4,390,000	4,625,000
Other investment	2,250,000	2,250,000
Federal Home Loan Bank stock	3,678,000	4,204,000
Loans held for sale	1,018,000	1,446,000
Loans, net	383,088,000	349,336,000
Carrying Amount [Member]
Financial Assets [Abstract]
Cash and cash equivalents	21,933,000	16,844,000
Investment securities available-for-sale (“AFS”), at fair value	265,390,000	308,727,000
Other investment	2,250,000	2,250,000
Federal Home Loan Bank stock	3,678,000	4,204,000
Loans held for sale	1,018,000	1,446,000
Loans, net	385,694,000	352,810,000
Accrued interest receivable	5,554,000	7,054,000
Financial Liabilities [Abstract]
Demand deposits	67,901,000	60,473,000
NOW and money markets	203,978,000	210,053,000
Savings	19,142,000	17,593,000
Time deposits	224,765,000	240,845,000
Short-term borrowings		10,000,000
Long-term borrowings	97,540,000	97,881,000
Subordinated debt	25,774,000	25,774,000
Accrued interest payable	2,305,000	965,000
Estimated Fair Value [Member]
Financial Assets [Abstract]
Cash and cash equivalents	21,933,000	16,844,000
Investment securities available-for-sale (“AFS”), at fair value	265,390,000	308,727,000
Other investment	2,250,000	2,250,000
Federal Home Loan Bank stock	3,678,000	4,204,000
Loans held for sale	1,018,000	1,446,000
Loans, net	383,088,000	349,336,000
Accrued interest receivable	5,554,000	7,054,000
Financial Liabilities [Abstract]
Demand deposits	67,901,000	60,473,000
NOW and money markets	203,978,000	210,053,000
Savings	19,142,000	17,593,000
Time deposits	223,270,000	239,102,000
Short-term borrowings		10,000,000
Long-term borrowings	94,885,000	94,896,000
Subordinated debt	24,209,000	26,000,000
Accrued interest payable	$ 2,305,000	$ 965,000

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Consolidated Balance Sheets (unaudited) (USD $)	Sep. 30, 2014	Dec. 31, 2013
ASSETS
Cash and due from banks	$ 8,850,000	$ 9,154,000
Interest bearing deposits	13,083,000	7,690,000
Total cash and cash equivalents	21,933,000	16,844,000
Investment securities available-for-sale (“AFS”), at fair value	265,390,000	308,727,000
Other investment, at cost	2,250,000	2,250,000
Federal Home Loan Bank ("FHLB") stock	3,678,000	4,204,000
Loans and leases held for sale ("LHFS")	1,018,000	1,446,000
Loans and leases ("LHFI")	397,176,000	366,481,000
Less allowance for loan and lease losses	11,482,000	13,671,000
Net loans and leases	385,694,000	352,810,000
Bank owned life insurance	15,508,000	15,124,000
Accrued interest receivable	5,554,000	7,054,000
Other real estate owned ("OREO"), net	9,593,000	9,617,000
Premises and equipment, net	4,803,000	4,475,000
Other assets	8,048,000	9,703,000
Total assets	723,469,000	732,254,000
Deposits
Non-interest bearing	67,901,000	60,473,000
Interest bearing	447,885,000	468,491,000
Total deposits	515,786,000	528,964,000
Short-term borrowings		10,000,000
Long-term borrowings	97,540,000	97,881,000
Subordinated debentures	25,774,000	25,774,000
Accrued interest payable	2,305,000	965,000
Other liabilities	19,531,000	20,865,000
Total liabilities	660,936,000	684,449,000
Royal Bancshares of Pennsylvania, Inc. equity:
Preferred stock, Series A perpetual, $1,000 liquidation value, 500,000 shares authorized, 30,407 shares issued and outstanding at June 30, 2014 and December 31, 2013	18,856,000	29,950,000
Additional paid in capital	111,095,000	127,299,000
Accumulated deficit	(116,676,000)	(120,396,000)
Accumulated other comprehensive loss	(1,815,000)	(6,122,000)
Treasury stock - at cost, shares of Class A, 414,384 and 453,077 at September 30, 2014 and December 31, 2013	(5,795,000)	(6,336,000)
Total Royal Bancshares of Pennsylvania, Inc. shareholders’ equity	62,258,000	47,534,000
Noncontrolling interest	275,000	271,000
Total equity	62,533,000	47,805,000
Total liabilities and shareholders' equity	723,469,000	732,254,000
Common Class A [Member]
Royal Bancshares of Pennsylvania, Inc. equity:
Common stock	56,400,000	22,940,000
Total equity	56,400,000	22,940,000
Common Class B [Member]
Royal Bancshares of Pennsylvania, Inc. equity:
Common stock	193,000	199,000
Total equity	$ 193,000	$ 199,000

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Capital Adequacy (Details) (Royal Bank [Member])	9 Months Ended
	Sep. 30, 2014 item	Dec. 31, 2011
Royal Bank [Member]
Capital Adequacy [Abstract]
Number of previous quarters for which Call Report was filed	16
Minimum Tier one leverage ratio required (as a percent)	8.00%	8.00%
Minimum total capital to risk weighted assets ratio required (as a percent)		12.00%
Tier I capital (to average assets, leverage) (as a percent)	9.96%
Total capital (to risk-weighted assets) (as a percent)	15.99%

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Consolidated Statement of Changes in Shareholders' Equity (unaudited) (USD $)	Preferred Stock Series A [Member]	Additional Paid In Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]	Common Class A [Member]	Common Class B [Member]	Total
Balance at Dec. 31, 2012	$ 29,396,000	$ 126,287,000	$ (117,080,000)	$ (142,000)	$ (6,971,000)	$ 3,860,000	$ 22,863,000	$ 202,000	$ 58,415,000
Balance (in shares) at Dec. 31, 2012							11,432	2,020
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			(343,000)			(364,000)			(707,000)
Other comprehensive income, net of reclassifications and taxes				(5,468,000)					(5,468,000)
Distributions to non controlling interests						(182,000)			(182,000)
Accretion of discount on preferred stock	412,000		(412,000)
Treasury shares issued for compensation		(377,000)			421,000				44,000
Stock option expense		20,000							20,000
Balance at Sep. 30, 2013	29,808,000	125,930,000	(117,835,000)	(5,610,000)	(6,550,000)	3,314,000	22,863,000	202,000	52,122,000
Balance (in shares) at Sep. 30, 2013							11,432	2,020
Balance at Dec. 31, 2013	29,950,000	127,299,000	(120,396,000)	(6,122,000)	(6,336,000)	271,000	22,940,000	199,000	47,805,000
Balance (in shares) at Dec. 31, 2013							11,470	1,987
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income			4,298,000			212,000			4,510,000
Other comprehensive income, net of reclassifications and taxes				4,307,000					4,307,000
Distributions to non controlling interests						(208,000)			(208,000)
Common stock conversion from Class B to Class A			(121,000)				127,000	(6,000)
Common stock conversion from Class B to Class A (in shares)							64	(55)
Redemption of 11,551 shares of preferred stock		(2,392,000)							(13,943,000)
Redemption of preferred stock (in shares)	(11,551,000)
Accretion of discount on preferred stock	457,000		(457,000)
Common shares issued		(13,333,000)					33,333,000		20,000,000
Common stock issued (in shares)							16,666
Treasury shares issued for compensation		(463,000)			541,000				78,000
Other adjustment to additional paid in capital		(28,000)							(28,000)
Stock option expense		12,000							12,000
Balance at Sep. 30, 2014	18,856,000	111,095,000	(116,676,000)	(1,815,000)	(5,795,000)	275,000	56,400,000	193,000	62,533,000
Balance (in shares) at Sep. 30, 2014							28,200	1,932
Balance at Jun. 30, 2014
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income									1,448,000
Other comprehensive income, net of reclassifications and taxes									(219,000)
Common stock issued (in shares)							5,000,000
Balance at Sep. 30, 2014							$ 56,400,000		$ 62,533,000
Balance (in shares) at Sep. 30, 2014							28,200

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013
Deposits [Abstract]
Demand	$ 67,901	$ 60,473
NOW	41,801	45,375
Money Market	162,177	164,678
Savings	19,142	17,593
Time deposits (over $100)	85,603	92,763
Time deposits (under $100)	139,162	148,082
Total deposits	$ 515,786	$ 528,964	$ 522,620

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Earnings (Loss) Per Common Share (Tables)

9 Months Ended

Sep. 30, 2014

Income (Loss) Per Common Share [Abstract]

Schedule of computation of basic and diluted earning per share

	Three months ended  September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	1,271	27,329	$	0.05

	Three months ended  September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(178)	13,286	$	(0.01)

	Nine months ended September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	2,654	18,042	$	0.15

	Nine months ended September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(1,896)	13,272	$	(0.14)

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Pension Plan (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Pension Plan [Abstract]
Highest consecutive years of employee compensation used to compute benefit			3 years
Years of employment used in benefit computation			10 years
Unfunded pension plan obligations	$ 14,300,000		$ 14,300,000		$ 14,500,000
Net Pension Cost [Abstract]
Service cost	15,000	19,000	45,000	56,000
Interest cost	155,000	133,000	466,000	399,000
Amortization of prior service cost	22,000	22,000	66,000	67,000
Amortization of actuarial loss	32,000	122,000	96,000	367,000
Net periodic benefit cost	$ 224,000	$ 296,000	$ 673,000	$ 889,000

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2014

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 15.Fair Value of Financial Instruments

Under FASB ASC Topic 820 “Fair Value Measurements and Disclosures” (“ASC Topic 820”), fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When available, management uses quoted market prices to determine fair value.  If quoted prices are not available, fair value is based upon valuation techniques such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates. If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments using discounted cash flow methodologies.

Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique.  Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could have realized in a sales transaction on the dates indicated.  The estimated fair value amounts have been measured as of their respective period end and have not been re-evaluated or updated for purposes of these financial statements subsequent to those respective dates.  As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

ASC Topic 820 provides guidance for estimating fair value when the volume and level of activity for an asset or liability has significantly declined and for identifying circumstances when a transaction is not orderly. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation methods used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under ASC Topic 820 are as follows:

Level 1:	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2:	Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability. Level 2 includes debt securities with quoted prices that are traded less frequently then exchange-traded instruments. Valuation techniques include matrix pricing which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted prices.
Level 3:	Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported with little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Company did not have transfers of financial instruments within the fair value hierarchy during the three and nine months ended September 30, 2014 and 2013.

Items Measured on a Recurring Basis

The Company’s available for sale investment securities are recorded at fair value on a recurring basis.

Fair value for Level 1 securities are determined by obtaining quoted market prices on nationally recognized securities exchanges.  Level 1 securities include common stocks.

Level 2 securities include obligations of U.S. government-sponsored agencies and debt securities with quoted prices, which are traded less frequently than exchange-traded instruments, whose value is determined using matrix pricing with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.  The prices were obtained from third party vendors.  This category generally includes the Company’s mortgage-backed securities and CMOs issued by U.S. government and government-sponsored agencies, non-agency CMOs, and corporate and municipal bonds.

Level 3 securities include investments in seven private equity funds which are predominantly invested in real estate.  The value of the private equity funds are derived from the funds’ financials and K-1 filings.  The Company also reviews the funds’ asset values and its near-term projections.

For financial assets measured at fair value on a recurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2014 and December 31, 2013 are as follows:

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	32,541	$	—	$	32,541
Mortgage-backed securities-residential		—		27,127		—		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		172,684		—		172,684
Non-agency		—		3,938		—		3,938
Corporate bonds		—		15,633		—		15,633
Municipal bonds		—		9,027		—		9,027
Other securities		—		—		4,390		4,390
Common stocks		50		—		—		50
Total investment securities available-for-sale	$	50	$	260,950	$	4,390	$	265,390

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Investment securities available-for-sale
U.S. government agencies	$	—	$	62,036	$	—	$	62,036
Mortgage-backed securities-residential		—		32,097		—		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		—		189,103		—		189,103
Non-agency		—		4,479		—		4,479
Corporate bonds		—		9,438		—		9,438
Municipal bonds		—		6,900		—		6,900
Other securities		—		—		4,625		4,625
Common stocks		49		—		—		49
Total investment securities available-for-sale	$	49	$	304,053	$	4,625	$	308,727

The following tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value for the nine months endedSeptember 30, 2014 and 2013:

(In thousands)	Other securities
Investment Securities Available for Sale	2014		2013
Beginning balance January 1,	$	4,625	$	4,164
Total gains/(losses) - (realized/unrealized):
Included in earnings		251		5
Included in other comprehensive income		299		361
Purchases		14		32
Sales and calls		(799)		(300)
Transfers in and/or out of Level 3		—		—
Ending balance September 30,	$	4,390	$	4,262

Items Measured on a Nonrecurring Basis

Non-accrual loans and TDRs are evaluated for impairment on an individual basis under FASB ASC Topic 310 “Receivables”.  The impairment analysis includes current collateral values, known relevant factors that may affect loan collectability, and risks inherent in different kinds of lending.  When the collateral value or discounted cash flows less costs to sell is less than the carrying value of the loan a specific reserve (valuation allowance) is established. Loans held for sale are carried at the lower of cost or fair value. OREO is carried at the lower of cost or fair value.  Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the real estate.  Additionally, for collateral acquired from tax liens, fair value may be established using brokers opinions due to their lower carrying value.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

For financial assets measured at fair value on a nonrecurring basis, the fair value measurements by level within the fair value hierarchy used at September 30, 2014 and December 31, 2013 are as follows:

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of September 30, 2014	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	3,739	$	3,739
Other real estate owned		—		—		2,624		2,624
Loans and leases held for sale		—		—		1,018		1,018

	Fair Value Measurements Using:
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical		Observable		Unobservable
As of December 31, 2013	Assets		Inputs		Inputs
(In thousands)	Level 1		Level 2		Level 3		Fair Value
Assets
Impaired loans and leases	$	—	$	—	$	4,073	$	4,073
Other real estate owned		—		—		9,182		9,182
Loans and leases held for sale		—		—		1,446		1,446

The following tables present additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level 3 inputs to determine fair valueat September 30, 2014 and December 31, 2013:

	Qualitative Information about Level 3 Fair Value Measurements
As of September 30, 2014			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	3,739	Appraisal of	Appraisal adjustments	0.0%	-	-28.9%	(-20.9%)
			collateral (1)	Liquidation expenses	0.0%	-	-21.1%	(-7.5%)
Other real estate owned		2,624	Appraisal of	Appraisal adjustments	0.0%	-	-69.7%	(-11.3%)
			collateral (1)	Liquidation expenses			-14.7%	(-14.7%)
Loans and leases held for sale		1,018	Appraisal of	Agreement of sale			0.0%
			collateral (1)

	Qualitative Information about Level 3 Fair Value Measurements
As of December 31, 2013			Valuation		Range
(In thousands)	Fair Value		Techniques	Unobservable Input	(WeightedAverage)
Impaired loans and leases	$	4,073	Appraisal of	Appraisal adjustments	0.0%	-	-25.0%	(-2.0%)
			collateral (1)	Liquidation expenses	0.0%	-	-23.2%	(-6.7%)
Other real estate owned		9,182	Appraisal of	Appraisal adjustments	0.0%	-	-62.5%	(-11.2%)
			collateral (1)	Liquidation expenses	-2.8%	-	-6.8%	(-5.0%)
Loans and leases held for sale		1,446	Appraisal of	Agreement of sale			0.0%
			collateral (1)

(1) Appraisals may be adjusted for qualitative factors such as interior condition of the property and liquidation expenses.

The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at September 30, 2014 and December 31, 2013. The following information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities.  Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.  The methodologies for estimating the fair value of financial instruments that are measured on a recurring or nonrecurring basis are discussed above.

Cash and cash equivalents (carried at cost):

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate those assets’ fair values.

Securities:

Management uses quoted market prices to determine fair value of securities (level 1).  If quoted prices are not available, fair value is based upon valuation techniques such as matrix pricing or other models that use, where possible, current market-based or independently sourced market parameters, such as interest rates (level 2). If observable market-based inputs are not available, the Company uses unobservable inputs to determine appropriate valuation adjustments by reviewing the private equities funds’ financials and K-1 filings (level 3).

Other Investment (carried at cost):

This investment includes the Solomon Hess SBA Loan Fund, which the Company invested in to partially satisfy its community reinvestment requirement.  Shares in this fund are not publicly traded and therefore have no readily determinable fair market value.  An investor can have their investment in the Fund redeemed for the balance of their capital account at any quarter end with 60 days notice to the Fund.  The investment in this Fund is recorded at cost.  The Company does not record this investment at fair value on a recurring basis, as this investment’s carrying amount approximates fair value.

Restricted investment in bank stock (carried at cost):

The carrying amount of restricted investment in bank stock approximates fair value, and considers the limited marketability of such securities.

Loans held for sale (carried at lower of cost or fair value):

The fair values of loans held for sale are based upon appraised values of the collateral less costs to sell, management’s estimation of the value of the collateral or expected net sales proceeds. These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Loans receivable (carried at cost):

The fair values of loans are estimated using discounted cash flow analyses, using market rates at the balance sheet date that reflect the credit and interest rate-risk inherent in the loans.  Projected future cash flows are calculated based upon contractual maturity or call dates, projected repayments and prepayments of principal.   Generally, for variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values.

Impaired loans (generally carried at fair value):

Impaired loans are accounted for under ASC Topic 310. Impaired loans are those in which the Company has measured impairment generally based on the fair value of the loan’s collateral.  Fair value is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based on the expected proceeds.  These assets are included as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.

Accrued interest receivable and payable (carried at cost):

The carrying amount of accrued interest receivable and accrued interest payable approximates its fair value.

Deposit liabilities (carried at cost):

The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings and money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts).  Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market on certificates to a schedule of aggregated expected monthly maturities on time deposits.

Short-term borrowings (carried at cost):

The carrying amounts of short-term borrowings approximate their fair values.

Long-term debt (carried at cost):

Fair values of FHLB advances and other long-term borrowings are estimated using discounted cash flow analysis, based on quoted prices for new FHLB advances with similar credit risk characteristics, terms and remaining maturity.  These prices obtained from this active market represent a market value that is deemed to represent the transfer price if the liability were assumed by a third party.

Subordinated debt (carried at cost):

Fair values of junior subordinated debt are estimated using discounted cash flow analysis, based on market rates currently offered on such debt with similar credit risk characteristics, terms and remaining maturity.

Off-balance sheet financial instruments (disclosed at cost):

Fair values for the Company’s off-balance sheet financial instruments (lending commitments and letters of credit) are based on fees currently charged in the market to enter into similar agreements, taking into account, the remaining terms of the agreements and the counterparties’ credit standing.  They are not shown in the table because the amounts are immaterial.

The tables below indicate the fair value of the Company’s financial instruments at September 30, 2014 and December 31, 2013.

					Fair Value Measurements
					At September 30, 2014
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	21,933	$	21,933	$	21,933	$	—	$	—
Investment securities available-for-sale		265,390		265,390		50		260,950		4,390
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		3,678		3,678		—		—		3,678
Loans held for sale		1,018		1,018		—		—		1,018
Loans, net		385,694		383,088		—		—		383,088
Accrued interest receivable		5,554		5,554		—		5,554		—
Financial Liabilities:
Demand deposits		67,901		67,901		—		67,901		—
NOW and money markets		203,978		203,978		—		203,978		—
Savings		19,142		19,142		—		19,142		—
Time deposits		224,765		223,270		—		223,270		—
Long-term borrowings		97,540		94,885		—		94,885		—
Subordinated debt		25,774		24,209		—		24,209		—
Accrued interest payable		2,305		2,305		—		2,305		—

					Fair Value Measurements
					At December 31, 2013
					Quoted Prices
					in Active		Significant
					Markets for		Other		Significant
					Identical		Observable		Unobservable
	Carrying		Estimated		Assets		Inputs		Inputs
(In thousands)	amount		fair value		Level 1		Level 2		Level 3
Financial Assets:
Cash and cash equivalents	$	16,844	$	16,844	$	16,844	$	—	$	—
Investment securities available-for-sale		308,727		308,727		49		304,053		4,625
Other investment		2,250		2,250		—		—		2,250
Federal Home Loan Bank stock		4,204		4,204		—		—		4,204
Loans held for sale		1,446		1,446		—		—		1,446
Loans, net		352,810		349,336		—		—		349,336
Accrued interest receivable		7,054		7,054		—		7,054		—
Financial Liabilities:
Demand deposits		60,473		60,473		—		60,473		—
NOW and money markets		210,053		210,053		—		210,053		—
Savings		17,593		17,593		—		17,593		—
Time deposits		240,845		239,102		—		239,102		—
Short-term borrowings		10,000		10,000		10,000		—		—
Long-term borrowings		97,881		94,896		—		94,896		—
Subordinated debt		25,774		26,000		—		26,000		—
Accrued interest payable		965		965		—		965		—

Limitations

The fair value estimates are made at a discrete point in time based on relevant market information and information about the financial instruments.  Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.  Further, the foregoing estimates may not reflect the actual amount that could be realized if all or substantially all of the financial instruments were offered for sale.  This is due to the fact that no market exists for a sizable portion of the loan, deposit and off balance sheet instruments.

In addition, the fair value estimates are based on existing on-and-off balance sheet financial instruments without attempting to value anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Other significant assets that are not considered financial assets include premises and equipment.  In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.

Finally, reasonable comparability between financial institutions may not be likely due to the wide range of permitted valuation techniques and numerous estimates which must be made given the absence of active secondary markets for many of the financial instruments.  This lack of uniform valuation methodologies introduces a greater degree of subjectivity to these estimated fair values.

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Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2014

Comprehensive Income (Loss) [Abstract]

Comprehensive Income (Loss) [Abstract]

	Nine months ended September 30, 2014
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized gains on investment securities:
Unrealized holding gains arising during period	$	6,570	$	2,101	$	4,469
Less reclassification adjustment for gains
realized in net income		330		112		218
Unrealized gains on investment securities		6,240		1,989		4,251
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(85)		(29)		(56)
Other comprehensive income, net	$	6,325	$	2,018	$	4,307

	Nine months ended September 30, 2013
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized losses on investment securities:
Unrealized holding losses arising during period	$	(8,833)	$	(3,128)	$	(5,705)
Less reclassification adjustment for gains
realized in net loss		69		23		46
Unrealized losses on investment securities		(8,902)		(3,151)		(5,751)
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(429)		(146)		(283)
Other comprehensive loss, net	$	(8,473)	$	(3,005)	$	(5,468)

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Federal Home Loan Bank Stock

9 Months Ended

Sep. 30, 2014

Federal Home Loan Bank Stock [Abstract]

Federal Home Loan Bank Stock

Note 17.Federal Home Loan Bank Stock

As a member of the FHLB, the Company is required to purchase and hold stock in the FHLB to satisfy membership and borrowing requirements.  The stock can only be sold to the FHLB or to another member institution, and all sales of FHLB stock must be at par. As a result of these restrictions, there is no active market for the FHLB stock. As of September 30, 2014 and December 31, 2013, FHLB stock totaled $3.7 million and $4.2 million, respectively.

FHLB stock is held as a long-term investment and its value is determined based on the ultimate recoverability of the par value. The Company evaluates impairment quarterly. The decision of whether impairment exists is a matter of judgment that reflects management’s view of the FHLB’s long-term performance, which includes factors such as the following: (1) its operating performance, (2) the severity and duration of declines in the fair value of its net assets related to its capital stock amount, (3) its liquidity position, and (4) the impact of legislative and regulatory changes on the FHLB.  Based on the capital adequacy and the liquidity position of the FHLB, management believes that the par value of its investment in FHLB stock will be recovered.  Accordingly, there is no other-than-temporary impairment related to the carrying amount of the Company’s FHLB stock as of September 30, 2014.

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Fair Value of Financial Instruments (Details) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	$ 265,390,000	$ 308,727,000
U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	32,541,000	62,036,000
Mortgage-backed Securities-residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	27,127,000	32,097,000
Collateralized Mortgage Obligations, Issued or Guaranteed by U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	172,684,000	189,103,000
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	3,938,000	4,479,000
Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	15,633,000	9,438,000
Municipal Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	9,027,000	6,900,000
Private Equity Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	4,390,000	4,625,000
Common Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	50,000	49,000
Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	265,390,000	308,727,000
Recurring [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	32,541,000	62,036,000
Recurring [Member] | Mortgage-backed Securities-residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	27,127,000	32,097,000
Recurring [Member] | Collateralized Mortgage Obligations, Issued or Guaranteed by U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	172,684,000	189,103,000
Recurring [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	3,938,000	4,479,000
Recurring [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	15,633,000	9,438,000
Recurring [Member] | Municipal Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	9,027,000	6,900,000
Recurring [Member] | Private Equity Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	4,390,000	4,625,000
Recurring [Member] | Common Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	50,000	49,000
Quoted Prices in Active Markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	50,000	49,000
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	50,000	49,000
Quoted Prices in Active Markets for Identical Assets Level 1 [Member] | Recurring [Member] | Common Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	50,000	49,000
Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	260,950,000	304,053,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	260,950,000	304,053,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	32,541,000	62,036,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | Mortgage-backed Securities-residential [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	27,127,000	32,097,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | Collateralized Mortgage Obligations, Issued or Guaranteed by U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	172,684,000	189,103,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | Mortgage-backed Securities, Issued by Private Enterprises [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	3,938,000	4,479,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	15,633,000	9,438,000
Significant Other Observable Inputs Level 2 [Member] | Recurring [Member] | Municipal Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	9,027,000	6,900,000
Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	4,390,000	4,625,000
Significant Unobservable Inputs Level 3 [Member] | Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	4,390,000	4,625,000
Significant Unobservable Inputs Level 3 [Member] | Recurring [Member] | Private Equity Funds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investment securities available for sale	$ 4,390,000	$ 4,625,000

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Consolidated Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Net Cash Provided by (Used in) Operating Activities, Continuing Operations [Abstract]
Net income (loss)	$ 4,298	$ (343)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	348	311
Stock compensation expense	12	20
Credit for loan and lease losses	(765)	(196)
Impairment charge for OREO	399	953
Net amortization of investment securities	1,495	3,492
Net accretion on loans	(303)	(263)
Net gains on sales of premises and equipment	(107)	(1,204)
Net gains on sales of OREO	(633)	(1,209)
Proceeds from sales of loans and leases	3,838	4,042
Gains on sales of loans and leases	(223)	(257)
Net gains on sales of investment securities	(330)	(69)
Income from bank owned life insurance	(384)	(401)
Share-based compensation	105	75
Impairment of loans held for sale		153
Changes in assets and liabilities:
Decrease in accrued interest receivable	1,500	2,387
Decrease (increase) in other assets	(121)	(540)
Increase (decrease) in accrued interest payable	1,340	(1,289)
Decrease in other liabilities	(1,334)	(498)
Net cash provided by operating activities	9,135	5,164
Cash flows from investing activities:
Proceeds from maturities, calls and paydowns of AFS investment securities	33,272	77,237
Proceeds from sales of AFS investment securities	55,290	20,428
Purchase of AFS investment securities	(40,150)	(52,131)
Redemption of Federal Home Loan Bank stock	526	1,647
Net decrease (increase) in loans	(37,001)	(41,043)
Additions to foreclosed real estate	(1,292)
Proceeds from the sales of premises and equipment	303	1,651
Purchase of premises and equipment	(872)	(296)
Proceeds from sales of foreclosed real estate	3,548	6,213
Net cash provided by investing activities	13,624	13,706
Cash flows from financing activities:
Increase in demand and NOW accounts	3,854	1,384
Decrease in money market and savings accounts	(952)	(17,726)
Decrease in certificates of deposit	(16,080)	(15,955)
Repayments of short-term borrowings	(10,000)
Repayments of long-term borrowings	(341)	(50,339)
Proceeds from short-term borrowings		14,000
Proceeds from long-term borrowings		40,000
Payments to noncontrolling interest	(208)	(182)
Issuance of common stock, net	20,000
Payments for Repurchase of Redeemable Preferred Stock	(13,943)
Net cash used in financing activities	(17,670)	(28,818)
Net increase (decrease) in cash and cash equivalents	5,089	(9,948)
Cash and cash equivalents at the beginning of the period	16,844	28,802
Cash and cash equivalents at the end of the period	21,933	18,854
Supplemental Disclosure
Interest paid	3,530	6,802
Transfers to OREO	1,998	6,428
Transfer to LHFS	$ 3,187	$ 2,283

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Royal Bancshares of Pennsylvania, Inc. equity:
Preferred stock, liquidation value (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares outstanding (in shares)	18,856	30,407
Common Class A [Member]
Royal Bancshares of Pennsylvania, Inc. equity:
Common stock, par value (in dollars per share)	$ 2.00	$ 2.00
Common stock, shares authorized (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	28,200,269	11,469,940
Treasury stock, shares (in shares)	414,384	453,077
Common Class B [Member]
Royal Bancshares of Pennsylvania, Inc. equity:
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, shares authorized (in shares)	3,000,000	3,000,000
Common stock, shares issued (in shares)	1,931,692	1,987,142

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Shareholders' Equity

9 Months Ended

Sep. 30, 2014

Shareholders' Equity [Abstract]

Shareholders' Equity

Note 10.Shareholders’ Equity

1. Preferred Stock

On February 20, 2009, as part of the Capital Purchase Program (“CPP”) established by the Treasury, the Company issued to Treasury 30,407 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, without par value per share (the “Series A Preferred Stock”), and a liquidation preference of $1,000 per share.  In conjunction with the purchase of the Series A Preferred Stock, Treasury received a warrant to purchase 1,104,370 shares of the Company’s Class A common stock.  The aggregate purchase price for the Series A Preferred Stock and warrant was $30.4 million in cash.  The Series A Preferred Stock qualifies as Tier 1 capital and originally paid cumulative dividends at a rate of 5% per annum.  In February 2014, the cumulative dividend rate on the Series A Preferred Stock increased to 9% per annum.  The Series A Preferred Stock may generally be redeemed by the Company at any time following consultation with its primary banking regulators.  The warrant issued to Treasury has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $4.13 per share of the common stock.  As a result of the shareholders’ right offering described below, the number of warrantsto purchase the Company’s Class A common stock adjusted to 1,368,040 and the warrant exercise price decreased to $3.33per share of the common stock.

The Company received approval from the Federal Reserve Bank to bid up to $14.0 million, which was raised in a private placement, to purchase shares of the Series A Preferred Stock in an auction of such shares to be conducted by the Treasury.  The auction closed on June 19, 2014.  The Series A Preferred Stock was priced in the auction at $1,207.11 per share for all 30,407 shares of Series A Preferred Stock outstanding. The Company was allocated 11,551 shares of Series A Preferred Stock for repurchase at the clearing price of $1,207.11. Closing for the sale of the Series A Preferred Stock by the Treasury, including the repurchase of 11,551 shares of Series A Preferred Stock by the Company occurred, on July 2, 2014. As part of this redemption, the Company eliminated nearly $3.5 million in preferred dividend in arrears.

2. Common Stock

The Company’s Class A common stock trades on the NASDAQ Global Market under the symbol RBPAA.  There is no market for the Company’s Class B common stock.  The Class B shares may not be transferred in any manner except to the holder’s immediate family.  Class B shares may be converted to Class A shares at the rate of 1.15 to 1.  Shareholders are entitled to one vote for each Class A share and ten votes for each Class B share held.  Holders of either class of common stock are entitled to conversion equivalent per share dividends when declared.

To fund the purchase of the Series A Preferred Stock, described above, the Company sold 11,666,667 shares of its Class A common stock in a private placement transaction at a price of $1.20 per share.  Additionally, during the third quarter of 2014, the Company conducted a shareholder rights offering to existing shareholders to limit their ownership dilution from the sale of Class A common stock to the other investors in the private placement. The Company issued approximately 5.0 million shares and received gross proceeds of approximately $6.0 million. The private placement and the shareholders rights offering combined to increase tangible common equity by nearly $17.6 million.

3. Payment of Dividends

Under the Pennsylvania Business Corporation Law, the Company may pay dividends only if it is solvent and would not be rendered insolvent by the dividend payment. There are also restrictions set forth in the Pennsylvania Banking Code of 1965 (the “Code”) and in the Federal Deposit Insurance Act (“FDIA”) affecting the payment of dividends to the Company by Royal Bank.  Under the Code, no dividends may be paid by a bank except from “accumulated net earnings” (generally retained earnings).  In addition, dividends paid by Royal Bank to the Company would be prohibited if the effect thereof would cause Royal Bank’s capital to be reduced below applicable minimum capital requirements. Royal Bank must receive prior approval from the FDIC and the Department before declaring and paying a dividend to the Company.

On August 13, 2009, the Company’s Board suspended the regular quarterly cash dividends on the $30.4 million in Series A Preferred Stock.  The Company’s Board took this action in consultation with the Federal Reserve Bank of Philadelphia as required by regulatory policy guidance.  In February 2014, the preferred cumulative dividend rate prospectively increased to 9%per annum.  As a result of the Company’s repurchase of 11,551 shares of Series A Preferred Stock, approximately $3.5 million of the Series A Preferred stockdividend in arrears was eliminated. As of September 30, 2014, the Series A Preferred stock dividend in arrears was approximately $6.1million and has not been recognized in the consolidated financial statements.  In the event the Company declared the preferred dividend the Company’s capital ratios would be negatively affected; however, they would remain above the required minimum ratios.  Under the Federal Reserve MOU as described in “Note 2 — Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company may not declare or pay any dividends without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 31, 2014 Common Class A [Member]	Oct. 31, 2014 Common Class B [Member]
Entity Information [Line Items]
Entity Registrant Name	ROYAL BANCSHARES OF PENNSYLVANIA INC
Entity Central Index Key	0000922487
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		27,801,904	1,931,692
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014

XML

Regulatory Capital Requirements

9 Months Ended

Sep. 30, 2014

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements

Note 11.Regulatory Capital Requirements

The Company and Royal Bank are subject to various regulatory capital requirements administered by the federal banking agencies.  Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company’s and Royal Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.  Under the informal agreement referenced in “Note 2 — Regulatory Matters and Significant Risks And Uncertainties” to the Consolidated Financial Statements, Royal Bank is required to maintain a minimum Tier 1 leverage ratio of 8% and a Total risk-based capital ratio of 12%.  As of September 30, 2014, the Company and Royal Bank met all capital adequacy requirements to which it is subject and Royal Bank met the criteria for a well-capitalized institution.

In connection with a prior bank regulatory examination, the FDIC concluded, based upon its interpretation of the Call Report instructions and under RAP, that income from Royal Bank’s tax lien business should be recognized on a cash basis, not an accrual basis.  Royal Bank’s current accrual method is in accordance with U.S. GAAP.  Royal Bank disagrees with the FDIC’s conclusion and filed the Call Report for September 30, 2014 and the previous 16 quarters in accordance with U.S. GAAP.  The change in the method of revenue recognition for the tax lien business for regulatory accounting purposes affects Royal Bank’s and the Company’s capital ratios as shown below.  The resolution of this matter will be decided by additional joint regulatory agency guidance which includes the Federal Reserve Bank, the FDIC, and the OCC.

The table below sets forth Royal Bank’s capital ratios under RAP based on the FDIC’s interpretation of the Call Report instructions:

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
Total capital (to risk-weighted assets)	$	76,403	15.99	%	$	38,237	8.00	%	$	47,796	10.00	%
Tier I capital (to risk-weighted assets)	$	70,970	14.85	%	$	19,118	4.00	%	$	28,677	6.00	%
Tier I capital (to average assets, leverage)	$	70,970	9.96	%	$	28,492	4.00	%	$	35,615	5.00	%

The tables below reflect the adjustments to the net income as well as the capital ratios for Royal Bank under U.S. GAAP:

	For the nine
	months ended
(In thousands)	September 30, 2014
RAP net income	$	682
Tax lien adjustment, net of noncontrolling interest		3,556
U.S. GAAP net income	$	4,238

	At September 30, 2014
	As reported		As adjusted
	under RAP		for U.S. GAAP
Total capital (to risk-weighted assets)	15.99	%	16.61	%
Tier I capital (to risk-weighted assets)	14.85	%	15.49	%
Tier I capital (to average assets, leverage)	9.96	%	10.42	%

The tables below reflect the Company’s capital ratios:

	At September 30, 2014
									To be well capitalized
					For capital				under prompt corrective
	Actual				adequacy purposes				action provision
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount	Ratio
Total capital (to risk-weighted assets)	$	94,205	19.37	%	$	38,899	8.00	%	N/A	N/A
Tier I capital (to risk-weighted assets)	$	85,328	17.55	%	$	19,449	4.00	%	N/A	N/A
Tier I capital (to average assets, leverage)	$	85,328	11.78	%	$	28,975	4.00	%	N/A	N/A

The Company has filed the Consolidated Financial Statements for Bank Holding Companies-FR Y-9C (“FR Y-9C”) as of September 30, 2014 consistent with U.S. GAAP and the FR Y-9C instructions.  In the event that a similar adjustment for RAP purposes would be required by the Federal Reserve on the holding company level, the adjusted ratios are shown in the table below.

	For the nine
	months ended
(In thousands)	September 30, 2014
U.S. GAAP net income	$	4,298
Tax lien adjustment, net of noncontrolling interest		(3,556)
RAP net income	$	742

	At September 30, 2014
	As reported		As adjusted
	under U.S. GAAP		for RAP
Total capital (to risk-weighted assets)	19.37	%	18.78	%
Tier I capital (to risk-weighted assets)	17.55	%	16.68	%
Tier I capital (to average assets, leverage)	11.78	%	11.17	%

XML

Consolidated Statements of Operations - (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest Income
Loans and leases, including fees	$ 5,451	$ 5,426	$ 15,925	$ 16,331
Investment securities AFS	1,734	1,528	5,610	4,103
Deposits in banks	6	6	16	21
Total Interest Income	7,191	6,960	21,551	20,455
Interest Expense
Deposits	900	983	2,712	3,061
Short-term borrowings	1	6	13	17
Long-term borrowings	722	901	2,145	2,589
Total Interest Expense	1,623	1,890	4,870	5,667
Net Interest Income	5,568	5,070	16,681	14,788
(Credit) provision for loan and lease losses	(51)	218	(765)	(196)
Net Interest Income after (Credit) Provision for Loan and Lease Losses	5,619	4,852	17,446	14,984
Non-interest Income
Service charges and fees	248	363	779	1,001
Net gains on sales of loans and leases	80	241	223	257
Net gains on sales of other real estate owned	173	629	633	1,209
Income from bank owned life insurance	129	134	384	401
Gain on sale of premises and equipment	107	526	107	1,204
Net gains (losses) on the sale of AFS investment securities	238	(1)	330	69
Other income	229	45	336	165
Total Non-interest Income	1,204	1,937	2,792	4,306
Non-interest Expense
Employee salaries and benefits	2,704	2,547	7,505	7,998
Loss contingency				1,650
Occupancy and equipment	614	566	1,865	1,682
Professional and legal fees	570	569	1,562	2,037
OREO expenses and impairment	154	844	892	1,741
Pennsylvania shares tax	138	283	406	840
FDIC and state assessments	261	253	770	781
Communications and data processing	166	166	485	439
Directors' fees	129	138	360	356
Marketing and advertising	86	64	325	175
Insurance	89	144	289	317
Loan collection expenses	70	130	227	408
Impairment of loans held for sale				153
Restructuring charges		119		230
Other operating expenses	394	467	1,042	1,190
Total Non-interest Expense	5,375	6,290	15,728	19,997
ncome (Loss) Before Tax Expense (Benefit)	1,448	499	4,510	(707)
Net Income (Loss)	1,448	499	4,510	(707)
Less Net Income (Loss) Attributable to Noncontrolling Interest	25	157	212	(364)
Net Income (Loss) Attributable to Royal Bancshares of Pennsylvania, Inc.	1,423	342	4,298	(343)
Less Preferred Stock Series A Accumulated Dividend and Accretion	152	520	1,644	1,553
Net Income (Loss) Available to Common Shareholders	$ 1,271	$ (178)	$ 2,654	$ (1,896)
Per Common Share Data
Net Income (Loss) - Basic and Diluted (in dollars per share)	$ 0.05	$ (0.01)	$ 0.15	$ (0.14)

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Allowance for Loan and Lease Losses

9 Months Ended

Sep. 30, 2014

Allowance for Loan and Lease Losses [Abstract]

Allowance for Loan and Lease Losses

Note 5.Allowance for Loan and Lease Losses

The following tables present the detail of the allowance and the loan portfolio disaggregated by loan portfolio classification as of September 30, 2014, December 31, 2013 and September 30,2013.

Allowance for Loan and Lease Losses

For the three months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	4,971	$	2,033	$	1,525	$	416	$	690	$	1,352	$	408	$	24	$	150	$	11,569
Charge-offs		—		—		—		—		—		(206)		(65)		—		—		(271)
Recoveries		—		205		12		—		5		13		—		—		—		235
(Credit) provision		(266)		3		(106)		(63)		25		325		29		9		(7)		(51)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

Allowance for Loan and Lease Losses

For the nine months endedSeptember 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Charge-offs		(349)		—		(452)		—		—		(568)		(330)		—		—		(1,699)
Recoveries		—		205		23		—		11		35		1		—		—		275
(Credit) provision		(444)		(280)		(1,146)		(49)		236		794		146		18		(40)		(765)
Ending balance	$	4,705	$	2,241	$	1,431	$	353	$	720	$	1,484	$	372	$	33	$	143	$	11,482
Ending balance: related to loans individually evaluated for impairment	$	205	$	172	$	5	$	—	$	30	$	62	$	19	$	—	$	—	$	493
Ending balance: related to loans collectively evaluated for impairment	$	4,500	$	2,069	$	1,426	$	353	$	690	$	1,422	$	353	$	33	$	143	$	10,989

Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2014

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	164,522	$	41,676	$	70,743	$	16,893	$	44,261	$	48,588	$	8,230	$	2,263	$	—	$	397,176
Ending balance: individually evaluated for impairment	$	6,877	$	1,192	$	5,897	$	—	$	983	$	64	$	1,128	$	—	$	—	$	16,141
Ending balance: collectively evaluated for impairment	$	157,645	$	40,484	$	64,846	$	16,893	$	43,278	$	48,524	$	7,102	$	2,263	$	—	$	381,035

Allowance for Loan and Lease Losses and Loans Held for Investment

For the year ended December 31, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,684)		(820)		(383)		—		(46)		(382)		(578)		—		—		(3,893)
Recoveries		600		297		17		—		158		29		74		—		—		1,175
(Credit) provision		(2,168)		(148)		1,448		(252)		(737)		468		587		(14)		(56)		(872)
Ending balance	$	5,498	$	2,316	$	3,006	$	402	$	473	$	1,223	$	555	$	15	$	183	$	13,671
Ending balance: related to loans individually evaluated for impairment	$	331	$	—	$	452	$	—	$	19	$	60	$	24	$	—	$	—	$	886
Ending balance: related to loans collectively evaluated for impairment	$	5,167	$	2,316	$	2,554	$	402	$	454	$	1,163	$	531	$	15	$	183	$	12,785
LHFI
Ending balance	$	148,293	$	45,261	$	79,589	$	11,737	$	25,535	$	42,524	$	12,716	$	826	$	—	$	366,481
Ending balance: individually evaluated for impairment	$	5,325	$	3,907	$	8,049	$	—	$	632	$	139	$	454	$	—	$	—	$	18,506
Ending balance: collectively evaluated for impairment	$	142,968	$	41,354	$	71,540	$	11,737	$	24,903	$	42,385	$	12,262	$	826	$	—	$	347,975

Allowance for Loan and Lease Losses

For the three months ended September 30,2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	7,952	$	2,017	$	2,465	$	588	$	353	$	999	$	586	$	18	$	201	$	15,179
Charge-offs		(605)		—		(34)		—		(32)		(40)		(126)		—		—		(837)
Recoveries		1		106		4		—		2		4		2		—		—		119
Provision (credit)		(1,159)		72		1,080		(114)		175		133		41		(3)		(7)		218
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

Allowance for Loan and Lease Losses

For the nine months endedSeptember 30,2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
Beginning balance	$	8,750	$	2,987	$	1,924	$	654	$	1,098	$	1,108	$	472	$	29	$	239	$	17,261
Charge-offs		(1,440)		(820)		(228)		—		(32)		(149)		(410)		—		—		(3,079)
Recoveries		127		297		14		—		157		24		74		—		—		693
Provision (credit)		(1,248)		(269)		1,805		(180)		(725)		113		367		(14)		(45)		(196)
Ending balance	$	6,189	$	2,195	$	3,515	$	474	$	498	$	1,096	$	503	$	15	$	194	$	14,679
Ending balance: related to loans individually evaluated for impairment	$	230	$	—	$	209	$	—	$	16	$	138	$	67	$	—	$	—	$	660
Ending balance: related to loans collectively evaluated for impairment	$	5,959	$	2,195	$	3,306	$	474	$	482	$	958	$	436	$	15	$	194	$	14,019

Loans Held for Investment and Evaluated for Impairment

For the three and nine months ended September 30, 2013

			Construction
	Commercial		and land		Commercial		Multi-		Residential				Tax
(In thousands)	real estate		development		& industrial		family		real estate		Leases		certificates		Consumer		Unallocated		Total
LHFI
Ending balance	$	158,223	$	39,594	$	86,401	$	11,678	$	24,830	$	40,408	$	15,364	$	831	$	—	$	377,329
Ending balance: individually evaluated for impairment	$	10,045	$	4,019	$	8,112	$	—	$	520	$	190	$	532	$	—	$	—	$	23,418
Ending balance: collectively evaluated for impairment	$	148,178	$	35,575	$	78,289	$	11,678	$	24,310	$	40,218	$	14,832	$	831	$	—	$	353,911

The following tables detail the LHFI that were evaluated for impairment by loan classification at September 30, 2014 and December 31, 2013.

	At September 30, 2014
	Unpaid
	principal		Recorded		Related
(In thousands)	balance		investment		allowance
With no related allowance recorded:
Commercial real estate	$	7,410	$	5,986	$	—
Construction and land development		2,690		633		—
Commercial & industrial		8,133		4,400		—
Residential real estate		—		—		—
Tax certificates		5,376		890		—
Total:	$	23,609	$	11,909	$	—

With an allowance recorded:
Commercial real estate	$	1,137	$	891	$	205
Construction and land development		559		559		172
Commercial & industrial		1,721		1,497		5
Residential real estate		1,080		983		30
Leasing		64		64		62
Tax certificates		4,244		238		19
Total:	$	8,805	$	4,232	$	493

	At and for the year ended December 31, 2013
	Unpaid						Average		Interest
	principal		Recorded		Related		recorded		income
(In thousands)	balance		investment		allowance		investment		recognized
With no related allowance recorded:
Commercial real estate	$	4,429	$	4,158	$	—	$	7,956	$	73
Construction and land development		9,850		3,907		—		3,933		209
Commercial & industrial		6,693		6,491		—		5,960		250
Residential real estate		—		—		—		84		27
Tax certificates		179		115		—		167		—
Total:	$	21,151	$	14,671	$	—	$	18,100	$	559

With an allowance recorded:
Commercial real estate	$	1,435	$	1,435	$	331	$	1,879	$	—
Construction and land development		—		—		—		381		—
Commercial & industrial		2,592		1,290		452		2,456		—
Residential real estate		827		631		19		492		—
Leases		139		139		60		106		—
Tax certificates		4,322		340		24		341		—
Total:	$	9,315	$	3,835	$	886	$	5,655	$	—

The following tables present the average recorded investment in impaired LHFI and the related interest income recognized for the three and nine months ended September 30, 2014 and 2013.

	For the three months ended September 30, 2014				For the nine months ended September 30, 2014
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	5,571	$	33	$	5,258	$	65
Construction and land development		1,673		11		2,823		68
Commercial & industrial		6,085		52		6,658		159
Residential real estate		993		—		833		—
Leasing		75		—		112		—
Tax certificates		1,134				918
Total:	$	15,531	$	96	$	16,602	$	292

	For the three months ended September 30, 2013				For the nine months ended September 30, 2013
	Average		Interest		Average		Interest
	recorded		income		recorded		income
(In thousands)	investment		recognized		investment		recognized
Commercial real estate	$	11,676	$	59	$	4,556	$	45
Construction and land development		4,047		18		10,779		129
Commercial & industrial		8,050		92		8,988		241
Residential real estate		523		—		580		27
Leasing		168		—		105		—
Tax certificates		433		—		509		—
Total:	$	24,897	$	169	$	25,517	$	442

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Loans and Leases

9 Months Ended

Sep. 30, 2014

Loans and Leases [Abstract]

Loans and Leases

Note 4.Loans and Leases

Major classifications of LHFI are as follows:

	September 30,		December 31,
(In thousands)	2014		2013
Commercial real estate	$	164,522	$	148,293
Construction and land development		41,676		45,261
Commercial and industrial		70,743		79,589
Multi-family		16,893		11,737
Residential real estate		44,261		25,535
Leases		48,588		42,524
Tax certificates		8,230		12,716
Consumer		2,263		826
Total LHFI, net of unearned income	$	397,176	$	366,481

The Company originates commercial and real estate loans, including construction and land development loans primarily in the greater Philadelphia metropolitan area as well as selected locations throughout the mid-Atlantic region.  The Company also has participated with other financial institutions in selected construction and land development loans outside our geographic area. The Company has a concentration of credit risk in commercial real estate, construction and land development loans at September 30, 2014.  The Company originates mainly small business, owner-occupied commercial real estate, middle market business and consumer loans.  Additionally, after thorough due diligence, the Company has purchased small residential loan pools. A substantial portion of its debtors’ ability to honor their contracts is dependent upon the housing sector specifically and the economy in general.

Loans and leases are classified as LHFI when management has the intent and ability to hold the loan or lease for the foreseeable future or until maturity or payoff.  LHFI are stated at their outstanding unpaid principal balances, net of an allowance for loan and leases losses and any deferred fees or costs. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the yield (interest income) of the related loans. The Company is generally amortizing these amounts over the contractual life of the loan.

At September 30, 2014 and December 31, 2013, the Company’s LHFS were $1.0 million and $1.4 million, respectively. LHFS at September 30, 2014 were comprised of one non-accrual loan.  The three loans that constituted the balance at December 31, 2013 were sold during the first quarter of 2014. During 2014, the Company transferred $3.2 million to LHFS from LHFI at fair value using expected net sales proceeds.  For the nine months ended September 30, 2014, the Company received net proceeds of $3.8 million and recorded net gains of $223,000 as a result of loan sales.

The Company classifies its leases as finance leases, in accordance with FASB ASC Topic 840, “Leases”. The difference between the Company’s gross investment in the lease and the cost or carrying amount of the leased property, if different, is recorded as unearned income, which is amortized to income over the lease term by the interest method.

The Company uses a nine point grading risk classification system commonly used in the financial services industry as the credit quality indicator.  The first four classifications are rated Pass.  The riskier classifications include Pass-Watch, Special Mention, Substandard, Doubtful and Loss. The risk rating is related to the underlying credit quality and probability of default.  These risk ratings are used in the calculationof the allowance for loan and lease losses.

· Pass: includes credits that demonstrate a low probability of default;

· Pass-watch: a warning classification which includes credits that are beginning to demonstrate above average risk through declining earnings, strained cash flows, increased leverage and/or weakening market fundamentals;

· Special mention: includes credits that have potential weaknesses that if left uncorrected could weaken the credit or result in inadequate protection of the Company’s position at some future date. While potentially weak, credits in this classification are marginally acceptable and loss of principal or interest is not anticipated;

· Substandard accrual: includes credits that exhibit a well-defined weakness which currently jeopardizes the repayment of debt and liquidation of collateral even though they are currently performing. These credits are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected;

· Non-accrual (substandard non-accrual, doubtful, loss): includes credits that demonstrate serious problems to the point that it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement.

All loans, at the time of presentation to the appropriate loan committee, are given an initial loan risk rating by the Chief Credit Officer (“CCO”). From time to time, and at the general direction of any of the various loan committees, the ratings may be changed based on the findings of that committee. Items considered in assigning ratings include the financial strength of the borrower and/or guarantors, the type of collateral, the collateral lien position, the type of loan and loan structure, any potential risk inherent in the specific loan type, higher than normal monitoring of the loan or any other factor deemed appropriate by any of the various committees for changing the rating of the loan. Any such change in rating is reflected in the minutes of that committee.

The following tables present risk ratings for each loan portfolio classification at September 30, 2014 and December 31, 2013, excluding LHFS.

As of September 30, 2014
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	128,983	$	25,167	$	5,062	$	1,578	$	3,732	$	164,522
Construction and land development		12,685		25,051		3,125		—		815		41,676
Commercial & industrial		56,385		7,688		750		3,337		2,583		70,743
Multi-family		16,050		321		522		—		—		16,893
Residential real estate		43,278		—		—		—		983		44,261
Leases		47,863		197		3		—		525		48,588
Tax certificates		7,102		—		—		—		1,128		8,230
Consumer		2,207		56		—		—		—		2,263
Total LHFI, net of unearned income	$	314,553	$	58,480	$	9,462	$	4,915	$	9,766	$	397,176

As of December 31, 2013
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	99,525	$	32,267	$	11,572	$	2,604	$	2,325	$	148,293
Construction and land development		14,677		16,270		11,095		569		2,650		45,261
Commercial & industrial		50,478		10,508		5,735		9,239		3,629		79,589
Multi-family		10,792		410		535		—		—		11,737
Residential real estate		24,903		—		—		—		632		25,535
Leases		41,325		485		247		—		467		42,524
Tax certificates		12,262		—		—		—		454		12,716
Consumer		750		76		—		—		—		826
Total LHFI, net of unearned income	$	254,712	$	60,016	$	29,184	$	12,412	$	10,157	$	366,481

The following tables present an aging analysis of past due payments for each loan portfolio classification at September 30, 2014 and December 31, 2013, excluding LHFS.

As of September 30, 2014	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	—	$	—	$	—	$	3,732	$	160,790	$	164,522
Construction and land development		—		—		—		815		40,861		41,676
Commercial & industrial		41		40		—		2,583		68,079		70,743
Multi-family		—		—		—		—		16,893		16,893
Residential real estate		47		116		—		983		43,115		44,261
Leases		198		3		—		525		47,862		48,588
Tax certificates		—		—		—		1,128		7,102		8,230
Consumer		—		—		—		—		2,263		2,263
Total LHFI, net of unearned income	$	286	$	159	$	—	$	9,766	$	386,965	$	397,176

As of December 31, 2013	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	996	$	—	$	—	$	2,325	$	144,972	$	148,293
Construction and land development		—		—		—		2,650		42,611		45,261
Commercial & industrial		115		49		—		3,629		75,796		79,589
Multi-family		—		—		—		—		11,737		11,737
Residential real estate		458		262		—		632		24,183		25,535
Leases		485		247		—		467		41,325		42,524
Tax certificates		—		—		—		454		12,262		12,716
Consumer		—		—		—		—		826		826
Total LHFI, net of unearned income	$	2,054	$	558	$	—	$	10,157	$	353,712	$	366,481

The following tables detail the composition of the non-accrual loans at September 30, 2014 and December 31, 2013.

	As of September 30, 2014				As of December 31, 2013
	Loan		Specific		Loan		Specific
(In thousands)	balance		reserves		balance		reserves
Non-accrual loans held for investment
Commercial real estate	$	3,732	$	205	$	2,325	$	331
Construction and land development		815		172		2,650		—
Commercial & industrial		2,583		5		3,629		452
Residential real estate		983		30		632		19
Leases		525		62		467		60
Tax certificates		1,128		19		454		24
Total non-accrual LHFI	$	9,766	$	493	$	10,157	$	886
Non-accrual loans held for sale
Construction and land development	$	1,018	$	—	$	—	$	—
Total non-accrual LHFS	$	1,018	$	—	$	—	$	—
Total non-accrual loans	$	10,784	$	493	$	10,157	$	886

Impaired Loans

The Company identifies a loan as impaired when it is probable that interest and principal will not be collected according to the contractual terms of the loan agreement. For all classes of loans receivable, with the exception of tax certificates, the accrual of interest is discontinued on a loan when management believes that the borrower’s financial condition is such that collection of principal and interest is doubtful or when a loan becomes 90 days past due. Impaired loans include troubled debt restructurings (“TDRs”). Excess proceeds received over the principal amounts due on impaired non-accrual loans are recognized as income on a cash basis. The Company recognizes income under the accrual basis when the principal payments on the loans become current and the collateral on the loan is sufficient to cover the outstanding obligation to the Company.  If these factors do not exist, the Company does not recognize income.

Total cash collected on non-accrual and impaired loans during the nine months endedSeptember 30, 2014 and 2013 was $5.0 million and $10.6 million respectively, of which $4.5 million and $9.9 million was credited to the principal balance outstanding on such loans, respectively.

The following is a summary of information pertaining to impaired loans:

	September 30,		December 31,
(In thousands)	2014		2013
Impaired LHFI with a valuation allowance	$	4,232	$	3,835
Impaired LHFI without a valuation allowance		11,909		14,671
Impaired LHFS		1,018		—
Total impaired loans and leases	$	17,159	$	18,506
Valuation allowance related to impaired LHFI	$	493	$	886

Troubled Debt Restructurings

A loan modification is deemed a TDR when two conditions are met: 1) the borrower is experiencing financial difficulty and 2) concessions are made by the Company that would not otherwise be considered for a borrower or collateral with similar credit risk characteristics.  All loans classified as TDRs are considered to be impaired.  TDRs are returned to an accrual status when the loan is brought current, has performed in accordance with the contractual restructured terms for a reasonable period of time (generally six months) and the ultimate collectibility of the total contractual restructured principal and interest is no longer in doubt.  At September 30, 2014, the Company had twelve TDRs, with a total carrying value of $9.4 million. At the time of the modifications, three of the loans were already classified as impaired non-accrual loans.  At December 31, 2013, the Company had twelve TDRs with a total carrying value of $12.1 million.  The Company’s policy for TDRs is to recognize income on currently performing restructured loans under the accrual method.

The following table details the Company’s TDRs that are on an accrual status and non-accrual status at September 30, 2014 and December 31, 2013.

	As of September 30, 2014
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	2	$	2,883	$	—	$	2,883
Construction and land development	3		378		815		1,193
Commercial & industrial	6		3,672		1,497		5,169
Residential real estate	1		—		105		105
Total	12	$	6,933	$	2,417	$	9,350

	As of December 31, 2013
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	3	$	3,847	$	—	$	3,847
Construction and land development	4		1,257		479		1,736
Commercial & industrial	3		4,420		1,960		6,380
Residential real estate	2		—		121		121
Total	12	$	9,524	$	2,560	$	12,084

At September 30, 2014, all of the TDRs were in compliance with their restructured terms.

The following tables present newly restructured loans that occurred during the nine months endedSeptember 30, 2014.  The Company did not classify any loan modifications as TDRs during the third quarter of 2013.

	Modifications by type for the three months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189
Total	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189

	Modifications by type for the nine months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262
Total	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262

	Modifications by type for the nine months ended September 30, 2013
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial real estate	2	$	—	$	—	$	—	$	3,705	$	3,705	$	3,761	$	3,761
Commercial & industrial	1		—		—		—		82		82		87		87
Total	3	$	—	$	—	$	—	$	3,787	$	3,787	$	3,848	$	3,848

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Segment Information

9 Months Ended

Sep. 30, 2014

Segment Information [Abstract]

Segment Information

Note 16.Segment Information

FASB ASC Topic 280, “Segment Reporting” (“ASC Topic 280”) established standards for public business enterprises to report information about operating segments in their annual financial statements and requires that those enterprises report selected information about operating segments in subsequent interim financial reports issued to shareholders.  It also established standards for related disclosure about products and services, geographic areas, and major customers.  Operating segments are components of an enterprise, which are evaluated regularly by the chief operating decision makers in deciding how to allocate and assess resources and performance.  The Company’s chief operating decision makers are the CEO and the Chief Administrative and Risk Officer (“CARO”). The Company has identified its reportable operating segments as “Community Banking” and “Tax Liens”.

Community banking

The Company’s community banking segment which includes Royal Bank consists of commercial and retail banking and equipment leasing. The community banking business segment is managed as a single strategic unit which generates revenue from a variety of products and services provided by Royal Bank and Royal Bank Leasing.  For example, commercial lending is dependent upon the ability of Royal Bank to fund cash needed to make loans with retail deposits and other borrowings and to manage interest rate and credit risk.

Tax liens

At September 30, 2014, Royal Bank’s tax liens segment includes its 80% and 100% ownership interest in CSC and RTL, respectively.  At September 30, 2013, Royal Bank’s ownership interest in CSC and RTL was 60%.  The Company’s tax liens segment consisted of purchasing delinquent tax certificates from local municipalities at auction and then processing those liens to either encourage the property holder to pay off the lien, or to foreclose and sell the property.  The tax liens segment earns income based on interest rates (determined at auction) and penalties assigned by the municipality along with gains on sale of foreclosed properties. CSC is liquidating its assets under an orderly, long term plan.  RTL ceased acquiring tax certificates at public auctions in 2010.

The following table presents selected financial information for reportable business segments for the three and nine months ended September 30, 2014 and 2013.

	Three months ended  September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	6,889	$	302	$	7,191
Interest expense		1,367		256		1,623
Net interest income	$	5,522	$	46	$	5,568
(Credit) provision for loan and lease losses		(79)		28		(51)
Total non-interest income		987		217		1,204
Total non-interest expense		4,916		459		5,375
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,672	$	(224)	$	1,448
Noncontrolling interest	$	69	$	(44)	$	25
Net income (loss) attributable to Royal Bancshares	$	1,603	$	(180)	$	1,423

	Three months ended  September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	6,485	$	475	$	6,960
Interest expense		1,560		330		1,890
Net interest income	$	4,925	$	145	$	5,070
Provision for loan and lease losses		178		40		218
Total non-interest income		1,344		593		1,937
Total non-interest expense		5,683		607		6,290
Income tax expense (benefit)		—		—		—
Net income	$	408	$	91	$	499
Noncontrolling interest	$	121	$	36	$	157
Net income attributable to Royal Bancshares	$	287	$	55	$	342

	Nine months ended September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	20,549	$	1,002	$	21,551
Interest expense		4,030		840		4,870
Net interest income	$	16,519	$	162	$	16,681
(Credit) provision for loan and lease losses		(911)		146		(765)
Total non-interest income		2,019		773		2,792
Total non-interest expense		14,221		1,507		15,728
Income tax expense (benefit)		—		—		—
Net income (loss)	$	5,228	$	(718)	$	4,510
Noncontrolling interest	$	337	$	(125)	$	212
Net income (loss) attributable to Royal Bancshares	$	4,891	$	(593)	$	4,298

	Nine months ended September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	18,556	$	1,899	$	20,455
Interest expense		4,525		1,142		5,667
Net interest income	$	14,031	$	757	$	14,788
(Credit) provision for loan and lease losses		(563)		367		(196)
Total non-interest income		3,056		1,250		4,306
Total non-interest expense		16,348		3,649		19,997
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,302	$	(2,009)	$	(707)
Noncontrolling interest	$	422	$	(786)	$	(364)
Net income (loss) attributable to Royal Bancshares	$	880	$	(1,223)	$	(343)

Interest income earned by the community banking segment related to the tax liens segment was approximately $256,000 and $330,000 for the three month periods ended September 30, 2014 and 2013, respectively and$840,000 and $1.1 million for the nine months endedSeptember 30, 2014 and 2013, respectively.

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Pension Plan

9 Months Ended

Sep. 30, 2014

Pension Plan [Abstract]

Pension Plan

Note 12.Pension Plan

The Company has a noncontributory nonqualified defined benefit pension plan (“Pension Plan”) covering certain eligible employees.  The Company’s Pension Plan provides retirement benefits under pension trust agreements.  The benefits are based on years of service and the employee’s compensation during the highest three consecutive years during the last 10 years of employment.

Net periodic defined benefit pension expense for the three and nine months ended September 30, 2014 and 2013 included the following components:

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands)	2014		2013		2014		2013
Service cost	$	15	$	19	$	45	$	56
Interest cost		155		133		466		399
Amortization of prior service cost		22		22		66		67
Amortization of actuarial loss		32		122		96		367
Net periodic benefit cost	$	224	$	296	$	673	$	889

The Company has unfunded pension plan obligations of $14.3 million as of September 30, 2014 compared to $14.5 million at December 31, 2013.  The Company plans to fund the pension plan obligations through existing Company owned life insurance policies.

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Borrowings and Subordinated Debentures

9 Months Ended

Sep. 30, 2014

Borrowings and Subordinated Debentures [Abstract]

Borrowings and Subordinated Debentures

Note 8.Borrowings and Subordinated Debentures

1. Advances from the Federal Home Loan Bank

As of September 30, 2014, Royal Bank had $180.0 million of available borrowing capacity at the FHLB, which is based on qualifying collateral.  Total advances from the FHLB were $55.0 million at September 30, 2014 and $65.0 million at December 31, 2013.  The advances and the line of credit are collateralized by FHLB stock, government agencies and mortgage-backed securities.  As of September 30, 2014, investment securities with a market value of $51.5 million were pledged as collateral to the FHLB.

Presented below are the Company’s FHLB borrowings allocated by the year in which they mature with their corresponding weighted average rates:

	As of				As of
	September 30, 2014				December 31, 2013
(Dollars in thousands)	Amount		Rate		Amount		Rate
Advances maturing in
2014	$	—	—	%	$	10,000	0.24	%
2015		10,000	0.71	%		10,000	0.71	%
2016		10,000	1.11	%		10,000	1.11	%
2017		25,000	1.46	%		25,000	1.46	%
2018		10,000	2.01	%		10,000	2.01	%
Total FHLB borrowings	$	55,000			$	65,000

2. Other borrowings

The Company has a note payable with PNC Bank (“PNC”) at September 30, 2014 in the amount of $2.5 million compared to $2.9 million at December 31, 2013.  The note’s maturity date is August 25, 2016.  The interest rate is a variable rate equal to one month LIBOR + 15 basis points and adjusts monthly.  The interest rate at September 30, 2014 was 0.31%.

At September 30, 2014 and December 31, 2013, the Company had additional borrowings of $40.0 million from PNC which will mature on January 7, 2018.  These borrowings have a weighted average interest rate of 3.65%. The note payable and the borrowings are secured by government agencies and mortgage-backed securities.

3. Subordinated debentures

The Company has outstanding $25.0 million of Trust Preferred Securities issued through two Delaware trust affiliates, Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”).  The Company issued an aggregate principal amount of $12.9 million of floating rate junior subordinated debt securities to Trust I and an aggregate principal amount of $12.9 million of fixed/floating rate junior subordinated debt securities to Trust II.  Both debt securities bear an interest rate of 2.38% at September 30, 2014, and reset quarterly at 3-month LIBORplus 2.15%.

Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387,000 of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Company.  The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

Under the Federal Reserve Agreement as described in “Note 2 — Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company and its non-bank subsidiaries may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System.  The Company received approval and paid all accumulated deferred interest in 2013 and the required interest payments through the first nine months of 2014.

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Borrowings and Subordinated Debentures (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Advances from the Federal Home Loan Bank [Abstract]
Line of credit with federal home loan bank, amount	$ 180,000,000
Federal Home Loan Bank, advances, general debt obligations, disclosures, collateral pledged	51,500,000
Amount [Abstract]
Advances maturing in 2014		10,000,000
Advances maturing in 2015	10,000,000	10,000,000
Advances maturing in 2016	10,000,000	10,000,000
Advances maturing in 2017	25,000,000	25,000,000
Advances maturing in 2018	10,000,000	10,000,000
Total FHLB borrowings	55,000,000	65,000,000
Rate [Abstract]
Advances maturing in 2014 (as a percent)		0.24%
Advances maturing in 2015 (as a percent)	0.71%	0.71%
Advances maturing in 2016 (as a percent)	1.11%	1.11%
Advances maturing in 2017 (as a percent)	1.46%	1.46%
Advances maturing in 2018 (as a percent)	2.01%	2.01%
Notes payable [Member] | Notes Payable To PNCBank Due August2016 Member
Rate [Abstract]
Notes payable with PNC Bank	2,500,000	2,900,000
Description of variable rate basis on notes payable	one month LIBOR
Interest rate on notes payable (as a percent)	0.31%
Notes payable [Member] | Notes PayableTo PNCBank Due January2018 Member
Rate [Abstract]
Notes payable with PNC Bank	$ 40,000,000	$ 40,000,000
Weighted average interest rate on other borrowings from PNC Bank (as a percent)	3.65%
Notes payable [Member] | London Interbank Offered Rate (LIBOR) [Member] | Notes Payable To PNCBank Due August2016 Member
Rate [Abstract]
DebtInstrumentBasisSpreadOnVariableRate1	0.15%

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Other Real Estate Owned

9 Months Ended

Sep. 30, 2014

Other Real Estate Owned [Abstract]

Real Estate Owned [Text Block]

Note 6.Other Real Estate Owned

OREO slightly decreased $24,000 and was $9.6 million at December 31, 2013d  September 30, 2014.  OREO is comprised of three real estate properties acquired through, or in lieu of foreclosure in settlement of loans and 73 real estate properties acquired through foreclosure related to tax liens.  Set forth below are tables which detail the changes in OREO from December 31, 2013 to September 30, 2014 and December 31,2012 to December 31, 2013.

	For the nine months ended September 30, 2014
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	1,725	$	7,892	$	9,617
Net proceeds from sales		(1,214)		(2,334)		(3,548)
Net gains on sales		22		611		633
Transfers in		—		1,998		1,998
Cash additions		—		1,292		1,292
Impairment charge		(100)		(299)		(399)
Ending balance	$	433	$	9,160	$	9,593

	For the year ended December 31, 2013
(In thousands)	Loans		Tax Liens		Total
Beginning balance	$	11,365	$	2,070	$	13,435
Net proceeds from sales		(8,869)		(3,910)		(12,779)
Net gain on sales		228		1,199		1,427
Transfers in		100		8,951		9,051
Cash additions		—		—		—
Impairment charge		(1,099)		(418)		(1,517)
Ending balance	$	1,725	$	7,892	$	9,617

At September 30, 2014, OREO was comprised of $229,000 in land, $9.2 million in tax liens, and residential real estate, related to a condominium construction project in Minneapolis, Minnesota in which the Company is a participant with a fair value of $204,000.  During the first nine months of 2014, the Company sold ten condominiums related to the construction project. The Company received its pro rata share of net proceeds in the amount of $193,000 and recorded a net gain of $37,000. Additionally, during the third quarter of 2014, the Company sold a parcel of land and a commercial real estate building.  As a result of these sales the Company received $1.0 million in net proceeds and recorded a net loss of $15,000.  During the first quarter of 2014, the Company recorded impairment charges of $75,000on the remaining, larger condominium units and $25,000 on the commercial real estate which was sold in the third quarter. 

As shown in the tables above, the composition of the OREO assets has evolved to properties primarily acquired through the tax lien portfolio. During the first nine months of 2014, the Company transferred $2.0 million to OREO which represents 40 properties and added $1.3 million in lien redemptions on existing properties.  During the same period the Company sold 30 tax lien properties, received proceeds of $2.3 million, and recorded net gains of $611,000as a result of these sales. Additionally, the Company recorded impairment charges of $299,000 during the first nine months of 2014 related to the tax lien properties.  At December 31, 2013, OREO assets acquired through the tax lien portfolio were $7.9million and were comprised of 59 properties.

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Deposits

9 Months Ended

Sep. 30, 2014

Deposits [Abstract]

Deposits

Note 7.Deposits

The Company’s deposit composition as of September 30, 2014 and December 31, 2013 is presented below:

	September 30,		December 31,
(In thousands)	2014		2013
Demand	$	67,901	$	60,473
NOW		41,801		45,375
Money Market		162,177		164,678
Savings		19,142		17,593
Time deposits (over $100)		85,603		92,763
Time deposits (under $100)		139,162		148,082
Total deposits	$	515,786	$	528,964

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Commitments, Contingencies, and Concentrations

9 Months Ended

Sep. 30, 2014

Commitments, Contingencies, and Concentrations [Abstract]

Commitments, Contingencies, and Concentrations

Note 9.Commitments, Contingencies, and Concentrations

The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  Such financial instruments are recorded in the financial statements when they become payable.  Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.  The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of non-performance by the other party to commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The contract amounts are as follows:

	September 30,		December 31,
(In thousands)	2014		2013
Financial instruments whose contract amounts represent credit risk:
Open-end lines of credit	$	47,455	$	21,182
Commitments to extend credit		6,430		200
Standby letters of credit and financial guarantees written		847		2,679

Legal Proceedings

From time to time, the Company is a party to routine legal proceedings within the normal course of business.  Such routine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s financial condition or results of operations.

On or about March 15, 2012, CSC, RTL and the Company were named defendants, among others, in a complaint filed by Marina Bay Towers Urban Renewal II, LP (“MBT”) in the Superior Court of New Jersey, Law Division, Cape May County.  The complaint alleges a conspiracy to rig bids in municipal tax lien auctions.  MBT does not seek to represent a class and only seeks remedies related to itself.  As of the date of this filing, the Company cannot reasonably estimate the possible loss or range of loss that may result from this proceeding.

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Regulatory Capital Requirements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended					9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 Royal Bank [Member]	Dec. 31, 2011 Royal Bank [Member]	Sep. 30, 2014 Royal Bancshares [Member]	Sep. 30, 2014 Royal Bancshares [Member] Regulatory report submission [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Minimum Tier one leverage ratio required (as a percent)					8.00%	8.00%
Total risk based capital ratio (in hundredths)					12.00%
Capital actual amount under regulations [Abstract]
Total capital (to risk-weighted assets)					$ 76,403		$ 94,205
Tier I capital (to risk-weighted assets)					70,970		85,328
Tier I capital (to average assets, leverage)					70,970		85,328
Actual Ratio Under RAP [Abstract]
Total capital (to risk-weighted assets) (as a percent)					15.99%		19.37%
Tier I capital (to risk-weighted assets) (in hundredths)					14.85%		17.55%
Tier I capital (to average assets, leverage) (as a percent)					9.96%		11.78%
For capital adequacy purposes, amount [Abstract]
Total capital (to risk-weighted assets)					38,237		38,899
Tier I capital (to risk-weighted assets)					19,118		19,449
Tier I capital (to average assets, leverage)					28,492		28,975
For capital adequacy purposes, ratio [Abstract]
Total capital (to risk-weighted assets) (in hundredths)					8.00%		8.00%
Tier I capital (to risk-weighted assets) (in hundredths)					4.00%		4.00%
Tier I capital (to average assets, leverage) (in hundredths)					4.00%		4.00%
To be well capitalized under prompt corrective action provision, amount [Abstract]
Total capital (to risk-weighted assets)					47,796
Tier I capital (to risk-weighted assets)					28,677
Tier I capital (to average assets, leverage)					35,615
To be well capitalized under prompt corrective action provision, ratio [Abstract]
Total capital (to risk-weighted assets) (in hundredths)					10.00%
Tier I capital (to risk-weighted assets) (in hundredths)					6.00%
Tier I capital (to average assets, leverage) (in hundredths)					5.00%
Adjustments to net loss as well as the capital ratios [Abstract]
RAP net loss					682			742
Tax lien adjustment, net of noncontrolling interest					3,556			(3,556)
Net income	$ 1,423	$ 342	$ 4,298	$ (343)	$ 4,238			$ 4,298
Actual Ratio Under US GAAP [Abstract]
Total capital (to risk-weighted assets) (in hundredths)					16.61%			19.37%
Tier I capital (to risk-weighted assets) (in hundredths)					15.49%			17.55%
Tier I capital (to average assets, leverage) (in hundredths)					10.42%			11.78%
Ratios As Adjusted Under RAP [Abstract]
Total capital (to risk-weighted assets) (in hundredths)					15.99%			18.78%
Tier I capital (to risk-weighted assets) (in hundredths)					14.85%			16.68%
Tier I capital (to average assets, leverage) (in hundredths)					9.96%			11.17%

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Earnings (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 item	Sep. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of classes of common stock outstanding			2
Basic and Diluted EPS [Abstract]
Income (loss) available to common shareholders (numerator)	$ 1,271	$ (178)	$ 2,654	$ (1,896)
Average shares (denominator) (in shares)	27,329,000	13,286,000	18,042,000	13,272,000
Per share Amount (in dollars per share)	$ 0.05	$ (0.01)	$ 0.15	$ (0.14)
Stock Options [Member]
Basic and Diluted EPS [Abstract]
Number of antidilutive common share (in shares)	168,907	202,408	168,907	202,408
Warrant To Purchase Class A Common Stock [Member]
Basic and Diluted EPS [Abstract]
Number of antidilutive common share (in shares)			1,368,040
Common Class B [Member]
Basic and Diluted EPS [Abstract]
Number of shares received after conversion, per share			1.15

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Shareholders' Equity (Details) (USD $)	9 Months Ended		9 Months Ended		0 Months Ended	9 Months Ended					3 Months Ended	9 Months Ended	0 Months Ended	9 Months Ended		9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Warrant To Purchase Class A Common Stock [Member]	Feb. 20, 2009 Warrant To Purchase Class A Common Stock [Member]	Jun. 20, 2014 Series A Preferred Stock [Member]	Sep. 30, 2014 Series A Preferred Stock [Member]	Jul. 02, 2014 Series A Preferred Stock [Member]	Jun. 20, 2014 Series A Preferred Stock [Member]	Feb. 28, 2014 Series A Preferred Stock [Member]	Feb. 20, 2009 Series A Preferred Stock [Member]	Sep. 30, 2014 Common Class A [Member]	Sep. 30, 2014 Common Class A [Member] Vote	Jun. 20, 2014 Common Class B [Member]	Sep. 30, 2014 Common Class B [Member] Vote	Jun. 20, 2014 Common Class B [Member]	Sep. 30, 2014 Scenario, Adjustment [Member] Warrant To Purchase Class A Common Stock [Member]	Feb. 20, 2009 Capital Unit Preferred Stock And Warrant Member
Preferred Stock [Abstract]
Preferred stock, shares issued (in shares)										30,407
Preferred stock, liquidation value (in dollars per share)	$ 1,000	$ 1,000								$ 1,000
Number of shares to be purchased by warrant (in shares)				1,104,370												1,368,040
Aggregate purchase price																	$ 30,400,000
Preferred stock cumulative dividend rate percentage beginning February 2014 (as a percent)	5.00%								9.00%
Number of years for warrant issued to treasury			10 years
Warrants, exercise price (in dollars per share)			$ 4.13													$ 3.33
Amount of approved purchase of preferred shares						14,000,000
Dividends in arrears eliminated							6,100,000
Preferred stock dividend in arrears						6,100,000
Share price (in dollars per share)								$ 1,207.11							$ 1.20
Shares allocated for repurchase (in shares)					11,551
Common Stock [Abstract]
ConvertibleStockConversionRatio														1.15
Number of vote for class of shares held												1		10
Common stock sold (in shares)											5,000,000	16,666	11,666,667
Proceeds from issuance of common stock	20,000,000										6,000,000
Increase in common equity	17,600,000
Payments of Dividends [Abstract]
Value on which quarterly dividend is suspended						$ 30,400,000

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Pension Plan (Tables)

9 Months Ended

Sep. 30, 2014

Pension Plan [Abstract]

Components of Net Pension Cost

	Three months ended				Nine months ended
	September 30,				September 30,
(In thousands)	2014		2013		2014		2013
Service cost	$	15	$	19	$	45	$	56
Interest cost		155		133		466		399
Amortization of prior service cost		22		22		66		67
Amortization of actuarial loss		32		122		96		367
Net periodic benefit cost	$	224	$	296	$	673	$	889

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Loans and Leases - Composition of Non-accrual Loans (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	$ 9,766		$ 10,157
LHFI, Nonaccrual, Specific reserves	493		886
LHFS, Nonaccrual, Loan balance	1,018
Total, Nonaccrual, Loan balance	10,784		10,157
Total, Nonaccrual. Specific reserve	493		886
Financing Receivable, Recorded Investment, Past Due [Abstract]
Transfers to OREO	1,998	6,428	9,051
Commercial real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	3,732		2,325
LHFI, Nonaccrual, Specific reserves	205		331
Construction and land development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	815		2,650
LHFI, Nonaccrual, Specific reserves	172
LHFS, Nonaccrual, Loan balance	1,018
Commercial and industrial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	2,583		3,629
LHFI, Nonaccrual, Specific reserves	5		452
Residential real estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	983		632
LHFI, Nonaccrual, Specific reserves	30		19
Leases [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	525		467
LHFI, Nonaccrual, Specific reserves	62		60
Tax certificates [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
LHFI, Nonaccrual, Loan balance	1,128		454
LHFI, Nonaccrual, Specific reserves	$ 19		$ 24

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Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2014

Comprehensive Income (Loss) [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 14.Comprehensive Income (Loss)

FASB ASC Topic 220, “Comprehensive Income” (“ASC Topic 220”), requires the reporting of all changes in equity during the reporting period except investments from and distributions to shareholders.  Net income (loss) is a component of comprehensive income (loss) with all other components referred to in the aggregate as other comprehensive income.  Unrealized gains and losses on AFS securities is an example of another comprehensive income (loss) component.

	Nine months ended September 30, 2014
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized gains on investment securities:
Unrealized holding gains arising during period	$	6,570	$	2,101	$	4,469
Less reclassification adjustment for gains
realized in net income		330		112		218
Unrealized gains on investment securities		6,240		1,989		4,251
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(85)		(29)		(56)
Other comprehensive income, net	$	6,325	$	2,018	$	4,307

	Nine months ended September 30, 2013
			Tax
	Before tax		expense		Net of tax
(In thousands)	amount		(benefit)		amount
Unrealized losses on investment securities:
Unrealized holding losses arising during period	$	(8,833)	$	(3,128)	$	(5,705)
Less reclassification adjustment for gains
realized in net loss		69		23		46
Unrealized losses on investment securities		(8,902)		(3,151)		(5,751)
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization		(429)		(146)		(283)
Other comprehensive loss, net	$	(8,473)	$	(3,005)	$	(5,468)

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2014

Investment Securities [Abstract]

Amortized cost, gross unrealized gains and losses, and fair value of available-for-sale investment securities

As of September 30, 2014			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	34,092	$	—	$	(1,551)	$	32,541
Mortgage-backed securities-residential		27,000		377		(250)		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		2,521		(1,533)		172,684
Non-agency		3,965		7		(34)		3,938
Corporate bonds		15,630		68		(65)		15,633
Municipal bonds		9,030		51		(54)		9,027
Other securities		2,829		1,597		(36)		4,390
Common stocks		33		17		—		50
Total available for sale	$	264,275	$	4,638	$	(3,523)	$	265,390

As of December 31, 2013			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	68,207	$	—	$	(6,171)	$	62,036
Mortgage-backed securities-residential		32,769		210		(882)		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		188,194		2,887		(1,978)		189,103
Non-agency		4,454		25		—		4,479
Corporate bonds		9,669		25		(256)		9,438
Municipal bonds		7,163		—		(263)		6,900
Other securities		3,363		1,405		(143)		4,625
Common stocks		33		16		—		49
Total available for sale	$	313,852	$	4,568	$	(9,693)	$	308,727

*Accumulated other comprehensive loss

Amortized cost and fair value of investment securities, by contractual maturity

	As of September 30, 2014
	Amortized
(In thousands)	cost		Fair value
Within 1 year	$	2,003	$	1,987
After 1 but within 5 years		10,345		10,324
After 5 but within 10 years		29,322		28,653
After 10 years		17,082		16,237
Mortgage-backed securities-residential		27,000		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		172,684
Non-agency		3,965		3,938
Total available for sale debt securities		261,413		260,950
No contractual maturity		2,862		4,440
Total available for sale securities	$	264,275	$	265,390

Gross realized gains and losses realized on sale of securities

	For the three months				For the nine months ended
	ended September 30,				ended September 30,
(In thousands)	2014		2013		2014		2013
Gross realized gains	$	446	$	—	$	1,143	$	181
Gross realized losses		(208)		(1)		(813)		(112)
Net realized gains (losses)	$	238	$	(1)	$	330	$	69

Schedule of credit related impairment losses on debt securities held, for portion of OTTI was recognized in other comprehensive income

(In thousands)	2013
Balance at January 1,	$	173
Reductions for securities sold during the period (realized)		(173)
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the Company intends to sell the security		—
Balance at September 30,	$	—

Investment securities in a continuous unrealized loss position

September 30, 2014	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	—	$	—	$	32,541	$	(1,551)	$	32,541	$	(1,551)
Mortgage-backed securities-residential		7,619		(38)		9,017		(212)		16,636		(250)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		49,360		(376)		37,312		(1,157)		86,672		(1,533)
Non-agency		1,464		(34)		—		—		1,464		(34)
Corporate bonds		9,027		(56)		991		(9)		10,018		(65)
Municipal bonds		623		(15)		3,539		(39)		4,162		(54)
Other securities		—		—		268		(36)		268		(36)
Total available-for-sale	$	68,093	$	(519)	$	83,668	$	(3,004)	$	151,761	$	(3,523)

December 31, 2013	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	48,919	$	(5,035)	$	12,267	$	(1,136)	$	61,186	$	(6,171)
Mortgage-backed securities-residential		18,045		(518)		6,276		(364)		24,321		(882)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		67,240		(1,446)		9,974		(532)		77,214		(1,978)
Corporate bonds		4,848		(221)		965		(35)		5,813		(256)
Municipal bonds		3,019		(102)		3,881		(161)		6,900		(263)
Other securities		—		—		301		(143)		301		(143)
Total available-for-sale	$	142,071	$	(7,322)	$	33,664	$	(2,371)	$	175,735	$	(9,693)

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Loans and Leases - Risk Ratings for Each Loan Portfolio Segment (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	$ 397,176	$ 366,481	$ 377,329
Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	164,522	148,293	158,223
Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	41,676	45,261	39,594
Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	70,743	79,589	86,401
Multi-family [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	16,893	11,737	11,678
Residential real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	44,261	25,535	24,830
Leases [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	48,588	42,524	40,408
Tax certificates [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	8,230	12,716	15,364
Consumer [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	2,263	826	831
Pass [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	314,553	254,712
Pass [Member] | Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	128,983	99,525
Pass [Member] | Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	12,685	14,677
Pass [Member] | Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	56,385	50,478
Pass [Member] | Multi-family [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	16,050	10,792
Pass [Member] | Residential real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	43,278	24,903
Pass [Member] | Leases [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	47,863	41,325
Pass [Member] | Tax certificates [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	7,102	12,262
Pass [Member] | Consumer [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	2,207	750
Pass Watch [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	58,480	60,016
Pass Watch [Member] | Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	25,167	32,267
Pass Watch [Member] | Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	25,051	16,270
Pass Watch [Member] | Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	7,688	10,508
Pass Watch [Member] | Multi-family [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	321	410
Pass Watch [Member] | Leases [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	197	485
Pass Watch [Member] | Consumer [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	56	76
Special Mention [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	9,462	29,184
Special Mention [Member] | Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	5,062	11,572
Special Mention [Member] | Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	3,125	11,095
Special Mention [Member] | Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	750	5,735
Special Mention [Member] | Multi-family [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	522	535
Special Mention [Member] | Leases [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	3	247
Substandard [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	4,915	12,412
Substandard [Member] | Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	1,578	2,604
Substandard [Member] | Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income		569
Substandard [Member] | Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	3,337	9,239
Nonperforming Financing Receivable [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	9,766	10,157
Nonperforming Financing Receivable [Member] | Commercial real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	3,732	2,325
Nonperforming Financing Receivable [Member] | Construction and land development [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	815	2,650
Nonperforming Financing Receivable [Member] | Commercial and industrial [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	2,583	3,629
Nonperforming Financing Receivable [Member] | Residential real estate [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	983	632
Nonperforming Financing Receivable [Member] | Leases [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	525	467
Nonperforming Financing Receivable [Member] | Tax certificates [Member]
Risk Ratings for Each Loan Portfolio Segment [Abstract]
Total LHFI, net of unearned income	$ 1,128	$ 454

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Net Income (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Significant Losses [Abstract]
Period of continued significant losses in calendar years					5 years
Net income	$ 1,423,000	$ 342,000	$ 4,298,000	$ (343,000)
Increase (decrease) in net interest income	498,000		1,900,000
Increase (decrease) in professional and legal fees			(475,000)
Increase (decrease) in salaries and benefits			(493,000)
Increase (decrease) in credit related expense	(750,000)		(1,200,000)
Increase (decrease) in provision for loan and lease losses			(569,000)
Loss contingency				1,650,000
Ownership interest (as a percent)	60.00%		60.00%
Loss contingency attributable to parent, pre-tax		990,000
Increase (decrease) in net gains on sales of premises and equipment			(1,100,000)
Increase (decrease) in occupancy and equipment expenses			576,000
Royal Bank [Member]
Significant Losses [Abstract]
Net income			$ 4,238,000

XML

Statements of Consolidated Comprehensive Income - (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Statements of Consolidated Comprehensive Income - (unaudited) [Abstract]
Net income (loss)	$ 1,448		$ 499		$ 4,510		$ (707)
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising during period, net of tax effect	(80)		(1,687)		4,469		(5,705)
Less reclassification adjustment for gains realized in net income (loss) (1)	157	[1]			218	[1]	46	[1]
Unrealized gains (losses) on investment securities	(237)		(1,687)		4,251		(5,751)
Unrecognized benefit obligation expense:
Less reclassification adjustment for amortization (2), net of tax effect	(18)	[2]	(94)	[2]	(56)	[2]	(283)	[2]
Other comprehensive income (loss)	(219)		(1,593)		4,307		(5,468)
Comprehensive income (loss)	1,229		(1,094)		8,817		(6,175)
Less net income (loss) attributable to noncontrolling interest	25		157		212		(364)
Comprehensive income (loss) attributable to Royal Bancshares of Pennsylvania, Inc.	$ 1,204		$ (1,251)		$ 8,605		$ (5,811)

[1] Amounts are included in net gains on the sale of AFS investment securities on the Consolidated Statements of Operations in total non-interest income, net of taxes.

[2] Amounts are included in salaries and benefits on the Consolidated Statements of Operations in non-interest expense.

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Investment Securities

9 Months Ended

Sep. 30, 2014

Investment Securities [Abstract]

Investment Securities

Note 3.Investment Securities

The carrying value and fair value of investment securities available-for-sale (“AFS”) at September 30, 2014 and December 31, 2013 are as follows:

As of September 30, 2014			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	34,092	$	—	$	(1,551)	$	32,541
Mortgage-backed securities-residential		27,000		377		(250)		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		2,521		(1,533)		172,684
Non-agency		3,965		7		(34)		3,938
Corporate bonds		15,630		68		(65)		15,633
Municipal bonds		9,030		51		(54)		9,027
Other securities		2,829		1,597		(36)		4,390
Common stocks		33		17		—		50
Total available for sale	$	264,275	$	4,638	$	(3,523)	$	265,390

As of December 31, 2013			Included in AOCL*
			Gross		Gross
	Amortized		unrealized		unrealized
(In thousands)	cost		gains		losses		Fair value
U.S. government agencies	$	68,207	$	—	$	(6,171)	$	62,036
Mortgage-backed securities-residential		32,769		210		(882)		32,097
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		188,194		2,887		(1,978)		189,103
Non-agency		4,454		25		—		4,479
Corporate bonds		9,669		25		(256)		9,438
Municipal bonds		7,163		—		(263)		6,900
Other securities		3,363		1,405		(143)		4,625
Common stocks		33		16		—		49
Total available for sale	$	313,852	$	4,568	$	(9,693)	$	308,727

*Accumulated other comprehensive loss

The amortized cost and fair value of investment securities at September 30, 2014, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	As of September 30, 2014
	Amortized
(In thousands)	cost		Fair value
Within 1 year	$	2,003	$	1,987
After 1 but within 5 years		10,345		10,324
After 5 but within 10 years		29,322		28,653
After 10 years		17,082		16,237
Mortgage-backed securities-residential		27,000		27,127
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		171,696		172,684
Non-agency		3,965		3,938
Total available for sale debt securities		261,413		260,950
No contractual maturity		2,862		4,440
Total available for sale securities	$	264,275	$	265,390

Proceeds from the sales of AFS investments during the three months ended September 30, 2014 and 2013 were $19.3 and $0 million, respectively. Proceeds from the sales of AFS investments during the nine months endedSeptember 30, 2014 and 2013 were $55.3 and $20.4 million, respectively.  The following table summarizes gross realized gains and losses on the sale of securities recognized in earnings in the periods indicated:

	For the three months				For the nine months ended
	ended September 30,				ended September 30,
(In thousands)	2014		2013		2014		2013
Gross realized gains	$	446	$	—	$	1,143	$	181
Gross realized losses		(208)		(1)		(813)		(112)
Net realized gains (losses)	$	238	$	(1)	$	330	$	69

The Company evaluates securities for OTTI at least on a quarterly basis.  The Company assesses whether OTTI is present when the fair value of a security is less than its amortized cost.  All investment securities are evaluated for OTTI under FASB ASC Topic 320, “Investments-Debt & Equity Securities” (“ASC Topic 320”).  Non-agency collateralized mortgage obligations maybe evaluated under FASB ASC Topic 325 Subtopic 40, “Beneficial Interests in Securitized Financial Assets”.  In determining whether OTTI exists, management considers numerous factors, including but not limited to: (1) the length of time and the extent to which the fair value is less than the amortized cost, (2) the Company’s intent to hold or sell the security, (3) the financial condition and results of the issuer including changes in capital, (4) the credit rating of the issuer, (5) analysts’ earnings estimate, (6) industry trends specific to the security, and (7) timing of debt maturity and status of debt payments.

Under ASC Topic 320, OTTI is considered to have occurred with respect to debt securities (1) if an entity intends to sell the security; (2) if it is more likely than not an entity will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of the expected cash flows is not sufficient to recover the entire amortized cost basis.  If an entity intends to sell the security or will be required to sell the security, the OTTI is recognized in earnings equal to the entire difference between the fair value and the amortized cost basis at the balance sheet date.  If an entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security before the recovery of its amortized cost basis, the OTTI is separated into two amounts, the credit-related loss and the noncredit-related loss. The credit-related loss is based on the present value of the expected cash flows and is recognized in earnings. The noncredit-related loss is based on other factors such as illiquidity and is recognized in other comprehensive income (loss).  The Company did not record OTTI charges to earnings during the first three quarters of 2014 and 2013.

There was no credit-related impairment losses on debt securities held at September 30, 2014 for which a portion of OTTI was recognized in other comprehensive income.  The following table presents a roll-forward of the balance of credit-related impairment losses on debt securities held at September 30,2013 for which a portion of OTTI was recognized in other comprehensive income (loss).

(In thousands)	2013
Balance at January 1,	$	173
Reductions for securities sold during the period (realized)		(173)
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the Company intends to sell the security		—
Balance at September 30,	$	—

The tables below indicate the length of time individual AFS securities have been in a continuous unrealized loss position at September 30, 2014 and December 31, 2013:

September 30, 2014	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	—	$	—	$	32,541	$	(1,551)	$	32,541	$	(1,551)
Mortgage-backed securities-residential		7,619		(38)		9,017		(212)		16,636		(250)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		49,360		(376)		37,312		(1,157)		86,672		(1,533)
Non-agency		1,464		(34)		—		—		1,464		(34)
Corporate bonds		9,027		(56)		991		(9)		10,018		(65)
Municipal bonds		623		(15)		3,539		(39)		4,162		(54)
Other securities		—		—		268		(36)		268		(36)
Total available-for-sale	$	68,093	$	(519)	$	83,668	$	(3,004)	$	151,761	$	(3,523)

December 31, 2013	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
			unrealized				unrealized				unrealized
(In thousands)	Fair value		losses		Fair value		losses		Fair value		losses
U.S. government agencies	$	48,919	$	(5,035)	$	12,267	$	(1,136)	$	61,186	$	(6,171)
Mortgage-backed securities-residential		18,045		(518)		6,276		(364)		24,321		(882)
Collateralized mortgage obligations:
Issued or guaranteed by U.S. government agencies		67,240		(1,446)		9,974		(532)		77,214		(1,978)
Corporate bonds		4,848		(221)		965		(35)		5,813		(256)
Municipal bonds		3,019		(102)		3,881		(161)		6,900		(263)
Other securities		—		—		301		(143)		301		(143)
Total available-for-sale	$	142,071	$	(7,322)	$	33,664	$	(2,371)	$	175,735	$	(9,693)

In determining the Company’s intent not to sell and whether it is more likely than not that the Company will be required to sell the investments before recovery of their amortized cost basis, management considers the following factors: current liquidity and availability of other non-pledged assets that permits the investment to be held for an extended period of time but not necessarily until maturity, capital planning, and any specific asset liability committee goals or guidelines related to the disposition of specific investments. The Company did not record OTTI charges in the first three quarters of 2014 or 2013.

Common stocks:  As of September 30, 2014, the Company had two common stocks of financial institutions with a total fair value of $50,000 and an unrealized gain of $17,000.

For all debt security types discussed below the fair value is based on prices provided by brokers and safekeeping custodians.

U.S. government-sponsored agencies (“U.S. Agency”):  As of September 30, 2014, the Company had 10 U.S. Agency securities with a fair value of $32.5 million and gross unrealized losses of $1.6 million.  All10 bonds had been in an unrealized loss position for twelve months or longer at September 30, 2014. Management believes that the unrealized losses on these debt securities are a function of changes in investment spreads.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

Mortgage-backed securities issued by U.S. government agencies and U.S. government sponsored enterprises: As of September 30, 2014, the Company had six mortgage-backed securities with a fair value of $16.6 million and gross unrealized losses of $250,000.  Three of the mortgage-backed securities had been in an unrealized loss position of twelve months or longer and three of the mortgage-backed securities had been in an unrealized loss position for less than twelve months. The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it isnot more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

U.S. government issued or sponsored collateralized mortgage obligations (“Agency CMOs”):  As of September 30, 2014, the Company had 28 Agency CMOs with a fair value of $86.7 million and gross unrealized losses of $1.5 million.  Eleven of the Agency CMOs had been in an unrealized loss position for twelve months or longer and the remaining 17 Agency CMOs have been in an unrealized loss position for less than twelve months.  The unrealized loss is attributable to a combination of factors, including relative changes in interest rates since the time of purchase.  The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Based on its assessment of these factors, management believes that the unrealized losses on these debt securities are a function of changes in investment spreads and interest rate movements and not as a result of changes in credit quality.  Management expects to recover the entire amortized cost basis of these securities. The Company does not intend to sell these securities before recovery of their cost basis and has not determined that it is not more likely than not that it will be required to sell these securities before recovery of their cost basis.  Therefore, management has determined that these securities are not other-than-temporarily impaired at September 30, 2014.

Non-agency collateralized mortgage obligations (“Non-agency CMOs”):  As of September 30, 2014, the Company had one non-agency CMO with a fair value of $1.5 million and a gross unrealized loss of $34,000.  The bond had been in an unrealized loss position for less than twelve months.  The Company does not intend to sell this security before recovery of its cost basis, and it is not more likely than not that the Company be required to sell this security before recovery of its cost basis.  Therefore, management has determined that this security is  not other-than-temporarily impaired at September 30, 2014.

Corporate bonds:  As of September 30, 2014, the Company had seven corporate bonds with a fair value of $10.0 million and gross unrealized losses of $65,000.  One of the corporate bonds had been in an unrealized loss position for twelve months or longer and six bonds had been in an unrealized loss position for less than twelve months. These bonds are investment grade.  The Company’s unrealized losses in investments in these corporate bonds represent interest rate risk and not credit risk of the underlying issuers. As previously mentioned management also considered (1) the length of time and the extent to which the fair value is less than the amortized cost, (2) the Company’s intent to hold or sell the security, (3) the financial condition and results of the issuer including changes in capital, (4) the credit rating of the issuer, (5) analysts’ earnings estimates, (6) industry trends specific to the security, and (7) timing of debt maturity and status of debt payments.  Based on the analysis, there was no credit-related loss on the bonds.  Because the Company does not intend to sell the corporate bonds and it is not more likely than not that the Company will be required to sell the bonds before recovery of their amortized cost basis, which may be maturity, the Company does not consider any of the seven bonds to be other-than-temporarily impaired at September 30, 2014.

Municipal bonds:  As of September 30, 2014, the Company had five municipal bonds with a fair value $4.2 million and gross unrealized losses of $54,000.  One of the municipal bonds had been in an unrealized loss position for less than twelve months and four municipal bonds had been in an unrealized loss position for twelve months or longer.   Because the Company does not intend to sell the bonds and it is not more likely than not that the Company will be required to sell the bond before recovery of its amortized cost basis, which may be maturity, the Company does not consider the bonds to be other-than-temporarily impaired at September 30, 2014.

Other securities:  As of September 30, 2014, the Company had six investments in private equity funds which were predominantly invested in real estate.  In determining whether or not OTTI exists, the Company reviews the funds’ financials, asset values, and near-term projections.  At September 30, 2014,  one of the private equity fund investments had a fair value of $268,000 and an unrealized loss of $36,000.  OTTI charges were recorded in a prior period on this fund.  Management concluded that there was no additional impairment on this investment as of September 30, 2014.

The Company will continue to monitor these investments to determine if the discounted cash flow analysis, continued negative trends, market valuations or credit defaults result in impairment that is other than temporary.

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Other Real Estate Owned - Composition and Other Information (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended		9 Months Ended	12 Months Ended			3 Months Ended				9 Months Ended	12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014 property	Sep. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2014 Loans [Member] property	Dec. 31, 2013 Loans [Member]	Dec. 31, 2012 Loans [Member]	Sep. 30, 2014 Loans, Land [Member]	Sep. 30, 2014 Loans, Commercial Real Estate [Member]	Mar. 31, 2014 Loans, Commercial Real Estate [Member]	Mar. 31, 2014 Loans, Residential Real Estate [Member]	Sep. 30, 2014 Loans, Residential Real Estate [Member]	Sep. 30, 2014 Tax Lien [Member] property	Dec. 31, 2013 Tax Lien [Member] property	Dec. 31, 2012 Tax Lien [Member]
Composition of OREO
Other real estate owned (OREO)	$ 9,593,000		$ 9,593,000		$ 9,617,000	$ 13,435,000	$ 433,000	$ 1,725,000	$ 11,365,000	$ 229,000				$ 204,000	$ 9,160,000	$ 7,892,000	$ 2,070,000
Number of properties sold			10												30
Proceeds from sale of collateral related to other real estate owned			3,548,000	6,213,000	12,779,000		1,214,000	8,869,000			1,000,000				2,334,000	3,910,000
Net gains on sales of other real estate owned	173,000	629,000	633,000	1,209,000	1,427,000		22,000	228,000			15,000				611,000	1,199,000
Impairment charge for OREO			399,000	953,000	1,517,000		100,000	1,099,000				25,000	75,000		299,000	418,000
Transfer to other real estate owned															$ 2.0
Number of Real Estate Properties							3								73	59
Number of properties transferred to OREO															40

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Fair Value of Financial Instruments - Unobservable Input Reconciliation (Details) (Private Equity Funds [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Private Equity Funds [Member]
Assets measured at fair value on recurring basis Level 3 inputs [Roll Forward]
Beginning balance	$ 4,625	$ 4,164
Fair Value Assets and Liabilities Measured on Recurring Basis Gain Loss Included in Earnings [Abstract]
Included in earnings	251	5
Included in other comprehensive income	299	361
Purchases	14	32
Sales and calls	(799)	(300)
Ending balance	$ 4,390	$ 4,262

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Loans and Leases (Tables)

9 Months Ended

Sep. 30, 2014

Loans and Leases [Abstract]

Major classifications of loans held for investment

	September 30,		December 31,
(In thousands)	2014		2013
Commercial real estate	$	164,522	$	148,293
Construction and land development		41,676		45,261
Commercial and industrial		70,743		79,589
Multi-family		16,893		11,737
Residential real estate		44,261		25,535
Leases		48,588		42,524
Tax certificates		8,230		12,716
Consumer		2,263		826
Total LHFI, net of unearned income	$	397,176	$	366,481

Risk ratings for loan portfolio segment

As of September 30, 2014
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	128,983	$	25,167	$	5,062	$	1,578	$	3,732	$	164,522
Construction and land development		12,685		25,051		3,125		—		815		41,676
Commercial & industrial		56,385		7,688		750		3,337		2,583		70,743
Multi-family		16,050		321		522		—		—		16,893
Residential real estate		43,278		—		—		—		983		44,261
Leases		47,863		197		3		—		525		48,588
Tax certificates		7,102		—		—		—		1,128		8,230
Consumer		2,207		56		—		—		—		2,263
Total LHFI, net of unearned income	$	314,553	$	58,480	$	9,462	$	4,915	$	9,766	$	397,176

As of December 31, 2013
(In thousands)	Pass		Pass-Watch		Special Mention		Substandard		Non-accrual		Total
Commercial real estate	$	99,525	$	32,267	$	11,572	$	2,604	$	2,325	$	148,293
Construction and land development		14,677		16,270		11,095		569		2,650		45,261
Commercial & industrial		50,478		10,508		5,735		9,239		3,629		79,589
Multi-family		10,792		410		535		—		—		11,737
Residential real estate		24,903		—		—		—		632		25,535
Leases		41,325		485		247		—		467		42,524
Tax certificates		12,262		—		—		—		454		12,716
Consumer		750		76		—		—		—		826
Total LHFI, net of unearned income	$	254,712	$	60,016	$	29,184	$	12,412	$	10,157	$	366,481

Aging analysis of past due payments for loan portfolio segment

As of September 30, 2014	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	—	$	—	$	—	$	3,732	$	160,790	$	164,522
Construction and land development		—		—		—		815		40,861		41,676
Commercial & industrial		41		40		—		2,583		68,079		70,743
Multi-family		—		—		—		—		16,893		16,893
Residential real estate		47		116		—		983		43,115		44,261
Leases		198		3		—		525		47,862		48,588
Tax certificates		—		—		—		1,128		7,102		8,230
Consumer		—		—		—		—		2,263		2,263
Total LHFI, net of unearned income	$	286	$	159	$	—	$	9,766	$	386,965	$	397,176

As of December 31, 2013	30-59 Days		60-89 Days		Accruing
(In thousands)	Past Due		Past Due		90+ Days		Non-accrual		Current		Total
Commercial real estate	$	996	$	—	$	—	$	2,325	$	144,972	$	148,293
Construction and land development		—		—		—		2,650		42,611		45,261
Commercial & industrial		115		49		—		3,629		75,796		79,589
Multi-family		—		—		—		—		11,737		11,737
Residential real estate		458		262		—		632		24,183		25,535
Leases		485		247		—		467		41,325		42,524
Tax certificates		—		—		—		454		12,262		12,716
Consumer		—		—		—		—		826		826
Total LHFI, net of unearned income	$	2,054	$	558	$	—	$	10,157	$	353,712	$	366,481

Composition of the non-accrual loans

	As of September 30, 2014				As of December 31, 2013
	Loan		Specific		Loan		Specific
(In thousands)	balance		reserves		balance		reserves
Non-accrual loans held for investment
Commercial real estate	$	3,732	$	205	$	2,325	$	331
Construction and land development		815		172		2,650		—
Commercial & industrial		2,583		5		3,629		452
Residential real estate		983		30		632		19
Leases		525		62		467		60
Tax certificates		1,128		19		454		24
Total non-accrual LHFI	$	9,766	$	493	$	10,157	$	886
Non-accrual loans held for sale
Construction and land development	$	1,018	$	—	$	—	$	—
Total non-accrual LHFS	$	1,018	$	—	$	—	$	—
Total non-accrual loans	$	10,784	$	493	$	10,157	$	886

Information pertaining to impaired Loans

	September 30,		December 31,
(In thousands)	2014		2013
Impaired LHFI with a valuation allowance	$	4,232	$	3,835
Impaired LHFI without a valuation allowance		11,909		14,671
Impaired LHFS		1,018		—
Total impaired loans and leases	$	17,159	$	18,506
Valuation allowance related to impaired LHFI	$	493	$	886

Troubled debt restructurings that are on an accrual status and a non-accrual status

	As of September 30, 2014
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	2	$	2,883	$	—	$	2,883
Construction and land development	3		378		815		1,193
Commercial & industrial	6		3,672		1,497		5,169
Residential real estate	1		—		105		105
Total	12	$	6,933	$	2,417	$	9,350

	As of December 31, 2013
				Non-
	Number of	Accrual		Accrual
(In thousands)	loans	Status		Status		Total TDRs
Commercial real estate	3	$	3,847	$	—	$	3,847
Construction and land development	4		1,257		479		1,736
Commercial & industrial	3		4,420		1,960		6,380
Residential real estate	2		—		121		121
Total	12	$	9,524	$	2,560	$	12,084

Newly restructured loans

	Modifications by type for the three months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189
Total	1	$	—	$	188	$	—	$	—	$	188	$	189	$	189

	Modifications by type for the nine months ended September 30, 2014
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial & industrial	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262
Total	3	$	—	$	233	$	—	$	28	$	261	$	262	$	262

	Modifications by type for the nine months ended September 30, 2013
												Pre-		Post-
												Modification		Modification
												Outstanding		Outstanding
	Number of							Combination				Recorded		Recorded
(Dollars in thousands)	loans	Rate		Term		Payment		of types		Total		Investment		Investment
Commercial real estate	2	$	—	$	—	$	—	$	3,705	$	3,705	$	3,761	$	3,761
Commercial & industrial	1		—		—		—		82		82		87		87
Total	3	$	—	$	—	$	—	$	3,787	$	3,787	$	3,848	$	3,848

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Federal Home Loan Bank Stock (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Federal Home Loan Bank Stock [Abstract]
Total FHLB stock	$ 3,678	$ 4,204

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2014

Segment Information [Abstract]

Selected segment information and reconciliations to consolidated financial information

	Three months ended  September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	6,889	$	302	$	7,191
Interest expense		1,367		256		1,623
Net interest income	$	5,522	$	46	$	5,568
(Credit) provision for loan and lease losses		(79)		28		(51)
Total non-interest income		987		217		1,204
Total non-interest expense		4,916		459		5,375
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,672	$	(224)	$	1,448
Noncontrolling interest	$	69	$	(44)	$	25
Net income (loss) attributable to Royal Bancshares	$	1,603	$	(180)	$	1,423

	Three months ended  September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	6,485	$	475	$	6,960
Interest expense		1,560		330		1,890
Net interest income	$	4,925	$	145	$	5,070
Provision for loan and lease losses		178		40		218
Total non-interest income		1,344		593		1,937
Total non-interest expense		5,683		607		6,290
Income tax expense (benefit)		—		—		—
Net income	$	408	$	91	$	499
Noncontrolling interest	$	121	$	36	$	157
Net income attributable to Royal Bancshares	$	287	$	55	$	342

	Nine months ended September 30, 2014
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	701,803	$	21,666	$	723,469
Total deposits	$	515,786	$	—	$	515,786
Interest income	$	20,549	$	1,002	$	21,551
Interest expense		4,030		840		4,870
Net interest income	$	16,519	$	162	$	16,681
(Credit) provision for loan and lease losses		(911)		146		(765)
Total non-interest income		2,019		773		2,792
Total non-interest expense		14,221		1,507		15,728
Income tax expense (benefit)		—		—		—
Net income (loss)	$	5,228	$	(718)	$	4,510
Noncontrolling interest	$	337	$	(125)	$	212
Net income (loss) attributable to Royal Bancshares	$	4,891	$	(593)	$	4,298

	Nine months ended September 30, 2013
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	708,864	$	28,136	$	737,000
Total deposits	$	522,620	$	—	$	522,620
Interest income	$	18,556	$	1,899	$	20,455
Interest expense		4,525		1,142		5,667
Net interest income	$	14,031	$	757	$	14,788
(Credit) provision for loan and lease losses		(563)		367		(196)
Total non-interest income		3,056		1,250		4,306
Total non-interest expense		16,348		3,649		19,997
Income tax expense (benefit)		—		—		—
Net income (loss)	$	1,302	$	(2,009)	$	(707)
Noncontrolling interest	$	422	$	(786)	$	(364)
Net income (loss) attributable to Royal Bancshares	$	880	$	(1,223)	$	(343)

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Earnings (Loss) Per Common Share

9 Months Ended

Sep. 30, 2014

Income (Loss) Per Common Share [Abstract]

Income (Loss) Per Common Share

Note 13.Earnings (Loss) Per Common Share

The Company follows the provisions of FASB ASC Topic 260, “Earnings per Share” (“ASC Topic 260”).  Basic earnings per share (“EPS”) excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period.  The Company has two classes of common stock currently outstanding. The classes are A and B, of which one share of Class B is convertible into 1.15 shares of Class A.  Diluted EPS takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock using the treasury stock method. For the three and nine months ended September 30, 2014 and 2013,  168,907options to purchase shares of common stock, respectively, were anti-dilutive in the computation of diluted EPS, as the exercise price exceeded average market price in each of those periods.  For the three and nine months ended September 30, 2013,  202,408 options to purchase shares of common stock, respectively, were anti-dilutive in the computation of diluted EPS, as the exercise price exceeded average market price and as a result of the net loss for the the three and nine months ended September 30, 2013.  Additionally warrants to purchase 1,368,040 shares of Class A common stock were also anti-dilutive.

Basic and diluted EPS are calculated as follows:

	Three months ended  September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	1,271	27,329	$	0.05

	Three months ended  September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(178)	13,286	$	(0.01)

	Nine months ended September 30, 2014
	Income		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Income available to common shareholders	$	2,654	18,042	$	0.15

	Nine months ended September 30, 2013
	Loss		Average shares	Per share
(In thousands, except for per share data)	(numerator)		(denominator)	Amount
Basic and Diluted EPS
Loss available to common shareholders	$	(1,896)	13,272	$	(0.14)