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 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 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 $271,000 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 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.

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 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 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 $271,000 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 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.