Segment Information

9 Months Ended

Sep. 30, 2016

Segment Information [Abstract]

Segment Information

Note 17.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.  Our chief operating decision makers are the CEO and the CFO. We have identified our reportable operating segments as “Community Banking” and “Tax Liens”.

Community banking

Our community banking segment consists of commercial and retail banking and equipment leasing. The community banking business segment includes Royal Bank and Royal Bank Leasing and generates revenue from a variety of products and services provided by those entities.  Royal Bank and Royal Bank Leasing have similar economic characteristics in that earnings are predominantly derived from net interest income.   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, 2016, Royal Bank’s tax liens segment includes its 80% and 100% ownership interest in CSC and RTL, respectively. Our 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 tables present selected financial information for reportable business segments for the three and nine months ended September 30, 2016 and 2015.

	For the three months ended September 30, 2016
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	798,996	$	12,372	$	811,368
Total deposits	$	592,239	$	—	$	592,239
Interest income	$	8,417	$	43	$	8,460
Interest expense		1,752		150		1,902
Net interest income (expense)	$	6,665	$	(107)	$	6,558
Provision for loan and lease losses		549		29		578
Total non-interest income		1,177		12		1,189
Total non-interest expense		4,842		159		5,001
Income tax expense		25		—		25
Net income (loss)	$	2,426	$	(283)	$	2,143
Noncontrolling interest	$	125	$	(12)	$	113
Net income (loss) attributable to Royal Bancshares	$	2,301	$	(271)	$	2,030

	For the three months ended September 30, 2015
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	745,853	$	16,058	$	761,911
Total deposits	$	553,764	$	—	$	553,764
Interest income	$	7,625	$	173	$	7,798
Interest expense		1,447		189		1,636
Net interest income (expense)	$	6,178	$	(16)	$	6,162
(Credit) provision for loan and lease losses		(254)		38		(216)
Total non-interest income		503		74		577
Total non-interest expense		4,897		345		5,242
Income tax expense		—		—		—
Net income (loss)	$	2,038	$	(325)	$	1,713
Noncontrolling interest	$	179	$	—	$	179
Net income (loss) attributable to Royal Bancshares	$	1,859	$	(325)	$	1,534

	For the nine months ended September 30, 2016
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	798,996	$	12,372	$	811,368
Total deposits	$	592,239	$	—	$	592,239
Interest income	$	24,663	$	192	$	24,855
Interest expense		4,932		457		5,389
Net interest income (expense)	$	19,731	$	(265)	$	19,466
Provision for loan and lease losses		924		63		987
Total non-interest income		3,422		47		3,469
Total non-interest expense		14,455		813		15,268
Income tax benefit		85		—		85
Net income (loss)	$	7,688	$	(1,093)	$	6,595
Noncontrolling interest	$	394	$	(52)	$	342
Net income (loss) attributable to Royal Bancshares	$	7,294	$	(1,041)	$	6,253

	For the nine months ended September 30, 2015
	Community
(In thousands)	Banking		Tax Liens		Consolidated
Total assets	$	745,853	$	16,058	$	761,911
Total deposits	$	553,764	$	—	$	553,764
Interest income	$	21,642	$	507	$	22,149
Interest expense		4,169		629		4,798
Net interest income	$	17,473	$	(122)	$	17,351
(Credit) provision for loan and lease losses		(1,451)		69		(1,382)
Total non-interest income		1,863		198		2,061
Total non-interest expense		14,819		889		15,708
Income tax expense		—		—		—
Net income (loss)	$	5,968	$	(882)	$	5,086
Noncontrolling interest	$	551	$	(51)	$	500
Net income (loss) attributable to Royal Bancshares	$	5,417	$	(831)	$	4,586

Interest income earned by the community banking segment related to the tax liens segment was approximately $150 thousand and $189 thousand for the three month periods ended September 30, 2016 and 2015,  respectively, and $457 thousand and $629 thousand for the nine month periods ended September 30, 2016 and 2015, respectively.