Royal Bancshares of Pennsylvania Announces Financial Results for Third Quarter Ended September 30, 2010


NARBERTH, PA--(Marketwire - November 15, 2010) - Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA) announced its financial results for the third quarter ended September 30, 2010. The net loss attributable to Royal Bancshares ("Royal") was $2.8 million for the quarter, or 25 cents per common share, compared to a net loss of $4.4 million, or 37 cents per common share, in the quarter ended September 30, 2009.

The improved results for the third quarter were primarily due to a $1.5 million reduction in the provision for loan and lease losses, a $628 thousand reduction in net income attributable to noncontrolling interests, a reduction of $474 thousand in income tax expense related to the surrender of bank owned life insurance in 2009 and a $333 thousand increase in net interest income as a result of a 52 basis point increase in net interest margin mainly due to lower funding costs. Partially offsetting these improvements was a $1.7 million increase in impairment of real estate owned via equity investments and an $830 thousand increase in impairments of other real estate owned. Excluding these impairments, other operating expenses decreased $2.0 million.

For the nine months ended September 30, 2010, net loss attributable to Royal Bancshares was $8.4 million, or 75 cents per common share, compared to a net loss of $23.2 million or $1.84 per share in the first nine months of 2009.

The improved results for the nine month period were due to a $9.4 million reduction in impairment losses on available for sale securities, a $5.1 million reduction in the provision for loan and lease losses, a $2.7 million increase in net interest income mainly due to a 51 basis point increase in net interest margin as a result of lower funding costs and a reduction of $474 thousand in income tax expense related to the surrender of bank owned life insurance in 2009. Partially offsetting these improvements was a $2.0 million increase in impairment of other real estate owned, a $1.7 million increase in impairment of real estate owned via equity investments and a $1.6 million increase in impairment of real estate joint ventures. Excluding these items, other operating expenses decreased $2.2 million.

Robert R. Tabas, Chairman and CEO, commented, "Although we continue to face significant pressure, our balance sheet has begun to reflect the positive impact of our strategic plan, including efforts to deleverage our balance sheet, increase small business lending and minimize risks in our investment portfolio."

In a statement echoed in a letter to shareholders dated November 15, 2010, Tabas noted, "(Our) management team is working diligently to navigate Royal through the unprecedented economic times that we face. We are making progress positioning Royal to operate successfully in the new economic reality, and serve our community -- and our shareholders -- for the long haul."

A digital version of the letter to shareholders is available online at www.royalbankamerica.com/investor.php

The following is an overview of key financial metrics:

Net interest income increased to $7.6 million in the third quarter of 2010, from $7.2 million for the same period in 2009, largely due to a lower cost of funds compared to prior periods. This also drove an increase in net interest income to $23.9 million for the nine months ended September 30, 2010, compared to $21.2 million for the same period in 2009.

Net interest margin in the third quarter was 2.88%, up 52 basis points from the comparable 2009 quarter of 2.36%. Net interest margin for the nine month period was 2.89%, up 51 basis points from 2.38% in the comparable period of 2009.

Total assets were $1.1 billion at September 30, 2010, a decrease of $175 million or 13.5% from $1.3 billion at December 31, 2009.

At September 30, 2010, Royal Bank America had capital ratios above the level required to meet regulatory standards for a well-capitalized institution.

Third quarter 2010 deposit levels were $743.5 million (including Royal Asian Bank deposits held for sale), down $138.3 million or 15.68% from $881.8 million at December 31, 2009 and down $48.3 million or 6.1% from $791.8 million at June 30, 2010. This was primarily due to the continuation of the bank's previously outlined strategy to reduce reliance on brokered deposits (down $45.2 million for the quarter and $108.0 million for the nine month period) and instead focus on more competitively priced branch deposits.

Net loans and leases at quarter end were $595.5 million (including Royal Asian Bank loans held for sale), down 9.3% or $61.0 million compared to $656.5 million at December 31, 2009 and down $18.2 million or 2.89% from $612.2 million at June 30, 2010.

Non-accrual and impaired loans were $83.0 million at September 30, 2010, compared to $73.7 million at December 31, 2009. An increase in new non-accrual loans since year end was partially offset by loans becoming current and placed back on accrual status, loan payoffs, transfers to other real estate owned, and charge-offs. Royal has no troubled debt restructured loans or loans past due 90 days or more on which it has continued to accrue interest during the quarter.

About Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc., headquartered in Narberth, Pennsylvania, is a two-bank holding company operating the Royal Bank America and Royal Asian Bank brands in Pennsylvania, New Jersey and New York. For the past 40+ years, Royal has played a lead role in the growth and development of our region, empowering small businesses, entrepreneurs and individuals to achieve their financial goals and enrich our communities. More information on Royal Bancshares of Pennsylvania, our banks and subsidiaries is available at www.royalbankamerica.com.

Forward-Looking Statements

The foregoing material may contain forward-looking statements. We caution that such statements may be subject to a number of uncertainties, and actual results could differ materially; therefore, readers should not place undue reliance on any forward-looking statements. Royal Bancshares of Pennsylvania, Inc. does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. For a discussion of the factors that could cause actual results to differ from the results discussed in any such forward-looking statements, see the filings made by Royal Bancshares of Pennsylvania, Inc. with the Securities and Exchange Commission, including its Annual Report - Form 10-K for the year ended December 31, 2009.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONDENSED INCOME STATEMENT



(in thousands, except         Three Months              Nine Months
 for earnings per           Ended Sept. 30th          Ended Sept. 30th
 share)                     2010         2009         2010         2009
                        -----------  -----------  -----------  -----------
                        (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
Interest Income         $    13,719  $    16,799  $    44,515  $    49,723
Interest Expense              6,157        9,570       20,601       28,536
                        -----------  -----------  -----------  -----------
Net Interest Income           7,562        7,229       23,914       21,187
Provision for Loan
 Losses                       2,194        3,716        8,387       13,469
                        -----------  -----------  -----------  -----------
Net Interest Income
 after Provision              5,368        3,513       15,527        7,718
Non Interest
 Income/(Loss)                1,823        2,705        4,846       (4,283)
Non Interest Expense         10,333        9,829       28,425       25,373
                        -----------  -----------  -----------  -----------
Loss before Taxes            (3,142)      (3,611)      (8,052)     (21,938)
Income Tax Expense                0          474            0          474
                        -----------  -----------  -----------  -----------
Net Loss                     (3,142)      (4,085)      (8,052)     (22,412)
Less Net (Loss)/Income
 attributable to
 noncontrolling
 interest                      (347)         281          354          761
Net Loss attributable
 to Royal Bancshares    ($    2,795) ($    4,366) ($    8,406) ($   23,173)
                        ===========  ===========  ===========  ===========
Loss per common share -
 basic                  ($     0.25) ($     0.37) ($     0.75) ($     1.84)
                        ===========  ===========  ===========  ===========
SELECTED RATIOS:
Return on Average
 Assets                        -1.0%        -1.3%        -0.9%        -2.4%
Return on Average
 Equity                       -10.6%       -15.4%       -10.7%       -29.3%
Average Equity to
 Average Assets                 9.1%         8.3%         8.7%         8.2%
Book Value Per Share    $      5.11  $      6.07  $      5.11  $      6.07






CONDENSED BALANCE SHEET


(in thousands)                                Sept. 30, 2010  Dec. 31, 2009
                                               (unaudited)     (unaudited)
Cash and Cash Equivalents                     $       74,634 $       58,298
Investment Securities                                332,651        449,671
Loans & Leases (net)                                 534,547        658,787
Assets Held for Sale                                  79,188              -
Premises and Equipment (net)                          14,247         18,798
Accrued Interest receivable                           16,775         14,942
Other Assets                                          65,647         92,230
                                              -------------- --------------
          Total Assets                        $    1,117,689 $    1,292,726
                                              -------------- --------------

Deposits                                             676,695        881,755
Liabilities Held for Sale                             67,137              -
Borrowings                                           214,152        257,827
Other Liabilities                                     32,242         23,056
Subordinated debentures                               25,774         25,774
Royal Bancshares Shareholders' Equity                 98,177        101,156
Noncontrolling Interest                                3,512          3,158
                                              -------------- --------------
        Total Equity                                 101,689        104,314
                                              -------------- --------------
        Total Liabilities and Equity          $    1,117,689 $    1,292,726
                                              -------------- --------------

  The above condensed financial information includes consolidation of
  Equity Real Estate Investments,
  owned by Royal Bancshares of Pennsylvania, Inc., which are required as a
  result of FIN 46® "Variable Interest Entities."

Contact Information: Company Contact: Marc Sanders Director of Marketing Royal Bank America Office: 610-668-4700 Cell: 484-802-1944