SOURCE: Royal Bancshares of Pennsylvania

April 20, 2007 16:40 ET

Royal Bank America Parent Co. Issues 48th Consecutive Quarterly Cash Dividend; Reports Earnings for the 1st Quarter

NARBERTH, PA -- (MARKET WIRE) -- April 20, 2007 -- Royal Bank America President/CEO Joseph P. Campbell announced that the Board of Directors for the Bank's holding company, Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA), declared its 48th consecutive quarterly cash dividend on April 18, 2007. This dividend will be twenty-eight and seventy-five hundredths cents ($.2875) per share for holders of Class A common stock and thirty-three and six hundred twenty-five ten thousandths cents ($.330625) per share for holders of Class B common stock of Royal Bancshares of Pennsylvania, Inc. The record date is May 2, 2007, and the payment date is May 16, 2007.

Net income for the three months ended March 31, 2007 was $3.9 million or $0.29 basic earnings per share, compared to $5.3 million or $0.40 basic earnings per share for the same period in 2006.

The lower earnings experienced during the first quarter of 2007, compared to the first quarter of 2006, was the result of a $780,000 reduction in interest income related to transferring two loans to non-accrual status during the quarter and also reflects a $1.3 million one-time gain from the sale of other real estate owned. The aforementioned loans are well collateralized and the bank expects to recover principal in full.

For the first quarter of 2007, interest income was $22.2 million compared to $21.4 million for the same quarter in 2006, an increase of $800 thousand. This increase is primarily due to growth in average loan balances. Net loans and leases increased 5.9% or $34.5 million from March 31, 2006 to a balance of $617.5 million at March 31, 2007.

Interest expense increased $3.4 million to $13.5 million for the quarter ended March 31, 2007 compared to the same period in 2006. The increase in interest expense was due to the growth in the average balance of deposits, higher interest rates paid on deposits and an increase of $1.1 million in interest expense related to variable interest entities. Total deposits increased 24.5% to $895.0 million at March 31, 2007 from March 31, 2006, primarily due to a $208.5 million increase in certificates of deposit. The growth in certificates of deposit was partially offset by a $161.5 million reduction in Federal Home Loan Bank advances.

The net interest margin (excluding variable interest entities) in the first quarter of 2007 was negatively impacted by the $780,000 non-accrual loan adjustment to interest income mentioned above and the continued pressures on funding costs. The 1st quarter 2007 net interest margin was 3.47% compared to 4.17% for the first quarter of 2006.

During the first quarter of 2007, $212 thousand of provisions were recorded to increase the allowance for loan losses. This additional provision was related to loan growth. Included in the reserve calculations are mezzanine loans, which generally provide higher yields but which management has determined to have a higher level of risk compared to the remainder of the loan portfolio.

Consolidated total assets ended March 31, 2007 at $1.34 billion, $22.6 million higher than March 31, 2006. The three-month period ended March 31, 2007 return on average assets and return on average equity were 1.2% and 9.7%, respectively.

About Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc., headquartered in Narberth, Pennsylvania, operates seventeen full-service branch offices throughout southeastern Pennsylvania and New Jersey under the name Royal Bank America and five locations under the name Royal Asian Bank. Together, Royal Bank America and Royal Asian Bank, along with Royal's other affiliates, offer a wide variety of products and services, including commercial real estate loans, asset based lending, structured financing, equipment leasing, equity/mezzanine lending, high-yielding CDs & MMAs and Internet Banking solutions at www.royalbankamerica.com and www.royalasianbank.com.

The foregoing material is unaudited and 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.

                   ROYAL BANCSHARES OF PENNSYLVANIA, INC.
                        CONDENSED INCOME STATEMENT



                                         Three Months
                                        Ended Mar. 31st

(dollars in thousands, except for
 earnings per share)                   2007        2006
                                    ----------- -----------
                                    (Unaudited) (Unaudited)

Interest Income                     $    22,195 $    21,413
Interest Expense                         13,526      10,079
                                    ----------- -----------
Net Interest Income                       8,669      11,334
Provision for Loan Losses                   212         335
                                    ----------- -----------
Net Interest Income after Provision       8,457      10,999
Non Interest Income                       5,942       2,998
Non Interest Expense                      8,708       6,186
                                    ----------- -----------
Income before Taxes                       5,691       7,809
Income Taxes                              1,789       2,465
                                    ----------- -----------
Net Income                                3,902       5,346
                                    =========== ===========
Earnings per share - basic          $      0.29 $      0.40


SELECTED RATIOS:
Return on Average Assets                   1.2%        1.7%
Return on Average Equity                   9.7%       13.9%
Average Equity to Assets                  12.2%       12.0%
Book Value Per Share                $    12.18  $    11.59


CONDENSED BALANCE SHEET

(in thousands)                            March 31,   Dec. 31,    March 31,
                                           2007        2006        2006
                                        (unaudited)             (unaudited)
                                        ----------- ----------- -----------
Cash and Cash Equivalents               $    42,672 $    82,436 $    20,279
Investment Securities                       563,204     568,742     577,959
Loans Held for Sale                              --       1,959       1,291
Loans & Leases (net)                        617,536     589,545     583,075
Premises and Equipment (net)                 49,554      50,280      66,918
Accrued Interest receivable                  17,553      16,494      15,850
Other Assets                                 48,818      46,855      51,401
                                        ----------- ----------- -----------
     Total Assets                       $ 1,339,337 $ 1,356,311 $ 1,316,773
                                        =========== =========== ===========

Deposits                                $   894,999 $   859,457 $   718,890
Borrowings                                  218,029     275,429     396,415
Other Liabilities                            32,297      29,247      17,723
Subordinated debentures                      25,774      25,774      25,774
Minority Interest                             3,839       3,150       2,150
Shareholders’ Equity                        164,399     163,254     155,821
                                        ----------- ----------- -----------
     Total Liabilities and
      Shareholders’ Equity              $ 1,339,337 $ 1,356,311 $ 1,316,773
                                        =========== =========== ===========


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

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