8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

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

Date of Report (Date of earliest event report) January 18, 2007.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.

(Exact name of registrant as specified in its charter)

PENNSYLVANIA
(State or Other Jurisdiction of Incorporation)

0-26366	23-2812193
(Commission File Number)	(IRS Employer Identification Number)

732 Montgomery Avenue, Narberth, Pennsylvania	19072
(Address of Principal Executive Office)	(Zip Code)

610-668-4700
(Issuer’s telephone number, including area code)

N/A
(Former Name or Former Address, if Change Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision:

o Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02 Results of Operations and Financial Condition.

Royal Bancshares of Pennsylvania, Inc. announced net income for three and twelve months ended December 31, 2006 and the declaration of a cash dividend as detailed in the Press Release attached as Exhibit 99.1.

Section 9 — Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

     (d.) Exhibits

Exhibit Number	Description of Document
99.1	Press Release dated January 18, 2007.

SIGNATURE

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 hereunto duly authorized.

	Royal Bancshares of Pennsylvania, Inc.
Dated: January 18, 2007	/s/ Jeffrey T. Hanuscin
	Jeffrey T. Hanuscin
	Chief Financial Officer

EX-99.1

Exhibit 99.1

Royal Bank America Media Alert

For additional information:
Marc Sanders, Director of Marketing
610-668-4700 x269 — marcsanders@royalbankamerica.com

ROYAL BANK AMERICA PARENT CO. REPORTS 26.9% INCREASE IN CORE
EARNINGS FOR THE FOURTH QUARTER; DEPOSITS UP 23%; LOANS UP 9%;
ISSUES 47^th CONSECUTIVE QUARTERLY CASH DIVIDEND

NARBERTH, PA — January 18, 2007 — Royal Bank America President/CEO Joseph P. Campbell announced core earnings (defined as net income less non-recurring items) for the Bank’s holding company, Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA) for the three months ended December 31, 2006 of $5.0 million or $0.37 basic earnings per share, compared to $4.0 million or $0.29 basic earnings per share for the same period in 2005. Core earnings for the twelve months ended December 31, 2006 were $18.4 million or $1.36 basic earnings per share, compared to $16.2million or $1.20 basic earnings per share for the same period in 2005. For the three months ended December 31, 2006, non-recurring items include: $67 thousand in distributions from variable interest entities and $75 thousand from the sale of other real estate owned. For the three months ended December 31, 2005, non recurring items include: a $16.7 million gain from the sale of two apartment complexes, $133 thousand in distributions from variable interest entities, and $1.0 million from the sale of other real estate owned. For the twelve months ended December 31, 2006, non-recurring items include: a $1.5 million prepayment fee, $643 thousand in loan exit fees collected on two mezzanine loans, $645 thousand in distributions from variable interest entities and $2.1 million from the sale of other real estate owned. For the twelve months ended December 31, 2005, there were $1.6 million in loan exit fees collected, a $16.7 million gain from the sale of two apartment complexes, a $1.9 million equity distribution from a variable interest entity, $2.5 million from the sale of other real estate owned and a $1.7 million reduction in tax expense resulting from a reduction in a deferred tax valuation allowance. In addition, a $930 thousand expense related to the company’s pension plan was recorded. A reconciliation of net income to core earnings, as well as related per share amounts, is included in a later section of this release.

Net income (including non-recurring items) for the three months ended December 31, 2006 was $5.1 million or $0.38 basic earnings per share, compared to $15.6 million or $1.16 basic earnings per share for the same period in 2005. Net income (including non-recurring items) for the twelve months ended December 31, 2006 was $21.6 million or $1.60 basic earnings per share, compared to $32.1 million or $2.39 basic earnings per share for the same period in 2005.

For the fourth quarter of 2006, interest income was $23.5 million compared to $20.3 million for the same quarter in 2005, an increase of $3.2 million. This increase is primarily due to growth in the average loan balances along with higher interest earned on our variable rate portfolio during the 4^th quarter as compared to the same period in 2005. In addition, the company received a special cash dividend from the Federal Home Loan Bank of Pittsburgh of approximately $200 thousand during the fourth quarter of 2006. Net loans increased 9% or $50.2 million from December 31, 2005 to $589.5 million at December 31, 2006. This increase is primarily due to an increased demand for commercial and construction loan products that are being offered at competitive rates coupled with an increase in volume from Royal Asian Bank, Royal Bank America Leasing and the Equity/Mezzanine division.

Interest expense increased $4.3 million to $12.3 million for the quarter ended December 31, 2006 compared to the same period in 2005. For the twelve-month period ended December 31, 2006, interest expense increased $14.6 million to $46.4 million compared to the same period in 2005. The increase in interest expense was due to an increase in the average balance of deposits along with higher interest rates paid on deposits and borrowings. Total deposits increased 23% to $859.5 million at December 31, 2006 from December 31, 2005, primarily as a result of attractive certificate of deposit rates offered during 2006. During this period, brokered deposits increased $18.0 million. These funds were utilized to fund a portion of loan growth.

Net interest margin was 3.90% for the fourth quarter of 2006 compared to 3.96% for the fourth quarter of 2005. Net interest margin was .4.17% for the twelve months ended December 31, 2006, compared to 4.06% for the same period in 2005.

During the fourth quarter of 2006, $202 thousand was recorded to increase the allowance for loan losses. This additional provision was the result of loan growth in Royal Asian Bank and Royal Bank America Leasing, LP. For the twelve-month period ended December 31, 2006, $1.8 million was recorded to increase the allowance, of which $849 thousand was related to specific loans and the remainder was attributed to loan growth during 2006. Included in the reserves 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 December 31, 2006 at $1.36 billion. Return on assets for the twelve-month period ended December 31, 2006 was 1.6%. Return on equity for the twelve-month period ended December 31, 2006 was 13.6%.

The Board of Directors of Royal Bancshares of Pennsylvania, Inc. declared its 47^th consecutive quarterly cash dividend on January 17, 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 January 31, 2007, and the payment date is February 14, 2007.

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 four 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 and 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						Twelve Months
	Ended Dec. 31st						Ended Dec. 31st
(dollars in thousands, except for earnings per share)	2006			2005			2006			2005
	(Unaudited)			(Unaudited)			(Unaudited)
Interest Income	$	23,475		$	20,281		$	93,006		$	76,460
Interest Expense		12,279			7,984			46,372			31,796
Net Interest Income		11,196			12,297			46,634			44,664
Provision for Loan Losses		202			0			1,803			1
Net Interest Income after Provision		10,994			12,297			44,831			44,663
Non Interest Income		2,137			15,039			11,971			24,826
Non Interest Expense		5,562			3,345			25,219			24,799
Income before Taxes		7,569			23,991			31,583			44,690
Income Taxes		2,448			8,405			10,015			12,637
Net Income	$	5,121		$	15,586		$	21,568		$	32,053
Earnings per share —basic	$	0.38		$	1.16		$	1.60		$	2.39
SELECTED RATIOS:
Return on Average Assets		1.5	%		4.8	%		1.6	%		2.5	%
Return on Average Equity		12.4	%		40.4	%		13.6	%		22.0	%
Average Equity to Assets		12.4	%		11.9	%		12.1	%		11.6	%
Book Value Per Share	$	12.10		$	11.57

CONDENSED BALANCE SHEET

(in thousands)	Dec. 31,		Dec. 31,
	2006		2005
	(unaudited)
Cash and Cash Equivalents	$	82,436	$	30,895
Investment Securities		568,742		598,730
Loans Held for Sale		1,959		803
Loans (net)		589,545		539,360
Premises and Equipment (net)		50,280		66,581
Accrued Interest receivable		16,494		14,843
Other Assets		46,855		49,807
Total Assets	$	1,356,311	$	1,301,019
Deposits	$	859,457	$	697,409
Borrowings		275,429		401,356
Other Liabilities		29,247		18,485
Subordinated debentures		25,774		25,774
Minority Interest		3,150		2,487
Shareholders’ Equity		163,254		155,508
Total Liabilities and Shareholders’ Equity	$	1,356,311	$	1,301,019

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(R) “Variable Interest Entities.”

NOTE: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Management uses the non-GAAP measure of core earnings from core earnings or operating earnings in its analysis of the company’s performance. This measure, as used by the company, adjusts net income determined in accordance with GAAP to exclude the effects of certain non-recurring special items, including significant gains or losses that are unusual in nature. Because certain of these items and their impact on the company’s performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the company’s core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. The following table reconciles our GAAP net income to core earnings for the periods presented:

	For the Three						For the Twelve
	Months Ended						Months Ended
	Dec. 31st						Dec. 31st
	(unaudited)						(unaudited)
(amounts in thousands, except for per share data)	2006			2005			2006			2005
Net Income	$	5,121		$	15,586		$	21,568		$	32,053
Changes
Loan exit fees		—			—			(643	)		(1,568	)
Prepayment fees		—			—			(1,500	)		—
Distributions from variable interest entities		(67	)		(133	)		(645	)		(1,925	)
Gains from the sale of variable interest entities		—			(16,746	)		—			(16,746	)
Pension plan expense		—			—			—			930
Gains on other real estate owned		(75	)		(1,003	)		(2,129	)		(2,494	)
Total Changes		(142	)		(17,882	)		(4,917	)		(21,803	)
Tax effect		50			6,259			1,721			7,631
Reduction in tax expense		—			—			—			(1,700	)
Net impact of changes		(92	)		(11,623	)		(3,196	)		(15,872	)
Net income adjusted (core earnings)	$	5,029		$	3,963		$	18,372		$	16,181
Basic earnings per share	$	0.38		$	1.16		$	1.60		$	2.39
Adjusted earnings per share	$	0.37		$	0.29		$	1.36		$	1.20