8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

July 15, 2009
Date of Report (Date of earliest event reported)

ROYAL BANCSHARES OF PENNSYLVANIA, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania
(State or other jurisdiction
of incorporation) 0-26366
(Commission
File Number) 23-2812193
(IRS Employer
Ident. No.)

732 Montgomery Avenue, Narberth, Pennsylvania
(Address of principal executive offices) 19072
(Zip Code)

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

N/A
(Former name or former address, if changed 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 provisions:

o     Written communications 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))

Item 1.01 Entry into a Material Definitive Agreement.

On July 15, 2009, Royal Bank America (the “Bank”), a wholly-owned subsidiary of Royal Bancshares of Pennsylvania, Inc. (the “Company”), agreed to enter into a Stipulation and Consent to the Issuance of an Order to Cease and Desist with each of the Federal Deposit Insurance Corporation (“FDIC”) and the Commonwealth of Pennsylvania Department of Banking (“Department”).

The material terms of the orders are identical and require the Bank to:

• have and retain qualified management, and notify the FDIC and the Department of any changes in the Bank’s board of directors or senior management;

• increase participation of the Bank’s board of directors in the Bank’s affairs by having the board assume full responsibility for approving the Bank’s policies and objectives and for supervising the Bank’s management;

• eliminate all assets classified as “Loss” and formulate a written plan to reduce assets classified as “Doubtful” and “Substandard” at its regulatory examination;

• develop a written plan to reduce delinquent loans, and restrict additional advances to borrowers with existing credits classified as “Loss,” “Doubtful” or “Substandard”;

• develop a written plan to reduce the Bank’s commercial real estate loan concentration;

• maintain, after establishing an adequate allowance for loan and lease losses, a ratio of Tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8% and a ratio of qualifying total capital to risk-weighted assets (total risk-based capital ratio) equal to or greater than 12%. On March 31, 2009, the Bank’s leverage ratio and total risk-based capital ratio were 10.27% and 13.11%, respectively;

• formulate and implement written profit plans and comprehensive budgets for each year during which the orders are in effect;

• formulate and implement a strategic plan covering at least three years, to be reviewed quarterly and revised annually;

• revise the liquidity and funds management policy and update and review the policy annually;

• refrain from increasing the amount of brokered deposits held by the Bank and develop a plan to reduce the reliance on non-core deposits and wholesale funding sources;

• refrain from paying cash dividends without prior approval of the FDIC and the Department;

• refrain from making payments to or entering contracts with the Bank’s holding company or other Bank affiliates without prior approval of the FDIC and the Department;

• submit to the FDIC for review and approval an executive compensation plan that incorporates qualitative as well as profitability performance standards for the Bank’s executive officers;

• establish a compliance committee of the board of directors of the Bank with the responsibility to ensure the Bank’s compliance with the orders; and

• prepare and submit quarterly reports to the FDIC and the Department detailing the actions taken to secure compliance with the orders.

The orders will remain in effect until modified or terminated by the FDIC and the Department.

Management believes it has already made significant progress toward meeting the terms of the orders. On March 31, 2009, the Bank was in compliance with the capital requirements stipulated in the orders, and expects to be in compliance when financial results for the second quarter, which ended June 30, 2009, are announced in August 2009. Over the past 18 months, the Bank has enhanced its management team with the hiring of a new Chief Credit Officer, a new Chief Financial Officer and a new head of commercial lending. In addition, when the Bank replaced its former President and Chief Executive Officer in late 2008, responsibilities were divided between two

experienced bankers. Management is cooperating with representatives from the FDIC and the Department, and views its relationship with the FDIC and the Department and compliance with the terms of this order as a prescription for the continued financial strength of the Bank.

The foregoing description of the orders and the stipulation and consents does not purport to be complete and is qualified in its entirety by reference to the complete copies of the documents attached hereto as Exhibits 10.1 through 10.3, and are incorporated herein by reference.

On July 16, 2009, the Company issued a press release with respect to the foregoing matters, a copy of which is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits:

10.1	FDIC Stipulation and Consent to the Issuance of an Order to Cease and Desist.
10.2	FDIC Order to Cease and Desist.
10.3	Pennsylvania Department of Banking Stipulation and Consent and Order to Cease and Desist.
99.1	Press release, dated July 16, 2009, of Royal Bancshares of Pennsylvania, Inc.

SIGNATURES

     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: July 16, 2009	By:	/s/ James J. McSwiggan, Jr.
		James J. McSwiggan, Jr.
		President and Chief Operating Officer

EX-10.1

Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

	)
In the Matter of	)	STIPULATION AND CONSENT
	)	TO THE ISSUANCE OF
ROYAL BANK AMERICA	)	AN ORDER TO
NARBERTH, PENNSYLVANIA	)	CEASE AND DESIST
	)
(INSURED STATE NONMEMBER BANK)	)	FDIC-09-282b
	)

     Subject to the acceptance of this STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”) by the Federal Deposit Insurance Corporation (“FDIC”), it is hereby stipulated and agreed by and between a representative of the Legal Division of the FDIC and Royal Bank America, Narberth, Pennsylvania (“Bank”), as follows:

          1. The Bank has been advised of its right to receive a NOTICE OF CHARGES AND OF HEARING (“NOTICE”) detailing the unsafe or unsound banking practices alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b)(1) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818 (b)(1), and has waived those rights.

          2. The Bank, solely for the purpose of this proceeding and without admitting or denying any of the alleged charges of unsafe or unsound banking practices, hereby consents and agrees to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC. The Bank further stipulates and agrees that such ORDER shall be deemed to be a final ORDER and that such ORDER shall become effective immediately upon issuance by the FDIC and fully enforceable by the FDIC pursuant to the provisions of section 8(i)(1) of the Act, 12 U.S.C.

§ 1818(i)(1), subject only to the conditions set forth in paragraph 3 of this CONSENT AGREEMENT.

          3. In the event the FDIC accepts this CONSENT AGREEMENT and issues the ORDER, it is agreed that no action to enforce such ORDER in the United States District Court will be taken by the FDIC unless the Bank or any director, officer, employee, agent, successor or assignee, or other institution-affiliated party, has violated or is about to violate any provision of the ORDER.

          4. The Bank hereby waives:

               (a) the receipt of a NOTICE;

               (b) all defenses to the allegations to be set forth in the NOTICE;

               (c) a hearing conducted for the purpose of taking evidence on the allegations to be set forth in the NOTICE;

               (d) the filing of proposed FINDINGS OF FACT AND CONCLUSIONS OF LAW;

               (e) the issuance of a RECOMMENDED DECISION by an administrative law judge in this matter; and

               (f) the filing of exceptions and briefs with respect to such RECOMMENDED DECISION.

Dated: July 15, 2009
FDIC LEGAL DIVISION BY:	ROYAL BANK AMERICA NARBERTH, PENNSYLVANIA BY:
/s/ G. Michael Saran G. Michael Saran Counsel	/s/ Edward F. Bradley Edward F. Bradley Director
	/s/ Joseph P. Campbell Joseph P. Campbell Director

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/s/ Carl M. Cousins Carl M. Cousins, DVM
Director

/s/ Samuel Goldstein Samuel Goldstein
Director

/s/ James J. McSwiggan James J. McSwiggan
Director

/s/ Anthony J. Micale Anthony J. Micale
Director

/s/ Albert Ominsky Albert Ominsky, Esq.
Director

/s/ Gregory T. Reardon Gregory T. Reardon
Director

/s/ Robert A. Richards, Jr. Robert A. Richards, Jr.
Director

/s/ Murray Stempel, III Murray Stempel, III
Director

/s/ Evelyn R. Tabas Evelyn R. Tabas
Director

/s/ Robert R. Tabas Robert R. Tabas
Director

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/s/ Linda Tabas Stempel Linda Tabas Stempel
Director

/s/ Edward B. Tepper Edward B. Tepper
Director

/s/ Howard J. Wurzak Howard J. Wurzak
Director

Comprising the Board of
Directors of
Royal Bank America
Narberth, Pennsylvania

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EX-10.2

Exhibit 10.2

FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C.

	)
In the Matter of	)	ORDER TO CEASE AND DESIST
	)
ROYAL BANK AMERICA	)	FDIC 09-282b
NARBERTH, PENNSYLVANIA	)
	)
(Insured State Nonmember Bank)	)
	)

          Royal Bank America, Narberth, Pennsylvania (“Bank”), through its board of directors, having been advised of its right to the issuance and service of a NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices alleged to have been committed by the Bank and of its right to a hearing on the alleged charges under section 8(b) of the Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b), and having waived those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST (“CONSENT AGREEMENT”) with counsel for the Federal Deposit Insurance Corporation (“FDIC”) dated July 15, 2009, whereby, solely for the purpose of this proceeding and without admitting or denying the alleged charges of unsafe or unsound banking practices, the Bank consented to the issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC.

          The FDIC considered the matter and determined that it had reason to believe that the Bank had engaged in unsafe or unsound banking practices. The FDIC, therefore, accepts the CONSENT AGREEMENT and issues the following:

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ORDER TO CEASE AND DESIST

     IT IS ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist from the following unsafe or unsound banking practices:

1.	Operating the Bank with inadequate management, policies and practices that are detrimental to the Bank.
2.	Operating the Bank without adequate supervision and direction by the Bank’s board of directors over the management of the Bank to prevent unsafe or unsound banking practices.
3.	Operating the Bank with an excessive level of adversely classified loans or assets.
4.	Operating the Bank with an excessive level of delinquent loans.
5.	Operating the Bank with an excessive level of nonaccrual loans.
6.	Engaging in unsatisfactory lending and collection practices, including, but not limited to:

a.	Insufficient monitoring and controls over receivable-based loans.
b.	Excessive out-of-territory lending.
c.	Over-reliance on real estate liquidation as a loan repayment source and over-reliance on guarantors’ real estate net worth.
d.	Operating with inadequate underwriting, loan-grading system and loan administration practices.

7. Operating the Bank with an inadequate level of capital protection for the kind and quality of assets held by the Bank.

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8.	Operating the Bank with inadequate earnings to fund growth and augment capital.
9.	Operating the Bank with inadequate net interest margins.
10.	Operating the Bank without adequate liquidity and funds management policies and procedures.
11.	Operating with an inadequate investment policy.
12.	Operating the Bank with a heavy reliance on non-core funding sources.
13.	Operating the Bank with inadequate internal routines and controls.

          IT IS FURTHER ORDERED, that the Bank, its institution-affiliated parties, and its successors and assigns, take affirmative action as follows:

MANAGEMENT

          1. (a) The Bank shall have and retain qualified management. Each member of management shall possess qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management personnel shall be evaluated on their ability to:

          (1) comply with the requirements of this ORDER;

          (2) operate the Bank in a safe and sound manner;

          (3) comply with applicable laws and regulations; and

          (4) restore all aspects of the Bank to a safe and sound condition, including improving the Bank’s asset quality, capital adequacy, earnings, management effectiveness, and liquidity.

          (b) While this ORDER is in effect, the Bank shall notify the Regional Director of the FDIC’s New York Regional Office (“Regional Director”) in writing of any changes of any member of the Bank’s board of directors (“Board”) or senior management officer within 15 days

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of the event. Any notification required by this subparagraph shall include a description of the background(s) and experience of any proposed replacement personnel and must be received at least 30 days prior to the individual(s) assuming the new position(s). The Bank shall also establish procedures to ensure compliance with section 32 of the Act, 12 U.S.C. § 1831i, and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. Part 303.

MANAGEMENT — BOARD SUPERVISION

          2. Within 30 days after the effective date of this ORDER, the Board shall increase its participation in the affairs of the Bank by assuming full responsibility for the approval of the Bank’s policies and objectives and for the supervision of the Bank’s management, including all the Bank’s activities. The Board’s participation shall include, at a minimum, monthly meetings in which the following areas shall be reviewed and approved by the Board: reports of income and expenses; new, overdue, renewed, insider, charged-off, delinquent, noncurrent, and recovered loans; investment activities; liquidity and funds management; operating policies; and individual committee actions. The Board minutes shall document these reviews and approvals, including the names of any dissenting directors.

CLASSIFIED ASSETS — CHARGE-OFF AND PLAN FOR REDUCTION

          3. (a) Within 30 days after the effective date of this ORDER, the Bank shall, to the extent that it has not previously done so, eliminate from its books, by charge-off or collection, all assets or portions of assets classified “Loss” by the FDIC and the Commonwealth of Pennsylvania Department of Banking in the Joint Report of Examination as of December 31, 2008 (“ROE”). Elimination or reduction of these assets through proceeds of loans made by the Bank shall not be considered “collection” for the purpose of this paragraph.

               (b) Within 60 days after the effective date of this ORDER, the Bank shall formulate and submit a detailed written plan to the Regional Director to reduce the remaining

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assets classified “Doubtful” and “Substandard” in the ROE. The plan shall address each asset so classified with a balance of $1,000,000 or greater and provide the following:

     (1) the name under which the asset is carried on the Bank’s books;

     (2) type of asset;

     (3) actions to be taken in order to reduce the classified asset; and

     (4) timeframes for accomplishing the proposed actions.

          The plan shall also include, at a minimum:

          (1) a review of the financial position of each such borrower, including the source of repayment, repayment ability, and alternate repayment sources; and

          (2) an evaluation of the available collateral for each such credit, including possible actions to improve the Bank’s collateral position.

          In addition, the plan shall contain a schedule detailing the projected reduction of total classified assets on a quarterly basis. Further, the plan shall contain a provision requiring the submission of monthly progress reports to the Board and a provision mandating a review by the Board.

          (c) The Bank shall submit the plan to the Regional Director for review and comment. Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director, which approval shall be recorded in the minutes of the Board meeting. The Bank shall then immediately initiate measures detailed in the plan to the extent such measures have not been initiated.

          (d) For purposes of the plan, the reduction of adversely classified assets shall be detailed using quarterly targets expressed as a percentage of the Bank’s Tier 1 capital plus the Bank’s Allowance for Loan and Lease Losses and may be accomplished by charge-off;

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collection; sufficient improvement in the quality of adversely classified assets so as to warrant removing any adverse classification, as determined by the FDIC; or an increase in the Bank’s Tier 1 capital.

          (e) While this ORDER is in effect, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified “Loss” as determined at any future examination.

REDUCTION OF DELINQUENCIES

          4. (a) Within 60 days after the effective date of this ORDER, the Bank shall formulate and submit to the Regional Director for review and comment a detailed written plan for the reduction and collection of delinquent loans. Such plan shall include, but not be limited to, provisions which:

          (1) prohibit the extension of credit for the payment of interest, unless the Board adopts prior to such extension of credit a detailed written statement giving reasons why such extension of credit is in the best interests of the Bank and how it improves the position of the Bank. Copies of the statement approved by the Board shall be made a part of the Board minutes and placed in the appropriate loan file and submitted to the Regional Director with the quarterly progress reports required pursuant to paragraph 16 of this ORDER;

          (2) delineate areas of responsibility for implementing and monitoring the Bank’s collection policies;

          (3) establish specific collection procedures to be instituted at various stages of a borrower’s delinquency;

          (4) establish dollar levels to which the Bank shall reduce delinquencies within 6 and 12 months from the effective date of this ORDER; and

6

          (5) provide for the submission of monthly written progress reports to the Board for review and notation in the Board minutes.

          (b) For purposes of the plan, “reduce” means to charge-off or collect.

          (c) Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

RESTRICTION ON ADVANCES TO CLASSIFIED BORROWERS

          5. (a) While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose existing credit has been classified “Loss” in the ROE, either in whole or in part, and is uncollected, or to any borrower who is already obligated in any manner to the Bank on any extension of credit, including any portion thereof, that has been charged off the books of the Bank and remains uncollected. The requirements of this paragraph shall not prohibit the Bank from renewing (after full collection, in cash, of interest due from the borrower) any credit already extended to the borrower.

          (b) While this ORDER is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose extension of credit is classified “Doubtful” and/or “Substandard” in the ROE, either in whole or in part, and is uncollected, unless the Board has signed a detailed written statement giving reasons why failure to extend such credit would be detrimental to the best interests of the Bank. The statement shall be placed in the appropriate loan file and included in the minutes of the applicable meeting of the Board.

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REDUCTION OF COMMERCIAL REAL ESTATE CONCENTRATIONS

          6. (a) Within 45 days from the effective date of this ORDER, the Bank shall develop and submit a written plan, acceptable to the Regional Director, for systematically reducing and monitoring the Bank’s commercial real estate (“CRE”) loan concentration of credit identified in the ROE to an amount which is commensurate with the Bank’s business strategy, management expertise, size, and location. Such plan shall prohibit any advances that would increase the concentration unless the advance is pursuant to an existing loan agreement and shall include, but not be limited to:

          (1) dollar levels and percent of capital to which the Bank shall reduce the concentration;

          (2) timeframes for achieving the reduction in dollar levels in response to (1) above;

          (3) compliance with the Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (FIL-104-2006, issued December 12, 2006) and Managing Commercial Real Estate Concentrations in a Challenging Environment (FIL-22-2008, issued March 17, 2008);

          (4) provisions for controlling and monitoring of CRE, including plans to address the rationale for CRE levels as they relate to growth and capital targets, segmentation and testing of the CRE portfolio to detect and limit concentrations with similar risk characteristics; and

          (5) provisions for the submission of monthly written progress reports to the Board for review and notation in minutes of the Board meetings.

          (b) For purposes of the plan, “reduce” means to charge-off or collect, or increase Tier 1 capital.

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          (c) The Bank shall submit the plan to the Regional Director for review and comment. Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director, which approval shall be recorded in the minutes of the Board meeting. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

CAPITAL MAINTENANCE

          7. (a) Within 30 days after the effective date of this ORDER, and at all times thereafter while this ORDER is in effect, the Bank, after establishing an adequate Allowance for Loan and Lease Losses, shall increase and maintain its ratio of Tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8 percent and its ratio of qualifying total capital to risk-weighted assets (“total risk-based capital ratio”) equal to or greater than 12 percent.

               (b) If said capital ratios are less than required by this ORDER, as determined as of the date of any Report of Condition and Income or at any future examination, the Bank shall, within 30 days after notice of its capital deficiency, submit to the Regional Director a plan to increase its capital or to take such other measures to bring its leverage ratio and total risk-based capital ratio to the percentages required by this ORDER. After the Regional Director responds to the plan, the Board shall adopt the plan, including any modifications or amendments requested by the Regional Director.

               (c) In addition, the Bank shall comply with the FDIC’s Statement of Policy on Risk-Based Capital found in Appendix A to Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325, App. A.

               (d) For purposes of this ORDER, all terms relating to capital shall have the meanings ascribed to them and shall be calculated according to the methodology set forth in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325.

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BUDGET AND PROFIT PLAN

          8. (a) Within 60 days after the effective date of this ORDER, the Bank shall submit to the Regional Director for review and comment a written profit plan and a realistic, comprehensive budget for all categories of income and expense for the remainder of the year 2009. The plan required by this paragraph shall contain formal goals and strategies, be consistent with sound banking practices, reduce discretionary expenses, improve the Bank’s overall earnings and net interest income, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.

               (b) Within 45 days after the end of each calendar quarter following completion of the profit plan and budget required by this paragraph, the Board shall evaluate the Bank’s actual performance in relation to the written profit plan and budget, record the results of the evaluation, and note any actions taken by the Bank in the Board minutes when such evaluation is undertaken.

               (c) A written profit plan and budget shall be prepared for each calendar year for which this ORDER is in effect and shall be submitted to the Regional Director for review and comment within 30 days after the end of each year. Within 30 days after receipt of all such comments from the Regional Director and after adoption of any recommended changes, the Bank shall approve the written profit plan and budget, which approval shall be recorded in the Board minutes. Thereafter, the Bank shall implement and follow the plan.

STRATEGIC PLAN

          9. (a) Within 90 days after the effective date of this ORDER, the Bank shall develop and submit to the Regional Director for review and comment a comprehensive business/strategic plan (“Strategic Plan”) covering at least an operating period of three years. The Strategic Plan shall contain an assessment of the Bank’s current financial condition and

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market area, and a description of the operating assumptions that form the basis for major projected income and expense components.

          (b) The Strategic Plan shall address, at a minimum:

          (1) strategies for pricing policies and asset/liability management;

          (2) specific plans for the maintenance of capital that may in no event be less than the requirement of the provisions of paragraph 7 of this ORDER and shall detail the actions to be taken to maintain the required capital ratio, including but not limited to, the sale of new securities, the direct contribution of cash by the directors or parent holding company, or the merger with or acquisition by another federally insured institution or holding company thereof;

          (3) plans for redeeming or buying back the senior securities from the U.S. Department of the Treasury issued pursuant to the Troubled Asset Relief Program Capital Purchase Program;

          (4) plans for sustaining adequate liquidity, including back-up lines of credit to meet any unanticipated deposit withdrawals;

          (5) goals for reducing problem loans;

          (6) financial goals, including pro forma statements for asset growth, capital adequacy, and earnings;

          (7) formulation of a mission statement and the development of a strategy to carry out that mission.

          (c) The Bank shall submit the Strategic Plan to the Regional Director for review and comment. Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director, which approval

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shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and follow the Strategic Plan.

          (d) Within 45 days after the end of each calendar quarter following the effective date of this ORDER, the Board shall evaluate the Bank’s performance in relation to the Strategic Plan and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the meeting of the Board at which such evaluation is undertaken. A copy of the evaluation shall be submitted to the Regional Director.

          (e) The Strategic Plan required by this ORDER shall be revised and submitted to the Regional Director for review and comment 45 days after the end of each calendar year for which this ORDER is in effect. Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement the Strategic Plan.

LIQUIDITY AND FUNDS MANAGEMENT

          10. (a) Within 60 days after the effective date of this ORDER, the Bank shall revise its liquidity and funds management policy and submit it to the Regional Director for review and comment. Annually thereafter, while this ORDER is in effect, the Bank shall review its policy for adequacy and, based upon such review, shall make necessary revisions to the policy to strengthen funds management procedures and maintain adequate provisions to meet the Bank’s liquidity needs. The initial plan shall include, at a minimum, provisions:

          (1) establishing a reasonable range for its net non-core funding ratio as computed in the Uniform Bank Performance Report and shall address the means by which the Bank will seek to reduce its reliance on non-core funding and high cost rate-sensitive deposits;

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          (2) identifying the source and use of borrowed and/or volatile funds;

          (3) establishing sufficient back-up lines of credit that would allow the Bank to borrow funds to meet depositor demands if the Bank’s other provisions for liquidity proved to be inadequate;

          (4) requiring the retention of securities and/or other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Bank’s total assets) to ensure the maintenance of the Bank’s liquidity posture at a level consistent with short- and long-term liquidity objectives;

          (5) establishing a minimum liquidity ratio and defining how the ratio is to be calculated;

          (6) establishing contingency plans by identifying alternative courses of action designed to meet the Bank’s liquidity needs; and

          (7) addressing the use of borrowings (i.e., seasonal credit needs, match funding mortgage loans, etc.) and providing for reasonable maturities commensurate with the use of the borrowed funds; addressing concentration of funding sources; and addressing pricing and collateral requirements with specific allowable funding channels (i.e., brokered deposits, internet deposits, Fed funds purchased and other correspondent borrowings).

          (b) Within 30 days after the Regional Director has responded to the plan, the Board shall adopt the plan as amended or modified by the Regional Director. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

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BROKERED DEPOSITS

          11. (a) Beginning with the effective date of this ORDER, and so long as this ORDER is in effect, the Bank shall not solicit, accept, renew, or roll over any brokered deposits unless it has applied for and been granted a waiver by the Regional Director in accordance with the provisions of section 337.6 of the FDIC Rules and Regulations.

               (b) Within 60 days from the effective date of this ORDER, the Board shall develop a plan to reduce the Bank’s reliance on non-core deposits and wholesale funding sources to a level acceptable to the Regional Director.

DIVIDEND RESTRICTION

          12. As of the effective date of this ORDER, the Bank shall not declare or pay any cash dividend without the prior written consent of the Regional Director.

HOLDING COMPANY — RESTRICTIONS ON PAYMENTS

          13. (a) As of the effective date of this ORDER, the Bank shall not make any payment, directly or indirectly, to or for the benefit of the Bank’s holding company or any other Bank affiliate, without the prior written consent of the Regional Director.

               (b) The Bank shall not enter into any contract with its holding company or any other Bank affiliate or increase payment under any existing contract without submitting the new contract or information concerning the increase in any existing contract to the Regional Director for review and comment.

CORRECTION AND PREVENTION

          14. Beginning on the effective date of this ORDER, the Bank shall take steps necessary, consistent with other provisions of this ORDER and sound banking practices, to correct and prevent the unsafe or unsound banking practices that were identified in the ROE.

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COMPLIANCE COMMITTEE

          15. (a) Within 30 days after the effective date of this ORDER, the Board shall establish a compliance committee of the Board with the responsibility of ensuring that the Bank complies with the provisions of this ORDER. The compliance committee shall report monthly to the entire Board, and a copy of the report and any discussion related to the report or this ORDER shall be included in the minutes of the Board meeting. Nothing contained herein shall diminish the responsibility of the entire Board to ensure compliance with the provisions of this ORDER.

PROGRESS REPORTS

          16. Within 45 days after the end of each calendar quarter following the effective date of this ORDER, the Bank shall furnish to the Regional Director written progress reports detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof. Such reports may be discontinued when the corrections required by this ORDER have been accomplished and the Regional Director has released, in writing, the Bank from making further reports.

EXECUTIVE COMPENSATION

          17. (a) Within 45 days from the effective date of this ORDER, the Bank shall submit to the Regional Director for review and approval an executive compensation plan which incorporates qualitative as well as profitability performance standards for the Bank’s executive officers. For purposes of this paragraph, “compensation” refers to any and all salaries, bonus and other benefits of every kind or nature whatsoever, both current and deferred, whether paid directly or indirectly, and the term “executive officers” shall include the Bank’s chairman of the Board, vice-chairman of the Board, president, chief executive officer, executive vice president(s), senior vice president(s), and chief financial officer.

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SHAREHOLDERS

          18. After the effective date of this ORDER, the Bank shall send a copy of this ORDER, or otherwise furnish a description of this ORDER, to its parent holding company in conjunction with the Bank’s next shareholder communication. The description shall fully describe the ORDER in all material respects.

ORDER EFFECTIVE

          19. This ORDER shall be binding upon the Bank, its successors and assigns, and all institution-affiliated parties of the Bank. The provisions of this ORDER shall remain effective and enforceable except to the extent that, and until such time as, any provision of this ORDER shall have been modified, terminated, superseded, or set aside in writing by the FDIC.

               This ORDER will become effective upon its issuance by the FDIC.

               Pursuant to delegated authority.

               Dated this 16^th day of July, 2009.

John M. Lane 

Acting Regional Director
New York Region
Division of Supervision and Consumer Protection
Federal Deposit Insurance Corporation 

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EX-10.3

Exhibit 10.3

COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF BANKING

	:
Commonwealth of Pennsylvania,	:	Docket No.: 09____(ENF-ORD)
Department of Banking, Bureau of	:
Commercial Institutions,	:
	:
v.	:
	:
Royal Bank America.	:
	:

CEASE AND DESIST ORDER

     WHEREAS, Royal Bank America, Narberth, Pennsylvania (the “Bank”), is a Pennsylvania state-chartered bank and subject to regulation by the Commonwealth of Pennsylvania Department of Banking (the “Department”) and the Federal Deposit Insurance Corporation (“FDIC”);

     WHEREAS, the Bureau of Commercial Institutions (the “Bureau”) is primarily responsible within the Department for the regulation and supervision of the Bank;

     WHEREAS, the Bank was the subject of a Joint Report of Examination of the Bank by the Bureau and the FDIC as of December 31, 2008 (the “Report of Examination”); and,

     WHEREAS, the Report of Examination gave the Bureau and the FDIC the reason to believe that the Bank had engaged in unsafe or unsound banking practices and had committed violations of law and regulation.

     IT IS HEREBY ORDERED, pursuant to Section 501.A of the Department of Banking Code, 71 P.S. § 733-501.A, that the Bank, its directors, officers, employees, agents, and other “institution-affiliated parties,” as that term is defined in Section 3(u) of the FDIA, 12 U.S.C. § 1813(u), and its successors and assigns, shall CEASE AND DESIST from engaging in the following unsafe or unsound banking practices and violations of law and regulation:

     1. Operating the Bank with inadequate management policies and practices that are detrimental to the Bank.

     2. Operating the Bank without adequate supervision and direction by the Bank’s board of directors over the management of the Bank to prevent unsafe or unsound banking practices.

     3. Operating the Bank with an excessive level of adversely classified loans or assets.

     4. Operating the Bank with an excessive level of delinquent loans.

     5. Operating the Bank with an excessive level of nonaccrual loans.

     6. Engaging in unsatisfactory lending and collection practices, including, but not limited to:

          (a) Insufficient monitoring and controls over receivable-based loans.

          (b) Excessive out-of-territory lending.

          (c) Over-reliance on real estate liquidation as a loan repayment source and over-reliance on guarantors’ real estate net worth.

          (d) Operating with inadequate underwriting, loan-grading system and loan administration practices.

     7. Operating the Bank with an inadequate level of capital protection for the kind and quality of assets held by the Bank.

     8. Operating the Bank with inadequate earnings to fund growth and augment capital.

     9. Operating the Bank with inadequate net interest margins.

     10. Operating the Bank without adequate liquidity and funds management policies and procedures.

     11. Operating with an inadequate investment policy.

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     12. Operating the Bank with a heavy reliance on non-core funding sources.

     13. Operating the Bank with inadequate internal routines and controls.

     IT IS FURTHER ORDERED, pursuant to Section 501.A of the Department of Banking Code, 71 P.S. § 733-501.A, that the Bank, its directors, officers, employees, agents, and other “institution-affiliated parties,” as that term is defined in Section 3(u) of the FDIA, 12 U.S.C. § 1813(u), and its successors and assigns, shall take AFFIRMATIVE ACTION, as follows:

     1. Management.

          (a) The Bank shall have and retain qualified management. Each member of management shall possess qualifications and experience commensurate with his or her duties and responsibilities at the Bank. The qualifications of management personnel shall be evaluated on their ability to:

(i)	comply with the requirements of this Order;
(ii)	operate the Bank in a safe and sound manner;
(iii)	comply with applicable laws and regulations; and
(iv)	restore all aspects of the Bank to a safe and sound condition, including improving the Bank’s asset quality, capital adequacy, earnings, management effectiveness, and liquidity.

          (b) While this Order is in effect, the Bank shall notify the Department in writing of any changes of any member of the Bank’s board of directors (“Board”) or senior management officer within 15 days of the event. Any notification required by this subparagraph shall include a description of the background(s) and experience of any proposed replacement personnel and must be received at least 30 days prior to the individual(s) assuming the new position(s). The Bank shall also establish procedures to ensure compliance with

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section 32 of the Act, 12 U.S.C. § 1831i, and Subpart F of Part 303 of the FDIC Rules and Regulations, 12 C.F.R. Part 303.

     2. Management — Board Supervision. Within 30 days after the effective date of this Order, the Board shall increase its participation in the affairs of the Bank by assuming full responsibility for the approval of the Bank’s policies and objectives and for the supervision of the Bank’s management, including all the Bank’s activities. The Board’s participation shall include, at a minimum, monthly meetings in which the following areas shall be reviewed and approved by the Board: reports of income and expenses; new, overdue, renewed, insider, charged-off, delinquent, noncurrent, and recovered loans; investment activities; liquidity and funds management; operating policies; and individual committee actions. The Board minutes shall document these reviews and approvals, including the names of any dissenting directors.

     3. Classified Assets — Charge-Off and Plan For Reduction.

          (a) Within 30 days after the effective date of this Order, the Bank shall, to the extent that it has not previously done so, eliminate from its books, by charge-off or collection, all assets or portions of assets classified “Loss” by the FDIC and the Department in the Joint Report of Examination as of December 31, 2008 (“Report of Examination”). Elimination or reduction of these assets through proceeds of loans made by the Bank shall not be considered “collection” for the purpose of this paragraph.

          (b) Within 60 days after the effective date of this Order, the Bank shall formulate and submit a detailed written plan to the Bureau to reduce the remaining assets classified “Doubtful” and “Substandard” in the Report of Examination. The plan shall address each asset so classified with a balance of $1,000,000 or greater and provide the following:

(i)	the name under which the asset is carried on the Bank’s books;
(ii)	type of asset;
(iii)	actions to be taken in order to reduce the classified asset;
(iv)	timeframes for accomplishing the proposed actions;

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(v)	The plan shall also include, at a minimum:
	(1) a review of the financial position of each such borrower, including the source of repayment, repayment ability, and alternate repayment sources; and
	(2) an evaluation of the available collateral for each such credit, including possible actions to improve the Bank’s collateral position;

(vi)	a schedule detailing the projected reduction of total classified assets on a quarterly basis; and,
(vii)	a provision requiring the submission of monthly progress reports to the Board and a provision mandating a review by the Board.

          (c) The Bank shall submit the plan to the Bureau for review and comment. Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau, which approval shall be recorded in the minutes of the Board meeting. The Bank shall then immediately initiate measures detailed in the plan to the extent such measures have not been initiated.

          (d) For purposes of the plan, the reduction of adversely classified assets shall be detailed using quarterly targets expressed as a percentage of the Bank’s Tier 1 capital plus the Bank’s Allowance for Loan and Lease Losses and may be accomplished by charge-off, collection; sufficient improvement in the quality of adversely classified assets so as to warrant removing any adverse classification, as determined by the Bureau; or an increase in the Bank’s Tier 1 capital.

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          (e) While this Order is in effect, the Bank shall eliminate from its books, by charge-off or collection, all assets or portions of assets classified “Loss” as determined at any future examination.

     4. Reduction of Delinquencies.

          (a) Within 60 days after the effective-date of this Order, the Bank shall formulate and submit to the Bureau for review and comment a detailed written plan for the reduction and collection of delinquent loans, such plan shall include, but not be limited to, provisions which:

(i)	prohibit the extension of credit for the payment of interest, unless the Board adopts prior to such extension of credit a detailed written statement giving reasons why such extension of credit is in the best interests of the Bank and how it improves the position of the Bank. Copies of the statement approved by the Board shall be made a part of the Board minutes and placed in the appropriate loan file and submitted to the Bureau with the quarterly progress reports required pursuant to paragraph 16 of this Order;
(ii)	delineate areas of responsibility for implementing and monitoring the Bank’s collection policies;
(iii)	establish specific collection procedures to be instituted at various stages of a borrower’s delinquency;
(iv)	establish dollar levels to which the Bank shall reduce delinquencies within 6 and 12 months from the effective date of this Order; and,

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(v) provide for the submission of monthly written progress reports to the Board for review and notation in the Board minutes.

          (b) For purposes of the plan, “reduce” means to charge-off or collect.

          (c) Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

     5. Restriction of Advances to Classified Borrowers.

          (a) While this Order is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose existing credit has been classified “Loss” in the Report of Examination, either in whole or in part, and is uncollected, or to any borrower who is already obligated in any manner to the Bank on any extension of credit, including any portion thereof, that has been charged off the books of the Bank and remains uncollected. The requirements of this paragraph shall not prohibit the Bank from renewing (after full collection, in cash, of interest due from the borrower) any credit already extended to the borrower.

          (b) While this Order is in effect, the Bank shall not extend, directly or indirectly, any additional credit to or for the benefit of any borrower whose extension of credit is classified “Doubtful” and/or “Substandard” in the Report of Examination, either in whole or in part, and is uncollected, unless the Board has signed a detailed written statement giving reasons why failure to extend such credit would be detrimental to the best interests of the Bank. The statement shall be placed in the appropriate loan file and included in the minutes of the applicable meeting of the Board.

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     6. Reduction of Commercial Real Estate Concentrations.

          (a) Within 45 days from the effective date of this Order, the Bank shall develop and submit a written plan, acceptable to the Bureau, for systematically reducing and monitoring the Bank’s commercial real estate (“CRE”) loan concentration of credit identified in the Report of Examination to an amount which is commensurate with the Bank’s business strategy, management expertise, size, and location. Such plan shall prohibit any advances that would increase the concentration unless the advance is pursuant to an existing loan agreement and shall include, but not be limited to:

(i)	dollar levels and percent of capital to which the Bank shall reduce the concentration; and,
(ii)	timeframes for achieving the reduction in dollar levels in response to (i) above;
(iii)	compliance with the Interagency Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (FIL-104-2006, issued December 12, 2006) and Managing Commercial Real Estate Concentrations in a Challenging Environment (FIL-22-2008, issued March 17, 2008);
(iv)	provisions for controlling and monitoring of CRE, including plans to address the rationale for CRE levels as they relate to growth and capital targets, segmentation and testing of the CRE portfolio to detect and limit concentrations with similar risk characteristics; and

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(v) provisions for the submission of monthly written progress reports to the Board for review and notation in minutes of the Board meetings.

          (b) For purposes of the plan, “reduce” means to charge-off or collect or increase Tier 1 capital.

          (c) The Bank shall submit the Plan to the Bureau for review and comment. Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau, which approval shall be recorded in the minutes of the Board meeting. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

     7. Capital Maintenance.

          (a) Within 30 days after the effective date of this Order, and at all times thereafter while this Order is in effect, the Bank, after establishing an adequate Allowance for Loan and Lease Losses, shall increase and maintain its ratio of Tier 1 capital to total assets (“leverage ratio”) equal to or greater than 8 percent and its ratio of qualifying total capital to risk-weighted assets (“total risk-based capital ratio”) equal to or greater than 12 percent.

          (b) If said capital ratios are less than required by this Order, as determined as of the date of any Report of Condition and Income or at any future examination, the Bank shall, within 30 days after notice of its capital deficiency, submit to the Bureau a plan to increase its capital or to take such other measures to bring its leverage and total risk-based capital ratio to the percentage required by this Order. After the Bureau responds to the plan, the Board shall adopt the plan, including any modifications or amendments requested by the Bureau.

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          (c) In addition, the Bank shall comply with the FDIC’s Statement of Policy on Risk-Based Capital found in Appendix A to Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325, App. A.

          (d) For purposes of this Order, all terms relating to capital shall have the meanings ascribed to them and shall be calculated according to the methodology set forth in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part 325.

     8. Budget and Profit Plan.

          (a) Within 60 days after the effective date of this Order, the Bank shall submit to the Bureau for review and comment a written profit plan and a realistic, comprehensive budget for all categories of income and expense for the remainder of the year 2009. The plan required by this paragraph shall contain formal goals and strategies, be consistent with sound banking practices, reduce discretionary expenses, improve the Bank’s overall earnings and net interest income, and shall contain a description of the operating assumptions that form the basis for major projected income and expense components.

          (b) Within 45 days after the end of each calendar quarter following completion of the profit plan and budget required by this paragraph, the Board shall evaluate the Bank’s actual performance in relation to the written profit plan and budget, record the results of the evaluation, and note any actions taken by the Bank in the Board minutes when such evaluation is undertaken.

          (c) A written profit plan and budget shall be prepared for each calendar year for which this Order is in effect and shall be submitted to the Bureau for review and comment within 30 days after the end of each year. Within 30 days after receipt of all such comments from the Bureau and after adoption of any recommended changes, the Bank shall approve the

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written profit plan and budget, which approval shall be recorded in the Board minutes. Thereafter, the Bank shall implement and follow the plan.

     9. Strategic Plan.

          (a) Within 90 days after the effective date of this Order, the Bank shall develop and submit to the Bureau for review and comment a comprehensive business/strategic plan (“Strategic Plan”) covering at least an operating period of three years. The Strategic Plan shall contain an assessment of the Bank’s current financial condition and market area, and a description of the operating assumptions that form the basis for major projected income and expense components.

          (b) The Strategic Plan shall address, at a minimum:

               (1) strategies for pricing policies and asset/liability management;

               (2) specific plans for the maintenance of capital that may in no event be less than the requirement of the provisions of paragraph 7 of this Order and shall detail the actions to be taken to maintain the required capital ratio, including but not limited to, the sale of new securities, the direct contribution of cash by the directors or parent holding company, or the merger with or acquisition by another federally insured institution or holding company thereof;

               (3) plans for sustaining adequate liquidity, including back-up lines of credit to meet any unanticipated deposit withdrawals;

               (4) goals for reducing problem loans;

               (5) financial goals, including pro forma statements for asset growth, capital adequacy, and earnings;

               (6) formulation of a mission statement and the development of a strategy to carry out that mission.

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          (c) The Bank shall submit the Strategic Plan to the Bureau for review and comment. Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement and follow the Strategic Plan.

          (d) Within 45 days after the end of each calendar quarter following the effective date of this Order, the Board shall evaluate the Bank’s performance in relation to the Strategic Plan and record the results of the evaluation, and any actions taken by the Bank, in the minutes of the meeting of the Board at which such evaluation is undertaken. A copy of the evaluation shall be submitted to the Bureau.

          (e) The Strategic Plan required by this Order shall be revised and submitted to the Bureau for review and comment 45 days after the end of each calendar year for which this Order is in effect. Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau, which approval shall be recorded in the minutes of the meeting of the Board. Thereafter, the Bank shall implement the Strategic Plan.

     10. Liquidity and Funds Management.

          (a) Within 60 days after the effective date of this Order, the Bank shall revise its liquidity and funds management policy and submit it to the Bureau for review and comment. Annually thereafter, while this Order is in effect, the Bank shall review its policy for adequacy and, based upon such review, shall make necessary revisions to the policy to strengthen funds management procedures and maintain adequate provisions to meet the Bank’s liquidity needs. The initial plan shall include, at a minimum, provisions:

(i) establishing a reasonable range for its net non-core funding ratio as computed in the Uniform Bank Performance Report and shall

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	address the means by which the Bank will seek to reduce its reliance on non-core funding and high cost rate-sensitive deposits;
(ii)	identifying the source and use of borrowed and/or volatile funds;
(iii)	establishing sufficient back-up lines of credit that would allow the Bank to borrow funds to meet depositor demands if the Bank’s other provisions for liquidity proved to be inadequate;
(iv)	requiring the retention of securities and/or other identified categories of investments that can be liquidated within one day in amounts sufficient (as a percentage of the Bank’s total assets) to ensure the maintenance of the Bank’s liquidity posture at a level consistent with short and long term liquidity objectives;
(v)	establishing a minimum liquidity ratio and defining how the ratio is to be calculated;
(vi)	establishing contingency plans by identifying alternative courses of action designed to meet the Bank’s liquidity needs; and,
(vii)	addressing the use of borrowings (i.e., seasonal credit needs, match funding mortgage loans, etc.) and providing for reasonable maturities commensurate with the use of the borrowed funds; addressing concentration of funding sources; and, addressing pricing and collateral requirements with specific allowable funding channels (i.e., brokered deposits, internet deposits, Fed funds purchased and other correspondent borrowings).

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          (b) Within 30 days after the Bureau has responded to the plan, the Board shall adopt the plan as amended or modified by the Bureau. The plan shall be implemented immediately to the extent that the provisions of the plan are not already in effect at the Bank.

     11. Brokered Deposits.

          (a) Beginning with the effective date of this Order, and so long as this Order is in effect, the Bank shall not solicit, accept, renew, or roll over any brokered deposits unless it has applied for and been granted a waiver by the Regional Director if the FDIC’s New York Regional Office in accordance with the provisions of section 337.6 of the FDIC Rules and Regulations.

          (b) Within 60 days from the effective date of this Order, the Board shall develop a plan to reduce the Bank’s reliance on non-core deposits and wholesale funding sources to a level acceptable to the Bureau.

     12. Dividend Restriction. As of the effective date of this Order, the Bank shall not declare or pay any cash dividend without the prior written consent of the Bureau.

     13. Holding Company — Restriction on Payments.

          (a) As of the effective date of this Order, the Bank shall not make any payment, directly or indirectly, to or for the benefit of the Bank’s holding company or any other Bank affiliate, without the prior written consent of the Bureau.

          (b) The Bank shall not enter into any contract with its holding company or any other Bank affiliate or increase payment under any existing contract without submitting the new contract or information concerning the increase in any existing contract to the Bureau for review and comment.

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     14. Correction and Prevention. Beginning on the effective date of this Order, the Bank shall take steps necessary, consistent with other provisions of this Order and sound banking practices, to correct and prevent the unsafe or unsound banking practices that were identified in the Report of Examination.

     15. Compliance Committee. Within 30 days after the effective date of this Order, the Board shall establish a compliance committee of the Board with the responsibility of ensuring that the Bank complies with the provisions of this Order. The compliance committee shall report monthly to the entire Board, and a copy of the report and any discussion related to the report or this Order shall be included in the minutes of the Board meeting. Nothing contained herein shall diminish the responsibility of the entire Board to ensure compliance with the provisions of this Order.

     16. Progress Reports. Within 45 days after the end of each calendar quarter following the effective date of this Order, the Bank shall furnish to the Bureau written progress reports detailing the form and manner of any actions taken to secure compliance with this Order and the results thereof. Such reports may be discontinued when the corrections required by this Order have been accomplished and the Bureau has released, in writing, the Bank from making further reports.

     17. Fidelity Bond.

          (a) Within thirty (30) days of the effective date of this Order, the Bank shall provide to the Bureau a full and complete copy of the bond required by 7 P.S. § 1410 (the “Bond”).

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          (b) The Bank shall immediately notify the Bureau of any notifications or information from the Bank’s bond insurance carrier, its agents and/or representatives that the Bond is not going to be renewed or will be terminated.

     18. Section 403 Reports to the Bureau. All reports required to be submitted to the Bureau under this Order are special reports being required under Section 403 of the Department of Banking Code, 71 P.S. § 733-403, and shall be submitted to the Bureau in accordance with Section 403.B of the Department of Banking Code, 71 P.S. § 733-403.B.

     19. Confidentiality. This Order and all reports and communications relating to this Order shall be confidential and shall not be released or divulged to any person or entity not officially connected to the Bank as a director, officer, attorney or employee without the express written permission of the Department. Notwithstanding the foregoing, the Bank may disclose the existence and contents of this Order under the provisions of 71 P.S. § 733-404.A, relating to disclosures required by federal and state securities laws.

     20. Other Actions.

          (a) If at any time the Department shall deem it appropriate in fulfilling the responsibilities placed upon the Department under applicable law to undertake any further action affecting the Bank, nothing in this Order shall in any way inhibit, estop, bar or otherwise prevent the Department from doing so.

          (b) Nothing herein shall preclude any proceedings brought by the Department to enforce the terms of this Order, and that nothing herein constitutes, nor shall the Bank contend that it constitutes, a waiver of any right, power or authority of any other representatives of the United States, departments or agencies thereof, Department of Justice, or any other

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representatives of the Commonwealth of Pennsylvania or any other departments or agencies thereof, including any prosecutorial agency, to bring other actions deemed appropriate.

     21. Communications. All communications regarding this Order shall be sent to:

Raymond C. Harper, Director
Bureau of Commercial Institutions
Commonwealth of Pennsylvania
Department of Banking
17 North Second Street, Suite 1300
Harrisburg, Pennsylvania 17101

     22. Binding Nature. The provisions of this Order including the recital paragraphs shall be binding upon the Bank and all of their institution-affiliated parties, in their capacities as such, and their successors and assigns.

     23. Effective Date. The effective date of this Order shall be the date upon which this Order has been executed by the Bureau. Each provision of this Order shall remain effective and enforceable, jointly and severally, until stayed, modified, terminated or suspended by the Bureau.

     24. Titles. The titles used to identify the paragraphs of this document are for the convenience of reference only and do not control the interpretation of this document.

SO ORDERED
7/16/2009
Date	Raymond C. Harper, Director
	Bureau of Commercial Institutions Commonwealth of Pennsylvania Department of Banking 17 North Second Street, Suite 1300 Harrisburg, PA 17101

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COMMONWEALTH OF PENNSYLVANIA
DEPARTMENT OF BANKING

	:
Commonwealth of Pennsylvania,	:	Docket No.: 09____(ENF-ORD)
Department of Banking, Bureau of	:
Commercial Institutions,	:
	:
v.	:
	:
Royal Bank America	:
	:

STIPULATION AND CONSENT TO
ENTRY OF ORDER

     WHEREAS, Royal Bank America, Narberth, Pennsylvania (the “Bank”), is a Pennsylvania state-chartered bank and subject to regulation by the Commonwealth of Pennsylvania Department of Banking (the “Department”) and the Federal Deposit Insurance Corporation (“FDIC”);

     WHEREAS, the Bureau of Commercial Institutions (the “Bureau”) is primarily responsible within the Department for the regulation and supervision of the Bank;

     WHEREAS, the Bank was the subject of a Joint Report of Examination of the Bank by the Bureau and the FDIC as of December 31, 2008 (the “Report of Examination”);

     WHEREAS, the Report of Examination gave the Bureau and the FDIC the reason to believe that the Bank had engaged in unsafe or unsound banking practices and had committed violations of law and regulation;

     WHEREAS, as a result of the Report of Examination, the Department is of the opinion that grounds exist for the entry of the attached Order (the “Order”) against the Bank pursuant to Section 501.A of the Department of Banking Code, 71 P.S. § 733-501.A; and,

     WHEREAS, the Bank in the interest of compliance and cooperation, without admitting wrongdoing and in order to avoid administrative proceedings or other litigation, stipulates and agrees to the following terms and conditions in consideration of the Department’s forbearance from further litigation and such other administrative proceedings based upon the forgoing recitals and the matters contained in the Order.

     NOW, THEREFORE, IT IS AGREED BETWEEN THE DEPARTMENT AND THE BANK AS FOLLOWS:

     1. Jurisdiction. The Bank is a “bank” within the meaning of Section 102(f) of the Banking Code of 1965, 7 P.S. § 102(f).

     2. Consent. The Bank consents to the issuance by the Department of the Order and further agrees to comply with the remedial action set forth in the Order upon its date of effectiveness as set forth in paragraph 5.

     3. Finality and Waiver. The Bank agrees that the Order is properly issued pursuant to the Department’s authority under Section 501.A of the Department of Banking Code, 71 P.S. § 733-501.A, and complies with all requirements of law, and upon issuance, shall become final and unappealable. The Bank waives any rights they may have to seek administrative or judicial review of the issuance of the Order or the remedial actions and requirements set forth in the Order.

     4. Enforceability. The Bank acknowledges that the Department has the power to enforce the attached Order pursuant to Section 502 of the Department of Banking Code, 71 P.S. § 733-502.

     5. Effectiveness. The Bank stipulates and agrees that the Order will become effective on the date that it is executed by the Department.

     6. Confidentiality. The Bank acknowledges that this Stipulation and Consent to Entry of Order (“Stipulation and Consent”) and the Order are for the confidential information of each member of the Board of Directors of the Bank, Bank committee persons and any of the Bank officers, employees or Bank attorneys at law who may be authorized by the Board of Directors of the Bank to review it. This Stipulation and Consent, the Order, any information contained therein and any reports or communication relating to the Stipulation and Consent and the Order may not be distributed to any party other than those identified in this paragraph without the prior approval of the Department, except as provided in Section 404.A of the Department of Banking Code, 71 P.S. § 733-404.A.

     7. Required Reports. The Bank acknowledges that the reports required to be submitted to the Department under the Order are special reports being required under Section 403 of the Department of Banking Code, 71 P.S. § 733-403, and that, pursuant to Section 403.E.(1), 71 P.S. § 733-403.E.(1), the Department may, in addition to such other relief the Department is authorized to take under the applicable statutes, impose a monetary penalty of One Hundred Dollars ($100.00) a day for each day after the time fixed by the Order that the Bank fails to submit a required report.

     8. Other Actions.

          (a) It is expressly and clearly understood that if at any time the Department shall deem it appropriate in fulfilling the responsibilities placed upon the Department under applicable law to undertake any further action affecting the Bank, nothing in this Order shall in any way inhibit, estop, bar or otherwise prevent the Department from doing so.

          (b) It is expressly and clearly understood that nothing herein shall preclude any proceedings brought by the Department to enforce the terms of this Order, and that nothing herein constitutes, nor shall the Bank contend that it constitutes, a waiver of any right, power or authority of any other representatives of the United States, departments or agencies thereof,

2

Department of Justice, or any other representatives of the Commonwealth of Pennsylvania or any other departments or agencies thereof, including any prosecutorial agency, to bring other actions deemed appropriate.

     9. Counsel. This Stipulation and Consent is entered into by the parties upon full opportunity for legal advice from legal counsel.

     10. Titles. The titles used to identify the paragraphs of this document are for the convenience of reference only and do not control the interpretation of this document.

     WHEREFORE, in consideration of the foregoing, including the recital paragraphs, the Department and the Bank, both intending to be legally bound, do hereby execute this Stipulation and Consent this 15th day of July, 2009.

(seal)
	/s/ Raymond C. Harper
	Raymond C. Harper, Director
	Bureau of Commercial Institutions Commonwealth of Pennsylvania Department of Banking 17 North Second Street, Suite 1300 Harrisburg, PA 17101

Section 501.B Notice. Pursuant to Section 501.B. of the Department of Banking Code, 71 P.S. § 733-501.B, the undersigned Directors of Royal Bank America are hereby given notice and warned that the Bank’s failure to comply in full with the terms of the Order may result in an order being issued by the Bureau directing one or more members of the Board of Directors to appear and show cause why he or she should not be removed from his or her office or position within the Bank.

Acknowledgement. The undersigned Directors of Royal Bank America, each acknowledge that he or she has read the foregoing Stipulation and Consent and, acting solely in his or her capacity as a Director, approves of the consent thereto by Royal Bank America.

/s/ Edward F. Bradley	/s/ Robert A. Richards, Jr.
Edward F. Bradley, Director	Robert A. Richards, Jr., Director
/s/ Carl M. Cousins	/s/ Murray Stempel, III
Carl M. Cousins, DVM, Director	Murray Stempel, III, Director

[Signatures continued on next page]

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[Signatures continued from previous page]

/s/ Samuel Goldstein	/s/ Evelyn R. Tabas
Samuel Goldstein, Director	Evelyn R. Tabas, Director
/s/ James J. McSwiggan	/s/ Robert R. Tabas
James J. McSwiggan, Director	Robert R. Tabas, Director
/s/ Anthony J. Micale	/s/ Linda Tabas Stempel
Anthony J. Micale, Director	Linda Tabas Stempel, Director
/s/ Albert Ominsky	/s/ Edward B. Tepper
Albert Ominsky, Esq., Director	Edward B. Tepper, Director
/s/ Gregory T. Reardon	/s/ Howard J. Wurzak
Gregory T. Reardon, Director	Howard J. Wurzak, Director

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EX-99.1

Exhibit 99.1

Contact:	Company Contact:
Joseph Crivelli	Marc Sanders
Senior Vice President	Director of Marketing
Gregory FCA Communications	Royal Bank America
Office: 610-228-2100	Office: 610-668-4700
Cell: 610-299-6700	Cell: 484-802-1944

ROYAL BANCSHARES OF PENNSYLVANIA COMMENTS ON
CONSENT AGREEMENT WITH FDIC AND PENNSYLVANIA
DEPARTMENT OF BANKING

Narberth, PA—July 16, 2009—Royal Bank America (Royal), the primary banking subsidiary of Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA), today announced that it has agreed to voluntarily enter into a consent agreement with the Federal Deposit Insurance Corporation (FDIC) and the Pennsylvania Department of Banking. The consent agreement results from findings of a joint examination by the FDIC and the Pennsylvania Department of Banking. Royal believes it has already addressed many of the matters highlighted in the consent agreement, having taken proactive steps since the beginning of 2008 to manage credit quality and financial performance in light of deteriorating macroeconomic conditions.

In commenting on the consent agreement, Robert Tabas, Chairman and Chief Executive Officer, said, “We appreciate the input and direction from the FDIC and the Department of Banking. Our partnership with our regulators is a prescription for Royal’s continued health, and will make us an even stronger bank as the plan is executed. Despite the challenges of the recession and its impact on our real estate borrowers, Royal meets all regulatory requirements for a well-capitalized bank, including those outlined in the consent agreement. The agreement will not impact our ability to support our customers, as it pertains to a limited number of our activities and we have already initiated a strategic plan to mitigate the specific concerns expressed by the FDIC and the Department of Banking.”

Mr. Tabas continued, “Our balance sheet is sound, and we have over $130 million of liquidity, which we believe is sufficient to meet our financial obligations for the foreseeable future. Over the past 19 months, we have taken the hard action needed to enhance our management team and board reporting, increase oversight of troubled credits, strengthen our capital base and liquidity, and position the bank for long term growth and stability. We believe these actions will enable us to quickly comply with the terms outlined in the consent agreement. At the same time, we are actively supporting our local community, lending to small businesses that will be the cornerstone of the region’s economic recovery through our SpurTheEconomy.com initiative, which continues to generate new business traction.”

The consent agreement addresses the following areas:

Capital Maintenance

Royal must maintain a leverage ratio equal to or greater than 8 percent, and a total risk-based capital ratio equal to or greater than 12 percent. At March 31, 2009, the date of the bank’s most recent quarter end, leverage ratio was 10.27% and total risk-based capital ratio was 13.11%. The bank expects to exceed both of these ratio milestones when the quarterly results for the period ended June 30, 2009 are announced later this month.

Management and Board of Directors

The consent agreement makes specific recommendations regarding bank’s management team, as well as Board of Directors oversight. Royal believes it is already in compliance with these provisions, due to steps that have been taken since the beginning of 2008 to enhance management and Board of Directors resources. The bank replaced its former president and CEO in December, and divided responsibilities between two experienced banking executives. It also hired a new Chief Lending Officer, Chief Credit Officer, and

Chief Financial Officer; enhanced its financial staff and special assets team; and hired a new head of small business lending. In addition, a new director was elected in 2008 with an extensive background in accounting and finance, and the Board of Directors has taken several steps to enhance corporate governance, establishing a formal Corporate Governance and Nominating Committee.

Classified Assets

The consent agreement provides for Royal to reduce classified assets and restricts additional advances to classified borrowers. Since the beginning of 2008, the bank has enhanced staffing levels in its special assets division and proactively managed classified loans. The bank continues to carefully monitor its classified loans and work with borrowers to establish repayment plans. Since 2008, Royal has added $8 million to its loan loss reserves and written off approximately $16.8 million of troubled credits, while maintaining its leverage and risk-based capital ratios above the regulatory standards for a well-capitalized bank.

Other provisions

The consent agreement also addresses the bank’s budgeting and strategic planning process, use of brokered deposits as a funding source, payment of dividends, and payments by the bank to its holding company. Management believes it is already in compliance with most aspects of these provisions.

Robert Tabas concluded, “The recessionary economic environment has hurt all banks and financial institutions, and Royal was not immune. With our historic emphasis on real estate, the downturn in new and existing home sales and real estate values negatively impacted our loan portfolio. That said, we have redirected our efforts towards small business lending and believe that there is a significant opportunity for us to grow in this

arena. The entire Royal team is committed to meeting all terms of the consent agreement as quickly as possible.”

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 throughout Pennsylvania, New Jersey and New York. Royal Bank America has played a lead role in the growth and development of our area for the past 40+ years. Royal Asian Bank enjoys a distinctive niche serving the financing and banking needs of the growing Asian-American population. 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, 2008.

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