Note 8. Borrowings and Subordinated Debentures

1. Advances from the Federal Home Loan Bank

Royal Bank has a $150 million line of credit with the FHLB of which $22.0 million was outstanding as of June 30, 2011. Total advances from the FHLB, including the $22.0 million above, were $107.5 million at June 30, 2011 compared to $110.7 million at December 31, 2010. The FHLB advances and the line of credit are collateralized by FHLB stock, government agencies and mortgage-backed securities, residential loans, and commercial real estate loans. The available borrowing capacity is based on qualified collateral. Royal Bank has a collateralized delivery requirement of 105% with the FHLB due to the level of Royal Bank's non-performing assets and prior net losses. The available amount for future borrowings will be based on the amount of collateral to be pledged.

Presented below are the Company's FHLB borrowings allocated by the year in which they mature with their corresponding weighted average rates:

	As of June 30,					As of December 31,
(Dollars in thousands)	2011					2010
	Amount		Rate			Amount		Rate
Advances maturing in
2011	$	22,000		0.75	%	$	22,000		0.72	%
2012		30,000		4.32	%		30,000		4.32	%
2013		50,000		2.64	%		50,000		2.64	%
Amortizing advance, due April 2012, requiring monthly principal and interest of $558,400		5,497		3.46	%		8,719		3.46	%
Total FHLB borrowings	$	107,497				$	110,719

Under the Orders as described in “Note 2 – Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, Royal Bank is required to reduce its level of FHLB advances and paid down $3.2 million during the first two quarters of 2011.

2. Other borrowings

The Company has a note payable with PNC Bank (“PNC”) at June 30, 2011 in the amount of $4.0 million compared to $4.2 million at December 31, 2010. The note's maturity date is August 25, 2016. The interest rate is a variable rate using rate index of one month LIBOR + 15 basis points and adjusts monthly. The interest rate at June 30, 2011 was 0.34%.

At June 30, 2011 and December 31, 2010, the Company had additional borrowings of $40.0 million from PNC which will mature on January 7, 2018. These borrowings are secured by government agencies and mortgage-backed securities. These borrowings have a weighted average interest rate of 3.65%.

3. Subordinated debentures

The Company has outstanding $25.0 million of Trust Preferred Securities issued through two Delaware trust affiliates, Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”). The Company issued an aggregate principal amount of $12.9 million of floating rate junior subordinated debt securities to Trust I, which debt securities bear an interest rate of 2.40% at June 30, 2011, and reset quarterly at 3-month LIBOR plus 2.15%, and an aggregate principal amount of $12.9 million of fixed/floating rate junior subordinated deferrable interest to Trust II, which debt securities had an initial interest rate of 5.80% until December 31, 2009 and now resets quarterly at 3-month LIBOR plus 2.15%. The interest rate at June 30, 2011 was 2.40%.

Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387,000 of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Company. The Company has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.

On August 13, 2009, the Company's board of directors determined to suspend interest payments on the trust preferred securities. Under the Federal Reserve Agreement as described in “Note 2 – Regulatory Matters and Significant Risks or Uncertainties” to the Consolidated Financial Statements, the Company and its non-bank subsidiaries may not make any distributions of interest, principal, or other sums on subordinated debentures or trust preferred securities without the prior written approval of the Reserve Bank and the Director of the Division of Banking Supervision and Regulation of the Board of Governors of the Federal Reserve System. As of June 30, 2011 the trust preferred interest payment in arrears was $1.5 million and has been recorded in interest expense and accrued interest payable.