SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. 1)

Filed by the Registrant / /
Filed by a Party other than the Registrant / /

Check the appropriate box:

/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

1) Title of each class of securities to which transaction applies:

----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:

----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:

----------------------------------------------------------------------

5) Total fee paid:

----------------------------------------------------------------------

/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

1) Amount Previously Paid:

___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:

___________________________________________________________________________
3) Filing Party:

___________________________________________________________________________
4) Date Filed:

___________________________________________________________________________

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2006

NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of ROYAL
BANCSHARES OF PENNSYLVANIA, INC. will be held at the Hilton Hotel Philadelphia,
4200 City Line Avenue, Philadelphia, Pennsylvania, 19131, on Wednesday, May 17,
2006, at 6:30 p.m., for the following purposes:

1. ELECTION OF DIRECTORS. To elect six Class I Directors to serve a
term of three years and until their successors are elected and qualified.

2. ROYAL BANCSHARES OF PENNSYLVANIA, INC. AMENDMENT TO ARTICLES OF
INCORPORATION. To consider and act upon a proposal to amend the Corporation's
Articles of Incorporation to increase the number of authorized shares of Class B
Common Stock by 1 million by increasing the number of authorized shares of Class
B Common Stock to 3 million, as described in the accompanying, Proxy Statement.

3. ROYAL BANCSHARES OF PENNSYLVANIA, INC. STOCK OPTION AND APPRECIATION
RIGHT PLAN. To amend the Plan in order to (i) reserve an additional 150,000
shares of the Corporation's common stock for issuance under the Plan, (ii)
provide that the maximum number of shares of stock that may be issued under the
Plan not to exceed 19% of the Corporation's shares outstanding, and (iii) extend
the Plan's termination date to April 18, 2007.

4. OTHER BUSINESS. To consider such other business as may properly be
brought before the meeting and any adjournment or postponement thereof.

Only shareholders of record at the close of business on April 3, 2006,
are entitled to notice of and to vote at the meeting, either in person or by
proxy.

We have enclosed a copy of the 2005 Annual Report on Form 10-K for
Royal Bancshares of Pennsylvania, Inc. Additional copies of the 2005 Annual
Report on Form 10-K are available upon request.

By Order of the Board of Directors

/s/ George J. McDonough
George J. McDonough,
Secretary

Enclosures (Proxy Card and Annual Report)
April 12, 2006

WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON AFTER GIVING WRITTEN
NOTICE TO THE SECRETARY OF THE CORPORATION.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
732 MONTGOMERY AVENUE
NARBERTH, PENNSYLVANIA 19072

TRADING SYMBOL: RBPAA
NASDAQ NM
WEBSITE: www.royalbankamerica.com
------------------------

PRELIMINARY
PROXY STATEMENT
2006 ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 17, 2006

MAILED TO SHAREHOLDERS ON OR ABOUT APRIL 12, 2006

TABLE OF CONTENTS
-----------------

PROXY STATEMENT PAGE
- --------------- ----
General Information 1

Revocation and Voting of Proxies 1

Voting Securities, Record Date and Quorum 1-2

Principal Shareholders 2-3

Election of Directors 3-4

Cumulative Voting 4

Information about Nominees, Continuing Directors 4-8
and Executive Officers

Meetings and Committees of the Board of Directors 8-9

Compensation Committee Report on Executive Compensation 9-11

The Audit Committee Report 11-15

Remuneration of Directors and Officers and Other Transactions 15-19

Common Stock Performance Graph 20

Beneficial Ownership - Compliance 21

Item 2: Amendment to Corporations Articles of Incorporation 21-23

Item 3: Amendment to Stock Option Plan 23-24

Interest of Management and others in certain transactions 24

Employee Code of Ethics 25

Legal Proceedings 25

Shareholder Proposals and Communication 25-26

Other Matters 26

PROXY STATEMENT

GENERAL INFORMATION

We furnish this proxy statement in connection with the solicitation of
proxies by the Board of Directors of Royal Bancshares of Pennsylvania, Inc. (the
"Corporation"), for the Annual Meeting of Shareholders of the Corporation to be
held on May 17, 2006, and any adjournment or postponement of the meeting. The
Corporation will bear the expense of soliciting proxies. In addition to
mailings, directors, officers and employees of the Corporation may solicit
proxies personally or by telephone. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners of stock held of record by these
persons and, upon request therefore, the Corporation will reimburse them for
their reasonable forwarding expenses.

REVOCATION AND VOTING OF PROXIES

The execution and return of the enclosed proxy will not affect your
right to attend the meeting and to vote in person. You may revoke your proxy by
delivering written notice of revocation to George J. McDonough, Secretary of the
Corporation, at the Corporation's address at any time before the proxy is voted
at the meeting. Unless revoked, the proxy holders will vote your proxy in
accordance with your instructions. In the absence of instructions, proxy holders
will vote all proxies FOR the election of the six nominees for Class I Director,
FOR the proposal to amend the Corporation's Articles of Incorporation to
increase the number of authorized shares by1 million shares by increasing the
number of authorized shares of Class B Common Stock to 3 million, and FOR the
amendment of Royal Bancshares of Pennsylvania, Inc. Stock Option and
Appreciation Right Plan (the "Stock Option Plan") in order to (i) reserve an
additional 150,000 shares of the Corporations' common stock for issuance under
the Stock Option Plan, (ii) provide that at no time shall the maximum number of
shares of stock that may be issued under the Stock Option Plan exceed 19% of the
Corporation's outstanding shares, and (iii) extend the termination date of the
Stock Option Plan to April 18, 2007. Although the Board of Directors knows of no
other business to be presented, in the event that any other matters are brought
before the meeting, proxy holders will vote any proxy in accordance with the
recommendations of the management of the Corporation.

VOTING SECURITIES, RECORD DATE AND QUORUM

Shareholders of record at the close of business on April 3, 2006, are
entitled to vote at the meeting and any adjournment or postponement of the
meeting. At the close of business on February 28, 2006, there were 10,485,125
shares of Class A common stock exclusive of 215,388 treasury shares ($2.00 par
value per share), issued and outstanding, and 1,992,156 shares of Class B common
stock ($0.10 par value per share), issued and outstanding.

Each shareholder is entitled to one vote for each share of Class A
common stock and ten votes for each share of Class B common stock on all matters
to be acted upon at the meeting, except that in the election of directors,
shareholders are entitled to vote shares cumulatively. See "ELECTION OF
DIRECTORS ----CUMMULATIVE VOTING.

The presence, in person or by proxy, of the holders of a majority of
the outstanding shares entitled to vote constitutes a quorum for the conduct of
business. A majority of the votes cast at a meeting, at which a quorum is
present, is required to approve any matter submitted to a vote of the
shareholders, except in cases where the vote of a greater number of votes is
required by law or under the Articles of Incorporation or Bylaws of the
Corporation. Votes withheld and abstentions will be counted in determining the
presence of a quorum. Broker non-votes will not be counted in determining the
presence of a quorum for the particular matter as to which the broker withheld
authority.

In the case of the election of directors, assuming the presence of a
quorum, the six candidates receiving the highest number of votes for Class I
Director shall be elected to the Board of Directors. Votes withheld from a
nominee and broker non-votes will not be cast for the nominee.

PRINCIPAL SHAREHOLDERS

The following table shows as of February 28, 2006, the amount of
outstanding common stock beneficially owned by each shareholder (including any
"group" as the term is used in Section 3(d)(3) of the Securities Exchange Act of
1934) known by the Corporation to be the beneficial owner of more than 5% of
such stock. Each share of Class A common stock is entitled to one vote per
share. Each share of Class B common stock is entitled to ten votes per share and
may be converted into shares of Class A common stock at the current rate of 1.15
shares of Class A common stock for each share of Class B common stock.
Beneficial ownership is determined in accordance with applicable regulations of
the SEC and the information is not necessarily indicative of beneficial
ownership for any other purpose. For purposes of the table set forth below and
the table following "Information about Nominees, Continuing Directors and
Executive Officers," beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and any shares
that the individual has the right to acquire within 60 days of February 28,
2006. In addition, a person is deemed to beneficially own any stock for which
he, directly or indirectly, through any contact, arrangement, understanding,
relationship or otherwise has or shares:

o Voting power, which includes the power to vote or to direct the voting
of the stock, or

o Investment power, which includes the power to dispose or to direct the
disposition of the stock.

Unless otherwise indicated in a footnote, shares reported in this table are
owned directly by the reporting person. The percent of class assumes all options
exercisable within 60 days of February 28, 2006, have been exercised and,
therefore, on a pro forma basis, 10,827,277 shares of Class A common stock would
be outstanding, net of treasury stock.

NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
------------------------------ ----------------------------- --------------

Daniel M. Tabas Trust(1) 3,457,116 (Class A) 31.93%
915 Montgomery Avenue 1,067,411 (Class B) 53.58%
Narberth, PA 19072

Evelyn Tabas(2)(4) 1,752,477 (Class A) 16.19%
915 Montgomery Avenue 461,917 (Class B) 23.19%
Narberth, PA 19072

Richard Tabas(3) 72 (Class A) 0.00%
1309 Lafayette Road 133,669 (Class B) 6.71%
Gladwyne, PA 19035

(1) The trustees for the Daniel M. Tabas Trust are, Robert R. Tabas, Linda Tabas
Stempel and Nicholas Randazzo who as a group have voting rights and dispositive
control of these shares.

(2)The shares beneficially owned by Evelyn R. Tabas consist of: (a) 2,732 shares
of Class A common stock owned and voted solely by Evelyn R. Tabas and 4,696
options currently exercisable to purchase shares of Class A common stock: (b)
271,014 Class A and 80,817 Class B shares in the Lee Tabas Trust: (c) 252,647
Class A and 78,711 Class B shares in the Susan Tepper Tabas Trust: (d) 237,763
Class A and 78,970 Class B shares in the Linda Stempel Tabas Trust: (e) 228,522
Class A and 72,702 Class B shares in the Joanne Tabas Wurzak Trust: (f) 208,642
Class A and 78,134 Class B shares in the Carol Tabas Stofman Trust: (g) 197,533
Class A and 72,553 Class B shares in the Robert R. Tabas Trust: (h) 50,631 Class
A shares held in the Elizabeth Rebecca Tabas Trust and (i) 46,460 Class A shares
held in the Samuel Bradford Tabas Trust. Evelyn R. Tabas shares voting and
dispositive control over the shares held in these trust with James McSwiggan and
Nicholas Randazzo.

(3) Mr. Tabas has sole power to vote and dispose of 116,768 shares of Class B
common stock. He disclaims beneficially ownership of 16,673 shares of Class B
stock owned by his mother, Harriette Tabas and 72 Class A shares common stock
and 228 shares of Class B common stock owned by his wife, Leslee Silverman Tabas
Esquire. Upon information and belief, Mr. Tabas has no power to vote or dispose
of these 72 shares of Class A common stock and 16,901 shares of Class B common
stock.

(4) Evelyn R. Tabas has sole power to vote and dispose of 251,837 shares of
Class A common stock and 30 shares Class B common stock from numerous trusts for
the Tabas grandchildren.

ITEM 1 ELECTION OF DIRECTORS

The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than 5 nor more than 25 persons and that the directors are
classified with respect to the time they hold office by dividing them into 3
classes, as nearly equal in number as possible. The Bylaws further provide that
the directors of each class are elected for a 3 year term, so that the term of
office of one class of directors expires at the annual meeting each year. The
Bylaws also provide that the aggregate number of directors and the number of
directors in each class of directors is determined by the Board of Directors.
Any vacancy occurring on the Board of Directors is filled by appointment by the
remaining directors. Any director who is appointed to fill a vacancy holds
office until the expiration of the term of office of the class of directors to
which he or she was appointed.

There are presently 17 members of the Board of Directors. At the March
15, 2006, meeting of the Corporation's Board of Directors, in accordance with
Article 10 of the Corporation's Bylaws, the directors fixed the number of
directors in Class I at 6, the number of directors in Class II at 6 and the
number of directors in Class III at 5. Due to an exemption as a "Controlled
Company" under NASDAQ Rules, we are not required to meet NASDAQ independence

standards for our Board of Directors. NASDAQ Rules define a "Controlled Company"
as one in which more than 50% of the voting power is held by an individual,
group or another company. As shown in the above stock ownership table, through
its ownership of Class A and Class B common stock, the Daniel M. Tabas Trust and
Evelyn R. Tabas control more than 50% of the voting power of the Corporation.

The Board of Directors has nominated the following 6 persons for
election to the Board of Directors as Class I Directors for a term of 3 years:

JOSEPH P. CAMPBELL JAMES J. MCSWIGGAN LINDA TABAS STEMPEL
MURRAY STEMPEL, III HOWARD WURZAK PATRICK J. MCCORMICK

CUMULATIVE VOTING

In the election of directors, every shareholder entitled to vote has
the right, in person or by proxy, to multiply the number of votes to which he
may be entitled by the number of directors in the class to be elected at the
annual meeting. Every shareholder may cast his or her whole number of votes for
one candidate or may distribute them among any 2 or more candidates in the
class. The 6 candidates receiving the highest number of votes for Class I
Director at the meeting will be elected. There are no conditions precedent to
the exercise of cumulative voting rights. Robert R. Tabas and George J.
McDonough, the persons named as proxies, have the right to vote cumulatively and
to distribute their votes among the nominees as they consider advisable, unless
a shareholder indicates on his or her Proxy how votes are to be cumulated for
voting purposes.

INFORMATION ABOUT NOMINEES, CONTINUING DIRECTORS
AND EXECUTIVE OFFICERS

Information concerning the directors of the Corporation, including the
6 persons nominated for election to the Board of Directors as Class I Directors
at the meeting, the 11 continuing directors and the executive officer(s) of the
Corporation and all directors and officers as a group, is set forth below,
including the number of shares of common stock of the Corporation beneficially
owned, as of February 28, 2006, by each of them. The table includes options
exercisable within 60 days of February 28, 2006, stock options unexercised but
currently exercisable, and stock beneficially owned. Unless otherwise indicated
in a footnote, shares, reported in this table are owned directly by the
reporting person and such person holds sole voting and investment power with
respect to such shares. The percent of class assumes all options exercisable
within 60 days of February 28, 2006, have been exercised and, therefore, on a
pro forma basis, 10,827,277 shares of Class A common Stock would be outstanding.
The information is furnished as of February 28, 2006, on which 10,485,125 Class
A shares (exclusive of 215,388 treasury shares) and 1,992,156 Class B shares
were issued and outstanding.

DIRECTOR SHARES PERCENT
OR OFFICER BENEFICIALLY OF
NAME AGE SINCE OWNED STOCK
---- --- ----------- ------------ -------

NOMINEES FOR CLASS I DIRECTORS
------------------------------

Joseph P. Campbell (6) 59 1982 159,776(A) 1.48%

James J. McSwiggan (1) 50 1992 76,509(A) .71%

Linda Tabas Stempel (2) (5) 54 2003 2,745(A) .03%

Murray Stempel, III (5) 51 1998 33,247(A) .31%

Howard Wurzak (5) 51 1992 65,445(A) .60%

Patrick J. McCormick 48 2006 1,020(A) .01%

CLASS II DIRECTORS
------------------

Jack R. Loew 58 1997 20,974(A) .19%

Anthony J. Micale 68 1997 10,191(A) .09%

Mitchell L. Morgan 51 2003 30,326(A) .28%

Albert Ominsky 72 1982 45,390(A) .42%
37,401(B) 1.88%

Gregory T. Reardon 52 1997 9,383(A) .09%

Robert R. Tabas (2) (5) 50 1998 71,730(A) .66%
6,193(B) .31%

CLASS III DIRECTORS
-------------------

Carl M. Cousins 73 1993 12,156(A) .11%

John M. Decker 45 1998 55,422(A) .51%

Evelyn R. Tabas (3) (5) 81 2002 1,752,447(A) 16.19%
461,917(B) 23.19%

Lee E. Tabas 56 1980 338,821(A) 3.13%
61,718(B) 3.10%

Edward B. Tepper 66 1986 28,983(A) 0.27%
13(B) 0.00%

ALL DIRECTORS AND 6,182,681(A) 57.10%
EXECUTIVE OFFICERS AS A GROUP 1,786,323(B) 89.60%
AND TABAS FAMILY TRUSTS (18 PERSONS)

Non-Director Executive Officers are Jeffrey T. Hanuscin, Chief Financial Officer
and George McDonough, Corporate Secretary.

The information in the preceding table was furnished by the beneficial owners or
their representatives and includes direct and indirect ownership.

We assume full conversion of Class B common stock to Class A common stock at the
current conversion factor of 1.15 shares of Class A common stock for each share
of Class B common stock. In calculating the tabulated percent of class for each
officer and director who has exercisable stock options, the additional shares of
Class A common stock to which the officer and director would be entitled upon
the exercise of his options were added to the shares of Class A common stock
currently held by the officer and director and to the total number of shares of
Class A common stock outstanding assuming the officer and directors exercised
all outstanding exercisable options.

The percent of stock assumes all outstanding exercisable options and options
exercisable within 60 days of February 28, 2006, issued to directors and
officers, have been exercised and therefore, on a pro forma basis, 10,831,457
shares of Class A common stock would be outstanding at February 28, 2006.

(1) James McSwiggan share with Evelyn R. Tabas and Nicholas Randazzo voting and
dispositive control over 1,493,212 shares of Class A common stock and 461,887
shares of Class B common stock held in various Tabas family trusts. These shares
are not included in the ownership reported in this table for Mr. McSwiggan. See
footnote (2) on page 3.

(2) Linda Tabas Stempel shares with Robert R. Tabas and Nicholas Randazzo voting
and dispositive control over 3,457,116 shares of Class A common stock and
1,067,411 shares of Class B common stock held in the Daniel M. Tabas Trust.
These shares are not included in the share ownership reported in this table for
Linda Tabas Stempel or for Robert R. Tabas. See footnote (1) on page 3.

(3) See footnote (2) and (4) on page 3.

(4) The 338,821 shares of Class A common stock and 61,718 shares of Class B
common stock beneficially owned by Lee E. Tabas included 286,539 shares of Class
A common stock owned jointly with his wife, Nancy Tabas: 4,932 shares of Class A
common stock and 56,083 shares of Class B common stock owned by his wife, Nancy
Tabas: and 39,002 shares of Class A common stock and 5,636 shares of Class B
common stock held by Mr. Tabas as custodian for his children. In calculating the
tabulated percent of class, the options to purchase 8,348 shares of Class A
common stock assuming all options are exercisable within 60 days of February 28,
2006, held by Mr. Tabas was exercised.

(5)Evelyn R. Tabas, Lee Tabas, Robert R. Tabas, Murray Stempel, Linda Tabas,
Howard Wurzak and members of their immediate families and their affiliates, in
the aggregate, own 5,721,580 shares of Class A common stock (52.84% of Class A)
and 1,597,239 shares of Class B common stock (79.13% of Class B) or (57.48% of
Class A) assuming full conversion of Class B common stock at a current
conversion of 1.15 shares of Class A common stock for each share of Class B
common stock.

(6) Excludes 4,180 shares of Class A common stock subject to options granted in
1997 and 1998 which Mr. Campbell disclaims beneficial ownership of these shares.

NOMINEES FOR CLASS I DIRECTORS

Joseph P. Campbell is the President and Chief Executive Officer of the
Corporation and a Director of the Corporation.

James J. McSwiggan is the Chief Operating Officer of the Corporation
and a Director of the Corporation.

Linda Tabas Stempel is a Director of the Corporation, and is Director
of Investor Relations for the Corporation. She is the daughter of Evelyn R.
Tabas, the wife of Murray Stempel, III, the sister of Lee E. Tabas and Robert R.
Tabas and the sister-in-law of Howard Wurzak.

Murray Stempel, III is an Executive Vice President of Royal Bank
America and a Director of the Corporation. Mr. Stempel is the son-in-law of
Evelyn R. Tabas, the husband of Linda Tabas Stempel and the brother-in-law of
Lee E. Tabas, Robert R. Tabas and Howard Wurzak.

Howard Wurzak is a Director of the Corporation, and is President and
CEO of the Hilton Hotel Philadelphia, Regency Palace and Ramada Plaza Hotel and
Wurzak Management Corporation. He is the son-in-law of Evelyn R. Tabas, and the
brother-in-law of Lee E. Tabas, Robert R. Tabas, Murray Stempel, III and Linda
Tabas Stempel.

Patrick J. McCormick is a Director of the Corporation and is a Managing
Director of Alvarez and Marsal, a Business Consulting Firm, where he responsible
for the Delaware Valley region as well as the Partner-in-Charge for the firm's
Financial Leadership Solutions Practice.

CLASS II DIRECTORS

Jack R. Loew is a Director of the Corporation, and is the President of
J. Loew & Associates, Inc., a real estate development firm specializing in
office, industrial and retail properties.

Anthony J. Micale is a Director of the Corporation, is President of
Micale Management Corporation and owns and operates ten McDonald's restaurants.

Mitchell L. Morgan is a Director of the Corporation, and is President
of Morgan Properties which owns and manages over 16,500 apartment units.

Albert Ominsky is a Director of the Corporation, is an attorney and
President of the law firm of Ominsky & Ominsky, P.C. in Philadelphia,
Pennsylvania.

Gregory T. Reardon is a Director of the Corporation, is a certified
valuation analyst, holds certificates to practice public accounting both in
Pennsylvania and Delaware and is President of The Reardon Group, Inc. The
Reardon Group, located in Glen Mills, Pennsylvania, comprises Weiss + Reardon &
Company, P.C. (a regional public accounting firm); Reardon Consulting, Inc. (a
management consulting firm); and Valuation Advisors, Inc. (a business valuation
firm). The Reardon Group is devoted to healthcare and other highly regulated
industries.

Robert R. Tabas is the Chairman of the Board and a Director of the
Corporation; and is an Executive Vice President of Royal Bank America. He is the
son of Evelyn R. Tabas, the brother of Lee E. Tabas and Linda Tabas Stempel and
the brother-in-law of Howard Wurzak and Murray Stempel, III.

CLASS III DIRECTORS

Carl M. Cousins is a Director of the Corporation, and is a retired
veterinarian.

John M. Decker is an Executive Vice President of Royal Bank America and
a Director of the Corporation.

Evelyn R. Tabas is a Director of the Corporation and is involved in a
variety of community and charitable causes and endeavors including Trustee,
Daniel M. Tabas Family Foundation; Trustee, Bank Street College; Director,
United Cerebral Palsy, Philadelphia; Founding Member, American Family Institute;
and Advisory Board, Drexel University Department of Education. She is the mother
of Lee E. Tabas, Robert R. Tabas and Linda Tabas Stempel and the mother-in-law
of Howard Wurzak and Murray Stempel, III.

Lee E. Tabas is a Director of the Corporation, an adjunct professor at
Philadelphia University and an independent investor. He is the son of Evelyn R.
Tabas, the brother of Robert Tabas and Linda Tabas Stempel and the
brother-in-law of Howard Wurzak and Murray Stempel, III.

Edward B. Tepper is a Director of the Corporation and the President of
Tepper Properties, a real estate investment company in Villanova, Pennsylvania.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

The committees of the Board of Directors include the Audit Committee,
the Compensation Committee, and the Nominating Committee.

The Audit Committee met 8 times in 2005. The Audit Committee arranges
examinations by the Corporation's independent registered public accounting firm,
reviews and evaluates the recommendations of the examinations, receives all
reports of examination of the Corporation and the Bank by regulatory agencies,
analyzes such reports and reports the results of its analysis of the regulatory
reports to the Corporation's Board. The committee receives reports directly from
the Corporation's internal auditors on a quarterly basis, and recommends any
action to be taken. The committee is also responsible for, among other things,
assisting the Board of Directors in monitoring (i) the integrity of the
financial statements of the Corporation, (ii) the independent auditor's
qualification and independence, (iii) the performance of the Corporation's
internal audit function and independent auditors, and (iv) the compliance by the
Corporation with legal and regulatory matters. The members of the Audit
Committee were Gregory T. Reardon, Chairperson, Jack R. Loew, and Anthony J.
Micale. The Board of Directors has determined that Gregory T. Reardon is an
"Audit Committee Financial Expert" and "Independent" under applicable SEC and
NASDAQ Rules. Edward B. Tepper served as a non-voting advisor to the committee
at the committee's discretion.

Effective March 15, 2006, Gregory T. Reardon stepped down as Audit
Committee Chairman and the Board of Directors appointed Patrick J. McCormick to
replace Mr. Reardon as Chairman. Under SEC and NASDAQ Rules, the Board of
Directors has determined that Mr. McCormick also qualifies as an "Audit
Committee Financial Expert" and an "Independent Director".

The Compensation Committee met 1 time in 2005. The members of this
committee were Jack R. Loew, Chairperson, Edward B. Tepper, Carl M. Cousins,
Anthony Micale and Robert R. Tabas. The Compensation Committee reviews and
determines compensation for all officers and employees of the Corporation. The
committee also has the authority to manage, administer, amend and interpret the

Corporation's Employees' Stock Option and Appreciation Rights Plan and to
determine, among other things:

o The employees to whom awards shall be made under the plan;
o The type of the awards to be made and the amount, size and terms of
the awards; and
o When awards shall be granted.

The Nominating Committee did not meet in 2005. The members of this
committee were Albert Ominsky, Chairman, Carl Cousins and Edward Tepper, each of
whom is a non-employee Director. The Committee was formed in 2003 and held its
first meeting in 2003. All members of the Nominating Committee are independent
(as independence is currently defined in Rule 4200(a)(14) of the NASD listing
standards). The principal duties of the Nominating Committee include developing
and recommending to the Board criteria for selecting qualified director
candidates, identifying individuals qualified to become Board members,
evaluating and selecting, or recommending to the Board, director nominees for
each election of directors, considering committee member qualifications,
appointment and removal, recommending codes of conduct and codes of ethics
applicable to the Corporation and providing oversight in the evaluation of the
Board of each committee. The Nominating Committee has no formal process for
considering director candidates recommended by shareholders, but its policy is
to give due consideration to any and all such candidates. If a shareholder
wishes to recommend a director candidate, the shareholder should mail the name,
background and contact information for the candidate to the Nominating Committee
at the Corporation's offices at 732 Montgomery Avenue, Narberth, PA, 19072. The
Nominating Committee intends to develop a process for identifying and evaluating
all nominees for director, including any recommended by shareholders, and
minimum requirements for nomination. The Nominating Committee has adopted a
written Charter that can be accessed on the internet via the Corporation's
website at www.royalbankamerica.com.

The Board of Directors of the Corporation held twelve formal meetings
during 2005. Each director attended at least 75% of the aggregate number of
meetings of the Board of Directors and the various committees on which he or she
served. The Corporation has no policy regarding attendance by directors at the
Annual Meeting of Shareholders, but all directors attended the May 18, 2005,
Annual Meeting of Shareholders.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Board of Directors of Royal Bancshares of Pennsylvania, Inc. is
responsible for the governance of the Corporation and its subsidiaries. In
fulfilling its fiduciary duties, the Board of Directors acts in the best
interests of the Corporation's shareholders, customers and the communities
served by the Corporation and its subsidiaries. To accomplish the strategic
goals and objectives of the Corporation, the Board of Directors engages
competent persons to accomplish these objectives with integrity and in a
cost-effective manner. The compensation of these individuals is part of the
Board of Directors' fulfillment of its duties to accomplish the Corporation's
strategic mission. The Corporation provides compensation to its employees.

The fundamental philosophy of the Corporation and Royal Bank America's
compensation program is to offer competitive compensation opportunities for all
employees based on the individual's contribution and personal performance. The
compensation program is administered by a committee comprised of five directors,
four of whom are outside directors. The objectives of the compensation committee
are to establish a fair compensation policy, to govern executive officers' base
salaries and incentive plans, and to attract and motivate competent, dedicated,
and ambitious managers whose efforts will enhance the products and services of
the Corporation, the results of which will be improved shareholder value.

The compensation of the Chief Executive Officer (Joseph P. Campbell)
and the Senior Executive Officers (including James J. McSwiggan, Robert R.
Tabas, John M. Decker and Murray Stempel, III) consists of a base salary, profit
sharing, long-term incentive compensation and certain perquisites. Profit
sharing and long-term incentive compensation constitutes a significant portion
of overall compensation for executive management. The committee believes that
this approach is essential in fostering a strong commitment to long-term growth
in shareholder value.

For 2005, the profit sharing of the CEO and the Senior Executive
Officers were directly tied to specific performance goals, some of which are
listed in the paragraph below. The CEO's 2005 compensation and the compensation
of the Senior Executive Officers were based on the Committee's subjective
determination after a review of all information, including the below, that it
deemed relevant. Future methods of determining compensation may differ.

Consolidated earnings for the twelve months ended December 31, 2005,
were $32,053,000, as compared to $20,033,000 for the same period ended in 2004.
Consolidated basic earnings per share for the year ended December 31, 2005, were
$2.50 versus $1.57 for the same period in 2004. Consolidated assets were
$1,301,019,000 at December 31, 2005, as compared to $1,205,274,000 at December
31, 2004. Total shareholders' equity increased to $155,508,000 at December 31,
2005, as compared to $140,876,000 at December 31, 2004.

The committee believes that ownership of the Corporation's stock by
executives who play significant roles in the success of the Corporation is a key
to building long-term shareholder value. As a result, the committee believes
that equity-based compensation offered through participation in the
Corporation's Stock Option Plan is an effective compensation tool. While the
committee encourages executives to retain stock acquired through the
Corporation's Stock Option Plan, the committee recognizes that personal
circumstances often lead executives to sell some or all of the stock acquired
through the exercise of stock options. For a more detailed description of the
Corporation's Stock Option Plan, including the terms of options granted under
the Stock Option Plan, please refer to the description of the Stock Option Plan
contained in this Proxy Statement on pages 23 and 24.

Total compensation opportunities available to the employees of the
Corporation are influenced by general labor market conditions, the specific
responsibilities of the individual, and the individual's contributions to the
Corporation's success. Individuals are reviewed annually on a calendar year
basis. The Corporation strives to offer compensation that is competitive with
that offered employees of a comparable size and performance in our industry.

Through these compensation policies, the Corporation strives to meet its
strategic goals and objectives to its constituencies and provide compensation
that is fair and meaningful to its employees.

Under federal income tax laws, compensation to executives of public
companies in excess of $1 million per year is not deductible for income tax
purposes if it is not "performance-based". The committee continues to monitor
this requirement and whether it modifies the Corporation's existing compensation
programs, or develops and implements new compensation programs, it intends to
structure these programs so that compensation will be deemed to be
"performance-based" under the federal income tax laws.

COMPENSATION COMMITTEE
Jack R. Loew, Chairman
Carl M. Cousins, D.V.M.
Edward B. Tepper
Anthony Micale
Robert R. Tabas

THE AUDIT COMMITTEE REPORT:

In 2005, the Audit Committee was comprised of 3 directors: Gregory T.
Reardon (Committee Chair), Jack R. Loew and Anthony Micale. Each current member
of the Audit Committee is considered "independent" as defined in the NASDAQ
corporate governance listing standards and under SEC Rule 10A-3. The duties and
responsibilities of the Audit Committee include, among other things:

o Retaining, overseeing and evaluating a firm of independent
registered public accounting firm to audit the annual
financial statements;
o In consultation with the independent auditors and the
internal auditor, reviewing the integrity of the
Corporation's financial reporting processes, both internal
and external;
o Approving the scope of the audit in advance;
o Reviewing the financial statements and the audit report
with management and the independent auditors;
o Considering whether the provision by the external auditors
of services not related to the annual audit and quarterly
reviews is consistent with maintaining the auditor's
independence;
o Reviewing earnings and financial releases and quarterly
reports filed with the SEC;
o Consulting with the internal audit staff and reviewing
management's administration of the system of internal
accounting controls;
o Approving all engagements for audit and non-audit services
by the independent auditors; and
o Reviewing the adequacy of the audit committee charter.

The Audit Committee met eight times during 2005. The Corporation's
Board of Directors has adopted a written charter for the Audit Committee, which
was reviewed and revised in December 2005. The Audit Committee's charter can be
accessed on the internet via the Corporation's website at
www.royalbankamerica.com under the heading "About Us." The Audit Committee
reports to the Board of Directors on its activities and findings. The Board of
Directors in accordance with Section 407 of the Sarbanes-Oxley Act has
identified Mr. Reardon as the "Audit Committee financial expert." In accordance
with SEC regulations, the Audit Committee has prepared the following report:

As part of its ongoing activities, the Audit Committee has:

o Reviewed and discussed with management the Corporation's
audited consolidated financial statements for the year
ended December 31, 2005;
o Discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards
No. 61, Communications with Audit Committees, as amended;
and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their independence.

Management has the responsibility for the consolidated financial
statements, including the preparation of its financial statements in conformity
with US GAAP and the financial reporting process, including the system of
internal control; for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)); for establishing and
maintaining internal control over financial reporting (as defined in Exchange
Act Rule 13a-15(f)); for evaluating the effectiveness of disclosure controls and
procedures; for evaluating the effectiveness of internal control over financial
reporting; and for evaluating any change in internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, internal control over financial reporting. The Committee's
responsibility is to oversee and review the financial reporting process and to
review and discuss management's report on the Corporation's internal control
over financial reporting. The Committee has relied on management's
representations that the financial statements are complete, free from material
misstatement and prepared in accordance with US GAAP, and in support thereof, on
the opinion and representations of the auditor, in the report on the
Corporation's consolidated financial statements, including the auditor's
representations that the auditor is "independent" and that the audit was
performed in accordance with US GAAP and in conformity with SEC regulations. The
responsibility for the completeness and accuracy of the Corporation's
consolidated financial statements rests with its management. In addition, our
independent auditors and not the Audit Committee are responsible for auditing
those consolidated financial statements. Each member of the Committee is
entitled to rely on the integrity of persons and organizations within and
outside the Corporation from which he or she receives information and the
accuracy of the financial and other information provided to the committee.

Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2005 filed with the SEC. The Audit Committee

approved, and the Board of Directors ratified the appointment of Beard Miller
Company LLP as independent auditors for the Corporation for the fiscal year
ending December 31, 2005. In addition, the Audit Committee approved the
reappointment of Beard Miller Company LLP as independent auditors for the
Corporation for the fiscal year ending December 31, 2006, the reappointment of
Accume Partners (formerly known as "The Outsourcing Partnership, LLC"), a
provider of internal auditing services to direct the role of the Bank's internal
auditing services for 2006 and Integrated Compliance Solutions, L.L.C., a
provider of professional compliance services to direct the role of the Bank's
compliance audit functions for 2006.

This report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Corporation specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.

The Audit Committee has approved a list of procedures for the
engagement of outside auditors to perform non-audit tasks. The auditor cannot
provide the following services:

o Financial information systems design and implementation;
o Internal audit outsourcing;
o Appraisal or valuation services;
o Fairness opinions;
o Contribution in kind reports;
o Management functions or human resources;
o Bookkeeping;
o Broker or dealer or investment banking services;
o Legal services unrelated to the audit;
o Actuarial services, and
o Services determined by the Audit Committee to be
impermissible.

All permissible non-audit services must be pre-approved by the Audit
Committee. The authority to approve audit and non-audit services may be
delegated by the committee to one or more of its members, provided that any
delegated approvals must be reported to the full Audit Committee and all
approvals of non-audit services will be disclosed in the Corporation's periodic
reports.

Fees pertaining to services rendered to the Corporation and the Bank by
Beard Miller Company LLP during the year ended December 31, 2005 and for year
ended December 31, 2004 were as follows:

YEAR ENDED DECEMBER 31,
2005 2004
------ ------

Audit fees $115,650 $123,984

Audit related fees $ 17,150 $ --

Tax fees $ 22,750 $ --

All other fees $ -- $ --
-------- --------
Total Fees: $155,550 $123,894
======== ========

Audit Fees include fees billed for professional services rendered for
the audit of the annual consolidated financial statement, internal controls and
fees billed for the review of financial statements, including expenses, included
in the Corporation's Forms 10-K and 10-Q and services that are normally provided
by Beard Miller Company LLP for 2005 and for 2004 in connection with statutory
and regulatory filings or engagements.

Audit Related Fees for 2005 include fees billed for assurance and
related services that are reasonably related to the performance of the audit or
review of the registrant's financial statements and are not reported under the
Audit Fees section of the table above. Audit Related Fees are related to audit
of the Bank's 401(k) Plan, and accounting and reporting consultations.

Tax Fees for 2005 include fees billed for professional services
rendered by Beard Miller Company LLP for tax compliance, tax advice, and tax
planning. These services include review and preparation of the Corporation's
federal and state tax returns.

There were no fees classified as "All Other Fees" for 2005 or 2004. The
classification "All Other Fees" typically include fees billed for products and
services provided by Beard Miller Company LLP, other than the services reported
under the Audit Fees, Audit Related Fees, or Tax Fees sections of the table
above.

The Audit Committee has considered whether, and determined that, the
provision of the non-audit services reflected above is compatible with
maintaining Beard Miller Company LLP's independence.

AUDIT COMMITTEE
---------------

Gregory T. Reardon, Chairman
Anthony J. Micale
Jack R. Loew

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee selected Beard Miller Company LLP as the
Corporation's principal independent registered public accounting firm for 2006.
Representatives of Beard Miller Company LLP will attend the Corporation's Annual
Meeting of Shareholders, will have the opportunity to make a statement if they
desire to do so, and will be expected to be available to respond to appropriate
questions.

REMUNERATION OF DIRECTORS AND OFFICERS AND OTHER TRANSACTIONS

Each member of the Board of Directors received a fee of $1,250 per
board meeting attended and a $10,000 annual retainer, payable in quarterly
amounts of $2,500. Additionally, directors who are not employees received $500
for each committee meeting attended. In addition to board and committee fees,
Gregory T. Reardon received $7,500 in 2005 as compensation for his duties as
Chairman of the Corporation's Audit Committee.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
- --------------------------------------

The Bank has established the Royal Bank Supplemental Executive
Retirement Plan for its executive officers and other key employees for the
purpose of providing supplemental income benefits to plan participants or their
survivors upon participants' retirement or post-retirement death. The Bank has
established and maintains a grantor "rabbi" trust for the purpose of
accumulating funds with which to meet the Bank's future obligations under the
plan. Although the trust is irrevocable and assets contributed to the trust can
only be used to pay the benefits, with certain exceptions, the benefits under
the plan remain obligations of the Bank. The Bank has purchased company-owned
life insurance policies for its benefit on the lives of certain participants
estimated to be sufficient to recover, over time, the cost of benefits provided
plus the cost of insurance. Estimated annual benefits payable upon retirement to
participants are intended to provide participants a single life annuity with 120
months certain, commencing at normal retirement age 60, at a rate of 50% of each
Group 1 participant's final average recognized compensation (averaged over the
three consecutive years which produce the highest average), not to exceed
$185,000. In addition, each Group 1 participant will receive 25% of the average
of three consecutive years of performance pay not to exceed $80,000; at the rate
of up to a maximum of 50% of each Group 2 participant's final average recognized
compensation (averaged over the 3 consecutive years that produce the highest
average), not to exceed $50,000; and at the rate of up to a maximum of 35% of
each Group 3 participant's final average recognized compensation (averaged over
the three consecutive years which produce the highest average), not to exceed
$20,000. To encourage continued employment after the plan retirement age of 60,
the compensation committee has the authority to increase the base salary
percentage to 70% of Group 1 participants.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ESTIMATED MAXIMUM ANNUAL BENEFITS AT AGE 60

FINAL AVERAGE FINAL AVERAGE GROUP 1 GROUP 2 GROUP 3
SALARY (FAS) PERFORMANCE PAY PARTICIPANTS PARTICIPANTS PARTICIPANTS
- ----------------- ---------------- ------------- ------------ ------------
(FAPP)
----------------

75,000 55,000 51,250 26,250 15,000
100,000 72,000 68,000 35,000 20,000
125,000 90,000 85,000 43,750 20,000
150,000 107,000 101,750 50,000 20,000
175,000 125,000 118,750 50,000 20,000
200,000 135,000 133,750 50,000 20,000
300,000 265,000 216,250 50,000 20,000
375,000 332,000 265,000 50,000 20,000

(1) Includes benefits from the addition of performance pay at 25% of the average
3 consecutive years at an amount not to exceed $80,000.

(2) If the CEO and the four other named executive officers listed in the Summary
Compensation Table retired on the date of this Proxy Statement, then each
would receive the following supplemental executive retirement benefit,
calculated as described in the paragraph preceding the chart: Mr. Campbell
$258,511per year, Mr. McSwiggan $153,209 per year, Mr. Tabas $125,705 per
year, Mr. Decker $106,537 per year and Mr. Stempel $109,205 per year.

EMPLOYEE OPTION GRANTS IN FISCAL YEAR 2005
- -------------------------------------------

POTENTIAL REALIZED
VALUE AT
NUMBER OF ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS EXERCISE APPRECIATION FOR
OPTIONS GRANTED TO OR BASE OPTION TERM ($)
GRANTED EMPLOYEES PRICE EXPIRATION ---------------------------
NAME (#)(1)(2) IN FISCAL YEAR ($/SH)(2)(3) DATE 5% 10%
- ------------------------------------- ---------------- ----------------- ------------- ------------- ------------- -------------

Joseph P. Campbell 58,905 38.50% 22.98 6/16/15 851,295 2,157,349

James J. McSwiggan 10,600 6.93% 22.98 6/16/15 153,191 388,217

Robert R. Tabas 8,889 5.81% 22.98 6/16/15 128,464 325,556

John M. Decker 7,409 4.84% 22.98 6/16/15 107,075 271,349

Murray Stempel, III 7,409 4.84% 22.98 6/16/15 107,075 271,349

- -----------------------
(1) Pursuant to the Stock Option Plan, the options are exercisable at 20% per
year after the date of grant and must be exercised within ten years of the date
of grant (June 16, 2005).

(2) The number of securities underlying stock options and the stock exercise
price have been adjusted for the Corporation's December 2005 stock dividend.

(3) The exercise price is equal to the fair market value at the time of grant of
the option, as determined by the Stock Option Plan, adjusted for the December
2005 stock dividend.

(4) Options terminate immediately if a participant ceases to be employed by the
Corporation as an officer or key employee. However, if a participant's
employment ceases due to the participant's retirement with Corporation's consent
or death, the participant my exercise the stock options within three months
after cessation of employment.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND 2005 OPTION/SAR VALUES
- -------------------------------------------------------------------------------

NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS AT
ACQUIRED DECEMBER 31, 2005(2) DECEMBER 31, 2005(3)
ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- -------------- ----------- -------------- -------------- ---------------- -------------- ----------------

Joseph P. Campbell ------ ------- 81,701 74,543 604,149 36,893

James J. McSwiggan ------ ------- 42,403 17,320 337,938 20,011

Robert R. Tabas ------ ------- 35,181 14,397 283,761 16,291

John M. Decker ------ ------- 26,536 11,877 209,156 13,099

Murray Stempel, III ------ ------- 24,691 11,877 187,212 13,099

(1) Value realized is the total market value of the underlying securities on the
date of exercise minus the total exercise price for the options exercised.
(2) The number of securities underlying stock options and the stock exercise
price have been adjusted for the Corporation's December 2005 stock dividend.
(3) Value of unexercised options/SARS is based upon the closing stock price at
December 31, 2005, of $22.70.

(The remainder of this page is intentionally left blank)

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following two tables disclose the number of outstanding options,
warrants and rights granted by the Corporation to participants in equity
compensation plans, as well as the number of securities remaining available for
future issuance under the plans. The tables provide this information separately
for equity compensation plans that have and have not been approved by security
holders.

(c)
Number of securities
(a) remaining available for
Number of securities to (b) future issuance under
be issued upon Weighted-average equity compensation
exercise of outstanding exercise price of plans (excluding
options, warrants and outstanding options, securities reflected in
rights warrants and rights column(a)
-------------------------------------------------------------------------------

OUTSIDE DIRECTORS STOCK OPTION PLAN
------------------------------------
Equity compensation plan approved
by stockholders 91,068 $18.53 46,632

Equity compensation plan not
approved by stockholders --- --- ---
------ ------ ------
Total 91,068 $18.53 46,632

(c)
Number of securities
(a) remaining available for
Number of securities to (b) future issuance under
be issued upon Weighted-average equity compensation
exercise of outstanding exercise price of plans (excluding
options, warrants and outstanding options, securities reflected in
rights warrants and rights column (a)
-------------------------------------------------------------------------

EMPLOYEES STOCK OPTION PLAN
----------------------------

Equity compensation plan approved
by stockholders 737,170 $19.61 44,941

Equity compensation plan not
approved by stockholders --- --- ---
------- ------ ------
Total 737,170 $19.61 44,941

During 2005, no present or former officer or employee of the
Corporation or its direct or indirect subsidiaries, and no individual who had a
relationship with the Corporation, requiring disclosure under Item 404 of
Regulation S-K, participated in deliberations of the Compensation Committee
concerning executive officer compensation. Joseph P. Campbell and James J.
McSwiggan attended portions of the meetings at the request of the committee
chairperson in a non-voting capacity.

SUMMARY COMPENSATION TABLE
- --------------------------

The following table sets forth all compensation paid by the Corporation
to the Chief Executive Officer and each of the four most highly compensated
non-CEO executive officers whose total annual salary and profit sharing exceeded
$100,000 in 2005, for services rendered during the past three fiscal years.

Annual Compensation

OTHER
PROFIT ANNUAL
SHARING COMPENSATION
NAME AND POSITION YEAR SALARY ($) ($)(1) ($) (2)
- ----------------- ----- ---------- ------- -----------

Joseph P. Campbell 2005 365,300 515,646 40,845
President and CEO 2004 364,500 322,281 50,336
2003 337,500 303,448 29,852

James J. McSwiggan 2005 232,500 251,212 31,550
Chief Operating Officer 2004 232,200 157,008 34,050
2003 215,000 147,834 23,600

Robert R. Tabas 2005 195,000 185,104 32,800
Chairman of the Board 2004 194,400 115,690 35,300
2003 180,000 112,820 23,600

John M. Decker 2005 162,500 191,715 32,800
Executive Vice President 2004 162,000 115,690 34,050
2003 150,000 101,149 23,600

Murray Stempel, III 2005 162,500 178,493 32,800
Chief Lending Officer 2004 162,000 119,822 35,300
2003 150,000 112,820 23,600

[RESTUBBED TABLE]

Long Term Compensation

VALUE OPTION SECURITIES SECURITIES 401 K
SARS UNDERLYING UNDERLYING PLAN TOTAL
EXERCISED OPTIONS OPTIONS CONTRIBUTIONS COMPENSATION
NAME AND POSITION ($) GRANTED (#) (3) GRANTED ($) (4) ($) (5) ($)
- ----------------- --------- --------------- --------------- ------------ ----------

Joseph P. Campbell -- 58,905 168,538 2,500 1,092,829
President and CEO -- 54,979 191,498 2,500 931,115
-- 26,144 75,247 2,500 748,547

James J. McSwiggan -- 10,600 74,106 2,500 591,868
Chief Operating Officer 218,751 23,524 88,971 2,500 733,480
270,986 10,804 37,256 2,500 697,176

Robert R. Tabas -- 8,889 60,021 2,500 475,425
Chairman of the Board 180,734 19,695 72,416 2,500 601,040
292,438 9,045 30,494 2,500 641,852

John M. Decker -- 7,409 47,483 2,500 436,998
Executive Vice President 116,126 16,411 55,803 2,500 486,169
152,767 7,537 22,913 2,500 452,929

Murray Stempel, III -- 7,409 47,316 2,500 423,609
Chief Lending Officer 44,669 16,411 54,719 2,500 419,010
30,381 7,538 22,013 2,500 341,314

(1) Profit sharing of Joseph P. Campbell, Robert R. Tabas, James J. McSwiggan,
Murray Stempel, III and John M. Decker are performance based and tied to goals
set by the Compensation Committee.
(2) Includes director fees and automobile allowances. The automobile allowance
is furnished by the Corporation to facilitate job performance and is included in
income because it has an inherent personal component.
(3) The number of shares granted through Stock Option Plan during 2005 which has
been adjusted for the Corporation's December 2005 stock dividend.
(4) Value of shares that became vested during their respective year adjusted for
stock dividends.
(5) Consists of the Bank's contribution to its Employee 401(k) Pension Plan,
under which the Board of Directors has an obligation to match 100% of the total
employee contributions up to an annual maximum of $2,500. The Plan was
administered by Principal Financial Group, Inc. Each employee participant is
entitled to contribute up to 15% of his gross salary. Senior management
executives are asked to refrain from contributing to the plan in the event the
administrator determines their contributions would make the Plan top heavy. Each
participant in the Plan will have credited to his Participant's Benefit Account
his proportionate share of all appropriate amounts. Future benefits are based on
future contributions.

COMMON STOCK PERFORMANCE GRAPH

The performance graph on the following page shows cumulative investment
returns to shareholders based on the assumption that an investment of $100 was
made on December 31, 2000 (with all dividends reinvested), in each of the
following:

o Royal Bancshares of Pennsylvania, Inc. Class A common stock;
o the stock of all United States companies trading on the NASDAQ
market;
o Common stock of the 2005 peer group of Mid-Atlantic Banks with
total assets between $750 Million and $1.5 Billion.

[GRAPHIC OMITTED]

- -------------------------------------------------------------------------------------------------------------------
PERIOD ENDING
- -------------------------------------------------------------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
- -------------------------------------------------------------------------------------------------------------------

Royal Bancshares of Pennsylvania, Inc. 100.00 157.16 186.23 238.69 273.69 249.66
- -------------------------------------------------------------------------------------------------------------------
NASDAQ - Total US* 100.00 79.18 54.44 82.09 89.59 91.54
- -------------------------------------------------------------------------------------------------------------------
Royal Bancshares Peer Group* 100.00 136.71 173.35 227.08 241.85 230.12
- -------------------------------------------------------------------------------------------------------------------

*Royal Bancshares Peer Group consists of twenty banks headquartered in the
Mid-Atlantic region, trade on the major exchanges, and have total assets between
$750M and $1.5B.

BENEFICIAL OWNERSHIP - COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more than
10% of the registered class of the Corporation's equity securities, to file
reports of ownership and changes in ownership with the SEC. Officers, directors
and greater than 10% shareholders are required by SEC regulation to furnish the
Corporation copies of all Section 16(a) forms they file.

Based solely on its review of forms received from certain reporting
persons, or written representations from reporting persons that no Forms 5 where
required for those persons, the Corporation believes that during the period
January 1, 2005 through December 31, 2005 its officers and directors were in
material compliance with all filing requirements applicable to them.

ITEM 2 AMENDMENT OF THE CORPORATION'S ARTICLES OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK

The Board of Directors has approved an amendment to Article 4 of the
Additional Articles to the Corporation's Articles of Incorporation which, if
adopted, would increase the number of authorized common shares of the
Corporation from twenty million (20,000,000) shares of Common Stock consisting
of eighteen million (18,000,000) shares of Class A Common Stock, par value $2.00
per share, and two million (2,000,000) shares of Class B Common Stock, par value
$0.10 per share, to 21 million (21,000,000 ) shares of Common Stock consisting
of eighteen million (18,000,000) share of Class A Common Stock, par value $2.00
per share, and 3 million (3,000,000) shares of Class B Common Stock, par value
$0.10 per share. The Board recommends that shareholders approve this amendment.

At February 28, 2006, there were 12,692,669 of the Corporation's common
shares issued and outstanding, consisting of 10,700,513 shares of Class A Common
Stock and 1,992,156 shares of Class B Common Stock. Of the remaining 7,299,487
authorized shares of Class A Common Stock, 901,694 shares are reserved for
issuance under the Corporation's various stock-based compensation and employee
benefit plans, leaving 6,377,676 shares of Class A Common Stock available for
issuance. More than 7,844 of the remaining authorized shares of Class B Common
Stock are needed in order to pay the balance of the 2% stock dividend paid by
the Corporation on January 17, 2006, as described in more detail below.

On December 21, 2005, the Corporation declared a 2% stock dividend with
a record date of January 4, 2006 and a payment date of January 17, 2006. The
final resolution adopted by the Board of Directors restricted the stock dividend
to 26,469 Class B shares. However, payment of the stock dividend on the
outstanding Class B shares would have resulted in the issuance of more Class B
shares than are currently authorized by the Corporation's Articles of
Incorporation. Due to the restriction on the number of Class B shares that were
to be issued, the Corporation requested and received from the trustees of the
Daniel M. Tabas Trust an agreement to defer receipt of 20,117 Class B Common
Shares until the Articles of Incorporation are amended to permit issuance of the
additional Class B Common Shares.

In addition to the Class B Common Shares needed to complete the payment
of the stock dividend, the Board believes that it is advisable to have a greater
number of authorized but unissued Class B Common Shares available for various
corporate programs and purposes.

The Corporation may from time to time consider acquisitions and
mergers, stock dividends or stock splits, and public or private financings to
provide the Corporation with capital, which may involve the issuance of
additional Class A Common Shares and Class B Common Shares or securities
convertible into Class A and/or Class B Common Shares. The Board believes that
having authority to issue additional Class B Common Shares will avoid the
possible delay and significant expense of calling and holding a special meeting
of shareholders to increase authorized capital.

The Corporation has no present plan, agreement or understanding
involving the issuance of its Class A Common Shares or its Class B Common Shares
except for Class B Common Shares required to be issued to complete the payment
of the 2% stock dividend from January 2006 and for Class A Common Shares
required to be issued under the Corporation's stock-based compensation and
employee benefit plans. It is possible, however, that merger and acquisition
opportunities involving the issuance of common shares will develop. It is also
possible that an increase in the market price for the Corporation's common
shares, and conditions in the capital markets generally, may make a stock
dividend, a stock split or a public offering of the Corporation's common stock
desirable. In each of the past 19 years, the Corporation has paid a 2% or
greater stock dividend and/or split its common stock. The Board believes that an
increase in the number of authorized Class B Common Shares will enhance its
ability to respond promptly to any such opportunities.

If this proposal is approved, the additional authorized Class B Common
Shares may be issued for such consideration, cash or otherwise, at such times
and in such amounts as the Board of Directors may determine without shareholder
approval, except to the extent that shareholder approval is required by
applicable law or rules. For example, because the Corporation's Class A Common
Shares are traded on the NASDAQ National Market tier of the NASDAQ Stock Market,
under applicable rules of the National Association of Securities Dealers, Inc.,
shareholder approval must be obtained prior to the issuance of Class A Common
Shares for certain purposes, including the issuance of greater than 20% of the
Corporation's then outstanding shares in connection with an acquisition or
merger.

Although the Board presently intends to employ the additional Class B
Common Shares solely for the purposes set forth above, such shares could be used
by the Board to dilute the stock ownership of persons seeking to obtain control
of the Corporation, thereby possibly discouraging or deterring a non-negotiated
attempt to obtain control of the Corporation and making removal of incumbent
management more difficult. The proposal, however, is not a result of, nor does
the Board have any knowledge of, any effort to accumulate the Corporation's
Class B Common Shares or to obtain control of the Corporation by means of a
merger, tender offer, solicitation in opposition to the Board or otherwise. The
proposal is not part of any plan by the Board to adopt a series of proposals
relating to a possible takeover of the Corporation, and the Board has no present
intention of soliciting a shareholder vote on any other such proposal.

Other than as discussed above, the authorization of additional Class B
Common Shares will not, by itself, have any effect on the rights of present
shareholders. Shareholders do not have preemptive rights to subscribe for or
purchase additional Class A Common Shares or Class B Common Shares. The issuance
of additional Class B Common Shares authorized by the amendment for corporate
purposes other than a stock split or stock dividend could have a dilutive effect
on earnings and book value per Class A Common Share and Class B Common Share and
on the voting power of all common shareholders at the time of issuance.

The Board recommends a vote FOR this amendment. The affirmative vote of
a majority of the votes cast by all shareholders entitled to vote at the Meeting
is required to approve this amendment. Abstentions and broker non-votes will not
constitute or be counted as "votes" cast on this matter, so they will have no
effect on the outcome. All proxies will be voted FOR approval of the amendment
unless a shareholder specifies to the contrary on such shareholder's proxy card.

ITEM 3 APPROVAL OF AN AMENDMENT TO THE STOCK OPTION AND
APPRECIATION RIGHT PLAN

The Board of Directors is recommending that the shareholders approve an
amendment to the Stock Option Plan to reserve an additional 150,000 shares of
the Corporation's common stock for issuance under the Stock Option Plan, provide
that at no time shall the maximum number of shares of stock that may be issued
under the Stock Option Plan exceed 19% of the Corporation's outstanding shares,
and extend the Stock Option Plan's termination date to April 18, 2007. The Board
is not asking the shareholders to approve a new stock option plan at this time.
The current Plan, adopted in 1996 after approval of the shareholders of the
Corporation, authorized the issuance of 1,500,000 shares. The Stock Option Plan
was amended in May, 2005 after receiving shareholder approval to increase the
number of shares reserved under the Stock Option Plan to 1,650,000 shares.
Options and SAR's can, therefore, be granted under the current Plan until April
18, 2006. Currently, the Compensation Committee is consulting with an
independent third party and carefully reviewing the proposed terms of a new
plan. Rather than present a new plan now for approval, the Compensation
Committee feels it is prudent to simply request approval of the issuance
additional shares and to extend the term of the Stock Option Plan by one year in
order to have sufficient shares and time to make awards through April 18, 2007,
consistent with its long-term incentive compensation strategy. All other terms
of the Stock Option Plan will remain in full force and effect. The principal
terms of the Stock Option Plan are summarized below. This summary is qualified
in its entirety by reference to the terms of the Stock Option Plan set forth in
the plan document attached to this Proxy Statement as Exhibit A.

Purpose of Plan. The purpose of the Stock Option Plan is to further long-term
growth of the Corporation by offering incentive compensation related to
long-term performance goals to officers and key employees responsible for such
growth.

Administration of Plan. The Stock Option Plan is administered by the
compensation committee appointed by the Board of Directors. The committee has
full and final authority to interpret the provision of the Stock Option Plan,
decide all questions of fact arising regarding application of the Stock Option
Plan and to determine the employees to whom awards should be made.

Stock Subject to Plan. 1,650,000 shares of Class A common stock are currently
approved for issuance under the Stock Option Plan. The Board is requesting
shareholder approval of an additional 150,000 shares. At no time shall the
maximum number of shares of stock that may be issued under the Stock Option Plan
exceed 19% of the Corporation's outstanding shares.

Eligibility to Receive Awards under the Plan. Employees eligible to receive
awards are limited to officers and other key employees of the Corporation who
are in positions to make decisions and take actions which will have significant
impact upon the profitability and success of the Corporation. Directors who are
not officers or employees of the Corporation are not eligible to receive awards
under the Stock Option Plan.

Form of Awards. Awards are grants of options to purchase a number of Class A
common stock and an equal number of SAR's, if SAR's are granted.

Option Price. The purchase price of stock subject to a stock option is the fair
market value of the stock at the time of grant of the stock option.

Exercise Term. The committee determines the period of time during which stock
options may be exercised. Not more than 20% of an option award shall be
exercisable for each year of satisfactory employment completed after the award
of the stock option. No stock option shall be exercised after ten years from the
date of the grant of the stock option.

Termination of Employment. In the event a Stock Option Plan participant ceases
to be an officer or key employee of the Corporation, other than due to
retirement with the Corporation's consent, death, or disability, the stock
options are immediately terminated. In the event of termination of employment
due to retirement with the Corporation's consent, death or disability, the
participant or the participant's legal representative shall have the right to
exercise the stock option for a period of three months after such termination.

Transferability. A stock option in not transferable other than by Will or the
laws of descent and distribution.

Non-Qualified Stock Options. The stock options do not qualify as Incentive Stock
Options under the Internal Revenue Code.

Stock Appreciation Right. An SAR entitles the participant to receive upon
exercise, all or a portion of the excess of (i) the fair market value of the
shares at the time of exercise over (ii) the exercise price (100% of the fair
market value at the time of the grant).

Coordination of SAR with Stock Option. An SAR may be granted only in connection
with a contemporaneously granted stock option for an identical number of shares
of stock. The SAR would be exercisable for the identical number of shares of
stock. The SAR would be exercisable for the identical number of shares that the
participant could purchase through the exercise of an option.

Terms applicable generally to Options also applicable to SAR's. Terms of the
Plan governing the exercise term, number of shares, rights upon termination of
employment and transferability of SAR's are similar to those governing stock
options.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

In the ordinary course of business, Royal Bank America, the
Corporation's wholly-owned banking subsidiary, has had, and expects to have in
the future, banking transactions with directors, officers of the Bank, principal
shareholders of the Corporation and their associates which involve substantially
the same terms, including interest rates, collateral and repayment terms as
those prevailing at the time for comparable transactions with others, and no
more than the normal risk of collectibility or other unfavorable features.

The largest aggregate amount of indebtedness to the Corporation and the
Bank during the year 2005, by all directors and officers of the Corporation and
Bank as a group, and their affiliates, was $9,200,000. The total of such
outstanding loans at December 31, 2005, was $13,338,000 (including available
funds not disbursed), representing 8.6% of shareholders' equity in the
Corporation. There is one fixed rate loan with an interest rate of 6.25%. There
is one floating rate loan based on 90 day LIBOR plus 300 basis points and one
floating rate loan based on 30 day LIBOR plus 225 basis points. All other loans
have floating interest rates ranging from prime to prime plus 100 basis points.

The Corporation has had and intends to have business transactions in
the ordinary course of business with directors, officers and associates on
comparable terms as those prevailing from time to time for other non-affiliated
vendors of the Corporation. During 2005, the Corporation used the services of
the Hilton Philadelphia Hotel and banquet facilities for Board of Director's
meetings. The Hilton Philadelphia Hotel complex is managed by Howard Wurzak and
owned by Stoudt Road Hotel Development, 50% of which is owned by Evelyn R. Tabas
and 50% of which is owned by the Estate of Daniel M. Tabas.

EMPLOYEE CODE OF ETHICS

Our employee Code of Ethics is applicable to our directors, officers
and employees. The Code of Ethics encourages individuals to report any conduct
that they believe in good faith to be an actual or apparent violation of the
Code of Ethics. The Board periodically receives reports on our compliance
program. The Code of Ethics can also be accessed on the internet via our website
at www@royalbankamerica.com under the caption "About Us".

LEGAL PROCEEDINGS

In the opinion of the management of the Corporation, there are no
proceedings pending to which the Corporation and the Bank are a party or to
which its property is subject, which, if determined adversely to the Corporation
and the Bank, would be material in relation to the Corporation's and the Bank's
financial condition. There are no proceedings pending other than litigation
incident to the business of the Corporation and the Bank. In addition, no
material proceedings are pending or are known to be threatened or contemplated
against the Corporation or the Bank by government authorities.

SHAREHOLDER PROPOSALS
AND COMMUNICATION

Any shareholder who, in accordance with and subject to the provisions
of the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Corporation's proxy statement for its 2007 Annual Meeting of Shareholders must
deliver the proposal in writing to the Secretary of Royal Bancshares of
Pennsylvania, Inc. at its principal executive offices, 732 Montgomery Avenue,
Narberth, Pennsylvania 19072, not later than December 20, 2006. A shareholder

who desires to propose an individual for consideration by the Board of Directors
as a nominee for director should submit a proposal in writing to the Secretary
of the Corporation in accordance with Section 10.1 of the Corporation's Bylaws.
Any shareholder who intends to nominate any candidate for election to the Board
of Directors must notify the Secretary of the Corporation in writing not less
than 90 days prior to the date of the annual meeting of shareholders or not
later than 7 days after the date on which notice was given for any other meeting
of shareholders called for the election of one or more directors.

Any shareholder who wishes to communicate with the Board of Directors
may send correspondence to Joseph P. Campbell, President and CEO, Royal Bank
America at 732 Montgomery Avenue, Narberth, PA, 19072, Phone # (610) 668-4700,
or by sending an electronic message to Mr. Campbell at
jcampbell@royalbankamerica.com. Mr. Campbell will submit your correspondence to
the Board of Directors or the appropriate committee as applicable.

OTHER MATTERS

The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the accompanying Notice of
Annual Meeting of Shareholders, but if any matters are properly presented, it is
the proxy holders' intent to vote on such matters in accordance with their best
judgment.

EXHIBIT A

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
STOCK OPTION AND APPRECIATION RIGHT PLAN

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
STOCK OPTION AND APPRECIATION RIGHT PLAN
Table of Contents

Section Page
------- ----

1. Purpose .................................................................................................... i

2. Definitions ................................................................................................ i

3. Administration.............................................................................................. i-ii

4. Stock Subject to the Plan................................................................................... ii

5. Eligibility to Receive Awards .............................................................................. ii

6. Form of Awards ............................................................................................. ii

7. Stock Options .............................................................................................. ii-iii

8. Stock Appreciation Right ................................................................................... iii-iv

9. General Restrictions........................................................................................ iv-v

10. Single or Multiple Agreements ............................................................................. v

11. Rights of a Shareholder ................................................................................... v

12. Termination of Employment ................................................................................. v

13. Rights in Event of Death or Disability..................................................................... v

14. Withholding ............................................................................................... vi

15. Non-Assignability ......................................................................................... vi

16. Non-Uniform Determinations ................................................................................ vi

17. Participants Not Obligated ................................................................................ vi

18. Effect of Changes in Stock Subject to the Plan ............................................................ vi

19. Reservation of Shares of Stock ............................................................................ vii

20. Amendment ................................................................................................. vii

21. Effect on Other Plans ..................................................................................... vii

22. Effective Date and Duration of the Plan ................................................................... vii

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
STOCK OPTION AND APPRECIATION RIGHT PLAN
Section 1. Purpose.

1.1 The purpose of the Royal Bancshares of Pennsylvania, Inc. Stock
Option and Appreciation Right Plan (the "Plan") is to further the long-term
growth of Royal Bancshares of Pennsylvania, Inc. (the "Corporation") by offering
incentive compensation related to long-term performance goals of those officers
and other key employees who will be responsible for planning for and directing
such growth. The Plan is also intended to be a means of reinforcing the
commonality of interest between the Corporation and its officers and key
employees and to be an aid in attracting and retaining officers and other key
employees of outstanding abilities and specialized skills. The Corporation hopes
to achieve these purposes through the grant of options to purchase shares of the
Corporation's Class "A" Common Stock and the grant of stock appreciation rights.

Section 2. Definitions.

2.1 Unless otherwise required by the context, the following terms shall
have the meaning set forth below:

(a) "Board" shall mean the Corporation's Board of Directors.
(b) "Committee" shall mean a minimum of three individuals and
a maximum of five individuals appointed by the Board. The Board of
Directors may appoint any individual, whether or not a director, to
serve as a Committee member, provided that such individual is
ineligible and has been ineligible for a one year period prior to
appointment to the Committee for selection as a person to whom a Stock
Option or Stock Appreciation Right may be granted pursuant to this Plan
or any other similar plan of the Board. The Committee shall be called
the "Royal Bancshares of Pennsylvania, Inc. Stock Option and
Appreciation Right Plan Committee" and shall have the rights and duties
set forth in Section 3 below.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended,
(d) "Corporation" shall mean Royal Bancshares of Pennsylvania,
Inc., a Pennsylvania business Corporation, or any subsidiary thereof
that adopts the Plan.
(e) "Option Price" shall mean the purchase price for Stock
under a Stock Option, as determined in Section 7(b) below.
(f) "Participant" shall mean an officer or other key
employee of the Corporation to whom a Stock Option or Stock
Appreciation Right is granted under the Plan.
(g) "Plan" shall mean this Royal Bancshares of Pennsylvania,
Inc. Stock Option and Appreciation Right Plan.
(h) "Stock" shall mean the Class "A" Common Stock of the
Corporation, par value $2.00.
(i) "Stock Option" shall mean a right to purchase Stock,
granted pursuant to Section 7 below.
(j) "Stock Appreciation Right" shall mean a right to receive
cash granted pursuant to Section 8 below.
(k) "Subsidiary" shall mean a subsidiary of the Corporation.

Section 3. Administration.

3.1 The Plan shall be administered by the Compensation Committee
("Committee"). A simple majority of the members of the Committee shall
constitute a quorum for the transaction of business. Unless otherwise determined
by the Board, the interpretation and construction of any provision of the Plan
by the Committee shall be final. No member of the Board or the committee shall
be liable for any action or determination made by the member in good faith. The
Committee shall have full and final authority in its discretion to interpret the
provisions of the Plan; to decide all questions of fact arising in its
application; to determine the employees to whom awards shall be made under the
Plan; to determine the type of awards to be made and the amount, size and terms
of each such award; to determine the time when awards shall be granted; and to
make all other determinations necessary or advisable for the administration of
the Plan.

Section 4. Stock Subject to the Plan.

4.1 Subject to the provisions of Section 18 below and the next sentence
of this Section, the maximum number of shares of Stock that may be optioned or
sold under the Plan is 1,800,000 shares. However, at no time shall the maximum
number of shares of Stock that may be optioned or sold under the Plan exceed
nineteen percent (19%) of the shares of Stock outstanding. Such shares may be
treasury, or authorized, but unissued, shares of Stock. Except as otherwise
provided herein, any shares subject to a Stock Option which for any reason
expires or is terminated unexercised, shall again be available under the Plan.

Section 5. Eligibility to Receive Awards.

5.1 Persons eligible to receive awards under the Plan shall be limited
to those officers and other key employees of the Corporation who are in
positions in which their decisions, actions and counsel will have a significant
impact upon the profitability and success of the Corporation. Directors of the
Corporation who are not otherwise officers or employees of the Corporation shall
not be eligible to participate in the Plan.

Section 6. Form of Awards.

6.1 Awards may be made from time to time by the Committee in the form
of Stock Options to purchase a number of shares of Stock of the Corporation and
an equal number of Stock Appreciation Rights.

Section 7. Stock Options.

7.1 Stock Options for the purchase of Stock of the Corporation shall be
evidenced by written agreements in such form not inconsistent with the Plan as
the Committee shall approve from time to time, which agreements shall contain
in substance the following terms and conditions:

(a) Employment Agreement The Committee may, in its discretion,
include in any Stock Option granted under the Plan a condition that the
Participant shall agree to remain in the employ of, and to render
services to, the Corporation for a period of time (specified in the
agreement) following the date the Stock Option is granted. No such
agreement shall impose upon the Corporation, however, any obligation to
employ the participant for any period of time or to maintain the
Participant's employment duties or responsibilities.
(b) Option Price. The purchase price of Stock subject to a
Stock Option shall be the fair market value at the time of grant, as
determined by the Committee.
(c) Exercise Term. Subject to the limitations of this Section,
the Committee shall determine the period of time within which the Stock
Option may be exercised. Each Stock Option agreement shall state such
period of time. However, not more than twenty percent (20%) of a Stock
Option shall be exercisable for each year of satisfactory employment
completed after the award of the Stock Option. Further, no Stock Option
shall be exercised after ten (10) years from the date of the grant
thereof.
(d) Payment for Shares. Subject to such payment terms and
conditions as may be prescribed by the Committee for such purpose, the
purchase price of the shares of Stock with respect to which a Stock
Option is exercised shall be payable in full at the time of exercise in
cash.
(e) Number of Shares. Each Stock Option shall state the total
number of shares of Stock to which it pertains. The number of shares to
which a Participant is entitled under a Stock Option shall be reduced
by the number of shares related to the Stock Option that have been
previously exercised, by the Participant, No Stock Option may be
exercised for a fractional share of Stock.

(f) Rights Upon Termination of Employment.
In the event that a Participant ceases to be an
officer or key employee of the Corporation for any cause other than retirement
with the Corporation's consent, death, or disability, the Participant's Stock
Option shall terminate at the time of termination of employment or upon the
transfer to a lesser position of employment so that the employee is no longer
deemed to be a key employee. In the event that a Participant retires with the
Corporation's consent, dies, or becomes disabled prior to the expiration of the
Participant's Stock Option and without having fully exercised the Participant's
Stock Option, to the extent that the Stock Option is exercisable at the time of
such retirement with the Corporation's consent, death, or disability, the
Participant or the Participant's successor shall have the right to exercise the
Stock Option during its term within a period of three (3) months after
termination of employment due to retirement with the Corporation's consent,
death, or disability.
(g) Nontransferability.
Each Stock Option agreement shall state that the
Stock Option is not transferable other than pursuant to subsection 7(f) above by
will or the laws of descent and distribution, and that during the lifetime of
the Participant the Stock Option is exercisable only by the Participant.
(h) Non-Qualified Stock Option.
It is not intended that this Stock Option qualify as
an Incentive Stock Option under Section 422A of the Code.

Section 8. Stock Appreciation Right.

8.1 A Stock Appreciation Right shall be evidenced by a written
agreement in such form not inconsistent with the Plan as the Committee shall
approve from time to time, which agreement shall contain in substance the
following terms and conditions:
(a) Employment Agreement.
The Committee may, in its discretion, include in any
Stock Appreciation Right granted under the Plan a condition that the Participant
shall agree to remain in the employ of, and to render services to, the
Corporation for a period of time (specified in the agreement) from the date the
Stock Appreciation Right is granted. No such agreement shall impose upon the
Corporation, however, any obligation to employ the Participant for any period of
time or to maintain the Participant's employment duties or responsibilities.
(b) Right Value.
A Stock Appreciation Right shall entitle the
Participant, subject to such terms and conditions determined by the Committee,
to receive upon exercise thereof all or a portion of the excess of (i) the fair
market value, as determined by the Committee, of a specified number of shares of
Stock at the time of exercise, over (ii) a specified price which shall not be
less than one hundred (100%) percent of the fair market value, as determined by
the Committee, of the specified number of shares of Stock at the time the right
is granted, as adjusted pursuant to Section 18 below.
(c) Coordination with. Stock Option.
A Stock Appreciation Right shall be granted only in
connection with a contemporaneously granted Stock Option for an identical number
of shares of Stock for which the Stock Option has been granted. A Stock
Appreciation Right shall be exercised for the identical number of shares to be
purchased by the Participant through the exercise of a Stock Option.
(d) Exercise Term.
Subject to the limitation of this Section, the
Committee shall determine the period of time within which the Stock Appreciation
Right may be exercised. Each Stock Appreciation Right agreement shall state such
period of time. However, not more than twenty percent (20%) of a Stock
Appreciation Right shall be exercisable for each year of satisfactory employment
completed after the award of the Stock Appreciation Right. Further, no Stock
Appreciation Right shall be exercisable after ten (10) years from the date of
the award thereof.

iii

(e) Number of Shares.
Each Stock Appreciation Right shall state the total
number of shares of Stock to which it pertains. The number of shares to which a
Participant is entitled under a Stock Appreciation Right shall be equal to the
number of shares in the contemporaneously granted Stock Option, (described in
Section 7 above).
(f) Rights Upon Termination of Employment.
In the event that a participant ceases to be an
officer or key employee of the Corporation for any cause other than retirement
with the Corporation's consent, death, or disability, the Participant's Stock
Appreciation Right shall terminate at the time of termination of employment or
upon the transfer to a lesser position of employment so that the employee is no
longer deemed to be a key employee. In the event that a Participant retires with
the Corporation's consent, dies, or becomes disabled prior to the expiration of
the Participant's Stock Appreciation Right and without having fully exercised
the Participant's Stock Appreciation Right; to the extent that the Stock
Appreciation Right is exercisable at the time of such retirement with the
Corporation's consent, death, or disability by the Participant, such Participant
or .;such Participant's successor shall have the right to exercise the Stock
Appreciation Right during its term within a period of three (3) months after
termination of employment due to retirement with the Corporation's consent,
death or disability.
(g) Nontransferabilitv.
Each Stock Appreciation Right agreement shall state
that the Stock Appreciation Right is not transferable other than pursuant to
subsection 8(f) above by will or the laws of descent and distribution; and that
during the lifetime of the Participant, the Stock Appreciation Right is
exercisable only by the Participant.
(h) Payment.
Upon exercise of a Stock Appreciation Right, payment
shall be made in cash, at the same time arid subject to the same terms and
conditions as the payment for the matching Stock Option.
(i) Manner of Exercise.
A Participant shall exercise a Stock Appreciation
Right by giving the Corporation written notice of such exercise accompanying the
Participant's notice of the exercise of a Stock Option for an identical number
of shares of Stock. The date upon which such written notice is received by the
Corporation shall be the exercise date for the Stock Appreciation Right.
(j) Other Terms.
A Stock Appreciation Right shall be granted in such
manner and such form, and subject to such additional terms and conditions as the
committee in its sole discretion deems necessary or desirable, including without
limitation, any form or manner in order to avoid any insider-trading liability
in connection with a Stock Appreciation Right under Section 16 (b) of the
Securities Exchange Act of 1934.

Section 9. General Restrictions.

9.1 Each award under the Plan shall be subject to the requirement that
if at any time the Committee shall determine that (i) the listing, registration
or qualification of the shares of Stock upon any securities exchange or under
any state or federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with respect
to the disposition of shares of Stock is necessary or desirable as a condition
of or in connection with the granting of such award or the issuance-or purchase
of shares of Stock; such award shall not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable to
the Committee. Moreover, as a condition to the exercise of any portion of a
Stock Option, or of any Stock Appreciation Right, the Corporation may require
the person exercising such Stock Option or Stock Appreciation Right to represent
and warrant at the time of such exercise that any shares of Stock acquired at
exercise are being acquired only for investment and without any present
intention to sell or distribute such shares, if, in the opinion of the
Corporation's counsel, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of any governmental
agency.

Section 10. Single or Multiple Agreements.

10.1 Multiple forms of awards or combinations thereof may be evidenced
by a single agreement or multiple agreements, as determine by the Committee.

Section 11. Rights of a Shareholder.

11.1 The recipient of any award under the Plan, unless otherwise
provided by the Plan, shall have no rights as a shareholder with respect thereto
unless and until certificates for shares of Stock are issued to the recipient.
Promptly after the exercise of a Stock Option and the payment of the full Option
Price, the Participant shall be entitled to the issuance of a stock certificate
evidencing the Participant's ownership of such Stock. No adjustment will be made
for dividends or other rights for which the record date is prior to the date
such stock certificate is issued.

Section 12. Termination of Employment.

12.1 Except as provided in this Section 12 and in Section 13 below, if
a Participant ceases to be employed by the Corporation as an officer or key
employee, the Participant's Stock Option and Stock Appreciation Right shall
terminate immediately upon such termination of employment or transfer to a
lesser position so that the employee is no longer deemed to be a key employee.
However, if a Participant's cessation of employment with the Corporation is due
to the Participant's retirement with the Corporation's consent, the Participant
may, within three months after such cessation of employment, exercise the
Participant's Stock Option and Stock Appreciation Right to the extent that the
Participant is entitled to exercise them on the date of cessation of employment.
However, in no event shall any Option or Stock Appreciation Right be exercisable
more than ten (10) years from the date it was granted. If the Participant
engages in employment or activities contrary, in the opinion of the Committee,
to the Corporation's best interests, the Committee may cancel an Option or Stock
Appreciation Right during the three month period referred to in this paragraph.
The Committee shall determine in each case whether a termination of employment
shall be considered a retirement with the Corporation's consent. Unless
overruled by the Board, any such determination of the Committee shall be final
and conclusive.

Section 13. Rights in Event of Death or Disability.

13.1 If a Participant dies or becomes disabled (as determined by the
Committee pursuant to the provisions of Section 3 above) while employed by the
Corporation, or within three months after having retired with the Corporation's
consent, and without having fully exercised the Participant's Stock Option and
Stock Appreciation Right; the Participant, the Participant's personal
representative, the executor or administrator, or the legatee or heir of the
Participant's estate shall have the right within three (3) months thereafter to
exercise, such Stock Option and Stock Appreciation Right to the extent that such
disabled or deceased Participant is entitled to exercise the Stock Option and
Stock Appreciation Right on the date of the Participant's disability or death.
However, in no event shall any Stock Option or Stock Appreciation Right be
exercisable more than ten (10) years from the date it was granted.

Section 14. Withholding.

14.1 Whenever the Corporation proposes or is required to issue or
transfer shares of Stock under the Plan, the Corporation shall have the right to
require the recipient to remit to the Corporation an amount sufficient to
satisfy any federal, state or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares.

Section 15. Non-Assignabilitv.

15.1 Except by will or by the laws of descent and distribution, no
award under the Plan shall be assignable or transferable by the recipient
thereof. Except as provided in Section 13 above, during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.

Section 16. Non-Uniform Determinations.

16.1 The Committee's determinations under the Plan (including without
limitation determinations of the persons to receive awards, the form, amount,
and timing of such awards, the terms and provisions of such awards and the
agreements evidencing same, and the establishment of values) need not be uniform
and may be made selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.

Section 17. Participants Not Obligated.

17.1 The granting of an Award of a Stock Option or Stock Appreciation
Right shall impose no obligation upon the Participant to exercise such stock
Option or Stock Appreciation Right.

Section 18. Effect of Changes in Stock Subject to the Plan.

18.1 The aggregate number of shares of Stock available for Stock
Options under the Plan, the shares subject to any Stock Option, the price per
share, and the number of Stock Appreciation Rights shall all be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
subsequent to the effective date of the Plan resulting from (1) a subdivision or
consolidation of shares or any other capital adjustment, (2) the payment of a
stock dividend, or (3) other increase or decrease in such shares effected
without receipt of consideration by the Corporation. The aforesaid adjustment
shall be made in such a manner so that the aggregate amount payable under the
Stock Option and the Stock Appreciation Right after the increase or decrease
equals the aggregate amount payable prior to such increase or decrease. If the
Corporation shall be the surviving Corporation in any merger or consolidation,
any Stock Option or Stock Appreciation Right shall pertain, apply, and relate to
the securities to which a holder of the number of shares of Stock subject to the
Stock Option and Stock Appreciation Right would have been entitled after the
merger or consolidation. Upon dissolution or liquidation of the Corporation, or
upon a merger or consolidation in which the Corporation is not the surviving
Corporation, all Stock Options and Stock Appreciation Rights outstanding under
the Plan shall terminate; provided, however, that each Participant (and each
other person entitled under Section 13 above to exercise a Stock Option or Stock
appreciation Right) shall have the right, immediately prior to such dissolution
or liquidation, or such merger or consolidation, to exercise such Participant's
Stock Option and Stock Appreciation Right in whole or in part to the extent that
such Stock Option and Stock Appreciation Right are otherwise exercisable under
the terms of the Plan, without regard to the twenty percent (20%) limitation of
Sub-section 5(c) above.

Section 19. Reservation of Shares of Stock.

19.1 The Corporation, during the term of this Plan, shall at all times
reserve and keep available, and shall seek or obtain from any regulatory body
having jurisdiction any requisite authority necessary to issue and to sell, the
number of shares of Stock that shall be sufficient to satisfy the requirements
of this Plan. The inability of the Corporation to obtain from any regulatory
body having jurisdiction the authority deemed necessary by the Corporation's
counsel for the lawful issuance and sale of its Stock hereunder shall relieve
the Corporation of any liability in respect of the failure to issue or sell
Stock as to which the requisite authority has not been obtained.

Section 20. Amendment.

20.1 Except as provided in the next sentence, the Corporation may
terminate or amend the Plan at any time. However, only with shareholder
approval, may the Corporation increase the maximum number of shares which may be
issued under the Plan (other than increases pursuant to Section 18 above),
extend the period during which any award may be exercised, extend the term of
the Plan or change the minimum Option Price. The termination, any modification,
or amendment of the Plan shall not, without the consent of a Participant, affect
a Participant's rights under an award previously granted.

Section 21. Effect on Other Plans.

21.1 Participation in this Plan shall not affect an employee's
eligibility to participate in any other benefit or incentive plan of the
Corporation. Unless specifically provided, any awards made pursuant to this Plan
shall not be used in determining the benefits provided under any other plan of
the Corporation.

Section 22. Effective Date and Duration of the Plan

22.1 The Plan shall be effective from the date that the Plan is
approved by the Corporation's Board, subject to the ratification of the Board's
actions by the Shareholders and shall remain in effect until all awards under
the Plan have been satisfied by the issuance of shares of Stock or the payment
of cash, but no award shall be granted more than ten years after the earlier of
the date the Plan is adopted by the Corporation or is approved by the
Corporation's shareholders.

Adopted as of April 18, 1996, amended March 21, 2001, amended March 16, 2005,
and further amended March 15, 2006 by the Board of Directors of Royal Bancshares
of Pennsylvania, Inc.

/s/ Jeffrey T. Hanuscin

CHIEF FINANCIAL OFFICER

vii