SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|

Check the appropriate box:

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

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

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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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

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2) Aggregate number of securities to which transaction applies:

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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):

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4) Proposed maximum aggregate value of transaction:

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5) Total fee paid:

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|_| Fee paid previously with preliminary materials:

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|_| 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:

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2) Form, Schedule or Registration Statement No.:

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3) Filing Party:

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4) Date Filed:

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ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 18, 2005

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 18,
2005, at 6:30 p.m., for the following purposes:

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

2. ROYAL BANCSHARES OF PENNSYLVANIA, INC. STOCK OPTION AND APPRECIATION
RIGHT PLAN. To amend the Plan in order to reserve an additional 150,000 shares
of the Corporations' common stock for issuance under the Plan.

3. RATIFY APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. To
ratify the appointment of Beard Miller Company, LLP, as Royal Bancshares'
independent registered public accounting firm, as recommended by the Audit
Committee.

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 1, 2005, are
entitled to notice of and to vote at the meeting, either in person or by proxy.

We enclose a copy of the 2004 Annual Report on Form 10-K for Royal
Bancshares of Pennsylvania, Inc. Additional copies of the 2004 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 15, 2005

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.

TABLE OF CONTENTS

PROXY STATEMENT PAGE
- --------------- ----

General Information 1

Revocation and Voting of Proxies 1

Voting Securities, Record Date and Quorum 1

Principal Shareholders 2

Election of Directors 3

Cumulative Voting 3

Information about Nominees, Continuing Directors 4-7
and Executive Officers

Nominees for Class III Directors 5

Meetings and Committees of the Board of Directors 7-8

Compensation Committee Report on Executive Compensation 8-9

The Audit Committee Report 9-11

Remuneration of Directors and Officers and Other Transactions 11-14

Approval of an Amendment to the Stock Option and Appreciation Right Plan 15

Common Stock Performance Graph 16-17

Beneficial Ownership - Compliance 17

Selection of Independent Registered Public Accounting Firm 18

Interest of Management and Others in Certain Transactions 18

Employee Code of Ethics 19

Legal Proceedings 19

Shareholder Proposals and Communication 19

Other Matters 19

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 18, 2005, 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 proxyholders will vote your proxy in
accordance with your instructions. In the absence of instructions, proxyholders
will vote all proxies FOR the election of the five nominees for Class III
Director, FOR the amendment of Royal Bancshares of Pennsylvania, Inc. Stock
Option and Appreciation Right Plan (the "Stock Option Plan") in order to reserve
an additional 150,000 shares of the Corporations' common stock for issuance
under the Stock Option Plan, and FOR the ratification of the appointment of
Beard Miller Company LLP as the Corporation's independent registered public
accounting firm. 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, proxyholders 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 1, 2005, are
entitled to vote at the meeting and any adjournment or postponement of the
meeting. At the close of business on April 1, 2005, there were 10,269,207 shares
of Class A common stock exclusive of 215,388 treasury shares ($2.00 par value
per share), issued and outstanding, and 1,978,347 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--CUMULATIVE
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 five candidates receiving the highest number of votes for Class III
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, 2005, 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,
2005. 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, 2005, have been exercised and,
therefore, on a pro forma basis, 10,759,802 shares of Class A common stock would
be outstanding.

Name and address of Beneficial owner Shares Beneficially Owned Percent of Class
------------------------------------ ------------------------- ----------------

Daniel M. Tabas Trust (1) 3,388,329 (Class A) 32.13%
915 Montgomery Avenue 1,046,481 (Class B) 52.90%
Narberth, PA 19072

Evelyn R. Tabas (2) (4) 1,772,232 (Class A) 16.81%
915 Montgomery Avenue 452,830 (Class B) 22.89%
Narberth, PA 19072

Richard Tabas (3) 71 (Class A) 0.00%
131,048 (Class B) 6.76%

(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) 2,678
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) 265,700 Class A and 79,232 Class B shares held in the
Lee Tabas Trust: (c) 247,693 Class A and 77,168 Class B held in the Susan
Tepper Tabas Trust: (d) 233,101 Class A and 77,422 Class B shares held in
the Linda Stempel Tabas Trust: (e) 224,041 Class A and 71,276 Class B
shares held in the Joann Tabas Wurzak Trust: (f) 204,551 Class A and
76,602 Class B shares held in the Carol Tabas Stofman Trust: (g) 193,660
Class A and 71,130 Class B shares held in the Robert R. Tabas Trust: (h)
49,638 Class A shares held in the Elizabeth Rebecca Tabas Trust: and (i)
45,549 Class A Shares held in the Samuel Bradford Tabas Trust. Evelyn R.
Tabas shares voting and dispositive control over the shares held in these
trusts with James J. McSwiggan and Nicholas Randazzo.

(3) Mr. Tabas has sole power to vote and dispose of 114,478 shares of Class B
common stock. He disclaims beneficial ownership of 16,346 shares of Class
B common stock owned by his mother, Harriette Tabas and 71 shares of Class
A common stock and 224 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 of dispose of these 71 shares of Class A common stock
and 16,570 shares of Class B common stock.

(4) Evelyn R. Tabas has sole power to vote and dispose of 300,925 shares of
Class A 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 16 members of the Board of Directors. At the March 16,
2005, 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 5, 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 above in the stock ownership table, through
its ownership of Class A and Class B common stock, 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 5 persons for election
to the Board of Directors as Class III Directors for a term of 3 years:

Carl M. Cousins Lee E. Tabas Evelyn R. Tabas John M. Decker Edward B. Tepper

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 5 candidates receiving the highest number of votes for Class III Director at
the meeting will be elected. There are no conditions precedent to the exercise
of cumulative voting rights. Joseph P. Campbell 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 5
persons nominated for election to the Board of Directors as Class III 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, 2005, by each of them. The table includes options
exercisable within 60 days of February 28, 2005 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, 2005, have been exercised and, therefore, on a
pro forma basis, 10,759,802 shares of Class A common Stock would be outstanding.
The information is furnished as of February 28, 2005, on which 10,544,414 Class
A shares (exclusive of 215,388 treasury shares) and 1,978,347 Class B shares,
were issued and outstanding.

Director Shares Percent
or Officer Beneficially of
Name Age Since Owned Stock
---- --- ----- ----- -----

CLASS I DIRECTORS

Joseph P. Campbell 58 1982 134,357(A) 1.27%

James J. McSwiggan (1) 49 1992 63,425(A) .60%

Linda Tabas Stempel (2) (5) 53 2003 2,721(A) .03%

Murray Stempel, III (5) 50 1998 24,943(A) .24%

Howard Wurzak (5) 50 1992 12,109(A) .11%

CLASS II DIRECTORS

Jack R. Loew 57 1997 14,275(A) .14%

Anthony J. Micale 67 1997 10,410(A) .10%

Mitchell L. Morgan 50 2003 22,253(A) .21%

Albert Ominsky 71 1982 44,870(A) .43%
37,746(B) 1.91%

Gregory T. Reardon 51 1997 9,201(A) .09%

Robert R. Tabas (2) (5) 49 1988 60,861(A) .58%
6,072(B) .31%

NOMINEES FOR CLASS III DIRECTORS

Carl M. Cousins 72 1993 11,919(A) .11%

John M. Decker 44 1988 46,822(A) .44%

Evelyn R. Tabas (3) (5) 80 2002 1,772,232(A) 16.81%
452,830(B) 22.89%

Lee E. Tabas (4) (5) 55 1980 360,972(A) 3.42%
60,505(B) 3.06%

Edward B. Tepper 65 1986 29,065(A) .28%
12(B) .00%

All Directors and 6,017,675(A) 57.07%
executive officers as a group 1,734,695(B) 87.68%
and Tabas Family Trusts (18 persons) (1)

Non-Director Executive Officers are Jeffrey T. Hanuscin, Chief Financial Office
and George J. 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, 2005, issued to Directors and
officers, have been exercised and therefore, on a pro forma basis, 10,544,414
shares of Class A common stock would be outstanding at February 28, 2005.

(1) James J. McSwiggan shares with Evelyn R. Tabas and Nicholas Randazzo
voting and dispositive control over 1,463,933 shares of Class A common
stock and 452,830 shares of Class B common stock held in various Tabas
family trusts. These shares are not included in the share ownership
reported in this table for Mr. McSwiggan. See footnote (2) on page 2.

(2) Linda Tabas Stempel shares with Robert R. Tabas and Nicholas Randazzo
voting and dispositive control over 3,388,329 shares of Class A common
stock and 1,046,481 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 2.

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

(4) The 360,972 shares of Class A common stock and 60,505 shares of Class B
common stock beneficially owned by Lee. E. Tabas include: 309,712 shares
of Class A common stock owned jointly with his wife, Nancy Tabas: 4,835
shares of Class A common stock and 54,983 shares of Class B common stock
owned by his wife, Nancy Tabas: and 38,239 shares of Class A common stock
and 5,522 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 8,186 shares of Class A common stocker were added to
the shares of Class A common stock currently held by Mr. Tabas and to the
total number of shares of Class A common stock outstanding assuming all
options exercisable within 60 days of February 28,2005, held by Mr. Tabas,
were exercised.

(5) Evelyn. R. Tabas, Lee. E. Tabas, Robert R. Tabas, Murray Stempel, Linda
Tabas, Howard Wurzak and members of their immediate families and their
affiliates, in the aggregate, own 5,622,167 shares of Class A common stock
(53.32% of Class A) and 1,565,888 shares of Class B common stock (79.15%
of Class B), or (57.90% of Class A) assuming full conversion of Class B
common stock to Class A common stock at a current conversion factor of
1.15 shares of Class A common stock for each share of Class B common
stock.

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.

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, a licensed certified public accountant, and is President of
the Reardon Group, Inc. The Reardon Group, located in Glen Mills, Pennsylvania
and Wilmington, Delaware, 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.

NOMINEES FOR 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 6 times in 2004. 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 also receives reports directly
from the Corporation's internal auditors on a quarterly basis, and recommends
any action to be taken. 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.

The Compensation Committee met 3 times in 2004. The members of this
committee were Jack R. Loew, Chairperson, Edward B. Tepper, Carl M. Cousins,
Anthony J. 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 2004. 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 fourteen formal meetings
during 2004. 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 Meeting, but all Directors attended the May 19,
2004, 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 the Bank'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 four outside
Directors. The objectives of the compensation committee are to establish a fair
compensation policy to govern executive officers' base salaries and incentive
plans, 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 and the Senior Executive
Officers consists of a base salary, profit sharing and perquisites. For 2004,
the profit sharing of the CEO and the Senior Executive Officers were directly
tied to specific performance goals, some of which are listed below. Along with
the financial performance of the Corporation, the compensation committee engaged
Palmer & Cay, a recognized compensation and benefits consulting firm, to do an
executive compensation analysis of the Corporation's peers. The CEO's 2004
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 deems relevant. Future methods of determining
compensation may differ.

Consolidated earnings for the twelve months ended December 31, 2004, were
$20,033,000, as compared to $18,526,000 for the same period ended in 2003.
Consolidated basic earnings per share for the year ended, December 31, 2004,
were $1.60 versus $1.49 for the same period in 2003. Consolidated assets were
$1,205,274,000 at December 31, 2004, as compared to $1,154,410,000 at December
31, 2003. Total shareholders equity increased to $140,876,000 at December 31,
2004, as compared to $134,833,000 at December 31, 2003.

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.

Compensation Committee

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

The Audit Committee Report:

The Audit Committee of the Board of Directors is comprised of 3 Directors,
each of whom meets the NASDAQ Standards for "independence". The members of the
Audit Committee are: Greg Reardon, Chairman; Anthony Micale; and Jack Loew. The
Audit Committee held 6 meetings during calendar year 2004. The Audit Committee
operates under a charter adopted by the Board of Directors, which was reviewed
and revised in October, 2003.

The Audit Committee's membership is organized to meet the recommendations
of the NASDAQ Audit Committee Policy and the provisions of the Sarbanes-Oxley
Act of 2002. Accordingly, the 3 Committee members are: Directors, independent of
management, and free from relationships that, in accordance with our Board's
interpretations, could interfere with the exercise of the independent judgment
of our Committee members. No officers or employees of the Corporation or
subsidiaries serve on the Committee.

The Audit Committee oversees the financial reporting process on behalf of
the Board of Directors. In fulfilling this responsibility, the Audit Committee
recommends the appointment of the Corporation's independent registered public
accounting firm, Beard Miller Company LLP, and the continuing appointment of
Accume Partners, LLC, a provider of professional and internal auditing services,
to direct the role of the Bank's financial, compliance, and internal audit
functions.

All auditing services (which may entail providing comfort letters or
consents in connection with securities underwritings) and all non-audit
services, provided to the Corporation by the Corporation's auditors have been
and will be preapproved by the Committee pursuant to such processes as are
determined to be available. This preapproval requirement shall not be applicable
with respect to the provision of non-audit services, if:

(i) the aggregate amount of all such non-audit services
provided to the Corporation constitutes not more than 5
percent of the total amount of revenues paid by
Corporation to its auditor during the fiscal year in
which the non-audit services are provided;

(ii) such services were not recognized by the Corporation at
the time of the engagement to be non-audit services; and

(iii) such services are promptly brought to the attention of
the Committee and approved prior to the completion of
the audit by the Committee or by one or more members of
the Committee who are members of the Board of Directors
to whom authority to grant such approvals has been
delegated by the Committee.

The Audit Committee discussed, with the internal auditors and the
independent registered public accounting firm, the overall scope and specific
plans for their respective audits. The Audit Committee also discussed with both,
and separately with management, the Corporation's consolidated financial
statements and the adequacy of the Corporation's internal controls.

The Committee meets with the internal and independent auditors, with and
without management present, to discuss the results of their examinations, their
evaluations of the Corporation's internal controls, and overall quality of the
Corporation's financial reporting.

Management has the primary responsibility for the financial statements and
the reporting process, including the system of internal control. In fulfilling
its oversight responsibilities, the Committee reviewed the audited consolidated
financial statements and the annual report with management, including a
discussion of the quality, not just the acceptability, of the accounting
principles; the reasonableness of the significant judgments; and the clarity of
disclosures in the financial statements.

In reliance on the reviews and discussions referred to above, the
Committee recommends to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 for filing with the Securities and Exchange Commission.

Fees pertaining to services rendered to the Corporation and the Bank by
Beard Miller Company, LLP during the year ended December 31, 2004 and Grant
Thornton, LLP for year ended December 31, 2003 were as follows:

Year Ended December 31,
2004 2003
---- ----

Audit fees $123,984 $87,000
Audit related fees $ -- $ 8,600
Tax fees $ -- $15,000
All other fees $ -- $ --

Audit Fees include fees billed for professional services rendered for the
audit of the annual financial statement, internal controls and fees billed for
the review of financial statements, including expenses, included in the
Corporation's Forms 10-Q and services that are normally provided by Beard Miller
Company LLP for 2004 and Grant Thornton, LLP for 2003 in connection with
statutory and regulatory filings or engagements.

Audit Related Fees for 2003 include fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the registrants financial statements and are not reported under the Audit
Fees section of the table above. Audit Related Fees are limited to audit of the
bank's 401K Plan.

Tax Fees for 2003 include fees billed for professional services rendered
by Grant Thornton, LLP for tax compliance, tax advice, and tax planning. These
services include review and preparation of the Corporation's federal and state
tax returns.

All Other Fees for 2003 include fees billed for products and services
provided by Grant Thornton, 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 is compatible with maintaining Beard Miller
Company'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 2005.
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, Director,
Gregory T. Reardon received $7,500 in 2004 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 the average of three consecutive
years of performance pay with a limit of 25% 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% for Group 1, 50% for Group 2 and 35% for Group 3 participants.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ESTIMATED MAXIMUM ANNUAL BENEFITS AT AGE 60

Final Average
Final Average Performance Pay Group 1 Group 2 Group 3
Salary (FAS) (FAPP) Participants Participants Participants
- ------------ ------ ------------ ------------ ------------
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 of the 3 prior years of compensation at an amount not to exceed
$80,000.

Employee Option Grants in Fiscal Year 2004

Potential Realized
Value at
Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term ($)
Options Employees Price Expiration -------------------------
Name Granted (#)(1)(2) In Fiscal Year ($/Sh)(2)(3) Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------

Joseph P. Campbell 53,901 20.64% 23.97 4/21/14 812,563 2,059,126
James J. McSwiggan 23,063 8.83% 23.97 4/21/14 347,606 881,053
Robert R. Tabas 19,309 7.39% 23.97 4/21/14 291,076 737,643
John M. Decker 16,090 6.16% 23.97 4/21/14 242,550 614,670
Murray Stempel, III 16,090 6.16% 23.97 4/21/14 242,550 614,670

(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
grant (April 21, 2004).

(2) The number of securities underlying stock options and the stock exercise
price has been adjusted for the Corporation's December 2004 stock
dividend.

(3) The exercise price is equal to the fair market value at the time of grant
of the option, as determined by Stock Option Plan, adjusted for December
2004 stock dividend.

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

Aggregated Option/SAR Exercises in Last Fiscal Year and 2004 Option/SAR Values

Number of Securities Value of
Underlying Unexercised Unexercised in-the-money
Shares Options/SARS Options/SARS at
Acquired December 31, 2004(2) December 31, 2004(3)
on Value -------------------- --------------------
Name Exercise(#) Realized($)(1) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
- ------------------- ----------- -------------- -------------- ---------------- -------------- ----------------

Joseph P. Campbell -- -- 51,198 102,234 618,710 562,416

James J. McSwiggan 4,901 218,751 26,891 44,335 336,150 247,370

Robert R. Tabas 4,573 180,734 22,707 36,496 286,593 200,777

John M. Decker 2,844 116,126 16,795 29,695 209,075 159,715

Murray Stempel, III 1,002 44,669 15,005 29,676 181,362 159,454

(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 has been adjusted for the Corporation's December 2004 stock
dividend.

(3) Value of unexercised options/SARS is based upon the closing stock price at
December 31, 2004, of $26.49.

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.

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

Outside Directors Stock Option Plan
Equity compensation plan approved
by stockholders 79,044 $17.29 66,903

Equity compensation plan not
approved by stockholders -- -- --
------ ------ ------
79,044 $17.29 66,903
Total

Employees Stock Option Plan 593,539 $19.18 77,026
Equity compensation plan approved
by stockholders

Equity compensation plan not
approved by stockholders -- -- --
------ ------ ------
593,539 $19.18 77,026
Total

During 2004, no present or former officer or employee of the Corporation
or its 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 2004, for services rendered during the past three fiscal years.

Annual Compensation Long Term Compensation
--------------------------------------------------------------------------------------------
Value Securities
Other Options Underlying 401K
Profit Annual SARS Options Plan
Sharing Compensation Exercised Granted Contribution
Year Salary($) ($)(1) ($) ($) (#)(2) ($)(3)
---- --------- ------ --- --- ------ ------
Name and Principal Position

2004 364,500 322,281 50,336 -- 53,901 2,500
Joseph P. Campbell 2003 337,500 303,448 29,852 -- 25,100 2,500
President & CEO 2002 257,452 259,777 14,000 640,500 24,463 2,500

James J. McSwiggan 2004 232,200 157,008 34,050 218,751 23,063 2,500
Chief Operating Officer 2003 215,000 147,834 23,600 270,986 10,386 2,500
2002 161,827 113,938 14,000 166,446 11,301 2,500

Robert R. Tabas 2004 194,400 115,690 35,300 180,734 19,309 2,500
Chairman of the Board 2003 180,000 112,820 23,600 292,438 8,695 2,500
2002 127,500 77,477 14,000 434,159 8,904 2,500

John M. Decker 2004 162,000 111,559 34,050 116,126 16,090 2,500
Executive Vice President 2003 150,000 101,149 23,600 152,767 7,246 2,500
2002 98,077 64,534 14,000 92,124 6,849 2,500

Murray Stempel, III 2004 162,000 119,822 35,300 44,669 16,090 2,500
Executive Vice President 2003 150,000 112,820 23,600 30,381 7,247 2,500
2002 98,077 77,443 14,000 -- 6,849 2,500

(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) Securities underlying stock options have been adjusted for the
Corporation's 2004 stock dividend.

(3) 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.

ITEM 2 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. 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 and provided that
awards of options and stock appreciation rights ("SARs") could be granted over a
period of ten years (until April 18, 2006). Options and SARs can, therefore, be
granted under the current plan until April 18, 2006. The Board anticipates that
it will present a new option plan for shareholder approval at the 2006 Annual
Meeting. At this time, the Compensation Committee desires time to consult with
an independent third party and carefully review any 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 of
additional shares in order to have sufficient shares to make awards through
April 18, 2006. All other terms of the Stock Options 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 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 Plan is administered by the compensation committee
appointed by the Board of Directors. The committee has full and final authority
to interpret the provisions of the Plan, decide all questions of fact arising
regarding application of the Plan and to determine the employees to whom awards
shall be made.

Stock Subject to Plan. 1,650,000 shares of Class A common stock were approved
for issuance in 1996. 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 optioned under the plan exceed 16% of the shares outstanding.

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 a
significant impact upon the profitability and success of the corporation.
Directors who are not officers or employees of the corporation are no eligible
to participate in the Plan.

Form of Awards. Awards are stock options to purchase a number of Class A common
stocks and an equal number of SARs.

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 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 terminate. In the event of termination of employment due to
retirement with the corporation's consent, death or disability, the participant
or the participants successor shall have the right to exercise the stock option
for a period of three months after such termination.

Transferability. A stock option is 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 grant).

Coordination of SAR with Stock Option. An SAR is granted only in connection with
a contemporaneously granted stock option for an identical number of shares of
stock. The SAR is exercisable for the identical number of shares of stock. The
SAR is 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 SARs. Terms of the Plan
governing the exercise term, number of shares, rights upon termination of
employment and transferability of SARs are similar to those governing stock
options.

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, 1999 (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 2004 peer group of Mid-Atlantic Banks with
total assets between $750 Million and $1.5 Billion.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.

[GRAPH OMITTED]

- --------------------------------------------------------------------------------------------------------------------------
Period Ending
- --------------------------------------------------------------------------------------------------------------------------
Index 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
- --------------------------------------------------------------------------------------------------------------------------

Royal Bancshares of Pennsylvania, Inc. 100.00 99.52 157.16 185.34 237.55 272.38
- --------------------------------------------------------------------------------------------------------------------------
NASDAQ - Total US* 100.00 60.82 48.16 33.11 49.93 54.49
- --------------------------------------------------------------------------------------------------------------------------
Royal Bancshares Peer Group* 100.00 97.15 132.82 168.41 220.62 234.96
- --------------------------------------------------------------------------------------------------------------------------

* 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 Form 5's were
required for those persons, the Corporation believes that during the period
January 1, 2004 through December 31, 2004, its Officers and Directors were in
material compliance with all filing requirements applicable to them.

ITEM 3 SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

The Audit Committee and the Board of Directors of Royal Bancshares of
Pennsylvania, Inc. believes it appropriate to submit for action by the
stockholders of Royal Bancshares of Pennsylvania Inc. the Audit Committee's
selection of Beard Miller Company LLP as the independent registered public
accounting firm for Royal Bancshares of Pennsylvania, Inc for the year 2005. A
representative of Beard Miller Company LLP is expected to be present at the
annual meeting, with the opportunity to make a statement if such representative
desires to do so, and is expected to be available to respond to appropriate
questions.

The proposal for the ratification of the Audit Committee's selection of
Beard Miller Company LLP as independent registered public accounting firm for
2005 requires for its adoption the favorable vote of the holders of shares of
Class A and Class B Common Stock representing at least a majority of outstanding
shares of Class A and Class B shares present in person or represented by proxy
and entitled to vote on the matter at the Annual Meeting.

The Board of Directors of Royal Bancshares of Pennsylvania Inc.
unanimously recommends a vote FOR the ratification of the Audit Committee's
selection of Beard Miller Company LLP.

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 collectability or other unfavorable features.

The largest aggregate amount of indebtedness to the Corporation and the
bank during the year 2004, by all Directors and Officers of the Corporation and
bank as a group, and their affiliates, was $4,699,000. The total of such
outstanding loans at December 31, 2004, was $4,723,000 (including available
funds not disbursed), representing 3.4% of shareholder's equity in the
Corporation. Interest rates for fixed rate loans ranged from 5.25 percent to
6.25 percent. There is one floating rate loan based on 90 day LIBOR plus 300
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 2004, 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

In 2004, as required by law and regulation, we amended our 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 is posted on our website at www.royalbankamerica.com. We have
also filed a copy of the Code of Ethics with the SEC as an exhibit to our
December 31, 2004 Annual Report on Form 10-K.

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 2006 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, 2005. 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 60 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 proxyholders 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

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.

(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 1,650,000 shares. However, at no time shall the maximum number
of shares of Stock that may be optioned or sold under the Plan exceed sixteen
percent (16%) 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.

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.

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

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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.

(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 and further amended March
16, 2005 by the Board of Directors of Royal Bancshares of Pennsylvania, Inc.

/s/ Jeffrey T. Hanuscin

CHIEF FINANCIAL OFFICER

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