Customers Bancorp, Inc. (Form: S-1/A, Received: 04/18/2011 06:02:50)

CUSTOMERS BANK - SELECTED FINANCIAL DATA

The following selected financial data is derived from Customers Bank’s audited financial statements as of and for the five years ended December 31, 2010. The following financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and related notes included elsewhere in this report.

Financial Highlights

Dollar amounts in thousands, except per share data

	Years ended December 31,
	2010 (1)			2009			2008			2007			2006
For the Period
Interest income	$	30,907		$	13,486		$	15,502		$	17,659		$	13,917
Interest expense		11,546			6,336			8,138			10,593			7,461
Net interest income		19,361			7,150			7,364			7,066			6,456
Provision for loan losses		10,397			11,778			611			444			416
Bargain purchase gains on bank acquisitions		40,254			—			—			—			—
Total non-interest income (loss)		45,670			1,074			(350	)		356			479
Salary and employee benefits		14,031			4,267			3,651			3,450			2,819
Total non-interest expense		26,168			9,681			7,654			6,908			5,588
Income (loss) before taxes		28,466			(13,235	)		(1,251	)		70			931
Income tax expense (benefit)		4,731			—			(426	)		(160)			275
Net income (loss)	$	23,735		$	(13,235	)	$	(825	)	$	230		$	656
Basic earnings (loss) per share	$	1.26		$	(3.66	)	$	(0.41	)	$	0.11		$	0.33
Diluted earnings (loss) per share	$	1.23		$	(3.66	)	$	(0.41	)	$	0.11		$	0.32
At Period End
Total assets	$	1,374,407		$	349,760		$	274,038		$	272,004		$	234,407
Loans held for sale		199,970			—			—			—			—
Investment securities, available for sale		205,828			44,588			32,061			40,779			46,588
Loans not covered under FDIC loss sharing agreements (2)		514,037			220,266			220,876			212,109			176,147
Allowance for loan losses		15,129			10,032			2,876			2,460			2,029
Loans covered under FDIC loss sharing agreements		164,885			—			—			—			—
FDIC loss sharing receivable (2)		16,702			—			—			—			—
Deposits		1,245,690			313,927			237,842			220,345			182,433
Stockholders’ equity		105,140			21,503			16,849			16,830			16,239
Tangible common equity (2)	$	105,140		$	21,503		$	15,869		$	16,830		$	16,239
Selected Ratios & Share Data
Return on average assets		3.40	%		(4.69	)%		(0.30)	%		0.09	%		0.31	%
Return on average equity		41.29	%		(65.35	)%		(4.98)	%		1.40	%		4.17	%
Book value per share	$	4.17		$	3.89		$	8.34		$	8.33		$	8.18
Tangible book value per common share (3)	$	4.17		$	3.89		$	7.85		$	8.33		$	8.18
Common shares outstanding		25,194,041			5,522,706			2,021,078			2,021,078			1,984,370
Net interest margin		2.70	%		2.62	%		2.82	%		2.83	%		2.85	%
Equity to assets		7.65	%		6.14	%		6.15	%		6.19	%		6.93	%
Tangible common equity to tangible assets (3)		7.65	%		6.72	%		6.15	%		6.19	%		6.93	%
Tier 1 leverage ratio		8.67	%		6.68	%		6.21	%		6.22	%		7.20	%
Tier 1 risk-based capital ratio		19.65	%		9.76	%		7.87	%		8.03	%		9.92	%
Total risk-based capital ratio		21.14	%		11.77	%		10.50	%		10.62	%		12.36	%
Asset Quality

Non-performing, non- covered loans (2)	$	27,023		$	19,150		$	7,175		$	2,069		$	742
Non-performing, non- covered loans to total non-covered loans (2)		5.26	%		8.32	%		3.21	%		1.63	%		0.42	%
Other real estate owned - non-covered (2)	$	1,906		$	1,155			1,519			-		$	-
Non-performing, non- covered assets (2)	$	28,929		$	20,305		$	8,694		$	2,069		$	742
Non-performing, non- covered assets to total non-covered assets (2)		2.40	%		5.81	%		3.17	%		1.28	%		0.32	%
Allowance for loan losses to total non- covered loans		2.94	%		4.36	%		1.29	%		1.15	%		1.15	%
Allowance for loan losses to non- performing, non- covered loans		55.99	%		52.39	%		40.08	%		118.90	%	273.45		%
Net charge offs	$	5,250		$	4,622		$	195		$	13		$	2
Net charge offs to average non-covered loans		1.00	%		2.05	%		0.09	%		0.01	%		0.00	%
Covered non-performing loans (2)	$	40,598			—			—			—			—
Covered other real estate owned (2)	$	5,342			—			—			—			—
Covered non-performing assets (2)	$	45,940			—			—			—			—

(1) Customers Bank acquired two banks in FDIC assisted transactions during the third quarter of 2010.

(2) Certain loans and other real estate owned (described as “covered”) acquired in the two FDIC assisted transactions are subject to loss sharing agreements between Customers Bank and the FDIC. If certain provisions within the loss sharing agreements are maintained, the FDIC will reimburse Customers Bank for 80% of the unpaid principal balance and certain expenses. A loss sharing receivable was recorded based upon the credit evaluation of the acquired loan portfolio and the estimated periods for repayments. Loans receivable and assets that are not subject to the loss sharing agreement are described as “non covered” within the ratios to provide comparability to previous periods presented.

(3) Our summary consolidated financial data contains information determined by methods other than in accordance with GAAP. These measures include tangible common equity and tangible book value per common share. Our management uses this non-GAAP measure to present historical periods comparable to current period presentation. These disclosures should not be viewed as substitutes for the results determined to be in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. As of December 31, 2008, tangible common equity equals total stockholders’ equity less preferred stock balances of $980 thousand. Tangible book value per common share equals tangible common equity divided by common shares outstanding for the year ended December 31, 2008. The preferred shares outstanding were converted in June 2009.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OF CUSTOMERS BANK

Critical Accounting Policies

Customers Bank has adopted various accounting policies that govern the application of accounting principles generally accepted in the United States of America and that are consistent with general practices within the banking industry in the preparation of its financial statements. Customers Bank’s significant accounting policies are described in footnote 2 to its audited financial statements.

Certain accounting policies involve significant judgments and assumptions by Customers Bank that have a material impact on the carrying value of certain assets and liabilities. Customers Bank considers these accounting policies to be critical accounting policies. The judgment and assumptions used are based on historical experience and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions management makes, actual results could differ from these judgments and estimates, which could have a material impact on the carrying values of its assets and liabilities and its results of operations.

The following is a summary of the policies Customers Bank recognizes as involving critical accounting estimates: Allowance for Loan Losses, Stock-Based Compensation, Unrealized Gains and Losses on Available for Sale Securities and Deferred Income Taxes.

Allowance for Loan Losses. Customers Bank maintains an allowance for loan losses at a level management believes is sufficient to absorb estimated probable credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires significant estimates by management. Consideration is given to a variety of factors in establishing these estimates including historical losses, current and anticipated economic conditions, diversification of the loan portfolio, delinquency statistics, results of internal loan reviews, borrowers’ perceived financial and management strengths, the adequacy of underlying collateral, the dependence on collateral, or the strength of the present value of future cash flows and other relevant factors. These factors may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required which may adversely affect Customers Bank’s results of operations in the future.

Stock-Based Compensation. Customers Bank recognizes compensation expense for stock options and their management stock purchase plans (collectively, stock based compensation plans) in accordance with FASB ASC 718 Compensation - Stock Compensation. Expense related to stock based compensation plans granted will generally be measured based on the fair value of the option at the grant date, with compensation expense recognized over the service period, which is usually the vesting period. Customers Bank will utilize the Black-Scholes option-pricing model to estimate the fair value of each option on the date of grant. The Black-Scholes model takes into consideration the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, the expected dividends on the stock and the current risk-free interest rate for the expected life of the option. Customers Bank’s estimate of the fair value of a stock option is based on expectations derived from historical experience and may not necessarily equate to its market value when fully vested.

Unrealized Gains and Losses on Securities Available for Sale. Customers Bank receives estimated fair values of debt securities from independent valuation services and brokers. In developing these fair values, the valuation services and brokers use estimates of cash flows based on historical performance of similar instruments in similar rate environments. Debt securities available for sale are mostly comprised of U.S. government agency securities. Customers Bank uses various indicators in determining whether a security is other-than-temporarily impaired, including for equity securities, if the market value is below its cost for an extended period of time with low expectation of recovery or, for debt securities, when it is probable that the contractual interest and principal will not be collected. The debt securities are monitored for changes in credit ratings because adverse changes in credit ratings could indicate a change in the estimated cash flows of the underlying collateral or issuer. The unrealized losses associated with securities that management does not intend to sell, and more likely than not that Customers Bank will be required to sell prior to maturity or market price recovery, are not considered to be other than temporary as of December 31, 2010, because the unrealized losses are related to changes in interest rates and do not affect the expected cash flows of the underlying collateral or issuer.

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Fair Value. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Management estimates the fair value of a financial instrument using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. The valuation methods and inputs consider factors such as types of underlying assets or liabilities, rates of estimated credit losses, interest rate or discount rate and collateral. The best estimate of fair value involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, current delinquency rates, loan-to-value ratios and the possibility of obligor refinancing.

Acquisition Accounting. USGAAP requires the use of fair values in determining the carrying values of certain assets and liabilities, as well as for specific disclosures. The most significant uses of fair values include impaired loans and foreclosed property and the net assets acquired in business combinations. Assets acquired and liabilities assumed in our FDIC-assisted acquisitions are recorded at their fair values. The fair value of a loan portfolio acquired in a business combination requires greater levels of management estimates and judgment than the remainder of purchased assets or assumed liabilities. The credit risks inherent and evidenced in the FDIC-assisted transactions resulted in substantially all loans purchased in the transaction being purchased with a credit discount. On the date of acquisition, when the loans have evidence of credit deterioration since their origination and we believe it is probable that we will not collect all contractually required principal and interest payments, we refer to the difference between contractually required payments and the cash flows expected to be collected as the non-accretable discount. We must estimate expected cash flows at each reporting date. Subsequent decreases to the expected cash flows will generally result in a provision for loan losses. Subsequent increases in cash flows result in a reversal of the provision for loan losses to the extent of prior charges and adjusted accretable discount, which will have a positive effect on interest income. Management also uses this method to handle acquired loans without evidence of credit deterioration.

Because we record loans acquired in connection with FDIC-assisted acquisitions at fair value, we record no allowance for loan losses related to the acquired covered loans on the acquisition date, given that the fair value of the loans acquired incorporates assumptions regarding credit risk. The acquired loans are recorded at fair value in accordance with the fair value methodology, exclusive of the loss share agreements with the FDIC.

The acquired covered loans are subject to the accounting prescribed by FASB ASC Topic 310 Receivables , and subsequent changes to the basis of the loss share agreements also follow that model. Deterioration in the credit quality of the loans (immediately recorded as an adjustment to the allowance for loan losses) would immediately increase the basis of the loss share agreements, with the offset recorded through the consolidated statement of operations. Increases in the credit quality or cash flows of loans (reflected as an adjustment to the discount and accreted into income over the remaining life of the loans) decrease the basis of the loss share agreements. That decrease is accreted into income over either the same period or the life of the loss share agreements, whichever is shorter. Loss assumptions used in the basis of the covered loans are consistent with the loss assumptions used to measure the FDIC receivable. Fair value accounting incorporates into the fair value of the FDIC receivable an element of the time value of money, which is accreted back into income over the life of the loss share agreements.

FDIC Receivable for Loss Share Agreements. The majority of the loans and other real estate assets acquired are covered under loss share agreements with the FDIC in which the FDIC has agreed to reimburse us for 80% of all losses incurred in connection with those assets. We estimated the amount that we will receive from the FDIC under the loss share agreements that will result from losses incurred as we dispose of covered loans and other real estate assets, and we recorded the estimate as a receivable from the FDIC.

The FDIC loss sharing receivable is measured separately from the related covered assets because it is not contractually embedded in the assets and is not transferable if we sell the assets. We estimated the fair value of the FDIC loss sharing receivable using the present value of cash flows related to the loss share agreements based on the expected reimbursements for losses and the applicable loss share percentages. We review and update the fair value of the FDIC receivable prospectively as loss estimates related to covered loans and other real estate owned change. Subsequent decreases in the amount expected to be collected result in a provision for loan and lease losses, an increase in the allowance for loan and lease losses, and a proportional adjustment to the FDIC receivable for the estimated amount to be reimbursed. Subsequent increases in the amount expected to be collected results in the reversal of any previously-recorded provision for loan and lease losses and related allowance for loan and lease losses and adjustments to the FDIC receivable, or prospective adjustment to the accretable discount if no provision for loan and lease losses had been recorded. The ultimate realization of the FDIC loss sharing receivable depends on the performance of the underlying covered assets, the passage of time and claims paid by the FDIC. The accretion of the FDIC receivable discount is recorded into noninterest income using the level yield method over the estimated life of the receivable. In November 2010, Customers Bank received their first reimbursement under the USA Bank Loss Sharing Agreement.

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Deferred Income Taxes. Customers Bank provides for deferred income taxes on the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and net operating loss carry-forwards and their tax basis. The valuation allowance previously applied to the net deferred tax assets was reversed when, in the opinion of management, it is more likely than not that the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Overview

The following discussion and analysis presents material factors affecting Customers Bank’s financial condition as of December 31, 2010 and 2009, and results of operations for each of the three years in the period ended December 31, 2010. This discussion and analysis should be read in conjunction with Customers Bank’s financial statements, notes thereto and other financial information appearing elsewhere in this report.

Like most financial institutions, Customers Bank derives the majority of its income from interest it receives on its interest-earning assets, such as loans and investments. Customers Bank’s primary source of funds for making these loans and investments is its deposits, on which Customers Bank pays interest. Consequently, one of the key measures of Customers Bank’s success is its amount of net interest income, or the difference between the income on its interest-earning assets and the expense on its interest-bearing liabilities, such as deposits and borrowings. Another key measure is the spread between the yield Customers Bank earns on these interest-earning assets and the rate it pays on its interest-bearing liabilities, which is called its net interest spread.

There are risks inherent in all loans, so Customers Bank maintains an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. Customers Bank maintains this allowance by charging a provision for loan losses against our operating earnings. Customers Bank has included a detailed discussion of this process, as well as several tables describing our allowance for loan losses.

The external environment in 2010 was very challenging as the economy struggles through a recession. Many business customers in our market experienced a loss of revenues and there was an increase in bankruptcies. Many overleveraged real estate customers were forced to take action to improve their cash flow due to high vacancy rates and a reduction in rents due to the reduced demand for space during the downturn. Unemployment increased throughout 2010 as companies reduced expenses to manage through the challenging times. These conditions produced stress in the asset quality of the loan portfolio primarily the commercial real estate portfolio. There continues to be uncertainty in the external environment in 2011 and it is likely that these challenging conditions will continue in the next few years.

Customers Bank began a new initiative in mortgage warehouse lending in 2009. In this business, Customers Bank provides financing to mortgage companies from the time of the home purchase or refinancing of a mortgage loan through the sale of the loan into the secondary market. Most of the loans are FHA/VA loans or conforming loans which are sold through Fannie Mae and Freddie Mac. The strategy is to stay focused on providing the financing in the lowest risk segments in this business. Most of the revenue is derived from the interest income earned on the mortgage warehouse loans but the business also generates fee income and deposits. Customers Bank expects growth in this business in 2011, however, not at the same rate of 2010 due to the continually changing interest rate environment. Mortgage warehouse lending has approximately $386.0 million or 41% of total loans, including loans held for sale, at December 31, 2010. This prediction about continued growth is a forward-looking statement and is subject to a number of contingencies, including an assumption that the recession may have reached bottom, and to Customers Bank’s estimation that borrowers will increase their borrowing activity in the coming months. If the economy falters or remains stagnant, or if businesses delay their borrowings, it is possible that Customers Bank’s continued growth in this business will not occur. Further, given the unprecedented low level of interest rates, there is no guarantee that the demand and profitability in this type of lending will continue. If interest rates rise, refinancing activity will most likely decline. The decline in volumes could put pressure on spreads and fee income margins.

In addition to earning interest on its loans and investments, Customers Bank earns income through other sources, such as fees and other charges to its customers and bank owned life insurance (“BOLI”). Customers Bank describes the various components of this non-interest income, as well as its non-interest expense, in the following discussion.

In the second half of 2009, Customers Bank introduced many new initiatives to increase the deposits of Customers Bank and continued this strategy through 2010. Sales management practices were introduced along with new marketing and pricing strategies. As a result of these changes, total deposits increased in the second half of the year by over 70% annualized with most of the growth coming from retail money market accounts and retail CDs. A new relationship checking account was introduced during the year. The new account features coupled with improved sales performance have caused a change in the trends. Net checking account totals began to increase in the second half of the year after declining in previous years. It is anticipated that this growth will continue for a period of time. It is anticipated that the combination of the changes in management along with the increase in branch locations in 2010 will lead to a continued strong growth in loans and deposits in 2011. It is possible that competition for loans and deposits will increase in future periods as we continue to engage our market with all products offered by Customers Bank. It is also likely that interest rates will move higher. If there is a material change in the external environment or management cannot successfully execute its plans, deposit growth may be more difficult than expected.

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Results of Operations

For the years ended December 31, 2010 and 2009

Customers Bank had a net income of $23.7 million for the year ended December 31, 2010 compared to a net loss of $13.2 million for the year ended December 31, 2009. Net interest income increased $12.2 million for the year ended December 31, 2010 to $19.4 million compared to $7.2 million for the year ended December 31, 2009. The decrease in provision for loan losses of $1.4 million over that in 2009 was primarily due to the non-performing loans not increasing as significantly in 2010 when compared to 2009 and the addition of new loan products that do not require such reserves. The allowance for loan losses to non-covered loans ratio, to 2.94% at December 31, 2010 from 4.36% at December 31, 2009. Non-interest income increased $4.3 million to $5.4 million, when excluding the bargain purchase gains on bank acquisitions of $40.3 million for the year ended December 31, 2010 compared to $1.1 million for the year ended December 31, 2009. The increase of $16.5 million in non-interest expense to $26.2 million for the year ended December 31, 2010 from $9.7 million for the year ended December 31, 2009 was due to the two bank acquisitions completed in 2010 and an increase in the number of employees at Customers Bank in connection with Customers Bank’s growth strategy, expenses related to loan workout, increased charges for impaired loans, and increased premiums for FDIC insurance and to maintain and expand the current infrastructure. On a diluted per share basis, the net income was $1.23 per share for 2010 compared to a net loss of $3.66 per share for 2009. Customers Bank’s return on average assets was 3.40% in 2010. Customers Bank’s return on average equity was 41.3 % in 2010.

For the years ended December 31, 2009 and 2008

Customers Bank experienced a net loss of $13.2 million for the year ended December 31, 2009 compared to a net loss of $0.8 million for the year ended December 31, 2008. Net interest income was relatively stable at $7.2 million for the year ended December 31, 2009 compared to $7.4 million for the year ended December 31, 2008. The increase in provision for loan losses of $11.2 million over that in 2009 was primarily due to the increase in non-performing loans and the deterioration of the economic conditions during 2009 as compared to 2008. This is highlighted by a 307 basis point increase in our allowance for loan losses to loans ratio, to 4.36% at December 31, 2009 from 1.29% at December 31, 2008. Non-interest income increased $1.4 million to $1.1 million for the year ended December 31, 2009 compared to a loss of $0.4 million for the year ended December 31, 2008. The increase of $2.0 million in non-interest expense to $9.7 million for the year ended December 31, 2009 from $7.7 million for the year ended December 31, 2008 was due to an increase in the number of employees of Customers Bank in connection with Customers Bank’s growth strategy, expenses related to loan workout, increased charges for impaired loans, and increased premiums for FDIC insurance. On a basic and diluted per share basis, the net loss was $3.66 per share for 2009 compared to a net loss of $0.41 per share for 2008. Customers Bank’s return on average assets was (4.69)% in 2009 compared to (0.30)% in 2008. Customers Bank’s return on average equity was (65.35)% in 2009 compared to (4.98)% in 2008.

NET INTEREST INCOME

For the years ended December 31, 2010 and 2009

Net interest income (the difference between the interest earned on loans, investments and interest-earning deposits with banks, and interest paid on deposits, borrowed funds and subordinated debt) is the primary source of Customers Bank’s earnings. The following table summarizes Customers Bank’s net interest income and related spread and margin for the periods indicated:

	Year ended December 31,
	2010							2009							2008
	Average balance		Interest income or expense		Average yield or cost			Average balance		Interest income or expense		Average yield or cost			Average balance		Interest income or expense		Average yield or cost
	(dollars in thousands)
Interest earning assets
Interest earning deposits	$	128,133	$	303		0.24	%	$	11,578	$	6		0.05	%	$	732	$	11		1.50	%
Federal funds sold		11,176		20		0.18	%		2,411		7		0.29	%		827		15		1.81	%
Investment securities, taxable		49,569		1,382		2.79	%		27,375		1,107		4.04	%		26,101		1,349		5.17	%
Investment securities, non taxable (B)		2,516		167		6.65	%		4,507		255		5.65	%		9,990		553		5.54	%
Loans (A)(B)		523,753		29,068		5.55	%		225,436		12,142		5.39	%		220,906		13,644		6.18	%
Restricted stock		3,219		71		2.21	%		1,845		33		1.79	%		2,332		70		3.00	%
Total interest earning assets	$	718,366	$	31,011		4.31	%	$	273,152	$	13,550		4.96	%	$	260,888	$	15,642		5.99	%
Interest-bearing liabilities
Interest checking	$	12,009	$	68		0.57	%	$	10,186	$	89		0.87	%	$	8,529	$	152		1.78	%
Money market		190,972		3,609		1.87	%		35,372		461		1.30	%		42,267		1,002		2.37	%
Savings		11,222		76		0.68	%		11,218		98		0.87	%		10,458		186		1.78	%
Certificates of deposit		369,757		7,359		1.99	%		168,996		5,081		3.01	%		135,907		5,492		4.04	%
Total interest bearing deposits		583,960		11,112		1.90	%		225,772		5,729		2.54	%		197,161		6,832		3.46	%
Borrowings		13,582		434		3.20	%		17,233		607		3.52	%		35,757		1,306		3.65	%
Total interest-bearing liabilities		597,542		11,546		1.93	%		243,005		6,336		2.61	%		232,918		8,138		3.49	%
Non-interest-bearing deposits		50,708		—		—			17,715		—		—			21,741		—		—
Total deposits & borrowings	$	648,250	$	11,546		1.78	%	$	260,720	$	6,336		2.43	%	$	254,659	$	8,138		3.19	%
Net interest earnings(B)				19,465							7,214							7,504
Tax equivalent adjustment				104							64							140
Net interest earnings			$	19,361						$	7,150						$	7,364
Interest spread						2.53	%						2.50	%						2.73	%
Net interest margin						2.70	%						2.62	%						2.82	%
Net interest margin tax equivalent (B)						2.71	%						2.64	%						2.88	%

(A) Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.

(B) Full tax equivalent basis, using a 34% statutory tax rate to approximate interest income as a taxable asset.

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Net interest income was $19.4 million for the year ended December 31, 2010, compared to $7.1 million for the same period of 2009, an increase of $12.3 million or 170%. Interest income on loans, investment securities and interest earning deposit was $31.0 million in 2010 compared to $13.6 million in 2009, an increase of $17.5 million or 129%. The yield on interest earning assets decreased to 4.31% in 2010 from 4.96% in 2009. Interest expense on deposits and borrowed funds was $11.5 million in 2010, an increase of $5.2 million or 82%, from $6.3 million in 2009. The increase in interest income reflects the increase in average earning assets of $445.2 million primarily from the acquisitions of two banks in the second half of 2010 that contributed interest earning assets of approximately $180 million, the purchase of $105.8 million manufactured housing loan portfolio on August 6, 2010, and an increase in interest bearing cash from the new branches opened in 2010. The increase in interest expense is due to an increase in average interest bearing liabilities of $356.5 million of which approximately $77 million is related to the two 2010 bank acquisitions and an increase of $281.7 million in interest bearing liabilities from new branches and organic growth. The cost of funds decreased to 1.78% in 2010 from 2.43% in 2009 due to changes in the interest rates charged on time deposit accounts.

The key measure of Customers Bank’s net interest income is its net interest margin. Customers Bank’s net interest margin increased slightly to 2.71% in 2010 from 2.64% in 2009. This slight increase was primarily attributable to an increase in loans with higher yields that the historical portfolio offset by the volume of interest bearing cash earning 25bp rather than higher earning assets. Deposit costs are close to a floor as short-term market interest rates hovered around 0% throughout the year.

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The following table presents the dollar amount of changes in interest income and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate:

	2010 vs. 2009									2009 vs. 2008
	Increase (decrease) due to change in									Increase (decrease) due to change in
	Rate			Volume			Total			Rate			Volume			Total
	( dollars in thousands)
Interest income
Interest earning deposits	$	22		$	275		$	297		$	(20	)	$	15		$	(5	)
Federal funds sold		(3	)		16			13			(20	)		12			(8	)
Investment securities, Taxable		(342	)		617			275			(306	)		64			(242	)
Investment securities, non taxable		45			(133	)		(88	)		11			(233	)		(222	)
Loans		361			16,565			16,926			(1,777	)		275			(1,502	)
Restricted stock		8			30			38			(24	)		(13	)		(37	)
Total interest income	$	91		$	17,370		$	17,461		$	(2,136	)	$	120		$	(2,016	)
Interest-expense
Interest checking	$	(31	)	$	10		$	(21	)	$	(88	)	$	25		$	(63	)
Money market		202			2,946			3,148			(397	)		(144	)		(541	)
Savings		(21	)		(1	)		(22	)		(101	)		13			(88	)
Certificates of deposit		(1,724	)		4,002			2,278			(1,578	)		1,167			(411	)
Total interest bearing deposits		(1,574	)		6,957			5,383			(2,164	)		1,061			(1,103	)
Borrowings		(55	)		(118	)		(173	)		(45	)		(654	)		(699	)
Total interest expense		(1,629	)		6,839			5,210			(2,209	)		407			(1,802	)
Net interest income	$	1,720		$	10,531		$	12,251		$	73		$	(287	)	$	(214	)

Years ended December 31, 2009 and 2008

Net interest income was $7.2 million for the year ended December 31, 2009, compared to $7.4 million for the same period of 2008, a decrease of $0.2 million, or 3%. Interest income on loans, investments and interest earning deposits was $13.6 million in 2009 compared to $15.6 million in 2008, a decrease of $2.0 million or 13%. Meanwhile, interest expense on deposits and borrowed funds was $6.3 million in 2009, down $1.8 million, or 22%, from $8.1 million in 2008. The decrease in interest income and interest expense reflects the declining market interest rates in 2008. Two benchmark rates, the prime rate and the Fed Funds rate, decreased 4.00% during 2008. In addition to average interest rates decreasing in 2009 compared to 2008, Customers Bank experienced an increase in non-accrual loans which also decreased yields on loans. Yield on assets decreased to 4.96% in 2009 from 5.99% in 2008 while the cost of funds decreased to 2.43% in 2009 from 3.19% in 2008. Average interest earning assets increased to $273.2 million in 2009 from $260.9 million in 2008.

The key measure of Customers Bank’s net interest income is its net interest margin. Customers Bank’s net interest margin decreased to 2.64% in 2009 from 2.87% in 2008. This decrease is primarily attributable to lower yields on loans being offset by lower costs on time deposits and borrowings and to the mix of assets and liabilities.

155

PROVISION FOR LOAN LOSSES

Year ended December 31, 2010 and 2009

Customers Bank establishes an allowance for loan losses through a provision for loan losses charged as an expense on the statement of operations. The non-covered loan portfolio, consisting of loans that are not covered by loss share agreements with the FDIC, is reviewed and evaluated on a quarterly basis to evaluate our outstanding loans and to measure both the performance of the portfolio and the adequacy of the allowance for loan losses.

During 2010, the provision for loan losses was $10.4 million a slight decrease of $1.4 million from $11.8 million in 2009. This slight decrease was primarily due to a stabilization of the elevated volumes of non-performing non-covered loans in the second half of 2010. Real estate values in our market area have decreased during 2010 related to the significant economic downturn faced by the national and regional economies in 2010.

As is typical with community banks, Customers Bank has a high concentration (93.1%) of its loans secured by real estate. Construction and Commercial real estate represent 30.9% of the total loan portfolio (by collateral type) a significant decrease from 2009 due to loan mix changes. Construction loans decreased to $13.4 million from the historical Customers Bank portfolio or 2.6% of the total loan portfolio, a decrease from 9.5% in 2009. In 2010, Customers Bank’s loan portfolio mix changed to 44.7% of the total loan portfolio are being comprised of loans to provide liquidity to mortgage originators under mortgage warehouse lines of credit and 11.9% of manufactured housing loans in 2010 when these two portfolio segments were 7.5% of the total loan portfolio in 2009. It is in the construction and commercial real estate secured portion of the loan portfolio that Customers Bank is experiencing the most difficulty with in delinquent and non-accrual loans. Although we believe that we have identified and appropriately allocated reserves against the riskiest of our loans in the construction and commercial real estate, the possibility of further deterioration before the real estate market turns presents the need for potential increased allocations of the allowance for loan losses in that area in the future.

We have several large relationships that represent a disproportionate percentage of the loan portfolio. This “chunkiness” in the portfolio can be seen in the disproportionate impact that large borrowers have on the delinquent and non-accrual loan balances. Although the delinquent and non-accrual loan percentages of the portfolio have risen over the past two years, a relatively limited number of borrowers are driving those numbers rather than a broad trend of delinquency across our borrowers as a whole.

For the year ended December 31, 2010, we had significant credit relationships with outstanding balances. The concentration of these credit relationships causes the “chunkiness” of our loan portfolio, however, no individual credit relationship concentration are greater than 3% of total loans at December 31, 2010. We monitor these credit relationships on an ongoing basis to evaluate that the collateral and the cash flow estimates used to determine these specific reserves are appropriate and reflect the current circumstances of the borrowers. These ongoing monitoring activities include obtaining updated financial information on a more frequent and formalized basis, evaluation of the underlying collateral to determine if the assumptions used to determine the valuation are appropriate, site visits to properties, if determined to be necessary and other factors significant to the underlying collateral of these loans.

Other than the concentrations already addressed in construction and commercial real estate, Customers Bank has no large exposures in other risky industries such as restaurants, home heating oil businesses or other industries that are typical viewed as high risk.

The majority of Customers Bank’s borrowers are small, local businesses and individuals with investments in residential or commercial real estate. The typical borrower provides self-prepared or accountant assisted financial statements and tax returns that are not audited and therefore are less reliable than information that would be obtained from more sophisticated borrowers. The cost of audited financial statements would be prohibitive for many of our small borrowers. The absence of objectively verified financial information is a challenge to all community banks and represents a layer of risk that must be considered in judging the adequacy of the allowance for loan losses.

Customers Bank believes that the allowance for loan losses is at a level considered adequate to provide for losses that can be reasonably anticipated. Net charge-offs were $5.3 million and $4.6 million, respectively, for the years ended December 31, 2010 and 2009.

156

Years ended December 31, 2009 and 2008

For the year ended, December 31, 2009, the provision for loan losses was $11.8 million, up $11.2 million from $611,000 in 2008. This increase was primarily due to a significant increase in non-performing loans and charge-offs and the declining value of real estate in our market area, all of which were related to the significant economic downturn faced by the national and regional economies in 2009.

See Credit Risk and Asset Quality sections for further information regarding Customers Bank’s provision for loan losses, allowance for loan losses and net charge-offs generally, and additional discussion of Customers Bank’s non-performing loans.

NON-INTEREST INCOME

The below chart shows Customers Bank’s results in the various components of non-interest income for each of the years ended December 31, 2010, 2009 and 2008.

	Years Ended December 31,
	2010		2009			2008
	(dollars in thousands)
Service fees	$	643	$	458		$	637
Mortgage warehouse transaction fees		2,631		70				—
Bank owned life insurance		228		229			218
Gain (loss) on sales of investment securities		1,114		236			(361	)
Impairment charge on investment securities		—		(15	)		(940	)
Bargain purchase gain on bank acquisitions		40,254		—			—
Other		800		96			96
Total non-interest income (loss)	$	45,670	$	1,074		$	(350	)

Years ended December 31, 2010 and 2009

In July 2010 and September 2010, we acquired two banks in FDIC assisted transactions and recorded a bargain purchase gain of $40.3 million. Excluding the bargain purchase gain on bank acquisitions, non-interest income increased $4.3 million from $1.1 million to $5.4 million. The increase is primarily related to the transactional fees earned by the mortgage warehouse division of $2.6 million. The mortgage warehouse division was started in the second half of 2009. Also, the gains of $1.1 million on the sales of investment securities recognized in 2010 increased compared to a gain of $236 in 2009.

Service fees, including mortgage warehouse fees, represent the largest component of non-interest income and were $3.3 million in 2010, an increase of $2.7 million from $528,000 in 2009 primarily due to an increase in loan fee income and the growth in the mortgage warehouse division in 2010. Late fees on loans were $89,000 in 2010.

Customers Bank sold investment securities in 2010 for a gain of $1.1 million, compared to a gain of $236,000 in 2009. The gain in 2010 was primarily due to the sales of $56.2 million of mortgage backed securities.

Other non-interest income included $520,000 of increases in the FDIC loss sharing receivable recorded for the two FDIC assisted transactions and $98,000 gain on the sale of an SBA loan. The non-interest loss of $350,000 was generated from the loss on the sales of investment securities of $361,000 and impairment charges on FHLMC stock of $940,000 in 2008.

Years ended December 31, 2009 and 2008

In 2009, non-interest income was $1.1 million an increase of $123,000 when compared to non-interest income of $951,000 in 2008 when excluding the $940,000 impairment charges on investment securities and the $361,000 loss on sales of investment securities.

Service fees were $458,000 in 2009 a decrease of $179,000 or 28%, from $637,000 in 2008. The decrease in service fees is primarily due to a change in accounting for loan fees. Customers Bank is now using cash basis instead of accrual basis accounting for late fees for loans. Given the inherent uncertainty in the collectability of certain late fees for commercial loans, Customers Bank decided to record these fees when collected. This change does not materially impact financial statement amounts for the year ended December 31, 2009.

Customers Bank had an impairment charge of $940,000 on a corporate bond and Freddie Mac preferred stock in 2008. The impairment charge on investment securities in 2009 were on a corporate bond and Freddie Mac preferred stock. Management believed the loss on this security was other-than-temporary due to Customers Bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government take-over of Freddie Mac.

157

NON-INTEREST EXPENSE

The below chart shows Customers Bank’s results in the various components of non-interest expense for each of the years ended December 31, 2010, 2009 and 2008.

	Years Ended December 31,
	2010		2009		2008
	(dollars in thousands)
Salaries and employee benefits	$	14,031	$	4,267	$	3,651
Occupancy		1,897		1,261		1,280
Technology, communication and bank operations		2,431		1,000		901
Advertising and promotion		1,007		191		231
Professional services		2,833		510		365
FDIC assessments, taxes, and regulatory fees		1,613		892		445
Impairment charges on other real estate owned		702		381		100
Loan workout and other real estate owned		682		531		152
Other		972		648		529
Total non-interest expenses	$	26,168	$	9,681	$	7,654

Years ended December 31, 2010 and 2009

Non-interest expense increased $16.5 million from $9.7 million in 2009 to $26.2 million in 2010. Salaries and employee benefits represent the largest component of non-interest expense and were $14.0 million in 2010 compared to $4.3 million in 2009, an increase of $9.8 million. The total number of employees doubled in 2010. At December 31, 2009, we had sixty-two employees and grew to 133 employees at December 31, 2010 adding $4.7 million in salaries and benefits in 2010. The additiona1 employees were added to continue to build the infrastructure of the Bank and support the growth strategy of the management team added in 2009. Also, fifteen employees were added from the two banks that we acquired in 2010. In addition, the management stock purchase plan, incentive compensation items either through bonus or stock-based compensation and the supplemental executive retirement plan for Customers Bank’s Chief Executive Officer came into effect in 2010. The management stock purchase plan and the SERP became vested and was effective at the completion of the acquisition of USA Bank in July 2010 and $1.8 million and $2.5 million, respectively, were recorded for each plan during the third quarter of 2010.

Occupancy expense increased $636,000 as a result of opening 4 new branches in three states, Pennsylvania, New Jersey and New York. Technology, communications and bank operations expense was $2.4 million in 2010, an increase of $1.4 million or 143.1% over $1.0 million in 2009 due to the expansion of the Bank and employing technology to services customers in a proactive manner. Customers Bank’s advertising and promotion expense increased $816,000 in 2010 to $1.0 million for the promotion of the new Bank strategy and mission and to support an increased market area.

Expenses related to professional services increased 455.5% or $2.3 million to $2.8 million from $510,000 in 2009. This increase was primarily attributable to legal expenses related to regulatory filings, the two FDIC assisted acquisitions and litigation related to one of the Bank’s vendors. Consulting fees increased to $507,000 in 2010 from $193,000 in 2009 to add the specialty knowledge and experience to support management in the growth of the Bank.

FDIC assessments, taxes and regulatory fees increased 80.8% or $721,000 to $1.6 million in 2010 from $892,000 in 2009. This increase is attributable to a broader deposit base and increases in premiums.

Impairment charges on other real estate owned increased $321,000 to $702,000 in 2010 from $381,000 in 2009. This increase is primarily attributable to deteriorating market values on real estate and increased other real estate owned. Loan workout and other real estate owned expenses increased 28% or $151,000 to $682,000 in 2010 from $531,000 in 2009. This increase is attributable to an increase of expenses related to preparing properties for sale and increase of other real estate properties from the two bank acquisitions in 2010. A portion of the expenses on the other real estate owned covered under the FDIC loss sharing agreements are reimbursable from the FDIC, however, the remaining 20% of the expense is absorbed by the Bank. At December 31, 2010, there were eighteen properties that we have acquired either through acquisition or foreclosure of loans with a book value of $7.2 million. In addition, loan workout expenses increase due to additional problem assets from the acquisitions of two failed banks in 2010 and a portion of the expenses incurred are reimbursable from the FDIC.

Other expenses increased 50.0% or $324,000 to $972,000 in 2010 from $648,000 in 2009. This increase was primarily attributable to increases in appraisal expenses in connection expansion costs, director fees, and other miscellaneous expenses.

158

Years ended December 31, 2009 and 2008

The 26.5% or $2.0 million increase in total non-interest expense, from $7.7 million in 2008 to $9.7 million in 2009, was largely due to an increase in FDIC assessments and legal fees incurred in 2009. Salaries and employee benefits were $4.3 million in 2009 compared to $3.7 million in 2008, an increase of 16.8% or $616,000. This increase was primarily driven by staff increases in 2009 related to building an infrastructure for planned growth.

Customers Bank’s occupancy expense remained level at $1.3 million in both 2009 and 2008. Technology, communications and bank operations expense was $1.0 million in 2009, an increase of $99,000 or 11.0% over the $901,000 in 2008. Customers Bank’s advertising and promotion expense remained stable at $0.2 million in both 2009 and 2008.

Expenses related to professional services increased 39.7% or $145,000 to $510,000 from $365,000 in 2008. This increase was primarily attributable to legal expenses related to regulatory filings, loan workouts and consulting fees. FDIC assessments, taxes and regulatory fees increased 100.4% or $447,000 to $892,000 in 2009 from $445,000 in 2008. This increase is attributable to the FDIC special assessment and increases in premiums.

Impairment and losses on other real estate owned increased $281,000 to $381,000 in 2009 from $100,000 in 2008. This increase is primarily attributable to deteriorating market values on real estate. Loan workout and other real estate owned expenses increased 249.3% or $379,000 to $531,000 in 2009 from $152,000 in 2008. This increase is attributable to an increase of expenses related to preparing properties for sale and the monitoring of the problem loans that increased in 2009.

Other expenses increased 22% or $119,000 to $648,000 in 2009 from $529,000 in 2008. This increase was primarily attributable to increases in director fees and other miscellaneous expenses.

INCOME TAXES

Years ended December 31, 2010 and 2009

The income tax provision is $4.7 million for the year ended December 31, 2010. The income tax provision reflects a provision for approximately $11.3 million offset by an $6.6 million adjustment to reverse the deferred tax valuation allowance previously recorded on the net deferred tax asset through the second quarter of 2010. Due to the acquisitions of USA Bank and ISN Bank, it is more likely than not that our net deferred tax asset will be realized, accordingly, the valuation allowances recorded in 2010 and in the previous years were reversed. Management periodically evaluates the recoverability of its deferred tax assets to determine if the valuation allowance should be adjusted. Income tax expense also increase due to the expansion into various jurisdictions.

Years ended December 31, 2009 and 2008

Customers Bank recognized no income tax benefit in 2009, compared to an income tax benefit of $0.4 million in 2008. A portion of Customers Bank’s net losses in 2008 were carried back to prior years creating a tax benefit in 2008. There was no additional income from prior years to create a tax benefit in 2009.

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FINANCIAL CONDITION

GENERAL

Customers Bank’s total assets were $1.37 billion at December 31, 2010. This represents a 293.0% increase from $349.8 million at December 31, 2009. The main components of this change were an increase in cash and cash equivalents, loans, and investment securities volume. Customers Bank’s total liabilities were $1.27 billion at December 31, 2010, up 286.7% from $328.3 million at December 31, 2009. The main component of this change was due to increased deposits, offset by a decrease in other borrowings.

On July 9, 2010 and September 17, 2010, Customers Bank acquired the former USA Bank and ISN Bank in FDIC assisted transactions that resulted in two additional branches and expanded the Customers Bank brand into New York and New Jersey to continue the growth into these markets.

The following table sets forth certain key condensed balance sheet data:

	December 31,
	2010		2009
	(dollars in thousands)
Cash and cash equivalents	$	238,724	$	68,807
Loans held for sale		199,970		---
Total investment securities, available for sale		205,828		44,588
Total loans receivable, not covered under FDIC loss sharing agreements		514,087		230,298
Total loans receivable covered under FDIC loss sharing agreements		164,885		---
Total loans receivable, net of the allowance for loan losses		663,843		220,266
Total assets		1,374,407		349,760
Earning assets		1,301,969		341,548
Total deposits		1,245,690		313,927
Total borrowings		13,000		13,000
Total liabilities		1,269,267		328,257
Total stockholders’ equity		105,140		21,503

The following table sets forth a summary of assets acquired and liabilities assumed from the former USA Bank and ISN Bank at their respective acquisition dates (in thousands):

Total loans receivable, not covered under FDIC loss sharing agreements	$	1,440
Total loans receivable, covered under FDIC loss sharing agreements		174,660
FDIC loss sharing receivables		28,337
Other real estate owned covered under FDIC loss sharing agreements		4,640
Total deposits	$	251,239

CASH AND DUE FROM BANKS

Cash and due from banks consists mainly of vault cash and cash items in the process of collection. These balances totaled $6.4 million at December 31, 2010. This represents a $2.2 million increase from $4.2 million at December 31, 2009. These balances vary from day to day, primarily due to variations in customers’ deposits with Customers Bank.

INTEREST-EARNING DEPOSITS WITH BANKS

Customers Bank’s interest earning deposits consist mainly of deposits at the Federal Home Loan Bank of Pittsburgh. These deposits totaled $225.6 million at December 31, 2010, which is a $166.7 million increase from $59.0 million at December 31, 2009. This balance varies from day to day, depending on several factors, such as variations in customers’ deposits with Customers Bank and the payment of checks drawn on customers’ accounts. The growth of interest earning deposits is primarily attributable to growth of the branch network and organic deposit growth, proceeds from the capital offerings in 2010, offset by Customers Bank’s growth of assets.

FEDERAL FUNDS SOLD

Federal funds sold consist of overnight interbank lending through Atlantic Central Bankers Bank. These funds totaled $6.7 million at December 31, 2010, representing an increase of $1.0 million from the $5.7 million at December 31, 2009. This balance varies day-to-day, based upon the short-term fluctuations in the net cash position of Customers Bank.

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INVESTMENT SECURITIES

Customers Bank’s investment securities portfolio is an important source of interest income and liquidity. It consists of U.S. Treasury, government agency and mortgage-backed securities (guaranteed by an agency of the United States government and non-agency guaranteed), municipal securities, domestic corporate debt, and asset-backed securities. In addition to generating revenue, Customers Bank maintains the investment portfolio to manage interest rate risk, provide liquidity, provide collateral for other borrowings and diversify the credit risk of earning assets. The portfolio is structured to maximize net interest income, given changes in the economic environment, liquidity position and balance sheet mix.

Management determines the appropriate classification of securities at the time of purchase. In accordance with ASC 320 Investments—Debt and Equity Securities , investment securities are classified as: (a) investment securities held to maturity (“HTM”), which are classified as such based on management’s intent and ability to hold the securities to maturity; (b) trading account securities, which are bought and held principally for the purpose of selling them in the near term; and (c) securities available for sale (“AFS”), which include those securities that may be sold in response to changes in interest rates, changes in pre-payment assumptions, the need to increase regulatory capital or other similar requirements. Customers Bank does not necessarily intend to sell its AFS securities, but has classified them as AFS to provide flexibility to respond to liquidity needs.

At December 31, 2010, $205.8 million of Customers Bank’s investment securities were classified as AFS. This represents an increase of 361.6% from $44.6 million at December 31, 2009. The increase was largely due to the purchases of investment securities, offset by normal maturities, calls, principal repayments, and sales. Unrealized gains and losses on AFS securities, although excluded from the results of operations, are reported as a separate component of stockholders’ equity, net of the related tax effect. At December 31, 2010, Customers Bank held no investment securities that were classified as HTM.

The investment securities portfolio’s composition changes periodically as a result of restructuring transactions, taken primarily to manage liquidity, capital and interest rate risk. Customers Bank had a concentration greater than 10% of stockholders’ equity in Fannie Mae ($25.5 million), Ginnie Mae ($38.5 million) and Freddie Mac ($139.1 million) at December 31, 2010.

The following three tables set forth information regarding the stated maturity, average yield, and compositions, of our investment securities portfolio as of the dates indicated. The first two tables do not include amortization or anticipated prepayments on mortgage-backed securities; callable securities are included at their stated maturity dates.

	December 31, 2010					December 31, 2009
	Fair Value		Weighted Average Yield			Fair Value		Weighted Average Yield
	(dollars in thousands)
Due after one year through five years	$	198		0.91	%	$	452		4.65	%
Due after five years through ten years		3,334		2.91			—		—
Due after ten years		—		—			3,894		6.28
		3,532		2.77			4,346		6.14
Mortgage-backed securities		201,574		2.49			39,403		3.91
Asset-backed securities		722		1.45			839		1.37
	$	205,828		2.48	%	$	44,588		4.04	%

	December 31,
	2010		2009

US Treasury and government agency	$	1,681	$	452
Mortgage-backed securities		201,574		39,403
Asset-backed securities		722		839
Municipal securities		1,851		3,894
	$	205,828	$	44,588

161

At December 31, 2010, Customers Bank held $2.6 million in securities that were impaired based on having a fair value lower than amortized cost for at least twelve consecutive months. Customers Bank considers these securities to be temporarily impaired primarily due to interest rate changes and a lack of liquidity in the market. Customers Bank does not intend to sell and it is not more likely than not that Customers Bank will be required to sell the securities prior to maturity or market price recovery. Management believes that there is no other than temporary impairment of these securities as of December 31, 2010. $2.0 million and $9.0 million of investment securities were pledged at December 31, 2010 and 2009, respectfully. Securities are pledged to the Federal Home Loan Bank of Pittsburgh to be used as collateral for borrowing purposes and to the Federal Reserve for contingency liquidity planning purposes.

LOANS

Our existing lending relationships are primarily with small businesses and individual consumers in Bucks, Berks, Montgomery, Chester and Delaware Counties and southeast New York and central New Jersey and to a lesser extent in surrounding markets. Our loan portfolio is primarily comprised of commercial real estate, construction and development, and commercial and industrial loans. We plan to continue our focus on small business loans, the management team plans to realign our commercial lending efforts, establish a specialty lending business and expand our consumer lending products, as outlined below:

Commercial Lending

Customers Bank’s commercial lending will be segregated into certain types of risk: Commercial Real Estate, Commercial and Industrial and Construction Loans. This distinction is designed to allow for greater resource deployment, higher standards of risk management, superior asset quality, lower interest rate risk and higher productivity levels. The Business Banking lending group will focus on companies with annual revenues ranging from $5.0 million to $20.0 million, which typically have credit requirements between $0.5 million and $2.0 million. The Small Business Banking platform will originate loans including Small Business Administration loans through the branch network sales force and a team of dedicated Small Business relationship managers. The support administration of the platform for this group will be centralized and include risk management, product management, marketing, performance tracking and overall strategy. Credit and sales training has been established for our sales force, ensuring we have small business experts in place providing appropriate financial solutions to the small business owners in our communities. This segregated approach is intended to focus on industries that offer us high asset quality and are deposit rich to drive profitability.

Specialty Lending

Our long-term financial plan also includes the addition of certain lower-risk specialty lending businesses, such as first mortgages, home equity, manufactured housing and mortgage warehouse lending. However, due to our anticipated growth in deposits and slower growth in lending due to our more stringent underwriting requirements and our view that it would not be prudent to rapidly grow loan portfolios in relatively small geographical areas, we believe that diversification of our credit risk across asset classes and geographies is the prudent approach to take during our growth stage. Furthermore, there is an opportunity to start specialty lending businesses with no legacy issues at attractive spreads. Many of the large banks have exited these businesses after experiencing capital issues or high credit losses. This provides the opportunity for us to hire experienced management teams in lower risk areas.

We established the mortgage warehouse lending business in 2009 which provides financing to mortgage bankers for residential mortgage originations from loan closing until sale in the secondary market. Many providers of liquidity in this segment exited the business last year during the period of excessive market turmoil. Despite a recently more stabilized market environment, lending in this area has not returned. We believe the market will yield an opportunity to provide liquidity to this division at attractive spreads. There is also opportunity to attract escrow deposits and to generate fee income in this business. It is anticipated that we will bring in deposit funding equal to 10% to 30% of the loans generated over time.

Mortgage warehouse loans were purchased by Customers Bank from third party mortgage originators. Customers Bank anticipates selling the loans to mortgage originators for securitization in the short term.

Consumer Lending

We plan to expand our product offerings in real estate secured consumer lending, but will not offer indirect automobile loans, unsecured loans or credit cards. Initially, we intend to provide home equity and residential mortgage loans to customers. Underwriting standards for home equity lending will be conservative, focusing on FICO scores 720 and higher, and lending will be offered to solidify customer relationships and grow relationship revenues in the long term. Residential loans will be originated for sale, which will become a source of fee revenue for Customers Bank. In the long term, Customers Bank intends to assess other consumer lending segments that adhere to our critical success factors. This lending is important in our efforts to grow total relationship revenues for our consumer households.

162

Our existing lending relationships are primarily with small businesses and individual consumers primarily in Bucks, Berks, Chester, Delaware and Montgomery Counties, Pennsylvania; Camden County, New Jersey; and Westchester County, New York and to a lesser extent in the surrounding markets. Our loan portfolio is primarily comprised of commercial real estate, construction and development, and commercial and industrial loans. In July and September 2010, Customers Bank purchased an aggregate portfolio of approximately $171.1 million of which substantially all the loans are covered under loss sharing arrangements with the FDIC (referred to as “covered loans” within the discussion).

Loans receivable outstanding (net of the allowance for loan losses) that are not covered under FDIC loss sharing arrangements (referred to as “non-covered” within the discussion) grew to $499.0 million at December 31, 2010, an increase of $278.7 million, or 127.0%, from $220.3 million at December 31, 2009. The growth of the loan portfolio was centered around the increase in mortgage warehouse loans totaling $186.1 million and manufactured housing loans totaling $102.9 million at December 31, 2010. In August 2010, Customers Bank purchased a pool of manufactured housing loans with an outstanding principal balance of $105.4 million with 10% of the purchase price held back in a deposit account (Holdback Deposit). The Holdback Deposit is for loans within the purchased portfolio under agreed upon terms, such as repossessions or missed principal payments. For further information on our loans, see Note 5 of Customers Bank’s 2010 Annual Financial Statements beginning on page Customers F-2 of this Joint Proxy Statement-Prospectus. Covered loans were $164.9 million at December 31, 2010.

The composition of net loans receivable at December 31, 2010 and 2009 is as follows:


	2010			2009
	(in thousands)
Commercial construction	$	38,280		$
Commercial real estate		75,245			—
Commercial and industrial		22,876			—
Residential real estate		23,822			—
Manufactured housing		4,662			—
Total loans receivable covered under FDIC loss sharing agreements		164,885			—
Commercial construction		13,387			21,742
Commercial real estate		144,849			133,433
Commercial and industrial		35,942			25,290
Mortgage warehouse		186,113			16,435
Manufactured housing		102,924			—
Residential real estate		28,964			27,422
Consumer		1,581			5,524
Total loans receivable		513,760			229,846
Unearned origination costs, net		327			452
Allowance for loan losses		(15,129	)		(10,032	)
Total loans receivable not covered under FDIC loss share agreements, net		498,958			220,266
Loans receivable, net	$	663,843		$	220,266

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The following table sets forth certain categories of loans as of December 31, 2010, in terms of contractual maturity date:

	Within one year		After one but within five years		After five years		Total
	(in thousands)
Types of Loans:
Commercial construction	$	46,483	$	3,617	$	1,567	$	51,667
Commercial real estate		38,751		108,828		72,515		220,094
Commercial and industrial		19,730		7,420		31,668		58,818

Total	$	104,964	$	119,865	$	105,750	$	330,579

Amount of such loans with:
Predetermined rates	$	59,267	$	101,637	$	24,653	$	185,557
Floating or adjustable rates		45,697		18,228		81,097		145,022
Total	$	104,964	$	119,865	$	105,750	$	330,579

* Includes covered and non-covered loans.

CREDIT RISK

Customers Bank manages credit risk by maintaining diversification in its loan portfolio, by establishing and enforcing rigorous underwriting standards, by intensive collection efforts, and by establishing and performing periodic loan classification reviews by management. Management also attempts to anticipate and allow for credit risks by maintaining an adequate allowance for loan losses, to which credit losses are charged as they are incurred, and to which provisions are added periodically as Management and the board of directors deem appropriate.

The provision for loan losses was $10.4 million, $11.8 million, and $611,000 for the years ended December 31, 2010, 2009, and 2008, respectively. The allowance for loan losses was $15.1 million, or 2.94% of total non-covered loans, at December 31, 2010 and $10.0 million or 4.96%, of total non-covered loans at December 31, 2009. Net charge-offs were $5.3 million for the year ended December 31, 2010, an increase of $628,000 compared to the $4.6 million for the year ending December 31, 2009. In addition, we have approximately $164.9 million in loans that are covered under loss share arrangements with the FDIC.

The $1.4 million decrease in the provision for loan losses for 2010 was primarily attributable to delinquent, non-performing and impaired loans stay relatively flat in the second half of 2010 during the deteriorating real estate market. This methodology determines the fair value on impaired loans and utilizes Customers Bank’s historical loss experience to project losses in the foreseeable future for performing loans. See “Asset Quality” beginning on page 166 in this Joint Proxy Statement-Prospectus.

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The below chart depicts Customers Bank’s allowance for loan losses for the periods indicated.

	December 31,
	2010			2009		2008		2007		2006
	(in thousands)

Balance of the allowance at the beginning of the year	$	10,032		$	2,876	$	2,460	$	2,029	$	1,615
Loan charge-offs
Commercial construction		1,214			920		100		-		-
Commercial real estate		964			2,597		79		-		-
Commercial and industrial		1,699			1,080		-		9		8
Residential real estate		1,366			-		1		-		-
Consumer and other		22			33		15		5		-
Total Charge-offs		5,265			4,630		195		14		8
Loan recoveries
Commercial construction		-			-		-		-		-
Commercial real estate		-			-		-		-		-
Commercial and industrial		6			8		-		1		4
Residential real estate		9			-		-		-		-
Consumer and other		-			-		-		-		2
Total Recoveries		15			8		-		1		6
Total net charge-offs		5,250			4,622		195		13		2
Provision for loan losses		10,397			11,778		611		444		416
Transfer (1)		(50	)		-		-		-		-
Balance of the allowance for loan losses at the end of the year	$	15,129		$	10,032	$	2,876	$	2,460	$	2,029

(1) In 2010, the Bank had a reserve of $50,000 for unfunded commitments previously included in the allowance for loan losses. The reserve for unfunded loan committments was reclassified to other liabilities.

The allowance for loan losses is based on a periodic evaluation of the loan portfolio and is maintained at a level that management considers adequate to absorb potential losses. All loans are assigned risk ratings, based on an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans are monitored regularly and the risk ratings are adjusted when appropriate. This process allows Customers Bank to take corrective actions on a timely basis. Management considers a variety of factors, and recognizes the inherent risk of loss that always exists in the lending process. Management uses a disciplined methodology to estimate the appropriate level of allowance for loan losses. This methodology includes an evaluation of loss potential from individual problem credits, as well as anticipated specific and general economic factors that may adversely affect collectability. This assessment includes a review of changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions that may affect borrowers’ ability to repay, and other factors that may warrant current recognition. In addition, Customers Bank’s internal auditors, loan review auditors and various regulatory agencies periodically review the adequacy of the allowance as an integral part of their examination process. Such agencies may require Customers Bank to recognize additions or reductions to the allowance based on their judgments of information available at the time of their examination.

A substantial portion, approximately 75-80%, of our commercial real estate, commercial and residential construction, consumer residential and commercial and industrial loan types have real estate as collateral (collectively, the real estate portfolio). Our lien position on the real estate collateral will vary on a loan by loan basis. Current appraisals are received when our credit group determines that the facts and circumstances have significantly changed since the date of the last appraisal or the geographical real estate values have deteriorated. The credit committee and loan officers review loans that are fifteen or more days delinquent and all nonaccrual loans on a periodic basis. In addition, loans where the loan officers have identified a “borrower of interest” are discussed to determine if additional analysis is necessary to apply the risk rating criteria properly. The risk ratings for the real estate loan portfolio are determined based upon the current information available, including but not limited to discussions with the borrower, updated financial information, economic conditions within the geographical area and other factors that may affect the cash flow of the loan. On a quarterly basis, if necessary, the collateral values or discounted cash flow models are used to determine the estimated fair value of the underlying collateral for the quantification of a specific reserve for impaired loans. Appraisals used within this evaluation process do not typically age more than two years before a new appraisal is obtained. For loans where real estate is not the primary source of collateral, updated financial information is obtained, including accounts receivable and inventory aging reports and relevant supplemental financial data to determine the fair value of the underlying collateral.

An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.

These evaluations, however, are inherently subjective as they require material estimates, including, among others, the amounts and timing of expected future cash flows on impaired loans, estimated losses in the loan portfolio, and general amounts for historical loss experience, economic conditions, uncertainties in estimating losses and inherent risks in the various credit portfolios, all of which may be susceptible to significant change. Pursuant to ASC 450 Contingencies and ASC 310-40 Troubled Debt Restructurings by Creditors impaired loans, consisting of non-accrual and restructured loans, are considered in the methodology for determining the allowance for credit losses. Impaired loans are generally evaluated based on the expected future cash flows or the fair value of the underlying collateral if principal repayment is expected to come from the sale or operation of such collateral.

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The following table shows how the allowance for loan losses is allocated among the various loan portfolios that Customers Bank has outstanding. This allocation is based on management’s specific review of the credit risk of the outstanding loan portfolios in each category as well as historical trends.

		December 31,
		2010				2009					2008
	Amount		Percent of Loans in each category to total loans (a)			Amount		Percent of Loans in each category to total loans			Amount		Percent of Loans in each category to total loans
		(dollars in thousands)
Commercial construction	$	2,126		7.7	%	$	2,349		9.5	%	$	608	15.8	%
Commercial real estate		6,280		32.7	%		4,874		58.0	%		856	53.3	%
Commercial and industrial		1,663		8.7	%		1,350		11.0	%		532	15.1	%
Residential real estate		3,988		7.8	%		1,284		19.1	%		696	12.2	%
Consumer and other		11		0.1	%		75		2.4	%		32	3.6	%
Mortgage warehouse		465		27.7	%		—		—	%		—	—	%
Manufactured housing		—		15.3	%		—		—	%		—	—	%
Unallocated		596					100					152
	$	15,129		100.0	%	$	10,032		100.0	%	$	2,876	100.0	%

	December 31,
	2007					2006
	Amount		Percent of Loans in each category to total loans			Amount		Percent of Loans in each category to total loans
	(dollars in thousands)
Commercial construction	$	352		16.2	%	$	69		3.9	%
Commercial real estate		757		34.2	%		762		38.4	%
Commercial and industrial		551		20.1	%		449		18.5	%
Consumer residential		724		27.9	%		623		37.4	%
Consumer and other		44		1.6	%		41		1.8	%
Unallocated		32					85
	$	2,460		100.0	%	$	2,029		100.0	%

(a) Total loans includes covered and non-covered loans in 2010. No covered loans held prior to 2010.

ASSET QUALITY

Customers Bank had impaired loans totaling $44.6 million at December 31, 2010, compared to $17.5 million at December 31, 2009. Non-accrual not covered loans totaled $22.2 million at December 31, 2010, up from $10.3 million at December 31, 2009. Customers Bank had net charge-offs of $5.3 million in 2010, compared with $4.6 million in 2009. Customers Bank had recoveries of $15,000 in 2010, compared with $8,000 in 2009. There was $1.9 million and $1.2 million of other real estate owned as a result of foreclosure or voluntary transfer to Customers Bank at December 31, 2010 and 2009, respectively.

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Loans not covered under loss sharing arrangements

The tables below set forth non-covered non-performing loans and non-performing assets and asset quality ratios at December 31, 2010, 2009, 2008, 2007 and 2006:

	December 31,
	2010		2009		2008		2007		2006
	(dollars in thousands)
Non-accrual loans	$	22,242	$	10,341	$	4,387	$	2,058	$	742
Loans 90+ days delinquent still accruing		5		4,119		1,585		11		-
Restructured loans		4,776		4,690		1,203		-		-
Non-performing non-covered loans		27,023		19,150		7,175		2,069		742
OREO		1,906		1,155		1,519		-		-
Non-performing non-covered assets	$	28,929	$	20,305	$	8,694	$	2,069	$	742

	December 31,
	2010			2009			2008			2007			2006

Non-accrual loans to total non-covered loans		4.33	%		4.49	%		1.96	%		0.96	%		0.42	%
Non-performing loans to non-covered total loans		5.26	%		8.32	%		3.21	%		1.63	%		0.42	%
Non-performing non-covered assets to non-covered total assets		2.40	%		5.81	%		3.17	%		1.28	%		0.32	%
Non-accrual non-covered loans and 90+ days delinquent to non-covered total assets		1.85	%		4.13	%		2.18	%		0.76	%		0.32	%
Allowance for loan losses to:
Total non-covered loans (a)		2.94	%		4.36	%		1.29	%		1.15	%		1.14	%
Non-performing non-covered loans		55.99	%		52.39	%		40.08	%		70.41	%		273.45	%
Non-performing non-covered assets		52.30	%		49.41	%		33.08	%		70.41	%		273.45	%

(a) Total non-covered loans included mortgage warehouse loans of $186,113 and $16,435 and purchased manufactured housing loans of $102,924 and $0 as of December 31, 2010 and December 31, 2009, respectively. Prior to 2009, the Bank did not hold mortgage warehouse and manufactured housing loans in our investment portfolio.

The table below sets forth types of not covered loans that were non-performing at December 31, 2010, 2009, 2008, 2007 and 2006.

	December 31,
	2010		2009		2008		2007		2006
	(dollars in thousands)
Commercial construction	$	4,673	$	2,835	$	1,443	$	1,469	$	-
Residential real estate		1,793		672		350		-		227
Commercial real estate		15,879		14,786		5,232		411		411
Commercial and industrial		4,673		721		150		172		104
Consumer and other		5		136		-		17		-
Total non-performing loans	$	27,023	$	19,150	$	7,175	$	2,069	$	742

Customers Bank seeks to manage credit risk through the diversification of the loan portfolio and the application of policies and procedures designed to foster sound credit standards and monitoring practices. While various degrees of credit risk are associated with substantially all investing activities, the lending function carries the greatest degree of potential loss.

Asset quality assurance activities include careful monitoring of borrower payment status and a review of borrower current financial information to ensure financial strength and viability. Customers Bank has established credit policies and procedures, seeks the consistent application of those policies and procedures across the organization, and adjusts policies as appropriate for changes in market conditions and applicable regulations. The risk elements which comprise asset quality include loans past due, non-accrual loans, renegotiated loans, other real estate owned, and loan concentrations.

167

All loans are assigned risk ratings, based on an assessment of the borrower, the structure of the transaction and the available collateral and/or guarantees. All loans are monitored regularly and the risk ratings are adjusted when appropriate. This process allows Customers Bank to take corrective actions on a timely basis.

A regular reporting and review process is in place to provide for proper portfolio oversight and control, and to monitor those loans identified as problem credits by management. This process is designed to assess Customers Bank’s progress in working toward a solution, and to assist in determining an appropriate specific allowance for possible losses. All loan work-out situations involve the active participation of management, and are reported regularly to the Board.

Loan charge-offs are determined on a case-by-case basis. Loans are generally charged off when principle is likely to be unrecoverable and after appropriate collection steps have been taken.

Loan policies and procedures are reviewed internally for possible revisions and changes on a regular basis. In addition, these policies and procedures, together with the loan portfolio, are reviewed on a periodic basis by various regulatory agencies and by Customers Bank’s internal, external and loan review auditors, as part of their examination and audit procedures.

Nonperforming loans and assets covered under FDIC loss sharing agreements

The tables below set forth non-accrual covered loans and non-performing covered assets covered under FDIC loss sharing agreements at December 31, 2010 (in thousands).

	December 31, 2010

Non-accrual covered loans	$	40,598
Covered other real estate owned		5,342
Total nonperforming covered assets	$	45,940

The table below sets forth the types of covered loans that were non-performing at December 31, 2010 (in thousands).

	December 31, 2010

Commercial construction	$	19,880
Residential real estate		4,017
Commercial real estate		10,146
Commercial and industrial		6,364
Manufactured housing		191
Total non-performing covered loans	$	40,598

FDIC LOSS SHARING RECEIVABLE

As of December 31, 2010, 23% of the outstanding principal balance of loans receivable and 6% of our other real estate assets were covered under loss share agreements with the FDIC in which the FDIC has agreed to reimburse us for 80% of all losses incurred in connection with those assets. We estimated the FDIC reimbursement that will result from losses or expenses incurred as we dispose of covered loans and other real estate assets, and we recorded the estimate as a receivable from the FDIC. The FDIC loss sharing receivable was approximately $16.7 million as of December 31, 2010. Realized losses in excess of acquisition date estimates will result in an increase in the FDIC receivable for loss share agreements. Conversely, if realized losses are less than acquisition date estimates, the FDIC loss sharing receivable will be reduced. The discount on the FDIC receivable is accreted into noninterest income using the level yield method over the estimated life of the receivable, including estimates of the timing of cash flow receipts and the disposition of non-performing assets.

168

PREMISES AND EQUIPMENT AND OTHER ASSETS

Customers Bank’s premises and equipment, net of accumulated depreciation, was $5.3 million and $2.7 million at December 31, 2010 and 2009, respectively.

Customers Bank’s restricted stock holdings at December 31, 2010 and December 31, 2009 were $4.3 million and $2.0 million, respectively. These consist of stock of the Federal Reserve Bank, Federal Home Loan Bank and Atlantic Central Bankers Bank, and are required as part of our relationship with these banks.

Customers Bank owned BOLI of $25.6 million and $5.0 million at December 31, 2010 and 2009, respectively. Cash flow from these policies will occur over an extended period of time and flow through non-interest income. Customers Bank periodically reviews the creditworthiness of the insurance companies that have underwritten the policies. The cash surrender values of the policies appear on Customers Bank’s balance sheet and are subject to full regulatory capital requirements.

Other assets increased to $6.8 million at December 31, 2010 from $1.8 million at December 31, 2009.

DEPOSITS

Customers Bank offers a variety of deposit accounts, including checking, savings, money market and time deposits. Deposits are obtained primarily from Customers Bank’s service area. Total deposits grew to $1.25 billion at December 31, 2010, an increase of $931.8 million, or 296.8%, from $313.9 million at December 31, 2009 primarily from deposits from the two acquired banks and continuation of deposit initiations in the second half of 2009. Customers Bank introduced many new initiatives to increase its deposits that continued through 2010. Sales management practices were introduced along with new marketing and pricing strategies.

The components of deposits were as follows at the dates indicated:

	December 31,
	2010		2009
	(in thousands)
Demand, non-interest bearing	$	72,268	$	18,502
Demand, interest bearing		387,013		84,996
Savings		17,649		9,037
Time, $100,000 and over		434,453		76,985
Time, other		334,307		124,407
Total deposits	$	1,245,690	$	313,927

Total time deposits increased $931.8 million, or 296.8%, to $1.25 billion at December 31, 2010 compared to $313.9 million at December 31, 2009. Time deposits of $100,000 or more were $434.53 million at December 31, 2010 compared to $77.0 million at December 31, 2009, an increase of $357.5 million or 464.3%. Customers Bank had brokered deposits of $46.0 million and $30.0 million at December 31, 2010 and 2009, respectively. During this period, non-interest bearing demand deposits increased $53.8 million, or 290.1%, to $72.3 million from $18.5 million. Interest bearing demand deposits increased $302.0 million, or 355.3%, to $387.0 million from $85.0 million. The majority of this increase is in money market accounts that increased to $373.6 million at December 31, 2010 from $74.4 million at December 31, 2009. Savings deposit accounts increased $8.6 million, or 95.3%, to $17.6 million at December 31, 2010 from $9.0 million.

At December 31, 2010, the scheduled maturities of time deposits greater than $100,000 are as follows (in thousands):



3 months or less	$	29,068
Over 3 through 6 months		62,012
Over 6 through 12 months		295,165
Over 12 months		48,208
	$	434,453

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OTHER BORROWINGS

Customers Bank had other borrowings of $11.0 million at December 31, 2010 and 2009. The contractual maturities of long-term advances at December 31, 2010 were as follows (in thousands):



2013	$	1,000
2015		10,000
	$	11,000

SUBORDINATED DEBT

In June 2004, Customers Bank issued $2.0 million in floating rate subordinated debt that matures on July 23, 2014. The quarterly interest rate at December 31, 2010 was 3.04%. Currently, 80% of this subordinated debt is included in Customers Bank’s Tier II regulatory capital requirement.

Customers Bank issued a subordinated term note during the fourth quarter of 2008. The note was issued for $1.0 million at a fixed interest rate of 7.50% per annum. Quarterly interest payments are made on this note in January, April, July and October. The note was converted to Common Stock in the third quarter of 2009 due to a significant change in Customers Bank’s board of directors, which triggered a change in control event.

PREFERRED STOCK

During 2008, Customers Bank issued $980,000 in 10% Series A Non-Cumulative Perpetual Convertible Preferred Stock. There were $30,000 of expenses related to the issuance of preferred stock in 2008. This stock paid a 10% dividend that is non-cumulative. The preferred shares were exchanged for Common Stock during 2009 in conjunction with the capital raise of $16.7 million. 178,164 shares of Common Stock were exchanged for 98 shares of preferred stock at a price of $5.50 per share. In addition, 24,500 warrants were issued in the exchange. Each warrant allows for the purchase of one (1) share of Common Stock at a price of $5.50 per share. The warrants expire seven (7) years from the date of issuance.

STOCKHOLDERS’ EQUITY

Stockholders’ equity increased to $105.1 million at December 31, 2010 from $21.5 million at December 31, 2009. The increase was due to a capital raises totally $59.7 million , net income of $23.7 million and the increase of $1.9 million in net unrealized losses on investment securities classified by Customers Bank as available for sale. The unrealized loss in Customers Bank’s investment securities portfolio is subject to change with fluctuations in interest rates and the market prices of the underlying securities, and is recognized as a component of net income only if realized through the sale of such securities prior to maturity, or if the security would become other-than-temporarily impaired. During 2010, Customers Bank issued 18,971,335 shares of common stock at an average price of $3.11 per share.

170

LIQUIDITY AND CAPITAL RESOURCES

Liquidity for a financial institution is a measure of that institution’s ability to meet depositors’ needs for funds, to satisfy or fund loan commitments, and for other operating purposes. Ensuring adequate liquidity is an objective of the Asset/Liability Management process. Customers Bank coordinates its management of liquidity with its interest rate sensitivity and capital position. Customers Bank’s policy is to maintain a strong liquidity position.

Customers Bank’s investment portfolio provides periodic cash flows through regular maturities and amortization, and can be used as collateral to secure additional liquidity funding. Customers Bank’s principal sources of funds are shareholder capital, deposits, debt issuance, principal and interest payments on loans, and other funds from operations. Customers Bank also maintains borrowing arrangements with the Federal Home Loan Bank and the Federal Reserve Bank of Philadelphia to meet short-term liquidity needs. As of December 31, 2010, Customers Bank’s borrowing capacity with the Federal Home Loan Bank was $128.0 million at December 31, 2010, of which $10.0 million was used in borrowings. As of December 31, 2010, Customers Bank’s borrowing capacity with the Federal Reserve Bank of Philadelphia was $74.2 million.

Customers Bank’s operating activities used $221.5 million and $2.4 million for the years ended December 31, 2010 and 2009, respectively. Customers Bank purchased $200.0 million of mortgage loans that were not sold until January 2011. In addition, bargain purchase gains were recorded on the two FDIC assisted transactions in the second half of 2010.

Investing activities used $348.8 million and $23.8 million for the years ended December 31, 2010 and 2009, respectively. This increase was primarily due to the higher volume of investment securities transactions and an increase in loan activity, primarily mortgage warehouse loans in 2010 compared to 2009.

Financing activities provided $740.2 million and $88.8 million for the years ended December 31, 2010 and 2009, respectively. The increase was primarily due to increased growth of deposits of $680.5 and a $59.7 million capital raise in 2010.

Overall, based on Customers Bank’s core deposit base and available sources of borrowed funds, management believes that Customers Bank has adequate resources to meet its short-term and long-term cash requirements within the foreseeable future.

171

CAPITAL ADEQUACY

The Board of Governors of the Federal Reserve System has adopted risk-based capital and leverage ratio requirements for banks like Customers Bank that are members of the Federal Reserve System. The Pennsylvania Department of Banking also sets minimum capital requirements. At December 31, 2010 and, 2009, Customers Bank met each of its minimum capital requirements. Management believes that Customers Bank would be deemed “well capitalized” for regulatory purposes as of December 31, 2010 and 2009. Banking regulators have discretion to establish an institution’s classification based on other factors, in addition to the institution’s numeric capital levels.

Management is not aware of any developments that have occurred and that would, or would be reasonably likely to, cause our classification to be reduced below a level of “well capitalized” for regulatory purposes. Customers Bank’s capital classification is determined pursuant to banking regulations to apply Customers Bank regulators’ “prompt corrective action” regulations, and to determine levels of deposit insurance assessments, and may not constitute an accurate representation of our overall financial condition or prospects. The following table summarizes the required capital ratios and the corresponding regulatory capital positions of Customers Bank for the periods or dates indicated:

	Actual						For Capital Adequacy Purposes							To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio				Amount			Ratio				Amount			Ratio
	(dollar amounts in thousands)
As of December 31, 2010:
Total capital (to risk weighted assets)	$	115,077		21.1	%	≥	$	43,571	≥		8.0	%	≥	$	53,464	≥		10.0	%
Tier 1 capital (to risk weighted assets)		107,036		19.7		≥		21,557	≥		4.0		≥		32,335	≥		6.0
Tier 1 capital (to average assets)		107,036		8.7		≥		49,397	≥		4.0		≥		61,747	≥		5.0

As of December 31, 2009:
Total capital (to risk weighted assets)	$	25,958		11.8	%	≥	$	17,648	≥		8.0	%	≥	$	22,060	≥		10.0	%
Tier 1 capital (to risk weighted assets)		21,537		9.8		≥		8,824	≥		4.0		≥		13,236	≥		6.0
Tier 1 capital (to average assets)		21,537		6.7		≥		12,906	≥		4.0		≥		16,132	≥		5.0

In general, Customers Bank’s capital increases with the addition of earnings to stockholders’ equity and with sales of stock or the issuance of certain qualifying debt, such as the subordinated debt Customers Bank issued in 2004 and 2008 (which is included in Tier II and total capital). Conversely, as Customers Bank’s assets grow, its capital ratios decrease. In general, in the past few years, balance sheet growth has been offset by decreases in capital through losses and increases in capital from sales of common stock, debt issuance, growth of the allowance for loan losses and our debt issuances. In 2010, the $59.7 million capital raise improved our capital ratios. Customers Bank plans to grow in the future and to maintain strong capital ratios. To accomplish both these goals, Customers Bank will need to raise additional capital to maintain strong capital ratios.

Customers Bank does not presently have any commitments for significant capital expenditures. Customers Bank is unaware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on liquidity, capital resources, or operations of Customers Bank.

The maintenance of appropriate levels of capital is an important objective of Customers Bank’s Asset and Liability Management process. Through its initial capitalization and its subsequent offerings, Customers Bank has continued to maintain a strong capital position. Management believes that, under current requirements and regulations, Customers Bank will meet its minimum capital requirements for the foreseeable future.

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MARKET FOR COMMON STOCK

Customers Bank’s Common Stock is not listed or quoted on any exchange or electronic bulletin board or other quotation service. Furthermore, there are no brokerage firms that act as market makers in Customers Bank’s stock. Consequently, information on current stock trading prices is not readily available. Customers Bank currently acts as its own transfer agent and offers to introduce potential buyers and sellers of our stock to each other, but does not make a market in its own stock or attempt to negotiate prices for trades of its stock.

OFF-BALANCE SHEET ARRANGEMENTS

Customers Bank is a party to financial instruments and other commitments with off-balance sheet risks. Financial instruments with off-balance sheet risks are incurred in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, including unused portions of lines of credit, and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized on the balance sheets.

With commitments to extend credit, our exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of those instruments. Customers Bank uses the same credit policies in making commitments and conditional obligations as for on-balance sheet instruments. Since they involve credit risk similar to extending a loan, they are subject to Customers Bank’s Credit Policy and other underwriting standards.

As of December 31, 2010 and December 31, 2009, the following off-balance sheet commitments, financial instruments and other arrangements were outstanding:

	December 31,
	2010		2009
	(in thousands)
Commitments to fund loans	$	23,446	$	3,922
Unfunded commitments to fund mortgage warehouse loans		221,706		28,565
Unfunded commitments under lines of credit		40,948		16,842
Letters of credit		1,085		854

Commitments to fund loans, unfunded commitments to fund mortgage warehouse loans, unfunded commitments under lines of credit and letters of credit are agreements to extend credit to or for the benefit of a customer in the ordinary course of Customers Bank’s business.

Commitments to fund loans and unfunded commitments under lines of credit may be obligations of Customers Bank as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by Customers Bank upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include personal or commercial real estate, accounts receivable, inventory and equipment.

Mortgage warehouse loan commitments are agreements to purchase mortgage loans from mortgage bankers that agree to purchase the loans back in a short period of time or to sell to third party mortgage originators. These commitments generally fluctuate monthly as existing loans are repurchased by the mortgage bankers and new loans are purchased by Customers Bank.

Outstanding letters of credit written are conditional commitments issued by Customers Bank to guarantee the performance of a customer to a third party. Letters of credit may obligate Customers Bank to fund draws under those letters of credit whether or not a customer continues to meet the conditions of the extension of credit. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

173

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - INTEREST RATE SENSITIVITY

The largest component of Customers Bank’s total income is net interest income, and the majority of its financial instruments are interest rate sensitive assets and liabilities with various terms and maturities. One of the primary objectives of management is to maximize net interest income while minimizing interest rate risk. Interest rate risk is derived from timing differences in the repricing of assets and liabilities, loan prepayments, deposit withdrawals, and differences in lending and funding rates. Customers Bank’s Asset/Liability Committee actively seeks to monitor and control the mix of interest rate sensitive assets and interest rate sensitive liabilities.

Customers Bank uses two complementary methods to analyze and measure interest rate sensitivity as part of the overall management of interest rate risk. They are income simulation modeling and estimates of economic value of equity. The combination of these two methods provides a reasonably comprehensive summary of the levels of interest rate risk of Customers Bank’s exposure to time factors and changes in interest rate environments.

Income simulation modeling is used to measure Customers Bank’s interest rate sensitivity and manage its interest rate risk. Income simulation considers not only the impact of changing market interest rates upon forecasted net interest income, but also other factors such as yield curve relationships, the volume and mix of assets and liabilities, customer preferences and general market conditions.

Through the use of income simulation modeling, Customers Bank has estimated the net interest income for the year ending December 31, 2010, based upon the assets, liabilities and off-balance sheet financial instruments in existence at December 31, 2010. Customers Bank has also estimated changes to that estimated net interest income based upon interest rates rising or falling immediately (“rate shocks”). Rate shocks assume that all interest rates increase or decrease immediately. The following table reflects the estimated percentage change in estimated net interest income for the year ending December 31, 2010, resulting from changes in interest rates.

Net change in net interest income
Rate Shocks	% Change
Up 3%		15.8	%
Up 2%		10.0	%
Up 1%		5.3	%
Down 1%		(0.5	)%
Down 2%		0.5	%
Down 3%		1.8	%

The net changes in net interest income in all of the “up” rate shocks and in the “down 1%” rate shock are well within Customers Bank’s interest rate risk policy guidelines. While the net changes in net interest income in the "up 1%" rate shocks are slightly higher that Customers Bank’s interest rate risk policy guidelines, Management does not believe these scenarios are likely.

Economic Value of Equity (“EVE”) estimates the discounted present value of asset and liability cash flows. Discount rates are based upon market prices for comparable assets and liabilities. Upward and downward rate shocks are used to measure volatility of EVE in relation to a constant rate environment. This method of measurement primarily evaluates the longer term repricing risks and options in Customers Bank’s balance sheet. The following table reflects the estimated EVE at risk and the ratio of EVE to EVE adjusted assets at December 31, 2010, resulting from shocks to interest rates.

174

Percent Change Economic Value of Equity
Rate Shocks	From base			EVE assets capital (a)

Up 3%		(22.6	)%		(22.8	)%
Up 2%		(12.5	)%		(12.7	)%
Up 1%		(5.7	)%		(5.8	)%
Down 1%		5.1	%		5.9	%
Down 2%		2.6	%		2.7	%
Down 3%		(2.7	)%		(2.7	)%

(a) Capital defined as Tier 1/Tier 2 Capital as calculated under regulatory quidelines.

The percent changes of EVE are within Customers Bank’s interest rate risk policy guidelines.

The matching of assets and liabilities may also be analyzed by examining the extent to which such assets and liabilities are interest rate sensitive and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that time period. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period.

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at December 31, 2010, that are anticipated, based upon certain assumptions, to reprice or mature in each of the future time periods shown. Except as stated below, the amount of assets and liabilities shown that reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at December 31, 2010, on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. The loan amounts in the table reflect principal balances expected to be repaid and/or repriced as a result of contractual amortization and anticipated prepayments of adjustable and fixed rate loans, and as a result of contractual rate adjustments on adjustable rate loans.

175

	At December 31, 2010
	3 months or less			3 to 6 months			6 to 12 months			1 to 3 years			3 to 5 years			over 5 years			Total
	(dollars in thousands)
Interest earning deposits and federal funds sold	$	232,328		$	-		$	-		$	-		$	-		$	-		$	232,328
Investment Securities		6,528			5,535			11,006			43,278			41,746			97,735			205,828
Loans receivable (a)		571,562			40,181			49,768			142,784			55,479			4,039			863,813
Total interest earning assets		810,418			45,716			60,774			186,062			97,225			101,774			1,301,969
Non interest earning assets		-			-			-			-			-			72,438			72,438
Total assets	$	810,418		$	45,716		$	60,774		$	186,062		$	97,225		$	174,212		$	1,374,407
Other interest bearing deposits	$	353,448		$	-		$	-		$	-		$	-		$	51,214		$	404,662
Time deposits		69,563			137,276			479,069			72,375			10,467			10			768,760
Other borrowings		-			-			-			1,000			-			10,000			11,000
Subordinated debt		2,000			-			-			-			-			-			2,000
Total interest bearing liabilities		425,011			137,276			479,069			73,375			10,467			61,224			1,189,862
Non interest bearing liabilities		-			-			-			-			-			82,845			82,845
Stockholders’ equity		-			-			-			-			-			105,140			105,140
Total liabilities and equity	$	425,011		$	137,275		$	479,069		$	73,375		$	10,467		$	249,209		$	1,374,407
Interest sensitivity gap	$	385,407		$	(91,560	)	$	(418,295	)	$	112,687		$	86,758		$	(74,997	)
Cumulative interest sensitivity gap	$	385,407		$	293,847		$	(124,448	)	$	(11,761	)	$	74,997
Cumulative interest sensitivity gap to total assets		28.0	%		(21.4	)%		(9.1	)%		(0.9	)%		5.5	%		(5.5	)%
Cumulative interest earning assets to cumulative interest bearing liabilities		190.7	%		152.3	%		88.0	%		98.9	%		55.7	%		-	%

(a) Including loans held for sale

As shown above, Customers Bank has a negative cumulative gap (cumulative interest sensitive assets are lower than cumulative interest sensitive liabilities) within the next year, which generally indicates that an increase in rates may lead to a decrease in net interest income and a decrease in rates may lead to an increase in net interest income. Interest rate sensitivity gap analysis measures whether assets or liabilities may reprice but does not capture the ability to reprice or the range of potential repricing on assets or liabilities. Thus indications based on a negative or positive gap position need to be analyzed in conjunction with other interest rate risk management tools.

Management believes that the assumptions and combination of methods utilized in evaluating estimated net interest income are reasonable. However, the interest rate sensitivity of Customers Bank’s assets, liabilities and off-balance sheet financial instruments, as well as the estimated effect of changes in interest rates on estimated net interest income, could vary substantially if different assumptions are used or actual experience differs from the assumptions used in the model.

176

CONTRACTUAL OBLIGATIONS

The following table sets forth contractual obligations and other commitments representing required and potential cash outflows as of December 31, 2010. Interest on subordinated debentures and long-term borrowed funds is calculated based on current contractual interest rates.

( in thousands )

					After one		After three
			Within		but within		but within
	Total		one year		three years		five years		More than 5 years

Operating Leases	$	9,734	$	1,433	$	2,848	$	2,014	$	3,439
Benefit plan commitments		4,500		-		-		-		4,500
Contractual Maturities on time deposits		768,761		684,766		72,360		11,625		10
Subordinated Notes and the interest expense (1)		2,227		61		121		2,045		-
Loan Commitments		292,561		282,275		12		231		10,043
Long term Debt		11,000		-		1,000		10,000		-
Interest on Long Term Debt		1,717		356		713		648		-
Standby Letters of Credit		1,085		1,085		-		-		-
Total	$	1,091,585	$	969,976	$	77,054	$	26,563	$	17,992

(1) Includes interest on long-term debt and subordinated debentures at a weighted rate of 3.24% and 3.04%, respectively.

177

BBI F-31

Independent Auditor’s Report

To the Board of Directors

Berkshire Bancorp, Inc.

Wyomissing, Pennsylvania

We have audited the accompanying consolidated balance sheets of Berkshire Bancorp, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Berkshire Bancorp, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ McGladry & Pullen, LLP

Blue Bell, Pennsylvania

March 12, 2010

BBI F-32

Berkshire Bancorp, Inc.

Consolidated Balance Sheets
December 31, 2009 and 2008
(Amounts in Thousands, Except Share Data)


	2009			2008

Assets

Cash and Due from Banks	$	1,787		$	1,897
Interest-Bearing Deposits with other Banks		506			235
Federal Funds Sold		9,259			-
Cash and cash equivalents		11,552			2,132

Investment Securities Available for Sale, at fair value		11,845			14,478
Loans Receivable (net of allowance for loan losses of $1,655 and
$1,267, as of December 31, 2009 and 2008, respectively)		108,560			103,500
Loans Held for Sale		978			420
Bank Premises and Equipment, net		4,164			4,434
Bank-owned Life Insurance		2,319			2,224
Goodwill		418			418
Accrued Interest Receivable and Other Assets		2,749			2,143
Other Real Estate Owned (OREO)		1,765			1,280
	$	144,350		$	131,029

Liabilities and Shareholders' Equity

Liabilities
Deposits
Noninterest-bearing demand	$	6,821		$	5,761
Interest-bearing		121,257			97,556
Total deposits		128,078			103,317

Federal funds purchased		-			396
Borrowings		4,304			16,798
Accrued interest payable and other accrued liabilities		562			560
Total liabilities		132,944			121,071

Commitments and Contingencies (Note 17)

Shareholders' Equity
Cumulative perpetual preferred stock, $1 par value,
10,000,000 shares authorized;
Series A-5% for five years, 9% thereafter, $1,000 liquidation preference,
2,892 shares issued and outstanding in 2009		2,737			-
Series B-9%, $1,000 liquidation preference, 145 shares issued
and outstanding in 2009		168			-
Non-Cumulative perpetual preferred stock,
Series C-6%, $1,000 liquidation preference, 50 shares issued
and outstanding in 2009		-			-
Common stock, $1 par value, 10,000,000 shares authorized
3,876,063 and 3,875,023 shares issued and outstanding
at December 31, 2009 and 2008, respectively		3,876			3,875
Additional paid-in-capital		11,084			11,178
Accumulated deficit		(6,339	)		(5,076	)
Accumulated other comprehensive loss		(120	)		(19	)
		11,406			9,958
	$	144,350		$	131,029

See Notes to Consolidated Financial Statements.

BBI F-33

Berkshire Bancorp, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2009 and 2008
(Amounts in Thousands, Except Share Data)
	2009			2008
Interest income
Interest and fees on loans	$	6,398		$	6,340
Interest and dividends on securities		558			718
Interest on federal funds sold		2			55
Interest, other		1			8
Total interest and dividend income		6,959			7,121
Interest expense
Interest on deposits		2,518			3,132
Interest on borrowings		436			539
Total interest expense		2,954			3,671
Net interest income		4,005			3,450
Provision for loan losses		809			395
Net interest income after provision for loan losses		3,196			3,055
Noninterest income
Gain on the sale of loans		365			202
Gain (loss) on the sale of available for sale securities		(10	)		2
Gain on the sale of OREO		103			1
Gain on the disposition of assets, net		2			-
Other income		270			253
Total noninterest income		730			458
Noninterest expenses
Compensation and benefits, net		2,141			2,263
Occupancy and data processing		1,525			1,364
Marketing and business development		46			77
Professional services		321			248
Other operating expenses		1,143			713
Total noninterest expenses		5,176			4,665
Loss before income taxes		(1,250	)		(1,152	)
Income taxes		-			-
Net loss		(1,250	)		(1,152	)
Preferred stock dividends and discount accretion		(100	)		-
Net loss attributable to common shareholders		(1,350	)		(1,152	)
Net loss per common share:
Basic and diluted	$	(0.35	)	$	(0.31	)
Weighted average shares outstanding:
Basic and diluted		3,875,605			3,736,877
See Notes to Consolidated Financial Statements.

BBI F-34

Berkshire Bancorp, Inc.
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 2009 and 2008
(Amounts in Thousands, Except Share Data)
											Accumulated
					Additional						Other			Total
	Preferred		Common		Paid-In			Accumulated			Comprehensive			Shareholders'
	Stock		Stock		Capital			Deficit			Income (Loss)			Equity

Balance, December 31, 2007	$	-	$	3,025	$	11,338		$	(3,923	)	$	(102	)	$	10,338

Five-for-four stock split, 757,631 shares		-		758		(758	)		-			-			-

Exercise of 89,908 stock warrants at a
weighted average price of $7.45		-		90		580			-			-			670

Issuance of 2,017 shares of common stock in
the form of stock grants to executive officers		-		2		18			-			-			20

Cash payments in lieu of fractional shares		-		-		-			(1	)		-			(1	)

Comprehensive loss:
Net loss - 2008		-		-		-			(1,152	)		-			(1,152	)

Change in net unrealized loss on securities
available for sale, net of tax effect		-		-		-			-			83			83

Total comprehensive loss		-		-		-			-			-			(1,069	)
Balance, December 31, 2008	$	-	$	3,875	$	11,178		$	(5,076	)	$	(19	)	$	9,958

Exercise of 1,040 stock warrants at a
weighted average price of $8.32		-		1		8			-			-			9

Issuance of preferred stock, 2,892 shares
Series A and 145 shares Series B		2,892		-		-			-			-			2,892

Issuance of preferred stock, Series C, net
of offering costs of $65		-				(15	)		-			-			(15	)

Accretion of preferred stock discount		13		-		-			(13	)		-			-

Dividends on preferred stock,
Series A & B		-		-		(87	)		-			-			(87	)

Comprehensive loss:
Net loss - 2009		-		-		-			(1,250	)		-			(1,250	)

Change in net unrealized loss on securities
available for sale, net of tax effect		-		-		-			-			(101	)		(101	)

Total comprehensive loss		-		-		-			-			-			(1,351	)
Balance, December 31, 2009	$	2,905	$	3,876	$	11,084		$	(6,339	)	$	(120	)	$	11,406

See Notes to Consolidated Financial Statements.

BBI F-35

Berkshire Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2009 and 2008
(Amounts in Thousands, Except Share Data)
	2009			2008
Cash Flows from Operating Activities
Net loss	$	(1,250	)	$	(1,152	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization		328			335
Provision for loan losses		809			395
Impairment charge on OREO		80			-
Net amortization of premiums/discounts on securities		9			20
Gain on the sale of loans		(365	)		(202	)
Net (gain) loss on the sale of investment securities		10			(2	)
Loss on the disposition of repossessed assets		2			-
Loss on the disposition of fixed assets		2			-
Loans originated for sale		(16,482	)		(10,108	)
Proceeds from sale of loans held for sale		16,289			11,230
Net gain on sale of OREO		(103	)		-
Proceeds from sale of OREO		771			-
Earnings on Bank owned life insurance, net		(95	)		(95	)
Changes in operating assets and liabilities:
Increase in accrued interest receivable and other assets		(574	)		(188	)
Increase (decrease) in accrued interest payable and other accrued liabilities		36			(568	)
Net cash used in operating activities		(533	)		(335	)
Cash Flows from Investing Activities
Purchases of investment securities available for sale		(8,247	)		(8,990	)
Purchases of FHLB stock		(32	)		(1,025	)
Proceeds from redemption of FHLB stock		-			827
Proceeds from maturities, calls and principal payments on investment
securities available for sale		9,370			8,576
Proceeds from the sale of investment securities available for sale		1,336			500
Net increase in loans		(7,104	)		(16,244	)
Cash effect of branch acquisitions		-			-
Net purchases of premises and equipment		(60	)		(90	)
Net cash used in investing activities		(4,737	)		(16,446	)
Cash Flows from Financing Activities
Net proceeds from issuance of common stock		-			-
Net proceeds from the exercise of common stock warrants		9			670
Cash payments on common stock in lieu of fractional shares		-			(1	)
Dividends paid on preferred stock, Series A & B		(67	)		-
Proceeds from the issuance of preferred stock, Series A & B		2,892			-
Proceeds from the issuance of preferred stock, Series C		50			-
Offering costs related to the preferred stock, Series C		(65	)		-
Net proceeds from borrowings		1,440			2,596
Net proceeds from federal funds purchased		(396	)		396
Repayment of borrowings		(13,934	)		-
Increase in interest-bearing deposits		23,701			9,396
Increase in noninterest-bearing deposits		1,060			198
Net cash provided by financing activities		14,690			13,255
Increase (decrease) in cash and cash equivalents		9,420			(3,526	)
Cash and Cash Equivalents, January 1		2,132			5,658
Cash and Cash Equivalents, December 31	$	11,552		$	2,132
(Continued)

BBI F-36

Berkshire Bancorp, Inc.
Consolidated Statements of Cash Flows (Continued)
Years Ended December 31, 2009 and 2008
(Amounts in Thousands, Except Share Data)

	2009			2008
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year for:
Interest	$	3,055		$	3,716
Non-cash items:
Issuance of common stock to executive officers in the form
of stock grants in accordance with executive contracts in
in 2009 and 2008, respectively	$	-		$	20
Issuance of common stock to directors as payment for directors fees
Transfer from loans to OREO		1,235			1,280
Change in unrealized loss on AFS Securities		(155	)		(126	)

Assets and (Liabilities) Received in Conjunction with Acquisition of Branches
Cash and due from banks		-			-
Loans, net		-			-
Premises and equipment, net		-			-
Good will		-			-
Other assets		-			-
Deposits		-			-
Other liabilities		-			-

Less cash acquired		-			-
Net cash provided	$			$

See Notes to Consolidated Financial Statements.

BBI F-37

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies

Description of Business : Berkshire Bancorp, Inc. (“the Company”) is a bank holding company headquartered in Wyomissing, Pennsylvania. Through its wholly owned subsidiary, Berkshire Bank, the Company provides individuals, corporations and other businesses, commercial and retail banking services, principally loans and deposits. Berkshire Bancorp, Inc. was incorporated on September 1, 2006 under the laws of the State of Pennsylvania for the sole purpose of becoming the holding company of Berkshire Bank (the "Bank").

Berkshire Bank (the “Bank”) is a commercial bank incorporated on May 14, 2002 under the laws of the Commonwealth of Pennsylvania. The Bank commenced operations on September 23, 2003. The Bank is chartered by the Pennsylvania Department of Banking and insured by the Federal Deposit Insurance Corporation. The Bank maintains its principal office at Wyomissing, Pennsylvania but also has branch offices in Muhlenberg Township, West Reading, Route 183 Airport, and Exeter, Pennsylvania. The Bank provides financial services primarily to Berks County and the surrounding Pennsylvania counties.

Zenith Mortgage Company, LLC, a subsidiary of the Bank, was established in 2007 for the purpose of providing mortgage brokerage and related services to the public. Zenith Mortgage is a limited liability company owned by Berkshire Bank (51%) and a third party. Zenith Mortgage Company, LLC was dormant as of December 31, 2009.

Accounting Standards Codification (ASC) : On July 1, 2009, the Financial Accounting Standards Board (FASB) officially launched the FASB Accounting Standards Codification™ (Codification), which has become the single official source of authoritative, nongovernmental U.S. GAAP, superseding all prior FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF), and related literature. The Codification is effective for interim and annual periods ending on or after September 15, 2009. Accordingly, the Company’s accounting policies, which are consistent with prior periods and detailed below are now in accordance with ASC and no longer contain references to Statements on Financial Accounting Standards (SFAS), EITF or related literature.

Principles of Consolidation : The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. The policies that materially affect the determination of the consolidated financial position, results of operations and cash flows are summarized below. The consolidated financial statements for 2009 and 2008 include the accounts of Berkshire Bancorp, Inc. and Berkshire Bank. All intercompany balances and transactions have been eliminated.

Use of Estimates : The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of deferred tax assets.

Cash and Cash Equivalents : Cash and cash equivalents include cash on hand, interest bearing deposits with banks and federal funds sold, all of which mature within ninety days.

Investment Securities Available for Sale : Management determines the appropriate classification of investments at the time of purchase. As of December 31, 2009, all securities are classified “available for sale” and carried at fair value. The Company has no trading securities or securities classified “held to maturity.”

BBI F-38

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies (Continued)

Investment Securities Available for Sale (Continued) : The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization or accretion recorded as adjustments to interest and dividends are included in interest income from investments. Realized gains and losses are included in gains (losses) on investment securities in the statements of operations. Gains and losses on the sale of securities are recorded on the trade date and are determined based on the specific-identification method.

Factors affecting the determination of whether an other-than-temporary impairment has occurred include a downgrading of the security by a rating agency, a significant deterioration in the financial condition of the issuer whether the Company intends to sell the security, or it is more likely than not that the Company will be required to sell the security before recovery of the cost basis, which may be maturity. In instances when a determination is made that an other-than-temporary impairment exists but the investor does not intend to sell the debt security or it is not more likely than not that it will not be required to sell the debt security prior to its anticipated recovery, the other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income.

The Company holds investments in the common stocks of Atlantic Central Bankers Bank (“ACBB”) and Federal Home Loan Bank of Pittsburgh (“FHLB”). These investments in restricted stock are carried at cost and are included in Other Assets. The stock has no quoted market value and is subject to redemption restrictions. Management reviews for impairment based on the ultimate recoverability of the cost basis in the stock. Management considers such criteria as the significance of the decline in all assets, if any, of the FHLB, the length of time the situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.

Loans : The Company makes commercial, real estate and consumer loans to customers. A substantial portion of the loan portfolio is represented by loans in Berks County. The ability of the Company’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in this area. Loans are stated at the outstanding principal amount, adjusted for the allowance for loan losses and any deferred fees or costs on originated loans. Interest income on loans is recognized as earned based on contractual interest rates applied to daily principal amounts outstanding.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis for commercial loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer and residential loans for impairment disclosures.

BBI F-39

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies (Continued)

Loans Held for Sale : The Company periodically sells mortgage loans. These loans are reported at the lower of cost or fair value. Gains and losses on sales of loans are recognized at settlement dates in non interest income and are determined by the difference between the sales proceeds and the carrying value of the loans. All sales are made without recourse and servicing is released.

Loans - Nonaccrual : Loans are placed on nonaccrual status and the accrual of interest income ceases, when a default of principal or interest exists for a period of ninety days except when, in management’s judgment, the collection of principal and interest is reasonably anticipated (i.e. the loan is well secured and in the process of collection). Interest receivable on nonaccrual loans previously credited to interest income is reversed. Nonaccrual loans are generally not returned to accruing status until principal and interest payments have been brought current and full collectability is reasonably assured.

Concentration of Credit Risk : The Company’s loans are generally to diversified customers in Berks, Montgomery and Chester counties, Pennsylvania. Loans to professional real estate management enterprises and lessors, general building contractors and developers, miscellaneous food stores and restaurants constitute approximately 38%, 10% and 8%, respectively, of commercial loans as of December 31, 2009. These concentrations were approximately 42%, 10% and 7%, respectively, of commercial loans as of December 31, 2008. Generally, loans are collateralized by assets of the borrower and are expected to be repaid from the cash flow or proceeds from the sale of selected assets of the borrower.

Loan Fees : Loan fees and direct costs associated with loan originations are netted and deferred. The deferred amount is recognized as an adjustment to loan interest over the term of the related loans on the interest method.

Allowance for Loan Losses : The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses. Loans that are determined to be uncollectible are charged against the allowance account, and subsequent recoveries, if any, are credited to the allowance. When evaluating the adequacy of the allowance, an assessment of the loan portfolio will typically include changes in the composition and volume of the loan portfolio, overall portfolio quality and past loss experience, review of specific problem loans, current economic conditions which may affect borrowers’ ability to repay, and other factors which may warrant current recognition.

Such periodic assessments may, in management’s judgment, require the Company to recognize additions or reductions to the allowance.

Various regulatory agencies periodically review the adequacy of the Company’s allowance for loan losses as an integral part of their examination process. Such agencies may require the Company to recognize additions or reductions to the allowance based on their evaluation of information available to them at the time of their examination. It is reasonably possible that the above factors may change significantly and, therefore, affect management’s determination of the allowance for loan losses in the near term.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical charge-off experience and expected losses given the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not reflected in the historical loss or risk rating data.

BBI F-40

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies (Continued)

Interest Rate Risk : The Company is principally engaged in the business of attracting deposits from the general public and using these deposits, together with any borrowed funds, to make commercial, commercial mortgage, residential mortgage, and consumer loans, and to invest in overnight and term investment securities. Inherent in such activities is the potential for the Company to assume interest rate risk that results from differences in the maturities and repricing characteristics of assets and liabilities. For this reason, management regularly monitors the level of interest rate risk and the potential impact on net income.

Bank Premises and Equipment : Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed and charged to expense using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized to expense over the shorter of the term of the respective lease or the estimated useful life of the improvements.

The estimated useful lives for calculating depreciation and amortization on furniture and equipment are between three and seven years. Leasehold improvements are depreciated over the lesser of the economic life or the term of the related lease, generally terms ranging from five to twenty-nine years.

Other Real Estate Owned (OREO) : OREO is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure. Foreclosed assets initially are recorded at fair value, net of estimated selling costs, at the date of foreclosure establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the assets are carried at the lower of cost or fair value minus estimated costs to sell. Revenues and expenses from operations and changes in the valuation allowance are included in other expenses.

Bank Owned Life Insurance : The Company invests in bank owned life insurance (“BOLI”) as a source of funding for employee benefit expenses. BOLI involves the purchasing of life insurance by the Company on a chosen group of employees. The Company is the owner and beneficiary of the policies. The life insurance investment is carried at the cash surrender value of the underlying policies. Income generated from the increase in cash surrender value of the policies is included in other income on the income statement. BOLI is used to fund the Nonqualified Supplemental Executive Retirement Plan discussed in Note 15.

Goodwill : Goodwill representing the excess of the cost over fair value of net assets of the acquired businesses. The Company acquired two branches that resulted in goodwill which is not amortized, but tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The Company has evaluated goodwill and determined that no impairment existed as of December 31, 2009.

Income Taxes : Deferred federal and state tax assets and liabilities are recognized for the expected future tax consequences of existing differences between financial statement and tax bases of existing assets and liabilities. The effect of a change in the tax rate on deferred taxes is recognized in the period of the enactment date. Deferred tax assets are reduced by a valuation allowance, when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Berkshire Bancorp, Inc. and its wholly-owned subsidiary, Berkshire Bank, file a consolidated federal income tax return.

BBI F-41

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies (Continued)

Income Taxes (Continued) : When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely-than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

Interest and penalties associated with unrecognized tax benefits would be recognized in income tax expense on the income statement.

Transfers of Financial Assets : Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Comprehensive Income (Loss) : Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income (loss). However, certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as other comprehensive income (loss), a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income (loss).

The components of accumulated other comprehensive income and related tax effects for are as follows:

	2009			2008

Net unrealized holding losses on available for
sale securities	$	(183	)	$	(28	)
Tax effect		63			9

Net-of-tax amount	$	(120	)	$	(19	)

Earnings (Loss) Per Common Share : Basic earnings (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share considers common stock equivalents (when dilutive) outstanding during the period such as options and warrants outstanding. Both basic and diluted earnings (loss) per common share computations give retroactive effect to stock dividends paid as a 5 for 4 stock splits in prior years. In computing diluted earnings (loss) per shares for 2009 and 2008, warrants to purchase approximately 774,571 and 775,611 shares of common stock were excluded from the computation noting the effect of these shares would be antidilutive.

BBI F-42

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 1. Summary of Significant Accounting Policies (Continued)

Stock-Based Employee Compensation : The Bank accounts for its stock based compensation plans (more fully described at Note 15) under the provisions of ASC Topic 718, Compensation – Stock Compensation , which requires recognizing expense for options granted equal to the grant-date fair value of the unvested amounts over their remaining vesting period. Excess tax benefits arising from increases in the value of equity instruments issued under stock-based payment arrangements are treated as cash inflows from financing activities.

Note 2. Recent Accounting Pronouncements

Accounting for Uncertainty in Income Taxes in accordance with ASC Topic 740 became effective for the Bank on January 1, 2009. This standard clarifies the application of accounting for income taxes by defining the criteria that an individual tax position must meet in order for the position to be recognized within the financial statements and provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition for tax positions.

The Bank presently recognizes income tax positions based on management’s estimate of whether it is reasonably possible that a liability has been incurred for unrecognized income tax benefits by applying ASC Topic 450, Accounting for Contingencies . Adoption of this authoritative accounting guidance did not have a material impact on the Bank’s financial position and results of operations. The Bank did not recognize or accrue any interest or penalties related to the income tax during the year ended December 31, 2009. The Bank does not have an accrual for uncertain tax positions as of December 31, 2009, as deductions taken and benefits accrued are based on widely understood administrative practices and procedures and are based on clear and unambiguous tax law. Tax returns for all years 2007 and thereafter are subject to future examination by tax authorities.

Fair value of non-financial assets and liabilities: Effective January 1, 2009, the Bank measures non-recurring nonfinancial assets and liabilities recognized or disclosed at fair value and has included these disclosures at Note 18. Accordingly, the fair value of OREO is included as of December 31, 2009.

Business Combinations : This new authoritative accounting guidance (ASC Topic 805) is a revision of previous business combinations guidance. It requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. It applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and became effective for Berkshire Bank on January 1, 2009. No transactions have occurred through December 31, 2009 warranting application of this guidance.

Subsequent Events: The Bank adopted the requirements of ASC 855-10-05 relating to subsequent events effective December 31, 2009. This accounting establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued ( i.e., complete in a form and format that complies with GAAP and approved for issuance). It does not apply to subsequent events or transactions that are within the scope of other applicable GAAP that provide different guidance on the accounting treatment for subsequent events or transactions.

BBI F-43

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 2. Recent Accounting Pronouncements (Continued)

There are two types of subsequent events to be evaluated:

Recognized subsequent events - An entity must recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements.

Non-recognized subsequent events - An entity must not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but that arose after the balance sheet date but before financial statements are issued or are available to be issued. Some non-recognized subsequent events may be of such a nature that they must be disclosed to keep the financial statements from being misleading. For such events, an entity must disclose the nature of the event and an estimate of its financial effect or a statement that such an estimate cannot be made.

The guidance also requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date - that is, whether that date represents the date the financial statements were issued or were available to be issued. The requirements of this standard are effective for interim and annual periods ending after June 15, 2009, and should be applied prospectively.

Accordingly, management has evaluated subsequent events through March 12, 2010, the date the financial statements are available to be issued and has determined that no recognized or non-recognized subsequent events warranted inclusion or disclosure in the financial statements as of December 31, 2009.

FASB ASC Topic 320, Investments − Debt and Equity Securities : New authoritative accounting guidance under ASC Topic 320, Investments −Debt and Equity Securities , (i) changes existing guidance for determining whether an impairment is other than temporary to debt securities and (ii) replaces the existing requirement that the entity’s management assert it has both the intent and ability to hold an impaired security until recovery with a requirement that management assert: (a) it does not have the intent to sell the security; and (b) it is more likely than not it will not have to sell the security before recovery of its cost basis. Under ASC Topic 320, declines in the fair value of held−to−maturity and available−for−sale debt securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors would be recognized in other comprehensive income. The Company adopted the provisions of the new authoritative accounting guidance under ASC Topic 320 during 2009. Adoption of the new guidance did not significantly impact the Company’s financial statements.

FASB ASC Topic 860, Transfers and Servicing : New authoritative accounting guidance under ASC Topic 860, Transfers and Servicing , amends prior accounting guidance to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. The new authoritative accounting guidance eliminates the concept of a “qualifying special−purpose entity” and changes the requirements for derecognizing financial assets. The new authoritative accounting guidance also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The new authoritative accounting guidance under ASC Topic 860 will be effective January 1, 2010 and is not expected to have a significant impact on the Company’s financial statements.

Note 3. Reclassifications

Certain items in the 2008 financial statements have been reclassified to conform to 2009 presentation, with no effect on the statements of operations or statements of changes in shareholders’ equity.

BBI F-44

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 4. Cash and Due from Banks

The Company maintains various deposit accounts with other banks to meet normal funds transaction requirements, to satisfy minimum deposit requirements, and to compensate other banks for certain correspondent services. The Federal Deposit Insurance Corporation insures these accounts up to $250,000 per account through December 31, 2013. Management is responsible for assessing the credit risk of its correspondent banks. The withdrawal or usage restrictions of these balances did not have a significant impact on the operations of the Company as of December 31, 2009 and 2008.

Note 5. Investment Securities

The amortized cost and estimated fair value of securities available for sale at December 31, 2009, summarized by contractual maturities are shown below. Expected maturities may differ from contractual maturities for mortgage-backed securities because the mortgages underlying the securities may be called or prepaid without any penalties; therefore, these securities are not included in the maturity categories in the following maturity summary.

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S. Government agencies and corporations
Due within one year	$	-	$	-	$	-		$	-
Due within one year through five years		-		-		-			-
Due within five years through ten years		-		-		-			-
Due after ten years		9,745		1		(230	)		9,516
		9,745		1		(230	)		9,516
Mortgage-backed securities		2,283		46		-			2,329
	$	12,028	$	47	$	(230	)	$	11,845

The amortized cost and estimated fair value of securities available for sale at December 31, 2008, summarized by contractual maturity, are as follows:

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

U.S. Government agencies and corporations
Due within one year	$	-	$	-	$	-		$	-
Due within one year through five years		-		-		-			-
Due within five years through ten years		1,115		6		-			1,121
Due after ten years		8,085		17		(12	)		8,090
		9,200		23		(12	)		9,211
Mortgage-backed securities		5,306		36		(75	)		5,267
	$	14,506	$	59	$	(87	)	$	14,478

BBI F-45

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 5. Investment Securities (Continued)

Securities with a carrying value of $7,665 and $10,912 at December 31, 2009 and 2008, respectively, were pledged as collateral to secure borrowings at the Federal Home Loan Bank of Pittsburgh and public deposits.

For the years ended December 31, 2009 and 2008, proceeds from sales of securities available for sale amounted to $1,336 and $500, respectively. Gross realized gains were $2 and gross realized losses were $12 in 2009. Gross realized gain of $2 and no losses were recognized in 2008.

	December 31, 2009
	Continuous Unrealized Losses Existing for Less Than 12 Months					Continuous Unrealized Losses Existing for More Than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

U.S. Government agencies and corporations	$	8,516	$	(230	)	$	-	$	-

Mortgage-backed securities		-		-			-		-

Total temporarily impaired securities	$	8,516	$	(230	)	$	-	$	-

	December 31, 2008
	Continuous Unrealized Losses Existing for Less Than 12 Months					Continuous Unrealized Losses Existing for More Than 12 Months
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

U.S. Government agencies and corporations	$	995	$	(3	)	$	1,490	$	(10	)

Mortgage-backed securities		358		(2	)		3,608		(72	)

Total temporarily impaired securities	$	1,353	$	(5	)	$	5,098	$	(82	)

Securities available-for-sale are stated at fair value with an adjustment to shareholders’ equity for unrealized gains and losses. The fair value of securities with unrealized losses by length of time that the individual securities have been in a continuous loss position at December 31, 2009 and 2008, consist of 12 and 7 securities respectively. The unrealized loss on these investments was caused by movement in interest rates. Management periodically evaluates securities for other-than-temporary impairment when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which fair value has been less than cost (2) the financial condition and near term prospects of the issuer, (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value and (4) whether it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity. Management does not consider these securities to be other-than-temporarily impaired at December 31, 2009.

Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period in which the other-than-temporary impairment is identified.

BBI F-46

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 6. Loans

The composition of loans follows:

	December 31,
	2009			2008

Commercial	$	87,197		$	80,029
Residential real estate		19,170			19,980
Consumer		3,397			4,279
Total loans		109,764			104,288
Less:
Allowance for loan losses		(1,655	)		(1,267	)
Net deferred loan costs		451			479
Net loans	$	108,560		$	103,500

Below is a summary of the Bank’s impaired loan information:

	December 31,
	2009		2008

Impaired loans without a valuation allowance	$	555	$	864
Impaired loans with a valuation allowance		3,808		582
Total impaired loans	$	4,363	$	1,446
Valuation allowance related to impaired loans	$	898	$	107
Total nonaccrual loans		5,412		1,612
Total loans past-due ninety days or more and still accruing		87		105
Average investment in impaired loans		2,850		1,375
Interest income recognized on impaired loans		-		-
Interest income recognized on a cash basis on impaired loans		-		-

Note 7. Loans and Deposits to Related Parties

In the normal course of business, the Company has granted loans to executive officers, directors and their affiliates (related parties). In the opinion of management, the terms of these loans, including interest rates and collateral, are similar to those prevailing for comparable transactions with other customers and do not involve more than a normal risk of collectibility.

An analysis of the activity of such related party loans is as follows:

	December 31,
	2009			2008

Balance, beginning of year	$	2,111		$	2,014
Advances		238			1,858
Less: repayments		(139	)		(1,761	)
Balance, end of year	$	2,210		$	2,111

At December 31, 2009 and 2008, deposits from related parties totaled approximately $751 and $1,305 respectively.

BBI F-47

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 8. Allowance for Loan Losses

An analysis of the allowance for loan losses is as follows:

	2009			2008

Balance, January 1	$	1,267		$	1,087
Provision for loan losses		809			395
Charge-offs		(431	)		(215	)
Recoveries		10			-
Balance, December 31	$	1,655		$	1,267

Note 9. Bank Premises and Equipment

A summary of the cost and accumulated depreciation of bank premises and equipment is as follows:

	December 31,
	2009			2008

Leasehold improvements	$	4,297		$	4,270
Furniture and equipment		1,029			1,020
		5,326			5,290
Less: accumulated depreciation and amortization		(1,162	)		(856	)

Bank premises and equipment	$	4,164		$	4,434

The Company has a fifteen-year operating lease agreement for its main banking office which commenced in September 2002. The Company has the option to extend the lease agreement for two additional five-year periods. In September 2004, the Company entered into a five-year operating lease for its Operations Center located in Shillington. The Company had the option to extend the lease agreement for an additional five-year period and exercised this option in 2009. In December 2005, the Company entered into a fifteen-year operating lease for its second branch office located in Muhlenberg. The Company has the option to extend the lease agreement for two additional five-year periods and one additional 59 month period.

In February 2006, the Company entered into a fifteen-year operating land lease for its third branch office in Exeter Township. The Company has the option to extend the lease agreement for two additional five-year periods and one additional 59 month period. In June 2007, as part of two branch acquisitions from Fleetwood Bank, the Company assumed the following leases: Airport office on Route 183: five-year term with the option to extend the lease agreement for an additional five years. West Reading office lease: five-year term with the option to extend the lease agreement for an additional six years and six months.

In each case, in addition to the base rent, the Company is also required to pay a monthly fee for its portion of certain operating expenses.

BBI F-48

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 9. Bank Premises and Equipment (Continued)

At December 31, 2009, the required future rental payments under leases are as follows:

Years Ending December 31,

2010	$	404
2011		415
2012		430
2013		361
2014		301
Thereafter		1,177
		-
Total minimum lease payments	$	3,088

Rent expense of approximately $426 and $316 is reflected in the statements of operations for the periods ended December 31, 2009 and 2008, respectively.

Note 10. Deposits

Deposits consisted of the following:

	December 31,
	2009		2008

Demand deposits, noninterest-bearing	$	6,821	$	5,761
Demand deposits, interest-bearing		60,376		32,664
Savings deposits		1,970		983
Time deposits of $100,000 or more		14,700		14,303
Other time deposits		44,211		49,606

Total deposits	$	128,078	$	103,317

Scheduled maturities of certificates of deposit at December 31, 2009 are as follows:

Years Ending December 31,

2010	$	50,315
2011		6,007
2012		2,339
2013		209
2014 and thereafter		41
	$	58,911

BBI F-49

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 11. Borrowings

The Company has maximum borrowing capacity with the Federal Home Loan Bank of Pittsburgh of approximately $64,629, of which $4,304 and $16,798 was outstanding at December 31, 2009 and 2008, respectively as follows:

	Amount				Weighted Average Rate
	2009		2008		2009			2008

Mid-Term Repurchase Agreement maturing:
2009	$	-	$	11,819		0.00	%		2.59	%
2010		1,440		4,020		0.44	%		2.73	%
2011		2,000		-		1.61	%		0.00	%
2013		266		266		3.91	%		3.91	%

Amortized fixed rate term note due:
2015		598		693		4.59	%		4.59	%

	$	4,304	$	16,798

Advances from the Federal Home Loan Bank are secured by qualifying assets of the Company and include Federal Home Loan Bank stock, certain investment securities and first mortgage loans aggregating approximating $20,679.

The Company also has available a line of credit agreement to purchase federal funds from the ACBB totaling $4,000 of which advances up to $1,000 would be unsecured. Additional advances up to the remaining $3,000 would be secured by investments held in safekeeping at ACBB. There were $0 and $396 of borrowings outstanding at December 31, 2009 and 2008.

Note 12. Income Taxes

The Company has incurred cumulative net losses for several years since its inception through December 31, 2009 which has caused there to be no provision for income taxes, deferred taxes and income taxes payable for the years ended December 31, 2009 and 2008.

BBI F-50

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 12. Income Taxes (Continued)

The components of the net deferred tax asset are as follows:

	December 31,
	2009			2008
Deferred tax assets:
Allowance for loan losses	$	526		$	401
Deferred Compensation		114			77
Organizational costs		15			16
Goodwill		118			127
Purchase accounting adjustment		48			53
Net unrealized loss on securities - Available for Sale		63			9
Net operating loss carryforwards		1,927			1,748
Other		103			47
		2,914			2,478
Valuation allowance		(2,551	)		(2,055	)
Total deferred tax assets, net of valuation allowance		363			423

Deferred tax liabilities:
Depreciation		44			58
Deferred loan costs		174			185
Cash basis conversion		106			156
Other		39			24
		363			423
Net deferred taxes	$	-		$	-

The Company has net operating loss carryforwards available for federal income tax purposes of approximately $5,667, which expire from 2023 through 2029.

Management evaluated the Company’s tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2006.

Note 13. Regulatory Matters

Capital Ratios : The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the Regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

BBI F-51

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 13. Regulatory Matters (Continued)

Capital Ratios (Continued) : Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2009 and 2008, the Bank met all capital adequacy requirements to which it is subject.

De novo banks (those insured seven years or less), such as Berkshire Bank are required to maintain Tier I capital to average assets (leverage) ratios of at least 8% during this period. This requirement did not apply to the Bank as confirmed by the FDIC. The most recent notification from the Federal Deposit Insurance Corporation categorized the Company as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. Under these guidelines, the Company and the Bank were considered well capitalized as of December 31, 2009 and 2008.

The Bank’s actual capital amounts and ratios are presented in the following table:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of December 31, 2009:
Total Risk Based Capital
(to Risk Weighted Assets)
Bank	$	12,680		11.62	%	$	8,731		8.0	%	$	10,913		10.0	%
Consolidated		12,472		11.46	%		8,706		8.0	%		N/A		N/A
Tier I Capital
(to Risk Weighted Assets)
Bank		11,316		10.37	%		4,365		4.0	%		6,548		6.0	%
Consolidated		11,108		10.21	%		4,353		4.0	%		N/A		N/A
Tier I Capital
(to Average Assets)
Bank		11,316		7.68	%		5,891		4.0	%		7,364		5.0	%
Consolidated		11,108		7.54	%		5,891		4.0	%		N/A		N/A

As of December 31, 2008:
Total Risk Based Capital
(to Risk Weighted Assets)
Bank	$	10,867		10.86	%	$	8,006		8.0	%	$	10,007		10.0	%
Consolidated		10,826		10.82	%		8,006		8.0	%		N/A		N/A
Tier I Capital
(to Risk Weighted Assets)
Bank		9,616		9.61	%		4,003		4.0	%		6,004		6.0	%
Consolidated		9,559		9.55	%		4,003		4.0	%		N/A		N/A
Tier I Capital
(to Average Assets)
Bank		9,616		7.35	%		5,230		4.0	%		6,537		5.0	%
Consolidated		9,559		7.31	%		5,230		4.0	%		N/A		N/A

BBI F-52

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 13. Regulatory Matters (Continued)

Capital Ratios (Continued) : Banking regulations limit the amount of dividends that may be paid without prior regulatory agency approval. Since the Bank’s deposits are insured by the FDIC, no dividends may be paid if the Bank is in default on any assessment due the FDIC. In addition, dividends paid by the Bank would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements.

Note 14. Shareholders’ Equity

Share Purchase Agreement : In 2003, the Company entered into an agreement with East Penn Financial Corporation (“East Penn”) whereby East Penn purchased 19.9% of the Company’s stock in the initial public offering. The agreement included the issuance of a stock warrant that allowed East Penn to purchase and own up to 24.9 % of the Company’s outstanding shares. East Penn has since been acquired by Harleysville National Corporation (“HNC”), which assumed the right to 19.9% ownership in the Company with the same terms as was extended to East Penn. HNC is presently under an agreement of sale to First Niagara Financial Group, Inc. (FNFG). The transaction is slated to close at the beginning of the second quarter of 2010, at which time FNFG will assume the right to 19.9% ownership in Berkshire Bancorp, Inc. with the same terms as was extended to HNC.

Stock Offering : On March 22, 2007, the Bank commenced the sale of 300,000 units of its common stock, which was completed in two stages through August 31, 2007. Each unit consisted of one share of common stock and one five-year, non-detachable warrant to purchase one share of common stock, exercisable until December 31, 2012 at various original exercise prices ranging from $10.00 to $17.50 from August 31, 2007 through December 31, 2012. The exercise prices were adjusted to reflect the stock split effected as a stock dividend. The adjusted exercise prices ranged from $8.32 to $11.20 ratably over the exercise term.

During the years ended December 31, 2009 and 2008, the Company received proceeds from the exercise of stock warrants in the amount of $9 and $670, respectively, at a weighted average exercise price of $8.32 and $7.45, respectively.

On September 1, 2008, the Board of Directors declared a 25% stock split effected as a 5 for 4 stock dividend to shareholders of record on September 15, 2008. The stock dividends were paid on September 30, 2008. All stock warrant information below has been adjusted to reflect the splits.

On October 26, 2009, the Bank commenced the sale of 6,000 shares of its 6% non-cumulative, non-voting, convertible perpetual preferred stock, Series C, par value $1.00 per share, $1,000 per share. During the year ended December 31, 2009, the Company sold 50 shares for total gross proceeds of $50. Direct offering expenses of $65 are netted against the gross proceeds and charged against additional paid-in capital.

TARP Capital Purchase Program : On October 3, 2008 Congress passed the Emergency Economic Stabilization Act of 2008 (“EESA”), which provides the U.S. Secretary of the Treasury with broad authority to implement certain actions to help restore stability and liquidity to the U.S. markets. One of the provisions resulting from the Act was the Treasury Capital Purchase Program (“CPP”) which provides direct equity investment of preferred stock by the U.S. Treasury in qualified financial institutions. This program is voluntary and requires an institution to comply with several restrictions and provisions, including limits on executive compensation, stock redemptions, and declaration of dividends. The CPP provides for a minimum investment of 1 percent of Risk-Weighted-Assets, with a maximum investment of the lesser of 3 percent of Risk-Weighted Assets or $25 Billion. The cumulative perpetual preferred stock, Series A has a dividend rate of 5 percent per year until the fifth anniversary of the Treasury investment and a dividend of 9 percent, thereafter. The CPP also requires the Treasury to receive warrants for fixed rate cumulative perpetual preferred stock, Series B with liquidation value equal to 5 percent of the capital invested by the Treasury. The exercise price of the warrants was $1.00. The Series B preferred stock has a dividend rate of 9 percent per year.

BBI F-53

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 14. Shareholders’ Equity (Continued)

TARP Capital Purchase Program (Continued) : On June 12, 2009, the Company received an investment in preferred stock of $2.892 million. On the same date, the warrant for 145 shares of cumulative perpetual preferred stock, Series B was exercised. The proceeds for the preferred stock were allocated between the Series A and Series B preferred stock based on their relative fair value, using a discount rate of 12%. The original net discount is being accreted over the expected term of five years using the effective interest method. The Company has recorded dividends in the approximate amount of $87 through December 31, 2009. In accordance with state law, because the Company is in an accumulated deficit position, the preferred stock dividends are declared from additional paid-in capital. All dividend amounts billed by the US Treasury through December 31, 2009 have been paid. The two preferred stock series qualify for and are accounted for as equity securities and included in the Company’s Tier I Capital on the date of receipt.

Provisions introduced by the American Recovery and Reinvestment Act of 2009 indicate that once the Company notifies Treasury that it would like to redeem the CPP preferred stock, the Treasury must permit the Company to do so subject to consultation with the Company’s federal regulator. The Company will be subject to existing supervisory procedures for approving redemption requests for capital instruments. The federal regulator will weigh the Company’s desire to redeem the preferred stock against the contribution of Treasury capital to the Company’s overall soundness, capital adequacy and ability to lend, including confirming that the Company has a comprehensive internal capital assessment process.

Stock Grants : The Company issues stock grants to its Executive Officers in accordance with the terms of their respective Employment contracts. The contracts provide for 764 shares of common stock each in the form of stock grants to the CEO and to the President and 489 shares of common stock in the form of stock grants to the CFO during the year ended December 31, 2008. No grants were issued in 2009. All shares had vested as of December 31, 2009.

Since 2004, a total of 6,008 stock grants have been authorized and awarded, net of cancellations, through December 31, 2009, at grant prices ranging from $8.80 to $10.50. Awards are adjusted for stock dividends and stock splits. The grant price is the price of the Company’s stock the day following the approval of the grant and is based upon the price of the last available trade. The grants vest over a period of one year of service, per the employment agreements.

Compensation cost approximating $0 and $21 has been charged against income for the years ended December 31, 2009 and 2008, respectively. There was no unrecognized compensation cost at December 31, 2009.

Stock Warrants : The Company issued stock purchase warrants in 2003 with its initial public offering at a price of $3.28 per share. Subsequently, in 2007, as part of the stock offering, the Company issued non-detachable warrants exercisable until December 31, 2012 at varying share prices ranging from $7.36 through December 31, 2008 to $11.20 through December 31, 2012. These prices and warrants reflect the adjusted amounts for the 5-for-4 stock split affected as stock dividends in 2008.

	2009					2008
	Number of Warrants			Weighted- average Exercise Price		Number of Warrants			Weighted- average Exercise Price

Outstanding, beginning of period		775,611		$	5.08		865,519		$	5.32
Granted		-			-		-			-
Expired/terminated		-			-		-			-
Exercised		(1,040	)		8.32		(89,908	)		7.45
Outstanding, December 31		774,571		$	5.08		775,611		$	5.08

BBI F-54

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 14. Shareholders’ Equity (Continued)

Stock Warrants (Continued) : The initial offering warrants and the 2007 stock offering warrants have a weighted-average remaining contractual life of 3.75 years and three years, respectively and the number of warrants exercisable totaled 433,537 and 341,034, respectively as of December 31, 2009.

Note 15. Employee Benefit Plans

The Company has a 401(k) deferred contribution salary deferral plan (with matching contributions) which covers substantially all full-time employees who meet the required criteria. The amount charged to expense was $42 and $43, respectively for the years ended December 31, 2009 and 2008.

The Company has a Nonqualified Supplemental Executive Retirement Plan for its Chief Executive Officer (“CEO”), President and Chief Financial Officer (“CFO”) of the Company which provides a retirement benefit. The Plan is funded by life insurance. For the years ended December 31, 2009 and 2008, $109 and $99 was charged to expense and included in other accrued liabilities in connection with the plan.

Note 16. Other Related Party Transactions

A member of the Board of Directors is a principal of a property and casualty insurance agency that provides all the insurance coverage for the Company. The cost of the insurance was approximately $32 and $38 for the years ended December 31, 2009 and 2008. A member of the Board of Directors operates a general contracting company that constructed the building currently housing the Exeter branch office. The remainder of construction costs was $6 and $8 for the years ended December 31, 2009 and 2008. In addition, the general contracting company provides services relating to the leasehold improvements at the branch and main office locations, as well as OREO held by the Bank. These costs were $6 for the year ended December 31, 2009. Effective September 1, 2004, the Bank has been making annual lease payments of approximately $28 to another Director for its Operations Center in Shillington, Pennsylvania (Note 9).

Note 17. Commitments and Contingencies

During the period in which preferred stock issued under the TARP Capital Purchase Program is issued and outstanding, certain “change in control” agreements with the CEO, President and CFO of the Company, which provide for continued payment of certain employment salaries and benefits in the event of a change in control, as defined, will be prohibited in accordance with EESA provisions.

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of these instruments reflect the extent of the Bank’s involvement in these particular classes of financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as they do for on-balance sheet instruments.

BBI F-55

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 17. Commitments and Contingencies (Continued)

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment and income-producing commercial properties. As of December 31, 2009 and 2008, commitments to extend credit amounted to approximately $12,665 and $14,499, respectively.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of December 31, 2009 and 2008, standby letters of credit with customers were $769 and $756, respectively.

The Bank does not issue or hold derivative instruments. The Bank does have standby letters of credit and these instruments are issued in the ordinary course of business to meet customer needs. Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. Management believes that off-balance sheet risk is not material to the results of operations or financial condition.

In the normal course of business, there are outstanding various contingent liabilities such as claims and legal action, which are not reflected in the financial statements. In the opinion of management, no material losses are anticipated as a result of these actions or claims.

Note 18. Fair Value of Financial Instruments

Fair Value Measurements : The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures topic of FASB ASC, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company's various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

The recent fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:

BBI F-56

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 18. Fair Value of Financial Instruments (Continued)

Fair Value Measurements (Continued) :

Level 1

·	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Generally, this includes debt and equity securities and derivative contracts that are traded in an active exchange market (i.e. New York Stock Exchange), as well as certain US Treasury and US Government and agency mortgage-backed securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2

·	Quoted prices for similar assets or liabilities in active markets.

·	Quoted prices for identical or similar assets or liabilities in markets that are not active.

·	Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”

·	Generally, this includes US Government and agency mortgage-backed securities, corporate debt securities, derivative contracts and loans held for sale.

Level 3 Inputs

·	Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.

·	These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The following is a description of the valuation methodologies used for instruments measured at fair value:

Fair Value on a Recurring Basis :

Available for Sale Securities Portfolio : The fair value of available for sale securities is the market value based on quoted market prices, when available, or market prices provided by recognized broker dealers (level 1). If listed prices or quotes are not available, fair value is based upon quoted market prices for similar or identical assets or other observable inputs (Level 2) or externally developed models that use unobservable inputs due to limited or no market activity of the instrument (Level 3).

Loans Held for Sale : The fair value of loans held for sale is the market value based upon quoted market prices provided by the investor at the time of sale. The carrying value is the lower of cost or quoted market prices.

BBI F-57

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 18. Fair Value of Financial Instruments (Continued)

Fair Value on a Recurring Basis (Continued) :

The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.

December 31, 2009	Level 1		Level 2		Level 3		Total
Financial Assets:
Securities available for sale	$	500	$	11,345	$	-	$	11,845
Loans held for sale		985		-		-		985

December 31, 2008	Level 1		Level 2		Level 3		Total
Financial Assets:
Securities available for sale	$	-	$	14,478	$	-	$	14,478
Loans held for sale		425		-		-		425

Fair Value on a Non-Recurring Basis :

Impaired Loans: The carrying value of impaired loans is derived in accordance with FASB ASC Topic 310, “Receivables”. Fair value is determined based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Appraised values may be discounted based upon Management’s historical knowledge and changes in market conditions from the time of valuation. The valuation allowance for impaired loans is included in the allowance for loan losses in the balance sheets. The valuation allowance for impaired loans at December 31, 2009 was $898 resulting in an increase in fair value of $2,126 for the year ended December 31, 2009. The valuation allowance at December 31, 2008 was $107 resulting in an increase in fair value of $113 for the year ended December 31, 2008.

OREO: The fair value of OREO is determined by the net realizable value of the real estate as of the reporting date. Such fair value is established by current appraised values adjusted for reasonable disposition costs. The appraised value may be discounted based on management’s review and changes in market conditions (Level 3) inputs. Disclosures were not required prior to 2009, accordingly, this is not presented at December 31, 2008.

Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). The following table presents the assets and liabilities measured at fair value on a recurring basis.

December 31, 2009	Level 1		Level 2		Level 3		Total
Financial Assets:
Other real estate owned	$	-	$	-	$	1,725	$	1,725
Impaired loans		-		-		3,465		3,465

BBI F-58

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 18. Fair Value of Financial Instruments (Continued)

Fair Value on a Non-Recurring Basis (Continued) :

December 31, 2008	Level 1		Level 2		Level 3		Total
Financial Assets:
Impaired loans	$	-	$	-	$	1,339	$	1,339

Fair Value of Financial Instruments : FASB ASC Topic 825, “Financial Instruments” requires disclosure of the estimated fair value of an entity’s assets and liabilities considered to be financial instruments that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair value of financial assets and liabilities that are measured on a recurring or non-recurring basis are discussed above. The methodologies for other financial assets and liabilities are discussed below.

For cash and cash equivalents and interest-bearing demand deposits with other banks, the carrying values approximate their fair values.

The net loan portfolio other than impaired loans is valued using a present value discounted cash flow method where market prices were not available. The discount rate used in these calculations is the estimated current market rate adjusted for credit risk.

The carrying values of accrued interest receivable, accrued interest payable and FHLB stock approximate their fair values.

The estimated fair values of non interest-bearing demand deposits, interest-bearing checking deposits, savings and certain types of money market accounts are, by their definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying values). The carrying values of variable rate deposit accounts approximate their fair values. For fixed maturity certificates of deposit, fair value is estimated using the rates currently offered for deposits of similar remaining maturities. The carrying value of accrued interest payable approximates its fair value.

The estimated fair values of borrowings are based on the discounted value of estimated cash flows. The discounted rate is estimated using the rates currently offered for similar instruments.

The fair value of commitments to extend credit is estimated based on the amount of unamortized deferred loan commitment fees. The fair value of letters of credit is based on the amount of unearned fees plus the estimated cost to terminate the letters of credit. Fair values of unrecognized financial instruments, including commitments to extend credit and the fair value of letters of credit, are considered immaterial.

BBI F-59

Berkshire Bancorp, Inc.

Notes to Consolidated Financial Statements

(Amounts in Thousands, Except Share Data)

Note 18. Fair Value of Financial Instruments (Continued)

Fair Value of Financial Instruments (Continued) : The carrying values and estimated fair values of the Company’s financial instruments as of December 31, 2009 are as follows:

	2009				2008
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value

Financial assets:
Cash and due from banks	$	1,787	$	1,787	$	1,897	$	1,897
Federal funds sold		9,259		9,259		-		-
Interest-bearing demand deposits
with other banks		506		506		235		235
Investment securities, available for sale		11,845		11,845		14,478		14,478
Loans, net of unearned income		108,560		109,860		103,500		105,592
Loans held for sale		978		985		420		425
FHLB stock		1,108		1,108		1,076		1,076
Accrued interest receivable		456		456		552		552

Financial liabilities:
Noninterest-bearing demand		6,821		6,821		5,761		5,761
Interest-bearing demand and time deposits		121,257		122,077		97,556		99,494
Federal funds purchased		-		-		396		396
Borrowings		4,304		4,352		16,798		17,110
Accrued interest payable		77		77		180		180

BBI F-60

ANNEX A

PLAN OF MERGER AND REORGANIZATION

Date: __________, 2011

CUSTOMERS BANK (the "Bank"), a banking institution organized under the Pennsylvania Banking Code of 1965, as amended (the "Banking Code"), and NEW CENTURY INTERIM BANK (the "Surviving Bank"), an interim bank in organization under the Banking Code, and Customers Bancorp, Inc. (the "Holding Company"), a Pennsylvania business corporation organized under the Pennsylvania Business Corporation Law of 1988, as amended, hereby enter into this Plan of Merger and Reorganization (the "Plan").

In consideration of their mutual promises and covenants, and intending to be legally bound hereby, the parties hereto, deeming it to be advantageous to their respective banking associations, corporation and their shareholders, have duly approved this Plan and its execution, and do hereby adopt this Plan setting forth the method, terms and conditions of the merger, including the rights under the Plan of the shareholders of each of the parties, and the agreements concerning the merger:

1. Merger . The Bank shall merge into the Surviving Bank under the charter of the Surviving Bank, under the title of "Customers Bank," and pursuant to the provisions of the Banking Code, by the method, on the terms and subject to the conditions and requirements hereinafter stated. Upon the merger becoming effective, Bank and Surviving Bank shall be merged into and continued in a single institution, the Surviving Bank, which shall be a Pennsylvania chartered bank and which shall be considered the same business and corporate entity as the constituent institutions. The Surviving Bank shall thenceforth be responsible for all of the liabilities and obligations of the Bank.. The Surviving Bank shall, upon consummation of the merger, engage in the business of a Pennsylvania chartered bank at the principal office and the legally established and approved branch offices of the Bank. Surviving Bank shall maintain the insurance of the Federal Deposit Insurance Corporation in the same way as it is now carried by the Bank.

2. Articles of Incorporation of Surviving Bank . When the merger becomes effective, the initial Articles of Incorporation of the Surviving Bank shall be substantially in the form attached hereto as Exhibit A attached hereto and incorporated herein.

3. Bylaws of Surviving Bank . When the merger becomes effective, the initial Bylaws of the Surviving Bank shall be substantially in the form attached hereto as Exhibit B attached hereto and incorporated herein, and the principal office and established and authorized branch offices of the Bank shall become the principal office and established and authorized branch offices, respectively, of the Surviving Bank.

4. Board of Directors of Surviving Bank . The persons who shall constitute the Board of Directors of the Surviving Bank at the time the merger becomes effective shall be the persons who were then members of the Board of Directors of the Bank. They shall serve until the subsequent annual meeting of shareholders of Surviving Bank or until their successors are duly qualified and elected. Any vacancy in the Board of Directors of the Surviving Bank which may exist upon or after the effective date of the merger may be filled as provided by the Articles of Incorporation and Bylaws of the Surviving Bank. The officers of the Bank at the time the merger becomes effective shall hold the same offices in the Surviving Bank.

A-1

5. Conversion of Shares: Exchange of Certificates: Capitalization . Upon the merger becoming effective:

(a) Each three (3) issued and outstanding shares of voting common stock of the Bank shall, ipso facto, and without any action on the part of the holder thereof, become and be converted into one (1) share of voting common stock of the Holding Company, par value $1.00 per share. Each three (3) issued and outstanding shares of Class B Non-Voting Common Stock of the Bank, if then authorized and issued, shall, ipso facto, and without any action on the part of the holder thereof, become and be converted into one (1) share of Non-Voting Common Stock of the Holding Company, par value $1.00 per share.

(b) As soon as practicable after the merger becomes effective, holders of shares of Bank common stock shall be furnished a form letter of transmittal for the tender of their share certificates to the Surviving Bank, which shall act as “Exchange Agent” for the Holding Company, to be exchanged for new certificates for the appropriate number of shares of Holding Company common stock. Holding Company shall be required to issue certificates for Holding Company common stock only upon the actual surrender of Bank shares or an acceptable indemnity agreement or bond from any Bank shareholder who is unable to surrender his or her certificate by reason of loss or destruction of the certificate. Upon surrender for cancellation to the Exchange Agent of one or more certificates for shares of Bank common stock, accompanied by a duly executed letter of transmittal in proper form, or an appropriate indemnity agreement or bond, as the case may be, the Exchange Agent shall, promptly after the effective date of the merger, deliver to each holder of such surrendered Bank certificates new certificates representing the appropriate number of shares of Holding Company common stock. Until certificates for Bank common stock have been surrendered and exchanged as herein provided for certificates of Holding Company common stock, each outstanding certificate for Bank common stock shall be deemed, for all corporate purposes, to be the number of full shares of Holding Company common stock into which the number of shares of Bank common stock shown thereon have been converted. In the event that any certificates for Bank common stock are not surrendered for exchange within two (2) years from the effective date of the merger, the shares of Holding Company common stock that would otherwise have been delivered in exchange for the unsurrendered Bank certificates shall be delivered by the Exchange Agent to the Holding Company, in which event the persons entitled thereto shall look only to the Holding Company for delivery of the Holding Company shares upon surrender of their outstanding certificates for Bank common stock. Following the expiration of such two (2) year period, the Holding Company may sell such unclaimed Holding Company common stock, in which event the sole right of the holders of the unsurrendered outstanding Bank certificates shall be the right to collect the net sale proceeds held for their account by the Holding Company. In the event that Holding Company shall, as required or permitted by law, pay to the Commonwealth of Pennsylvania any net sale proceeds relating to unclaimed Holding Company common stock, the holders of unsurrendered outstanding Bank certificates shall thereafter look only to the Commonwealth of Pennsylvania for payment on account thereof.

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(c) Prior to the merger becoming effective, the Surviving Bank will have a capital of $100,000 consisting of 100,000 issued and outstanding shares of common stock, par value $1.00 per share, and a surplus of $55,000. Upon the merger becoming effective: (i) the amount and number of issued and outstanding shares of common stock of the Surviving Bank shall be increased to an amount equal to the total, immediately before the merger, of (A) the issued and outstanding shares of common stock of the Bank, now being _____ shares, and (B) the issued and outstanding shares of common stock of the Surviving Bank; (ii) the surplus of the Surviving Bank shall be increased to an amount equal to the total of the surplus of the Bank and the surplus of the Surviving Bank immediately before the merger; and (iii) all of the issued and outstanding shares of the Surviving Bank, as increased by the number of issued and outstanding shares of the Bank, shall be issued to and owned by the Holding Company.

(d) Except as provided below in connection with fractional shares, no cash shall be allocated to shareholders of the Bank or to any other person, firm, or corporation upon and by reason of the merger becoming effective. Cash fees will, however, be paid to attorneys, accountants and other like persons for services rendered in the accomplishment of the merger and reorganization and other phases of the overall transaction; some of these persons may be shareholders of the Bank and of Holding Company. The Holding Company will not issue any fractional shares of its common stock in the reorganization. Holders of Bank voting common stock or Class B Non-Voting Common Stock who would otherwise be entitled to a fractional share of Holding Company common stock or Holding Company Class B Non-Voting Common Stock will instead receive an amount in cash, rounded to the nearest cent and without interest, equal to the product of (i) the fraction of such share to which the holder would otherwise have been entitled and (ii) the book-value of one share of voting common stock of the Bank as of the final day of the quarter ended immediately prior to the consummation of the merger.

(e) Each then outstanding warrant or option to acquire shares of the common stock of the Bank heretofore issued by the Bank shall, ipso facto, and without any action on the part of the holder thereof, become and be converted into a warrant or option, respectively, to acquire one-third the number of shares of the Holding Company on the same terms and conditions and shall remain outstanding. The number of shares of Holding Company stock for which each outstanding option or warrant will be exercisable after the consummation of the merger will be rounded up to the nearest whole number of shares, subject to the holder’s agreement to any necessary corresponding upward rounding adjustments of the exercise price to the nearest whole cent. After the merger becomes effective the Holding Company may, but is not obligated to, issue amended warrant or option agreements reflecting the conversion and the assumption of such warrants or options.

6. Dissenting Shareholders . The rights and remedies of a dissenting shareholder under Sections 1607 and 1222 of the Pennsylvania Banking Code, 7 P.S. Sections 1607 and 1222, and, thereby, Subchapter D of Chapter 15 of the Pennsylvania Business Corporation Law of 1988, as amended (15 Pa. C.S. Section 1571 et seq.) shall be afforded to any shareholder of the Bank who takes the necessary steps to perfect his or her dissenters rights. The Bank will make whatever payments are to be made to validly dissenting shareholders in the exercise of such rights. Unless otherwise provided by law, shares of the Holding Company not taken by the dissenting shareholders of the Bank shall not be issued.

7. Conditions . The merger provided under this Plan shall take place only if: (i) this Plan is approved (A) by the affirmative vote of holders of at least two-thirds (2/3) of the outstanding shares of common stock of the Bank and (B) by the Holding Company as a shareholder of the Surviving Bank, in accordance with applicable law; (ii) this Plan, the merger and any constituent steps are approved by the Pennsylvania Department of Banking, the Board of Governors of the Federal Reserve System and (if applicable) the Federal Deposit Insurance Corporation, and the Notice or Application, as applicable, of the Holding Company to form a bank holding company is not objected to, or is otherwise approved, by the Board of Governors of the Federal Reserve System and all other requirements prescribed by law are satisfied; (iii) the Bank receives an opinion of its special counsel, Stradley Ronon Stevens & Young, LLP, to the effect that the transactions contemplated herein constitute a tax-free reorganization under the Internal Revenue Code of 1986, as amended, and that neither gain nor loss will be recognized for federal income tax purposes to the Bank, the Surviving Bank, the Holding Company or the shareholders of the Bank (other than the dissenting shareholders who elect dissenters' rights), the Surviving Bank and the Holding Company, by reason of the transactions contemplated herein, and as to such further matters relating to the tax consequences of the transactions contemplated hereby, as the Bank may deem advisable; and (iv) there shall be no litigation or proceeding pending or threatened for the purpose of enjoining, restraining or preventing the consummation of the merger in accordance with this Plan.

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8. Amendment; Termination . At any time before the merger becomes effective, by vote of a majority of the Board of Directors of each of the Bank, the Holding Company and the Surviving Bank, this Plan (a) may be amended in any manner not inconsistent with its general purpose, provided that no amendment shall change the share exchange ratio following approval of this Plan by the shareholders of the Bank, or (b) may be terminated for any reason, including without limitation for reasons such as because of the number of shares of common stock of the Bank exercising dissenters' rights, or if it shall appear that the consummation of the Plan would be inadvisable for any reason. If this Plan is terminated pursuant to this Section, this Plan shall be void and of no further effect, without any liability on the part of any of the parties hereto, or their respective directors, officers, shareholders or agents.

9. Shares of Holding Company Subscribers . The shares of the Holding Company, subscribed for by the initial subscriber or subscribers for common stock of the Holding Company, shall be purchased by such subscriber or subscribers by the payment of each individual incorporator's own cash to the Holding Company. Upon consummation of the merger, each subscriber for common stock of the Holding Company shall sell, surrender and redeem all of such subscriber’s stock subscribed for to the Holding Company for cash.

10. Financing of Initial Capitalization . In order to provide funds with which the Holding Company can purchase shares of common stock of the Surviving Bank for $155,000 (which Surviving Bank shall allocate as follows: Capital - $100,000; Surplus - $50,000; Expense Fund - $5,000), the Holding Company will make a temporary borrowing from an unaffiliated lender. After consummation of the merger the Surviving Bank will pay a special cash dividend to the Holding Company which will enable the Holding Company to repay the principal amount of said loan in full plus interest.

11. Issuance of Shares . When required by the terms of this Plan, the Holding Company will issue the shares of its common stock which the shareholders of the Bank shall be entitled to receive as hereinabove provided, and will perform all other acts necessary for it to comply with the provisions of this Plan.

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12. Assumption and Amendment of Stock Option Plan . Upon the merger becoming effective, without any further action being required:

(a) the Holding Company shall assume all equity compensation, employee retirement and employee benefit plans of the Bank (each, a "Plan");

(b) all then outstanding grants by the Bank under any Plan shall be converted, to the extent required, to grants by the Holding Company under such Plan; and

(c) each Plan shall be deemed amended and restated: (i) to substitute the Holding Company and the common stock of the Holding Company for the Bank and the common stock of the Bank, respectively; and (ii) to provide that eligible participants under the Plan shall include the same category or categories of officers, other employees, and non-employee directors, of the Holding Company and any current or future subsidiary of the Holding Company, including the Bank, as the categories of officers, other employees and non-employee directors of the Bank currently eligible to be participants under the Plan. The maximum number of shares of Holding Company common stock that have been or may be issued or transferred under any Plan immediately after the merger shall be the same as the maximum number of shares of Bank common stock immediately prior to the Merger, and the maximum aggregate number of shares of Holding Company common stock that shall be subject to options or awards under any Plan to any single individual immediately after the merger shall be the same as the maximum number of shares of Bank common stock immediately prior to the merger, subject to any adjustment provisions of the Plan. Approval of this Plan of Merger and Reorganization shall constitute approval of each Plan as so amended by the directors and shareholders of the Bank and Holding Company for all purposes, including, without limitation, for purposes of Sections 162(m) and 422 of Internal Revenue Code of 1986, as amended, and Section 16(b) of the Securities Exchange Act of 1934, as amended, and the exemptive rules promulgated thereunder.

13. Board of Directors of Holding Company . The persons who shall constitute the Board of Directors of the Holding Company at the time the merger becomes effective shall be the persons who were then members of the Board of Directors of the Bank immediately prior to the merger. The Board of Directors of the Holding Company shall, to the extent consistent with the provisions of the Holding Company Articles of Incorporation and Bylaws and applicable law, be divided into three classes, with members of one class serving until the first Holding Company annual meeting and members of each of the other two classes serving until successive annual meetings. The directors in each class shall serve until the annual meeting of shareholders of the Holding Company at which his or her class is to be re-elected or until their successors are duly qualified and elected. The members of each class shall be designated initially by the Board of Directors. Any vacancy in the Board of Directors of the Holding Company which may exist upon or after the effective date of the merger may be filled as provided by the Articles of Incorporation and Bylaws of the Holding Company.

14. Affiliates; Agreements Relating to Resales of Holding Company Securities . The Bank shall prepare and deliver to Holding Company, prior to completion of the merger, a list that identifies all persons whom the Bank believes may be deemed to be “affiliates” of Bank or Holding Company under applicable securities laws. The Bank shall use its commercially reasonable best efforts to cause each person whom it identifies on the list as a potential affiliate to deliver, at or prior to the completion of the transaction, a written agreement that the affiliate will not sell, pledge, transfer or otherwise dispose of any Holding Company shares issued to the affiliate pursuant to the transaction unless the sale, pledge, transfer or other disposition meets one of the following criteria: (1) it is made pursuant to an effective registration statement filed under the Securities Act; (2) it is in compliance with Rule 144; or (3) in the opinion of counsel, it is otherwise exempt from the registration requirements of the Securities Act. Without limiting the foregoing, any shares of Holding Company common stock issued to any persons deemed to be “affiliates” for such persons shall, at the discretion of management, include a legend disclosing applicable restrictions on transfer for such “control shares.”

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15. Waiver . Any of the terms or conditions of this Plan may be waived in writing at any time by the Bank by action taken by its Board of Directors, whether before or after action by the Bank's shareholders, provided, however, that such action shall be taken only if, in the judgment of the Board of Directors, such waiver will not have a materially adverse effect on the benefits intended to be granted hereunder to the shareholders of the Bank.

16. Governing Law . This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, except as such may be pre-empted by federal law.

17. Entire Agreement . This Plan contains the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, written or oral, with respect thereto.

18. Counterparts . This Plan may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

[signature page follows]

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IN WITNESS WHEREOF, each of the parties hereto has caused this instrument to be

executed by its Chief Executive Officer and its seal affixed, attested by its Secretary, all under

authority of its Board of Directors.

Attest: [Corporate Seal] _____________________________ Gertrude M. Hackney Secretary	CUSTOMERS BANK By: ____________________________ Jay S. Sidhu Chairman & CEO
Attest: [Corporate Seal] _____________________________ Gertrude M. Hackney Secretary	NEW CENTURY INTERIM BANK By: ____________________________ Jay S. Sidhu Chairman & CEO
Attest: [Corporate Seal] _____________________________ Gertrude M. Hackney Secretary	Customers Bancorp, Inc. By: ____________________________ Jay S. Sidhu Chairman & CEO

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Exhibit A to Agreement and Plan of Merger and Reorganization

Draft Articles Of Incorporation of Interim Bank

ARTICLES OF INCORPORATION

TO THE DEPARTMENT OF BANKING OF

THE COMMONWEALTH OF PENNSYLVANIA:

In compliance with the requirements of the Pennsylvania Banking Code of November 30, 1965, P.L. 847, as amended, the undersigned hereby states that:

ARTICLE I

Name and Place of Business

Section 1 The name of the institution is New Century Interim Bank (the “Bank”).

Section 2 The location and post office address of its principal place of business are at 99 Bridge Street, Phoenixville, PA 19460.

ARTICLE II

Purpose and Term

Section 1 The institution is incorporated for the purpose of receiving deposits, making loans and generally transacting all business permitted to a bank, as defined in the Banking Code of 1965, as amended, and under any present or future laws of the Commonwealth of Pennsylvania.

Section 2 The Bank is to have perpetual existence.

Section 3 The institution is incorporated under the provisions of the Banking Code of 1965, as amended.

ARTICLE III

Capitalization

Section 1 The total number of shares of all capital stock which the Bank shall have the authority to issue is 41,500,000 shares of capital stock consisting of:

(i)

40,000,000 share of voting common stock, par value $1.00 per share (the “Voting Common Stock”),

(ii)

500,000 shares of nonvoting common stock, par value $1.00 per share (the “Nonvoting Common Stock”), and

(iii)

1,000,000 shares of preferred stock in one or more series, any series having such par value or no par value as may be determined by the Bank’s board of directors from time to time as more fully provided in this Article (the “Preferred Stock”).

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Section 2 The Bank’s board of directors is hereby authorized and vested with the exclusive authority to establish one or more additional series of common stock and one or more series of preferred stock, without further approval by the shareholders of the Bank, but nevertheless subject to compliance with provisions of applicable law including without limitation applicable provisions of the Pennsylvania Banking Code.

Section 3 As to any series of common or preferred stock hereafter established by the Bank’s board of directors, whether or not the shares in such series have par value and, if so, the par value, whether or not the shares in such series have voting rights and if so whether such voting rights are full, limited, multiple or fractional, and the designations, preferences, qualifications, privileges, limitations, redemption provisions, options, conversion rights and other special rights attributable to the shares in such series, shall be as may be established and changed from time to time by a resolution or resolutions providing for the issue of such shares, in each case adopted by the Bank’s board of directors. Without limiting the foregoing, the Board of Directors shall have authority to establish any and all of the following:

(a)

The distinctive serial designation and the number of shares constituting any series;

(b)

The dividend rate or the amount of dividends to be paid on the shares of such series, whether dividends shall be cumulative and. if so from which date(s)1 the payment date(s) for dividends and the participating or other special rights, if any, with respect to dividends;

(c)

The voting powers, full or limited, if any, or shares of such series;

(d)

Whether the shares of such series shall be redeemable and. if so, the price(s) at which, and the terms and conditions of which, such shares may be redeemed;

(e)

The amount(s) payable upon the shares of such series in the event of voluntary or involuntary liquidation, dissolution, or winding up of the Bank;

(f)

Whether the shares of such series shall be entitled to the benefit of a sinking or retirement fund to be applied to the purchase or redemption of such shares, and if so entitled, the amount of such fund and the manner of its application, including the price(s) at which such shares may be redeemed or purchased through the application of such fund;

(g)

Whether the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes of stock of the Bank and, if so. the conversion price(s) or the rate(s) of exchange, and the adjustments thereof, if any. at which such conversion or exchange may be made, and any other terms and conditions of such conversion or exchange;

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(h)

The price or other consideration for which the shares of such series shall be issued;

(i)

Whether the shares of such series which are redeemed or converted shall have the status of authorized but unissued shares of serial preferred stock and whether such shares may be reissued as shares of the same or any other series of serial preferred stock;

(j)

Preferences as to dividends or assets which are prior or subordinate to or on parity with any other class or series; and

(k)

Designations, qualifications, privileges, limitations, redemption provisions, options, conversion rights and other special rights, including, but not limited to, voting rights, which are greater or lesser than or equal to those of any other class or series, whether or not the other shares are issued or outstanding at the time when the board of directors acts to determine them.

Section 4 Any of the terms of a class or series of preferred shares may be made dependent upon facts ascertainable outside of these articles, or outside of the resolution or resolutions providing for the issue of such shares adopted by the board of directors pursuant to the authority vested in the board of directors by this Article, provided that the manner in which the facts will operate upon the terms of the class or series is set forth in the resolution or resolutions providing for the issue of such shares adopted by the board of directors.

Section 5 No shareholder of any class of capital stock or any series of any class of capital stock shall have a pre-emptive right to purchase, pro rata or otherwise, additional shares of any class or series of capital stock or any other security of the Bank.

Section 6 The Board of Directors, in its sole discretion, has authority to sell any treasury stock and/or authorized but unissued stock or other securities of the Bank, or any options, warrants or other rights to purchase any of the foregoing, upon such terms as the Board of Directors deems advisable.

ARTICLE IV

The name, occupation, place of residence and post office address of each of the incorporators of the Institution, two-thirds of whom are citizens of the United States of America, and the number of shares subscribed by each are as follows:

Name	Occupation	Place of Residence and Post Office Address	Number of Shares of Common Stock Subscribed
Richard A. Ehst	Banker	1309 East Wyomissing Boulevard, Reading, PA 19611	1,000
Gertrude M. Hackney	Banker	1324 Barrowdale Rd., Rydal, PA 19046	1,000
Thomas Brugger	Banker	1142 Lehigh Avenue, Wyomissing, PA 19610	1,000

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ARTICLE V

Ownership Limitation

Section 1 Except as provided in Article V, Section 2, no shareholder may have Holdings (as defined in Section 4 of this Article) of shares that exceed twenty-five percent (25%) of the issued and outstanding shares of Common Stock.

Section 2 Upon the resolution of at least two-thirds of the Board of Directors, the restriction imposed by Article V, Section 1 may be waived with respect to the Holdings of any shareholders.

Section 3 If any shareholder acquires Holdings which cause the violation of the restriction contained in Article V, Section 1, the Board of Directors may (i) terminate all voting rights attributable to the shares owned beneficially by such shareholder (the “Substantial Shareholder”) during the time that Article V, Section 1 is being violated; (ii) commence litigation to require the divestiture of such amount of the shares so that after such divestiture the shareholder would no longer be in violation of the restriction contained in Article V, Section 1; or (iii) take such ether action as is appropriate under the circumstances.

Section 4 A shareholder’s Holdings, as such term is used in this Article V are: (i) the Common Stock the shareholder owns of record; (ii) the Common Stock to which the shareholder has direct or indirect beneficial ownership and (iii) the Common Stock owned of record or beneficially (as defined in this Section) by other shareholder(s) acting together with the shareholder as a group for the purpose of acquiring, holding or disposing of Common Stock (such group is hereinafter referred to as a “Shareholder Group”). The Board of Directors may use, but is not necessarily limited to, the following indicia to determine “beneficial ownership”: the effect of stock ownership by a person’s spouse and minor children; ownership of shares held by a corporation or foundation of which a Substantial Shareholder is an officer or affiliate; the extent of a Substantial Shareholder’s ownership of partnership shares; transfers pursuant to divorce; installment purchases; stock warrants, grants and options; control over the voting power of any stock; the status of a Substantial Shareholder as trustee, trust beneficiary or settlor of a trust of which part or all of the corpus is shares of the common stock of the Bank; and stock dividends. The Board of Director’s determination of the existence and membership of a Shareholder Group, of a shareholder’s Holdings and of the record are conclusive, absent proof of bad faith.

Section 5 This Article V may not be amended unless approved by the affirmative vote of at least two-thirds (2/3) of the outstanding shares of Common Stock of the Bank.

ARTICLE VI

Control Transactions

Section 1 Section 1610 of the Banking Code of 1965 (relating to the right of shareholders to receive payment for shares following a control transaction) shall not apply to the institution.

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ARTICLE VII

The name, occupation, place of residence and post office address of each of the first directors, all of whom shall serve until the first annual meeting of shareholders of the Institution and until their respective successors are elected, are:

Name	Occupation	Place of Residence and Post Office Address
Jay S. Sidhu	Banker	5 Chardonnay Circle, Mohnton, PA 19540
Richard A. Ehst	Banker	1309 East Wyomissing Boulevard, Reading, PA 19611
Thomas Brugger	Banker	1142 Lehigh Avenue, Wyomissing, PA 19610
Gertrude M. Hackney	Banker	1324 Barrowdale Rd., Rydal, PA 19046
Warren Taylor	Banker	320 Mill Race Lane, Newtown, PA 18940

ARTICLE VIII

Acquisition Offers

Section 1 The Board of Directors may, if it deems it advisable, oppose a tender, or other offer for the Bank’s securities, whether the offer is in cash or in the securities of a corporation or otherwise. When considering whether to oppose an offer, the Board of Directors may, but is not legally obligated to, consider any relevant or pertinent issue; by way of illustration, but not of limitation, the Board of Directors may, but shall not be legally obligated to, consider any or all of the following:

(a) whether the offer price is acceptable based on the historical and present operating results or financial condition of the Bank;

(b) whether a more favorable price could be obtained for the Bank’s securities in the future;

(c) the social and economic effects of the offer or transaction on this Bank and any of its subsidiaries, employees, depositors, loan and other customers, creditors, shareholders and other elements of the communities in which this Bank and any of its subsidiaries operate or are located;

(d) the business and financial conditions and earnings prospects of the offeror, including, but not limited to, debt service and other existing or likely financial obligations of the offeror, and the possible affect of such conditions upon this Bank and any of its subsidiaries and the other elements of the communities in which this Bank and any of its subsidiaries operate or are located;

(e) the value of the securities (if any) which the offeror is offering in exchange for the Bank’s securities, based, on an analysis of the worth of the Bank as compared to the corporation whose securities are being offered;

(f) any antitrust or other legal and regulatory issues that are raised by the offer.

Section 2 If the Board of Directors determines that an offer should be rejected, it may take any lawful action to accomplish its purpose including, but not limited to, the following: advising shareholders not to accept the offer; litigation against the offeror; filing complaints with all governmental and regulatory authorities; acquiring securities; selling or otherwise issuing authorized but unissued securities or treasury stock or granting options with respect thereto; acquiring a company to create an antitrust or other regulatory problem for the offeror; or obtaining a more favorable offer from another individual or entity.

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Section 3 This Article VIII may not be amended unless first approved by the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares of common stock of the Bank.

ARTICLE IX

Special Voting and Concurrence Provision

Section 1 The Bylaws may be altered, amended or repealed by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of Common Stock at regular or special meeting duly convened after notice to the shareholders of that purpose, or by a majority vote of the members of the Board of Directors at any regular or special meeting thereof duly convened after notice to the directors of that purpose, (except the directors shall not make or alter any bylaws fixing their qualification, classification or term of office) subject always to the power of the shareholders to change such action of the Board of Directors by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of Common Stock.

Section 2 No merger, consolidation, liquidation or dissolution of the Bank nor any action that would result in the sale or other disposition of all or substantially all of the assets of the Bank shall be valid unless first approved by the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares of common stock of the Bank.

Section 3 This Article IX may not be amended unless first approved by the affirmative vote of the holders of at least two-thirds (2/3) of the outstanding shares of common stock of the Bank.

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IN WITNESS WHEREOF, the incorporators have signed and sealed these Articles of Incorporation this 17th day of December, 2010

___________________________________ Richard A. Ehst, Incorporator	___________________________________ Gertrude M. Hackney, Incorporator
___________________________________ Thomas Brugger, Incorporator

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Exhibit B to Agreement and Plan of Merger and Reorganization

BYLAWS

NEW CENTURY INTERIM BANK

Article I.

PURPOSE

Section 1.1 New Century Interim Bank will provide banking services to its community in a manner that stimulates community consciousness and vision, involves its customers in forming that vision and provides funds for the achievement of the vision. The Bank will provide security for its depositors, a sound financial basis for its future and a fair return to its shareholders.

Section 1.2 The Bank shall have and continuously maintain in Pennsylvania a registered office.

Article 2

SHAREHOLDERS MEETINGS

Section 2.1 All meetings of the shareholders shall be held within the Commonwealth of Pennsylvania at such time and place as may be fixed from time to time by the Board of Directors.

Section 2.2 The annual meeting of the shareholders shall be held at such time and place as may be set by the Board of Directors but not later than the thirty-first day of May in each year, when the shareholders shall elect directors to the Board of Directors and transact such other business as may properly be brought before the meeting.

Section 2.3 Special meetings of the shareholders may be called at any time by the Chairperson of the Board, the President, a majority of the Board of Directors or by one or more shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast at the particular meeting. If such request is addressed to the Secretary, it shall be signed by the persons making the same and shall state the purpose or purposes of the proposed meeting. Upon receipt of any such request, the Secretary shall fix the date of such meeting to be held not more than sixty (60) days after the receipt of the request and shall give due notice thereof. In the event of the Secretary’s failure within thirty (30) days after the receipt of the request to fix the date or give the notice, the person or persons making the request may issue the call.

Section 2.4 Written notice of all meetings other than adjourned meetings of shareholders, stating the place, date and hour, and, in case of special meetings of shareholders, the purpose thereof, shall be served upon, or mailed, postage prepaid, or telegraphed, charges prepaid, at least ten (10) days before such meeting, unless a greater period of notice is required by statute or by these Bylaws, to each shareholder entitled to vote thereat at such address as appears on the transfer books of the Bank.

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Article 3

QUORUM OF SHAREHOLDERS

Section 3.1 The presence, in person or by proxy, of the holders of a majority of the outstanding shares entitled to vote shall constitute a quorum. If a meeting cannot be organized for lack of a quorum, those present may adjourn the meeting to such time and place as they may determine.

In the case of a meeting for the election of directors which is twice adjourned for lack of a quorum, those present at the second of such adjourned meetings shall constitute a quorum for the election of directors without regard to the other quorum requirements of this section, the articles or bylaws.

Article 4

VOTING RIGHTS

Section 4.1 Except as may be otherwise provided by statute or by the Articles of Incorporation, at every shareholders meeting, every shareholder entitled to vote thereat shall have the right to one vote for every share having voting power standing in his or her name on the books of the Bank on the record date fixed for the meeting. No share shall be voted at any meeting if an installment is due and unpaid thereon.

Section 4.2 When a quorum is present at any meeting the voice vote of the holders of a majority of the stock having voting power, present, in person or by proxy, shall decide any question brought before such meeting except as provided differently by statute or by the Articles of Incorporation.

Section 4.3 Upon demand made by a shareholder entitled to vote at any election for directors before the voting begins, the election shall be by ballot.

Article 5

PROXIES

Section 5.1 Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy. Every proxy shall be executed in writing by the shareholder or his or her duly authorized attorney in fact and filed with the Secretary of the Bank. A proxy shall be revocable at will, notwithstanding any other agreement or any provision in the proxy to the contrary, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the Bank. No unrevoked proxy shall be valid after eleven (11) months from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker, unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Bank.

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Article 6

RECORD DATE

Section 6.1 The Board of Directors may fix a time, not more than forty-five (45) days prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares. The Board of Directors may close the books of the Bank against transfers of shares during the whole or any part of such period, and in such case written or printed notice thereof shall be mailed at least ten (10) days before closing thereof to each shareholder of record at the address appearing on the records of the Bank or supplied by him or her to the Bank for the purpose of notice. While the stock transfer books of the Bank are closed, no transfer of shares shall be made thereon. If no record date is fixed by the Board of Directors for the determination of shareholders entitled to receive notice of, and vote at, a shareholders meeting, transferees of shares which are transferred on the books of the Bank within ten (10) days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting.

Article 7

VOTING LISTS

Section 7.1 The officer or agent having charge of the transfer books for shares of the Bank shall make, at least five (5) days before each meeting of shareholders, a complete alphabetical list of the shareholders entitled to vote at the meeting, with their addresses and the number of shares held by each, which list shall be kept on file at the registered office or principal place of business of the Bank and shall be subject to inspection by any shareholder during normal business hours and at the time and place of the meeting during the entire meeting. The original transfer books for shares of the Bank, or a duplicate thereof kept in this Commonwealth, shall be prima facie evidence as to who are the shareholders entitled to exercise the rights of a shareholder.

Article 8

JUDGES OF ELECTION

Section 8.1 In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election are not so appointed, the Chairperson of any such meeting may, and on the request of any shareholder or his or her proxy shall, make such appointment at the meeting. The number of judges shall be one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present and entitled to vote shall determine whether one or three judges are to be appointed. No person who is a candidate for office shall act as a judge. The judges of election shall do all such acts as may be proper to conduct the election or vote, and such other duties as may be prescribed by statute, with fairness to all shareholders, and if requested by the Chairperson of the meeting or any shareholder or his or her proxy, shall make a written report of any matter determined by them and execute a certificate of any fact found by them. If there are three judges of election, the decision, act or certificate of a majority shall be the decision, act or certificate of all.

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Article 9

CONSENT OF SHAREHOLDERS IN LIEU OF MEETING

Section 9.1 Any action required to be taken at a meeting of the shareholders, or of a class of shareholders, may be taken without a meeting, if a consent or consents in writing setting forth the action so taken shall be signed by all of the shareholders who would be entitled to vote at a meeting for such purpose and shall be filed with the Secretary of the Bank.

Article 10

DIRECTORS

Section 10.1 Nominations for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote in the election of directors. All nominations made by any shareholder must be made in writing, delivered or mailed by registered or certified mail, postage prepaid, return receipt requested, to the Secretary of the Bank not less than thirty (30) days nor more than sixty (60) days prior to any meeting of the shareholders called for the election of directors. If less than thirty (30) days’ notice of the meeting is given to the shareholders, the nomination shall be delivered or mailed to the Secretary not later than the close of the seventh (7th) day following the day on which notice of the meeting was mailed to shareholders. Every nomination shall include:

(a)

the consent of the person nominated to serve as a director;

(b)

the name, age, business address and residence address of the nominee;

(c)

the principal occupation or employment of the nominee;

(d)

the number of shares of the Bank beneficially owned by the nominee;

(e)

the name and address of the notifying shareholder; and

(f)

the number of shares of the Bank owned by the notifying shareholder.

The chairperson of any meeting called for the election of directors shall reject any nomination made by any shareholder which was not made in accordance with the provisions of this Section, unless the Board of Directors has agreed to waive said provisions as to such nomination. In the event that the same person is nominated by more than one shareholder, if at least one nomination for such person complies with this Section, the nomination shall be honored and all votes cast for such nominee shall be counted. Nominations for the election of directors made by the Board of Directors need not comply with the provisions of this Section.

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Section 10.2 Within the requirements of law, the exact number of directors shall be determined from time to time by resolution adopted by an affirmative majority vote of the Board of Directors. However, no increase in the number of directors shall shorten the term of any incumbent director.

Section 10.3 The Board of Directors shall be divided into three classes (Class A, Class B and Class C), as nearly equal in number as the then total number of directors constituting the whole Board permits, with the term of office of one class expiring each year. At the first annual meeting of shareholders, directors in Class A shall be elected to hold office for one (1) year term; directors in Class B shall be elected to hold office for a two (2) year term; and directors in Class C shall be elected to hold office for a three (3) year term. Each class shall be elected in a separate election.

Section 10.4 Within the requirements of law, the term and number of directors in each class shall be fixed, from time to time, by the Board of Directors. The term of office, until otherwise fixed, for all directors elected at each annual meeting held after the first annual meeting shall be three (3) years from the date of their election. At each annual meeting after the first annual meeting, elections shall be held to elect directors to replace those whose terms have expired. All directors shall continue in office after the expiration of their term until their successors are elected or appointed and have qualified, except in the event of earlier resignation, removal or disqualification.

Section 10.5 Each director shall be required to attend a minimum of 75% of meetings of directors properly called under Article 13, each calendar year.

Article 11

VACANCIES ON BOARD OF DIRECTORS

Section 11.1 Any vacancies in the Board of Directors for any reason, including vacancies caused by any increase in the number of directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum. Any director chosen to fill a vacancy in any class of directors defined in Section 3 of Article 10 shall become a member of the class of directors in which the vacancy occurred. Such director shall hold office for the remainder of the original term of such vacancy.

Article 12

POWERS OF BOARD OF DIRECTORS

Section 12.1 The business and affairs of the Bank shall be managed by its Board of Directors, which may exercise all such powers of the Bank and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised and done by the shareholders.

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Section 12.2 The Board of Directors may appoint each year such number of Advisory Directors as the Board may from time to time determine.

Article 13

MEETINGS OF THE BOARD OF DIRECTORS

Section 13.1 An organization meeting may be held immediately following the annual shareholders meeting without the necessity of notice to the directors to constitute a legally convened meeting, or the directors may meet at such time and place as may be fixed by either a notice or waiver of notice or consent signed by all of such directors.

Section 13.2 Regular meetings of the Board of Directors shall be held not less often than semi-annually at a time and place determined by the Board of Directors at the preceding meeting. One or more directors may participate in any meeting of the Board of Directors, or of any committee thereof, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear one another.

Section 13.3 Special meetings of the Board of Directors may be called by the Chairperson of the Board or the President and shall be called at the request of any three Directors on one day’s notice to each director, either personally or by mail, telegram or telephone; special meetings shall be called by the Chairperson of the Board or the President in like manner and on like notice upon the written request of three directors.

Section 13.4 At all meetings of the Board of Directors, a majority of the directors shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting in person or by conference telephone or similar communications equipment at which a quorum is present in person or by such communications equipment shall be the acts of the Board of Directors, except as may be otherwise specifically provided by statute or by the Articles of Incorporation or by these Bylaws.

Article 14

INFORMAL ACTION BY THE BOARD OF DIRECTORS

Section 14.1 If all the directors shall severally or collectively consent in writing, including but not limited to telegrams and radiograms, to any action to be taken by the Bank, such action shall be as valid a corporate action as though it had been authorized at a meeting of the Board of Directors.

Article 15

COMPENSATION OF DIRECTORS

Section 15.1 Directors, as such, may receive a stated salary for their services or fixed sum and expenses for attendance at regular and special meetings, or any combination of the foregoing as may be determined from time to time by resolution of the Board of Directors, and nothing contained herein shall be construed to preclude any director from serving the Bank in any other capacity and receiving compensation therefore.

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Article 16

COMMITTEES

Section 16.1 The standing committees which shall be appointed from time to time by the Board of Directors shall be the Executive Committee, the Audit Committee and such other committees as may be deemed necessary by the Board or shareholders for efficient operation of the institution.

Section 16.2 The Executive Committee shall consist of not less than three nor more than five outside directors and such officers as shall be appointed by the board. The Executive Committee shall meet at such time as may be fixed by the Board of Directors, or upon call of the Chairperson of the Board or the President. A majority of voting members of the Executive Committee shall constitute a quorum. The Executive committee shall have and exercise the authority of the Board of Directors in the intervals between the meetings of the Board of Directors as far as may be permitted by law.

Section 16.3 The Audit Committee shall consist of not less than two nor more than five Directors, all of whom shall comply with such independence standards as may be required by the laws governing the bank from time to time, subject to such stricter standards of independence, if any, as the Board may establish from time to time. A majority of the members of the Committee shall constitute a quorum. The Committee shall effect its own organization.

For so long as required by the Department of Banking, the Audit Committee or the Board of Directors shall at least once in each year cause to be made by a certified public accountant selected for the purpose, a complete audit of the books and affairs of the bank. Upon completion of the audit the certified public accountant shall make a report thereof and its recommendations in accordance with the Department of Banking’s minimum acceptable requirements for directors’ audits to the Board of Directors.

Article 17

OFFICERS

Section 17.1 The officers of the Bank shall be elected by the Board of Directors at its organization meeting and shall be a Chairperson, a President, a Secretary and a Treasurer. The Board of Directors may also elect one or more Vice Presidents and such other officers and appoint such agents as it shall deem necessary, who shall hold their offices for such terms, have such authority and perform such duties as may from time to time be prescribed by the Board of Directors. Any two or more offices may be held by the same person except both the offices of President and of Treasurer.

Section 17.2 Chairperson. The Chairperson of the Board shall preside at all meetings of the shareholders and directors. He or she shall supervise the carrying out of the policies adopted or approved by the Board of Directors. He or she shall have general executive powers, as well as the specific powers conferred by these Bylaws. He or she shall also have and may exercise such further powers and duties as from time to time may be conferred upon or assigned to him or her by the Board of Directors.

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Section 17.3 President. The President shall have general and active management of the business of the Bank; shall see that all orders and resolutions of the Board of Directors are put into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the Bank; and shall execute bonds, mortgages and other contracts requiring a seal under the seal of the Bank, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Bank.

Section 17.4 Chief Executive Officer. The Board of Directors shall designate the Chairperson of the Board or the President as Chief Executive Officer. He or she shall

supervise the carrying out of the policies adopted or approved by the Board. He or she shall have general executive powers as well as any specific powers and duties as may be conferred upon him or her by the Board.

Section 17.5 Vice Presidents. The Vice Presidents shall have such duties and powers as may from time to time be assigned to them by the Board of Directors or the President in the absence of any assignment by the Board of Directors. One or more may be designated Executive Vice President.

Section 17.6 Secretary. The Secretary shall keep the minutes of the meetings of the shareholders, of the Board of Directors and of the Executive Committee. He or she shall have charge of the corporate records, papers, and the corporate seal of the bank. He or she shall give notice of all meetings of shareholders, of the Board of Directors and of special meetings of the Executive Committee.

Section 17.7 Treasurer. The Treasurer shall be responsible for all money, funds, securities, fidelity and indemnity bonds and other valuables belonging to the bank; shall cause to be kept proper records of the transactions of the bank; and shall perform such other duties as may be assigned to him or her from time to time by the Board of Director-, or the President.

Section 17.8 The compensation of all officers of the Bank shall be fixed by the Board of Directors.

Section 17.9 The Board of Directors may remove any officer or agent elected or appointed, at any time and within the period, if any, for which such person was elected or employed whenever in the Board of Directors’ judgment it is in the best interests of the Bank, and all persons shall be elected and employed subject to the provisions thereof. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.

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Article 18

INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

Section 18.1 A director of this Bank shall stand in a fiduciary relation to the Bank and shall perform his or her duties as a director, including his or her duties as a member of any committee of the board upon which he or she may serve, in good faith, in a manner he or she reasonably believes to be in the best interests of the Bank, and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances. In performing his or her duty, a director shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

(a)

one or more officers or employees of the Bank whom the director reasonably believes to be reliable and competent in the matters presented.

(b)

Counsel, public accountants or other persons as to matters which the director reasonably believes to be within the professional or expert competence of such person.

(c)

A committee of the board upon which he or she does not serve, duly designated in accordance with law, as to matters within its designated authority, which committee the director reasonably believes to merit confidence.

A director shall not be considered to be acting in good faith if he or she has knowledge concerning the matter in question that would cause his or her reliance to be unwarranted.

Section 18.2 In discharging the duties of their respective positions, the board of directors, committees of the board, and individual directors may, in considering the best interests of the Bank, consider the effects of any action upon employees, upon suppliers and customers of the Bank and upon communities in which offices or other establishments of the Bank are located, and all other pertinent factors. The consideration of those factors shall not constitute a violation of Section 18.1.

Section 18.3 Absent a breach of fiduciary duty, lack of good faith or self-dealing, actions taken as a director or any failure to take any action shall be presumed to be in the best interests of the Bank.

Section 18.4 A director of this Bank shall not be personally liable for monetary damages as such for any action taken or for any failure to take any action, unless:

(a)

the director has breached or failed to perform the duties of his or her office under the provisions of Sections 18.1 and 18.2; and

(b)

the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness.

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Section 18.5 The provisions of Section 18.4 shall not apply to:

(a)

the responsibility or liability of a director pursuant to a criminal statute; or

(b)

the liability of a director for the payment of taxes pursuant to local, state or federal law.

Section 18.6 The Bank shall indemnify any director, officer and/or employee, or any former director, officer and/or employee, who was or is a party to, or is threatened to be made a party to, or who is called to be a witness in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that such person is or was a director, officer and/or employee of the Bank, or is or was serving at the request of the Bank as a director, officer, employee or agent of a corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Bank, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in, or not opposed to, the best interests of the Bank, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. No indemnification shall be made in respect of any such claim, issue or matter as to which such person shall have been adjudged to be liable for misconduct in the performance of his or her duty to the Bank.

Section 18.7 Except as may be otherwise ordered by a court, there shall be a presumption party director, officer and/or employee is entitled to indemnification as provided in Sections 18.6 of this Article unless either a majority of the directors who are not involved in such proceedings (“disinterested directors”) or, if there are less than three disinterested directors, then the holders of one-third of the outstanding shares of the Bank determine that the person is not entitled to such presumption by certifying such determination in writing to the Secretary of the Bank. In such event the disinterested director(s) or, in the event of certification by shareholders, the Secretary of the Bank shall request of independent counsel, who may be the outside general counsel of the Bank, a written opinion as to whether or not the parties involved are entitled to indemnification under Sections 18.6 of this Article.

Section 18.8 Expenses incurred by a director, officer and/or employee in defending a civil or criminal action, suit or proceeding may be paid by the Bank in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided under Section 18.7 of this Article upon receipt of an undertaking by or on behalf of the director, officer and/or employee to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Bank.

Section 18.9 The indemnification provided by this Article shall not be deemed exclusive of any other rights, to which a person seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity while serving as a director, officer and/or employee and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer and/or employee and shall inure to the benefit of the heirs, executors and administrators of such a person.

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Section 18.10 The Bank may create a fund of any nature, which may, but need not be, under the control of a trustee, or otherwise secure or insure in any manner its indemnification obligations arising under this Article.

Section 18.11 The Bank shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer and/or employee of the Bank, or is or was serving at the request of the Bank as a director, officer and/or employee of a corporation, partnership, joint venture trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Bank would have the power to indemnify him or her against such liability under the provisions of this Article.

Section 18.12 Indemnification under this Article shall not be made in any case where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted negligence, willful misconduct or recklessness.

Article 19

DIVIDENDS

Section 19.1 The Board of Directors may, from time to time, at any duly convened regular or special meeting or by unanimous consent in writing, declare and pay dividends upon the outstanding shares of capital stock of the Bank in cash, property or shares of the Bank, as long as any dividend shall not be in violation of law or the Articles of Incorporation.

Section 19.2 Before payment of any dividend, there may be set aside out of any funds of the Bank available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Bank, or for such other purposes as the Board of Directors shall believe to be for the best interests of the Bank, and the Board of Directors may reduce or abolish any such reserve in the manner in which it was created.

Article 20

FINANCIAL REPORT TO SHAREHOLDERS

Section 20.1 The President and the Board of Directors shall present at each annual meeting of the shareholders a full and complete statement of the business and affairs of the Bank for the preceding year.

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Article 21

INSTRUMENTS

Section 21.1 All checks or demands for money and notes of the Bank shall be signed by such officer or officers or such other persons as the Executive Committee or the Board of Directors may from time to time designate.

Section 21.2 All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments and documents may be signed, executed, acknowledged, verified, delivered or accepted, on behalf of the Bank by the Chairperson, President or other persons as may be designated by them.

Article 22

FISCAL YEAR

Section 22.1 The fiscal year of the Bank shall be the calendar year.

Article 23

NOTICES AND WAIVERS THEREOF

Section 23.1 Whenever, under the provisions of applicable law or of the Articles of Incorporation or of these Bylaws, written notice is required to be given to any person, it may be given to such person either personally or by sending a copy thereof through the mail or by telegram, charges prepaid, to his or her address appearing on the books of the Bank or supplied by him or her to the Bank for the purpose of notice. If the notice is sent by mail or telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of shareholders, the general nature of the business to be transacted.

Section 23.2 Any written notice required to be given to any person may be waived in writing signed by the person entitled to such notice whether before or after the time stated therein. Attendance of any person entitled to notice whether in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where any person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. Where written notice is required of any meeting, the waiver thereof must specify the purpose only if it is for a special meeting of shareholders.

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Article 24

AMENDMENTS

Section 24.1 These Bylaws may be altered, amended or repealed by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of Common Stock at regular or special meeting duly convened after notice to the shareholders of that purpose, or by a majority vote of the members of the Board of Directors at any regular or special meeting thereof duly convened after notice to the directors of that purpose, (except the directors shall not make or alter any bylaws fixing their qualification, classification or term of office) subject always to the. power of the shareholders to change such action of the Board of Directors by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of Common Stock.

Article 25

EMERGENCIES

Section 1. In the event of any emergency declared by governmental authorities, the result of a regional or national disaster and of such severity as to prevent the normal conduct and management of the affairs of this bank by its Directors and Officers as contemplated by these bylaws, any three available Directors shall constitute the Executive Committee to exercise the full authority of that Committee until such time as a duly elected Board of Directors can again assume full responsibility and control of the bank.

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Exhibit C to Agreement and Plan of Merger and Reorganization

ARTICLES OF INCORPORATION

CUSTOMERS 1ST BANCORP, INC.

FIRST. The name of the Corporation is Customers 1st Bancorp, Inc.

SECOND. The location and post office address of the Corporation’s registered office in this Commonwealth is 99 Bridge Street, Phoenixville, PA 19460.

THIRD. The Corporation is being incorporated under the provisions of the Business Corporation Law of 1988, as amended (the “Pennsylvania Business Corporation Law”). The corporation is being organized on a stock share basis. The purpose of the Corporation is and it shall have unlimited power to engage in and to do any lawful act concerning any or all lawful business for which corporations may be incorporated under such Law.

FOURTH. The term of the Corporation’s existence is perpetual.

FIFTH. A. Authorized Shares . The aggregate number of shares of capital stock which the Corporation shall have authority to issue is 300,000,000 shares, divided into three classes consisting of:

(a)	100,000,000 shares of common stock without par value (“Common Stock”);

(b)	100,000,000 shares of Class B Non-Voting Common Stock with the rights, designations, preferences and limitations provided more fully in Sub-Article B of this Article below (“Class B Non-Voting Common Stock”); and

(c)	100,000,000 shares of preferred stock, having such par value, or no par value, as the board of directors shall fix and determine as provided in Article SIXTH below or as may be permitted by applicable law (“Preferred Stock”).

B. Statement of Designations Applicable to Class B Non-Voting Common Stock .

Section 1. General . The Class B Non-Voting Common Stock shall have the rights, designations, preferences and limitations set forth in this Sub-Article.

Section 2. Ranking . In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Corporation, holders of Common Stock and Class B Non-Voting Common Stock shall be entitled to receive an equal amount per share of all the assets of the Corporation of whatever kind available for distribution to holders of Common Stock, after the rights of the holders of preferred stock have been satisfied.

Section 3. Definitions . As used herein with respect to the Class B Non-Voting Common Stock:

“ Articles of Incorporation ” shall mean these articles of incorporation of the Corporation, as they have been or may hereafter be amended from time to time.

“ Board of Directors ” means the board of directors of the Corporation or any committee thereof duly authorized to act on behalf of such board of directors.

“ Bylaws ” means the Bylaws of the Corporation, as they have been or may hereafter be amended from time to time.

“ Common Stock ” means the voting common stock, par value $1.00 per share, of the Corporation.

“ Depositary ” means DTC or its nominee or any successor depositary appointed by the Corporation.

“ DTC ” means The Depository Trust Company and its successors or assigns.

“ Securities Act ” means the Securities Act of 1933, as amended.

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“ Holder ” means the Person in whose name the shares of the Class B Non-Voting Common Stock are registered, which may be treated by the Corporation, Transfer Agent, Registrar and paying agent as the absolute owner of the shares of Class B Non-Voting Common Stock for the purpose of making payment and for all other purposes.

“ Person ” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

“ Registrar ” shall mean the Transfer Agent acting in its capacity as registrar for the Class B Non-Voting Common Stock, and its successors and assigns or any other registrar duly appointed by the Corporation.

“ Transfer Agent ” means the Corporation, acting as Transfer Agent, Registrar and paying agent for the Class B Non-Voting Common Stock, and its successors and assigns, including any successor transfer agent appointed by the Corporation. The Corporation may act as its own transfer agent.

Section 4. Dividends and Other Distributions . The holders of the Common Stock and Class B Non-Voting Common Stock shall be entitled to receive an equal amount of dividends per share if, as and when declared from time to time by the Board of Directors. In no event shall any stock dividends or stock splits or combinations of stock be declared or made on Common Stock or Class B Non-Voting Common Stock unless the shares of Common Stock and Class B Non-Voting Common Stock at the time outstanding are treated equally and identically, provided that, in the event of a dividend of Common Stock, shares of Class B Non-Voting Common Stock shall only be entitled to receive shares of Class B Non-Voting Common Stock and shares of Common Stock shall only be entitled to receive shares of Common Stock.

Section 5. Voting Rights . Except as otherwise required by law, herein or as otherwise provided in any statement of designation for any series of preferred stock, the holders of Common Stock shall exclusively possess all voting power and each share of Common Stock shall be entitled to one vote, and the holders of the Class B Non-Voting Common Stock shall have no voting power, and shall not have the right to participate in any meeting of stockholders or to have notice thereof, except as required by applicable law and except that any action that would significantly and adversely affect the rights of the Class B Non-Voting Common Stock with respect to the modification of the terms of the securities or dissolution, shall require the approval of the Class B Non-Voting Common Stock voting separately as a class.

Section 6. Other Rights, Preferences and Privileges . Except as expressly provided in this Article FIFTH(B), the rights, preferences and privileges of the Common Stock and Class B Non-Voting Common Stock shall be in all respects and for all purposes and in all circumstances absolutely and completely identical.

Section 7. Redemptions . The Class B Non-Voting Common Stock shall not be redeemable either at the Corporation’s option or at the option of Holders at any time. The Class B Non-Voting Common Stock shall not be subject to any sinking fund or other obligation to redeem, repurchase or retire the Class B Non-Voting Common Stock.

Section 8. Listing; Registration . In the event the Corporation lists the Common Stock on any national securities exchange or quotation system or registers the Common Stock under the Securities Act, it shall also list the shares of Class B Non-Voting Common Stock at the same time, to the extent such listing or registration is permitted by applicable laws, rules and regulations, and reasonably feasible.

Section 9. Transfer Agent, Registrar and Paying Agent . The duly appointed Transfer Agent, Registrar and paying agent for the Class B Non-Voting Common Stock shall initially be the Corporation. The Corporation may, in its sole discretion, remove itself or any appointed successor as Transfer Agent; provided that the Corporation shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal.

Section 10. Miscellaneous .

(i) The Corporation will pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the conversion of shares of Class B Non-Voting Common Stock into shares of Common Stock; provided, however, that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the Holder of Class B Non-Voting Common Stock to be converted and no such issue or delivery shall be made unless and until the person requesting such issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid.

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(ii) Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under applicable law.

(iii) The headings of the various subdivisions of this Article FIFTH are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.

(iv) If any of the voting powers, preferences and relative participating, optional and other special rights of Class B Non-Voting Common Stock and qualifications, limitations and restrictions thereof set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative participating, optional and other special rights of Class B Non-Voting Common Stock and qualifications, limitations and restrictions thereof set forth herein that can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative participating, optional and other special rights of Class B Non-Voting Common Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative participating, optional or other special rights of Class B Non-Voting Common Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative participating, optional or other special rights of Class B Non-Voting Common Stock and qualifications limitations and restrictions thereof unless so expressed herein.

SIXTH. There is hereby expressly granted to and vested in the board of directors of the Corporation authority to, pursuant to and in accordance with the Section 1522(b) of the Business Corporation Law and any amendment to or restatement of such section, divide the authorized and unissued shares of the Corporation into classes or series, or both, and to fix and determine (except as fixed and determined herein), by resolution, the par value, voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations or restrictions thereof, if any, including specifically, but not limited to, the dividend rights, conversion rights, redemption rights and liquidation preferences, if any, of any wholly unissued series of Common Stock, Class B Non-Voting Common Stock or Preferred Stock (or any entire class if none of the shares in such class have been issued), the number of shares constituting any such series or class, and the terms and conditions of the issue thereof.

SEVENTH. Each holder of record of Common Stock, to the extent such Common Stock has voting rights, shall have the right to one vote for each share of Common Stock standing in such holder’s name on the books of the Corporation. No shareholder shall be entitled to cumulate any votes for the election of directors.

EIGHTH. The management, control and government of the Corporation shall be vested in a board of directors consisting of not less than six (6) nor more than twenty-five (25) members in number, as fixed by the board of directors of the Corporation from time to time. The directors of the Corporation shall be divided into three classes: Class I, Class II and Class III. Each Class shall be as nearly equal in number as possible; subject to the foregoing, the number of Class I, Class II or Class III directors may be changed from time to time by a majority vote of the board of directors. The term of office of each Class shall be three (3) years, so that the term of office of one class of directors shall expire each year when their respective successors have been duly elected by the shareholders and qualified. At each annual election by the shareholders of the Corporation, the directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the directors they succeed. If, for any reason, a vacancy occurs on the board of directors of the Corporation, a majority of the remaining directors shall have the exclusive power to fill the vacancy by electing a director to hold office for the unexpired term in respect of which the vacancy occurred. No director of the Corporation shall be removed from office by the vote of shareholders, unless the votes of shareholders cast in favor of the resolution for the removal of such director constitute at least a majority of the votes which all shareholders would be entitled to cast at an annual election of directors.

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NINTH. Any or all classes of shares of the Corporation, or any part thereof, may be represented by uncertificated shares to the extent determined by the Board of Directors, except that shares represented by a certificate that is issued and outstanding shall be represented thereby until the certificate is surrendered to the Corporation.

TENTH. No holder of any class of capital stock of the Corporation shall have preemptive rights, and the Corporation shall have the right to issue and to sell to any person or persons any shares of its capital stock or any option, warrant or right to acquire capital stock, or any securities having conversion or option rights without first offering such shares, rights or securities to any holder of any class of capital stock of the Corporation.

ELEVENTH . Except as set forth below, the affirmative vote of shareholders entitled to cast at least 80 percent (80%) of the votes which all shareholders of the Corporation are entitled to cast, and if any class of shares is entitled to vote as a separate class, the affirmative vote of shareholders entitled to cast at least a majority of the votes entitled to be cast by the outstanding shares of such class (or such greater amount as required by the provisions of these Articles of Incorporation establishing such class) shall be required to approve any of the following ---

(a) any merger or consolidation of the Corporation with or into any other organization;

(b) any share exchange in which an organization, person or entity acquires the issued or outstanding shares of capital stock of the Corporation pursuant to a vote of shareholders;

(c) any sale, lease, exchange or other transfer of all, or substantially all, of the assets of the Corporation to any other organization, person or entity; or

(d) any transaction similar to, or having similar effect as, any of the foregoing transactions;

--- if, in any of the foregoing cases, as of the record date for the determination of shareholders entitled to notice thereof and to vote thereon, such other organization, person or entity is the beneficial owner, directly or indirectly, of shares of capital stock of the Corporation issued, outstanding and entitled to cast five percent (5%) or more of the votes which all shareholders of the Corporation are then entitled to cast.

If any of the transactions identified above in this Article ELEVENTH is with an organization, person or entity that is not the beneficial owner, directly or indirectly, of shares of capital stock of the Corporation issued, outstanding and entitled to cast five percent (5%) or more of the votes which all shareholders of the Corporation are then entitled to cast, then the affirmative vote of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast shall be required to approve any such transaction. An affirmative vote as provided in the foregoing provisions shall, to the extent permitted by law, be in lieu of the vote of the shareholders otherwise required by law.

The board of directors of the Corporation shall have the power and duty to determine, for purposes of this Article ELEVENTH, on the basis of information known to the board, if and when such other corporation, person or entity is the beneficial owner, directly or indirectly, of shares of capital stock of the Corporation issued, outstanding and entitled to cast five percent (5%) or more of the votes which all shareholders of the Corporation are then entitled to cast, and/or if any transaction is similar to, or has an effect similar to, any of the transactions identified above in this Article ELEVENTH. Any such determination shall be conclusive and binding for all purposes of this Article ELEVENTH. The Corporation may voluntarily completely liquidate and/or dissolve only in accordance with all applicable laws and only if the proposed liquidation and/or dissolution is approved by the affirmative vote of shareholders entitled to cast at least 80 percent (80%) of the votes which all shareholders are entitled to cast. The provisions of this Article ELEVENTH shall not apply to any transaction which is approved in advance by 66-2/3 percent (66-2/3%) of the members of the board of directors of the Corporation, at a meeting duly called and held.

Notwithstanding any provision of this Article or any other provision of these Articles of Incorporation or the Corporation’s bylaws, a plan of merger or consolidation may be approved and adopted without the approval of the Corporation’s shareholders in those circumstances where the applicable law, rules and regulations permit the plan to be approved by the board of directors without the approval of the shareholders.

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TWELFTH. No action required to be taken or which may be taken at any annual or special meeting of shareholders of the Corporation may be taken without a meeting, and the power of the shareholders of the Corporation to consent in writing to action without a meeting is specifically denied. The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast shall constitute a quorum of shareholders at any annual or special meeting of shareholders of the Corporation.

THIRTEENTH. The authority to make, amend, alter, change or repeal the Corporation’s bylaws is hereby expressly and solely granted to and vested in the board of directors of the Corporation, subject always to the power of the shareholders to change such action by the affirmative vote of shareholders of the Corporation entitled to cast at least 66-2/3 percent (66-2/3%) of the votes which all shareholders are entitled to cast, except that Article Eight of the Corporation’s bylaws relating to limitations on directors’ liabilities and indemnification of directors, officers and others may not be amended to increase the exposure to liability for directors or to decrease the indemnification of directors, officers and others except by the affirmative vote of 66-2/3 percent (66-2/3%) of the entire board of directors or by the affirmative vote of shareholders of the Corporation entitled to cast at least 80 percent (80%) of the votes which all shareholders are entitled to cast.

FOURTEENTH. The board of directors of the Corporation, when evaluating any offer of another party to (a) make a tender or exchange offer for any equity security of the Corporation, (b) merge or consolidate the Corporation with another corporation, (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, or (d) engage in any transaction similar to, or having similar effects as, any of the foregoing transactions, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its shareholders, give due consideration to all relevant factors, including without limitation the social and economic effects of the proposed transaction on the depositors, employees, suppliers, customers and other constituents of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located, the business reputation of the other party, and the board of directors’ evaluation of the then value of the Corporation in a freely negotiated sale and of the future prospects of the Corporation as an independent entity.

FIFTEENTH. If any corporation, person, entity, or group becomes the beneficial owner, directly or indirectly, of shares of capital stock of the Corporation having the right to cast in the aggregate 25 percent (25%) or more of all votes entitled to be cast by all issued and outstanding shares of capital stock of the Corporation entitled to vote, such corporation, person, entity or group shall within thirty (30) days thereafter offer to purchase all shares of capital stock of the Corporation issued, outstanding and entitled to vote. Such offer to purchase shall be at a price per share equal to the highest price paid for shares of the respective class or series of capital stock of the Corporation purchased by such corporation, person, entity or group within the preceding twelve months. If such corporation, person, entity or group did not purchase any shares of a particular class or series of capital stock of the Corporation within the preceding twelve months, such offer to purchase shall be at a price per share equal to the fair market value of such class or series of capital stock on the date on which such corporation, person, entity or group becomes the beneficial owner, directly or indirectly, of shares of capital stock of the Corporation having the right to cast in the aggregate 25 percent (25%) or more of all votes entitled to be cast by all issued and outstanding capital stock of the Corporation. Such offer shall provide that the purchase price for such shares shall be payable in cash. The provisions of this Article FIFTEENTH shall not apply if 80 percent (80%) or more of the members of the board of directors of the Corporation approve in advance the acquisition of beneficial ownership by such corporation, person, entity or group, of shares of capital stock of the Corporation having the right to cast in the aggregate 25 percent (25%) or more of all votes entitled to be cast by all issued and outstanding shares of capital stock of the Corporation.

SIXTEENTH. The Corporation’s board of directors may amend, alter, change or repeal any provision contained in its Articles of Incorporation in the manner now or hereafter prescribed by statute and all rights conferred upon shareholders and directors herein are hereby granted subject to this reservation; provided, however, that the provisions set forth in Articles SEVENTH, EIGHTH, ELEVENTH and TWELFTH through FOURTEENTH, inclusive, of these Articles of Incorporation may not be repealed, altered or amended, in any respect whatsoever, unless such repeal, alteration or amendment is approved by either (a) the affirmative vote of shareholders of the Corporation entitled to cast at least 80 percent (80%) of the votes which all shareholders of the Corporation are then entitled to cast or (b) the affirmative vote of 80 percent (80%) of the members of the board of directors of the Corporation and the affirmative vote of shareholders of the Corporation entitled to cast at least a majority of the votes which all shareholders of the Corporation are then entitled to cast.

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SEVENTEENTH. The Control Transactions provisions of Section 2541 of the Business Corporation Law and any amendment to or restatement of such section, shall not be applicable to the Corporation. The Disgorgement By Certain Controlling Shareholders Following Attempt to Acquire Control provisions of Section 2571 of the Business Corporation Law and any amendment to or restatement of such section , shall not be applicable to the Corporation.

NINETEENTH. The name and address, including number and street, if any, of each incorporator is as follows:

Name	Address
Jay S. Sidhu	5 Chardonnay Circle, Mohnton, PA 19540
Richard A. Ehst	1309 East Wyomissing Boulevard, Reading, PA 19611
Thomas Brugger	1142 Lehigh Avenue, Wyomissing, PA 19610

IN TESTIMONY WHEREOF, the Incorporators have signed these Articles of Incorporation this 6th day of April, 2010.

/s/Jay S. Sidhu Jay S. Sidhu, Incorporator	/s/ Richard A. Ehst Richard A. Ehst, Incorporator
/s/ Thomas Brugger Thomas Brugger, Incorporator

Entity #: 3947063

Date Filed: 12/28/2010

Basil L Merenda

Secretary of the Commonwealth

PENNSYLVANIA DEPARTME NT OF STATE

CORPORATION BUREAU

Articles of Amendment-Domestic Corporation

(15 Pa.C.S.)

x Business Corporation (§ 1915)

o Nonprofit Corporation (§ 5915)


Name			Document will be returned to the name and address you enter to the left.
Address			‹
City	State	Zip Code

Fee: $70

In compliance with the requirements of the applicable provisions (relating to articles of amendment), the undersigned, desiring to amend its articles, hereby states that:

	1. The name of the corporation is: Customers 1st Bancorp, Inc.



	2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department) (a) Number and Street City State Zip County 99 Bridge Street Phoenixville PA 19460 Chester
	(b) Name of Commercial Registered Office Provider	County
	c/o

	3. The statute by or under which it was incorporated: Pennsylvania Business Corporation Law of 1988

	4. The date of its incorporation: April 7, 2010

5. Check, and if appropriate complete, one of the following:

x The amendment shall be effective upon filing these Articles of Amendment in the Department of State.

o The amendment shall be effective on: at

Date Hour

PA009 - 10/09/2006 C T System Online

DSCB:15-1915/5915-2

6. Check one of the following:

x The amendment was adopted by the shareholders or members pursuant to 15 Pa.C.S. § 1914(a) and (b) or § 5914(a).

o The amendment was adopted by the board of directors pursuant to 15 Pa. C.S. § 1914(c) or § 5914(b).

7. Check, and if appropriate, complete one of the following:

x The amendment adopted by the corporation, set forth in full, is as follows

o The amendment adopted by the corporation is set forth in full in Exhibit A attached hereto and made a part hereof.

8. Check if the amendment restates the Articles:

o The restated Articles of Incorporation supersede the original articles and all amendments thereto.


	IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 20th day of December,
	2010.
	Customers Bancorp, Inc.
	Name of Corporation
	Signature
	President and Chief Operating Officer
	Title

EXHIBIT A

ARTICLES OF AMENDMENT

ARTICLES OF INCORPORATION

CUSTOMERS 1 st BANCORP, INC.

The Articles of Incorporation of Customers 1 st Bancorp, Inc. are hereby amended as follows:

Article FIRST is amended and restated in its entirety to read:

“ FIRST . The name of the Corporation is Customers Bancorp, Inc.”

Article SECOND is amended and restated in its entirety to read:

“ SECOND . The location and address of the Corporation’s registered office in this Commonwealth is 1015 Penn Avenue, Suite 103, Wyomissing, Pennsylvania 19610.”

pennsylvania

DEPARTMENT OF BANKING

MARKET SQUARE PLAZA | 17 N SECOND STREET, SUITE 1300 | HARRISBURG, PA 17101

Ph 717.787.2665 Fx 717.787.8773 w www.banking.state.pa.us

December 21, 2010

717-783-2253

Christopher S. Connell, Esquire

Stradley Ronon Stevens & Young, LLP

2005 Market Street, Suite 2600

Philadelphia, PA 19103-7018

Dear Mr. Connell:

This will advise you that the Pennsylvania Department of Banking (the "Department") does not object to use of the names "Customers Bank" and "Customers Bancorp, Inc."

It is understood that the name "Customers Bank" is intended to be used by New Century Bank (the "Bank"), Phoenixville, Pennsylvania for a proposed change in corporate name. Similarly, the name "Customers Bancorp, Inc." will be utilized in a proposed bank holding company reorganization planned by the Bank. New Century Bank is chartered and supervised by this Department.

	Very truly yours,

	Joseph A. Moretz
	Manager
	Corporate Applications Division

JAM:jsb

cc: William L. Gaunt, Assistant Vice President, Federal Reserve Bank of Philadelphia

Exhibit D to Agreement and Plan of Merger and Reorganization

BYLAWS

CUSTOMERS 1ST BANCORP, INC.

ARTICLE ONE

OFFICES

1.01. Registered Office . The registered office of Customers 1st Bancorp, Inc. (the “Corporation”) shall be located in such place as the Board of Directors may from time to time designate.

1.02. Other Offices . The Corporation may also have offices at such other places within or without the Commonwealth of Pennsylvania as the Board of Directors may from time to time designate or the business of the Corporation may require.

ARTICLE TWO

SEAL

2.01. Seal . The corporate seal shall have inscribed thereon the name of the Corporation, the year of its incorporation and the words “Corporate Seal, Pennsylvania.”

ARTICLE THREE

SHAREHOLDERS’ MEETINGS

3.01. Place of Meeting . Meetings of shareholders shall be held at any geographic location within or without the Commonwealth of Pennsylvania as shall be fixed from time to time by the Board of Directors. In the absence of such designation, shareholders’ meetings shall be held at the executive office of the Corporation. Shareholders shall not be permitted to participate in any meeting of shareholders by means of conference telephone or the Internet or other electronic communications technology, unless the Board of Directors, by resolution so directs with respect to such meeting. Meetings held by means of the Internet conference or telephone or other electronic communications technology shall not be required to be held at a particular geographic location and shall provide shareholders with the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders and pose questions to the Directors.

3.02. Annual Meeting . The annual meeting of shareholders shall be held on such day each year as may be fixed from time to time by the Board of Directors. At such meetings, Directors shall be elected, reports of the affairs of the Corporation shall be considered, and any other business may be transacted which is within the powers of the shareholders.

3.03. (a) Notice of Meetings . Notice of all meetings of shareholders shall be delivered, personally, by courier service, charges prepaid, by first class, express or bulk mail, postage prepaid, facsimile transmission, e-mail or other electronic communication addressed to the shareholder at his or her postal address, facsimile number, e-mail address or other electronic communication location as it appears on the books of the Corporation or as supplied by such shareholder to the Corporation for the purpose of notice, by or at the direction of the Chief Executive Officer, the Secretary or the officer or persons calling the meeting.

(b) Time of Notice . Notice of any meeting of shareholders shall be delivered not less than ten (10) days, or in the case of bulk mail not less than twenty (20) days, before the date of the meeting, and in accordance with any laws, rules or regulations applicable to the Corporation (collectively referred to herein as “applicable law”). If the notice is sent by mail or courier, such notice shall be deemed to be delivered when deposited in the United States mail or with a courier service for delivery to the shareholder. If the notice is sent by facsimile, e-mail or other electronic communication, such notice shall be deemed to be delivered when sent to the shareholder.

(c) Contents of Notice . Notice of any meeting of shareholders shall state the day, hour and geographic location, if any, of the meeting. The notice shall also state the general nature of the business to be transacted if it is a special meeting.

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(d) Notice of Adjourned Meeting . When a shareholders’ meeting is adjourned, it shall not be necessary to give any notice of the adjourned meeting or of the business to be transacted thereat other than by announcement at the meeting at which the adjournment is taken, unless the Board of Directors fixes a new record date for the new meeting.

3.04. (a) Calling of Special Meetings . Upon request in writing to the Chief Executive Officer, Vice President or Secretary, sent by registered mail or delivered to the officer in person, by any persons entitled to call a special meeting of shareholders, the Secretary of the Corporation shall fix as the date of the meeting a date not less than sixty (60) days after the receipt of the request, and cause notice to be delivered to the shareholders entitled to vote thereat in accordance with Section 3.03 of these Bylaws. Nothing contained in this section shall be construed as limiting, fixing, or affecting the time or date when a meeting of shareholders called by action of the Board of Directors may be held.

(b) Persons Entitled to Call Special Meetings . Special meetings of the shareholders may be called at any time by any of the following: (1) the Board of Directors at a duly called and held meeting of the Board of Directors or upon the unanimous written consent of the members of the Board of Directors; or (2) the Chairman of the Board or the Chief Executive Officer, but only upon receiving written direction of at least a majority of Directors then in office.

(c) Business of Special Meeting . Business transacted at all special meetings shall be confined to the subjects stated in the notice and matters germane thereto, unless all shareholders entitled to vote are present and shall have otherwise consented.

3.05. (a) Quorum of and Action by Shareholders . The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all of shareholders are entitled to cast on a particular matter to be acted upon at a meeting (after giving effect to Article FIFTEENTH or any successor “excess shares” provision, in the Articles of Incorporation of the Corporation), shall constitute a quorum for the purpose of consideration and action on the matter. If a proxy casts a vote on behalf of a shareholder on any issue other than a procedural motion considered at a meeting of shareholders, the shareholder shall be deemed to be present during the entire meeting for purposes of determining whether a quorum is present for consideration of any other issue. If a quorum is present, except in the election of Directors, the affirmative vote of a majority of all votes cast at the meeting shall be the act of the shareholders, unless the vote of a greater or lesser number or the voting by classes is required by these Bylaws, the Articles of Incorporation of the Corporation, the Pennsylvania Business Corporation Law of 1988, as amended (“BCL”) or other applicable law.

(b) Adjournment for Lack or Loss of Quorum . In the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the affirmative vote of a majority of all votes cast at the meeting, but no other business may be transacted. Meetings at which Directors are to be elected shall be adjourned only from day to day or for such longer periods not exceeding fifteen (15) days each and those shareholders who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing Directors. The minimum attendance required for purposes of determining a quorum at an adjourned meeting shall be as provided by applicable law.

3.06. (a) Closing Transfer Books . For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide, or may authorize any officer to provide, that the share transfer books shall be closed for a stated period not to exceed fifty (50) days, in which case written or printed notice thereof shall be mailed at least ten (10) days before the beginning of such period to each shareholder of record at the address appearing on the books of the Corporation or supplied by him to the Corporation for the purpose of notice.

(b) Record Date . In lieu of closing the share transfer books, the Board of Directors may fix in advance, or may authorize any officer to fix, a date as the record date for any such determination of shareholders, such date in any case to be not more than ninety (90) days prior to the date on which the particular action requiring such determination of shareholders is to be taken.

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(c) Other Determination of Shareholders . If the share transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, absent subsequent action by the Board of Directors establishing a different record date, the date fifteen (15) days after the date on which the resolution of the Board of Directors declaring such dividend is adopted, or the date on which the resolutions of the Board of Directors on any other matter is adopted, shall be the record date for such determination of shareholders of record.

(d) Adjourned Meetings . When any determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Article, such determination shall apply to any adjournment thereof unless the Board of Directors fixes a new record date for the adjourned meeting.

3.07. Inspection of Corporate Records . Every shareholder, upon written demand under oath stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books or records of account, and records of the proceedings of the incorporators, shareholders and Directors, and make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand under oath shall be accompanied by a power of attorney or other writing which authorizes the attorney or other agent to so act on behalf of the shareholder. In all cases, the demand under oath shall be directed to the Corporation at its registered office in the Commonwealth of Pennsylvania, at its principal place of business or in care of the person in charge of the actual business office of the Corporation. For purposes of this Section, the Corporation’s principal place of business and its sole actual business office shall be deemed to be the location where the Chief Executive Officer maintains his or her principal office and the person in charge of that office shall be deemed to be the Chief Executive Officer.

3.08. Voting List . The officer or agent having charge of the transfer book for shares of the Corporation shall make, at least ten (10) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such a meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open, or otherwise made available in accordance with applicable law, at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share or transfer book or to vote at any meeting of shareholders.

3.09. Voting of Shares . Except as otherwise provided in the Articles of Incorporation of the Corporation or any statement or other instrument establishing the voting rights of any class or series of shares, or any amendment to any of the foregoing, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.

3.10. Nominations for Directors . Nominations for the election of Directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of Directors. Nominations made by the shareholders entitled to vote for the election of Directors shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the Secretary of the Corporation not less than ninety (90) days nor more than one hundred and twenty (120) days prior to any meeting of shareholders called for election of Directors; provided, however, that if less than twenty-one (21) days’ notice of the meeting is given to shareholders, such written notice shall be delivered or mailed, as prescribed, to the Secretary of the Corporation not later than the close of the seventh day following the day on which notice was mailed to shareholders. Notice of nominations, which are proposed by the Board of Directors, shall be given by the Chairman of the Board or any other appropriate officer. Each notice shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each nominee, and (iii) the number of shares of capital stock of the Corporation which are beneficially owned by each such nominee and the earliest date of acquisition of any of such stock. The Chairman of a meeting of shareholders may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

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3.11. Voting by Ballot . Voting by shareholders in elections for Directors shall be by ballot. No shares shall be voted at any meeting upon which shares an installment is due and unpaid.

3.12. Agenda and Inclusion of Materials in Proxy for Annual Meeting .

(a) Matters to be placed on the agenda for consideration at annual meetings of shareholders may be proposed by the Board of Directors or by any shareholder in accordance with applicable law. Matters proposed for the agenda by shareholders shall be made in accordance with applicable law, by notice in writing, mailed by first class United States mail, postage prepaid, and received by the Secretary of the Corporation not less than forty-five (45) days nor more than one hundred and twenty (120) days prior to the one year anniversary of the date materials were mailed to shareholders for the prior year’s annual meeting of shareholders. Notice of matters, which are proposed by the Board of Directors, shall be given by the Chairman of the Board or any other appropriate officer. Each notice given by a shareholder shall set forth a brief description of the business desired to be brought before the annual meeting in accordance with applicable law. The Chairman of the meeting of shareholders may determine and declare to the meeting that a matter proposed for the agenda was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the matter shall be disregarded.

(b) Any shareholder request to include matters in the Corporation’s proxy material for an annual meeting shall be made in accordance with applicable law, and shall be in writing, mailed by first class United States mail, postage prepaid, and received by the Secretary of the Corporation not less than one hundred and twenty (120) days nor more than one hundred and eighty (180) days prior to the one year anniversary of the date materials were mailed to shareholders for the prior year’s annual meeting of shareholders, unless the annual meeting of shareholders is to be held more than thirty days before or after such anniversary date, in which case, such notice must be received by the Secretary of the Corporation within a reasonable time for inclusion in the Corporation’s proxy materials for the annual meeting.

3.13. Proxies and Revocation of Proxies . Every shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. Every proxy shall be executed or authenticated by the shareholder, or by his duly authorized attorney in fact, and filed or transmitted to with the Secretary of the Corporation. A proxy, unless coupled with an interest, shall be revocable at will, notwithstanding any agreement or any provision to the contrary, but the revocation of a proxy shall not be effective until an executed or authenticated notice thereof shall have been given to the Secretary of the Corporation or its designated agent in writing or by electronic transmission. A telegram, telex, cablegram, datagram, e-mail, Internet communication or other means of electronic transmission from a shareholder or attorney-in-fact, or a photographic, facsimile or similar reproduction of a writing executed by a shareholder or attorney-in-fact:

(1) may, at the discretion of the Secretary, be treated as properly executed or authenticated for purposes of this subsection; and

(2) shall be so treated if it sets forth or utilizes a confidential and unique identification number or other mark furnished by the Corporation to the shareholder for the purposes of a particular meeting or transaction.

No unrevoked proxy shall be valid after eleven (11) months from the date of its execution, authentication or transmission, unless a longer time is expressly provided therein, but in no event shall a proxy unless coupled with an interest, be voted on after three years from the date of its execution. A proxy shall not be revoked by the death or incapacity of the maker unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the Corporation or its designated agent. A shareholder shall not sell his vote or execute a proxy to any person for any sum of money or any other thing of value. A proxy coupled with an interest shall include an unrevoked proxy in favor of a creditor of a shareholder and such proxy shall be valid so long as the debt owed by the shareholder to the creditor remains unpaid.

3.14. Waiver of Notice . Whenever any notice whatever is required to be given to a shareholder under the provisions of the BCL or under the provisions of the Articles of Incorporation or Bylaws of the Corporation, a waiver thereof in writing signed by the shareholder entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice; however, in the case of special meetings, the business to be transacted and the purpose of the meeting shall be stated in the waiver of notice. Attendance of a person at any meeting shall constitute a waiver of notice of the meeting except where a person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.

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3.15. (a) Appointment of Judges of Election . In advance of any meeting of shareholders, the Board of Directors may appoint judges of election, who need not be shareholders, to act at such meeting or any adjournment thereof. If judges of election not be so appointed, the chairman of any such meeting may, and on the request of any shareholder or his proxy shall, make such appointment at the meeting. The number of judges shall be one (1) or three (3) in number. If appointed at a meeting on the request of one (1) or more shareholders or proxies, the majority of all votes entitled to be cast shall determine whether one (1) or three (3) judges are to be appointed. No person who is a candidate for Director shall act as a judge. In case any person appointed as a judge fails to appear or fails or refuses to act, the vacancy may be filled by appointment made by the Board of Directors in advance of the convening of the meeting, or at the meeting by the person acting as chairman.

(b) Duties of Judges . The judges of election shall determine the number of shares outstanding and the voting power and rights of each, the shares represented at the meeting, the existence of a quorum, the authenticity, validity, and effect of proxies, receive votes or ballots, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes, determine the result, and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The judges of election shall perform their duties impartially, in good faith, to the best of their ability, and as expeditiously as is practical. If there are three (3) judges of election, the decision, act or certificate of a majority shall be effective in all respects as the decision, act or certificate of all.

(c) Report of Judges . On request of the chairman of the meeting, or of any shareholder or his proxy, the judges shall be made a report in writing of any challenge or question or matter determined by them, and execute a certificate of any fact found by them.

3.16. Conduct of Meetings . Unless the Board of Directors shall designate another officer or Director of the Corporation to preside and act as the chairman at any regular or special meeting of shareholders, the Chairman of the Board, or in his absence, the Chief Executive Officer shall preside and act as the chairman at any regular or special meeting of shareholders. The chairman of the meeting, consistent with any authority, direction, restriction or limitation given to him by the Board of Directors, shall have any and all powers and authority necessary to conduct an orderly meeting, preserve order and determine any and all procedural matters, including the proper means of obtaining the floor, who shall have the right to address the meeting, the manner in which shareholders will be recognized to speak, imposing reasonable limits on the amount of time at the meeting taken up in remarks by any one shareholder or group of shareholders, the number of times a shareholder may address the meeting, and the person to whom questions should be addressed. Any actions by the Chairman of the Board or any person acting in his place in adopting rules for, or in conducting, a meeting shall be fair to the shareholders. Rules adopted for use at a meeting which are approved in advance by the Board of Directors, and actions taken by the chairman in conducting the meeting pursuant to such rules shall be deemed to be fair to shareholders. The chairman shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the ability to cast a vote will be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes, nor any revocations or changes thereto, may be accepted. In addition, until the business to be completed at a meeting of shareholders is completed, the chairman of a meeting of the shareholders is expressly authorized to temporarily adjourn and postpone the meeting from time to time. The Secretary of the Corporation or in his absence, an Assistant Secretary, shall act as Secretary of all meetings of the shareholders. In the absence at such meeting of the Secretary and Assistant Secretary, the chairman of the meeting may appoint another person to act as Secretary of the meeting.

3.17. Action Without Meeting . No action required to be taken or which may be taken at any annual or special meeting of the shareholders of the Corporation may be taken without a meeting, and the power of the shareholders of the Corporation to consent in writing to action without a meeting is specifically denied.

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ARTICLE FOUR

DIRECTORS

4.01. Directors Defined . “Director” means a director of the Corporation, and “Directors,” when used in relation to any power or duty requiring collective action, means “Board of Directors.”

4.02. Powers . The business and affairs of the Corporation and all corporate powers shall be exercised by or under authority of the Board of Directors, subject to any limitation imposed by the BCL, the Articles of Incorporation of the Corporation, or these Bylaws as to action which requires authorization or approval by the shareholders.

4.03. (a) Number and Classes of Directors . The number of Directors of the Corporation shall be not less than six (6) nor more than twenty-five (25), and the Directors shall be divided into classes and be elected for such terms of office, as provided in the Articles of Incorporation of the Corporation.

(b) Qualifications . Directors need not be residents of the Commonwealth of Pennsylvania. Unless waived by a majority of the Directors in accordance with applicable law, a majority of the Directors shall be persons who are not directors, officers, employees, agents or record or beneficial holders of more than 5% of the voting securities of the Corporation or any corporation or other entity which is a record or beneficial holder of 66-2/3% or more of the issued and outstanding shares of any class of capital stock of the Corporation.

4.04. (a) Vacancies . Vacancies in the Board of Directors shall exist in the case of the happening of any of the following events: (i) the death or resignation of any Director; (ii) if at any annual, regular or special meeting of shareholders at which any Director is elected, the shareholders fail to elect the full authorized number of Directors to be voted for at that meeting; (iii) an increase in the number of Directors (up to a maximum of twenty-five (25)) by resolution of the Board of Directors; (iv) the removal of a Director by the affirmative vote of shareholders of the Corporation in accordance with the Articles of Incorporation of the Corporation; or (v) if the Board of Directors declares vacant the office of any Director for such just cause as the Directors may determine or because such Director has not accepted the office of Director within seventy-five (75) days of being notified of his election by either responding in writing or attending any meeting of the Board of Directors.

(b) Filling of Vacancies . Except as provided in the Articles of Incorporation of the Corporation, any vacancy occurring in the Board of Directors shall be filled by a majority of the remaining Directors (even if less than a quorum of the Board) and each person so elected shall be a Director of the same class as his predecessor until his successor is elected by the shareholders.

4.05. Place of Meetings . All meetings of the Board of Directors shall be held at the principal office of the Corporation or at such place within or without the Commonwealth of Pennsylvania as may be designated from time to time by a majority of the Directors, or may be designated in the notice calling the meeting.

4.06. Regular Meetings . Regular meetings of the Board of Directors shall be held, without call or notice, immediately following each annual meeting of the shareholders of the Corporation, and at such other times as the Directors may determine.

4.07. (a) Call of Special Meetings . Special meetings of the Board of Directors of the Corporation may be called by the Chief Executive Officer, Chairman of the Board, President or by one-third of the Directors.

(b) Notice of Special Meetings . Notice of the day, hour, geographic location and purpose of special meetings of the Board of Directors shall be delivered at least five (5) days before the meeting, personally, by courier service, charges prepaid, first class or express mail, postage prepaid, facsimile transmission, e-mail or other electronic communication, to the postal address, facsimile number, e-mail address or other electronic communication location supplied by the Secretary of the Corporation for the purpose of notice. Notice sent by United States mail shall be deemed to have been delivered when deposited in the United States mail or with a courier service. Notice sent by facsimile transmission, e-mail or other electronic communication shall be deemed to have been given when sent.

4.08. Validation of Meetings Defectively Called or Noticed . The transactions of any meeting of the Board of Directors, however called and noticed and wherever held, are as valid as though taken at a meeting duly held after regular call and notice, if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a waiver of notice. All such waivers shall be filed with corporate records or made a part of the minutes of the meeting. Attendance of a Director at any meeting shall constitute a waiver of notice of such a meeting except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened.

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4.09. Quorum . A majority of the number of Directors in office constitutes a quorum of the Board for the transaction of business.

4.10. Majority Action . Every action or decision done or made by a majority of the Directors present at any meeting duly held at which a quorum is present is the act of the Board of Directors. Each Director who is present at a meeting will be conclusively presumed to have assented to the action taken at such meeting unless his dissent to the action is entered in the minutes of the meeting, or, where he is absent from the meeting, his written objection to such action is promptly filed with the Secretary of the Corporation upon learning of the action. Such right to dissent shall not apply to a Director who voted in favor of such action.

4.11. Action by Consent of Board Without Meeting . Any action required by the BCL to be taken at a meeting of the Board of Directors, or any other action which may be taken at a meeting of the Board of Directors or the executive or other committee thereof, may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the Directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be, and filed with the Secretary of the Corporation.

4.12. (a) Adjournment . In the absence of a quorum a majority of the Directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board.

(b) Notice of Adjourned Meeting . Notice of the time and place of holding an adjourned meeting, whether the meeting is a regular meeting or special meeting, need not be given to absent Directors if the time and place are fixed at the meeting adjourned.

4.13. Conduct of Meetings . At every meeting of the Board of Directors, the Chairman of the Board, the Chief Executive Officer, or in their absence, an officer of the Corporation designated by one of them, or in the absence of such designation, a chairman chosen by a majority of the Directors present, shall preside. The Secretary of the Corporation shall act as Secretary of the Board of Directors. In case the Secretary shall be absent from any meeting, the chairman of the meeting may appoint any person to act as secretary of the meeting.

4.14. Participation at Meeting . One or more Directors may participate in a meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other.

4.15. Compensation . The Board of Directors, by the affirmative vote of a majority of the Directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all Directors for services to the Corporation as Directors, officers, or otherwise.

ARTICLE FIVE

COMMITTEES

5.01. Authorization . The Board of Directors, by resolution adopted by a majority of the whole Board, may create an Executive Committee, an Audit Committee, a Nominating Committee, a Compensation Committee, and such other permanent or temporary committees as the Board deems necessary for the proper conduct of the business of the Corporation. Each committee shall have and may exercise such powers as shall be conferred or authorized by resolution of the Board and which are not inconsistent with these Bylaws nor applicable law. The creation of any committee and the delegation thereto of authority shall not operate to relieve the Board of Directors of any responsibility imposed on it by law.

5.02. Appointment of Committees . The Chief Executive Officer shall submit to the Board of Directors, at its first meeting after the annual meeting of the shareholders, his or her recommendations for the members of and chairman of each committee. The Board shall then appoint, in accordance with such recommendations or otherwise, the members and a chairman for each committee. If the appointees accept their appointment, they shall serve for one (1) year or until their successors are appointed. The Board of Directors shall have the power to fill any vacancies occurring on any committee and to remove and replace a member of any committee. Unless otherwise provided, a Director may be a member of more than one (1) committee. If the Chief Executive Officer of the Corporation is a member of the Board of Directors, the Chief Executive Officer of the Corporation shall be appointed as a full member of the Executive Committee and, to the extent permitted by applicable law, as an ex-officio, non-voting member of each committee of which he or she is not a full member.

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5.03. Conduct of Committees . A majority of the membership of each committee shall constitute a quorum for the transaction of business. Each committee shall meet at such times as the committee may decide or as the Board of Directors may require. Special meetings of committees may be called at any time by its chairman, or by the Chairman of the Board or by the Chief Executive Officer. Except, for its chairman, each committee may appoint a secretary and such other officers as the committee members deem necessary. Each committee shall have the power and authority to obtain from the appropriate officers of the Corporation all information necessary for the conduct of the proper business of the committee. If required by the Board of Directors, minutes of the proceedings shall be submitted to the Board of Directors upon its request.

5.04. Executive Committee . If created by resolution adopted by a majority of the whole Board, the Executive Committee shall meet upon five (5) days’ notice. The Executive Committee shall have and may exercise all the powers of the Board of Directors in the management of the Corporation, except as the Board of Directors may specifically limit by resolution, or except where action by the entire Board of Directors is specifically required by law.

5.05. Audit Committee . If created by resolution adopted by a majority of the whole Board, the Audit Committee shall consist entirely of outside Directors whose emphasis and background shall preferably be in the areas of accounting, finance, or law or who have significant experience with the Corporation or any of its subsidiaries. The object of the Audit Committee shall be to give additional assurance of the integrity of the financial information distributed to the shareholders and the public at large. The Audit Committee shall review the internal audit controls of the Corporation and shall have the authority to cause and supervise such examinations and audits to be made by public accountants of the books and affairs of the Corporation and subsidiary companies as it, in its discretion, deems advisable. The Audit Committee shall also review audit policies, oversee internal audits, review external audits and review any federal or state examination reports. Members of management of the Corporation, whether or not Directors of the Corporation, may be invited by the Audit Committee to attend meetings thereof.

5.06. Nominating Committee . If created by resolution adopted by a majority of the whole Board, the Nominating Committee shall meet at least annually to propose, for consideration by the whole Board, nominees for election as Directors of the Corporation.

ARTICLE SIX

OFFICERS

6.01. Number and Titles . The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, a President, a Secretary, and a Treasurer. The Corporation may also have, at the discretion of the Board of Directors, one (1) or more Vice Chairman, one (1) or more Executive Vice Chairman, one (1) or more Executive Vice Presidents or Vice Presidents, one (1) or more Assistant Secretaries, one (1) or more Assistant Treasurers, and such other officers and assistant officers as may be appointed in accordance with the provisions of Section 6.03 of this Article. One person may hold two (2) or more offices. No person shall, however, simultaneously hold the offices of President and Secretary.

6.02. Election . The Board of Directors shall choose, annually, either the President or Chairman of the Board to be the Chief Executive Officer of the Corporation. The other officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 6.03 or Section 6.05 of this Article, shall be chosen annually by the Board of Directors. Each officer of the Corporation shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.

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6.03. Subordinate Officers . The Chief Executive Officer may appoint, subject to the power of the Board of Directors to approve or disapprove such appointment, such other officers or agents as he may deem necessary, each of whom shall hold office for such period, have such authority and perform such duties in the management of the property and affairs of the Corporation as may be determined by the Chairman or the President not inconsistent with these Bylaws. The Board of Directors may delegate to any officer or committee the power to appoint any subordinate officers, committees or agents to specify their duty and authority, and to determine their compensation.

6.04. Removal and Resignation . Any officer or agent may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, provided, however, that such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer may resign at any time giving written notice to the Board of Directors, to the President or to the Secretary of the Corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

6.05. Vacancies . If the office of the Chairman of the Board or the Chief Executive Officer becomes vacant by reason of death, resignation, removal, or otherwise, the Board of Directors shall elect a successor who shall hold office for the unexpired term and until his successor is elected. If any other office becomes vacant by reason of death, resignation, removal or otherwise, the Chief Executive Officer shall appoint a successor who shall hold office for the unexpired term and until his successor is elected or appointed.

6.06. Chairman of the Board . The Chairman of the Board shall perform the duties of the Chief Executive Officer either when he has (i) been chosen as Chief Executive Officer by the Board of Directors or (ii) when the appointed Chief Executive Officer is legally incapable or physically unable to perform the duties of Chief Executive Officer, and shall perform such duties until the Board of Directors appoints a temporary or permanent successor. The Chairman shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the Bylaws.

6.07. Chief Executive Officer . Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, the Chief Executive Officer shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation, and shall have the general powers and duties of management usually vested in the office of Chief Executive of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws. Within this authority and in the course of his duties he shall:

(a) Conduct Meeting . In the absence of the Chairman of the Board, preside at all meetings of the Board of Directors.

(b) Execute Instruments . When authorized by the Board of Directors or required by law, execute in the name of the Corporation, deeds, conveyances, notices, leases, checks, drafts, bills of exchange, warrants, promissory notes, debentures, contracts, and other papers and instruments in writing, and unless the Board of Directors shall order otherwise by resolution, make such contracts as the ordinary conduct of the Corporation’s business may require.

(c) Hire and Fire Employees . Appoint and remove, employ and discharge, and prescribe the duties and fix the compensation of all agents, employees, and clerks of the Corporation other than the duly appointed officers, subject to the approval of the Board of Directors, and control, subject to the direction of the Board of Directors, all of the officers, agents, and employees of the Corporation.

(d) Meetings of Other Corporations . Unless otherwise directed by the Board of Directors, attend in person, or by substitute appointed by him, or by proxy executed by him, and vote on behalf of the Corporation at all meetings of the shareholders of any corporation in which the Corporation holds stock.

6.08. President . The President shall perform the duties of Chief Executive Officer either when he has been chosen as Chief Executive Officer or when the Chairman of the Board is absent or unable to perform the duties of the Chief Executive Officer. The President shall have such other powers and perform such other duties from time to time as may be prescribed for him by the Board of Directors, the Chief Executive Officer or the Bylaws.

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6.09. Vice Chairman . The Vice Chairman shall have such powers and perform such duties from time to time as may be prescribed for him by the Board of Directors, the Chief Executive Officer or the Bylaws.

6.10. Chief Financial Officer . Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chief Executive Officer, and subject to the control of the Board of Directors, the Chief Financial Officer shall have general supervision, direction and control of the financial affairs of the Corporation, and shall have the general powers and duties of management usually vested in the office of Chief Financial Officer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors, the Chief Executive Officer or the Bylaws.

6.11. Executive Vice President or Vice President . Except as otherwise provided in these Bylaws with respect to the performance of the duties of Chief Executive Officer, in the absence or disability of the President, the Executive Vice Presidents and Vice Presidents, in order of their rank as fixed by the Board of Directors, or if not ranked, the Executive Vice President or Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions on, the President. The Executive Vice Presidents and Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors, the Chief Executive Officer or the Bylaws.

6.12. Secretary . The Secretary shall:

(a) Certify Bylaws . Certify and keep at the registered office or principal place of business of the Corporation the original or a copy of its Bylaws, including all amendments or alterations to date.

(b) Minutes of Meetings . Keep the place where the certified Bylaws or a copy thereof are kept, a record of the proceedings of meetings of its Directors, shareholders, Executive Committee, and other committees, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at Directors’ meetings, the number of shares present or represented at shareholders’ meetings, and the proceedings thereof.

(c) Sign or Attest Documents . Sign, certify, or attest such documents as may be required by law for the business of the Corporation.

(d) Notices . See that all notices are duly given in accordance with the provisions of these Bylaws and as required by applicable law. In case of the absence or disability of the Secretary or his or her refusal or neglect to act, notice may given and served by an Assistant Secretary, Treasurer, or by the Chief Executive Officer or Board of Directors.

(e) Custodian of Records and Seals . Be custodian of the records and of the seal of the Corporation and see that it is engraved, lithographed, printed, stamped, impressed upon or affixed to all certificated shares prior to their issuance, and to all documents or instruments the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the provisions of these Bylaws, or which otherwise attested to or certified to by the Secretary.

(f) Share Register . Keep at the place where the certified Bylaws or a copy thereof are kept, or at the office of the transfer agent or registrar, a share register or duplicate share register giving the names of shareholders, their respective addresses, and the number of classes of shares held by each. The secretary shall also keep appropriate, complete, and accurate books or records of account at the Corporation’s registered office or its principal place of business.

(g) Reports and Statements . See that the books, reports, statements, certificates and all other documents and records required by law are properly kept and filed.

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(h) Exhibit Records . Exhibit at all reasonable times to proper persons on such terms as are provided by applicable law on proper application, the Bylaws, the share register, and minutes of proceedings of the shareholders and Directors of the Corporation.

(i) Other Duties . In general, perform all duties incident to the office of Secretary, and such other duties as from time to time may be assigned to him or her by the Board of Directors.

(j) Absence of Secretary . In case of the absence or disability of the Secretary or his or her refusal or neglect to act, the Assistant Secretary, or if there be none, the Treasurer, acting as Assistant Secretary may perform all of the functions of the Secretary. In the absence or inability to act or refusal or neglect to act of the Secretary, the Assistant Secretary and Treasurer, any person thereunto authorized by the Chief Executive Officer or by the Board of Directors may perform the functions of the Secretary.

6.13. Assistant Secretary . At the request of the Secretary or in his or her absence or disability, any Assistant Secretary, shall perform all the duties of the Secretary, and when so acting, he or she shall have all the powers of, and be subject to all restrictions on, the Secretary. The Assistant Secretary shall perform such other duties as from time to time may be assigned to him or her by the Board of Directors or the Secretary.

6.14. Treasurer .

(a) Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chief Financial Officer, the Treasurer shall, subject to the control of the Board of Directors, have the general powers and duties of management usually vested in the office of Treasurer of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors, the Chief Executive Officer, the Chief Financial Officer or the Bylaws.

(b) The Treasurer and such other Officers as may be designated by the Board of Directors shall receive, take care of, and be responsible for all moneys, securities, and evidences of indebtedness belonging to the Corporation, deposit the same in the name of the Corporation in such depositories as the Board of Directors shall direct and shall keep a complete record of all receipts and disbursements of the Corporation.

(c) The Treasurer shall sign drafts and such other instruments as may, under these Bylaws or by direction of the Board of Directors, require his official signature, and shall keep a record thereof.

(d) The Treasurer shall perform such other duties as may be required by these Bylaws or by the Chief Executive Officer, Chief Executive Officer or the Board of Directors.

6.15. Assistant Treasurer . At the request of the Treasurer or in his or her absence or disability, the Assistant Treasurer shall perform all the duties of the Treasurer, and when so acting, shall have all the powers of, and be subject to, all the restrictions on the Treasurer. The Assistant Treasurer shall perform such duties as from time to time may be assigned to him or her by the Board of Directors, the Chief Financial Officer, the Chief Executive Officer or the Treasurer.

6.16. Salaries . The salaries of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the Corporation.

ARTICLE SEVEN

ISSUANCE AND TRANSFER OF SHARES

7.01. Classes and Series of Shares . The Corporation may issue such shares of stock as are authorized by the Articles of Incorporation of the Corporation. Except as provided in the Articles of Incorporation, if a class is divided into series, all the shares of any one series shall have the same conversion, redemption and other rights, preferences, qualifications, limitations and restrictions.

7.02. Fully Paid Shares . No shares may be issued by the Corporation until the full amount of the consideration for such shares has been paid. When such consideration has been paid to the Corporation, the shares shall be issued to the shareholder in uncertificated form or in certificated form if the shareholder requests physical certificates representing such shares.

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7.03. Certificated and Uncertificated Shares Authorized . As authorized in the Corporation’s Articles of Incorporation, any or all classes and series of shares of the Corporation, or any part thereof, may be represented by uncertificated shares to the extent determined by the Board of Directors, except that shares represented by a certificate that is issued and outstanding shall continue to be represented thereby until the certificate is surrendered to the Corporation. Shares shall be issued in certificated form if a shareholder requests physical certificates representing such shareholder’s shares. Except as otherwise expressly provided by applicable law, the rights and obligations of the holders of uncertificated and certificated shares of the same class and series shall be identical.

7.04. Consideration for Shares . The consideration for the issuance of shares may be paid, in whole or in part, in money, in other property actually received, tangible or intangible, or in labor done for the Corporation. Future services shall not constitute payment, or part-payment, for shares of the Corporation.

7.05. Information Regarding Shares .

(a) Form of Certificates . Certificated shares shall be of such form and style, printed or otherwise, as the Board of Directors may designate, and each certificate shall state all of the following facts:

(i)

That the Corporation is organized under the laws of the Commonwealth of Pennsylvania.

(ii)

The name of the registered holder of the shares represented by the certificate.

(iii)

The number and class of shares and the designation of the series, if any, which such certificate represents.

(b) Shares in Classes or Series . If the Corporation is authorized to issue shares of more than one class or series, each certificated share shall set forth, either on the face or back of the certificate, a full or summary statement of all of the designations, voting rights, preferences, limitations, and relative rights of the shares of each class or series authorized to be issued and, if the Corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series, so far as the same have been fixed and determined, and authority of the Board of Directors to fix and determine the designations, voting rights, preferences, limitations, and relative rights of the classes and series of shares of the Corporation. The full or summary statement required by this paragraph (b) to be on the face or back of the certificated share or in the written notice required by paragraph (d) of this Section with respect to uncertificated shares, may be omitted from the certificate or written notice, as the case may be, if it is written on the face or back of such certificate or written notice that such statement, in full, will be furnished by the Corporation to any shareholder upon request and without charge.

(c) Restriction on Transfer . Any restrictions imposed by the Corporation on the sale or other disposition of its shares and on the transfer thereof must be noted conspicuously on each certificated share, or on a written notice given as required by paragraph (d) of this Section in the case of each uncertificated share, to which the restriction applies.

(d) Notice of Rights for Uncertificated Shares . Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered holder of such shares, a written notice containing the information required to be set forth on certificated shares as set forth in paragraphs (a), (b) and (c) of this Section.

7.06. Signing Certificates — Facsimile Signatures . All certificated shares shall be signed by such officers as the Board of Directors may determine from time to time, or, in the absence of such any determination, by the Chief Executive Officer or a Vice President and by either the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer, and shall be sealed with the corporate seal, or a facsimile of the seal of the Corporation. If a certificated share is countersigned by a transfer agent or registrar, any other signatures or countersignatures on the certificate may be facsimiles. In case any officer of the Corporation or any officer or employee of the transfer agent or registrar who has signed or whose facsimile signature has been placed upon such certificated share ceases to be an officer of the Corporation, or an officer or employee of the transfer agent or registrar before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if the officer of the Corporation, or the officer or employee of the transfer agent or registrar, had not ceased to be such at the date of its issue.

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7.07. (a) Transfer of Shares . Transfer of certificated or uncertificated shares shall be made on the books of the Corporation upon surrender of the shares therefor, and, in the case of certificated shares, endorsed by the person named in the certificate or by his attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with applicable law.

(b) Transfer of Lost or Destroyed Shares . Where a certificated shares has been lost, apparently destroyed, or wrongfully taken and the owner fails to notify the Corporation of that fact within a reasonable time after he has notice of it, and the Corporation registers a transfer of the share(s) represented by the certificate before receiving such notification, the owner is precluded from asserting against the Corporation any claim for registering the transfer or any claim to new certificated or uncertificated shares representing such lost, destroyed or wrongfully taken shares.

(c) Replacement of Lost or Destroyed Certificates . Where the holder of certificated shares claims that the certificate has been lost, destroyed, or wrongfully taken, the Corporation shall issue new shares in uncertificated form, unless the holder requests certificated shares, in place of the original certificate if the owner: (i) so requests before the Corporation has notice that the shares have been acquired by a bona fide purchaser; (ii) files with the Corporation a sufficient indemnity bond; and (iii) satisfies any other reasonable requirements imposed by the Board of Directors.

(d) Transfer After Replacement . If, after the issue of new certificated or uncertificated shares as a replacement for a lost, destroyed, or wrongfully taken certificated shares, a bona fide purchaser of the original certificate presents it for registration of transfer, the Corporation must register the transfer unless registration would result in over-issue. In addition to any rights on the indemnity bond, the Corporation may recover the new certificated or uncertificated shares from the person to whom such shares were issued or any person taking under him except a bona fide purchaser.

7.08. Transfer Agents and Registrars . The Board of Directors may appoint one (1) or more transfer agents and one (1) or more registrars, each of which shall be an incorporated bank or trust company, either domestic or foreign, either independent or a subsidiary of the Corporation, which shall be appointed at such times and places as the requirements of the Corporation may necessitate and the Board of Directors may designate.

7.09. Conditions of Transfer . A person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof as regards the Corporation, provided that whenever any transfer of shares shall be made for collateral security, and written notice thereof shall be given to the Secretary of the Corporation or its transfer agent, if any, such fact shall be stated in the entry of the transfer. When a transfer of shares is requested and there is reasonable doubt as to the right of the person seeking the transfer, the Corporation or its transfer agent, before recording the transfer of the shares on its books or issuing any certificated or uncertificated shares therefor, may require from the person seeking the transfer reasonable proof of his right to the transfer. If there remains a reasonable doubt of the right to the transfer, the Corporation may refuse a transfer unless the person gives adequate security or a bond of indemnity executed by a corporate surety or by two (2) individual sureties satisfactory to the Corporation as to form, amount and responsibility of sureties. The bond shall be conditioned to protect the Corporation, its officers, transfer agents, and registrars, and any of them against any loss, damage, expense, or other liability (including attorneys’ fees) to the owner of the shares by reason of the recordation of the transfer or the issuance of new shares.

ARTICLE EIGHT

LIMITATION OF DIRECTORS’ LIABILITY; INDEMNIFICATION

8.01. Limitation of Liability . To the fullest extent permitted by the provisions of Subchapter B of Chapter 17 of the BCL (15 Pa. C.S. 1711 et seq .) and any amendment to or restatement of such provisions, other applicable provisions of the BCL and any other applicable law, a Director (including a member of any advisory board) of the Corporation shall not be personally liable to the Corporation, its shareholders or others for monetary damages for any action taken or any failure to take any action unless the Director has breached or failed to perform the duties of his or her office, as set forth in the applicable law, and such breach or failure constitutes self-dealing, willful misconduct or recklessness. The provisions of this Article Eight shall not apply with respect to the responsibility or liability of a Director (including a member of any advisory board) under any criminal statute or the liability of a Director (including a member of any advisory board) for the payment of taxes pursuant to local, state or federal law.

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8.02. (a) Indemnification . The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a Director (including a member of any advisory board), officer, employee or agent of the Corporation, any one or more bank subsidiaries of the Corporation (individually and collectively, the “Bank”), or any other direct or indirect subsidiary of the Corporation or the Bank designated by the Board of Directors or is or was serving at the request of the Corporation as a Director (including a member of any advisory board), officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, to the fullest extent authorized or permitted by the laws of the Commonwealth of Pennsylvania.

(b) Advance of Expenses . Expenses (including attorneys’ fees) incurred in defending a civil or criminal action, suit, or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of (i) an undertaking by or on behalf of the Director (including a member of any advisory board), officer, employee, or agent to repay such amount if it shall be ultimately determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article Eight and (ii) if requested at the discretion of the Board of Directors, adequate security or a bond to cover any such amounts for which it is ultimately determined that he or she is not entitled to such indemnity.

(c) Indemnification not Exclusive . The indemnification and advancement of expenses provided by this Article Eight shall not be deemed exclusive of any other right to which persons seeking indemnification and advancement of expenses may be entitled under any agreement, vote of shareholders or disinterested Directors, or otherwise, both as to actions in such persons’ official capacity and as to their actions in another capacity while holding office, and shall continue as to a person who has ceased to be a Director (including a member of any advisory board), officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person.

(d) Insurance, Contracts, Security . The Corporation may purchase and maintain insurance on behalf of any person, may enter into contracts of indemnification with any person, and may create a fund of any nature (which may, but need not, be under the control of a trustee) for the benefit of any person and may otherwise secure in any manner its obligations with respect to indemnification and advancement of expenses, whether arising under this Article Eight or otherwise, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article Eight.

8.03. Effective Date . The limitation of liability provided in Section 8.01 of this Article Eight and the right to indemnification provided in Section 8.02 of this Article Eight shall apply to any action or failure to take any action occurring on or after the formation of the Corporation.

8.04. Amendment, Etc . Notwithstanding anything herein contained to the contrary, this Article Eight may not be amended or repealed, and a provision inconsistent herewith may not be adopted, except by the affirmative vote of 66-2/3% of the members of the entire Board of Directors or by the affirmative vote of shareholders of the Corporation entitled to cast at least 80% of the votes which all shareholders of the Corporation are then entitled to cast, except that, if the BCL is amended or any other statute is enacted or amended so as to decrease the exposure of Directors (including a member of any advisory board) to liability or increase the indemnification rights available to Directors (including a member of any advisory board), officers, employees, agents or others, then this Article Eight and any other provisions of these Bylaws inconsistent with such decreased exposure or increased indemnification rights shall be amended, automatically and without any further action on the part of the shareholders or Directors, to reflect such reduced exposure or increased indemnification rights, unless such legislation expressly requires otherwise. Any repeal or modification of this Article Eight by the shareholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a Director (including a member of any advisory board) of the Corporation or any right to indemnification from the Corporation with respect to any action or failure to take any action occurring prior to the time of such repeal or modification.

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ARTICLE NINE

SEVERABILITY

9.01. If a final judicial determination is made or an order is issued by a court or government regulatory agency having jurisdiction that any provision of these Bylaws is unreasonable or otherwise unenforceable, such provisions shall not be rendered void, but shall be deemed amended to apply to the maximum extent as such court or government regulatory agency may determine or indicate to be reasonable. If, for any reason, any provision of these Bylaws shall be held invalid, such invalidity shall not affect any other provision of these Bylaws not held so invalid, and each such other provision shall, to the full extent permitted by law, continue in full force and effect. If any provision of these Bylaws shall be held invalid in part, such invalidity shall in no way affect the remainder of such provisions, and the remainder of such provisions, together with all other provisions of these Bylaws shall, to the full extent permitted by law, continue in full force and effect.

ARTICLE TEN

AMENDMENTS

10.01. Except and only to the extent otherwise expressly provided in these Bylaws, the Articles of Incorporation of the Corporation, the BCL or other applicable law, the authority to make, amend, alter, change, or repeal these Bylaws is hereby expressly and solely granted to and vested in the Board of Directors of the Corporation, subject always to the power of shareholders to change such action by the affirmative vote of shareholders of the Corporation entitled to cast at least 66-2/3% of the votes that all shareholders are entitled to cast thereon.

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ANNEX B

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER is dated as of August 23, 2010 (this “ Agreement ”), by and among Berkshire Bancorp, Inc., a Pennsylvania corporation (“ Berkshire Bancorp ”), its direct wholly-owned subsidiary, Berkshire Bank, a Pennsylvania commercial bank (“ Berkshire Bank ”), Customers 1 ST Bancorp, Inc., a Pennsylvania business corporation, intending to be renamed Customers Bancorp, Inc. (“ Holdco ”) and New Century Bank, a Pennsylvania commercial bank (“ NCB ”).

W I T N E S S E T H:

WHEREAS, the boards of directors of Berkshire Bancorp, Berkshire Bank and NCB have determined that it is in the best interests of their respective companies and their shareholders, customers, employees and communities, to consummate the strategic business combination transaction provided for in this Agreement in which (i) Berkshire Bancorp will merge with and into Holdco (the “ Merger ”), and, immediately thereafter, (ii) Berkshire Bank will, on the terms and subject to the conditions set forth in this Agreement, merge with and into NCB (the “ Bank Merger ”), so that NCB is the resulting institution in the Bank Merger (sometimes referred to in such capacity as the “ Resulting Institution ”) and Holdco will continue as the holding company and sole shareholder of the Resulting Institution;

WHEREAS, NCB and Holdco have proposed a holding company reorganization pursuant to which Holdco, which is presently a wholly owned subsidiary of NCB, will become the holding company for NCB (the “Holding Company Reorganization” ). As presently proposed, the Holding Company Reorganization is more fully described in a certain registration statement on form S-1 filed with the SEC on April 22, 2010 (File No. 333-166225), and further amended to and including the amended registration statement filed on July 2, 2010 (collectively, as so amended, the “Pending NCB Registration Statement” ). In connection with the Holding Company Reorganization, which is not expected to be consummated until immediately prior to the Merger and Bank Merger, Holdco proposes to issue shares of “Holdco Common Stock” and “Holdco Nonvoting Stock” (as those terms are hereinafter defined) to holders of NCB Common Stock and NCB Nonvoting Stock, respectively, in exchange for the NCB Shares they hold.

WHEREAS, for federal income Tax purposes, it is intended that the Merger and Bank Merger qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and this Agreement is intended to be and is adopted as a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g);

WHEREAS, concurrently with the execution of this Agreement, each individual included on Schedule A attached hereto, constituting each of the directors and executive officers of Berkshire Bancorp and Berkshire Bank, has executed an agreement in the form of Exhibit A attached hereto (collectively, the “ Support Agreements ”) between such individual and Holdco and NCB governing the voting of all shares of Berkshire Bancorp Common Stock (as defined herein) owned by such individual and the support of the Merger and Bank Merger and this Agreement by such individual as director and/or officer of Berkshire Bancorp and Berkshire Bank, in connection with the Berkshire Shareholders Meeting (as defined herein); and

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WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the Merger and Bank Merger and also to prescribe certain conditions to the Merger and Bank Merger.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1

Definitions

Section 1.1. Defined Terms . As used in this Agreement, the following terms have the following meanings.

“ BCL ” means the Pennsylvania Business Corporation Law of 1988, as amended.

“ Berkshire Bank Common Stock ” means the class of common stock, $1.00 par value per share, of Berkshire Bank.

“ Berkshire Bancorp Common Stock ” means the class of common stock, $1.00 par value per share, of Berkshire Bancorp.

“ Berkshire Bancorp Shares ” means and includes shares of the Berkshire Bank Common Stock.

“Berkshire Series C Preferred Stock’ means the 6% non-cumulative, non-voting, convertible perpetual preferred stock, Series C.

“Berkshire Valuation” means (A) (i) Berkshire's tangible common book value (as determined according to GAAP) as of the most recent calendar month-end prior to the Effective Time, minus (ii) the Book Value Adjustment, if any, minus the costs (whether capitalized or expensed) that, as of the Effective Time, shall be or have been accrued or otherwise incurred by either or both of Berkshire Bancorp and Berkshire Bank related to this Agreement and the Merger or Bank Merger, divided by (B) the number of shares of Berkshire Common Stock outstanding at the Effective Time; provided, however , that, in the event the Berkshire Valuation would be less than $1.95, then the Berkshire Valuation shall be deemed equal to $1.95.

“ BHC Act ” means the Bank Holding Company Act of 1956, as amended.

“Book Value Adjustment” means the dollar amount necessary, as of the most recent calendar month end prior to the Effective Time, to bring Berkshire Bank’s total loan loss reserves up to an amount equal to 40% of its Nonperforming Loans.

“ Certificate ” means each certificate evidencing Berkshire Bancorp Shares.

“ Dissenting Holder ” means a holder of Dissenting Shares.

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“ Dissenting Shares ” means Berkshire Bancorp Shares owned of record by persons who do not vote any such Berkshire Bancorp Shares in favor of the adoption of this Agreement and the Merger and who comply with the provisions of the BCL concerning the rights of holders of Berkshire Bancorp Shares to dissent from the Merger and require appraisal of their Common Shares.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Exchange Agent ” means such bank or trust company or other agent designated by Holdco, and reasonably acceptable to Berkshire Bancorp, which shall act as agent for Holdco in connection with the exchange procedures for converting Berkshire Bancorp Shares into the Merger Consideration.

“ Exchange Ratio ” means, subject to the provisions of Section 3.1.5, the quotient, rounded to the nearest one ten thousandth, of (i) the Berkshire Valuation, divided by (ii) the product of the NCB Valuation multiplied by exchange ratio that is used with respect to the Holding Company Reorganization.

“ Holdco Common Stock ” means the class of voting common stock, $1.00 par value per share, of Holdco.

“Holdco Nonvoting Stock” means the Class B Non-Voting Common Stock, $1.00 par value per share, of Holdco.

“Holdco Shares” means the Holdco Common Stock and the Holdco Nonvoting Stock.

“ Lien ” means any lien, pledge, charge, security interest or similar encumbrance.

“ Material Adverse Effect ” means, with respect to Berkshire Bancorp, Berkshire Bank, Holdco, NCB or the Resulting Institution, as the case may be, a material adverse effect on (i) the business, results of operations or financial condition of such party and its Subsidiaries taken as a whole ( provided, however , a Material Adverse Effect shall not be deemed to include effects to the extent resulting from (A) changes, after the date hereof, in generally accepted accounting principles or regulatory accounting requirements applicable to banks or savings associations and their holding companies, generally, (B) changes, after the date hereof, in laws, rules or regulations of general applicability to banks or savings associations and their holding companies, generally, or interpretations thereof by courts or Governmental Entities, (C) changes, after the date hereof, in global or national political conditions (including national emergencies, the outbreak of war or acts of terrorism) or in general economic or market conditions affecting banks, savings associations or their holding companies generally, (D) consummation or public disclosure of this Agreement or the transactions contemplated hereby or compliance with the terms hereof, including reasonable expenses incurred by the parties hereto in consummating the transactions contemplated by this Agreement, or (E) actions or omissions of Berkshire Bancorp, Berkshire Bank on the one hand, or NCB on the other hand, taken with the prior written consent of the other party or parties in contemplation of the transactions contemplated hereby or required hereunder. Without limiting the foregoing in any respect, at “Material Adverse Effect” shall be deemed to have occurred if at any time heretofore or hereafter Berkshire Bank’s combined Nonperforming Loans and Nonperforming Assets exceed $9,685,907.80, calculated in the same

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manner (subject, nevertheless, to the definitions of the respective terms set forth in this Agreement) as in Schedule B attached hereto.

“ NCB Common Stock ” means the class of voting common stock, $1.00 par value per share, of NCB.

“NCB Nonvoting Stock” means the Class B Non-Voting Common Stock, $1.00 par value per share, of NCB.

“NCB Shares” means the NCB Common Stock and the NCB Nonvoting Stock.

“NCB Valuation” means (i) NCB's tangible common book value (as determined according to GAAP) as of the most recent calendar month-end prior to the Effective Time, divided by (ii) the then current number of NCB Shares outstanding at the Effective Time.

“Nonperforming Asset” with respect to Berkshire Bank means an asset (other than property originally acquired for future expansion but no longer intended to be used for that purpose) required to be reported, as of any date of reference, in Item 3 of Schedule RC-M to FFIEC Form 041 (Consolidated Report of Condition and Income), as in force on the date of this Agreement, whether or not Berkshire Bank is required to report such items or is required to report as required in the instructions to such form, and “Nonperforming Assets” shall mean them collectively.

“Nonperforming Loan” with respect to Berkshire Bank means an asset required to be reported, as of any date of reference, in Column B or Column C of Items 1 through 9 of Schedule RC-N to FFIEC Form 041 (Consolidated Report of Condition and Income), as in force on the date of this Agreement, whether or not Berkshire Bank is required to report such items or is required to report as required in the instructions to such form, and “Nonperforming Loans” shall mean them collectively.

“ Relevant Group ” means any affiliated, combined, consolidated, unitary or similar group.

“ Sarbanes-Oxley Act ” means the Sarbanes-Oxley Act of 2002, as amended.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Tax ” or “ Taxes ” means all federal, state, local, or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental, profits, windfall profits, transaction, license, lease, service, use, occupation, severance, energy, unemployment, social security, worker’s compensation, capital, premium, or other taxes, assessments, customs, duties, fees, levies, or other governmental charges of any nature whatever, whether disputed or not, together with any interest, penalties, additions to tax, or additional amounts with respect thereto.

“ Troubled Debt Restructuring ” when applied to Berkshire Bank means and includes each asset that is included in the term “Troubled Debt Restructurings” for regulatory reporting purposes,

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as of any date of reference, as defined in the FFIEC Instructions for Preparation of Consolidated Reports of Condition and Income (FFIEC 031 and 041) as in force on the date of this Agreement, whether or not Berkshire Bank is required to report such items or is required to report as required in such instructions.

Section 1.2. Other Defined Terms . Other capitalized terms used herein are defined elsewhere in this Agreement.

Term	Section

Agreement	Introduction
Alternative Proposal	Section 7.9.1
Alternative Transaction	Section 7.9.1
Articles of Merger	Section 2.2
Banking Code	Section 2.1
Bank Merger	Preamble
Berkshire Bank	Introduction
Berkshire Bank Articles	Section 5.1.3
Berkshire Bank Bylaws	Section 5.1.3
Berkshire Bancorp	Introduction
Berkshire Bancorp Articles	Section 5.1.2
Berkshire Bancorp Bylaws	Section 5.1.2
Berkshire Bancorp Disclosure Schedule	Article 5
Berkshire Bancorp Ratio	Section 9.1.7
Berkshire Bancorp Regulatory Agreement	Section 5.5.2
Berkshire Bancorp Requisite Regulatory Approvals	Section 8.2.3
Berkshire Bancorp Stock Plans	Section 5.2.1
Berkshire Bancorp Subsidiary	Section 5.1.3
Berkshire Bancorp Warrants	Section 3.1.6
Berkshire Contract	Section 5.13.1
Berkshire Director Designee	Section 7.11
Berkshire Tarp Shares	Section 5.2.1
Berkshire Tarp Shares Series A	Section 5.2.1
Berkshire Tarp Shares Series B	Section 5.2.1
Claim	Section 7.6.1
Closing	Section 10.1
Closing Date	Section 10.1
Code	Preamble
Confidentiality Agreement	Section 7.3.3
Covered Employees	Section 7.5.1
Departing Berkshire Directors	Section 7.11
Derivative Transactions	Section 4.14.1
DPC Common Shares	Section 3.12
Effective Time	Section 2.2
Election	Section 3.2.1(a)
Election Deadline	Section 3.2.1(d)

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Term	Section

Environmental Laws	Section 4.18
ERISA	Section 4.11.1
ERISA Affiliate	Section 4.11.3(d)
Exchange Agent Agreement	Section 3.2.1(d)
Exchange Fund	Section 3.2.2
Expense Reimbursement	Section 9.3.2(c)
FDIC	Section 4.1.4
Federal Reserve Board	Section 4.4
Form of Election	Section 3.2.1(b)
GAAP	Section 5.1.3
Governmental Entity	Section 4.4
Holdco	Introduction
Holder	Section 3.2.1
Holding Company Reorganization	Preamble
HSR Act	Section 4.4
Indemnified Parties	Section 7.6.1
Index Price	Section 9.1.7
Index Ration	Section 9.1.7
Injunction	Section 8.1.3
Insurance Amount	Section 7.6.2
Intellectual Property	Section 4.17
Letter of Transmittal	Section 3.2.3(a)
Loan(s)	Section 4.25.1
Materially Burdensome Regulatory Condition	Section 7.2
Merger	Preamble
Merger Consideration	Section 3.1.3
NCB	Introduction
NCB Articles	Section 4.1.2
NCB Board	Section 4.3.1
NCB Bylaws	Section 4.1.2
NCB Contract	Section 4.13.1
NCB Directors	Section 7.11
NCB Disclosure Schedule	Article 4
NCB Regulatory Agreement	Section 4.5.2
NCB Requisite Regulatory Approvals	Section 8.3.3
NCB Shareholder Meeting	Section 7.4.1
Other Regulatory Approvals	Section 4.4
Pending NCB Registration Statement	Preamble
Permitted Encumbrances	Section 4.16
Personal Property Lease	Section 4.19
Plans	Section 4.11.1
Policies, Practices and Procedures	Section 4.15.2
Proxy Statement-Prospectus	Section 7.1.1
Public Proposal	Section 9.3.2(b)
Real Property	Section 4.16

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Term	Section

Regulatory Agencies	Section 4.5.1
Resulting Institution	Preamble
SEC	Section 4.4
Securities Act	Section 4.2.1
Shortfall Number	Section 3.1.6(b)(ii)
Stock Consideration	Section 3.1.3
Subsidiary	Section 5.1.3
Support Agreements	Preamble
Termination Fee	Section 9.3.2
Trust Account Common Shares	Section 3.12
Voting Debt	Section 4.2.1

ARTICLE 2

The Merger

Section 2.1. The Merger . Subject to the terms and conditions of this Agreement, in accordance with the BCL, at the Effective Time Berkshire Bancorp shall merge with and into Holdco in the Merger. NCB shall be the resulting institution in the Merger and Holdco shall continue its existence under the laws of the Commonwealth of Pennsylvania, continuing as the holding company and sole shareholder of the Resulting Institution.

Section 2.2. Effective Time . The Merger shall become effective as set forth in the articles of merger (the “ Articles of Merger ”) that shall be filed with the Secretary of State of the Commonwealth of Pennsylvania. The “ Effective Time ” shall be the date and time when the Merger becomes effective as set forth in the Articles of Merger. The Bank Merger is intended to become effective immediately after the Merger, as more fully provided in the Bank Plan of Merger.

Section 2.3. Effects of the Bank Merger . At and after the Effective Time, the Bank Merger shall have the effects set forth in Section 1606 of the Banking Code.

Section 2.4. Tax Consequences . It is intended that the Merger and Bank Merger shall constitute a “reorganization” within the meaning of Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

Section 2.5. Board of Directors; Officers . At and after the Effective Time, the directors of Holdco and the Resulting Institution, respectively, shall be comprised of the directors of Holdco and NCB, respectively, immediately prior to the Effective Time, and immediately after the Effective Time, one individual who is presently a member of the board of directors of Berkshire Bancorp on the date of this Agreement shall be appointed to the board of directors of Holdco and the board of directors of the Resulting Institution in accordance with Section 7.13. The executive officers of the Holdco and Resulting Institution at and immediately after the Effective Time shall consist of the officers of Holdco and NCB, respectively, immediately prior to the Effective Time.

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Section 2.6. Articles of Incorporation . At the Effective Time, (a) the Articles of Incorporation of Holdco shall be and remain the Articles of Incorporation of Holdco as the survivor of the Merger (subject to such amendments as Holdco may hereafter elect to make to establish such name as Holdco deems appropriate), provided, however, after the Berkshire Shareholder Meeting, Holdco shall not make changes that affect the rights or consideration to the Berkshire Bancorp shareholders, and (b) the Articles of Incorporation of NCB shall be the Articles of Incorporation of the Resulting Institution until thereafter amended in accordance with applicable law.

Section 2.7. Bylaws . At the Effective Time, (a) the Bylaws of Holdco shall be and remain the Bylaws of Holdco as the survivor of the Merger (subject to such amendments as Holdco may hereafter elect to make to establish such name as Holdco deems appropriate), and (b) the Bylaws of NCB shall be the Bylaws of the Resulting Institution, in each case until thereafter amended in accordance with applicable law.

ARTICLE 3

Conversion of Shares; Delivery of Merger Consideration

Section 3.1. Conversion of Common Stock; Merger Consideration . At the Effective Time, by virtue of the Merger and without any action on the part of Berkshire Bancorp, Berkshire Bank, Holdco, NCB or the holder of any of the following securities:

3.1.1. The share(s) of Berkshire Bancorp Common Stock issued and outstanding immediately prior to the Effective Time and owned by Holdco or NCB shall be cancelled and shall cease to exist and no stock of Holdco or other consideration shall be delivered in exchange therefor.

3.1.2. All Berkshire Bancorp Shares issued and outstanding immediately prior to the Effective Time that are owned by Holdco, NCB, Berkshire Bank or Berkshire Bancorp (other than Berkshire Bancorp Shares held in trust accounts, managed accounts and the like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties (any such shares, “ Trust Account Common Shares ”) and other than Berkshire Bancorp Shares held, directly or indirectly, by Holdco, NCB, Berkshire Bancorp or Berkshire Bank in respect of a debt previously contracted (any such shares, “ DPC Common Shares ”)) shall be cancelled and shall cease to exist and no stock of Holdco or other consideration shall be delivered in exchange therefor. Prior to closing, Berkshire Bancorp shall have received from the holders of all Berkshire Series C Preferred Stock all requisite approvals to redeem or exchange such shares for shares of Holdco Common Stock, as NCB or Holdco may elect.

3.1.3. Subject to Sections 3.1.4, 3.1.5, 3.1.6 and 3.1.7, each share of Berkshire Bancorp Common Stock, except for shares of Berkshire Bancorp Common Stock owned by Holdco, NCB, Berkshire Bank or Berkshire Bancorp (other than Trust Account Common Shares and DPC Common Shares), shall be converted into the right to receive such number of shares of Holdco Common Stock as is equal to the Exchange Ratio.

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The Berkshire Bancorp Shares to be exchanged pursuant to this subsection 3.1.3 are sometimes referred to herein as the “ Stock Consideration. ” The aggregate Stock Consideration, together with any cash to be paid for fractional shares, is sometimes referred to herein as the “ Merger Consideration .”

3.1.4. All of the Berkshire Bancorp Shares converted into the right to receive the Merger Consideration pursuant to this Article 3 shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time, and each Certificate shall thereafter represent only the right to receive the Merger Consideration into which the Berkshire Bancorp Shares represented by such Certificate have been converted pursuant to this Section 3.1 and Section 3.2.3(f), as well as any dividends to which holders of Berkshire Bancorp Common Stock become entitled in accordance with Section 3.2.3(c).

3.1.5. If, between the date of this Agreement and the Effective Time, the outstanding Berkshire Bancorp Shares, the Holdco Shares or the NCB Shares shall have been increased, decreased, changed into or exchanged for a different number or kind of shares or securities as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar change in capitalization, an appropriate and proportionate adjustment shall be made to the Exchange Ratio. In addition, in the event that, NCB enters into or is a party to an agreement pursuant to which shares of NCB Common Stock would be converted into shares or other securities or obligations of another corporation, proper provision shall be made in such agreement so that each Berkshire Bancorp shareholder entitled to receive shares of Holdco Common Stock in the Merger shall be entitled to receive such number of shares or other securities or amount of obligations of such other corporation as such shareholder would be entitled to receive if the Effective Time had occurred immediately prior to the happening of such event. Without limiting any of the foregoing, Berkshire Bancorp shareholders shall be entitled to receive shares of Holdco Common Stock in the merger in the event NCB Common Stock has been exchanged for Holdco Common Stock and the appropriate and proportional adjustment shall be made to the Exchange Ratio.

3.1.6. Berkshire Warrants Treatment of Berkshire Bancorp Warrants . Section 3.1.6 of the Berkshire Bancorp Disclosure sets forth all of the outstanding Berkshire Bancorp warrants as of the date hereof (“ Berkshire Bancorp Warrants ”), which schedule includes, for each warrant, the name of the individual holder of the warrant, the exercise price, the vesting schedule and the expiration date. At the Effective Time, all Berkshire Bancorp Warrants that are outstanding and unexercised immediately prior thereto shall be converted, in their entirety, automatically into the right to receive warrants to purchase shares of Holdco Common Stock upon the same terms and conditions as the Berkshire Bancorp Warrants, except that the expiration date shall be extended five (5) years and the number of shares and exercise price of the warrants shall be adjusted as follows:

(a) The number of shares of Holdco Common Stock to be subject to the converted Berkshire Bancorp Warrants shall be equal to the product of the number of shares of Berkshire Bancorp Common Stock subject to the Berkshire Bancorp Warrants and the Exchange Ratio, provided that any fractional shares of Holdco Common Stock resulting from such multiplication shall be rounded down to the nearest whole share; and

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(b) The exercise price per share of Holdco Common Stock under the converted Berkshire Bancorp Warrants shall be equal to the exercise price per share of Berkshire Bancorp Common Stock under the Berkshire Bancorp Warrants divided by the Exchange Ratio, provided that such exercise price shall be rounded up to the nearest cent.

At all times after the Effective Time, Holdco shall reserve for issuance such number of shares of Holdco Common Stock as necessary so as to permit the exercise of converted Berkshire Bancorp Warrants in the manner contemplated by this Agreement and in the instruments pursuant to which such Berkshire Bancorp Warrants were granted.

3.1.7. Dissenting Shares . Any Dissenting Shares which, as of the Effective Time of the Merger, the holder thereof has not withdrawn or otherwise lost any right to such appraisal, shall not be entitled to receive the consideration set forth in Section 3.1.3 , as applicable, but instead shall be converted into the right to receive such amount as may be determined to be due with respect to such Dissenting Shares pursuant to applicable provisions of the BCL. Berkshire Bancorp shall give Holdco (i) prompt notice of any written notice or demands for appraisal of Berkshire Bancorp Shares, written withdrawals or modifications of such demands, and any other instruments served pursuant to the applicable provisions of the BCL and received by Berkshire Bancorp which relate to any such demand for appraisal, and (ii) the opportunity to participate in all negotiations and proceedings which take place prior to the Closing. Berkshire Bancorp agrees that, except with the prior written consent of Holdco, it will not make any payment with respect to or settle any claim, demand or other obligation it may have with respect to any Dissenting Shares. Each Dissenting Holder who, pursuant to the applicable provisions of the BCL, becomes entitled to payment of the fair value for any Dissenting Shares, shall receive payment therefor (but only after the value therefor shall have been agreed upon or finally determined pursuant to the applicable provisions of the BCL) and thereupon such Dissenting Shares shall be canceled and retired, and shall cease to exist. If, after the Effective Time of the Merger, any Dissenting Shares shall lose their status as Dissenting Shares for any reason, including because the Dissenting Holder withdraws, fails to perfect or otherwise loses the right to appraisal, then Holdco shall pay the consideration, without interest, which such Dissenting Holder would have been entitled to receive pursuant to Section 3.1.3 , assuming such shares were not Dissenting Shares at the Effective Time of the Merger.

3.1.8. Bank Merger; Bank Plan of Merger . The Bank Merger shall be consummated in accordance with the Bank Plan of Merger in the form of Exhibit B attached hereto, which NCB and Berkshire Bank shall mutually execute promptly hereafter.

Section 3.2. Procedures for Exchange of Berkshire Bancorp Common Stock .

3.2.1. Deposit of Merger Consideration . At or prior to the Effective Time, Holdco shall deposit, or shall cause to be deposited, with the Exchange Agent (i) certificates representing the number of shares of Holdco Common Stock sufficient to deliver, and Holdco shall instruct the Exchange Agent to timely deliver, the aggregate Stock Consideration, and (ii) immediately available funds equal to, to the extent then determinable, any cash payable in lieu of fractional shares pursuant to Section 3.2.2(f) (collectively, the “ Exchange

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Fund ”) and Holdco shall instruct the Exchange Agent to timely pay the Stock Consideration, and such cash in lieu of fractional shares, in accordance with this Agreement.

3.2.2. Delivery of Merger Consideration .

(a) As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of Certificate(s) which immediately prior to the Effective Time represented outstanding Berkshire Bancorp Shares whose shares were converted into the right to receive the Merger Consideration pursuant to Section 3.1 and any cash in lieu of fractional Holdco Shares to be issued or paid in consideration therefor (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to Certificate(s) shall pass, only upon delivery of Certificate(s) (or affidavits of loss in lieu of such Certificates) to the Exchange Agent and shall be substantially in such form and have such other provisions as shall be prescribed by the Exchange Agent Agreement) (the “ Letter of Transmittal ”) and (ii) instructions for use in surrendering Certificate(s) in exchange for the Merger Consideration to be issued or paid in consideration therefor in accordance with Section 3.2.3(f) upon surrender of such Certificate and any dividends or distributions to which such holder is entitled pursuant to Section 3.2.3(c).

(b) Upon surrender to the Exchange Agent of its Certificate or Certificates, accompanied by a properly completed Letter of Transmittal, a holder of Berkshire Bancorp Common Stock will be entitled to receive promptly after the Effective Time the Merger Consideration and any cash in lieu of fractional Holdco Shares to be issued or paid in consideration therefor in respect of the Berkshire Bancorp Shares represented by its Certificate or Certificates. Until so surrendered, each such Certificate shall represent after the Effective Time, for all purposes, only the right to receive the Merger Consideration to be issued or paid in consideration therefor upon surrender of such Certificate in accordance with, and any dividends or distributions to which such holder is entitled pursuant to, this Section 3.2.

(c) No dividends or other distributions with respect to Holdco Shares shall be paid to the holder of any unsurrendered Certificate with respect to the Holdco Shares represented thereby, in each case until the surrender of such Certificate in accordance with this Section 3.2. Subject to the effect of applicable abandoned property, escheat or similar laws, following surrender of any such Certificate in accordance with this Section 3.2, the record holder thereof shall be entitled to receive, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to the whole Holdco Shares represented by such Certificate and not paid and/or (ii) at the appropriate payment date, the amount of dividends or other distributions payable with respect to Holdco Shares represented by such Certificate with a record date after the Effective Time (but before such surrender date) and with a payment date subsequent to the issuance of the Holdco Common Stock issuable with respect to such Certificate.

(d) In the event of a transfer of ownership of a Certificate representing Berkshire Bancorp Shares that is not registered in the stock transfer records of Berkshire Bancorp, the proper amount of cash and/or Holdco Shares shall be paid or issued in exchange therefor to a person other than the person in whose name the Certificate so surrendered is registered if the Certificate formerly representing such Berkshire Bancorp Common Stock

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shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment or issuance shall pay any transfer or other similar Taxes required by reason of the payment or issuance to a person other than the registered holder of the Certificate or establish to the satisfaction of Holdco that the Tax has been paid or is not applicable.

(e) After the Effective Time, there shall be no transfers on the stock transfer books of Berkshire Bancorp of the Berkshire Bancorp Shares that were issued and outstanding immediately prior to the Effective Time other than to settle transfers of Berkshire Bancorp Common Stock that occurred prior to the Effective Time. If, after the Effective Time, Certificates representing such shares are presented for transfer to the Exchange Agent, they shall be cancelled and exchanged for the Merger Consideration to be issued or paid in consideration therefor in accordance with the procedures set forth in this Section 3.2.

(f) Notwithstanding anything to the contrary contained in this Agreement, no certificates or scrip representing fractional Holdco Shares shall be issued upon the surrender of Certificates for exchange, no dividend or distribution with respect to Holdco Common Stock shall be payable on or with respect to any fractional share, and such fractional share interests shall not entitle the owner thereof to vote or to any other rights of a shareholder of Holdco. In lieu of the issuance of any such fractional share, Holdco shall pay to each former shareholder of Berkshire Bancorp who otherwise would be entitled to receive such fractional share an amount in cash (rounded to the nearest cent) determined by multiplying (i) the NCB Valuation by (ii) the fraction of a share (after taking into account all Berkshire Bancorp Shares held by such holder at the Effective Time and rounded to the nearest thousandth when expressed in decimal form) of Holdco Common Stock to which such holder would otherwise be entitled to receive pursuant to Section 3.1.

(g) Any portion of the Exchange Fund that remains unclaimed by the shareholders of Berkshire Bancorp as of the first anniversary of the Effective Time may, to the extent permitted by applicable law, be paid to Holdco. In such event, any former shareholders of Berkshire Bancorp who have not theretofore complied with this Section 3.2 shall thereafter look only to Holdco with respect to the Merger Consideration, any cash in lieu of any fractional shares and any unpaid dividends and distributions on the Holdco Common Stock deliverable in respect of each share of Berkshire Bancorp Common Stock such shareholder holds as determined pursuant to this Agreement, in each case, without any interest thereon. Notwithstanding the foregoing, none of Holdco, Berkshire Bank, Berkshire Bancorp, the Exchange Agent or any other person shall be liable to any former holder of Berkshire Bancorp Shares for any amount delivered in good faith to a public official pursuant to applicable abandoned property, escheat or similar laws.

(h) In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if reasonably required by Holdco or the Exchange Agent, the posting by such person of a bond in such amount as Holdco may determine is reasonably necessary as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration deliverable in respect thereof pursuant to this Agreement.

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3.2.3. Withholding Rights . The Exchange Agent (or, subsequent to the first anniversary of the Effective Time, Holdco) shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Berkshire Bancorp Common Stock such amounts as the Exchange Agent or Holdco, as the case may be, is required to deduct and withhold under federal, state, local or foreign law, with respect to the making of such payment. To the extent the amounts are so withheld by the Exchange Agent or Holdco, as the case may be, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Berkshire Bancorp Shares in respect of whom such deduction and withholding was made by the Exchange Agent or Holdco, as the case may be.

Section 3.3. Reservation of Shares . Holdco shall reserve for issuance a sufficient number of shares of Holdco Common Stock for the purpose of issuing shares of Holdco Common Stock in accordance with this Article 3.

ARTICLE 4

Representations and Warranties of Holdco and NCB

Holdco and NCB have delivered a disclosure schedule (the “ NCB Disclosure Schedule ”), to Berkshire Bancorp and Berkshire Bank in connection with the execution of this Agreement setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article 4 or to one or more of Holdco or NCB’s covenants contained herein. The Pending NCB Registration Statement is publicly available and has been available for inspection by Berkshire Bancorp and Berkshire Bank prior to the date of this Agreement. Holdco’s and NCB’s representations and warranties set forth herein, and the NCB Disclosure Schedules and each Section thereof, shall be deemed supplemented in their entirety by the disclosures set forth in the Pending NCB Registration Statement, which Holdco and NCB hereby represent and warrant to Berkshire Bancorp and Berkshire Bank is accurate and complete in all material respects, and all references in this Agreement to the NCB Disclosure Schedule or any Section thereof shall also be deemed to refer to the Pending NCB Registration Statement to the extent any disclosure therein is applicable. For purposes of the NCB Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule. Except as set forth in the NCB Disclosure Schedules or the Pending NCB Registration Statement, Holdco and NCB hereby represent and warrant to Berkshire Bancorp and Berkshire Bank as follows:

Section 4.1. Corporate Organization .

4.1.1. NCB is a commercial bank duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. NCB has the power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, other than in such

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jurisdictions where to failure to be so licensed or qualified, individually or in the aggregate, would not have a Material Adverse Effect. Except as set forth on Section 4.1.1 of the NCB Disclosure Schedule, NCB has no Subsidiaries (as defined below).

4.1.2. True, complete and correct copies of the Articles of Incorporation of NCB, as amended (the “ NCB Articles ”), and the Bylaws of NCB (the “ NCB Bylaws ”), as in effect as of the date of this Agreement, have previously been made available to Berkshire Bancorp.

4.1.3. NCB is a member of the Federal Reserve System and the deposit accounts of NCB are insured by the Federal Deposit Insurance Corporation (the “ FDIC ”) through the Deposit Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due.

4.1.4. Holdco is a Pennsylvania business corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Holdco has the power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, other than in such jurisdictions where to failure to be so licensed or qualified, individually or in the aggregate, would not have a Material Adverse Effect. Holdco has no Subsidiaries (as defined below).

4.1.5. True, complete and correct copies of the Articles of Incorporation of Holdco, as amended (the “ Holdco Articles ”), and the Bylaws of Holdco (the “ Holdco Bylaws ”), as in effect as of the date of this Agreement, have previously been made available to Berkshire Bancorp.

Section 4.2. Capitalization .

4.2.1. The authorized capital stock of NCB consists of: (i) 30,000,000 shares of NCB Common Stock, par value $1.00 per share, of which, as of the date of this Agreement, 17,010,728 shares were issued and outstanding; (ii) 500,000 shares of nonvoting common stock, par value $1.00 per share, of which, as of the date of this Agreement, no shares were issued and outstanding; (iii) 10,000,000 shares of Class B Non-Voting Common Stock, par value $1.00 per share, of which, as of the date of this Agreement, 5,013,513 shares were issued and outstanding; and (iv) 1,000,000 shares of preferred stock, any series having such par value or no par value as may be determined by the Bank’s board of directors from time to time, of which, as of the date of this Agreement, no shares were issued and outstanding. As of the date of this Agreement, 1,975,450 shares of NCB Common Stock were reserved for issuance under one or more plans or agreements, or otherwise. All of the issued and outstanding NCB Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights.

4.2.2. The authorized capital stock of Holdco consists of: (i) 100,000,000 shares of common stock, without par value (“Common Stock”), of which [___] share(s) is/are

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issued and outstanding; 100,000,000 shares of Class B Non-Voting Common Stock, without designated par value (“Class B Non-Voting Common Stock”), of which no shares are issued and outstanding; and (iii) 100,000,000 shares of preferred stock, having such par value, or no par value, as the board of directors shall fix and determine (“Preferred Stock”), of which no shares are issued or outstanding.

4.2.3. As of the date of this Agreement, no shares of Holdco Common Stock were reserved for issuance under one or more plans or agreements, or otherwise. All of the issued and outstanding Holdco Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights.

4.2.4. As of the date of this Agreement, except as set forth in Section 4.2.2 of the NCB Disclosure Schedule: (X) no bonds, debentures, notes or other indebtedness of NCB having the right to vote on the Merger, the Bank Merger, this Agreement or the actions to be taken by NCB pursuant to this Agreement (“Voting Debt”) are issued or outstanding; (Y) NCB does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of, or the payment of any amount based on, any NCB Shares, Voting Debt or any other equity securities of NCB or any securities representing the right to purchase or otherwise receive any NCB Shares, Voting Debt or other equity securities of NCB; and (Z) there are no contractual obligations of NCB (i) to repurchase, redeem or otherwise acquire any shares of capital stock of NCB or any equity security of NCB or any securities representing the right to purchase or otherwise receive any shares of capital stock or any other equity security of NCB or (ii) pursuant to which NCB is or could be required to register shares of NCB capital stock or other securities under the Securities Act of 1933, as amended (the “Securities Act”); and (iv) no equity-based awards are outstanding as of the date of this Agreement.

4.2.5. Neither Holdco or NCB does not own any capital stock, equity interest or other direct or indirect ownership interest in any person, where such ownership interest is equal to or greater than five percent of the total ownership interest of such person.

Section 4.3. Authority; No Violation .

4.3.1. Holdco and NCB each has requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the boards of directors of NCB (the “ NCB Board ”) and Holdco (the “ Holdco Board ”). The NCB Board and Holdco Board have determined that the Bank Merger and the Merger, respectively, on substantially the terms and conditions set forth in this Agreement, is advisable and in the best interests of Holdco and of NCB and its shareholders, customers, employees and communities, have resolved to recommend that their respective shareholders vote in favor of the Merger and Bank Merger, on substantially the terms and conditions set forth in this Agreement, and has directed that the Merger and Bank Merger, on substantially the terms and conditions set forth in this Agreement, be submitted to their respective shareholders for consideration at a duly held meeting of such shareholders. Except for the approval of this Agreement by the affirmative vote of the holders of two thirds of the outstanding shares of NCB Common Stock entitled to vote at such meeting, and the approval

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of the Merger by NCB as sole shareholder of Holdco, no other proceedings on the part of NCB are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by NCB and (assuming due authorization, execution and delivery by Berkshire Bancorp and Berkshire Bank) constitutes the valid and binding obligation of NCB, enforceable against NCB in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity).

4.3.2. Neither the execution and delivery of this Agreement by NCB or Holdco, nor the consummation by NCB or Holdco of the transactions contemplated hereby, nor compliance by NCB or Holdco with any of the terms or provisions of this Agreement, will (i) violate any provision of the Holdco Articles or the Holdco Bylaws, NCB Articles or the NCB Bylaws or (ii) assuming that the consents, approvals and filings referred to in Section 4.4 are duly obtained and/or made, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or Injunction applicable to Holdco or NCB or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Holdco or NCB under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Holdco or NCB is a party or by which any of them or any of their respective properties or assets is bound.

Section 4.4. Consents and Approvals . Except for (a) the filing of applications and notices, as applicable, with the FDIC, the Pennsylvania Department of Banking and the Board of Governors of the Federal Reserve System (the “ Federal Reserve Board ”) and approval or waiver of such applications and notices, (b) the filing of any required applications, filings or notices with any other federal or state banking, insurance or other regulatory or self-regulatory authorities or any courts, administrative agencies or commissions or other governmental authorities or instrumentalities (each a “ Governmental Entity ”) and approval of such applications, filings and notices (the “ Other Regulatory Approvals ”), (c) the filing with the Securities and Exchange Commission (the “ SEC ”) of the Proxy Statement-Prospectus in definitive form relating to the meeting of NCB’s shareholders to be held in connection with this Agreement and the transactions contemplated by this Agreement and the Pending NCB Registration Statement, in which the Proxy Statement-Prospectus will be included as a prospectus, and declaration of effectiveness of Pending NCB Registration Statement, (d) the filing of the respective Articles of Merger for the Merger and the Bank Merger with the Secretary of State of the Commonwealth of Pennsylvania after approval by the Pennsylvania Department of Banking pursuant to the Banking Code, (e) notices or filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), if any, and (f) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the Holdco Shares pursuant to this Agreement, NCB is not aware of any consents or approvals of or filings or registrations with any Governmental Entity that are necessary in connection with the consummation by

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Holdco and NCB of the Merger and Bank Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with the execution and delivery by Holdco and NCB of this Agreement.

Section 4.5. Reports; Regulatory Matters .

4.5.1. Except as set forth on Section 4.5.1 of the NCB Disclosure Schedule, NCB has timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 2007 with (i) the Federal Reserve Board, (ii) the FDIC, (iii) the Pennsylvania Department of Banking or any state regulatory authority, (iv) any foreign regulatory authority, (v) any applicable industry self-regulatory organization, and (vi) the SEC (collectively, “ Regulatory Agencies ”) and with each other applicable Governmental Entity, and all other reports and statements required to be filed by them since January 1, 2007, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, any foreign entity or any Regulatory Agency or Governmental Entity, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency or Governmental Entity in the ordinary course of the business of NCB, no Regulatory Agency or Governmental Entity has initiated since January 1, 2007 or has pending any proceeding, enforcement action or, to the knowledge of NCB, investigation into the business, disclosures or operations of NCB. Except as set forth on Section 4.5.1 of the NCB Disclosure Schedule, since January 1, 2007, there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency or Governmental Entity with respect to the business, operations, policies or procedures of NCB (other than normal examinations conducted by a Regulatory Agency or Governmental Entity in NCB’s ordinary course of business).

4.5.2. Except as set forth on Section 4.5.2 of the NCB Disclosure Schedule, NCB is not subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been ordered to pay any civil money penalty by, or has been since January 1, 2007 a recipient of any supervisory letter from, or since January 1, 2007 has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency or other Governmental Entity (each item in this sentence, a “ NCB Regulatory Agreement ”), nor has NCB been advised since January 1, 2007 by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering or requesting any such NCB Regulatory Agreement. Except as set forth on Section 4.5.2 of the NCB Disclosure Schedules, to the knowledge of NCB, there has not been any event or occurrence since January 1, 2007 that would result in a determination that NCB is not “well capitalized” and “well managed” as a matter of U.S. federal banking law, and there has been no notification or communication from any Governmental Entity (i) threatening to revoke any permit, license, franchise, certificate of authority or other governmental authorization, or (ii) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance.

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Section 4.6. Financial Statements .

4.6.1. The financial statements of NCB at and for the years ended December 31, 2009 and 2008 (including the related notes, where applicable), as well as the financial statements of NCB at and for the seven-month period ended July 31, 2010 that have been provided to Berkshire Bancorp (including any notes thereto), (i) have been prepared from, and are in accordance with, the books and records of NCB, (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of NCB for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), and (iii) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of NCB have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.

4.6.2. NCB does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of NCB included in the financial statements of NCB at and for the seven-month period ended July 31, 2010 (including any notes thereto) that have been provided to Berkshire Bancorp and for liabilities incurred in the ordinary course of business consistent with past practice since July 31, 2010 or in connection with this Agreement and the transactions contemplated hereby.

4.6.3. Except as set forth on Section 4.6.3 of the NCB Disclosure Schedules, since December 31, 2009, (i) through the date hereof, neither NCB nor any of its Subsidiaries nor, to the knowledge of NCB, any director, officer, employee, auditor, accountant or representative of NCB has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of NCB or its respective internal accounting controls, including any material complaint, allegation, assertion or claim that NCB has engaged in questionable accounting or auditing practices, and (ii) no attorney representing NCB, whether or not employed by NCB, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by NCB or any of its officers, directors, employees or agents to the NCB Board or any committee thereof or to any director or officer of NCB.

Section 4.7. Broker’s Fees . Neither NCB nor any of its officers, directors, employees, agents and representatives, has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger or related transactions contemplated by this Agreement, other than to ________ pursuant to agreement dated September __, 2009, a true, complete and correct copy of which has been previously delivered to Berkshire Bancorp.

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Section 4.8. Absence of Certain Changes or Events .

4.8.1. Except as set forth in the financial statements of NCB at and for the seven-month period ended July 31, 2010 that have been provided to Berkshire Bancorp, since December 31, 2009, no event has occurred that has had or is reasonably likely to have, either individually or in the aggregate with all other events, a Material Adverse Effect on NCB.

4.8.2. Since December 31, 2009 through and including the date of this Agreement, NCB has carried on its respective business in all material respects in the ordinary course of business consistent with their past practice.

Section 4.9. Legal Proceedings .

4.9.1. Except as disclosed on Section 4.9 of the NCB Disclosure Schedule, NCB is not a party to any, and there are no pending or, to the knowledge of NCB, threatened, legal, administrative, arbitration, mediation or other material proceedings, claims, actions or governmental or regulatory investigations of any nature against NCB, or otherwise challenging the validity or propriety of the transactions contemplated by this Agreement. None of the proceedings, claims, actions or governmental or regulatory investigations set forth on Section 4.9 of the NCB Disclosure Schedule would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on NCB.

4.9.2. There is no Injunction, judgment or regulatory restriction (other than those of general application that apply to similarly situated Pennsylvania commercial banks or their Subsidiaries) imposed upon NCB or the assets of NCB.

Section 4.10. Compliance with Applicable Law . NCB holds all material licenses, franchises, permits and authorizations necessary for the lawful conduct of its business and has complied in all respects with and is not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy or guideline of any Governmental Entity relating to NCB. NCB does not act as a fiduciary for any person, or administer any account for which it acts as a fiduciary, including as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor.

Section 4.11. Certain Contracts .

4.11.1. Except as disclosed on Section 4.11.1 of the NCB Disclosure Schedule, NCB is not a party to or bound by any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers, employees or consultants, other than in the ordinary course of business consistent with past practice, (ii) that, upon execution of this Agreement or consummation or shareholder approval of the transactions contemplated by this Agreement, will (either alone or upon the occurrence of any additional acts or events) result in any payment or benefits (whether of severance pay or otherwise) becoming due from Holdco, NCB, the Resulting Institution, or any of their respective Subsidiaries to any officer or employee of NCB thereof, (iii) that materially restricts the conduct of any line of business by NCB or, to the knowledge of NCB, upon consummation of the Merger or Bank Merger will materially restrict the ability of the Resulting Institution to engage in any line of business in which a bank holding company may lawfully

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engage, (iv) with or to a labor union or guild (including any collective bargaining agreement), (v) including any stock option plan, stock appreciation rights plan, restricted stock plan, stock purchase plan or benefits plan in which any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the execution of this Agreement, the occurrence of any shareholder approval or the consummation of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of or affected by any of the transactions contemplated by this Agreement, or (vi) which is otherwise material. Each contract, arrangement, commitment or understanding of the type described in this Section 4.11.1, whether or not set forth in the NCB Disclosure Schedule, is referred to as an “ NCB Contract ,” and NCB does not know of, and has not received notice of, any material violation of any NCB Contract by any of the other parties thereto.

Section 4.12. Reorganization; Approvals . NCB (a) is not aware of any fact or circumstance, and has not taken or agreed to take any action, that could reasonably be expected to prevent the Merger or Bank Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code and (b) knows of no reason why all regulatory approvals from any Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.

Section 4.13. NCB Information . The information relating to NCB that is provided by NCB or its representatives for inclusion in the Proxy Statement-Prospectus and Pending NCB Registration Statement, or in any application, notification or other document filed with any other Regulatory Agency or other Governmental Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The portions of the Proxy Statement-Prospectus relating to NCB and other portions within the reasonable control of NCB will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.

Section 4.14. Taxes .

4.14.1. All Tax Returns required to have been filed by or with respect to NCB or Holdco have been duly and timely filed, and each such Tax Return correctly and completely reflects liability for Taxes and all other information required to be reported thereon. All Taxes owed by NCB or Holdco (whether or not shown on any Tax Return) have been timely paid. NCB and Holdco have adequately provided for, in its books of account and related records, liability for all unpaid Taxes, being current Taxes not yet due and payable.

4.14.2. There is no action, audit, dispute or claim now proposed, threatened or pending against, or with respect to, NCB or Holdco in respect of any Taxes. Neither NCB nor Holdco is the beneficiary of any extension of time within which to file any Tax Return, nor has it requested such an extension. No claim has ever been made by an authority in a jurisdiction where NCB or Holdco does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens on any of the stock or assets of NCB or Holdco with respect to Taxes.

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4.14.3. NCB and Holdco have withheld and timely paid all Taxes required to have been withheld and paid and has complied with all information reporting and backup withholding requirements

4.14.4. Section 4.14.4 of the NCB Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to NCB and Holdco for taxable periods ended on or after January 1, 2007, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. NCB and Holdco have delivered to Berkshire Bancorp correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by NCB or Holdco since January 1, 2007. Neither NCB nor Holdco has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

4.14.5. Neither NCB nor Holdco has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Except as set forth on Section 4.14.5 of the NCB Disclosure Schedule, neither NCB nor Holdco has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make payments that would result in a nondeductible expense under Section 280G of the Code. NCB and Holdco have never been a member of a Relevant Group.

4.14.6. Neither NCB nor Holdco has agreed to and is not required to make by reason of a change in accounting method and could not be required to make by reason of a proposed or threatened change in accounting method, any adjustment under Section 481(a) of the Code. Neither NCB nor Holdco has been the “distributing corporation” or the “controlled corporation” with respect to a transaction described in Section 355 of the Code within the 5-year period ending as of the date of this Agreement. Neither NCB nor Holdco is subject to any ruling from or agreement with any taxing authority. NCB and Holdco have each disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. Neither NCB nor Holdco has participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4.

4.14.7. Except as set forth on Section 4.14.7 of the NCB Disclosure Schedule, neither NCB nor Holdco is a party to any Tax allocation or sharing agreement. Neither NCB nor Holdco has any liability for the Taxes of any Person under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local, or foreign law) as a transferee or successor, by contract or otherwise. Neither NCB nor Holdco is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes.

ARTICLE 5

Representations and Warranties of Berkshire Bancorp and Berkshire Bank

Berkshire Bancorp and Berkshire Bank have delivered a disclosure schedule (the “ Berkshire Bancorp Disclosure Schedule ”) to NCB in connection with the execution of this Agreement setting forth, among other things, items the disclosure of which is necessary or

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appropriate either in response to a disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article 5 or to one or more of Berkshire Bancorp’s covenants contained herein. For purposes of the Berkshire Bancorp Disclosure Schedule, any item disclosed on any schedule therein is deemed to be fully disclosed with respect to all schedules under which such item may be relevant as and to the extent that it is reasonably clear on the face of such schedule that such item applies to such other schedule. Except as set forth on the Berkshire Bancorp Disclosure Schedule, Berkshire Bancorp hereby represents and warrants to NCB as follows:

Section 5.1. Corporate Organization .

5.1.1. Berkshire Bancorp is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. Berkshire Bancorp has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, other than in such jurisdictions where to failure to be so licensed or qualified, individually or in the aggregate, would not have a Material Adverse Effect.

5.1.2. Berkshire Bancorp is duly registered as a bank holding company under the BHC Act. True, complete and correct copies of the Articles of Incorporation of Berkshire Bancorp, as amended (the “ Berkshire Bancorp Articles ”) and Bylaws of Berkshire Bancorp (the “ Berkshire Bancorp Bylaws ”), as in effect as of the date of this Agreement, have previously been made available to NCB.

5.1.3. Each Berkshire Bancorp Subsidiary, including Berkshire Bank, (i) is duly incorporated or duly formed, as applicable to each such Subsidiary, and validly existing under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and (iii) has all requisite corporate power or other power and authority to own or lease its properties and assets and to carry on its business as now conducted. True, complete and correct copies of the Articles of Incorporation of Berkshire Bank, as amended (the “ Berkshire Bank Articles ”) and Bylaws of Berkshire Bank (the “ Berkshire Bank Bylaws ”), as in effect as of the date of this Agreement, have previously been made available to NCB. As used in this Agreement, the word “ Subsidiary ,” when used with respect to either party, means any bank, corporation, partnership, limited liability company or other organization, whether incorporated or unincorporated, that is consolidated with such party for financial reporting purposes under U.S. generally accepted accounting principles (“ GAAP ”), and the terms “ Berkshire Bancorp Subsidiary ” shall mean any direct or indirect Subsidiary of Berkshire Bancorp.

5.1.4. The deposit accounts of Berkshire Bank are insured by the Federal Deposit Insurance Corporation (the “ FDIC ”) through the Deposit Insurance Fund to the fullest extent permitted by law, and all premiums and assessments required to be paid in connection therewith have been paid when due.

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Section 5.2. Capitalization .

5.2.1. The authorized capital stock of Berkshire Bancorp consists of: (i) 10,000,000 shares of Common Stock, par value $1.00 per share, of which 3,876,063 shares were issued and outstanding; (ii) 10,000,000 shares of preferred stock consisting of (A) its Fixed Rate Cumulative Perpetual Preferred Stock, Series A, liquidation preference $1,000 per share (the “Berkshire TARP Shares Series A” ), of which 2,892 shares are issued and outstanding; (B) Fixed Rate Cumulative Perpetual Preferred Stock, Series B, liquidation preference $1,000 per share (the “Berkshire TARP Shares Series B” ), of which 145 shares are issued and outstanding; and (C) Series C Preferred Stock of which 50 shares are issued and outstanding. The Berkshire TARP Shares Series A and Berkshire TARP Shares Series B are sometimes collectively referred to herein as the “Berkshire TARP Shares.” No Berkshire Bancorp Shares are reserved for issuance. All of the issued and outstanding Berkshire Bancorp Shares have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, no Voting Debt of Berkshire Bancorp is issued or outstanding. Section 5.2.1 of the Berkshire Bancorp Disclosure Schedule sets forth any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any Berkshire Bancorp Shares, Voting Debt of Berkshire Bancorp or any other equity securities of Berkshire Bancorp or any securities representing the right to purchase or otherwise receive any Berkshire Bancorp Shares, Voting Debt of Berkshire Bancorp or other equity securities of Berkshire Bancorp.

5.2.2. The authorized capital stock of Berkshire Bank consists of 10,000,000 shares of Berkshire Bank Common Stock, of which, as of the date of this Agreement, 1,706,998 shares were issued and outstanding. As of the date of this Agreement, no shares of Berkshire Bank Common Stock were reserved for issuance. All of the issued and outstanding shares of Berkshire Bank Common Stock have been duly authorized and validly issued and are fully paid, and free of preemptive rights, with no personal liability attaching to the ownership thereof. As of the date of this Agreement, Berkshire Bank does not have and is not bound by any outstanding subscriptions, options, warrants, calls, rights, commitments or agreements of any character calling for the purchase or issuance of any shares of Berkshire Bank Common Stock or any other equity securities of Berkshire Bank or any securities representing the right to purchase or otherwise receive any shares of Berkshire Bank Common Stock or other equity securities of Berkshire Bank.

5.2.3. All of the issued and outstanding shares of capital stock or other equity ownership interests of each Subsidiary of Berkshire Bancorp are owned by Berkshire Bancorp, directly or indirectly, free and clear of any Liens, and all of such shares or equity ownership interests are duly authorized and validly issued and are fully paid, nonassessable (subject to 12 U.S.C. § 55) and free of preemptive rights.

5.2.4. Section 5.2.4 of the Berkshire Bancorp Disclosure Schedule sets forth Berkshire Bancorp’s capital stock, equity interest or other direct or indirect ownership interest in any person, where such ownership interest is equal to or greater than five percent of the total ownership interest of such person.

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Section 5.3. Authority; No Violation .

5.3.1. Each of Berkshire Bancorp and Berkshire Bank has requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by the board of directors of Berkshire Bancorp and Berkshire Bank, and by Berkshire Bancorp as the sole shareholder of Berkshire Bank, and no other corporate proceedings on the part of Berkshire Bancorp or Berkshire Bank are necessary to approve this Agreement or to consummate the transactions contemplated hereby. The Berkshire Bancorp Board and Berkshire Bank Board have each determined that the Merger and Bank Merger, respectively, on substantially the terms and conditions set forth in this Agreement, is advisable and in the best interests of it and its shareholders. This Agreement has been duly and validly executed and delivered by each of Berkshire Bancorp and Berkshire Bank and (assuming due authorization, execution and delivery by NCB) constitutes the valid and binding obligations of each of Berkshire Bancorp and Berkshire Bank, enforceable against each of them in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity).

5.3.2. Except as provided on Section 5.3.2 of the Berkshire Bancorp Disclosure Schedules, neither the execution and delivery of this Agreement by Berkshire Bancorp or Berkshire Bank, nor the consummation by Berkshire Bancorp or Berkshire Bank of the transactions contemplated hereby, nor compliance by Berkshire Bancorp or Berkshire Bank with any of the terms or provisions of this Agreement, will (i) violate any provision of the Berkshire Bancorp Articles, Berkshire Bancorp Bylaws, Berkshire Bank Articles or Berkshire Bank Bylaws, or (ii) assuming that the consents, approvals and filings referred to in Section 5.4 are duly obtained and/or made, (A) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or Injunction applicable to Berkshire Bancorp, any of its Subsidiaries or any of their respective properties or assets or (B) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event that, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Berkshire Bancorp or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Berkshire Bancorp or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets is bound.

Section 5.4. Consents and Approvals . Except for (a) the filing of applications and notices, as applicable, with the FDIC, the Pennsylvania Department of Banking and the Federal Reserve Board and approval of such applications and notices, (b) the Other Regulatory Approvals, (c) the filing with the SEC of the Proxy Statement-Prospectus and the filing and declaration of effectiveness of Pending NCB Registration Statement, (d) the filing of the Articles of Merger with the Secretary of State of the Commonwealth of Pennsylvania after approval by the Pennsylvania Department of Banking pursuant to the Banking Code, (e) any consents, authorizations, approvals, filings or exemptions in connection with compliance with consumer finance, mortgage banking and

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other similar laws, (f) notices or filings under the HSR Act, if any, (g) such filings and approvals as are required to be made or obtained under the securities or “Blue Sky” laws of various states in connection with the issuance of the Holdco Shares pursuant to this Agreement, and (h) approval of the U.S. Treasury to repay the Berkshire Tarp Shares, no consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with the consummation by Berkshire Bancorp or Berkshire Bank of the Merger and the other transactions contemplated by this Agreement. No consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with the execution and delivery by Berkshire Bancorp or Berkshire Bank of this Agreement.

Section 5.5. Reports; Regulatory Matters .

5.5.1. Except as set forth on Section 5.5.1 of the Berkshire Bancorp Disclosure Schedule, Berkshire Bancorp and each of its Subsidiaries have timely filed all reports, registrations and statements, together with any amendments required to be made with respect thereto, that they were required to file since January 1, 2007 with the Regulatory Agencies and each other applicable Governmental Entity, and all other reports and statements required to be filed by them since January 1, 2007, including any report or statement required to be filed pursuant to the laws, rules or regulations of the United States, any state, any foreign entity or any Regulatory Agency, and have paid all fees and assessments due and payable in connection therewith. Except for normal examinations conducted by a Regulatory Agency or Governmental Entity in the ordinary course of the business of Berkshire Bancorp and its Subsidiaries, no Regulatory Agency or Governmental Entity has initiated since January 1, 2007 or has pending any proceeding, enforcement action or, to the knowledge of Berkshire Bancorp, investigation into the business, disclosures or operations of Berkshire Bancorp or any of its Subsidiaries. Since January 1, 2007, no Regulatory Agency or Governmental Entity has resolved any proceeding, enforcement action or, to the knowledge of Berkshire Bancorp, investigation into the business, disclosures or operations of Berkshire Bancorp or any of its Subsidiaries. Since January 1, 2007, there has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency or Governmental Entity with respect to the business, operations, policies or procedures of Berkshire Bancorp or any of its Subsidiaries (other than normal examinations conducted by a Regulatory Agency or Governmental Entity in Berkshire Bancorp’s ordinary course of business).

5.5.2. Except as set forth on Section 5.5.2 of the Berkshire Bancorp Disclosure Schedule, neither Berkshire Bancorp nor any of its Subsidiaries is subject to any cease-and-desist or other order or enforcement action issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any order or directive by, or has been since January 1, 2007 a recipient of any supervisory letter from, or has been ordered to pay any civil money penalty by, or since January 1, 2007 has adopted any policies, procedures or board resolutions at the request or suggestion of, any Regulatory Agency or other Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management or its business, other than those of general application that apply to bank holding companies or their Subsidiaries

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(each, a “ Berkshire Bancorp Regulatory Agreement ”), nor has Berkshire Bancorp or any of its Subsidiaries been advised since January 1, 2007 by any Regulatory Agency or other Governmental Entity that it is considering issuing, initiating, ordering or requesting any such Berkshire Bancorp Regulatory Agreement. Except as set forth on Section 5.5.2 of the Berkshire Bancorp Disclosure Schedules, to the knowledge of Berkshire Bancorp and Berkshire Bank, there has not been any event or occurrence since January 1, 2007 that would result in a determination that Berkshire Bank is not “well capitalized” and “well managed” as a matter of U.S. federal banking law, and there has been no notification or communication from any Governmental Entity (i) threatening to revoke any permit, license, franchise, certificate of authority or other governmental authorization, or (ii) threatening or contemplating revocation or limitation of, or which would have the effect of revoking or limiting, FDIC deposit insurance.

Section 5.6. Financial Statements .

5.6.1. The consolidated financial statements of Berkshire Bancorp and Berkshire Bank at and for the years ended December 31, 2009 and 2008 (including the related notes, where applicable), as well as the consolidated financial statements of Berkshire Bancorp and Berkshire Bank at and for the seven-month period ended July 31, 2010 that have been provided to NCB (including any notes thereto), (i) have been prepared from, and are in accordance with, the books and records of Berkshire Bancorp and Berkshire Bank (as applicable), (ii) fairly present in all material respects the consolidated results of operations, cash flows, changes in shareholders’ equity and consolidated financial position of Berkshire Bancorp and Berkshire Bank, as applicable, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), and (iii) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto. The books and records of Berkshire Bancorp and Berkshire Bank have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and reflect only actual transactions.

5.6.2. Neither Berkshire Bancorp nor Berkshire Bank has any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of Berkshire Bancorp included in the consolidated financial statements of Berkshire Bancorp at and for the seven-month period ended July 31, 2010 (including any notes thereto) that have been provided to NCB and for liabilities incurred in the ordinary course of business consistent with past practice since July 31, 2010 or in connection with this Agreement and the transactions contemplated hereby.

5.6.3. Except as provided on Section 5.3.2 of the Berkshire Bancorp Disclosure Schedules, since December 31, 2009, (i) through the date hereof, neither Berkshire Bancorp nor any of its Subsidiaries nor, to the knowledge of Berkshire Bancorp, any director, officer, employee, auditor, accountant or representative of Berkshire Bancorp has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of Berkshire Bancorp or its respective internal accounting controls,

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including any material complaint, allegation, assertion or claim that Berkshire Bancorp has engaged in questionable accounting or auditing practices, and (ii) no attorney representing Berkshire Bancorp, whether or not employed by Berkshire Bancorp, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar violation by Berkshire Bancorp, Berkshire Bank, any Subsidiary of either of them, or any of its officers, directors, employees or agents to the Berkshire Bancorp or Berkshire Bank board of directors or any committee thereof or to any director or executive officer of Berkshire Bancorp or Berkshire Bank.

Section 5.7. Broker’s Fees . Neither Berkshire Bancorp nor any Berkshire Bancorp Subsidiary nor any of their respective officers or directors has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with the Merger, the Bank Merger or related transactions contemplated by this Agreement, other than to Commonwealth Advisors pursuant to agreement dated July 1, 2010, a true, complete and correct copy of which has been previously delivered to NCB.

Section 5.8. Absence of Certain Changes or Events .

5.8.1. Except as set forth on Section 5.8.1 of the Berkshire Bancorp Disclosure Schedule and as reflected in the July 31, 2010 financial statements, no event or events have occurred that have had or are reasonably likely to have a Material Adverse Effect on Berkshire Bancorp or Berkshire Bank.

5.8.2. Since December 31, 2009 through and including the date of this Agreement, Berkshire Bancorp and its Subsidiaries have carried on their respective businesses in all material respects in the ordinary course of business consistent with their past practice.

5.8.3. Except as set forth on Section 5.8.3 of the Berkshire Bancorp Disclosure Schedule, since December 31, 2009, neither Berkshire Bancorp nor Berkshire Bank has (i) except for (A) normal increases for employees made in the ordinary course of business consistent with past practice or (B) as required by applicable law or pre-existing contractual obligations, increased the wages, salaries, compensation, pension or other fringe benefits or perquisites payable to any executive officer, employee or director from the amount thereof in effect as of December 31, 2009, granted any severance or termination pay, entered into any contract to make or grant any severance or termination pay (in each case, except as required under the terms of agreements or severance plans listed on Section 5.8 of the Berkshire Bancorp Disclosure Schedule, as in effect as of the date hereof), or paid any bonus, (ii) granted any stock appreciation rights or options to purchase Berkshire Bancorp Shares, any restricted Berkshire Bancorp Shares or any right to acquire any shares of its capital stock to any executive officer, director or employee, (iii) changed any accounting methods, principles or practices of Berkshire Bancorp or Berkshire Bank affecting its or their assets, liabilities or business, including any reserving, renewal or residual method, practice or policy, (iv) suffered any strike, work stoppage, slow-down or other labor disturbance, (v) declared, set aside or paid any dividend or other distribution (whether in cash, stock or property) with respect to any Berkshire Bancorp Common Stock, other than customary dividends, (vi) effected or authorized any issuance, split, combination or reclassification of Berkshire Bancorp Common Stock, (vii) to the Knowledge of Berkshire Bancorp, taken or omitted to take any action, the taking or omission of which violated

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or violates any provision of the Emergency Economic Stabilization Act of 2008 (“ EESA ”), the American Recovery and Reinvestment Act of 2009 (“ ARRA ”) or the regulations or statements of policy adopted under either of such acts, or (vii) made any agreement or commitment (contingent or otherwise) to do any of the foregoing.

Section 5.9. Legal Proceedings .

5.9.1. Except as set forth on Section 5.9.1 of the Berkshire Bancorp Disclosure Schedule, none of Berkshire Bancorp or any of its Subsidiaries is a party to any, and there are no pending or, to the best of Berkshire Bancorp’s knowledge, threatened, material legal, administrative, arbitration, mediation or other proceedings, claims, actions or governmental or regulatory investigations of any nature against Berkshire Bancorp or any of its Subsidiaries, or otherwise challenging the validity or propriety of the transactions contemplated by this Agreement. None of the proceedings, claims, actions or governmental or regulatory investigations set forth on Section 5.9.1 of the Berkshire Bancorp Disclosure Schedule would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Berkshire Bancorp or any of its Subsidiaries.

5.9.2. There is no Injunction, judgment or regulatory restriction (other than those of general application that apply to similarly situated bank holding companies or their Subsidiaries) imposed upon Berkshire Bancorp, any of its Subsidiaries or the assets of Berkshire Bancorp or any of its Subsidiaries.

Section 5.10. Taxes .

5.10.1. All Tax Returns required to have been filed by or with respect to Berkshire Bancorp or Berkshire Bank have been duly and timely filed, and each such Tax Return correctly and completely reflects liability for Taxes and all other information required to be reported thereon. All Taxes owed by Berkshire Bancorp and Berkshire Bank (whether or not shown on any Tax Return) have been timely paid. Berkshire Bancorp and Berkshire Bank have adequately provided for, in its books of account and related records, liability for all unpaid Taxes, being current Taxes not yet due and payable.

5.10.2. There is no action, audit, dispute or claim now proposed, threatened or pending against, or with respect to, Berkshire Bancorp or Berkshire Bank in respect of any Taxes. Neither Berkshire Bancorp nor Berkshire Bank is the beneficiary of any extension of time within which to file any Tax Return, nor has it requested such an extension. No claim has ever been made by an authority in a jurisdiction where Berkshire Bancorp or Berkshire Bank does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no liens on any of the stock or assets of Berkshire Bancorp or Berkshire Bank with respect to Taxes.

5.10.3. Berkshire Bancorp and Berkshire Bank have withheld and timely paid all Taxes required to have been withheld and paid and has complied with all information reporting and backup withholding requirements

5.10.4. Section 5.10.4 of the Berkshire Bancorp Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to Berkshire Bancorp

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and Berkshire Bank for taxable periods ended on or after January 1, 2007, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. Berkshire Bancorp and Berkshire Bank have delivered to NCB correct and complete copies of all federal income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by Berkshire Bancorp or Berkshire Bank since January 1, 2007. Neither Berkshire Bancorp nor Berkshire Bank has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

5.10.5. Except as provided on Section 5.10.5 of the Berkshire Bancorp Disclosure Schedules, neither Berkshire Bancorp nor Berkshire Bank has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code. Except as set forth on Section 5.10.5 of the Berkshire Bancorp Disclosure Schedule, neither Berkshire Bancorp nor Berkshire Bank has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make payments that would result in a nondeductible expense under Section 280G of the Code. Berkshire Bancorp and Berkshire Bank have never been a member of a Relevant Group.

5.10.6. Neither Berkshire Bancorp nor Berkshire Bank has agreed to and is not required to make by reason of a change in accounting method and could not be required to make by reason of a proposed or threatened change in accounting method, any adjustment under Section 481(a) of the Code. Neither Berkshire Bancorp nor Berkshire Bank has been the “distributing corporation” or the “controlled corporation” with respect to a transaction described in Section 355 of the Code within the 5-year period ending as of the date of this Agreement. Neither Berkshire Bancorp nor Berkshire Bank is subject to any ruling from or agreement with any taxing authority. Berkshire Bancorp and Berkshire Bank have each disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code. Neither Berkshire Bancorp nor Berkshire Bank has participated in any “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4.

5.10.7. Except as set forth on Section 5.10.7 of the Berkshire Bancorp Disclosure Schedule, neither Berkshire Bancorp nor Berkshire Bank is a party to any Tax allocation or sharing agreement. Neither Berkshire Bancorp nor Berkshire Bank has any liability for the Taxes of any Person under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local, or foreign law) as a transferee or successor, by contract or otherwise. Neither Berkshire Bancorp nor Berkshire Bank is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes.

5.10.8. Neither Berkshire Bancorp nor Berkshire Bank will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any installment sale or open transaction disposition made on or prior to the Closing Date, or prepaid amount received on or prior to the Closing Date. There is no power of attorney in force with respect to Taxes with respect to Berkshire Bancorp or Berkshire Bank.

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5.10.9. The amount of the bad debt reserve of Berkshire Bank that must be recaptured for federal income Tax purposes as a result of the Merger and Bank Merger is $163,450.

5.10.10. Except as set forth on Section 5.10.10 of the Berkshire Bancorp Disclosure Schedule, Berkshire Bancorp has no equity interest in any corporation, partnership, limited liability company, trust or other entity.

Section 5.11. Employee Matters .

5.11.1. Section 5.11.1 of the Berkshire Bancorp Disclosure Schedule sets forth a true and correct list of each deferred compensation plan, incentive compensation plan, equity compensation plan, “welfare” plan, fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)); “pension” plan, fund or program (within the meaning of Section 3(2) of ERISA); each employment, termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by Berkshire Bancorp or Berkshire Bank or any of its ERISA Affiliates, for the benefit of any employee or former employee, director or consultant of Berkshire Bancorp or Berkshire Bank or with respect to which Berkshire Bancorp or Berkshire Bank has any liability or obligation, contingent or otherwise (the “ Berkshire Plans ”), whether or not subject to ERISA.

5.11.2. Berkshire Bancorp and Berkshire Bank have heretofore made available to NCB with respect to each of the Berkshire Plans true and correct copies of each of the following documents, if applicable: (i) the Berkshire Plan document and any amendment thereto (or if there is no Berkshire Plan document, a summary of the material terms of the Berkshire Plan); (ii) any related trust or other funding vehicle; (iii) the actuarial report and annual report for such Berkshire Plan for the most recent two years for which such reports are available; (iv) the most recent determination letter from the IRS for such Berkshire Plan, and (v) the most recent summary plan description and related summaries of material modifications.

5.11.3. Except as may be set forth in Section 5.11.3 of the Berkshire Bancorp Disclosure Schedule and to the Knowledge of Berkshire Bancorp and Berkshire Bank:

(a) each of the Berkshire Plans has been established and has at all times been operated and administered in material compliance with the applicable law, including the Code and ERISA;

(b) there is no material liability relating to the Berkshire Plans (with materiality determined with respect to the Berkshire Plans in the aggregate) that has not been disclosed on Berkshire Bancorp’s financial statements in accordance with GAAP and any other applicable legal and accounting requirements and such liability with respect to any Berkshire Plan will not materially increase as a result of the Merger and the Bank Merger;

(c) with respect to each of the Berkshire Plans intended to be “qualified” within the meaning of Section 401(a) of the Code, Berkshire Bancorp has received a favorable determination or opinion letter from the IRS, and, to Berkshire Bancorp’s knowledge,

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no event has occurred that would reasonably be expected to affect such determination or opinion and each of the Berkshire Plans has been timely amended to comply with current laws and regulations (or time remains to make such amendments under Section 401(b) of the Code or other similar statutory, regulatory or administrative relief);

(d) Berkshire Bancorp and its ERISA Affiliates do not sponsor, participate in or contribute to, and have not in the past sponsored, participated in or contributed to, and have no current or contingent obligation with respect to: (1) any defined benefit pension plan subject to Title IV of ERISA, (2) any multiemployer Plan (as defined in Section 3(37) of ERISA), (3) any plan or arrangement that provides medical benefits, life insurance benefits or other welfare benefits following cessation of employment, except to the extent required by the continuation coverage requirements of part 6 of Title I of ERISA (“COBRA”) or any similar state law or (4) any “welfare benefit fund” (within the meaning of Section 419 of the Code), and for purposes of this Agreement, “ ERISA Affiliate ” shall mean all persons that are treated as being a single employer with Berkshire Bancorp or any affiliate under Code Section 414(b), (c), (m), or (o);

(e) Neither Berkshire Bancorp nor Berkshire Bank has incurred any liability for any Tax (including any excise tax) or penalty with respect to any Berkshire Plan, and no event has occurred and no circumstance exists or has existed that could reasonably be expected to give rise to the imposition of any such Tax or penalty;

(f) to Berkshire Bancorp’s knowledge, no non-exempt “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA) or breach of any fiduciary duty described in Section 404 of ERISA has occurred that could result in any material liability, direct or indirect, for Berkshire Bancorp or Berkshire Bank or any of its ERISA Affiliates or any shareholder, officer, director or employee of Berkshire Bancorp or Berkshire Bank or an ERISA Affiliate;

(g) each Berkshire Plan that is a group health plan (within the meaning of section 5000(b)(1) of the Code) complies, and in each and every case has complied, with all material requirements of ERISA and section 4980B of the Code;

(h) all amounts that Berkshire Bancorp and Berkshire Bank and its ERISA Affiliates are required to pay as contributions to each of the Berkshire Plans have been paid or properly accrued and fully deducted by Berkshire Bancorp and Berkshire Bank for federal income tax purposes;

(i) all benefits accrued under any funded or unfunded Berkshire Plan have been paid, accrued or otherwise adequately reserved in accordance with GAAP; and all monies withheld from employee paychecks with respect to Berkshire Plans have been transferred to the appropriate Berkshire Plan or otherwise applied to pay premiums or benefits in a timely manner as required by applicable law;

(j) except as specifically described in this Agreement, the execution of and performance of the transactions contemplated herein will not (either alone or upon the occurrence of any additional or subsequent events) result in: (i) any payment to or

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acceleration, vesting or increase in the rights of any current or former service provider of Berkshire Bancorp or Berkshire Bank, or (ii) any “excess parachute payment” (as defined in Section 280G of the Code) to any person;

(k) there are no pending or, to the knowledge of Berkshire Bancorp and Berkshire Bank, threatened or anticipated (i) claims (other than routine claims for benefits) by, on behalf of or against any of the Berkshire Plans or any trusts related thereto, or (ii) any audit or investigation by any Governmental Entity with respect to a Berkshire Plan;

(l) each Berkshire Plan that is subject to Section 409A of the Code has been maintained and operated in good faith based on the regulations promulgated by the IRS and related IRS guidance issued with respect to Section 409A of the Code and has been timely amended in accordance therewith;

(m) all persons classified by Berkshire Bancorp or Berkshire Bank or its ERISA Affiliates as independent contractors satisfy and have at all times satisfied the requirements of applicable law to be so classified; and Berkshire Bancorp and Berkshire Bank and its ERISA Affiliates have fully and accurately reported their compensation on IRS Forms 1099 when required to do so;

(n) no individuals are currently providing services to Berkshire Bancorp or Berkshire Bank or its ERISA Affiliates pursuant to an employee leasing agreement or similar type of arrangement, nor is Berkshire Bancorp or Berkshire Bank or its ERISA Affiliates party to any such arrangement; and

(o) each Berkshire Plan may be amended or terminated at any time determined by Berkshire Bancorp or Berkshire Bank in its sole discretion without the consent of any third party.

Section 5.12. Compliance with Applicable Law . Except as set forth on Section 5.12 of the Berkshire Bancorp Disclosure Schedule, Berkshire Bancorp and each of its Subsidiaries hold all material licenses, franchises, permits and authorizations necessary for the lawful conduct of their respective businesses under and pursuant to each, and have complied in all respects with and are not in default in any material respect under any, applicable law, statute, order, rule, regulation, policy or guideline of any Governmental Entity relating to Berkshire Bancorp or any of its Subsidiaries. Since the enactment of the Sarbanes-Oxley Act, Berkshire Bancorp has been and is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act applicable to Berkshire Bancorp. Section 5.12 of the Berkshire Bancorp Disclosure Schedule sets forth a schedule of all officers and directors of Berkshire Bancorp and Berkshire Bank who have outstanding loans from Berkshire Bancorp or Berkshire Bank, and there has been no default on, or forgiveness or waiver of, in whole or in part, any such loan during the two years immediately preceding the date hereof.

Section 5.13. Certain Contracts .

5.13.1. Except as disclosed on Section 5.13.1 of the Berkshire Bancorp Disclosure Schedule, neither Berkshire Bancorp nor Berkshire Bank is a party to or bound by

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any contract, arrangement, commitment or understanding (whether written or oral) (i) with respect to the employment of any directors, officers, employees or consultants, other than in the ordinary course of business consistent with past practice, (ii) that, upon execution of this Agreement or consummation or shareholder approval of the transactions contemplated by this Agreement, will (either alone or upon the occurrence of any additional acts or events) result in any payment or benefits (whether of severance pay or otherwise) becoming due from Berkshire Bancorp, Holdco, NCB, the Resulting Institution, or any of their respective Subsidiaries to any officer or employee of Berkshire Bancorp or Berkshire Bank, (iii) that materially restricts the conduct of any line of business by Berkshire Bancorp or Berkshire Bank or, to the knowledge of Berkshire Bancorp or Berkshire Bank, upon consummation of the Merger and Bank Merger will materially restrict the ability of the Resulting Institution to engage in any line of business in which a bank holding company may lawfully engage, (iv) with or to a labor union or guild (including any collective bargaining agreement), (v) including any stock option plan, stock appreciation rights plan, restricted stock plan, stock purchase plan or benefits plan in which any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the execution of this Agreement, the occurrence of any shareholder approval or the consummation of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of or affected by any of the transactions contemplated by this Agreement, or (vi) which is otherwise material. Each contract, arrangement, commitment or understanding of the type described in this Section 5.13.1, whether or not set forth in the Berkshire Bancorp Disclosure Schedule, is referred to as an “ Berkshire Contract ,” and Berkshire Bancorp and Berkshire Bank do not know of, and has not received notice of, any material violation of any Berkshire Contract by any of the other parties thereto.

5.13.2. (i) Each Berkshire Contract is valid and binding on Berkshire Bancorp or Berkshire Bank and is in full force and effect, (ii) Berkshire Bancorp and Berkshire Bank have in all material respects performed all obligations required to be performed by it to date under each Berkshire Contract except as restricted by federal regulators and (iii) except as set forth on Section 5.13.2 of the Berkshire Bancorp Disclosure Schedule, no event or condition exists that constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of Berkshire Bancorp or Berkshire Bank under any such Berkshire Contract.

Section 5.14. Risk Management Instruments .

5.14.1. “ Derivative Transactions ” means any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, prices, values, or other financial or nonfinancial assets, credit-related events or conditions or any indexes, or any other similar transaction or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.

5.14.2. All Derivative Transactions, whether entered into for the account of Berkshire Bancorp or Berkshire Bank or for the account of a customer of Berkshire Bancorp or Berkshire Bank, were entered into in the ordinary course of business consistent with past

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practice and in accordance with prudent banking practice and applicable laws, rules, regulations and policies of any Regulatory Authority and in accordance with the investment, securities, commodities, risk management and other policies, practices and procedures employed by Berkshire Bancorp or Berkshire Bank, and with counterparties believed at the time to be financially responsible and able to understand (either alone or in consultation with their advisers) and to bear the risks of such Derivative Transactions. All of such Derivative Transactions are legal, valid and binding obligations of Berkshire Bancorp or Berkshire Bank enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity), and are in full force and effect. Berkshire Bancorp and Berkshire Bank have duly performed its obligations under the Derivative Transactions to the extent that such obligations to perform have accrued and, to Berkshire Bancorp and Berkshire Bank’s knowledge, there are no breaches, violations or defaults or allegations or assertions of such by any party thereunder.

Section 5.15. Investment Securities and Commodities .

5.15.1. Except as would not reasonably be expected to have a Material Adverse Effect on Berkshire Bancorp or Berkshire Bank, Berkshire Bancorp and Berkshire Bank have good title to all securities and commodities owned by each of them respectively (except those sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Liens, except to the extent such securities or commodities are pledged in the ordinary course of business to secure obligations of Berkshire Bancorp or Berkshire Bank. Such securities and commodities are valued on the books of Berkshire Bancorp and Berkshire Bank in accordance with GAAP in all material respects.

5.15.2. Berkshire Bancorp and Berkshire Bank and their business employ and have acted in compliance in all material respects with investment, securities, commodities, risk management and other policies, practices and procedures (the “ Policies, Practices and Procedures ”) that Berkshire Bancorp and Berkshire Bank believe are prudent and reasonable in the context of such business. Before the date hereof, Berkshire Bancorp and Berkshire Bank have made available to NCB in writing its material Policies, Practices and Procedures.

Section 5.16. Property . Each of Berkshire Bancorp and Berkshire Bank (a) has fee simple title to all its Real Property, free and clear of all Liens of any nature whatsoever, except (i) statutory Liens securing payments not yet due, (ii) Liens for real property Taxes not yet delinquent, (iii) easements, rights of way and other similar encumbrances and matters of record that do not materially adversely affect the use of the properties or assets subject thereto or affected thereby as used by Berkshire Bancorp and Berkshire Bank on the date hereof and (iv) such imperfections or irregularities of title or Liens as do not materially affect the use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties as conducted by Berkshire Bancorp and Berkshire Bank on the date hereof (collectively, “ Permitted Encumbrances ”). Neither Berkshire Bancorp nor Berkshire Bank is a lessor or lessee under any real property Lease. The Real Property is in material compliance with all applicable zoning laws and building codes, and the buildings and improvements located on the Real Property are in good operating condition and in a state of good working order, ordinary wear

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and tear and casualty excepted. There are no pending or, to the knowledge of Berkshire Bancorp and Berkshire Bank, threatened condemnation proceedings against the Real Property. Each of Berkshire Bancorp and Berkshire Bank is in material compliance with all applicable health and safety related requirements for the Real Property, including those under the Americans with Disabilities Act of 1990 and the Occupational Health and Safety Act of 1970. Each of Berkshire Bancorp and Berkshire Bank currently maintains (or causes to be maintained) insurance on all its property, including the Real Property in amounts, scope and coverage reasonably necessary for its operations. Neither Berkshire Bancorp nor Berkshire Bank has received any written notice of termination, nonrenewal or premium adjustment for such policies.

Section 5.17. Intellectual Property . Each of Berkshire Bancorp and Berkshire Bank owns, or is licensed to use (in each case, free and clear of any Liens), all Intellectual Property used in or necessary for the conduct of its business as currently conducted. The use of any Intellectual Property by Berkshire Bancorp and Berkshire Bank does not, to the knowledge of Berkshire Bancorp and Berkshire Bank, infringe on or otherwise violate the rights of any person and is in accordance with any applicable license pursuant to which Berkshire Bancorp and Berkshire Bank acquired the right to use any Intellectual Property. To Berkshire Bancorp and Berkshire Bank’s knowledge, no person is challenging, infringing on or otherwise violating any right of Berkshire Bancorp or Berkshire Bank with respect to any Intellectual Property owned by and/or licensed to Berkshire Bancorp or Berkshire Bank. Neither Berkshire Bancorp nor Berkshire Bank has received any written notice of any pending claim with respect to any Intellectual Property used by Berkshire Bancorp or Berkshire Bank and, to Berkshire Bancorp and Berkshire Bank’s knowledge, no Intellectual Property owned and/or licensed by Berkshire Bancorp or Berkshire Bank is being used or enforced in a manner that would result in the abandonment, cancellation or unenforceability of such Intellectual Property. For purposes of this Agreement, “ Intellectual Property ” means trademarks, service marks, brand names, certification marks, trade dress and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction; patents, applications for patents (including divisions, continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not, in any jurisdiction; and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof; and any similar intellectual property or proprietary rights.

Section 5.18. Environmental Liability . There are no legal, administrative, arbitration, mediation or other proceedings, claims, actions, causes of action or notices with respect to any environmental, health or safety matters or any private or governmental environmental, health or safety investigations or remediation activities of any nature seeking to impose, or that are reasonably likely to result in, any liability or obligation of Berkshire Bancorp or Berkshire Bank arising under common law or under any local, state or federal environmental, health or safety statute, regulation or ordinance (collectively,

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“ Environmental Laws ”), including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, pending or, to the knowledge of Berkshire Bancorp and Berkshire Bank, threatened against Berkshire Bancorp or Berkshire Bank. To the knowledge of Berkshire Bancorp and Berkshire Bank, there is no reasonable basis for, or circumstances that are reasonably likely to give rise to, any such proceeding, claim, action, investigation or remediation by any Governmental Entity or any third party that would give rise to any liability or obligation on the part of Berkshire Bancorp or Berkshire Bank. Neither Berkshire Bancorp nor Berkshire Bank is subject to any agreement, order, judgment, decree, letter or memorandum by or with any Governmental Entity or third party imposing any liability or obligation with respect to any of the foregoing. Each of Berkshire Bancorp and Berkshire Bank is and has been, and all properties foreclosed upon by Berkshire Bancorp or Berkshire Bank are, in compliance with all applicable Environmental Laws.

Section 5.19. Personal Property Leases . Section 5.19 of the Berkshire Bancorp Disclosure Schedule sets forth a list of each personal property lease involving annual payments in excess of $100,000 to which Berkshire Bancorp or Berkshire Bank is a party (each, a “ Personal Property Lease ”). Each Personal Property Lease is valid and binding on Berkshire Bancorp or Berkshire Bank and is in full force and effect. Each of Berkshire Bancorp and Berkshire Bank has performed, in all material respects, all obligations required to be performed by it to date under each Personal Property Lease. Neither Berkshire Bancorp nor Berkshire Bank is in material default under any Personal Property Lease beyond any applicable notice and cure period.

Section 5.20. Securitizations. Neither Berkshire Bancorp nor Berkshire Bank is a party to any agreement pursuant to which it has securitized any of its assets.

Section 5.21. Reorganization; Approvals . Berkshire Bancorp (a) is not aware of any fact or circumstance, and has not taken or agreed to take any actions, that could reasonably be expected to prevent the Merger or the Bank Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code and (b) knows of no reason why all regulatory approvals from any Governmental Entity required for the consummation of the transactions contemplated by this Agreement should not be obtained on a timely basis.

Section 5.22. Opinion . Before the execution of this Agreement, the Berkshire Bancorp board of directors has received an opinion from Commonwealth Advisors LLC to the effect that as of the date thereof and based upon and subject to the assumptions, qualifications and other matters set forth therein, the Merger Consideration is fair to Berkshire Bancorp and its shareholders from a financial point of view. A copy of such opinion shall be delivered to Holdco and NCB within 10 days of Berkshire Bancorp’s receipt thereof. Such opinion has not been amended or rescinded as of the date of this Agreement.

Section 5.23. Berkshire Bancorp Information . The information relating to Berkshire Bancorp and its Subsidiaries that is provided by Berkshire Bancorp or its representatives for inclusion in the Proxy Statement-Prospectus and Pending NCB

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Registration Statement, or in any application, notification or other document filed with any other Regulatory Agency or other Governmental Entity in connection with the transactions contemplated by this Agreement, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they are made, not misleading. The portions of the Proxy Statement-Prospectus relating to Berkshire Bancorp and other portions within the reasonable control of Berkshire Bancorp will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. The Registration Statement will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder.

Section 5.24. State Takeover Law . The Berkshire Bancorp and Berkshire Bank boards of directors have approved the transactions contemplated by this Agreement such that no “moratorium,” “control share,” “fair price,” “business combination” or other anti-takeover laws are applicable to the Merger, the Bank Merger or any transactions contemplated therein.

Section 5.25. Loan Portfolio .

5.25.1. Berkshire Bank has made available to NCB a listing, as of July 31, 2010, of the following: (i) each borrower, customer or other party which has notified Berkshire Bank during the past 12 months of, or has asserted against Berkshire Bank, in each case in writing, any “lender liability” or similar claim; (ii) (A) the aggregate outstanding principal amount of all loan agreements, notes or borrowing arrangements (including leases, credit enhancements and interest-bearing assets) payable to Berkshire Bank (each, a “ Loan ” and collectively, the “ Loans ”), other than “nonaccrual” Loans, (B) the aggregate outstanding principal amount of all “nonaccrual” Loans, (C) a summary of all Loans designated as of such date by either Berkshire Bank or Berkshire Bancorp, its accountants (whether internal or external) or its auditors (whether internal or external) as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch List” or words of similar import, including the aggregate principal amount of such Loans and the amount of specific reserves with respect to all such Loans, (D) any Loan where a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still accruing or the Loan is less than 90 days past due, (E) any Loan where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the agreement under which the loan was originally created due to concerns regarding the borrower’s ability to pay and (F) any Loan where a specific reserve allocation exists in connection therewith; and (iii) all other assets classified by Berkshire Bank as real estate acquired through foreclosure or in lieu of foreclosure, including in-substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure. Since July 31, 2010, no Loans have been designated by either Berkshire Bank or Berkshire Bancorp, its accountants (whether internal or external) or its auditors (whether internal or external) as “Special Mention,” “Substandard,” “Doubtful,” “Loss,” “Classified,” “Criticized,” “Watch List” or words of similar import, except for such Loans that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect on Berkshire Bank or Berkshire Bancorp.

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5.25.2. Each Loan (i) is evidenced by notes, agreements or other evidences of indebtedness that are true, genuine and what they purport to be, (ii) to the extent secured, has been secured by valid Liens in favor of Berkshire Bank that have been perfected and (iii) is the legal, valid and binding obligation of the obligor named therein, enforceable in accordance with its terms (except as may be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity). All Loans originated by Berkshire Bank, and all such Loans purchased by Berkshire Bank, were made or purchased in accordance with customary lending standards. All such Loans (and any related guarantees) and payments due thereunder are, and on the Closing Date will be, free and clear of any Lien, and Berkshire Bank has complied in all material respects, and on the Closing Date will have complied in all material respects, with all laws and regulations relating to such Loans.

5.25.3. Except as disclosed in the financial statements of Berkshire Bancorp at and for the seven-month period ended July 31, 2010 that have been provided to NCB, since December 31, 2009, neither Berkshire Bank nor Berkshire Bancorp has incurred any unusual or extraordinary loan losses which are material to Berkshire Bank or Berkshire Bancorp; to Berkshire Bancorp and Berkshire Bank’s knowledge and in light of its historical loan loss experiences and its managements’ analyses of the quality and performance of its loan portfolios, as of July 31, 2010, its reserves for loan losses are adequate to absorb potential loan losses determined on the basis of management of Berkshire Bancorp and Berkshire Bank’s continuing review and evaluation of the loan portfolio and their judgment as to the impact of economic conditions on the portfolio.

Section 5.26. Internal Controls . The records, systems, controls, data and information of Berkshire Bancorp and Berkshire Bank are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Berkshire Bancorp or Berkshire Bank, respectively, or their accountants (including all means of access thereto and therefrom). Since December 31, 2007, Berkshire Bancorp and its Subsidiaries have devised and maintained a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP.

Section 5.27. U.S. Treasury Capital Purchase Program . On June 12, 2009, Berkshire Bancorp closed on the issuance of $2,892,000 in liquidation amount of its Berkshire TARP Shares Series A together with a warrant (the “TARP Warrant”) for the purchase of an additional $145,000 in liquidation amount of Berkshire TARP Shares Series B to the United States Treasury Department (“UST”) under the UST's Capital Purchase Program (the “Capital Purchase Program”), for a total consideration of $2,892,145 and liquidation amount of $3,037,000, plus any unpaid dividends. Except as set forth on Section 5.27 of the Berkshire Bancorp Disclosure Schedule, Berkshire Bancorp and Berkshire Bank are in compliance with all statutory, regulatory and contractual requirements applicable to them in connection with their participation in the Capital Purchase Program.

Section 5.28. Intentionally omitted .

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Section 5.29. Certain Matters Relating to Berkshire Bancorp Shareholders .

5.29.1. Approval of the Merger and approval and adoption of this Agreement by Berkshire Bancorp shareholders will not require the affirmative vote of more than 66 2/3% (assuming the prior approval of 75% of the members of the Berkshire board of directors) of the votes cast on the matter by all holders of shares of Berkshire Bancorp Common Stock that are entitled to vote thereon.

ARTICLE 6

Covenants Relating to Conduct of Business

Section 6.1. Conduct of Berkshire Bancorp's and Berkshire Bank’s Business Before the Effective Time . Except as expressly contemplated by or permitted by this Agreement or with the prior written consent of NCB, during the period from the date of this Agreement to the Effective Time, each of Berkshire Bancorp and Berkshire Bank shall:

6.1.1. conduct its business in the ordinary course in all material respects;

6.1.2. use reasonable best efforts to maintain and preserve intact its business organization and advantageous business relationships and retain the services of its key officers and key employees; and

6.1.3. take no action that is intended to or would reasonably be expected to adversely affect or materially delay the ability of either Holdco, NCB or Berkshire Bancorp to obtain any necessary approvals of any Regulatory Agency or other Governmental Entity required for the transactions contemplated hereby or to perform its covenants and agreements under this Agreement or to consummate the transactions contemplated hereby.

6.1.4. at all times comply with all statutory, regulatory and contractual requirements applicable to them in connection with their participation in the Capital Purchase Program, and deliver immediately to NCB true and complete copies of all notice and other communications given or received by either of them with respect to the Capital Purchase Program or compliance or alleged noncompliance by either of this with its requirements, the TARP Preferred, the TARP Warrant Preferred or the TARP Warrant or any agreement relating to any of the foregoing.

Section 6.2. Berkshire Bancorp and Berkshire Bank Forbearances . During the period from the date of this Agreement to the Effective Time, except as expressly contemplated or permitted by this Agreement, neither Berkshire Bancorp nor Berkshire Bank shall, without the prior written consent of NCB or at the request of a Regulatory Agency or Government Entity (provided that prior to taking any action requested by a Regulatory Agency or Government Entity, Berkshire Bancorp and Berkshire Bank shall first notify NCB and consult with NCB as to possible resolutions of the issue raised by the Regulatory Agency or Government Entity):

6.2.1. other than in the ordinary course of business consistent with past practice, incur any indebtedness for borrowed money, assume, guarantee, endorse or otherwise

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as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan or advance or capital contribution to, or investment in, any person (it being understood and agreed that incurrence of indebtedness in the ordinary course of business consistent with past practice shall include the creation of deposit liabilities, purchases of federal funds, borrowings from the Federal Home Loan Bank, purchases of brokered certificates of deposit, sales of certificates of deposit and entering into repurchase agreements);

6.2.2. (i) adjust, split, combine or reclassify any of its capital stock; (ii) except to repay the Tarp Shares, make, declare or pay any dividend, or make any other distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of its capital stock (provided that nothing herein shall be deemed to limit the ability of Berkshire Bancorp and Berkshire Bank to make intercompany transfers of up to $1,000,000 in the aggregate of newly invested capital received from third parties); (iii) grant any stock options, restricted shares or other equity-based award with respect to Berkshire Bancorp Shares or grant any individual, corporation or other entity any right to acquire any shares of its capital stock; or (iv) issue any additional shares of capital stock or other securities, except as provided on Section 6.2.2 of the Berkshire Bancorp Disclosure Schedule;

6.2.3. except (A) as required by applicable law (including, without limitation, Section 409A of the Code), (B) the terms of any Berkshire Plan as in effect on the date of this Agreement, or (C) as described on Section 6.2.3 of the Berkshire Bancorp Disclosure Schedule (i) increase the wages, salaries, incentive compensation or incentive compensation opportunities of any officer, director or employee of Berkshire Bancorp or Berkshire Bank, or pay or provide, or increase or accelerate the accrual rate, vesting or timing of payment or funding of, any compensation, benefits or other rights of any officer, director or employee of Berkshire Bancorp or Berkshire Bank, excepting (only with respect to employees who are not executive officers or directors) normal increases made in the ordinary course of business consistent with past practices; (ii) pay any bonus other than bonuses to employees who are not executive officers or directors made in the ordinary course of business and consistent with past practices or (iii) establish, adopt or become a party to any new employee benefit or compensation plan, program, commitment or agreement or amend any Berkshire Plan;

6.2.4. sell, transfer, mortgage, encumber or otherwise dispose of any material amount of its properties or assets to any person other than in the ordinary course of business consistent with past practice, or cancel, release, assign or enter into a forbearance agreement with respect to any amount of indebtedness in excess of $ [100,000], except as requested or required by any Regulatory Agency or Government Entity (provided that prior to taking such action requested or required by such Regulatory Agency or Government Entity, Berkshire Bancorp and Berkshire Bank shall first notify NCB and consult with NCB as to the requested or required action);

6.2.5. enter into any new line of business or change in any material respect its lending, investment, underwriting, risk and asset liability management and other banking, operating and servicing policies, except as required by applicable law, regulation or policies imposed by any Governmental Entity;

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6.2.6. (i) acquire or agree to acquire, by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets or make any investments which would be material, individually or in the aggregate, to Berkshire Bancorp or Berkshire Bank, other than in connection with foreclosures and settlements in lieu of foreclosure in the ordinary course of business consistent with prudent banking practices or in accordance with Section 9.1.7 or (ii) open, close, sell or acquire any branches;

6.2.7. take any action, or knowingly fail to take any action, which action or failure to act could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code;

6.2.8. amend the Berkshire Bancorp Articles, the Berkshire Bancorp Bylaws, the Berkshire Bank Articles or Berkshire Bank Bylaws, or otherwise take any action to exempt any person (other than NCB or its Subsidiaries) or any action taken by any person from any takeover statute or similarly restrictive provisions of its organizational documents or terminate, amend or waive any provisions of any confidentiality or standstill agreements in place with any third parties;

6.2.9. restructure or materially change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;

6.2.10. except in accordance with commitments issued prior to the date hereof which have not expired, which commitments are described in Section 6.2.10 of the Berkshire Bancorp Disclosure Schedule, renew any existing loan or credit facility, or extend any new loan or credit facility, in an amount in excess of $500,000;

6.2.11. except in furtherance of loan collection efforts in the ordinary course, commence or settle any claim, action or proceeding where the amount in dispute is in excess of $100,000 or subjecting Berkshire Bancorp or Berkshire Bank to any material restrictions on its current or future business or operations (including the future business and operations of the Resulting Institution);

6.2.12. take any action or fail to take any action that is intended or may reasonably be expected to result in any of its representations or warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions to the Merger set forth in Article 8 not being satisfied or in a violation of any provision of this Agreement;

6.2.13. implement or adopt any change in its Tax accounting or financial accounting principles, practices or methods, other than as may be required by applicable law, GAAP or regulatory guidelines;

6.2.14. (i) file any Tax Return other than in the ordinary course of business, amend any Tax Return, make any change in any method of Tax or financial accounting (other than as may be required by applicable law, GAAP or regulatory guidelines), make, revoke

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or change any Tax election, enter into any closing agreements, settle or compromise any Tax liability, (ii) surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to Berkshire Bancorp or Berkshire Bank or Holdco, or (iii) take any other action, if such action would have the effect of increasing the Tax liability of NCB, Berkshire Bancorp, Berkshire Bank, Holdco or any of their Subsidiaries for any period ending after the Effective Time or decreasing any Tax attribute of NCB existing at the Effective Time;

6.2.15. except for transactions in the ordinary course of business consistent with past practice, terminate, or waive any material provision of any Berkshire Contract or make any change in any instrument or agreement governing the terms of any of its securities, or material lease or contract, other than normal renewals of contracts and leases without material adverse changes of terms;

6.2.16. take any action that would reasonably be expected to prevent, materially impede, materially impact or materially delay the ability of the parties to obtain any necessary approvals of any Regulatory Agency or Governmental Entity required for the transaction, contemplated hereby;

6.2.17. fail to comply with the terms of any regulatory orders issued by any Governmental Entity;

6.2.18. make capital expenditures other than in the ordinary and usual course of business consistent with past practice;

6.2.19. file any application to establish, or relocate or terminate the operations of, any banking office of Berkshire Bancorp or Berkshire Bank; or

6.2.20. agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of, any of the actions prohibited by this Section 6.2.

6.2.21. not redeem or cancel any TARP Preferred, or TARP Warrant Preferred, or any TARP Warrant, or agree to any modification of the terms of any TARP Preferred, TARP Warrant Preferred or TARP Warrant, or any agreement relating to any of the foregoing, nor issue any additional TARP Preferred, TARP Warrant Preferred or TARP Warrant, other than in accordance with Section 7.13 hereof.

Section 6.3. NCB Covenants . Except as expressly permitted by this Agreement or with the prior written consent of Berkshire Bancorp, during the period from the date of this Agreement to the Effective Time, NCB shall not, and shall not permit any of its Subsidiaries to, (i) amend, repeal or otherwise modify any provision of the NCB Articles or NCB Bylaws in a manner that would adversely effect, the shareholders of either NCB or Berkshire Bancorp or the transactions contemplated by this Agreement; (ii) take any action, or knowingly fail to take any action, which action or failure to act could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; (iii) take any action that is intended or may reasonably be expected to result in any of the conditions to the Merger set forth in Article 8 not being

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satisfied; (iv) take any action that would be reasonably expected to prevent, materially impede, materially impact or materially delay the ability of the parties to obtain any necessary approvals of any Regulatory Agency or any Governmental Entity required for the consummation of the transactions contemplated hereby; (v) take any action or fail to take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect; or (vi) agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of, any of the actions prohibited by this Section 6.3.

ARTICLE 7

Additional Agreements

Section 7.1. Registration Statement; Proxy Statement-Prospectus .

7.1.1. For the purposes (x) of registering the Holdco Common Stock to be offered to holders of Berkshire Bancorp Shares in connection with the Merger with the SEC under the Securities Act and (y) of holding the NCB Shareholder Meeting and Berkshire Shareholder Meeting, Berkshire Bancorp and NCB shall jointly draft and prepare Pending NCB Registration Statement, including a proxy statement of NCB, proxy statement of Berkshire Bancorp and prospectus of Holdco satisfying all applicable requirements of applicable state securities and banking laws, and of the Securities Act and the Exchange Act, and the rules and regulations thereunder (such proxy statement/prospectus in the form mailed to the NCB shareholders, together with any and all amendments or supplements thereto, being herein referred to as the “ Proxy Statement-Prospectus ”). Each of Berkshire Bancorp and NCB shall use their reasonable best efforts to have Pending NCB Registration Statement declared effective under the Securities Act as promptly as practicable after such filing, and each shall thereafter promptly mail the Proxy Statement-Prospectus to its shareholders. Holdco shall also use its reasonable best efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and Berkshire Bancorp shall furnish all information concerning Berkshire Bancorp and the holders of Berkshire Bancorp Common Stock as may be reasonably requested in connection with any such action.

7.1.2. Each party shall provide the other with any information concerning itself that the other may reasonably request in connection with the drafting and preparation of the Proxy Statement-Prospectus, and each party shall notify the other promptly of the receipt of any comments of the SEC with respect to the Proxy Statement-Prospectus and of any requests by the SEC for any amendment or supplement thereto or for additional information and shall provide to the other promptly copies of all correspondence between such party or any of their representatives and the SEC. No filing of Pending NCB Registration Statement, including any amendment thereto shall be made without the parties each having the opportunity to review, comment on and revise Pending NCB Registration Statement. Each of Berkshire Bancorp and NCB agrees to use all reasonable best efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the SEC and to cause the Proxy Statement-Prospectus and all required amendments and supplements thereto to be mailed to the holders of Berkshire Common Stock and NCB Common Stock at the earliest practicable time.

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7.1.3. Berkshire Bancorp and NCB shall promptly notify the other party if at any time it becomes aware that the Proxy Statement-Prospectus or Pending NCB Registration Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, Berkshire Bancorp shall cooperate with NCB in the preparation of a supplement or amendment to such Proxy Statement-Prospectus that corrects such misstatement or omission, and NCB or Holdco shall cause to be filed an amended Registration Statement with the SEC, and each party shall mail an amended Proxy Statement-Prospectus to its shareholders.

Section 7.2. Regulatory Approvals . The parties shall cooperate with each other and use their respective reasonable best efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Entities that are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Merger), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such third parties or Governmental Entities. Each of NCB and Berkshire Bancorp, upon request, shall furnish to the other all information concerning itself, its Subsidiaries, directors, officers and shareholders, and such other matters as may be reasonably necessary or advisable in connection with any applications, notices, petitions and filings made by Berkshire Bancorp, NCB or any of their Subsidiaries with any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement. NCB and Berkshire Bancorp shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable laws relating to the confidentiality of information, all the information relating to NCB or Berkshire Bancorp, as the case may be, and any of their respective Subsidiaries, that appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable. The parties shall consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement. Notwithstanding the foregoing, nothing contained herein shall be deemed to require Berkshire Bancorp or NCB to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the foregoing permits, consents, approvals and authorizations of third parties or Governmental Entities, that would reasonably be expected to have a Material Adverse Effect on it or any of its affiliates (any of which, a “ Materially Burdensome Regulatory Condition ”).

Section 7.3. Access to Information; Confidentiality .

7.3.1. Upon reasonable notice and subject to applicable laws relating to the confidentiality of information, each of NCB, on the one hand, and Berkshire Bancorp and Berkshire Bank, on the other hand, shall, and shall cause each of its Subsidiaries to, afford to the

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officers, employees, accountants, counsel, advisors, agents and other representatives of the other party, reasonable access, during normal business hours during the period before the Effective Time, to all its properties, books, contracts, commitments and records, and, during such period, such party shall, and shall cause its Subsidiaries to, make available to the other party (i) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or federal or state banking or insurance laws (other than reports or documents that such party is not permitted to disclose under applicable law) and (ii) all other information concerning its business, properties and personnel as the other party may reasonably request (in the case of a request by NCB, information concerning Berkshire Bancorp and Berkshire Bank that is reasonably related, directly or indirectly, to the prospective value of Berkshire Bancorp Common Stock or the Exchange Ratio or to Berkshire Bancorp’s and Berkshire Bank’s ability to consummate the transactions contemplated hereby). Neither NCB nor Berkshire Bancorp, nor any of their Subsidiaries, shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of such party or its Subsidiaries or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into before the date of this Agreement. The parties shall make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

7.3.2. Notwithstanding any provision of this Agreement or the Confidentiality Agreement, Berkshire Bancorp and Berkshire Bank understand and agree that the Pending NCB Registration Statement is pending, and that NCB and Holdco will be subject to a variety of disclosure obligations under federal and state securities laws in that respect, and agree that NCB and Holdco shall be entitled to take such steps and make such disclosures as they reasonably conclude, with the advice of legal counsel, may be required in order to assure compliance with applicable securities laws. However, NCB and Holdco agree that, to the extent any proposed disclosure would include information about Berkshire Bancorp or Berkshire Bank, NCB and Holdco shall make reasonable efforts to consult with and notify Berkshire Bancorp and Berkshire Bank prior to making disclosure of such information.

7.3.3. All information and materials exchanged by the parties pursuant to this Agreement shall continue to be subject to the provisions of the Confidentiality Agreement entered into between Berkshire Bancorp, Berkshire Bank and NCB dated September 15, 2009 (the “ Confidentiality Agreement ”), and the execution of this Agreement shall not be deemed to merge or supersede the provisions of the Confidentiality Agreement, but the Confidentiality Agreement shall be deemed to have been modified to the extent it is inconsistent with any of the provisions of this Agreement.

Section 7.4. Shareholder Approval .

7.4.1. Subject to the effectiveness of Pending NCB Registration Statement, Berkshire Bancorp and NCB shall each call a meeting of its respective shareholders (respectively, the “ Berkshire Shareholder Meeting ” and the “ NCB Shareholder Meeting ”) to be held as soon as reasonably practicable after the date hereof for the purposes of respectively obtaining shareholder approval of the Merger and approval and adoption of this Agreement on substantially the terms and conditions set forth in this Agreement; and shall each use its reasonable best efforts to cause such respective meeting to occur as soon as reasonably

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practicable. The Berkshire Bancorp Board and the NCB Board shall each use its reasonable best efforts to obtain from its shareholders the shareholder vote approving the Merger, on substantially the terms and conditions set forth in this Agreement, required to consummate the transactions contemplated by this Agreement, and shall, subject to the provisions of Section 7.9.2 and 9.1.7, affirmatively recommend that its shareholders vote in favor of and adopt this Agreement (as to Berkshire Bancorp and NCB, respectively, an “Approval Recommendation”), and submit this Agreement to its shareholders at the Berkshire Shareholder Meeting and NCB Shareholder Meeting.

7.4.2. Each of Berkshire Bancorp and NCB shall, and shall cause its respective Subsidiaries to, use their reasonable best efforts (i) to take, or cause to be taken, all actions necessary, proper or advisable to comply promptly with all legal requirements that may be imposed on such party or its Subsidiaries with respect to the Merger and, subject to the conditions set forth in Article 8 hereof, to consummate the transactions contemplated by this Agreement, and (ii) to obtain (and to cooperate with the other party to obtain) any material consent, authorization, order or approval of, or any exemption by, any Governmental Entity and any other third party that is required to be obtained by NCB or Berkshire Bancorp or any of their respective Subsidiaries in connection with the Merger and the other transactions contemplated by this Agreement.

Section 7.5. Benefit and Incentive Compensation Plans; Existing Agreements .

7.5.1. Prior to the Effective Time, Berkshire Bancorp and Berkshire Bank shall terminate the Berkshire Plans that contain “cash or deferred arrangements” subject to section 401(k) of the Code and shall adopt such amendments to such Berkshire Plans as are necessary to cause the written terms of such Berkshire Plans to comply with Section 401(a) of the Code as of their termination dates.

7.5.2. Those individuals actively employed by, or on an authorized leave of absence from, Berkshire Bank as of the Effective Time, who continue their employment with Holdco or one of its Subsidiaries after the Effective Time (the “ Covered Employees ”) shall be eligible to participate in those Holdco Plans in which similarly situated employees of Holdco or its Subsidiaries participate after the Effective Time, to the same extent that similarly situated employees of Holdco or its Subsidiaries then participate. From and after the Effective Time, Holdco may elect not to provide to the Covered Employees any benefits which are not then provided by Holdco and its Subsidiaries to their employees generally, notwithstanding that such benefits were provided by NCB to its employees immediately prior to the Effective Time. In the case of benefits which are provided after the Effective Time by Holdco to employees of Holdco and its Subsidiaries but are not then provided by Berkshire Bancorp or Berkshire Bank to its employees, Holdco will as soon as possible after the Effective Time include the Covered Employees in the Holdco Plans under which such benefits are made available.

7.5.3. With respect to each Holdco Plan for which length of service is taken into account for any purpose, service with Berkshire Bank shall be treated as service with Berkshire Bancorp for purposes of determining eligibility to participate, vesting, and entitlement to benefits, including for vacation entitlement; provided , however , that such service shall not be

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recognized to the extent that such recognition would result in a duplication of benefits. Such service also shall apply for purposes of satisfying any waiting periods, evidence of insurability requirements, or the application of any preexisting condition limitations . Covered Employees shall be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the Holdco Plan.

7.5.4. Holdco shall use its commercially reasonable efforts to offer employment with the Resulting Institution to each individual who is an employee of Berkshire Bank immediately prior to the Effective Time (a “ Berkshire Employee ”) in a position with a salary at least equal to such Berkshire Employee’s salary and within forty miles of the location of their current position at the time of the execution of this Agreement immediately prior to the Effective Time, provided , however , that such position need not be the same as, or have the same duties or responsibilities as, the Berkshire Employee’s position with Berkshire Bank or Berkshire Bancorp. Each Berkshire Employee who is not offered a position with a salary at least equal to such Berkshire Employee’s salary immediately prior to the Effective Time shall be entitled to receive severance compensation equal to two (2) weeks’ base salary for every year of service with Berkshire Bank, with a minimum benefit of two (2) weeks’ base salary. Any Berkshire Employee who is offered a position with a salary at least equal to such Berkshire Employee’s salary immediately prior to the Effective Time, but does not accept such position, will not be entitled to any severance compensation.

Section 7.6. Indemnification; Directors’ and Officers’ Insurance .

7.6.1. In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative (a “ Claim ”), including any such Claim in which any individual who is now, or has been at any time before the date of this Agreement, or who becomes before the Effective Time, a director or officer of Berkshire Bancorp or Berkshire Bank or their Subsidiaries (the “ Indemnified Parties ”), is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he or she is or was a director or officer of Berkshire Bancorp or Berkshire Bank before the Effective Time or (ii) this Agreement or any of the transactions contemplated by this Agreement, whether asserted or arising before or after the Effective Time, each such Indemnified Party shall continue to be indemnified to the same extent as such Indemnified Party was required to be indemnified under the Berkshire Bancorp Articles, Berkshire Bancorp Bylaws, Berkshire Bank Articles or Berkshire Bank Bylaws, as applicable, and the parties shall cooperate and use their best efforts to defend against and respond thereto.

7.6.2. Holdco shall cause the individuals serving as officers and directors of Berkshire Bancorp or Berkshire Bank immediately before the Effective Time to be covered for a period of six years after the Effective Time by the directors’ and officers’ liability insurance policy maintained after the Effective Time by Holdco or the Resulting Institution (as applicable) (provided that Holdco may substitute therefor policies of at least the same coverage and amounts containing terms and conditions that are not less advantageous than such policy) with respect to acts or omissions occurring before the Effective Time that were committed by such officers and directors in their capacity as such; provided that in no event shall Holdco be required to expend annually in the aggregate an amount in excess of 200% of the annual premiums currently paid by

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Berkshire Bancorp for such insurance (the “ Insurance Amount ”), and provided further that if Holdco is unable to maintain such policy (or such substitute policy) as a result of the preceding proviso, Holdco shall obtain as much comparable insurance as is available for the Insurance Amount. Berkshire Bancorp represents and warrants to Holdco and NCB that the total amount of the current prepaid premium for directors’ and officers’ liability insurance by Berkshire Bancorp and Berkshire Bank for the coverage period commencing on December 1, 2009 and ending on December 1, 2010 is approximately $10,432.00 as of July 31, 2010.

7.6.3. In the event that Holdco or any of its respective successors or assigns (i) consolidates with or merges into any other entity and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any entity, then, and in each such case the successors and assigns of such entity shall assume the obligations set forth in this Section 7.6.

7.6.4. The provisions of this Section 7.6 shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and his or her heirs and representatives.

Section 7.7. Additional Agreements .

7.7.1. Subject to the terms and conditions of this Agreement, each of Berkshire Bancorp, Berkshire Bank and NCB agrees to cooperate fully with each other and to use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective, at the time and in the manner contemplated by this Agreement, the Merger, including using reasonable best efforts to lift or rescind any injunction or restraining order or other order adversely affecting the ability of the parties to consummate the Merger.

7.7.2. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or to vest the Resulting Institution with full title to all properties, assets, rights, approvals, immunities and franchises of any of the parties to the Merger, the proper officers and directors of each party to this Agreement and their respective Subsidiaries shall take all such necessary action as may be reasonably requested by Berkshire Bancorp.

7.7.3. Berkshire Bancorp, Berkshire Bank and NCB shall use commercially reasonable efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code.

Section 7.8. Advice of Changes . Each of Berkshire Bancorp and NCB shall promptly advise the other of any change or event (a) having or reasonably likely to have a Material Adverse Effect on it or (b) that it believes would or would be reasonably likely to cause or constitute a material breach of

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any of its representations, warranties or covenants contained in this Agreement; provided, however , that no such notification shall affect the representations, warranties, covenants or agreements of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement; provided further that a failure to comply with this Section 7.8 shall not constitute a breach of this Agreement or the failure of any condition set forth in Article 8 to be satisfied unless the underlying Material Adverse Effect or material breach would independently result in the failure of a condition set forth in Article 8 to be satisfied.

Section 7.9. No Solicitation .

7.9.1. None of Berkshire Bancorp, Berkshire Bank or any officer, director, employee, agent or representative (including any investment banker, financial advisor, attorney, accountant or other retained representative) of either of them shall directly or indirectly (i) solicit, initiate, encourage, or (subject to Section 7.9.2(b)) facilitate (including by way of furnishing information) or take any other action designed to facilitate any inquiries or proposals regarding any merger, share exchange, consolidation, sale of assets, sale of shares of capital stock (including by way of a tender offer) or similar transactions involving either of them that, if consummated, would constitute an Alternative Transaction (any of the foregoing inquiries or proposals being referred to herein as an “ Alternative Proposal ”), (ii) subject to Section 7.9.2(b), participate in any discussions or negotiations regarding an Alternative Transaction; or (iii) subject to Section 7.9.2(b), enter into any agreement regarding any Alternative Transaction. As used in this Agreement, “ Alternative Transaction ” means any of (w) a transaction pursuant to which any person (or group of persons) (other than Holdco or its affiliates), directly or indirectly, acquires or would acquire more than 25% of the outstanding shares of Berkshire Bancorp Common Stock or Berkshire Bank Common Stock or outstanding voting power or of any new series or new class of stock that would be entitled to a class or series vote with respect to the Merger, whether from Berkshire Bancorp or Berkshire Bank or pursuant to a tender offer or exchange offer or otherwise, (x) a merger, share exchange, consolidation or other business combination involving NCB (other than the Merger), (y) any transaction pursuant to which any person (or group of persons) (other than Holdco or its affiliates) acquires or would acquire control of assets (including for this purpose the outstanding equity securities of Berkshire Bancorp or Berkshire Bank and securities of the entity surviving any merger or business combination) of NCB representing more than 25% of the fair market value of all the assets, net revenues or net income of Berkshire Bancorp on a consolidated basis, taken as a whole, immediately before such transaction, or (z) any other consolidation, business combination, recapitalization or similar transaction involving Berkshire Bancorp or Berkshire Bank, other than the transactions contemplated by this Agreement, as a result of which the holders of shares of Berkshire Bancorp or Berkshire Bank immediately before such transactions do not, in the aggregate, own at least 75% of the outstanding shares of common stock and the outstanding voting power of the surviving or resulting entity in such transaction immediately after the consummation thereof in substantially the same proportion as such holders held the shares of Berkshire Bancorp Common Stock immediately before the consummation thereof.

7.9.2.

(a) Berkshire Bancorp and Berkshire Bank shall immediately cease and cause to be terminated any existing discussions or negotiations with any persons (other than NCB) conducted heretofore with respect to any of the foregoing, and agree not to release any third party from the confidentiality and standstill provisions of any agreement to which Berkshire Bancorp or Berkshire Bank is or may become a party.

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(b) Notwithstanding anything herein to the contrary, at any time prior to the Effective Time, Berkshire Bancorp and its board of directors shall be permitted (i) to comply with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act, provided that the Berkshire Bancorp Board shall not withdraw or modify in a manner adverse to NCB its Approval Recommendation except as set forth in subsection (iii) below; (ii) to engage in any discussions or negotiations with, and provide any information to, any person in response to a Superior Proposal (as hereinafter defined) by any such person, if and only to the extent that (x) the Berkshire Bancorp Board concludes in its good faith judgment, after consulting with outside legal counsel, that the Superior Proposal is more favorable to Berkshire Bancorp, (y) prior to providing any information or data to any person in connection with a Superior Proposal by any such person, the Berkshire Bancorp Board receives from such person an executed confidentiality agreement, which confidentiality terms shall be no less favorable to Berkshire Bancorp than those contained in the Confidentiality Agreement, and (z) at least 72 hours prior to providing any information or data to any person or entering into discussions or negotiations with any person, Berkshire Bancorp promptly notifies NCB in writing of the name of such person and the material terms and conditions of any such Superior Proposal, and (iii) to withdraw, modify, qualify in a manner adverse to NCB, condition or refuse to make its Approval Recommendation if the Berkshire Bancorp Board concludes in its good faith judgment, after consultation with outside counsel and financial advisors, that such Alternative Proposal constitutes a Superior Proposal that is more favorable to Berkshire Bancorp , provided, that the Berkshire Bancorp Board may not effect a withdrawal of its Approval Recommendation pursuant to this clause (iii) unless: (x) Berkshire Bancorp shall have provided prior written notice to NCB, at least five business days in advance (“ Notice Period ”), of its intention to effect a withdrawal of its Approval Recommendation in response to such Superior Proposal, which notice shall specify the material terms and conditions of any such Superior Proposal (including the identity of the party making such Superior Proposal), and shall have contemporaneously provided a copy of the relevant proposed transaction agreements with the party making such Superior Proposal and other material documents and (y) prior to effecting a withdrawal of its Approval Recommendation, Berkshire Bancorp shall, and shall cause its financial and legal advisors to, during the Notice Period, negotiate with NCB in good faith (to the extent NCB desires to negotiate) to make such adjustments in the terms and conditions of this Agreement so that such Alternative Proposal ceases to constitute a Superior Proposal.

(c) Berkshire Bancorp shall notify NCB promptly (but in no event later than 24 hours) after receipt of any Alternative Proposal, or any material modification of or material amendment to any Alternative Proposal, or any request for nonpublic information relating to Berkshire Bancorp or for access to the properties, books or records of Berkshire Bancorp by any person that informs the Berkshire Bancorp Board that it is considering making, or has made, an Alternative Proposal. Such notice to NCB shall be made orally and in writing, and shall indicate the identity of the person making the Alternative Proposal or intending to make or considering making an Alternative Proposal or requesting nonpublic information or access to the books and records of Berkshire Bancorp, and the material terms of any such Alternative Proposal or modification or amendment to an Alternative Proposal. Berkshire Bancorp shall keep NCB fully informed, on a current basis, of any material changes in the status and any material changes or modifications in the terms of any such Alternative Proposal, indication or request. Berkshire Bancorp shall also promptly, and in any event within 24 hours,

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notify NCB, orally and in writing, if it enters into discussions or negotiations concerning any Alternative Proposal in accordance with this Section 7.9.

(d) For purposes of this Agreement, “ Superior Proposal ” means any bona fide, unsolicited written Alternative Proposal made by any person or entity, other than NCB or Holdco, that is on terms that the Board of Directors of Berkshire Bancorp in good faith concludes, after consultation with its financial advisors and legal counsel (with the advice of outside counsel), taking into account, among other things, all legal, financial, regulatory and other aspects of the proposal and the person making the proposal, including any break-up fees, expense reimbursement provisions and conditions to consummation, (A) is on terms that the Board of Directors of Berkshire Bancorp in its good faith judgment believes to be more favorable to its shareholders than the Merger; (B) for which financing, to the extent required, is then fully committed or reasonably determined to be available by the Board of Directors of Berkshire Bancorp and (C) is reasonably capable of being completed; provided that for purposes of the definition of “Superior Proposal”, the references to “25%” in the definition of Alternative Transaction shall be deemed to be references to “a majority.”

7.9.3. Berkshire Bancorp shall notify all officers, directors and all employees, agents and representatives (including any investment bankers, financial advisors, attorneys, accountants or other retained representatives) of Berkshire Bancorp of the restrictions described in this Section 7.9 as reasonably necessary to avoid violations thereof. It is understood that any violation of the restrictions set forth in this Section 7.9 by any officer, director, employee, agent or representative (including any investment banker, financial advisor, attorney, accountant or other retained representative) of Berkshire Bancorp, at the direction or with the consent of Berkshire Bancorp, shall be deemed to be a breach of this Section 7.9 by Berkshire Bancorp.

Section 7.10. Employment Agreements . Subject to any applicable TARP restrictions that may remain at the Effective Time and any other regulatory approvals, Holdco will honor and expressly assumes all management contracts, including all change of control and vesting payments, of Norm Heilenman, Rick Gromis, and Lori Maley, as such agreements are executed prior to the date of this Agreement and shall have been fully disclosed to NCB prior to the date of this Agreement, and will offer management positions to each of them at the Resulting Institution, subject to the respective individual entering into amendments to their employment contracts reflecting only change in position and title, in a form attached hereto as Exhibit “C” .

Section 7.11. Appointment of Directors . Prior to the Effective Time, Holdco and NCB shall cause the number of directors constituting their respective boards of directors immediately after the Effective Time to be increased, if necessary, to permit the actions required in this Section 7.11. At or immediately after the Effective Time, Holdco shall cause the “Berkshire Director Designee” (as defined below) to be appointed to the boards of directors of Holdco and the Resulting Institution. The term “ Berkshire Director Designee ” means one (1) of the existing Berkshire Bancorp directors, to be mutually agreed upon prior to the Effective Time.

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Section 7.12. Bank Advisory Board Memberships . All directors of Berkshire Bancorp and Berkshire Bank other than the Berkshire Director Designee (collectively, the “Departing Berkshire Directors” ) will be invited by the Resulting Institution to serve on its Berks/Schuylkill Advisory Board after the Effective Time, with board fees equal to the previously approved board fees on Schedule 7.12.

Section 7.13. Tier 1 Capital Investment . Subject to the receipt of all applicable regulatory approvals and consents, prior to or at the Effective Time, Holdco shall cause an investment in Berkshire Bancorp Common Stock of $3,180,000, such that Berkshire Bancorp shall have received not less than $3,180,000 in new, net cash proceeds (after deducting a fee of 10% for equity placement and other customary expenses, provided that the same shall not affect the Berkshire Valuation and Material Adverse Effect provisions hereof) of an issuance of fully paid, nonassessable capital securities qualifying for Tier 1 capital treatment under all applicable banking laws and regulations.

Section 7.14. Retirement of Berkshire TARP Shares and TARP Obligations . Berkshire Bancorp shall, on or before the Effective Time, use its commercially reasonable best efforts to promptly apply to the U.S. Treasury to repurchase and retire the Berkshire TARP Shares and otherwise terminated and satisfied all obligations of Berkshire Bancorp or Berkshire Bank under the U.S. Treasury Department’s Troubled Asset Relief Program. The proceeds Berkshire Bancorp receives pursuant to Section 7.1.3 shall only be used for retirement of the Berkshire Tarp shares and Tarp obligations.

Section 7.15. Post Closing Covenants .

7.15.1. Notwithstanding Section 7.10, Holdco or NCB shall not terminate Norman E. Heilenman, Richard C. Gromis, or Lori Maley within seven (7) calendar days following the Effective Time.

7.15.2. Holdco or NCB shall have the Berkshire Director Designee or a former Berkshire Bancorp director replacement for three (3) years following the Effective Time.

ARTICLE 8

Conditions Precedent

Section 8.1. Conditions to Each Party’s Obligation to Effect the Merger . The respective obligations of the parties to effect the Merger shall be subject to the satisfaction at or before the Effective Time of the following conditions:

8.1.1. Shareholder Approval . This Agreement, the Merger and the Bank Merger, on substantially the terms and conditions set forth in this Agreement with such modifications thereto as may hereafter be made, shall have been approved by the NCB shareholders and the Berkshire Bancorp shareholders.

8.1.2. Registration Statement . The Registration Statement shall have become effective under the Securities Act, no stop order suspending the effectiveness of Pending NCB Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC and if the offer and sale of Holdco Common Stock

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in the Merger is subject to the blue sky laws of any state, shall not be subject to a stop order of any state securities commission and all comments with such have been satisfied.

8.1.3. No Injunctions or Restraints; Illegality . No order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition (an “ Injunction ”) preventing the consummation of the Merger or any of the other transactions contemplated by this Agreement shall be in effect, and no such Injunction shall be threatened by or before any Governmental Entity which represents a reasonable probability of preventing the consummation of the Merger or any of the other transactions contemplated by this Agreement or imposing damages that would reasonably be expected to have a Material Adverse Effect on Berkshire Bancorp or Berkshire Bank, a Material Adverse Effect on NCB or Holdco or a Material Adverse Effect on the Resulting Institution. No statute, rule, regulation, order, Injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Entity that prohibits or makes illegal consummation of the Merger.

8.1.4. Intentionally omitted .

8.1.5. Holdco Reorganization . The Holdco Reorganization shall have been consummated on such terms as NCB and Holdco shall determine, but in any event based upon an exchange in which holders of NCB Shares receive one (1) Holdco Share for every three (3) NCB Shares, subject to such holders’ receipt of cash instead of fractional Holdco Shares, provided, however, that after the Berkshire Shareholder Meeting, no changes that affect the rights or consideration to the Berkshire Bancorp shareholders shall be made.

Section 8.2. Conditions to Obligations of Berkshire Bancorp and Berkshire Bank . The obligation of Berkshire Bancorp and Berkshire Bank to effect the Merger is also subject to the satisfaction, or waiver by Berkshire Bancorp and Berkshire Bank, at or before the Effective Time, of the following conditions:

8.2.1. Representations and Warranties . Subject to the standard set forth in Section 10.2, the representations and warranties of NCB set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date), and Berkshire Bancorp shall have received a certificate signed without personal liability on behalf of NCB by the Chief Executive Officer or Chief Financial Officer of NCB to the foregoing effect.

8.2.2. Performance of Obligations of NCB and Holdco . NCB and Holdco shall have performed in all material respects all obligations required to be performed by them under this Agreement at or before the Effective Time; and Berkshire Bancorp shall have received a certificate or certificates signed without personal liability on behalf of NCB and Holdco by their respective Chief Executive Officer to such effect.

8.2.3. Regulatory Approvals . All regulatory approvals set forth in Section 5.4 required to consummate the transactions contemplated by this Agreement, including the Merger and Bank Merger, shall have been obtained and shall remain in full force and effect

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and all statutory waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred as the “ Berkshire Bancorp Requisite Regulatory Approvals ”), and no such regulatory approval shall have resulted in the imposition of any Materially Burdensome Regulatory Condition.

8.2.4. Federal Tax Opinion . Berkshire Bancorp shall have received the opinion of Berkshire Bancorp’s counsel, dated as of the Effective Time, in form and substance reasonably satisfactory to Berkshire Bancorp, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, Berkshire Bancorp’s counsel may require and rely upon customary representations contained in certificates of officers of Holdco, NCB, Berkshire Bancorp and Berkshire Bank, reasonably satisfactory in form and substance to such counsel.

8.2.5. Employment Agreements . Holdco or NCB shall have expressly assumed all management contracts, including, subject to all applicable regulatory and legal limitations, including, but not limited to TARP limitations, change in control and vesting payments of Norm Heilenman, Rick Gromis, and Lori Maley.

8.2.6. Tier 1 Capital Investment . Berkshire Bancorp shall have received not less than $3,180,000 in new net cash proceeds from an issuance of fully paid, non-assessable capital securities qualifying for Tier 1 capital treatment under all applicable banking laws and regulations.

Section 8.3. Conditions to Obligations of NCB . The obligation of NCB to effect the Merger is also subject to the satisfaction or waiver by NCB at or before the Effective Time of the following conditions:

8.3.1. Representations and Warranties . Subject to the standard set forth in Section 10.2, the representations and warranties of Berkshire Bancorp and Berkshire Bank set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Effective Time as though made on and as of the Effective Time (except that representations and warranties that by their terms speak specifically as of the date of this Agreement or another date shall be true and correct as of such date), and NCB shall have received a certificate signed on behalf of Berkshire Bancorp and Berkshire Bank by the Chief Executive Officer or the Chief Financial Officer of Berkshire Bancorp and Berkshire Bank to the foregoing effect.

8.3.2. Performance of Obligations of Berkshire Bancorp . Berkshire Bancorp and Berkshire Bank shall have performed in all material respects all obligations required to be performed by them under this Agreement at or before the Effective Time, and NCB shall have received a certificate signed without personal liability on behalf of Berkshire Bancorp and Berkshire Bank by the Chief Executive Officer or the Chief Financial Officer of Berkshire Bancorp and Berkshire Bank to such effect.

8.3.3. Regulatory Approvals . All regulatory approvals set forth in Section 4.4 required to consummate the transactions contemplated by this Agreement, including the Merger, shall have been obtained and shall remain in full force and effect and all statutory

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waiting periods in respect thereof shall have expired (all such approvals and the expiration of all such waiting periods being referred as the “ NCB Requisite Regulatory Approvals ”).

8.3.4. Federal Tax Opinion . NCB shall have received the opinion of NCB’s counsel, dated as of the Effective Time, in form and substance reasonably satisfactory to NCB, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion, the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. In rendering such opinion, NCB’s counsel may require and rely upon customary representations contained in certificates of officers of Holdco, NCB, Berkshire Bancorp and Berkshire Bank, reasonably satisfactory in form and substance to such counsel.

8.3.5. Dissenting Shares . The Dissenting Shares, if any, shall not include greater than 1% of the outstanding Berkshire Bancorp Common Stock.

8.3.6. FIRPTA Certificate . On the Closing Date, Holdco and the Resulting Institution shall have received from Berkshire Bancorp and Berkshire Bank a certification, in form and substance reasonably acceptable to Holdco, for purposes of satisfying Holdco’s and/or the Resulting Institution’s obligations under Treasury Regulation Section 1.1445-2(c)(3).

8.3.7. Retirement of Berkshire TARP Shares and TARP Obligations . Berkshire shall have repurchased and retired the Berkshire TARP Shares and otherwise terminated and satisfied all obligations of Berkshire Bancorp or Berkshire Bank under the U.S. Treasury Department’s Troubled Asset Relief Program.

ARTICLE 9

Termination and Amendment

Section 9.1. Termination . This Agreement may be terminated at any time before the Effective Time, whether before or after approval of the matters presented in connection with the Merger by the shareholders of NCB or Berkshire Bancorp:

9.1.1. Consent of the Parties . By consent of Holdco, NCB, Berkshire Bank and Berkshire Bancorp in a written instrument, if the board of directors of each of Holdco, NCB, Berkshire Bancorp and Berkshire Bank so determines by a vote of the majority of the members of its entire board of directors;

9.1.2. Approvals . By either Holdco and NCB, of the one part, or Berkshire Bancorp and Berkshire Bank, of the other part, if

(a) any Governmental Entity that must grant a Berkshire Bancorp Requisite Regulatory Approval or a NCB Requisite Regulatory Approval has denied approval of the Merger or Bank Merger and such denial has become final and nonappealable or any Governmental Entity of competent jurisdiction shall have issued a final and nonappealable order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement; or

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(b) the NCB shareholders or the Berkshire Bancorp shareholders do not approve the Merger, on substantially the terms and conditions set forth in this Agreement;

9.1.3. Delay . By either Holdco and NCB, of the one part, or Berkshire Bancorp and Berkshire Bank, of the other part, if the Merger shall not have been consummated on or before March 31, 2011, unless the failure of the Closing to occur by such date shall be due to the failure of the party seeking to terminate this Agreement to perform or observe the covenants and agreements of such party set forth in this Agreement, provided however, the parties agree that if the Holding Company Reorganization has not been approved by the shareholders of NCB by March 31, 2011, the parties agree to extend this Agreement for a period of 45 additional days;

9.1.4. Material Breach of Representation, Warranty or Covenant . By either Berkshire Bancorp and Berkshire Bank, of the one part, or Holdco and NCB, of the other part (provided that no terminating party is then in material breach of any representation, warranty, covenant or other agreement contained in this Agreement), if there shall have been a material breach of any of the covenants or agreements or any of the representations or warranties set forth in this Agreement on the part of NCB or Holdco, in the case of a termination by Berkshire Bancorp and Berkshire Bank, or Berkshire Bancorp or Berkshire Bank in the case of a termination by NCB and Holdco, which breach, either individually or in the aggregate, would result in, if occurring or continuing on the Closing Date, the failure of any of the conditions set forth in Sections 8.1, 8.2 or Section 8.3, as the case may be, and which is not cured within 30 days following written notice to the party committing such breach or by its nature or timing cannot be cured within such time period; or

9.1.5. Failure to Recommend . By NCB, if the Berkshire Bancorp Board shall have (i) failed to recommend in the Proxy Statement-Prospectus the approval and adoption of this Agreement or (ii) in a manner adverse to NCB, (A) withdrawn, modified or qualified, or proposed to withdraw, modify or qualify, the recommendation by the Berkshire Bancorp Board of this Agreement and/or the Merger or Bank Merger to Berkshire Bancorp’s shareholders, (B) taken any public action or made any public statement in connection with the Berkshire Bancorp Shareholder Meeting inconsistent with such recommendation (including not taking action to convene the Berkshire Bancorp Shareholder Meeting) or (C) recommended any Alternative Proposal (or, in the case of clause (ii), resolved to take any such action), whether or not permitted by the terms hereof.

9.1.6. Material Adverse Effect . By Berkshire Bancorp, Berkshire Bank, NCB and Holdco, if there shall have been a Material Adverse Effect with respect to the other party, which has not been cured by the Effective Time.

9.1.7. Superior Proposal . By Berkshire Bancorp and Berkshire Bank at any time prior to the Effective Time, in order to enter concurrently into a Superior Proposal; provided, however, that this Agreement may be terminated by Berkshire Bancorp pursuant to this Section only after the fifth business day following Berkshire Bancorp’s provision of written notice to NCB (which notice shall specify the material terms and conditions of any such Superior Proposal, including the identity of the party making such Superior Proposal, and such notice

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shall also include a copy of the relevant proposed transaction agreements with the party making such Superior Proposal and other material documents) advising NCB that the Berkshire Bancorp Board of Directors is prepared to accept such Superior Proposal and only if (i) during such five business day period, Berkshire Bancorp has caused its financial and legal advisors to negotiate with NCB in good faith (to the extent Berkshire Bancorp chooses to negotiate) to make such adjustments in the terms and conditions of this Agreement such that such Acquisition Proposal would no longer constitute a Superior Proposal, and (ii) Berkshire Bancorp’s Board of Directors has considered such adjustments in the terms and conditions of this Agreement resulting from such negotiations and has concluded in good faith, based upon consultation with its financial and legal advisers, that such Acquisition Proposal remains a Superior Proposal even after giving effect to any adjustments that may be proposed by NCB and further provided that such termination shall not be effective until Berkshire Bancorp has paid the Termination Fee to NCB.

The party desiring to terminate this Agreement pursuant to any clause of this Section 9.1 (other than Section 9.1.1) shall give written notice of such termination to the other party in accordance with Section 10.4, specifying the provision or provisions hereof pursuant to which such termination is effected.

Section 9.2. Effect of Termination . If either NCB or Berkshire Bancorp terminates this Agreement as provided in Section 9.1, this Agreement shall forthwith become void and have no effect, and none of NCB, Berkshire Bancorp, any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except that (i) Sections 7.3.3, 9.2, 9.3, 10.4, 10.5, 10.8, 10.10 and 10.12 shall survive any termination of this Agreement and (ii) neither NCB nor Berkshire Bancorp shall be relieved or released from any liabilities or damages arising out of its breach of any provision of this Agreement.

Section 9.3. Fees and Expenses .

9.3.1. Except as set forth in Section 9.3.2, and except with respect to costs and expenses of printing and mailing the Proxy Statement-Prospectus and all filing and other fees paid to the SEC in connection with the Merger, which shall be borne equally by NCB and Berkshire Bancorp, all fees and expenses incurred in connection with the Merger, this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

9.3.2. Berkshire Bancorp and Berkshire Bank shall be jointly and severally obligated to pay to NCB, by wire transfer of immediately available funds, a termination fee in the amount of $400,000 (the “ Termination Fee ”) and/or expense reimbursement on the following terms:

(a) If this Agreement is terminated by NCB pursuant to Section 9.1.5, then Berkshire Bancorp shall pay the Termination Fee on the business day following such termination;

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(b) If this Agreement is terminated by Berkshire Bancorp pursuant to Section 9.1.7, then Berkshire Bancorp shall pay the Termination Fee immediately upon such termination;

(c) If (A) either party shall terminate this Agreement pursuant to Section 9.1.2(b) and (B) at any time after the date of this Agreement and on or before the date of the Berkshire Shareholder Meeting an Alternative Transaction shall have been publicly announced or otherwise communicated to the Berkshire Bancorp Board (a “ Public Proposal ”) that has not been withdrawn prior to such date, and, if within 12 months of the date of such termination, Berkshire Bancorp enters into any definitive agreement with respect to, or consummates, any Alternative Transaction, then Berkshire Bancorp shall pay the Termination Fee on the date of such execution or consummation;

(d) Intentionally omitted;

(e) If (A) either party shall terminate this Agreement pursuant to Section 9.1.3 and (B) at any time after the date of this Agreement and before such termination there shall have been a Public Proposal that has not been withdrawn prior to such termination, and, if within 12 months of the date of termination, Berkshire Bancorp executes any definitive agreement with respect to, or consummates, any Alternative Transaction, then Berkshire Bancorp shall pay the Termination Fee upon the date of such execution or consummation.

Upon payment of all applicable fees and expenses in accordance with this Section 9.3, Berkshire Bancorp and Berkshire Bank shall have no further liability to NCB at law or in equity with respect to such termination, or with respect to Berkshire Bancorp’s Board’s failure to take action to convene the Berkshire Bancorp Shareholder Meeting and/or recommend that Berkshire Bancorp shareholders adopt this Agreement.

9.3.3. Berkshire Bancorp and Berkshire Bank acknowledge that the agreements contained in this Section 9.3 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, NCB would not enter into this Agreement. Accordingly, if Berkshire Bancorp and Berkshire Bank fail to pay timely any amount due pursuant to this Section 9.3 and, in order to obtain such payment, NCB commences a suit that results in a judgment against Berkshire Bancorp or Berkshire Bank for the amount payable to NCB pursuant to this Section 9.3, Berkshire Bancorp and Berkshire Bank shall jointly and severally pay to NCB its reasonable, out-of-pocket costs and expenses (including attorneys’ fees and expenses) in connection with such suit, together with interest on the amount so payable at the prime lending rate prevailing at such time, as published in The Wall Street Journal , from the date such amounts were required to be paid until the date actually received by Berkshire Bancorp.

Section 9.4. Amendment . This Agreement may, to the extent legally allowed, be amended by the parties, by action taken or authorized by their respective boards of directors, at any time before or after approval of the matters presented in connection with the Merger and Bank Merger by the shareholders of NCB and Berkshire Bancorp; provided, however , that after any approval of the transactions contemplated by this Agreement by the shareholders of NCB and Berkshire Bancorp, there may not be, without further approval of

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such shareholders, any amendment of this Agreement that (a) alters or changes the amount or the form of the consideration to be delivered under this Agreement to the holders of Berkshire Bancorp Common Stock, if such alteration or change would adversely affect the holders of any security of Berkshire Bancorp, (b) alters or changes any term of the articles of incorporation of Holdco or NCB from those contemplated herein if such alteration or change would adversely affect the holders of any securities of Berkshire Bancorp, or (c) alters or changes any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any securities of Berkshire Bancorp, in each case other than as contemplated by this Agreement. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

Section 9.5. Extension; Waiver . At any time before the Effective Time, the parties, by action taken or authorized by their respective boards of directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or (c) waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

ARTICLE 10

General Provisions

Section 10.1. Closing . On the terms and subject to conditions set forth in this Agreement, the closing of the Merger and Bank Merger (the “ Closing ”) shall take place at 10:00 a.m. on a date and at a place to be specified by the parties, which date shall be no later than ten (10) business days after the satisfaction or waiver (subject to applicable law) of the latest to occur of the conditions set forth in Article 8 (other than those conditions that by their nature are to be satisfied or waived at the Closing), unless extended by mutual agreement of the parties (the “ Closing Date ”). If the conditions set forth in Article 8 are satisfied or waived during the two weeks immediately before the end of a fiscal quarter of Berkshire Bancorp, then Berkshire Bancorp may postpone the Closing until the first full week after the end of that fiscal quarter.

Section 10.2. Standard . No representation or warranty of Holdco contained in Article 4 or of Berkshire Bancorp or Berkshire Bank contained in Article 5 shall be deemed untrue or incorrect for any purpose under this Agreement, and no party hereto shall be deemed to have breached a representation or warranty for any purpose under this Agreement, in any case as a consequence of the existence or absence of any fact, circumstance or event unless such fact, circumstance or event, individually or when taken together with all other facts, circumstances or events inconsistent with any representations or warranties contained in Article 4, in the case of Holdco or NCB, or Article 5, in the case of Berkshire Bancorp and Berkshire Bank, has had or would be reasonably likely to have a Material Adverse Effect with respect to Holdco or NCB or Berkshire Bancorp or Berkshire Bank, respectively (disregarding for purposes of this Section 10.2 any materiality or

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Material Adverse Effect qualification contained in any representations or warranties). Notwithstanding the immediately preceding sentence, the representations and warranties contained in (a) Sections 4.1.1, 4.2, 4.3 and 4.7 in the case of NCB or Holdco, and Sections 5.1.1, 5.1.3, 5.2.1, 5.2.2, 5.3 and 5.7 in the case of Berkshire Bancorp or Berkshire Bank, shall be deemed untrue and incorrect if not true and correct in all material respects, and (b) Section 4.8.1 in the case of NCB or Holdco and Section 5.8.1 in the case of Berkshire Bancorp or Berkshire Bank, shall be deemed untrue and incorrect if not true and correct in all respects.

Section 10.3. Nonsurvival of Representations, Warranties and Agreements . None of the representations, warranties, covenants and agreements set forth in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time, except for Sections 7.5, 7.10, 7.12 and 7.13 and for those other covenants and agreements contained in this Agreement that by their terms apply or are to be performed in whole or in part after the Effective Time.

Section 10.4. Notices . All notices and other communications in connection with this Agreement shall be in writing and shall be deemed given if delivered personally, sent via facsimile (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

if to NCB, to:

New Century Bank

99 Bridge Street

Phoenixville, PA 18518

Attn: Jay S. Sidhu, Chairman & CEO

Facsimile: ________________

with a copy to:

Stradley Ronon Stevens & Young, LLP

30 Valley Stream Parkway

Malvern, PA 19355-1481

Attn: David F. Scranton, Esquire

Facsimile: 610.640.1965

if to Berkshire Bancorp or Berkshire Bank, to:

Berkshire Bancorp, Inc.

1101 Woodland Road

Wyomissing, PA 19610

Attn: President and Chief Executive Officer

Facsimile: 610-376-8200

with a copy to:

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Bybel Rutledge LLP

1017 Mumma Road, Suite 302

Lemoyne, PA 17043

Attn: Nicholas Bybel, Jr.

Facsimile: 717-731-8205

Section 10.5. Interpretation . When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The NCB Disclosure Schedule and the Berkshire Bancorp Disclosure Schedule, as well as all other schedules and all exhibits hereto, shall be deemed part of this Agreement and included in any reference to this Agreement. This Agreement shall not be interpreted or construed to require any person to take any action, or fail to take any action, if to do so would violate any applicable law. For purposes of this Agreement, (a) “person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity (including its permitted successors and assigns) and (b) “knowledge” of any person that is not an individual means the knowledge of such person’s directors and senior executive officers.

Section 10.6. Counterparts . This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that each party need not sign the same counterpart. Facsimile copy or electronic transmission of a signature page shall be deemed an original signature page.

Section 10.7. Entire Agreement . This Agreement (including the Disclosure Schedules and Exhibits hereto and the other documents and the instruments referred to in this Agreement), together with the Confidentiality Agreement, constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, other than the Confidentiality Agreement.

Section 10.8. Governing Law; Jurisdiction . This Agreement shall be governed and construed in accordance with the internal laws of the Commonwealth of Pennsylvania applicable to contracts made and wholly performed within such state, without regard to any applicable conflicts-of-law principles. The parties agree that any suit, action or proceeding brought by either party to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal court located in the Commonwealth of Pennsylvania having jurisdiction over the matter; provided, however , that if such a federal court does not have jurisdiction over the matter, any aforementioned suit, action or proceeding shall be brought in a state court located in the Commonwealth of Pennsylvania having jurisdiction over the

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matter. Each of the parties submits to the jurisdiction of any such court in any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of, or in connection with, this Agreement or the transactions contemplated hereby and hereby irrevocably waives the benefit of jurisdiction derived from present or future domicile or otherwise in such action or proceeding. Each party irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

Section 10.9. Publicity . Neither NCB nor Berkshire Bancorp shall, and neither NCB nor Berkshire Bancorp shall permit any of its Subsidiaries or agents to, issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement without the prior consent (which consent shall not be unreasonably withheld) of Berkshire Bancorp, in the case of a proposed announcement by NCB, or NCB, in the case of a proposed announcement by Berkshire Bancorp or any of its Subsidiaries; provided, however , that any party may, without the prior consent of the other parties (but after prior consultation with the other parties to the extent practicable under the circumstances) issue or cause the publication of any press release or other public announcement to the extent required by law or by the rules and regulations of any applicable securities exchange.

Section 10.10. Assignment; Third-Party Beneficiaries . Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned by either of the parties (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by each of the parties and their respective successors and assigns. Except as otherwise specifically provided in Section 7.5, this Agreement (including the documents and instruments referred to in this Agreement) is not intended to and does not confer upon any person other than the parties hereto any rights or remedies under this Agreement.

Section 10.11. Enforcement of Agreement . The parties hereto agree that irreparable damage would occur in the event that this Agreement were not performed in accordance with its specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 10.12. Severability . Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only as broad as is enforceable.

[ Signature Page Follows. ]

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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be executed by their respective officers thereunto duly authorized as of the date first above written.

	CUSTOMERS 1 ST BANCORP, INC.

	By:
	Name:
	Title:

	NEW CENTURY BANK

	By:
	Name:
	Title:

	BERKSHIRE BANCORP, INC.

	By:
	Name:
	Title:

	BERKSHIRE BANK

	By:
	Name:
	Title:

Signature Page to Agreement and Plan of Merger

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Schedule A

List of Individuals for Support Agreements

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Schedule B

Non-Performing Assets

				Balance as of 7/31/2010
Non-performing Loans					2,519,271.97
Non-performing Assets:
Other Real Estate Owned		4,350,042.00
Less: Valuation allowance		(160,724.00	)
					4,189,318.00
Troubled Debt Restructuring					1,363,000.00
Combined NPL’s and NPA’s					8,071,589.97
	x 20% based on 7/31/2010 numbers				1,614,317.99

Allowance for Loan Losses				$	1,260,225.37

Coverage Ratio					50.02	%

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EXHIBIT A

SUPPORT AGREEMENT

This SUPPORT AGREEMENT (“Agreement”), dated as of August __, 2010, is by and among CUSTOMERS 1 ST BANCORP, INC., (“ Holdco ”), NEW CENTURY BANK, a Pennsylvania bank (“ NCB ”) and each of the undersigned individuals, each of whom is a director ("Director") of Berkshire Bancorp, Inc. (“Berkshire Bancorp”) or Berkshire Bank (“Berkshire Bank”). This Agreement will be effective upon the signing of the Merger Agreement (defined below).

RECITAL

As an inducement for NCB and Holdco to enter into the Agreement and Plan of Merger dated as of the date hereof (the "Merger Agreement"), whereby, among other things, Berkshire Bancorp will merge with and into Holdco and Berkshire Bank will merge with and into NCB (collectively, the "Merger"), each of the Directors, for himself or herself, his or her heirs and legal representatives, hereby agrees as follows:

AGREEMENT

1. VOTING AND OTHER MATTERS. Each of the Directors will vote or cause to be voted all shares of Berkshire Bancorp common stock that he or she has power to vote or direct the voting of (the "Shares"), in favor of approval of the Merger Agreement, the Merger and Bank Merger.

2. REPRESENTATIONS AND WARRANTIES. Each Director represents and warrants that, as of this date, he or she has power to vote or direct the voting of each of the shares of common stock of Berkshire Bancorp shown opposite his or her name on Exhibit A to this Agreement, and hence that each of such shares is a “Share” within the meaning of this Agreement.

3. CONDITIONS TO TRANSFER OR ENCUMBRANCE. Until the earlier of the consummation of the Merger and Bank Merger or the termination of the Merger Agreement, each Director will not sell, permit a lien or other encumbrance to be created hereafter with respect to, or grant any proxy in respect of (except for proxies solicited by the board of directors of Berkshire Bancorp in connection with Berkshire Bancorp shareholders' meeting at which the Merger Agreement and Merger is presented for shareholder approval) any Shares, unless all other parties to any such sale or other transaction enter into an agreement in form and substance satisfactory to Holdco and NCB embodying the benefits and rights contained in this Agreement.

3. INDIVIDUAL OBLIGATIONS. Obligations of each of the Directors under this Agreement are intended to be several and not joint and shall be binding upon each Director and his or her personal representatives, heirs and assigns.

4. RIGHT TO EQUITABLE REMEDIES. The Directors severally acknowledge and agree that money damages may not be an adequate remedy for Holdco and NCB for any breach

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or of any obligation under this Agreement by any one or more Directors. The parties therefore agree that in addition to any other remedies available hereunder, by law or otherwise, Holdco and NCB shall be entitled to seek equitable remedies, including without limitation injunctive relief, specific performance or a constructive trust, against or with respect to any such existing, threatened, prospective or continued breach by any of them.

6. MISCELLANEOUS.

(a) Severability. If any provision of this Agreement or the application of such provision to any person or circumstances will be held invalid or unenforceable by a court of competent jurisdiction, such provision or application will be unenforceable only to the extent of such invalidity or unenforceability, and the remainder of the provision held invalid or unenforceable and the application of such provision to persons or circumstances, other than the party as to which it is held invalid, and the remainder of this Agreement, will not be affected.

(b) Counterparts. This Agreement may be executed in one or more counterparts or by counterpart signature pages, including facsimile counterparts, each of which will be deemed an original, but all of which taken together will constitute one and the same document.

(c) Governing Law. This Agreement will be deemed a contract made under, and for all purposes will be construed in accordance with, the internal laws of the Commonwealth of Pennsylvania (without reference to rules of choice of law or conflicts of laws), and be federal law to the extent it pre-empts state law.

(d) Entire Agreement. This Agreement is the entire agreement of the parties with respect to their subject matter, and no other discussions, undertakings, promises, inducements, representations or prior agreements (whether oral or written) shall be of any force or effect.

(e) Individual Capacity. Each Director is signing this Agreement solely in his or her capacity as a shareholder of Berkshire Bancorp, and not in any other capacity, such as a director or officer of Berkshire Bancorp or as a fiduciary of any trusts of which such Director is not a beneficiary. Notwithstanding anything in this Agreement to the contrary, (1) no Director makes any agreement or understanding herein in any capacity other than in his or her capacity as an owner of Berkshire Bancorp stock, and (2) nothing herein shall be construed to limit or affect any action or inaction by such Director or any of his or her representatives, as applicable, serving on Berkshire Bancorp’s Board of Directors or as an officer of Berkshire Bancorp, acting in his or her capacity as a director, officer or fiduciary of Berkshire Bancorp or as a fiduciary of any trust of which he or she is not a beneficiary.

(f) Modification; Waiver. This Agreement may only be modified, or any benefits of this Agreement waived, by an instrument in writing signed by the party or parties to be bound thereby.

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(g) Termination. This Agreement shall terminate and be of no further force or effect concurrently with and automatically upon the earlier of (1) the “Effective Time” of the Merger and Bank Merger (as defined in the Merger Agreement), (2) the “Outside Effective Time” (as defined in the Merger Agreement), or (3) the termination of the Merger Agreement in accordance with its terms.

IN WITNESS WHEREOF, the undersigned have duly executed this Director Support Agreement as of the date first set forth above.

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EXHIBIT B

BANK PLAN OF MERGER

THIS BANK PLAN OF MERGER ("Plan of Merger") dated ___________, 200__, is by and between BERKSHIRE BANK, a Pennsylvania bank ("Berkshire Bank"), and NEW CENTURY BANK, a Pennsylvania bank ("New Century Bank").

Background:

1. The authorized capital stock of New Century Bank consists of (i) 30,000,000 shares of common stock, par value $1.00 per share ("New Century Bank Common Stock"), of which at the date hereof _____ shares are issued and outstanding; (ii) 500,000 shares of nonvoting common stock, par value $1.00 per share of which no shares are issued or outstanding; (iii) 10,000,000 shares of Class B Non-Voting Common Stock, of which ____ shares are issued and outstanding; and (ii) 10,000,000 shares of preferred stock, with such par value or no par value as shall be established by New Century Bank’s board of directors, of which no shares are issued and outstanding.

2. Berkshire Bank is a Pennsylvania bank and a wholly owned Subsidiary of Berkshire Bancorp, Inc., a Pennsylvania corporation ("Berkshire Bancorp"). The authorized capital stock of Berkshire Bank consists of 10,000,000 shares of common stock, par value $1.00 per share.

3. The respective Boards of Directors of New Century Bank and Berkshire Bank deem the merger of Berkshire Bank with and into New Century Bank, pursuant to the terms and conditions set forth or referred to in this Agreement, to be desirable and in the best interests of the respective corporations and their respective shareholders.

4. The respective Boards of Directors of New Century Bank and Berkshire Bank have adopted resolutions approving this Plan of Merger. The respective boards of directors of Customers 1 st Bancorp, Inc. and Berkshire Bancorp, Inc. adopted resolutions approving a merger agreement dated August ___, 2010 (the “Agreement”) among Customers 1 st Bancorp, Inc., New Century Bank, Berkshire Bancorp, Inc. and Berkshire Bank, providing for the merger of Berkshire Bancorp with and into Customers 1 st Bancorp, Inc., (the “Holding Company Merger”). This Plan of Merger is being executed by New Century Bank and Berkshire Bank pursuant to the Agreement

Agreements:

In consideration of the premises and of the mutual covenants and agreements contained in this Plan of Merger, and in accordance with the applicable laws and regulations of the Commonwealth of Pennsylvania, New Century Bank and Berkshire Bank, intending to be legally bound hereby, agree:

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ARTICLE I

MERGER

Subject to the terms and conditions of this Plan of Merger and in accordance with the applicable laws and regulations of the Commonwealth of Pennsylvania on the “Effective Time” (as that term is defined in Article IV hereof): (i) Berkshire Bank shall merge with and into New Century Bank; (ii) the separate existence of Berkshire Bank shall cease; and (iii) New Century Bank shall be the surviving corporation (such transaction referred to in this Plan of Merger as the "Merger" and New Century Bank, as the surviving corporation in the Merger, referred to in this Plan of Merger as the "Resulting Institution"). New Century Bank will have its home office at Wyomissing, Berks County, Pennsylvania and its branch offices at the present locations of each of the existing authorized branch offices of New Century Bank and Berkshire Bank.

ARTICLE II

CHARTER AND BYLAWS

On and after the Effective Time, the Charter and Bylaws of New Century Bank, as in effect immediately prior to the Effective Time, shall automatically be and remain the Charter and Bylaws of the Resulting Institution, until altered, amended or repealed.

ARTICLE III

CONVERSION OF SHARES

4.1 Stock of New Century Bank.

Each share of New Century Bank Common Stock issued and outstanding immediately prior to the Effective Time shall, on and after the Effective Time, continue to be issued and outstanding as a share of common stock of the Resulting Institution.

4.2 Stock of Berkshire Bank.

Each share of Berkshire Bank Common Stock issued and outstanding immediately prior to the Effective Time, and each share of Berkshire Bank Common Stock issued and held in the treasury of Berkshire Bank as of the Effective Time, if any, shall, on the Effective Time, be cancelled, and no cash, stock or other property shall be delivered in exchange therefor.

ARTICLE IV

EFFECTIVE DATE OF THE MERGER

The Merger shall be effective on a date (the “Effective Time”) which shall be the later of (i) the date on which all filings with government agencies as may be required under applicable laws and regulations for the Merger to become effective have been made and all regulatory approvals therefor shall have been received and first become effective, and (ii) immediately after the “Effective Time” of the Holding Company Merger.

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ARTICLE V

EFFECT OF THE MERGER

6.1 Separate Existence.

On the Effective Time: the separate existence of Berkshire Bank shall cease, and all of the property (real, personal and mixed), rights, powers, duties and obligations of Berkshire Bank shall be taken and deemed to be transferred to and vested in the Resulting Institution, without further act or deed, as provided by applicable laws and regulations.

6.2 Deposit Accounts.

After the Effective Time, (i) each deposit account liability of New Century Bank and each deposit account liability of Berkshire Bank shall be and become, automatically and by operation of law, the equivalent deposit account liability of the Resulting Institution, and (ii) the Resulting Institution will continue to issue deposit accounts on the same basis as New Century Bank had immediately prior to the Effective Time.

ARTICLE VI

CONDITIONS PRECEDENT

The obligations of New Century Bank and Berkshire Bank to effect the Merger shall be subject to satisfaction, unless duly waived by the party permitted to do so, of the conditions precedent set forth in the Agreement.

ARTICLE VII

TERMINATION

This Plan of Merger shall terminate upon any termination of the Agreement in accordance with its terms; provided, however, that any such termination of this Plan of Merger shall not relieve any party hereto from liability on account of a breach by such party of any of the terms hereof or thereof.

ARTICLE VIII

AMENDMENT

Subject to applicable law, this Plan of Merger may be amended, by action of the respective Boards of Directors of the parties hereto, at any time prior to consummation of the Merger, but only by an instrument in writing signed by duly authorized officers on behalf of Berkshire Bank and New Century Bank.

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ARTICLE IX

MISCELLANEOUS

10.1 Extensions; Waivers.

Each party, by a written instrument signed by a duly authorized officer, may extend the time for the performance of any of the obligations or other acts of the other party hereto and may waive compliance with any of the covenants, or performance of any of the obligations, of the other party contained in this Plan of Merger.

10.2 Notices.

Any notice or other communication required or permitted under this Plan of Merger shall be given, and shall be effective, in accordance with the notice provisions of the Agreement.

10.3 Captions.

The headings of the several Articles and Sections in this Plan of Merger are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Plan of Merger.

10.4 Counterparts.

For the convenience of the parties hereto, this Plan of Merger may be executed in several counterparts, each of which shall be deemed the original, but all of which together shall constitute one and the same instrument.

10.5 Governing Law.

This Plan of Merger shall be governed by and construed in accordance with the federal laws of the United States of America, and by Pennsylvania law in the absence of controlling Federal law.

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EXHIBIT C

FORM AMENDMENT

This Amendment to the Employment Agreement entered into between Berkshire Bancorp, Inc. (“Berkshire Bancorp”), Berkshire Bank (“Berkshire Bank”) and _______ is made and entered into as of ________________, by and between Berkshire Bancorp, Berkshire Bank, New Century Bank (“NCB”), and __________ (the “Executive”) (collectively the “Parties”).

WHEREAS, Berkshire Bancorp, Berkshire Bank and Executive entered into an Employment Agreement dated October 18, 2007 (“Employment Agreement”);

WHEREAS, Berkshire Bancorp, Berkshire Bank, NCB, and Customers 1 st Bancorp, Inc. (“Customers 1 st ”) entered into an Agreement and Plan of Merger dated August 23, 2010 (“Merger Agreement”);

WHEREAS, pursuant to Section 7.10 of the Merger Agreement, Berkshire Bancorp, Berkshire Bank, Customers 1 st and NCB have agreed that the Berkshire Bank executives will enter into an amendment to his or her employment agreement reflecting only a change in position and title; and

WHEREAS, this Amendment is in satisfaction of Section 7.10 of the Merger Agreement.

NOW, THEREFORE , in consideration of the covenants hereinafter set forth, and intending to be legally bound hereby, the Parties agree, effective on the Effective Time of the Merger Agreement (as defined therein), that the Employment Agreement shall be amended as follows:

1. Section 3 of the Employment Agreement shall be amended in its entirety as follows:

3. Position and Duties. The Executive shall serve as __________________________________ reporting only to _______________________, and shall have responsibility for ________________________________________________________.

2. Customers 1 st and NCB hereby expressly assumes all obligations and responsibilities under the Employment Agreement effective at the Effective Time of the Merger, subject to any applicable TARP restrictions that may remain applicable.

3. This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania except to the extent that they are preempted by federal law.

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4. Except as amended by this Amendment, the Agreement shall continue in full force and effect.

5. Unless otherwise defined in this Amendment, defined terms shall have the meanings ascribed to them in the Agreement.

IN WITNESS WHEREOF , the Parties, intending to be legally bound hereby, have caused this Amendment to be duly executed in their respective names or by its authorized representative, on the day and year first above written.

ATTEST		BERKSHIRE BANCORP, INC.






ATTEST		BERKSHIRE BANK






ATTEST		CUSTOMERS 1 ST BANCORP, INC.





ATTEST		NEW CENTURY BANK





WITNESS		EXECUTIVE

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ANNEX C

SECTIONS 1607 AND 1222 OF THE PENNSYLVANIA BANKING CODE

Section 1222. Rights of Dissenting Shareholders

If a shareholder of an institution shall object to a proposed plan of action of the institution authorized under a section of this act and such section provides that the shareholder shall be entitled to the rights and remedies of a dissenting shareholder, the rights and remedies of such shareholder shall be governed by the provisions of the Business Corporation Law applicable to dissenting shareholders and shall be subject to the limitations on such rights and remedies under those provisions. Shares acquired by an institution as a result of the exercise of such rights by a dissenting shareholder may be held and disposed of as treasury shares or, in the case of a merger or consolidation, as otherwise provided in the plan of merger or consolidation.

Section 1607. Rights of Dissenting Shareholders

(a) A shareholder of an institution which is a party to a plan in which the proposed merger or consolidation will result in an institution subject to this act who objects to the plan shall be entitled to the rights and remedies of a dissenting shareholder provided under, and subject to compliance with, the provisions of section 1222 of this act.

(b) If a shareholder of a national bank which is a party to a plan in which the proposed merger or consolidation will result in an institution subject to this act shall object to the plan and shall comply with the requirements of applicable laws of the United States, the resulting institution shall be liable for the value of his shares as determined in accordance with such laws of the United States. If the laws of the United States do not provide rights of dissenting shareholders or requirements for the exercise of such rights and the valuation of shares, such shareholder shall be entitled to the rights and remedies of a dissenting shareholder under, and subject to compliance with, the provisions of section 1222 of this act.

SUBCHAPTER D OF CHAPTER 15 AND SECTION 1930

OF THE PENNSYLVANIA BUSINESS CORPORATION LAW

OF 1988 (15 Pa. C.S.A. §§1571-1580 and 1930) AS AMENDED,

RELATING TO DISSENTERS' RIGHTS

§ 1930. Dissenters rights

(a) General rule. If any shareholder of a domestic business corporation that becomes a party to a merger or consolidation pursuant to a plan of merger or consolidation objects to the plan of merger or consolidation and complies with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights), the shareholder shall be entitled to the rights and remedies of dissenting shareholders therein provided, if any. See also section 1906(c) (relating to dissenters right upon special treatment).

(b) Plans adopted by directors only. Except as otherwise provided pursuant to section 1571(c) (relating to grant of optional dissenters rights), Subchapter D of Chapter 15 shall not apply to any of the shares of a corporation that is a party to a merger or consolidation pursuant to section 1924(b)(1)(i) or (4) (relating to adoption by board of directors).

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(c) Cross references. See sections 1571(b) (relating to exceptions) and 1904 (relating to de facto transaction doctrine abolished).

§ 1571. Application and effect of subchapter

(a) General rule. Except as otherwise provided in subsection (b) any shareholder (as defined in Section 1572 (relating to definitions)) of a business corporation shall have the right to dissent from, and to obtain payment of the fair value of his shares in the event of, any corporate action, or to otherwise obtain fair value for his shares, where this part expressly provides that a shareholder shall have the rights and remedies provided in this subchapter. See:

Section 1906(c) (relating to dissenters rights upon special treatment).

Section 1930 (relating to dissenters rights).

Section 1931(d) (relating to dissenters rights in share exchanges).

Section 1932(c) (relating to dissenters rights in asset transfers).

Section 1952(d) (relating to dissenters rights in division).

Section 1962(c) (relating to dissenters rights in conversion).

Section 2104(b) (relating to procedure).

Section 2324 (relating to corporation option where a restriction on transfer of a security is held invalid).

Section 2325(b) (relating to minimum vote requirement).

Section 2704(c) (relating to dissenters rights upon election).

Section 2705(d) (relating to dissenters rights upon renewal of election).

Section 2904(b) (relating to procedure)

Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions).

Section 7104(b)(3) (relating to procedure).

(b) Exceptions.

(1) Except as otherwise provided in paragraph (2), the holders of the shares of any class or series of shares shall not have the right to dissent and obtain payment of the fair market value of the shares under this subchapter if, on the record date fixed to determine the shareholders entitled to notice of and to vote at the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on or on the date of the first public announcement that such a plan has been approved by the shareholders by consent without a meeting, the shares are either:

(i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc., or

(ii) held of record by more than 2,000 persons.

(2) Paragraph (1) shall not apply to and dissenters rights shall be available without regard to the exception provided in that paragraph in the case of:

(i) (Repealed.)

(ii) Shares of any preferred or special class unless the articles, the plan or the terms of the transaction entitle all shareholders of the class or series to vote thereon and require for the adoption of the plan or the effectuation of the transaction the affirmative vote of a majority of the votes cast by all shareholders of the class or series.

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(iii) Shares entitled to dissenters rights under section 1906(c) (relating to dissenters rights upon special treatment).

(3) The shareholders of a corporation that acquires by purchase, lease, exchange or other disposition all or substantially all of the shares, property or assets of another corporation by the issuance of shares, obligations or otherwise, with or without assuming the liabilities of the other corporation and with or without the intervention of another corporation or other person, shall not be entitled to the rights and remedies of dissenting shareholders provided in this subchapter regardless of the fact, if it be the case, that the acquisition was accomplished by the issuance of voting shares of the corporation to be outstanding immediately after the acquisition sufficient to elect a majority or more of the directors of the corporation.

(c) Grant of optional dissenters rights. The bylaws or a resolution of the board of directors may direct that all or a part of the shareholders shall have dissenters rights in connection with any corporate action or other transaction that would otherwise not entitle such shareholders to dissenters rights.

(d) Notice of dissenters rights. Unless otherwise provided by statute, if a proposed corporate action that would give rise to dissenters rights under this subpart is submitted to a vote at a meeting of shareholders, there shall be included in or enclosed with the notice of meeting:

(1) a statement of the proposed action and a statement that the shareholders have a right to dissent and obtain payment of the fair value of their shares by complying with the terms of this subchapter; and

(2) a copy of this subchapter.

(e) Other statutes. The procedures of this subchapter shall also be applicable to any transaction described in any statute other than this part that makes reference to this subchapter for the purpose of granting dissenters rights.

(f) Certain provisions of articles ineffective. This subchapter may not be relaxed by any provision of the articles.

(g) Computation of Beneficial Ownership. For purposes of subsection (b)(1)(ii), shares that are held beneficially as joint tenants, tenants by the entireties, tenants in common or in trust for two or more persons, as fiduciaries or otherwise, shall be deemed to be held beneficially by one person.

(h) Cross references. See sections 1105 (relating to restriction on equitable relief), 1904 (relating to de facto transaction doctrine abolished), 1763(c) (relating to determination of shareholders of record) and 2512 (relating to dissenters rights procedure).

§ 1572. Definitions

The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:

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"Corporation." The issuer of the shares held or owned by the dissenter before the corporate action or the successor by merger, consolidation, division, conversion or otherwise of that issuer. A plan of division may designate which one or more of the resulting corporations is the successor corporation for the purposes of this subchapter. The designated successor corporation or corporations in a division shall have sole responsibility for payments to dissenters and other liabilities under this subchapter except as otherwise provided in the plan of division.

"Dissenter." A shareholder who is entitled to and does assert dissenters rights under this subchapter and who has performed every act required up to the time involved for the assertion of those rights.

"Fair value." The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action.

"Interest." Interest from the effective date of the corporate action until the date of payment at such rate as is fair and equitable under all the circumstances, taking into account all relevant factors, including the average rate currently paid by the corporation on its principal bank loans.

"Shareholder." A shareholder as defined in section 1103 (relating to definitions) or an ultimate beneficial owner of shares, including, without limitation, a holder of depository receipts, where the beneficial interest owned includes an interest in the assets of the corporation upon dissolution.

§ 1573. Record and beneficial holders and owners

(a) Record holders of shares. A record holder of shares of a business corporation may assert dissenters rights as to fewer than all of the shares registered in his name only if he dissents with respect to all the shares of the same class or series beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders.

(b) Beneficial owners of shares. A beneficial owner of shares of a business corporation who is not the record holder may assert dissenters rights with respect to shares held on his behalf and shall be treated as a dissenting shareholder under the terms of this subchapter if he submits to the corporation not later than the time of the assertion of dissenters rights a written consent of the record holder. A beneficial owner may not dissent with respect to some but less than all shares of the same class or series owned by the owner, whether or not the shares so owned by him are registered in his name.

§ 1574. Notice of intention to dissent

If the proposed corporate action is submitted to a vote at a meeting of shareholders of a business corporation, any person who wishes to dissent and obtain payment of the fair value of his shares must file with the corporation, prior to the vote, a written notice of intention to demand that he be paid the fair value for his shares if the proposed action is effectuated, must effect no change in the beneficial ownership of his shares from the date of such filing continuously through the effective date of the proposed action and must refrain from voting his shares in approval of such action. A dissenter who fails in any respect shall not acquire any right to payment of the fair value of his shares under this subchapter. Neither a proxy nor a vote against the proposed corporate action shall constitute the written notice required by this section.

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§ 1575. Notice to demand payment

(a) General rule. If the proposed corporate action is approved by the required vote at a meeting of shareholders of a business corporation, the corporation shall mail a further notice to all dissenters who gave due notice of intention to demand payment of the fair value of their shares and who refrained from voting in favor of the proposed action. If the proposed corporate action is to be taken without a vote of shareholders, the corporation shall send to all shareholders who are entitled to dissent and demand payment of the fair value of their shares a notice of the adoption of the plan or other corporate action. In either case, the notice shall:

(1) State where and when a demand for payment must be sent and certificates for certificated shares must be deposited in order to obtain payment.

(2) Inform holders of uncertificated shares to what extent transfer of shares will be restricted from the time that demand for payment is received.

(3) Supply a form for demanding payment that includes a request for certification of the date on which the shareholder, or the person on whose behalf the shareholder dissents, acquired beneficial ownership of the shares.

(4) Be accompanied by a copy of this subchapter.

(b) Time for receipt of demand for payment. The time set for receipt of the demand and deposit of certificated shares shall be not less than 30 days from the mailing of the notice.

§ 1576. Failure to comply with notice to demand payment, etc.

(a) Effect of failure of shareholder to act. A shareholder who fails to timely demand payment, or fails (in the case of certificated shares) to timely deposit certificates, as required by a notice pursuant to section 1575 (relating to notice to demand payment) shall not have any right under this subchapter to receive payment of the fair value of his shares.

(b) Restriction on uncertificated shares. If the shares are not represented by certificates, the business corporation may restrict their transfer from the time of receipt of demand for payment until effectuation of the proposed corporate action or the release of restrictions under the terms of section 1577(a) (relating to failure to effectuate corporate action).

(c) Rights retained by shareholders. The dissenter shall retain all other rights of a shareholder until those rights are modified by effectuation of the proposed corporate action.

§ 1577. Release of restrictions or payment for shares

(a) Failure to effectuate corporate action. Within 60 days after the date set for demanding payment and depositing certificates, if the business corporation has not effectuated the proposed corporate action, it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment.

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(b) Renewal of notice to demand payment. When uncertificated shares have been released from transfer restrictions and deposited certificates have been returned, the corporation may at any later time send a new notice conforming to the requirements of section 1575 (relating to notice to demand payment), with like effect.

(c) Payment of fair value of shares. Promptly after effectuation of the proposed corporate action, or upon timely receipt of demand for payment if the corporate action has already been effectuated, the corporation shall either remit to dissenters who have made demand and (if their shares are certificated) have deposited their certificates the amount that the corporation estimates to be the fair value of the shares, or give written notice that no remittance under this section will be made. The remittance or notice shall be accompanied by:

(1) The closing balance sheet and statement of income of the issuer of the shares held or owned by the dissenter for a fiscal year ending not more than 16 months before the date of remittance or notice together with the latest available interim financial statements.

(2) A statement of the corporation's estimate of the fair value of the shares.

(3) A notice of the right of the dissenter to demand payment or supplemental payment, as the case may be, accompanied by a copy of this subchapter.

(d) Failure to make payment. If the corporation does not remit the amount of its estimate of the fair value of the shares as provided by subsection (c), it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. The corporation may make a notation on any such certificate or on the records of the corporation relating to any such uncertificated shares that such demand has been made. If shares with respect to which notation has been so made shall be transferred, each new certificate issued therefore or the records relating to any transferred uncertificated shares shall bear a similar notation, together with the name of the original dissenting holder or owner of such shares. A transferee of such shares shall not acquire by such transfer any rights in the corporation other than those that the original dissenter had after making demand for payment of their fair value.

§ 1578. Estimate by dissenter of fair value of shares

(a) General rule. If the business corporation gives notice of its estimate of the fair value of the shares, without remitting such amount, or remits payment of its estimate of the fair value of a dissenter's shares as permitted by section 1577(c) (relating to payment of fair value of shares) and the dissenter believes that the amount stated or remitted is less than the fair value of his shares, he may send to the corporation his own estimate of the fair value of the shares, which shall be deemed a demand for payment of the amount or the deficiency.

(b) Effect of failure to file estimate. Where the dissenter does not file his own estimate under subsection (a) within 30 days after the mailing by the corporation of its remittance or notice, the dissenter shall be entitled to no more than the amount stated in the notice or remitted to him by the corporation.

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§ 1579. Valuation proceedings generally

(a) General rule. Within 60 days after the latest of:

(1) effectuation of the proposed corporate action;

(2) timely receipt of any demands for payment under section 1575 (relating to notice to demand payment); or

(3) timely receipt of any estimates pursuant to section 1578 (relating to estimate by dissenter of fair value of shares);

if any demands for payment remain unsettled, the business corporation may file in court an application for relief requesting that the fair value of the shares be determined by the court.

(b) Mandatory joinder of dissenters. All dissenters, wherever residing, whose demands have not been settled shall be made parties to the proceeding as in an action against their shares. A copy of the application shall be served on each such dissenter. If a dissenter is a nonresident, the copy may be served on him in the manner provided or prescribed by or pursuant to 42 Pa. C.S. Ch. 53 (relating to bases of jurisdiction and interstate and international procedure).

(c) Jurisdiction of the court. The jurisdiction of the court shall be plenary and exclusive. The court may appoint an appraiser to receive evidence and recommend a decision on the issue of fair value. The appraiser shall have such power and authority as may be specified in the order of appointment or in any amendment thereof.

(d) Measure of recovery. Each dissenter who is made a party shall be entitled to recover the amount by which the fair value of his shares is found to exceed the amount, if any, previously remitted, plus interest.

(e) Effect of corporation's failure to file applications. If the corporation fails to file an application as provided in subsection (a), any dissenter who made a demand and who has not already settled his claim against the corporation may do so in the name of the corporation at any time within 30 days after the expiration of the 60-day period. If a dissenter does not file an application within the 30-day period, each dissenter entitled to file an application shall be paid the corporation's estimate of the fair value of the shares and no more, and may bring an action to recover any amount not previously remitted.

§ 1580. Costs and expenses of valuation proceedings

(a) General rule. The costs and expenses of any proceeding under section 1579 (relating to valuation proceedings generally), including the reasonable compensation and expenses of the appraiser appointed by the court, shall be determined by the court and assessed against the business corporation except that any part of the costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters who are parties and whose action in demanding supplemental payment under section 1578 (relating to estimate by dissenter of fair value of shares) the court finds to be dilatory, obdurate, arbitrary, vexatious or in bad faith.

(b) Assessment of counsel fees and expert fees where lack of good faith appears. Fees and expenses of counsel and of experts for the respective parties may be assessed as the court deems appropriate against the corporation and in favor of any or all dissenters if the corporation failed to comply substantially with the requirements of this subchapter and may be assessed against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights provided by this subchapter.

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(c) Award of fees for benefits to other dissenters. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and should not be assessed against the corporation, it may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited.

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ANNEX D

TAX OPINION OF STRADLEY RONON STEVENS & YOUNG, LLP

To be attached by amendment.

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ANNEX E

[Commonwealth Advisors LLC Letterhead]

August 23, 2010

The Board of Directors

Berkshire Bancorp, Inc.

1101 Woodland Road

Wyomissing, PA 19610

Members of the Board of Directors:

You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock (the “Company Common Stock”), $1.00 par value per share, of Berkshire Bancorp, Inc. (the “Company”) of the consideration, defined below, in the proposed merger (the “Transaction”) of the Company with Customers 1 st Bancorp, Inc. (the “Acquiror”). Pursuant to the Agreement and Plan of Merger, dated as of August 23, 2010 (the “Agreement”), by and among the Company, the Acquiror, Berkshire Bank and New Century Bank, the Company will be merged with and into the Acquiror, and Berkshire Bank will be merged with and into New Century Bank and each outstanding share of Company Common Stock, other than shares of Company Common Stock held in treasury or owned by the Acquiror and its affiliates, will be converted into the right to receive a calculated number of shares of the Acquiror’s common stock (the “Acquiror Common Stock”), such that the consideration received for each share of the Company Common Stock will be not less than $1.95 nor more than the tangible common book value per share of the Company Common Stock, or the adjusted tangible common book value per share of the Company Common Stock, after the effect of the Book Value Adjustment , as defined in the Agreement, if applicable.

In arriving at our opinion, we have (i) reviewed the Agreement; (ii) reviewed and discussed with the Company and the Acquiror certain publicly available business and financial information concerning the Company and the Acquiror and the industry in which they operate; (iii) reviewed and discussed with the Company and the Acquiror matters relating to their respective liquidity, leverage and capital adequacy; (iv) compared the proposed financial terms of the Transaction with the publicly available financial terms of certain transactions involving companies we deemed relevant; (v) compared the financial and operating performance of the Company and the Acquiror with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock and the Acquiror Common Stock and certain publicly traded securities of such other companies; (vi) reviewed and discussed with the Company certain internal financial analyses and forecasts prepared by the management of the Company relating to its business; (vii) reviewed and discussed with the Acquiror the estimated amount and timing of the cost savings and related expenses expected to result from the Transaction; and (vii) performed

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such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.

In addition, we have held discussions with certain members of the management of the Company and the Acquiror with respect to certain aspects of the Transaction, and the past and current business operations of the Company and the Acquiror, the financial condition and future prospects and operations of the Company and the Acquiror, the effects of the Transaction on the financial condition and future prospects of the Company and the Acquiror, and certain other matters we believed necessary or appropriate to our inquiry. In the course of such discussions, we have been advised by members of the management of the Company that the Company has been negatively affected by, and continues to have exposure to, risks related to asset quality issues, including the impact thereof on the Company’s capital.

In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company and the Acquiror or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. We have not reviewed individual credit files of the Company or the Acquiror, nor have we conducted or been provided with any valuation or appraisal of any assets or liabilities (including any derivative or off- balance sheet liabilities) of the Company or the Acquiror, nor have we evaluated the solvency of the Company or the Acquiror under any state or federal laws relating to bankruptcy, insolvency or similar matters. We are not experts in the evaluation of loan and lease portfolios for assessing the adequacy of the allowances for losses with respect thereto and, accordingly, we did not make an independent evaluation of the adequacy of the allowance for loan losses of the Company or the Acquiror and we have assumed, with your consent, that the respective allowances for loan losses for both the Company and the Acquiror, respectively, are adequate to cover such losses and will be adequate on a pro forma basis for the combined entity. In relying on financial analyses and forecasts provided to us by the Company and the Acquiror or derived therefrom, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate, and that they have been reviewed and accepted by the parties’ respective regulators. We express no view as to the validity or accuracy of any analyses, forecasts or estimates referred to above, or the assumptions on which they were based. We have also assumed that the Transaction contemplated by the Agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the Agreement. We have also assumed that the representations and warranties made by the Company and the Acquiror in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis and that the covenants and agreements contained therein will be performed in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and

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approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or the Acquiror or on the contemplated benefits of the Transaction. The Agreement provides that the Acquiror’s obligation to carry out the Transaction may be voided a Material Adverse Effect, as described in the Agreement, in which case our opinion is invalid.

Our opinion is necessarily based on economic, market and other conditions in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Common Stock of the Consideration in the proposed Transaction, and we express no opinion as to the fairness of the Transaction, or any consideration to be paid to creditors or other constituencies of the Company or as to the underlying decision by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the consideration defined above applicable to the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock or the Acquiror Common Stock will trade at any future time or the value of the Acquiror Common Stock when issued pursuant to the Agreement.

We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. During the two years preceding the date of this letter, we have had no commercial or investment banking relationships with the Company or the Acquiror. Commonwealth Advisors LLC is indirectly owned by Bybel Rutledge LLP. Bybel Rutledge LLP is serving as special counsel to the Company with respect to the Transaction.

On the basis of and subject to the foregoing, it is our opinion that, as of the date hereof, the Exchange Ratio in the proposed Transaction is fair, from a financial point of view, to the holders of the Company Common Stock.

This letter is provided to the Board of Directors of the Company in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Transaction, the relative merits of the Transaction as compared to other business strategies or transactions that might be available to the Company, or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may, however, be reproduced in any proxy statement mailed to shareholders of the Company provided that the opinion is reproduced in such document in its entirety, and such document includes a summary of the opinion and related analysis

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in a form prepared or approved by us (such approval not to be unreasonably withheld), but may not otherwise be disclosed publicly in any manner without our prior written approval.

Very truly yours,

Commonwealth Advisors LLC

/s/ Commonwealth Advisors LLC

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ANNEX F

DISSENTERS’ RIGHTS PROVISIONS

Pennsylvania Business Corporation Law of 1988, as Amended, Provisions For Dissenting Shareholders

Subchapter D.—Dissenters Rights.

§ 1571. Application and effect of subchapter.

(a)

General rule.—Except as otherwise provided in subsection (b), any shareholder (as defined in Section 1572 (relating to definitions)) of a business corporation shall have the right to dissent from, and to obtain payment of the fair value of his shares in the event of, any corporate action, or to otherwise obtain fair value for his shares, only where this part expressly provides that a shareholder shall have the rights and remedies provided in this subchapter. See:

Section 1906(c) (relating to dissenters rights upon special treatment).

Section 1930 (relating to dissenters rights).

Section 1931(d) (relating to dissenters rights in share exchanges).

Section 1932(c) (relating to dissenters rights in asset transfers).

Section 1952(d) (relating to dissenters rights in division).

Section 1962(c) (relating to dissenters rights in conversion).

Section 2104(b) (relating to procedure).

Section 2324 (relating to corporation option where a restriction on transfer of a security is held invalid).

Section 2325(b) (relating to minimum vote requirement).

Section 2704(c) (relating to dissenters rights upon election).

Section 2705(d) (relating to dissenters rights upon renewal of election).

Section 2904(b) (relating to procedure).

Section 2907(a) (relating to proceedings to terminate breach of qualifying conditions).

Section 7104(b)(3) (relating to procedure).

(b)

Exceptions.—(1) Except as otherwise provided in paragraph (2), the holders of the shares of any class or series of shares shall not have the right to dissent and obtain payment of the fair value of the shares under this subchapter if, on the record date fixed to determine the shareholders entitled to notice of and to vote at the meeting at which a plan specified in any of section 1930, 1931(d), 1932(c) or 1952(d) is to be voted on, or on the first public announcement that such a plan has been approved by the shareholders by consent without a meeting, the shares are either:

(i)

listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.; or

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(ii)

held beneficially or of record by more than 2,000 persons.

(2)

Paragraph (1) shall not apply to and dissenters rights shall be available without regard to the exception provided in that paragraph in the case of:

(i)

(Repealed).

(ii)

Shares of any preferred or special class or series unless the articles, the plan or the terms of the transaction entitle all shareholders of the class or series to vote thereon and require for the adoption of the plan or the effectuation of the transaction the affirmative vote of a majority of the votes cast by all shareholders of the class or series.

(iii)

Shares entitled to dissenters rights under section 1906(c) (relating to dissenters rights upon special treatment).

(3)

The shareholders of a corporation that acquires by purchase, lease, exchange or other disposition all or substantially all of the shares, property or assets of another corporation by the issuance of shares, obligations or otherwise, with or without assuming the liabilities of the other corporation and with or without the intervention of another corporation or other person, shall not be entitled to the rights and remedies of dissenting shareholders provided in this subchapter regardless of the fact, if it be the case, that the acquisition was accomplished by the issuance of voting shares of the corporation to be outstanding immediately after the acquisition sufficient to elect a majority or more of the directors of the corporation.

(c)

Grant of optional dissenters rights.—The bylaws or a resolution of the board of directors may direct that all or a part of the shareholders shall have dissenters rights in connection with any corporate action or other transaction that would otherwise not entitle such shareholder to dissenters rights.

(d)

Notice of dissenters rights.—Unless otherwise provided by statute, if a proposed corporate action that would give rise to dissenters rights under this subpart is submitted to a vote at a meeting of shareholders, there shall be included in or enclosed with the notice of meeting:

(2) a copy of this subchapter.

(e)

Other statutes.—The procedures of this subchapter shall also be applicable to any transaction described in any statute other than this part that makes reference to this subchapter for the purpose of granting dissenters rights.

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(f)

Certain provisions of articles ineffective.—This subchapter may not be relaxed by any provision of the articles.

(g)

Computation of beneficial ownership.—For purposes of subsection (b)(1)(ii), shares that are held beneficially as joint tenants, tenants by the entireties, tenants in common or in trust by two or more persons, as fiduciaries or otherwise, shall be deemed to be held beneficially by one person.

(h)

Cross references.—See sections 1105 (relating to restriction on equitable relief), 1904 (relating to de facto transaction doctrine abolished), 1763(c) (relating to determination of shareholders of record) and 2512 (relating to dissenters rights procedure).

§ 1572. Definitions.

The following words and phrases when used in this subchapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:

“Corporation.” The issuer of the shares held or owned by the dissenter before the corporate action or the successor by merger, merger, division, conversion or otherwise of that issuer. A plan of division may designate which one or more of the resulting corporations is the successor corporation for the purposes of this subchapter. The designated successor corporation or corporations in a division shall have sole responsibility for payments to dissenters and other liabilities under this subchapter except as otherwise provided in the plan of division.

“Dissenter.” A shareholder who is entitled to and does assert dissenters rights under this subchapter and who has performed every act required up to the time involved for the assertion of those rights.

“Fair value.” The fair value of shares immediately before the effectuation of the corporate action to which the dissenter objects, taking into account all relevant factors, but excluding any appreciation or depreciation in anticipation of the corporate action.

“Interest.” Interest from the effective date of the corporate action until the date of payment at such rate as is fair and equitable under all the circumstances, taking into account all relevant factors, including the average rate currently paid by the corporation on its principal bank loans.

“Shareholder.” A shareholder as defined in section 1103 (relating to definitions), or an ultimate beneficial owner of shares, including without limitation, a holder of depository receipts, where the beneficial interest owned includes an interest in the assets of the corporation upon dissolution.

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§ 1573. Record and beneficial holders and owners.

(a)

Record holders of shares.—A record holder of shares of a business corporation may assert dissenters rights as to fewer than all of the shares registered in his name only if he dissents with respect to all the shares of the same class or series beneficially owned by any one person and discloses the name and address of the person or persons on whose behalf he dissents. In that event, his rights shall be determined as if the shares as to which he has dissented and his other shares were registered in the names of different shareholders.

(b)

Beneficial owners of shares.—A beneficial owner of shares of a business corporation who is not the record holder may assert dissenters rights with respect to shares held on his behalf and shall be treated as a dissenting shareholder under the terms of this subchapter if he submits to the corporation not later than the time of the assertion of dissenters rights a written consent of the record holder. A beneficial owner may not dissent with respect to some but less than all shares of the same class or series owned by the owner, whether or not the shares so owned by him are registered in his name.

§ 1574. Notice of intention to dissent.

§ 1575. Notice to demand payment.

(a)

General rule.—If the proposed corporate action is approved by the required vote at a meeting of shareholders of a business corporation, the corporation shall mail a further notice to all dissenters who gave due notice of intention to demand payment of the fair value of their shares and who refrained from voting in favor of the proposed action. If the proposed corporate action is to be taken without a vote of shareholders, the corporation shall send to all shareholders who are entitled to dissent and demand payment of the fair value of their shares a notice of the adoption of the plan or other corporate action. In either case, the notice shall:

(1)

State where and when a demand for payment must be sent and certificates for certificated shares must be deposited in order to obtain payment.

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(2)

Inform holders of uncertificated shares to what extent transfer of shares will be restricted from the time that demand for payment is received.

(3)

Supply a form for demanding payment that includes a request for certification of the date on which the shareholder, or the person on whose behalf the shareholder dissents, acquired beneficial ownership of the shares.

(4)

Be accompanied by a copy of this subchapter.

(b)

Time for receipt of demand for payment.—The time set for receipt of the demand and deposit of certificated shares shall be not less than 30 days from the mailing of the notice.

§ 1576. Failure to comply with notice to demand payment, etc.

(a)

Effect of failure of shareholder to act.—A shareholder who fails to timely demand payment, or fails (in the case of certificated shares) to timely deposit certificates, as required by a notice pursuant to section 1575 (relating to notice to demand payment) shall not have any right under this subchapter to receive payment of the fair value of his shares.

(b)

Restriction on uncertificated shares.—If the shares are not represented by certificates, the business corporation may restrict their transfer from the time of receipt of demand for payment until effectuation of the proposed corporate action or the release of restrictions under the terms of section 1577(a) (relating to failure to effectuate corporate action).

(c)

Rights retained by shareholder.—The dissenter shall retain all other rights of a shareholder until those rights are modified by effectuation of the proposed corporate action.

§ 1577. Release of restrictions or payment for shares.

(a)

Failure to effectuate corporate action.—Within 60 days after the date set for demanding payment and depositing certificates, if the business corporation has not effectuated the proposed corporate action, it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment.

(b)

Renewal of notice to demand payment.—When uncertificated shares have been released from transfer restrictions and deposited certificates have been returned, the corporation may at any later time send a new notice conforming to the requirements of section 1575 (relating to notice to demand payment), with like effect.

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(c)

Payment of fair value of shares.—Promptly after effectuation of the proposed corporation action, or upon timely receipt of demand for payment if the corporate action has already been effectuated, the corporation shall either remit to dissenters who have made demand and (if their shares are certificated) have deposited their certificates the amount that the corporation estimates to be the fair value of the shares, or give written notice that no remittance under this section will be made. The remittance or notice shall be accompanied by:

(1)

The closing balance sheet and statement of income of the issuer of the shares held or owned by the dissenter for a fiscal year ending not more than 16 months before the date of remittance or notice together with the latest available interim financial statements.

(2)

A statement of the corporation’s estimate of the fair value of the shares.

(3)

A notice of the right of the dissenter to demand payment or supplemental payment, as the case may be, accompanied by a copy of this subchapter.

(d)

Failure to make payment.—If the corporation does not remit the amount of its estimate of the fair value of the shares as provided by subsection (c), it shall return any certificates that have been deposited and release uncertificated shares from any transfer restrictions imposed by reason of the demand for payment. The corporation may make a notation on any such certificate or on the records of the corporation relating to any such uncertificated shares that such demand has been made. If shares with respect to which notation has been so made shall be transferred, each new certificate issued therefor or the records relating to any transferred uncertificated shares shall bear a similar notation, together with the name of the original dissenting holder or owner of such shares. A transferee of such shares shall not acquire by such transfer any rights in the corporation other than those that the original dissenters had after making demand for payment of their fair value.

§ 1578. Estimate by dissenter of fair value of shares.

(a)

General rule.—If the business corporation gives notice of its estimate of the fair value of the shares, without remitting such amount, or remits payment of its estimate of the fair value of a dissenter’s shares as permitted by section 1577(c) (relating to payment of fair value of shares) and the dissenter believes that the amount stated or remitted is less than the fair value of his shares, he may send to the corporation his own estimate of the fair value of the shares, which shall be deemed a demand for payment of the amount or the deficiency.

(b)

Effect of failure to file estimate.—Where the dissenter does not file his own estimate under subsection (a) within 30 days after the mailing by the corporation of its remittance or notice, the dissenter shall be entitled to no more than the amount stated in the notice or remitted to him by the corporation.

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§ 1579. Valuation proceedings generally.

(a)

General rule.—Within 60 days after the latest of:

(1)

effectuation of the proposed corporate action;

(2)

timely receipt of any demands for payment under section 1575 (relating to notice to demand payment); or

(3)

timely receipt of any estimates pursuant to section 1578 (relating to estimate by dissenter of fair value of shares);

if any demands for payment remain unsettled, the business corporation may file in court an application for relief requesting that the fair value of the shares be determined by the court.

(b)

Mandatory joinder of dissenters.—All dissenters, wherever residing, whose demands have not been settled shall be made parties to the proceeding as in an action against their shares. A copy of the application shall be served on each such dissenter. If a dissenter is a nonresident, the copy may be served on him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53 (relating to bases of jurisdiction and interstate and international procedure).

(c)

Jurisdiction of the court.—The jurisdiction of the court shall be plenary and exclusive. The court may appoint an appraiser to receive evidence and recommend a decision on the issue of fair value. The appraiser shall have such power and authority as may be specified in the order of appointment or in any amendment thereof.

(d)

Measure of recovery.—Each dissenter who is made a party shall be entitled to recover the amount by which the fair value of his shares is found to exceed the amount, if any, previously remitted, plus interest.

(e)

Effect of corporation’s failure to file application.—If the corporation fails to file an application as provided in subsection (a), any dissenter who made a demand and who has not already settled his claim against the corporation may do so in the name of the corporation at any time within 30 days after the expiration of the 60-day period. If a dissenter does not file an application within the 30-day period, each dissenter entitled to file an application shall be paid the corporation’s estimate of the fair value of the shares and no more, and may bring an action to recover any amount not previously remitted.

§ 1580. Costs and expenses of valuation proceedings.

(a)

General rule.—The costs and expenses of any proceeding under section 1579 (relating to valuation proceedings generally), including the reasonable compensation and expenses of the appraiser appointed by the court, shall be determined by the court and assessed against the business corporation except that any part of the costs and expenses may be apportioned and assessed as the court deems appropriate against all or some of the dissenters who are parties and whose action in demanding supplemental payment under section 1578 (relating to estimate by dissenter of fair value of shares) the court finds to be dilatory, obdurate, arbitrary, vexatious or in bad faith.

F-7

(b)

Assessment of counsel fees and expert fees where lack of good faith appears.—Fees and expenses of counsel and of experts for the respective parties may be assessed as the court deems appropriate against the corporation and in favor of any or all dissenters if the corporation failed to comply substantially with the requirements of this subchapter and may be assessed against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in respect to the rights provided by this subchapter.

(c)

Award of fees for benefits to other dissenters.—If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated and should not be assessed against the corporation, it may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited.

§ 1930. Dissenters rights.

(a)

General rule.—If any shareholder of a domestic business corporation that is to be a party to a merger or merger pursuant to a plan of merger or merger objects to the plan of merger or merger and complies with the provisions of Subchapter D of Chapter 15 (relating to dissenters rights), the shareholder shall be entitled to the rights and remedies of dissenting shareholders therein provided, if any. See also section 1906(c) (relating to dissenters rights upon special treatment).

(b)

Plans adopted by directors only.—Except as otherwise provided pursuant to section 1571(c) (relating to grant of optional dissenters rights), Subchapter D of Chapter 15 shall not apply to any of the shares of a corporation that is a party to a merger or merger pursuant to section 1924(b)(1)(i) or (4) (relating to adoption by board of directors).

(c)

Cross references.—See sections 1571(b) (relating to exceptions) and 1904 (relating to de facto transaction doctrine abolished).

Jay S. Sidhu Customers Bank 1015 Penn Avenue Suite 103 Wyomissing PA 19610 (610) 933-2000 (Name, address, telephone no. of agent for service)
With a Copy to:
David F. Scranton, Esquire Stradley Ronon Stevens & Young, LLP 30 Valley Stream Parkway Malvern, Pennsylvania 19355 (610) 640-5806	Erik Gerhard, Esquire Bybel Rutledge LLP 1017 Mumma Road, Suite 302 Lemoyne, Pennsylvania 17043 (717) 731-1700

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

FORWARD-LOOKING STATEMENTS	1
SUMMARY	2
PRINCIPAL PARTIES TO THE REORGANIZATION AND THE MERGER	2
COMMONLY USED TERMS	3
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND VOTING	3
Why am I receiving these proxy materials?	3
Who is entitled to vote at the meeting?	3
What am I being asked to vote on?	4
How many votes do I have?	4
What is a quorum?	5
What vote is required?	5
How do I vote?	5
What if I return a proxy card but do not make specific choices?	6
What if I receive more than one proxy card or voting instruction form?	6
Who will count the votes and how will my votes be counted?	7
Can I change my vote after I have sent you my proxy?	7
How may I communicate with the board of directors?	7
Who will bear the cost of soliciting proxies?	7
How can I find out the results of the voting at the meeting?	8
What is the recommendation of the board of directors?	8
Whom should I call if I have questions about the Special Meeting, the reorganization or the merger?	8
QUESTIONS AND ANSWERS ABOUT THE REORGANIZATION AND THE MERGER	9
What is the proposed transaction for which I am being asked to vote?	9
Who is being asked to vote?	9
What will I receive as consideration?	9
What will happen, upon consummation of the reorganization, to options and warrants to purchase Customers Bank’s Common Stock?	10
What will happen, upon the consummation of the merger, to outstanding warrants to purchase BBI common stock?	10
Do I have to take any action to exchange my shares?	11
Can I trade Customers Bank and/or BBI shares between the date of this Joint Proxy Statement-Prospectus and the closing of the reorganization?	11
After the reorganization and the merger, where can I trade CBI’s shares?	11
Will the reorganization or the merger affect Customers Bank’s current or future operations?	12
Will the reorganization or merger dilute my economic interest?	12
Will the reorganization or merger result in any changes to my rights as a shareholder?	12
What are the expected federal income tax consequences of the reorganization and merger?	12
When do you expect the reorganization and the merger to be completed?	13
What vote is required to approve the reorganization and the merger?	13
What vote do the boards of directors recommend?	13
Why do the board of directors believe the merger is in the best interest of each respective company's shareholders	14
Are the interests of Customers Bank's and BBI's boards of directors and executive officers in the reorganization and merger the same as mine?	17
Do I have the right to dissent from the reorganization or merger?	17
What are the conditions that must be satisfied for the reorganization and merger to occur?	18
Can the proposed reorganization or the merger be deferred or abandoned altogether?	19
What do I need to do now?	19
What happens after the Special Meeting?	19
RISK FACTORS	20

	C1.	To approve and adopt a Plan of Merger and Reorganization pursuant to which Customers Bank will reorganize to a bank holding company structure (which is referred to as the “reorganization”);

	C2.	To approve and adopt the Agreement and Plan of Merger, dated as of August 23, 2010, by and among Berkshire Bancorp, Inc., Berkshire Bank, Customers Bancorp, Inc., and Customers Bank (which is referred to as the “Merger Agreement”) and to approve all transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Berkshire Bancorp, Inc. will merge with an into Customers Bancorp, Inc., and, immediately thereafter, Berkshire Bank will merge with and into Customers Bank; and

	C3.	To adjourn the meeting to a date to be proposed at the meeting, if necessary to solicit or receive additional proxies.

	B1.	To approve and adopt the Agreement and Plan of Merger, dated as of August 23, 2010, by and among Berkshire Bancorp, Inc., Berkshire Bank, Customers Bancorp, Inc., and Customers Bank (which is referred to as the “Merger Agreement”) and to approve all transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, Berkshire Bancorp, Inc. will merge with an into Customers Bancorp, Inc., and, immediately thereafter, Berkshire Bank will merge with and into Customers Bank; and

	B2.	To adjourn the meeting to a date to be proposed at the meeting, if necessary to solicit or receive additional proxies.

Risks Related to the Reorganization Transaction	20
The reorganization may not be consummated or Customers may not realize the anticipated benefits of the reorganization.	20
Your rights as a shareholder will change as a result of the reorganization.	20
Customers Bank may choose to defer or abandon the reorganization.	21
The reorganization could result in adverse effects on management’s ability to effectively manage Customers Bank’s business.	21
The reorganization may fail to qualify as a tax-free reorganization under the Internal Revenue Code.	21
CBI may become subject to additional Pennsylvania taxes as a result of the reorganization.	21
Risks Related to the Merger Transaction	21
BBI shareholders cannot be sure of the value they will receive per share of BBI common stock.	21
BBI shareholders cannot be sure of the exact market value of the merger consideration they will receive.	22
BBI will be subject to business uncertainties and contractual restrictions while the merger is pending.	22
The opinion obtained by BBI from its financial advisor will not reflect changes in circumstances between signing the Merger Agreement and completion of the merger.	22
Both CBI’s and BBI directors’ and executive officers’ interests in the merger may differ from your interests.	22
The merger may fail to qualify as a tax-free reorganization under the Internal Revenue Code.	23
Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.	23
The Merger Agreement limits BBI’s ability to pursue alternatives to the merger.	23
The shares of CBI Voting Common Stock to be received by BBI shareholders as a result of the merger will have different rights from the shares of BBI common stock currently held by them.	23
The value of CBI Voting Common Stock after the merger may be affected by factors different from those affecting BBI common stock or CBI Voting Common Stock currently.	23
Both CBI and BBI shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.	24
If the merger has not occurred by May 15, 2011, either Customers or Berkshire may choose not to proceed with the merger.	24
If the merger is terminated, BBI and Berkshire Bank will continue to be subject to certain regulatory actions, restrictions, and agreements that may materially affect their ability to do business and compete.	24
If the merger with CBI is not completed, BBI will continue to face certain risk factors related to its on-going operations.	24
If the merger is not completed, Customers and Berkshire will have incurred substantial expenses without realizing the expected benefits of the merger.	24
If the merger is not completed, BBI may have to revise its business strategy.	24
Both entities may fail to realize the cost savings expected to be achieved from the merger.	25
Combining CBI and BBI may be more difficult, costly or time-consuming than expected.	25
Risks Related to CBI’s and Customers Bank’s Securities	25
There is no established trading market for CBI’s and Customers Bank’s Voting Common Stock and share price may be volatile.	25
Either Customers Bank before the reorganization or CBI after the reorganization may issue additional shares of Voting Common Stock, preferred stock or equity, debt or derivative securities, which could adversely affect the value or voting power of your Voting Common Stock.	26

Either Customers Bank before the reorganization or CBI after the reorganization may issue incentive stock options, warrants, stock or other equity securities convertible into Voting Common Stock to management, directors and employees.	26
Customers Bank Voting Common Stock is and CBI’s Voting Common Stock will be subordinate to all of each such entity’s existing and future indebtedness; and neither Customers Bank nor CBI is limited on the amount of indebtedness it may incur in the future.	26
Risk of disruption in deposit movement.	27
Customers Bank and CBI may not pay dividends on the shares in the foreseeable future, which may adversely affect the return and the price of their Voting Common Stock.	27
Risks Related To Customers Bank’s Business	27
Customers Bank has engaged in two FDIC-assisted transactions and may engage in more such transactions in the future, which could present additional risks to its financial condition and earnings.	27
Failure to comply with the terms of Loss Sharing Agreements with the FDIC may result in losses.	27
Customers Bank’s level of assets categorized as doubtful, substandard or special mention expose it to increased lending risk. If Customers Bank’s allowance for loan losses is insufficient to absorb losses in its loan portfolio, its earnings could decrease.	28
Customers Bank’s emphasis on commercial and warehouse lending may expose it to increased lending risks.	28
Decreased residential mortgage origination, volume and pricing decisions of competitors.	28
Customers Bank’s performance and financial condition may be adversely affected by regional economic conditions and real estate values.	29
Federal Home Loan Bank of Pittsburgh continues not to pay dividends nor repurchase capital stock.	29
Financial turmoil may increase other-than-temporary-impairment (“OTTI”) charges.	29
Customers Bank may need to raise additional capital in the future and such capital may not be available when needed or at all.	29
Sufficient funding to support earning asset growth.	29
The FDIC’s recent policy statement imposing restrictions and criteria on private investors in failed bank acquisitions may apply to Customers and Customers’ investors.	30
Customers Bank shareholders may be deemed to be acting in concert and thereby subject to increased regulatory scrutiny, including the application of the FDIC policy statement to Customers Bank and its investors.	30
Previously enacted and potential future legislation, including legislation to reform the U.S. financial regulatory system, could adversely affect Customers Bank’s business.	31
The new Bureau of Consumer Financial Protection (“BCFP”) may reshape the consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including Customers Bank.	31
Government regulation might have an adverse effect on Customers Bank’s business.	31
Customers Bank and/or CBI may become subject to additional Pennsylvania taxes as a result of the reorganization.	31
Accounting standards periodically change and the application of Customers Bank’s accounting policies and methods may require estimates about matters that are uncertain.	32
Customers Bank might not achieve profitability or consistent earnings.	32
Customers Bank might not be able to keep growing or may fail to manage its growth effectively.	32

Asset growth may not cause Customers Bank’s earnings to grow.	32
If Customers Bank does not open new branches as planned or does not achieve profitability on new branches, earnings may be reduced.	32
Interest rate changes might have an adverse effect on Customers Bank’s earnings and financial condition.	33
FDIC assessments will negatively impact earnings.	33
The short-term and long-term impact of the new Basel III capital standards and the forthcoming new capital rules to be proposed for non-Basel III U.S. banks is uncertain.	33
Competition with other financial institutions might negatively impact Customers Bank’s profits.	33
Losses or liabilities may be higher than anticipated and may negatively impact Customers Bank’s earnings and financial position.	34
Provisions in Customers Bank’s charter documents may prevent others from obtaining control or increase the cost of completing a transaction in which control of Customers Bank is acquired by others.	34
Customers Bank’s directors and executive officers can influence the outcome of shareholder votes.	34
Customers Bank depends on its executive management, and the loss of a member of its management team could have an adverse effect on business.	34
Customers Bank’s chairman and chief executive officer also serves as Executive Chairman of Atlantic Coast Financial Corporation, the holding company for another financial institution and such responsibilities could affect his ability to devote sufficient time to his position with Customers Bank.	34
Risks Related to Customers Bank’s Acquisition Strategy	35
Customers Bank and CBI intend to engage in acquisitions of other businesses from time to time, including FDIC-assisted acquisitions. These acquisitions may not produce revenue or earnings enhancements or cost savings at levels or within timeframes originally anticipated and may result in unforeseen integration difficulties.	35
Customers Bank and CBI are subject to certain risks related to FDIC-assisted transactions.	35
Customers Bank’s ability to continue to receive benefits of its loss share arrangement with the FDIC is conditioned upon compliance with certain requirements under the Purchase and Assumption Agreement.	36
FDIC-assisted acquisition opportunities may not become available and increased competition may make it more difficult for Customers Bank or CBI to bid on failed bank transactions on terms considered to be acceptable.	37
Attractive acquisition opportunities may not be available in the future.	37
Customers Bank may currently be unable to ascertain the merits or risks of the businesses it may ultimately acquire.	37
Customers Bank is subject to environmental liability risk associated with lending activities.	37
Customers Bank is subject to certain risks in connection with Customers Bank’s use of technology.	37
Customers Bank is subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors.	38
Some institutions Customers Bank or CBI could acquire may have distressed assets and there can be no assurance that Customers will be able to realize the value predicted from these assets or that it will make sufficient provision for future losses in the value of, or accurately estimate the future write-downs taken in respect of, these assets.	38
As a result of an investment or acquisition transaction, Customers may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on Customers’ financial condition and results of operations, which could cause you to lose some or all of your investment.	39

Customers Bank and/or CBI may in the future hire consultants or advisors on a contingent basis, who would only receive payment in the event an investment or acquisition transaction occurred and, therefore, they might be viewed as having an interest in such investment or acquisition transaction occurring.	39
Shareholders may have no opportunity to evaluate and affect the investment decision regarding a potential investment or acquisition transaction.	39
Resources could be expended in considering or evaluating potential investment or acquisition transactions that are not consummated, which could materially and adversely affect subsequent attempts to locate and acquire or merge with another business.	39
The officers and directors of an acquisition candidate may resign upon consummation of an acquisition.	39
Risks Related to Customers Bank and CBI’s Industry	40
Difficult market conditions have adversely affected Customers Bank and CBI’s industry.	40
The soundness of other financial institutions could adversely affect Customers Bank.	40
There can be no assurance that recently enacted legislation will stabilize the U.S. financial system.	40
A continuation of recent turmoil in the financial markets could have an adverse effect on the financial position or results of operations of Customers Bank and CBI.	40
RECENT DEVELOPMENTS	41
Raised over $75 million of capital	41
FDIC-Assisted Acquisitions	41
Changing name of Customers Bank	41
Purchase of manufactured housing portfolio	42
Extension of anti-dilution provision	42
PROPOSAL TO APPROVE A PLAN OF MERGER AND REORGANIZATION PURSUANT TO WHICH THE BANK WILL REORGANIZE TO FORM A BANK HOLDING COMPANY	43
THE REORGANIZATION	45
Background and Reasons for the Reorganization	45
Private Offerings	46
The Plan of Reorganization	48
Amendment or Termination	48
Conditions to Completing the Reorganization	49
Regulatory Approval of the Reorganization	49
Securities Law Consequences; Resale Restrictions for Certain Persons	49
Management of CBI	50
Dissenters’ Rights	50
No Action Required to Exchange Shares	51
Accounting Treatment of the Reorganization	51
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE REORGANIZATION	51
For Customers Bank Shareholders	51
Dissenting Shareholders	53
Backup Withholding	53
Limitation on Use of Net Operating Losses	53
For Holders of Warrants and Options to Purchase Shares of Customers Bank Common Stock	53
Interests Of Management And Others In The Reorganization	54
PROPOSAL C2 AND B1 TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS OF AUGUST 23, 2010, BY AND AMONG BERKSHIRE BANCORP, INC., BERKSHIRE BANK, CUSTOMERS BANCORP, INC., AND CUSTOMERS BANK, AND TO APPROVE ALL TRANSACTIONS CONTEMPLATED BY SUCH AGREEMENT	55
THE MERGER	57
Background of the Merger	57
Reasons for the Merger – Customers Bank	64

Reasons for the Merger – BBI	67
Financial Interests of Directors, Officers and Others in the Merger.	69
Share Ownership	69
Indemnification and Insurance	69
Board of Directors and Management Following Completion of the Merger	70
Existing Employment Agreements	70
Supplemental Executive Retirement Plan Agreements	70
Voting Agreements	70
Fairness Opinion of Commonwealth Advisors LLC	70
Transaction Summary	72
Contribution Analysis	72
Comparable Company Analysis	72
Selected Merger Analysis	74
Discounted Cash Flow Analysis	74
Pro Forma Merger Analysis	75
Compensation of Commonwealth Advisors LLC	76
Rights of Dissenting Shareholders	76
THE MERGER AGREEMENT	77
Terms of the Merger	77
Conversion of BBI Warrants	78
Closing and Effective Time of the Merger	79
Conversion of Shares; Exchange of Certificates	79
Letter of Transmittal	79
Withholding	79
Dividends and Distributions	79
Redemption or Exchange of Series C Preferred Stock	80
Representations and Warranties	80
Covenants and Agreements	81
Bank Merger	85
Reasonable Best Efforts to Obtain the Required Shareholder Votes	85
Agreement Not to Solicit Other Offers	85
Expenses and Fees	86
Employee Matters	86
Indemnification and Insurance	87
Conditions to Complete the Merger	87
Termination of the Merger Agreement	88
Termination Fee	89
Amendment, Waiver and Extension of the Merger Agreement	89
Accounting Treatment	90
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER	90
For BBI Shareholders	90
Dissenting Shareholders	91
Backup Withholding	91
Limitation on Use of Net Operating Losses	92
For Holders of Warrants and Options to Purchase BBI Shares	92
USE OF PROCEEDS	92
DESCRIPTION OF CBI SHARES	92
General	92
Voting rights	93
Dividend rights	93
Redemption, Preemptive Rights and Repurchase Provisions	94
Liquidation Rights	94
Anti-Takeover Effect of Governing Documents and Applicable Law	95
COMPARISON OF SHAREHOLDERS’ RIGHTS	96

Authorized Capital	97
Undesignated Non-Voting Common Stock	97
25% Ownership Limitation	97
Supermajority Vote for Business Combinations with 5% Shareholders	97
Shareholder Vote for Business Combinations Generally	97
Shareholder Right to Valuation and Payment for Shares on Control Share Acquisition	98
Board Right to Oppose Acquisition Offers Considering Multiple Constituencies or Factors	98
Bylaw Amendments	98
Amendment of Articles by Board of Directors	98
Special Meetings of Shareholders	99
Notice	99
Place of Shareholder Meetings	99
Deadline for Annual Meeting	99
Record Date for Meetings and Other Share-Related Actions	99
Written Consent of Shareholders in Lieu of Meeting	99
Shareholder Nominations for Director	100
Cumulative Voting	100
Advance Notice of Shareholder Board Nominations	100
Quorum	101
Required Shareholder Vote	101
Director Qualifications	104
Director Classification	105
Number of Directors	105
Attendance at Board Meetings	105
Vacancies on Board	105
Control Transactions	105
Amendment of Articles of Incorporation	105
OUTSTANDING OPTIONS GRANTED TO UNAFFILIATED INSTITUTIONAL INVESTORS	106
WARRANTS TO PURCHASE ADDITIONAL STOCK	107
ANTI-DILUTION AGREEMENTS	108
CUSTOMERS BANCORP, INC.	109
History, Business, and Properties	109
Principal Shareholders	110
Description of CBI’s Voting Common Stock	110
Executive Compensation	111
Anti-Takeover Mechanisms	111
Indemnification Provisions	111
Financial Statements	112
Legal Proceedings	112
CUSTOMERS BANK	112
History, Business, and Properties	112
History	112
Business	112
FDIC Assisted Transactions	114
Properties	115
Legal Proceedings	116
Management	116
CBI’S BOARD OF DIRECTORS AND MANAGEMENT	116
BOARD GOVERNANCE	119

Director Independence	119
Information About Board Committees	119
Compensation Committee Interlocks and Insider Participation	120
EXECUTIVE COMPENSATION	121
COMPENSATION DISCUSSION AND ANALYSIS	121
Customers Bank’s Compensation Objectives and the Focus of Compensation Rewards	121
Role of the Compensation and Corporate Governance Committee	121
Specific Elements of the Compensation Program	121
Salary	121
Bonuses	122
Long-Term Equity Incentive Compensation	122
Perquisites, Post-Retirement and Other Elements of Compensation for Executive Officers	122
Employment and Other Agreements	122
Consideration of Risk	122
Risk Management Checks and Balances	122
Compliance with Section 409A of the Internal Revenue Code	123
SUMMARY COMPENSATION TABLE	124
GRANTS OF PLAN-BASED AWARDS	125
2004 Incentive Equity and Deferred Compensation Plan	126
Management Stock Purchase Plan	126
2010 Stock Option Plan	127
Stock Option Grants in Connection with Recent Private Offerings	127
Bonus Recognition And Retention Program	127
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END TABLE—NAMED EXECUTIVE OFFICERS	129
OPTION EXERCISES AND STOCK VESTED	130
PENSION BENEFITS	130
Potential Payments upon Termination or Change in Control	131
NONQUALIFIED DEFERRED COMPENSATION	132
DIRECTOR COMPENSATION	133
EMPLOYEE BENEFITS	133
401(k) Retirement Savings and Profit Sharing Plan	133
Insurance	133
Officer Employment Agreements	134
Supplemental Executive Retirement Plan for Chairman and Chief Executive Officer	135
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	136
TRANSACTIONS WITH RELATED PARTIES	138
RECENT SALES OF UNREGISTERED SECURITIES	140
CUSTOMERS INTERIM BANK	141
MARKET PRICE OF COMMON STOCK AND DIVIDENDS – CUSTOMERS BANK	141
Trading Market for Voting Common Stock	141

Market Price of Voting Common Stock	141
Dividends on Voting Common Stock	142
Dividend Policy	142

SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION	143
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION	145
SUMMARY SELECTED UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010	147
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2010	148
CUSTOMERS BANK - SELECTED FINANCIAL DATA	149
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CUSTOMERS BANK	150
Critical Accounting Policies	150
Overview	152
Results of Operations	153
For the years ended December 31, 2010 and 2009	153
For the years ended December 31, 2009 and 2008	153
NET INTEREST INCOME	153
For the years ended December 31, 2010 and 2009	153
For the years ended December 31, 2009 and 2008	156
PROVISION FOR LOAN LOSSES	156
Years ended December 31, 2010 and 2009	156
Years ended December 31, 2009 and 2008	157
NON-INTEREST INCOME	157
Years ended December 31, 2010 and 2009	157
Years ended December 31, 2009 and 2008	157
NON-INTEREST EXPENSE	158
Years ended December 31, 2010 and 2009	158
Years ended December 31, 2009 and 2008	159
INCOME TAXES	159
Years ended December 31, 2010 and 2009	159
Years ended December 31, 2009 and 2008	159
FINANCIAL CONDITION	160
GENERAL	160
CASH AND DUE FROM BANKS	160
INTEREST-EARNING DEPOSITS WITH BANKS	160
FEDERAL FUNDS SOLD	160
INVESTMENT SECURITIES	161
LOANS	162
CREDIT RISK	164
ASSET QUALITY	166
FDIC LOSS SHARING RECEIVABLE	168
PREMISES AND EQUIPMENT AND OTHER ASSETS	169
DEPOSITS	169
OTHER BORROWINGS	170
SUBORDINATED DEBT	170
PREFERRED STOCK	170
STOCKHOLDERS' EQUITY	170
LIQUIDITY AND CAPITAL RESOURCES	171
CAPITAL ADEQUACY	172

MEMORANDUM OF UNDERSTANDING	182
BANK HOLDING COMPANY REORGANIZATION AND REGULATION	183
BERKSHIRE BANCORP, INC.	184
History and Business	184
History	184
Business	184
Supervision and Regulation of BBI and Berkshire Bank	184
MARKET PRICE OF COMMON STOCK AND DIVIDENDS – BBI	185
Trading Market for Common Stock	185
Market Price of Common Stock	185
Dividends on Common Stock	185
Security Ownership of Certain Beneficial Owners and Management	185
Beneficial Ownership of Executive Officers, Directors and Nominees	186
BERKSHIRE BANCORP, INC. - MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	188
Critical Accounting Policies	188
Overview	188
Results of Operations	189
Years ended December 31, 2010, 2009 and 2008	189

NET INTEREST INCOME	190
Twelve months ended December 31, 2010 and 2009	190
Twelve months ended December 31, 2009 and 2008	193
PROVISION FOR LOAN LOSSES	193
Twelve months ended December 31, 2010 and 2009	193
Twelve months ended December 31, 2009 and 2008	194
NON-INTEREST INCOME	194
Twelve months ended December 31, 2010 and 2009	194
Twelve months ended December 31, 2009 and 2008	195
NON-INTEREST EXPENSE	195
Twelve months ended December 31, 2010 and 2009	195
Twelve months ended December 31, 2009 and 2008	196
INCOME TAXES	197
Twelve months ended December 31, 2010 and 2009	197
Twelve months ended December 31, 2009 and 2008	197
FINANCIAL CONDITION	197
GENERAL	197
CASH DUE FROM BANKS	198
INTEREST EARNING DEPOSITS	198
FEDERAL FUNDS SOLD	198
INVESTMENT SECURITIES	198
LOANS	200
CREDIT RISK	202
ASSET QUALITY	206
PREMISES EQUIPMENT AND OTHER ASSETS	207
DEPOSITS	208
OTHER BORROWINGS	209
PREFERRED STOCK	210
SHAREHOLDERS' EQUITY	211
STOCK WARRANT PLAN	212
LIQUIDITY AND CAPITAL RESOURCES	212
CAPITAL ADEQUACY	213
MARKET FOR COMMON STOCK	215
OFF-BALANCE SHEET ARRANGEMENTS	215
OTHER OFF-BALANCE SHEET ARRANGEMENTS	216
CONTRACTUAL OBLIGATIONS	216
WHERE YOU CAN FIND MORE INFORMATION	217
ADDITIONAL INFORMATION	218
PROPOSAL C3 AND B2	218
SHAREHOLDER PROPOSALS FOR 2011	219
LEGAL MATTERS	219
EXPERTS	219
ACCOUNTANTS	219
OTHER BUSINESS	219

·	Changes in the external competitive market factors that might impact results of operations;
·	Changes in laws and regulations, including without limitation changes in capital requirements under the federal prompt corrective action regulations;
·	Changes in business strategy or an inability to execute strategy due to the occurrence of unanticipated events;
·	Ability to identify potential candidates for, and consummate, acquisition or investment transactions;
·	Constraints on ability to consummate an attractive acquisition or investment transaction because of significant competition for these opportunities;
·	Failure to complete any or all of the transactions described herein on the terms currently contemplated;
·	Local, regional and national economic conditions and events and the impact they may have on Customers Bank, Berkshire Bank and their customers;
·	Ability to attract deposits and other sources of liquidity;
·	Changes in the financial performance and/or condition of Customers Bank’s or Berkshire Bank’s borrowers;
·	Changes in the level of non-performing and classified assets and charge-offs;
·	Changes in estimates of future loan loss reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;
·	Changes in Customers Bank’s or Berkshire Bancorp’s capital structure resulting from future capital offerings or acquisitions;
·	Changes in the timing or substance of Customers Bank’s strategic and operating plans resulting from future acquisitions or acquisition proposals;
·	The integration of Customers Bank’s recent FDIC-assisted acquisition may present unforeseen challenges;
·	Inflation, interest rate, securities market and monetary fluctuations;
·	The timely development and acceptance of new banking products and services and perceived overall value of these products and services by users;
·	Changes in consumer spending, borrowing and saving habits;
·	Technological changes;
·	The ability to increase market share and control expenses;
·	Continued volatility in the credit and equity markets and its effect on the general economy;
·	The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters;
·	The businesses of the Customers Bancorp, Inc. and Berkshire Bancorp, Inc., and subsidiaries, not integrating successfully or such integration being more difficult, time-consuming or costly than expected;
·	Material differences in the actual financial results of merger and acquisition activities compared with expectations, such as with respect to the full realization of anticipated cost savings and revenue enhancements within the expected time frame, including as to the merger;
·	Revenues following the merger being lower than expected; and
·	Deposit attrition, operating costs, customer loss and business disruption following the merger, including, without limitation, difficulties in maintaining relationships with employees, being greater than expected.

	·	The Pennsylvania Banking Department and the Federal Reserve must approve the formation and organization of CBI and Customers Interim Bank;
	·	The Federal Deposit Insurance Corporation (“FDIC”) must approve deposit insurance for Customers Interim Bank;

	·	The Pennsylvania Banking Department must approve the merger of Customers Bank into Customers Interim Bank;
	·	The Federal Reserve must approve the merger of Customers Bank into Customers Interim Bank; and

	·	It is in compliance with Rule 144; or

	·	In the opinion of counsel, it is otherwise exempt from the registration requirements of the Securities Act.

Transaction Ratios
Transaction Value/Last Twelve Months Earnings per Share	NM (1)
Transaction Value/Book Value	NA
Transaction Price/Tangible Book Value	100% (2)

Contribution Analysis(1)	CBI	BBI
Ownership	89%	11%
Assets	78%	22%
Gross Loans	76%	24%
Deposits	76%	24%
Tangible Common Equity	89%	11%
2011 GAAP Net Income	97%	3%
2011 Cash Net Income	97%	3%
2012 GAAP Net Income	98%	2%
2012 Cash Net Income	98%	2%
Pre-Deal Market Capitalization(2)	89%	11%

	Peer Group Average (%)	Peer Group Median (%)	BBI (%)
Core ROA	0.25	0.46	0.01
Core ROE	-6.9	4.2	0.12
Net Interest Margin	3.66	3.50	4.58
Fee Income/Revenue	10.3	7.8	18.2
Efficiency Ratio	75.2	76.2	80.5
Tangible Equity/Tangible Assets	9.00	9.21	7.83
Loans/Deposits	78.9	80.9	81.9
Core Deposits/Deposits	80.1	82.0	91.3
Loan Loss Reserve/Loans	1.41	1.26	1.18
Loan Loss Reserve/Non-Performing Loans	137.1	56.9	50.6
Net Charge-Offs/Average Loans	0.49	0.07	0.14

	Average	Median
Price/Book	109%	103%
Price/Tangible Book	124%	117%
Price/Assets	10.0%	7.6%
Core Deposit Premium	7.0%	3.5%

	NPAs/Total Assets greater than 6%		NPAs/Total Assets greater than 4%
	Average	Median	Average	Median
Price/Book	65%	70%	79%	76%
Price/Tangible Book	66%	70%	82%	77%
Price/Assets	8.3%	8.6%	9.1%	8.6%

	Terminal Multiple
Discount Rate	10.0x	12.0x	14.0x
10%	$8,610	$10,546	$12,482
12%	$7,831	$9,600	$11,370
14%	$7,132	$8,751	$10,371

	·	The name, age, business address and, if known, residence address of each nominee proposed in such notice;
	·	The principal occupation or employment of each nominee; and
	·	The number of shares of capital stock of CBI which are beneficially owned by each such nominee and the earliest date of acquisition of any of such stock.

Transaction	Type of Stock Underlying Warrants	Original Number of Shares Underlying Warrants		Original Exercise Price	Number of Shares Underlying Warrants upon Anti-Dilution Adjustment		Exercise Price upon Anti-Dilution Adjustment
June 30, 2009 Preferred Stock Exchange	Voting Common Stock		24,500	$5.50		--		--
July 31, 2009 Voting Common Stock Issuance	Voting Common Stock		683,330	$5.50		1,073,820		$3.50
February 17, 2010 Voting Common Stock and Class B Non-Voting Common Stock Issuance	Voting Common Stock		205,779	$4.28		251,643		$3.50
	Class B Non-Voting Common Stock		156,532	$4.28		191,421		$ 3.50
March 29, 2010 Voting Common Stock and Class B Non-Voting Common Stock Issuance	Voting Common Stock		48,104	$3.76		51,678		$3.50
	Class B Non-Voting Common Stock		48,107	$3.76		51,681		$3.50

Name	Director Since	Position	Age	Term Expires:
Bhanu Choudhrie	2009	Director	32	2012
John R. Miller	2010	Director	64	2013
Daniel K. Rothermel, J.D.	2009	Director, Lead Independent Director	72	2013
Jay S. Sidhu	2009	Director, Chairman and Chief Executive Officer	59	2012
T. Lawrence Way, CPA J.D.	2005	Director	62	2011
Steven J. Zuckerman	2009	Director	47	2011

Name	Executive	Audit	Risk Management	Compensation	Nominating and Corporate Governance
Bhanu Choudhrie		X		X	X
Daniel Rothermel	X	X	X*	X	X*
Jay Sidhu	X		X
T. Lawrence Way	X	X*	X		X
Steven Zuckerman				X*	X
John R. Miller		X	X		X

	·		Rather than determining incentive compensation awards based on a single metric, the Committee applies its informed judgment taking into account factors such as quality and sustainability of earnings, successful implementation of strategic initiatives and adherence to risk and compliance policies and other core values of Customers Bank.

	·		To further ensure that executive officers are focused on long-term performance, a significant portion of the incentive award is provided as a long-term equity award that does not become earned and paid until three to five years after the grant date.
	·		Use of equity awards aligns executive officers’ interests with the interests of shareholders, and the significant stock ownership requirements further enhance this alignment.

	·		Ensure that compensation opportunities do not encourage excessive risk taking;

	·		Focus executive officers on managing the bank towards creating long-term, sustainable value for shareholders; and

	·		Provide appropriate levels of realized rewards over time.

Name & Principal Position	Year	Salary ($)	Bonus ($)		Stock Award ($) (4)	Option Awards ($) (2)		All Other Compensation ($) (3)		Pension ($) (6)	Total ($)
Jay S. Sidhu	2010	225,000	225,000		1,075,000	1,683,809		7,599		2,561,677	5,778,085
Chairman & CEO	2009	120,835	120,835		--	684,923	(2)	18,762	(5)	--	945,355
	2008	--	--		--	--		--		--	--
Richard A. Ehst	2010	150,000	75,000		12,500	252,371		21,500		--	511,371
President & COO	2009	55,668	27,833		--	--		5,461		--	88,962
	2008	--	--		--	--		--		--	--
Thomas R. Brugger	2010	145,000	72,500		125,000	252,371		5,374		--	600,245
EVP & Chief Financial Officer	2009	45,281	22,640		--	--		2,751		--	70,672
	2008	--	--		--	--		--		--	--
Warren Taylor	2010	134,615	50,000		187,500	51,570		1,508		--	425,193
President and Director of	2009	64,620	10,000		--	--		632		--	75,252
Community Banking	2008	--	--		--	--		--		--	--
Glenn A. Hedde	2010	125,000	150,000	(7)	368,752	10,314		6,073		--	660,139
President of Customers Bank	2009	50,584	5,000		--	--		1,932		--	57,516
Mortgage Warehouse Lending	2008	--	--		--	--		--		--	--

Name	Grant date	All other stock awards: Number of shares of stock (#)	All other option awards: Number of securities underlying options (#) (2)	Exercise or base price of option awards ($/Sh)	Grant date fair value of stock and option awards ($)
Jay S. Sidhu	4/6/2010	--	1,346,262 (3)	3.25	1,388,534 (3)
	7/14/2010	--	35,000 (4)	3.50	32,071 (4)
	7/9/2010	430,000 (1)	--		--
	12/28/2010	--	223,262 (5)	4.00	263,204 (5)
	2/28/2011	--	3,394 (6)	4.00 (6)	3,666(6)
	4/6/2010	--	201,939 (3)	3.25	208,280 (3)
Richard A. Ehst	7/14/2010	--	5,250 (4)	3.50	4,811 (4)
	7/9/2010	5,000 (1)	--		--
	12/28/2010	--	33,489 (5)	4.00	39,481 (5)
	2/28/2011	--	509 (6)	4.00 (6)	550(6)
	4/6/2010	--	201,939 (3)	3.25	208,280 (3)
Thomas R. Brugger	7/14/2010	--	5,250 (4)	3.50	4,811 (4)
	7/9/2010	50,000 (1)	--		--
	12/28/2010	--	33,489 (5)	4.00	39,481 (5)

Warren Taylor	4/6/2010	--	50,000 (3)	3.25	51,570 (3)
	7/9/2010	75,000 (1)	--		--
	2/17/2011	--	50,000 (7)	4.00 (7)	55,230(7)
Glenn A. Hedde	4/6/2010	--	10,000 (3)	3.25	10,314 (3)
	7/9/2010	30,000 (1)	--		--
	2/17/2011	--	25,000 (7)	4.00 (7)	27,615(7)
	2/17/2011	73,438 (8)	--	4.00 (8)	293,752(8)