BRYN MAWR BANK CORP (Form: 10-Q, Received: 05/10/2010 17:09:06)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 or 15 (d)

of the Securities and Exchange Act of 1934.

For Quarter ended March 31, 2010

Commission File Number 0-15261

Bryn Mawr Bank Corporation

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2434506
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer identification No.)

801 Lancaster Avenue, Bryn Mawr, Pennsylvania		19010
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (610) 525-1700

Not Applicable

Former name, former address and fiscal year, if changed since last report.

Indicate by checkmark whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x

Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.


Class		Outstanding at May 7, 2010
Common Stock, par value $1		8,992,404

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED March 31, 2010

Index


PART I -	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)

	Consolidated Financial Statements	Page 3

	Notes to Consolidated Financial Statements	Page 7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 19

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	Page 37

ITEM 4.	Controls and Procedures	Page 37

PART II -	OTHER INFORMATION	Page 37

ITEM 1.	Legal Proceedings	Page 37

ITEM 1A.	Risk Factors	Page 37

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 37

ITEM 3.	Defaults Upon Senior Securities	Page 38

ITEM 4.	Reserved	Page 38

ITEM 5.	Other Information	Page 38

ITEM 6.	Exhibits	Page 39

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income - Unaudited


	Three Months Ended March 31,
(dollars in thousands, except per share data)	2010		2009
Interest income:
Interest and fees on loans and leases	$	12,670	$	13,002
Interest on cash and cash equivalents		15		100
Interest on investment securities		1,209		1,191

Total interest income		13,894		14,293
Interest expense:
Savings, NOW, and market rate accounts		657		816
Time deposits		454		1,554
Wholesale deposits		236		813
Borrowed funds		1,130		1,263
Subordinated debt		273		221
Mortgage payable		27		—

Total interest expense		2,777		4,667
Net interest income		11,117		9,626
Provision for loan and lease losses		3,113		1,591

Net interest income after provision for loan and lease losses		8,004		8,035
Non-interest income
Fees for wealth management services		3,831		3,504
Service charges on deposits		501		463
Loan servicing and other fees		381		291
Net gain on sale of residential mortgage loans		525		1,877
Net gain on sale of investments		1,544		472
Other operating income		529		878

Total non-interest income		7,311		7,485
Non-interest expenses:
Salaries and wages		5,287		5,479
Employee benefits		1,558		1,582
Occupancy and bank premises		984		927
Furniture, fixtures, and equipment		595		586
Advertising		262		232
Impairment of mortgage servicing rights		41		204
Amortization of mortgage servicing rights		199		195
Intangible asset amortization		77		77
FDIC insurance		314		322
Net loss on sale of OREO		152		—
Due diligence and merger related expenses		347		—
Professional fees		619		343
Other operating expenses		1,470		1,521

Total non-interest expenses		11,905		11,468
Income before income taxes		3,410		4,052
Income tax expense		1,187		1,420

Net income	$	2,223	$	2,632

Basic earnings per common share	$	0.25	$	0.31
Diluted earnings per common share	$	0.25	$	0.31
Dividends declared per share	$	0.14	$	0.14
Weighted-average basic shares outstanding		8,893,997		8,602,406
Dilutive potential shares		11,017		18,498

Adjusted weighted-average diluted shares		8,905,014		8,620,904

The accompanying notes are an integral part of the unaudited consolidated financial statements.

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets - Unaudited


(dollars in thousands, except share and per share data)	March 31, 2010			December 31, 2009
Assets
Cash and due from banks	$	17,995		$	11,670
Interest bearing deposits with banks		71,680			58,472
Money market funds		402			9,175

Cash and cash equivalents		90,077			79,317
Investment securities available for sale, at fair value (amortized cost of $172,912 and $206,689 as of March 31, 2010 and December 31, 2009 respectively)		173,816			208,224
Loans held for sale		2,214			3,007
Portfolio loans and leases		893,100			885,739
Less: Allowance for loan and lease losses		(9,740	)		(10,424	)

Net portfolio loans and leases		883,360			875,315

Premises and equipment, net		21,724			21,438
Accrued interest receivable		4,498			4,289
Deferred income taxes		4,970			4,991
Mortgage servicing rights		3,994			4,059
FHLB stock		7,916			7,916
Goodwill		6,301			6,301
Intangible assets		5,344			5,421
Other investments		3,145			3,140
Other assets		13,852			15,403

Total assets	$	1,221,211		$	1,238,821

Liabilities
Deposits:
Non-interest-bearing demand	$	194,697		$	212,903
Savings, NOW and market rate accounts		491,715			482,987
Other wholesale deposits		47,687			52,174
Wholesale time deposits		43,352			36,118
Time deposits		136,927			153,705

Total deposits		914,378			937,887

Borrowed funds		142,244			144,826
Mortgage payable		2,046			2,062
Subordinated debt		22,500			22,500
Accrued interest payable		1,395			1,987
Other liabilities		32,377			25,623

Total liabilities		1,114,940			1,134,885

Shareholders’ equity
Common stock, par value $1; authorized 100,000,000 shares; issued 11,878,634 and 11,786,084 shares as of March 31, 2010 and December 31, 2009, respectively, and outstanding of 8,958,970, and 8,866,420 as of March 31, 2010 and December 31, 2009, respectively		11,879			11,786
Paid-in capital in excess of par value		19,106			17,705
Accumulated other comprehensive loss, net of taxes		(7,051	)		(6,913	)
Retained earnings		112,269			111,290

		136,203			133,868
Less: Common stock in treasury at cost — 2,919,664 and 2,919,664 shares as of March 31, 2010 and December 31, 2009, respectively		(29,932	)		(29,932	)

Total shareholders’ equity		106,271			103,936

Total liabilities and shareholders’ equity	$	1,221,211		$	1,238,821

Book value per share	$	11.86		$	11.72
Tangible book value per share	$	10.56		$	10.40

The accompanying notes are an integral part of the unaudited consolidated financial statements.

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows - Unaudited


	Three Months Ended March 31
(dollars in thousands)	2010			2009
Operating activities:
Net Income	$	2,223		$	2,632
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		3,113			1,591
Provision for depreciation and amortization		799			592
Loans originated for resale		(19,692	)		(92,290	)
Proceeds from loans sold		21,010			94,295
Net gain on sale of residential mortgages		(525	)		(1,877	)
Provision for deferred income taxes (benefit)		56			(90	)
Stock based compensation cost		123			70
Change in income taxes payable/receivable		429			1,372
Change in accrued interest receivable		(209	)		(211	)
Change in accrued interest payable		(592	)		(60	)
Change in mortgage servicing rights		65			(502	)
Loss on sale of Other Real Estate Owed (“OREO”)		152			—
Net change in intangible assets		77			77
Other, net		(9,166	)		3,530

Net cash (used) provided by operating activities		(2,137	)		9,129

Investing activities:
Purchases of investment securities		(27,613	)		(20,345	)
Proceeds from maturity of investment securities and mortgage-backed securities pay downs		5,533			4,590
Proceeds from sale of investment securities available for sale		37,490			14,737
Proceeds from calls of investment securities available for sale		34,520			3,000
Net change in other investments		(5	)		113
Proceeds from BOLI repayment		—			15,585
Net portfolio loan and lease repayments (originations)		(11,158	)		2,999
Purchases of premises and equipment		(763	)		(443	)
Contingent earn-out payment for Lau Associates		—			(195	)
Proceeds from sale of OREO		873			—

Net cash provided by investing activities		38,877			20,041

Financing activities:
Change in demand, NOW, savings and market rate deposit accounts		(9,478	)		57,681
Change in time deposits		(16,778	)		(6,378	)
Change in wholesale time and other wholesale deposits		2,747			(34,015	)
Dividends paid		(1,244	)		(1,203	)
Repayment of borrowed funds greater than 90 days		(2,582	)		(2,497	)
Mortgage payable		(16	)		—
Purchase of treasury stock		—			(42	)
Tax benefit from exercise of stock options		17			38
Proceeds from issuance of common stock		1,279			—
Proceeds from exercise of stock options		75			319

Net cash (used) provided by financing activities		(25,980	)		13,903

Change in cash and cash equivalents		10,760			43,073
Cash and cash equivalents at beginning of year		79,317			68,985

Cash and cash equivalents at end of period	$	90,077		$	112,058

Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	610		$	99
Interest	$	3,369		$	4,727
Supplemental cash flow information:
Unsettled AFS Securities		16,457			—
Change in unrealized losses on AFS Securities and Pension		(212	)		90
Change in deferred taxes due to change in comprehensive income		(74	)		(32	)
Transfer of loans to other real estate owned		—			1,315

The accompanying notes are an integral part of the unaudited consolidated financial statements.

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity


	For the Three Months Ended March 31, 2010
	Shares of Common Stock issued	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)		Treasury Stock			Total Shareholders’ Equity
	*(in thousands, except for shares of common stock)*
Balance, December 31, 2009	11,786,084	$	11,786	$	17,705	$	111,290		($6,913	)	($	29,932	)	$	103,936
Net income	—		—		—		2,223		—			—			2,223
Dividends declared, $0.14 per share	—		—		—		(1,244	)	—			—			(1,244	)
Other comprehensive (loss), net of taxes	—		—		—		—		(138	)		—			(138	)
Stock based compensation	—		—		123		—		—			—			123
Tax benefit from gains on stock option exercise	—		—		17		—		—			—			17
Purchase of treasury stock	—		—		—		—		—			—			—
Retirement of treasury stock	—		—		—		—		—			—			—
Common stock issued	85,550		86		1,193		—		—			—			1,279
Stock options exercised	7,000		7		68		—		—			—			75

Balance, March 31, 2010	11,878,634	$	11,879	$	19,106	$	112,269		($7,051	)	($	29,932	)	$	106,271


	For the Three Months Ended March 31, 2009
	Shares of Common Stock issued	Common Stock		Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive (Loss)		Treasury Stock			Total Shareholders’ Equity
	*(in thousands, except for shares of common stock)*
Balance, December 31, 2008	11,513,782	$	11,514	$	12,983	$	105,845		($7,995	)	($	29,934	)	$	92,413
Net income	—		—		—		2,632		—			—			2,632
Dividends declared, $0.14 per share	—		—		—		(1,203	)	—			—			(1,203	)
Other comprehensive income, net of taxes	—		—		—		—		58			—			58
Stock based compensation	—		—		482		—		—			—			482
Tax benefit from gains on stock option exercise	—		—		38		—		—			—			38
Purchase of treasury stock	—		—		—		—		—			(42	)		(42	)
Retirement of treasury stock	—		—		—		—		—			—			—
Stock options exercised	25,700		25		294		—		—			—			319

Balance, March 31, 2009	11,539,482	$	11,539	$	13,797	$	107,274		($7,937	)	($	29,976	)	$	94,697

Consolidated Statements of Comprehensive Income

Unaudited


	Three Months Ended March 31
(dollars in thousands)	2010			2009
Net Income	$	2,223		$	2,632
Other comprehensive income:
Unrealized investment (losses) net of tax benefit ($221) and ($27), respectively		(410	)		(52	)
Change in unfunded pension liability, net of tax expense $147 and $59, respectively		272			110

Total comprehensive income	$	2,085		$	2,690

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2010 and 2008

(Unaudited)

1. Basis of Presentation:

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of Bryn Mawr Bank Corporation’s (the “Corporation”) Management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Corporation’s 2009 Annual Report on Form 10-K. The Corporation’s consolidated financial condition and results of operations consist almost entirely of The Bryn Mawr Trust Company’s (the “Bank”) financial condition and results of operations.

The results of operations for the three month period ended March 31, 2010 are not necessarily indicative of the results to be expected for the full year.

2. Earnings Per Common Share:

Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution, computed pursuant to the treasury stock method that could occur if stock options were exercised and converted into common stock. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be anti-dilutive. All weighted average shares, actual shares and per share information in the financial statements have been adjusted retroactively for the effect of stock dividends and splits.


	Three Months Ended March 31
(dollars in thousands, except per share data)	2010		2009
Numerator:
Net income available to common shareholders	$	2,223	$	2,632

Denominator for basic earnings per share – weighted average shares outstanding		8,893,997		8,602,406
Effect of dilutive potential common shares		11,017		18,498

Denominator for diluted earnings per share – adjusted weighted average shares outstanding		8,905,014		8,620,904

Basic earnings per share	$	0.25	$	0.31
Diluted earnings per share	$	0.25	$	0.31
Anti-dilutive shares excluded from computation of average dilutive earnings per share		907,196		753,764

3. Allowance for Loan and Lease Losses

The allowance for loan and lease losses is established through a provision for loan and lease losses charged as an expense. Loans are charged against the allowance for loan and lease losses when Management believes that such amounts are uncollectible. The allowance for loan and lease losses is maintained at a level that Management believes is sufficient to absorb estimated probable credit losses. Note 1 – Summary of Significant Accounting Policies – G, Allowance for Loan and Lease Losses, included in the Corporation’s 2009 Annual Report which forms a part of its 10-K, contains additional information relative to Management’s determination of the adequacy of the allowance for loan and lease losses.

4. Investment Securities

The amortized cost and estimated fair value of investments, all of which were classified as available for sale, are as follows:

As of March 31, 2010


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
Obligations of the U.S. Government and agencies	$	94,774	$	112	$	(78	)	$	94,808
State & political subdivisions		24,270		183		(22	)		24,431
Federal agency mortgage-backed securities		12,979		407		—			13,386
Government agency mortgage-backed securities		2,524		—		(6	)		2,518
Other debt securities		1,250		—		—			1,250

Total fixed income investments	$	135,797	$	702	$	(106	)	$	136,393
Bond – mutual funds		37,115		382		(74	)		37,423

Total	$	172,912	$	1,084	$	(180	)	$	173,816

At March 31, 2010, securities having an amortized cost of $75.5 million were specifically pledged as collateral for public funds, trust deposits, the Federal Reserve Bank of Philadelphia (“FRB”) discount window program, the Federal Home Loan Bank of Pittsburgh (“FHLB-P”) borrowings and other purposes. The FHLB-P has a blanket lien on non-pledged, mortgage-related loans and securities as part of the Bank’s borrowing agreement with the FHLB-P.

As of December 31, 2009


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
Obligations of the U.S. Government and agencies	$	85,462	$	75	$	(476	)	$	85,061
State & political subdivisions		24,859		197		(32	)		25,024
Federal agency mortgage-backed securities		49,318		1,634		—			50,952
Government agency mortgage-backed securities		8,607		121		(10	)		8,718
Other debt securities		1,500		—		(1	)		1,499

Total fixed income investments	$	169,746	$	2,027	$	(519	)	$	171,254
Bond – mutual funds		36,943		140		(113	)		36,970

Total	$	206,689	$	2,167	$	(632	)	$	208,224

The following table shows the amount of securities that were in an unrealized loss position:

As of March 31, 2010


	Less than 12 Months					12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)		Fair Value		Unrealized Losses
Obligations of the U.S. Government and agencies	$	25,086	$	(78	)	$	—	$	—	$	25,086	$	(78	)
State & political subdivisions		6,344		(22	)		—		—		6,344		(22	)
Government agency mortgage-backed securities		2,518		(6	)		—		—		2,518		(6	)
Bond – mutual funds		7,049		(74	)		—		—		7,049		(74	)

Total	$	40,977	$	(180	)	$	—	$	—	$	40,977	$	(180	)

The following table shows the amount of securities that were in an unrealized loss position:

As of December 31, 2009


	Less than 12 Months					12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)		Fair Value		Unrealized Losses
Obligations of the U.S. Government and agencies	$	43,166	$	(476	)	$	—	$	—	$	43,166	$	(476	)
State & political subdivisions		8,631		(32	)		—		—		8,631		(32	)
Government agency mortgage backed securities		2,535		(10	)		—		—		2,535		(10	)
Other debt securities		399		(1	)		—		—		399		(1	)
Bond – mutual funds		19,491		(113	)		—		—		19,491		(113	)

Total	$	74,222	$	(632	)	$	—	$	—	$	74,222	$	(632	)

The Corporation evaluates the debt securities in our investment portfolio, which include U.S. government agencies, government sponsored agencies, municipalities and other issuers, for other-than-temporary impairment and considers current economic conditions, the length of time and the extent to which the fair value has been less than cost, interest rates and the bond rating of each security. All of the debt securities in our investment portfolio are rated investment grade or higher and the Corporation believes that it will not incur any material losses with respect to such securities. The unrealized losses presented in the table above are temporary in nature as they are primarily related to market interest rates and are not related to the underlying credit quality of the issuers within our investment portfolio. None of the investments in the table above are believed to be other-than-temporarily impaired. The Corporation does not intend to sell other-than-temporary-impaired securities and it is more likely than not it will not be required to sell such securities before recovery occurs.

The amortized cost and estimated fair value of available for sale investment securities at March 31, 2010 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	March 31, 2010
(dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,366	$	2,371
Due after one year through five years		57,074		57,178
Due after five years through ten years		45,230		45,279
Due after ten years		15,624		15,661

Subtotal		120,294		120,489
Mortgage backed securities		15,503		15,904

Total available for sale securities	$	135,797	$	136,393

Included in the investment portfolio, but not in the above table, are $37.4 million of bond mutual funds which do not have a final stated maturity nor a constant stated coupon rate.

5. Stock Based Compensation

Stock based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the vesting period. The fair value of stock option grants is determined using the Black-Scholes pricing model. The assumptions necessary for the calculation of the fair value are expected life of options, annual volatility of stock price, risk free interest rate and annual dividend yield.

The following table provides information about options outstanding for the three-months ended March 31, 2010:


	Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding December 31, 2009	1,013,396	$	19.75	$	4.41
Granted	—	$	—	$	—
Forfeited	—	$	—	$	—
Exercised	7,000	$	10.64	$	2.03

Options outstanding March 31, 2010	1,006,396	$	19.81	$	4.42

The following table provides information about unvested options for the three-months ended March 31, 2010:


	Shares		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Unvested options December 31, 2009	350,076		$	20.88	$	4.79
Granted	—		$	—	$	—
Vested	(1,333	)	$	23.77	$	6.82
Forfeited	—			—		—

Unvested options March 31, 2010	348,743		$	20.87	$	4.78

The total not-yet-recognized compensation expense of unvested stock options is $1.3 million. This expense will be recognized over a weighted average period of 43 months.

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised during the three months ended March 31, 2010 and 2009 were as follows:


(dollars in thousands)	2010		2009
Proceeds from strike price of options exercised	$	75	$	319
Related tax benefit recognized		17		38

Proceeds of options exercised	$	92	$	357

Intrinsic value of options exercised	$	49	$	102

The following table provides information about options outstanding and exercisable at March 31, 2010:


	Outstanding		Exercisable
Number		1,006,396		657,653
Weighted average exercise price	$	19.81	$	19.25
Aggregate intrinsic value	$	452,437	$	443,978
Weighted average contractual term (in years)		5.9		4.4

On January 28, 2010, the Board of Directors amended the 2001 and 2004 Stock Option Plans. The Amendments extended the expiration dates on stock options for individuals who terminate as a result of retirement, death or disability from one year from termination date to five years or the original expiration date of the options, whichever is earlier (10 years from date of grant). These amendments resulted in an additional stock based compensation expense of $27 thousand, which was recognized in the first quarter of 2010.

6. Pension and Other Post-Retirement Benefit Plans

The Corporation sponsors two pension plans; the qualified defined benefit pension plan (“QDBP”) and the non-qualified defined benefit pension plan (“SERP”). In addition, the Corporation also sponsors a post-retirement benefit plan (“PRBP”).

On February 12, 2008, the Corporation amended the QDBP to cease further accruals of benefits effective March 31, 2008, and amended the 401(K) Plan to provide for a new class of immediately vested discretionary, non-matching employer contributions effective April 1, 2008. Additionally, the Corporation amended the SERP to expand the class of eligible participants to include certain officers of the Bank and to provide that each participant’s accrued benefit shall be reduced by the actuarially equivalent value of the immediately vested discretionary, non-matching employer contribution to the 401(K) Plan made on his or her behalf.

The following table provides a reconciliation of the components of the net periodic benefits cost (benefit) for the three months ended March 31, 2010 and 2009:


	For Three Months Ended March 31
	SERP				QDBP						PRBP
(dollars in thousands)	2010		2009		2010			2009			2010			2009
Service cost	$	46	$	48	$	12		$	—		$	—		$	—
Interest cost		56		68		430			469			13			13
Expected return on plan assets		—		—		(489	)		(501	)	$	—			—
Amortization of transition obligation		—		—		—			—			6			6
Amortization of prior service costs		22		36		—			—			(35	)		(50	)
Amortization of net (gain) loss		7		—		191			265			19			19

Net periodic benefit cost (benefit)	$	131	$	152	$	144		$	233		$	3		$	(12	)

QDBP: As stated in the Corporation’s 2009 Annual Report, the Corporation did not have any minimum funding requirements for its QDBP for 2009. As of March 31, 2010 no contributions have been made to the QDBP.

SERP: The Corporation contributed $34 thousand during the first quarter of 2010 and it is expected to contribute an additional $102 thousand to the SERP plan for the remaining nine months of 2010.

PRBP: In 2005 the Corporation capped the maximum payment under the PBRP at 120% of the 2005 benefit. It is anticipated the cost is at the cap in 2010.

7. Segment Information

The Corporation aggregates certain of its operations and has identified four “segments” as follows: Banking, Wealth Management, Mortgage Banking, and All Other. Footnote 28 – Segment Information, in the Notes to the Consolidated Financial Statements in the Corporation’s 2009 Annual Report which forms a part of its 10-K provides additional descriptions of the identified segments.

Segment information for the quarter ended March 31, 2010 is as follows:


	2010
(dollars in thousands)	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Net interest income	$	11,143		$	2		$	—		$	(28	)	$	11,117
Less: Loan and lease loss provision		3,113			—			—			—			3,113

Net interest income after loan and lease loss provision		8,030			2			—			(28	)		8,004
Other income:
Fees for wealth management services		—			3,831			—			—			3,831
Service charges on deposit accounts		501			—			—			—			501
Loan servicing and other fees		44			—			337			—			381
Net gain on sale of residential mortgage loans		—			—			525			—			525
Other operating income		1,957			11			57			48			2,073

Total other income		2,502			3,842			919			48			7,311
Other expenses:
Salaries and wages		3,071			1,800			234			182			5,287
Employee benefits		1,064			470			32			(8	)		1,558
Occupancy and equipment		1,381			194			54			(50	)		1,579
Other operating expense		2,860			398			335			(112	)		3,481

Total other expense		8,376			2,862			655			12			11,905

Segment profit		2,156			982			264			8			3,410
Inter-segment pretax revenues (expenses) *		247			25			10			(282	)		—

Pretax segment profit (loss) after eliminations	$	2,403		$	1,007		$	274		$	(274	)	$	3,410

% of segment pretax profit (loss) after eliminations		70.47	%		29.53	%		8.04	%		(8.04	)%		100	%

Segment assets in millions of dollars	$	1,199		$	13		$	5		$	4		$	1,221

*	Inter-segment revenues consist of rental payments, insurance commissions and a management fee.

Segment information for the quarter ended March 31, 2009 is as follows:


	2009
(dollars in thousands)	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Net interest income	$	9,608		$	4		$	14		$	—		$	9,626
Less: Loan and lease loss provision		1,591			—			—			—			1,591

Net interest income after loan and lease loss provision		8,017			4			14			—			8,035
Other income:
Fees for wealth management services		—			3,504			—			—			3,504
Service charges on deposit accounts		463			—			—			—			463
Loan servicing and other fees		46			—			245			—			291
Net gain on sale of residential mortgage loans		—			—			1,877			—			1,877
Other operating income		1,162			12			128			48			1,350

Total other income		1,671			3,516			2,250			48			7,485
Other expenses:
Salaries and wages		3,087			1,580			686			126			5,479
Employee benefits		1,188			385			25			(16	)		1,582
Occupancy and equipment		1,304			207			53			(51	)		1,513
Other operating expense		2,065			376			591			(138	)		2,894

Total other expense		7,644			2,548			1,355			(79	)		11,468

Segment profit		2,044			972			909			127			4,052
Inter-segment pretax revenues (expenses) *		246			46			10			(302	)		—

Pretax segment profit (loss) after eliminations	$	2,290		$	1,018		$	919		$	(175	)	$	4,052

% of segment pretax profit (loss) after eliminations		56.5	%		25.1	%		22.7	%		(4.3	)%		100	%

Segment assets in millions of dollars	$	1,151		$	12		$	3		$	4		$	1,170

*	Inter-segment revenues consist of rental payments, insurance commissions and a management fee.

Other segment information is as follows:

Wealth Management Segment Activity


	As of
(dollars in millions)	March 31, 2010		December 31, 2009		March 31, 2009
Total wealth assets under management, administration, supervision and brokerage	$	3,110	$	2,871	$	1,959

Mortgage Segment Activity


	As of
(dollars in thousands)	March 31, 2010		December 31, 2009		March 31, 2009
Mortgage loans serviced for others	$	520,023	$	514,875	$	411,493
Mortgage servicing rights		3,994		4,059		2,707

8. Mortgage Servicing Rights

The following summarizes the Corporation’s activity related to mortgage servicing rights (“MSR’s”) for the three months ended March 31, 2010 and 2009:


(dollars in thousands)	2010			2009
Balance, January 1	$	4,059		$	2,205
Additions		175			901
Amortization		(199	)		(195	)
Recovery		—			—
Impairment		(41	)		(204	)

Balance, March 31	$	3,994		$	2,707

Fair Value	$	4,713		$	2,871

At March 31, 2010 key economic assumptions and the sensitivity of the current fair value of MSR’s to immediate 10 and 20 percent adverse changes in those assumptions are as follows:


(dollars in thousands)	March 31, 2010
Fair value amount of MSRs	$	4,713
Weighted average life (in years)		5.2
Prepayment speeds (constant prepayment rate)*:		15.4	%
Impact on fair value:
10% adverse change	$	(244	)
20% adverse change	$	(468	)
Discount rate:		10.26	%
Impact on fair value:
10% adverse change	$	(167	)
20% adverse change	$	(324	)

*	Represents the weighted average prepayment rate for the life of the MSR asset.

These assumptions and sensitivities are hypothetical and should be used with caution. Changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSR’s is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.

9. Impaired Loans and Leases

The following summarizes the Corporation’s impaired loans and leases for the periods ended:


	For The Three Months Ended				For The Twelve Months Ended
(dollars in thousands)	March 31, 2010		March 31, 2009		December 31, 2009
Period end impaired loan balances	$	7,633	$	2,492	$	5,711
Loan charge-offs, net of recoveries		3,240		216		1,804
Period end specific reserve for impaired loans		339		227		317
Period to date income recognized		27		45		41

Troubled debt restructuring – commercial loan		1,459		—		1,459
Trouble debt restructuring – residential loan		726		—		682

The period end impaired lease balances were $2.14 million, $2.2 million and $527 thousand as of March 31, 2010, December 31, 2009 and March 31, 2009, respectively. Net charge-offs on impaired leases for the quarter ended March 31, 2010, year ended December 31, 2009 and quarter ended March 31, 2009 were $545 thousand, $4.4 million and $1.4 million, respectively. The troubled debt restructurings (‘TDR’s”) in the lease portfolio as of March 31, 2010 and December 31, 2009 were $1.7 million and $1.8 million, respectively. There were no lease TDR’s as of March 31, 2009.

The first quarter 2010 impaired loan charge-offs, net of recoveries, included a $750 thousand specific reserve, that was included in the Corporation’s general reserve within its allowance for loan and lease losses at December 31, 2009.

The allowance for impaired loans and leases of $339 thousand, $227 thousand and $317 thousand at March 31, 2010, March 31, 2009 and December 31, 2009, respectively, are included in the Corporation’s allowance for loan and lease losses for each period.

10. Goodwill and Other Intangibles

The goodwill and intangible balances presented below resulted from the acquisition of JNJ Holdings LLC, Lau Associates LLC and Lau Professional Services LLC (collectively, “Lau”) in the third quarter of 2008. For further information on the goodwill and other intangible assets associated with the acquisition of Lau, please refer to Footnote 2 in the Corporation’s 2009 Annual Report which forms a part of its 10-K.

The changes in the carrying amount of goodwill and intangibles were as follows:


(dollars in thousands)	Goodwill		Intangibles
Balance January 1, 2010	$	6,301	$	5,421
Additions		—		—
Amortization		—		77
Impairment		—		—

Balance March 31, 2010	$	6,301	$	5,344

The Corporation performed the annual review of goodwill and identifiable intangible assets at December 31, 2009 in accordance with ASC 350, “Intangibles Goodwill and Other.” The Corporation determined there was no impairment of goodwill and other intangible assets.

11. Capital

Dividend

During the first quarter of 2010, the Corporation declared and paid a regular quarterly dividend of $0.14 per share. This payment totaled $1.2 million, based on outstanding shares at February 8, 2010 of 8,895,399. On April 28, 2010 the Corporation’s Board of Directors declared a regular quarterly dividend of $0.14 per share payable June 1, 2010 to shareholders of record as of May 10, 2010.

Dividend Reinvestment and Stock Purchase Plan

On July 20, 2009, the Corporation filed with the Securities and Exchange Commission a prospectus supplement pursuant to Section 424(b)(2) of the Securities Act (“Prospectus Supplement”) in order to issue up to 850,000 shares of common stock under its shelf registration statement on Form S-3/A (Registration No. 333-15988) (the “Shelf Registration Statement”) in connection with a Dividend Reinvestment and Stock Purchase Plan (the “DRIP”). The DRIP is intended to allow both existing shareholders and new investors to increase their investment in the Corporation without incurring many of the fees and commissions normally associated with brokerage transactions.

12. Accounting for Uncertainty in Income Taxes

The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would be more likely than not to sustain the position following an examination. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.

The Corporation is subject to income taxes in the United States federal jurisdiction and multiple state jurisdictions. The Corporation is no longer subject to U.S. Federal income tax examination by taxing authorities for years before 2008.

The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. No interest or penalties were accrued in the first quarter of 2010. There were no significant liabilities accrued during the first three months of 2010.

13. Fair Value Measurement

The following disclosures are made in conjunction with the application of fair value measurements.

FASB ASC 820, “Fair Value Measurement”, establishes a fair value hierarchy based on the nature of data inputs for fair value determinations, under which the Corporation is required to value each asset using assumptions that market participants would utilize to value that asset. When the Corporation uses its own assumptions, it is required to disclose additional information about the assumptions used and the effect of the measurement on earnings or the net change in assets for the period.

The value of the Corporation’s investment securities which generally includes state and municipal securities, U.S. government agencies and mortgage backed securities are reported at fair value. These securities are valued by an independent third party. The third party’s evaluations are based on market data. They utilize evaluated pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis their pricing applications apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bid, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions.

Trading securities are evaluated using quoted prices in active markets. U.S. Government agencies are evaluated and priced using multi-dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other investments are evaluated using a broker-quote based application, including quotes from issuers.

The investment securities classified as available for sale and trading are shown below.

The value of the investment portfolio is determined using three broad levels of inputs:

Level 1 – Quoted prices in active markets for identical securities;

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 – Instruments whose significant value drivers are unobservable.

These levels are not necessarily an indication of the risks or liquidity associated with these investments. The following table summarizes the assets at March 31, 2010 that are recognized on the Corporation’s balance sheet using fair value measurement determined based on the differing levels of input.


(dollars in millions)	Level 1		Level 2		Level 3		Total
Assets Measured at Fair Value on a Recurring Basis at March 31, 2010:
Investment securities – available for sale
Obligations of U.S. Government and agencies	$	—	$	94.8	$	—		94.8
State and political subdivisions		—		24.4		—		24.4
Federal agency mortgage backed securities		—		13.4		—		13.4
Government agency mortgage backed securities		—		2.5		—		2.5
Bonds – mutual funds		37.4		—		—		37.4
Other debt securities		—		1.3		—		1.3

Total assets measured at fair value on a recurring basis	$	37.4	$	136.4	$	—	$	173.8

Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2010:
Mortgage servicing rights (MSRs)	$	—	$	4.0	$	—	$	4.0
Impaired loans and leases		—		9.8		—		9.8

Total assets measured at fair value on a nonrecurring basis	$	—	$	13.8	$	—	$	13.8

There have been no transfers between categories during the first quarter 2010 as compared to the period ended 12/31/2009.


(dollars in millions)	Level 1		Level 2		Level 3		Total
Assets Measured at Fair Value on a Recurring Basis at December 31, 20 09 :
Investment securities – available for sale
Obligations of U.S. Government and agencies	$	—	$	85.1	$	—		85.1
State and political subdivisions		—		25.0		—		25.0
Federal agency mortgage backed securities		—		50.9		—		50.9
Government agency mortgage backed securities		—		8.7		—		8.7
Bonds – mutual funds		37.0		—		—		37.0
Other debt securities		—		1.5		—		1.5

Total assets measured at fair value on a recurring basis	$	37.0	$	171.1	$	—	$	208.2

Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 20 09 :
Mortgage servicing rights (MSRs)	$	—	$	4.1	$	—	$	4.0
OREO and other repossessed property		—		1.0	$	—		1.0
Impaired loans and leases		—		6.2		—		6.2

Total assets measured at fair value on a nonrecurring basis	$	—	$	11.3	$	—	$	11.3

Other Real Estate Owned and Other Repossessed Property:

Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense. The Corporation had no OREO assets at March 31, 2010. OREO assets with a carrying value of $1.0 million were sold during the first quarter of 2010 for a net realized loss of $152 thousand.

On April 15, 2010, the Corporation foreclosed on a $1.5 million non-performing commercial loan.

14. Fair Value of Financial Instruments

The following disclosures and schedules are disclosed in conjunction with the Corporation’s adoption of interim disclosures about fair value of financial instruments.

Disclosure about fair value of financial instruments requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented do not represent the underlying value of the Corporation.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

Cash and Cash Equivalents

The carrying amounts reported in the balance sheet for cash and cash equivalents approximate their fair values.

Investment Securities

Estimated fair values for investment securities are valued by an independent third party based on market data utilizing pricing models that vary by asset and incorporate available trade, bid and other market information.

Loans and Leases

For variable rate loans that reprice frequently and which have no significant change in credit risk, estimated fair values are based on carrying values. Fair values of certain mortgage loans and consumer loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and is indicative of an entry price. The estimated fair value of nonperforming loans is based on discounted estimated cash flows as determined by the internal loan review of the Bank or the appraised market value of the underlying collateral, as determined by independent third party appraisers. The resulting estimate of the fair value of loans does not represent an exit price.

MSR’s

The fair value of the MSRs for these periods was determined using a third-party valuation model that calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates.

Other Assets

The carrying amount of accrued interest receivable and other investments approximates fair value.

Deposits

The estimated fair values disclosed for noninterest-bearing demand deposits, savings, NOW accounts, and Market Rate accounts are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on the certificate of deposit.

Borrowed Funds

The fair value of borrowed funds is established using a discounted cash flow calculation that applies interest rates currently being offered on mid-term and long term borrowings.

Subordinated Debt

The fair value of subordinated debt is established using a discounted cash flow calculation that applies interest rates currently being offered on comparable borrowings.

Mortgage Payable

The fair value of the mortgage payable is established using a discounted cash flow calculation that applies interest rates currently being offered on comparable borrowings.

Other Liabilities

The carrying amounts of accrued interest payable, accrued taxes payable and other accrued payables approximate fair value.

Off-Balance Sheet Instruments

Estimated fair values of the Corporation’s off-balance sheet instruments (standby letters of credit and loan commitments) are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and estimated fair values of off-balance sheet instruments.

The carrying amount and estimated fair value of the Corporation’s financial instruments as of the dates indicated are as follows:


	March 31, 2010				December 31, 2009
(dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and due from banks	$	17,995	$	17,995	$	11,670	$	11,670
Interest-bearing deposits with other banks		71,680		71,680		58,472		58,472
Money market funds		402		402		9,175		9,175

Cash and cash equivalents		90,077		90,077		79,317		79,317
Investment securities		173,816		173,816		208,224		208,224
Mortgage servicing rights		3,994		4,713		4,059		4,807
Loans held for sale		2,214		2,341		3,007		3,051
Other assets		15,559		15,559		15,345		15,345
Net loans and leases		883,360		897,087		875,315		888,242

Total financial assets	$	1,169,020	$	1,183,593	$	1,185,267	$	1,198,986

Financial liabilities:
Deposits	$	914,378	$	915,269	$	937,887	$	938,523
Borrowed funds		142,244		144,645		144,826		147,446
Subordinated debt		22,500		22,731		22,500		22,580
Mortgage payable		2,046		2,220		2,062		2,232
Other liabilities		33,772		33,772		27,610		27,610

Total financial liabilities	$	1,114,940	$	1,118,637	$	1,134,885	$	1,138,391

Off-balance sheet contract or notional amount	$	349,362	$	349,362	$	348,900	$	348,900

15. New Accounting Pronouncements

FASB ASC 860 – Transfers and Servicing

In June 2009, the FASB issued ASC 860 related to accounting for transfers of financial assets. The standard amends the derecognition guidance in previous regulatory guidance and eliminates the concept of a qualifying special-purpose entities (“QSPEs”). The standard is effective for fiscal years and interim periods beginning after November 15, 2009. Early adoption of the standard is prohibited. The Corporation adopted the standard on January 1, 2010 and the adoption of this statement did not have an impact on the Corporation’s financial statements.

FASB ASC 810 – Consolidation – Variable Interest Entities

In June 2009, the FASB issued ASC 810 related to amendments to FASB interpretation No. 46(R) (“ASC 810”) which amends the consolidation guidance applicable to variable interest entities (“VIE”s). An entity would consolidate a VIE, as the primary beneficiary, when the entity has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Ongoing reassessment of whether an enterprise is the primary beneficiary of a VIE is required. ASC 810 amends Interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a VIE. ASC 810 is effective for fiscal years and interim periods beginning after November 15, 2009. The Corporation adopted the standard on January 1, 2010 and the adoption of this statement did not have an impact on the Corporation’s financial statements.

FASB ASC 820 – Fair Value Measurements and Disclosures

Accounting Standards Update No. 2010-6 “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”) was issued in January 2010 to update ASC 820 “Fair Value measurements and Disclosures”. ASU 2010-06 requires new disclosures (1) for significant transfers in and out of Level 1 and Level 2 including a description of the reason for the transfers and (2) in the reconciliation of Level 3 presenting sales, issuances and settlements gross rather than one net number. ASU 2010-06 also requires clarification of existing disclosures requiring (1) measurement disclosures for each “class” of assets and liabilities (a class being a subset of assets and liabilities within one line item in the statement of financial position) using judgment in determining the appropriate classes and (2) disclosures about inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 and Level 3. The new disclosures and clarifications of existing disclosures were effective for interim and reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity Level 3 which are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Corporation made these required disclosures in this Form 10-Q.

ITEM 2 Management’s Discussion and Analysis of Results of Operation and Financial Condition

Brief History of the Corporation

The Bryn Mawr Trust Company (the “Bank”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (the “Corporation”) was formed and on January 2, 1987, the Bank became a wholly-owned subsidiary of the Corporation. The Bank and Corporation are headquartered in Bryn Mawr, PA, a western suburb of Philadelphia, PA. The Corporation and its subsidiaries provide wealth management, community banking, residential mortgage lending, insurance and business banking services to customers through nine full service branches and seven limited-hour retirement community offices throughout Montgomery, Delaware and Chester Counties of Pennsylvania. The Corporation trades on the NASDAQ Global Market (“NASDAQ”) under the symbol BMTC. The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.

The Corporation competes in a highly competitive market area and includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many regulatory agencies including the Securities and Exchange Committee (“SEC”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Bank of Philadelphia (“FRB”) and the Pennsylvania Department of Banking.

Acquisition of First Keystone Financial, Inc.

On November 3, 2009, the Corporation announced that it had entered into a definitive Agreement and Plan of Merger (the “Agreement”) to acquire First Keystone Financial, Inc. and its subsidiaries (collectively, “First Keystone” or “FKF”), a Pennsylvania chartered savings and loan holding company headquartered in Media, PA, in a stock and cash transaction. In accordance with the terms of the Agreement, the acquisition is to be effected pursuant to a merger of First Keystone with and into the Corporation, and a two-step merger of First Keystone Bank with and into the Bank (collectively, the “Transaction”). At December 31, 2009, First Keystone had total assets of approximately $500 million and operated eight full-service branches, primarily in Delaware County, PA.

The Agreement provides for a per share merger consideration in the form of cash and common stock of the Corporation. The per share merger consideration may be adjusted based on the level of First Keystone’s “Delinquencies” at the month-end preceding the closing date of the Transaction. Delinquencies are defined in the Agreement as all loans delinquent thirty days or more, non-accruing loans, other real estate owned, troubled debt restructurings and the aggregate amount of loans charged-off between October 31, 2008 and the month-end preceding the closing date in excess of $2.5 million. “Administrative Delinquencies” as defined in the Agreement are excluded from this definition. First Keystone reported in an April 29, 2010 press release that its Delinquencies at March 31, 2010 were $13.1 million.

The per share merger consideration and adjustment levels pursuant to the Agreement are as follows:


FKF Delinquencies at Month-End Preceding Closing	Adjusted Amount of BMBC Stock to be Received for Each FKF Share	Adjusted Per Share Cash Consideration for Each FKF Share		Deal Value with BMTC Stock Valued at $16.00 per Share* (in millions)
Less than $10.5 million	0.6973	$	2.06	$	32.156
$10.5 – $12.5 million	0.6834	$	2.02	$	31.518
$12.5 – $14.5 million	0.6718	$	1.98	$	30.969
$14.5 – $16.5 million	0.6589	$	1.95	$	30.393
$16.5 million or more	0.6485	$	1.92	$	29.916

Calculated as the sum of (a) the product of the number of shares of First Keystone common stock outstanding, multiplied by the adjusted amount of BMBC stock to be received for such shares, multiplied by the per share market price of BMBC common stock, as listed on the NASDAQ Global Market, plus (b) the product of the number of shares of First Keystone common stock outstanding multiplied by the per share cash consideration. Numbers in this column are provided as an example of what the deal value would be assuming the market price of BMBC common stock is $16.00 per share, and the number of First Keystone shares outstanding does not change. As the price of BMBC common stock fluctuates, or the number of First Keystone’s shares outstanding changes, the deal value also changes.

The Agreement also provides that all options to purchase First Keystone stock which are outstanding and unexercised immediately prior to the closing (“Continuing Options”) under FKF’s Amended and Restated 1995 Stock Option Plan and Amended and Restated 1998 Stock Option Plan, in each case as amended, shall, subject to certain conditions and regulatory approvals, become fully vested, to the extent not already fully vested, and exercisable and be converted into fully vested and exercisable options to purchase shares of the Corporation’s stock. The number of shares of the Corporation’s stock to be subject to the Continuing Options will be equal to 0.8204 (“Option Exchange Ratio”) multiplied by the number of shares of First Keystone stock subject to the Continuing Options, subject to rounding. The exercise price per share of the Corporation’s stock under the Continuing Options will be equal to the exercise price per share of First Keystone stock under the Continuing Options divided by the Option Exchange Ratio, subject to rounding. In the event that the per share Merger Consideration is adjusted as described above, the option exchange ratio will also reflect a corresponding adjustment.

The closing of the Transaction is subject to approval by the Pennsylvania Department of Banking, the Office of Thrift Supervision and the Federal Reserve. Regulatory applications have been filed with these agencies and are under review. On March 2, 2010, First Keystone held a shareholder meeting to approve the Transaction. There were 2,432,998 shares of First Keystone common stock eligible to be voted at the meeting and 1,984,657 shares represented in person or by proxy. The shareholders approved the Transaction with more than 81% of the issued and outstanding shares voting in favor.

The closing of the Transaction remains subject to certain conditions more fully described in the Agreement, including, without limitation, governmental filings and regulatory approvals and expiration of applicable waiting periods, accuracy of specified representations and warranties of both parties, the absence of a material adverse effect, and obtaining material permits and authorizations for the lawful consummation of the Transaction. Upon completion of the Transaction, the Corporation and the Bank expect to be able to more efficiently leverage resources and deliver high quality products and services to the marketplace. Increasing the Corporation’s presence in Delaware and Chester Counties of Pennsylvania has been a strategic goal, and this Transaction is an important component of that strategic plan.

The above summaries of the Transaction and the Agreement are qualified in their entirety by the complete text of the Agreement which was attached as Exhibit 2.1 to the Corporation’s Form 8-K filed with the SEC on November 4, 2009. For a more complete summary, see the Proxy Statement/Prospectus which was filed with the SEC on January 25, 2010 in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”).

Results of Operations

The following is the Corporation’s discussion and analysis of the significant changes in the results of operations, capital resources and liquidity presented in the accompanying consolidated financial statements. The Corporation’s consolidated financial condition and results of operations consist almost entirely of the Bank’s financial condition and results of operations. Current performance does not guarantee, and may not be indicative of similar performance in the future.

Critical Accounting Policies, Judgments and Estimates

The accounting and reporting policies of the Corporation and its subsidiaries conform with accounting principles generally accepted in the United States of America applicable to the financial services industry (Generally Accepted Accounting Principles “GAAP”). All inter-company transactions are eliminated in consolidation and certain reclassifications are made when necessary to conform the previous year’s financial statements to the current year’s presentation. In preparing the consolidated financial statements, the Corporation is required to make estimates and assumptions that affect the reported amount of assets and liabilities as of the dates of the balance sheets and revenues and expenditures for the periods presented. Therefore, actual results could differ from these estimates.

The allowance for loan and lease losses involves a higher degree of judgment and complexity than other significant accounting policies. The allowance for loan and lease losses is calculated with the objective of maintaining a reserve level believed by the Corporation to be sufficient to absorb estimated probable credit losses. The Corporation’s determination of the adequacy of the allowance is based on periodic evaluations of the loan and lease portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, expected loan commitment usage, the amounts and timing of expected future cash flows on impaired loans and leases, value of collateral, estimated losses on consumer loans and residential mortgages and general amounts for historical loss experience. The process also considers economic conditions, international events, and inherent risks in the loan and lease portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from the Corporation’s estimates, additional provisions for loan and lease losses may be required that would adversely impact earnings in future periods. See the section of this document titled Asset Quality and Analysis of Credit Risk for additional information.

Other significant accounting policies are presented in Footnote 1 – Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements in the Corporation’s 2009 Annual Report which forms a part of its 10-K.

Executive Overview

Three Month Results

The Corporation reported first quarter 2010 diluted earnings per share of $0.25 and net income of $2.2 million compared to diluted earnings per share of $0.31 and net income of $2.6 million in the same period last year. Return on average equity (ROE) and return on average assets (ROA) for the first quarter ended March 31, 2010 were 8.59% and 0.76%, respectively. ROE was 11.54% and ROA was 0.92% for the same period last year.

The Corporation is well positioned for growth and profitability and continues to exceed regulatory requirements for a well-capitalized financial organization. The merger integration and regulatory approval process for the pending First Keystone Transaction are progressing, and the Corporation anticipates a legal closing date in July 2010, subject to receipt of all necessary regulatory approvals. First quarter 2010 net income included securities gains, a larger than expected provision for loan and lease losses and merger related costs. There were a number of positive events during the quarter which included a decrease for the second consecutive quarter in non-performing assets to 0.56% of total assets at March 31, 2010, and the third consecutive quarterly increase in the net interest margin to 4.06%. Wealth Management Division assets under management, administration, supervision and brokerage (collectively “AUM”) were $3.1 billion at March 31, 2010. This is the highest level of AUM in the history of the Corporation.

Total portfolio loans and leases at March 31, 2010 were $893.1 million, an increase of $7.4 million or 0.8% from the December 31, 2009 year-end balance of $885.7 million. Credit quality on the overall loan and lease portfolio is stable. Total non-performing loans and leases represented 77 basis points or $6.9 million of portfolio loans and leases at March 31, 2010. This compares with 78 basis points or $6.9 million at December 31, 2009.

The provision for loan and lease losses for the quarters ended March 31, 2010 and 2009 were $3.1 million and $1.6 million, respectively. At March 31, 2010, the allowance for loan and lease losses (“allowance”) of $9.7 million represents 1.09% of portfolio loans and leases compared with 1.18% at December 31, 2009.

For the quarter ended March 31, 2010, non-interest income was $7.3 million, in line with the $7.5 million for the same period last year. During the first quarter of 2010, fees for wealth management services were $3.8 million, loan servicing and late fees were $381 thousand and the net gain on the sale of investments was $1.5 million. The net gain on sale of residential mortgage loans of $525 thousand and other operating income of $529 thousand during the first quarter of 2010 declined from $1.9 million and $878 thousand, respectively, in the first quarter of 2009.

Wealth Management assets under management, administration, supervision and brokerage as of March 31, 2010 were $3.1 billion, up $239 million or 8.3% higher than the $2.9 billion at December 31, 2009 and up $1.1 billion or 58.8% from March 31, 2009. Success in the Wealth Management area is primarily attributable to improvements in the financial markets and the success of BMT Asset Management.

Non-interest expense for the quarter ended March 31, 2010 was $11.9 million, an increase of $437 thousand or 3.8% over the $11.5 million in the same period last year. The increase is mainly due to increases in due diligence and merger related expenses and professional fees associated with the First Keystone Transaction as well as a $152 thousand loss on the sale of OREO during the first quarter of 2010.

Key Performance Ratios

Key financial performance ratios for the three months ended March 31, 2010 and 2009 are shown in the table below:


	Three Months Ended March 31,
	2010			2009
Return on average equity		8.59	%		11.54	%
Return on average assets		0.76	%		0.92	%
Efficiency ratio*		64.6	%		67.0	%
Tax equivalent net interest margin		4.06	%		3.62	%
Diluted earnings per share	$	0.25		$	0.31
Dividend per share	$	0.14		$	0.14

*	The efficiency ratio is calculated by dividing the sum of net interest income and non-interest income by non-interest expense

Key period end ratios and balances are shown in the table below:


	At or for the Three Months Ended March 31,
(dollars in millions, except per share amounts)	2010			2009
Book value per share	$	11.86		$	10.99
Tangible book value per share	$	10.56		$	9.78
Allowance for loan and lease losses as a percentage of loans and leases		1.09	%		1.13	%
Tier I capital to risk weighted assets		9.70	%		8.96	%
Tangible common equity ratio		7.82	%		7.20	%
Loan to deposit ratio		97.7	%		100.8	%
Wealth assets under management, administration, supervision and brokerage	$	3,110		$	1,959
Portfolio loans	$	893		$	893
Total assets	$	1,221		$	1,170
Shareholders’ Equity	$	106		$	95

Components of Net Income

Net income is affected by five major elements: Net Interest Income or the difference between interest income earned on loans, leases and investments and interest expense paid on deposit and borrowed funds; the Provision for Loan and Lease Losses or the amount added to the allowance for loan and lease losses to provide reserves for inherent losses on loans and leases; Non-Interest Income which is made up primarily of certain fees, trust income, residential mortgage activities and gains and losses from the sale of securities; Non-Interest Expenses which consist primarily of salaries, employee benefits and other operating expenses; and Income Taxes . Each of these major elements are discussed in more detail below.

NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

We present information on a tax equivalent basis for net interest income. Refer to Analyses of Interest Rates and Interest Differential below for further information.

Three Months Ended March 31, 2010 Compared to the Same Period Ended March 31, 2009

The tax equivalent net interest income for the three months ended March 31, 2010 of $11.3 million was $1.6 million or 16.2% higher than the tax equivalent net interest income for the same period in 2009 of $9.7 million. This increase was primarily attributable to a decrease in interest expense of $1.9 million or 40.5% from $4.7 million for the quarter ended March 31, 2009 to $2.8 million for the quarter ended March 31, 2010, average investment portfolio growth of $92.1 million or 84.9% from $108.4 million for the three month period ended March 31, 2009 to $200.5 million for the three month period ended March 31, 2010 and a reduction in average wholesale deposits of $47.8 million or 36.0% from $132.8 million for the quarter ended March 31, 2009 to $85.0 million for the quarter ended March 31, 2010.

Average interest bearing liabilities decreased $932 thousand or 0.1% to $877.9 million during the first quarter of 2010 compared to $878.8 million during first quarter of 2009. The rate on interest bearing liabilities decreased from 2.15% in the first quarter 2009 to 1.28% in the first quarter of 2010, largely due to higher rate wholesale deposits maturing, the increase in lower rate money market and savings accounts and prudent management of deposit pricing. Average total wholesale funding, which is defined as wholesale deposits (wholesale time deposits and other wholesale deposits) and borrowed funds (FHLB-P advances, Federal Reserve Bank borrowings and Federal Funds overnight borrowings), decreased $58.0 million or 20.2% to $229.0 million for the quarter ended March 31, 2010 compared to the same period in 2009. Average deposit balances for the first quarter of 2010 were $898.7 million, a $28.7 million increase or 3.3% above the $870.0 million at March 31, 2009.

The tax equivalent net interest margin on interest earning assets increased 44 basis points from 3.62% in the first quarter of 2009 to 4.06% in the quarter ended March 31, 2010, due mainly to a reduction in interest expense, a result of conservative deposit pricing and a planned decline in time and wholesale deposits.

Rate/Volume Analysis on a tax equivalent basis*


(dollars in thousands) increase/(decrease)	Three Months Ended March 31, 2010 Compared to 2009
(dollars in thousands) increase/(decrease)	Volume			Rate			Total
Interest Income:
Interest-bearing deposits with other banks	$	(1	)	$	(2	)	$	(3	)
Federal funds sold		(1	)		—			(1	)
Money market funds sold		3			(84	)		(81	)
Investment securities available for sale		1,034			(958	)		76
Loans and leases		(119	)		(192	)		(311	)

Total interest income		916			(1,236	)		(320	)

Interest Expense:
Savings, NOW and market rate accounts		257			(417	)		(160	)
Other wholesale deposits		41			(18	)		23
Time deposits		(459	)		(141	)		(600	)
Wholesale deposits		(509	)		(591	)		(1,100	)
Borrowed funds		(5	)		(48	)		(53	)

Total interest expense		(675	)		(1,215	)		(1,890	)

Interest differential	$	(1,591	)	$	(21	)	$	1,570

*	The tax rate used in the calculation of the tax equivalent income is 35%.

Analyses of Interest Rates and Interest Differential

The tables below present the major asset and liability categories on an average daily basis for the periods presented, along with interest income and expense and key rates and yields.


	For the Three Months Ended March 31,
	2010							2009
(dollars in thousands)	Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:
Interest-bearing deposits with other banks	$	27,300		$	14	0.21	%	$	29,434		$	17	0.23	%
Federal funds sold		—			—	—			2,222			1	0.18	%
Money market funds		1,426			1	0.28	%		40,903			82	0.81	%
Investment securities available for sale:
Taxable		175,632			1,021	2.36	%		98,240			1,116	4.61	%
Tax-exempt		24,850			278	4.54	%		10,173			107	4.27	%

Total investment securities		200,482			1,299	2.63	%		108,413			1,223	4.58	%

Loans and leases ^{(1) (2)}		895,159			12,724	5.76	%		903,693			13,035	5.85	%

Total interest earning assets		1,124,367			14,038	5.06	%		1,084,665			14,358	5.37	%
Cash and due from banks		10,627							11,706
Allowance for loan and lease losses		(10,620	)						(10,353	)
Other assets		69,185							69,175

Total assets	$	1,193,559						$	1,155,193

Liabilities:
Savings, NOW and market rate accounts	$	484,402		$	657	0.55	%	$	368,917		$	816	0.90	%
Other wholesale deposits		42,030			51	0.49	%		29,287			28	0.39	%
Wholesale deposits		43,026			185	1.74	%		103,562			785	3.07	%
Time deposits		139,959			454	1.32	%		207,964			1,554	3.03	%

Total interest-bearing deposits		709,417			1,347	0.77	%		709,730			3,183	1.82	%
Borrowed funds		143,939			1,130	3.18	%		154,114			1,263	3.32	%
Mortgage payable		2,056			27	5.52	%		—			—	—
Subordinated debt		22,500			273	4.92	%		15,000			221	5.98	%

Total interest-bearing liabilities		877,912			2,777	1.28	%		878,844			4,667	2.15	%
Non-interest-bearing demand deposits		189,314							160,295
Other liabilities		21,315							23,559

Total non-interest-bearing liabilities		210,629							183,854

Total liabilities		1,088,541							1,062,698
Shareholders’ equity		105,018							92,495

Total liabilities and shareholders’ equity	$	1,193,559						$	1,155,193

Net interest spread						3.78	%						3.22	%
Effect of non-interest-bearing sources						0.28	%						0.40	%

Net interest income/margin on earning assets				$	11,261	4.06	%				$	9,691	3.62	%

Tax equivalent adjustment (tax rate 35%)				$	144	0.05	%				$	65	0.02	%

⁽¹⁾	Non-accrual loans have been included in average loan balances, but interest on nonaccrual loans has not been included for purposes of determining interest income.

⁽²⁾	Loans include portfolio loans and leases and loans held for sale.

Tax Equivalent Net Interest Margin

The Corporation’s net interest margin increased 44 basis points to 4.06% in the first quarter of 2010 from 3.62% in the same period last year. The cost of interest bearing liabilities decreased in the first quarter of 2010 to 1.28%, a decrease of 87 basis points from 2.15% the first quarter of 2009. This reduction more than offset the decline in the yield on earning assets of 31 basis points during the same comparative period to 5.06% for the quarter ended March 31, 2010 from 5.37% for the quarter ended March 31, 2009.

The tax equivalent net interest margin and related components for the past five consecutive quarters are shown in the table below.


	Year	Earning Asset Yield		Interest Bearing Liability Cost		Net Interest Spread		Effect of Non-Interest Bearing Sources		Net Interest Margin
Net Interest Margin Last Five Quarters
1 ^st Quarter	2010	5.06	%	1.28	%	3.78	%	0.28	%	4.06	%
4 ^th Quarter	2009	4.99	%	1.45	%	3.54	%	0.31	%	3.85	%
3 ^rd Quarter	2009	5.09	%	1.73	%	3.36	%	0.36	%	3.72	%
2 ^nd Quarter	2009	5.13	%	1.94	%	3.19	%	0.40	%	3.59	%
1 ^st Quarter	2009	5.37	%	2.15	%	3.22	%	0.40	%	3.62	%

Interest Rate Sensitivity

The Corporation actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. The Corporation’s Asset and Liability Committee (“ALCO”), using policies and procedures approved by the Corporation’s Board of Directors, is responsible for managing the interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offering of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of several sources including borrowings from the FHLB-P, FRB discount window, certificates of deposit from institutional brokers, Certificate of Deposit Account Registry Service (“CDARS”), IND, IDC and PLGIT.

The Corporation uses several tools to manage its interest rate risk including interest rate sensitivity analysis (a/k/a “GAP Analysis”), market value of portfolio equity analysis, interest rate simulations under various rate scenarios and tax equivalent net interest margin reports. The results of these reports are compared to limits established by the Corporation’s ALCO Policies and appropriate adjustments are made if the results are outside of established limits.

The following table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift in the yield curve and subjective adjustments in deposit pricing might have on the Corporation’s projected net interest income over the next 12 months.

This simulation assumes that there is no growth in the balance sheet over the next twelve months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines. Actual results may differ significantly from the interest rate simulation due to numerous factors including assumptions, the competitive environment, market reactions and customer behavior.

Summary of Interest Rate Simulation


	March 31, 2010
(dollars in thousands)	Change In Net Interest Income Over Next 12 Months
Change in Interest Rates
+300 basis points	$	4,424		10.12	%
+200 basis points	$	2,796		6.39	%
+100 basis points	$	(159	)	(0.36	)%
-100 basis points	$	2,228		(5.09	)%

The interest rate simulation above indicates that the Corporation’s balance sheet as of March 31, 2010 is liability sensitive if rates increase 100 basis points. Liability sensitive means that more liabilities than assets are repricing in that time period resulting in a negative impact on the net interest income. However, a 200 basis point and 300 basis point increase in rates will enhance the Bank’s net interest income. An increase in rates of 100 basis points would reduce the net interest income since deposit rates would increase, but there would be no corresponding increase in interest income on all loan products. This is due to the Bank’s prime rate currently being 74 basis points higher than Wall Street Journal Prime Rate of 3.25% as of March 31, 2010 and certain interest rate floors that are in place on consumer lines of credit and other loans. The interest rate simulation is an estimate based on assumptions, which are based in part on past behavior of customers, along with expectations of future behavior relative to interest rate changes. In today’s uncertain economic times, the reliability of the Corporation’s interest rate simulation model is more uncertain. Actual customer behavior may be significantly different than expected behavior, which could cause an unexpected outcome which might translate into lower net interest income.

GAP Report

The interest sensitivity or “GAP” report identifies interest rate risk by showing repricing gaps in the Bank’s balance sheet. All assets and liabilities are reflected based on behavioral sensitivity, which is usually the earliest of either: repricing, maturity, contractual amortization, prepayments or likely call dates. Non-maturity deposits such as NOW, Savings and money market accounts are spread over various time periods based on the expected sensitivity of these rates considering liquidity and investment preferences for the bank. Non-rate sensitive assets and liabilities are spread over time periods to reflect how the Corporation views the maturity of these funds.

Non-maturity deposits, demand deposits in particular, are recognized by the regulatory agencies to have different sensitivities to interest rate environments. Consequently, it is an accepted practice to spread non-maturity deposits over defined time periods in order to capture that sensitivity. Commercial demand deposits are often in the form of compensating balances, and fluctuate inversely to the level of interest rates; the maturity of those deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the regulatory capital agencies have inferred what the appropriate distribution limits are for non-maturity deposits. The Corporation has taken a more conservative approach than these limits would imply by reporting them as having a shorter maturity.

The following table presents the Corporation’s interest rate sensitivity position or GAP Analysis as of March 31, 2010:


(dollars in millions)	0 to 90 Days			90 to 365 Days			1-5 Years			Over 5 Years			Non-Rate Sensitive			Total
Assets:
Interest-bearing deposits with banks	$	71.7		$	—		$	—		$	—		$	—		$	71.7
Money market funds		0.4			—			—			—			—			0.4
Available for sale securities		72.1			35.1			30.2			36.4			—			173.8
Loans and leases ⁽¹⁾		367.2			76.9			355.5			95.7			—			895.3
Allowance for loan and lease losses		—			—			—			—			(9.7	)		(9.7	)
Cash and due from banks		—			—			—			—			18.0			18.0
Other assets		—			0.2			0.4			0.1			71.0			71.7

Total assets	$	511.4		$	112.2		$	386.1		$	132.2		$	79.3		$	1,221.2

Liabilities and shareholders’ equity:
Non-interest-bearing demand	$	75.6		$	18.8		$	100.3		$	—		$	—		$	194.7
Savings, NOW and market rate		85.9			76.0			266.2			63.6			—			491.7
Time deposits		42.1			53.6			41.1			0.1			—			136.9
Other wholesale deposits		47.7			—			—			—			—			47.7
Wholesale time deposits		21.8			16.4			5.1			—			—			43.3
Borrowed funds		11.8			42.9			77.5			10.0			—			142.2
Subordinated debt		22.5			—			—			—			—			22.5
Mortgage payable		—			0.2			1.9			—			—			2.1
Other liabilities		—			—			—			—			33.8			33.8
Shareholders’ equity		3.8			11.4			60.7			30.4			—			106.3

Total liabilities and shareholders’ equity	$	311.2		$	219.3		$	552.8		$	104.1		$	33.8		$	1221.2

Interest earning assets	$	511.4		$	112.0		$	385.7		$	132.1		$	—		$	1141.2
Interest bearing liabilities		231.8			189.1			391.8			73.7			—			886.4

Difference between interest earning assets and interest bearing liabilities	$	279.6		$	(77.1	)	$	(6.1	)	$	58.4		$	—		$	254.8

Cumulative difference between interest earning assets and interest bearing liabilities	$	219.5		$	182.2		$	238.1		$	270.2		$	—		$	254.8

Cumulative earning assets as a % of cumulative interest bearing liabilities		221	%		148	%		124	%		129	%		—			129	%

⁽¹⁾	Loans include portfolio loans and leases and loans held for sale.

The table above indicates that the Corporation is asset sensitive in the immediate to 90 day time frame and should theoretically experience an increase in net interest income during that time period. It should be noted that the GAP analysis is one tool used to measure interest rate sensitivity and must be used in conjunction with other measures such as the interest rate simulation discussed above. The GAP report measures the timing of changes in rate, but not the true weighting of any specific line item. Accordingly, if rates decline, theoretically net interest income will also decline. This position is similar to the Corporation’s position at December 31, 2009.

PROVISION FOR LOAN AND LEASE LOSSES

General Discussion of the Allowance for Loan and Lease Losses

The Corporation uses the allowance method of accounting for credit losses. The balance in the allowance for loan and lease losses (“allowance”) is determined based on the Corporation’s review and evaluation of the loan and lease portfolio in relation to past loss experience, the size and composition of the portfolio, current economic events and conditions, and other pertinent factors, including the Corporation’s assumptions as to future delinquencies, recoveries and losses.

Increases to the allowance are implemented through a corresponding provision (expense) in the Corporation’s statement of income. Loans and leases deemed uncollectible are charged against the allowance. Recoveries of previously charged-off amounts are credited to the allowance.

While the Corporation considers the allowance to be adequate based on information currently available, future additions to the allowance may be necessary due to changes in economic conditions or the Corporation’s assumptions as to future delinquencies, recoveries and losses and the Corporation’s intent with regard to the disposition of loans. In addition, the Pennsylvania Department of Banking and the Federal Reserve Bank of Philadelphia, as an integral part of their examination process, periodically review the Corporation’s allowance.

The Corporation’s allowance is the accumulation of four components that are calculated based on various independent methodologies. All components of the allowance are estimations. The Corporation discusses these estimates earlier in this document under the heading of “Critical Accounting Policies, Judgments and Estimates”. The four components are as follows:

•

Specific Loan Evaluation Component – Includes the specific evaluation of larger classified loans. The Corporation evaluates larger, classified loans with greater scrutiny to calculate an appropriate allowance for the identified loan.

•

Historical Charge-Off Component – Applies a three year rolling historical charge-off rate to pools of non-classified loans excluding leases.

•

Additional Factors Component – The loan and lease portfolios are broken down into multiple homogeneous sub-classifications upon which multiple factors (such as delinquency trends, economic conditions, loan terms, credit grade, state of origination, industry, other relevant information and regulatory environment) are evaluated resulting in an allowance amount for each of the sub-classifications. The sum of these amounts equals the Additional Factors Component. These additional factors are reviewed by the Corporation on a quarterly basis to reflect changes in each homogeneous sub-classification identified.

•

Unallocated Component – This amount represents a reserve against all loans and leases for factors not included in the components above. The unallocated component of the Allowance is available for use against any portion of the loan and lease portfolio.

Given the difficult national economic conditions since 2008, it has been recommended by regulators in general that recent charge-off history be given more weight in the ALLL calculation. The Corporation is aware of these recommendations and refined the historical charge-off component of the allowance to a three year rolling historical average in the first quarter of 2010 from a five year rolling historical average in prior periods. The Corporation believes its ALLL methodology adequately provides the appropriate weighting to current charge-off history in the aggregate, primarily through the specific loan and additional factor components of the allowance methodology. The Corporation will continue to evaluate its ALLL methodology on a quarterly basis and will make appropriate adjustments as needed.

Asset Quality and Analysis of Credit Risk

Credit quality on the overall loan and lease portfolio remains stable at March 31, 2010 as total non-performing loans and leases of $6.9 million were 77 basis points of total loans and leases. This compares to non-performing loans and leases of $6.9 million or 78 basis points at December 31, 2009. While total non-performing loans and leases remained constant during the quarter ended March 31, 2010, non-accrual loans decreased $366 thousand and loans 90 days past due increased $347 thousand, partially offsetting each other. The majority of non-performing loans are adequately secured by collateral that can substantially liquidate the associated debt.

As of March 31, 2010 the Corporation had no OREO assets. The reduction of $1.0 million in OREO from December 31, 2009 is due to a first quarter 2010 sale of OREO resulting in a $152 thousand loss. On April 15, 2010, the Corporation foreclosed on a $1.5 million commercial loan which was included in total non-performing loans at March 31, 2010. The Corporation expects to fully recover the outstanding loan balance. Additionally, included in non-performing loans as of March 31, 2010 is a $595 thousand construction loan secured by two newly constructed homes. The Corporation anticipates foreclosing on this property during the second quarter of 2010. Non-performing assets at March 31, 2010 totaled $6.9 million or 56 basis points of total assets, a decrease of $1.0 million from $7.9 million in non-performing assets at December 31, 2009.

In the first quarter of 2010, net loan charge-offs were $3.3 million, with $3.0 million of this charge-off related to a $5.1 million commercial loan which had a $750 thousand specific reserve at December 31, 2009. This commercial loan relationship is involved in the building and construction industry and experienced a sharp decline in sales due to this past winter’s severe weather. The balance of the loan after the charge-off is classified as a performing loan, which was restructured in April 2010 and was a TDR at this date. In total, $990 thousand of the $3.3 million first quarter net loan charge-offs was specifically reserved for at December 31, 2009. This compares with net loan charge-offs of $414 thousand in the fourth quarter of 2009 and $405 thousand in the first quarter of 2009.

In the first quarter of 2010, net lease charge-offs totaled $545 thousand compared to $764 thousand in the fourth quarter of 2009 and $1.4 million in the first quarter of 2009. The Corporation made certain lease underwriting adjustments in prior years and continued to tighten these standards in 2010 to mitigate potential losses, including the reduction of broker relationships, the curtailment of lease originations in certain geographical regions, reductions in the maximum dollar amount of each lease, changes to equipment categories, and higher credit quality minimum requirements. These adjustments and others have improved overall lease portfolio performance as net charge-offs have declined each quarter since March 31, 2009. The lease portfolio balance was $44.0 million at March 31, 2010, down from $47.8 million at December 31, 2009 and $57.7 million at March 31, 2009.

Please refer to the Summary of Changes in the Allowance for Loan and Lease Losses on the next page for further information.

Non Performing Assets and Related Ratios


	At or for the Period Ended
(dollars in thousands)	March 31, 2010			December 31, 2009			March 31, 2009
Non-Performing Assets:
Non-accrual loans and leases	$	5,880		$	6,246		$	3,020
Loans and leases 90 days or more past due - still accruing		1,015			668			975

Total non-performing loans and leases		6,895			6,914			3,995
Other real estate owned (“OREO”)		—			1,025			1,315

Total non-performing assets	$	6,895		$	7,939		$	5,310

Troubled Debt Restructures (“TDRs”): *
Total TDRs	$	3,893		$	3,896		$	—
Less: TDRs in non-performing loans and leases		2,048			2,274			—

TDRs not included in non-performing loans and leases	$	1,845		$	1,622		$	—

Allowance for loan and lease losses to non-performing assets		141.3	%		131.3	%		199.8	%
Allowance for loan and lease losses to total non-performing loans and leases		141.3	%		150.8	%		269.4	%
Non-performing loans and leases to total portfolio loans		0.77	%		0.78	%		0.45	%
Allowance for loan losses to portfolio loans		1.09	%		1.18	%		1.13	%
Non-performing assets to total assets		0.56	%		0.64	%		0.45	%
Net loan and lease charge-offs/average quarterly loans and leases		1.70	%		0.77	%		0.79	%
Period end portfolio loans and leases	$	893,100		$	885,739		$	893,477
Average quarterly portfolio loans and leases	$	892,184		$	882,956		$	897,215
Allowance for loan and lease losses	$	9,740		$	10,424		$	10,137

*	Not included in the table is a commercial loan for which there was a TDR with a recorded investment in the loan of $2.1 million, in April 2010.

The allowance for loan and lease losses for the quarter ended March 31, 2010 was $9.7 million compared with $10.4 million at December 31, 2009. The allowance for loan and lease losses as a percentage of total loans was 1.09% at March 31, 2010 compared with 1.18% at December 31, 2009.

Summary of Changes in the Allowance For Loan and Lease Losses


	Three Months Ended March 31						Year Ended December 31 2009
(dollars in thousands)	2010			2009			Year Ended December 31 2009
Balance, beginning of period	$	10,424		$	10,332		$	10,332
Charge-offs:
Consumer		(12	)		(9	)		(45	)
Commercial and industrial		(3,240	)		(398	)		(1,933	)
Construction		—			—			(382	)
Real estate		—			—			(53	)
Leases		(694	)		(1,451	)		(4,957	)

Total charge-offs		(3,946	)		(1,858	)		(7,370	)
Recoveries:
Consumer		—			3			8
Commercial and industrial		—			—			—
Construction		—			—			—
Real estate		—			—			1
Leases		149			69			569

Total recoveries		149			72			578

Net (charge-offs) / recoveries		(3,797	)		(1,786	)		(6,792	)
Provision for loan and lease losses		3,113			1,591			6,884

Balance, end of period	$	9,740		$	10,137		$	10,424

NON-INTEREST INCOME

Three months ended March 31, 2010 Compared to the Same Period Ended March 31, 2009

Non-interest income for the first quarter of 2010 was $7.3 million, a decrease of $174 thousand or 2.3% from the $7.5 million in the first quarter of 2009. Fees for Wealth Management services increased 9.3%, loan servicing and late fees increased 30.9% and service charges on deposits increased 8.2% from the same period in 2009. These increases were offset by a decrease in other operating income of 39.7% from March 31, 2009. The Corporation’s strong performance in the net gain on the sale of residential mortgage loans of $1.9 million during the quarter ended March 31, 2009 decreased to $525 thousand at March 31, 2010, while the net gain on the sale of investments of $472 thousand during the quarter ended March 31, 2009 increased to $1.5 million during the quarter ended March 31, 2010.

First quarter 2010 Wealth Management Services revenue of $3.8 million increased $327 thousand or 9.3% over the $3.5 million in the first quarter of 2009. These revenues include fees from trust administration, investment management, brokerage, custody and estates. Wealth Management Services revenues were impacted by the improvements in the financial markets over the past 12 months along with the success of BMT Asset Management. Wealth Management Division assets increased 58.8% from $2.0 billion at March 31, 2009 to $3.1 billion at March 31, 2010.

Components of other operating income:


	For the Period Ended
(dollars in thousands)	March 31, 2010		March 31, 2009
Title insurance income	$	15	$	135
Other		87		243
Cash management		5		132
Insurance commissions		87		91
Safe deposit rentals		87		77
Commission and fees		114		65
VISA debit card income		74		61
Rent		43		58
Other investment income		17		16

Other operating income	$	529	$	878

NON-INTEREST EXPENSE

Three months ended March 31, 2010 Compared to the Same Period Ended March 31, 2009

Non-interest expense for the first quarter of 2010 was $11.9 million, an increase of $437 thousand or 3.8% from $11.5 million in the first quarter of 2009. Factors primarily contributing to this increase include due diligence and merger related expenses of $347 thousand, a $152 thousand net loss on the sale of OREO and a $276 thousand increase in professional fees related to collections and other initiatives partially offsetting the increase. Salaries and wages in the first quarter of 2010 were $5.3 million, a decrease of $192 thousand or 3.5% from the first quarter of 2009.

Occupancy and bank premises expense increased to $984 thousand, a $57 thousand or 6.1% increase from $927 thousand in the first quarter of 2009. This increase is primarily due to an overall increase in snow removal and general maintenance costs of running the Corporation.

Components of other operating expense:


	For the Period Ended
(dollars in thousands)	March 31, 2010		March 31, 2009
Other	$	213	$	224
Fidelity bond & insurance		62		61
Loan processing and closing		187		270
Other taxes		240		218
Computer processing		102		130
Telephone		76		93
Director fees		120		96
Postage		90		99
Temporary help & recruiting		131		101
Travel & entertaining		67		49
Security portfolio maintenance		56		43
Dues & memberships		25		29
Subscriptions		32		34
Stationary & supplies		69		74

Other operating expense	$	1,470	$	1,521

INCOME TAXES

Income taxes for the three months ended March 31, 2010 were $1.2 million compared to $1.4 million for the same period in 2009. This represents an effective tax rate of 34.8% for the three months ended March 31, 2010 compared to an effective tax rate of 35.0% for the same period in 2009.

BALANCE SHEET ANALYSIS

The total assets were $1.2 billion as of March 31, 2010, flat compared with the $1.2 billion at December 31, 2009. Deposit levels were $914.4 million at March 31, 2010, a decrease of $23.5 million or 2.5% from December 31, 2009, partially due to a temporary 2009 year-end inflow from one large commercial customer and a planned decline in time deposits. Deposit levels increased $27.6 million or 3.1% from March 31, 2009, as new core transaction account openings have continued to grow.

First quarter 2010 portfolio loan and lease balances of $893.1 million increased 0.8% or $7.4 million compared to $885.7 million at December 31, 2009, led primarily by a 3.8% or $10.1 million increase in commercial mortgages. Partially offsetting these increases was a decline in home equity lines and loans of $2.2 million or 1.2% and a planned decline in the lease portfolio of $3.8 million or 7.9%.

Average portfolio loan and leases for the first quarter of 2010 increased $9.2 million or 1.0% to $892.2 million compared to $883.0 million in the fourth quarter of 2009.

The table below compares portfolio loans and leases outstanding at March 31, 2010 and December 31, 2009. The table reflects a increase in total loans and leases of $7.4 million.

Commercial mortgage loans increased $10.1 million from December 31, 2009. This is largerly due to the Corporation developing opportunities for what we believe to be credit worthy borrowers in the Commercial real estate market who are not satisfied with their current lender. The commercial mortgage loans comprise 30.8% of the total loan and lease portfolio at March 31, 2010.

Home equity lines and loans decreased $2.2 million from December 31, 2009. This is due to several large payoffs and new volume was relatively flat in our local market area. The home equity loans and lines comprise is 19.7% of the total loan and lease portfolio at March 31, 2010.

Construction loans increased $3.1 million from December 31, 2009. The increase was partially due to the Corporation providing financing for the sale of its OREO property and providing financing for a small residential subdivision that was 100% pre-sold. Construction loans comprise 4.6% of the total loan and lease portfolio at March 31, 2010.

The planned decline in the leasing portfolio resulted in a $3.8 million decrease from December 31, 2009. However, trends within the leasing portfolio have shown improvement as net charge-offs have continually decreased on a quarterly basis from $1.4 million in the first quarter of 2009 to $545 thousand in the first quarter of 2010. The Corporation continues to focus its business development efforts on building banking relationships with local businesses, not-for-profit business and strong credit quality individuals.


	March 31, 2010		December 31, 2009		Change
(dollars in millions)	March 31, 2010		December 31, 2009		Dollars			Percentage
Real estate loans:
Consumer loans	$	12.1	$	12.7	$	(0.6	)		(4.7	)%
Commercial and industrial loans		234.3		233.3		1.0			0.4	%
Commercial mortgage loans		275.1		265.0		10.1			3.8	%
Construction loans		41.5		38.4		3.1			8.1	%
Residential mortgage loans		110.4		110.6		(0.2	)		(0.2	)%
Home equity lines and loans		175.7		177.9		(2.2	)		(1.2	)%
Leases		44.0		47.8		(3.8	)		(7.9	)%

Total portfolio loans and leases	$	893.1	$	885.7	$	7.4			0.8	%

Loans held for sale	$	2.2	$	3.0	$	(0.8	)	$	(26.7	)%

Quarterly average portfolio loans and leases	$	892.2	$	883.0	$	9.2			1.0	%

The Corporation’s investment portfolio had a fair value of $173.8 million at March 31, 2010, a decrease of $34.4 million or 16.5% from $208.2 million at December 31, 2009. The reduction resulted from sales that reduced exposure to mortgage-backed securities by $39.0 million. See the Liquidity section of this document for more detailed information on the Corporation’s investment portfolio.

As of March 31, 2010, liquidity remains strong as the Corporation had $62 million of cash balances at the Federal Reserve and $9 million in other interest-bearing accounts. As interest rates remain low, the Corporation continues to look for attractive yielding investments while placing a strong emphasis on liquidity without taking unnecessary risks in this recessionary economic environment. See the Liquidity section for more detailed information on the Corporation’s investment portfolio.

First quarter 2010 average total interest bearing deposits were $709.4 million, flat compared to the first quarter of 2009. Over the past 12 months, the Corporation had significant increases in money market and savings accounts. Funding from wholesale sources, which includes wholesale deposits, other wholesale deposits and borrowed funds, at March 31, 2010 was $233.3 million, which was essentially flat compared with the $233.1 million at December 31, 2009. The increase in deposit activity over the past twelve months reduced the Corporation’s dependency on more expensive wholesale funding.

The Corporation successfully attracted new core deposit balances in savings, NOW and market rate accounts. As of March 31, 2010 these accounts totaled $491.7 million, an increase of 1.8% from $483.0 million at December 31, 2009.

Deposits and borrowings at March 31, 2010 and December 31, 2009 were as follows:


	March 31, 2010		December 31, 2009		Change
(dollars in millions)	March 31, 2010		December 31, 2009		Dollars			Percentage
Interest bearing demand	$	143.7	$	151.5	$	(7.8	)	(5.1	)%
Money market		244.9		229.8		15.1		6.6	%
Savings		103.2		101.7		1.5		1.5	%
Other wholesale deposits		47.7		52.2		(4.5	)	(8.6	)%
Wholesale time deposits		43.3		36.1		7.2		19.9	%
Time deposits		136.9		153.7		(16.8	)	(10.9	)%

Interest-bearing deposits		719.7		725.0		(5.3	)	(0.7	)%
Non-interest bearing deposits		194.7		212.9		(18.2	)	(8.5	)%

Total deposits		914.4		937.9		(23.5	)	(2.5	)%
FHLB advances		142.2		144.8		(2.6	)	(1.8	)%
Mortgage payable		2.1		2.1		—		—
Subordinated debt		22.5		22.5		—		—

Borrowed funds		166.8		169.4		(2.6	)	(1.5	)%

Total deposits and borrowings	$	1,081.2	$	1,107.3	$	(26.1	)	(2.4	)%

Quarterly average deposits	$	898.7	$	909.4	$	(10.7	)	(1.2	)%
Quarterly average borrowings and subordinated debt		168.5		170.6		(2.1	)	(1.2	)%

Quarterly average deposits and borrowings	$	1,067.2	$	1,080.0	$	(12.8	)	(1.2	)%

Residential Mortgage Segment Activity


(dollars in millions)	1 ^st Qtr 2010			4 ^th Qtr 2009			3 ^rd Qtr 2009			2 ^nd Qtr 2009			1 ^st Qtr 2009
Residential loans held in portfolio *	$	110.4		$	110.7		$	118.1		$	120.5		$	124.6
Mortgage originations		24.3			35.0			35.0			125.1			96.5
Mortgage loans sold:
Servicing retained		18.7			31.5			29.6			112.6			93.1
Servicing released		1.8			1.3			3.5			0.2			1.2

Total mortgage loans sold	$	20.5		$	32.8		$	33.1		$	112.8		$	94.3

Servicing retained %		91.2	%		96.0	%		89.4	%		99.8	%		98.7	%
Servicing released %		8.8	%		4.0	%		10.6	%		0.2	%		1.3	%
Loans serviced for others *	$	520.0		$	514.9		$	499.5		$	490.2		$	411.5
Mortgage servicing rights *		4.0			4.1			3.8			3.6			2.7
Gain on sale of loans		0.5			0.9			0.8			2.5			1.9
Loan servicing and late fees		0.4			0.4			0.4			0.3			0.3
Amortization of MSR’s		0.2			0.2			0.2			0.3			0.2
Impairment (recovery) of MSR’s		0.0			(0.2	)		0.0			(0.1	)		0.2
Basis point yield on loans sold (includes MSR income)		256 bp			262 bp			230 bp			223 bp			199 bp

*	period end balance

Capital

Consolidated shareholder’s equity of the Corporation was $106.3 million or 8.7% of total assets as of March 31, 2010, compared to $103.9 million or 8.4% of total assets as of December 31, 2009. The following table presents the Corporation’s and Bank’s capital ratios and the minimum capital requirements to be considered “Well Capitalized” by regulators as of March 31, 2010 and December 31, 2009:


(dollars in thousands)	Actual				Minimum to be Well Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio
March 31, 2010:
Total (Tier II) Capital to Risk Weighted Assets
Corporation	$	134,150	12.78	%	$	105,005	10.00	%
Bank		129,732	12.41	%		104,559	10.00	%
Tier I Capital to Risk Weighted Assets
Corporation		101,871	9.70	%		63,003	6.00	%
Bank		97,453	9.32	%		62,735	6.00	%
Tier I Leverage Ratio (Tier I Capital to Total Quarterly Average Assets)
Consolidated		101,871	8.63	%		58,990	5.00	%
Bank		97,453	8.28	%		58,829	5.00	%
Tangible Common Equity to Tangible Assets
Consolidated		—	7.82	%		—	—
Bank		—	6.91	%		—	—
December 31, 2009:
Total (Tier II) Capital to Risk Weighted Assets
Corporation	$	132,226	12.53	%	$	105,533	10.00	%
Bank		128,185	12.20	%		105,092	10.00	%
Tier I Capital to Risk Weighted Assets
Corporation		99,277	9.41	%		63,320	6.00	%
Bank		95,236	9.06	%		63,055	6.00	%
Tier I Leverage Ratio (Tier I Capital to Total Quarterly Average Assets)
Corporation		99,277	8.35	%		59,478	5.00	%
Bank		95,236	8.03	%		59,327	5.00	%
Tangible Common Equity to Tangible Assets
Consolidated		—	7.51	%		—	—
Bank		—	7.22	%		—	—

Both the Corporation and the Bank exceed the required capital levels to be considered “Well Capitalized” by their respective regulators at the end of each period presented. Neither the Corporation nor the Bank are under any agreement with regulatory authorities, nor is Corporation aware of any current recommendations by the regulatory authorities, which, if such recommendations were implemented, would have a material effect on liquidity, capital resources or operations of the Corporation. There is no official regulatory guideline for the tangible common equity to tangible asset ratio.

Liquidity

The Corporation’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, purchasing federal funds, selling loans in the secondary market, borrowing from the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank, and purchasing and issuing wholesale certificates of deposit as its secondary sources.

Unused availability is detailed on the following table:


(dollars in millions)	3/31/10		% Unused		12/31/09		% Unused		$ Change			% Change
Federal Home Loan Bank of Pittsburgh	$	297.4	67.7	%	$	302.7	67.6	%	$	(5.3	)	(1.8	)%
Federal Reserve Bank of Philadelphia		60.1	100.0	%		55.3	100.0	%		4.8		8.7	%
Fed Funds Lines (7 banks)		75.0	100.0	%		75.0	100.0	%		—		—

Total	$	432.5	75.3	%	$	433.0	74.9	%	$	(0.5	)	(0.1	)%

Quarterly, the ALCO reviews the Corporation’s liquidity needs and reports its findings to the Risk Management Committee of the Bank’s Board of Directors.

As of March 31, 2010 the Corporation held $7.9 million of FHLB-P stock which is included in other assets. As of December 31, 2008 the FHLB-P announced it had voluntarily suspended the payment of dividends and the repurchase of excess capital stock until further notice. The Corporation’s use of FHLB-P borrowings as a source of funds is effectively more expensive due to the suspension of FHLB-P dividends and the related capital stock redemption restrictions. It should be noted that the FHLB-P capital ratios remained above regulatory guidelines. The suspension of dividends and repurchase of excess capital stock will continue until further notice by the FHLB-P.

The Corporation has an agreement with Promotory Interfinancial Network, LLC to provide up to $75 million of Insured Network Deposits (“IND”) from broker dealers priced at the effective Federal Funds rate plus 20 basis points. The Corporation had $37.6 million in balances at March 31, 2010 under this program which are classified on the balance sheet as other wholesale deposits.

The Corporation has an agreement with IDC to provide up to $10 million of money market deposits at an agreed upon rate currently at 1.00%. The Corporation had $10.1 million in balances at March 31, 2010 under this program which are classified on the balance sheet as other wholesale deposits.

Wholesale funding, which is defined as wholesale deposits and borrowed funds of $233.3 million at March 31, 2010 increased $165 thousand or .07% from year end 2009 balances of $233.1 million. Wholesale funding as a percentage of total funding which is defined as total deposits, FHLB advances, Federal Funds borrowings and Federal Reserve borrowings was 22.1% at March 31, 2010 compared to 21.5% at December 31, 2009. The Corporation continually evaluates the capacity and cost of continuing to fund earning asset growth with wholesale deposits. The Corporation believes that it has sufficient capacity to fund expected 2010 earning asset growth with wholesale sources, along with deposit growth from the West Chester Regional Banking Center and strong deposit inflows from troubled institutions.

The Corporation’s investment portfolio decreased $34.4 million or 16.5% to $173.8 million at March 31, 2010 from $208.2 million at December 31, 2009. The decrease in the investment portfolio resulted from sales that reduced exposure to mortgage-backed securities by $39.0 million due to historically tight spreads between mortgage-backed securities and treasuries, the uncertainties surrounding the end of the Federal government’s mortgage buying program and to limit extension risk as the Corporation expects interest rates to rise. On March 31, 2010, the fair value of the Corporation’s investment securities portfolio was $173.8 million, $904 thousand or 0.5% above the amortized cost. The Corporation’s investment portfolio is 14.2% of total assets at March 31, 2010 compared to 16.8% of total assets at December 31, 2009. The Corporation’s policy is to keep the investment portfolio at a minimum of 10% of total assets. The investment portfolio provides the Corporation with the opportunity to utilize the securities to borrow additional funds through the FHLB-P, Federal Reserve or through other repurchase agreements.

Off Balance Sheet Risk

The Corporation 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.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at March 31, 2010 were $331.4 million compared to $334.0 million at December 31, 2009.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation’s obligation under standby letters of credit at March 31, 2010 amounted to $20.2 million compared to $18.4 million at December 31, 2009.

Estimated fair values of the Corporation’s off-balance sheet instruments are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and the estimated fair value of off-balance sheet instruments.

Contractual Cash Obligations of the Corporation as of March 31, 2010:


(In millions)	Total		Within 1 Year		2-3 Years		4-5 Years		After 5 Years
Deposits without a stated maturity	$	734.1	$	734.1	$	—	$	—	$	—
Wholesale and time deposits		180.3		134.0		45.1		1.1		0.1
Operating leases		20.6		1.4		2.5		2.0		14.7
Subordinated debt		22.5		—		—		—		22.5
Borrowings		142.2		45.0		69.7		17.5		10.0
Mortgage payable		2.0		0.1		0.1		0.1		1.7
Purchase obligations		4.6		1.7		1.9		1.0		—
Non-discretionary pension contributions		2.0		0.1		0.3		0.3		1.3

Total	$	1,108.3	$	916.4	$	119.6	$	22.0	$	50.3

Other Information

Regulatory Matters and Pending Legislation

The federal government is considering a variety of other reforms related to banking and the financial industry including, without limitation, efforts to deal with home foreclosures, financial regulatory reforms, and reform of consumer regulatory guidelines. There can be no assurance as to whether or when any of the proposed reforms will be enacted into legislation and, if adopted, what the final provisions of such legislation will be. New legislation and regulatory changes could impose potentially significant additional costs on us, require us to change certain of our business practices, adversely affect our ability to pursue business opportunities we might otherwise consider engaging in, cause business disruptions and/or have other impacts that are as-of-yet unknown to the Corporation and its subsidiaries.

Effects of Inflation

Inflation has some impact on the Corporation’s operating costs. Unlike many industrial companies, however, substantially all of the Corporation’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on the Corporation’s performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as prices of goods and services.

Effect of Government Monetary Policies

The earnings of the Corporation are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect rates charged on loans or paid for deposits.

The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

Special Cautionary Notice Regarding Forward Looking Statements

Certain of the statements contained in this Report and the documents incorporated by reference herein, may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements with respect to the Corporation’s financial goals, performance, revenues, growth, profits, operating expenses, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, impairment of goodwill, the effect of changes in accounting standards, and market and pricing trends. The words “may”, “would”, “should”, “could”, “will”, “likely”, “expect,” “anticipate,” “intend”, “estimate”, “target”, “potentially”, “probably”, “outlook”, “predict”, “contemplate”, “continue”, “plan”, “forecast”, “project” and “believe” or other similar words and phrases may identify forward-looking statements. Such statements are only predictions, and the Corporation’s actual results may differ materially from the results anticipated by the forward-looking statement due to a variety of factors, including without limitation:

•

the effect of future economic conditions on the Corporation and its customers, including economic factors which affect consumer confidence in the securities markets, wealth creation, investment and savings patterns, and the Corporation’s interest rate risk exposure and credit risk;

•

changes in the securities markets with respect to the market values of financial assets and the stability of particular securities markets;

•

governmental monetary and fiscal policies, as well as legislation and regulatory changes;

•

results of examinations by the Federal Reserve Board, including the possibility that the Federal Reserve Board may, among other things, require us to increase our allowance for loan losses or to write-down assets;

•

changes in accounting requirements or interpretations;

•

changes in existing statutes, regulatory guidance, legislation or judicial decisions that adversely affect our business, including changes in income and non-income taxes;

•

the risks of changes in interest rates on the level and composition of deposits, loan demand, and the value of loan collateral and securities, as well as interest rate risk;

•

the effects of competition from other commercial banks, thrifts, mortgage companies, finance companies, credit unions, securities brokerage firms, insurance companies, money-market and mutual funds and other institutions operating in the Corporation’s trade market area and elsewhere including institutions operating locally, regionally, nationally and internationally together with such competitors offering banking products and services by mail, telephone, computer and the internet;

•

any extraordinary event (such as the September 11, 2001 events, the war on terrorism and the U.S. Government’s response to those events including the war in Iraq);

•

the Corporation’s success in continuing to generate new business in its existing markets, as well as its success in identifying and penetrating targeted markets and generating a profit in those markets in a reasonable time;

•

the Corporation’s ability to continue to generate investment results for customers and the ability to continue to develop investment products in a manner that meets customers’ needs;

•

changes in consumer and business spending, borrowing and savings habits and demand for financial services in our market area;

•

the Corporation’s timely development of competitive new products and services in a changing environment and the acceptance of such products and services by customers;

•

the Corporation’s ability to originate and sell residential mortgage loans;

•

the accuracy of assumptions underlying the establishment of reserves for loan and lease losses and estimates in the value of collateral, and various financial assets and liabilities;

•

the Corporation’s ability to retain key members of senior management team;

•

the ability of key third-party providers to perform their obligations to the Corporation and the Bank;

•

technological changes being more difficult or expensive than anticipated; and

•

the Corporation’s success in managing the risks involved in the foregoing.

All written or oral forward-looking statements attributed to the Corporation are expressly qualified in their entirety by use of the foregoing cautionary statements. All forward-looking statements included in this Report are based upon management’s beliefs and assumptions as of the date of this Report. The Corporation assumes no obligation to update any forward-looking statement. In light of these risks, uncertainties and assumptions, the forward-looking statements discussed in this Report or the incorporated documents might not occur, and you should not put undue reliance on any forward-looking statements.

ITEM 3 . Quantitative and Qualitative Disclosures About Market Risks

There has been no material change to the Corporation’s and Bank’s exposure to market risk since December 31, 2009. For further discussion of quantitative and qualitative disclosures about market risks, please refer to the Corporation’s 2009 Annual Report and Form 10-K of which it forms a part.

ITEM 4 . Controls and Procedures

As of the end of the period covered by the report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Frederick C. Peters II, and Principal Financial Officer, J. Duncan Smith, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s periodic SEC filings.

There have not been any changes in the Corporation’s internal controls over financial reporting during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II OTHER INFORMATION.

ITEM 1 . Legal Proceedings.

None.

ITEM 1A . Risk Factors.

There have been no material changes to the risk factors included in the Corporation’s 2009 Annual Report on Form 10-K.

ITEM 2 . Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase

The following tables present the shares repurchased by the Corporation during the first quarter of 2010 ⁽¹⁾ :


Period	Total Number of Shares Purchased ⁽²⁾	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
January 1, 2010 – January 31, 2010	—	$	—	—	195,705
February 1, 2010 – February 28, 2010	—	$	—	—	195,705
March 1, 2010 – March 31, 2010	—	$	—	—	195,705

Total	—	$	—	—	195,705

(1)

On February 24, 2006, the Board of Directors of the Corporation adopted a stock repurchase program (the “2006 Program”) under which the Corporation may repurchase up to 450,000 shares of the Corporation’s common stock, not to exceed $10 million. The 2006 Program was publicly announced in a Press Release dated February 24, 2006. There is no expiration date on the 2006 Program and the Corporation has no plans for an early termination of the 2006 Program. All shares purchased through the 2006 Program were accomplished in open market transactions.

Unregistered Sales of Equity Securities

On April 20, 2009, in accordance with and reliance on the exemption provided by Section 4(2) of the Securities Act, the Corporation sold 150,061 shares of its common stock, par value $1.00 per share (“Shares”), in a private placement of securities to a purchaser which qualifies as an accredited investor under Rule 501(a) of Regulation D under the Securities Act. The purchase price per Share was equal to the average closing price of shares of the Corporation’s common stock on the NASDAQ Global Market for the thirty trading days ending on April 16, 2009, which equaled $16.66 per Share. The aggregate purchase price for the Shares sold was $2,500,000. The Corporation did not pay any underwriting discounts or commissions and did not pay any brokerage fees in connection with the sale of the Shares. The Shares sold constitute 1.7% of the number of outstanding shares of the Corporation’s common stock, as determined immediately after the closing of the sale. Proceeds were used to satisfy working capital requirements and general corporate purposes.

Use of Proceeds from Registered Securities

The Corporation had 175,094 shares registered within the DRIP eligible for the 3% discount on reinvested dividends as of May 7, 2010.

The Corporation’s DRIP, since inception through April 26, 2010, has issued 195,062 shares, which raised $3.0 million (net of expenses) in capital of which all has been used to increase regulatory capital and for general corporate purposes.

A reasonable estimate of the Corporation’s expenses incurred with respect to the Shelf Registration Statement and the DRIP from the effective date of the Shelf Registration Statement through March 31, 2010 consists of direct payments to the parties in the amounts indicated below.


	(dollars in thousands)
Expenses:
Legal Fees	$	95
Accounting Fees		20

Total	$	115

ITEM 3 . Defaults Upon Senior Securities

None

ITEM 4 . Reserved.

ITEM 5 . Other Information

None

ITEM 6 . Exhibits


Exhibit No.		Description and References
2.1		Membership Interest Purchase Agreement, dated as of June 9, 2008, by and among Bryn Mawr Bank Corporation, Marigot Daze LLC, JNJ Holdings LLC, Lau Associates LLC, Lau Professional Services LLC and Judith W. Lau, incorporated by reference to Exhibit 2.1 to the Corporation’s 10-Q filed with SEC on November 10, 2008

2.2		Agreement and Plan of Merger, dated as of November 3, 2009, by and between Bryn Mawr Bank Corporation and First Keystone Financial, Inc., incorporated by reference to Exhibit 2.1 to the Corporation’s 8-K filed with SEC on November 4, 2009

3.1		Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

3.2		Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

4.1		Shareholders Rights Plan, dated November 18, 2003, incorporated by reference to Exhibit 4 of the Corporation’s Form 8-A12G filed with the SEC on November 25, 2003

4.2		Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

4.3		Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007

4.4		Subordinated Note Purchase Agreement dated July 30, 2008, incorporated by reference to Exhibit 4.4 to the Corporation’s 10-Q filed with SEC on November 10, 2008

4.5		Subordinated Note Purchase Agreement dated August 28, 2008, incorporated by reference to Exhibit 4.5 of the Corporation’s 10-Q filed with the SEC on November 10, 2008

4.6		Subordinated Note Purchase Agreement dated April 20, 2009, incorporated by reference to Exhibit 4.6 of the Corporation’s 10-Q filed with the SEC on August 7, 2009

10.1*		Amended and Restated Supplemental Employee Retirement Plan of the Bryn Mawr Bank Corporation, effective January 1, 1999, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 10-K filed with the SEC on March 13, 2008

10.2*		Executive Change-of-Control Severance Agreement, dated October 19, 1995, between the Bryn Mawr Trust Company and Robert J. Ricciardi, incorporated by reference to Exhibit 10.O of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

10.3**		The Bryn Mawr Bank Corporation 1998 Stock Option Plan, incorporated by reference to Exhibit B of the Corporation’s Proxy Statement dated March 6, 1998 filed with the SEC on March 5, 1998

10.4*		Amended and Restated Deferred Bonus Plan for Executives of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.4 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009

10.5*		Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.5 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009

10.6*		Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Trust Company, effective January 1, 2008 incorporated by reference to Exhibit 10.6 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009

10.7*		Employment Agreement, dated January 11, 2001, between the Bryn Mawr Bank Corporation and Frederick C. Peters II, incorporated by reference to Exhibit 10.N of the Corporation’s Form 10-K filed with the SEC on March 29, 2001

10.8*		Executive Change-of-Control Severance Agreement, dated January 22, 2001, between the Bryn Mawr Trust Company and Frederick C. Peters II, incorporated by reference to Exhibit 10.K of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

10.9**		The Bryn Mawr Bank Corporation 2001 Stock Option Plan, incorporated by reference to Appendix B of the Corporation’s Proxy Statement dated March 8, 2001 filed with the SEC on March 6, 2001

10.10**		Bryn Mawr Bank Corporation 2004 Stock Option Plan, incorporated by reference to Appendix A of the Corporation’s Proxy Statement dated March 10, 2004 filed with the SEC on March 8, 2004

10.11*		Executive Change-of-Control Amended and Restated Severance Agreement, dated May 21, 2004, between the Bryn Mawr Trust Company and Alison E. Gers, incorporated by reference to Exhibit 10.M of the Corporation’s Form 10-K filed with the SEC on March 15, 2007


Exhibit No.		Description and References
10.12*		Executive Change-of-Control Amended and Restated Severance Agreement, dated May 21, 2004, between the Bryn Mawr Trust Company and Joseph G. Keefer, incorporated by reference to Exhibit 10.N of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

10.13*		Executive Severance and Change of Control Agreement, dated April 4, 2005, between the Bryn Mawr Trust Company and J. Duncan Smith, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K filed with the SEC on April 6, 2005

10.14**		Form of Key Employee Non-Qualified Stock Option Agreement, incorporated by reference to Exhibit 10.3 to the Corporation’s Form 10-Q filed with the SEC on May 10, 2005

10.15**		Form of Non-Qualified Stock Option Agreement for Non-Employee Directors, incorporated by reference to Exhibit 10.2 of the Corporation’s Form 10-Q filed with the SEC on May 10, 2005

10.16*		Letter Employment Agreement, dated January 3, 2007, from the Bryn Mawr Trust Company to Matthew G. Waschull, incorporated by reference to Exhibit 10.2 of the Corporation’s Form 10-Q filed with the SEC on August 7, 2007

10.17*		Executive Change-of-Control Amended and Restated Severance Agreement, dated March 15, 2007, between the Bryn Mawr Trust Company and Matthew G. Waschull, incorporated by reference to Exhibit 10.P of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

10.18*		Non-Disclosure and Nonsolicitation Agreement, dated March 9, 2007, between the Bryn Mawr Trust Company and Matthew G. Waschull, incorporated by reference to Exhibit 10.18 to the Corporation’s 10-K filed with SEC on March 13, 2008

10.19**		2007 Long Term Incentive Plan, effective April 25, 2007, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 10-Q filed with the SEC May 10, 2007

10.20**		Bryn Mawr Bank Corporation Supplemental Employee Retirement Plan for Select Executives, executed December 8, 2008, incorporated by reference to Exhibit 10.20 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009

10.21*		Restricted Covenant Agreement, dated as of November 2, 2009, between the Bryn Mawr Trust Company and Francis J. Leto, incorporated by reference to Exhibit 10.2 of the Corporation’s 8-K filed with the SEC on November 6, 2009

10.22*		Executive Change-of-Control Amended and Restated Severance Agreement, dated November 2, 2009, between the Bryn Mawr Trust Company and Francis J. Leto, incorporated by reference to Exhibit 10.1 of the Corporation’s 8-K filed with the SEC on November 6, 2009

10.23		Bryn Mawr Bank Corporation Dividend Reinvestment and Stock Purchase Plan with Request for Waiver Program, effective July 20, 2009, incorporated by reference to the prospectus supplement filed with the SEC on July 20, 2009 pursuant to Rule 424(b)(2) of the Securities Act

10.24**		Bryn Mawr Bank Corporation 2010 Long-Term Incentive Plan, effective April 28, 2010, filed herewith

31.1		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

31.2		Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith

*	Management contract or compensatory plan arrangement.

**	Shareholder approved compensatory plan pursuant to which the Registrant’s Common Stock may be issued to employees of the Corporation.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Bryn Mawr Bank Corporation

Date: May 10, 2010	By:	/s/ F REDERICK C. P ETERS II
		Frederick C. Peters II
		President & Chief Executive Officer

Date: May 10, 2010	By:	/s/ J. D UNCAN S MITH
		J. Duncan Smith
		Treasurer & Principal Financial Officer

Form 10-Q

Index to Exhibits Furnished Herewith



Exhibit 10.24**		Bryn Mawr Bank Corporation 2010 Long-Term Incentive Plan, effective April 28, 2010

Exhibit 31.1		Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)

Exhibit 31.2		Certification of the Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a)

Exhibit 32.1		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of the Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**	Shareholder approved compensatory plan pursuant to which the Registrant’s Common Stock may be issued to employees of the Corporation.

Exhibit 10.24

APPENDIX A

BRYN MAWR BANK CORPORATION 2010 LONG-TERM INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT OF THE PLAN

1.1 PLAN NAME. As of the Effective Date, the name of this plan shall be the Bryn Mawr Bank Corporation (“Corporation”) “2010 Long-Term Incentive Plan” (hereinafter called the “Plan”).

1.2 EFFECTIVE DATE. This Plan shall become effective on April 28, 2010 (the “Effective Date”), subject to its approval by the holders of a majority of the voting power of the shares deemed present and entitled to vote at the Corporation’s Annual Meeting of Shareholders to be held on that date.

1.3 PURPOSE. The purpose of the Plan is to promote the success and enhance the value of the Corporation by providing long-term incentives to directors and employees of the Corporation and its subsidiaries linking their personal interest to that of the Corporation’s shareholders. The Plan is further intended to provide flexibility to the Corporation by increasing its ability to motivate, attract and retain the services of employees and directors upon whose judgment, interest and special effort the successful conduct of the Corporation’s operations are largely dependent.

ARTICLE II

DEFINITIONS

2.1 AWARD. An “Award” is a grant of Stock Options, Stock Appreciation Rights, Dividend Equivalents, Performance Awards, Restricted Stock or Restricted Stock Units under the Plan.

2.2 BOARD. The “Board” is the Board of Directors of the Corporation.

2.3 CAUSE. “Cause” means, (i) the willful and continued failure to substantially perform the Participant’s duties (other than failure resulting from incapacity due to physical or mental illness) after receipt of a written demand for such performance specifically identifying such failure; (ii) the willful engaging by the Participant in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Corporation or its successor; (iii) breach of fiduciary duty, or (iv) breach of any confidentiality, non-compete, non-solicitation agreement, non-disparagement or any other stipulated agreement.

2.4 CHANGE IN CONTROL. A “Change in Control” with respect to any Award has the meaning assigned to the term in the change in control agreement, if any, between the Participant and the Corporation, provided, however, that if there is no such change in control agreement, it shall mean: (a) the acquisition by any Person (as the term “Person” is used for the purposes of Section 13 (d) or 15 (d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of direct or indirect beneficial ownership (within the meaning of Rule 13D promulgated under the Exchange Act) of fifty percent (50%) of the combined voting power of the then outstanding securities of the Corporation entitled to vote in the election of directors (the “Voting Securities”); or (b) during any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Corporation’s shareholders, was approved by a vote of at least

two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (c) the consummation of (i) the sale or disposition of all or substantially all of the Corporations’ assets, or (ii) a merger or consolidation of the Corporation with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the Voting Securities of the Corporation (or such surviving entity) outstanding immediately after such merger or consolidation or (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation.

However, in no event shall a Change in Control be deemed to have occurred with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change in Control transaction.

2.5 CODE. The “Code” is the Internal Revenue Code of 1986, as amended, and rules and regulations thereunder, as now in force or as hereafter amended.

2.6 COMMITTEE. The “Committee” is the committee described in Section 8.1 hereof.

2.7 COMMON STOCK. “Common Stock” is the common stock, $1.00 par value per share (as such par value may be adjusted from time to time) of the Corporation.

2.8 CORPORATION. The “Corporation” is Bryn Mawr Bank Corporation, a Pennsylvania corporation, and any successor thereof.

2.9 DATE OF GRANT. The “Date of Grant” of an Award is the date designated in the resolution by the Committee as the date of an Award, which shall not be earlier than the date of the resolution and action thereon by the Committee. In the absence of a designated date or a fixed method of computing such date being specifically set forth in the Committee’s resolution, then the Date of Grant shall be the date of the Committee’s resolution or action. In no event shall the Date of Grant of any Award that is authorized by the Committee on or after the Effective Date be earlier than the Effective Date.

2.10 DIRECTOR. A member of the Board or the board of directors of a Subsidiary.

2.11 DIVIDEND EQUIVALENT. A “Dividend Equivalent” is a right to receive an amount equal to the regular cash dividend paid on one share of Common Stock. Dividend Equivalents may only be granted in connection with the grant of an Award that is based on but does not consist of shares of Common Stock (whether or not restricted). The number of Dividend Equivalents so granted shall not exceed the number of related stock-based rights. (For example, the number of Dividend Equivalents granted in connection with a grant of Stock Appreciation Rights may equal the number of such Stock Appreciation Rights, even though the number of shares actually paid upon exercise of those Stock Appreciation Rights necessarily will be less than the number of Stock Appreciation Rights and Dividend Equivalents granted.) Dividend Equivalents shall be subject to such terms and conditions as may be established by the Committee, but they shall expire no later than the date on which their related stock-based rights are either exercised, expire or are forfeited (whichever occurs first). The amounts payable due to a grant of Dividend Equivalents may be paid in cash, either currently or deferred, or converted into shares of Common Stock, as determined by the Committee.

2.12 EXCHANGE ACT. The “Exchange Act” is the Securities Exchange Act of 1934, as amended, and rules and regulations thereunder, as now in force or as hereafter amended.

2.13 FAIR MARKET VALUE. “Fair Market Value” of a share of Common Stock on any date is the last sale price as reported by the NASDAQ Global Market on the preceding day, but if no sales are reported on that day, for the last preceding day on which a sale was reported.

2.14 GOOD REASON. “Good Reason” means any material diminution of the Participant’s position, authority, duties or responsibilities (including the assignment of duties materially inconsistent with the Participant’s position or a material increase in the time Participant is required by the Corporation or its successor to travel), any reduction in salary or in the Participant’s aggregate bonus and incentive opportunities, any material reduction in the aggregate value of the Participant’s employee benefits (including retirement, welfare and fringe benefits), or relocation to a principal work site that is more than 40 miles further from the Participant’s primary residence than the Participant’s principal work site immediately prior to the Change in Control.

2.15 INCENTIVE STOCK OPTIONS. An “Incentive Stock Option” means a Stock Option granted under the Plan which satisfies the requirements of Section 422 of the Code or such successor provision as may be in effect from time to time.

2.16 NON-QUALIFIED OPTIONS. A “Non-Qualified Option” is a Stock Option under the Plan which is not an Incentive Stock Option intended to satisfy the requirements of Section 422 of the Code or such successor provision as may be in effect from time to time.

2.17 PARTICIPANT. A “Participant” is a person who has been designated as such by the Committee and granted an Award under this Plan pursuant to Article III hereof.

2.18 PERFORMANCE AWARD. A “Performance Award” is a right to either a number of shares of Common Stock (“Performance Shares”) or a cash amount (“Performance Units”) determined (in either case) in accordance with Article IV of this Plan based on the extent to which the applicable Performance Goals are achieved. A Performance Share shall be of no value to a Participant unless and until earned in accordance with Article IV hereof.

2.19 PERFORMANCE GOALS. “Performance Goals” are the performance conditions, if any, established pursuant to Section 4.1 hereof by the Committee in connection with an Award.

2.20 PERFORMANCE PERIOD. The “Performance Period” with respect to a Performance Award is a period of not less than one calendar year or one fiscal year of the Corporation, beginning not earlier than the year in which such Performance Award is granted, which may be referred to herein and by the Committee by use of the calendar or fiscal year in which a particular Performance Period commences.

2.21 PLAN YEAR. The “Plan Year” shall be a fiscal year of the Corporation falling within the term of this Plan.

2.22 RESTRICTED PERIOD. The “Restricted Period” with respect to Restricted Stock is the period of time during which certain restrictions established by the Committee shall apply to the Award, as provided in Section 6.1 of this Plan.

2.23 RESTRICTED STOCK. “Restricted Stock” is Common Stock granted subject to terms and conditions, including a risk of forfeiture, established by the Committee pursuant to Article VI of this Plan.

2.24 RESTRICTED STOCK UNIT. A “Restricted Stock Unit” is a right to receive one share of Common Stock at a future date that has been granted subject to terms and conditions, including a risk of forfeiture, established by the Committee pursuant to Article VI of this Plan.

2.25 STOCK APPRECIATION RIGHT. A “Stock Appreciation Right” is a right to receive, upon exercise of that right, an amount, which may be paid in cash, shares of Common Stock or a combination thereof in the discretion of the Committee, equal to the difference between the Fair Market Value of one share of Common Stock as of the date of exercise and the exercise price for that right as determined by the Committee on the Date of Grant. Stock Appreciation Rights may be granted in tandem with Stock Options or other Awards or may be freestanding.

2.26 STOCK OPTION. A “Stock Option” is a right to purchase from the Corporation at any time not more than ten years following the Date of Grant, one share of Common Stock for an exercise price not less than the Fair Market Value of a share of Common Stock on the Date of Grant, subject to such terms and conditions established pursuant to Article V hereof. Stock Options may be either Non-Qualified Options or Incentive Stock Options.

2.27 SUBSIDIARY. The terms “Subsidiary” or “Subsidiary Corporation” mean any corporation, partnership, joint venture or other entity during any period in which at least fifty percent (50%) voting or profit interest is owned, directly or indirectly, by the Corporation, including all business entities that, at the time in question, are subsidiaries of the Corporation within the meaning of Section 424(f) of the Code.

ARTICLE III

GRANTING OF AWARDS TO PARTICIPANTS

3.1 ELIGIBLE PARTICIPANTS. Awards may be granted by the Committee to any employee of the Corporation or a Subsidiary, including any employee who is also a director of the Corporation or a Subsidiary. Awards other than grants of Incentive Stock Options may also be granted to a director of the Corporation who is not an employee of the Corporation or a Subsidiary. References in this Plan to “employment” and similar terms (except “employee”) shall include the providing of services in the capacity of a director. A person who has been engaged by the Corporation for employment shall be eligible for Awards other than Incentive Stock Options, provided such person actually reports for and commences such employment within 90 days after the Date of Grant. Incentive Stock Options may be granted only to individuals who are employees on the Date of Grant.

3.2 DESIGNATION OF PARTICIPANTS. At any time and from time to time during the Plan Year, the Committee may designate the employees and directors of the Corporation and its Subsidiaries eligible for Awards.

3.3 ALLOCATION OF AWARDS. Contemporaneously with the designation of a Participant pursuant to Section 3.2 hereof, the Committee shall determine the size, type and Date of Grant for each Award, taking into consideration such factors as it deems relevant, which may include the following: (a) the total number of shares of Common Stock available for Awards under the Plan; (b) the work assignment or the position of the Participant and its sensitivity and/or impact in relationship to the

profitability and growth of the Corporation and its Subsidiaries; and (c) the Participant’s performance in reference to such factors.

The Committee may grant a Participant only one type of Award or it may grant any combination of Awards in whatever relationship one to the other, if any, as the Committee in its discretion so determines.

3.4 NOTIFICATION TO PARTICIPANTS AND DELIVERY OF DOCUMENTS. As soon as practicable after such determinations have been made, each Participant shall be notified of (a) his/her designation as a Participant, (b) the Date of Grant, (c) the number and type of Awards granted to the Participant, (d) in the case of Performance Awards, the Performance Period and Performance Goals, and (e) in the case of Restricted Stock or Restricted Stock Units, the Restriction Period. The Participant shall thereafter be supplied with written evidence of any such Awards.

3.5 AWARD AGREEMENTS. Each Award shall be evidenced by an agreement (an “Award Agreement”), which will be provided to the Participant. Each Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

ARTICLE IV

PERFORMANCE AWARDS

4.1 ESTABLISHMENT OF PERFORMANCE GOALS. Performance Goals applicable to a Performance Award shall be established by the Committee in its sole discretion on or before the Date of Grant and not more than a reasonable period of time after the beginning of the relevant Performance Period. Such Performance Goals may include or be based upon any of the following criteria: pretax operating contribution; economic value added; consolidated profits of the Corporation expressed as a percent improvement, from year to year, or as a percentage of total revenue; earnings per share; return on capital; return on investment; return on shareholders’ equity; internal rate of return; efficiency ratio; revenue; working capital; pre-tax segment profit; net profit; net interest margin; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; return on assets; growth of loans and/or deposits; market share; business expansions; cash flow; stock price or performance; and total shareholder return. Performance Goals may be absolute in their terms or be measured against or in relationship to other companies comparably, similarly or otherwise situated. The Committee, in its sole discretion, may modify the Performance Goals if it determines that circumstances have changed and modification is required to reflect the original intent of the Performance Goals; provided, however, that no such change or modification may be made to the extent it increases the amount of compensation payable to any Participant who is a “covered employee” within the meaning of Code Section 162(m). The Committee may in its sole discretion classify Participants into as many groups as it determines, and as to any Participant relate his/her Performance Goals partially, or entirely, to the measured performance, either absolutely or relatively, of an identified Subsidiary, operating company or test strategy or new venture of the Corporation.

4.2 LEVELS OF PERFORMANCE REQUIRED TO EARN PERFORMANCE AWARDS. At or about the same time that Performance Goals are established for a specific period, the Committee shall in its absolute discretion establish the percentage of the Performance Awards granted for such Performance Period which shall be earned by the Participant for various levels of performance measured in relation to achievement of Performance Goals for such Performance Period.

4.3 OTHER RESTRICTIONS. The Committee shall determine the terms and conditions applicable to any Performance Award, which may include restrictions on the delivery of Common

Stock payable in connection with the Performance Award and restrictions that could result in the future forfeiture of all or part of any Common Stock earned. The Committee may provide that shares of Common Stock issued in connection with a Performance Award be held in escrow and/or legended.

4.4 NOTIFICATION TO PARTICIPANTS. Promptly after the Committee has established or modified the Performance Goals with respect to a Performance Award, the Participant shall be provided with written notice of the Performance Goals so established or modified. Performance Awards shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time.

4.5 MEASUREMENT OF PERFORMANCE AGAINST PERFORMANCE GOALS. The Committee shall, as soon as practicable after the close of a Performance Period, determine: (a) the extent to which the Performance Goals for such Performance Period have been achieved; and (b) the percentage of the Performance Awards earned as a result.

These determinations shall be absolute and final as to the facts and conclusions therein made and be binding on all parties. Promptly after the Committee has made the foregoing determination, each Participant who has earned Performance Awards shall be notified, in writing thereof. For all purposes of this Plan, notice shall be deemed to have been given the date action is taken by the Committee making the determination. Participants may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of all or any portion of their Performance Awards during the Performance Period, except that Performance Awards may be transferable by assignment by a Participant to the extent provided in the applicable Performance Award agreement.

4.6 TREATMENT OF PERFORMANCE AWARDS EARNED. Upon the Committee’s determination that a percentage of any Performance Awards has been earned for a Performance Period, Participants to whom such earned Performance Awards have been granted and who have been (or were) in the employ of the Corporation or a Subsidiary thereof continuously from the Date of Grant, subject to the exceptions set forth at Section 4.9 and Section 4.10 hereof, shall be entitled, subject to the other conditions of this Plan, to payment in accordance with the terms and conditions of their Performance Awards. Such terms and conditions may permit or require that any applicable tax withholding be deducted from the amount payable. Performance Awards shall under no circumstances become earned or have any value whatsoever for any Participant who is not in the employ of the Corporation or its Subsidiaries continuously during the entire Performance Period for which such Performance Award was granted, except as provided at Section 4.9 or Section 4.10 hereof.

4.7 DISTRIBUTION. Distributions payable pursuant to Section 4.6 above shall be made as soon as practicable after the Committee determines the Performance Awards have been earned unless the provisions of Section 4.8 hereof are applicable to a Participant.

4.8 DEFERRAL OF RECEIPT OF PERFORMANCE AWARD DISTRIBUTIONS. With the consent of the Committee, a Participant who has been granted a Performance Award may by compliance with the then applicable procedures under the Plan irrevocably elect in writing to defer receipt of all or any part of any distribution associated with that Performance Award. The terms of any deferral and the election to defer under this Plan must comply with Section 409A of the Code. The terms and conditions of any such deferral, including but not limited to, the period of time for, and form of, election; the manner and method of payout; the plan and form in which the deferred amount shall be held; the interest equivalent or other payment that shall accrue pending its payout; and the use and

form of Dividend Equivalents in respect of stock-based units resulting from such deferral, shall be as determined by the Committee. The Committee may, at any time and from time to time, but prospectively only except as hereinafter provided, amend, modify, change, suspend or cancel any and all of the rights, procedures, mechanics and timing parameters relating to such deferrals. In addition, the Committee may, in its sole discretion, accelerate the payout of such deferrals (and any earnings thereon), or any portion thereof, either in a lump sum or in a series of payments, but under the following conditions only: (a) the Federal tax statutes, regulations or interpretations are amended, modified, or otherwise changed or affected in such a manner as to adversely alter or modify the tax effect of such deferrals; or (b) the Participant suffers or incurs an event that would qualify for a “withdrawal” of contributions that have not been accumulated for two years without adverse consequences on the tax status of a qualified profit-sharing or stock bonus plan under the Federal tax laws applicable from time to time to such types of plans.

4.9 NON-DISQUALIFYING TERMINATION OF EMPLOYMENT. Except for Section 4.10 hereof, the only exceptions to the requirement of continuous employment during a Performance Period for Performance Award distribution are termination of a Participant’s employment by reason of death (in which event the Performance Award may be transferable by will or the laws of descent and distribution only to such Participant’s beneficiary designated to receive the Performance Award or to the Participant’s applicable legal representatives, heirs or legatees), total and permanent disability, with the consent of the Committee, normal or late retirement or early retirement, with the consent of the Committee, or transfer of an executive in a spin-off, with the consent of the Committee, occurring during the Performance Period applicable to the subject Performance Award. In such instance a distribution of the Performance Award shall be made, upon the end of the Performance Period (subject to the Committees determination of the percentage of the Performance Award earned), and 100% of the total Performance Award that would have been earned during the Performance Period, if the Participant had met the requirement of continuous employment during a Performance Period, shall be earned and paid out; provided, however, in a spin-off situation the Committee may set additional conditions, such as, without limiting the generality of the foregoing, continuous employment with the spin-off entity.

4.10 CHANGE IN CONTROL. In the event of a Change in Control, a pro rata portion of all outstanding Performance Awards under the Plan shall be payable ten days after the Change in Control. The amount payable shall be determined by assuming that 100% of each Performance Award was earned at target levels, and by multiplying the earned amount by a fraction, the numerator of which shall be the number of months that have elapsed in the applicable Performance Period prior to the Change in Control and the denominator of which shall be the total number of months in the Performance Period.

ARTICLE V

STOCK OPTIONS AND

STOCK APPRECIATION RIGHTS

5.1 NON-QUALIFIED OPTION. Non-Qualified Options granted under the Plan are Stock Options that are not intended to be Incentive Stock Options under the provisions of Section 422 of the Code. Non-Qualified Options shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time, which agreements shall specify the number of shares to which they pertain and the purchase price of such shares.

5.2 INCENTIVE STOCK OPTION. Incentive Stock Options granted under the Plan are Stock Options that are intended to be “incentive stock options” under Section 422 of the Code, and the Plan shall be administered, except with respect to the right to exercise options after termination of employment, to qualify Incentive Stock Options issued hereunder as incentive stock options under Section 422 of the Code. An Incentive Stock Option shall not be granted to an employee who owns, or is deemed under Section 424(d) of the Code to own, stock of the Corporation (or of any parent or Subsidiary of the Corporation) possessing more than 10% of the total combined voting power of all classes of stock therein. The aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all incentive stock option plans of the Corporation or any parent or Subsidiary of the Corporation) shall not exceed $100,000. Incentive Stock Options shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time, which agreements shall specify the number of shares to which they pertain and the purchase price of such shares.

5.3 OPTION TERMS. Stock Options granted under this Plan shall be subject to the following terms and conditions:

(a) Option Period . Each Stock Option shall expire and all rights to purchase shares thereunder shall cease not more than ten years after its Date of Grant or on such date prior thereto as may be fixed by the Committee, or on such other date as is provided by this Plan in the event of termination of employment, death or reorganization. No Stock Option shall permit the purchase of any shares thereunder during the first year after its Date of Grant, except as provided in Section 5.5 hereof or as otherwise determined by the Committee.

(b) Exercise Price . The purchase price per share payable upon exercise of a Stock Option shall not be less than the Fair Market Value of a share of Common Stock on the Date of Grant of the Stock Option.

(c) Time and Conditions of Exercise . The Committee shall determine the time or times at which an Option may be vested and exercised in whole or in part. The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Committee may waive any exercise provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable at an earlier date.

(d) Transferability and Termination of Options . During the lifetime of an individual to whom a Stock Option is granted, the Stock Option may be exercised only by such individual and only while such individual is an employee of the Corporation or a Subsidiary and only if the Participant has been continuously so employed by any one or combination thereof since the Date of Grant of the Stock Option, provided, however, that if the employment of such Participant by the Corporation or a Subsidiary Corporation terminates, the Stock Option may additionally be exercised as follows, or in any other manner provided by the Committee, but in no event later than ten years after the Date of Grant of the Stock Option:

(i) if a Participant’s termination of employment occurs by reason of normal or late retirement under any retirement plan of the Corporation or its Subsidiaries, such Participant’s Stock Options may be exercised within five years after the date of such termination of employment. If a Participant’s termination of employment occurs by reason of early

retirement under any retirement plan of the Corporation or its Subsidiaries, or by reason of the transfer of a Participant in a spin-off, or by reason of total and permanent disability, as determined by the Committee, without retirement, then such Participant’s Stock Options shall be exercisable for a period of up to five years after the date of such termination of employment if the Committee consents to such an extension. During the extension period, the right to exercise Stock Options, if any, accruing in installments, shall continue unless the Committee provides otherwise; provided, however, that if the Stock Options are Incentive Stock Options all installments shall be immediately exercisable; and provided further, that the Committee may set additional conditions, such as, without limiting the generality of the foregoing, an agreement to not provide services to a competitor of the Corporation and its Subsidiaries and/or continuous employment with a spin-off entity;

(ii) if a Participant’s termination of employment occurs by reason of death, then such Participant’s outstanding Stock Options shall all become immediately exercisable and may be exercised within five years after the date of death or the life of the option, whichever is less, but in the case of Non-Qualified Options in no event less than one year after the date of death, unless the Committee provides otherwise;

(iii) if a Participant’s termination of employment occurs for any reason other than as specified in Section 5.3(d)(i) or (ii) hereof, the Committee has not approved an extension and Participant’s termination of employment is not for Cause, then, but only with respect to Options that are as of the date of termination vested, such Participant’s Stock Options may be exercised within ninety days after the date of such termination of employment;

(iv) rights accruing to a Participant under Sections 5.3(d)(i) and 5.3(d)(iii) may, upon the death of a Participant subsequent to his/her termination of employment, be exercised by his/her duly designated beneficiary or otherwise by his/her applicable legal representatives, heirs or legatees to the extent vested in and unexercised or perfected by the Participant at the date of his/her death. In the case of Non-Qualified Options, the period for such exercise shall not expire less than one year after the date of the Participant’s death;

(v) if a Participant’s termination of employment occurs for Cause, such Participant’s unexercised vested and unvested Stock Options shall be null and void immediately upon termination of the Participant’s service and may not be exercised; and

(vi) absence on an approved leave of absence communicated to the Committee shall not be deemed a termination or interruption of continuous employment for the purposes of the Plan.

No Stock Option shall be assignable or transferable by the individual to whom it is granted, except that it may be transferable (x) by assignment by the Participant to the extent provided in the applicable option agreement, or (y) by will or the laws of descent and distribution in accordance with the provisions of this Plan. An option transferred after the death of the Participant to whom it is granted may only be exercised by such individual’s beneficiary designated to exercise the option or otherwise by his/her applicable legal representatives, heirs or legatees, and only within the specific time period set forth above and only to the extent vested in and unexercised by the Participant at the date of his/her death, except as provided in Section 5.3(d)(ii).

In no event, whether by the Participant directly or by his/her proper assignee or beneficiary or other representative, shall any option be exercisable at any time after its expiration date as stated in the

option agreement, except as provided in Section 5.3(d)(ii) and (iv). When an option is no longer exercisable it shall be deemed for all purposes and without further act to have lapsed and terminated. The Committee may, in its sole discretion, determine solely for the purposes of the Plan that a Participant is permanently and totally disabled, and the acts and decisions of the Committee made in good faith in relation to any such determination shall be conclusive upon all persons and interests affected thereby.

(e) Exercise of Options . An individual entitled to exercise Stock Options may, subject to their terms and conditions and the terms and conditions of the Plan, exercise them in whole or in part by delivery of written notice of exercise to the Corporation at its principal office, specifying the number of whole shares of Common Stock with respect to which the Stock Options are being exercised. Before shares may be issued, payment must be made in full, in legal United States tender, in the amount of the purchase price of the shares to be purchased at the time and any amounts for withholding as provided in Section 10.8 hereof; provided, however, in lieu of paying for the exercise price in cash as described above, the individual may pay (subject to such conditions and procedures as the Committee may establish) all or part of such exercise price by tendering (either actually or by attestation) owned and unencumbered shares of Common Stock acceptable to the Committee and having a Fair Market Value on the date of exercise of the Stock Options equal to or less than the exercise price of the Stock Options exercised, with cash, as set forth above, for the remainder, if any, of the purchase price; provided, further, that the Committee may permit a Participant to elect to pay the exercise price by authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Options and remit to the Corporation a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. Subject to rules established by the Committee, the withholdings required by Section 10.8 hereof may be satisfied by the Corporation withholding shares of Common Stock issued on exercise that have a Fair Market Value on the date of exercise of the Stock Options equal to or less than the withholding required by Section 10.8 hereof.

(f) Repricing Prohibited . Subject to Sections 5.5, 7.3 and 10.7, outstanding Stock Options granted under this Plan shall not be repriced.

5.4 STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted to Participants either alone (“freestanding”) or in tandem with other Awards, including Performance Awards, Stock Options and Restricted Stock. Stock Appreciation Rights granted in tandem with Incentive Stock Options must be granted at the same time as the Incentive Stock Options are granted. Stock Appreciation Rights granted in tandem with any other Award may be granted at any time prior to the earlier of the exercise or expiration of such Award. Stock Appreciation Rights granted in tandem with Stock Options shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Options. The Committee shall establish the terms and conditions applicable to any Stock Appreciation Rights, which terms and conditions need not be uniform but may not be inconsistent with the terms of the Plan. Freestanding Stock Appreciation Rights shall generally be subject to terms and conditions substantially similar to those described in Section 5.3 for Stock Options, including the requirements of 5.3(a), (b) (c) and (f) regarding the maximum period, minimum price and prohibition on repricing.

5.5 CHANGE IN CONTROL. In the event of a Change in Control:

(a) If the Corporation is the surviving entity and any adjustments necessary to preserve the value of the Participant’s outstanding Stock Options and Stock Appreciation Rights have been

made, or the Corporation’s successor at the time of the Change in Control irrevocably assumes the Corporation’s obligations under this Plan or replaces the Participant’s outstanding Stock Options and Stock Appreciation Rights with stock options and stock appreciation rights of equal or greater value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s Stock Options and Stock Appreciation Rights immediately prior to the Change in Control, then such Awards or their replacement awards shall become immediately exercisable in full only if within two years after the Change in Control:

(i) the Participant’s employment is terminated without Cause;

(ii) the Participant terminates employment with Good Reason;

(iii) the Participant’s employment terminates under circumstances that entitle the Participant to benefit under Participant’s change of control agreement or any income continuation benefits under any plan of the Corporation, a Subsidiary, or an entity that is a successor to the Corporation or a Subsidiary as a result of the Change in Control, or that would have entitled the Participant to such benefits if the Participant participated in such plan (for this purpose only, any such plan terminated in connection with the Change in Control shall be taken into account); or

(iv) the Participant’s employment terminates under circumstances that entitle the Participant to income continuation benefits under any change of control agreement or employment agreement between the Participant and the Corporation, a Subsidiary, or any successor thereof.

(b) If 5.5(a) does not apply, then without any action by the Committee or the Board, each outstanding Stock Option and Stock Appreciation Right granted under the Plan that has not been previously exercised or otherwise lapsed and terminated shall become immediately exercisable in full; provided, however, that the Committee, in its sole discretion, and without the consent of any Participant affected thereby, may determine that a cash payment shall be made promptly following the Change in Control in lieu of all or any portion of the outstanding Stock Options and Stock Appreciation Rights granted under this Plan. The amount payable with respect to each share of Common Stock subject to an affected Stock Option and each affected Stock Appreciation Right shall equal the excess of the Fair Market Value of a share of Common Stock immediately prior to such Change in Control over the exercise price of such Stock Option or Stock Appreciation Right. After such a determination by the Committee, each Stock Option and Stock Appreciation Right, with respect to which a cash payment is to be made shall terminate, and the Participant shall have no further rights thereunder except the right to receive such cash payment.

ARTICLE VI

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

6.1 RESTRICTION PERIOD. At the time an Award of Restricted Stock or Restricted Stock Units is made, the Committee shall establish the terms and conditions applicable to such Award, including the period of time (the “Restriction Period”) during which certain restrictions established by the Committee shall apply to the Award. The Restriction Period shall be not less than three years, except that for Awards based upon the attainment of performance goals, the Restriction Period shall be not less than one year. Subject to the foregoing sentence, each such Award, and designated portions of the

same Award, may have a different Restriction Period, at the discretion of the Committee. Except as permitted or pursuant to Sections 6.4, 6.5 or 10.7 hereof, the Restriction Period applicable to a particular Award shall not be changed.

6.2 RESTRICTED STOCK TERMS AND CONDITIONS. Restricted Stock shall be represented by a stock certificate registered in the name of the Participant granted such Restricted Stock. Such Participant shall have the right to enjoy all shareholder rights during the Restriction Period except that: (a) the Participant shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired; (b) the Corporation may either issue shares subject to such restrictive legends and/ or stop-transfer instructions as it deems appropriate or provide for retention of custody of the Common Stock during the Restriction Period; (c) the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period, except that it may be transferable by assignment by the Participant to the extent provided in the applicable Restricted Stock Award agreement; (d) a breach of the terms and conditions established by the Committee with respect to the Restricted Stock shall cause a forfeiture of the Restricted Stock, and any dividends withheld thereon, and (e) dividends payable in cash or in shares of stock or otherwise may be either currently paid or withheld by the Corporation for the Participant’s account. At the discretion of the Committee, interest may be paid on the amount of cash dividends withheld, including cash dividends on stock dividends, at a rate and subject to such terms as determined by the Committee.

Provided, however, and the provisions of Section 6.4 to the contrary notwithstanding, in lieu of the foregoing, the Committee may provide that no shares of Common Stock be issued until the Restriction Period is over and further provide that the shares of Common Stock issued after the Restriction Period has been completed, be issued in escrow and/or be legended and that the Common Stock be subject to restrictions including the forfeiture of all or a part of the shares.

6.3 PAYMENT FOR RESTRICTED STOCK. A Participant shall not be required to make any payment for Restricted Stock unless the Committee so requires.

6.4 FORFEITURE PROVISIONS. Subject to Section 6.5, in the event a Participant terminates employment during a Restriction Period for the Participant’s Restricted Stock or Restricted Stock Units, such Awards will be forfeited; provided, however, that the Committee may provide for proration or full payout in the event of (a) a termination of employment because of normal or late retirement, (b) with the consent of the Committee, early retirement or spin-off, (c) death, or (d) total and permanent disability, as determined by the Committee, all subject to any other conditions the Committee may determine.

6.5 CHANGE IN CONTROL. In the event of a Change in Control, restrictions on a fraction of each Participant’s outstanding Restricted Stock and Restricted Stock Units granted under the Plan will lapse, and any shares not previously distributed shall be distributed within ten days after the Change in Control in accordance with the provisions set forth in Section 4.10. The numerator of such fraction with respect to an Award shall be the number of months that have elapsed in the applicable Restriction Period prior to the Change in Control and the denominator shall be the number of months in such Restriction Period.

ARTICLE VII

SHARES OF STOCK SUBJECT TO THE PLAN; MAXIMUM AWARDS

7.1 SHARES AVAILABLE. Subject to the other provisions of this Article VII, the total number of shares available for grant as Awards pursuant to the Plan shall not exceed in the aggregate five percent (5%) of the outstanding shares of the Corporation’s Common Stock as of March 11, 2010, the record date for the Corporation’s Annual Meeting, that is a maximum of 445,002 shares of the Corporation’s Common Stock. Solely for the purpose of applying the limitation in the preceding sentence and subject to the replenishment and adjustment provisions of Sections 7.2 and 7.3 below: (a) each Award granted under this Plan shall reduce the number of shares available for grant by one share for every one share granted, and (b) each Stock Option or Stock Appreciation Right granted under this Plan shall reduce the number of shares available for grant by one share for every one share granted.

Shares available for grant under the Plan may be authorized and unissued shares, treasury shares held by the Corporation or shares purchased or held by the Corporation or a Subsidiary for purposes of the Plan, or any combination thereof. Shares issued upon assumption or conversion of outstanding stock-based awards granted by an acquired company shall be disregarded in applying the limitation set forth in this Section 7.1.

7.2 SHARES AGAIN AVAILABLE. In the event all or any portion of an Award is forfeited or cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a portion of the shares subject to the Award in connection with the exercise or settlement of such Award, the number of shares not issued that were deducted for such Award pursuant to Section 7.1 above shall be restored and may again be used for Awards under the Plan.

Notwithstanding anything in this Section 7.2 to the contrary and solely for purposes of determining whether shares are available for the issuance of Incentive Stock Options, the maximum aggregate number of shares that may be granted under this Plan shall be determined without regard to any shares restored pursuant to this Section 7.2 that, if taken into account, would cause the Plan to fail the requirement under Code Section 422 that the Plan designate the maximum aggregate number of shares that may be issued.

7.3 RELEVANT CHANGE ADJUSTMENTS. Appropriate adjustments in the number of shares available for grant and in any outstanding Awards, including adjustments in the size of the Award and in the exercise price per share of Stock Options and Stock Appreciation Rights, as authorized herein shall be made by the Committee (except as provided in Section 10.7 hereof), to give effect to adjustments made in the number of shares of Common Stock through a merger, consolidation, recapitalization, reclassification, combination, spin-off, common stock dividend, stock split or other relevant change.

7.4 MAXIMUM PER PARTICIPANT AWARD. During any consecutive thirty-six month period, no Participant may receive Awards that, in the aggregate, could result in that Participant receiving, earning or acquiring, subject to the adjustments described in Section 7.3: (a) Stock Options and Stock Appreciation Rights for, in the aggregate, more than 100,000 shares of Common Stock; (b) Performance Shares, Restricted Stock and Restricted Stock Units for, in the aggregate, more than 100,000 shares of Common Stock; (c) a number of Dividend Equivalents greater than the number of shares of Common Stock the Participant could receive, earn or acquire in connection with the related stock-based Awards granted to the Participant; and (d) Performance Units with a value exceeding $500,000.

In addition, during any consecutive thirty-six month period, no Participant who is a non-employee director may receive Awards that, in the aggregate, could result in that Participant receiving, earning or acquiring, subject to the adjustments described in Section 7.3, more than 50,000 shares of Common Stock. For purposes of applying the limits described in this Section 7.4, if Awards subject to the same limit are granted in tandem, so that only one of the Awards may actually be exercised, only one of the Awards shall be counted.

ARTICLE VIII

ADMINISTRATION

8.1 COMMITTEE. The Plan will be administered by the Compensation Committee of the Board who are appointed from time to time by the Board and who are outside, independent Board members who, in the judgment of the Board, are qualified to administer the Plan as contemplated by (a) Rule 16b-3 of the Securities and Exchange Act of 1934 (or any successor rule), (b) Section 162(m) of the Code, as amended, and the regulations thereunder (or any successor Section and regulations), and (c) any rules and regulations of a stock exchange on which Common Stock is traded. Any member of the Committee administering the Plan who does not satisfy or ceases to satisfy the qualifications set out in the preceding sentence may recuse himself or herself from any vote or other action taken by such Committee.

8.2 POWERS. The Committee shall have and exercise all of the powers and responsibilities granted expressly or by implication to it by the provisions of the Plan. Subject to and as limited by such provisions, the Committee may from time to time enact, amend and rescind such rules, regulations and procedures with respect to the administration of the Plan as it deems appropriate or convenient.

8.3 INTERPRETATION. All questions arising under the Plan, any Award agreement, or any rule, regulation or procedure adopted by the Committee shall be determined by the Committee, and its determination thereof shall be conclusive and binding upon all parties.

8.4 COMMITTEE PROCEDURE. Any action required or permitted to be taken by the Committee under the Plan shall require the affirmative vote of a majority of a quorum of the members of the Committee. A majority of all members of the Committee shall constitute a “quorum” for Committee business. The Committee may act by written determination instead of by affirmative vote at a meeting, provided that any written determination shall be signed by all members of the Committee, and any such written determination shall be as fully effective as a majority vote of a quorum at a meeting.

8.5 DELEGATION. The Committee may delegate all or any part of its authority under the Plan to a subcommittee of directors and/or officers of the Corporation for purposes of determining and administering Awards granted to persons who are not then subject to the reporting requirements of Section 16 of the Exchange Act.

ARTICLE IX

REDUCTION IN AWARDS

9.1 WHEN APPLICABLE. Anything in this Plan to the contrary notwithstanding, the provisions of this Article IX shall apply to a Participant if an independent auditor selected by the Committee (the “Auditor”) determines that each of (a) and (b) below are applicable.

(a) Payments or distributions hereunder, determined without application of this Article IX, either alone or together with other payments in the nature of compensation to the Participant

which are contingent on a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, or otherwise (but after any elimination or reduction of such payments under the terms of the Corporation’s income continuance policy, if any), would result in any portion of the payments hereunder being subject to an excise tax on excess parachute payments imposed under Section 4999 of the Code.

(b) The excise tax imposed on the Participant under Section 4999 of the Code on excess parachute payments, from whatever source, would result in a lesser net aggregate present value of payments and distributions to the Participant (after subtraction of the excise tax) than if payments and distributions to the Participant were reduced to the maximum amount that could be made without incurring the excise tax.

9.2 REDUCED AMOUNT. Under this Article IX the payments and distributions under this Plan shall be reduced (but not below zero) so that the present value of such payments and distributions shall equal the Reduced Amount. The “Reduced Amount” (which may be zero) shall be an amount expressed in present value which maximizes the aggregate present value of payments and distributions under this Plan which can be made without causing any such payment to be subject to the excise tax under Section 4999 of the Code. The determinations and reductions under this Section 9.2 shall be made after eliminations or reductions, if any, have been made under the Corporation’s income continuance policy, if any.

9.3 PROCEDURE. If the Auditor determines that this Article IX is applicable to a Participant, the Auditor shall so advise the Committee in writing. The Committee shall then promptly give the Participant notice to that effect together with a copy of the detailed calculation supporting such determination which shall include a statement of the Reduced Amount. The Participant may then elect, in his/her sole discretion, which and how much of the Awards otherwise awarded under this Plan shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining Awards under this Plan equals the Reduced Amount), and shall advise the Committee in writing of his/her election within ten days of his/her receipt of notice. If no such election is made by the Participant within such ten-day period, the Committee may elect which and how much of the Awards shall be eliminated or reduced (as long as after such election their aggregate present value equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Article IX, present value shall be determined in accordance with Section 280G of the Code. All the foregoing determinations made by the Auditor under this Article IX shall be made as promptly as practicable after it is determined that excess parachute payments (as defined in Section 280G of the Code) will be made to the Participant if an elimination or reduction is not made. As promptly as practicable following the election hereunder, the Corporation shall provide to or for the benefit of the Participant such amounts and shares as are then due to the Participant under this Plan and shall promptly provide to or for the benefit of the Participant in the future such amounts and shares as become due to the Participant under this Plan.

9.4 CORRECTIONS. As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Auditor hereunder, it is possible that payments or distributions under this Plan will have been made which should not have been made (“Overpayment”), or that additional payments or distributions which will have not been made could have been made (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Auditor, based upon the assertion of a deficiency by the Internal Revenue Service against the Corporation or the Participant which the Auditor believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment shall be treated for all

purposes as a loan to the Participant which the Participant shall repay together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant if and to the extent such payment would not reduce the amount which is subject to the excise tax under Section 4999 of the Code. In the event that the Auditor, based upon controlling precedent, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

9.5 NON-CASH BENEFITS. In making its determination under this Article IX, the value of any non-cash benefit shall be determined by the Auditor in accordance with the principles of Section 280G(d)(3) of the Code.

9.6 DETERMINATIONS BINDING. All determinations made by the Auditor under this Article IX shall be binding upon the Corporation, the Committee and the Participant.

ARTICLE X

GENERAL PROVISIONS

10.1 AMENDMENT OR TERMINATION OF PLAN. The Board may at any time amend, suspend, discontinue or terminate the Plan (including the making of any necessary enabling, conforming and procedural amendments to the Plan to authorize and implement the granting of Incentive Stock Options or other income tax preferred stock options which may be authorized by federal law subsequent to the effective date of this Plan); provided, however, that no amendment by the Board shall, without further approval of the shareholders of the Corporation, increase the total number of shares of Common Stock which may be made subject to the Plan, except as provided at Section 7.3 hereof, or make any other change for which shareholder approval is required by law or under the applicable rules of the NASDAQ Global Market. No action taken pursuant to this Section 10.1 of the Plan shall, without the consent of the Participant, alter or impair any Awards which have been previously granted to a Participant except pursuant to Section 10.5 of the Plan.

10.2 NON-ALIENATION OF RIGHTS AND BENEFITS. Except as expressly provided herein, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such right or benefit. If any Participant or beneficiary hereunder should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder (other than as expressly provided herein), then such right or benefit shall, in the sole discretion of the Committee, cease and in such event the Corporation may hold or apply the same or any or no part thereof for the benefit of the Participant or beneficiary, his/her spouse, children or other dependents or any of them in any such manner and in such proportion as the Committee in its sole discretion may deem proper.

10.3 NO RIGHTS AS SHAREHOLDER. The granting of Awards under the Plan shall not entitle a Participant or any other person succeeding to his/her rights, to any dividend, voting or other right as a shareholder of the Corporation unless and until the issuance of a stock certificate to the Participant or such other person pursuant to the provisions of the Plan and then only subsequent to the date of issuance thereof.

10.4 LIMITATION OF LIABILITY OR OBLIGATION OF THE CORPORATION. As illustrative only of the limitations of liability or obligation of the Corporation and not intended to be

exhaustive thereof, nothing in the Plan shall be construed: (a) to give any employee of the Corporation any right to be granted any Award other than at the sole discretion of the Committee; (b) to give any Participant any rights whatsoever with respect to shares of Common Stock except as specifically provided in the Plan; (c) to limit in any way the right of the Corporation or any Subsidiary to terminate, change or modify, with or without Cause, the employment of any Participant at any time; or (d) to be evidence of any agreement or understanding, express or implied, that the Corporation or any Subsidiary will employ any Participant in any particular position at any particular rate of compensation or for any particular period of time.

Payments and other benefits received by a Participant under an Award shall not be deemed part of a Participant’s regular, recurring compensation for purposes of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Corporation or any Subsidiary, unless expressly so provided by such other plan, contract or arrangement or the Committee determines that an Award or portion of an Award should be included to reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation.

10.5 GOVERNMENT REGULATIONS. Notwithstanding any other provisions of the Plan seemingly to the contrary, the obligation of the Corporation with respect to Awards granted under the Plan shall at all times be subject to any and all applicable laws, rules and regulations and such approvals by any government agencies as may be required or deemed by the Board or Committee as reasonably necessary or appropriate for the protection of the Corporation. In connection with any sale, issuance or transfer hereunder, the Participant acquiring the shares shall, if requested by the Corporation, give assurances satisfactory to counsel of the Corporation that the shares are being acquired for investment and not with a view to resale or distribution thereof and assurances in respect of such other matters as the Corporation may deem desirable to assure compliance with all applicable legal requirements.

10.6 NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board nor the submission of the Plan to shareholders of the Corporation for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other or additional incentive or other compensation arrangements of whatever nature as the Board may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Corporation or any Subsidiary now has lawfully put into effect, including, without limitation, any retirement, pension, savings, profit sharing or stock purchase plan, insurance, death and disability benefits, and executive short term incentive plans.

10.7 REORGANIZATION. In case the Corporation is merged or consolidated with another corporation, or in case the property or stock of the Corporation is acquired by another corporation, or in case of a separation, reorganization or liquidation of the Corporation (for purposes hereof any such occurrence being referred to as an “Event”), the Committee or a comparable committee of any corporation assuming the obligations of the Corporation hereunder, shall either:

(a) make appropriate provision for the protection of any outstanding stock-based Awards granted thereunder by the substitution on an equitable basis of appropriate stock, stock units, stock options or stock appreciation rights of the Corporation, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect to the Awards. Stock to be

issued pursuant to such substitute awards shall be limited so that the excess of the aggregate fair market value of the shares subject to such substitute awards immediately after such substitution over the purchase price thereof (if any) is not more than the excess of the aggregate fair market value of the shares subject to such substitute awards immediately before such substitution over the purchase price thereof (if any); or

(b) upon written notice to the Participant, declare that all Performance Awards granted to the Participant are deemed earned, that the Restriction Period of all Restricted Stock and Restricted Stock Units has been eliminated and that all outstanding Stock Options and Stock Appreciation Rights shall accelerate and become exercisable in full but that all outstanding Stock Options and Stock Appreciation Rights, whether or not exercisable prior to such acceleration, must be exercised within the period of time set forth in such notice or they will terminate. In connection with any declaration pursuant to this Section 10.7(b), the Committee may, but shall not be obligated to, cause a cash payment to be made to each Participant who holds a Stock Option or Stock Appreciation Right that is terminated in an amount equal to the product obtained by multiplying (x) the amount (if any) by which the Event Proceeds Per Share (as hereinafter defined) exceeds the exercise price per share covered by such Stock Option times (y) the number of shares of Common Stock covered by such Stock Option or Stock Appreciation Right. For purposes of this Section 10.7(b), “Event Proceeds Per Share” shall mean the cash plus the fair market value, as determined in good faith by the Committee, of the non-cash consideration to be received per share by the shareholders of the Corporation upon the occurrence of the Event.

10.8 WITHHOLDING TAXES, ETC. All distributions under the Plan shall be subject to any required withholding taxes and other withholdings and, in case of distributions in Common Stock, the Participant or other recipient may, as a condition precedent to the delivery of Common Stock, be required to pay to his/her participating employer the excess, if any, of the amount of required withholding over the withholdings, if any, from any distributions in cash under the Plan. All or a portion of such payment may, in the discretion of the Committee and upon the election of the Participant, be made (a) by withholding from shares that would otherwise be delivered to the Participant a number of shares sufficient to satisfy the remaining required tax withholding or (b) by tendering (either actually or by attestation) owned and unencumbered shares of Common Stock acceptable to the Committee and having a Fair Market Value on the date of tender equal to or less than the remaining required tax withholding. No distribution under the Plan shall be made in fractional shares of Common Stock, but the proportional market value thereof shall be paid in cash.

10.9 GENERAL RESTRICTION. Each Award shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the shares subject to such option and/or right upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with the granting of such Award or the issue or purchase of shares respectively thereunder, such Award may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

10.10 USE OF PROCEEDS. The proceeds derived by the Corporation from the sale of the stock pursuant to Awards granted under the Plan shall constitute general funds of the Corporation.

10.11 DURATION OF PLAN. This Plan shall remain in effect until the earliest of the following events occurs: (a) distribution of all shares of Common Stock subject to the Plan, (b) termination of this Plan pursuant to Section 10.1 hereof, or (c) the tenth anniversary of the Effective Date.

10.12 SEVERABILITY. In the event any provision of this Plan shall be held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

10.13 GOVERNING LAW. To the extent that federal laws do not otherwise control, this Plan and all determinations made and actions taken pursuant to this Plan shall be governed by the laws of the Commonwealth of Pennsylvania and construed accordingly.

10.14 HEADINGS. The headings of the Articles and their subparts in this Plan are for convenience of reading only and are not meant to be of substantive significance and shall not add to or detract from the meaning of such Article or subpart to which it refers.

10.15 STOCK CERTIFICATES. Notwithstanding anything in the Plan to the contrary, to the extent the Plan provides for the issuance of stock certificates to reflect the issuance of shares of Common Stock or Restricted Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange on which the Common Stock is traded.

10.16 FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

ARTICLE XI

COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE

11.1 To the extent the Committee determines that any Award granted under the Plan is subject to Section 409A of the Internal Revenue Code, the Agreement evidencing such Award will incorporate the terms and conditions required by Section 409A of the Internal Revenue Code. To the extent applicable, the Plan and Agreement will be interpreted in accordance with Section 409A of the Internal Revenue Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidelines that may be issued after the Effective Date. Notwithstanding any provisions of the Plan, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Internal Revenue Code, the Committee may adopt such amendment to the Plan and/or the applicable Agreement or adopt policies and procedures or take any other action or actions, including an action or amendment with retroactive effect, that the Committee determines is necessary or appropriate to (i) exempt the Award from the application of Section 409A of the Internal Revenue Code or (ii) comply with the requirements of Section 409A of the Internal Revenue Code. The foregoing authority of the Committee with respect to determinations relating to compliance with Section 409A, shall include without limitation, where the Committee determines it to be appropriate, providing for a 6 month delay in payments to a Specified Employee as defined in Section 409A and the regulations thereunder; implementing adjustments pursuant to Sections 5.5, 7.3 and 10.7 so as not to constitute an impermissible modification under Section 409A and the regulations thereunder; including in any Award Agreement a definition of Separation from Service in lieu of the term termination of employment, or variation thereof, as defined in Section 409A and the regulations thereunder; limiting the discretion of a Participant under Section 9.3, and limiting the use of Dividend Equivalents.

Exhibit 31.1

CERTIFICATIONS

I, Frederick C. Peters II, certify that:

I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank Corporation;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2010				/s/ F REDERICK C. P ETERS II
				Frederick C. Peters II, Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, J. Duncan Smith, certify that:

I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank Corporation;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2010				/ S / J. D UNCAN S MITH
				J. Duncan Smith, Treasurer and Principal Financial Officer

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Bryn Mawr Bank Corporation (the “Corporation”) on Form 10-Q for the period ending March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick C. Peters II, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 10, 2010

/ S / F REDERICK C. P ETERS II

Frederick C. Peters II

Chief Executive Officer

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Bryn Mawr Bank Corporation (the “Corporation”) on Form 10-Q for the period ending March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Duncan Smith, CPA, Treasurer and Principal Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: May 10, 2010

/ S / J. D UNCAN S MITH

J. Duncan Smith

Treasurer and Principal Financial Officer