BRYN MAWR BANK CORP (Form: 10-K, Received: 03/16/2011 16:47:30)

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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from to

Commission file number 0-15261.

BRYN MAWR BANK CORPORATION

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2434506
(State of other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

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

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock ($1 par value)		Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ¨ No x

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than 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 check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (& 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “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 by Rule 126-2 of the Exchange Act):

Yes ¨ No x

The aggregate market value of shares of common stock held by non-affiliates of Registrant (including fiduciary accounts administered by affiliates*) was $171,013,182 on June 30, 2010.

As of March 10, 2011, there were 12,460,376 shares of common stock outstanding.

Documents Incorporated by Reference : Portions of Registrant’s Annual Report to Shareholders for the year ended December 31, 2010 (“2010 Annual Report”), as indicated, are incorporated by reference in Parts I, II and IV hereof. Portions of the Definitive Proxy Statement of Registrant with respect to the Registrant’s Annual Meeting of Shareholders to be held on April 27, 2011 to be filed with the Commission pursuant to Regulation 14A (“2011 Proxy Statement”), as indicated, are incorporated by reference in Parts II and III hereof.

*	Registrant does not admit by virtue of the foregoing that its officers and directors are “affiliates” as defined in Rule 405 and does not admit that it controls the shares of Registrant’s voting stock held by the Trust Department of its bank subsidiary.

Form 10-K

Bryn Mawr Bank Corporation

Index


Item No.		Page

	Part I
1.	Business		1
1A.	Risk Factors		12
1B.	Unresolved Staff Comments		20
2.	Properties		20
3.	Legal Proceedings		21
4.	Submission of Matters to a Vote of Security Holders		21

	Part II

5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		22
6.	Selected Financial Data		23
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)		23
7A.	Quantitative and Qualitative Disclosures about Market Risk		23
8.	Financial Statements and Supplementary Data		23
9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure		23
9A.	Controls and Procedures		23
9B.	Other Information		24

	Part III

10.	Directors and Executive Officers of the Registrant		24
11.	Executive Compensation		25
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		25
13.	Certain Relationships and Related Transactions		26
14.	Principal Accountant Fees and Services		26

	Part IV

15.	Exhibits and Financial Statement Schedules		26

UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 1, 2011.

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 Bryn Mawr Bank Corporation (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, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words The words “may”, “would”, “could”, “will”, “likely”, “expect,” “anticipate,” “intend”, “estimate”, “plan”, “forecast”, “project” and “believe” and similar expressions are intended to identify such forward-looking statements. The Corporation’s actual results may differ materially from the results anticipated by the forward-looking statements 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, the real estate market, 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 federal income tax or other tax regulations;

•

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, consumer 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 and such competitors offering banking products and services by mail, telephone, computer and the Internet;

•

any extraordinary events (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 need for capital;

•

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;

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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 investment products in a manner that meets customers’ needs;

•

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, sell and service residential mortgage loans;

•

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

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

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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;

•

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 and the documents incorporated by reference herein are based upon the Corporation’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 incorporated documents might not occur and you should not put undue reliance on any forward-looking statements.

PART I

ITEM 1.

BUSINESS

GENERAL

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, Pennsylvania, a western suburb of Philadelphia. The Corporation and its subsidiaries offer a full range of personal and business banking services, consumer and commercial loans, equipment leasing, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from 17 full-service branches and seven Life Care Community offices throughout Montgomery, Delaware and Chester counties of Pennsylvania. The Corporation’s common stock trades on the NASDAQ Stock 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 operates in a highly competitive market area that 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 agencies, including the Securities and Exchange Commission (“SEC”), Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking.

WEBSITE DISCLOSURES

The Corporation makes available, free of charge, through its website, its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after the reports are electronically filed with the SEC. These reports can be obtained on the Corporation’s website at www.bmtc.com by following the link, “About Us,” followed by “Investor Relations.” Further copies of these reports are located at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding our filings, at www.sec.gov.

OPERATIONS

•

Bryn Mawr Bank Corporation

The Corporation has no active staff as of December 31, 2010. The Corporation holds the stock of the Bank. Additionally, the Corporation performs several functions including shareholder communications, shareholder recordkeeping, the distribution of dividends and the periodic filing of reports and payment of fees to NASDAQ, the SEC and other regulatory agencies.

A complete list of directors and executive officers of the Corporation and the Bank, as of March 1, 2011 is incorporated by reference to the last page of the Corporation’s 2010 Annual Report to Shareholders (“2010 Annual Report”). At December 31, 2010, the Corporation and its subsidiaries had 325 full-time and 34 part-time employees, totaling 342 full-time equivalent staff.

The Corporation and its subsidiaries engaged in numerous transactions in 2010 including the July 1, 2010 acquisition of First Keystone Financial, Inc. (“FKF”), discussed below, as well as a registered direct offering of common stock on May 18, 2010. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital” at page 21 of the 2010 Annual Report for a more complete discussion of these transactions.

On July 1, 2010, the merger of First Keystone Financial, Inc. (“FKF”) with and into the Corporation (the “Merger”), and the two step merger of FKF’s wholly-owned subsidiary, First Keystone Bank (“FKB”) with and into the Bank, were completed. In accordance with the terms of the Agreement and Plan of Merger, dated November 3, 2009, by and between the Corporation and FKF (the “Merger Agreement”), shareholders of FKF received 0.6973 shares of the Corporation’s common stock plus $2.06 per share cash consideration for each share of FKF common stock they owned as of the effective date of the Merger. The 85% stock and 15% cash transaction was valued at $31.3 million, based on FKF’s June 30, 2010, closing share price of $13.35 as listed on NASDAQ.

The aggregate consideration paid to FKF shareholders consisted of approximately 1.6 million shares of the Corporation’s common stock, valued at approximately $26.4 million, and approximately $4.8 million in cash. FKF employee stock options, valued at approximately $102 thousand, which were fully vested and converted to options to purchase the Corporation’s common stock upon the closing of the Merger, were also included in the total consideration paid.

The acquisition of FKF, a federally chartered thrift institution with assets of approximately $480 million, enabled the Corporation to increase its regional footprint with the addition of eight full service branch locations, primarily in Delaware County, Pennsylvania. The geographic locations of the acquired branches were such that it was not necessary to close any of the former FKF branches. By expanding into these new areas within Delaware County, Pennsylvania, the Corporation will be able to extend its successful sales culture as well as offer its reputable wealth management products and other value-added services to a wider segment of the county’s population.

On February 18, 2011, the Corporation entered into a definitive stock purchase agreement (the “Stock Purchase Agreement”) with Hershey Trust Company (“HTC”) pursuant to which the Corporation will acquire the private wealth management business of HTC (the “PWMG Business”) for a total purchase price of $18.25 million, of which $8.15 million is to be paid at closing in cash, $6.5 million is to be issued at closing in unregistered shares of the Corporation’s common stock (the “Stock Consideration”), and the final $3.6 million is to be placed in escrow and paid in cash installments on the 6-, 12- and 18-month anniversaries of the date of signing, subject to certain post-closing contingencies relating to the assets under management of the PWMG Business (the “Holdback Amount”).

Pursuant to the Stock Purchase Agreement, substantially all of the assets used to conduct the PWMG Business will be assigned to a newly formed Bank and Trust Company (the “Acquired Company”) that will be a wholly-owned subsidiary of an affiliate of HTC (the “Seller”) prior to the closing of the transaction. All issued and outstanding shares of common stock of the Acquired Company will, upon closing, be acquired by the Corporation, and immediately after closing, the Acquired Company will be merged with and into the Bank.

In accordance with the terms of the Stock Purchase Agreement, for a 6 month period following the closing, the Seller will be restricted from selling, assigning, transferring or otherwise disposing of the Stock Consideration. The Corporation and HTC are expected to enter into a separate Registration Rights Agreement at or prior to closing which will provide that HTC can demand that the Corporation prepare and file with the SEC a resale registration statement registering the Stock Consideration.

Among the transferred assets will be all non-objecting client accounts of the PWMG Business, the Real Estate Lease relating to the headquarters of PWMG Business located in Hershey, Pennsylvania, certain operating agreements and various items of tangible and intangible personal property.

Consummation of the transaction is subject to certain conditions, including, among others, the filing of certain governmental applications and notices, receipt of applicable regulatory approvals and expiration of applicable waiting periods, accuracy of specified representations and warranties of each party, absence of a material adverse effect, and obtaining material permits and authorizations for the lawful consummation of the acquisition of the Acquired Company and the merger of the Acquired Company into the Bank.

ACTIVE SUBSIDIARIES OF THE CORPORATION

The Corporation has four active subsidiaries which provide various services as described below:

•

Lau Associates

Lau Associates LLC, acquired in July of 2008, is a nationally recognized independent, family office serving high net worth individuals and families, with special expertise in planning intergenerational inherited wealth. Lau Associates employees numbered 10 as of December 31, 2010, and are included in the Corporation’s employment numbers. Lau Associates LLC is a wholly-owned subsidiary of the Corporation.

•

The Bryn Mawr Trust Company of Delaware

The Bryn Mawr Trust Company of Delaware (“BMTC-DE”) began operations as a limited purpose trust company in the fourth quarter of 2008. BMTC-DE is located in Wilmington, DE and has the ability to be named and serve as a corporate fiduciary under Delaware law. BMTC-DE employed three full-time employees as of December 31, 2010. BMTC-DE employees are included in the Corporation’s employment numbers. Being able to serve as a corporate fiduciary under Delaware law is advantageous as Delaware statutes are widely recognized as being favorable with respect to the creation of tax-advantaged trust structures, LLCs and related wealth transfer vehicles for families and individuals throughout the United States. BMTC-DE is a wholly-owned subsidiary of the Corporation.

•

FKF Capital Trust I

In connection with the acquisition of FKF, the Corporation acquired FKF Capital Trust I (the “Trust”), a trust formed under Delaware law that became an unconsolidated subsidiary of the Corporation. The Corporation owns all of the common shares of the Trust which are recorded in other investments in the Corporation’s Consolidated Balance Sheet. On August 21, 1997, the Trust issued $16.2 million of preferred securities (the “Preferred Securities”) at an interest rate of 9.7%, with a scheduled maturity of August 15, 2027. Simultaneously, the proceeds from the issue, along with $502 thousand of cash were invested in junior subordinated debentures (the “Debentures”) that have been assumed by the Corporation. The Debentures are unsecured and rank subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Corporation. The Trust has no employees as of December 31, 2010.

•

The Bryn Mawr Trust Company

The Bank is engaged in commercial and retail banking business, providing basic banking services, including the acceptance of demand, time and savings deposits and the origination of commercial, real estate and consumer loans and other extensions of credit including leases. The Bank also provides a full range of wealth management services including trust administration and other related fiduciary services, custody services, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax services, financial planning and brokerage services. As of December 31, 2010, the market value of assets under management, administration, supervision and asset management/ brokerage by the Bank’s Wealth Management Division was $3.412 billion.

Through the acquisition of FKF, the Bank has expanded its branch footprint into Delaware County, Pennsylvania, with the addition of eight full service branches. The Bank presently has 17 full-service branch offices, plus seven Life Care Community locations. See the section titled “COMPETITION” later in this item for additional information.

ACTIVE SUBSIDIARIES OF THE BANK

The Bank has four active subsidiaries providing various services as described below:

•

Insurance Counsellors of Bryn Mawr, Inc.

Insurance Counsellors of Bryn Mawr, Inc. (“ICBM”) began operation in February 1998 as a wholly-owned subsidiary of the Bank. ICBM is a full-service insurance agency, through which the Bank offers insurance and related products and services to its customer base. This includes casualty, property and allied insurance lines, as well as life insurance, annuities, medical insurance and accident and health insurance for groups and individuals.

ICBM utilizes five licensed insurance agents and ICBM employees are included in the Corporation’s employment numbers above.

•

BMT Settlement Services, Inc.

BMT Settlement Services, Inc. (“BMTS”) began operation in February 2002. BMTS is a limited partner in Bryn Mawr Settlement Services, LP (the “Limited Partnership”), with Commonwealth Land Transfer Company, to provide title search and abstract services to Bank customers. Under the terms of the Limited Partnership’s partnership agreement, BMTS receives seventy percent of the profits of the Limited Partnership, after expenses. BMTS is a wholly-owned subsidiary of the Bank.

BMTS’s primary market area is located in southeastern Pennsylvania. BMTS is housed in the main office of the Bank, located at 801 Lancaster Avenue, Bryn Mawr, PA 19010. BMTS had no employees as of December 31, 2010.

•

BMT Mortgage Services, Inc.

BMT Mortgage Services, Inc. (“BMTM”) began operations in February, 2006. BMTM is a member in BMT Mortgage Company, LLC, which was established in 2006 to provide mortgage services to customers of the Keller Williams Bryn Mawr, PA office. Under the terms of the operating agreement, BMTM has a 40% interest in the entity, will perform certain accounting and administrative functions, and will process certain mortgage applications for a fee. BMTM is a wholly-owned subsidiary of the Bank.

•

BMT Leasing, Inc.

BMT Leasing, Inc. (“BMTL”) began operations in September 2006. BMTL is a Delaware corporation registered to do business in Pennsylvania. BMTL is an equipment leasing company servicing customers nationwide from its Bryn Mawr location with an original average equipment cost of approximately $18 thousand per lease. BMTL is a wholly-owned subsidiary of the Bank and had nine employees as of December 31, 2010. BMT Leasing employees are included in the Corporation’s employment numbers above.

SOURCES OF THE CORPORATION’S REVENUE

•

Continuing Operations

The following table shows the percentage of consolidated revenues.


	For the Twelve Months Ended December 31,
	2010				2009				2008
Interest income on loans, leases and investments	$	64,796	68.8	%	$	56,892	66.6	%	$	57,934	73.0	%
Other banking fees including insurance		7,511	8.0	%		6,644	7.8	%		5,257	6.6	%
Wealth management segment		15,473	16.4	%		14,233	16.7	%		13,855	17.4	%
Mortgage banking segment		6,391	6.8	%		7,593	8.9	%		2,360	3.0	%

Total revenues from continuing operations	$	94,171	100.0	%	$	85,362	100.0	%	$	79,406	100.0	%

See Note 28, Segment Information, in the Notes to the Consolidated Financial Statements located in the 2010 Annual Report for additional information. The Corporation had no discontinued operations in 2008, 2009 or 2010.

STATISTICAL INFORMATION

The statistical information required in this Part I Item I is incorporated by reference to the information appearing in the 2010 Annual Report in the sections captioned Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Financial Statements and related notes.

•

Financial Information About Segments

The financial information concerning the Corporation’s business segments is incorporated by reference to the MD&A of the 2010 Annual Report and Note 28 Segment Information to the financial statements accompanying such Annual Report.

COMPETITION

The Corporation and its subsidiaries, including the Bank, compete for deposits, loans and wealth management services in Delaware, Montgomery, Chester and Philadelphia counties in southeastern Pennsylvania. The Corporation has a significant presence in the affluent Philadelphia suburbs known as the “Main Line.” The Corporation has 17 full-service branches and seven Life Care Community offices.

The markets in which the Corporation competes are highly competitive. The Corporation’s direct competition in attracting deposits, loans and wealth management services come from commercial banks, investment management companies, savings and loan associations, and trust companies. The Corporation also competes with credit unions, on-line banking enterprises, consumer finance companies, mortgage companies, insurance companies, stock brokerage companies, investment advisory companies and other entities providing one or more of the services and products offered by the Corporation.

The Corporation is able to compete with the other firms because of its consistent level of customer service, excellent reputation, professional expertise, full product line, and its competitive rates and fees. However, there are several negative factors relative to the Corporation’s ability to compete with large institutions such as its limited number of locations, smaller advertising budget, lower technology budget, ability to spread out fixed costs and other lack-of-scale type disadvantages.

With the acquisition of FKF in July 2010, the Corporation has expanded its footprint significantly into Delaware County, Pennsylvania. In addition, with the acquisition of Lau Associates in July 2008, and the formation of BMTC-DE, the Corporation was able to establish a presence in the State of Delaware, where it competes for wealth management business. Additionally, BMT Leasing competes on a national level for its leasing customers.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

The geographic information required by Item 101(d) of Regulation S-K under the Securities Exchange Act of 1934, as amended, is impracticable for the Corporation to calculate; however, the Corporation does not believe that a material amount of revenues in any of the last three years was attributable to customers outside of the United States, nor does it believe that a material amount of its long-lived assets, in any of the past three years, was located outside of the United States.

SUPERVISION AND REGULATION

The Corporation and its subsidiaries, including the Bank, are subject to extensive regulation under both federal and state law. To the extent that the following information describes statutory provisions and regulations which apply to the Corporation and its subsidiaries, it is qualified in its entirety by reference to those statutory provisions and regulations:

•

Bank Holding Company Regulation

The Corporation, as a bank holding company, is regulated under the Bank Holding Company Act of 1956, as amended (the “Act”). The Act limits the business of bank holding companies to banking, managing or controlling banks, performing certain servicing activities for subsidiaries and engaging in such other activities as the Federal Reserve Board may determine to be closely related to banking. The Corporation and its non-bank subsidiaries are subject to the supervision of the Federal Reserve Board and the Corporation is required to file, with the Federal Reserve Board, an annual report and such additional information as the Federal Reserve Board may require pursuant to the Act and the regulations which implement the Act. The Federal Reserve Board also conducts inspections of the Corporation and each of its non-banking subsidiaries.

The Act requires each bank holding company to obtain prior approval by the Federal Reserve Board before it may acquire (i) direct or indirect ownership or control of more than 5% of the voting shares of any company, including another bank holding company or a bank, unless it already owns a majority of such voting shares, or (ii) all, or substantially all, of the assets of any company.

The Act also prohibits a bank holding company from engaging in, or from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company engaged in non-banking activities unless the Federal Reserve Board, by order or regulation, has found such activities to be so closely related to banking or to managing or controlling banks as to be appropriate. The Federal Reserve Board has, by regulation, determined that certain activities are so closely related to banking or to managing or controlling banks, so as to permit bank holding companies, such as the Corporation, and its subsidiaries formed for such purposes, to engage in such activities, subject to obtaining the Federal Reserve Board’s approval in certain cases.

Under the Act, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension or provision of credit, lease or sale of property or furnishing any service to a customer on the condition that the customer provide additional credit or service to the bank, to its bank holding company or any other subsidiaries of its bank holding company or on the condition that the customer refrain from obtaining credit or service from a competitor of its bank holding company. Further, the Bank, as a subsidiary bank of a bank holding company, such as the Corporation, is subject to certain restrictions on any extensions of credit it provides to the Corporation or any of its non-bank subsidiaries, investments in the stock or securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower.

In addition, the Federal Reserve Board may issue cease and desist orders against bank holding companies and non-bank subsidiaries to stop actions believed to present a serious threat to a subsidiary bank. The Federal Reserve Board also regulates certain debt obligations and changes in control of bank holding companies.

Under Federal Reserve Board policy, a bank holding company is expected to act as a source of financial strength to each of its subsidiary banks and to commit resources, including capital funds during periods of financial stress, to support each such bank. Consistent with its “source of strength” policy for subsidiary banks, the Federal Reserve Board has stated that, as a matter of prudent banking, a bank holding company generally should not maintain a rate of cash dividends unless its net income available to common shareholders has been sufficient to fund fully the dividends, and the prospective rate of earnings retention appears to be consistent with the company’s capital needs, asset quality and overall financial condition.

Federal law also grants to federal banking agencies the power to issue cease and desist orders when a depository institution or a bank holding company or an officer or director thereof is engaged in or is about to engage in unsafe and unsound practices. The Federal Reserve Board may require a bank holding company, such as the Corporation, to discontinue certain of its activities or activities of its other subsidiaries, other than the Bank, or divest itself of such subsidiaries if such activities cause serious risk to the Bank and are inconsistent with the Bank Holding Company Act or other applicable federal banking laws.

•

Federal Reserve Board and Pennsylvania Department of Banking Regulations

The Corporation’s Pennsylvania state chartered bank, The Bryn Mawr Trust Company, is regulated and supervised by the Pennsylvania Department of Banking (the “Department of Banking”) and subject to regulation by The Federal Reserve Board and the FDIC. The Department of Banking and the Federal Reserve Board regularly examine the Bank’s reserves, loans, investments, management practices and other aspects of its operations and the Bank must furnish periodic reports to these agencies. The Bank is a member of the Federal Reserve System.

The Bank’s operations are subject to certain requirements and restrictions under federal and state laws, including requirements to maintain reserves against deposits, limitations on the interest rates that may be paid on certain types of deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon, limitations on the types of investments that may be made and the types of services which may be offered. Various consumer laws and regulations also affect the operations of the Bank. These regulations and laws are intended primarily for the protection of the Bank’s depositors and customers rather than holders of the Corporation’s stock.

The regulations of the Pennsylvania Department of Banking restrict the amount of dividends that can be paid to the Corporation by the Bank. Payment of dividends is restricted to the amount of the Bank’s 2010 net income plus its net retained earnings for the previous two years. As of December 31, 2010, this amount was approximately $10.4 million. However, the amount of dividends paid by the Bank cannot reduce capital levels below levels that would cause the Bank to be less than adequately capitalized. The payment

of dividends by the Bank to the Corporation is the source on which the Corporation currently depends to pay dividends to its shareholders.

As a bank incorporated under and subject to Pennsylvania banking laws and insured by the FDIC, the Bank must obtain the prior approval of the Department of Banking and the Federal Reserve Board before establishing a new branch banking office. Depending on the type of bank or financial institution, a merger of the Bank with another institution is subject to the prior approval of one or more of the following: the Department of Banking, the FDIC, the Federal Reserve Board and the Office of the Comptroller of the Currency and any other regulatory agencies having primary supervisory authority over any other party to the merger. An approval of a merger by the appropriate bank regulatory agency would depend upon several factors, including whether the merged institution is a federally insured state bank, a member of the Federal Reserve System, or a national bank. Additionally, any new branch expansion or merger must comply with branching restrictions provided by state law. The Pennsylvania Banking Code permits Pennsylvania banks to establish branches anywhere in the state.

•

Deposit Insurance Assessments

The deposits of the Bank are insured by the FDIC up to the limits set forth under applicable law and are subject to deposit insurance premium assessments. The FDIC imposes a risk based deposit premium assessment system, under which the amount of FDIC assessments paid by an individual insured depository institution, such as the Bank, is based on the level of risk incurred in its activities.

On February 7, 2011, the FDIC Board of Directors adopted new regulations regarding assessments. The final rule, as adopted redefines the deposit insurance assessment base as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank”); makes changes to assessment rates; implements Dodd-Frank’s Deposit Insurance Fund (“DIF”) dividend provisions; and revises the risk-based assessment system for all large insured depository institutions (“IDI”s), generally, those institutions with at least $10 billion in total assets. Nearly all of the 7,600-plus institutions with assets less than $10 billion will pay smaller assessments as a result of this final rule.

The final rule redefines the deposit insurance assessment base as average consolidated total assets minus average tangible equity;

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Makes generally conforming changes to the unsecured debt and brokered deposit adjustments to assessment rates;

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Creates a depository institution debt adjustment;

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Eliminates the secured liability adjustment; and

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Adopts a new assessment rate schedule effective April 1, 2011, and, in lieu of dividends, other rate schedules when the reserve ratio reaches certain levels.

Changes to the assessment calculation are as follows:

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The base for deposit insurance assessment purposes is defined as average consolidated total assets during the assessment period less average tangible equity capital during the assessment period.

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Average consolidated total assets are defined in the schedule of quarterly averages in the Consolidated Reports of Condition and Income (Call Reports), using a daily averaging method.

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Banks with less than $1 billion in assets (other than newly insured banks) may report average weekly assets; these banks may opt to report daily averages on a permanent basis.

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Tangible equity capital is defined as Tier 1 capital and will be calculated monthly or, if the IDI has less than $1 billion in assets, on an end-of-quarter basis.

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Institutions that are parents of other insured institutions will report separately from subsidiary depository institutions.

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Banker’s banks and custodial banks may deduct low risk, liquid assets from their assessment base.

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A banker’s bank for purposes of calculating deposit insurance assessments is defined as that term is used in 12 U.S.C. 24.

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Funds resulting from government capital infusion programs, FDIC stock ownership, or employee compensation plan stock ownership do not disqualify a bank from being a banker’s bank.

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An institution that meets the definition of banker’s bank is required to certify to that effect each quarter on its Call Report or Thrift Financial Report (TFR), or any successor report.

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The assessment base for a banker’s bank excludes the average amount of reserve balances passed through to the Federal Reserve, the average reserve balances held at the Federal Reserve for its own account (including balances due from the Federal Reserve), and the average amount of the institution’s federal funds sold, but in no case can the amount excluded exceed the sum of the bank’s average amount of total deposits of commercial banks and other depository institutions in the United States and the average amount of its federal funds purchased.

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A custodial bank for purposes of calculating deposit insurance assessments is defined in terms of total fiduciary and custody and safekeeping assets and revenues.

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The assessment base for a custodial bank excludes all 0 percent Basel risk-weighted assets and 50 percent of 20 percent risk-weighted assets not to exceed the total transaction account deposits linked to custody and safekeeping and fiduciary assets.

The following are adjustments to the assessment rate:

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Unsecured debt adjustment . All institutions, except new institutions and insured branches of foreign banks, are potentially subject to a reduction in assessment rates for unsecured debt.

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The unsecured debt adjustment equals 40 basis points plus the initial base assessment rate.

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The unsecured debt adjustment is capped at the lesser of 5 basis points or 50 percent of the IDI’s initial base assessment rate.

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Unsecured debt no longer includes Tier 1 capital.

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Brokered deposit adjustment . All small IDIs in Risk Categories II, III, and IV, and all large IDIs and highly complex IDIs that are less than well capitalized or have a CAMELS composite rating of 3, 4, or 5, are potentially subject to an increase in assessment rates for brokered deposits. For purposes of the brokered deposit adjustment, brokered deposits include all brokered deposits.

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The brokered deposit adjustment is limited to those IDIs in which the ratio of brokered deposits to domestic deposits is greater than 10 percent.

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The brokered deposit adjustment is calculated by multiplying 25 basis points by the ratio of the difference between an IDI’s brokered deposits and 10 percent of its deposits to its assessment base.

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The maximum brokered deposit adjustment is 10 basis points.

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Depository institution debt adjustment . All IDIs are potentially subject to an increase in assessment rates for unsecured debt held that is issued by another IDI.

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The depository institution debt adjustment equals 50 basis points of each dollar of long-term, unsecured debt held as an asset by an IDI when that debt was issued by another IDI, to the extent that all such debt exceeds 3 percent of the IDI’s Tier 1 capital.

The FDIC suspended dividends indefinitely; however, in lieu of dividends, and pursuant to its authority to set risk-based assessments, the FDIC adopted progressively lower assessment rate schedules that will take effect when the reserve ratio exceeds 1.15 percent, 2 percent, and 2.5 percent. The following new rate schedule will be effective April 1, 2011:

Initial and Total Base Assessment Rates (basis points)*


	Risk Category I	Risk Category II	Risk Category III	Risk Category IV	Large and Highly Complex Institutions
Initial base assessment rate	5 - 9	14	23	35	5 - 35
Unsecured debt adjustment**	(4.5) - 0	(5) - 0	(5) - 0	(5) - 0	(5) - 0
Brokered deposit adjustment	—	0 - 10	0 - 10	0 - 10	0 - 10
Total base assessment rate	2.5 - 9	9 - 24	18 - 33	30 - 45	2.5 - 45

*	Total base assessment rates do not include the depository institution debt adjustment.

The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base assessment rate; thus for example, an insured depository institution with an initial base assessment rate of 5 basis points will have a maximum unsecured debt adjustment of 2.5 basis points and cannot have a total base assessment rate lower than 2.5 basis points.

The following rate schedules become effective once the reserve ratio exceeds certain levels:

Initial and Total Base Assessment Rates (basis points)* Once the Reserve Ratio Reaches 1.15 Percent and the Reserve Ratio for the Immediately Prior Assessment Period Is Less Than 2 Percent


	Risk Category I	Risk Category II	Risk Category III	Risk Category IV	Large and Highly Complex Institutions
Initial base assessment rate	3 - 7	12	19	30	3 - 30
Unsecured debt adjustment**	(3.5) - 0	(5) - 0	(5) - 0	(5) - 0	(5) - 0
Brokered deposit adjustment	—	0 - 10	0 - 10	0 - 10	0 -10
Total base assessment rate	1.5 - 7	7 - 22	14 - 29	25 - 40	1.5 - 40

*	Total base assessment rates do not include the depository institution debt adjustment.

The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum unsecured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points.

Initial and Total Base Assessment Rates* If the Reserve Ratio for Prior Assessment Period Is Equal To Or Greater Than 2 Percent and Less Than 2.5 Percent


	Risk Category I	Risk Category II	Risk Category III	Risk Category IV	Large and Highly Complex Institutions
Initial base assessment rate	2 - 6	10	17	28	2 - 28
Unsecured debt adjustment**	(3) - 0	(5) - 0	(5) - 0	(5) - 0	(5) -0
Brokered deposit adjustment	—	0 - 10	0 - 10	0 - 10	0 -10
Total base assessment rate	1 - 6	5 - 20	12 - 27	23 - 38	1 - 38

*	Total base assessment rates do not include the depository institution debt adjustment.

The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial assessment rate of 2 basis points will have a maximum unsecured debt adjustment of 1 basis point and could not have a total base assessment rate lower than 1 basis point.

Initial and Total Base Assessment Rates* If the Reserve Ratio For the Prior Assessment Period is Equal to or Greater than 2.5 Percent


	Risk Category I	Risk Category II	Risk Category III	Risk Category IV	Large and Highly Complex Institutions
Initial base assessment rate	1 - 5	9	15	25	1 - 25
Unsecured debt adjustment**	(2.5) - 0	(4.5) - 0	(5) - 0	(5) - 0	(5) - 0
Brokered deposit adjustment	—	0 -10	0 - 10	0 - 10	0 - 10
Total base assessment rate	0.5 - 5	4.5 - 19	10 - 25	20 - 35	0.5 - 35

*	Total base assessment rates do not include the depository institution debt adjustment.

The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial assessment rate of 1 basis point will have a maximum unsecured debt adjustment of 0.5 basis points and could not have a total base assessment rate lower than 0.5 basis points.

In addition to deposit insurance assessments, banks are subject to assessments to pay the interest on Financing Corporation bonds. The Financing Corporation was created by Congress to issue bonds to finance the resolution of failed thrift institutions. The FDIC sets the Financing Corporation assessment rate every quarter. The Financing Corporation assessment for the fourth quarter of 2010 was an annual rate of 1 basis point, which resulted in approximately $107 thousand FICO assessment payment by the Bank in 2010.

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Government Monetary Policies

The monetary and fiscal policies of the Federal Reserve Board and the other regulatory agencies have had, and will probably continue to have, an important impact on the operating results of the Bank through their power to implement national monetary policy in order to, among other things, curb inflation or combat a recession. The monetary policies of the Federal Reserve Board may have a major effect upon the levels of the Bank’s loans, investments and deposits through the Federal Reserve Board’s open market operations in United States government securities, through its regulation of, among other things, the discount rate on borrowing of depository institutions, and the reserve requirements against depository institution deposits. It is not possible to predict the nature and impact of future changes in monetary and fiscal policies.

The earnings of the Bank and, therefore, of the Corporation are affected by domestic economic conditions, particularly those conditions in the trade area as well as the monetary and fiscal policies of the United States government and its agencies.

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Safety and Soundness

The Federal Reserve Board also has authority to prohibit a bank holding company from engaging in any activity or transaction deemed by the Federal Reserve Board to be an unsafe or unsound practice. The payment of dividends could, depending upon the financial condition of the Bank or Corporation, be such an unsafe or unsound practice and the regulatory agencies have indicated their view that it generally would be an unsafe and unsound practice to pay dividends except out of current operating earnings. The ability of the Bank to pay dividends in the future is presently and could be further influenced, among other things, by applicable capital guidelines discussed below or by bank regulatory and supervisory policies. The ability of the Bank to make funds available to the Corporation is also subject to restrictions imposed by federal law. The amount of other payments by the Bank to the Corporation is subject to review by regulatory authorities having appropriate authority over the Bank or Corporation and to certain legal limitations.

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Capital Adequacy

Federal and state banking laws impose on banks certain minimum requirements for capital adequacy. Federal banking agencies have issued certain “risk-based capital” guidelines, and certain “leverage” requirements on member banks such as the Bank. By policy statement, the Banking Department also imposes those requirements on the Bank. Banking regulators have authority to require higher minimum capital ratios for an individual bank or bank holding company in view of its circumstances.

Minimum Capital Ratios. The risk-based guidelines require all banks to maintain two “risk-weighted assets” ratios. The first is a minimum ratio of total capital (“Tier 1” and “Tier 2” capital) to risk-weighted assets equal to 8.00%; the second is a minimum ratio of “Tier 1” capital to risk-weighted assets equal to 4.00%. Assets are assigned to five risk categories, with higher levels of capital being required for the categories perceived as representing greater risk. In making the calculation, certain intangible assets must be deducted from the capital base. The risk-based capital rules are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and to minimize disincentives for holding liquid assets.

The risk-based capital rules also account for interest rate risk. Institutions with interest rate risk exposure above a normal level would be required to hold extra capital in proportion to that risk. A bank’s exposure to declines in the economic value of its capital due to changes in interest rates is a factor that the banking agencies will consider in evaluating a bank’s capital adequacy. The rule does not codify an explicit minimum capital charge for interest rate risk. The Corporation currently monitors and manages its assets and liabilities for interest rate risk , and believes its interest rate risk practices are prudent and are in-line with industry standards. The Corporation is not aware of any new or proposed rules or standards relating to interest rate risk that would materially adversely affect our operations.

The “leverage” ratio rules require banks which are rated the highest in the composite areas of capital, asset quality, management, earnings, liquidity and sensitivity to market risk to maintain a ratio of “Tier 1” capital to “adjusted total assets” (equal to the bank’s average total assets as stated in its most recent quarterly Call Report filed with its primary federal banking regulator, minus end-of-quarter intangible assets that are deducted from Tier 1 capital) of not less than 3.00%. For banks which are not the most highly rated, the minimum “leverage” ratio will range from 4.00% to 5.00%, or higher at the discretion of the bank’s primary federal regulator, and is required to be at a level commensurate with the nature of the level of risk of the bank’s condition and activities.

For purposes of the capital requirements, “Tier 1” or “core” capital is defined to include common stockholders’ equity and certain noncumulative perpetual preferred stock and related surplus. “Tier 2” or “qualifying supplementary” capital is defined to include a bank’s allowance for loan and lease losses up to 1.25% of risk-weighted assets, plus certain types of preferred stock and related surplus, certain “hybrid capital instruments” and certain term subordinated debt instruments.

The Basel Committee on Banking Supervision (the “Basel Committee”) released a comprehensive list of proposals for changes to capital, leverage, and liquidity requirements for banks in December 2009 (commonly referred to as “Basel III”). In July 2010, the Basel Committee announced the design for its capital and liquidity reform proposals.

In September 2010, the oversight body of the Basel Committee announced minimum capital ratios and transition periods providing: (i) the minimum requirement for the Tier 1 common equity ratio will be increased from the current 2.0% level to 4.5% (to be phased in by January 1, 2015); (ii) the minimum requirement for the Tier 1 capital ratio will be increased from the current 4.0% to 6.0% (to be phased in by January 1, 2015); (iii) an additional 2.5% of Tier 1 common equity to total risk-weighted assets (to be phased in between January 1, 2016 and January 1, 2019; and (iv) a minimum leverage ratio of 3.0% (to be tested starting January 1, 2013). The proposals also narrow the definition of capital, excluding instruments that no longer qualify as Tier 1 common equity as of January 1, 2013, and phasing out other instruments over several years. It is unclear how U.S. banking regulators will define “well-capitalized” in their implementation of Basel III.

The liquidity proposals under Basel III include: (i) a liquidity coverage ratio (to become effective January 1, 2015); (ii) a net stable funding ratio (to become effective January 1, 2018); and (iii) a set of monitoring tools for banks to report minimum types of information to their regulatory supervisors. Many of the details of the new framework related to minimum capital levels and minimum liquidity requirements in the Basel Committee’s proposals will remain uncertain until the final release is issued later this year. Implementation of the final provisions of Basel III will require implementing regulations and guidelines by U.S. banking regulators. Implementation of these new capital and liquidity requirements has created significant uncertainty with respect to the future liquidity and capital requirements for financial institutions. Therefore, we are not able to predict at this time the content of liquidity and capital guidelines or regulations that may be adopted by regulatory agencies or the impact that any changes in regulation may have on the Corporation and the Bank.

Prompt Corrective Action. Federal banking law mandates certain “prompt corrective actions,” which Federal banking agencies are required to take, and certain actions which they have discretion to take, based upon the capital category into which a Federally regulated depository institution falls. Regulations have been adopted by the Federal bank regulatory agencies setting forth detailed procedures and criteria for implementing prompt corrective action in the case of any institution that is not adequately capitalized. Under the rules, an institution will be deemed to be “adequately capitalized” or better if it exceeds the minimum Federal regulatory capital requirements. However, it will be deemed “undercapitalized” if it fails to meet the minimum capital requirements, “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 3.0%, or a leverage ratio that is less than 3.0%, and “critically undercapitalized” if the institution has a ratio of tangible equity to total assets that is equal to or less than 2.0%. The rules require an undercapitalized institution to file a written capital restoration plan, along with a performance guaranty by its holding company or a third party. In addition, an undercapitalized institution becomes subject to certain automatic restrictions including a prohibition on the payment of dividends, a limitation on asset growth and expansion, and in certain cases, a limitation on the payment of bonuses or raises to senior executive officers, and a prohibition on the payment of certain “management fees” to any “controlling person”. Institutions that are classified as undercapitalized are also subject to certain additional supervisory actions, including increased reporting burdens and regulatory monitoring, a limitation on the institution’s ability to make acquisitions, open new branch offices, or engage in new lines of business, obligations to raise additional capital, restrictions on transactions with affiliates, and restrictions on interest rates paid by the institution on deposits. In certain cases, bank regulatory agencies may require replacement of senior executive officers or directors, or sale of the institution to a willing purchaser. If an institution is deemed to be “critically undercapitalized” and continues in that category for four quarters, the statute requires, with certain narrowly limited exceptions, that the institution be placed in receivership. The Bank is currently regarded as “well capitalized” for regulatory capital purposes. See Note 25 in the Notes to Consolidated Financial Statements in the 2010 Annual Report for more information regarding the Bank’s and Corporation’s regulatory capital ratios.

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Gramm-Leach Bliley Act

The Gramm-Leach-Bliley Act (“GLB Act”) repealed provisions of the Glass-Steagall Act, which prohibited commercial banks and securities firms from affiliating with each other and engaging in each other’s businesses. Thus, many of the barriers prohibiting affiliations between commercial banks and securities firms have been eliminated.

The GLB Act amended the Glass-Steagall Act to allow new “financial holding companies” (“FHC”) to offer banking, insurance, securities and other financial products to consumers. Specifically, the GLB Act amends section 4 of the Act in order to provide for a framework for the engagement in new financial activities. Bank holding companies may elect to become a financial holding company if all its subsidiary depository institutions are well-capitalized and well-managed. If these requirements are met, a bank holding company may file a certification to that effect with the Federal Reserve Board and declare that it elects to become a FHC. After the certification and declaration is filed, the FHC may engage either de novo or through an acquisition in any activity that has been determined by the Federal Reserve Board to be financial in nature or incidental to such financial activity. Bank holding companies may engage in financial activities without prior notice to the Federal Reserve Board if those activities qualify under the new list in section 4(k) of the Act. However, notice must be given to the Federal Reserve Board, within 30 days after the FHC has commenced one or more of the financial activities. The Corporation has not elected to become an FHC at this time.

Under the GLB Act, a bank subject to various requirements is permitted to engage through “financial subsidiaries” in certain financial activities permissible for affiliates of FHC’s. However, to be able to engage in such activities a bank must continue to be “well-capitalized” and well-managed and receive at least a “satisfactory” rating in its most recent Community Reinvestment Act examination.

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Community Reinvestment Act

The Community Reinvestment Act requires banks to help serve the credit needs of their communities, including providing credit to low and moderate income individuals and areas. Should the Bank fail to serve adequately the communities it serves, potential penalties may include regulatory denials to expand branches, relocate, add subsidiaries and affiliates, expand into new financial activities and merge with or purchase other financial institutions.

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Privacy of Consumer Financial Information

The GLB Act also contains a provision designed to protect the privacy of each consumer’s financial information in a financial institution. Pursuant to the requirements of the GLB Act, the financial institution regulators have promulgated final regulations intended to better protect the privacy of a consumer’s financial information maintained in financial institutions. The regulations are designed to prevent financial institutions, such as the Bank, from disclosing a consumer’s nonpublic personal information to third parties that are not affiliated with the financial institution.

However, financial institutions can share a customer’s personal information or information about business and corporations with their affiliated companies. The regulations also provide that financial institutions can disclose nonpublic personal information to nonaffiliated third parties for marketing purposes but the financial institution must provide a description of its privacy policies to the consumers and give the consumers an opportunity to opt-out of such disclosure and, thus, prevent disclosure by the financial institution of the consumer’s nonpublic personal information to nonaffiliated third parties.

These privacy regulations will affect how consumer’s information is transmitted through diversified financial companies and conveyed to outside vendors. The Bank does not believe the privacy regulations will have a material adverse impact on its operations in the near term.

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Consumer Protection Rules – Sale of Insurance Products

In addition, as mandated by the GLB Act, the regulators have published consumer protection rules which apply to the retail sales practices, solicitation, advertising or offers of insurance products, including annuities, by depository institutions such as banks and their subsidiaries.

The rules provide that before the sale of insurance or annuity products can be completed, disclosures must be made that state (i) such insurance products are not deposits or other obligations of or guaranteed by the FDIC or any other agency of the United States, the Bank or its affiliates; and (ii) in the case of an insurance product that involves an investment risk, including an annuity, that there is an investment risk involved with the product, including a possible loss of value.

The rules also provide that the Bank may not condition an extension of credit on the consumer’s purchase of an insurance product or annuity from the Bank or its affiliates or on the consumer’s agreement not to obtain or a prohibition on the consumer obtaining an insurance product or annuity from an unaffiliated entity.

The rules also require formal acknowledgement from the consumer that such disclosures have been received. In addition, to the extent practical, the Bank must keep insurance and annuity sales activities physically separate from the areas where retail banking transactions are routinely accepted from the general public.

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Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) addresses, among other matters, increased disclosures; audit committees; certification of financial statements by the principal executive officer and the principal financial officer; evaluation by management of our disclosure controls and procedures and our internal control over financial reporting; auditor reports on our internal control over financial reporting; forfeiture of bonuses and profits made by directors and senior officers in the twelve (12) month period covered by restated financial statements; a prohibition on insider trading during Corporation stock blackout periods; disclosure of off-balance sheet transactions; a prohibition applicable to companies, other than federally insured financial institutions, on personal loans to their directors and officers; expedited filing of reports concerning stock transactions by a company’s directors and executive officers; the formation of a public accounting oversight board; auditor independence; and increased criminal penalties for violation of certain securities laws.

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Patriot Act of 2001

The Patriot Act of 2001, which was enacted in the wake of the September 11, 2001 attacks, includes provisions designed to combat international money laundering and advance the U.S. government’s war against terrorism. The Patriot Act and the regulations which implement it contain many obligations which must be satisfied by financial institutions, including the Bank. Those regulations impose obligations on financial institutions, such as the Bank, to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. The failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for the financial institution.

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Government Policies and Future Legislation

As the enactment of the GLB Act and the Sarbanes-Oxley Act confirm, from time to time various laws are passed in the United States Congress as well as the Pennsylvania legislature and by various bank regulatory authorities which would alter the powers of, and place restrictions on, different types of banks and financial organizations. It is impossible to predict whether any potential legislation or regulations will be adopted and the impact, if any, of such adoption on the business of the Corporation or its subsidiaries, especially the Bank.

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Dodd-Frank Wall Street Reform and Consumer Protection Act

The federal government is considering a variety of reforms related to banking and the financial industry including. Among those reforms is the Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, that was enacted by Congress on July 15, 2010, and was signed into law by President Obama on July 21, 2010. The Dodd-Frank Act is intended to promote financial stability in the U.S., reduce the risk of bailouts and protect against abusive financial services practices by improving accountability and transparency in the financial system and ending the concept of “too big to fail” institutions by giving regulators the ability to liquidate large financial institutions. It is the broadest overhaul of the U.S. financial system since the Great Depression and the overall impact on the Corporation and its subsidiaries is unknown at this time.

The Dodd-Frank Act delegates to various federal agencies the task of implementing its many provisions through regulation. Hundreds of new federal regulations, studies and reports addressing all of the major areas of the new law, including the regulation of banks and their holding companies, will be required, ensuring that federal rules and policies in this area will be further developing for months and years to come. Based on the provisions of the Dodd-Frank Act and anticipated implementing regulations, it is highly likely that banks and thrifts as well as their holding companies will be subject to significantly increased regulation and compliance obligations. The Dodd-Frank Act could require us to make material expenditures, in particular personnel training costs and additional compliance expenses, or otherwise adversely affect our business or financial results. It could also 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 the Bank. Failure to comply with these laws or regulations, even if inadvertent, could result in negative publicity, fines or additional licensing expenses, any of which could have an adverse effect on our cash flow and results of operations. For example, a provision of the Dodd-Frank Act is intended to preclude bank holding companies from treating future trust preferred securities issuances as Tier 1 capital for regulatory capital adequacy purposes. This provision may narrow the number of possible capital raising opportunities the Corporation, and other bank holding companies, might have in the future. As another example, the new law established the Bureau of Consumer Financial Protection, which has been given substantive rule-making authority under most of the consumer protection regulations affecting the Bank in connection with future consumer-related transactions.

The legislation also calls for regulations to be promulgated jointly by the federal banking regulators and the SEC which will require each bank and its holding company with consolidated assets of $1 billion or more (which includes the Bank and the Corporation) to disclose to its federal regulator the structure of its incentive-based compensation arrangements and prohibiting it from entering into any incentive-based compensation arrangement that encourages (as determined by the federal banking regulators) the institution to take inappropriate risk. Such rule is required by the legislation to be adopted on or before April 21, 2011, but at this time it is difficult to predict the extent to which the new rule, and other rules promulgated pursuant to the legislation, will impact the Corporation’s business.

ITEM 1A.

RISK FACTORS

Investment in the Corporation’s common shares involves risk. The market price of the Corporation’s common shares may fluctuate significantly in response to a number of factors including those that follow. The following list contains certain risks that may be unique to the Corporation and to the banking industry. The following list of risks should not be viewed as an all inclusive list or in any particular order.

FDIC assessments may negatively impact earnings

The FDIC has authority to increase regular deposit insurance assessments or impose additional special or emergency assessments if necessary to maintain public confidence in federal deposit insurance or as a result of deterioration in the deposit insurance fund reserve ratio. The Corporation cannot predict what insurance assessment rates will be in the future.

Increases in FDIC insurance premiums may adversely affect the Corporation’s earnings

In response to the impact of economic conditions since 2008 on banks generally and on the FDIC deposit insurance fund, the FDIC changed its risk-based assessment system and increased base assessment rates. On November 12, 2009, the FDIC adopted a rule requiring banks to prepay three years’ worth of premiums to replenish the depleted insurance fund. In February 2011, as required

under the Dodd-Frank Act, the FDIC issued a ruling pursuant to which the assessment base against which FDIC assessments for deposit insurance are made will change. Instead of FDIC insurance assessments being based upon an insured bank’s deposits, FDIC insurance assessments will generally be based on an insured bank’s total average assets minus average tangible equity. With this change, the Corporation expects that its overall FDIC insurance cost will decline. However, a change in the risk categories applicable to the Corporation’s bank subsidiaries, further adjustments to base assessment rates and any special assessments could have a material adverse effect on the Corporation.

The Dodd-Frank Act also requires that the FDIC take steps necessary to increase the level of the Deposit Insurance Fund to 1.35% of total insured deposits by September 30, 2020. In October 2010, the FDIC adopted a Restoration Plan to achieve that goal. Certain elements of the Restoration Plan are left to future FDIC rulemaking, as are the potential for increases to the assessment rates, which may become necessary to achieve the targeted level of the DIF. Future FDIC rulemaking in this regard may have a material adverse effect on the Corporation.

Federal Home Loan Bank of Pittsburgh continues not to pay dividends and limits stock repurchases

On December 23, 2008, the FHLB announced that it would voluntarily suspend the payment of dividends and the repurchase of excess capital stock until further notice. The FHLB expected its ability to pay dividends and add to retained earnings to be significantly curtailed due to low short-term interest rates, an increased cost of maintaining liquidity, other-than-temporary impairment charges, and constrained access to debt markets at attractive rates. Capital stock repurchases from member banks are reviewed on a quarterly basis by the FHLB, and only limited repurchases are expected to occur until further notice. As of December 31, 2010, the Corporation held $14.2 million of FHLB capital stock.

The steadiness of other financial institutions could have detrimental effects

Routine funding transactions may be adversely affected by the actions and soundness of other financial institutions. Financial service institutions are interrelated as a result of trading, clearing, lending, borrowing or other relationships. Transactions are executed on a daily basis with different industries and counterparties, and routinely executed with counterparties in the financial services industry. As a result, a rumor, default or failures within the financial services industry could lead to market-wide liquidity problems which in turn could materially impact the financial condition of the Corporation.

Financial turmoil may increase other-than-temporary-impairment (“OTTI”) charges

Over the last several years, there has been a rise in OTTI charges taken by institutions, as the fair market values of many investment securities have fallen below their amortized cost basis. The increasing duration of unrealized losses on these securities brought about heightened scrutiny by banks, auditors, and outside examiners on whether write-downs were necessary. If the Corporation’s OTTI charges result in it falling below the “well capitalized” regulatory requirement, the Corporation may need to raise additional capital.

The Corporation may need to raise additional capital in the future and such capital may not be available when needed or at all

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations and may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs. In the absence of wholesale funding sources, the Corporation may turn to additional subordinated debt and/or other transactions that might be available. We cannot assure you that such capital will be available to us on acceptable terms or at all. If the Corporation is unable to generate sufficient additional capital though its earnings, or other sources, it would be necessary to slow earning asset growth and or pass up possible acquisition opportunities, which may result in a reduction of future net income growth. Further, an inability to raise additional capital on acceptable terms when needed could have a material adverse effect on our business, financial condition and results of operations.

Sufficient funding to support earning asset growth

The Corporation recognizes the need to grow both wholesale and non-wholesale funding sources to support earning asset growth and to provide appropriate liquidity. The Corporation’s asset growth over the past few years has been funded with various forms of wholesale funding which is defined as wholesale deposits (primarily certificates of deposit) and borrowed funds (FHLB advances, Federal advances and Federal fund line borrowings). Wholesale funding at December 31, 2010 represents approximately 18.3% of total funding compared with approximately 21.5% at December 31, 2009 and 30.9% at December 31, 2008. Wholesale funding generally costs more than deposits generated from the Corporation’s traditional branch system and is subject to certain practical limits such as the FHLB’s Maximum Borrowing Capacity and the Corporation’s liquidity targets. Additionally, regulators might consider wholesale funding beyond certain points to be imprudent and might suggest that future asset growth be reduced or halted.

In the absence of wholesale funding sources, the Corporation might need to reduce earning asset growth through the reduction of current production, sale of assets, and/or the participating out of future and current loans or leases. This in turn might reduce future net income of the Corporation.

The amount loaned to us is generally dependant on the value of the collateral pledged and the Corporation’s financial condition. These lenders could reduce the percentages loaned against various collateral categories, eliminate certain types of collateral and otherwise modify or even terminate their loan programs, particularly to the extent they are required to do so because of capital adequacy or other balance sheet concerns, or if further disruptions in the capital markets occur. Any change or termination of our borrowings from the FHLB, the Federal Reserve or correspondent banks would have an adverse affect on our liquidity and profitability.

On February 27, 2009 the FDIC finalized its risk based assessment rules for ongoing assessments. These new rules include certain upward adjustments in the base assessment rate for rapid growth and use of wholesale funding. These new ongoing assessment rules effectively increase the cost of wholesale funding above certain levels in the form of increased FDIC assessments.

The capital and credit markets remain volatile

The capital and credit markets have been experiencing volatility and disruption for the past few years. In some cases, the markets have produced downward pressure on stock prices and credit availability for certain issuers seemingly without regard to those issuers’ underlying financial strength. If levels of market disruption and volatility worsen, we could experience a material adverse effect on our business, financial condition and results of operations and/or our ability to access capital. Several factors could cause the market price for our common shares to fluctuate substantially in the future, including without limitation:

•

announcements of developments related to our business;

•

fluctuations in our results of operations;

•

sales of substantial amounts of our securities into the marketplace;

•

general conditions in our markets or the worldwide economy;

•

a shortfall in revenues or earnings compared to securities analysts’ expectations;

•

changes in analysts’ recommendations or projections; and

•

our announcement of new acquisitions or other projects.

Market conditions have adversely affected the financial services industry

Declines in the housing market over the past few years, with falling home prices and increasing foreclosures, coupled with a rising unemployment rate, have resulted in write-downs of asset values by financial institutions throughout the country. These write-downs include asset-backed securities, credit default swaps and other derivative securities. Reflecting concern about the stability of the financial markets and the strength of many financial institutions, lenders have reduced or ceased providing funding to borrowers. This market turmoil and tightening of credit could lead to continual elevated levels of commercial and consumer delinquencies, the abundance of merger and acquisition activity, failures of financial institutions and a reduction of general business activity and related revenues.

Political gridlock at state and federal levels

The inability of our federal and state governments to control spending and borrowing, and the resulting record deficits, does not bode well for the future economic growth of our Country and the Commonwealth of Pennsylvania. Unless the problem of the escalating costs of governmental entitlement programs, unfunded spending and growing deficits, are brought under control, we may experience large tax increases, higher interest rates, reduced government services and much slower growth in the coming years, resulting in lower net income to the Corporation.

Previously enacted and potential future legislation, including legislation to reform the U.S. financial regulatory system, could adversely affect our business

Market conditions have resulted in creation of various programs by the United States Congress, the Treasury, the Federal Reserve and the FDIC that were designed to enhance market liquidity and bank capital. As these programs expire, are withdrawn or reduced, the impact on the financial markets, banks in general and their customers is unknown. This could have the effect of, among other things, reducing liquidity, raising interest rates, reducing fee revenue, limiting the ability to raise capital, all of which could have an adverse impact on the financial condition of the Bank and the Corporation.

Additionally, the federal government is considering a variety of other reforms related to banking and the financial industry including, without limitation, the newly adopted Dodd-Frank Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, that was enacted by Congress on July 15, 2010, and was signed into law by President Obama on July 21, 2010. This legislation could require us to make material expenditures, in particular personnel training costs and additional compliance expenses, or otherwise adversely affect our business or financial results. It could also 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 the Bank. Failure to comply with these laws or regulations, even if

inadvertent, could result in negative publicity, fines or additional licensing expenses, any of which could have an adverse effect on our cash flow and results of operations. For example, a provision of the Dodd-Frank Act is intended to preclude bank holding companies from treating future trust preferred securities issuances as Tier 1 capital for regulatory capital adequacy purposes. This provision may narrow the number of possible capital raising opportunities the Corporation, and other bank holding companies, might have in the future.

The new Bureau of Consumer Financial Protection (“BCFP”) may reshape the consumer financial laws through rulemaking and enforcement of unfair, deceptive or abusive practices, which may directly impact the business operations of depository institutions offering consumer financial products or services including the Bank.

The BCFP has broad rulemaking authority to administer and carry out the purposes and objectives of the “Federal consumer financial laws, and to prevent evasions thereof,” with respect to all financial institutions that offer financial products and services to consumers. The BCFP is also authorized to prescribe rules applicable to any covered person or service provider identifying and prohibiting acts or practices that are “unfair, deceptive, or abusive” in connection with any transaction with a consumer for a consumer financial product or service, or the offering of a consumer financial product or service (“UDAP authority”). The potential reach of the BCFP’s broad new rulemaking powers and UDAP authority on the operations of financial institutions offering consumer financial products or services including the Bank is currently unknown.

Potential losses incurred in connection with possible repurchases and indemnification payments related to mortgages that we have sold into the secondary market may require us to increase our financial statement reserves in the future.

We engage in the origination and sale of residential mortgages into the secondary market. In connection with such sales, we make certain representations and warranties, which, if breached, may require us to repurchase such loans or indemnify the purchasers of such loans for actual losses incurred in respect of such loans. These representations and warranties vary based on the nature of the transaction and the purchaser’s or insurer’s requirements but generally pertain to the ownership of the mortgage loan, the real property securing the loan and compliance with applicable laws and applicable lender and government-sponsored entity underwriting guidelines in connection with the origination of the loan. While we believe our mortgage lending practices and standards to be adequate, we may receive requests in the future, which could be material in volume. If that were to happen, we could incur losses in connection with loan repurchases and indemnification claims, and any such losses might exceed our financial statement reserves, requiring us to increase such reserves. In that event, any losses we might have to recognize and any increases we might have to make to our reserves could have a material adverse effect on our business, financial position, results of operations or cash flows.

Accounting standards periodically change and the application of our accounting policies and methods may require the Corporation to make estimates about matters that are uncertain

The regulatory bodies that establish accounting standards, including, among others, the Financial Accounting Standards Board and the SEC, periodically revise or issue new financial accounting and reporting standards that govern the preparation of our consolidated financial statements. The effect of such revised or new standards on our financial statements can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

In addition, the Corporation must exercise judgment in appropriately applying many of our accounting policies and methods so they comply with generally accepted accounting principles. In some cases, the Corporation may have to select a particular accounting policy or method from two or more alternatives. In some cases, the accounting policy or method chosen might be reasonable under the circumstances and yet might result in our reporting materially different amounts than would have been reported if we had selected a different policy or method. Accounting policies are critical to fairly presenting our financial condition and results of operations and may require the Corporation to make difficult, subjective or complex judgments about matters that are uncertain.

Rapidly changing interest rate environment could reduce the Corporation’s net interest margin, net interest income, fee income and net income

Interest and fees on loans and securities, net of interest paid on deposits and borrowings, are a large part of the Corporation’s net income. Interest rates are key drivers of the Corporation’s net interest margin and subject to many factors beyond the control of the Corporation. As interest rates change, net interest income is affected. Rapidly changing interest rates in the future could result in interest expense increasing faster than interest income because of divergence in financial instrument maturities and/or competitive pressures. Further, substantially higher interest rates generally reduce loan demand and may result in slower loan growth. Decreases or increases in interest rates could have a negative effect on the spreads between the interest rates earned on assets and the rates of interest paid on liabilities, and therefore decrease net interest income. Also, changes in interest rates might also impact the values of equity and debt securities under management and administration by the Wealth Management Division which may have a negative impact on fee income. See the section captioned “Net Interest Income” in the MD&A of the 2010 Annual Report for additional details regarding interest rate risk.

Provision for loan and lease losses and level of non-performing loans

All borrowers carry the potential to default and our remedies to recover may not fully satisfy money previously loaned. We maintain an allowance for loan losses, which is a reserve established through a provision for loan losses charged to expense, which represents the Corporation’s best estimate of probable credit losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of the Corporation, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The level of the allowance for loan losses reflects the Corporation’s continuing evaluation of industry concentrations; specific credit risks; loan loss experience; current loan portfolio quality; present economic conditions; and unidentified losses inherent in the current loan portfolio. The determination of the appropriate level of the allowance for loan losses inherently involves a high degree of subjectivity and requires us to make significant estimates of current credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans, identification of additional problem loans and other factors, both within and outside of our control, may require an increase in the allowance for loan losses. In addition, bank regulatory agencies periodically review our allowance for loan losses and may require an increase in the provision for loan losses or the recognition of additional loan charge-offs, based on judgments different than those of the Corporation. An increase in the allowance for loan losses results in a decrease in net income, and possibly risk-based capital, and may have a material adverse effect on our financial condition and results of operations.

The design of the allowance for loan loss methodology is a dynamic process that must be responsive to changes in environmental factors. Accordingly, at times the allowance methodology may be modified in order to incorporate changes in various factors including, but not limited to, levels and trends of delinquencies and charge-offs, trends in volume and types of loans, national and economic trends and industry conditions.

The Corporation’s controls and procedures may fail or be circumvented

The Corporation diligently reviews and updates the its internal controls over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. Any failure or undetected circumvention of these controls could have a material adverse impact on our financial condition and results of operations.

Decreased residential mortgage origination, volume and pricing decisions of competitors

The Corporation originates, sells and services residential mortgage loans. Changes in interest rates and pricing decisions by our loan competitors affect demand for the Corporation’s residential mortgage loan products, the revenue realized on the sale of loans and revenues received from servicing such loans for others, ultimately reducing the Corporation’s net income. New regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which the Corporation utilizes to sell mortgage loans may be introduced and may increase costs and make it more difficult to operate a residential mortgage origination business.

The Corporation’s performance and financial condition may be adversely affected by regional economic conditions and real estate values

The Bank’s loan and deposit activities are largely based in eastern Pennsylvania. As a result, the Corporation’s consolidated financial performance depends largely upon economic conditions in this eastern Pennsylvania region. This region experienced deteriorating local economic conditions during 2008 and 2009, and a continued downturn in the regional real estate market could harm our financial condition and results of operations because of the geographic concentration of loans within this regional area and because a large percentage of our loans are secured by real property. If there is further decline in real estate values, the collateral for the Corporation’s loans will provide less security. As a result, the Corporation’s ability to recover on defaulted loans by selling the underlying real estate will be diminished, and the Bank will be more likely to suffer losses on defaulted loans.

Additionally, a significant portion of the Corporation’s loan portfolio is invested in commercial real estate loans. Often in a commercial real estate transaction, repayment of the loan is dependent on rental income. Economic conditions may affect the tenant’s ability to make rental payments on a timely basis, and may cause some tenants not to renew their leases, each of which may impact the debtor’s ability to make loan payments. Further, if expenses associated with commercial properties increase dramatically, the tenant’s ability to repay, and therefore the debtor’s ability to make timely loan payments, could be adversely affected.

All of these factors could increase the amount of the Corporation’s non-performing loans, increase its provision for loan and lease losses and reduce the Corporation’s net income.

Leasing business transactions may result in additional risks not previously experienced by the Corporation

The Corporation’s leasing business which began operations in September 2006, consists of nation-wide leasing various types of equipment to businesses with an average original equipment cost of $18 thousand per lease. Continued economic sluggishness may result in higher credit losses than we would experience in our traditional lending business, as well as potential increases in state regulatory burdens such as state income taxes, personal property taxes and sales and use taxes.

A continued general economic slowdown could further impact Wealth Management Division revenues

A continued general economic slowdown could decrease the value of Wealth Management Division assets under management and administration resulting in lower fee income, and clients potentially seeking alternative investment opportunities with other providers, which resulting in lower fee income to the Corporation.

Our ability to realize our deferred tax asset may be reduced, which may adversely impact results of operations

Realization of a deferred tax asset requires us to exercise significant judgment and is inherently uncertain because it requires the prediction of future occurrences. The deferred tax asset may be reduced in the future if estimates of future income or our tax planning strategies do not support the amount of the deferred tax asset. If it is determined that a valuation allowance of its deferred tax asset is necessary, the Corporation may incur a charge to earnings.

The Corporation is subject to environmental liability risk associated with lending activities

A significant portion of our loan portfolio is secured by real property. In the course of our business, we may own or foreclose and take title to real estate and could become subject to environmental liabilities with respect to these properties. We may become responsible to a governmental agency or third parties for property damage, personal injury, investigation and clean-up costs incurred by those parties in connection with environmental contamination, or may be required to investigate or clean-up hazardous or toxic substances, or chemical releases at a property. The costs associated with environmental investigation or remediation activities could be substantial. If we were to become subject to significant environmental liabilities, it could have a material adverse effect on our results of operations and financial condition.

The Corporation is subject to certain risks in connection with its use of technology

Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, our general ledger, our deposits, and our loans. While we have established policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there can be no assurance that such events will not occur or that they will be adequately addressed if they do. In addition, any compromise of our security systems could deter customers from using our web site and our online banking service, which involve the transmission of confidential information. Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource certain of our data processing to third-party providers. If our third-party providers encounter difficulties, or if we have difficulty in communicating with them, our ability to adequately process and account for customer transactions could be affected, and our business operations could be adversely impacted. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

The occurrence of any systems failure, interruption, or breach of security could damage our reputation and result in a loss of customers and business, could subject us to additional regulatory scrutiny, or could expose us to civil litigation and possible financial liability. Any of these occurrences could have a material adverse effect on our financial condition and results of operations.

Additionally, financial products and services have become increasingly technology-driven. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so on our part could have a material adverse impact on our business and therefore on our financial condition and results of operations.

The Corporation is subject to certain operational risks, including, but not limited to, customer or employee fraud and data processing system failures and errors

Employee errors and misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

We maintain a system of internal controls and insurance coverage to mitigate operational risks, including data processing system failures and errors and customer or employee fraud. Should our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, results of operations and financial condition.

Potential acquisitions, including the pending acquisition of the Private Wealth Management Group of the Hershey Trust Company, may disrupt the Corporation’s business and dilute shareholder value

We regularly evaluate opportunities to strengthen our current market position by acquiring and investing in banks and in other complementary businesses, or opening new branches. As a result, we may engage in negotiations or discussions that, if they were to result in a transaction, could have a material effect on our operating results and financial condition, including short and long-term liquidity. Our acquisition activities could be material to us. For example, we could issue additional shares of common stock in a purchase transaction, which could dilute current shareholders’ ownership interest. These activities could require us to use a substantial amount of cash, other liquid assets, and/or incur debt. In addition, if goodwill recorded in connection with our prior or potential future acquisitions were determined to be impaired, then we would be required to recognize a charge against our earnings, which could materially and adversely affect our results of operations during the period in which the impairment was recognized. Any potential charges for impairment related to goodwill would not impact cash flow, tangible capital or liquidity.

Our acquisition activities, including the pending acquisition of the private wealth management business (the “PWMG Business”) of the Hershey Trust Company, could involve a number of additional risks, including the risks of:

•

incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential transactions, resulting in the Corporation’s attention being diverted from the operation of our existing business;

•

using inaccurate estimates and judgments to evaluate credit, operations, management, and market risks with respect to the target institution or assets;

•

potential exposure to unknown or contingent liabilities of banks and businesses we acquire;

•

the time and expense required to integrate the operations and personnel of the combined businesses;

•

experiencing higher operating expenses relative to operating income from the new operations;

•

creating an adverse short-term effect on our results of operations;

•

losing key employees and customers as a result of an acquisition that is poorly received; and

•

risk of significant problems relating to the conversion of the financial and customer data of the entity being acquired into the Corporation’s financial and customer product systems.

We cannot assure you that we will be successful in overcoming these risks or any other problems encountered in connection with pending or potential acquisitions. Our inability to overcome these risks could have an adverse effect on our levels of reported net income, ROE and ROA, and our ability to achieve our business strategy and maintain our market value.

Attractive acquisition opportunities may not be available to us in the future

We may not be able to sustain a positive rate of growth or be able to expand our business. We expect that other banking and financial service companies, many of which have significantly greater resources than us, will compete with us in acquiring other financial institutions if we pursue such acquisitions. This competition could increase prices for potential acquisitions that we believe are attractive. Also, acquisitions are subject to various regulatory approvals. If we fail to receive the appropriate regulatory approvals for a transaction, including the PWMG Business, we will not be able to consummate such transaction which we believe to be in our best interests. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals. Other factors, such as economic conditions and legislative considerations, may also impede or prohibit our ability to expand our market presence. If we are not able to successfully grow our business, our financial condition and results of operations could be adversely affected.

The financial services industry is very competitive

The Corporation faces competition in attracting and retaining deposits, making loans, and providing other financial services such as trust and investment management services throughout the Corporation’s market area. The Corporation’s competitors include other community banks, larger banking institutions, trust companies and a wide range of other financial institutions such as credit unions, registered investment advisors, financial planning firms, leasing companies, government-sponsored enterprises, on-line banking enterprises, mutual fund companies, insurance companies and other non-bank businesses. Many of these competitors have substantially greater resources than the Corporation. This is especially evident in regards to advertising and public relations spending. For a more complete discussion of our competitive environment, see “Business—Competition” in Item 1 above. If the Corporation is unable to compete effectively, the Corporation may lose market share and income from deposits, loans, and other products may be reduced.

Additionally, increased competition among financial services companies due to consolidation of certain competing financial institutions and the conversion of certain investment banks to bank holding companies may adversely affect our ability to market our products and services.

The Corporation’s common stock is subordinate to all of our existing and future indebtedness; regulatory and contractual restrictions may limit or prevent us from paying dividends on our common stock; and we are not limited on the amount of indebtedness we and our subsidiaries may incur in the future

Our common stock ranks junior to all indebtedness, including our outstanding subordinated debentures, and other non-equity claims on the Corporation with respect to assets available to satisfy claims on the Corporation, including in a liquidation of the Corporation. Additionally, unlike indebtedness, where principal and interest would customarily be payable on specified due dates, in the case of our common stock, dividends are payable only when, as and if authorized and declared by our Board of Directors and depend on, among other things, our results of operations, financial condition, debt service requirements, other cash needs and any other factors our Board of Directors deems relevant. Under Pennsylvania law we are subject to restrictions on payments of dividends out of lawfully available funds. Also, the Corporation’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors.

In addition, we are not limited by our common stock in the amount of debt or other obligations we or our subsidiaries may incur in the future. Accordingly, we and our subsidiaries may incur substantial amounts of additional debt and other obligations that will rank senior to our common stock or to which our common stock will be structurally subordinated.

There may be future sales of additional common stock or other dilution of our equity, which may adversely affect the market price of our common stock

We are not restricted from issuing additional common stock or other securities. Additionally, our shareholders may in the future approve the authorization of additional classes or series of stock which may have distribution or other rights senior to the rights of our common stock, or may be convertible into or exchangeable for, or may represent the right to receive, common stock or substantially similar securities. The future issuance of shares of our common stock or any other such future equity classes or series could have a dilutive effect on the holders of our common stock. Additionally, the market value of our common stock could decline as a result of sales by us of a large number of shares of common stock or any future class or series of stock in the market or the perception that such sales could occur.

Additional risk factors also include the following all of which may reduce revenues and/or increase expenses and/or pull the Corporation’s attention away from core banking operations which may ultimately reduce the Corporation’s net income:

•

Inability to hire or retain key professionals, management and staff;

•

Changes in securities analysts’ estimates of financial performance;

•

Volatility of stock market prices and volumes;

•

Rumors or erroneous information;

•

Changes in market values of similar companies;

•

New developments in the banking industry;

•

Variations in quarterly or annual operating results;

•

New litigation or changes in existing litigation;

•

Regulatory actions;

•

Changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

As of December 31, 2010, the Corporation owns or leases 17 full-service branch locations, seven limited-service Life Care Community branches and eight other office properties which serve as administrative offices.

The total minimum cash lease payments for office, branch office (including ground leases) and life care community locations amounts to $133 thousand per month.

The following table details the Corporation’s properties as of December 31, 2010:


Property Address	Owned/Leased		Net Book Value as of December 31, 2010 (dollars in thousands)		Total Deposits as of December 31, 2010 (dollars in thousands)
Full Service Branches:
801 Lancaster Ave., Bryn Mawr, PA 19010*		Owned	$	5,377	$	562,138
50 W. Lancaster Ave., Ardmore, PA 19003		Leased		2,494		75,768
5000 Pennell Rd., Aston, PA 19014***		Leased		463		14,376
3218 Edgemont Ave., Brookhaven, PA 19015***		Owned		767		56,937
US Rts. 1 and 100, Chadds Ford, PA 19317***		Leased		90		24,947
23 E. Fifth St., Chester, PA 19013***		Leased		35		29,675
31 Baltimore Pk., Chester Heights, PA 19107***		Leased		516		42,147
One Tower Bridge, West Conshohocken, PA 19428		Leased		5		20,345
237 N. Pottstown Pk., Exton, PA 19341		Leased		869		50,039
18 W. Eagle Rd., Havertown, PA 19083		Owned		589		71,701
106 E. Street Rd., Kennett Square, PA 19348***		Leased		523		16,083
22 W. State St., Media, PA 19063***		Owned		3,352		63,725
3601 West Chester Pk., Newtown Square, PA 19073		Leased		1,236		40,855
39 W. Lancaster Ave., Paoli, PA 19301		Owned		1,667		55,160

Property Address

Owned/Leased

Net Book Value as of
December 31, 2010
(dollars in thousands)

Total Deposits as of
December 31, 2010
(dollars in thousands)

330 Dartmouth Ave., Swarthmore, PA 19081***

Owned

752

50,489

849 Paoli Pk., West Chester, PA 19380

Leased

1,488

27,401

330 E. Lancaster Ave., Wayne, PA 19087

Owned

2,683

109,671

Life Care Community Offices:

601 N. Ithan Ave., Bryn Mawr, PA 19010

Leased

—

4,627

1400 Waverly Rd., Gladwyne, PA 19035

Leased

—

2,440

3300 Darby Rd., Haverford, PA 19041

Leased

—

7,156

11 Martins Run, Media, PA 19063

Leased

—

3,363

535 Gradyville Rd., Newtown Square, PA 19073

Leased

—

7,391

404 Cheswick Pl., Rosemont, PA 19010

Leased

—

3,002

1615 E. Boot Rd., West Chester, PA 19380

Leased

—

1,996

Other Administrative Offices:

2, 6 S. Bryn Mawr Ave., Bryn Mawr, PA 19010

Leased

375

Not applicable

10 S. Bryn Mawr Ave., Bryn Mawr, PA 19010

Owned

766

Not applicable

4093 W. Lincoln Hwy., Exton, PA 19341**

Leased

—

Not applicable

16 Campus Blvd., Newtown Square, PA 19073**

Leased

—

Not applicable

322 E. Lancaster Ave., Wayne, PA 19087

Owned

1,316

Not applicable

Subsidiary Offices:

Lau Associates - 20 Montchanin Rd., Greenville, DE 19807

Leased

223

Not applicable

BMTC-DE - 20 Montchanin Rd., Greenville, DE 19807

Leased

Not applicable

Total:

25,632

1,341,432

*	Corporate headquarters and executive offices

**	Lending office

***	Former FKF branch office

ITEM 3.

LEGAL PROCEEDINGS

Neither the Corporation nor any of its subsidiaries is a party to, nor is any of their property the subject of, any material legal proceedings other than ordinary routine litigation incident to their businesses.

ITEM 4.

RESERVED

PART II

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Corporation’s common stock is traded on the NASDAQ Stock Market under the symbol BMTC. As of December 31, 2010, there were 623 holders of record of the Corporation’s common stock.

•

Price Range of Shares

The information required by this Item 5 is incorporated by reference to the information appearing under the caption “Price Range of Shares” on page 67 of the 2010 Annual Report.

•

Comparison of Cumulative Total Return Chart

The information required by this Item 5 is incorporated by reference to the information appearing under the caption “Total Return Performance” on page 68 of the 2010 Annual Report.

•

Equity Compensation Plan Information

The information required by this Item 5 relating to common stock that may be issued upon the exercise of options under the Corporation’s Stock Option Plans as of December 31, 2010 is incorporated by reference to the information appearing under the caption “Equity Based Compensation” in the 2011 Proxy Statement. Equity compensation plan information is incorporated by reference to Item 12 of this Form 10-K. Additional information regarding the Corporation’s stock option plans can be found at Note 18 – “Stock Based Compensation” in the accompanying Notes to Consolidated Financial Statements found in the 2010 Annual Report and such information is incorporated herein by reference thereto.

We have agreed to pay, and our non-employee independent directors have agreed to accept, payment of their annual $12,500 retainer compensation in the form of our common stock, payable in April of each year at the market value of the stock on the day prior to the day of payment. If all of the Corporation’s non-employee independent directors, including the directors elected at the Annual Meeting, continue this compensation arrangement for their 2011-2012 terms as directors, it is estimated, based on the $17.45 per share market price of the common stock on December 31, 2010, as listed on NASDAQ, that such directors, as a group, will receive a total of 5,731 shares of our common stock as retainer compensation.

•

Issuer Purchases of Equity Securities

The following tables present the repurchasing activity of the Corporation during the fourth quarter of 2010:

Shares Repurchased in the 4 ^th Quarter of 2010 ⁽ ¹ ⁾ ⁽ ² ⁾


Period:	Total Number of Shares Purchased		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
Oct. 1, 2010 – Oct. 31, 2010		1,315	$	17.30		—		195,705
Nov. 1, 2010 – Nov. 30, 2010		—		—		—		195,705
Dec. 1, 2010 – Dec. 31, 2010		—		—		—		195,705

Total		1,315	$	17.30

Notes to these tables:

(1)

On February 24, 2006, the Board of Directors of the Corporation adopted a new 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. All shares purchased through the 2006 Program were accomplished in open market transactions.

(2)	In October, November and December 2010, 1,315 shares were purchased by the Corporation’s Deferred Compensation Plans through open market transactions by the Corporation’s Wealth Management Division investment personnel.

•

Sales of Unregistered Securities

The information required by this Item 5 is incorporated by reference to the information appearing under in Note 25-C – Regulatory Capital Requirements – Private Transactions in Securities – of our financial statements in the 2010 Annual Report.

•

Dividends Declared

The following table indicates the frequency and amount of all cash dividends declared on the Corporation’s common stock for the past two fiscal years.


Quarter ended	Dividend Declared

December 31, 2010	$	0.15
September 30, 2010		0.14
June 30, 2010		0.14
March 31, 2010		0.14

December 31, 2009	$	0.14
September 30, 2009		0.14
June 30, 2009		0.14
March 31, 2009		0.14

The information regarding dividend restrictions set forth in Note 24 – Dividend Restrictions – of our financial statements in the 2010 Annual Report is incorporated into this item by reference.

ITEM 6.

SELECTED FINANCIAL DATA

The information required by this Item 6 is incorporated by reference to the information appearing under the caption “Selected Financial Data” in the financial section of the 2010 Annual Report as well as information related to accounting changes found under the caption “New Accounting Pronouncements” at Note 1 Item 1-W of the 2010 Annual Report.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)

The information required by this Item 7 is incorporated by reference to the information appearing under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the financial section of the 2010 Annual Report.

ITEM 7A.

QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item 7A is incorporated by reference to information appearing in the MD&A Section of the 2010 Annual Report, more specifically in the sections entitled “Net Interest Income”—Rate/Volume Analyses (Tax-equivalent Basis), Analysis of Interest Rate and Interest Differential, Net Interest Income and Net Interest Margin—2010 Compared to 2009, and—2009 Compared to 2008, Net Interest Margin, Interest Rate Sensitivity, Summary of Interest Rate Simulation, and Gap Report, and Fair Value Adjustments Impacting the Statement of Income; “Provision for Loan and Lease Losses”—General Discussion of the Allowance for Loan and Lease Losses, Portfolio Segmentation, Impairment Measurement, Troubled Debt Restructurings, Charge-off Policy, Asset Quality and Analysis of Credit Risk, Non-Performing Assets, TDRs and Related Ratios as of December 31, Summary of Changes in the Allowance of Loan and Lease Losses, Allocation of Allowance for Loan and Lease Losses; “Non-Interest Income”; “Non-Interest Expense”; “Income Taxes”; “Balance Sheet Analysis”; “Discussion of Segments”; “Capital”; “Liquidity”; “Off Balance Sheet Risk”; “Contractual Cash Obligation of the Corporation as of December 31, 2010”; and “Other Information”.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and the auditor’s report thereon and supplementary data required by this Item 8 are incorporated by reference to the financial section of the 2010 Annual Report.

ITEM 9.

CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.

CONTROLS AND PROCEDURES

•

Evaluation of Disclosure Controls and Procedures

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 Chief Financial Officer, J. Duncan Smith, CPA, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2010 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of December 31, 2010, 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.

•

Changes in Internal Control over Financial Reporting

As of the date of this Report, there have not been any significant changes in the Corporation’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Corporation’s internal control over financial reporting.

•

Design and Evaluation of Internal Control Over Financial Reporting

Pursuant to Section 404 of Sarbanes-Oxley, we have incorporated a report of management’s assessment of the design and effectiveness of our internal controls as part of this Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Our independent registered public accounting firm, KPMG LLP (“KPMG”), also attested to, and reported on, the effectiveness of internal control over financial reporting. Management’s report and KPMG’s attestation report are incorporated herein by reference to our 2010 Annual Report under the captions entitled “Management’s Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm”.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information with respect to Directors of the Corporation and Committees of the Corporation’s Board of Directors is incorporated by reference to the 2011 Proxy Statement under the captions “Corporate Governance” and “Our Board of Directors.”

Each member of the Audit Committee is independent and financially literate as defined by NASDAQ. The Board of Directors of the Corporation has determined that Scott M. Jenkins and Britton H. Murdoch are financial experts as defined by SEC regulations.

The Boards of Directors of the Corporation and the Bank have each determined that all of their members are independent and meet the independence requirements of the NASDAQ, except for Frederick C. Peters, II, Francis J. Leto and Donald S. Guthrie.

•

Executive Officers of the Corporation and the Bank

Below is certain information with respect to the executive officers of the Corporation and Bank as of March 1, 2011:


NAME	AGE AS OF MARCH 1, 2011	OFFICE WITH THE CORPORATION AND/OR BANK
Frederick C. Peters II	61	President and Chief Executive Officer and Chairman of Corporation and Bank

J. Duncan Smith, CPA	52	Treasurer and Chief Financial Officer of Corporation and Executive Vice President, Treasurer & Chief Financial Officer of Bank

Alison E. Gers	53	Executive Vice President of Bank – Community Banking Division, Marketing, Technology and Information, Services and Operations

Joseph G. Keefer	52	Executive Vice President of Bank – Chief Lending Officer

Geoffrey L. Halberstadt	54	Secretary of Corporation and Executive Vice President, Secretary and Chief Credit Policy Officer of the Bank

Francis J. Leto	51	Executive Vice President of Bank – Wealth Management Division

•

Mr. Peters was elected President and Chief Executive Officer and a Director of the Corporation and the Bank on January 22, 2001. Mr. Peters was elected the Chairman of each of the Boards of the Bank and Corporation effective August 5, 2002. Prior to that, Mr. Peters was founder, President and Chief Executive Officer of the 1 ^st Main Line Bank, a division of National Penn Bank, from May 1995 to January 2001.

•

Mr. Smith has been employed by the Corporation since April 2005 and is the Treasurer and Chief Financial Officer of the Corporation and Executive Vice President, Treasurer and Chief Financial Officer of the Bank. From March 1993 through March 2005, Mr. Smith was the Principal Accounting Officer for First Chester County Corporation which is headquartered in West Chester, PA. During his tenure at First Chester County Corporation he held a variety of positions, the last of which was Executive Vice President and principal financial officer.

•

Ms. Gers was employed by the Bank in 1998 as Senior Vice President of Marketing. Ms. Gers was appointed Executive Vice President of the Bank in 2001. Since joining the Bank, Ms. Gers has held various positions. As of September 2005, Ms. Gers became responsible for the Community Banking Division, marketing, technology and information services and operations.

•

Mr. Keefer was employed by the Bank in 1991 as Vice President and Commercial Lending manager. Mr. Keefer was made the Bank’s Chief Lending Officer in December 1997. In February 2001, Mr. Keefer was designated Executive Vice President and Chief Lending Officer of the Bank. In December 2002, Mr. Keefer assumed responsibility for the Bank’s Credit Division.

•

Mr. Halberstadt was employed by the Bank in 1991 as Vice President in the Construction Loan department. Mr. Halberstadt was made Senior Vice President and Risk Management Officer of the Bank and Vice President of the Corporation in January 2001. In April 2010, Mr. Halberstadt was appointed Executive Vice President and Chief Credit Policy Officer of the Bank and Secretary of the Corporation and Bank.

•

Mr. Leto has been Executive Vice President and head of the Bank’s Wealth Management Division, since January 20, 2009, and has served as a member of the Corporation’s and the Bank’s Boards of Directors since 2002. Previously, Mr. Leto served as General Counsel for Lifestyle Development, LP from October 2007 to January 2009; of Counsel for Brett Senior & Associates from April 2006 to January 2009; a partner in the law firm of Celli and Leto, LLP from January 1995 to March 2006; and President, Brandywine Abstract Company, L.P. from May 1988 to January 2009.

The Corporation has adopted a Code of Business Conduct and Ethics (the “Code”) which amended, restated and combined into one code its Code of Ethics for Officers and Directors and its Employee Code of Ethics. The Code is available on the Corporation’s website at www.bmtc.com by clicking “About Us” followed by “Investor Relations” and “Governance Documents,” and printed copies are available to any shareholder upon request. The Code meets the requirements for a code of ethics for the Corporation’s Chief Executive Officer, Principal Financial Officer and Comptroller or persons performing similar functions under Item 406 of Regulation S-K of the SEC. Any amendments to the Code, or any waivers of the Code for directors or executive officers will be disclosed promptly on a Form 8-K filed with the SEC or by any other means approved by the SEC.

The information with respect to compliance with Section 16 of SEC Exchange Act of 1934 is incorporated by reference to the 2011 Proxy Statement under the caption “section 16(a) Beneficial Ownership Reporting Compliance.”

ITEM 11.

EXECUTIVE COMPENSATION

The information required for Item 11 is incorporated by reference to the 2011 Proxy Statement under the captions “Compensation Committee Interlocks and Insider Participation,” “Director Compensation,” “Compensation Discussion and Analysis,” “Compensation Committee Report,” and “Executive Compensation.”

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required for Item 12 is found below and incorporated by reference to Item 5 of this 2010 Form 10-K and to the caption “Security Ownership of Certain Beneficial Owners and Management” of the 2011 Proxy Statement.

Equity Compensation Plan Information


Plan Category	A. Number of securities to be issued upon exercise of outstanding options		B. Weighted- average exercise price of outstanding options		C. Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A)
Equity compensation plans approved by shareholders		993,710	$	19.82		425,884
Equity compensation plans not approved by shareholders		—		—		—
Total		993,710	$	19.82		425,884

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required for Item 13 is incorporated by reference to sections titled “Transactions With Related Persons” and “Corporate Governance – Director Independence” the 2011 Proxy Statement.

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required for Item 14 is incorporated by reference to the 2011 Proxy Statement under the caption “Audit and Non-Audit Fees.”

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 15(a)(1) — The following items are incorporated by reference to the 2010 Annual Report, attached hereto as Exhibit 13.1 (see table of contents on cover of 2010 Annual Report for specific page references):

Report of Independent Registered Public Accounting Firm, KPMG LLP

Consolidated Financial Statements and related Notes

Quarterly Results of Operations

Item 15(a)(2) — Financial Statement Schedules are omitted because of the absence of the conditions under which they are required or because the information called for is included in the Consolidated Financial Statements or Notes thereto.

Item15(a)(3) — 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

2.3		Stock Purchase Agreement, dated as of February 18, 2011, by and between Bryn Mawr Bank Corporation and Hershey Trust Company, incorporated by reference to Exhibit 2.1 to the Corporation’s 8-K filed with SEC on February 18, 2011

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**		Form of Restricted Stock Agreement for Employees (Service/Performance Based) Subject to the 2010 Long Term Incentive Plan, filed herewith

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


Exhibit No.		Description and References
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

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, incorporated by reference to Exhibit 10.24 of the Corporation’s Form 10-Q filed with the SEC on May 10, 2010

10.25		Placement Agency Agreement dated as of May 13, 2010, among Bryn Mawr Bank Corporation, Stifel Nicolaus & Company, Incorporation, Keefe, Bruyette & Woods, Inc., and Boenning & Scattergood, Inc., incorporated by reference to Exhibit 1.1 to the Corporation’s Form 8-K filed with the SEC on May 14, 2010

10.26		Form of Purchase Agreement relating to May 2010 Registered Direct Offering, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K filed with the SEC on May 14, 2010

10.27		Amended and Restated Transition, Consulting, Noncompetition and Retirement Agreement, dated November 25, 2008, by and among First Keystone Financial, Inc., First Keystone Bank and Donald S. Guthrie, as assumed by Bryn Mawr Bank Corporation and The Bryn Mawr Trust Company as of July 1, 2010, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K filed with the SEC on July 1, 2010


Exhibit No.		Description and References
10.28		First Keystone Financial, Inc. Amended and Restated 1998 Stock Option Plan, as assumed by Bryn Mawr Bank Corporation, incorporated by reference to Exhibit 10.1 to the Corporation’s Post-Effective Amendment No. 1 to Form S-4 on Form S-3, filed with the SEC on July 9, 2010

10.29*		Executive Change-of-Control Amended and Restated Severance Agreement, dated September 27, 2010, between the Bryn Mawr Trust Company and Geoffrey L. Halberstadt, filed herewith

10.30*		Restricted Stock Agreement for Employees (Service/Performance Based) Subject to the 2010 Long Term Incentive Plan, dated as of January 10, 2011, for Francis J. Leto, filed herewith

13.1		Corporation’s Annual Report to Shareholders for the year ended December 31, 2009, filed herewith

21.1		List of Subsidiaries, filed herewith

23.1		Consent of KPMG LLP, 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 Chief 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 Chief 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

99.1		Corporation’s Proxy Statement for 2010 Annual Meeting to be held on April 27, 2011, expected to be filed with the SEC on or around March 28, 2011, and incorporated herein by reference

*	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.

Item 15(b) — The Exhibits described above in Item 15(a)(3) are attached hereto or incorporated by reference herein, as noted

Item 15(c) — Not Applicable

SIGNATURES

Pursuant to the requirements of section 13 or 15d of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized

(Registrant) Bryn Mawr Bank Corporation

By (Signature and Title) /s/ J. Duncan Smith, Treasurer and Principal Financial Officer

Date March 16, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Corporation and in the capacities and on the date indicated.


NAME	TITLE	DATE

/s/ Frederick C. Peters II	Chairman, President and Chief Executive Officer	March 16, 2011
Frederick C. Peters II	(Principal Executive Officer) and Director

/s/ J. Duncan Smith	Treasurer and Principal Financial Officer	March 16, 2011
J. Duncan Smith

/s/ David E. Lees	Director	March 11, 2011
David E. Lees

/s/ Andrea F. Gilbert	Director	March 11, 2011
Andrea F. Gilbert

/s/ Wendell F. Holland	Director	March 14, 2011
Wendell F. Holland

/s/ Francis J. Leto	Director	March 14, 2011
Francis J. Leto

/s/ B. Loyall Taylor, Jr.	Director	March 14, 2011
B. Loyall Taylor, Jr.

/s/ Thomas L. Bennett	Director	March 11, 2011
Thomas L. Bennett

/s/ Britton H. Murdoch	Director	March 9, 2011
Britton H. Murdoch

/s/ Scott M. Jenkins	Director	March 9, 2011
Scott M. Jenkins

/s/ Donald S. Guthrie	Director	March 11, 2011
Donald S. Guthrie

EXHIBIT INDEX


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

2.3		Stock Purchase Agreement, dated as of February 18, 2011, by and between Bryn Mawr Bank Corporation and Hershey Trust Company, incorporated by reference to Exhibit 2.1 to the Corporation’s 8-K filed with SEC on February 18, 2011

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**		Form of Restricted Stock Agreement for Employees (Service/Performance Based) Subject to the 2010 Long Term Incentive Plan, filed herewith

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


Exhibit No.		Description and References
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

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, incorporated by reference to Exhibit 10.24 of the Corporation’s Form 10-Q filed with the SEC on May 10, 2010

10.25		Placement Agency Agreement dated as of May 13, 2010, among Bryn Mawr Bank Corporation, Stifel Nicolaus & Company, Incorporation, Keefe, Bruyette & Woods, Inc., and Boenning & Scattergood, Inc., incorporated by reference to Exhibit 1.1 to the Corporation’s Form 8-K filed with the SEC on May 14, 2010

10.26		Form of Purchase Agreement relating to May 2010 Registered Direct Offering, incorporated by reference to Exhibit 10.1 of the Corporation’s Form 8-K filed with the SEC on May 14, 2010

10.27		Amended and Restated Transition, Consulting, Noncompetition and Retirement Agreement, dated November 25, 2008, by and among First Keystone Financial, Inc., First Keystone Bank and Donald S. Guthrie, as assumed by Bryn Mawr Bank Corporation and The Bryn Mawr Trust Company as of July 1, 2010, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 8-K filed with the SEC on July 1, 2010

10.28		First Keystone Financial, Inc. Amended and Restated 1998 Stock Option Plan, as assumed by Bryn Mawr Bank Corporation, incorporated by reference to Exhibit 10.1 to the Corporation’s Post-Effective Amendment No.1 to Form S-4 on Form S-3, filed with the SEC on July 9, 2010


Exhibit No.		Description and References
10.29*		Executive Change-of-Control Amended and Restated Severance Agreement, dated September 27, 2010, between the Bryn Mawr Trust Company and Geoffrey L. Halberstadt, filed herewith

10.30*		Restricted Stock Agreement for Employees (Service/Performance Based) Subject to the 2010 Long Term Incentive Plan, dated as of January 10, 2011, for Francis J. Leto, filed herewith

13.1		Corporation’s Annual Report to Shareholders for the year ended December 31, 2010, filed herewith

21.1		List of Subsidiaries, filed herewith

23.1		Consent of KPMG LLP, 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 Chief 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 Chief 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

99.1		Corporation’s Proxy Statement for 2010 Annual Meeting to be held on April 27, 2011, expected to be filed with the SEC on or around March 28, 2011, and incorporated herein by reference

*	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.

Exhibit 10.3

BRYN MAWR BANK CORPORATION

RESTRICTED STOCK AGREEMENT FOR EMPLOYEES

(SERVICE/PERFORMANCE BASED)

SUBJECT TO THE 2010 LONG TERM INCENTIVE PLAN


Grantee:

Date of Grant:		August 20, 2010

Number of Shares:

Restricted Period:		August 20, 2010 to August 19, 2013

Performance Goal:		The Corporation’s total shareholder return relative to the total shareholder return of the NASDAQ Community Bank Index as calculated according to Exhibit A hereto

AGREEMENT, dated as of the Date of Grant set forth above by and between BRYN MAWR BANK CORPORATION (the “Corporation”) and the Grantee named above (the “Grantee”).

1. The Plan . This Agreement is subject to the terms and conditions of the Bryn Mawr Bank Corporation 2010 Long Term Incentive Plan (the “Plan”) as approved by the Board of Directors of the Corporation on February 26, 2010 and by the Corporation’s shareholders on April 28, 2010. Except as otherwise specified herein, all capitalized terms used in this Agreement shall have the meanings given to them in the Plan. The term “Corporation” as used in this Agreement with reference to employment shall include employment with any Subsidiary of the Corporation.

2. Grant of Restricted Stock .

a. Subject to the terms and conditions of the Plan and this Agreement, the Corporation’s Compensation Committee (“Compensation Committee”) hereby grants to the Grantee the number of shares of its Common Stock set forth above (the “Restricted Stock”).

b. Upon execution of this Agreement by the Grantee, the Corporation will cause the issuance of the Restricted Stock to Grantee subject to the terms and conditions of this Agreement and the Plan. Restricted Stock will be held by the secretary of the Corporation as escrow agent (“Escrow Agent”). The certificate or certificates representing such shares of Restricted Stock will not be delivered by the Escrow Agent to the Grantee unless and until the shares of Restricted Stock are vested and all other terms and conditions in this Agreement have been satisfied. The Escrow Agent may, in its discretion, elect to enter into alternative arrangements for the escrow of the shares of Restricted Stock if, in the Escrow Agent’s discretion, such shares are issued in book entry form.

c. The certificate or certificates representing the Restricted Stock will contain the following legend: “This certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture and restrictions against transfer) set forth in the Bryn Mawr Bank Corporation 2010 Long Term Incentive Plan and an agreement entered into between the registered owner and the Bryn Mawr Bank Corporation. Release from such terms and conditions will be made only in accordance with the provisions of the Plan and the Agreement, a copy of each of which is on file with the office of the corporate secretary of Bryn Mawr Bank Corporation.”

d. If a book entry system is used with respect to the issuance of Restricted Stock, appropriate notations of forfeiture possibility and transfer restrictions will be made on the system with respect to the account or accounts to which the Restricted Stock are credited.

e. Upon vesting of the Restricted Stock and satisfaction of all of the other terms and conditions in this Agreement, the Corporation will cause replacement stock certificate(s) without the restrictive legend referred to in subsection 2. c. above to be issued and delivered to Grantee as soon as practicable.

3. Terms and Conditions . The Grant is subject to the following terms and conditions:

a. Restricted (Vesting) Period . The period of time during which the transfer of shares of Restricted Stock is restricted is from the Date of Grant to August 19, 2013 (the “Restricted Period”) The time period restriction will lapse and Restricted Stock will vest upon expiration of the applicable Restricted Period and achievement of the Performance Goals as defined in subsection 3. b., but only if the Grantee remains continuously employed by the Corporation through the end of the applicable Restricted Period or as otherwise provided herein.

b. Performance Goals . The Restricted Stock is issued subject to the performance goals (“Performance Goals”) set forth on Exhibit A and shall only vest if the Performance Goals are achieved and the timing restrictions set forth in subsection 3. a. have lapsed. The Compensation Committee shall determine whether the performance goals have been achieved in accordance with Exhibit A attached hereto. The Compensation Committee shall determine within 75 days after August 19, 2013 whether the Performance Goals have been achieved in accordance with Exhibit A attached hereto. Any fractional shares shall be rounded to the nearest whole numbers of shares. No vesting shall be deemed to occur unless and until the Compensation Committee certifies in writing which Performance Goals have been achieved. The Compensation Committee shall make such certification no later than 75 days after August 19, 2013. The date on which the Compensation Committee certifies whether a Performance Goal has been achieved that results in the vesting of some or all of the Restricted Stock referred to in this Agreement as the “Vesting Date”.

c. Prohibition Against Sale, Assignment, Etc. Unvested Restricted Stock may not be sold, assigned or transferred, except by Will or by the laws of descent and distribution, and may not be pledged, hypothecated or otherwise encumbered.

d. Rights as a Shareholder . Grantee will have all of the rights and privileges of a shareholder with respect to the Restricted Stock including, but not limited to, the right to vote the Restricted Stock and the right to receive dividends thereon, if and when declared by the Corporation’s board of directors; provided, however, that all such rights and privileges will cease immediately upon any forfeiture of unvested Restricted Stock.

4. Forfeiture .

a. Forfeiture . All Restricted Stock that has not vested at the Vesting Date in accordance with subsections 3. a. and 3. b. and Exhibit A attached hereto shall be forfeited in their entirety and automatically transferred to and reacquired by the Corporation at no cost to the Corporation. Grantee hereby appoints the Escrow Agent as Grantee’s attorney-in-fact with irrevocable power and authority to take any action and execute all documents, including stock powers, which may be necessary to transfer the unvested Restricted Stock to the Corporation upon determination of forfeiture.

b. Forfeiture of Unvested Restricted Stock and Payment to the Corporation for Vested Restricted Stock If Grantee Engages in Certain Activities . The provisions of this subsection 4. b. will apply to all Restricted Stock granted to Grantee under the Plan. If, at any time during the Restricted Period, or (ii) two (2) years after termination of, or leaving, Grantee’s employment with the Corporation, Grantee engages in any activity inimical, contrary or harmful to the interests of the Corporation including, but not limited to (A) conduct related to Grantee’s employment for which either criminal or civil penalties against Grantee may be brought, (B) violation of the Corporation’s policies including, without limitation, the Corporation’s insider trading policy, (C) soliciting of any customer of the Corporation for business which would result in such customer terminating their relationship with the Corporation; soliciting or inducing any individual who is an employee or director of the Corporation to leave the Corporation or otherwise terminate their relationship with the Corporation, (D) disclosing or using any confidential information or material concerning the Corporation, or (E) participating in a hostile takeover attempt, then (x) all shares of Restricted Stock that have not vested effective as of the date on which Grantee engages in such activity, unless terminated sooner by operation of another term or condition of this Agreement or the Plan, shall be forfeited in their entirety and automatically transferred to and acquired by the Corporation at no cost to the

Corporation, and (y) for any Restricted Stock which has vested and been delivered to Grantee, the Grantee shall pay to the Corporation the market value of the Restricted Stock on the date of the grant or the day Grantee engages in such activity, whichever is greater. The term “confidential information” as used in this Agreement includes, but is not limited to, records, lists, and knowledge of the Corporation’s clients, methods of operation, processes, trade secrets, methods of determination of prices, prices or fees, financial condition, profits, sales, net income, and indebtedness, as the same may exist from time to time.

c. Right of Setoff . By accepting this Agreement, Grantee consents to the deduction, to the extent permitted by law, from any amounts that the Corporation owes Grantee from time to time (including amounts owed to Grantee as wages or other compensation, fringe benefits, or paid time-off pay, as well as any other amounts owed to Grantee by the Corporation), the amounts Grantee owes the Corporation under subsection b. above. Whether or not the Corporation elects to make any setoff in whole or in part, if the Corporation does not recover by means of setoff the full amount Grantee owes it, calculated as set forth above, Grantee agrees to immediately pay the unpaid balance to the Corporation.

d. Compensation Committee Discretion. Grantee may be released from Grantee’s obligations under subsections b. and c. of this section 4 only if the Compensation Committee, or its duly appointed agent, determines in its sole discretion that such action is in the best interest of the Corporation.

5. Death, Disability or Retirement . In the event the Grantee shall cease to be an employee by reason of: normal or late retirement; with the consent of the Compensation Committee, early retirement or a transfer of the Grantee in a spinoff; or death; or total and permanent disability as determined by the Compensation Committee, then the time restrictions on a fraction of Grantee’s outstanding Restricted Stock will lapse. The numerator of such fraction with respect to the Restricted Stock shall be the number of full calendar months that have elapsed in the Restricted Period prior to the death, disability or retirement of the Grantee and the denominator shall be the number of months in the Restricted Period. All Restricted Stock for which the time restrictions have not lapsed as provided in this section 5 shall be forfeited and automatically transferred to and reacquired by the Corporation at no cost to the Corporation. The terms of section 2. b. above and Exhibit A (including the requirement for certification by the Compensation Committee) shall continue to apply to the Restricted Stock for which the time restrictions have lapsed as provided in this section 5.

6. Termination . If the Corporation terminates the Grantee’s employment with or without Cause, any shares of Restricted Stock subject to a Restricted Period or a Performance Goal shall automatically be forfeited and transferred to and reacquired by the Corporation at no cost to the Corporation.

7. Change of Control . In the event of a Change in Control:

a. In the event of a Change of Control, restrictions on a fraction of Grantee’s outstanding Restricted Stock will lapse and all Performance Goals shall be deemed to have been achieved and any Restricted Stock not previously distributed shall be distributed within ten days after the Change of Control. The numerator of such fraction shall be the number of months that have elapsed in the Restricted Period prior to the Change in Control and the denominator shall be the number of months in the Restricted Period. Any Restricted Stock for which the Restricted Period has not lapsed as provided in this section 7 shall be forfeited and automatically transferred to and reacquired by the Corporation at no cost to Corporation.

8. Change Adjustments . The Compensation Committee shall make appropriate adjustments to give effect to adjustments made in the number of shares of the Corporation’s common stock through a merger, consolidation, recapitalization, reclassification, combination, spinoff, common stock dividend, stock split or other relevant change as the Compensation Committee deems appropriate to prevent dilution or enlargement of the rights of the Grantee. Any adjustments or substitutions pursuant to this section shall meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and shall be final and binding upon the Grantee.

9. Compliance with Law and Regulations . The grant of shares of Restricted Stock shall be subject to all applicable federal and state laws, the rules and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to register any securities pursuant to

the Securities Act of 1933, as amended, or to list such shares under the Stock Exchange in which the common shares of the Corporation may then be listed, or to take any other affirmative action in order to cause the issuance or delivery of the Restricted Stock to comply with any law or regulation of any governmental authority.

10. Notice . Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, addressed as follows: to the Corporation, Attention: Chief Financial Officer, at its office at 801 Lancaster Avenue, Bryn Mawr, PA 19010 or to the Grantee at her/his address on the records of the Corporation or at such other addresses as the Corporation, or Grantee, may designate in writing from time to time to the other party hereto.

11. Employment . Neither the action of the Corporation or the shareholders, nor any action taken by the Compensation Committee under the Plan nor any provisions of this Agreement shall be construed as giving to the Grantee the right to be retained as an employee of the Corporation.

12. Payment of Taxes . The Corporation may require, as a condition precedent to the issuance of Restricted Stock or the release from the escrow established under section 2 above, that appropriate arrangements be made for the withholding of any applicable federal, state and local taxes of any kind required by law to be withheld with respect to any grant or any issuance or release from escrow of Restricted Shares. The Corporation and any of its subsidiaries including, without limitation, The Bryn Mawr Trust Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including retainer or director fees) otherwise due to an Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any Restricted Stock or dividends thereon under the Plan, or to retain or sell, without notice, a sufficient number of the Restricted Stock to be delivered to such Grantee to cover any such taxes, provided that the Corporation shall not sell any Restricted Stock if such sale would be considered a sale for purposes of Section 16 of the Securities Exchange Act of 1934, as amended.

13. Incorporation by Reference . This Restricted Stock Award is granted pursuant and subject to the terms and conditions of the Plan, the provisions of which are incorporated herein by reference. If any provision of this Agreement conflicts with any provision of the Plan in effect on the Date of Grant, the terms of the Plan shall control. This Agreement shall not be modified after the Date of Grant except by written agreement between the Corporation and the Grantee; provided, however, that such modification shall (a) not be inconsistent with the Plan, and (b) be approved by the Committee.

14. Severability . If any one or more of the provisions contained in this Agreement are invalid, illegal or unenforceable, the other provisions of this Agreement will be construed and enforced as if the invalid, illegal or unenforceable provision had never been included.

15. Compliance with Internal Revenue Code Section 409A . It is the intention of the parties that the Restricted Stock and the Agreement comply with the provisions of Section 409A of the Code to the extent, if any, that such provisions are applicable to the Agreement and the Agreement will be administered by the Compensation Committee in a manner consistent with this intent. If any payments or benefits may be subject to taxation under Section 409A of the Code, Grantee agrees that the Compensation Committee may, without the consent of Grantee, modify this Agreement to the extent and in the manner that the Compensation Committee deems necessary or advisable or take any other action or actions, including an amendment or action with retroactive effect that the Compensation Committee determines is necessary or appropriate to exempt any payments or benefits from the application of Section 409A or to provide such payments or benefits in the manner that complies with the provisions of Section 409A such that they will not be taxable thereunder.

16. Section 83(b) Election . The Grantee acknowledges that an election under Section 83(b) of the Code may be available to the Grantee for federal income tax purposes and that such election, if desired, must be made within thirty days of the date of this Agreement. The Grantee acknowledges that whether Grantee makes such election is the responsibility of the Grantee, and not the Corporation, and that the Grantee should consult the Grantee’s tax advisor with respect to the election and all other tax aspects associated with this Agreement. The Grantee may make the election as to any or all of the Restricted Stock.

17. Choice of Law . The provisions of this Agreement shall be construed in accordance with the laws of the Commonwealth of Pennsylvania, without regard to the conflict of law provisions of any jurisdiction.

18. Interpretation . The interpretation and construction or any terms or conditions of the Plan or this Agreement by the Compensation Committee shall be final and conclusive.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be executed by a duly authorized officer, and the Grantee has hereunto set his/her hand and seal, effective as of the Date of Grant set forth above.


BRYN MAWR BANK CORPORATION

By:
Print Name:
Print Title:

(Signature of Grantee)

(Print Name of Grantee)

(Address of Grantee)

EXHIBIT A

TO RESTRICTED STOCK AGREEMENT DATED AS OF AUGUST 20, 2010

All of the terms and conditions of the Restricted Stock Agreement dated , 2010 to which this Exhibit is attached are incorporated herein by reference.

Calculation of Relative Total Shareholder Return

“ Relative Total Shareholder Return ” means the Corporation’s TSR relative to the TSR of the NASDAQ Community Bank Index at the end of the Restricted Period based on the following formula:

Vesting Amount = 100% - (NASDAQ Community Bank Index TSR- Corporation’s TSR) x 3.33%

Provided however, if the Corporation’s TSR is negative, no Restricted Stock will vest. If the Corporations TSR is greater than the NASDAQ Community Bank Index TSR and greater than zero, one hundred percent of the Restricted Stock will vest. For every 100 basis points (1%) that the Corporation’s TSR is behind the NASDAQ Community Bank Index, the Vesting Amount is decreased by 3.33%.

“ TSR ” means, for the Corporation, the Corporation’s total shareholder return, which will be calculated by dividing (i) the Closing Average Share Value by (ii) the Opening Average Share Value.

Example : An illustrative example of the TSR calculation for a hypothetical company and performance period is attached at the end of this Exhibit.

“ Opening Average Share Value ” means the average, over the trading days in the Opening Average Period, of the closing price of a company’s stock multiplied by the Accumulated Shares for each trading day during the Opening Average Period.

“ Opening Average Period ” means the 20 trading days preceding August 20, 2010.

“ Accumulated Shares ” means, for a giving trading day, the sum of (i) and (1) share and (ii) a cumulative number of shares of the company’s common stock purchased with the dividends declared on a company’s common stock, assuming same day reinvestment of the dividends in the common stock of a company at the closing price on the ex-dividend date, for ex-dividend dates between the start of the Opening Average Period and the trading day.

“ Closing Average Share Value ” means the average, over the trading days in the Closing Average Period, of the closing price of the company’s stock multiplied by the Accumulated Shares for each trading day during the Closing Average Period.

“ Closing Average Period ” means (i) in the absence of a Change in Control (as defined in the 2010 Plan), the 20 trading days preceding August 20, 2013; or (ii) in the case of a Change of Control, the trading days during the period beginning thirty (30) calendar days prior to the Change in Control; and ending on the Accelerated End Date.

“ Accelerated End Date ” means the date five (5) calendar days (or such shorter period as may be established by the Compensation Committee in its sole discretion) prior to the Change in Control.

Exhibit 10.29

THE BRYN MAWR TRUST COMPANY

EXECUTIVE CHANGE-OF-CONTROL

AMENDED & RESTATED

SEVERANCE AGREEMENT

This Agreement made as of September 27, 2010, amends and restates the Agreement dated October 21, 2004, as previously amended by amendment dated December 8, 2008, between The Bryn Mawr Trust Company, a Pennsylvania financial institution, subject to the provisions of the Pennsylvania Banking Code of 1965, as amended (the “Company”), and Geoffrey L. Halberstadt (the “Employee”).

WHEREAS, the Employee is presently employed by the Company as its Executive Vice President and Secretary;

WHEREAS, the Company considers it essential to foster the employment of well qualified key management personnel, and, in this regard, the board of directors of the Company recognizes that, as is the case with many financial institutions, the possibility of a change of control of the Company’s publicly held parent company, Bryn Mawr Bank Corporation, (“BMBC”) may exist and that such possibility, and the uncertainty and questions which it may raise among the Company’s management, may result in the departure or distraction of key management personnel to the detriment of the Company and ultimately to the detriment of BMBC and its shareholders;

WHEREAS, the Boards of directors of the Company and BMBC have determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company’s management to their assigned duties, without

distraction in the face of potentially disturbing circumstances arising from the possibility of a change of control of the BMBC, although no such change is now contemplated; and

WHEREAS, in order to induce the Employee, a key member of the Company’s management, to remain in the employ of the Company, the Company agrees that the Employee shall receive the compensation and benefits set forth in this Agreement in the event his/her employment with the Company is terminated subsequent to a “Change of Control” (as defined in Section 1 hereof) of BMBC, as a cushion against the financial and career impact on the Employee of any such Change of Control;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:

1. Definitions . For all purposes of this Agreement, the following terms shall have the meanings specified in this Section, unless the context clearly otherwise requires:

(a) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations issued under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

(b) “AIP” shall mean any Annual Incentive Plan of the Company, as in effect immediately prior to a change of Control, or predecessor or prior plan, including BMBC’s Thrift and Savings Plan and the Company’s annual bonus plan.

(c) “Base Salary” shall mean the total cash remuneration earned by the Employee on an annualized basis in all capacities with the Company and its Subsidiaries,

including, without limitation, any amounts the payment of which has been deferred by the Employee, excluding only payments earned by or allocated to the Employee under the AIP.

(d) A Person shall be deemed the “Beneficial Owner” of any securities:

(i) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided , however , that a Person shall not be deemed the “Beneficial Owner” of securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for payment, purchase or exchange;

(ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has “beneficial ownership” of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations issued under the Exchange Act), including without limitation pursuant to any agreement, arrangement or understanding, whether or not in writing; provided , however , that a Person shall not be deemed the “Beneficial Owner” of any security under this subsection (ii) as a result of an oral or written agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations issued under the Exchange Act, and (B) is not then reportable by

such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or

(iii) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in the proviso to subsection (ii) above) or disposing of any voting securities of BMBC; provided , however , that nothing in this Section 1(d) shall cause a Person engaged in business as an underwriter of securities to be the “Beneficial Owner” of any securities acquired through such Person’s participation in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition.

(e) “Board” shall mean the board of directors of the Company or BMBC as the context of this Agreement indicates.

(f) “Change of Control” shall be deemed to have taken place if (i) any Person (except BMBC, any Subsidiary of BMBC, any employee benefit plan of BMBC or the Company, any Person or entity organized, appointed or established by BMBC or any Subsidiary of BMBC for or pursuant to the terms of any such employee benefit plan) together with all Affiliates and Associates of such Person, shall become the Beneficial Owner in the aggregate of 25% or more of the common stock of BMBC then outstanding, or (ii) during any twenty-four month period, individuals who at the beginning of such period constituted the Board of BMBC or the Company cease, for any reason, to constitute a majority thereof, unless the election, or the nomination for election by BMBC’s or the Company’s shareholders, as the case may be, of each

director who was not a director at the beginning of such period was approved by a vote of at least two-thirds of the directors in office at the time of such election or nomination, who were directors at the beginning of such period.

(g) “Common Stock” shall mean the outstanding common stock of BMBC.

(h) “Person” shall mean any individual, firm, corporation, partnership or other entity.

(i) “Supplemental Employee Retirement Plan” shall mean the BMBC Supplemental Employment Retirement Plan which covers eligible employees of the Company.

(j) “Stock Plan” shall mean (i) BMBC’s 2001 Stock Option Plan; (ii) BMBC’s 2004 Stock Option Plan; (iii) BMBC’s 2007 Long Term Incentive Plan; (iv) BMBC’s 2010 Long Term Incentive Plan, and (v) any other long term incentive plan, stock option plan, stock option, stock appreciation rights, restricted stock and performance award plans, stock bonus plan, stock grant plan, or similar benefit plan established by BMBC and which exists for the benefit of the Employee at the time of a Change in Control.

(k) “Subsidiary” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations issued under the Exchange Act.

(l) “Termination Date” shall mean the date of receipt of the Notice of Termination described in Section 2 hereof or any later date specified therein, as the case may be.

(m) “Separation from Service” means, the Employee’s “separation from service”, within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), from the Company To the extent required by the definition of “separation from service” under Section 409A of the Code, “Separation from Service” shall mean the Employee’s

separation from service (as so defined) from both the Company and all other persons with whom the Company would be considered a “single employer” under Section 414(b) or (c) of the Code, but replacing the phrase “at least 80 per cent” with the phrase “at least 50%” where it appears in Section 1563(a)(1), 2, and 3 of the Code and in the regulations under Section 414(c).

(mm) “Specified Employee” means an individual who is a “specified employee” with respect to the Company within the meaning of Section 409A of the Code.

(n) “Termination upon a Change of Control” shall mean a Separation from Service upon or within two (2) years after a Change of Control either:

(i) initiated by the Company for any reason other than (x) the Employee’s continuous illness, injury or incapacity for a period of six consecutive months or (y) for “cause,” which shall mean misappropriation of funds, habitual insobriety, substance abuse, conviction of a crime involving moral turpitude, or gross negligence in the performance of his/her duties, which gross negligence has had a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its Subsidiaries or BMBC and its Subsidiaries taken as a whole; or

(ii) initiated by the Employee following one or more of the following occurrences:

(A) a significant reduction by the Company or BMBC (if the Employee is an officer of BMBC) of the authority, duties or responsibilities of the Employee immediately prior to the Change of Control;

(B) any removal of the Employee from his/her officer position with BMBC, the Company and its Subsidiaries held by him/her immediately prior to the Change of Control, except in connection with promotions to higher office;

(D) revocation or any modification of the AIP or Stock Plan, or any action taken pursuant to the terms of either plan, which materially (x) reduces the opportunity to receive compensation under any or both of such plans of equivalent amounts received by the Employee during the three (3) fiscal years immediately preceding the Change of Control, subject to the right of the Boards of Directors of BMBC or the Company, as appropriate, to establish in a manner consistent with past practice, prior to the Change of Control, reasonable goals under the AIP or Stock Plan, (y) reduces the compensation payable to the Employee under either or both of such plans but which does not effect comparable reductions in the compensation payable to the other participants in such plans, or (z) increases the compensation payable to other participants in either or both of such plans but which does not effect corresponding increases in the amount of compensation payable to the Employee;

(E) termination or modification of BMBC’s Supplemental Employee Retirement Plan, as such plan is in effect immediately prior to the Change of Control, which materially reduces (x) the retirement benefits provided by such plan, or (y) or the funding thereof provided by any trust established by BMBC to fund benefits provided by the Supplemental Employee Retirement Plan;

(F) a transfer of the Employee, without his/her express written consent, to a location which is outside the Greater Philadelphia area (or the general area in which his/her principal place of business immediately preceding the Change of Control may be located at such time, if other than Bryn Mawr, Pennsylvania), or which is otherwise an unreasonable commuting distance from the Employee’s principal residence at the date of the Change of Control;

(G) the Employee being required to undertake business travel to an extent substantially greater than the Employee’s business travel obligations immediately prior to the Change of Control; or

(H) any failure of the Company to comply with and satisfy Section 13 of this Agreement.

2. Notice of Termination . Any Termination upon a Change of Control shall be communicated by a Notice of Termination to the other party hereto given in accordance with Section 14 hereof. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) briefly summarizes the facts and circumstances deemed to provide a basis for termination of the Employee’s employment under the provision so indicated, and (iii) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than 15 days after the giving of such notice).

3. Severance Compensation upon Termination . Subject to the provisions of Section 10 hereof, in the event of the Employee’s Termination upon a Change of Control, the Company shall pay to the Employee, within fifteen (15) days after the Termination Date (or as soon as

possible thereafter in the event that the procedures set forth in paragraph (b) of Section 11 hereof cannot be completed within fifteen (15) days) an amount in cash equal to three (3) times the sum of the Employee’s Base Salary in effect either immediately prior to the Separation from Service or immediately prior to the Change of Control, whichever is higher.

4. Other Payments . Subject to the provisions of Section 10 hereof, in the event of the Employee’s Termination upon a Change of Control, the Company shall:

(a) pay to the Employee within fifteen (15) days after the Termination Date:

(i) unless the Employee has exercised such options, an amount equal to the excess, if any, of the aggregate fair market value of the shares of BMBC’s Common Stock subject to all stock options outstanding and unexercised as of the Termination Date, whether vested or unvested, granted to the Employee under the Stock Plan, over the aggregate exercise price of all such stock options. For purposes of this paragraph, fair market value shall mean the highest of (x) the closing price of BMBC’s Common Stock on the last business day the Common Stock was traded immediately preceding the Termination Date, if such Common Stock is publicly traded at such date, (y) if such Common Stock is not publicly traded at the Termination Date, the value determined by an independent appraiser, such appraiser to be selected by the Employee and to be reasonably satisfactory to the Company (the fees and expenses of such appraiser to be borne by the Company), or (z) the highest per share price of BMBC’s Common Stock paid (in connection with the Change of Control or at any time thereafter) by the Person or group whose acquisition of shares of Common Stock of BMBC has given rise to a Change of Control;

(ii) to the extent not theretofore paid, the Employee’s Base Salary through the Termination Date and a further amount equal to the Employee’s salary in lieu of his/her unused vacation pay, if any, both calculated at the salary rate in effect on the Termination Date, or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Termination Date;

(iii) to the extent not theretofore paid, an amount equal to all awards earned by the Employee under the AIP in respect of complete plan periods prior to the Termination Date (excluding all amounts the payment of which was previously deferred under such plans which shall be payable in accordance with their terms). In the event that the Company’s financial statements for any fiscal years, included in such plan periods, have not yet been completed at the Termination Date, the Company shall pay to the Employee the amounts due hereunder as soon as possible thereafter;

(iv) payment in respect of the AIP for the uncompleted fiscal year during which Separation from Service occurs determined by multiplying the amount determined in Section 4(a)(iii) by a fraction, the numerator of which shall be the number of days between the Termination Date and the last day of the last full fiscal year prior to the Termination Date and the denominator of which shall be Three Hundred Sixty Five (365); and

(b) to the extent permitted by applicable law, continue or cause to be continued until thirty-six (36) whole months after the Termination Date, on the cost-sharing basis in effect immediately prior to the Change of Control, medical, dental, life and disability insurance benefits substantially equivalent in all material respects payable in the same amounts and according to the same schedule as, to those furnished by the Company to the Employee

immediately prior to the Change of Control; provided , however , that the obligation of the Company to provide such benefits shall cease at such time as the Employee is employed on a full-time basis by a Person not owned or controlled by the Employee that provides the Employee, on substantially the same cost-sharing basis between the Company and the Employee in effect immediately prior to the Change of Control, with medical, dental, life and disability insurance benefits substantially equivalent in all material respects to those furnished by the Company and its Subsidiaries to the Employee immediately prior to the Change of Control;

(c) for both vesting and benefit calculation purposes, credit the Employee with three (3) additional “year of credited service” (as defined in BMBC’s Supplemental Employee Retirement Plan) under BMBC’s Supplemental Employee Retirement Plan in addition to the years of credited service that would have otherwise been calculated by reference solely to the Termination Date, it being understood that benefits in respect of the three (3) additional year of credited service shall be paid to the Employee under the Supplemental Employee Retirement Plan, and that BMBC shall, to the extent necessary to provide the Employee the additional benefits intended hereby, amend the Supplemental Employee Retirement Plan or create such supplemental retirement plans as may be necessary;

(d) pay for reasonable career counseling services provided by Manchester Partners International or any such equivalent agency satisfactory to both the Company and the Employee payable in the same amounts and on the same schedule as in effect, immediately prior to the Change of Control, and payable for no more than thirty six (36) whole months after the Termination Date; and

(e) Payments or reimbursements pursuant to subsection (b) and (d) of this Section 4 shall be subject to the following conditions:

(i) Payments shall be made on a calendar year basis;

(ii) Amounts payable with respect to a calendar year shall not affect amounts payable with respect to another calendar year; and

(iii) Payments with respect to expenses incurred must be made no later than the end of the calendar year following the calendar year in which they were incurred.

4A 6 Month Delay in Payments . Notwithstanding anything in this Agreement to the contrary, if the Employee is a Specified Employee on the date of his Separation From Service, then in no event shall any amount payable to him or her be paid before the date that is six months after the date of such Separation From Service.

5. Establishment of Trust . Immediately upon a Change of Control as herein defined, the Company shall establish an irrevocable trust fund pursuant to a trust agreement to hold assets to satisfy its obligations hereunder. Funding of such trust fund shall be subject to the Company’s discretion, as to be set forth in the agreement pursuant to which the trust fund will be established.

6. Enforcement .

(a) In the event that the Company shall fail or refuse to make payment of any amounts due the Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to the Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3, 4 or 5, as appropriate, until paid to the

Employee, at the prime rate published daily in the Wall Street Journal, each change in such rate to take effect on the effective date of the change in such prime rate.

(b) It is the intent of the parties hereto that the Employee not be required to incur any expenses associated with the enforcement of his/her rights under this Agreement by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Employee hereunder. Accordingly, the Company shall pay the Employee on demand the amount necessary to reimburse the Employee in full for all expenses (including all attorneys’ fees and legal expenses) incurred by the Employee in enforcing any of the obligations of the Company under this Agreement.

7. No Mitigation . The Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise.

8. Nonexclusivity of Rights . Nothing in this Agreement shall prevent or limit the Employee’s continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by BMBC, the Company or any of its Subsidiaries or Affiliates and for which the Employee may qualify; provided , however , that if the Employee becomes entitled to and receives all of the payments provided for in this Agreement, the Employee agrees to waive his/her right to receive payments under any severance plan or program applicable to all employees of the Company.

9. No Set-Off . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or

other right which the Company may have against the Employee or others and the Company hereby agrees not to exercise any such rights with respect to payment due the Employee pursuant to this Agreement.

10. Certain Reduction of Payments .

(a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined as set forth herein that any payment or distribution by the Company to or for the benefit of the Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and that it would be economically advantageous to the Employee to reduce the Payment to avoid or reduce the taxation of excess parachute payments under Section 4999 of the Code, the aggregate present value of amounts payable or distributable to or for the benefit of the Employee pursuant to this Agreement (such payments or distributions pursuant to this Agreement are hereinafter referred to as “Agreement Payments”) shall be reduced (but not below zero) to the Reduced Amount. The “Reduced Amount” shall be an amount expressed in present value which maximizes the aggregate present value of Agreement Payments without causing any Payment to be subject to the taxation under Section 4999 of the Code. For purposes of this Section 10, present value shall be determined in accordance with Section 280G(d)(4) of the Code.

(b) All determinations to be made under this Section 10 shall be made, in writing, by KPMG LLP, or the Company’s independent certified public accountant immediately prior to the Change of Control, if other than KPMG LLP, (the “Accounting Firm”), which firm

shall provide its determinations and any supporting calculations in writing to both the Company and the Employee within ten (10) days of the Termination Date. Any such determination by the Accounting Firm shall be binding upon the Company and the Employee. The Employee shall in his or her sole discretion determine which and how much of the Agreement Payments shall be eliminated or reduced consistent with the requirements of this Section 10, which determination shall be made by delivery of written notice to the Company within 10 days of Employee’s receipt of the determination of the Accounting Firm. Within five (5) days after the Employee’s timely determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee, such amounts as are then due to the Employee under this Agreement. In the event Employee does not make such timely determination then within 15 days after Company’s receipt of the determination of the Accounting Firm, the Company in its sole discretion may pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Employee such portion of the Agreement Payments as it may deem appropriate, but no less than the Reduced Amount.

(c) As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Agreement Payments, as the case may be, will have been made by the Company which should not have been made (“Overpayment”) or that additional Agreement Payments which have not been made by the Company could have been made (“Underpayment”), in each case, consistent with the calculations required to be made hereunder. Within two (2) years after the Separation from Service, the Accounting Firm shall review the determination made by it pursuant to the preceding paragraph. In the event that the Accounting Firm determines that an Overpayment has

been made, any such Overpayment shall be treated for all purposes as a loan to the Employee which the Employee shall repay to the Company together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code (the “Federal Rate”); provided , however , that no amount shall be payable by the Employee to the Company if and to the extent such payment would not reduce the amount which is subject to taxation under Section 4999 of the Code. In the event that the Accounting Firm determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee together with interest thereon at the Federal Rate.

(d) All of the fees and expenses of the Accounting Firm in performing the determinations referred to in paragraphs (b) and (c) above shall be borne solely by the Company. The Company agrees to indemnify and hold harmless the Accounting Firm of and from any and all claims, damages and expenses of any nature resulting from or relating to its determinations pursuant to paragraphs (b) and (c) above, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of the Accounting Firm.

11. Settlement of All Disputes .

(a) The Employee and the Company acknowledge that the Compensation Committee of the Company’s Board intends to review and approve a schedule indicating a method of calculating certain payments to be made to the Employee hereunder in the event of a Termination upon a Change of Control. In the event that the compensation plans referred to herein change prior to a Change of Control, the Compensation Committee of the Company’s Board may, prior to such Change of Control, revise the schedule to reflect such changes. The

method of calculation set forth on such schedule, as so revised prior to a Change of Control, shall be followed by the parties hereto unless manifestly unfair to the Employee.

(b) In the event of any dispute, controversy or claim arising out of or relating to any provision of this Agreement or the Employee’s Termination upon a Change of Control, the Company shall appoint as the sole and exclusive arbiter of such dispute, controversy or claim, a committee composed of two persons who were members of the Company’s Board at any time within five (5) years prior to the Change of Control (which persons may, but need not be, directors of the Company at the time of such dispute, controversy or claim); provided , however , that no person shall be eligible to serve thereon who (i) is at the Termination Date, or shall have been at any time within one year prior thereto, an executive officer of the Company, or (ii) shall be or have been at any time related in any manner to or otherwise affiliated with, or was first nominated by, the corporation, Person or group whose acquisition of shares of Common Stock of BMBC has given rise to a Change of Control. The decision of such committee and the award of any monetary judgment or other relief by such committee shall be final and binding upon the Employee and the Company, and shall not be subject to appeal. Judgment may be entered upon the decision and award of such committee by the Employee or the Company in any court of competent jurisdiction. The Company shall pay the persons selected pursuant to this subsection a reasonable fee for their services, and shall reimburse such persons for their expenses incurred in this capacity. In addition, the Company shall, to the maximum extent permitted by law, indemnify and hold harmless such persons of and from any and all claims, damages or expenses of any nature whatsoever relating to or arising from their activities in this capacity.

(c) In the event that the Company shall be unable to appoint the committee referred to in paragraph (b) above after good faith efforts to do so, or in the event that such committee cannot reach a unanimous agreement, any remaining dispute, controversy or claim arising out of or relating to any provision of this Agreement or the Employee’s Termination upon a Change of Control shall be settled by arbitration in the City of Philadelphia, in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three (3) arbitrators, two (2) of whom shall be selected by the Company and the Employee, respectively, and the third of whom shall be selected by the other two arbitrators. Each arbitrator selected as provided herein is required to be or have been a director or an executive officer of a corporation whose shares of common stock were listed during at least one year of such service on the New York Stock Exchange or the American Stock Exchange or quoted on the National Association of Securities Dealers Automated Quotations System. Any award entered by the arbitrators shall be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration shall be paid by the Company.

(d) The party or parties challenging the right of the Employee to the benefits of this Agreement shall in all circumstances have the burden of proof.

12. Term of Agreement . The term of this Agreement shall be for three (3) years from the date hereof and shall automatically be extended for additional one-year periods unless written notice of termination of this Agreement is provided to the Employee by the Company at least one year prior to the expiration of the initial three (3) year term or any one-year renewal period;

provided , however , that (i) after a Change of Control during the term of this Agreement, this Agreement shall remain in effect for a period of two (2) years and until all of the obligations of the parties hereunder are satisfied or have expired, and (ii) this Agreement shall terminate if, prior to the Change of Control, the employment of the Employee with the Company or any of its Subsidiaries shall terminate for any reason whatsoever.

13. Successor Company . The Company shall require any Person who acquires the majority of the Common Stock of the Company or BMBC or any successor or successors thereof (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or BMBC, by agreement, in form and substance satisfactory to the Employee, to acknowledge expressly, in writing, that this Agreement is binding upon and enforceable against the Company or BMBC or any successor or successors thereto in accordance with the terms hereof and the instrument of transfer, and to become jointly and severally obligated with the Company to perform this Agreement, in the same manner and to the same extent that the Company would be required to perform this Agreement if no such acquisition purchaser, merger consolidation, succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally.

14. Notice . All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered

personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows:

If to the Company, to:

Corporate Secretary

The Bryn Mawr Trust Company

801 Lancaster Avenue

Bryn Mawr, PA 19010

If to the Employee, to:

16 Indian Valley Lane

Telford, PA 18969

or to such other names or addresses as the Company or the Employee, as the case may be, shall designate by notice to the other party hereto in the manner specified in this Section. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five (5) days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service.

15. Governing Law . This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws provisions.

16. Contents of Agreement, Amendment and Assignment .

(a) This Agreement supersedes all prior agreements and sets forth the entire understanding between the parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by the Employee and approved by the Board and executed on the Company’s behalf by a duly authorized officer. The provisions of this Agreement may provide for payments to the Employee

under certain compensation or bonus plans (including without limitation the AIP and Stock Plan) under circumstances where such plans would not provide for payment thereof. It is the specific intention of the parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Boards of BMBC or the Company.

(b) Nothing in this Agreement shall be construed as giving the Employee any right to be retained in the employ of the Company.

(c) The Employee acknowledges that from time to time, the Company may establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. Such manuals, handbooks and statements are intended only for general guidance. No policies, procedures or statements of any nature by or on behalf of the Company (whether written or oral, and whether or not contained in any employee manual or handbook or personnel policy manual), and no acts or practices of any nature, shall be construed to modify this Agreement.

(d) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Employee and the Company hereunder shall not be assignable in whole or in part by the Company.

17. Severability . If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or

unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application.

18. Remedies Cumulative; No Waiver . No right conferred upon the Employee by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employee in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, including without limitation any delay by the Employee in delivering a Notice of Termination pursuant to Section 2 hereof after an event has occurred which would, if the Employee had resigned, have constituted a Termination upon a Change of Control pursuant to Section 1(n)(ii) of this Agreement.

19. Miscellaneous . All section headings in this Agreement are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

20. Compliance with Section 409A of the Code . This Agreement is intended to comply with the provisions of Section 409A of the Code and shall be interpreted to be consistent with Section 409A of the Code.

IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written.


Attest: [Seal]		THE BRYN MAWR TRUST COMPANY

	/s/ Diane McDonald	By	/s/ Fredrick C. Peters II
	Assistant Secretary		Fredrick C. Peters II
			President

	/s/ Gloria Reiff		/s/ Geoffrey L. Halberstadt
	Witness		Employee

Exhibit 10.30

BRYN MAWR BANK CORPORATION

RESTRICTED STOCK AGREEMENT FOR EMPLOYEES

(SERVICE/PERFORMANCE BASED)

SUBJECT TO THE 2010 LONG TERM INCENTIVE PLAN


Grantee:		Francis J. Leto

Date of Grant:		January 10, 2011

Target Number:		9,000 shares

Restricted Period:		January 10, 2011 to January 10, 2014

Performance Goal:		The Corporation’s annual wealth revenue, wealth pre-tax margin and subjective criteria as set forth on Exhibit A hereto

AGREEMENT, dated as of the Date of Grant set forth above by and between BRYN MAWR BANK CORPORATION (the “Corporation”) and the Grantee named above (the “Grantee”).

2. Grant of Restricted Stock .

a. Subject to the terms and conditions of the Plan and this Agreement, the Corporation’s Compensation Committee (“Compensation Committee”) hereby grants to the Grantee the Target Number of shares of its Common Stock set forth above (the “Restricted Stock”) and an opportunity to earn up to one hundred and fifty percent (150%) of the Target Number upon over performance (“Over Performance Shares”).

b. Upon execution of this Agreement by the Grantee, the Corporation will cause the issuance of the Restricted Stock to Grantee subject to the terms and conditions of this Agreement and the Plan. Restricted Stock (and any dividends earned thereon) will be held by the secretary of the Corporation as escrow agent (“Escrow Agent”). The certificate or certificates representing such shares of Restricted Stock (and any dividends earned thereon) will not be delivered by the Escrow Agent to the Grantee unless and until the shares of Restricted Stock are vested and all other terms and conditions in this Agreement have been satisfied. The Escrow Agent may, in its discretion, elect to enter into alternative arrangements for the escrow of the shares of Restricted Stock if, in the Escrow Agent’s discretion, such shares are issued in book entry form.

3. Terms and Conditions . The Grant is subject to the following terms and conditions:

a. Restricted (Vesting) Period . The period of time during which the transfer of shares of Restricted Stock and the right to receive Over Performance Shares is restricted is from the Date of Grant to January 10, 2014 (the “Restricted Period”) The time period restriction will lapse and Restricted Stock and any Over Performance Shares will vest upon expiration of the applicable Restricted Period and achievement of the Performance Goals as defined in subsection 3. b. and Exhibit A, but only if the Grantee remains continuously employed by the Corporation through the end of the applicable Restricted Period or as otherwise provided herein.

b. Performance Goals . The Restricted Stock is issued and the Restricted Stock and Over Performance Shares are subject to the performance goals (“Performance Goals”) set forth on Exhibit A and shall only vest if the Performance Goals are achieved and the timing restrictions set forth in subsection 3. a. have lapsed. The Compensation Committee shall determine whether the Performance Goals have been achieved in accordance with Exhibit A attached hereto. The Compensation Committee shall determine within 75 days after January 10, 2014 whether the Performance Goals have been achieved in accordance with Exhibit A attached hereto. Any fractional shares resulting from the application of the percentages in the Table set forth on Exhibit A hereto shall be rounded to the nearest whole numbers of shares. No vesting shall be deemed to occur unless and until the Compensation Committee certifies in writing which Performance Goals have been achieved. The Compensation Committee shall make such certification no later than 75 days after January 10, 2014. The date on which the Compensation Committee certifies whether a Performance Goal has been achieved that results in the vesting of some or all of the Restricted Stock and/or Over Performance Shares is referred to in this Agreement as the “Vesting Date”.

c. Prohibition Against Sale, Assignment, Etc. Unvested Restricted Stock and the right to receive Over Performance Shares may not be sold, assigned or transferred, except by Will or by the laws of descent and distribution, and may not be pledged, hypothecated or otherwise encumbered.

e. Dividends . At the time of delivery of the Restricted Stock pursuant to paragraph 2. e. above, the Corporation shall also pay to Grantee an amount equal to the aggregate amount of all dividends paid by the Corporation between January 10, 2011 and the date of such delivery with respect to the number of shares of Restricted Stock so delivered or issued, less an amount equal to the Corporation’s federal, state and local or other income and employment tax withholding obligations with respect to the income recognized by the Grantee as a result of such payment.

4. Forfeiture .

a. Forfeiture . All Restricted Stock and the right to receive any Over Performance Shares that have not vested at the Vesting Date in accordance with subsections 3. a. and 3. b. and Exhibit A attached hereto shall be forfeited in their entirety and such Restricted Stock shall be automatically transferred to and reacquired by the Corporation at no cost to the Corporation. Grantee hereby appoints the Escrow Agent as Grantee’s attorney-in-fact with irrevocable power and authority to take any action and execute all documents, including stock powers, which may be necessary to transfer the unvested Restricted Stock to the Corporation upon determination of forfeiture.

b. Forfeiture of Unvested Restricted Stock and Over Performance Shares and Payment to the Corporation for Vested Restricted Stock and Over Performance Shares If Grantee Engages in Certain Activities . The provisions of this subsection 4. b. will apply to all Restricted Stock and the right to receive Over Performance Shares granted to Grantee under the Plan. If, at any time during the Restricted Period, or (ii) two (2) years after termination of, or leaving, Grantee’s employment with the Corporation, Grantee engages in any activity inimical, contrary or harmful to the interests of the Corporation including, but not limited to (A) conduct related to Grantee’s

employment for which either criminal or civil penalties against Grantee may be brought, (B) violation of the Corporation’s policies including, without limitation, the Corporation’s insider trading policy, (C) soliciting of any customer of the Corporation for business which would result in such customer terminating their relationship with the Corporation; soliciting or inducing any individual who is an employee or director of the Corporation to leave the Corporation or otherwise terminate their relationship with the Corporation, (D) disclosing or using any confidential information or material concerning the Corporation, or (E) participating in a hostile takeover attempt, then (x) all shares of Restricted Stock and the right to receive Over Performance Shares that have not vested effective as of the date on which Grantee engages in such activity, unless terminated sooner by operation of another term or condition of this Agreement or the Plan, shall be forfeited in their entirety and all such shares of Restricted Stock shall be automatically transferred to and acquired by the Corporation at no cost to the Corporation, and (y) for any Restricted Stock and Over Performance Shares which have vested and been delivered to Grantee, the Grantee shall pay to the Corporation the market value of the Restricted Stock and Over Performance Shares on the date of the grant or the day Grantee engages in such activity, whichever is greater. The term “confidential information” as used in this Agreement includes, but is not limited to, records, lists, and knowledge of the Corporation’s clients, methods of operation, processes, trade secrets, methods of determination of prices, prices or fees, financial condition, profits, sales, net income, and indebtedness, as the same may exist from time to time.

c. Compensation Committee Discretion. Grantee may be released from Grantee’s obligations under subsections b. and c. of this section 4 only if the Compensation Committee, or its duly appointed agent, determines in its sole discretion that such action is in the best interest of the Corporation.

5. Death or Disability . In the event the Grantee shall cease to be an employee by reason of: a transfer of the Grantee in a spinoff; or death; or total and permanent disability as determined by the Compensation Committee, then the time restrictions on a fraction of Grantee’s outstanding Restricted Stock and right to receive Over Performance Shares will lapse and the Target Number shall be adjusted by such fraction. The numerator of such fraction with respect to the Target Number shall be the number of full calendar months that have elapsed in the Restricted Period prior to the death or disability of the Grantee and the denominator shall be the number of months in the Restricted Period. All Restricted Stock and right to receive Over Performance Shares for which the time restrictions have not lapsed as provided in this section 5 shall be forfeited and such Restricted Stock shall be automatically transferred to and reacquired by the Corporation at no cost to the Corporation. The terms of section 2. b. above and Exhibit A (including the requirement for certification by the Compensation Committee) shall continue to apply to the Restricted Stock and right to receive Over Performance Shares for which the time restrictions have lapsed as provided in this section 5 except that the Compensation Committee shall determine whether the Performance Goals have been achieved as of the end of the fiscal quarter in which the death or disability occurs subject to any adjustments deemed necessary and appropriate by the Compensation Committee in its sole discretion.

6. Termination . If the Grantee terminates the Grantee’s employment or retires or if the Corporation terminates the Grantee’s employment with or without Cause, any shares of Restricted Stock and any right to Over Performance Shares subject to a Restricted Period or a Performance Goal shall automatically be forfeited and all such Restricted Stock shall be transferred to and reacquired by the Corporation at no cost to the Corporation.

7. Change of Control . In the event of a Change in Control:

a. In the event of a Change of Control, restrictions on a fraction of Grantee’s outstanding Restricted Stock will lapse and the Target Number shall be adjusted by such fraction. The numerator of such fraction shall be the number of full calendar months that have elapsed in the Restricted Period prior to the Change in Control and the denominator shall be the number of full calendar months in the Restricted Period. All Performance Goals shall be deemed to have been achieved at the one hundred percent (100%) of the Target Number level and any Restricted Stock not previously distributed shall be distributed within 10 days after the change of control. Grantee’s right to receive Over Performance Shares will lapse. Any Restricted Stock for which the Restricted Period has not lapsed as provided in this section 7 shall be forfeited and such Restricted Stock shall be automatically transferred to and reacquired by the Corporation at no cost to Corporation.

relevant change as the Compensation Committee deems appropriate to prevent dilution or enlargement of the rights of the Grantee. Any adjustments or substitutions pursuant to this section shall meet the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and shall be final and binding upon the Grantee.

9. Compliance with Law and Regulations . The grant of shares of Restricted Stock and right to receive Over Performance Shares shall be subject to all applicable federal and state laws, the rules and regulations and to such approvals by any government or regulatory agency as may be required. The Corporation shall not be required to register any securities pursuant to the Securities Act of 1933, as amended, or to list such shares under the Stock Exchange in which the common shares of the Corporation may then be listed, or to take any other affirmative action in order to cause the issuance or delivery of the Restricted Stock to comply with any law or regulation of any governmental authority.

12. Payment of Taxes . The Corporation may require, as a condition precedent to the issuance of Restricted Stock and Over Performance Shares or the release from the escrow established under section 2 above, that appropriate arrangements be made for the withholding of any applicable federal, state and local taxes of any kind required by law to be withheld with respect to any grant or any issuance or release from escrow of Restricted Shares or Over Performance Shares. The Corporation and any of its subsidiaries including, without limitation, The Bryn Mawr Trust Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including retainer or director fees) otherwise due to a Grantee any federal, state or local taxes of any kind required by law to be withheld with respect to any Restricted Stock or dividends thereon or Over Performance Shares under the Plan, or to retain or sell, without notice, a sufficient number of the Restricted Stock or Over Performance Shares to be delivered to such Grantee to cover any such taxes, provided that the Corporation shall not sell any Restricted Stock or Over Performance Shares if such sale would be considered a sale for purposes of Section 16 of the Securities Exchange Act of 1934, as amended.

15. Compliance with Internal Revenue Code Section 409A . It is the intention of the parties that the Restricted Stock, Over Performance Shares and the Agreement comply with the provisions of Section 409A of the Code to the extent, if any, that such provisions are applicable to the Agreement and the Agreement will be administered by the Compensation Committee in a manner consistent with this intent. If any payments or benefits may be subject to taxation under Section 409A of the Code, Grantee agrees that the Compensation Committee may, without the consent of Grantee, modify this Agreement to the extent and in the manner that the Compensation Committee deems necessary or advisable or take any other action or actions, including an amendment or action with retroactive effect that the Compensation Committee determines is necessary or appropriate to exempt any payments or benefits from the application of Section 409A or to provide such payments or benefits in the manner that complies with the provisions of Section 409A such that they will not be taxable thereunder.

18. Interpretation . The interpretation and construction or any terms or conditions of the Plan or this Agreement by the Compensation Committee shall be final and conclusive.


BRYN MAWR BANK CORPORATION

By:		/s/ Geoffrey L. Halberstadt
Print Name:		Geoffrey L. Halberstadt
Print Title:		Secretary

/s/ Francis J. Leto
(Signature of Grantee)

Francis J. Leto
(Print Name of Grantee)


(Address of Grantee)

EXHIBIT A

TO RESTRICTED STOCK AGREEMENT DATED AS OF JANUARY 10, 2011

All of the terms and conditions of the Restricted Stock Agreement dated January 10, 2011 to which this Exhibit is attached are incorporated herein by reference.


Date of Grant:		January 10, 2011

Name of Grantee:		Francis J. Leto

Target Number:		9,000 Shares

Performance Goals

Average Annual Wealth Revenue Increase Year Over Year includes all wealth related revenue, including wealth revenue from The Bryn Mawr Trust Company, Lau Associates LLC, The Bryn Mawr Trust Company of Delaware and any companies acquired or formed by the Corporation or any of its subsidiaries related to the Wealth business.

Average of the Wealth Pretax Margin means the pretax margin as presently calculated at December 31, 2010 by the Corporation’s Finance Department and includes Trust Operations but does not include unallocated overhead.

Subjective Criteria includes effort, teamwork, leadership and vision, including (i) the strategic development of the business measured against the overall strategic plan approved by the Corporation’s Board of Directors, and (ii) the Grantee’s personal contribution to the non-wealth areas of the Corporation and its subsidiaries, including The Bryn Mawr Trust Company, as determined by the Compensation Committee.

Table


Weight	Measure	75% of Target Number			100% of Target Number			125% of Target Number			150% of Target Number
37.5%	Average Annual Wealth Revenue Percent Increase Year Over Year		9	%		11	%		13	%		15	%
37.5%	Average of the Annual Wealth Pre-tax Margin		37	%		39	%		41	%		43	%
25%	Subjective Criteria		Average			Above average			Excellent			Superior

The performance measures are independent of each other and each is weighted in accordance with the percentage set forth in the above table. In determining whether the Performance Goals have been achieved, the Compensation Committee will utilize the year end results for the years 2011, 2012 and 2013, respectively.

Illustration

If Average Wealth Revenue increased 14%, the Wealth Pre-tax margin increased 39%, and Mr. Leto’s subjective performance was superior, the following is a calculation of the number of vested shares:


Average Wealth Revenue	9,000 x .375 = 3,375 x 1.25 =	4,219
Average Wealth Pre-tax	9,000 x .375 = 3,375 x 1.00 =	3,375
Subjective Criteria	9,000 x .25 = 2,250 x 1.50 =	3,375

Total Shares		10,969

Exhibit 13.1

Commission File No. 0-15261

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES AND EXCHANGE ACT OF 1934

For the Year Ended December 31, 2010

BRYN MAWR BANK CORPORATION

LOGO

Investing for growth

A rich tradition of investing in our franchise and in our future.

Recent investments over the last five years have included:

•

JANUARY 2007 — Opened the Ardmore office.

•

MAY 2007 — Formed the Private Banking Group.

•

JUNE 2008 — Major renovations of the Wayne office.

•

JULY 2008 — Acquired Lau Associates LLC, Wilmington, DE.

•

NOVEMBER 2008 — Established The Bryn Mawr Trust Company of Delaware in Wilmington, DE.

•

JANUARY 2009 — Opened the West Chester Regional Banking Center.

•

MAY 2009 — Established BMT Asset Management.

•

NOVEMBER 2009 — Signed agreement to acquire First Keystone Financial.

•

DECEMBER 2009 — Major renovations of the Paoli office.

•

JULY 2010 — Acquired First Keystone Financial, Inc.

•

DECEMBER 2010 — Lau Associates LLC and The Bryn Mawr Trust Company of Delaware move to Greenville, Delaware.

•

FEBRUARY 2011 — Signed agreement to acquire the Private Wealth Management Group from Hershey Trust Company with approximately $1.1 billion of assets under management.

ANNUAL MEETING — The Annual Meeting of Shareholders of Bryn Mawr Bank Corporation will be held at Saint Davids Golf Club, 845 Radnor Street Road, Wayne, PA 19087, on Wednesday, April 27, 2011, at 11:00 a.m.

STOCK LISTING — Bryn Mawr Bank Corporation common stock is listed on the NASDAQ Select Global Market under the symbol BMTC.

FORM 10-K — A copy of the Corporation’s Form 10-K, including financial statement schedules as filed with the Securities and Exchange Commission, is available on our website www.bmtc.com or upon written request to the Corporate Secretary, Bryn Mawr Bank Corporation, 801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010.

EQUAL EMPLOYMENT OPPORTUNITY — The Corporation continues its commitment to equal opportunity employment and does not discriminate against minorities or women with respect to recruitment, hiring, training, or promotion. It is the policy of the Corporation to comply voluntarily with the practices of Affirmative Action.

This discussion contains forward-looking statements. Please see the section entitled “Special Cautionary Notice Regarding Forward Looking Statements” in the enclosed Annual Report to Shareholders, and the section entitled “Risk Factors” in the enclosed Form 10-K, for discussions of the risks, uncertainties and assumptions associated with these statements.

2010 Annual Report

Consolidated financial highlights

The comparability of these Consolidated financial highlights are impacted by the July 1, 2010 merger of First Keystone Financial, Inc. into Bryn Mawr Bank Corporation.


	2010			2009			CHANGE
FOR THE YEAR
Net interest income	$	52,150		$	40,793		$	11,357		27.8	%
Net interest income after loan and lease loss provision		42,296			33,909			8,387		24.7	%
Non-interest income		29,375			28,470			905		3.2	%
Non-interest expenses		57,985			46,542			11,443		24.6	%
Income taxes		4,512			5,500			(988	)	-18.0	%
Net income		9,174			10,337			(1,163	)	-11.3	%
Net income, exclusive of merger-related expenses		13,004			10,739			2,265		21.1	%
(a non-GAAP measure)*
AT YEAR-END
Total assets	$	1,731,768		$	1,238,821		$	492,947		39.8	%
Total portfolio loans and leases		1,196,717			885,739			310,978		35.1	%
Total deposits		1,341,432			937,887			403,545		43.0	%
Shareholders’ equity		161,418			103,936			57,482		55.3	%
Tangible common equity		136,695			92,214			44,480		48.2	%
Wealth assets under management, administration		3,412,890			2,871,143			541,747		18.9	%
and supervision
PER COMMON SHARE
Basic earnings per common share	$	0.85		$	1.18		$	(0.33	)	-28.0	%
Diluted earnings per common share		0.85			1.18			(0.33	)	-28.0	%
Dividends declared		0.56			0.56			0.00		0.0	%
Book value		13.24			11.72			1.52		13.0	%
Tangible book value		11.21			10.40			0.81		7.8	%
Closing price		17.45			15.09			2.36		15.6	%
SELECTED RATIOS
Return on average assets		0.61	%		0.88	%
Return on average shareholders’ equity		6.76	%		10.55	%
Tax equivalent net interest margin		3.79	%		3.70	%
Tangible common equity		8.01	%		7.51	%

dollars in thousands, except per share data

Net income, exclusive of merger-related expenses, is calculated by adding back to reported net income, which is a GAAP measure, the tax-effected due diligence and merger-related expenses of $3.830 million (pre-tax of $5.714 million, effective tax rate of 33.0%) and $402 thousand (pre-tax of $616 thousand, effective tax rate of 33.7%), for the years ended December 31, 2010 and 2009, respectively. Our management uses these non-GAAP financial measures in their analysis of our performance and believes that they provide useful supplemental information that is essential to an investor’s understanding of Bryn Mawr Bank Corporation’s operating results. These non-GAAP financial measures should not be viewed as a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

LOGO

Letter to shareholders

Dear Fellow Shareholders,

Although the recession has continued to batter many banks around the nation, I’m pleased to report that the Bryn Mawr Bank Corporation and our main subsidiary, The Bryn Mawr Trust Company, had an outstanding year.

Credit for this performance goes to our hardworking and dedicated staff, an excellent management team, and an engaged and active Board of Directors.

Here are the highlights:

•

On July 1, we successfully completed the acquisition of First Keystone Bank. In doing so, we doubled the size of our branch system and geographical footprint, and increased our banking assets by $480 million.

•

Net income, exclusive of merger expenses, was $13 million, an increase of 21% over the prior year. ^*

•

Wealth assets under management and administration increased 19% during 2010 and finished the year at $3.4 billion. A strong contributor was our newly-formed BMT Asset Management group, which specializes in handling investment accounts from $500 thousand to $3 million.

•

We completed a “private placement” stock offering in May and raised over $24 million of new common equity to support current and future growth. Bryn Mawr Trust remains a “well-capitalized” bank per federal and state regulatory guidelines.

•

Our stock price increased from $15.09 on December 31, 2009 to $17.45 on December 31, 2010, an improvement of 15.6%. Including our dividends, the total return to our shareholders for the year was 19.4%.

•

Bryn Mawr Bank Corporation was ranked #56 in financial performance out of thousands of institutions on the US Banker’s “Annual List of Top Community Banks.”

Despite such a strong year, challenges still remain. Many of our clients, especially small businesses, continue to be affected by the weak economy and, especially, by high unemployment. While the recently enacted Dodd-Frank

Act for financial reform bill mainly affects the very large banks, it still includes time-consuming and burdensome requirements on institutions such as ours.

However, we believe that we are very well positioned for another excellent year of profitability and growth in 2011.

Should you have any questions, please do not hesitate to call me at my direct line, 610-581-4800.

Sincerely,

Ted Peters

Chairman and Chief Executive Officer

*	See non-GAAP disclosure on page 1.

LOGO

Year in review

In 2010, we announced our 3-5-3 strategic vision. Our goal is to have $3 billion in banking assets and $5 billion in wealth assets within 3 years. This year, we made significant strides in achieving that strategic vision.

INVESTING IN OUR FUTU RE

On July 1, 2010, we completed our acquisition of First Keystone Financial, Inc., and its main operating subsidiary, First Keystone Bank. With this acquisition, we added eight full-service branches to our network and $480 million in assets. Closing on the acquisition marked an important milestone for us. However, we still had a tremendous amount of work ahead of us converting all former First Keystone Bank client accounts to Bryn Mawr Trust’s computer systems. Our primary goal for conversion was to develop and implement a “client focused” plan that would effectively communicate any changes in products or services, anticipate customer questions, identify new opportunities for customers and guide them through the transition to Bryn Mawr Trust.

On August 25, 2010, we announced the successful conversion of all First Keystone Bank client accounts to Bryn Mawr Trust’s computer systems. Our conversion team did a wonderful job on this project, and we experienced relatively few issues or complaints. In fact, client and account retention has been very high, and we are excited about the growth opportunities for the combined organizations.

In September, following our successful conversion, we launched a major multimedia campaign to improve brand awareness, particularly in our newly-acquired markets. The campaign promoted our capabilities in wealth management, commercial banking, retail banking and mortgage banking, using radio, cable TV, newspapers, internet and outdoor advertising. We received a tremendous amount of positive feedback about the campaign and generated many new client relationships.

LOGO

OUR CORE BUSINESSES

Once again, each of our four core businesses performed well in 2010. There was certainly the potential for getting distracted as we worked through the First Keystone acquisition. However, our team didn’t let that effort interfere with their primary goal of growing the Bank.

The Wealth Management Division acquired many new clients and made progress in growing some of our newer services, including philanthropic and escrow services. Our Wealth Management professionals are recognized financial management experts. Major news organizations sought their opinions and interviewed them on a variety of wealth and financial management topics. They have been seen on CNBC Closing Bell, CNBC Squawk on the Street, Fox Business News and Fox 29 News, and quoted in The Wall Street Journal, New York Times, Philadelphia Business Journal, Wilmington News Journal and The Philadelphia Inquirer, to name a few.

The Retail Banking staff personnel kept very busy growing new consumer and business account relationships. In addition to their normal sales and customer service activities, they were responsible for training the former First Keystone staff on our products, services, computer systems and procedures. As a result of their hard work, account retention and new client growth has been excellent. Our clients are receiving the excellent service they have come to expect!


5		2010 Annual Report

LOGO

With a disciplined approach to loan underwriting and risk management, our Commercial Banking group was able to avoid the significant loan problems that many other banks have encountered over the last few years. Credit quality of our loan portfolio is good and, with the addition of several new experienced lenders to our staff, we are poised for growth in 2011.

Many consumers were motivated to refinance residential mortgages due to the continued low rate environment in 2010. The BMT Mortgage Company closed over $239 million in new mortgages.

BUILDING STRONGER COMMUNITIES

Bryn Mawr Trust has always had a strong commitment to supporting the communities we serve. As we grow larger, we feel it is even more important to maintain close ties with residents, business leaders and community leaders. In 2009, we began to formalize our commitment by establishing a Chester County Advisory Board. In 2010, we expanded the program by establishing a Delaware County Advisory Board, a Wealth Management Advisory Board and The Bryn Mawr Trust Company of Delaware Advisory Board. Advisory Board members meet with Bryn Mawr Trust’s senior managers on emerging trends, issues, and opportunities to enhance our well-established role as a business and community partner. We are fortunate to have assembled a prestigious group of leaders to serve on our Advisory Boards. The members of our Advisory Boards are:

CHESTER COUNTY ADVISORY BOARD

Anthony Giannascoli, Attorney at Law, Giannascoli & Associates, P.C.

Kevin Holleran, Attorney at Law, Gawthrop Greenwood, P.C.

Senya D. Isayeff, Alliance Environmental Systems, Inc.

Valerie Jester, Brandywine Capital Associates, Inc.

James MacFadden,Century 21 Alliance

Mary Ellen “Mell” Josephs, Executive Director, Student Services, Inc., West Chester University

Eugene Steger, Attorney at Law, and CPA, Steger Gowie & Company, Inc.

Hon. Richard B. Yoder, Former Mayor of West Chester, Pennsylvania

DELAWARE COUNTY ADVISORY BOARD

Donald S. Guthrie, Attorney at Law and former Chairman of First Keystone Bank

Bruce Hendrixson, Owner, Garnet Ford

Donald G. Hosier, Jr., Executive, Montgomery Insurance Services, Inc.

Edmund Jones, Attorney at Law

Bruce E. Miller, President, Open MRI Centers

William J. O’Donnell, Executive, Wawa, Inc.

Lawrence G. Strohm, Jr., Attorney at Law

Thomas Broadt, Attorney at Law

Margaret Kuo, Restaurateur

Photos, left to right: J. Duncan Smith, Executive Vice President and Chief Financial Officer; Marie D. Connolly, Senior Vice President, Comptrollers; Mame O. Skelly, Senior Vice President, Comptrollers; Geoffrey L. Halberstadt, Executive Vice President, Chief Credit Policy Officer and Corporate Secretary. Stephen P. Novak, Senior Vice President, Retail Banking; Robin G. Otto, Group Vice President, Retail Banking; Sigal Silverman, Group Vice President, Retail Banking; Amy K. Groff, Vice President, Retail Banking. Joseph G. Keefer, Executive Vice President and Chief Lending Officer; Britton H. Murdoch, Lead Board Director; Martin F. Gallagher, Jr., Senior Vice President, Commercial Banking Division Head.

WEALTH MANAGEMENT ADVISORY BOARD

Brett Senior, Senior Partner of Brett Senior & Associates, P.C. Denean Williams, Managing Director of Cameron Capital Management LLC

Joseph Sidelarz, Senior Associate at Raffaele & Puppio, LLP

Virginia Sikes, Partner at Montgomery, McCracken, Walker & Rhodes, LLP

Joseph Lundy, Founding Partner of Lundy & Flynn, LLP

THE BRYN MAWR TRUST COMPANY OF DELAWARE ADVISORY BOARD

F. Peter Conaty, Jr., Attorney at Law, Richard, Layton & Finger, P.A.

Frances Gauthier, Attorney at Law, Stradley Ronan Stevens & Young, LLP

Michael M. Gordon, Attorney at Law, Gordon, Fournaris & Mammarella, P.A.

Harold W. T. Purnell, II, Attorney at Law, Archer & Greiner, P.C.

James W. Whalen, Jr., CEBS, Belfint, Lyons & Shuman, P.A.

In 2010, we continued our tradition of contributing generously to a wide variety of charitable, educational, cultural and civic organizations. In addition to our continued financial support, many members of our staff donate their personal time to many different community organizations.

RECOGNITION AND AWARDS

It’s always nice to receive recognition for a special achievement or a job well done. Thanks to our dedicated team members, Bryn Mawr Trust was honored on several different occasions this year.

In May 2010, we were notified that we had been ranked 56th in the US Banker’s annual ranking of the top community banks in the United States. The rankings are based on the financial institution’s performance as compiled by SNL Financial LC.

On August 2, 2010, in recognition of our 25th anniversary of being listed on the NASDAQ exchange, we were invited to ring the closing bell at the market. When first listed on NASDAQ, our market capitalization was $64.3 million and it has grown to over $240 million during the first quarter of 2011.

LOGO

Ringing the closing bell on August 2, 2010. Photo ^© NASDAQ OMX Group.


7		2010 Annual Report

LOGO

In December 2010, we received the Community Service Award from The Pennsylvania Association of Community Bankers for our support of The Radnor High School Scholarship Fund. In addition to our financial support, many of our staff members volunteer their time to work on various fundraising activities for this and other organizations.

We are honored to have received this award and recognition.

INVESTING IN OUR FRANCHISE

In December 2010, two of our subsidiaries, The Bryn Mawr Trust Company of Delaware and Lau Associates LLC, moved to a beautiful new location at 20 Montchanin Road, Greenville, Delaware 19807. This new location is ideally situated to serve our growing client base in the state of Delaware.

We are also in the process of making major renovations at our Havertown branch located at 18 West Eagle Road, Havertown, Pennsylvania 19083. We expect to have renovations completed in the first quarter of 2011.

Photos, left to right: Elizabeth Roberts, Esq., Senior Vice President, Chief Fiduciary Officer and Director of Trust; Gilbert B. Mateer, Senior Vice President, Retirement Services; Anrita McGinn, Group Vice President, Custody Services; F. Peter Brodie, Senior Vice President, Chief Investment Officer; Francis J. Leto, Executive Vice President, Wealth Management Division; Ellen T. Jordan, Senior Vice President, Wealth Management Division; Richard K. Cobb, Jr., Senior Vice President, BMT Asset Management; Mary T. Martin, Senior Vice President and Tax Manager. June M. Falcone, Senior Vice President, Operations; Kevin L. O’Connor, Chief Technology Officer, Information Services; Alison E. Gers, Executive Vice President, Retail Banking, Operations, IT and Marketing.

FUTURE OPPORTUNITIES

We will continue to seek out new and profitable opportunities for growth in the future. Because we are a Strong, Stable, Secure organization, we expect to have the financial strength to take advantage of new opportunities. We will carefully evaluate new opportunities as we have in the past, using a thoughtful, disciplined approach focused on risk management. We are very excited by opportunities for growth.

Management, staff and the Board of Directors are pleased with our 2010 accomplishments and thank you for your continued support.

Bryn Mawr Trust

Strong. Stable. Secure.

“This year was filled with more exciting opportunities and challenges than any other year in recent memory. It was a pleasure to see how our team took advantage of the opportunities and responded to the challenges.” — TED PETERS

Corporate information

CORPORATE H EADQUARTERS

801 Lancaster Ave., Bryn Mawr, PA 19010 Ÿ 610-525-1700 Ÿ www.bmtc.com

DIRECTORS

Thomas L. Bennett,

Private Investor, Director and Trustee of the Delaware Investments Family of Funds

Andrea F. Gilbert,

President, Bryn Mawr Hospital

Donald S. Guthrie,

Attorney at Law

Wendell F. Holland,

Partner, Saul Ewing LLP

Scott M. Jenkins,

President, S. M. Jenkins & Co.

David E. Lees,

Senior Partner, myCIO Wealth Partners, LLC

Francis J. Leto,

Executive Vice President, Wealth Management

Britton H. Murdoch,

CEO, City Line Motors;

Managing Director, Strattech Partners

Frederick C. “Ted” Peters II,

Chairman, President & Chief Executive Officer,

Bryn Mawr Bank Corporation and The Bryn Mawr Trust Company

B. Loyall Taylor, Jr.,

President, Taylor Gifts, Inc.

MARKET MAKERS

Boenning & Scattergood, Inc.

Credit Suisse Securities USA

Deutsche Bank Securities Inc.

Goldman, Sachs & Co.

Janney Montgomery Scott LLC

Keefe, Bruyette & Woods, Inc.

Morgan Stanley & Co., Inc.

Ryan Beck & Co., Inc.

Sandler O’Neill & Partners, LP

Sterne, Agee & Leach, Inc.

Stifel, Nicolaus & Co.

UBS Securities LLC

For a complete list, visit our website at www.bmtc.com

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

KPMG LLP, 1601 Market Street,

Philadelphia, PA 19103

LEGAL COUNSEL

McElroy, Deutsch, Mulvaney & Carpenter, LLP

One Penn Center at Suburban Station

1617 John F. Kennedy Boulevard,

Suite 1500,

Philadelphia, PA 19103

Stradley Ronon Stevens & Young, LLP

2005 Market Street,

Suite 2600,

Philadelphia, PA 19103-7098

BRYN MAWR BANK CORPORATION

Frederick C. “Ted” Peters II,

Chairman, President & Chief Executive Officer

Geoffrey L. Halberstadt,

Corporate Secretary

J. Duncan Smith, CPA,

Treasurer and Assistant Secretary

Francis J. Leto,

Vice President

PRINCIPAL SUBSIDIARY

The Bryn Mawr Trust Company

A Subsidiary of Bryn Mawr Bank Corporation

EXECUTIVE MANAGEMENT

Frederick C. “Ted” Peters II,

Chairman, President & Chief Executive Officer

Alison E. Gers,

Executive Vice President, Retail Banking,

Central Sales, Marketing,

Information Systems & Operations

Geoffrey L. Halberstadt,

Executive Vice President, Chief Credit Policy Officer and Corporate Secretary

Joseph G. Keefer,

Executive Vice President and Chief Lending Officer

Francis J. Leto,

Executive Vice President, Wealth Management

J. Duncan Smith, CPA,

Executive Vice President and Chief Financial Officer

WEALTH MANAGEMENT DIVI SION

10 South Bryn Mawr Avenue, Bryn Mawr, PA 19010

LIFE CARE COMMUNITY OFFICES

Beaumont at Bryn Mawr Retirement Community,

Bryn Mawr, PA

Bellingham Retirement Living,

West Chester, PA

Martins Run Life Care Community,

Media, PA

Rosemont Presbyterian Village,

Rosemont, PA The Quadrangle,

Haverford, PA

Waverly Heights, Gladwyne, PA

White Horse Village, Newtown Square, PA

OTHER SUBSIDIARIES AND FINANCIAL SERVICES

BMT Leasing, Inc.

Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA

James A. Zelinskie, Jr., President

BMT Mortgage Company

A Division of The Bryn Mawr Trust Company,

Bryn Mawr, PA

Myron H. Headen, President

BMT Mortgage Services, Inc.

Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA Myron H. Headen, President

BMT Settlement Services, Inc.

Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA Myron H. Headen, President

The Bryn Mawr Trust Company of Delaware

A Subsidiary of Bryn Mawr Bank Corporation,

Greenville, DE Karen A. Fahrner, Esq., President

Insurance Counsellors of Bryn Mawr, Inc.

A Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr,PA

Thomas F. Drennan, President

Lau Associates LLC

A Subsidiary of Bryn Mawr Bank Corporation,

Greenville, DE Judith W. Lau, CFP ^® , President

REGISTRAR & TRANSFER AGENT

BNY Mellon Shareowner Services

PO Box 358015, Pittsburgh, PA 15252-8015 www.bnymellon.com/shareowner/isd

INVESTOR RELATIONS

Aaron F. Strenkoski,

Vice President

Exhibit 13.1

Selected Financial Data ⁽¹⁾


For the years ended December 31,	2010			2009			2008			2007			2006
	(dollars in thousands, except for per share data)
Interest income	$	64,796		$	56,892		$	57,934		$	54,218		$	45,906
Interest expense		12,646			16,099			20,796			19,976			12,607

Net interest income		52,150			40,793			37,138			34,242			33,299
Provision for loan and lease losses		9,854			6,884			5,596			891			832

Net interest income after provision for loan and lease losses		42,296			33,909			31,542			33,351			32,467
Non-interest income		29,375			28,470			21,472			21,781			18,361
Non-interest expense		57,985			46,542			38,676			34,959			31,423

Income before income taxes		13,686			15,837			14,338			20,173			19,405
Income taxes		4,512			5,500			5,013			6,573			6,689

Net Income	$	9,174		$	10,337		$	9,325		$	13,600		$	12,716

Per share data:
Earnings per common share:
Basic	$	0.85		$	1.18		$	1.09		$	1.59		$	1.48
Diluted	$	0.85		$	1.18		$	1.08		$	1.58		$	1.46
Dividends declared	$	0.56		$	0.56		$	0.54		$	0.50		$	0.46
Weighted-average shares outstanding		10,765,657			8,732,004			8,566,938			8,539,904			8,578,050
Dilutive potential common shares		12,312			16,719			34,233			93,638			113,579

Adjusted weighted-average shares		10,777,969			8,748,723			8,601,171			8,633,542			8,691,629
Selected financial ratios:
Tax equivalent net interest margin		3.79	%		3.70	%		3.84	%		4.37	%		4.90	%
Net income/average total assets (“ROA”)		0.61	%		0.88	%		0.89	%		1.59	%		1.72	%
Net income/average shareholders’ equity (“ROE”)		6.76	%		10.55	%		10.01	%		15.87	%		15.71	%
Dividends declared per share to net income per basic common share		65.9	%		47.5	%		49.5	%		31.4	%		31.1	%
Average equity/average total assets		9.02	%		8.34	%		8.89	%		10.02	%		10.95	%
Non-interest expense / net-interest income and non-interest income		71.1	%		67.2	%		66.0	%		62.4	%		60.8	%
Non-interest income / net-interest income and non-interest income		36.0	%		41.1	%		36.6	%		38.9	%		35.5	%

At or for the year ended December 31,	2010			2009			2008			2007			2006
Total assets	$	1,731,768		$	1,238,821		$	1,151,346		$	1,002,096		$	826,817
Earning assets		1,597,130			1,164,617			1,061,139			874,661			733,781
Portfolio loans and leases		1,196,717			885,739			899,577			802,925			681,291
Deposits		1,341,432			937,887			869,490			849,528			714,489
Shareholders’ equity		161,418			103,936			92,413			90,351			82,092
Wealth assets under management, administration & supervision ⁽²⁾		3,412,890			2,871,143			2,146,399			2,277,091			2,178,777
Ratio of tangible common equity to tangible assets		8.01	%		7.51	%		7.13	%		9.02	%		9.97	%
Tier 1 Capital to Risk Weighted Assets		11.30	%		9.41	%		8.81	%		10.40	%		11.38	%
Total Regulatory Capital to Risk Weighted Assets		13.71	%		12.53	%		11.29	%		11.31	%		12.46	%
Loans serviced for others		605,485			514,875			350,199			357,363			382,141
Book value per share	$	13.24		$	11.72		$	10.76		$	10.60		$	9.59
Tangible book value per share	$	11.21		$	10.40		$	9.55		$	10.60		$	9.59
Allowance as a percentage of portfolio loans and leases		0.86	%		1.18	%		1.15	%		1.01	%		1.19	%
Allowance as a percentage of originated portfolio loans and leases ⁽³⁾		1.08	%		1.18	%		1.15	%		1.01	%		1.19	%
Non-performing loans and leases as a percentage of loans and leases		0.79	%		0.78	%		0.65	%		0.25	%		0.12	%

⁽¹⁾

The comparability of the Selected Financial Data is impacted by the July 1, 2010 merger of First Keystone Financial, Inc. into Bryn Mawr Bank Corporation.

⁽²⁾

Excludes assets under management from an institutional client for 2007, and 2006.

⁽³⁾

A non-GAAP measure that excludes loans and leases acquired in the Merger as detailed on page 23 of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

B RIEF H ISTORY OF THE C ORPORATION

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, Pennsylvania, a western suburb of Philadelphia. The Corporation and its subsidiaries offer a full range of personal and business banking services, consumer and commercial loans, equipment leasing, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from 17 full-service branches and seven limited-hour, retirement community offices throughout Montgomery, Delaware and Chester counties of Pennsylvania. The common stock of the Corporation trades on the NASDAQ Stock 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 operates in a highly competitive market area that 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 agencies including the Securities and Exchange Commission (“SEC”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking.

F IRST K EYSTONE F INANCIAL , I NC .

On July 1, 2010, the merger of First Keystone Financial, Inc. (“FKF”) with and into the Corporation (the “Merger”), and the two step merger of FKF’s wholly-owned subsidiary, First Keystone Bank (“FKB”) with and into the Bank, were completed. In accordance with the terms of the Agreement and Plan of Merger, dated November 3, 2009, by and between the Corporation and FKF (the “Merger Agreement”), shareholders of FKF received 0.6973 shares of the Corporation’s common stock plus $2.06 per share cash consideration for each share of FKF common stock they owned as of the effective date of the Merger. The 85% stock and 15% cash transaction is valued at $31.3 million, based on FKF’s June 30, 2010 closing share price of $13.35 as listed on NASDAQ.

R ESULTS OF O PERATIONS

The following is Management’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 are comprised primarily 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. For more information on the factors that could affect performance, see “Special Cautionary Notice Regarding Forward Looking Statements” on page 24 of this Annual Report.

C RITICAL A CCOUNTING P OLICIES , J UDGMENTS AND E STIMATES

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 (“GAAP”). All inter-company transactions are eliminated in consolidation and certain reclassifications are made when necessary in order to conform the previous years’ financial statements to the current year’s presentation. In preparing the consolidated financial statements, Management 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 (the “Allowance”) 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 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 Note 1 in the accompanying financial statements. The Corporation’s Summary of Significant Accounting Policies has not substantively changed any aspect of its overall approach in the application of the foregoing policies.

O VERVIEW OF G ENERAL E CONOMIC , R EGULATORY AND G OVERNMENTAL E NVIRONMENT

During 2010, the global and U.S. economies began to stabilize from the severe recessionary environment of 2008 and 2009. According to the National Bureau of Economic Research, a private, non-profit research group, the recession began in December 2007 and ended in June 2009. The decline in the housing market during the past year began to slow and the unemployment rate retreated from a high of 10% during the first part of 2010.

The drop in real estate values negatively impacted residential home builder and development business nationwide. In addition, investment securities backed by residential and commercial real estate reflected substantial unrealized losses due to a lack of liquidity in the financial markets and anticipated credit losses. Some financial institutions were forced into liquidation or were merged with stronger institutions as losses increased and the amounts of available funding and capital levels decreased. As of December 31, 2010, the Corporation and the Bank are “well capitalized” by regulatory standards and are in a position to acquire new customers from weaker financial institutions.

As the economic recovery was not as robust as the Federal Reserve anticipated, a second round of quantitative easing, known as “QE2,” was announced in November 2010. To further stimulate the economy, the Federal Reserve announced it would purchase $600 billion of Treasury securities by the end of the second quarter of 2011. There has been much debate as to whether QE2 was needed, the inflationary impact it may ultimately have and whether the program should be stopped early.

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), a sweeping overhaul to financial regulation within the U.S. was signed into law. The main goals of the Dodd-Frank Act were to promote financial stability within the U.S. by improving accountability and transparency in the financial system, to end the “too big to fail” theory pertaining to financial institutions, to protect consumers from abusive financial service practices and to protect American taxpayers by ending bailouts of institutions. Implementation of the various provisions of the Dodd-Frank Act represents a significant change in the U.S. financial regulatory environment and will impact the entire financial services industry, including the Corporation.

In November 2010, the Federal Deposit Insurance Corporation, (“FDIC”) approved Section 343 of the Dodd-Frank Act providing temporary unlimited coverage for non-interest-bearing transaction accounts. This coverage became effective December 31, 2010 and will end on December 31, 2012. Excluded from this coverage are negotiable orders of withdrawal (“NOW”) accounts and interest on lawyer trust accounts (“IOLTA”).

In addition, on November 9, 2010, the FDIC approved proposed rules related to the calculation of the deposit insurance assessment. The proposal would shift the basis for the assessment away from an institution’s total domestic deposits, to its average total assets less tangible equity. The FDIC is also proposing that the new assessment method be implemented, effective April 1, 2011. This shift in assessment basis would benefit community banks by placing more of the burden on the large, multi-national banks, which, until now, were only assessed on their domestic deposit base.

The Federal Home Loan Bank of Pittsburgh (“FHLB”) has continued its voluntary suspension of dividend payments and the repurchase of excess capital stock originally announced on December 23, 2008. The FHLB expects that its ability to pay dividends and add to retained earnings will be significantly curtailed due to low short-term interest rates, an increased cost of maintaining liquidity and constrained access to debt markets at attractive rates. Capital stock repurchases from member banks will be reviewed on a quarterly basis, and only limited repurchases have taken place during the current fiscal year. As

of December 31, 2010, the Corporation held $14.2 million of FHLB capital stock. The FHLB is the primary source of liquidity for the Corporation, but alternatives are also available, including the Federal Reserve and wholesale certificates of deposit.

Since the financial crisis began in late 2008, there has been much debate on the future of two government sponsored enterprises: Fannie Mae and Freddie Mac. For decades, borrowers, lenders and investors benefited from the liquid markets these institutions helped establish. However, financial decisions were based on the faulty assumptions that housing prices could only rise. As credit and home demand catapulted to unseen levels, various financial instruments were created to shift risk away from the originators and mortgages became a tool for speculation. As the housing market collapsed, Fannie Mae and Freddie Mac did not have enough capital to support their investments and absorb losses. In September 2008, these two institutions were placed into conservatorship where they remain today. In February 2011, a report was issued by the Department of the Treasury and the U.S. Department of Housing entitled “Reforming America’s Housing Finance Market – A Report to Congress.” Though the report does not focus on one solution for Fannie Mae and Freddie Mac, it is clear that both organizations going forward will reduce their footprint in the housing market. It is unclear as of this writing how this will affect the Corporation, going forward.

Throughout 2010 the economy remained weak, but stabilized and there is reserved optimism for 2011. A continued anemic economic recovery could have an adverse effect on the Corporation’s revenues, capital, liquidity and profitability. However, the Corporation is confident that its disciplined strategies to maintain a strong financial position and build the brand name should put it in a good position to weather the financial downturn and take advantage of opportunities as they arise.

E XECUTIVE OVERVIEW

2010 Compared to 2009

As a result of the acquisition by merger of FKF on July 1, 2010, the primary cause of the changes in both the Corporation’s balance sheet and results of operations for the twelve months ended December 31, 2010, as compared to the same period in 2009 can be attributed to the Merger.

The Corporation reported net income of $9.2 million or $0.85 diluted earnings per share for the twelve months ended December 31, 2010, as compared to $10.3 million, or $1.18 diluted earnings per share, for the same period in 2009. Return on average equity (“ROE”) and return on average assets (“ROA”) for the twelve months ended December 31, 2010, were 6.76% and 0.61%, respectively, as compared to 10.55% and 0.88%, respectively, for the same period in 2009. Net income, ROE and ROA for the twelve months ended December 31, 2010, as compared to the same period in 2009, were reduced, primarily by the due diligence and merger-related expenses of $5.7 million associated with the Merger and $3.0 million increase in the provision for loan and lease losses (the “Provision”) for the twelve months ended December 31, 2010, as compared to the same period in 2009. ROE was also affected by the registered direct stock offering, completed in May 2010, which increased capital by $24.6 million.

The $11.6 million, or 28.1% increase in the Corporation’s tax-equivalent net interest income for the twelve months ended December 31, 2010, as compared to the same period in 2009, was attributed to a $3.5 million, or 21.4%, decrease in interest expense for the twelve months ended December 31, 2010, as compared to the same period in 2009. This decrease was primarily the result of a 71 basis point decrease in the rate paid on deposits between the periods. The decrease was partially offset by a 44 basis point decline in interest-earning asset yield for the twelve months ended December 31, 2010, as compared to the same period in 2009. The Corporation’s tax-equivalent net interest margin increased from 3.70% for the twelve months ended December 31, 2009 to 3.79% for the same period in 2010.

Asset quality remained stable as of December 31, 2010. The allowance for loan and lease losses of $10.3 million was 0.86% of portfolio loans and leases, as of December 31, 2010, as compared to $10.3 million, or 1.18%, of portfolio loans and leases, at December 31, 2009. The calculation of the Allowance, as a percentage of loans and leases in 2010, includes the acquired FKF loan portfolio which, in accordance with GAAP, was recorded at its fair value without its previously recorded Allowance.

Total portfolio loans and leases of $1.20 billion at December 31, 2010 increased $311.0 million, or 35.1%, as compared to $885.7 million at December 31, 2009. The growth was primarily attributable to the Merger and new business development efforts. Partially offsetting this increase was a decrease in the Bank’s lease portfolio of $12.3 million from $47.7 million as of December 31, 2009 to $35.4 million as of December 31, 2010, as repayments and charge-offs exceeded new production.

The Corporation’s investment portfolio at December 31, 2010 had a fair market value of $317.1 million, as compared to $208.2 million at December 31, 2009. This increase of $108.8 million, or 52.3%, was primarily the result of the Merger and the purchase of short-term securities, to utilize excess cash balances.

Deposits of $1.34 billion at December 31, 2010, increased $403.5 million, or 43.0%, from $937.9 million at December 31, 2009. This growth was largely due to the deposits acquired in the Merger, in addition to continued

strong branch activity, and the increase in balances of new accounts opened in previous quarters.

For the twelve months ended December 31, 2010, the Provision increased to $9.9 million, an increase of $3.0 million, or 43.1%, from the $6.9 million for the same period in 2009. This increase is related to $7.7 million in write-downs during the twelve months ended December 31, 2010, of two commercial loan relationships to their expected net realizable values based on updated analyses of the collateral supporting the loans and certain new valuation information. Partially offsetting this increase was a $2.7 million decrease in net charge-offs in the lease portfolio, for the twelve months ended December 31, 2010, as compared to the same period in 2009.

Non-interest income for the twelve months ended December 31, 2010 was $29.4 million, an increase of $905 thousand, or 3.2%, as compared to the same period in 2009. Contributing to the increase in non-interest income for the twelve months ended December 31, 2010, as compared to the same period in 2009, was a $239 thousand, or 17.2%, increase in loan servicing and late fees and a $356 thousand, or 18.2%, increase in service charges on deposits. These increases were largely attributable to the addition of the FKF branches during the third quarter of 2010. In addition to the effects of the Merger, fees for Wealth Management services increased $1.3 million, or 9.3%, from $14.2 million for the twelve months ended December 31, 2009 to $15.5 million, for the same period in 2010. Partially offsetting the increases in Wealth Management fees and other fee income was a $1.3 million decline in the gain on sale of mortgage loans for the twelve months ended December 31, 2010, as compared to the same period in 2009.

Non-interest expense for the twelve months ended December 31, 2010, was $58.0 million, an increase of $11.4 million, or 24.6%, as compared to the same period in 2009, partially due to the $5.7 million due diligence and merger-related expenses, as well as increased staffing and processing costs related to the addition of FKF’s eight full-service branch locations.

2009 Compared to 2008

The Corporation reported net income of $10.3 million or $1.18 diluted earnings per share for the twelve months ended December 31, 2009, as compared to $9.3 million, or $1.08 diluted earnings per share, for the same period in 2008. ROE and ROA for the twelve months ended December 31, 2009, were 10.22% and 0.87%, respectively, as compared to 10.01% and 0.89%, respectively, for the same period in 2008.

The Corporation’s portfolio of loans and leases as of December 31, 2009 of $885.7 million decreased $13.9 million, or 1.6%, from $899.6 million as of December 31, 2008. This decrease was primarily due to the $11.6 million, or 19.5% decline in the Bank’s lease portfolio to $47.8 million as of December 31, 2009, from the December 31, 2008 balance of $59.4 million. The decline in the loan portfolio, which related primarily to its construction segment, as well as the decline in the leasing portfolio, resulted from Management’s decision to limit exposure to these sections of the portfolio.

As of December 31, 2009 credit quality on the overall loan and lease portfolio remained stable as total non-performing loans and leases totaled $6.9 million or 0.78% of portfolio loans and leases as compared to non-performing loans and leases of $5.8 million, or 0.65% of portfolio loans and leases as of December 31, 2008.

The Provision for the years ended December 31, 2009 and 2008 was $6.9 million and $5.6 million, respectively. At December 31, 2009, the Allowance of $10.4 million represented 1.18% of portfolio loans and leases, as compared $10.3 million as of December 31, 2008, which was 1.15% of portfolio loans and leases, at December 31, 2008.

The increase in the Corporation’s tax-equivalent net interest income of $3.7 million, or 9.8%, for the year ended December 31, 2009, as compared to the same period in 2008 was attributed to a $4.7 million, or 22.6% decrease in interest expense for the twelve months ended December 31, 2009, as compared to the same period in 2008, primarily resulting from a 106 basis point decrease in the rate paid on deposits. The Corporation’s tax-equivalent net interest margin decreased from 3.84% for the twelve months ended December 31, 2008 to 3.70% for the same period in 2009.

For the twelve months ended December 31, 2009, non-interest income was $28.5 million, an increase of $7.0 million or 32.6% from $21.5 million for the same period in 2008. Contributing to this improvement was a $4.7 million increase in gain on sale of residential mortgage loans and a $1.9 million increase in gain on sale of available for sale and trading investment securities, for the twelve months ended December 31, 2009, as compared to the same period in 2008.

For the twelve months ended December 31, 2009, non-interest expense was $46.5 million, an increase of $7.9 million or 20.3% over the $38.7 million for the same period in 2008. Contributing to this increase was a $4.7 million increase in salary and benefits expense, which included commissions on mortgage originations associated with new business initiatives. In addition, FDIC insurance for the twelve months ended December 31, 2009 increased $1.3 million, to $1.8 million, which included a one-time special assessment of $540 thousand, as compared to the same period in 2008.

C OMPONENTS OF N ET I NCOME

Net income is affected by five major elements: Net Interest Income , or the difference between interest income and loan fees earned on loans and investments and interest expense paid on deposits and borrowed funds; Provision For Loan and Lease Losses , or the amount added to the allowance for loan and lease losses to provide for estimated inherent losses on loans and leases; Non-Interest Income which is made up primarily of certain fees, wealth management revenue, residential mortgage activities and gains and losses from the sale of loans, securities and other assets; Non-Interest Expense , which consists primarily of salaries, employee benefits and other operating expenses; and Income Taxes . Each of these major elements will be reviewed in more detail in the following discussion.

N ET I NTEREST I NCOME

Rate/Volume Analyses (Tax-equivalent Basis) ⁽¹⁾

The rate volume analysis in the table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the years 2010 as compared 2009 and 2009 as compared to 2008, allocated by rate and volume. The change in interest income / expense due to both volume and rate has been allocated to changes in volume.


	Year Ended December 31,
(dollars in thousands)	2010 Compared to 2009									2009 Compared to 2008
increase/(decrease)	Volume			Rate			Total			Volume			Rate			Total
Interest Income:
Interest-bearing deposits with banks	$	82		$	22		$	104		$	127		$	(198	)	$	(71	)
Money market funds		(195	)		(1	)		(196	)		(123	)		(12	)		(135	)
Federal funds sold		(1	)		—			(1	)		193			(15	)		178
Investment securities		4,479			(4,004	)		475			2,531			(1,848	)		683
Loans and leases		8,676			(932	)		7,744			2,546			(4,121	)		(1,575	)

Total interest income		13,041			(4,915	)		8,126			5,274			(6,194	)		(920	)

Interest expense:
Savings, NOW and market rate accounts		1,413			(1,550	)		(137	)		1,084			(1,632	)		(548	)
Other wholesale deposits		128			25			153			27			10			37
Wholesale time deposits		(1,125	)		(308	)		(1,433	)		(2,076	)		(1,338	)		(3,414	)
Time deposits		288			(2,740	)		(2,452	)		(162	)		(1,985	)		(2,147	)
Borrowed funds		1,534			(1,118	)		416			1,221			154			1,375

Total interest expense		2,238			(5,691	)		(3,453	)		94			(4,791	)		(4,697	)

Interest differential	$	10,803		$	776		$	11,579		$	5,180		$	(1,403	)	$	3,777

⁽¹⁾

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

Analysis of Interest Rates and Interest Differential

The table below presents the major asset and liability categories on an average daily basis for the periods presented, along with tax-equivalent interest income and expense and key rates and yields:


	For the Year Ended December 31,
	2010								2009								2008
(dollars in thousands)	Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid			Average Balance		Interest Income/ Expense		Average Rates Earned/ Paid
Assets:
Interest-bearing deposits with banks	$	73,046		$	178		0.24	%	$	34,946		$	74		0.21	%	$	18,678	$	145		0.78	%
Federal funds sold		—			—		—			548			1		0.18	%		5,616		136		2.42	%
Money market funds		475			1		0.21	%		38,662			197		0.51	%		3,445		19		0.55	%
Investment securities:
Taxable		249,714			4,555		1.82	%		129,780			4,398		3.39	%		86,940		4,127		4.75	%
Tax - Exempt		27,173			1,094		4.03	%		17,818			776		4.36	%		7,538		364		4.83	%

Total investment securities ⁽³⁾		276,887			5,649		2.04	%		147,598			5,174		3.51	%		94,478		4,491		4.75	%
Loans and leases ⁽¹⁾⁽²⁾		1,041,109			59,579		5.72	%		892,518			51,835		5.81	%		851,752		53,410		6.27	%

Total interest-earning assets		1,391,517			65,407		4.70	%		1,114,272			57,281		5.14	%		973,969		58,201		5.98	%
Cash and due from banks		11,750								11,249								15,780
Allowance for loan and lease losses		(10,248	)							(10,421	)							(8,613
Other assets		100,351								65,395								64,542

Total assets	$	1,493,370							$	1,180,495							$	1,045,678

Liabilities:
Savings, NOW, and market rate accounts	$	594,756			2,957		0.50	%	$	408,523		$	3,094		0.76	%	$	325,291	$	3,753		1.15	%
Other wholesale deposits		62,875			301		0.48	%		33,988			148		0.44	%		10,088		111		1.10	%
Wholesale time deposits		38,379			651		1.70	%		83,277			2,084		2.50	%		123,794		5,498		4.11	%
Time deposits		201,947			2,192		1.09	%		190,071			4,644		2.44	%		194,739		6,791		3.49	%

Total interest-bearing deposits		897,957			6,101		0.68	%		715,859			9,970		1.39	%		653,912		16,042		2.45	%
Subordinated debentures		22,500			1,129		5.02	%		20,260			1,108		5.47	%		5,934		408		6.88	%
Junior subordinated debentures		6,076			494		8.13	%		—			—		—			—		—		—
Short-term borrowings		5,838			16		0.28	%		159			1		0.61	%		—		—		—
FHLB advances and other borrowings		177,882			4,906		2.76	%		151,228			5,020		3.32	%		130,490		4,346		3.33	%

Total interest-bearing liabilities		1,110,253			12,646		1.14	%		887,506			16,099		1.81	%		790,336		20,796		2.63	%
Non-interest-bearing deposits		222,715								172,468								143,924
Other liabilities		24,601								22,502								18,243

Total non-interest-bearing liabilities		247,316								194,970								162,167

Total liabilities		1,357,569								1,082,476								952,503
Shareholders’ equity		135,801								98,019								93,175

Total liabilities and shareholders’ equity	$	1,493,370							$	1,180,495							$	1,045,678

Net interest spread							3.56	%							3.33	%						3.35	%
Effect of non-interest-bearing sources							0.23	%							0.37	%						0.49	%

Net interest income/margin on earning assets				$	52,761		3.79	%				$	41,182		3.70	%			$	37,405		3.84	%

Tax-equivalent adjustment (tax rate 35%)				$	611		0.04	%				$	389		0.04	%			$	267		0.03	%

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

(2)	Includes portfolio loans and leases and loans held for sale.

(3)	Investment securities include trading and available for sale ^.

Net Interest Income and Net Interest Margin 2010 Compared to 2009

The tax-equivalent net interest margin increased 9 basis points to 3.79% for the twelve months ended December 31, 2010, as compared to 3.70%, for the same period in 2009.

The tax-equivalent net interest income for the twelve months ended December 31, 2010, of $52.8 million, was $11.6 million, or 28.1%, higher than the tax-equivalent net interest income of $41.2 million for the same period in 2009. This increase was primarily driven by the effects of larger asset and liability balances resulting from the Merger as well as a 71 basis point decrease in weighted average rate paid on deposits from 1.39% for the twelve months ended December 31, 2009 to 0.68% for the same period in 2010.

The tax-equivalent net interest income increased as a result of the $148.6 million, or 16.6%, increase in average loans and leases for the twelve month period ended December 31, 2010, as compared to the same period in 2009, primarily due to loans acquired in the Merger as well as new business development initiatives. The yield on loans declined 9 basis points to 5.72% from 5.81% for the twelve months ended December 31, 2010, as compared to the same period in 2009. In addition, the average balance of investment securities grew by $129.3 million, or 87.6%, to $276.9 for the twelve months ended December 31, 2010 from the same period in 2009, primarily due to investments acquired in the Merger, and, to a lesser extent, the investment of cash resulting from strong deposit inflows as well as cash acquired in the Merger. The tax-equivalent yield on investment securities for the twelve months ended December 31, 2010 decreased 147 basis points to 2.04% from 3.51% for the same period in 2009, as more short-term liquid investments were purchased, replacing the higher-yielding investments that were called and the continued decline in interest rates.

Average interest-bearing liabilities increased $222.7 million, or 25.1%, to $1.1 billion during the twelve months ended December 31, 2010, as compared to $887.5 million for the same period in 2009. The rate paid on interest-bearing liabilities dropped 67 basis points to 1.14%, for the twelve months ended December 31, 2010 from 1.81%, for the same period in 2009. This was primarily due to the maturing of higher-rate wholesale deposits, the increase in lower-costing money market and savings account balances and reduced deposit rates.

Net Interest Income and Net Interest Margin 2009 Compared to 2008

Net interest income on a tax-equivalent basis for the year ended December 31, 2009 of $41.2 million was $3.8 million or 10.1% higher than the $37.4 million recorded for the twelve months ended December 31, 2008. This increase was primarily due to the $4.7 million, or 22.6% reduction in interest expense for the twelve months ended December 31, 2009, as compared to the same period in 2008. The average balance of interest-earning assets, for the twelve months ended December 31, 2009, increased $140.3 million, or 14.4%, to $1.11 billion, from $974.0 million for the same period in 2008. However, the tax-equivalent yield on interest-earning assets decreased by 84 basis points from 5.98% for the twelve months ended December 31, 2008 to 5.14% for the same period in 2009. This was the result of decreases in the tax-equivalent yields on investment securities and loans and leases of 124 basis points and 46 basis points, respectively, for the twelve months ended December 31, 2009, as compared to the same period in 2008. The yields on loans decreased largely due to the current rate environment and competitive pricing pressures, while the yield on investments decreased as more short-term liquid investments were purchased.

Average interest-bearing liabilities increased $97.2 million, or 12.3%, from $790.3 million for the twelve months ended December 31, 2008 to $887.5 million for the same period in 2009. This increase was mainly due to the increase in core deposits, as wholesale deposits that matured were not replaced. Additionally, the Corporation increased subordinated debt by $14.3 million during the twelve months ended December 31, 2009. The tax-equivalent rate on interest-bearing liabilities declined 82 basis points from 2.63% for the twelve months ended December 31, 2008 to 1.81% for the same period in 2009, primarily due to aggressive management of deposit pricing and the maturities of higher-rate wholesale deposits during 2009. Despite the increase in tax-equivalent net interest income, tax-equivalent net interest margin on interest-earning assets decreased 14 basis points to 3.70% for the twelve months ended December 31, 2009, from 3.84% for the same period in 2008.

Net Interest Margin

The interest-bearing liability cost decreased 41 basis points to 1.04% for the three months ended December 31, 2010, from 1.45% for the same period in 2009. This reduction was due primarily to aggressive management of deposit pricing and the maturity of higher-rate wholesale deposits during the fourth quarter of 2010. At the same time, the yield on interest-earning assets for the three months ended December 31, 2010 declined 43 basis points to 4.56% from 4.99% for the same period in 2009.

The interest-bearing liability cost for the twelve months ended December 31, 2010 decreased 67 basis points, to 1.14%, from 1.81% for the same period in 2009. This reduction was due primarily to the aggressive management of deposit pricing and the maturity of higher-rate wholesale deposits during 2010.

The tax-equivalent net interest margin and related components, for the past five quarters and the past three years 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
Tax-equivalent Net Interest Margin Last Five Quarters
4 ^th Quarter		2010		4.56	%		1.04	%		3.52	%		0.21	%		3.73	%
3 ^rd Quarter		2010		4.57	%		1.09	%		3.48	%		0.18	%		3.66	%
2 ^nd Quarter		2010		4.74	%		1.22	%		3.52	%		0.32	%		3.84	%
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	%
Tax-equivalent Net Interest Margin Last Three Years
		2010		4.70	%		1.14	%		3.56	%		0.23	%		3.79	%
		2009		5.14	%		1.81	%		3.33	%		0.37	%		3.70	%
		2008		5.98	%		2.63	%		3.35	%		0.49	%		3.84	%

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 Liability Committee (“ALCO”), using policies and procedures approved by the Corporation’s Board of Directors, is responsible for the management of the Corporation’s 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 offerings of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of multiple sources including borrowings from the FHLB, the Federal Reserve Bank of Philadelphia’s discount window, certificates of deposit from institutional brokers, Certificate of Deposit Account Registry Service (“CDARS”), Insured Network Deposit (“IND”) Program, Institutional Deposit Corporation (“IDC”) and Pennsylvania Local Government Investment Trust (“PLGIT”).

The Corporation uses several tools to manage its interest rate risk including interest rate sensitivity analysis, or 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 the established limits.

The following table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock”, 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 interest-earning assets or interest-bearing liabilities over the next twelve months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

Summary of Interest Rate Simulation


	December 31, 2010
(dollars in thousands)	Estimated Change In Net Interest Income Over Next 12 Months
Change in Interest Rates
+300 basis points	$	1,326		2.09	%
+200 basis points	$	936		1.47	%
+100 basis points	$	66		0.10	%
-100 basis points	$	(1,952	)	(3.08	)%

The interest rate simulation above demonstrates that the Corporation’s balance sheet as of December 31, 2010 is asset sensitive, indicating that an increase in interest rates will have a positive impact on net interest income over the next 12 months while a decrease in interest rates will negatively impact net interest income. In the above simulation, net interest income will increase if rates increase 100-, 200- or 300 basis points. However, the 100-basis point increase scenario indicates a minimal increase in net interest income over the next twelve months as the Corporation has interest rate floors on many of its portfolio loans. In addition, the Corporation’s internal prime loan rate is set, as of December 31, 2010, at 3.99%, or 74 basis points above the Wall Street Journal Prime Rate of 3.25%. The 100 basis point decrease scenario shows a $1.95 million, or (3.08)%, decrease in net interest income over the next twelve months as many of the Corporation’s liabilities bear rates of interest below 1.00% and therefore would not be able to sustain the entire decrease. The four scenarios are directionally consistent with the December 31, 2009 simulation (with the exception of the 100 basis point increase), but reflect a lower interest income increase and percentage change in net interest income due to the current rate environment.

The interest rate simulation is an estimate based on assumptions, which are based on past behavior of customers, along with expectations of future behavior relative to interest rate changes. In today’s uncertain economic environment and the current extended period of very low interest rates, the reliability of the Corporation’s interest rate simulation model is more uncertain than in other periods. Actual customer behavior may be significantly different than expected behavior, which could cause an unexpected outcome and may result in lower net interest income.

Gap Report

The interest sensitivity, or Gap report, identifies interest rate risk by showing repricing gaps in the Corporation’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 the investment preferences of the bank. Non-rate-sensitive assets and liabilities are spread over time periods to reflect the Corporation’s view of the maturity of these funds.

Non-maturity deposits (demand deposits in particular), are recognized by the Bank’s 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 these deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the Bank’s regulatory agencies have suggested distribution limits for non-maturity deposits. However, the Corporation has taken a more conservative approach than these limits would suggest by forecasting these deposit types with a shorter maturity. The following table presents the Corporation’s GAP Analysis as of December 31, 2010:


(dollars in millions)	0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive			Total
Assets:
Interest-bearing deposits with banks	$	78.4		$	—		$	—		$	—		$	—		$	78.4
Money market funds		0.1			—			—			—			—			0.1
Investment securities		86.4			97.7			108.8			24.1			—			317.0
Loans and leases ⁽¹⁾		428.8			157.4			510.1			105.3			—			1,201.6
Allowance		—			—			—			—			(10.3	)		(10.3	)
Cash and due from banks		—			—			—			—			11.0			11.0
Other assets		—			—			—			—			134.0			134.0

Total assets	$	593.7		$	255.1		$	618.9		$	129.4		$	134.7		$	1,731.8

Liabilities and shareholders’ equity:
Demand, non-interest-bearing	$	54.4		$	36.0		$	192.0		$	—		$	—		$	282.4
Savings, NOW and market rate		121.0			105.2			375.2			94.7			—			696.1
Time deposits		66.6			123.2			55.8			0.1			—			245.7
Other wholesale deposits		80.1			—			—			—			—			80.1
Wholesale time deposits		30.9			6.3			—			—			—			37.2
Short-term borrowings		10.1			—			—			—			—			10.1
Other borrowings		39.3			26.0			73.8			21.0			—			160.1
Subordinated debentures		22.5			—			—			—			—			22.5
Junior Subordinated debentures		—			—			—			12.0			—			12.0
Other liabilities		—			—			—			—			24.2			24.2
Shareholders’ equity		5.8			17.3			92.2			46.1			—			161.4

Total liabilities and shareholders’ equity	$	430.7		$	314.0		$	789.0		$	173.9		$	24.2		$	1,731.8

Interest-earning assets	$	593.7		$	255.1		$	618.9		$	129.4		$	—		$	1,597.1
Interest-bearing liabilities		370.5			260.7			504.8			127.8			—			1,263.8

Difference between interest-earning assets and interest-bearing liabilities	$	223.2		$	(5.6	)	$	114.1		$	1.6		$	—		$	333.3

Cumulative difference between interest earning assets and interest-bearing liabilities	$	223.2		$	217.6		$	331.7		$	333.3		$	—		$	333.3

Cumulative earning assets as a % of cumulative interest bearing liabilities		160	%		134	%		129	%		126	%

⁽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 experience an increase in net interest income in the near term, if interest rates rise. Accordingly, if rates decline, net interest income should decline. Actual results may differ from expected results for many reasons including market reactions, competitor responses, customer behavior and/or regulatory actions.

The following table summarizes the maturities of certificates of deposit of $100,000 or greater at December 31, 2010:


(dollars in thousands)	Non- Wholesale		Wholesale
Three months or less	$	38,602	$	30,422
Three to six months		9,536		647
Six to twelve months		35,463		5,484
Greater than twelve months		17,658		—

Total	$	101,259	$	36,553

Fair Value Adjustments Impacting the Statement of Income

The following table details the actual effect for the six months ended December 31, 2010, and the projected effect for each of the five years ending December 31, 2015, and thereafter, of the accretable and amortizable fair value adjustments attributable to the Merger, on net interest income and pretax income. The projected accretion and amortization is subject to change in future periods related to, among other things, changes in the Corporation’s estimates of loan cash flows, investment sales and calls, deposit maturities, loan prepayments, and prepayments of FHLB advances and junior subordinated debentures.


	Income Statement Effect		Accretable /Amortizable Balance July 1, 2010			For the Six Months Ended Dec 31, 2010			For the Twelve Months Ending													Thereafter
	Income Statement Effect					For the Six Months Ended Dec 31, 2010			Dec 31, 2011			Dec 31, 2012			Dec 31, 2013			Dec 31, 2014		Dec 31, 2015		Thereafter
Interest income/expense:
Loans		Income	$	5,998		$	657		$	1,148		$	995		$	795		$	627	$	530	$	1,246
Investment securities		Expense		(1,499	)		(554	)		(630	)		(315	)		––			––		––		––
Deposits		Income		1,688			564			545			333			224			22		––		––
FHLB advances		Income		3,088			1,450			552			442			142			125		125		252
Jr. subordinated debentures		Income		452			78			57			57			57			57		57		89

Net interest income							2,195			1,672			1,512			1,218			831		712		1,587
Non-interest income/expense:
Core deposit intangible		Expense		2,127			176			323			287			255			226		201		659
Premises and equipment		Expense		2,084			46			93			93			93			93		93		1,567
Other liabilities		Income		(116	)		––			(38	)		(38	)		(39	)		––		––		––

Net non-interest expense							222			378			3429			309			319		294		2,226
Change in pretax income						$	1,973		$	1,294		$	1,170		$	909		$	512	$	418		(639	)

P ROVISION FOR L OAN AND L EASE L OSSES

Loans acquired in the Merger

In accordance with GAAP, the loans acquired from FKF were recorded at their fair value with no carryover of the previously associated allowance for loan loss. As a result, loans acquired from FKF are not factored into the calculation of the allowance unless or until their credit quality declines below the level present at acquisition.

In connection with the Merger, certain loans were acquired which exhibited deteriorated credit quality since origination and for which the Bank does not expect to collect all contractual payments. Accounting for these purchased credit-impaired loans is done in accordance with ASC 310-30 “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”. The loans were recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.

Management evaluates purchased credit-impaired loans individually for further impairment. The balance of the Bank’s loan and lease portfolio is evaluated on either an individual basis or on a collective basis for impairment. Refer to Notes 5-G and 5-H in the Notes to Consolidated Financial Statements for a more information regarding the Bank’s impaired loans and leases.

General Discussion of the Allowance for Loan and Lease Losses

The Corporation uses the allowance method of accounting for credit losses. The balance of the allowance for loan and lease losses 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 based on Management’s estimates. These estimates are summarized earlier in this document under the heading “Critical Accounting Policies, Judgments and Estimates”.

The four components of the Allowance are as follows:

•

Specific Loan Evaluation Component – Includes the specific evaluation of larger classified loans

•

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

•

Additional Factors Component – The loan and lease portfolios are broken down into multiple homogenous 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 comprises the Additional Factors Component.

•

Unallocated Component – This amount represents a reserve against all loans for factors not included in the components mentioned above.

As part of the process of allocating the allowance to the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:

•

Pass – Loans considered to be satisfactory with no indications of deterioration.

•

Special mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•

Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Consumer credit exposure, which includes residential mortgages, home equity lines and loans, leases and consumer loans, are assigned a credit risk profile based on payment activity.

Refer to Note 5-G in the Notes to Consolidated Financial Statements for details regarding credit quality indicators associated with the bank’s loan and lease portfolio.

Portfolio Segmentation – The Corporation’s loan and lease portfolio is divided into specific segments of loans and leases having similar characteristics. These segments are as follows:

•

Commercial mortgage

•

Home equity lines and loans

•

Residential mortgage

•

Construction

•

Commercial and industrial

•

Consumer

•

Leases

Refer to Note 5 in the Notes to Consolidated Financial Statements for the details of the Bank’s loan and lease portfolio, broken down by portfolio segment.

Impairment Measurement – In accordance with guidance provided by ASC 310-10, “Accounting by Creditors for Impairment of a Loan”, Management employs one of three methods to determine and measure impairment:

•

the Present Value of Future Cash Flow Method;

•

the Fair Value of Collateral Method;

•

the Observable Market Price of a Loan Method.

To perform an impairment analysis, the Corporation reviews a loan’s internally assigned grade, its outstanding balance, guarantors, collateral, strategy, and a current report of the action being implemented.

Based on the nature of the specific loans, one of the impairment methods is chosen for the respective loan and any impairment is determined, based on criteria established in ASC 310-10.

Troubled Debt Restructurings (“TDR”s) - The Corporation follows guidance provided by ASC 310-40, “Troubled Debt Restructurings by Creditors.” A restructuring of a debt constitutes a TDR if the creditor, for economic or legal reasons related to the debtor’s financial difficulties grants a concession to the debtor that it would not otherwise consider in the normal course of business. A concession may include an extension of repayment terms which would not normally be granted, a reduction of interest rate or the forgiveness of principal and/or accrued interest. If the debtor is experiencing financial difficulty and the creditor has granted a concession, the Corporation will make the necessary disclosures related to the TDR. In certain cases, a modification may be made in an effort to retain a customer who is not experiencing financial difficulty. This type of modification is not considered to be a TDR. Once a loan or lease has been modified and is considered a TDR, it is reported as an impaired loan or lease. If the loan or lease deemed a TDR has performed for at least six months at the level prescribed by the modification, it is not considered to be non-performing; however, it will generally continue to be reported as impaired. Loans and leases that have performed for at least six months are reported as TDRs in compliance with modified terms .

Refer to Notes 5-C and 5-H in the Notes to Consolidated Financial Statements for more information regarding the Bank’s TDRs.

Charge-off Policy - The Bank’s charge-off policy is that, on a periodic basis, not less often than quarterly, delinquent and non-performing loans that exceed the following limits are considered for charge-off:

•

Open-ended consumer loans exceeding 180 days past due.

•

Closed-ended consumer loans exceeding 120 days past due.

•

All commercial/business purpose loans exceeding 180 days past due.

•

All leases exceeding 120 days past due.

Any other loan or lease, for which Management has reason to believe collectibility is unlikely, and for which sufficient collateral does not exist, is also charged off.

Refer to Notes 5-G in the Notes to Consolidated Financial Statements for more information regarding the Bank’s charge-offs

Asset Quality and Analysis of Credit Risk

As of December 31, 2010, credit quality on the overall loan and lease portfolio remains stable as total non-performing loans and leases of $9.5 million represents 79 basis points of portfolio loans and leases, as compared to 78 basis points or $6.9 million at December 31, 2009. The increase in the non-performing loans and leases from $6.9 million as of December 31, 2009 to $9.8 million as of December 31, 2010 is related to a $2.0 million increase in non-performing residential mortgage loans, a $469 thousand increase in non-performing commercial and industrial loans, a $362 thousand increase in non-performing home equity loans and lines, and a $452 thousand increase in non-performing commercial mortgage loans. These increases were partially offset by a $393 thousand decrease in non-performing construction loans. As of December 31, 2010, these changes include $2.5 million of loans acquired in the Merger.

The provision for loan and lease losses for the twelve month periods ended December 31, 2010, 2009 and 2008 was $9.9 million, $6.9 million and $5.6 million, respectively. As of December 31, 2010, the allowance for loan and lease losses of $10.3 million represents 0.86% of portfolio loans and leases, as compared to the allowance, as of December 31, 2009, of $10.4 million, which represented 1.18% of portfolio loans and leases as of that date. The decrease in the allowance as a percentage of portfolio loans and leases from December 31, 2009 to December 31, 2010 reflects the effect of the acquisition of $274.5 million of

loans from FKF, which, in accordance with GAAP, were recorded at their fair values with no carryover of their associated allowance. No additional provision was recorded related to the acquired loans.

As of December 31, 2010, the Corporation had OREO valued at $2.5 million, as compared to $1.0 million as of December 31, 2009. Included in the balance as of December 31, 2010, were four properties, totaling $1.3 million that resulted from the foreclosure of loans acquired in the Merger. All properties are recorded at their fair value less cost to sell.

As of December 31, 2010, the Corporation had $6.6 million of TDR’s, of which $4.7 million are in compliance with the modified terms, and hence, excluded from non-performing loans and leases. As of December 31, 2009, the Corporation had $3.9 million of TDR’s, of which $1.9 million were in compliance with the modified terms, and as such, were excluded from non-performing loans and leases.

As of December 31, 2010, the Corporation had $13.4 million of impaired loans and leases which includes $6.6 million of TDRs. Impaired loans and leases are those for which it is probable that the Corporation will not be able to collect all scheduled principal and interest in accordance with the original terms of the loans and leases. Impaired loans and leases as of December 31, 2009 totaled $6.2 million. Refer to Notes 5-H in the Notes to Consolidated Financial Statements for more information regarding the Bank’s impaired loans and leases.

The Corporation continues to be diligent in its credit underwriting process and very proactive with its loan review process, including the services of an independent outside loan review firm, which helps identify developing credit issues. These proactive steps include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. Management believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall losses.

The list below identifies certain key characteristics of the Corporation’s loan and lease portfolio. Refer to the loan and lease portfolio tables in Note 5 in the Notes to Consolidated Financial Statements for further details.

•

Portfolio Loans and Leases – The Corporation’s $1.2 billion loan portfolio is predominantly based in the Corporation’s traditional market areas of Chester, Delaware and Montgomery counties of Pennsylvania and in the greater Philadelphia area which have not experienced the real estate price appreciation and subsequent decline that many other areas of the country have experienced. However, this area is not immune from these tough economic times. The Corporation has observed a slow-down in new construction in the local area and some home value reductions, but this has not had a significant impact on the Corporation’s loan quality ratios relative to the loan portfolio.

•

Concentrations – The Corporation has a significant portion of its portfolio loans (excluding leases) in real estate-related loans. As of December 31, 2010, loans secured by real estate were $909.9 million or 75.7% of the total loan portfolio of $1.20 billion.

A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is within Pennsylvania. Management is aware of this concentration and mitigates this risk to the extent possible in many ways, including the underwriting and assessment of the borrower’s capacity to repay, equity in the underlying real estate collateral and a review of a borrower’s global cash flows. The Corporation has recourse against a substantial majority of the loans in the portfolio.

•

Construction – The construction portfolio of $45.4 million accounts for 3.8% of the total loan and lease portfolio at December 31, 2010, an increase of $7.0 million from $38.4 million as of December 31, 2009.

The Bank’s construction portfolio, which consists of residential site development loans, commercial construction loans and loans for construction of individual homes, had a delinquency rate, as of December 31, 2010, of 4.25%, as compared to a delinquency rate of 8.28% as of December 31, 2009.

•

Residential Mortgages – Residential mortgage loans were $262.0 million as of December 31, 2010, an increase of $151.3 million from the $110.7 million at December 31, 2009. This increase is largely attributable to the loans acquired in the Merger and the Corporation’s decision to retain in its portfolio, rather than sell to Fannie Mae, a larger portion of the residential mortgages originated during the twelve months ended December 31, 2010, than were sold during the same period in 2009. The residential mortgage portfolio had a delinquency rate of 1.50% as of December 31, 2010 as compared to 2.59% as of December 31, 2009. The Corporation believes it is well protected with its collateral position on this portfolio. The residential mortgage segment

accounts for 21.9% of the total loan and lease portfolio as of December 31, 2010.

•

Commercial Mortgages – The performance in the $385.6 million commercial mortgage portfolio, representing 32.2% of the total loan and lease portfolio, as of December 31, 2010, is stable. This segment of the Bank’s loan and lease portfolio grew $120.6 million, or 45.5%, from December 31, 2009. This increase is largely attributable to the loans acquired in the Merger, as well as organic growth. The delinquency rate in the portfolio as of December 31, 2010 was 0.58% as compared to 0.60% as of December 31, 2009. The borrowers comprising this segment of the portfolio generally have strong, global cash flows which have remained stable in this tough economic environment.

•

Commercial and Industrial – The performance in the $239.3 million commercial and industrial portfolio, representing 20.0% of the total loan and lease portfolio at December 31, 2010, remains stable with a delinquency rate of approximately 1.20%. This segment of the total loan and lease portfolio increased 2.6% or $6.1 million from December 31, 2009, largely due to loans acquired in the Merger, and consists of loans to privately held institutions, family businesses, non-profit institutions and private banking relationships. While certain of these loans are collateralized by real estate, others are collateralized by non-real estate business assets, including accounts receivable and inventory.

•

Home Equity Loans and Lines of Credit – The Home equity loans and lines of credit portfolio has increased $38.8 million or 21.8% from $178.1 million at December 31, 2009 to $216.9 million at December 31, 2010, largely due to the loans acquired in the Merger. The delinquency level in the portfolio is 1.35% at December 31, 2010, as compared to 0.96% as of December 31, 2009. The segment represents 18.1% of the total loan and lease portfolio as of December 31, 2010.

•

Consumer loans – The Corporation’s portfolio of consumer loans was $12.2 million as of December 31, 2010, a slight decrease of $277 thousand from the $12.5 million at December 31, 2009. The consumer portfolio had a delinquency rate of 0.47% as of December 31, 2010 as compared to 0.63% as of December 31, 2009.

•

Leasing – As of December 31, 2010, the Corporation’s $35.4 million national leasing portfolio consists of over 3,550 equipment financing leases to customers with initial lease terms of 24 to 60 months and yields significantly higher than other loans in the Corporation’s portfolio. Approximately 56% of the Corporation’s leases are in 7 states, with California accounting for the largest percentage of approximately 13%.

The lease portfolio balance as of December 31, 2010 was down $12.4 million, to $35.4 million from $47.8 million as of December 31, 2009. As of December 31, 2010, the lease portfolio made up 3.0% of the total loan and lease portfolio as compared to 5.4% as of December 31, 2009. The rate of growth within the leasing portfolio has been intentionally reduced and tighter underwriting standards have been implemented over the past 24 months which has helped reduce lease delinquencies from 3.4% at December 31, 2009 to 2.0% at December 31, 2010. During 2008 and 2009, in order to mitigate further potential losses, the Corporation reduced the number of broker relationships, curtailed lease originations in certain geographic regions, reduced the maximum dollar amount of each lease and made changes to equipment categories that qualify for new originations. These adjustments improved overall lease portfolio performance as net charge-offs declined each quarter since December 31, 2009. Net charge-offs were $763 thousand in the fourth quarter of 2009 as compared to $199 thousand in the fourth quarter of 2010.

Non-Performing Assets, TDRs and Related Ratios As of or For the Twelve Months Ended December 31,


(dollars in thousands)	2010			2009			2008			2007			2006
Non-accrual loans and leases	$	9,497		$	6,246		$	5,303		$	747		$	704
Loans 90 days or more past due and still accruing		10			668			504			1,263			119

Total non-performing loans and leases		9,507			6,914			5,807			2,010			823
Other real estate owned (“OREO”)		2,527			1,025			—			—			—

Total non-performing assets	$	12,034		$	7,939		$	5,807		$	2,010		$	823

Troubled debt restructurings (“TDR”s) included in non-performing assets	$	1,879			2,274			—			—			—
TDRs in compliance with modified terms		4,693			1,622			—			—			—

Total TDRs	$	6,572			3,896			—			—			—

Allowance for loan and lease losses to non-performing loans and leases		108.1	%		150.8	%		177.9	%		404.1	%		986.9	%
Non-performing loans and leases to total loans and leases		0.79	%		0.78	%		0.65	%		0.25	%		0.12	%
Allowance for loan losses to total portfolio loans and leases		0.86	%		1.18	%		1.15	%		1.01	%		1.19	%
Allowance for loan losses to total originated portfolio loans and leases ⁽¹⁾		1.08	%		1.18	%		1.15	%		1.01	%		1.19	%
Non-performing assets to total assets		0.69	%		0.64	%		0.50	%		0.20	%		0.10	%
Net loan and lease charge-offs/average loans and leases		0.96	%		0.77	%		0.40	%		0.12	%		0.02	%
Net loan charge-offs/average loans		0.83	%		0.29	%		0.00	%		0.05	%		0.02	%
Net lease charge-offs/average leases		4.24	%		8.05	%		6.24	%		1.97	%		0.00	%
Period end portfolio loans and leases	$	1,196,717		$	885,739		$	899,577		$	802,925		$	681,291
Average portfolio loans and leases	$	1,037,158		$	882,956		$	851,752		$	740,694		$	636,286
Allowance for loan and lease losses	$	10,275		$	10,424		$	10,332		$	8,124		$	8,122

(1 )	A non-GAAP measure that excludes loans and leases acquired in the Merger as detailed on page 23 of Management’s Discussion and Analysis of Financial Condition and Results of Operations under “Non-GAAP Financial Measure Reconciliation.”

Summary of Changes in the Allowance for Loan and Lease Losses


(dollars in thousands)	2010			2009			2008			2007			2006
Balance, January 1	$	10,424		$	10,332		$	8,124		$	8,122		$	7,402
Charge-offs:
Consumer		(456	)		(45	)		(72	)		(396	)		(31	)
Commercial and industrial		(7,019	)		(1,933	)		(4	)		(41	)		—
Real estate		(689	)		(53	)		—			—			(120	)
Construction		(135	)		(382	)
Leases		(2,395	)		(4,957	)		(3,540	)		(599	)		—

Total charge-offs		(10,694	)		(7,370	)		(3,616	)		(1,036	)		(151	)
Recoveries:
Consumer		2			8			28			22			34
Commercial and industrial		—			—			—			46			3
Real estate		15			1			24			15			2
Leases		674			569			176			64			—

Total Recoveries		691			578			228			147			39

Net charge-offs		(10,003	)		(6,792	)		(3,388	)		(889	)		(112	)
Provision for loan and lease losses		9,854			6,884			5,596			891			832

Balance, December 31	$	10,275		$	10,424		$	10,332		$	8,124		$	8,122

Allocation of Allowance for Loan and Lease Losses

The following table sets forth an allocation of the allowance for loan and lease losses by category. The specific allocations in any particular category may be changed in the future to reflect then current conditions. Accordingly, the Corporation considers the entire allowance to be available to absorb losses in any category.


	December 31,
	2010					2009					2008					2007					2006
(dollars in thousands)			% Loans to Total Loans					% Loans to Total Loans					% Loans to Total Loans					% Loans to Total Loans					% Loans to Total Loans
Balance at end of period applicable to:
Commercial and industrial	$	3,565		20.0	%	$	3,801		26.3	%	$	3,093		26.3	%	$	2,636		26.4	%	$	2,161		25.7	%
Real estate – construction		633		3.8			652		4.4			1,061		6.5			850		8.3			950		11.0
Real estate – mortgage		4,940		72.2			3,952		62.5			4,154		59.7			3,727		58.7			4,448		60.9
Consumer		115		1.0			125		1.4			70		0.9			62		1.0			77		1.4
Leases		766		3.0			1,403		5.4			1,894		6.6			789		5.6			140		1.0
Unallocated		256		—			491		—			60		—			60		—			346		—

Total	$	10,275		100	%	$	10,424		100	%	$	10,332		100	%	$	8,124		100	%	$	8,122		100	%

N ON -I NTEREST I NCOME

2010 Compared to 2009

For the twelve months ended December 31, 2010, non-interest income was $29.4 million, an increase of $905 thousand or 3.2% from the $28.5 million for the same period in 2009. The primary factors for this increase were the fees for wealth management services of $15.5 million, an increase of $1.3 million, or 9.3% as compared to $14.2 million for the same period in 2009. Gain on the sale of investment securities available for sale of $2.5 million, for the twelve months ended December 31, 2010, an increase of $549 thousand, or 29.6% above the $1.9 million from the same period in 2009 and $2.3 million of service charges on deposits, a $356 thousand, or 18.3% increase from the $2.0 million for the same period in 2009, also contributed to the increase. Partially offsetting these increases was a decrease in the gain on the sale of residential mortgage loans for the twelve months ended December 31, 2010 of $1.3 million, to $4.7 million, as compared to $6.0 million for the same period in 2009.

The increase in Wealth Management fees is directly related to the $541 million increase in wealth assets under management, administration and supervision during 2010 to $3.4 billion, as of December 31, 2010, from $2.9 billion as of December 31, 2009. This increase is due largely to the success of new initiatives within the division and asset appreciation resulting from improvements in the financial markets

The increase in the gain on sale of investments is the result of the Management’s decision to adjust the investment portfolio mix, while the increase in service charges on deposit accounts is largely due to the addition of the eight full-service branches acquired in the Merger, along with other increased deposit activity. The decrease in the gain on sale of residential mortgage loans for the twelve months ended December 31, 2010, as compared to the same period in 2009 was due to decreased origination activity in 2010 as compared to 2009 related to the rate environment, as well as Management’s decision to retain, in its portfolio, a larger portion of the residential mortgage loans originated during the twelve months ended December 31, 2010, rather than sell them to Fannie Mae, as compared to the same period in 2009. The value of mortgages originated for resale (servicing retained and servicing released) in 2010 of $157.6 million was 42.3% lower than the $273.0 million originated for resale in 2009.

2009 Compared to 2008

For the twelve months ended December 31, 2009, non-interest income was $28.5 million, an increase of $7.0 million, or 32.6%, as compared to the $21.5 million for the same period in 2008. The primary factors for this increase were the gain on the sale of residential mortgage loans of $6.0 million for the twelve months ended December 31, 2009, an increase of $4.7 million as compared the $1.3 million recorded for the same period in 2008, along with and a $1.9 million gain on the sale of investments for the twelve months ended December 31, 2009, an increase of $1.7 million from the $230 thousand recorded for the same period in 2008. Fees for Wealth Management services of $14.2 million for the twelve months ended December 31, 2009, were $336 thousand, or 2.4% above the $13.8 million recorded for the same period in 2008, due primarily to a full year of revenue for Lau Associates and The Bryn Mawr Trust Company of Delaware along with the success of the newly established BMT Asset Management.

N ON -I NTEREST E XPENSE

2010 Compared to 2009

Non-interest expense for the twelve months ended December 31, 2010, was $58.0 million, an increase of $11.4 million, or 24.6%, as compared to the same period in 2009, partially due to the $5.7 million due diligence and merger-related expenses. Merger-related expenses consisted primarily of investment banking, legal, employee severance, systems conversion cost and vendor termination fees. In addition, salaries and wages for the twelve months ended December 31, 2010 increased $2.6 million, or 11.5%, as compared to the same period in 2009 due to the addition of FKF’s eight full-service branch locations. Increases in the other expense categories are a direct result of the Merger. These include FDIC expense, occupancy, furniture, fixture and equipment and other operating expenses. FDIC expense increased $317 thousand or, 25.6%, to $1.6 million for the twelve months ended December 31, 2010, as compared to $1.2 million for the same period in 2009. Occupancy expense increased $620 thousand, or 17.0%, to $4.3 million for the twelve months ended December 31, 2010, as compared to $3.6 million for the same period in 2009. Furniture, fixture and equipment expenses increased $371 thousand, or 15.4%, to $2.8 million for the twelve months ended December 31, 2010, as compared to $2.4 million for the same period in 2009. Other operating expenses, which also increased as a result of increased processing cost due to the Merger, are detailed in Note 21 in the Notes to Consolidated Financial Statements.

2009 Compared to 2008

For the twelve months ended December 31, 2009, non-interest expense was $46.5 million, an increase of $7.9 million or 20.9% as compared to $38.7 million for the same period in 2008. Primary factors contributing to this increase include related support costs associated with residential mortgage originations, the opening of our West Chester Regional Banking Center on January 1, 2009 and FDIC insurance costs rising $1.3 million, or 275.8% for the twelve months ended December 31, 2009 from $472 thousand for the same period in 2008. The FDIC insurance cost includes a one-time special assessment of $540 thousand. Professional fees increased $458 thousand, or 29.5%, to $2.0 million for the twelve months ended December 31, 2009, as compared to $1.6 million, for the same period in 2008. Due diligence and merger related expenses for the twelve months ended December 31, 2009 increased $460 thousand to $616 thousand from $156 for the same period in 2008. Much of this increase is directly related to expenses associated with the Merger.

Amortization of mortgage servicing rights for the twelve months ended December 31, 2009 increased by $486 thousand, or 132.4%, to $853 thousand, from the $367 thousand recorded for the same period in 2008. This increase was directly related to the increased refinancing activity that occurred in 2009 as a result of the low interest rate environment.

I NCOME T AXES

Income taxes for the twelve months ended December 31, 2010 were $4.5 million as compared to $5.5 million and $5.0 million for the same periods in 2009 and 2008, respectively. The effective tax rate for the twelve month periods ended December 31, 2010, 2009 and 2008 was 33.0%, 34.7% and 35.0%, respectively. The decrease in the effective tax rate for the twelve months ended December 31, 2010, as compared to the rate for the same period in 2009, was due to an increase in the level of tax-free income from municipal investment securities, bank owned life insurance, and the utilization of a capital loss carry-forward and other items. The decrease in the effective tax rate for the twelve months ended December 31, 2009, as compared to the rate for the same period in 2008, was due to an increase in the level of tax-free income from municipal investment securities.

B ALANCE S HEET A NALYSIS

Asset Changes

Total assets, as of December 31, 2010, increased $492.9 million to $1.7 billion from $1.2 billion as of December 31, 2009. This increase is largely the result of the Merger.

Investment Portfolio - The investment securities portfolio, as of December 31, 2010, increased $108.8 million or 52.3% to $317.1 million from $208.2 million as of December 31, 2009. In addition to the effect of the Merger, continued deposit inflows during 2010 resulted in the purchase of additional short term investment securities. The investment securities portfolio as of December 31, 2010 was 18.3% of total assets, which provides the Corporation with liquidity and the opportunity to borrow additional funds, if needed, from the FHLB.

The following table details the maturity and weighted average coupon rate of the investment portfolio ⁽ ²⁾ :


(dollars in thousands)	Maturing During 2011			Maturing From 2012 Through 2015			Maturing From 2016 Through 2020			Maturing After 2021			Total
Obligations of the U.S. Government and agencies:
Book value	$	2,019		$	85,030		$	64,277		$	9,986		$	161,312
Weighted average coupon		2.10	%		1.75	%		3.19	%		4.76	%		2.51	%
State and political subdivisions:
Book value	$	3,854		$	10,571		$	11,478		$	6,110		$	32,013
Weighted average coupon		2.08	%		2.87	%		4.65	%		4.09	%		3.65	%
Corporate bonds:
Book value	$	—		$	7,498		$	3,305		$	—		$	10,803
Weighted average coupon		0.00	%		4.19	%		4.60	%		0.00	%		4.31	%
Other investment securities:
Book value	$	350		$	1,400		$	—		$	—		$	1,750
Weighted average coupon		4.75	%		1.78	%		0.00	%		0.00	%		2.37	%

Subtotal book value	$	6,223		$	104,499		$	79,060		$	16,096		$	205,878
Weighted average coupon		2.24	%		2.04	%		3.46	%		4.51	%		2.78	%
Mortgage backed securities ⁽¹⁾
Book value	$	943		$	4,608		$	21,457		$	47,967		$	74,975
Weighted average coupon		4.50			4.15	%		4.58	%		3.86	%		4.09	%

Total book value	$	7,166		$	109,107		$	100,517		$	64,063		$	280,853

Weighted average coupon		2.54	%		2.13	%		3.70	%		4.02	%		3.13	%

⁽ ¹ ⁾

Mortgage backed securities are included in the above table based on their contractual maturity. However, mortgage backed securities, by design, have scheduled monthly principal payments which are not reflected in this table.

⁽²⁾	Excluded from the above table is the Corporation’s $34.5 million book value investment in bond mutual funds, which have no stated maturity or constant stated coupon rate, as well as the Corporation’s $243 thousand investment in an equity security.

Portfolio Loans and Leases - The loan and lease portfolio, as of December 31, 2010, increased $311.0 million or 35.1% to $1.196 billion from $885.7 million as of December 31, 2009, largely as a result of the Merger and new business development initiatives. The loan and lease portfolio, excluding leases, increased $323.3 million or 38.6% to $1.16 billion as of December 31, 2010, as compared to $839.0 million as of December 31, 2009. Within the loan portfolio, as of December 31, 2010, as compared to December 31, 2009, commercial and industrial loans increased $6.0 million, or 2.6%, commercial mortgages increased $120.6 million, or 45.5%, residential mortgages increased $151.3 million, or 136.8%, and home equity loans and leases increased $39.0 million or 21.9%. Partially offsetting these increases, the lease portfolio declined $12.4 million or 25.9% during 2010. As of December 31, 2010, the lease portfolio was 3.0% of total loans and leases, as compared to 5.4% as of December 31, 2009. Higher credit standards and other underwriting changes contributed to a reduction in new lease volume, resulting in lower net lease balances as of December 31, 2010, as compared to December 31, 2009.

A breakdown of the loan portfolio by major categories as of December 31, for each of the last five years is as follows:


	December 31,
(dollars in thousands)	2010		2009		2008		2007		2006
Commercial mortgage	$	385,615	$	265,023	$	249,730	$	224,510	$	198,407
Home equity lines & loans		216,853		178,103		154,576		123,293		113,068
Residential mortgage		261,983		110,653		132,536		121,313		103,572
Construction		45,403		38,444		58,446		66,901		74,798
Commercial & industrial		239,266		233,288		236,469		213,834		175,278
Consumer		12,200		12,477		8,518		7,990		9,156
Leases		35,397		47,751		59,302		45,084		7,012

Total portfolio loans and leases		1,196,717		885,739		899,577		802,925		681,291

Loans held for sale		4,838		3,007		3,024		5,125		3,726

	$	1,201,555	$	888,746	$	902,601	$	808,050	$	685,017

The following table summarizes the loan maturity distribution and interest rate sensitivity as of December 31, 2010. Excluded from the table are residential mortgage, home equity lines and loans and consumer loans:


(dollars in thousands)	Maturing During 2011		Maturing From 2012 Through 2015		Maturing After 2015		Total
Loan Portfolio Maturity:
Commercial and industrial	$	99,843	$	87,309	$	52,114	$	239,266
Construction		32,341		13,062		—		45,403
Commercial mortgage		8,065		149,452		228,098		385,615
Leases		2,982		32,391		24		35,397

Total	$	143,231	$	282,214	$	280,236	$	705,681

Interest sensitivity on the above loans:
Loans with predetermined rates	$	18,046	$	215,388	$	78,736	$	312,170
Loans with adjustable or floating rates		125,185		66,826		201,500		393,511

Total	$	143,231	$	282,214	$	280,236	$	705,681

Additionally, increases as of December 31, 2010, as compared to December 31, 2009, in premises and equipment of $7.7 million, or 36.0%, in bank owned life insurance of $19.0 million, or 100%, in FHLB stock of $6.3 million, or 79.7%, and in deferred income taxes of $9.6 million, or 191.5%, are primarily a result of the Merger.

The increase in goodwill and other intangible assets of $13.0 million or 109.2% to $24.7 million as of December 31, 2010, as compared to December 31, 2009, is largely the result of the Merger along with the earn-out payment in connection with the purchase of Lau Associates, partially offset by the amortization of certain identifiable intangibles. See Note 3 in the Notes to Consolidated Financial Statements, for additional details.

Mortgage servicing rights increased $876 thousand, or 27.5%, to $4.9 million as of December 31, 2010, from $4.1 million as of December 31, 2009. This increase is primarily the result of MSRs acquired in the Merger, additional volume in loans sold with servicing retained, as well as the partial recovery of temporary impairment of MSRs during the twelve months ended December 31, 2010.

Liability Changes

Total liabilities as of December 31, 2010 increased $435.5 million, or 38.4%, to $1.570 billion, from $1.134 billion as of December 31, 2009. The increase was primarily due to the Merger, but also contributing to this increase was an inflow of deposits from existing customers.

Deposits - Total deposits increased $403.5 million or 43.0% to $1.34 billion as of December 31, 2010 from $937.9 million as of December 31, 2009. Core deposits (total deposits less wholesale deposits), which include market rate certificates of deposits and demand accounts, increased $374.5 million, while wholesale deposits increased $29.0 million, as of December 31, 2010, as compared to December 31, 2009.

A breakdown of the deposits by major categories at December 31, for each of the last five years is as follows:


(dollars in thousands)	2010		2009		2008		2007		2006
Interest-bearing checking	$	234,107	$	151,432	$	135,513	$	137,486	$	143,742
Money market		327,824		229,836		142,707		114,310		111,338
Savings		134,163		101,719		54,333		36,181		40,441
Other wholesale deposits		80,112		52,174		30,185		—		—
Wholesale time deposits		37,201		36,118		120,761		129,820		19,976
Time deposits		245,669		153,705		211,542		203,462		200,446

Interest-bearing deposits	$	1,059,076	$	724,984	$	695,041	$	621,259	$	515,943
Non-interest-bearing deposits		282,356		212,903		174,449		228,269		198,546

Total deposits	$	1,341,432	$	937,887	$	869,490	$	849,528	$	714,489

Borrowings - Short-term and other borrowings, which include repurchase agreements, FHLB advances and a commercial mortgage loan, increased to $170.2 million as of December 31, 2010, a $23.3 million increase, as compared to December 31, 2009. This increase is primarily due to the $105.7 million of FHLB advances acquired in the Merger, substantially offset by repayment of maturing advances. During 2010, as FHLB advances matured, they were not replaced. The growth in deposits combined with the sluggish loan demand did not necessitate any additional advances. See the Liquidity Section of Management’s Discussion and Analysis on page 22 for further details on the Corporation’s FHLB available borrowing capacity.

Debentures - As of December 31, 2010 the Corporation had $12.0 million of junior subordinated debentures and $22.5 million of subordinated debentures, as compared to $22.5 million of subordinated debentures as of December 31, 2009. The addition of the $12.0 million of junior subordinated debentures was the result of the Merger. Refer to Note 12 in the Notes to Consolidated Financial Statements for further information.

D ISCUSSION OF S EGMENTS

The Corporation has three principal segments (Residential Mortgage, Wealth Management, and Banking) as defined by FASB ASC 280 – “Segment Reporting”. These segments are discussed below. Detailed segment information appears in Note 28 in the accompanying Consolidated Financial Statements.

Residential Mortgage Segment Activity

All activity is for each of the last three years ending December 31:


(dollars in thousands)	2010			2009			2008
Residential loans held in portfolio ⁽¹⁾	$	261,983		$	110,653		$	132,536
Mortgage originations		221,904			291,613			109,219
Mortgage loans sold:
Servicing retained	$	148,418		$	266,759		$	43,575
Servicing released		8,028			6,222			34,259

Total mortgage loans sold	$	156,446		$	272,981		$	77,834

Percentage of mortgage loans sold:
Servicing retained %		94.9	%		97.7	%		56.0	%
Servicing released %		5.1	%		2.3	%		44.0	%
Loans serviced for others ⁽¹⁾	$	605,485		$	514,875		$	350,199
Mortgage servicing rights ⁽¹⁾	$	4,925		$	4,059		$	2,205
Gain on sale of loans	$	4,718		$	6,012		$	1,275
Loans servicing & late fees	$	1,626		$	1,387		$	1,194
Amortization of MSRs	$	923		$	853		$	367
Impairment/(Recovery) of MSRs	$	30		$	(137	)	$	668
Basis point gain on loans sold		302			220			164

⁽¹⁾	Period end balance

The Mortgage Banking Segment’s pre-tax segment profit (“PTSP”) of $2.8 million in for the twelve months ended December 31, 2010 decreased by $1.0 million from the PTSP of $3.8 million for the same period in 2009 due primarily to a $1.3 million decrease in gain on sale of residential mortgage loans, partially offset by a $492 thousand decrease in salaries and wages expense for the twelve months ended December 31, 2010, as compared to the same period in 2009. The decline in gain on sale of residential mortgages was directly related to a 42.3% reduction in the volume of residential mortgage loans originated for resale during the twelve months ended December 31, 2010, as the refinancing activity subsided from the high levels seen in 2009. However, the gain in terms of basis points increased for the twelve months ended December 31, 2010, as compared to the same period in each of the prior

two years. This was largely due to the higher rates paid by Fannie Mae, which were driven by market conditions.

The Mortgage Banking Segment had a very strong year in 2009 with a PTSP of $3.8 million, as compared to a pre-tax segment loss (“PTSL”) of $198 thousand for the same period in 2008. This increase was due primarily to a $4.7 million increase in gain on sale of residential mortgage loans during the twelve months ended December 31, 2009, as compared to the same period in 2008. The low interest rate environment during 2009 caused mortgage originations to rise 167% for the twelve months ended December 31, 2009, as compared to the same period in 2008.

Mortgage originations for the twelve months ended December 31, 2010 were $221.9 million, a decrease of $52.2 million from the $291.6 million originated during the same period in 2009 and an increase of $130.2 million from the $109.2 million originated during the twelve months ended December 31, 2008. The value of mortgages originated for resale (servicing retained and servicing released) in 2010 of $157.6 million was 42.3% lower than the $273.0 million originated for resale in 2009 and $83.1 million higher than the $74.5 million originated for resale in 2008. These totals are reflective of the changing interest rate environment which made refinancing of mortgage loans more attractive during 2009 and 2010, as compared to 2008. In addition, tax incentives related to first-time homebuyers accounted for additional increases in originations. Furthermore, the Corporation’s decision to retain in its portfolio a larger portion of the residential mortgages originated during the twelve months ended December 31, 2010 than it did in 2009, as opposed to selling them to Fannie Mae, contributed to the decrease in gain on sale of mortgages for the twelve months ended December 31, 2010, as compared to the same period in 2009.

Wealth Management Segment Activity

The Wealth Management Segment reported a 2010 PTSP of $4.5 million, a $655 thousand or 16.9% million increase over 2009. The increase in PTSP was primarily due to a $1.3 million or 9.3% increase in fees for Wealth Management services. The increase in Wealth Management segment revenue for 2010 as compared to 2009 was due largely to the success of new initiatives within the division and asset appreciation resulting from improvements in the financial markets.

The Wealth Management segment reported a 2009 PTSP of $3.9 million, a 29.0% or a $1.6 million decrease as compared to 2008. The decrease in PTSP was primarily due to a $2.0 million or 23.2% increase in Wealth Management Segment overall expense, due to the formation of The Bryn Mawr Trust Company of Delaware and the establishment of BMT Asset Management, partially offset by a $336 thousand or 2.4% increase in revenue.

Wealth Management assets under management, administration, supervision and brokerage were as follows:


	As of December 31,
(in millions)	2010		2009		200
Total wealth assets under management, administration, supervision and brokerage	$	3,412.9	$	2,871.2	$	2,146.4

Banking Segment Activity

Banking segment data as presented in Note 28 in the accompanying Notes to Consolidated Financial Statements indicates a PTSP of $7.8 million in 2010, $9.0 million in 2009 and $9.9 million in 2008. See Components of Net Income earlier in this documentation for a discussion of the Banking Segment.

C APITAL

Consolidated shareholder’s equity of the Corporation was $161.4 million, or 9.3% of total assets, as of December 31, 2010, as compared to $103.9 million, or 8.4% of total assets, as of December 31, 2009.

In June 2009, the Corporation filed a shelf registration statement (the “Shelf Registration Statement”) which allows the Corporation to raise additional capital through offers and sales of registered securities consisting of common stock, warrants to purchase common stock, stock purchase contracts or units consisting of any combination of the foregoing securities. Using the prospectus in the Shelf Registration Statement, together with applicable prospectus supplements, the Corporation may sell, from time to time, in one or more offerings, any amount of such securities in a dollar amount up to $90,000,000, in the aggregate.

On May 18, 2010, through a registered direct stock offering of securities registered in the Shelf Registration Statement, the Corporation issued 1,548,167 common shares, at a price of $17.00 per share, raising $24.7 million after deducting placement agent’s fees and other offering expenses.

In addition, in connection with the Merger, the Corporation issued 1,630,053 common shares, valued at $26.5 million, to former shareholders of FKF. These shares were registered on an S-4 registration statement filed by the Corporation in January 2010.

account per year. An RFW is granted based on a variety of factors, including the Corporation’s current and projected capital needs, prevailing market prices of the Corporation’s common stock and general economic and market conditions.

The Plan is intended to allow both existing shareholders and new investors to easily and conveniently increase their investment in the Corporation without incurring many of the fees and commissions normally associated with brokerage transactions. For the twelve months ended December 31, 2010 and 2009, the Corporation issued 119,175 and 81,641 shares, respectively, and raised $2.0 million and $1.2 million, respectively, through the Plan.

In connection with the Merger with FKF, the Corporation acquired FKF Capital Trust I (the “Trust”), a trust formed under Delaware law that became an unconsolidated subsidiary of the Corporation. The Corporation owns all the common shares of the Trust, which totals $928 thousand, as of December 31, 2010 and is recorded in other investments in the Corporation’s Consolidated Balance Sheet. On August 21, 1997, the Trust issued $16.2 million of preferred securities (the “Preferred Securities”) at an interest rate of 9.7%, with a scheduled maturity of August 15, 2027. Simultaneously, the proceeds from the issue, along with $502 thousand cash were invested in junior subordinated debentures (the “Debentures”) that have been assumed by the Corporation. The Debentures are unsecured and rank subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Corporation. On November 15, 2001 and June 25, 2008, FKF purchased $3.5 million and $1.5 million, respectively, of the Preferred Securities. The net carrying value of the Debentures of $12.0 million contributes to both the Tier I and Tier II capital of the Corporation.

Also affecting regulatory capital ratios is the $9.7 million increase in goodwill recorded in connection with the Merger. In addition, under the terms of the Lau Associates acquisition, the Corporation has one remaining earn-out payment, which increases goodwill, due in the first quarter of 2012 (which will be recorded at the end of 2011), with the maximum purchase price not exceeding $19 million. As of December 31, 2010, $13.2 million has been accrued or paid for the Lau acquisition. Goodwill is excluded from capital in the calculation of the regulatory capital ratios. See Notes 1-U and Note 3 in the Notes to Consolidated Financial Statements for information on the Corporation’s treatment of goodwill and other intangible assets related to this transaction.

The Corporation’s and Bank’s regulatory capital ratios and the minimum capital requirements to be considered “Well Capitalized” by banking regulators are displayed in Note 25 of the accompanying Notes to Consolidated Financial Statements. 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.

L IQUIDITY

The Corporation has significant sources and availability of liquidity at December 31, 2010 as discussed in this section. The liquidity position is managed on a daily basis as part of the daily settlement function and on a monthly basis as part of the asset liability management process. The Corporation’s primary liquidity is maintained by managing its deposits along with the utilization of purchased federal funds, borrowings from the FHLB and utilization of other wholesale funding sources. Secondary sources of liquidity include the sale of investment securities and certain loans in the secondary market.

Other wholesale funding sources include certificates of deposit from brokers, including CDARS, PLGIT, IND and IDC, generally available in blocks of $1.0 million or more. Funds obtained through these programs increased by approximately $37.6 million during 2010.

Maximum borrowing capacity with the FHLB as of December 31, 2010 was approximately $611.3 million, with an unused borrowing availability of approximately $444.8 million, and availability at the Federal Reserve was approximately $55.0 million. Overnight Fed Funds lines consist of lines from 6 banks totaling $75.0 million. Quarterly, ALCO reviews the Corporation’s liquidity needs and reports its findings to the Risk Management Committee of the Board of Directors.

As of December 31, 2010 the Corporation held approximately $14.2 million of FHLB stock. On December 23, 2008, the FHLB announced that it would voluntarily suspend the payment of dividends and the repurchase of excess capital stock until further notice. There were no dividends paid on FHLB stock in 2010 or 2009, no repurchases of capital stock during the twelve months ended December 31, 2009 and only limited repurchases of capital stock during the same period in 2010. The Corporation’s use of FHLB borrowings as a source of funds is effectively more expensive due to the suspension of FHLB dividends and the related capital stock redemption restrictions. It should be noted that the FHLB capital ratios remained above regulatory guidelines. The suspension of dividends and repurchase of excess capital stock will continue until further notice by the FHLB.

On July 6, 2009, the Corporation entered into an agreement with IDC to provide up to $10 million of money market deposits at an agreed upon rate currently at 1.00%. The agreement with IDC was amended at the end of 2010, reducing the amount to $5 million. The Corporation had approximately $5.1 million in balances at December 31, 2010 under this program which are classified on the balance

sheet as other wholesale deposits. The Corporation can request an increase in the agreement amount as it deems necessary.

The Corporation’s investment portfolio of $317.1 million at December 31, 2010 was approximately 18.3% of total assets. Some of these investments were in short-term, high-quality, liquid investments to earn more than the 25 basis points currently earned on Fed Funds. 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, Federal Reserve or through other repurchase agreements.

The Corporation continually evaluates the capacity and the cost of continuing to fund earning asset growth with wholesale deposits. The Corporation believes that it has sufficient capacity to fund expected 2011 earning asset growth with wholesale sources, along with deposit growth from its expanded branch system.

O FF B ALANCE S HEET R ISK

The following chart presents the off-balance sheet commitments of the Bank as of December 31, 2010, listed by dates of funding or payment:


(dollars in millions)	Total		Within 1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Unfunded loan commitments	$	358.7	$	243.6	$	20.6	$	15.3	$	79.2
Standby letters of credit		27.2		13.0		14.0		0.2		—

Total	$	385.9	$	256.6	$	34.6	$	15.5	$	79.2

The Corporation becomes party to financial instruments 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 and create off-balance sheet risk.

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.

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.

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. Collateral requirements for off-balance sheet items are generally based upon the same standards and policies as booked loans. 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.

C ONTRACTUAL C ASH O BLIGATIONS OF THE C ORPORATION AS OF D ECEMBER 31, 2010


(dollars in millions)	Total		Within 1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Deposits without a stated maturity	$	1,058.5	$	1,058.5	$	—	$	—	$	—
Wholesale and retail certificates of deposit		282.9		226.7		43.1		13.0		0.1
Subordinated debentures		22.5		—		—		—		22.5
Jr. subordinated debentures		12.0		—		—		—		12.0
Short-term borrowings		10.1		10.1		—		—		—
Other borrowings		160.1		63.7		70.6		2.3		23.5
Operating leases		26.5		1.8		3.6		3.1		18.0
Purchase obligations		6.1		2.0		1.9		1.5		0.7
Non-discretionary pension contributions		2.0		0.1		0.3		0.3		1.3

Total	$	1,580.7	$	1,362.9	$	119.5	$	20.2	$	78.1

N ON -GAAP F INANCIAL M EASURE R ECONCILIATION

The Corporation believes the presentation of this non-GAAP financial measure provides useful supplemental information that is essential to an investor’s proper understanding of the financial condition of the Corporation. Management uses this non-GAAP financial measure in the analysis of the Corporation’s performance. This non-GAAP disclosure should not be viewed as a substitute for the financial measure determined in accordance with GAAP, nor is it necessarily comparable to a non-GAAP performance measure that may be presented by other companies. The reconciliation of the GAAP to non-GAAP measure is included in the table below:


	As of December 31, 2010
	GAAP Measure						Non-GAAP Measure
(dollars in thousands)	Total Portfolio Loans and Leases			Less: Loans Acquired in Merger			Total Originated Loans
Commercial mortgage	$	385,615		$	(70,993	)	$	314,622
Home equity lines & loans		216,853			(44,791	)		172,062
Residential mortgage		261,983			(111,632	)		150,351
Construction		45,403			(8,155	)		37,248
Commercial & industrial		239,266			(8,108	)		231,158
Consumer		12,200			(1,154	)		11,046
Leases		35,397			—			35,397

Total	$	1,196,717		$	(244,833	)	$	951,884

Allowance for loan and lease losses	$	10,275		$	—		$	10,275

Allowance as a percentage of loans and leases		0.86	%		0.00	%		1.08	%

O THER I NFORMATION

Regulatory Matters and Pending Legislation

The Corporation is not aware of any other current specific recommendations by regulatory authorities or proposed legislation which, if implemented, would have a material adverse effect upon the liquidity, capital resources, or results of operations, however the general cost of compliance with numerous and multiple federal and state laws and regulations does have, and in the future may have, an impact on the Corporation’s results of operations.

On November 9, 2010, the FDIC approved proposed rules related to the calculation of the deposit insurance assessment. The proposal would shift the basis for the assessment away from an institution’s total domestic deposits, to its average total assets less average tangible equity. The FDIC is also proposing that the new assessment method be implemented, effective April 1, 2011. This shift in assessment basis would benefit community banks by placing more of the burden on the large, multi-national banks, which, until now, were only assessed on their domestic deposit base.

E FFECTS OF I NFLATION

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.

Q UANTITATIVE A ND Q UALITATIVE D ISCLOSURES A BOUT M ARKET R ISKS

The quantitative and qualitative disclosures about market risks are included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, in various sections detailed as follows:

“Net Interest Income” - Rate/Volume Analyses (Tax-equivalent Basis), Analysis of Interest Rates and Interest Differential, Net Interest Income and Net Interest Margin 2010 Compared to 2009, and - 2009 Compared to 2008, Net Interest Margin, Interest Rate Sensitivity, Summary of Interest Rate Simulation, Gap Report and Fair Value Adjustments Impacting the Statement of Income; “Provision for Loan and Lease Losses” - General Discussion of Allowance for Loan and Lease Losses, Portfolio Segmentation, Impairment Measurement, Troubled Debt Restructurings, Charge-Off Policy, Asset Quality and Analysis of Credit Risk, Non-Performing Assets, TDRs and Related Ratios, Summary of Changes in the Allowance of Loan and Lease Losses, Allocation of Allowance for Loan and Lease Losses; “Non- Interest Income”; “Non-Interest Expense”; “Income Taxes”; “Balance Sheet Analysis”; “Discussion of Segments”; “Capital”; “Liquidity”; “Off Balance Sheet Risk”; “Contractual Cash Obligation of the Corporation as of December 31, 2010”; and “Other Information.”

S PECIAL C AUTIONARY N OTICE R EGARDING F ORWARD L OOKING S TATEMENTS

Certain of the statements contained in this Annual Report, including without limitation the Letter to Shareholders, Year in Review, and Management’s Discussion and Analysis of Financial Condition and Results of Operations (which we refer to in this section as “incorporated documents”), 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 Bryn Mawr Bank Corporation (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, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words The words “may”, “would”, “could”, “will”, “likely”, “expect,” “anticipate,” “intend”, “estimate”, “plan”, “forecast”, “project” and “believe” and similar expressions are intended to identify such forward-looking statements. The Corporation’s actual results may differ materially from the results anticipated by the forward-looking statements due to a variety of factors, including without limitation:

•

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;

•

changes in accounting requirements or interpretations;

•

changes in existing statutes, regulatory guidance, legislation or judicial decisions that adversely affect our business, including changes in federal income tax or other tax regulations;

•

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;

•

any extraordinary events (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 need for capital;

•

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 investment products in a manner that meets customers’ needs;

•

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, sell and service residential mortgage loans;

•

the Corporation’s ability to retain key members of the 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;

•

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 Annual Report and incorporated documents are based upon the Corporation’s beliefs and assumptions as of the date of this Annual 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 Annual Report or incorporated documents might not occur and you should not put undue reliance on any forward-looking statements. Some of these and other factors are discussed in the section entitled “Risk Factors” in the accompanying Form 10-K.

Management’s Report on Internal Control Over Financial Reporting

The Corporation’s Management is responsible for establishing and maintaining adequate internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles; provide a reasonable assurance that receipts and expenditures of the Corporation are only being made in accordance with authorizations of Management and directors of the Corporation; and provide a reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Corporation’s assets that could have a material effect on the financial statements. The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by Management and tested for reliability through a program of internal audits. Actions are taken to correct potential deficiencies as they are noted.

Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2010, in relation to the criteria for effective control over financial reporting as described in “Internal Control – Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, Management concludes that, as of December 31, 2010, its system of internal control over financial reporting was effective.

The effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2010 has been audited by KPMG LLP, (“KPMG”) the Corporation’s independent registered public accounting firm responsible for auditing the Corporation’s financial statements. KPMG has issued an attestation report on the Corporation’s internal control over financial reporting as of December 31, 2010, which appears herein.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Bryn Mawr Bank Corporation:

We have audited the accompanying consolidated balance sheets of Bryn Mawr Bank Corporation and subsidiaries (the Corporation) as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows, changes in shareholders’ equity, and comprehensive income for each of the years in the three year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Bryn Mawr Bank Corporation’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2011 expressed an unqualified opinion on the effectiveness of Bryn Mawr Bank Corporation’s internal control over financial reporting.

Philadelphia, Pennsylvania

March 16, 2011

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Bryn Mawr Bank Corporation:

We have audited Bryn Mawr Bank Corporation’s (the Corporation) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Bryn Mawr Bank Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows, changes in shareholders’ equity, and comprehensive income for each of the years in the three-year period ended December 31, 2010, and our report dated March 16, 2011 expressed an unqualified opinion on those consolidated financial statements.

Philadelphia, Pennsylvania

March 16, 2011

Consolidated Balance Sheets


	As of December 31,
	2010			2009
	(dollars in thousands)
Assets
Cash and due from banks	$	10,961		$	11,670
Interest bearing deposits with banks		78,410			58,472
Money market funds		113			9,175

Cash and cash equivalents		89,484			79,317
Investment securities available for sale, at fair value (amortized cost of $315,587 and $206,689 as of December 31, 2010 and December 31, 2009 respectively)		317,052			208,224
Loans held for sale		4,838			3,007
Portfolio loans and leases		1,196,717			885,739
Less: Allowance for loan and lease losses		(10,275	)		(10,424	)

Net portfolio loans and leases		1,186,442			875,315
Premises and equipment, net		29,158			21,438
Accrued interest receivable		6,470			4,289
Deferred income taxes		14,551			4,991
Mortgage servicing rights		4,925			4,059
Bank owned life insurance		18,972			—
FHLB stock		14,227			7,916
Goodwill		17,659			6,301
Core deposit intangible		1,951			—
Other intangible assets		5,113			5,421
Other investments		5,156			3,140
Other assets .		15,770			15,403

Total assets	$	1,731,768		$	1,238,821

Liabilities
Deposits:
Non-interest-bearing demand	$	282,356		$	212,903
Savings, NOW and market rate accounts		696,094			482,987
Other wholesale deposits		80,112			52,174
Wholesale time deposits		37,201			36,118
Time deposits		245,669			153,705

Total deposits		1,341,432			937,887

Short-term borrowings		10,051			—
FHLB advances and other borrowings		160,144			146,888
Subordinated debentures		22,500			22,500
Junior subordinated debentures		12,029			—
Accrued interest payable		3,293			1,987
Other liabilities		20,901			25,623

Total liabilities		1,570,350			1,134,885

Shareholders’ equity
Common stock, par value $1; authorized 100,000,000 shares; issued 15,109,718 and 11,786,084 shares as of December 31, 2010 and December 31, 2009, respectively, and outstanding of 12,195,240 and 8,866,420 as of December 31, 2010 and December 31, 2009, respectively		15,110			11,786
Paid-in capital in excess of par value		68,398			17,705
Accumulated other comprehensive loss, net of tax benefit		(6,757	)		(6,913	)
Retained earnings		114,548			111,290

		191,299			133,868
Less: Common stock in treasury at cost - 2,914,478 and 2,919,664 shares as of December 31, 2010 and December 31, 2009, respectively		(29,881	)		(29,932	)

Total shareholders’ equity		161,418			103,936

Total liabilities and shareholders’ equity	$	1,731,768		$	1,238,821

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

Consolidated Statements of Income


	Year Ended December 31,
	2010			2009			2008
	(dollars in thousands, except per share data)
Interest income:
Interest and fees on loans and leases	$	59,324		$	51,686		$	53,251
Interest on cash and cash equivalents		179			272			300
Interest on investment securities:
Taxable		3,552			4,007			4,129
Non-taxable		749			593			254
Dividends		992			334			—

Total interest income		64,796			56,892			57,934

Interest expense on:
Savings, NOW and market rate accounts		2,957			3,094			3,753
Time deposits		2,192			4,644			6,791
Wholesale deposits		952			2,232			5,498
Short-term borrowings		16			1			78
FHLB advances and other borrowings		4,907			5,020			4,268
Subordinated debentures		1,129			1,108			408
Junior subordinated debentures		493			—			—

Total interest expense		12,646			16,099			20,796

Net interest income		52,150			40,793			37,138
Provision for loan and lease losses		9,854			6,884			5,596

Net interest income after provision for loan and lease losses		42,296			33,909			31,542
Non-interest income
Fees for wealth management services		15,499			14,178			13,842
Service charges on deposits		2,307			1,951			1,685
Loan servicing and other fees		1,626			1,387			1,194
Net gain on sale of residential mortgage loans		4,718			6,012			1,275
Net gain on sale of available for sale securities		2,472			1,923			230
Net gain on sale of trading securities		—			255			—
Net loss on sale of other real estate owned (“OREO”)		(114	)		—			—
BOLI income		266			—			261
Other operating income		2,601			2,764			2,985

Total non-interest income		29,375			28,470			21,472
Non-interest expenses:
Salaries and wages		24,829			22,275			18,989
Employee benefits		5,984			5,578			4,172
Occupancy and bank premises		4,257			3,637			3,165
Furniture, fixtures, and equipment		2,778			2,407			2,324
Advertising		1,142			1,084			1,115
Amortization of mortgage servicing rights		923			853			367
Net impairment (recovery) of mortgage servicing rights		30			(137	)		668
Amortization of core deposit intangible asset		176			—			—
Amortization of other intangible assets		308			308			141
FDIC insurance		1,551			1,234			472
FDIC special assessment		—			540			—
OREO expense		116			—			—
Impairment of OREO		381			—			—
Due diligence and merger-related expenses		5,714			616			156
Professional fees		2,140			2,008			1,550
Other operating expenses		7,656			6,139			5,557

Total non-interest expenses		57,985			46,542			38,676
Income before income taxes		13,686			15,837			14,338
Income tax expense		4,512			5,500			5,013

Net income	$	9,174		$	10,337		$	9,325

Basic earnings per common share	$	0.85		$	1.18		$	1.09
Diluted earnings per common share	$	0.85		$	1.18		$	1.08
Dividends declared per share	$	0.56		$	0.56		$	0.54
Weighted-average basic shares outstanding		10,765,657			8,732,004			8,566,938
Dilutive potential shares		12,312			16,719			34,233

Adjusted weighted-average diluted shares		10,777,969			8,748,723			8,601,171

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

Consolidated Statements of Cash Flows


	Year Ended December 31,
	2010			2009			2008
	(dollars in thousands)
Operating activities:
Net Income	$	9,174		$	10,337		$	9,325
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		9,854			6,884			5,596
Provision for depreciation and amortization		3,877			3,106			1,920
Loans originated for resale		(157,607	)		(272,964	)		(74,458	)
Proceeds from loans sold		159,784			276,423			77,414
Purchase of trading securities		—			(5,076	)		—
Proceeds from sale of trading securities		—			5,331			—
Gain on trading securities		—			(255	)		—
Net gain on sale of available for sale securities		(2,472	)		(1,923	)		—
Net gain on sale of residential mortgages		(4,718	)		(6,012	)		(1,275	)
Provision for deferred income taxes (benefit)		395			(57	)		(600	)
Stock based compensation cost		539			386			277
Change in income taxes payable/receivable		687			892			(906	)
Change in accrued interest receivable		(445	)		(256	)		283
Change in accrued interest payable		(544	)		(2,382	)		(1,925	)
Amortization and net impairment of mortgage servicing rights		953			716			1,035
Net accretion of fair value adjustments		(2,149	)		—			—
Amortization of core deposit intangible		176			—			—
Amortization of other intangible assets		308			308			141
Impairment of other real estate owned (“OREO”)		381			—			—
Loss (gain) on sale of OREO		114			(6	)		—
Net change in cash surrender value of bank owned life insurance (“BOLI”)		(266	)		—			—
Other, net		3,776			637			(4,109	)

Net cash provided by operating activities		21,817			16,089			12,718

Investing activities:
Purchases of investment securities		(335,992	)		(203,016	)		(105,865	)
Proceeds from maturity of investment securities and mortgage-backed securities paydowns		18,836			31,152			10,884
Proceeds from sale of investment securities available for sale		88,017			62,905			26,011
Proceeds from calls of investment securities		212,600			18,390			9,705
Net change in other investments		71			(190	)		(5,226	)
Proceeds from BOLI repayment		—			15,585			—
Net portfolio loan and lease (originations) repayments		(49,585	)		5,106			(100,040	)
Purchases of premises and equipment		(2,084	)		(2,090	)		(5,930	)
Acquisition of First Keystone Financial, Inc., net of cash acquired		46,240			—			—
Acquisition of Lau Associates, net of cash acquired		(1,477	)		(1,672	)		(9,875	)
Increase in OREO		(44	)		(147	)		—
Proceeds from sale of OREO		1,371			1,068			—

Net cash used by investing activities		(22,047	)		(72,909	)		(180,336	)

Financing activities:
Change in demand, NOW, savings and market rate deposit accounts		95,617			158,703			20,941
Change in time deposits		(41,297	)		(57,837	)		8,080
Change in wholesale time and other wholesale deposits		29,021			(32,469	)		(9,059	)
Decrease in short-term borrowings		(3,036	)		—			—
Dividends paid		(5,916	)		(4,892	)		(4,626	)
Increase in FHLB advances and other borrowings		—			2,062			124,939
Repayment of FHLB advances and other borrowings		(91,028	)		(10,113	)		—
Increase in subordinated debt		—			7,500			—
Purchase of treasury stock		—			(42	)		(361	)
Tax benefit from exercise of stock options		60			66			185
Proceeds from issuance of common stock		26,688			3,660			100
Proceeds from exercise of stock options		288			514			1,130

Net cash provided by financing activities		10,397			67,152			141,329

Change in cash and cash equivalents		10,167			10,332			(26,289	)
Cash and cash equivalents at beginning of year		79,317			68,985			95,274

Cash and cash equivalents at end of year	$	89,484		$	79,317		$	68,985

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

Consolidated Statements of Cash Flows (Continued)


	Year Ended December 31,
	2010		2009		2008
	(dollars in thousands)
Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	3,627	$	4,650	$	6,238
Interest		11,340		18,481		22,721
Supplemental cash flow information:
Available for sale securities purchased, not settled	$	—	$	7,996	$	—
Change in other comprehensive income		240		1,664		(5,678	)
Change in deferred tax due to change in comprehensive income		84		582		(1,987	)
Transfer of loans to other real estate owned		3,124		1,940		—
Acquisition of noncash assets and liabilities:
Assets acquired		438,989		—		10,609
Liabilities assumed		458,736		—		734

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

Consolidated Statements of Changes in Shareholders’ Equity


	For the Years Ended December 31, 2010, 2009 and 2008
	Shares of Common Stock Issued			Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock			Total Shareholders’ Equity
	(dollars in thousands, except share information)
Balance December 31, 2007		11,434,332		$	11,434		$	11,698		$	101,146		$	(4,304	)	$	(29,623	)	$	90,351
Net income		—			—			—			9,325			—			—			9,325
Dividends declared, $0.54 per share		—			—			—			(4,626	)		—			—			(4,626	)
Other comprehensive loss, net of tax benefit of $1,987		—			—			—			—			(3,691	)		—			(3,691	)
Tax benefit from gains on stock option exercise		—			—			185			—			—			—			185
Purchase of treasury stock		—			—			—			—			—			(361	)		(361	)
Retirement of treasury stock		(5,096	)		(5	)		(45	)		—			—			50			—
Common stock issued:
Exercise of stock options		84,546			85			1,145			—			—			—			1,230

Balance December 31, 2008		11,513,782		$	11,514		$	12,983		$	105,845		$	(7,995	)	$	(29,934	)	$	92,413
Net income		—			—			—			10,337			—			—			10,337
Dividends declared, $0.56 per share		—			—			—			(4,892	)		—			—			(4,892	)
Other comprehensive income, net of tax expense of $582		—			—			—			—			1,082			—			1,082
Stock based compensation		—			—			798			—			—			—			798
Tax benefit from gains on stock option exercise		—			—			66			—			—			—			66
Purchase of treasury stock		—			—			—			—			—			(42	)		(42	)
Retirement of treasury stock		(4,522	)		(4	)		(40	)		—			—			44			—
Common stock issued:
Dividend Reinvestment and Stock Purchase Plan		81,641			82			1,106			—			—			—			1,188
Directors’ retainer		4,522			4			83			—			—			—			87
Exercise of stock options		40,600			40			474			—			—			—			514
Private placement		150,061			150			2,235			—			—			—			2,385

Balance December 31, 2009		11,786,084		$	11,786		$	17,705		$	111,290		$	(6,913	)	$	(29,932	)	$	103,936
Net income		—			—			—			9,174			—			—			9,174
Dividends declared, $0.56 per share		—			—			—			(5,916	)		—			—			(5,916	)
Other comprehensive income, net of tax expense of $84		—			—			—			—			156			—			156
Stock based compensation		—			—			539			—			—			—			539
Tax benefit from gains on stock option exercise		—			—			60			—			—			—			60
Retirement of treasury stock		(5,186	)		(5	)		(46	)		—			—			51			—
Common stock issued:
Dividend Reinvestment and Stock Purchase Plan		119,175			119			1,918			—			—			—			2,037
Directors’ retainer		5,186			6			92			—			—			—			98
Exercise of stock options.		26,239			26			262			—			—			—			288
Acquisition of First Keystone Financial, Inc.		1,630,053			1,630			24,846			—			—			—			26,476
Registered direct common stock offering		1,548,167			1,548			23,022			—			—			—			24,570

Balance December 31, 2010		15,109,718		$	15,110		$	68,398		$	114,548		$	(6,757	)	$	(29,881	)	$	161,418

Consolidated Statements of Comprehensive Income


	For the Years Ended December 31,
	2010			2009		2008
	(dollars in thousands)
Net income	$	9,174		$	10,337	$	9,325
Other comprehensive (loss) income:
Unrealized investment (losses) gains, net of tax (benefit) expense of $(25), $161 and $318, respectively		(46	)		300		589
Change in unfunded pension liability, net of tax expense (benefit) of $109, $421 and $(2,305), respectively		202			782		(4,280	)

Comprehensive income	$	9,330		$	11,419	$	5,634

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

Notes to Consolidated Financial Statements

1. S UMMARY OF S IGNIFICANT A CCOUNTING P OLICIES

A. Nature of Business

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 its customers through 17 full service branches and seven retirement community offices throughout Montgomery, Delaware and Chester counties. In 2008, the Corporation opened the Bryn Mawr Trust Company of Delaware in Wilmington, Delaware, to further its long-term growth strategy, and diversify its asset base and client accounts. The common stock of the Corporation trades on the NASDAQ Stock Market (“NASDAQ”) under the symbol BMTC.

On July 1, 2010, the merger of First Keystone Financial, Inc. (“FKF”) with and into the Corporation (the “Merger”), and the two step merger of FKF’s wholly-owned subsidiary, First Keystone Bank (“FKB”) with and into the Bank, were completed. The acquisition of FKF, a federally chartered thrift institution with assets of approximately $480 million, enabled the Corporation to increase its regional footprint with the addition of eight full service branch locations, primarily in Delaware County, Pennsylvania.

The Corporation operates in a highly competitive market area that 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 Commission (“SEC”), Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking.

B. Basis of Presentation

The accounting policies of the Corporation conform to accounting principles generally accepted in the United States of America (“GAAP”) and predominant practice within the banking industry.

The Consolidated Financial Statements include the accounts of the Corporation and its wholly owned subsidiaries. The Corporation’s consolidated financial condition and results of operations consist almost entirely of the Bank’s financial condition and results of operations. All material inter-company transactions and balances have been eliminated.

In preparing the Financial Statements, the Corporation is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the balance sheets, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Although our current estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that in 2011, actual conditions could be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Amounts subject to significant estimates are items such as the allowance for loan and lease losses and lending related commitments, goodwill and intangible assets, pension and post-retirement obligations, the fair value of financial instruments and other-than-temporary impairments. Among other effects, such changes could result in future impairments of investment securities, goodwill and intangible assets and establishment of allowances for loan losses and lending related commitments as well as increased pension and post-retirement expense.

C. Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, interest –bearing deposits, federal funds sold and money market funds with other banks with original maturities of three months or less. Cash balances required to meet regulatory reserve requirements of the Federal Reserve Board amounted to $4.6 million and $1.3 million at December 31, 2010 and December 31, 2009, respectively.

D. Investment Securities – Available for Sale

Investment securities which are held for indefinite periods of time, which the Corporation intends to use as part of its asset/liability strategy, or which may be sold in response to changes in interest rates, changes in prepayment risk, increases in capital requirements, or other similar factors, are classified as available for sale and are carried at fair value. Net unrealized gains and losses for such securities, net of tax, are required to be recognized as a separate component of shareholders’ equity and excluded from determination of net income. Gains or losses on disposition are based on the net proceeds and cost of the securities sold, adjusted for amortization of premiums and accretion of discounts, using the specific identification method.

Prior to April 1, 2009, declines in the fair value of available-for-sale securities below their cost that were deemed to be

other than temporary were reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, the Corporation considers (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Beginning in April 1, 2009, the Corporation implemented ASC 370-10-65-1 “Recognition and Presentation of Other-Than-Temporary Impairments” that amended the accounting for recognizing other-than-temporary impairment for debt securities and expanded disclosure requirements for other-than-temporarily impaired debt and equity securities. Under the new guidance, companies are required to record other-than-temporary impairment charges, through earnings, if they have the intent to sell, or will more likely than not be required to sell, an impaired debt security before a recovery of its amortized cost basis. In addition, companies are required to record other-than-temporary impairment charges through earnings for the amount of credit losses, regardless of the intent or requirement to sell. Credit loss is measured as the difference between the present value of an impaired debt security’s cash flows and its amortized cost basis. Non-credit related write-downs to fair value must be recorded as decreases to accumulated other comprehensive income as long as the Corporation has no intent or it is more likely than not that the Corporation would not be required to sell an impaired security before a recovery of amortized cost basis. Since the Corporation did not have any other-than-temporary impairment for 2010 or 2009, the adoption of this guidance had no impact.

E. Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair value in the aggregate. Net unrealized temporary losses, if any, are recognized through a valuation allowance by charges to income.

F. Portfolio Loans and Leases

The Corporation grants construction, commercial, residential mortgage and consumer loans to customers primarily in southeastern Pennsylvania and small ticket equipment leasing to customers nationwide. Although the Corporation has a diversified loan and lease portfolio, its debtors’ ability to honor their contracts is substantially dependent upon the real estate and general economic conditions of the region.

Loans and leases that the Corporation has the intention and ability to hold for the foreseeable future or until maturity or pay-off, generally are reported at their outstanding principal balance adjusted for charge-offs, the allowance for loan and lease losses and any deferred fees or costs on originated loans and leases. Interest income is accrued on the unpaid principal balance.

Loan and lease origination fees and loan and lease origination costs are deferred and recognized as an adjustment of the related yield using the interest method.

The accrual of interest on loans and leases is generally discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Loans and leases are placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued, but not collected for loans that are placed on non-accrual status or charged-off is reversed against interest income. All interest accrued, but not collected on leases that are placed on non-accrual status is not reversed against interest until the lease is charged-off at 120 days delinquent. The interest received on these non-accrual loans and leases is applied to reduce the carrying value of loans and leases. Loans and leases are returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for at least six months and future payments are reasonably assured.

In connection with the Merger, the Corporation acquired $274.5 million of loans from FKF. Loans acquired in the Merger were recorded at their fair value. The difference between the recorded fair value and the principal value is accreted to interest income over the contractual lives of the loans in accordance with ASC 310-20 (formerly SFAS 91). Certain acquired loans which were deemed to be credit impaired at acquisition are accounted for in accordance with ASC 310-30, as discussed below, in subsection I of this footnote.

G. Allowance for Loan and Lease Losses

The allowance for loan and lease losses (“allowance”) is established through a provision for loan and lease losses (“provision”) charged as an expense. Loans and leases are charged against the allowance when the Corporation believes that the principal is uncollectible. The allowance is maintained at a level that the Corporation believes is 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 significant estimates by the Corporation. Consideration is given to a variety of factors in establishing these estimates including specific terms and conditions of loans and leases, underwriting standards, delinquency statistics, historical charge-off history by portfolio segment, industry concentration, overall exposure to a single customer, adequacy of collateral, the dependence on collateral, and results of internal loan review, including a borrower’s perceived financial and management strengths, the amounts and timing of the present value of future cash flows, and access to additional funds.

As part of the process of allocating the allowance to the different segments of the loan and lease portfolio,

Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. In addition, the remaining segments of the loan and lease portfolio, which include residential mortgage, home equity lines and loans, consumer loans, and leases, are allocated portions of the allowance based on their performance status.

The evaluation process also considers the impact of competition, current and expected economic conditions, national and international events, the regulatory and legislative environment 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 estimates, an additional provision for loan and lease losses may be required that might adversely affect the Corporation’s results of operations in future periods. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance. Such agencies may require the Corporation to recognize additions to the allowance based on their judgment of information available to them at the time of their examination.

H. Other Investments and Federal Home Loan Bank Stock

Other investments include Community Reinvestment Act (“CRA”) investment, and equity stocks without a readily determinable fair market value. The Bank’s investments in equity stocks include those issued by the Federal Home Loan Bank of Pittsburgh (“FHLB”), the Federal Reserve Bank and Atlantic Central Bankers Bank. The Bank is required to hold FHLB stock as a condition of its borrowing funds from the FHLB. As of December 31, 2010, the carrying value of the Bank’s FHLB stock was $14.2 million. Ownership of FHLB stock is restricted and there is no market for these securities. In 2008, the FHLB reported significant losses due to numerous factors, including other-than-temporary impairment charges on its portfolio of private-label mortgage-backed securities. The FHLB announced a capital restoration plan in February of 2009 which restricts it from repurchasing or redeeming capital stock or paying dividends. Further deterioration in the financial condition of the FHLB may result in an other-than-temporary impairment charge related to the Bank’s investment in FHLB stock. For further information on the FHLB stock, see Note 10 – Short-Term and Other Borrowings.

I. Impaired Loans and Leases

A loan or lease is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan and lease agreement. When assessing impairment, Management considers various factors. Factors include payment status, value of collateral and the probability of collecting scheduled principal and interest payments when due. Loans and leases that experience insignificant payment delays and payment shortfalls generally are not classified as impaired.

The Corporation determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

In connection with the Merger, certain loans were acquired which exhibited deteriorated credit quality since origination and for which the Bank does not expect to collect all contractual payments. Accounting for these purchased credit-impaired loans is done in accordance with ASC 310-30. The loans were recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield.

J. Troubled Debt Restructurings (“TDR”s)

A TDR occurs when a creditor, for economic or legal reasons related to a borrower’s financial difficulties, modifies the original terms of the loan or lease or grants a concession to the borrower that it would not otherwise have granted. A concession may include an extension of repayment terms, a reduction of interest rate or the forgiveness of principal and/or accrued interest. If the debtor is experiencing financial difficulty and the creditor has granted a concession, the Corporation will make the necessary disclosures related to the TDR. In certain cases, a modification may be made in an effort to retain a customer who is not experiencing financial difficulty. This type of modification is not considered to be a TDR.

K. Other Real Estate Owned (“OREO”)

OREO consists of assets that the Corporation has acquired through foreclosure, by accepting a deed in lieu of foreclosure, or by taking possession of assets that were used as loan collateral. The Corporation reports OREO on the balance sheet within other assets, at the lower of cost or estimated fair value less cost to sell, adjusted periodically based on current appraisals. Costs relating to the development or improvement of assets, as well as the costs required to obtain legal title to

the property are capitalized, while costs related to holding the property are charged to expense as incurred.

L. Premises and Equipment

Premises and equipment are stated at cost less accumulated depreciation. Depreciation and rent are recorded using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the expected lease term or the estimated useful lives, whichever is shorter.

M. Pension and Postretirement Benefit Plans

The Corporation has three defined benefit pension plans and one postretirement benefit plan and a 401(K) plan as discussed in Note 15 – 401(K) Plan and in Note 16 – Pension and Postretirement Benefit Plans. Net pension expense consists of service cost, interest cost, return on plan assets, amortization of prior service cost, amortization of transition obligations and amortization of net actuarial gains and losses. The Corporation accrues pension costs as incurred.

On February 12, 2008, the Corporation amended the Qualified Defined Pension Plan 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 contribution effective April 1, 2008. Additionally, the Corporation created a non-qualified defined benefit pension plan for 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.

N. Bank Owned Life Insurance (“BOLI”)

In connection with the Merger, the Bank acquired $18.7 million of BOLI.

BOLI is recorded at its cash surrender value on the balance sheet. Income from BOLI is tax-exempt and included as a component of other non-interest income.

O. Accounting for 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.

All share-based payments, including grants of stock options, restricted stock awards and performance-based stock awards, are recognized as compensation expense in the statement of income at their fair value. The fair value of stock option grants is determined using the Black-Scholes pricing model which considers the expected life of the options, the volatility of stock price, risk-free interest rate and annual dividend yield. The fair value of the restricted stock awards is based on their market value on the grant date, while the fair value of the performance-based stock awards is based on their grant-date market value in addition to the likelihood of attaining certain pre-determined performance goals utilizing the Monte Carlo Simulation model.

Stock-based compensation expense for 2010, 2009 and 2008 were $539 thousand, $386 thousand and $277 thousand, respectively.

P. 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 that could occur if stock options were exercised and converted into common shares. Proceeds assumed to have been received on such exercise are assumed to be used to purchase shares of the Corporation’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. 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.

Q. Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would more likely than not 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 percent likelihood of being realized upon settlement with the relevant tax authority. The Corporation applied these criteria to tax positions for which the statute of limitations remained open.

R. Revenue Recognition

With the exception of non-accrual loans and leases, the Corporation recognizes all sources of income on the accrual method. Additional information relating to wealth management fee revenue recognition follows:

The Corporation earns Wealth Management fee revenue from a variety of sources including fees from trust administration

and other related fiduciary services, custody, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax service fees, shareholder service fees and brokerage. These fees are generally based on asset values and fluctuate with the market. Some of the revenues are not directly tied to asset value but are based on a flat fee for services provided. For many of our revenue sources, amounts are not received in the same accounting period in which they are earned. However, each source of Wealth Management fees is recorded on the accrual method of accounting.

The most significant portion of the Corporation’s Wealth Management fees is derived from trust administration and other related services, custody, investment management and advisory services, and employee benefit account and IRA administration. These fees are generally billed in arrears, based on the market value of assets at the end of the previous billing period. A smaller number of customers are billed in a similar manner, but on a quarterly or annual basis and some revenues are not based on market values.

The balance of the Corporation’s Wealth Management fees include estate settlement fees and tax service fees, which are recorded when the related service is performed and asset management and brokerage fees on non-depository investment products, which are received one month in arrears based on settled transactions but are accrued in the month when the settlement occurs.

Included in other assets on the statement of condition is a Wealth Management fee receivable that reflects the impact of fees earned but not yet collected. This receivable is reviewed quarterly for collectibility.

S. Mortgage Servicing

The Corporation performs various servicing functions on loans owned by others. A fee, usually based on a percentage of the outstanding principal balance of the loan, is received for these services. Gain on sale of loans is based on the specific identification method.

Mortgage servicing rights (“MSR”s) are recognized as separate assets when rights are retained through the sale of financial assets. Capitalized servicing rights are amortized into non-interest expense in proportion to, and over the period of, the estimated future net servicing life of the underlying financial assets.

Servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rate and terms. Fair value is determined based upon discounted cash flows using market-based assumptions. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount for the stratum. A valuation allowance is utilized to record temporary impairment in MSRs. Temporary impairment is defined as impairment that is not deemed permanent. Permanent impairment is recorded as a reduction of the MSR and is not reversed.

T. Statement of Cash Flows

The Corporation’s statement of cash flows details operating, investing and financing activities during the reported periods.

U. Goodwill and Intangible Assets

The Corporation accounts for goodwill and other intangible assets in accordance with ASC 350, “Intangibles – Goodwill and Other.” The goodwill and intangible assets as of December 31, 2010 other than MSR’s in Note 1-S above are related to the acquisition of Lau Associates, which is a component of the Wealth Management Segment and FKF, a component of the Banking Segment. The amount of goodwill initially recorded reflects the value assigned to the asset at the time of investment. Goodwill impairment tests are performed at least annually, or when events occur or circumstances change that would more likely than not reduce the fair value of the acquisition or investment.

The Corporation’s impairment testing methodology is consistent with the methodology prescribed in ASC 350. Other intangible assets include the core deposit intangible, which was acquired in the Merger, customer relationships, a non-competition agreement and a trade name. The core deposit intangible is amortized over a ten year period utilizing a declining balance method. The customer relationships and non-competition agreement intangibles are amortized on the straight-line basis over the estimated useful lives of the assets. The trade name intangible has an indefinite life and is evaluated for impairment annually.

V. Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

W. New Accounting Pronouncements

Standards Adopted:

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 Annual Report filed on Form 10-K.

FASB ASU Update 2010-18 – Loan Modification

Accounting Standards Update No. 2010-18 “Effect of a Loan Modification When the Loan is Part of a Pool that is Accounted for as a Single Asset, a consensus of the FASB Emerging Issues Task Force (Issue No. 09-1)” amends FASB ASC Subtopic 310-30, Receivables – Loans and Debt Securities acquired with Deteriorated Credit Quality, so that modifications of loans that are accounted for within a pool under that Subtopic do not result in the removal of the loans from the pool even if the modifications of the loans would otherwise be considering a troubled debt restructuring. A one-time election to terminate accounting for loans in a pool, which may be made on a pool-by-pool basis, is provided upon adoption of the new guidance. An entity will continue to be required to consider whether the pool of assets in which the loan is included is impaired if expected cash flows for the pool change. The amendments are effective prospectively for modifications of loans accounted for within pools under subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. Early adoption is permitted. This ASU has no effect on the Corporation’s balance sheet or results of operations as the Corporation does not account for any of its loans on a pool basis.

FASB ASU Update 2010-20 – Credit Quality Disclosure

Accounting Standards Update No. 2010-20 “Disclosures about Credit Quality of Financial Receivables and the Allowance for Credit Losses” (“ASU 2010-20”) was issued July 2010. The ASU requires disclosure related to period-end information (i.e. credit quality information and the ending financing receivable balance segregated by impairment method) in all interim and annual reporting periods ending on or after December 15, 2010. Disclosures of activity that occur during a reporting period are required in interim or annual periods beginning on or after December 15, 2010. The Corporation adopted ASU 2010-20 and has provided disclosures required by ASU 2010-20 in this Annual Report filed on Form 10-K.

2. B USINESS C OMBINATIONS

On July 1, 2010, the Merger with FKF, and the two step merger of FKF’s wholly-owned subsidiary, FKB with and into the Bank, were completed. In accordance with the terms of the Agreement and Plan of Merger, dated November 3, 2009, by and between the Corporation and FKF (the “Merger Agreement”), shareholders of FKF received 0.6973 shares of the Corporation’s common stock plus $2.06 per share cash consideration for each share of FKF common stock they owned as of the effective date of the Merger. The 85% stock and 15% cash transaction was valued at $31.3 million, based on FKF’s June 30, 2010, closing share price of $13.35 as listed on NASDAQ. The aggregate consideration paid to FKF shareholders consisted of approximately 1.6 million shares of the Corporation’s common stock, valued at approximately $26.4 million, and approximately $4.8 million in cash. FKF employee stock options, valued at approximately $102 thousand, which were fully vested and converted to options to purchase the Corporation’s common stock upon the closing of the Merger, were also included in the total consideration paid. The results of the combined entity’s operations are included in the

Corporation’s Consolidated Statements of Income for the period beginning July 1, 2010, the date of the acquisition.

The acquisition of FKF, a federally chartered thrift institution with assets of approximately $480 million, enabled the Corporation to increase its regional footprint with the addition of eight full service branch locations, primarily in Delaware County, Pennsylvania. The geographic locations of the acquired branches were such that it was not necessary to close any of the former FKF branches. By expanding into these new areas within Delaware County, the Corporation will be able to extend its successful sales culture as well as offer its reputable wealth management products and other value-added services to a wider segment of the region’s population. In addition, a large majority of the FKF employees were retained, which will allow the Corporation to maintain the valuable customer relationships that FKF was able to build over the past century.

The acquisition of FKF was accounted for using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed and consideration paid were recorded at their estimated fair values as of the acquisition date. The excess of consideration paid over the fair value of net assets acquired was recorded as goodwill in the amount of approximately $9.7 million, which will not be amortizable and is not deductible for tax purposes. The Corporation allocated the total balance of goodwill recorded in connection with the Merger to its Banking segment. The Corporation also recorded $2.1 million in core deposit intangibles which will be amortized over ten years using a declining balance method.

The fair values listed below are preliminary estimates and are subject to adjustment, however, while they are not expected to be materially different than those shown. Adjustments to the estimates may be made during the twelve months following the date of the Merger.

In connection with the Merger, the consideration paid, and the fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition are summarized in the following table:


(dollars in thousands)
Consideration paid:
Common shares issued (1,630,053 shares)	$	26,391
Cash paid to FKF shareholders		4,819
Fair value of FKF employee stock options		102

Value of consideration		31,312
Assets acquired:
Cash and due from banks		51,059
Investment securities		100,888
Loans		274,533
Premises and equipment		7,856
Deferred federal income taxes		9,408
Bank owned life insurance		18,711
Federal Home Loan Bank (“FHLB”) stock		7,060
Core deposit intangible		2,127
Other assets		8,613

Total assets		480,255
Liabilities assumed:
Deposits		320,768
FHLB advances		105,734
Junior subordinated debentures		12,103
Repurchase agreements		13,087
Other liabilities		6,992

Total liabilities		458,684
Net assets acquired		21,571

Goodwill resulting from acquisition of FKF	$	9,741

The following table details the changes in fair value of the net assets acquired and liabilities assumed from the amounts originally reported in the Form 10-Q for the period ending September 30, 2010:


Goodwill resulting from acquisition of FKF reported on Form 10-Q for the quarter ended September 30, 2010	$	10,370
Effect of adjustments to:
Portfolio loans		250
Deferred tax asset		(311	)
Other assets		(568	)

Adjusted goodwill resulting from acquisition of FKF as of December 31, 2010	$	9,741

In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-20 (formerly SFAS 91).

Certain loans, for which specific credit-related deterioration, since origination, was identified, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition on these loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield. The Corporation uses the cash basis method of interest income recognition for these impaired loans. The following table details the loans that are accounted for in accordance with FASB ASC 310-30 (formerly SOP 03-3) as of July 1, 2010:


Contractually required principal and interest at acquisition	$	41,170
Contractual cash flows not expected to be collected (nonaccretable difference)		14,856

Expected cash flows at acquisition		26,314
Interest component of expected cash flows (accretable discount)		7,024

Fair value of acquired loans accounted for under FASB ASC 310-30	$	19,290

In accordance with accounting principles generally accepted in the United States (“GAAP”), there was no carryover of the allowance for loan losses that had been previously recorded by FKF.

In connection with the Merger, the Corporation acquired an investment portfolio with a fair value of $100.9 million. The fair value of the investment portfolio was determined by taking into account market prices obtained from independent valuation sources.

In connection with the acquisition of FKF, the Corporation recorded a deferred income tax asset of $9.4 million related to FKF’s net operating loss carry-forward, as well as other tax attributes of the acquired company, along with the effects of fair value adjustments resulting from applying the acquisition method of accounting.

The fair value of savings and transaction deposit accounts acquired from FKF was assumed to approximate their carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit accounts were valued by comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates. The portfolio was segregated into pools based on remaining maturity. For each pool, the projected cash flows from maturing certificates were then calculated based on contractual rates and prevailing market rates. The valuation adjustment for each pool is equal to the present value of the difference of these two cash flows, discounted at the assumed market rate for a certificate with a corresponding maturity. This valuation adjustment will be accreted to reduce interest expense over the remaining maturities of the respective pools.

Due to the overnight nature of the repurchase agreements acquired from FKF, their carrying value was used to approximate their fair value as of the acquisition date, and hence, no adjustment to fair value was recorded.

The fair value of the FHLB advances took into account the prepayment penalties that would have been assessed as of July 1, 2010, by the FHLB for their redemption. This fair value adjustment to the face value of the borrowings will be accreted to reduce interest expense over the remaining lives of the respective borrowings.

The fair value of the junior subordinated debentures was determined taking into account the price to call the instruments. The premium to call the debentures decreases annually until August 2017, at which time they may be called at par. The fair value adjustment will be accreted to reduce interest expense over the periods ending in August 2017.

The following table presents unaudited pro forma information as if the acquisition of FKF had occurred on both January 1, 2010 and January 1, 2009. This pro forma information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles and related income tax effects.

The pro forma information does not necessarily reflect the results of operations that would have occurred had the acquisition of FKF occurred at the beginning of 2010 or 2009.


	Pro forma Twelve Months Ended December 31,
(dollars in thousands)	2010			2009
Net interest income	$	58,568		$	55,735
Allowance for loan loss		(11,754	)		(9,884	)
Non-interest income		28,202			30,302
Non-interest expense		66,054			65,642

Net income	$	8,962		$	10,511

In July 2008, the Corporation acquired JNJ Holdings LLC, Lau Associates LLC and Lau Professional Services (collectively, “Lau”). The transaction was valued at $10.3 million. Under the terms of the purchase agreement, the Corporation makes annual earn-out payments based on the performance of the acquired entities. As of December 31, 2010, payments and accruals related to the purchase, totaling $13.2 million have been recorded. There remains one final earn-out payment, due in the first quarter of 2012, based on the 2011 performance. The final payment will not exceed $5.8 million, in accordance with the purchase agreement with Lau, and will be accrued in 2011.

3. G OODWILL & OTHER INTANGIBLE ASSETS

The Corporation’s goodwill and intangible assets related to the acquisitions of Lau in July, 2008 and FKF in July, 2010, for the years ending December 31, 2010 and 2009, are as follows:


(dollars in thousands)	Beginning Balance 1/1/10		Additions		Amortization			Ending Balance 12/31/10		Amortization Period
Goodwill – Lau	$	6,301	$	1,617	$	—		$	7,918		Indefinite
Goodwill – FKF		—		9,741		—			9,741		Indefinite
Core deposit intangible		—		2,127		(176	)		1,951		10 Years
Customer relationships		4,728		—		(255	)		4,473		20 Years
Non compete agreement		453		—		(53	)		400		10 Years
Brand (trade name)		240		—		—			240		Indefinite

Total	$	11,722	$	13,485	$	(484	)	$	24,723


(dollars in thousands)	Beginning Balance 1/1/09		Additions		Amortization			Ending Balance 12/31/09		Amortization Period
Goodwill – Lau	$	4,629	$	1,672	$	—		$	6,301		Indefinite
Customer relationships		4,983		—		(255	)		4,728		20 Years
Non compete agreement		506		—		(53	)		453		10 Years
Brand (trade name)		240		—		—			240		Indefinite

Total	$	10,358	$	1,672	$	(308	)	$	11,722

Under the terms of the Lau Associates acquisition, the Corporation has one remaining contingent earn-out payment due in the first quarter of 2012 (which would be recorded at the end of 2011), with the maximum remaining earn-out payment, which will be based on 2011 performance, not to exceed $5.8 million, in accordance with the purchase agreement with Lau.

4. I NVESTMENT S ECURITIES

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

As of December 31, 2010


(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Fair Value
U.S. treasury obligations	$	5,011	$	134	$	—		$	5,145
Obligations of the U.S. Government and agencies		156,301		704		(367	)		156,638
State & political subdivisions		28,273		252		(95	)		28,430
State & political subdivisions - taxable		3,740		106		(4	)		3,842
Federal agency mortgage backed securities		48,542		798		(139	)		49,201
Government agency mortgage backed securities		24,365		68		(107	)		24,326
Collateralized mortgage obligations		2,068		30		—			2,098
Corporate bonds		10,803		—		(159	)		10,644
Other debt securities		1,750		—		—			1,750

Total fixed income investments		280,853		2,092		(871	)		282,074
Bond – mutual funds		34,491		241		(10	)		34,722
Equity securities		243		13		—			256

Total non-maturity investments		34,734		254		(10	)		34,978

Total	$	315,587	$	2,346	$	(881	)	$	317,052

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 at December 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	$	46,027	$	(367	)	$	—	$	—	$	46,027	$	(367	)
State & political subdivisions		10,158		(99	)		—		—		10,158		(99	)
Federal agency mortgage backed securities		11,469		(139	)		—		—		11,469		(139	)
Government agency mortgage backed securities		21,296		(107	)		—		—		21,296		(107	)
Corporate bonds		10,645		(159	)		—		—		10,645		(159	)

Total fixed income investments		99,595		(871	)		—		—		99,595		(871	)
Bond – mutual funds		603		(10	)		—		—		603		(10	)

Total	$	100,198	$	(881	)	$	—	$	—	$	100,198	$	(881	)

The following table shows the amount of securities that were in an unrealized loss position at December 31, 2009:


(dollars in thousands)	Less than 12 Months					12 Months or Longer				Total
	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	)

Total fixed income investments		54,731		(519	)		—		—		54,731		(519	)
Bond – mutual funds		19,491		(113	)		—		—		19,491		(113	)

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

Management evaluates the Corporation’s investment securities that are in an unrealized loss position in order to determine if the decline in market value is other than temporary. The investment portfolio includes debt securities issued by U.S. government agencies, U.S. government-sponsored agencies, state and local municipalities and other issuers. All investment securities in the Corporation’s investment portfolio are highly rated as investment grade. Factors considered in the evaluation include the current economic climate, the length of time and the extent to which the fair value has been below cost, interest rates and the bond rating of each security. The unrealized losses presented in the tables above are temporary in nature and are primarily related to market interest rates rather than the underlying credit quality of the issuers. None of the investments in the tables above is believed to be other-than-temporarily impaired. Management believes that it is more likely than not that it will be able to hold the securities until recovery of their amortized cost bases.

At December 31, 2010, securities having fair value of $125.0 million were specifically pledged as collateral for public funds, trust deposits, the FRB discount window program, FHLB borrowings and other purposes. The FHLB has a blanket lien on non-pledged, mortgage-related loans and securities as part of the Bank’s borrowing agreement with the FHLB.

The amortized cost and estimated fair value of investment and mortgage-related securities as of December 31, 2010 and 2009, 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.


	December 31, 2010
(dollars in thousands)	Amortized Cost		Estimated Market Value
Investment securities ⁽¹⁾ :
Due in one year or less	$	6,223	$	6,231
Due after one year through five years		104,499		104,803
Due after five years through ten years		79,060		79,288
Due after ten years		16,096		16,127

Subtotal		205,878		206,449
Mortgage-related securities		74,975		75,625

Total	$	280,853	$	282,074

⁽¹⁾	Included in the investment portfolio, but not in the table above, are $34.5 million of bond mutual funds which have no stated maturity or constant stated coupon rate, as well as the Corporation’s $243 thousand investment in an equity security.


	December 31, 2009
(dollars in thousands)	Amortized Cost		Estimated Market Value
Investment securities ⁽¹⁾ :
Due in one year or less	$	1,803	$	1,807
Due after one year through five years		52,324		52,398
Due after five years through ten years		46,767		46,401
Due after ten years		10,927		10,978

Subtotal		111,821		111,584
Mortgage-related securities		57,925		59,670

Total	$	169,746	$	171,254

⁽¹⁾	Included in the investment portfolio, but not in the table above, are $36.9 million of bond mutual funds which have no stated maturity or constant stated coupon rate.

Proceeds from the sale of available for sale investment securities totaled $88.0 million, $62.9 million and $26.0 million for the twelve months ended December 31, 2010, 2009 and 2008, respectively.

5. L OANS AND L EASES

A. Loans and leases outstanding are detailed by category as follows:


	December 31,
(dollars in thousands)	2010		2009
Loans held for sale	$	4,838	$	3,007

Real estate loans:
Commercial mortgage	$	385,615	$	265,023
Home equity lines and loans		216,853		178,103
Residential mortgage		261,983		110,653
Construction		45,403		38,444

Total real estate loans		909,854		592,223
Commercial and industrial		239,266		233,288
Consumer		12,200		12,477
Leases		35,397		47,751

Total portfolio loans and leases		1,196,717		885,739

Total loans and leases	$	1,201,555	$	888,746

Loans with predetermined rates	$	544,784	$	344,398
Loans with adjustable or floating rates		656,771		544,348

Total loans and leases	$	1,201,555	$	888,746

Net deferred loan origination costs included in the above loan table	$	378	$	430

B. Leases outstanding at December 31 are detailed by components of the net investment as follows:


	December 31,
(dollars in thousands)	2010			2009
Minimum lease payments receivable	$	39,711		$	54,556
Unearned lease income		(5,808	)		(9,014	)
Initial direct costs and deferred fees		1,494			2,209

Total	$	35,397		$	47,751

C. Troubled Debt Restructurings (“TDR”s):


	December 31,
(dollars in thousands)	2010		2009
TDRs included in nonperforming loans and leases	$	1,879		$	2,274
TDRs in compliance with modified terms		4,693			1,622

Total TDRs	$	6,572		$	3,896

D. Non-Performing Loans and Leases ⁽¹⁾


	December 31,
(dollars in thousands)	2010		2009
Non-accrual loans and leases :
Commercial mortgage	$	1,911	$	1,459
Home equity lines and loans		987		—
Residential mortgage		4,411		2,452
Construction		202		595
Commercial and industrial		1,692		1,204
Consumer		15		—
Leases		279		536

Total	$	9,497	$	6,246

Loans and leases 90 days or more past due and still accruing :
Home equity lines and loans	$	—		625
Commercial and industrial		—		19
Consumer		10		24

Total		10		668

Total non-performing loans and leases	$	9,507	$	6,914

⁽¹⁾	Purchased credit-impaired loans, which have been recorded at their fair values at the Merger date and which are performing are excluded from this table . Also excluded from this table are the $1.1 million of purchased credit-impaired loans described in note 5E, below.

E. Purchased Credit-Impaired Loans

The outstanding principal balance and related carrying amount of credit-impaired loans, for which the Bank applies ASC 310-30 to account for the interest earned, as of the dates indicated, is as follows:

December 31,

(dollars in thousands)

2010

2009

Outstanding principal balance

27,489

—

Carrying amount ⁽¹⁾

17,837

—

The following table presents changes in the accretable discount on purchased credit-impaired loans, for which the Bank applies ASC 310-30, for the twelve months ended December 31, 2010:


(dollars in thousands)	Accretable Discount
Balance, December 31, 2009	$	—
Recorded at acquisition		7,024
Accretion		(554	)
Reversals (sales and foreclosures)		(137	)

Balance, December 31, 2010	$	6,333

⁽¹⁾

Includes $1.1 million of purchased credit-impaired loans for which the Bank could not estimate the timing or amount of expected cashflows to be collected at the Merger date, and for which no accretable yield is recognized. Additionally, this includes $785 thousand of purchased credit-impaired loans that subsequently became non-performing, which are disclosed in note 5D, above, and which also have no accretable yield.

F. Age Analysis of Past Due Loans and Leases

The following tables present an aging of the Corporation’s loan and lease portfolio as of December 31, 2010 and 2009:


(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Loans and Leases		Over 89 Days and Accruing		Delinquency % ⁽¹⁾
As of December 31, 2010
Commercial mortgage	$	377	$	—	$	1,854	$	2,231	$	383,384	$	385,615	$	—		0.58	%
Home equity lines and loans		958		981		988		2,927		213,926		216,853		—		1.35	%
Residential mortgage		958		1,089		1,885		3,932		258,051		261,983		—		1.50	%
Construction		1,730		201		—		1,931		43,472		45,403		—		4.25	%
Commercial and industrial		1,467		68		1,344		2,879		236,387		239,266		—		1.20	%
Consumer		21		3		23		47		12,153		12,200		10		0.47	%
Leases		244		257		203		704		34,693		35,397		—		1.99	%

	$	5,755	$	2,599	$	6,297	$	14,651	$	1,182,066	$	1,196,717	$	10		1.23	%

⁽¹⁾

Delinquency % equals [“Total past due” plus “Over 89 and accruing”] /[Total loans and leases]


(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Loans and Leases		Over 89 Days and Accruing		Delinquency % ⁽¹⁾
As of December 31, 2009
Commercial mortgage	$	142	$	—	$	1,458	$	1,600	$	263,423	$	265,023	$	—		0.60	%
Home equity lines and loans		485		13		590		1,088		177,015		178,103		625		0.96	%
Residential mortgage		1,285		14		1,565		2,864		107,789		110,653		—		2.59	%
Construction		2,077		513		594		3,184		35,260		38,444		—		8.28	%
Commercial and industrial		980		—		4,508		5,488		227,800		233,288		19		2.36	%
Consumer		—		29		25		54		12,423		12,477		24		0.63	%
Leases		609		476		535		1,620		46,131		47,751		—		3.39	%

	$	5,578	$	1,045	$	9,275	$	15,898	$	869,841	$	885,739	$	668		1.87	%

⁽¹⁾

Delinquency % equals [“Total past due” plus “Over 89 and accruing”] /[Total loans and leases]

G. Allowance for Loan and Lease Losses (the “Allowance”)

The following table details the roll-forward of the Bank’s allowance for loan and lease losses for the twelve month periods ended December 31, 2010, 2009, 2008:


	For the Twelve Months Ended December 31,
	2010			2009			2008
Balance, beginning of period	$	10,424		$	10,332		$	8,124
Charge-offs		(10,694	)		(7,370	)		(3,616	)
Recoveries		691			578			228
Provision for loan and lease losses		9,854			6,884			5,596

Balance, end of period	$	10,275		$	10,424		$	10,332

The following table details the allocation of the allowance for loan and lease losses by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2010 and 2009:


(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Unallocated		Total
As of December 31, 2010
Allowance on loans and leases:
Individually evaluated for impairment	$	152	$	390	$	56	$	160	$	83	$	—	$	—	$	—	$	841
Collectively evaluated for impairment		2,382		1,173		787		473		3,482		115		766		256		9,434
Purchased credit- impaired ⁽¹⁾		—		—		—		—		—		—		—		—		—

Total	$	2,534	$	1,563	$	843	$	633	$	3,565	$	115	$	766	$	256	$	10,275

As of December 31, 2009
Allowance on loans and leases:
Individually evaluated for impairment	$	36	$	41	$	—	$	218	$	1,002	$	—	$	—	$	—	$	1,297
Collectively evaluated for impairment		1,991		1,187		697		434		2,799		125		1,403		491		9,127

Total	$	2,027	$	1,228	$	697	$	652	$	3,801	$	125	$	1,403	$	491	$	10,424

⁽¹⁾

Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following table details the carrying value for loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2010 and 2009:


(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
As of December 31, 2010
Balance of loans and leases:
Individually evaluated for impairment	$	2,615	$	749	$	2,480	$	1,875	$	896	$	—	$	—	$	8,615
Collectively evaluated for impairment		371,692		215,991		259,165		38,179		237,643		12,198		35,397		1,170,265
Purchased credit-impaired ⁽¹⁾		11,308		113		338		5,349		727		2		—		17,837

Total	$	385,615	$	216,853	$	261,983	$	45,403	$	239,266	$	12,200	$	35,397	$	1,196,717

As of December 31, 2009
Balance of loans and leases:
Individually evaluated for impairment	$	3,759	$	492	$	—	$	2,677	$	8,114	$	—	$	—	$	15,042
Collectively evaluated for impairment		261,264		177,371		110,653		35,767		225,174		12,717		47,751		870,697

Total	$	265,023	$	177,863	$	110,653	$	38,444	$	233,288	$	12,717	$	47,751	$	885,739

⁽¹⁾

Purchased credit-impaired loans are evaluated for impairment on an individual basis.

•

Pass - Loans considered to be satisfactory with no indications of deterioration.

•

Special mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•

Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

•

Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

In addition, the remaining segments of the loan and lease portfolio, which include residential mortgage, home equity lines and loans, consumer, and leases, are allocated portions of the allowance based on their performance status.

The following tables detail the carrying value of loans and leases by portfolio segment based on the credit quality indicators used to allocate the allowance for loan and lease losses as of December 31, 2010 and 2009:


	Credit Risk Profile by Internally Assigned Grade
(dollars in thousands)	Commercial Mortgage				Construction				Commercial and Industrial				Total
	2010		2009		2010		2009		2010		2009		2010		2009
As of December 31,
Pass	$	373,098	$	257,455	$	36,230	$	35,774	$	232,717	$	223,395	$	642,045	$	516,624
Special Mention		9,141		3,811		6,486		2,077		4,969		2,427		20,596		8,315
Substandard		1,680		3,757		2,687		593		735		6,258		5,102		10,608
Doubtful ⁽¹⁾		1,696		—		—		—		845		1,208		2,541		1,208

Total	$	385,615	$	265,023	$	45,403	$	38,444	$	239,266	$	233,288	$	670,284	$	536,755


	Credit Risk Profile Based on Payment Activity
(dollars in thousands)	Residential Mortgage				Home Equity Lines and Loans				Consumer				Leases				Total
	2010		2009		2010		2009		2010		2009		2010		2009		2010		2009
As of December 31,
Performing	$	257,572	$	108,201	$	215,866	$	177,238	$	12,175	$	12,693	$	35,118	$	47,215	$	520,731	$	345,347
Non-performing		4,411		2,452		987		625		25		24		279		536		5,702		3,637

Total	$	261,983	$	110,653	$	216,853	$	177,863	$	12,200	$	12,717	$	35,397	$	47,751	$	526,433	$	348,984

⁽¹⁾	As of December 31, 2010, these loans reflect loan balances which have been reduced by partial charge-offs, and are carried at their net realizable value.

H. Impaired Loans

The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related allowance for loan and lease losses and interest income recognized for the twelve months ended December 31, 2010 and 2009:


(dollars in thousands)	Recorded Investment ⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income recognized		Cash-Basis Interest Income Recognized
As of or for the twelve months ended December 31, 2010
Impaired loans with related allowance:
Commercial mortgage	$	1,696	$	2,285	$	110	$	2,287	$	116	$	—
Home equity lines and loans		749		1,099		390		1,078		22		—
Residential mortgage		2,480		2,480		56		2,480		—		—
Commercial and industrial		1,514		4,294		123		4,318		83		—

Total		6,439		10,158		679		10,163		221		—
Impaired loans without related allowance ⁽¹⁾⁽³⁾ :												—
Commercial mortgage		158		158		—		160		1		—
Home equity lines and loans		273		279		—		280		8		—
Residential mortgage		4,841		5,170		—		5,109		194		—
Commercial and industrial		323		500		—		501		11		—
Consumer loans		25		26		—		26		1		—

Total		5,620		6,133		—		6,076		215		—

Grand total	$	12,059	$	16,291	$	679	$	16,239	$	436	$	—

⁽¹⁾

The table above does not include the recorded investment of $1.3 million of impaired leases without a related allowance for loan and lease losses.

⁽²⁾

Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.

⁽³⁾

The table above excludes purchased credit-impaired loans discussed in Note 5E, above.


*(dollars in thousands)*	Recorded Investment ⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest income recognized		Cash-Basis Interest Income Recognized
As of or for the twelve months ended December 31, 2009
Impaired loans with related allowance:
Commercial mortgage	$	1,459	$	1,459	$	19	$	1,460	$	49	$	—
Construction		595		595		58		595		24		—
Commercial and industrial		1,204		2,804		240		2,462		131		—

Total		3,258		4,858		317		4,517		204		—
Impaired loans without related allowance ⁽¹⁾ :												—
Residential mortgage		2,452		2,618		—		2,602		49		—

												—
Grand total	$	5,710	$	7,476	$	317	$	7,119	$	253	$	—

⁽¹⁾

The table above does not include the recorded investment of $536 thousand of impaired leases without a related allowance for loan and lease losses.

⁽ ²⁾

Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal

6. O THER R EAL E STATE O WNED

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 $2.5 million in OREO assets at December 31, 2010.

The summary of the change in other real estate owned, which is included as a component of other assets on the Corporation’s Consolidated Balance Sheets, is as follows:


	December 31,
(dollars in thousands)	2010			2009
Balance January 1	$	1,025		$	—
Additions		3,124			1,940
Capitalized cost		244			147
Impairment of OREO		(381	)		—
Sales		(1,485	)		(1,062	)

Balance December 31	$	2,527		$	1,025

7. P REMISES AND E QUIPMENT

A. A summary of premises and equipment is as follows:


	December 31,
(dollars in thousands)	2010			2009
Land	$	5,369		$	3,268
Buildings		21,478			17,350
Furniture and equipment.		20,001			18,122
Leasehold improvements		10,883			9,021
Construction in progress		531			617
Less: accumulated depreciation		(29,104	)		(26,940	)

Total	$	29,158		$	21,438

Depreciation and amortization expense related to the assets detailed in the above table for the years ended December 31, 2010, 2009, and 2008 amounted to $2.3 million, $1.9 million, and $1.7 million, respectively.

B. Future minimum cash rent commitments under various operating leases as of December 31, 2010 are as follows:


(dollars in thousands)
2011	$	1,779
2012		1,900
2013		1,677
2014		1,555
2015		1,550
2016 and thereafter		18,045

Rent expense on leased premises and equipment for the years ended December 31, 2010, 2009 and 2008 amounted to $1.6 million, $1.3 million, and $1.0 million, respectively.

8. M ORTGAGE S ERVICING R IGHTS (“MSR” S )

A. The following summarizes the Corporation’s activity related to MSRs for the years ended December 31:


(dollars in thousands)	2010			2009			2008
Balance, January 1	$	4,059		$	2,205		$	2,820
Additions		1,819			2,570			420
Amortization		(923	)		(853	)		(367	)
Recovery (impairment)		(30	)		137			(668	)

Balance, December 31	$	4,925		$	4,059		$	2,205

Fair value	$	5,815		$	4,807		$	2,210

Loans serviced for others	$	605,485		$	514,875		$	350,199

B. The following summarizes the Corporation’s activity related to changes in the impairment valuation allowance of MSRs for the years ended December 31:


(dollars in thousands)	2010			2009			2008
Balance, January 1	$	(566	)	$	(703	)	$	(35	)
Impairment		(390	)		(205	)		(698	)
Recovery		360			342			30

Balance, December 31	$	(596	)	$	(566	)	$	(703	)

C. Other MSR Information – At December 31, 2010, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:


(dollars in thousands)
Fair value amount of MSRs	$	5,815
Weighted average life (in years)		5.6
Prepayment speeds (constant prepayment rate) ⁽¹⁾		13.0	%
Impact on fair value:
10% adverse change	$	(265	)
20% adverse change	$	(510	)
Discount rate		10.26	%
Impact on fair value:
10% adverse change	$	(210	)
20% adverse change	$	(406	)

⁽¹⁾

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

At December 31, 2010, 2009 and 2008, the fair value of the mortgage MSRs is $5.8 million, $4.8 million, and $2.2 million, respectively. The fair value of the MSRs for these dates 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. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate is used to determine the present value of future net servicing income. Another key assumption in the model is the required rate of return the market would expect for an asset with similar risk. Both assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change.

These assumptions and sensitivities are hypothetical and should be used with caution. As the figures indicate, 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 MSRs 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. D EPOSITS

A. The following table details the components of deposits:


	As of December 31,
(dollars in thousands)	2010		2009
Savings	$	134,163	$	101,719
NOW accounts ⁽¹⁾		234,107		151,432
Market rate accounts ⁽¹⁾		407,936		282,010
Time deposits, less than $100		144,410		74,528
Time deposits, $100 or more		101,259		79,177
Wholesale time deposits		37,201		36,118

Total interest-bearing deposits		1,059,076		724,984
Non-interest-bearing deposits		282,356		212,903

Total deposits	$	1,341,432	$	937,887

⁽¹⁾

Includes other wholesale deposits.

The aggregate amount of deposit overdrafts included as loans as of December 31, 2010 and 2009 were $740 thousand and $332 thousand, respectively.

B. The following tables detail the maturities of time deposits:


	As of December 31, 2010
(dollars in thousands)	$100 or more		Less than $100
Maturing during:
2011	$	83,601	$	105,863
2012		10,794		23,251
2013		2,499		6,562
2014		2,606		5,538
2015		1,759		3,141
2016 and thereafter		—		55

Total	$	101,259	$	144,410

C. The following tables detail the maturities of wholesale time deposits:


	As of December 31, 2010
(dollars in thousands)	$100 or more		Less than $100
Maturing during:
2011	$	36,553	$	648
2012		—		—
2013		—		—
2014		—		—
2015		—		—
2016 and thereafter		—		—

Total	$	36,553	$	648

10. S HORT - TERM AND O THER B ORROWINGS

A. Short-term borrowings – As of December 31, 2010 and 2009, the Corporation had $10.1 million and $0 of short-term (original maturity of one year or less) borrowings, respectively, which consisted solely of funds obtained from overnight repurchase agreements with commercial customers.

A summary of short-term borrowings is as follows:


(dollars in thousands)	2010		2009
FRB discount window borrowings	$	—	$	—
Repurchase agreements		10,051		—

Total short-term borrowings	$	10,051		—

The following table sets forth information concerning short-term borrowings:


(dollars in thousands)	2010			2009
Balance at year-end	$	10,051		$	—
Maximum amount outstanding at any month-end		12,127			—
Average balance outstanding during the year		5,839			159
Weighted-average interest rate:
As of year-end		0.25	%		N/A
Paid during the year		0.28	%		0.61	%

Average balances outstanding during the year represent daily average balances and average interest rates represent interest expense divided by the related average balance.

B. FHLB Advances and Other Borrowings:

As of December 31, 2010 and 2009, the Corporation had $160.1 million and $146.9 million, respectively, of other borrowings, consisting mainly of advances from FHLB as well as a commercial mortgage on its Wealth Management Division’s offices located in Bryn Mawr, PA.

The following table presents the remaining periods until maturity of the FHLB advances and other borrowings:


	As of December 31,
(dollars in thousands)	2010		2009
Within one year	$	63,680	$	40,523
Over one year through five years		72,980		94,120
Over five years through ten years		22,345		10,998
Over ten years		1,139		1,247

Total	$	160,144	$	146,888

The following table presents rate and maturity information on FHLB advances and other borrowings:


	Maturity Range ⁽¹⁾				Weighted Average Rate			Stated Interest Rate						Balance at December 31,
Description	From		To		Weighted Average Rate			From			To			2010		2009
Fixed amortizing		04/11/11		12/29/15		3.54	%		2.88	%		3.90	%	$	19,028	$	29,326
Adjustable amortizing (commercial mortgage)		01/29/29		01/29/29		5.50	%		5.50	%		5.50	%		2,000		2,062
Bullet maturity		01/24/11		09/09/13		3.31	%		1.19	%		4.12	%		65,500		95,500
Convertible-fixed		01/10/11		08/20/18		1.49	%		1.16	%		2.62	%		73,616		20,000

Total														$	160,144	$	146,888

⁽¹⁾

Maturity range refers to December 31, 2010 balances.

Included in the table above as of December 31, 2010 and 2009 are $73.6 million and $20.0 million, respectively, of FHLB advances whereby the FHLB has the option, at predetermined times, to convert the fixed interest rate to an adjustable interest rate indexed to the London Interbank Offered Rate (“LIBOR”). The Corporation has the option to prepay these advances, without penalty, if the FHLB elects to convert the interest rate to an adjustable rate. As of December 31, 2010, substantially all the FHLB advances with this convertible feature are subject to conversion in fiscal 2011. These advances are included in the periods in which they mature, rather than the period in which they are subject to conversion.

C. Other FHLB Information – The Corporation had a maximum borrowing capacity (“MBC”) with the FHLB of approximately $611.3 million as of December 31, 2010 of which the unused capacity was $444.8 million at December 31, 2010. In addition there were $75 million in overnight federal funds line and $55 million of Federal Reserve Discount Window capacity. In connection with its FHLB borrowings, the Corporation is required to hold the capital stock of the FHLB. The amount of capital stock held was $14.2 million at December 31, 2010, and $7.9 million at December 31, 2009. The carrying amount of the FHLB stock approximates its redemption value. On December 23, 2008, the FHLB announced that it would voluntarily suspend the payment of dividends and the repurchase of excess capital stock until further notice. There were no dividends paid on FHLB stock in 2010 or 2009, no repurchases of capital stock during the twelve months ended December 31, 2009 and only limited repurchases of capital stock during the same period in 2010.

The level of required investment in FHLB stock is based on the balance of outstanding loans the Corporation has from the FHLB. Although FHLB stock is a financial instrument that represents an equity interest in the FHLB, it does not have a readily determinable fair value. FHLB stock is generally viewed as a long-term investment. Accordingly, when evaluating FHLB stock for impairment, its value should be determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. The Corporation regularly reviews financial statements filed by the FHLB. The most recent financial information available as of March 2, 2011 indicates improvement in the FHLB’s net income as well as its capital ratios. In addition, credit-related other-than-temporary impairments have declined considerably for the year ended December 31, 2010, as compared to the same period in 2009. Management believes that these indicators, as well as the fact that the FHLB has recently resumed redemption of its capital stock, support the Corporation’s assessment that its investment in FHLB capital stock is not other-than-temporarily impaired.

11. S UBORDINATED D EBENTURES

The Bank issued an aggregate of $15 million in subordinated debentures in July and August 2008. This subordinated debenture has a floating interest rate, which resets quarterly at 90 day LIBOR plus 3.75%, has a maturity of 10 years, and can be prepaid at the end of 5 years with no prepayment penalty. At December 31, 2010, the rate was 4.05% and will next reset on March 15, 2011. Interest is payable quarterly and principal is due September 15, 2018.

In April 2009, the Bank raised an additional $7.5 million in subordinated debentures. These subordinated debentures bear an interest rate at a rate per annum equal to the 90 day LIBOR rate plus 5.75% and is adjusted quarterly. Interest is payable quarterly and principal is due on June 15, 2019. The rate of interest is capped at 10.0% per annum during the first 5 years of the term. At December 31, 2010, the rate was 6.05% and will next reset on March 15, 2011.

Subordinated debentures qualify as Tier II regulatory capital for the first five years from the date of issuance and thereafter are discounted as the subordinated debentures approach maturity, with one fifth of the original amount excluded from Tier II capital each year during the last five years before maturity. When the remaining maturity is less than one year, the subordinated debentures are excluded from Tier II capital. Unamortized subordinated debenture issuance costs were $296 thousand and $320 thousand at December 31, 2010 and 2009, respectively. These costs are amortized over the term of the debt, as an adjustment to the yield.

12. J UNIOR S UBORDINATED D EBENTURES

In connection with the acquisition of FKF, the Corporation acquired FKF Capital Trust I (the “Trust”), a trust formed under Delaware law that became an unconsolidated subsidiary of the Corporation. The Corporation owns all the common shares of the Trust, which totals $928 thousand, as of December 31, 2010 and is recorded in other investments in the Corporation’s Consolidated Balance Sheet. On August 21, 1997, the Trust issued $16.2 million of preferred securities (the “Preferred Securities”) at an interest rate of 9.7%, with a scheduled maturity of August 15, 2027. Simultaneously, the proceeds from the issue, along with $502 thousand of cash were invested in junior subordinated debentures (the “Debentures”) that have been assumed by the Corporation. The Debentures are unsecured and rank subordinate and junior in right of payment to all indebtedness, liabilities and obligations of the Corporation. On November 15, 2001 and June 25, 2008, FKF purchased $3.5 million and $1.5 million, respectively, of the Preferred Securities.

The Debentures represent the sole assets of the Trust. Interest on the Preferred Securities is cumulative and payable semiannually in arrears. The Corporation has the option, subject to required regulatory approval, if any, to prepay the securities. The Corporation has, under the terms of the Debentures and the related Indenture as well as the other operative corporate documents, agreed to irrevocably and unconditionally guarantee the Trust’s obligations under the Debentures.

The premium to call the Preferred Securities decreases each August 15th until August 15, 2017, at which time they are callable at their face value.

13. D ISCLOSURE ABOUT F AIR V ALUE OF F INANCIAL I NSTRUMENTS

FASB ASC 825, “Disclosures 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 below 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 Available for Sale

Estimated fair values for investment securities are generally 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. See Note 4 for more information.

Loans Held for Sale

The fair value of loans held for sale is based on pricing obtained from secondary markets.

Net Portfolio 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. This technique does not reflect an exit price as contemplated in Note 4.

Mortgage Servicing Rights

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. FASB Codification 825 defines the fair value of demand deposits as the amount payable on demand as of the reporting date and prohibits adjusting estimated fair value from any

value derived from retaining those deposits for an expected future period of time.

Short-term borrowings

The carrying amount of short-term borrowings, which include overnight repurchase agreements approximate their fair value.

FHLB Advances and Other Borrowings

The fair value of FHLB advances and other borrowings, which includes a $2.0 million commercial mortgage loan, is established using a discounted cash flow calculation that applies interest rates currently being offered on mid-term and long term borrowings.

Subordinated Debentures

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

Junior Subordinated Debentures

The carrying amounts reported in the balance sheet for junior subordinated debentures approximate their fair values, and are based in part on the call price of the instruments.

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 are as follows:


	As of December 31,
	2010				2009
(dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	89,484	$	89,484	$	79,317	$	79,317
Investment securities AFS		317,052		317,052		208,224		208,224
Loans held for sale		4,838		4,874		3,007		3,051
Net portfolio loans and leases		1,186,442		1,204,056		875,315		888,242
Mortgage servicing rights		4,925		5,815		4,059		4,807
Other assets		25,853		25,853		15,345		15,345

Total financial assets	$	1,628,594	$	1,647,134	$	1,185,267	$	1,198,986

Financial liabilities:
Deposits	$	1,341,432	$	1,342,294	$	937,887	$	938,523
Repurchase agreements		10,051		10,051		—		—
FHLB advances		158,144		161,483		144,826		147,446
Mortgage payable		2,000		2,210		2,062		2,232
Subordinated debentures		22,500		22,732		22,500		22,580
Jr. subordinated debentures		12,029		12,029		—		—
Other liabilities		24,174		24,174		27,610		27,610

Total financial liabilities	$	1,570,330	$	1,574,973	$	1,134,885	$	1,138,391

Off-balance sheet contract or notional amount	$	383,123	$	383,123	$	348,900	$	348,900

14. F AIR V ALUE M EASUREMENT

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 available for sale investment securities, which generally include 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.

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 available for sale investments are evaluated using a broker-quote based application, including quotes from issuers.

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 tables summarize the assets at December 31, 2010 and 2009 that are recognized on the Corporation’s balance sheet using fair value measurement determined based on the differing levels of input.

Fair value of assets measured on a recurring basis for the year ended December 31, 2010:


(dollars in millions)	Total		Level 1		Level 2		Level 3
Investments:
Obligations of U.S. government & agencies	$	5.1	$	5.1	$	—	$	—
U.S. Treasury obligations		156.6		—		156.6		—
State & political subdivisions		32.3		—		32.3		—
Federal agency mortgage backed securities		49.2		—		49.2		—
Government agency mortgage backed securities		24.3		—		24.3		—
Collateralized mortgage obligations		2.1		—		2.1		—
Corporate bonds		10.6		—		10.6		—
Other equity investments		0.3		0.3		—		—
Bond – mutual funds		34.7		34.7		—		—
Other debt securities		1.8		—		1.8		—

Total assets measured on a recurring basis at fair value	$	317.0	$	40.1	$	276.9	$	—

Fair value of assets measured on a non-recurring basis at December 31, 2010:


(dollars in millions)	Total		Level 1		Level 2		Level 3
Mortgage servicing rights	$	0.7	$	—	$	0.7	$	—
Impaired loans and leases		2.5		—		2.5		—
OREO and other repossessed property		2.5		—		2.5		—

Total assets measured at fair value on a non-recurring basis	$	5.7	$	—	$	5.7	$	—

Fair value of assets measured on a recurring basis for the year ended December 31, 2009:


(dollars in millions)	Total		Level 1		Level 2		Level 3
Investments:
Obligations of U.S. government & agencies	$	85.1	$	—	$	85.1	$	—
State & political subdivisions		25.0		—		25.0		—
Federal agency mortgage backed securities		50.9		—		50.9		—
Government agency mortgage backed securities		8.7		—		8.7		—
Bond – mutual funds		37.0		37.0		—		—
Other debt securities		1.5		—		1.5		—

Total assets measured on a recurring basis at fair value	$	208.2	$	37.0	$	171.2	$	—

Fair value of assets measured on a non-recurring basis at December 31, 2009:


(dollars in millions)	Total		Level 1		Level 2		Level 3
Mortgage servicing rights	$	0.7	$	—	$	0.7	$	—
Impaired loans and leases		6.2		—		6.2		—
OREO and other repossessed property		1.0		—		1.0		—

Total assets measured at fair value on a non-recurring basis	$	7.9	$	—	$	7.9	$	—

As of December 31, 2010 and 2009, the Corporation did not have any assets whose fair value was determined using level 3 inputs. Hence, no rollforward of the level 3 assets is presented here. In addition, no transfer of assets between levels has occurred during the twelve months ended December 31, 2010 or 2009.

15. 401(K) P LAN

The Corporation has a qualified defined contribution plan for all eligible employees under which the Corporation contributes $1.00 for each $1.00 that an employee contributes up to a maximum of 3.0% of the employee’s base salary. The Corporation’s expenses for the 401(K) Plan were $570 thousand, $503 thousand and $457 thousand in 2010, 2009 and 2008, respectively.

Effective April 1, 2008, an amendment was made to the 401(K) Plan to provide for a new class of immediately vested discretionary, non-matching employer contribution. The Corporation’s expense for the non-matching discretionary contribution was $769 thousand, $589 thousand and $438 thousand, for the twelve month periods ending December 31, 2010, 2009 and 2008, respectively.

16. P ENSION AND P OSTRETIREMENT B ENEFIT P LANS

A. General Overview – The Corporation has three defined benefit pension plans, the qualified defined benefit plan (“QDBP”) which covers all employees over age 20 1/2 who meet certain service requirements and two non-qualified defined benefit pension plans (“SERP”) which are restricted to certain officers of the Corporation.

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 non-matching employer contributions mentioned previously.

The original SERP was restricted and frozen to certain officers of the Corporation and provided each participant the equivalent pension benefit on any compensation which exceeded the IRS limits and bonus deferrals made by eligible individuals.

Additionally, effective April 1, 2008, the Corporation added a new SERP which includes certain officers of the Corporation. This new SERP provides that each participant shall receive a pension benefit equal to what the QDBP would have provided at retirement, 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 and their respective QDBP benefit.

The Corporation also has a postretirement benefit plan (“PRBP”) that covers certain retired employees and a group of current employees. The PRBP was closed to new participants in 1994. In 2007, the Corporation amended the PRBP to allow for settlement of obligations to certain current and retired employees. Certain retired participant obligations were settled in 2007 and current employee obligations were settled in 2008.

The following table provides information with respect to our QDBP, SERP, and PRBP, including benefit obligations and funded status, net periodic pension costs, plan assets, cash flows, amortization information and other accounting items.

B. Actuarial Assumptions:


	QDBP						SERP ⁽¹⁾						PRBP
	2010			2009			2010			2009			2010			2009
Used to determine benefit obligations for the year ended December 31:
Discount rate		5.30	%		5.80	%		5.30	%		5.80	%		5.30	%		5.80	%
Rate of increase for future compensation		N/A			N/A			3.50	%		3.50	%		N/A			N/A
Expected long-term rate of return on plan assets		7.50	%		7.50	%		N/A			N/A			N/A			N/A

C. Changes in Benefit Obligations and Plan Assets:


	QDBP						SERP ⁽¹⁾						PRBP
(dollars in thousands)	2010			2009			2010			2009			2010			2009
Change in benefit obligations
Benefit obligation at January 1	$	30,540		$	28,453		$	4,339		$	3,772		$	930		$	937
Service cost		—			—			185			194			—			—
Interest cost		1,722			1,738			224			215			58			59
Plan participants contribution		—			—			—			—			13			24
Actuarial (gain) loss		1,852			1,708			(278	)		295			164			95
Benefits paid		(1,540	)		(1,359	)		(144	)		(137	)		(167	)		(185	)

Benefit obligation at December 31	$	32,574		$	30,540		$	4,326		$	4,339		$	998		$	930

Change in plan assets
Fair value of plan assets at January 1	$	28,745		$	26,141		$	—		$	—		$	—		$	—
Actual return (loss) on plan assets		3,190			3,963			—			—			—			—
Employer contribution		—			—			144			137			154			161
Plan participants’ contribution		—			—			—			—			13			24
Benefits paid		(1,540	)		(1,359	)		(144	)		(137	)		(167	)		(185	)

Fair value of plan assets at December 31	$	30,395		$	28,745		$	—		$	—		$	—		$	—

Funded status at year end (plan assets less benefit obligations)	$	(2,179	)	$	(1,795	)	$	(4,326	)	$	(4,339	)	$	(998	)	$	(930	)

Amounts included in the consolidated balance sheet as other assets (liabilities) & accumulated other comprehensive income including the following:
Prepaid benefit cost/(accrued liability)	$	7,524		$	7,915		$	(2,698	)	$	(2,320	)	$	(312	)	$	(434	)
Accumulated other comprehensive loss/(income)		(9,703	)		(9,710	)		(1,628	)		(2,019	)		(686	)		(496	)

Net amount recognized	$	(2,179)		$	(1,795	)	$	(4,326	)	$	(4,339	)	$	(998	)	$	(930	)

⁽¹⁾

Includes SERP I and SERP II which are combined for disclosure purposes.

D. The following tables provide the components of net periodic pension costs for the years ended December 31:

QDBP Net Periodic Pension Cost


(dollars in thousands)	2010			2009			2008
Service cost	$	—		$	—		$	337
Interest cost		1,722			1,738			1,701
Expected return on plan assets		(2,099	)		(1,905	)		(2,586	)
Amortization of prior service cost		—			—			16
Amortization of net actuarial (gain) loss		768			945			235
Curtailment		—			—			17

Net periodic pension cost	$	391		$	778		$	(280	)

SERP Net Periodic Pension Cost


(dollars in thousands)	2010		2009		2008
Service cost	$	185	$	194	$	90
Interest cost		224		215		197
Amortization of prior service cost		87		120		131
Amortization of net actuarial (gain) loss		26		26		—

Net periodic pension cost	$	522	$	555	$	418

PRBP Net Periodic Pension Cost


(dollars in thousands)	2010			2009			2008
Service cost	$	—		$	—		$	—
Interest cost		58			59			64
Settlement		—			—			153
Amortization of transition obligation (asset)		26			26			26
Amortization of prior service cost		(138	)		(138	)		(202	)
Amortization of net actuarial (gain) loss		86			77			55

Net periodic pension cost	$	32		$	24		$	96

E. Plan Assets:


	Asset Allocation Range		Percentage of QDBP Plan Assets at December 31
	Asset Allocation Range		2010			2009
Asset Category
Equity securities ⁽¹⁾		50% - 65%		63	%		60	%
Debt securities		30% - 45%		37	%		40	%
Cash reserves		1% - 5%		—			—

Total				100	%		100	%

⁽¹⁾	Includes Bryn Mawr Bank Corporation common stock in the amount of $550 thousand or 1.8% and $475 thousand or 1.7% at December 31, 2010 and 2009, respectively.

The expected rate of return on plan assets in the QDBP was selected by the Corporation after consultation with its actuary, and is based in part on long term historical rates of return and various actuarial assumptions. The discount rate was also selected by the Corporation after consultation with its actuary, and is based in part upon the current yield of a portfolio of long term investment grade securities.

The investment strategy of the QDBP is to maintain the investment ranges listed above. The target ranges are to be periodically reviewed based on the prevailing market conditions. Any modification to the current investment strategy must be ratified by the Executive Committee of the Corporation’s Board of Directors. The QDBP is allowed to retain approximately 2.5% of Bryn Mawr Bank Corporation common stock.

The Corporation’s overall investment strategy is to achieve a mix of approximately 60% investments for long-term growth and 40% for production of current income. The target allocations for the plan are 60% equity securities comprised of a number of mutual funds managed with differing objectives and styles. The plan also holds shares of the Corporation’s common stock. Fixed income obligations include corporate obligations, U.S. Treasury and Agency securities, along with fixed income mutual funds.

The following table summarizes the assets of the Pension Plan at December 31, 2010 determined by using three broad levels of inputs. See Note 14 for description of levels.

The fair value of the pension assets measured on a recurring basis as of December 31, 2010:


(dollars in thousands)	Total		Level 1		Level 2		Level 3
Cash	$	11	$	11	$	—	$	—
Obligations of U.S. Treasury		530		—		530		—
Obligations of U.S. Government and agencies		1,743		—		1,743		—
Corporate bonds		352		—		352		—
Common stocks		550		550		—		—
Equity – mutual funds		19,103		19,103		—		—
Bond – mutual funds		7,919		7,919		—		—
Money market – mutual funds		187		187		—		—

Total assets measured on a recurring basis at fair value	$	30,395	$	27,770	$	2,625	$	—

The fair value of the pension assets measured on a recurring basis as of December 31, 2009:


(dollars in thousands)	Total		Level 1		Level 2		Level 3
Obligations of U.S. Treasury	$	1,099	$	—	$	1,099	$	—
Obligations of U.S. Government and agencies		3,439		—		3,439		—
Corporate bonds		355		—		355		—
Common stocks		475		475		—		—
Equity – mutual funds		16,866		16,866		—		—
Bond – mutual funds		6,287		6,287		—		—
Money market – mutual funds		224		224		—		—

Total assets measured on a recurring basis at fair value	$	28,745	$	23,852	$	4,893	$	—

F. Cash Flows

The following benefit payments, which reflect expected future services, are expected to be paid over the next ten years:


(dollars in thousands)	QDBP		SERP		PRBP
Fiscal year ending
2011	$	1,587	$	146	$	154
2012		1,621		146		142
2013		1,685		145		130
2014		1,785		148		118
2015		1,960		195		107
2016-2020	$	10,166	$	961	$	381

G. Other Pension and Post Retirement Benefit Information

In 2005, the Corporation capped the maximum payment under the PRBP at 120% of the 2005 benefit. The cost is at the cap in 2010. The long term impact of the cap will be to make the cost trend rate assumed for 2010 immaterial.

H. Expected Contribution to be Paid in the Next Fiscal Year

Based on the status of the Corporation’s QDBP at December 31, 2010, no minimum funding requirement is anticipated for 2011. The 2011 expected contribution for the SERP is $146 thousand.

17. I NCOME T AXES

A. The components of the net deferred tax asset (liabilities) as of December 31 are as follows:


(dollars in thousands)	2010			2009
Deferred tax assets:
Loan and lease loss reserve	$	5,194		$	3,648
Other reserves		2,467			711
Net operating loss carry-forward		2,707			—
Alternative minimum tax credits		568			—
Amortizing fair value adjustments, Merger		3,539			—
Defined benefit plans		5,259			5,243

Total deferred tax assets		19,734			9,602

Deferred tax liabilities:
Other reserves		(258	)		98
QDBP		(2,634	)		(2,770	)
Originated MSRs		(1,724	)		(1,421	)
Unrealized appreciation on investment securities		(567	)		(518	)

Total deferred tax liability		(5,183	)		(4,611	)

Total net deferred tax assets	$	14,551		$	4,991

Not included in the table above are deferred tax assets related to state tax net operating losses related to our leasing subsidiary of approximately $175 thousand as of December 31, 2010, for which we have recorded a full valuation allowance. Also, as of December 31, 2010, the Corporation has a $432 thousand capital loss carry-forward, for which it has recorded a 100% valuation allowance, due to the Corporation’s limited access to instruments that would produce an offsetting capital gain.

B. The provision for income taxes consists of the following:


(dollars in thousands)	2010		2009		2008
Currently payable	$	4,055	$	5,443	$	4,413
Deferred		457		57		600

Total	$	4,512	$	5,500	$	5,013

C. Applicable income taxes differed from the amount derived by applying the statutory federal tax rate to income as follows:


(dollars in thousands)	2010			Tax Rate			2009			Tax Rate			2008			Tax Rate
Computed tax expense at statutory federal rate	$	4,790			35.0	%		$5,543			35.0	%		$5,018			35.0	%
Tax-exempt income		(444	)		(3.2	)		(300	)		(1.9	)%		(270	)		(1.9	)%
Other, net		166			1.2			257			1.6	%		265			1.9	%

Total income tax expense	$	4,512			33.0	%		$5,500			34.7	%		$5,013			35.0	%

D. Other Income Tax Information

In accordance with the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes”, the Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would more likely than not 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 percent likelihood of being realized upon settlement with the relevant tax authority. The Corporation applied these criteria to tax positions for which the statute of limitations remained open.

There were no reserves for uncertain tax positions recorded during the twelve months ended December 31, 2010, 2009 or 2008.

The Corporation is subject to income taxes in the U.S. federal jurisdiction, and in multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by tax authorities for the 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 2010.

As of December 31, 2010, the Corporation has net operating loss carry-forwards for federal income tax purposes of $ 7.7 million which are available to offset future federal taxable income through 2030. In addition, the Corporation has alternative minimum tax credits of $568 thousand, which are available to reduce future federal regular income taxes over an indefinite period.

18. S TOCK - B ASED C OMPENSATION

A. General Information

The Corporation permits the issuance of stock options, dividend equivalents, performance awards, stock appreciation rights, restricted stock and/or restricted stock units to employees and directors of the Corporation under several plans. The terms and conditions of awards under the plans are determined by the Corporation’s Compensation Committee.

Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25, 2007, the Shareholders approved the Corporation’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of 428,996 shares of the Corporation’s common stock were made available for award grants. On April 28, 2010, the Shareholders approved the Corporation’s “2010 Long Term Incentive Plan” (“2010 LTIP”) under which a total of 445,002 shares of the Corporation’s common stock were made available for award grants.

The equity awards granted under the 2007 and 2010 LTIPs were authorized to be in the form of, among others, options to purchase the Corporation’s common stock, restricted stock awards (“RSA”s) and performance stock awards (“PSA”s).

The fair value of the RSAs is based on the closing price on the day preceding the date of the grant.

The PSAs vest based on the Corporation’s total shareholder return relative to the performance of the community bank index for the respective period. The amount of PSAs earned will not exceed 100% of the PSAs awarded. The fair value of the PSAs is calculated using the Monte Carlo Simulation method.

In connection with the Merger, 21,133 fully vested options which had been granted to former FKF employees were assumed by the Corporation.

The following table summarizes the remaining shares authorized to be granted for options, RSAs and PSAs:


	Shares Authorized for:
	Options Only			Options, RSAs or PSAs
Balance, December 31, 2007		10,189			300,996
Options granted – five year vesting		—			(130,514	)
Options forfeited		—			10,000

Balance, December 31, 2008		10,189			180,482
Options granted – five year vesting		(10,189	)		(158,993	)
Options forfeited		—			17,500

Balance, December 31, 2009		—			38,989
Shares authorized – 2010 LTIP		—			445,002
Options authorized – FKF Merger		21,133			—
Options granted – fully vested		(21,133	)		—
RSAs granted – four year cliff-vesting		—			(11,920	)
PSAs granted – three year cliff-vesting		—			(60,767	)
PSAs forfeited		—			500
Unexercised options expired		—			14,080

Balance, December 31, 2010		—			425,884

B. Fair Value of Options Granted

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants issued during:


	2010			2009			2008
Expected dividend yield		3.24	%		3.1	%		2.3	%
Expected volatility of Corporation’s stock		45.7	%		29.4	%		21.9	%
Risk-free interest rate		1.5	%		3.2	%		3.4	%
Expected life in years		6.0			7.0			7.0
Weighted average fair value of options granted	$	5.42		$	4.42		$	5.27

The expected dividend yield is based on the company’s annual dividend amount as a percentage of the average stock price at the time of the grant. Expected volatility of the Corporation’s stock is based on the historic volatility of the Corporation’s stock price. The risk free interest rate is based on a yield curve of the U.S. Treasury rates ranging from one month to ten years and a period commensurate with the expected life of the option.

C. Other Stock Option Information – The following table provides information about options outstanding:


	For the Twelve Months Ended December 31,
	2010							2009							2008
	Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Shares			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding, beginning of period		1,012,896		$	19.75	$	4.41		901,814		$	19.70	$	4.31		860,750		$	18.52	$	4.04
Granted		21,133			13.35		5.42		169,182			18.27		4.42		130,514			24.27		5.27
Forfeited		(14,080	)		21.53		4.87		—			—		—		(1,250	)		22.00		4.90
Expired		—			—		—		(17,500	)		19.50		4.25		(8,750	)		20.95		4.77
Exercised		(26,239	)		10.97		3.14		(40,600	)		12.68		2.45		(79,450	)		14.22		2.87

Options outstanding, end of period		993,710		$	19.82	$	4.45		1,012,896		$	19.75	$	4.41		901,814		$	19.70	$	4.31

The following table provides information related to options as of December 31, 2010:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Options Outstanding		Remaining Contractual Life		Number Exercisable At 12/31/10		Remaining Contractual Life		Weighted Average Exercise Price
$10.36 - $10.75		6,150		7.89 yrs		6,150		7.89 yrs	$	10.36
$12.25 - $15.15		62,000		0.23 yrs		62,000		0.23 yrs	$	13.67
$16.25 - $18.91		443,152		5.05 yrs		312,886		3.67 yrs	$	18.34
$19.11 - $24.27		482,408		5.45 yrs		363,100		5.04 yrs	$	21.69

		993,710		4.98 yrs		744,136		4.08 yrs	$	19.52

The following table provides information about unvested options:


	For the Twelve Months Ended December 31,
	2010					2009					2008
	Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value		Shares			Weighted Average Grant Date Fair Value
Unvested options, beginning of period		350,076		$	4.78		237,172		$	5.15		139,584		$	5.04
Granted		21,133			5.42		169,182			4.42		130,514			5.27
Vested		(107,405	)		4.96		(56,278	)		5.22		(31,676	)		5.17
Forfeited		(14,230	)		4.87		—			—		(1,250	)		4.90

Unvested options, end of period		249,574		$	4.76		350,076		$	4.78		237,172		$	5.15

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows:


	For the Twelve Months Ended December 31,
(dollars in thousands)	2010		2009		2008
Proceeds from strike price of value of options exercised	$	288	$	514	$	1,130
Related tax benefit recognized		60		66		185

Proceeds of options exercised	$	348	$	580	$	1,315
Intrinsic value of options exercised	$	460	$	690	$	529

The following table provides information about options outstanding and exercisable options:


	As of December 31,
	2010				2009				2008
	Options Outstanding		Exercisable Options		Options Outstanding		Exercisable Options		Options Outstanding		Exercisable Options
Number		993,710		744,136		1,013,396		663,320		901,814		664,642
Weighted average exercise price	$	19.82	$	19.52	$	19.75	$	19.15	$	19.70	$	18.43
Aggregate intrinsic value	$	260,320	$	260,320	$	167,536	$	167,536	$	1,449,701	$	1,449,701
Weighted average contractual term		5.0		4.0		6.1		4.6		6.0		4.9

The unamortized stock based compensation expense at December 31, 2010 was $1.4 million which will be recognized over the next 42 months.

D. Restricted Stock Awards and Performance Stock Awards

The Corporation has granted restricted stock awards and Performance Stock Awards under the 2007 LTIP and 2010 LTIP Plans.

The compensation expense for the RSAs is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight line basis over the vesting period, accelerated for retirement eligibility. Stock restrictions are subject to alternate vesting for death and disability and retirement.

During 2010, the Corporation recognized $25 thousand of expense related to the Corporation’s RSAs. As of December 31, 2010, there was $175 thousand of unrecognized compensation cost related to RSAs. This cost will be recognized over a weighted average period of 3.5 years.

The following table details the RSAs for the twelve month periods ended December 31, 2010, 2009 and 2008:

Twelve Months Ended
December 31, 2010

Twelve Months Ended
December 31, 2009

Twelve Months Ended
December 31, 2008

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Beginning balance

—

Granted

11,920

16.78

—

Vested

—

Forfeited

—

Ending balance

11,920

16.78

—

The compensation expense for PSAs is measured based on the grant date fair value as calculated using the Monte Carlo Simulation. The Simulation used various assumptions that include expected volatility of 54.78%, a risk free rate of return of 0.742% and a correlation co-efficient of 0.5602%

The Corporation recognized $87 thousand of expense related to the PSAs in 2010. As of December 31, 2010 there was $499 thousand of unrecognized compensation cost related to PSAs. This cost will be recognized over a weighted average period of 2.6 years.

The following table details the PSAs for the twelve month periods ending December 31, 2010, 2009 and 2008:

Twelve Months Ended
December 31, 2010

Twelve Months Ended
December 31, 2009

Twelve Months Ended
December 31, 2008

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Number
of
Shares

Weighted
Average
Grant Date
Fair Value

Beginning balance

—

Granted

60,767

9.64

—

Vested

—

Forfeited

(500

)

9.64

—

Ending balance

60,267

9.64

—

19. E ARNINGS P ER S HARE

The calculation of basic earnings per share and diluted earnings per share is presented below:


(dollars in thousands, except per share data)	Year Ended December 31,
(dollars in thousands, except per share data)	2010		2009		2008
Numerator – Net income available to common shareholders	$	9,174	$	10,337	$	9,325

Denominator for basic earnings per share – Weighted average shares outstanding		10,765,657		8,732,004		8,566,938
Effect of dilutive potential common shares		12,312		16,719		34,233

Denominator for diluted earnings per share – Adjusted weighted average shares outstanding		10,777,969		8,748,723		8,601,171

Basic earnings per share	$	0.85	$	1.18	$	1.09
Diluted earnings per share	$	0.85	$	1.18	$	1.08
Antidulitive shares excluded from computation of average dilutive earnings per share		941,079		806,396		321,812

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. See Note 1-P – Summary of Significant Accounting Policies: Earnings Per Common Share for a discussion on the calculation of earnings per share.

20. O THER O PERATING I NCOME

Components of other operating income for the indicated years ended December 31 include:


(dollars in thousands)	2010		2009		2008
Cash management	$	77	$	306	$	679
Other		841		714		308
Insurance commissions		386		394		365
Safe deposit rental income		365		334		318
Other investment income		162		67		476
Interest rate floor income		—		—		268
Rent		167		222		179
Title insurance		207		355		52
Commissions and fees		396		372		340

Other operating income	$	2,601	$	2,764	$	2,985

21. O THER O PERATING E XPENSE

Components of other operating expense for the indicated years ended December 31 include:


(dollars in thousands)	2010		2009		2008
Other	$	2,533	$	1,925	$	1,750
Temporary help & recruiting		570		377		430
Loan processing and closing		1,029		1,046		568
Computer processing		974		508		525
Other taxes		698		650		587
Travel and entertainment		371		323		400
Postage		370		351		350
Director fees		322		312		333
Telephone		455		371		342
Stationary & supplies		334		276		272

Other operating expense	$	7,656	$	6,139	$	5,557

22. R ELATED P ARTY T RANSACTIONS

In the ordinary course of business, the Bank granted loans to principal officers, directors and their affiliates. Loan activity during 2010 and 2009 was as follows:

Following is a summary of these transactions:


(dollars in thousands)	2010			2009
Balance, January 1	$	4,472		$	3,600
Additions		2,232			1,004
Amounts collected		(587	)		(132	)

Balance, December 31	$	6,117		$	4,472

Related party deposits amounted to $917 thousand and $728 thousand at December 31, 2010 and 2009, respectively.

23. F INANCIAL I NSTRUMENTS WITH O FF -B ALANCE S HEET R ISK , C ONTINGENCIES AND C ONCENTRATION OF C REDIT R ISK

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. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

The Corporation’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument of commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.

Commitments to extend credit, which include unused lines of credit and unfunded commitments to originate loans, are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon, and the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit at December 31, 2010 were $358.7 million. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on a credit evaluation of the counterparty. Collateral varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credits are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in extending loan facilities to customers. The collateral varies, but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and residential real estate for those commitments for which collateral is deemed necessary. The Corporation’s obligation under standby letters of credit as of December 31, 2010 amounted to $27.2 million. There were no outstanding bankers’ acceptances as of December 31, 2010.

Contingencies

Legal Matters

In the ordinary course of business, the Corporation is subject to litigation, claims, and assessments that involve claims for monetary relief. Some of these are covered by insurance. Based upon information presently available to the Corporation and its counsel, it is the Corporation’s opinion that any legal and financial responsibility arising from such claims will not have a material, adverse effect on its results of operations, financial condition or capital.

Indemnifications

In general, the Corporation does not sell loans with recourse, except to the extent that it arises from standard loan-sale contract provisions. These provisions cover violations of representations and warranties and, under certain circumstances, first payment default by borrowers. These indemnifications may include the repurchase of loans by the Corporation, and are considered customary provisions in the secondary market for conforming mortgage loan sales. For the twelve months ended December 31, 2010, 2009 and 2008, the Corporation recorded an immaterial amount of loan repurchases resulting from these provisions.

Concentrations of Credit Risk

The Corporation has a material portion of its loans in real estate related loans. A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in the Corporation’s primary trade area which includes portions of Delaware, Chester, Montgomery and Philadelphia counties in Southeastern Pennsylvania. The Corporation is aware of this concentration and attempts to mitigate this risk to the extent possible in many ways, including the underwriting and assessment of borrower’s capacity to repay. See Note 5 – Loans and Leases for additional information.

At December 31, 2010, the total first lien interest only residential loans of $42.7 million included $37.1 million of adjustable rate loans that convert to principal and interest payments between five and ten years after inception and $5.7 million of fixed rate loans that continue as interest only loans until reaching maturity. At December 31, 2010, the balance sheet also included $327 thousand one to four family residential loans secured by junior lien positions that are interest only loans. These fixed rate loans will remain as interest only loans until maturity.

As of December 31, 2010, the Corporation had no loans sold with recourse outstanding.

24. D IVIDEND R ESTRICTIONS

The Bank is subject to the Pennsylvania Banking Code of 1965 (the “Code”), as amended, and is restricted in the amount of dividends that can be paid to its shareholder, the Corporation. The Code restricts the payment of dividends by the Bank to the amount of its net income during the current calendar year and the retained net income of the prior two calendar years, unless the dividend has been approved by the Board of Governors of the Federal Reserve System. The total was $10.4 million as of December 31, 2010. However, the amount of dividends paid by the Bank cannot reduce capital levels below levels that would cause the Bank to be less than adequately capitalized as detailed in Note 25 – Regulatory Capital Requirements.

25. R EGULATORY C APITAL R EQUIREMENTS

A. General Regulatory Capital Information

Both the Corporation and the Bank are subject to various regulatory capital requirements, administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if taken, could have a direct material effect on the Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

B. S-3 Shelf Registration Statement and Offerings Thereunder

On May 18, 2010, through a registered direct stock offering under the Shelf Registration Statement, the Corporation issued 1,548,167 common shares, at a price of $17.00 per share, raising $24.6 million after deducting placement agent’s fees and other offering expenses of $1.7 million.

On July 20, 2009, the Corporation filed with the Securities and Exchange Commission a prospectus supplement in order to register 850,000 common shares of its stock under the Shelf Registration Statement in connection with a Dividend Reinvestment and Stock Purchase Plan (the “Plan”). The Plan allows for the grant of a request for waiver (“RFW”) above the Plan maximum investment of $120 thousand per account per year. An RFW is granted based on a variety of factors, including the Corporation’s current and projected capital needs, prevailing market prices of the Corporation’s common stock and general economic and market conditions.

The Plan is intended to allow both existing shareholders and new investors to easily and conveniently increase their investment in the Corporation without incurring many of the

fees and commissions normally associated with brokerage transactions. For the twelve months ended December 31, 2010 and 2009, the Corporation issued 119,175 and 81,641 shares, respectively, and raised $2.0 million and $1.2 million, respectively, through the Plan.

C. Private Transactions in Securities

In April 2009, the Bank raised $7.5 million in subordinated debt which qualified as Tier II capital. This subordinated debt bears interest at a rate per annum equal to the ninety day LIBOR rate plus 5.75% and is adjusted quarterly. Interest is payable quarterly and principal is due on June 15, 2019. The rate of interest is capped at 10.0% per annum during the first five years of the term.

In April 2009, in accordance with and reliance on the exemption provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), the Corporation also 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 NASDAQ 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 $2.5 million. 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 constituted, at the time, 1.7% of the outstanding shares of the Corporation’s common stock, as determined immediately after the closing of the sale.

D. Shares Issued in Merger

In connection with the Merger, the Corporation issued 1,630,053 common shares, valued at $26.5 million, to former shareholders of FKF. These shares were registered on an S-4 registration statement filed by the Corporation in January 2010.

E. Regulatory Capital Ratios

As set forth in the following table, quantitative measures have been established to ensure capital adequacy ratios required of both the Corporation and the Bank. Both the Corporation’s and the Bank’s Tier II capital ratios are calculated by adding back a portion of the loan loss reserve to the Tier I capital. The Corporation believes that as of December 31, 2010 and 2009, the Corporation and the Bank had met all capital adequacy requirements to which they were subject. Federal banking regulators have defined specific capital categories, and categories range from a best of “well capitalized” to a worst of “critically under capitalized.” Both the Corporation and the Bank were classified as “well capitalized” as of December 31, 2010 and 2009.

See Note 16 – Pension and Postretirement Benefit Plans for certain information relating to the accumulated other comprehensive income that is a reduction to capital and related regulatory capital impact.

The Corporation’s and the Bank’s actual capital amounts and ratios as of December 31, 2010 and 2009 are presented in the following table:


	Actual					Minimum to be Well Capitalized
(dollars in thousands)	Amount		Ratio			Amount		Ratio
December 31, 2010
Total (Tier II) Capital to Risk Weighted Assets:
Corporation	$	186,657		13.71	%	$	136,142		10	%
Bank		182,587		13.47	%		135,556		10	%
Tier I Capital to Risk Weighted Assets:
Corporation		153,806		11.30	%		81,685		6	%
Bank		149,742		11.05	%		81,334		6	%
Tier I Capital to Quarterly Average Assets:
Corporation		153,806		8.85	%		86,926		5	%
Bank		149,742		8.62	%		86,828		5	%
December 31, 2009
Total (Tier II) Capital to Risk Weighted Assets:
Corporation	$	132,226		12.53	%	$	105,533		10	%
Bank		128,185		12.20	%		105,092		10	%
Tier I Capital to Risk Weighted Assets:
Corporation		99,277		9.41	%		63,320		6	%
Bank		95,236		9.06	%		63,055		6	%
Tier I Capital to Quarterly Average Assets:
Corporation		99,277		8.35	%		59,478		5	%
Bank		95,236		8.03	%		59,327		5	%

26. S ELECTED Q UARTERLY F INANCIAL D ATA (U NAUDITED )


	Quarters Ending 2010
(dollars in thousands, except per share data)	3/31		6/30		9/30			12/31
Interest income	$	13,894	$	13,824	$	18,473		$	18,605
Interest expense		2,777		2,773		3,691			3,405

Net interest income	$	11,117	$	11,051	$	14,782		$	15,200
Provision for loan and lease losses		3,113		994		4,236			1,511
Income before income taxes		3,410		3,844		(1,766	)		8,198
Tax expense		1,187		1,438		(746	)		2,633

Net income.	$	2,223	$	2,406	$	(1,020	)	$	5,565

Basic earnings per common share	$	0.25	$	0.25	$	(0.08	)	$	0.46
Diluted earnings per common share	$	0.25	$	0.25	$	(0.08	)	$	0.46
Dividend declared	$	0.14	$	0.14	$	0.14		$	0.14


	Quarters Ending 2009
(dollars in thousands, except per share data)	3/31		6/30		9/30		12/31
Interest income	$	14,293	$	14,222	$	14,186	$	14,191
Interest expense		4,667		4,310		3,856		3,266

Net interest income		9,626		9,912		10,330		10,925
Provision for loan and lease losses		1,591		1,686		2,305		1,302
Income before income taxes		4,052		3,740		3,979		4,066
Tax expense		1,420		1,291		1,360		1,429

Net income.	$	2,632	$	2,449	$	2,619	$	2,637

Basic earnings per common share	$	0.31	$	0.28	$	0.30	$	0.30
Diluted earnings per common share	$	0.31	$	0.28	$	0.30	$	0.30
Dividend declared	$	0.14	$	0.14	$	0.14	$	0.14

Net interest income, for the three month periods ended September 30, and December 31, 2010 increased significantly as compared to the three month periods ended March 31, and June 30, 2010, largely due to the increase in average interest-earning assets that resulted from the Merger. The increases in provision for loan and lease losses for the quarters ended March 31, and September 30, 2010, as compared to the other two quarters of 2010 were related to charge-offs of $3.2 million in each of the two quarters ended March 31, and September 30, 2010, involving two commercial loan relationships. Net income for the three months ended September 30, 2010, as compared to each of the two prior three month periods, decreased sharply as the result of the $3.9 million increase and $3.7 million increase in merger-related expenses, as compared to the three month periods ended March 31, 2010 and June 30, 2010, respectively. Net income for the three months ended December 31, 2010 increased significantly from the prior three month period as a result of the $3.9 million decrease in merger-related expenses and the $2.7 million decrease in provision.

27. C ONDENSED F INANCIAL S TATEMENTS

The condensed balance sheet of the Corporation (parent company only) as of December 31, 2010 and 2009 is as follows:

A. Condensed Balance Sheets


(dollars in thousands)	2010			2009
Assets:
Cash	$	4,208		$	3,676
Investment securities		256			—
Investments in subsidiaries, at equity in net assets		169,296			100,103
Premises and equipment, net		2,877			2,975
Goodwill		457			—
Other assets		1,910			1,311

Total assets	$	179,004		$	108,065

Liabilities and shareholders’ equity:
Borrowings – mortgage payable	$	2,001		$	2,062
Jr. subordinated debentures		13,268			—
Accrued taxes payable		41			19
Other liabilities		2,276			2,048

Total liabilities	$	17,586		$	4,129

Common stock, par value $1, authorized 100,000,000 shares issued 15,109,718 shares and 11,786,084 shares as of December 31, 2010 and 2009, respectively and outstanding 12,195,240 shares and 8,866,420 shares as of December 31, 2010 and 2009, respectively	$	15,110		$	11,786
Paid-in capital in excess of par value		68,398			17,705
Accumulated other comprehensive income, net of deferred income taxes		(6,757	)		(6,913	)
Retained earnings		114,548			111,290
Less common stock in treasury, at cost - 2,914,478 shares and 2,919,664 shares as of December 31, 2010 and 2009		(29,881	)		(29,932	)

Total shareholders’ equity	$	161,418		$	103,936

Total liabilities and shareholders’ equity	$	179,004		$	108,065

The condensed income statement of the Corporation (parent company only) as of December 31 is as follows:

B. Condensed Statements of Income


(dollars in thousands)	2010			2009		2008
Dividends from The Bryn Mawr Trust Company	$	4,900		$	1,204	$	11,368
Interest and other income		1,569			1,012		933

Total operating income		6,469			2,216		12,301
Expenses		1,711			918		831

Income before equity in undistributed income of subsidiaries		4,758			1,298		11,470
Equity in undistributed income of subsidiaries		4,368			9,071		(2,111	)

Income before income taxes		9,126			10,369		9,359
Income tax (benefit) expense		(48	)		32		34

Net income	$	9,174		$	10,337	$	9,325

The condensed statement of cash flows (parent company only) as of December 31 is as follows:

C. Condensed Statements of Cash Flows


(dollars in thousands)	2010			2009			2008
Operating activities:
Net Income	$	9,174		$	10,337		$	9,325
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of subsidiaries		(4,368	)		(9,071	)		2,111
Depreciation and amortization		102			98			98
Net gain on sale of available for sale securities		(50	)		—			—
Net accretion of fair value adjustments		(78	)		—			—
Other, net		570			227			395

Net cash provided by operating activities		5,350			1,591			11,929

Investing Activities:
Proceeds from sale of available for sale securities		450			—			—
Acquisition of FKF, net of cash acquired		(4,565	)		—			—
Investment in subsidiaries		(21,761	)		660			(10,632	)

Net cash (used) provided by investing activities		(25,876	)		660			(10,632	)

Financing activities:
Dividends paid		(5,916	)		(4,892	)		(4,625	)
Mortgage payable		(62	)		2,062			—
Repurchase of treasury stock		—			(42	)		(361	)
Proceeds from issuance of common stock		26,688			3,660			100
Tax benefit on exercise of stock option		60			66			185
Proceeds from exercise of stock options		288			514			1,130

Net cash provided (used) by financing activities		21,058			1,368			(3,571	)

Change in cash and cash equivalents		532			3,619			(2,274	)
Cash and cash equivalents at beginning of year		3,676			57			2,331

Cash and cash equivalents at end of year	$	4,208		$	3,676		$	57

These statements should be read in conjunction with the Notes to the Consolidated Financial Statements.

28. S EGMENT I NFORMATION

FASB Codification 280 – “Segment Reporting” identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Executive Officer, our Chief Operating Decision Maker, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this Codification to the results of its operations.

The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leases) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including service charges on deposit accounts; cash sweep fees, overdraft fees, BOLI income and interchange revenue associated with its Visa Check Card offering.

The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware and Lau Associates are included in the Wealth Management Segment of the Corporation since it has similar economic characteristics, products and services to those of the Wealth Management Segment of the Corporation.

The Mortgage Banking segment includes the origination of residential mortgage loans and the sale and servicing of such loans to the secondary mortgage market. This segment also includes the Corporation’s title insurance and joint mortgage origination activity with a real estate brokerage organization.

The “All Other” segment includes activities and expenses that do not fit into the other three segments including general corporate activities such as shareholder relations costs, NASDAQ fees and the annual meeting of shareholders. This segment also includes revenues and expenses from the Corporation’s insurance agency activities.

The accounting policies of the Corporation are applied by segment in the following tables. The segments are presented on a pre-tax basis which is the way the Corporation evaluates business results.

The Banking, Wealth Management and Mortgage Banking segments consolidate and roll-up through the Bank.

Segment information for the years ended December 31:


	2010															2009															2008
(dollars in thousands)	Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consoli- dated			Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consoli- dated			Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consoli- dated
Net interest income (expense)	$	52,742		$	9		$	—		$	(601	)	$	52,150		$	40,834		$	12		$	28		$	(81	)	$	40,793		$	37,069		$	—		$	57		$	12		$	37,138
Less loan loss provision		9,854			—			—			—			9,854			6,884			—			—			—			6,884			5,596			—			—			—			5,596

Net interest income (expense) after loan loss provision		42,888			9			—			(601	)		42,296			33,950			12			28			(81	)		33,909			31,473			—			57			12			31,542

Other income:
Fees for wealth management services		—			15,498			—			1			15,499			—			14,178			—			—			14,178			—			13,842			—			—			13,842
Service charges on deposit accounts		2,307			—			—			—			2,307			1,951			—			—			—			1,951			1,685			—			—			—			1,685
Loan servicing and other fees		190			—			1,436			—			1,626			217			—			1,170			—			1,387			259			—			935			—			1,194
Net gain on sale of loans		—			—			4,718			—			4,718			—			—			6,012			—			6,012			—			—			1,275			—			1,275
Net loss on sale of real estate		(114	)		—			—			—			(114	)		—			—			—			—			—			—			—			—			—			—
Other operating income		4,761			(25	)		237			366			5,339			4,306			55			411			170			4,942			3,137			13			150			176			3,476

Total other income		7,144			15,473			6,391			367			29,375			6,474			14,233			7,593			170			28,470			5,081			13,855			2,360			176			21,472
Other expenses:
Salaries & wages		15,341			7,025			1,693			770			24,829			12,774			6,697			2,184			620			22,275			12,156			5,439			864			530			18,989
Employee benefits		4,413			1,560			103			(92	)		5,984			4,113			1,454			85			(74	)		5,578			2,918			1,080			118			56			4,172
Occupancy & equipment		6,287			752			177			(181	)		7,035			5,200			848			197			(201	)		6,044			4,791			625			251			(178	)		5,489
Due diligence and merger-related expenses		5,714			—			—			—			5,714			616			—			—			—			616			156			—			—			—			156
Other operating expenses		11,890			1,700			1,642			(809	)		14,423			9,563			1,547			1,435			(516	)		12,029			7,439			1,417			1,422			(408	)		8,870

Total other expenses		43,645			11,037			3,615			(312	)		57,985			32,266			10,546			3,901			(171	)		46,542			27,460			8,561			2,655			—			38,676

Segment profit (loss)		6,387			4,445			2,776			78			13,686			8,159			3,699			3,720			259			15,837			9,094			5,294			(238	)		188			14,338
Intersegment (revenues) expenses ⁽¹⁾		1,357			96			40			(1,493	)		—			885			187			40			(1,112	)		—			818			181			40			(1,039	)		—

Pre-tax segment profit after eliminations	$	7,744		$	4,541		$	2,816		$	(1,415	)	$	13,686		$	9,044		$	3,886		$	3,760		$	(853	)	$	15,837		$	9,912		$	5,475		$	(198	)	$	(851	)	$	14,338

% of segment (loss) pre-tax profit (loss) after eliminations		56.6	%		33.2	%		20.5	%		(10.3	)%		100	%		57.1	%		24.5	%		23.7	%		(5.3	)%		100.0	%		69.1	%		38.2	%		(1.4	)%		(5.9	)%		100	%

Segment assets (in millions)	$	1,704.7		$	14.9		$	6.6		$	5.6		$	1,731.8		$	1,216.9		$	12.9		$	4.8		$	4.2		$	1,238.8		$	1,132.8		$	11.5		$	2.9		$	4.1		$	1,151.3

⁽¹⁾

Intersegment revenues consist of rental payments, insurance commissions and management fees.

Other Segment Data


	As of December 31,
	2010		2009		2008
Wealth Management Segment:
(dollars in millions)
Assets under management, administration, supervision and brokerage	$	3,412.9	$	2,871.2	$	2,146.4

	As of December 31,
	2010		2009		2008
Mortgage Banking Segment:
(dollars in thousands)
Mortgage Loans Serviced for Others	$	605,485	$	514,875	$	350,199
Mortgage Servicing Rights		4,925		4,059		2,205

29. S UBSEQUENT E VENTS

On February 18, 2011, the Corporation entered into a definitive stock purchase agreement (the “Agreement”) with Hershey Trust Company (“HTC”) pursuant to which the Corporation will acquire the private wealth management business of HTC (the “PWMG Business”) for a total purchase price of $18.25 million, of which $8.15 million is to be paid at closing in cash, $6.5 million is to be issued at closing in unregistered shares of the Corporation’s common stock, and the final $3.6 million is to be placed in escrow and paid in cash installments on the 6-, 12- and 18-month anniversaries of the date of signing, subject to certain post-closing contingencies relating to the assets under management of the PWMG Business.

Pursuant to the Agreement, substantially all of the assets used to conduct the PWMG Business will be assigned by HTC to a newly formed Bank and Trust Company (the “Acquired Company”) that will be a wholly-owned subsidiary of an affiliate of HTC prior to the closing of the transaction. All issued and outstanding shares of common stock of the Acquired Company will, upon closing, be acquired by the Corporation, and immediately after closing, the Acquired Company will be merged with and into the Bank.

The acquisition is expected to close in the second quarter of 2011, subject to certain conditions and regulatory approvals.

Price Range of Shares

BRYN MAWR BANK CORPORATION

(NASDAQ: BMTC)


	2010						2009
	High-Low Quotations						High-Low Quotations
	High Bid		Low Bid		Dividend Declared		High Bid		Low Bid		Dividend Declared
Quarter
1st	$	18.94	$	14.00	$	0.14	$	20.98	$	12.50	$	0.14
2nd	$	19.74	$	15.00	$	0.14	$	20.50	$	15.52	$	0.14
3rd	$	18.64	$	16.00	$	0.14	$	19.03	$	16.00	$	0.14
4th	$	17.80	$	15.13	$	0.15	$	18.24	$	13.01	$	0.14

The approximate number of holders of record of common stock as of December 31, 2010 was 623.

The shares are traded on the NASDAQ Stock Market under the symbol BMTC. The price information was obtained from NASDAQ.

Performance Graph

Comparison of Cumulative Total Return of One or More Companies, Peer Groups,

Industry Indexes and/or Broad Market

Bryn Mawr Bank Corporation

LOGO

Source : SNL Financial LC, Charlottesville, VA

www.snl.com

LOGO

Exhibit 21.1

List of Subsidiaries

Subsidiaries of the Corporation:


Name	State of Incorporation	Status
The Bryn Mawr Trust Company	Pennsylvania	Active
Bryn Mawr Financial Services, Inc.	Pennsylvania	Inactive
Bryn Mawr Advisors, Inc.	Pennsylvania	Inactive
Bryn Mawr Brokerage Co., Inc.	Pennsylvania	Inactive
Joseph W. Roskos Co., Inc.	Pennsylvania	Inactive
Bryn Mawr Asset Management, Inc.	Pennsylvania	Inactive
Lau Associates LLC	Delaware	Active
The Bryn Mawr Trust Company of Delaware	Delaware	Active
FKF Capital Trust I	Delaware	Active

Subsidiaries of the Bank:


Name	State of Incorporation	Status
Insurance Counsellors of Bryn Mawr, Inc.	Pennsylvania	Active
BMT Settlement Services, Inc.	Pennsylvania	Active
BMT Mortgage Services, Inc.	Pennsylvania	Active
BMT Leasing, Inc.	Delaware	Active

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Bryn Mawr Bank Corporation:

We consent to the incorporation by reference in the registration statements (Nos. 333-144280, 333-143445, 333-119958, 333-76244, 333-57415, 033-61881, and 333-168072) on Forms S-8, registration statement (No. 333-163874) on Form S-4, and registration statement (No. 333-159588) on Form S-3 of Bryn Mawr Bank Corporation (the Corporation) of our reports dated March 16, 2011, with respect to the consolidated balance sheets of Bryn Mawr Bank Corporation and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows, changes in shareholders’ equity, and comprehensive income for each of the years in the three-year period ended December 31, 2010, and the effectiveness of internal control over financial reporting as of December 31, 2010, which reports appear in the December 31, 2010 annual report on Form 10-K of the Corporation.

KPMG LLP

Philadelphia, Pennsylvania

March 16, 2011

Exhibit 31.1

CERTIFICATIONS

I, Frederick C. Peters II, certify that:

I have reviewed this Year End report on Form 10-K 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 officers 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 officers 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 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: March 16, 2011				/s/ Frederick C. Peters II
				Frederick C. Peters II, Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, J. Duncan Smith, certify that:

I have reviewed this Year End report on Form 10-K of Bryn Mawr Bank Corporation;

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 the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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: March 16, 2011				/s/ J. Duncan Smith
				J. Duncan Smith, Treasurer and Chief 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 Year End Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-K for the period ending December 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 Company, 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 Company.

/s/ Frederick C. Peters II

Frederick C. Peters II

Chief Executive Officer

Date: March 16, 2011

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 Year End Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-K for the period ending December 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Duncan Smith, CPA, Treasurer and Chief Financial Officer of the Company, 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 Company.

/s/ J. Duncan Smith

J. Duncan Smith

Treasurer and Chief Financial Officer

Date: March 16, 2011

Date of Grant:

August 20, 2010

Name of

Grantee:

Number of

Shares: