10-K

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, 2009

¨ 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 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 $159,518,356 on June 30, 2009.

As of March 11, 2010, there were 8,900,051 shares of common stock outstanding.

Documents Incorporated by Reference: Portions of Registrant’s Annual Report to Shareholders for the year ended December 31, 2009 (“2009 Annual Report”), as indicated, are incorporated by reference in Parts I, II and IV hereof. Portions of the Definitive Proxy Statement of Registrant filed with respect to the Registrant’s Annual Meeting of Shareholders to be held on April 28, 2010 filed with the Commission pursuant to Regulation 14A (“2010 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	10
1B.	Unresolved Staff Comments	17
2.	Properties	18
3.	Legal Proceedings	18
4.	Submission of Matters to a Vote of Security Holders	18
	Part II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
6.	Selected Financial Data	20
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	20
7A.	Quantitative and Qualitative Disclosures about Market Risk	20
8.	Financial Statements and Supplementary Data	21
9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	21
9A.	Controls and Procedures	21
9B.	Other Information	21
	Part III
10.	Directors and Executive Officers of the Registrant	21
11.	Executive Compensation	23
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
13.	Certain Relationships and Related Transactions	23
14.	Principal Accountant Fees and Services	23
	Part IV
15.	Exhibits and Financial Statement Schedules	23

UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 1, 2009.

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;

• 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;

• 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 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, PA, a western suburb of Philadelphia, PA. 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 nine full-service branches and seven Life Care Community offices throughout Montgomery, Delaware and Chester counties. The Corporation trades on the NASDAQ Global Market (“NASDAQ GM”) 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 regulatory 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 by logging onto the Corporation’s website at www.bmtc.com and clicking on “About Us,” followed by “Investor Relations.”

OPERATIONS

• Bryn Mawr Bank Corporation

The Corporation has no active staff as of December 31, 2009. 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 GM, the SEC and other regulatory agencies.

A complete list of directors and executive officers of the Corporation and the Bank, as of March 1, 2010 is incorporated by reference to the last page of the Corporation’s 2009 Annual Report to Shareholders (“2009 Annual Report”).

The Corporation and its subsidiaries engaged in numerous transactions in 2009 including a private placement of securities, the issuance of subordinated debt to a private investor, the registration of securities on a “shelf” registration statement, and the establishment of a Dividend Reinvestment and Stock Purchase Plan with a Request for Waiver Program. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital” at page 18 of the 2009 Annual Report for a more complete discussion of these transactions.

The Corporation also entered into an Agreement and Plan of Merger (“Agreement”) on November 3, 2009 with First Keystone Financial, Inc. pursuant to which, subject to certain conditions, First Keystone Financial, Inc. will merge with and into the Corporation and its wholly owned subsidiary, First Keystone Bank, will merge with and into the Bank in a two-step merger (collectively, the “Transaction”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – First Keystone Financial, Inc.” beginning at page 2 of the 2009 Annual Report for additional information about the Agreement and the Transaction. The summaries of the Agreement and Transaction set forth above and in the 2009 Annual Report are qualified in their entirety by the complete text of the Agreement which was attached as Exhibit 2.1 to the Corporation’s Form 8-K filed with the SEC on November 4, 2009.

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• 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 making 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, 2009, the market value of assets under management, administration, supervision and asset management/ brokerage by the Bank’s Wealth Management Division was $2.871 billion.

The Bank has expanded its branch footprint by establishing de-novo branch office in Exton, PA in April 2005, relocating the former Wynnewood, PA office to Ardmore, PA in January 2007, and opening the West Chester regional branch office in West Chester, PA on January 2, 2009. The Bank presently has 9 full-service branch offices, plus 7 Life Care Community locations. See the section titled “COMPETITION” later in this item for additional information.

In 2009, BMT Asset Management, a department of the Wealth Management Division of the Bank, was established through the hiring of experienced asset managers in the latter part of June 2009 and has generated $86.6 million in assets under management at December 31, 2009.

At December 31, 2009, the Corporation and its subsidiaries had 254 full time and 26 part time employees, equaling 267 full time equivalent staff.

OTHER OPERATING SUBSIDIARIES OF THE BANK

The Bank has four operating 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’ 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, 2009.

• 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 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.

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• 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 equipment cost of approximately $18 thousand per lease. BMTL is a wholly owned subsidiary of the Bank and had 8 employees as of December 31, 2009. BMT Leasing employees are included in the Corporation’s employment numbers above.

The Corporation has two operating 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 employed 10 employees as of December 31, 2009. Lau Associates employees 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, 2009. 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.

SOURCES OF THE CORPORATION’S REVENUE

• Continuing Operations

The following table shows the percentage of consolidated revenues.

	2009				2008				2007
Interest income on loans, leases and investments	$	56,892	66.6	%	$	57,934	73.0	%	$	54,218	71.3	%
Other banking fees including insurance		6,644	7.8	%		5,257	6.6	%		5,795	7.6	%
Wealth management segment		14,233	16.7	%		13,855	17.4	%		13,502	17.8	%
Mortgage banking segment		7,593	8.9	%		2,360	3.0	%		2,484	3.3	%
Total revenues from continuing operations	$	85,362	100.0	%	$	79,406	100.0	%	$	75,999	100.0	%

See Note 28, Segment Information, in the Notes to the Consolidated Financial Statements located in the 2009 Annual Report for additional information. The Corporation had no discontinued operations in 2007, 2008 or 2009.

STATISTICAL INFORMATION

The statistical information required in this Part I Item I is incorporated by reference to the information appearing in the 2009 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.

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• Financial Information About Segments

The financial information concerning the Corporation’s business segments is incorporated by reference to the MD&A of the 2009 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 nine 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, competitive rates and fees. However, there are several negative factors relative to the Corporation’s ability to compete with large institutions such as its lack 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 Lau Associates in July 2008, and the formation of BMTC-DE, the Corporation has expanded into the State of Delaware where it competes for wealth management business. Additionally, BMTC 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 were 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 were 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

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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 2009 net income plus its net retained earnings for the previous two years. As of December 31, 2009, this amount was approximately $15.6 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

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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. The FDIC places a depository institution in one of four risk categories determined by reference to its capital levels and supervisory ratings. In addition, in the case of those institutions in the lowest risk category, the FDIC further determines its assessment rates based on certain specified financial ratios. Pursuant to the Federal Deposit Insurance Act, the FDIC has authority and the responsibility to establish deposit insurance assessments at rates sufficient to maintain the designated reserve ratio of the Deposit Insurance Fund at a level between 1.15% and 1.5% of estimated insured deposits, and to take action to restore the designated reserve ratio to at least 1.15% of estimated insured deposits when it falls below that level. As of June 30, 2008, the designated reserve ratio fell below 1.15%, to 1.01%. On October 7, 2008, the FDIC established a restoration plan which is has updated periodically since then to respond to deteriorating economic conditions. Conditions in the banking industry have continued to deteriorate through 2008 and 2009. According to the FDIC’s Quarterly Banking Profile for the Fourth Quarter 2009, as of December 30, 2009 the designated reserve ratio had fallen to (0.39%), down from (0.16%) on September 30, 2009, and 0.36% as of December 31, 2008. The FDIC reports that the December 31, 2009 reserve ratio is the lowest on record for a combined bank and thrift insurance fund. In response to the declining reserve ratio, the FDIC took a series of extraordinary deposit insurance assessment actions during 2009.

Effective for the second quarter of 2009, the FDIC adopted changes to its base and risk-based deposit insurance rates. Pursuant to the new rules, a bank’s annual assessment base rates were as follows, depending on the bank’s risk category:

	Risk Category
	I		II	III	IV
	Minimum	Maximum
Annual Rates (in basis points)	12	16	22	32	45

The base assessment rate can be adjusted downward based on a bank’s unsecured debt and level of excess capital above the well capitalized threshold, or upward based on a bank’s secured liabilities including Federal Home Loan Bank advances and repurchase agreements, so that the total risk-based assessment rates will range as follows, depending on a bank’s risk category:

	Risk Category
	I	II	III	IV
Initial base assessment rate	12 to 16	22	32	45
Unsecured debt adjustment	(5) to 0	(5) to 0	(5) to 0	(5) to 0
Secured liability adjustment	0 to 8	0 to 11	0 to 16	0 to 22.5
Brokered deposit adjustment	—	0 to 10	0 to 10	0 to 10
Total base assessment rate	7 to 24	17 to 43	27 to 58	40 to 77.5

On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment on each insured depository institution’s assets minus Tier 1 capital as of June 30, 2009. The amount of the special assessment for any institution did not exceed 10 basis points times the institution’s assessment base for the second quarter 2009. The assessment, in the amount of $547 thousand was accrued at June 30, 2009 and paid on December 30, 2009 by the Bank.

As of December 31, 2009 the Bank had an assessment rate of 12.2 basis points. The Bank’s estimated 2010 FDIC insurance cost projection is approximately $1.3 million excluding any impact of the FKF merger.

On September 29, 2009, the FDIC adopted a uniform three-basis point increase in the assessment rates shown above, effective on January 1, 2011, and on November 12, 2009, the FDIC adopted a final rule to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009, and for all of 2010, 2011, and 2012. The prepaid assessment was collected on December 30, 2009, along with each institution’s regular quarterly risk-based

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deposit insurance assessment for the third quarter of 2009. For purposes of calculating the prepaid assessment, each institution’s assessment rate was its total base assessment rate in effect on September 30, 2009. In calculating the prepayment attributable to 2011 and thereafter, it is calculated using the September 29, 2009 increase in 2011 base assessment rates. In addition, future deposit growth was reflected in the prepayment by assuming that an institution’s third quarter 2009 assessment base would be increased quarterly at a 5 percent annual growth rate through the end of 2012. The FDIC will begin to draw down an institution’s prepaid assessments on March 30, 2010, representing payment for the regular quarterly risk-based assessment for the fourth quarter of 2009. In announcing these initiatives, the FDIC stated that, while the prepaid assessment would not immediately affect bank earnings, each institution would record the entire amount of its prepaid assessment as a prepaid expense asset as of December 30, 2009, the date the payment was made and, as of December 31, 2009 and each quarter thereafter, record an expense or charge to earnings for its regular quarterly assessment and an offsetting credit to the prepaid assessment until the asset is exhausted. Once the asset is exhausted, institutions would resume paying and accounting for quarterly deposit insurance assessments as they currently do. The total amount of the Bank’s deposit insurance assessment prepayment was $4.5 million.

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 2009 was an annual rate of .01 basis points, which resulted in approximately $90 thousand FICO assessment payment by the Bank in 2009.

• 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.

• 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.

• 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.

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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.

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-D in the 2009 Annual Report for more information regarding the Bank’s and Corporation’s regulatory capital ratios.

• 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

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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.

• 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.

• 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.

• 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.

• 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.

• 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.

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 will negatively impact earnings

The FDIC has adopted rules requiring banks to prepay their estimated quarterly risk-based federal deposit insurance assessments for all of 2010, 2011 and 2012. On September 29, 2009, the FDIC also adopted a uniform three-basis point increase in assessment rates effective on January 1, 2011. 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 recent increase in assessment rate and any additional assessments would likely have a continued adverse effect on our operating expenses and results of operations. The Corporation cannot predict what insurance assessment rates will be in the future.

Risk of disruption in deposit movement

The FDIC Temporary Liquidity Guaranty Program (“TLGP”) that authorizes the unlimited guarantee of non-interest bearing deposit transaction accounts was originally scheduled to expire on December 31, 2009, but was extended until June 30, 2010. After the temporary guarantee expires, there could be banking system disruption and deposit movement prior to and on June 30, 2010. If banking system disruption occurs and deposit movement is significant, the Corporation may lose deposits and be required to draw down on its unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh (“FHLB-P”), Federal Reserve or correspondent bank fed funds lines. This may result in fewer funds being available to fund earning asset growth, along with the increased costs of any borrowings required as a result of transaction account loss, may cause the Corporation’s net interest income and net income to be lower.

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Federal Home Loan Bank of Pittsburgh continues not to pay dividends nor repurchase capital stock

On December 23, 2008, the FHLB-P announced that it would voluntarily suspend the payment of dividends and the repurchase of excess capital stock until further notice. The FHLB-P 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-P, but no repurchases will take place until further notice. As of December 31, 2009, the Corporation held $7.9 million of FHLB-P 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

Due to the ongoing economic crisis, 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, including the TLGP. 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, 2009 represents approximately 21.5% of total funding compared with approximately 30.9% at December 31, 2008 and 19.5% at December 31, 2007. 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-P’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

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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-P, 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 Corporation.

Additionally, the federal government is considering a variety of other reforms related to banking and the financial industry including, without limitation, efforts to deal with home foreclosures, financial regulatory reforms, and reform of consumer regulatory guidelines. There can be no assurance as to whether or when any of the proposed reforms will be enacted into legislation and, if adopted, what the final provisions of such legislation will be. New legislation and regulatory

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changes could impose potentially significant additional costs on us, require us to change certain of our business practices, adversely affect our ability to pursue business opportunities we might otherwise consider engaging in, cause business disruptions and/or have other impacts that are as-of-yet unknown to the Corporation and its subsidiaries.

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 2009 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.

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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 has 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.

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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 mergers of First Keystone Financial, Inc. into the Corporation and First Keystone Bank into the Bank, 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,

15

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 mergers of First Keystone Financial, Inc. into the Corporation and First Keystone Bank into the Bank, 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 First Keystone Transaction, 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.

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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.

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ITEM 2. PROPERTIES

The Corporation maintains its headquarters and largest branch location in a three-story, stone-front office building consisting of 37,000 net useable square feet located at the corner of Lancaster and Bryn Mawr Avenues in Bryn Mawr, PA. The building has been the Corporation’s headquarters since its founding in 1889. In 1988, additional space was added to the main office building to facilitate drive-in banking and expanded office space. The Corporation and its subsidiaries own these buildings.

In addition, as part of the Bryn Mawr office complex (“Main Office”), the Corporation occupies three buildings across the street from the Main Office. These buildings house the finance/accounting, marketing, other administrative functions and the Corporation’s Wealth Division. The surplus space in these buildings is sublet to several tenants on short term leases. The Corporation leases two of these buildings and owns the third building.

The Corporation’s operations center and Wayne branch office are located in a three story building owned by the Corporation and located in Wayne, PA, approximately 6 miles from the Main Office complex. In 2008, the Corporation purchased a 3,700 square foot property at 322 East Lancaster Avenue, Wayne, PA. This building is adjacent to the Corporation’s Wayne building which houses the Wayne branch and the Corporation’s operation center. Acquiring this property will provide additional space for the Corporation to expand its operations center, while continuing to offer a portion of this property for lease.

Additionally, the Corporation and its subsidiaries own or lease nine branch office facilities and seven Life Care Community offices. The Corporation owns five of its branch locations and has long term ground leases on its most recently established branches. All of the life care community office locations are leased under various terms ranging from month to month up to five years.

The total minimum cash lease payments for office, branch office (including ground leases) and life care community locations amounts to $104 thousand per month.

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the fiscal year ended December 31, 2009.

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 Global Market under the symbol BMTC.

• 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 56 of the 2009 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 “Comparison of Cumulative Total Returns” on page 57 of the 2009 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, 2009 is incorporated by reference to the information

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appearing under the caption “Proposal 3 – To Approve the Adoption of the Bryn Mawr Bank Corporation 2010 Long-Term Incentive Plan – Equity Compensation Plan Information” at page 58 in the 2010 Proxy Statement. Additional information regarding the Corporation’s stock option plans can be found at Note 18 – “Stock Option Plan” in the accompanying Notes to Consolidated Financial Statements found in the 2009 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 2010-2011 terms as directors, it is estimated, based on the $15.09 per share market price of the stock on December 31, 2009, that such directors, as a group, will receive a total of 5,799 shares of our common stock as retainer compensation.

• Issuers Purchases of Equity Securities

The following tables present the repurchasing activity of the Corporation during the fourth quarter of 2009:

Shares Repurchased in the 4^th Quarter of 2009 were as follows: ⁽¹⁾

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, 2009 – Oct. 31,2009	37	$	17.21	—	195,705
Nov. 1, 2009 – Nov. 30, 2009	—		—	—	195,705
Dec. 1, 2009 – Dec. 31, 2009	—		—	—	195,705
Total	37	$	17.21	—	195,705

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 2009, 37 shares were purchased by the Corporation’s Deferred Compensation Plans through open market transactions by the Corporation’s Wealth Management Division investment personnel.

• 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, 2009	$	0.14
September 30, 2009		0.14
June 30, 2009		0.14
March 31, 2009		0.14
December 31, 2008	$	0.14
September 30, 2008		0.14
June 30, 2008		0.13
March 31, 2008		0.13

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• Use of Proceeds from Registered Securities

On June 17, 2009, the SEC declared effective a shelf registration statement on Form S-3/A Registration No. 333-159588 (“Shelf Registration Statement”) filed by the Corporation on June 15, 2009. The Shelf Registration Statement is intended to allow 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. The Corporation also registered for resale in the Shelf Registration Statement the Shares issued in the private placement of securities discussed in the preceding section.

On July 20, 2009, the Corporation filed with the Securities and Exchange Commission a prospectus supplement pursuant to Section 424(b)(2) of the Securities Act (“Prospectus Supplement”) in order to take up to 850,000 shares of common stock down from the Shelf Registration Statement in connection with a newly established Dividend Reinvestment and Stock Purchase Plan (the “Plan”). The Plan is intended to allow both existing shareholders and new investors to increase their investment in the Corporation without incurring many of the fees and commissions normally associated with brokerage transactions.

To date, the Corporation has sold a total of 81,641 shares of common stock under the Shelf Registration Statement through the Plan for an aggregate offering price of $14.543.

A reasonable estimate of the Corporation’s expenses incurred with respect to the Shelf Registration Statement and the Plan from the effective date of the Shelf Registration Statement through September 30, 2009 consists of direct payments to the parties in the amounts indicated below.

Expenses:	(In Thousands)
Legal Fees	$	94.8
Accounting Fees	$	19.9
Total	$	114.7

A reasonable estimate of the Corporation’s net offering proceeds with respect to the Shelf Registration Statement and the Plan from the effective date of the Shelf Registration Statement through December 31, 2009 is $1.1 million, of which 100% has been used for general working capital.

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 2009 Annual Report as well as information related to accounting changes found under the caption “New Accounting Pronouncements” at Note 1 Item X of the 2009 Annual Report.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 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 2009 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 2009 Annual Report, more specifically in the sections entitled “Net Interest Income”—Rate Volume Analysis of Interest Rates and Interest Differential, Net Interest Income and Net Interest Margin—2009 Compared to 2008, and—2008 Compared to 2007, Net Interest Margin Over the Last Five Quarters, Interest Rate Sensitivity, Summary Interest Rate Simulation, and Gap Report; “Provision for Loan and Lease Losses”—General Discussion of the Allowance for Loan and Lease Losses, Asset Quality and Analysis of Credit Risk, Non-Performing Assets 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, 2009”; and “Other Information”.

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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 2009 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 Principal 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, 2009 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the Corporation’s disclosure controls and procedures as of December 31, 2009, 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, 2009. 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 2009 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 2010 Proxy Statement from pages 3 to 19.

Each member of the Audit Committee is independent and financially literate as defined by NASDAQ GM. 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 its members are independent and meet the independence requirements of the NASDAQ GM, except for Frederick C. Peters, II and Francis J. Leto. Because Mr. Peters is the President and Chief Executive Officer of the Corporation and the Bank, he is not independent. Mr. Peters also serves as Chairman of the Corporation and the Bank. Mr. Leto became a non-independent member of the Board of Directors as of January 20, 2009 when he assumed the position of Executive Vice President of the Bank and head of the Wealth Management Division.

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• 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, 2009:

NAME	AGE AS OF MARCH 1, 2010	OFFICE WITH THE CORPORATION AND/OR BANK
Frederick C. Peters II	60	President and Chief Executive Officer and Chairman of Corporation and Bank
J. Duncan Smith, CPA	51	Treasurer and Principal Financial Officer of Corporation and Executive Vice President, Treasurer & Principal Financial Officer of Bank
Alison E. Gers	52	Executive Vice President of Bank – Community Banking Division, Marketing, Technology and Information, Services and Operations
Joseph G. Keefer	51	Executive Vice President of Bank - Chief Lending Officer
Robert J. Ricciardi	61	Secretary of Corporation and Executive Vice President, Secretary and Chief Credit Policy Officer of the Bank
Francis J. Leto	50	Executive Vice President of Bank – Wealth Management Division
Matthew G. Waschull	48	Executive Vice President of Bank; President and Chief Operating Officer – The Bryn Mawr Trust Company of Delaware

• 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 was employed by the Corporation in April 2005 as Treasurer and Principal Financial Officer of the Corporation and as Executive Vice President, Treasurer and Principal 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 was 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 December 2002, Mr. Keefer assumed responsibility for the Bank’s Credit Division. In February 2001, Mr. Keefer was designated Executive Vice President and Chief Lending Officer of the Bank.

• Mr. Ricciardi was employed by the Bank in 1971. In January 2001, Mr. Ricciardi was named Secretary of the Corporation and the Bank, and was responsible for the Credit Division, the Community Banking Division and the Risk Management Division. In December 2002, Mr. Ricciardi relinquished responsibility for the Credit Division. As of September 2005, Mr. Ricciardi was responsible for the Risk Management Division, the Human Resources/Facilities Division and Insurance Counsellors of Bryn Mawr.

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• 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.

• Mr. Waschull was appointed President and Chief Operating Officer of The Bryn Mawr Trust Company of Delaware in January 2009 and continues to serve as Executive Vice President of the Bank. Mr. Waschull served as Executive Vice President of the Bank in charge of the Wealth Management Division from February 2007 through January 20, 2009. Prior to joining Bryn Mawr Trust, Mr. Waschull served as Managing Director for a substantial segment of the private wealth management business at Wilmington Trust Company in Wilmington, Delaware.

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 2010 Proxy Statement at page 46.

ITEM 11. EXECUTIVE COMPENSATION

The information required for Item 11 is incorporated by reference to the executive compensation section and the Corporations’ compensation committee report section of the 2010 Proxy Statement at pages 19 to 45.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required for Item 12 is incorporated by reference to Item 5, Page 18 of the 2009 Form 10-K and to the sections titled “Security Ownership of Certain Beneficial Owners” and “Proposal 3 – To Approve the Adoption of the Bryn Mawr Bank Corporation 2010 Long-Term Incentive Plan – Equity Compensation Plan Information” of the 2010 Proxy Statement at pages 7 and 58, respectively.

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 2010 Proxy Statement at pages 46 and 9, respectively.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required for Item 14 is incorporated by reference to the 2010 Proxy Statement at page 49.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 15(a)(1) — The following items are incorporated by reference to the 2009 Annual Report, attached hereto as Exhibit 13.1 (see table of contents on cover of 2009 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

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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
3.1	Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
3.2	Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.1	Shareholders Rights Plan, dated November 18, 2003, incorporated by reference to Exhibit 4 of the Corporation’s Form 8-A12G filed with the SEC on November 25, 2003
4.2	Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.3	Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.4	Subordinated Note Purchase Agreement dated July 30, 2008, incorporated by reference to Exhibit 4.4 to the Corporation’s 10-Q filed with SEC on November 10, 2008
4.5	Subordinated Note Purchase Agreement dated August 28, 2008, incorporated by reference to Exhibit 4.5 of the Corporation’s 10-Q filed with the SEC on November 10, 2008
4.6	Subordinated Note Purchase Agreement dated April 20, 2009, incorporated by reference to Exhibit 4.6 of the Corporation’s 10-Q filed with the SEC on August 7, 2009
10.1*	Amended and Restated Supplemental Employee Retirement Plan of the Bryn Mawr Bank Corporation, effective January 1, 1999, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 10-K filed with the SEC on March 13, 2008
10.2*	Executive Change-of-Control Severance Agreement, dated October 19, 1995, between the Bryn Mawr Trust Company and Robert J. Ricciardi, incorporated by reference to Exhibit 10.O of the Corporation’s Form 10-K filed with the SEC on March 15, 2007
10.3**	The Bryn Mawr Bank Corporation 1998 Stock Option Plan, incorporated by reference to Exhibit B of the Corporation’s Proxy Statement dated March 6, 1998 filed with the SEC on March 5, 1998
10.4*	Amended and Restated Deferred Bonus Plan for Executives of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.4 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.5*	Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.5 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.6*	Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Trust Company, effective January 1, 2008 incorporated by reference to Exhibit 10.6 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.7*	Employment Agreement, dated January 11, 2001, between the Bryn Mawr Bank Corporation and Frederick C. Peters II, incorporated by reference to Exhibit 10.N of the Corporation’s Form 10-K filed with the SEC on March 29, 2001
10.8*	Executive Change-of-Control Severance Agreement, dated January 22, 2001, between the Bryn Mawr Trust Company and Frederick C. Peters II, incorporated by reference to Exhibit 10.K of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

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Exhibit No.	Description and References
10.9**	The Bryn Mawr Bank Corporation 2001 Stock Option Plan, incorporated by reference to Appendix B of the Corporation’s Proxy Statement dated March 8, 2001 filed with the SEC on March 6, 2001
10.10**	Bryn Mawr Bank Corporation 2004 Stock Option Plan, incorporated by reference to Appendix A of the Corporation’s Proxy Statement dated March 10, 2004 filed with the SEC on March 8, 2004
10.11*	Executive Change-of-Control Amended and Restated Severance Agreement, dated May 21, 2004, between the Bryn Mawr Trust Company and Alison E. Gers, incorporated by reference to Exhibit 10.M of the Corporation’s Form 10-K filed with the SEC on March 15, 2007
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
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 Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

25

Exhibit No.	Description and References
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
99.1	Corporation’s Proxy Statement for 2010 Annual Meeting to be held on April 28, 2010, expected to be filed with the Securities and Exchange Commission on or around March 24, 2010, and incorporated hereto 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

26

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 15, 2010

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 15, 2010
Frederick C. Peters II	(Principal Executive Officer) and Director
/s/ J. Duncan Smith	Treasurer and Principal Financial Officer	March 15, 2010
J. Duncan Smith
/s/ David E. Lees	Director	March 15, 2010
David E. Lees
/s/ Andrea F. Gilbert	Director	March 15, 2010
Andrea F. Gilbert
/s/ Wendell F. Holland	Director	March 15, 2010
Wendell F. Holland
/s/ Francis J. Leto	Director	March 15, 2010
Francis J. Leto
/s/ B. Loyall Taylor, Jr.	Director	March 15, 2010
B. Loyall Taylor, Jr.

NAME	TITLE	DATE
/s/ Thomas L. Bennett	Director	March 15, 2010
Thomas L. Bennett
/s/ Britton H. Murdoch	Director	March 15, 2010
Britton H. Murdoch
/s/ Scott M. Jenkins	Director	March 15, 2010
Scott M. Jenkins

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
3.1	Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
3.2	Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.1	Shareholders Rights Plan, dated November 18, 2003, incorporated by reference to Exhibit 4 of the Corporation’s Form 8-A12G filed with the SEC on November 25, 2003
4.2	Amended and Restated By-Laws, effective November 20, 2007, incorporated by reference to Exhibit 3.2 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.3	Amended and Restated Articles of Incorporation, effective November 21, 2007, incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed with the SEC on November 21, 2007
4.4	Subordinated Note Purchase Agreement dated July 30, 2008, incorporated by reference to Exhibit 4.4 to the Corporation’s 10-Q filed with SEC on November 10, 2008
4.5	Subordinated Note Purchase Agreement dated August 28, 2008, incorporated by reference to Exhibit 4.5 of the Corporation’s 10-Q filed with the SEC on November 10, 2008
4.6	Subordinated Note Purchase Agreement dated April 20, 2009, incorporated by reference to Exhibit 4.6 of the Corporation’s 10-Q filed with the SEC on August 7, 2009
10.1*	Amended and Restated Supplemental Employee Retirement Plan of the Bryn Mawr Bank Corporation, effective January 1, 1999, incorporated by reference to Exhibit 10.1 to the Corporation’s Form 10-K filed with the SEC on March 13, 2008
10.2*	Executive Change-of-Control Severance Agreement, dated October 19, 1995, between the Bryn Mawr Trust Company and Robert J. Ricciardi, incorporated by reference to Exhibit 10.O of the Corporation’s Form 10-K filed with the SEC on March 15, 2007
10.3**	The Bryn Mawr Bank Corporation 1998 Stock Option Plan, incorporated by reference to Exhibit B of the Corporation’s Proxy Statement dated March 6, 1998 filed with the SEC on March 5, 1998
10.4*	Amended and Restated Deferred Bonus Plan for Executives of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.4 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.5*	Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Bank Corporation, effective January 1, 2008 incorporated by reference to Exhibit 10.5 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.6*	Amended and Restated Deferred Payment Plan for Directors of Bryn Mawr Trust Company, effective January 1, 2008 incorporated by reference to Exhibit 10.6 of the Corporation’s Form 10-K filed with the SEC on March 16, 2009
10.7*	Employment Agreement, dated January 11, 2001, between the Bryn Mawr Bank Corporation and Frederick C. Peters II, incorporated by reference to Exhibit 10.N of the Corporation’s Form 10-K filed with the SEC on March 29, 2001
10.8*	Executive Change-of-Control Severance Agreement, dated January 22, 2001, between the Bryn Mawr Trust Company and Frederick C. Peters II, incorporated by reference to Exhibit 10.K of the Corporation’s Form 10-K filed with the SEC on March 15, 2007

Exhibit No.	Description and References
10.9**	The Bryn Mawr Bank Corporation 2001 Stock Option Plan, incorporated by reference to Appendix B of the Corporation’s Proxy Statement dated March 8, 2001 filed with the SEC on March 6, 2001
10.10**	Bryn Mawr Bank Corporation 2004 Stock Option Plan, incorporated by reference to Appendix A of the Corporation’s Proxy Statement dated March 10, 2004 filed with the SEC on March 8, 2004
10.11*	Executive Change-of-Control Amended and Restated Severance Agreement, dated May 21, 2004, between the Bryn Mawr Trust Company and Alison E. Gers, incorporated by reference to Exhibit 10.M of the Corporation’s Form 10-K filed with the SEC on March 15, 2007
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
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 Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith

Exhibit No.	Description and References
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
32.2	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith
99.1	Corporation’s Proxy Statement for 2010 Annual Meeting to be held on April 28, 2010, expected to be filed with the Securities and Exchange Commission on or around March 23, 2010, and incorporated hereto 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.

EX-13.1

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, 2009

BRYN MAWR BANK CORPORATION

BRYN MAWR

BANK CORPORATION

2009 ANNUAL REPORT

Strong. Stable. Secure.

Investing for Growth

A rich tradition of investing in our franchise and our future. Recent investments over the last five years have included: January 2004 — Opened the Newtown Square office. February 2005 — Formed mortgage joint venture with Keller Williams. March 2005 — Opened the Exton office. September 2006 — Established Bryn Mawr Leasing Company. 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.

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 28, 2010, at 11:00 a.m.

STOCK LISTING Bryn Mawr Bank Corporation common stock is traded over-the-counter and is listed on the NASDAQ 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.

2009 Annual Report

Financial highlights

CONSOLIDATED FINANCIAL HIGHLIGHTS

dollars in thousands, except per share data

	2009			2008			CHANGE
FOR THE YEAR
Net interest income	$	40,793		$	37,138		$	3,655		9.8	%
Net interest income after loan and lease loss provision		33,909			31,542			2,367		7.5	%
Non-interest income		28,470			21,472			6,998		32.6	%
Non-interest expenses		46,542			38,676			7,866		20.3	%
Income taxes		5,500			5,013			487		9.7	%
Net income		10,337			9,325			1,012		10.9	%
AT YEAR-END
Total assets	$	1,238,821		$	1,151,346		$	87,475		7.6	%
Total portfolio loans and leases		885,739			899,577			(13,838	)	-1.5	%
Total deposits		937,887			869,490			68,397		7.9	%
Shareholders’ equity		103,936			92,413			11,523		12.5	%
Tangible common equity		92,214			82,055			10,159		12.4	%
Wealth assets under management, administration and supervision		2,871,143			2,146,399			724,744		33.8	%
PER COMMON SHARE
Basic earnings per common share	$	1.18		$	1.09		$	0.09		8.3	%
Diluted earnings per common share		1.18			1.08			0.10		9.3	%
Dividends declared		0.56			0.54			0.02		3.7	%
Book value		11.72			10.76			0.96		8.9	%
Tangible book value		10.40			9.55			0.85		8.9	%
Closing price		15.09			20.10			(5.01	)	-24.9	%
SELECTED RATIOS
Return on average assets		0.88	%		0.89	%
Return on average shareholders’ equity		10.55	%		10.01	%
Tax equivalent net interest margin		3.70	%		3.84	%
Allowance for loan & lease losses as a % of loans & leases		1.18	%		1.15	%
Tangible common equity to tangible assets		7.51	%		7.13	%

1

Letter to shareholders

Dear Shareholders and Friends,

While almost all financial institutions had sharp declines in income and many registered losses, I’m pleased to report that Bryn Mawr Bank Corporation, and our chief subsidiary, The Bryn Mawr Trust Company, had an increase in earnings of 10.9% and remained one of the most profitable banks in the nation.

Let’s review some of the highlights of this past year.

• The biggest news in 2009 was the signing of a definitive agreement to purchase First Keystone Financial, Inc. of Media, Pennsylvania. First Keystone has a long and rich history in Delaware County, and has deep relationships with its clients. With an expected closing by this July, Bryn Mawr Trust will now be the largest community bank in the western suburbs of Philadelphia, with 17 full-service branch locations and approximately $1.7 billion in banking assets.

• Our Wealth Management Division saw its assets under management and supervision grow sharply from $1.9 billion, in March 2009, to just under $2.9 billion by year’s end. Lau Associates, the high-end financial planning and investment management firm in Wilmington, Delaware which we acquired in 2008, continued to play an important role in our wealth growth strategy.

2

2009 Annual Report

• Our new Bryn Mawr Trust Company of Delaware gathered over $400 million of new wealth assets during the year. We are projecting sustained growth with this important initiative, which takes advantage of the special trust statutes available in only Delaware and few other states.

• During the year, we started BMT Asset Management, which replaced our existing brokerage business. Professionals from UBS, Morgan Stanley, and other investment firms have been recruited, and we have attracted well over $100 million of new wealth assets to manage.

• In January of 2009, we opened a large regional banking office in West Chester, staffed not only with an experienced team of retail bankers, but also with a business lending group and a wealth officer. With over $21 million of new deposits, we have far exceeded our original projections. When we conclude the merger with First Keystone Bank, we will have five offices in Chester County, still one of the fastest growing areas in Pennsylvania.

• BMT Mortgage Company had a stellar year as low interest rates created an active re-financing market. Over $250 million of new mortgage loans were closed, most of which were sold to Fannie Mae while we retained the servicing of these loans. At the end of 2009, we were servicing over half a billion dollars of loans for Fannie Mae.

Despite this strong record of accomplishments in 2009, we have many challenges ahead of us. Although we expect business conditions to remain difficult, the Bank is prepared. Bryn Mawr Trust is well-capitalized, profitable, and uniquely well-positioned to serve our wealth and banking clients. We have clearly defined goals and strategies to grow the Bank and to remain highly profitable.

The Board of Directors, the management team, and I thank you for your support of the Bank this past year. In a difficult environment we have performed well. We are hopeful that through our continued growth in profitability, banking assets, and wealth assets that our stock price will show improvement in 2010.

As always, please feel free to call me with any questions or comments. My direct phone line is 610-581-4800. Thank you.

Best wishes,

Ted Peters

Chairman and Chief Executive Officer

3

Year in review

“The current economic turmoil has given us a wonderful opportunity to increase our market share and to geographically expand our franchise.” – TED PETERS

In 2009, the financial services industry was in crisis and faced many significant problems and challenges. It would have been hard for anyone to imagine that there would be opportunities for success amidst all of this turmoil. However, there were opportunities for success, and the Bryn Mawr Trust team was able to recognize and capitalize on many of them. As a result, while many other institutions struggled, we had a very successful year. We are pleased to share with you some of our most significant accomplishments.

Seizing Opportunities

The Wealth Management Division had a fantastic year, with assets growing 33.8% from year-end 2008. While the entire Division contributed to this outstanding performance, a big part of the success was the result of two new initiatives which generated significant growth. The BMT Asset Management unit was formed in the second quarter of 2009, by hiring well-known, experienced investment professionals who developed significant new investment relationships of approximately $100 million in a very short period of time. We made additions to this staff in the fourth quarter and we are very excited about their future growth potential. In its first full year of operation, The Bryn Mawr Trust Company of Delaware grew to more than $400 million in wealth assets. This subsidiary allows us to serve as a corporate fiduciary under Delaware statutes, a significant competitive advantage, and we expect it to be a meaningful contributor to our long-term growth.

Professionals in the Wealth Management Division have long been sought out for their advice, opinions and comments on a variety of wealth and financial management topics. That trend continued in 2009, and our professionals were interviewed extensively by the news media including: The Wall Street Journal, FOX Business News, CNBC, Bloomberg News, The Philadelphia Inquirer, The American Banker and the Philadelphia Business Journal.

Our strong brand enabled us to attract many new clients in 2009. To increase our brand awareness and promote our Wealth Management capabilities, we launched a mass media campaign using radio, print and outdoor advertising. We were very satisfied with our promotional efforts and intend to continue these strategies in 2010.

Above: Wealth Management Division, 10 S. Bryn Mawr Avenue, Bryn Mawr, PA; Opposite page (left to right): Francis J. Leto, Executive V.P., Wealth Management Division, Karin Kinney, Senior V.P., Philanthropic Services Group; Richard K. Cobb, Jr., Senior V.P., BMT Asset Management, Drew Camerota, Senior V.P., BMT Asset Management, Bill Thorkelson, Senior V.P., Investment Management, Charles F. Ward, Senior V.P., BMT Asset Management.

4

2009 Annual Report

Once again, Retail Banking had another strong year, growing our deposits by almost 8.0% over the prior year. The branch banking staff concentrated their selling efforts on generating small business accounts, cash management sales and deep consumer banking relationships. Consumer banking promotions required new checking accounts with direct deposit, online banking and eStatements in order to qualify for the promotional offers. Our solid reputation was a great benefit as many clients, concerned with the financial crisis, chose to develop a relationship with a “Strong, Stable and Secure” financial institution.

The new West Chester Regional Banking Center, which opened in January 2009, contributed to our strong deposit growth with over $21 million in deposits at year end. To strengthen our ties with the business community, we announced the formation of a Business Advisory Board for Chester County in June 2009. Advisory Board members will meet with senior managers from the Bank on emerging trends, issues and opportunities to enhance Bryn Mawr Trust’s well-established role as a leading business and community partner. The board is comprised of leaders from the area’s business and professional community, including; Anthony Giannascoli, Esq., Giannascoli & Associates, PC, Kevin Holleran, Esq., Gawthrop Greenwood, PC, 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, Esq. and CPA, Steger Gowie & Company, Inc. and the Hon. Richard B. Yoder, Immediate Past Mayor of West Chester, Pennsylvania.

The BMT Mortgage Company was a very busy place to be in 2009 as sustained low interest rates created a very beneficial environment for refinancing activity. Revenues for this unit were more than four times 2008 revenues. The Consumer Lending department also saw solid growth, with home equity loans and lines, in our local market area, up more than 15.0% from the prior year.

While many banks stopped making loans, we continued to lend, helping businesses grow and expand. However, overall growth in commercial lending was relatively flat as a result of our desire to limit exposure to certain types of commercial loans. A significant challenge for our lenders was to protect the margin and preserve asset quality, and they did an outstanding job. Our business model, emphasizing risk management and a disciplined approach to growing the Corporation, has served us well, particularly in this difficult financial climate.

5

Community Giving, Activities and Events

As a Community Bank, we truly understand the need to be a part of and support the communities we serve. In good times and bad, we have a tradition of generously supporting a wide variety of charitable, educational, cultural and civic organizations. The entire team finds it very rewarding that we are able to support these worthwhile activities and organizations.

This page, left to right: Kristin M. Green, V.P., Retail Banking, Alison E. Gers, Executive V.P., Retail Banking, Operations, IT and Marketing, Stephen P. Novak, Senior V.P., Retail Banking; Robert J. Ricciardi, Executive V.P. and Chief Credit Policy Officer.

We were especially pleased this year to have been awarded the Regional Community Service Award by the Pennsylvania Association of Community Bankers (PACB). Each year the PACB recognizes community banks for outstanding community activities and support. Bryn Mawr Trust was recognized for establishing the Linda Kahley Ovarian Cancer Walk, to honor the memory of Linda Kahley, a thirty-seven year employee.

Bryn Mawr Trust is committed to making a positive difference in the communities we serve.

Recognizing an Outstanding Career

After nearly 39 years at Bryn Mawr Trust, our distinguished colleague Robert J. Ricciardi has announced his retirement. After his graduation from Villanova University in 1971, Bob started his career as a management trainee in the mortgage department. It didn’t take long for management to recognize Bob’s talent and potential as he was promoted to Loan Officer in December 1972. This was the first of many 1972. This was the first of many promotions for Bob, who is currently Executive Vice President, Chief Credit Policy Officer and Corporate Secretary.

Bob has managed many different functions during his career, including; commercial lending, real estate lending, community banking, human resources, facilities, risk management, the Bank’s title insurance subsidiary, Insurance Counsellors of Bryn Mawr, Inc. and corporate services.

Over the last several years, Bob has also had oversight over branch site acquisitions, construction of new branches and renovation projects for our existing branches and facilities. Bob will continue to provide expertise in this area as a consultant to the Bank.

6

2009 Annual Report

Despite a very heavy workload, Bob also found time to volunteer for many different organizations. He is currently a board member for East Whiteland Township Park and Recreation Board, and is a Trustee of the Hospice and Homecare Foundation, which is part of the Jefferson Home Care Network. He is also a former board member of the Main Line Chamber of Commerce.

When asked about accomplishments at Bryn Mawr Trust that he is most proud of Bob said, “There are many things I’m proud of, but I think the thing I’m most proud of is the number of talented people I’ve hired and worked with over the years who have made Bryn Mawr Trust the outstanding organization it is today”. Bob, we’re proud that you chose to spend your career with us! Bob’s future plans include spending more time with his wife Nancy, his children, five grandchildren, and golf at St. Davids Golf Club. Best wishes from all of us.

This page, left to right: Martin F. Gallagher, Jr., Senior V.P., Commercial Lending, Regina Kemery, Senior V.P., Consumer Lending, Joseph G. Keefer, Executive V.P. and Chief Lending Officer; Myron H. Headen, Senior V.P., BMT Mortgage Company, Thomas DiBiase, V.P., BMT Mortgage Company, Robert J. McLaughlin IV, Senior V.P., BMT Mortgage Company.

Investing in Facilities

In December, we completed major renovations to our Paoli Branch. The remodeling project significantly improved the appearance and functionality of the branch and makes it a much more inviting place to do business. We invite you to visit the branch located at 39 West Lancaster Avenue, Paoli, PA, and see for yourself just how great it looks.

Investing in our Future

In November 2009, we announced our agreement to acquire First Keystone Financial, Inc. and its main operating subsidiary First Keystone Bank. We are very excited that they have agreed to join Bryn Mawr Trust. First Keystone has a rich history of providing exceptional client service and we feel that our combined organization will have many opportunities to grow market share. The proposed merger is subject to regulatory approval and other conditions. For additional details please review the enclosed Annual Report to Shareholders.

Despite the unprecedented financial turmoil our team came together to uncover opportunities for us to succeed and grow. Management, staff, and the Board of Directors are very pleased with our 2009 accomplishments and thank you for your continued support.

Bryn Mawr Trust

Strong. Stable. Secure.

7

CORPORATE INFORMATION

CORPORATE HEADQUARTERS

801 Lancaster Avenue,

Bryn Mawr, PA 19010

610-525-1700 ¢

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

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.

Citigroup Global Markets Holdings Inc.

Deutsche Bank Securities Inc.

FTN Equity Capital Markets Corp.

Janney Montgomery Scott LLC

Keefe, Bruyette & Woods, Inc.

Morgan Stanley & Co., Inc.

Ryan Beck & Co., Inc.

Sandler O’Neill & Partners, L.P.

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 (effective 3/31/10)

J. Duncan Smith, CPA,

Treasurer and Assistant Secretary

Francis J. Leto,

Vice President (effective 3/31/10)

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

Joseph G. Keefer,

Executive Vice President and Chief Lending Officer

Francis J. Leto,

Executive Vice President, Wealth Management

Robert J. Ricciardi,

Executive Vice President, Chief Credit Policy

Officer and Corporate Secretary

J. Duncan Smith, CPA,

Executive Vice President and Chief Financial Officer

Matthew G. Waschull, CTFA^®, AEP^®,

President and Treasurer, The Bryn Mawr

Trust Company of Delaware

BRANCH OFFICES

50 West Lancaster Avenue,

Ardmore, PA 19003

801 Lancaster Avenue,

Bryn Mawr, PA 19010

237 North Pottstown Pike,

Exton, PA 19341

18 West Eagle Road,

Havertown, PA 19083

3601 West Chester Pike,

Newtown Square, PA 19073

39 West Lancaster Avenue,

Paoli, PA 19301

330 East Lancaster Avenue,

Wayne, PA 19087

849 Paoli Pike,

West Chester, PA 19380

One Tower Bridge,

West Conshohocken, PA 19428

WEALTH MANAGEMENT DIVISION

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.

A Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA

Joseph G. Keefer, Chairman;

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.

A Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA

Joseph G. Keefer, Chairman;

Myron H. Headen, President

BMT Settlement Services, Inc.

A Subsidiary of The Bryn Mawr Trust Company,

Bryn Mawr, PA

Joseph G. Keefer, Chairman;

Myron H. Headen, President

The Bryn Mawr Trust Company of Delaware

A Subsidiary of Bryn Mawr Bank Corporation,

Wilmington, DE

Matthew G. Waschull, CTFA^®, AEP^®, President and Treasurer

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,

Wilmington, DE

Judith W. Lau, CFP^®, President

REG ISTRAR & TRANSFER AGENT

BNY Mellon Shareowner Services

PO Box 358015,

Pittsburgh, PA 15252-8015

www.bnymellon.com/shareowner/isd

8

2009 Annual Report

SELECTED FINANCIAL DATA	1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2
MANAGEMENT’S REPORT OF INTERNAL CONTROL OVER FINANCIAL REPORTING	23
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	24
CONSOLIDATED BALANCE SHEETS	26
CONSOLIDATED STATEMENTS OF INCOME	27
CONSOLIDATED STATEMENTS OF CASH FLOWS	28
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	31
PRICE RANGE OF SHARES	56
COMPARATIVE DATA PERFORMANCE	57

Exhibit 13.1

Selected Financial Data

For the years ended December 31,	2009			2008			2007			2006			2005
	(dollars in thousands, except for per share data)
Interest income	$	56,892		$	57,934		$	54,218		$	45,906		$	37,908
Interest expense		16,099			20,796			19,976			12,607			6,600
Net interest income		40,793			37,138			34,242			33,299			31,308
Provision for loan and lease losses		6,884			5,596			891			832			762
Net interest income after loan loss provision		33,909			31,542			33,351			32,467			30,546
Non-interest income		28,470			21,472			21,781			18,361			18,305
Non-interest expense		46,542			38,676			34,959			31,423			31,573
Income before income taxes		15,837			14,338			20,173			19,405			17,278
Applicable income taxes		5,500			5,013			6,573			6,689			5,928
Net Income	$	10,337		$	9,325		$	13,600		$	12,716		$	11,350
Per share data:
Earnings per common share:
Basic	$	1.18		$	1.09		$	1.59		$	1.48		$	1.33
Diluted	$	1.18		$	1.08		$	1.58		$	1.46		$	1.31
Dividends declared	$	0.56		$	0.54		$	0.50		$	0.46		$	0.42
Weighted-average shares outstanding		8,732,004			8,566,938			8,539,904			8,578,050			8,563,027
Dilutive potential common shares		16,719			34,233			93,638			113,579			101,200
Adjusted weighted-average shares		8,748,723			8,601,171			8,633,542			8,691,629			8,664,227
Selected financial ratios:
Tax equivalent net interest margin		3.70	%		3.84	%		4.37	%		4.90	%		5.05	%
Net income/average total assets (“ROA”)		0.88	%		0.89	%		1.59	%		1.72	%		1.66	%
Net income/average shareholders’ equity (“ROE”)		10.55	%		10.01	%		15.87	%		15.71	%		15.50	%
Tier 1 Capital to Risk Weighted Assets		9.41	%		8.81	%		10.40	%		11.38	%		11.38	%
Total Regulatory Capital to Risk Weighted Assets		12.53	%		11.29	%		11.31	%		12.46	%		12.46	%
Dividends declared per share to net income per basic common share		47.5	%		49.5	%		31.4	%		31.1	%		31.6	%
At December 31,	2009			2008			2007			2006			2005
Total assets	$	1,238,821		$	1,151,346		$	1,002,096		$	826,817		$	727,383
Earning assets		1,164,617			1,061,139			874,661			733,781			664,073
Portfolio loans and leases		885,739			899,577			802,925			681,291			595,165
Deposits		937,887			869,490			849,528			714,489			636,260
Shareholders’ equity		103,936			92,413			90,351			82,092			77,222
Ratio of tangible common equity to tangible assets		7.51	%		7.13	%		9.02	%		9.97	%		10.66	%
Ratio of equity to assets		8.39	%		8.03	%		9.02	%		9.97	%		10.66	%
Loans serviced for others		514,875			350,199			357,363			382,141			417,649
Assets under management, administration & supervision1		2,871,143			2,146,399			2,277,091			2,178,777			2,042,613
Book value per share	$	11.72		$	10.76		$	10.60		$	9.59		$	9.03
Tangible book value per share	$	10.40		$	9.55		$	10.60		$	9.59		$	9.03
Allowance as a percentage of portfolio loans and leases		1.18	%		1.15	%		1.01	%		1.19	%		1.24	%
Non-performing loans and leases as a percentage of total loans and leases		0.78	%		0.65	%		0.25	%		0.12	%		0.07	%

¹ Excludes assets under management from an institutional client for 2007, 2006 and 2005.

1

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

BRIEF HISTORY OF THE CORPORATION

The Bryn Mawr Trust Company (the “Bank” or “BMTC”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (the “Corporation” or “BMBC”) 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 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 nine full-service branches and seven limited-hour retirement community offices throughout Montgomery, Delaware and Chester counties. The Corporation trades on the NASDAQ Global Market (“NASDAQ”) under the symbol BMTC.

The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.

The Corporation 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”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking.

FIRST KEYSTONE FINANCIAL, INC.

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

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

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

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

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

2

the Corporation’s stock under the Continuing Options will be equal to the exercise price per share of First Keystone stock under the Continuing Options divided by the Option Exchange Ratio, subject to rounding. In the event that the per share Merger Consideration is adjusted as described above, the option exchange ration will also reflect a corresponding adjustment.

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

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

For further information with respect to the Agreement, please review the Proxy Statement / Prospectus which was filed with the SEC on January 25, 2010 in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”).

RESULTS OF OPERATIONS

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

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

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

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

Other significant accounting policies are presented in 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.

OVERVIEW OF GENERAL ECONOMIC, REGULATORY AND GOVERNMENTAL ENVIRONMENT

During 2009, the global and U.S. economies experienced a dramatic swing, beginning the year in a recessionary environment which then began to stabilize in the latter part of 2009.

3

Dramatic declines in the housing market during the past year, as home prices fell and foreclosures and unemployment increased, resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks.

The drop in real estate values negatively impacted residential real estate builder and development business nationwide. As the U.S. economy entered a recession in 2008 which carried over into 2009, financial institutions faced higher credit losses from distressed real estate values and borrower defaults which resulted in reduced capital levels. In addition, investment securities backed by residential and commercial real estate were reflecting 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 lessened. As of December 31, 2009, the Bryn Mawr Bank Corporation (the “Corporation” and “BMBC”) and The Bryn Mawr Trust Company (“BMTC” and the “Bank”) are “well capitalized” by regulatory standards and are in a position to acquire new customers from weaker financial institutions.

In 2008 the Emergency Economic Stabilization Act of 2008 (“EESA”) was signed into law on October 3, 2008. The EESA authorizes the U.S. Treasury the ability to provide funds to restore liquidity and stability to the U.S. financial system. Two of the specific programs, the Troubled Asset Relief Program (“TARP”) and the Temporary Liquidity Guarantee Program (“TLGP”) are described in further detail below from their onset with relevant updates.

The TARP program under which the Treasury purchases equity stakes in certain banks and thrifts. The Treasury’s initial effort was to make available $250 billion of capital to U.S. financial institutions in the form of preferred stock (from the $700 billion authorized by the EESA). In conjunction with the purchase of preferred stock, the Treasury receives warrants to purchase common stock with an aggregate market price equal to 15% of the preferred investment.

As financial systems have stabilized, many larger financial institutions have begun to repay TARP funds early, as Federal Reserve stress tests performed on these institutions showed no additional need for capital. The Corporation elected not to participate in the program due to its “well capitalized” regulatory capital position and the ever changing conditions of the TARP program.

The systemic risk exception to the Federal Deposit Insurance Corporation (“FDIC”) Act, enables the FDIC to temporarily provide a 100% guarantee of the senior unsecured debt of all FDIC-insured institutions and their holding companies, as well as deposits in noninterest-bearing transaction deposit accounts under the TLGP through December 31, 2009. Pursuant to this program, all insured depository institutions automatically participated in the TLGP for 30 days following the announcement of the program without charge and thereafter, unless the institution opted out, at a cost of 75 basis points per annum for senior unsecured debt and 10 basis points per annum for noninterest-bearing transaction deposits.

On August 26, 2009 the FDIC extended the TLGP until June 30, 2010. This program will continue to provide depositors with unlimited coverage for non-interest bearing transaction accounts at participating FDIC-insured institutions. The unlimited coverage applies to all personal and business checking deposit accounts that do not earn interest, including DDA accounts, low interest NOW accounts and IOLTA accounts. BMTC chose to continue its participation in the TLGP and, thus, did not opt out.

On May 22, 2009 the FDIC adopted a final rule imposing a five basis point emergency special assessment on each insured depository institution’s assets less Tier I capital as of June 30, 2009, payable September 30, 2009. The Corporation’s special assessment was $540 thousand.

On November 12, 2009 the FDIC announced it will require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The prepaid assessment for these periods was collected on December 30, 2009. The Corporation’s prepayment was $4.5 million.

The FDIC announced on October 3, 2008 that deposits held at FDIC-insured institutions are insured up to at least $250 thousand per depositor until December 31, 2009. On May 20, 2009 the FDIC announced an extension of this program until December 31, 2013.

The Federal Home Loan Bank of Pittsburgh (“FHLB-P”) has continued its voluntary suspension of dividend payments and the repurchase of excess capital stock originally announced on December 23, 2008. The FHLB-P 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, but no repurchase will take place until advised. As of December 31, 2009, the Corporation held $7.9 million of FHLB-P capital stock and is monitoring the situation closely as are other FHLB-P member banks. The FHLB-P is the primary source of liquidity for the Corporation, but it can also use other alternatives available to the Corporation that include the Federal Reserve and wholesale certificates of deposit.

Throughout 2009 the economy remained weak though improvements are occurring. A drawn-out 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

4

financial position and build the brand name put it in a good position to weather the financial downturn and take advantage of opportunities as they arise.

EXECUTIVE OVERVIEW

2009 Compared to 2008

The Corporation’s 2009 diluted earnings per share increased $0.10 per share to $1.18 per share or 9.3% compared to $1.08 per share in 2008, and net income for the year ended December 31, 2009 of $10.3 million increased 10.9% or $1.0 million, compared to $9.3 million last year. Return on average equity (ROE) and return on average assets (ROA) for the year ended December 31, 2009 were 10.22% and 0.87%, compared with ROE and ROA of 10.01% and 0.89%, respectively, in 2008.

During 2009, the Corporation made progress on several of its growth initiatives including the announcement on November 3, 2009 to acquire First Keystone Financial, Inc. as discussed earlier in this document.

Additionally, on January 2, 2009, the Corporation opened its West Chester Regional Banking Center which enabled the Corporation’s wealth management and banking services to be introduced into another affluent market with good growth potential while further diversifying its asset base and client accounts.

Rounding out 2009, the Corporation established BMT Asset Management, a department within the Wealth Management Division of the Bank, filed a Shelf Registration Statement on Form S-3 and established a Dividend Reinvestment and Stock Purchased Plan (“DRIP”).

BMT Asset Management was established through the hiring of experienced asset managers in the later part of June 2009 and has generated $86.6 million in assets under management at December 31, 2009.

The shelf registration was declared effective by the Securities and Exchange Commission (“SEC”) on June 17, 2009, and is intended to allow 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.

On July 20, 2009 the Corporation filed a prospectus supplement with the SEC in order to take securities down from the Shelf Registration Statement in connection with the DRIP. The DRIP provides existing shareholders and new investors the opportunity to easily and conveniently increase their investment in the Corporation through reinvestment of dividends, new investments and requests for waivers.

The Corporation’s portfolio of loans and leases at December 31, 2009 of $885.7 million decreased 1.6% or $13.9 million from $899.6 million at December 31, 2008 balances.

The loan portfolio, excluding leases, declined marginally by 0.3% or $2.3 million to $838.0 million in 2009 compared with $840.3 million in 2008. The lease portfolio declined 19.5% or $11.6 million to $47.8 million from the December 31, 2008 balance of $59.4 million. The lease portfolio represents approximately 5.4% of total 2009 year-end portfolio loans and leases. The decline in the loan portfolio was concentrated in the construction and lease portfolios due to the Corporation’s decision to limit exposure to those sections of the portfolio.

Credit quality on the overall loan and lease portfolio remains stable as total non-performing loans and leases represents 78 basis points or $6.9 million of portfolio loans and leases at December 31, 2009. The Corporation believes the majority of these loans are adequately secured by collateral that can substantially liquidate the debt. This compares with 65 basis points or $5.8 million at December 31, 2008. The provision for loan and lease losses for the years ended December 31, 2009 and 2008 was $6.9 million and $5.6 million, respectively. At December 31, 2009, the allowance for loan and lease losses (“allowance”) of $10.4 million represented 1.18% of portfolio loans and leases compared with 1.15% at December 31, 2008. For additional information about asset quality and analysis of credit risk, see page 11 of this document.

Funding from wholesale sources, which includes wholesale deposits, subordinated debt and Federal Home Loan Bank of Pittsburg (“FHLB-P”) borrowings, at December 31, 2009 of approximately $255.6 million was $65.3 million lower than the $320.9 million at December 31, 2008. The increase in deposit activity during 2009 reduced the Corporation’s dependency on more expensive wholesale funding by approximately 8%.

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 compared to the same period last year was due to an interest expense reduction of $5.4 million or 26.5%, growth in the investment portfolio and a higher than average interest rate on interest earning assets. The Corporation’s tax-equivalent net interest margin increased from 3.70% in 2008 to 3.84% in 2009.

For the year ended December 31, 2009, non-interest income was $28.5 million, a increase of $7.0 million or 32.6% from $21.5 million in 2008. The primary factors for this increase were the gains on the sale of residential mortgage loans, the gains on sale of investment securities and increased fees from the Wealth Management Division.

For the year 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 in the same period last year. Personnel and

5

related support costs associated with new business initiatives including commissions on mortgage originations, the opening of the West Chester Regional Banking Center, costs associated with the Transaction with First Keystone and the FDIC insurance increase along with the FDIC one-time special assessment were the largest contributors to this increase.

2008 Compared to 2007

For the twelve months ended December 31, 2008, the Corporation earned $9.3 million or $1.08 per diluted share. The Corporation’s 2008 diluted earnings per share decreased $0.50 per share or 31.6% compared to $1.58 per share in 2007, and net income for the year ended December 31, 2008 decreased 31.6% or $4.3 million, compared to $13.6 million in 2007. Return on average equity (ROE) and return on average assets (ROA) for the year ended December 31, 2008 were 10.01% and 0.89%, respectively. ROE was 15.87% and ROA was 1.59% for the same period last year.

The Corporation elected not to participate in the United States Government’s TARP Program due to the Corporation’s regulatory capital status of “well capitalized” and the ever changing conditions of the TARP Program.

During 2008, the Corporation established The Bryn Mawr Trust Company of Delaware, a limited purpose trust company (“LPTC”) in the State of Delaware. Additionally, on July 15, 2008, the Corporation acquired Lau Associates, a Wilmington, Delaware, based investment advisory and financial planning firm.

The Corporation increased portfolio loans and leases in 2008 by 12.0% or $96.7 million compared with year-end 2007 balances by expanding banking relationships with local businesses, not-for-profit entities and high credit quality individuals.

The loan portfolio, excluding leases, grew 10.9% or $82.4 million to $840.3 million in 2008 compared with $757.8 million in 2007. This increase included home equity loans and lines, commercial and industrial loans and commercial mortgages. The lease portfolio grew 31.5% or $14.2 million to $59.3 in 2008 and now represents approximately 6.6% of total portfolio loans and leases. The lease portfolio, which is national in scope, did not perform well in 2008 as charge-offs were 6.24% of average leases. The Corporation made underwriting adjustments at the end of 2007 and has continued to “tighten” these standards in 2008 and early 2009.

Total non-performing loans and leases represents 65 basis points or $5.8 million of portfolio loans and leases at December 31, 2008. This compares with 25 basis points or $2.0 million at December 31, 2007. The provision for loan and lease losses for the years ended December 31, 2008 and 2007 was $5.6 million and $891 thousand, respectively, which was primarily due to the increased level of charge-offs in the lease portfolio. At December 31, 2008, the allowance for loan and lease losses (“allowance”) of $10.3 million represents 1.15% of portfolio loans and leases compared with 1.01% at December 31, 2007.

Funding from wholesale sources, which includes wholesale deposits, subordinated debt and FHLB-P borrowings, at December 31, 2008 of approximately $290.7 million was $115.9 million higher than the $174.8 million at December 31, 2007. The incremental wholesale funding was primarily used to fund $96.7 million of growth in the loan and lease portfolio and $60.0 million of growth in the Corporation’s investment portfolio.

The increase in the Corporation’s tax equivalent net interest income of $2.8 million or 8.2% for the year ended December 31, 2008 compared to the same period last year was due to the increase in loan and lease volume, and the growth in the investment portfolio, which more than offset the decrease in asset yields and higher funding costs. The Corporation’s tax-equivalent net interest margin declined from 4.37% in 2007 to 3.84% in 2008.

For the year ended December 31, 2008, non-interest income was $21.5 million, a decrease of $0.3 million or 1.4% from the $21.8 million in 2007. The primary factor for this decrease was a gain on the sale of real estate of $1.3 million in 2007. Partially offsetting this decrease were gains on sale of investments, interest rate floor income and increased Wealth Management Division revenue which is attributed to the acquisition of Lau Associates.

For the year ended December 31, 2008, non-interest expense was $38.7 million, an increase of $3.7 million or 10.6% over the $35.0 million in the same period last year. Personnel and related support costs associated with new business initiatives including the Lau Associates acquisition and the impairment of mortgage servicing rights were the largest contributors to this increase.

6

COMPONENTS OF NET INCOME

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 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.

NET INTEREST INCOME

Rate/Volume Analyses (Tax Equivalent Basis)*

The rate volume analysis in the table below analyzes changes in tax equivalent net interest income for the years 2009 compared to 2008 and 2008 compared to 2007 by its rate and volume components. 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)	2009 Compared to 2008									2008 Compared to 2007
increase/(decrease)	Volume			Rate			Total			Volume		Rate			Total
Interest Income:
Interest-bearing deposits with banks	$	127		$	(198	)	$	(71	)	$	867	$	(798	)	$	69
Money market funds		(123	)		(12	)		(135	)		162		(152	)		10
Federal funds sold		193			(15	)		178			106		(144	)		(38	)
Investment securities available for sale		2,531			(1,848	)		683			2,522		(271	)		2,251
Loans and leases		2,546			(4,121	)		(1,575	)		7,820		(6,463	)		1,357
Total interest income		5,274			(6,194	)		(920	)		11,477		(7,828	)		3,649
Interest expense:
Savings, NOW and market rate accounts		1,084			(1,632	)		(548	)		628		(1,044	)		(416	)
Other wholesale deposits		27			10			37			111		—			111
Wholesale time deposits		(2,076	)		(1,338	)		(3,414	)		2,099		(1,637	)		462
Time deposits		(162	)		(1,985	)		(2,147	)		355		(2,226	)		(1,871	)
Borrowed Funds		1,221			154			1,375			4,907		(2,373	)		2,534
Total interest expense		94			(4,791	)		(4,697	)		8,100		(7,280	)		820
Interest differential	$	5,180		$	(1,403	)	$	3,777		$	3,377	$	(548	)	$	2,829

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

7

Analyses 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,
	2009							2008							2007
(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	$	34,946		$	74	0.21	%	$	18,678		$	145	0.78	%	$	1,506		$	76	5.05	%
Federal funds sold		548			1	0.18	%		5,616			136	2.42	%		3,496			174	4.98	%
Money market funds		38,662			197	0.51	%		3,445			19	0.55	%		182			9	4.95	%
Investment securities:
Taxable		129,780			4,398	3.39	%		86,940			4,127	4.75	%		39,510			2,008	5.08	%
Tax –Exempt		17,818			776	4.36	%		7,538			364	4.83	%		5,029			232	4.61	%
Total investment securities (3)		147,598			5,174	3.51	%		94,478			4,491	4.75	%		44,539			2,240	5.03	%
Loans and leases(1)(2)		892,518			51,835	5.81	%		851,752			53,410	6.27	%		740,694			52,053	7.03	%
Total interest earning assets		1,114,272			57,281	5.14	%		973,969			58,201	5.98	%		790,418			54,552	6.90	%
Cash and due from banks		11,249							15,780							22,640
Allowance for loan and lease losses		(10,421	)						(8,613	)						(8,463	)
Other assets		65,395							64,542							48,725
Total assets	$	1,180,495						$	1,045,678						$	853,320
Liabilities:
Savings, NOW, and market rate accounts	$	408,523			3,094	0.76	%	$	325,291		$	3,753	1.15	%	$	280,371		$	4,169	1.49	%
Other wholesale deposits		33,988			148	0.44	%		10,088			111	1.10	%		—			—	—
Wholesale time deposits		83,277			2,084	2.50	%		123,794			5,498	4.11	%		92,329			4,925	5.53	%
Time deposits		190,071			4,644	2.44	%		194,739			6,791	3.49	%		187,044			8,662	4.63	%
Total interest-bearing deposits		715,859			9,970	1.39	%		653,912			16,042	2.45	%		559,744			17,756	3.17	%
Subordinated debt		20,260			1,108	5.47	%		5,934			408	6.88	%		—			—	—
Mortgage payable		1,450			82	5.66	%		—			—	—			—			—	—
Borrowed funds		149,937			4,939	3.29	%		130,490			4,346	3.33	%		42,496			2,220	5.22	%
Total interest-bearing liabilities		887,506			16,099	1.81	%		790,336			20,796	2.63	%		602,240			19,976	3.32	%
Non-interest-bearing deposits		172,468							143,924							148,773
Other liabilities		22,502							18,243							16,622
Total non-interest-bearing liabilities		194,970							162,167							165,395
Total liabilities		1,082,476							952,503							767,635
Shareholder’s equity		98,019							93,175							85,685
Total liabilities and shareholders’ equity	$	1,180,495						$	1,045,678						$	853,320
Net interest spread						3.33	%						3.35	%						3.58	%
Effect of non-interest-bearing sources						0.37	%						0.49	%						0.79	%
Net interest income/margin on earning assets				$	41,182	3.70	%				$	37,405	3.84	%				$	34,576	4.37	%
Tax equivalent adjustment (tax rate 35%)				$	389	0.04	%				$	267	0.03	%				$	334	0.04	%

(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. Average loans and leases include portfolio loans, leases and loans held for sale.

(2) Loans include 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 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 $37.4 million in 2008. This increase was substantially due to the reduction in interest expense of $4.7 million or 22.6%. Interest earning assets increased $140.3 million or 14.4% from 2008. However, the yield on earning assets, which offset the reduction in interest expense, decreased from 5.98% to 5.14% or 84 basis points from the same period. This is the result to the yields on loans decreasing 46 basis points to 5.81% due to the current rate environment and competitive pricing pressures. The yield on investments decreased 124 basis points as more short term liquid investments were purchased.

Average interest bearing liabilities increased $97.2 million or 12.3% from $790.3 million in 2008 to $887.5 million in 2009. This increase is 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. The rate on interest bearing liabilities declined 82 basis points from 2.63% to 1.81% primarily due to

8

aggressive management of deposit pricing and the maturity of higher rate wholesale deposits. Despite the increase in the tax equivalent net interest income, the tax equivalent net interest margin on interest earning assets decreased 14 basis points to 3.70% from 3.84% during 2008.

Net Interest Income and Net Interest Margin 2008 Compared to 2007

Net interest income on a tax equivalent basis for the year ended December 31, 2008 of $37.4 million was 8.1% higher than $34.6 million in 2007. This increase was substantially rate driven. Average loan growth of $111.1 million or 15.0% and investment security growth of $50 million were able to offset rate decreases and the impact of funding with higher cost wholesale funds, which includes wholesale deposits, subordinated debt and borrowings.

Average interest bearing liabilities increased by $188.1 million or 31.2% to $790.3 million during 2008 compared to $602.2 million during 2007. Wholesale deposits and borrowings were the primary factors contributing to the increase in average interest bearing liabilities. The change in average other deposit balances in 2008 was a nominal $1.6 million increase.

Despite the increase in tax equivalent net interest income due to increased loan, lease and investment balances, the tax equivalent net interest margin on interest earning assets decreased by 53 basis points from 4.37% during 2007 to 3.84% during 2008, due to lower rates on interest earning assets.

Net Interest Margin Over Last Five Quarters

The Corporation’s tax equivalent net interest margin increased 22 basis points to 3.85% in the fourth quarter of 2009 from 3.63% in the same period in 2008. The reduction in the earning asset yield of 64 basis points was due to prime rate decreases, the current rate environment and competitive pricing pressure.

The interest bearing liability cost decreased in the fourth quarter of 2009 to 1.45%, a decrease of 97 basis points from the fourth quarter of 2008. This reduction was due primarily to aggressive management of deposit pricing and the maturity of higher rate wholesale deposits during 2009.

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

	Year	Earning Asset Yield		Interest Bearing Liability Cost		Net Interest Spread		Effect of Non-Interest Bearing Sources		Net Interest Margin
Tax Equivalent Net Interest Margin Last Five Quarters
4th Quarter	2009	4.99	%	1.45	%	3.54	%	0.31	%	3.85	%
3rd Quarter	2009	5.09	%	1.73	%	3.36	%	0.36	%	3.72	%
2nd Quarter	2009	5.13	%	1.94	%	3.19	%	0.40	%	3.59	%
1st Quarter	2009	5.37	%	2.15	%	3.22	%	0.40	%	3.62	%
4th Quarter	2008	5.63	%	2.42	%	3.21	%	0.42	%	3.63	%
	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 Three Years
	2009	5.14	%	1.81	%	3.33	%	0.37	%	3.70	%
	2008	5.98	%	2.63	%	3.35	%	0.49	%	3.84	%
	2007	6.90	%	3.32	%	3.58	%	0.79	%	4.37	%

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 managing the interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and re-pricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offering of loan and selected deposit terms and through wholesale funding. Wholesale funding consists of multiple sources including borrowings from the FHLB-P, Federal Reserve Bank of Philadelphia 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 (a/k/a “GAP Analysis”), market value of portfolio equity analysis, interest rate simulations under various rate scenarios and tax equivalent net interest margin reports. The results of these reports are compared to limits established by the Corporation’s ALCO Policies and appropriate adjustments are made if the results are outside of established limits.

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

This simulation assumes that there is no growth in the balance sheet over the next twelve months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

9

Summary of Interest Rate Simulation

	December 31, 2009
(dollars in thousands)	Estimated Change In Net Interest Income Over Next 12 Months
Change in Interest Rates
+300 basis points	$	2,980		6.86	%
+200 basis points	$	1,725		3.97	%
+100 basis points	$	(632	)	(1.45	)%
-100 basis points	$	(1,313	)	(3.02	)%

The interest rate simulation above indicates that the Corporation’s balance sheet as of December 31, 2009 is asset sensitive, meaning that a 100 basis point increase or decrease in interest rates will have a negative impact on net interest income over the next 12 months. Assets will not reprice as quickly as deposits since Bryn Mawr Trust’s prime rate is 74 basis points higher than the Wall Street Journal prime rate and there are interest rate floors on approximately all home equity lines of credit. The interest rate simulation is an estimate based on assumptions, which are based in part on past behavior of customers, along with expectations of future behavior relative to interest rate changes.

Actual results may differ from the interest rate simulation for many reasons including market reactions, competitor responses, regulatory actions and/or customer behavior, especially in these uncertain economic times, which could cause an unexpected outcome that may translate into lower net interest income.

GAP Report

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

Non-maturity deposits, demand deposits in particular, are recognized by the regulatory agencies to have different sensitivities to interest rate environments. Consequently, it is an accepted practice to spread non-maturity deposits over defined time periods in order to capture that sensitivity. Commercial demand deposits are often in the form of compensating balances, and fluctuate inversely to the level of interest rates; the maturity of those deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the regulatory agencies have suggested distribution limits are for non-maturity deposits. However, the Corporation has taken a more conservative approach than these limits would imply by reporting them as having a shorter maturity. The following table presents the Corporation’s GAP Analysis as of December 31, 2009:

(dollars in thousands)	0 to 90 Days			91 to 365 Days			1 - 5 Years			Over 5 Years			Non-Rate Sensitive			Total
Assets:
Interest-bearing deposits with banks	$	58.5		$	—		$	—		$	—		$	—		$	58.5
Money market funds		9.2			—			—			—			—			9.2
Investment securities		67.2			37.9			55.3			47.8			—			208.2
Loans and leases(1)		369.7			84.5			374.4			60.1			—			888.7
Allowance		—			—			—			—			(10.4	)		(10.4	)
Cash and due from banks		—			—			—			—			11.7			11.7
Other assets		—			—			0.6			0.1			72.2			72.9
Total assets	$	504.6		$	122.4		$	430.3		$	108.0		$	73.5		$	1,238.8
Liabilities and shareholders’ equity:
Demand, non-interest-bearing	$	79.2			21.1			112.6			—			—			212.9
Savings, NOW and market rate		83.5			73.4			260.9			65.1			—			482.9
Time deposits		97.7			45.3			10.7			0.1			—			153.8
Other wholesale deposits		52.2			—			—			—			—			52.2
Wholesale time deposits		17.4			13.0			5.7			—			—			36.1
Borrowed funds		11.7			27.9			94.6			10.7			—			144.9
Subordinated debt		22.5			—			—			—			—			22.5
Mortgage payable		—			0.1			1.9			—			—			2.0
Other liabilities		—			—			—			—			27.6			27.6
Shareholders’ equity		3.7			11.1			59.4			29.7			—			103.9
Total liabilities and shareholders’ equity	$	367.9		$	191.9		$	545.8		$	105.5		$	27.6		$	1,238.8
Interest earning assets		504.6			122.4			429.7			107.9			—			1,164.6
Interest bearing liabilities	$	285.0			159.7			373.8			75.9			—			894.4
Difference between interest earning assets and interest bearing liabilities	$	219.6		$	(37.3	)	$	55.9		$	32.0		$	—		$	270.2
Cumulative difference between interest earning assets and interest bearing liabilities	$	219.5		$	182.2		$	238.1		$	270.2		$	—		$	270.2
Cumulative earning assets as a % of cumulative interest bearing liabilities		177	%		141	%		129	%		130	%

⁽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.

10

Maturity of Certificates of Deposit of $100,000 or Greater at December 31, 2009

(dollars in thousands)	Non- Wholesale		Wholesale
Three months or less	$	59,606	$	3,583
Three to six months		5,141		—
Six to twelve months		11,909		5,489
Greater than twelve months		2,521		5,701
Total	$	79,177	$	14,733

PROVISION FOR LOAN AND LEASE LOSSES

General Discussion of the Allowance for Loan and Lease Losses

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

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

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

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

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

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

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

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

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

Asset Quality and Analysis of Credit Risk

Credit quality on the overall loan and lease portfolio remains stable as total non-performing loans and leases of $6.9 million represented 78 basis points of portfolio loans and leases at December 31, 2009. This compares with 65 basis points or $5.8 million at December 31, 2008 and 25 basis points or $2.0 million at December 31, 2007. The increase in the non-performing loans and leases from $5.8 million to $6.9 million is primarily attributable to one specific commercial loan relationship which experienced financial difficulties. While the level of non-performing loans and leases has increased from December 31, 2008, the majority of these loans are adequately secured by collateral that can substantially liquidate the associated debt. As of December 31, 2009 the Corporation had OREO valued at $1.0 million which was written down and then carried at fair value less cost to sell.

11

A troubled debt restructure (“TDR”) occurs when a creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would otherwise not consider. As of December 31, 2009 the Corporation had $2.3 million of loans which it had classified as TDR’s and were included in total non-performing loans and leases and an additional $1.6 million of performing lease balances which were classified as TDR’s. The Corporation has procedures in place to determine if a loan or lease is a TDR and to report them in accordance with regulatory guidance, and reviews loans and leases subject to any concession on a monthly basis.

At December 31, 2009 the Corporation had $6.2 million of impaired loans which are included in total nonperforming loan and leases. Impaired loans are loans and leases in which it is probable that the Corporation will not be able to collect all scheduled principal and interest in accordance with the loan agreements.

The provision for loan and lease losses for the years ended December 31, 2009, 2008 and 2007 was $6.9 million, $5.6 million and $891 thousand, respectively. At December 31, 2009, the allowance for loan and lease losses of $10.4 million represented 1.18% of portfolio loans and leases compared with 1.15% at December 31, 2008 and 1.01% at December 31, 2007. The nominal increase in the allowance as a percentage of portfolio loans and leases from the end of 2008 to the end of 2009 reflects the commercial loan mentioned previously, and lower loan and lease balances.

The Corporation believes that while economic conditions indicate the country may be coming out of the recession, a return to full employment (defined as 6%) and improvements in the construction and commercial real estate markets may be several years away, which may have a negative effect on collateral value and the borrower’s ability to repay. The Greater Philadelphia area in which the Corporation operates (except for its national leasing business) has not seen the severe downturn that many of the other areas in the country have experienced, but this area has not been immune from these tough economic times.

Accordingly, the Corporation expects that this continued economic weakness may result in the Corporation’s provision for loan and lease losses and non-performing loans and leases to remain at current levels or higher for the foreseeable future, as loans and leases that have performed in prior years may succumb to this extended downturn and migrate to classified loans status and possibly to non-performing status. At the same time, loans and leases that are listed as non-performing are being actively managed, moved to OREO, restructured, charged-off, charged-down, brought current and/or paid off, reducing the aggregate dollar amount of non-performing loans and leases, possibly to be replaced by loans and leases that were previously performing.

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 identifies 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. We believe that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall losses.

During the third quarter of 2009, the Corporation made refinements, along with changes to estimates of loss in certain asset classes. These changes in estimates and refinements resulted in a lower pre-tax provision for loan and lease losses in the third quarter of 2009 than would have resulted under the previous loss estimates of approximately $750 thousand which equates to $.06 per diluted share (after tax).

The list below identifies certain key characteristics of the Corporation’s loan and lease portfolio. See the loan portfolio table on page 18 for further detail.

• Portfolio Loans and Leases – The Corporation’s $885.7 million loan portfolio is based in the Corporation’s traditional market areas of Chester, Delaware and Montgomery counties (Pennsylvania) and the greater Philadelphia area which have not experienced the real estate price appreciation and subsequent decline that many areas nationwide have experienced, 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 substantial impact on the Corporation’s loan quality ratios relative to the loan portfolio.

• Concentrations – The Corporation has a material portion of its portfolio loans (excluding leases) in real estate related loans. As of December 31, 2009, loans secured by real estate were $729.9 million or 86.9% of the total loan portfolio of $838.0 million, which includes $592.0 million of real estate loans. The remainder of the loans were for non-real estate purposes.

A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in Pennsylvania. The Corporation 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.

12

• Construction – Residential site development construction loans were $33.9 million at December 31, 2009, a decline from the $43.7 million at December 31, 2008. The residential site development portfolio had a delinquency rate of 1.67% at December 31, 2009. The delinquency rate decreased from 6.06% at December 31, 2008 due to one residential site development moving mostly into OREO.

Commercial construction projects were $1.7 million at December 31, 2009, a decline from the $8.3 million at December 31, 2008. The commercial construction portfolio has no delinquencies and most loans within this subcategory have converted to permanent mortgages in 2009.

Construction loans of individual houses were $2.8 million at December 31, 2009 and $6.5 million at December 31, 2008. This decrease is attributable to the completion of existing construction projects and the Corporation’s decision to limit exposure in this section of the portfolio prior to 2009 due to economic conditions. The total construction loan segment is 4.3% of the total loan and lease portfolio at December 31, 2009.

• Residential Mortgages – Residential mortgage loans were $110.7 million at December 31, 2009, a decrease of $21.8 million from the $132.5 million at December 31, 2008. The residential mortgage portfolio had a delinquency rate of 3.11% at December 31, 2009 compared to 1.44% at December 31, 2008. Economic conditions and a continued high unemployment rate in the area have affected the portfolio. However, the Corporation is well protected with its collateral position on this portfolio with an average combined loan-to-value ratio of approximately 70%. The residential mortgage segment is 12.5% of the total loan and lease portfolio at December 31, 2009.

• Commercial Mortgages – The performance in the $265.0 million commercial mortgage portfolio, representing 29.9% of the total loan and lease portfolio at December 31, 2009, remains excellent except for one commercial relationship which has substantial collateral and the Corporation expects full repayment. This segment of the total loan and lease portfolio grew 6.1% or $15.3 million from December 31, 2008. The delinquency rate in the portfolio is 0.56% and the growth over the past twelve months within this subsection of the loan portfolio was 6.0%. The Corporation’s borrowers in this portfolio have strong global cash flows which have remained stable in this tough economic environment. Commercial mortgages that are owner occupied represent 49.9% of the outstanding balance at December 31, 2009.

• Commercial and Industrial – The performance in the $233.3 million commercial and industrial portfolio, representing 26.3% of the total loan and lease portfolio at December 31, 2009, remains stable with a delinquency rate of approximately 0.65%. This segment of the total loan and lease portfolio declined 1.3% or $3.2 million from December 31, 2008 and consists of loans to privately held institutions, family businesses, non-profit institutions and private banking relationships.

• Home Equity Lines of Credit (“HELOC”) – The HELOC portfolio has increased $26.6 million or 19.3% from $137.8 million at December 31, 2008 to $164.4 million at December 31, 2009. The delinquency level in the portfolio remains stable at approximately 0.55%, compared to approximately 0.50% at December 31, 2008 and 79% of loans have a loan-to-value of 80% or below as of December 31, 2009. The HELOC segment is 18.6% of the total loan and lease portfolio at December 31, 2009.

• Non-Traditional Loan Products – The Corporation’s portfolio of loans and leases as reflected on the balance sheet includes $49.5 million of first lien mortgage positions on one to four family residential loans that are interest only loans. At December 31, 2009, the total first lien interest only residential loans of $49.5 million included $43.6 million of adjustable rate loans that convert to principal and interest payments between five and ten years after inception and $5.9 million of fixed rate loans that continue as interest only loans until reaching maturity. While these loans are considered “non-traditional loan products,” the Corporation does not consider these loans as having a higher risk since the underwriting standard and loan to value ratios are comparable to the remainder of the loan portfolio. Non-traditional loan balances are included in the residential mortgage totals or included in the home equity lines and loans as of December 31, 2009.

• Leasing – The Corporation’s $47.8 million leasing portfolio is national in scope and consists of over 4,150 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 53% of the Corporation’s leases are in 6 states with California being the largest at approximately 13%. Lease originations in California, Georgia, Florida and other states have been intentionally reduced due to continued deteriorating economic conditions nationally.

13

The lease portfolio balance at the end of 2009 was down $11.6 million to $47.8 million from the $59.3 million in 2008. At December 31, 2009 the lease portfolio was 5.4% of the total loan and lease portfolio compared to 6.6% at the end of 2008. The rate of growth within the leasing portfolio has been intentionally reduced and tighter underwriting standards have been implemented reducing lease delinquencies from 4.4% at December 31, 2008 to 3.5% at December 31, 2009. To mitigate further potential losses, the Corporation has 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 have improved overall lease portfolio performance as net charge-offs have declined each quarter since December 31, 2008. Net charge-offs have declined from $1.6 million in the fourth quarter of 2008 to $763 thousand in the fourth quarter of 2009. The Corporation believes that lease charge-offs should continue to improve in 2010.

Non-Performing Assets and Related Ratios as of December 31

(dollars in thousands)	2009			2008			2007			2006			2005
Non-accrual loans and leases	$	6,246		$	5,303		$	747		$	704		$	261
Loans 90 days or more past due and still accruing		668			504			1,263			119			129
Total non-performing loans and leases		6,914			5,807			2,010			823			390
Other real estate owned (“OREO”)		1,025			—			—			—			25
Total non-performing assets	$	7,939		$	5,807		$	2,010		$	823		$	415
Total TDR’s	$	3,896			—			—			—			—
Less: TDR’s included in non-performing loans and leases above		2,274			—			—			—			—
TDR’s not included in non-performing loans and leases	$	1,622			—			—			—			—
Total impaired loans (included in total non-performing loans and leases)	$	6,246			4,586			574			704			261
Allowance for loan and lease losses to non-performing assets		131.3	%		177.9	%		404.1	%		986.9	%		1,783.6	%
Allowance for loan and lease losses to non-performing loans and leases		150.8	%		177.9	%		404.1	%		986.9	%		1,897.9	%
Non-performing loans and leases to total loans and leases		0.78	%		0.65	%		0.25	%		0.12	%		0.07	%
Allowance for loan losses to total loans and leases		1.18	%		1.15	%		1.01	%		1.19	%		1.24	%
Non-performing assets to total assets		0.64	%		0.50	%		0.20	%		0.10	%		0.06	%
Net loan and lease charge-offs/average loans and leases		0.77	%		0.40	%		0.12	%		0.02	%		0.05	%
Net loan charge-offs/average loans		0.29	%		0.00	%		0.05	%		0.02	%		0.05	%
Net lease charge-offs/average leases		8.05	%		6.24	%		1.97	%		0.00	%		—
Period end portfolio loans and leases	$	885,739		$	899,577		$	802,925		$	681,291		$	595,165
Average loans and leases (average for year)	$	882,956		$	851,752		$	740,694		$	636,286		$	582,386
Allowance for loan and lease losses	$	10,424		$	10,332		$	8,124		$	8,122		$	7,402

Summary of Changes in the Allowance for Loan and Lease Losses
(dollars in thousands)	2009			2008			2007			2006			2005
Balance, January 1	$	10,332		$	8,124		$	8,122		$	7,402		$	6,927
Charge-offs:
Consumer		(45	)		(72	)		(396	)		(31	)		(158	)
Commercial and industrial		(1,933	)		(4	)		(41	)		—			—
Real estate		(53	)		—			—			(120	)		(156	)
Construction		(382	)
Leases		(4,957	)		(3,540	)		(599	)		—			—
Total charge-offs		(7,370	)		(3,616	)		(1,036	)		(151	)		(314	)
Recoveries:
Consumer		8			28			22			34			11
Commercial and industrial		—			—			46			3			12
Real estate		1			24			15			2			4
Leases		569			176			64			—			—
Total Recoveries		578			228			147			39			27
Net charge-offs		(6,792	)		(3,388	)		(889	)		(112	)		(287	)
Provision for loan and lease losses		6,884			5,596			891			832			762
Balance, December 31	$	10,424		$	10,332		$	8,124		$	8,122		$	7,402

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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,
	2009				2008				2007				2006				2005
(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	$	3,817	26.4	%	$	3,093	26.3	%	$	2,636	26.4	%	$	2,161	25.7	%	$	2,191	28.5	%
Real estate – construction		652	4.3			1,061	6.5			850	8.3			950	11.0			569	7.6
Real estate – mortgage		3,944	62.6			4,154	59.7			3,727	58.7			4,448	60.9			4,141	62.3
Consumer		108	1.3			70	0.9			62	1.0			77	1.4			143	1.6
Leases		1,403	5.4			1,894	6.6			789	5.6			140	1.0			—	—
Unallocated		500	—			60	—			60	—			346	—			358	—
Total	$	10,424	100	%	$	10,332	100	%	$	8,124	100	%	$	8,122	100	%	$	7,402	100.0	%

NON-INTEREST INCOME

2009 Compared to 2008

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

Non-interest income from residential mortgage operations related to the increase in residential mortgage loans being serviced, the gain on sale of residential mortgage loans due to increased origination activity, the investment trading account income, the gain on sale of investments, and service charges on deposit accounts, increased during the fourth quarter of 2009 compared to the fourth quarter of 2008

2008 Compared to 2007

For the year ended December 31, 2008, non-interest income was $21.5 million, an increase of $1.1 million or 5.4% above the $21.8 million in 2007. The primary factor for this decrease was a one-time gain on the sale of real estate of $1.3 million in 2007. Partially offsetting this decrease were the gain on sale of investments, interest rate floor income and increased wealth management revenue. Wealth Management Division revenues not associated with Lau Associates decreased by $1.3 million or 9.7% in 2008 due to the decline in the value of the financial markets and the loss of a significant customer resulting from a business combination in the fourth quarter of 2007.

NON-INTEREST EXPENSE

2009 Compared to 2008

For the year ended December 31, 2009, non-interest expense was $46.5 million, an increase of $7.9 million or 20.9% over the $38.7 million in 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 $762 thousand or 161.4% from $472 thousand a year ago, along with the one-time FDIC special assessment of $540 thousand. Professional fees increased $458 thousand or 29.5% from $1.6 million at December 31, 2008. Due diligence and merger related expense increased $460 thousand to $616 thousand from $156 thousand at December 31, 2008. Much of this increase is directly related to expenses associated with the Transaction with First Keystone.

Amortization of mortgage servicing rights increased to $216 thousand in the fourth quarter of 2009, a $135 thousand or 166.7% increase from $81 thousand in the fourth quarter of 2008. This is primarily due to higher rate mortgages refinancing during the continued low rate environment.

2008 Compared to 2007

For the year ended December 31, 2008, non-interest expense was $38.7 million, an increase of $3.7 million or 10.6% over $35.0 million in the same period in 2007. Primary factors contributing to this increase include a $647 thousand impairment of mortgage servicing assets from a year ago due to the rapid decline of long-term mortgage rates, FDIC

15

insurance costs rising $391 thousand or 483% from 2007 and personnel and related support costs associated with the acquisition of Lau Associates, the opening of the Corporation’s West Chester regional banking center, and the opening of The Bryn Mawr Trust Company of Delaware. Non-interest expenses in 2008 included approximately $135 thousand of expenses related to potential acquisitions that did not materialize and $141 thousand of amortization of intangible assets related to the Lau Associates acquisition.

INCOME TAXES

Income taxes for the year ended December 31, 2009 were $5.5 million compared to $5.0 million in 2008 and $6.6 million in 2007. The effective tax rate was 34.7% in 2009, 35.0% in 2008 and 32.6% in 2007. The decrease in the effective tax rate in 2009 when compared to 2008 is due to an increase in the level of tax-free income from municipal investments.

Income taxes for the year ended December 31, 2008 were $5.0 million compared to $6.6 million in 2007. The effective tax rate was 35.0% in 2008 and 32.6% in 2007. The increase in the effective tax rate in 2008 over 2007 was due to a decrease in tax free income related to the surrender of the BOLI insurance contract in 2008, state income taxes, and other smaller items.

BALANCE SHEET ANALYSIS

Asset Changes

Total assets increased $87.5 million to $1.24 billion as of December 31, 2009. This increase is largely the result of deposit inflows during 2009. The increase in the investment portfolio is $99.9 million or 92.2%. The loan portfolio, excluding leases, declined marginally by 0.3% or $2.3 million to $838.0 million in 2009 compared with $840.3 million in 2008. Within the loan portfolio, construction loans decreased $20.0 million or 34.2%, leases declined $11.6 million or 19.5% and residential mortgages declined $21.9 million or 16.5%. Partially offsetting this decline, home equity lines and loans in our local market area increased $23.3 million or 15.5% and commercial mortgages increased $15.3 million or 6.1%. The lease portfolio declined 19.5% or $11.6 million to $47.8 million from the December 31, 2008 balance of $59.4 million. This represented approximately 5.4% of total portfolio loans and leases. The decline in the construction loan and lease balances was due to the Corporation’s decision to limit exposure to those sections of the portfolio.

The Corporation’s investment portfolio increased to $208.2 million at December 31, 2009 from $108.3 million at December 31, 2008. The Asset and Liability Committee (“ALCO”) decided that increasing the investment portfolio to a minimum of 10% of total assets, and maintaining this level, should improve liquidity and provide the Corporation the opportunity to borrow additional funds through the Federal Home Loan Bank of Pittsburgh (“FHLB-P”), Federal Reserve or other repurchase agreements. The Corporation’s investment portfolio had no OTTI charges in 2008 or 2009.

Demand for high-quality loans throughout 2009 and the weak economy has affected both the quantity and quality of lending opportunities. Reductions in the construction loan portfolio over the past 12 months reflect the conversion of completed projects to permanent status and the intentional scale-back of new construction projects by our residential home building customers.

Additionally in 2009, premises and equipment increased marginally by $142 thousand over 2008 due to the opening of The Bryn Mawr Trust Company of Delaware and the West Chester Regional Banking Center, which was offset by depreciation. Mortgage servicing rights increased $1.9 million from $2.2 million in 2008 to $4.1 million in 2009. This increase is due to the increased volume of mortgage loans sold servicing retained, which increased $223 million during 2009 and the partial recovery of the temporary impairment of mortgage servicing rights during 2009 as the value of the mortgage servicing rights increased. The $1.7 million increase in goodwill and intangible assets was due to earn-out payments in connection with the purchase of Lau Associates, partially offset by amortization of identifiable intangibles.

Investment Portfolio

A maturity breakout of the investment portfolio by investment type at December 31, 2009 is as follows:

(dollars in thousands)	Maturing During 2010			Maturing From 2011 Through 2014			Maturing From 2015 Through 2019			Maturing After 2019			Total
Obligations of the U.S. Government and agencies:
Book value	$	—			34,826			48,139			2,497			85,462
Weighted average yield	$	—			1.60	%		2.64	%		2.10	%		2.20	%
State and political subdivisions:
Book value	$	1,553			6,748			8,128			8,430			24,859
Weighted average yield		2.38	%		2.74	%		3.95	%		4.14	%		3.59	%
Other investment securities:
Book value	$	250		$	1,250		$	—		$	—		$	1,500
Weighted average yield		4.25	%		3.03	%		—			—			3.23	%
Subtotal book value	$	1,803		$	42,824		$	56,267		$	10,927		$	111,821
Weighted average yield		2.64	%		1.82	%		2.83	%		3.67	%		2.53	%
Mortgage backed securities1)
Book value	$	—		$	644		$	9,518		$	47,763		$	57,925
Weighted average yield		—			4.16	%		5.43	%		5.44	%		5.42	%
Total book value	$	1,803		$	43,468		$	65,785		$	58,690		$	169,746	2)
Weighted average yield		2.64	%		1.86	%		3.21	%		5.11	%		3.51	%

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⁾ Included in the investment portfolio, but not in the table above, are $36.9 million of bond mutual funds which do not have a final stated maturity nor a constant stated coupon rate.

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Loan Portfolio

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

	December 31,
(dollars in thousands)	2009		2008		2007		2006		2005
Consumer	$	12,717	$	8,518	$	7,990	$	9,156	$	9,437
Commercial & Industrial		233,288		236,469		213,834		175,278		170,283
Commercial Mortgage		265,023		249,730		224,510		198,407		162,621
Construction		38,444		58,446		66,901		74,798		45,523
Residential Mortgage		110,653		132,536		121,313		103,572		99,602
Home Equity Lines & Loans		177,863		154,576		123,293		113,068		107,699
Leases		47,751		59,302		45,084		7,012		—
Total Portfolio Loans and Leases		885,739		899,577		802,925		681,291		595,165
Loans held for sale		3,007		3,024		5,125		3,726		2,765
	$	888,746	$	902,601	$	808,050	$	685,017	$	597,930

Loan Portfolio Maturity and Interest Rate Sensitivity

The loan maturity distribution and interest rate sensitivity table below excludes loans secured by one to four family residential properties and consumer loans as of December 31, 2009:

(dollars in thousands)	Maturing During 2010		Maturing From 2011 Through 2014		Maturing After 2014		Total
Loan Portfolio Maturity:
Commercial and industrial	$	98,718	$	81,942	$	52,628	$	233,288
Construction		17,584		19,834		1,026		38,444
Commercial mortgage		2,882		90,089		172,052		265,023
Leases		3,332		44,389		30		47,751
Total	$	122,516	$	236,254	$	225,736	$	584,506
Interest sensitivity on the above loans:
Loans with predetermined rates	$	19,941	$	170,626	$	74,025	$	264,592
Loans with adjustable or floating rates		102,575		65,628		151,711		319,914
Total	$	122,516	$	236,524	$	225,736	$	584,506

Liability Changes

Total liabilities increased $76.0 million or 7.2% from $1.06 billion as of December 31, 2008 to $1.13 billion as of December 31, 2009. This increase was largely due to an inflow of deposits as customers wanted to affiliate with a strong, stable and secure community bank. Additionally, the FDIC unlimited guarantee as well as several promotions also helped to generate new deposit growth. Core deposits (total deposits less wholesale deposits) which include market rate, certificates of deposit and demand accounts increased $100.9 million, while wholesale deposits declined $32.5 million as maturing deposits were not replaced. Funding from wholesale sources at December 31, 2009 included approximately $88.3 million in wholesale deposits and $144.8 million in FHLB-P borrowings ($180.9 million in total). This compares with approximately $150.8 million and $154.9 million in wholesale deposits and FHLB-P borrowings, respectively, at December 31, 2008 ($275.7 million in total).

See paragraph 3 of the Liquidity section on page 19 for further details on the Corporation’s FHLB-P borrowing capacity and availability.

During 2009, the Corporation successfully attracted new core deposit balances in savings, NOW and market rate accounts. The balance as of December 31, 2009 was $483.0 million, an increase of 45.2% from December 31, 2008.

Deposits

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

(dollars in thousands)	2009		2008		2007		2006		2005
Interest-bearing checking	$	151,432	$	135,513	$	137,486	$	143,742	$	154,319
Money market		229,836		142,707		114,310		111,338		112,319
Savings		101,719		54,333		36,181		40,441		46,258
Other wholesale deposits		52,174		30,185		—		—		—
Wholesale time deposits		36,118		120,761		129,820		19,976		5,000
Time deposits		153,705		211,542		203,462		200,446		150,322
Interest-bearing deposits	$	724,984	$	695,041	$	621,259	$	515,943	$	468,218
Non-interest bearing deposits		212.903		174,449		228,269		198,546		168,042
Total deposits	$	937,887	$	869,490	$	849,528	$	714,489	$	636,260

DISCUSSION OF SEGMENTS

The Corporation has three principal segments (Residential Mortgage, Wealth Management, and Banking) as defined by Codification 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)	2009			2008			2007
Residential loans held in portfolio*	$	110,653		$	132,536		$	121,313
Mortgage originations		291,613			109,219			127,611
Mortgage loans sold:
Servicing retained	$	266,759		$	43,575		$	24,300
Servicing released		6,222			34,259			64,466
Total mortgage loans sold	$	272,981		$	77,834		$	88,766
Percentage of mortgage loans sold:
Servicing retained %		97.7	%		56.0	%		27.4	%
Servicing released %		2.3	%		44.0	%		72.6	%
Loans serviced for others*	$	514,875		$	350,199		$	357,363
Mortgage servicing rights*	$	4,059		$	2,205		$	2,820
Gain on sale of loans	$	6,012		$	1,275		$	1,250
Loans servicing & late fees	$	1,387		$	1,194		$	1,115
Amortization of MSRs	$	853		$	367		$	327
(Recovery)/Impairment of MSRs	$	(137	)	$	668		$	21
Basis point gain on loans sold		220			164			141

* Period end balance

17

The Mortgage Banking Segment had a very strong year with a pre-tax segment profit (“PTSP”) of $3.8 million in 2009 compared with a pre-tax segment loss (“PTSL”) of $198 thousand in 2008 due to the low interest rate environment in 2009 which allowed mortgage originations to rise 167% from 2008 levels.

Mortgage originations in 2009 of $291.6 million were up from a year ago and 2007. The value of mortgages sold (servicing retained and servicing released) in 2009 of $273.0 million was 250.7% higher than those sold in 2008. Due to the continued low interest rate environment in 2009, originations remained strong throughout the year with exceptional performance in the first and second quarters of 2009 resulting in a gain of $4.4 million on the sale of residential mortgage loans, 533% above the $695 thousand during the first six months of 2008.

Loans serviced for others were $357.4 million in 2007, $350.2 million in 2008 and $514.9 million in 2009.

Wealth Management Segment Activity

(in millions)	2008		2007		2006
Total wealth assets under management, administration, supervision and brokerage	$	2,871.2	$	2,146.4	$	2,277.1

The Wealth Management Segment reported a 2009 PTSP of $3.9 million, a 29.0% or a $1.6 million decrease over 2008. The decrease in PTSP was primarily due to a $1.9 million or 2.3% increase in Wealth Management Segment overall expense, due to the formation of The Bryn Mawr Trust Company of Delaware and the startup of BMT Asset Management, partially offset by a $336 thousand or 2.4% increase in revenue. The increase in Wealth Management Segment revenue is attributable to the rebound in the financial markets during 2009, expanded wealth management services including the formation of BMT Asset Management and new relationships within our demographic region.

The Wealth Management Segment reported a 2008 PTSP of $5.5 million, an 18% or a $1.2 million decrease over 2007. The decrease in PTSP was primarily due to a $1.5 million or 22% increase in Wealth Management Segment overall expense, partially offset by a $353 thousand or 2.6% increase in revenue. The increase in Wealth Management Segment revenue was attributable to the Lau Associates acquisition, as organic fees for the Wealth Management Segment were reduced due to the decline in financial market valuations and the loss of an institutional client in November 2007 due to a business consolidation.

Banking Segment Activity

Banking segment data as presented in Note 28 in the accompanying Notes to Consolidated Financial Statements indicates a PTSP of $9.0 million in 2009, $9.9 million in 2008 and $13.8 million in 2007, which included a $1.3 million gain on real estate. See Components of Net Income earlier in this documentation for a discussion of the Banking Segment.

CAPITAL

Consolidated shareholder’s equity of the Corporation was $103.9 million or 8.4% of total assets as of December 31, 2009 compared to $92.4 million or 8.0% of total assets as of December 31, 2008.

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.

As disclosed earlier in this document, the Corporation elected not to participate in the Federal government’s Troubled Asset Relief Program (“TARP”) for several reasons, the most significant being the strong capital position of the Corporation and the Bank. 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.

The Corporation ended its common stock repurchase program in May 2008 as the financial crisis and economic downturn began.

To enhance the Tier II regulatory capital ratios of the Corporation and the Bank, the Bank raised $7.5 million in subordinated debt on April 20, 2009 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. Subordinated debt qualifies as Tier II regulatory capital for the first five years from the date of issuance and thereafter is discounted as the subordinated debt approaches maturity, with one fifth of the original amount excluded from Tier II capital each year during the last five years before maturity.

Also on April 20, 2009, in accordance with and reliance on the exemption provided by Section 4(2) of the Securities Act, the Corporation sold 150,061 shares of its common stock, par value $1.00 per share (“Shares”), in a private placement of securities to a purchaser which qualifies as an accredited investor under Rule 501(a) of Regulation D under the Securities Act. The purchase price per Share was equal to the average closing price of shares of the Corporation’s common stock on NASDAQ Global Markets 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

18

any brokerage fees in connection with the sale of the Shares. The Shares sold constituted 1.7% of the outstanding shares of the Corporation’s common stock, as determined immediately after the closing of the sale. The Corporation intends to use the proceeds from the sale of the Shares to satisfy its working capital requirements and general corporate purposes, and for any other purpose deemed to be in the Corporation’s best interest.

Additionally, on June 17, 2009, the SEC declared effective a shelf registration statement on Form S-3/A (“Shelf Registration Statement”) filed by the Corporation on June 15, 2009. The Shelf Registration Statement is intended to allow 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. The Corporation also registered for resale in the Shelf Registration Statement the Shares issued in the private placement of securities discussed in the preceding paragraph.

On July 20, 2009 the corporation registered with the SEC the Bryn Mawr Bank Corporation Dividend Reinvestment and Direct Stock Purchase Plan (“DRIP”). The DRIP provides investors with a convenient and economical means of purchasing shares of the Corporation’s common stock by reinvesting the cash dividends paid on the common stock and by making additional optional cash purchases. As of December 31, 2009 the Corporation had 81,641 shares registered under the DRIP and received $1.3 million in additional cash purchases under the optional cash purchase and request for waiver program.

Under the terms of the Lau Associates acquisition, the Corporation has two remaining earn-out payments due in the first quarter of each of 2011 and 2012 (which will each be recorded at the end of 2010 and 2011), with the maximum purchase price not exceeding $19 million ($10.9 million has been accrued or paid through December 31, 2009). See Note 2 for information on the Corporation’s treatment of goodwill and other intangible assets related to this transaction.

See Note 1-V in the Notes to Consolidated Financial Statements for additional information.

LIQUIDITY

The Corporation has significant sources and availability of liquidity at December 31, 2009 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-P 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, generally available in blocks of $1.0 million or more, CDARS, PLGIT, IND and IDC Programs. Usage of these programs decreased by approximately $26 million in 2009.

Maximum borrowing capacity with the FHLB-P as of December 31, 2009 was approximately $448 million, with an unused borrowing availability of approximately $303 million, and availability at the Federal Reserve was approximately $55 million. Overnight Fed Funds lines consist of lines from 6 banks totaling $75 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, 2009 the Corporation held approximately $7.9 million of FHLB-P stock. As of December 31, 2008 the FHLB-P announced it had voluntarily suspended the payment of dividends and the repurchase of excess capital stock until further notice. The Corporation’s use of FHLB-P borrowings as a source of funds is effectively more expensive due to the suspension of FHLB-P dividends and the related capital stock redemption restrictions. It should be noted that the FHLB-P capital ratios remained above regulatory guidelines. The suspension of dividends and repurchase of excess capital stock will continue until further notice by the FHLB-P.

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 Corporation had approximately $10 million in balances at December 31, 2009 under this program which are classified on the balance sheet as savings and NOW accounts. The Corporation can request an increase in the agreement amount as it deems necessary.

The Corporation’s investment portfolio of $208.2 million at December 31, 2009 was approximately 16.8% 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-P, Federal Reserve or through other repurchase agreements.

19

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 2010 earning asset growth with wholesale sources, along with deposit growth from the newly opened West Chester Regional Banking Center and deposit inflows from troubled institutions.

The Corporation elected to participate (i.e. did not opt out of) in the FDIC’s additional deposit insurance program originally covering balances up to $250 thousand and then providing additional coverage over $250 thousand. After final adjustments in January 2009, this program now covers the following: all non-interest bearing DDA accounts; NOW accounts paying less than 50 basis points; interest on lawyer trust accounts (“IOLTA”); and certain trust sweep accounts.

This program was scheduled to end on December 31, 2009, but on August 26, 2009 the FDIC extended the TLGP until June 30, 2010.

OFF BALANCE SHEET RISK

The following chart presents the off-balance sheet commitments of the Bank as of December 31, 2009, 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	$	315.0	$	190.4	$	20.6	$	8.7	$	95.3
Standby letters of credit		18.4		6.7		11.6		0.1		—
Total	$	333.4	$	197.1	$	32.2	$	8.8	$	95.3

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.

CONTRACTUAL CASH OBLIGATIONS OF THE CORPORATION AS OF DECEMBER 31, 2009

(dollars in thousands)	Total		Within 1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Deposits without a stated maturity	$	748,064	$	748,064	$	—	$	—	$	—
Wholesale and retail certificates of deposit		189,823		173,363		15,730		659		71
Operating leases		20,841		1,369		2,561		1,998		14,913
Purchase obligations		5,084		1,780		2,109		1,195		—
Non-discretionary pension contributions		1,938		137		273		314		1,214
Total	$	965,750	$	924,713	$	20,673	$	4,166	$	16,198

OTHER INFORMATION

New Offices

The Corporation opened its West Chester Regional Banking Center in January 2009. The West Chester PA Regional Banking Center is a conveniently located, state-of-the-art 4,000 foot facility with a multi-lane drive-up and twenty-four hour ATM banking. Also during the year, the Corporation completed the modernization of its Wayne, PA branch and began a significant modernization of its Paoli, PA branch, making each branch more visible and enhancing its ability to attract new business.

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.

The FDIC base assessment rate is between 12 and 16 basis points. The Corporation was not subject to additional adjustments of up to 8 basis points based on the level of unsecured and secured borrowings effective April 1, 2009.

Effects of Inflation

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

20

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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 Analysis of Interest Rates and Interest Differential, Net Interest Income and Net Interest Margin 2009 Compared to 2008, and - 2008 Compared to 2007, Net Interest Margin Over the Last Five Quarters, Interest Rate Sensitivity, Summary Interest Rate Simulation, and Gap Report; “Provision for Loan and Lease Losses” - General Discussion of Allowance for Loan and Lease Losses, Asset Quality and Analysis of Credit Risk, Non-Performing Assets 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, 2008”; and “Other Information.”

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

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:

• 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;

21

• 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;

• 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;

• 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.

22

Management’s Report on Internal Control Over Financial Reporting

The Corporation’s Management is responsible for both establishing and maintaining adequate internal controls over financial reporting. As of December 31, 2009, Management conducted an assessment of the effectiveness of the Corporation’s internal controls over financial reporting and concluded that such internal controls are effective and found no material weaknesses. The assessment was accomplished using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Management has concluded that, as of December 31, 2009, the Corporation’s internal control over financial reporting is effective, based on the COSO criteria.

Management’s assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2009 has been audited by KPMG LLP, (“KPMG”) the Corporation’s independent registered public accounting firm having responsibility for auditing the Corporation’s financial statements. KPMG has expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2009.

23

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, 2009 and 2008, 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, 2009. 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, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, 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), the Corporation’s internal control over financial reporting as of December 31, 2009, 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 15, 2010 expressed an unqualified opinion on the effectiveness of the Corporation’s internal control over financial reporting.

Philadelphia, Pennsylvania

March 15, 2010

24

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, 2009, 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, 2009, 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, 2009 and 2008, 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, 2009, and our report dated March 15, 2010 expressed an unqualified opinion on those consolidated financial statements.

Philadelphia, Pennsylvania

March 15, 2010

25

Consolidated Balance Sheets

	As of December 31,
	2009			2008
	(dollars in thousands, except share and per share data)
Assets
Cash and due from banks	$	11,670		$	18,776
Interest bearing deposits with banks		58,472			45,100
Money market funds		9,175			5,109
Cash and cash equivalents		79,317			68,985
Investment securities available for sale, at fair value (amortized cost of $206,689 and $107,255 as of December 31, 2009 and 2008, respectively)		208,224			108,329
Loans held for sale		3,007			3,024
Portfolio loans and leases		885,739			899,577
Less: Allowance for loan and lease losses		(10,424	)		(10,332	)
Net portfolio loans and leases		875,315			889,245
Premises and equipment, net		21,438			21,296
Accrued interest receivable		4,289			4,033
Deferred income taxes		4,991			5,478
Mortgage servicing rights		4,059			2,205
Bank owned life insurance (BOLI)		—			15,585
FHLB stock		7,916			7,916
Goodwill		6,301			4,629
Intangible assets		5,421			5,729
Other investments		3,140			2,950
Other assets		15,403			11,942
Total assets	$	1,238,821		$	1,151,346
Liabilities
Deposits:
Non-interest-bearing demand	$	212,903		$	174,449
Savings, NOW and market rate accounts		482,987			362,738
Other wholesale deposits		52,174			—
Wholesale time deposits		36,118			120,761
Time deposits		153,705			211,542
Total deposits		937,887			869,490
Borrowed funds		144,826			154,939
Mortgage payable		2,062			—
Subordinated debt		22,500			15,000
Accrued interest payable		1,987			4,369
Other liabilities		25,623			15,135
Total liabilities		1,134,885			1,058,933
Shareholders’ equity
Common stock, par value $1; authorized 100,000,000 shares; issued 11,786,084 and 11,513,782 shares as of December 31, 2009 and 2008, respectively, and outstanding of 8,866,420 and 8,592,259 shares as of December 31, 2009 and 2008, respectively		11,786			11,514
Paid-in capital in excess of par value		17,705			12,983
Accumulated other comprehensive loss, net of tax benefit		(6,913	)		(7,995	)
Retained earnings		111,290			105,845
		133,868			122,347
Less: Common stock in treasury at cost – 2,919,664 and 2,921,523 shares as of December 31, 2009 and 2008, respectively		(29,932	)		(29,934	)
Total shareholders’ equity		103,936			92,413
Total liabilities and shareholders’ equity	$	1,238,821		$	1,151,346
Book value per share	$	11.72		$	10.76
Tangible book value per share	$	10.40		$	9.55

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

26

Consolidated Statements of Income

	For the Years Ended December 31,
	2009			2008		2007
	(dollars in thousands, except per share data)
Interest income:
Interest and fees on loans and leases	$	51,686		$	53,251	$	51,785
Interest on cash and cash equivalents		272			300		250
Interest on investment securities		4,934			4,383		2,183
Total interest income		56,892			57,934		54,218
Interest expense:
Interest expense on savings, NOW and market rate deposits		3,094			3,753		4,169
Interest expense on time deposits		4,644			6,791		8,662
Interest expense on wholesale time and other wholesale deposits		2,232			5,498		4,925
Interest expense on subordinated debt		1,108			408		—
Interest expense on other borrowings and mortgage payable		5,021			4,346		2,220
Total interest expense		16,099			20,796		19,976
Net interest income		40,793			37,138		34,242
Provision for loan and lease losses		6,884			5,596		891
Net interest income after provision for loan and lease losses		33,909			31,542		33,351
Non-interest income:
Fees for wealth management services		14,178			13,842		13,502
Service charges on deposit accounts		1,951			1,685		1,464
Loan servicing and other fees		1,387			1,194		1,115
Net gain on sale of loans		6,012			1,275		1,250
Net gain on sale of securities		1,923			230		—
Net gain on sale of real estate		—			—		1,333
BOLI income		—			261		424
Other operating income		3,019			2,985		2,693
Total non-interest income		28,470			21,472		21,781
Non-interest expenses:
Salaries and wages		22,275			18,989		17,116
Employee benefits		5,578			4,172		4,548
Occupancy and bank premises		3,637			3,165		2,862
Furniture, fixtures, and equipment		2,407			2,324		2,078
Advertising		1,084			1,115		1,026
Amortization of mortgage servicing rights		853			367		327
(Recovery)/Impairment of mortgage servicing rights		(137	)		668		21
Professional fees		2,008			1,550		1,585
Intangible asset amortization		308			141		—
FDIC insurance		1,234			472		81
FDIC special assessment		540			—		—
Due diligence and merger related expenses		616			156		—
Other operating expense		6,139			5,557		5,315
Total non-interest expenses		46,542			38,676		34,959
Income before income taxes		15,837			14,338		20,173
Income tax expense		5,500			5,013		6,573
Net income	$	10,337		$	9,325	$	13,600
Basic earnings per common share	$	1.18		$	1.09	$	1.59
Diluted earnings per common share	$	1.18		$	1.08	$	1.58
Dividends per share	$	0.56		$	0.54	$	0.50
Weighted-average basic shares outstanding		8,732,004			8,566,938		8,539,904
Dilutive potential common shares		16,719			34,233		93,638
Weighted-average dilutive shares		8,748,723			8,601,171		8,633,542

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

27

Consolidated Statements of Cash Flows

	For the Years Ended December 31,
	2009			2008			2007
	(dollars in thousands)
Operating activities:
Net Income	$	10,337		$	9,325		$	13,600
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan and lease losses		6,884			5,596			891
Provision for depreciation and amortization		3,106			1,920			1,596
Loans originated for resale		(272,964	)		(74,458	)		(90,164	)
Proceeds from sale of loans		278,993			77,834			90,015
Purchase of trading securities		(5,076	)		—			—
Gain on trading securities		(255	)		—			—
Proceeds from sale of trading securities		5,331			—			—
Net gain on sale of loans		(6,012	)		(1,275	)		(1,250	)
Net gain on sale of real estate		—			—			(1,333	)
Net gain on sale of investment securities		(1,923	)		—			—
Provision for deferred income taxes (benefit)		(57	)		(600	)		82
Stock based compensation cost		386			277			75
Change in income taxes payable/receivable		892			(906	)		707
Change in accrued interest receivable		(256	)		283			(84	)
Change in accrued interest payable		(2,382	)		(1,925	)		1,948
Change in mortgage servicing rights		(1,854	)		615			63
Change in intangible assets		308			141			—
Other, net		637			(4,109	)		(3,288	)
Net cash provided by operating activities		16,095			12,718			12,858
Investing activities:
Purchases of investment securities		(203,016	)		(105,865	)		(17,033	)
Proceeds from maturities of investment securities and mortgage-backed securities pay downs		31,152			10,884			8,775
Proceeds from sales of investment securities available for sale		62,905			26,011			—
Proceeds from calls of investment securities		18,390			9,705			8,595
Proceeds from sale of real estate		—			—			1,850
Proceeds from BOLI prepayment		15,585			—			—
Net change in other investments		(190	)		(5,226	)		(1,424	)
Net portfolio loan and lease repayments (originations)		5,106			(100,040	)		(122,524	)
Purchase of BOLI		—			—			(15,000	)
Purchase of premises and equipment		(2,090	)		(5,930	)		(2,388	)
Net change in Other Real Estate Owned (“OREO”)		915			—			110
Purchase of Lau Associates		(1,672	)		(9,875	)		—
Net cash used by investing activities		(72,915	)		(180,336	)		(139,139	)
Financing activities:
Change in demand, NOW, savings and market rate deposit accounts		158,703			20,941			22,179
Change in time deposits		(57,837	)		8,080			3,016
Change in wholesale time and other wholesale deposits		(32,469	)		(9,059	)		109,844
Dividends paid		(4,892	)		(4,626	)		(4,269	)
Increase in borrowed funds greater than 90 days		—			124,939			45,000
Repayment of borrowed funds greater than 90 days		(10,113	)		—			(15,000	)
Net change in subordinated debt		7,500			—			—
Mortgage payable		2,062			—			—
Purchase of treasury stock		(42	)		(361	)		(2,420	)
Tax benefit from exercise of stock options		66			185			182
Proceeds from issuance of common stock		3,660			—			—
Proceeds from exercise of stock options		514			1,230			918
Net cash provided by financing activities		67,152			141,329			159,450
Change in cash and cash equivalents		10,332			(26,289	)		33,269
Cash and cash equivalents at beginning of year		68,985			95,274			62,005
Cash and cash equivalents at end of year	$	79,317		$	68,985		$	95,274

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

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Consolidated Statements of Cash Flows (Continued)

	For the Years Ended December 31,
	2009		2008			2007
	(dollars in thousands)
Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	4,650	$	6,238		$	6,192
Interest		18,481		22,721			18,028
Supplemental cash flow information:
Unsettled AFS securities	$	7,996	$	—		$	—
Change in other comprehensive income		1,664	$	(5,678	)	$	223
Change in deferred tax due to change in other comprehensive income		582		(1,987	)		77
Transfer of loans to other real estate		1,940		—			—

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

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Consolidated Statements of Changes in Shareholders’ Equity

	For the Years Ended December 31, 2008, 2007 and 2006
	Shares of Common Stock Issued		Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Stock			Total Shareholders’ Equity
	(dollars in thousands)
Balance - December 31, 2006	11,373,182		$	11,373		$	10,598		$	91,815		$	(4,450	)	$	(27,244	)	$	82,092
Net Income	—			—			—			13,600			—			—			13,600
Dividends declared - $0.50 per share	—			—			—			(4,269	)		—			—			(4,269	)
Other comprehensive income, net of tax expense of $77	—			—			—			—			146			—			146
Tax benefit stock option exercise	—			—			182			—			—			—			182
Purchase of treasury stock	—			—			—			—			—			(2,420	)		(2,420	)
Retirement of treasury stock	(4,128	)		(4	)		(37	)		—			—			41			—
Common stock issued	65,278			65			955			—			—			—			1,020
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 income, net of tax benefit of ($1,987)	—			—			—			—			(3,691	)		—			(3,691	)
Tax benefit stock option exercise	—			—			185			—			—			—			185
Purchase of treasury stock	—			—			—			—			—			(361	)		(361	)
Retirement of treasury stock	(5,096	)		(5	)		(45	)		—			—			50			—
Common stock issued	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 stock option exercise	—			—			66			—			—			—			66
Purchase of treasury stock	—			—			—			—			—			(42	)		(42	)
Retirement of treasury stock	(4,522	)		(4	)		(40	)		—			—			44			—
Common stock issued	236,224			236			3,424			—			—			—			3,660
Stock option exercises	40,600			40			474			—			—			—			514
Balance - December 31, 2009	11,786,084		$	11,786		$	17,705		$	111,290		$	(6,913	)	$	(29,932	)	$	103,936

Consolidated Statements of Comprehensive Income

	For the Years Ended December 31,
	2009		2008			2007
	(dollars in thousands)
Net income	$	10,337	$	9,325		$	13,600
Other comprehensive income:
Unrealized investment gains, net of tax expense of $161, $318 and $198, respectively		300		589			370
Change in unfunded pension and post-retirement liability, net of tax expense (benefit) of $421, ($2,305) and $(121), respectively		782		(4,280	)		(224	)
Comprehensive income	$	11,419	$	5,634		$	13,746

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

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Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 nine 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 Corporation trades on the NASDAQ Global Market (“NASDQ”) under the symbol BMTC.

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 with 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 2010, 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.

In June 2009, the FASB issued “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” which was incorporated in Accounting Standards Codification (“ASC”) 105, “Generally Accepted Accounting Principles.” This standard established the FASB Accounting Standards Codification as the single source of authoritative U.S. accounting and reporting standards, excluding the requirements and guidance issued by the SEC, which were unaffected by the Codification. ASC 105 did not change current GAAP, but it did change the manner in which accounting literature is organized and referenced. This standard was effective at the quarter ended September 30, 2009 and accounting literature references were updated in our financial statements accordingly starting in the 2009 third quarter. The adoption of this standard did not affect our financial statements.

C. Cash and Cash Equivalents

Cash and cash equivalents include cash 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 $1.3 million and $1.9 million at December 31, 2009 and December 31, 2008, 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

31

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 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 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 intent 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 or, if principal is considered fully collectible, recognized as interest income until qualifying for return to accrual status. Loans and leases are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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, industry concentration, overall exposure to a single customer, adequacy of collateral, the dependence on collateral, and results of internal loan review, including borrowers perceived financial and management strengths, the amounts and timing of the present value of future cash flows, and access to additional funds.

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.

32

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 FHLB-P Stock

Other investments include Community Reinvestment Act (“CRA”) investment, and equity stocks without a determinable fair market value. The equity stocks include the Federal Reserve Bank and Atlantic Central Bankers Bank. The Corporation is required to hold Federal Home Loan Bank of Pittsburgh (“FHLB-P”) stock as a condition of borrowing funds from the FHLB-P. As of December 31, 2009, the carrying value of our FHLB-P stock was $7.9 million. Ownership of FHLB-P stock is restricted and there is no market for these securities. In 2009, the FHLB-P reported significant losses due to numerous factors, including other-than-temporary impairment charges on its portfolio of private-label mortgage-backed securities. The FHLB-P announced a capital restoration plan in February of 2009 which restricts it from repurchasing or redeeming capital stock or paying dividends. If the FHLB-P’s financial condition declines further, other-than-temporary impairment charges related to our investment in FHLB stock could occur in future periods. For further information on the FHLB-P stock, see Note 10 – Borrowed Funds.

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. The Corporation’s assessment of impairment is applied to the factors considered in determining impairment. 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 on a loan-by-loan basis 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.

J. Troubled Debt Restructure (“TDR”)

A TDR is when a creditor, for economic or legal reason related to debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. A concession may include extending repayment terms, reducing the interest rate or forgiving principal and/or accrued interest. If the debtor is experiencing financial difficulty and the creditor has granted a concession, the Corporation will make the disclosures related to TDR reporting. It should be noted that not all modifications are a concession, thus a TDR. If the modified terms are consistent with market conditions and represent terms the debtor could obtain from another creditor in the current market, the modification is not a TDR.

K. Other Real Estate Owned

Other real estate owned (“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 are capitalized and costs related to holding the property are charged to expense.

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.

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N. BOLI

The Corporation purchased $15.0 million of BOLI during the second quarter of 2007. On August 13, 2008 the Bank gave notice to its BOLI insurance carrier that it was surrendering its separate account BOLI contract. The Bank received $15.6 million in cash on February 9, 2009. As part of the surrender, the Corporation has represented to the insurance carrier that it will not enter into any other BOLI agreement or obtain life insurance on any of the employees covered by the BOLI policy for five years.

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. In 2007, BOLI income was tax-exempt. However, as a result of the surrender of the BOLI contract in August 2008, the total income earned in 2007 and 2008 became taxable income. This resulted in additional tax expense of $266 thousand in 2008.

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, are recognized as compensation cost in the statement of income at their fair value. The fair value of stock option grants is determined using the Black-Scholes pricing model. The assumptions necessary for the calculation of the fair value are expected life of options, annual volatility of stock price, risk free interest rate and annual dividend yield.

Stock-based compensation expense for 2009, 2008 and 2007 were $386 thousand, $277 thousand and $75 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 this period. Diluted earnings per common share takes into account the potential dilution that could occur if stock options were exercised and converted into common stock. 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.

As required by ASC 740 “Accounting for 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 adjustments to retained earnings for unrecognized tax benefits as a result of the implementation of ASC 740.

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.

34

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 (MSRs) are recognized as separate assets when rights are retained through the sale of financial assets. Capitalized servicing rights are amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income 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. Interest Rate Floor

The Corporation accounts for derivatives under FASB guidance related to Accounting for Derivative Instruments on Hedging Activities, as amended. The Corporation records interest rate floors, which are not used as hedging instruments, at fair value on the balance sheet as part of other assets. Changes in the fair value of the interest rate floor are recorded in current earnings as other operating income or other operating expense, depending on whether the net change in value for the applicable period was a gain or loss. The interest rate floor was closed out in January 2008.

V. Goodwill and Intangible Assets

The Corporation accounts for goodwill and other intangible assets in accordance with ASC 350, “Intangibles – Goodwill and Other.” All goodwill and intangible assets as of December 31, 2009 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. 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 customer relationships, a non-compete agreement and a trade name. The customer relationships and non-compete agreement intangibles are amortized on the straight-line basis over the estimated useful life of the asset. The trade name intangible has an indefinite life and is evaluated for impairment annually.

W. Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

X. New Accounting Pronouncements

Standards Adopted:

FASB ASC 820 – Fair Value Measurement and Disclosures

The Corporation follows ASC 820, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are not Orderly.” This standard provides additional guidance for estimating fair value in accordance with the standard on Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. ASC 820 became effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. The adoption of this Standard did not have a material effect on our financial condition or results of operations.

FASB ASC 825 – Financial Instruments

FASB issued ASC 825 related to the interim disclosure about fair value of financial instruments which amended the previous standard on disclosures about fair value of financial instruments to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. All publicly traded companies are required to include disclosures about the fair value of financial instruments whenever it issues summarized financial information for interim reporting periods. ASC 825 became effective for interim reporting periods ending after June 15, 2009. The Corporation adopted

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this standard as of June 30, 2009 and has made the required disclosures of fair value of financial instruments in Note 13 of this Annual Report.

FASB ASC 320 – Investments – Debt and Equity Securities

The Corporation adopted standards related to the recognition and presentation of other than temporary impairment as of June 30, 2009. Since the Corporation has not had any other-than-temporary impairment as of April 1, 2009, no cumulative-effect adjustments were required to be recorded at adoption.

FASB ASC 815 – Derivatives and Hedging

In March 2008, the FASB issued ASC 815, “Disclosures about Derivative Instruments and Hedging Activities” an amendment to previous guidance. ASC 815 amends the previous related guidance by requiring expanded disclosures about derivative instruments and hedging activities. This statement will require us to provide additional disclosure about a) how and why we use derivative instruments; b) how we account for derivative instruments and related hedged items under ASC 815 and its related interpretations; and c) how derivative instruments and related hedged items effect our financial condition, financial performance, and cash flows. This does not change the accounting for derivatives under previous guidance.

FASB ASC 815 was effective for the fiscal year and interim periods beginning January 1, 2009. The Corporation adopted this statement effective January 1, 2009. The Corporation has determined that the adoption of this standard did not have a material impact on the Corporation’s consolidated financial statements.

FASB ASC 805 – Business Combinations

In December 2007, FASB issued ASC 805, “Business Combinations.” This standard retains the previous FASB guidance that the acquisition method of accounting be used for all business combinations. However, ASC 805 does make significant changes to the accounting for a business combination achieved in stages, the treatment of contingent consideration, transaction and restructuring costs (which are recognized when incurred), and other aspects of business combination accounting. ASC 805 was effective January 1, 2009, and changes the Corporation’s accounting treatment for business combinations on a prospective basis.

FASB ASC-715 – Compensation, Retirement Benefits

FASB issued a Codification standard referencing an Employer’s Disclosures About Pension and Post Retirement Benefits, to provide guidance on an employer’s disclosure about the plan assets of a defined pension or post retirement plan. The Codification requires an entity to disclose more information on how investment allocation decisions are made, the major categories of plan assets including concentration risks and fair value measurements and the fair value techniques and inputs used to measure the plan. The Corporation has adopted the Codification effective December 31, 2009 and the Corporation made the required disclosure in this Annual Report.

FASB ASC 855 – Subsequent Events

The Corporation follows the ASC standards related to subsequent events. The ASC establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The statement sets forth (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosure that an entity should make about events or transactions that occurred after the balance sheet date. The standard is effective for fiscal years and interim periods ending after June 15, 2009, and is applied prospectively. The Corporation adopted this standard as of June 30, 2009 and adoption did not have an impact on the results of operations or financial position.

Standards Not Yet 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 will adopt the standard on January 1, 2010 and has not yet determined the effect of the adoption on its consolidated financial statements, if any.

FASB ASC 810 – Consolidation – Variable Interest Entities

In June 2009, the FASB issued ASC 810 related to amendments to FASB interpretation No. 46(R) 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

36

beneficiary of a VIE. ASC 810 is effective for fiscal years and interim periods beginning after November 15, 2009. The Corporation will adopt the standard on January 1, 2010 and has not yet determined the effect of the adoption on its consolidated financial statements, if any.

2. GOODWILL & OTHER INTANGIBLE ASSETS

The Corporation’s goodwill and intangible assets related to the acquisition of Lau Associates LLC in July, 2008 for the years ending December 31, 2009 and 2008 is as follows:

(dollars in thousands)	Beginning Balance 1/1/09		Additions		Amortization			Ending Balance 12/31/09		Amortization Period
Goodwill	$	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

(dollars in thousands)	Beginning Balance 1/1/08		Additions		Amortization			Ending Balance 12/31/08		Amortization Period
Goodwill	$	—	$	4,629	$	—		$	4,629	Indefinite
Customer relationships		—		5,100		(117	)		4,983	20 Years
Non compete agreement		—		530		(24	)		506	10 Years
Brand (trade name)		—		240		—			240	Indefinite
Total	$	—	$	10,499	$	(141	)	$	10,358

Under the terms of the Lau Associates acquisition, the Corporation has two remaining contingent earn-out payments due in the first quarter of each of 2011 and 2012 (which would each be recorded at the end of 2010 and 2011), with the maximum purchase price not exceeding $19 million.

3. INVESTMENT SECURITIES

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

As of 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

As of December 31, 2008

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Estimated Market Value
Obligations of the U.S. Government and agencies	$	10,999	$	171	$	—		$	11,170
State & political subdivisions		7,071		43		(18	)		7,096
Federal agency mortgage backed securities		78,054		1,647		(42	)		79,659
Corporate bonds		10,181		—		(727	)		9,454
Other debt securities		950		—		—			950
Total	$	107,255	$	1,861	$	(787	)	$	108,329

The following table shows the amount of securities that were in an unrealized loss position at December 31, 2009:

	Less than 12 Months					12 Months or Longer				Total
(dollars in thousands)	Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)		Fair Value		Unrealized Losses
Obligations of the U.S. Government and agencies	$	43,166	$	(476	)	$	—	$	—	$	43,166	$	(476	)
State & political subdivisions		8,631		(32	)		—		—		8,631		(32	)
Federal agency mortgage backed securities		—		—			—		—		—		—
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	)

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

The Corporation does not intend to sell the other-than-temporarily impaired securities, and it is more likely than not it will not be required to sell such securities before recovery occurs.

At December 31, 2009 securities having an amortized cost of $75.2 million were specifically pledged as collateral for public funds, trust deposits, the FRB discount window program, FHLB-P borrowings and other purposes. The FHLB-P has a blanket lien on non-pledged, mortgage related loans and securities as part of the Bank’s borrowing agreement with FHLB-P.

The amortized cost and estimated market value of investment securities at December 31, 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.

	2009
(dollars in thousands)	Amortized Cost		Estimated Market Value
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 backed securities		57,925		59,670
Total	$	169,746	$	171,254

Included in the investment portfolio, but not in the table above, are $36.9 million of bond mutual funds which do not have a final stated maturity nor a constant stated coupon rate.

The sale of debt securities in 2009 totaled $61.0 million. The sale of debt securities in 2008 was $26.0 million, and there were no sales of debt securities in 2007.

4. LOANS AND LEASES

A. Loans and leases outstanding at December 31 are detailed by category as follows:

(dollars in thousands)	2009		2008
Loans held for sale	$	3,007	$	3,024
Real estate loans:
Commercial mortgage loans	$	265,023		249,730
Home equity lines and loans		177,863		154,576
Residential mortgage loans		110,653		132,536
Construction loans		38,444		58,446
Total real estate loans		591,983		595,288
Commercial and industrial loans		233,288		236,469
Consumer loans		12,717		8,518
Leases		47,751		59,302
Total portfolio loans and leases		885,739		899,577
Total loans and leases	$	888,746	$	902,601
Loans with predetermined rates	$	344,398	$	351,925
Loans with adjustable or floating rates		544,348		550,676
Total loans and leases	$	888,746	$	902,601
Net deferred loan origination costs and (fees) included in the above loan table	$	430	$	343

B. Leases outstanding at December 31 are detailed by components of the net investment as follows:

	December 31
(dollars in thousands)	2009			2008
Minimum lease payments receivable	$	54,556		$	69,812
Unearned lease income		(9,014	)		(13,784	)
Initial direct costs and deferred fees		2,209			3,274
Total	$	47,751		$	59,302
C. Non Performing Loans and Leases:
Non-accrual loans and leases	$	6,246		$	5,303
Loans past due 90 days or more and still accruing		668			504
Total non-performing loans and leases		6,914			5,807
TDR’s not included in non-performing		1,622			—
Total non-performing loans and leases and TDR’s*	$	8,536		$	5,807

* TDR’s included in this total for 2009 are $3.9 million of which $2.3 million are non-accruing and $1.6 million are performing.

D. Information regarding impaired loans and leases:

(dollars in thousands)	2009		2008		2007
Impaired loans and leases at year end	$	6,246	$	4,586	$	574
Average impaired loans and leases	$	4,221	$	1,476	$	504

All impaired loans and leases are included in the non-performing loans and leases in the table above.

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A summary of the changes in the allowance for impaired loans and leases is as follows:

(dollars in thousands)	2009			2008		2007
Balance, January 1	$	124		$	124	$	101
Charge-offs		(1,804	)		—		(37	)
Recoveries		—			—		60
Provision		2,490			—		—
Balance, December 31	$	810		$	124	$	124
Interest income that would have been recognized under original terms	$	322		$	141	$	48
Interest income actually received	$	60		$	84	$	23
Interest income recognized	$	41		$	42	$	1
Interest income recognized using the cash basis method of income recognition	$	41		$	42	$	1

The allowance for impaired loans and leases of $810 thousand is included in the Corporation’s allowance for loan and lease losses of $10.4 million.

5. ALLOWANCE FOR LOAN AND LEASE LOSSES

The summary of the changes in the allowance for loan and lease losses is as follows:

(dollars in thousands)	2009			2008			2007
Balance, January 1	$	10,332		$	8,124		$	8,122
Charge-offs		(7,370	)		(3,616	)		(1,036	)
Recoveries		578			228			147
Provision		6,884			5,596			891
Balance, December 31	$	10,424		$	10,332		$	8,124

During the third quarter of 2009, the Corporation made refinements, along with changes to estimates of loss in certain asset classes. These changes in estimates and refinements resulted in a lower pre-tax provision for loan and lease losses in the third quarter of 2009 than would have resulted under the previous loss estimates of approximately $750 thousand which equates to $.06 per diluted share (after tax).

6. OTHER REAL ESTATE OWNED

The summary of the change in other real estate owned (“OREO”) is as follows:

(dollars in thousands)	2009			2008
Balance January 1	$	—		$	—
Additions		1,940			—
Capitalized cost		147			—
Sales		(1,062	)		—
Balance December 31	$	1,025		$	—

7. PREMISES AND EQUIPMENT

A. A summary of premises and equipment at December 31 is as follows:

(dollars in thousands)	2009			2008
Land	$	3,268		$	3,268
Buildings		17,350			16,320
Furniture and equipment.		18,122			17,451
Leasehold improvements		9,021			7,205
Construction in progress		617			2,073
Less: accumulated depreciation		(26,940	)		(25,021	)
Total	$	21,438		$	21,296

Depreciation and amortization expense related to the assets detailed in the above table for the years ended December 31, 2009, 2008, and 2007 amounted to $1.9 million, $1.7 million, and $1.5 million, respectively.

B. Future minimum cash rent commitments under various operating leases as of December 31, 2009 are as follows:

(dollars in thousands)
2010	$	1,369
2011		1,325
2012		1,236
2013		1,066
2014		932
2015 and thereafter	$	14,913

Rent expense on leased premises and equipment for the years ended December 31, 2009, 2008 and 2007 amounted to $1.32 million, $1.03 million and $963 thousand, respectively.

8. MORTGAGE SERVICING

A. The following summarizes the Corporation’s activity related to MSRs for the years ended December 31:

(dollars in thousands)	2009			2008			2007
Balance, January 1	$	2,205		$	2,820		$	2,883
Additions		2,570			420			285
Amortization		(853	)		(367	)		(313	)
Recovery (impairment)		137			(668	)		(35	)
Balance, December 31	$	4,059		$	2,205		$	2,820
Fair Value	$	4,807		$	2,210		$	3,881
Loans serviced for others	$	514,875		$	350,199		$	357,363

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)	2009			2008			2007
Balance, January 1	$	(703	)	$	(35	)	$	(14	)
Impairment		(205	)		(698	)		(29	)
Recovery		342			30			8
Balance, December 31	$	(566	)	$	(703	)	$	(35	)

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C. Other MSR Information – At December 31, 2009, 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	$	4,807
Weighted average life (in years)		5.4
Prepayment speeds (constant prepayment rate)*		14.7	%
Impact on fair value:
10% adverse change	$	(703	)
20% adverse change	$	(917	)
Discount rate		10.27	%
Impact on fair value:
10% adverse change	$	(174	)
20% adverse change	$	(335	)

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

At December 31, 2009, 2008 and 2007, the fair value of the mortgage servicing rights (“MSRs”) is $4.8 million, $2.2 million and $3.9 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. DEPOSITS

A. Following is a summary of deposits as of December 31,

(dollars in thousands)	2009		2008
Savings	$	101,719	$	54,333
NOW accounts*		151,432		135,587
Market rate accounts*		282,010		172,818
Time deposits (less than $100,000)		74,528		95,326
Time deposits, $100,000 or more		79,177		116,216
Wholesale deposits		36,118		120,761
Total interest-bearing deposits		724,984		695,041
Non-interest-bearing deposits		212,903		174,449
Total deposits	$	937,887	$	869,490

* Includes other wholesale deposits.

The aggregate amount of deposit overdrafts included as loans as of December 31, 2009 and 2008 were $332 thousand and $357 thousand, respectively.

B. Maturity of time deposits as of December 31, 2009 were as follows:

(dollars in thousands)	$100,000 or more		Less than $100,000
Maturing during:
2010	$	76,656	$	66,290
2011		2,287		6,591
2012		—		1,151
2013		100		101
2014		134		324
2015 and thereafter		—		71
Total	$	79,177		74,528

C. Maturity of wholesale time deposits as of December 31, 2009 was as follows:

(dollars in thousands)	$100,000 or more		Less than $100,000
Maturing during:
2010	$	9,047	$	21,385
2011		5,686		—
2012		—		—
2013		—		—
2014 and thereafter		—		—
Total	$	14,733	$	21,385

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10. BORROWED FUNDS

A. Borrowings at December 31, 2009 consisted of the following FHLB-P advances:

(dollars in thousands)
Borrowing		Interest Rate	Maturity	Term	Next Call Date	F/V
	Amortizing:
$	4,551	2.88%	4/11/2011	3 yrs	—	F
	10,257	3.90%	8/13/2012	4 yrs	—	F
	6,678	3.15%	3/12/2013	5 yrs	—	F
	7,840	3.57%	4/08/2015	7 yrs	—	F
$	29,326
	Non-amortizing convertible selects:
$	10,000	2.58%	8/20/2018	10 yrs/6 mos	2/18/2010	F
	10,000	2.32%	3/18/2013	5 yrs/2 yrs	3/18/2010	F
$	20,000
	Non-amortizing bullets:
	10,000	0.61%	10/18/2010	3 yrs	—	V
	10,000	4.30%	11/09/2010	3 yrs	—	F
	5,000	3.18%	1/24/2011	2 yrs/11 mos	—	F
	10,000	3.22%	2/28/2011	3 yrs	—	F
	10,000	3.62%	9/08/2011	3 yrs	—	F
	10,500	3.21%	3/05/2012	4 yrs	—	F
	10,000	3.90%	9/10/2012	4 yrs	—	F
	10,000	4.06%	9/09/2013	5 yrs	—	F
	10,000	3.55%	10/04/2010	2 yrs	—	F
	2,500	1.17%	5/09/2011	18 mos	—	F
	2,500	1.51%	11/09/2011	2 yrs	—	F
	2,500	1.81%	5/09/2013	30 mos	—	F
	2,500	2.10%	11/09/2012	3 yrs	—	F
$	95,500
$	144,826

F = fixed rate and V = variable rate

B. The table below reflects the borrowing activity with the FHLB-P and overnight federal funds. The Federal Reserve discount window program has not been used in these periods:

(dollars in thousands)	2009			2008			2007
Average balance during the year	$	149,937		$	130,490		$	42,496
Year end balance		144,826			154,939			45,000
Highest month end balance		154,109			182,293			77,000
Weighted-average interest rate during the year		3.29	%		3.33	%		5.22	%
Weighted-average interest rate at year end		3.11	%		3.34	%		4.56	%

C. Other FHLB Information – The Corporation had a maximum borrowing capacity (“MBC”) with the FHLB-P of approximately $448 million as of December 31, 2009 of which the unused capacity was $303 million at December 31, 2009. In addition there were $75 million in overnight federal funds line and approximately $55 million of Federal Reserve Discount Window capacity. In connection with its FHLB-P borrowings, the Corporation is required to hold stock in the FHLB-P. This amount was $7.9 million at December 31, 2009, and $7.9 million at December 31, 2008. The carrying amount of the FHLB-P stock approximates its fair value. On December 23, 2008, the FHLB-P announced it will voluntarily suspend the payment of dividends and the repurchase of excess capital stock until further notice. There were no dividends paid in 2009.

11. SUBORDINATED DEBT

The Bank issued an aggregate of $15 million in subordinated debt in July and August 2008. This subordinated debt 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, 2009 the rate was 4.00% and will next reset on March 15, 2010. Interest is payable quarterly and principal is due September 15, 2018.

In April 2009, the Bank raised $7.5 million in subordinated debt. The subordinated debt bears 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, 2009 the rate was 6.00% and will next reset on March 15, 2010.

Subordinated debt qualifies as Tier II regulatory capital for the first five years from the date of issuance and thereafter is discounted as the subordinated debt approaches 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 debt is excluded from Tier II capital. Unamortized subordinated debt issuance costs were $320 thousand and $335 thousand at December 31, 2009 and 2008, respectively. These costs are amortized over the term of the debt, as an adjustment to the yield.

12. MORTGAGE PAYABLE

In April 2009, the Corporation entered into a $2.1 million commercial mortgage on 10 South Bryn Mawr Avenue, Bryn Mawr, PA, which serves as its Wealth Management Division offices. The twenty year commercial mortgage has a current rate of 5.50%, is a five year adjustable rate mortgage with a floor of 25 basis points from the initial rate of 5.50% and has a current balance of approximately $2.06 million.

13. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

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

41

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. Accordingly, 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

Estimated fair values for investment securities are valued by an independent third party based on market data utilizing pricing models that vary by asset and incorporate available trade, bid and other market information. See Note 3 for more information.

Loans and Leases

For variable rate loans that reprice frequently and which have no significant change in credit risk, estimated fair values are based on carrying values. Fair values of certain mortgage loans and consumer loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality and is indicative of an entry price. The estimated fair value of nonperforming loans is based on discounted estimated cash flows as determined by the internal loan review of the Bank or the appraised market value of the underlying collateral, as determined by independent third party appraisers. This technique does not reflect an exit price as contemplated in Note 4.

MSRs

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.

Borrowed Funds

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

Subordinated Debt

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

Mortgage Payable

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

Other Liabilities

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

Off-Balance Sheet Instruments

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

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The carrying amount and estimated fair value of the Corporation’s financial instruments as of December 31 are as follows:

	2009				2008
(dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and due from banks	$	11,670	$	11,670	$	18,776	$	18,776
Interest-bearing deposits with other banks		58,472		58,472		45,100		45,100
Money market funds		9,175		9,175		5,109		5,109
Cash and cash equivalents		79,317		79,317		68,985		68,985
Investment securities		208,224		208,224		108,329		108,329
Mortgage servicing rights		4,059		4,807		2,205		2,210
Loans held for sale		3,007		3,051		3,024		3,094
Other assets		15,345		15,345		30,484		30,484
Net loans and leases		875,315		888,242		889,245		909,228
Total financial assets	$	1,185,267	$	1,198,986	$	1,102,272	$	1,122,330
Financial liabilities:
Deposits	$	937,887	$	938,523	$	869,490	$	871,679
Borrowed funds		144,826		147,446		154,939		157,344
Subordinated debt		22,500		22,580		15,000		15,000
Mortgage payable		2,062		2,232		—		—
Other liabilities		27,610		27,610		19,504		19,504
Total financial liabilities	$	1,134,885	$	1,138,391	$	1,058,933	$	1,063,527
Off-balance sheet contract or notional amount	$	348,900	$	348,900	$	318,368	$	318,368

14. FAIR VALUE MEASUREMENT

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

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 table summarizes the assets at December 31, 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, 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	$	—

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Assets Measured at Fair Value on a Non-recurring Basis at December 31, 2009:

(dollars in millions)	Total		Level 1		Level 2		Level 3
Mortgage servicing rights (MSRs)	$	4.1	$	—	$	4.1	$	—
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	$	11.3	$	—	$	11.3	$	—

Fair Value of Assets Measured on a Recurring Basis for the year ended December 31, 2008:

(dollars in millions)	Total		Level 1		Level 2		Level 3
Investments:
Obligations of U.S. government & agencies		11.2		—		11.2		—
State & political subdivisions		7.1		—		7.1		—
Federal agency mortgage backed securities		79.6		—		79.6		—
Corporate bonds		9.4		—		9.4		—
Other securities		1.0		—		1.0		—
Total assets measured on a recurring basis at fair value	$	108.3	$	—	$	108.3	$	—

Assets Measured at Fair Value on a Non-recurring Basis at December 31, 2008:

(dollars in millions)	Total		Level 1		Level 2		Level 3
Mortgage servicing rights (MSRs)	$	2.2	$	—	$	2.2		$	—
Impaired loans and leases		4.6		—		4.6			—
Total assets measured at fair value on a non-recurring basis	$	6.8	$	—	$	6.8		$	—

Other Real Estate Owned and Other Repossessed Property

Other real estate owned (“OREO”) consists of properties acquired as a result of deed in-lieu-of foreclosure and foreclosures. Properties or other assets are classified as OREO and are reported at the lower of carrying value or fair value, less estimated costs to sell. Costs relating to the development or improvement of assets are capitalized, and costs relating to holding the property are charged to expense. The Corporation had $1.0 million in OREO assets at December 31, 2009.

15. 401(K) PLAN

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 $503 thousand, $457 thousand and $410 thousand in 2009, 2008 and 2007, 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 $589 thousand in 2009 and $438 thousand in 2008.

16. PENSION AND POSTRETIREMENT BENEFIT PLANS

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 existing 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.

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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*						PRBP
	2009			2008			2009			2008			2009			2008
Used to determine benefit obligations for the year ended December 31:
Discount rate		5.80	%		6.25	%		5.80	%		6.25	%		5.80	%		6.25	%
Rate of increase for future compensation		N/A			N/A			3.50	%		3.50	%		N/A			N/A
Used to determine benefit cost for the year ended December 31:
Discount rate		5.80	%		6.25	%		5.80	%		6.25	%		5.80	%		6.25	%
Rate of increase for future compensation		0.00	%		0.00	%		3.50	%		3.50	%		N/A			N/A
Expected long-term rate of return on plan assets		7.50	%		8.50	%		N/A			N/A			N/A			N/A
Cost trend rate assumed for next year		N/A			N/A			N/A			N/A			N/A			N/A
Rate to which the cost trend rate is assumed to decline		N/A			N/A			N/A			N/A			N/A			N/A
Year that the rate reaches the ultimate trend rate		N/A			N/A			N/A			N/A			2009			2008
C. Changes in Benefit Obligations and Plan Assets:
	QDBP						SERP*						PRBP
(dollars in thousands)	2009			2008			2009			2008			2009			2008
Change in benefit obligations
Benefit obligation at January 1	$	28,453		$	32,036		$	3,772		$	2,037		$	937		$	1,251
Service cost		—			336			194			89			—			—
Interest cost		1,738			1,701			215			197			59			64
Plan participants contribution		—			—			—			—			24			—
Amendments		—			(4,513	)		—			1,530			—			—
Settlement		—			—			—			—			—			(258	)
Actuarial (gain) loss		1,708			(6	)		295			55			95			61
Benefits paid		(1,359	)		(1,101	)		(137	)		(136	)		(185	)		(181	)
Benefit obligation at December 31	$	30,540		$	28,453		$	4,339		$	3,772		$	930		$	937
Change in plan assets
Fair value of plan assets at January 1	$	26,141		$	32,156		$	—		$	—		$	—		$	—
Actual return (loss) on plan assets		3,963			(6,914	)		—			—			—			—
Employer contribution		—			2,000			137			136			161			439
Plan participants’ contribution		—			—			—			—			24			—
Benefits paid		(1,359	)		(1,101	)		(137	)		(136	)		(185	)		(181	)
Settlement		—			—			—			—			—			(258	)
Fair value of plan assets at December 31	$	28,745		$	26,141		$	—		$	—		$	—		$	—
Funded status at year end (plan assets less benefit obligations)	$	(1,795	)	$	(2,312	)	$	(4,339	)	$	(3,772	)	$	(930	)	$	(937	)
Amounts included in the consolidated balance sheet as other assets (liabilities) & accumulated other comprehensive income including the following:
Prepaid benefit cost/(accrued liability)	$	7,915		$	8,693		$	(2,320	)	$	(1,903	)	$	(434	)	$	(570	)
Accumulated other comprehensive loss/(income)		(9,710	)		(11,005	)		(2,019	)		(1,869	)		(496	)		(367	)
Net amount recognized	$	(1,795	)	$	(2,312	)	$	(4,339	)	$	(3,772	)	$	(930	)	$	(937	)

* Includes SERP I and SERP II which are combined for disclosure purposes.

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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)	2009			2008			2007
Service cost	$	—		$	337		$	1,251
Interest cost		1,738			1,701			1,752
Expected return on plan assets		(1,905	)		(2,586	)		(2,547	)
Amortization of prior service cost		—			16			81
Amortization of net actuarial (gain) loss		945			235			457
Curtailment		—			17			—
Net periodic pension cost	$	778		$	(280	)	$	994
SERP Net Periodic Pension Cost
(dollars in thousands)	2009			2008			2007
Service cost	$	194		$	90		$	60
Interest cost		215			197			114
Amortization of prior service cost		120			131			44
Amortization of net actuarial (gain) loss		26			—			26
Net periodic pension cost	$	555		$	418		$	244
PRBP Net Periodic Pension Cost
(dollars in thousands)	2009			2008			2007
Service cost	$	—		$	—		$	5
Interest cost		59			64			84
Settlement		N/A			153			123
Amortization of transition obligation (asset)		26			26			26
Amortization of prior service cost		(138	)		(202	)		(202	)
Amortization of net actuarial (gain) loss		77			55			89
Net periodic pension cost	$	24		$	96		$	125

E. Plan Assets:

	Target Asset Allocation		Percentage of QDBP Plan Assets at December 31
			2009	2008
Asset Category
Equity securities*	50% - 65	%	60%	51%
Debt securities	30% - 45	%	40%	36%
Cash reserves	1% - 5	%	—	13%
Total			100%	100%

* Includes Bryn Mawr Bank Corporation common stock in the amount of $475 thousand or 1.7% and $633 thousand or 2% at December 31, 2009 and 2008, respectively.

The expected rate of return on plan assets in the QDBP was selected by Management after consultation with the Corporation’s actuary, and is based in part on long term historical rates of return and various actuarial assumptions. The discount rate was also selected by Management after consultation with the Corporation’s actuary, and is based in part upon the current yield of a basket 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 objections 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, 2009 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, 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	$	—

The fair value of the pension assets measured on a recurring basis as of December 31, 2008:

(dollars in thousands)	Total		Level 1		Level 2		Level 3
Obligations of U.S. Treasury	$	1,142	$	—	$	1,142	$	—
Obligations of U.S. Government and agencies		922		—		922		—
Corporate bonds		339		—		339		—
Common stocks		1,900		1,900		—		—
Equity – mutual funds		1,264		1,264		—		—
Common trust funds		17,059		—		17,059		—
Money market – mutual funds		3,515		3,515		—		—
Total assets measured on a recurring basis at fair value	$	26,141	$	6,679	$	19,462	$	—

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
2010	$	1,549	$	137	$	152
2011		1,616		137		138
2012		1,653		136		125
2013		1,713		136		112
2014		1,812		177		101
2015-2019	$	10,024	$	1,241	$	354

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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 2009. The long term impact of the cap will be to make the cost trend rate assumed for 2009 immaterial.

H. Expected Contribution to be Paid in the Next Fiscal Year

Based on the status of the Corporation’s QDBP at December 31, 2009 no minimum funding requirement is anticipated for 2010. The 2010 expected contribution for the SERP is $137 thousand.

17. INCOME TAXES

A. The components of the net deferred tax asset (liabilities) as of December 31 are as follows:

(dollars in thousands)	2009			2008
Deferred tax assets:
Loan and lease loss reserve	$	3,648		$	3,616
Other reserves		711			393
Defined benefit plans		5,243			5,500
Total deferred tax assets		9,602			9,509
Deferred tax liabilities:
Other reserves		98			113
QDBP		(2,770	)		(3,043	)
Originated mortgage servicing rights		(1,421	)		(772	)
Unrealized appreciation on investment securities		(518	)		(329	)
Total deferred tax liability		(4,611	)		(4,031	)
Total net deferred tax assets	$	4,991		$	5,478

Not included in the table above are deferred tax assets related to state tax net operating losses related to our leasing subsidiary of approximately $160 thousand as of December 31, 2009, for which we have recorded a full valuation allowance. Other than this, there were no valuation allowances against our deferred tax assets as the Corporation believes that it is more likely than not that such assets will be realizable.

B. The provision for income taxes consists of the following:

(dollars in thousands)	2009		2008		2007
Currently payable	$	5,443	$	4,413	$	6,491
Deferred		57		600		82
Total	$	5,500	$	5,013	$	6,573

C. Applicable income taxes differed from the amount derived by applying the statutory federal tax rate to income as follows:

(dollars in thousands)	2009			Tax Rate		2008			Tax Rate		2007			Tax Rate
Computed tax expense at statutory federal rate	$	5,543		35.0	%	$	5,018		35.0	%	$	7,060		35.0	%
Tax-exempt income		(300	)	(1.9	)%		(270	)	(1.9	)%		(412	)	(2.0	)%
Other, net		257		1.6	%		265		1.9	%		(75	)	(0.4	)%
Total income tax expense	$	5,500		34.7	%	$	5,013		35.0	%	$	6,573		32.6	%

D. Other Income Tax Information

The Corporation adopted the provisions of ASC 740, Accounting for Uncertainty in Income Taxes” on January 1, 2007. As required by ASC 740, which clarifies previous FASB guidance, 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 adjustments to retained earnings for unrecognized tax benefits as a result of the implementation of ASC 740.

There were no identified future tax liabilities accrued during 2009, 2008 or 2007.

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 2007. The Corporation recently closed and settled with the Internal Revenue Service an examination of the 2007 tax year. Resolution of the examination did not have any material impact to the financial position of the Corporation

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 2009.

18. STOCK OPTION PLAN:

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.

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On April 25, 2007, the Shareholders approved the Corporation’s “2007 Long-Term Incentive Plan” (“LTIP”) under which a total of 428,996 shares of the Corporation’s common stock were made available for award grants under the LTIP. As of December 31, 2007, a total of 300,496 shares were available for grant. In 2008, a total of 130,514 grants were awarded as non-qualified stock options under the LTIP and will vest over a five year period from the date of grant. In 2009 a total of 158,993 grants were awarded as nonqualified stock options under the LTIP and will vest over a 5 year period. Additionally, 10,189 grants were awarded from prior plans and will vest over a five year period from the date of grant. As of December 31, 2009, there are no shares available for grant under the prior plan. The total options available for grant remaining are 38,489 shares. The exercise price for stock options issued under the LTIP is the closing price for the stock on the day preceding the date of the grant. The price for options issued under the prior plan is set at the last sale price for the stock on the day preceding the date of the grant. The Corporation’s practice is to issue option related shares from authorized but unissued shares or treasury.

B. Grant data is in the tables below.

	Shares Under Option		Available for Option		Price Per Share		Weighted Average Exercise Price
Balance at December 31, 2006	789,900		14,189		$	8.45 – $23.67	$	17.66
Options authorized	—		428,996
Options granted	132,500		(132,500	)	$	22.00 – $23.77		22.05
Options exercised	(61,150	)	—			—		15.03
Options forfeited	(500	)	500			—		—
Balance at December 31, 2007	860,750		311,185		$	10.50 – $23.77	$	18.52
Options authorized	—		—			—		—
Options granted	130,514		(130,514	)	$	24.27		24.27
Options exercised	(79,450	)	—		$	10.50 – $21.21		14.22
Options expired	(8,750	)	8,750		$	18.91 – $21.21		20.95
Options forfeited	(1,250	)	1,250		$	22.00 – $22.00		22.00
Balance at December 31, 2008	901,814		190,671		$	10.50 - $24.27	$	19.70
Options granted	169,182		(169,182	)	$	18.27		18.27
Options exercised	(40,600	)	—		$	10.50 - $17.35		12.68
Options expired	(17,000	)	17,000		$	17.85 - $22.00		19.45
Options forfeited	—		—			—		—
Balance at December 31, 2009	1,013,396		38,489		$	10.50 - $24.27	$	19.75

C. Information pertaining to options outstanding at December 31, 2009 is as follows:

Price Range of Shares Under Option at December 31, 2009
Shares Under Option	Price Per Share		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
16,200	$	10.50 – $10.75	0.4	$	10.62	16,200	$	10.62
64,000	$	12.45 – $15.15	1.4	$	13.72	64,000	$	13.72
445,882	$	16.25 – $18.91	6.3	$	18.32	276,700	$	18.35
487,314	$	19.11 – $24.27	6.9	$	22.16	306,420	$	21.47
1,013,396	$	10.50 – $24.27	6.1	$	19.75	663,320	$	19.15

D. Shares exercisable and weighted average exercise price at December 31:

	2009		2008		2007
Shares exercisable		663,320		664,642		721,166
Weighted average exercise price	$	19.15	$	18.43	$	17.83

E. 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:

	2009			2008			2007
Expected dividend yield		3.1	%		2.3	%		2.4% – 2.0	%
Expected volatility of Corporations’ stock		29.4	%		21.9	%		20.0 – 23.9	%
Risk-free interest rate		3.2	%		3.4	%		4.4 – 5.0	%
Expected life in years		7.0			7.0			6.9 – 7.0
Weighted average fair value of options granted	$	4.42		$	5.27		$	4.90 – $6.82

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.

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F. Other Plan Information – The following table provides information about options outstanding for the twelve months ended December 31:

	2009						2008						2007
	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	901,814		$	19.70	$	4.31	860,750		$	18.52	$	4.04	789,900		$	17.66	$	3.81
Granted	169,182			18.27		4.42	130,514			24.27		5.27	132,500			22.05		4.96
Forfeited	—			—		—	(1,250	)		22.00		4.90	(500	)		22.00		4.90
Expired	(17,000	)		19.45		4.23	(8,750	)		20.95		4.77	—			—		—
Exercised	(40,600	)		12.68		2.45	(79,450	)		14.22		2.87	(61,150	)		15.03		3.11
Options outstanding, end of period	1,013,396		$	19.75	$	4.41	901,814		$	19.70	$	4.31	860,750		$	18.52	$	4.04

The following table provides information about unvested options for the twelve months ended December 31:

	2009				2008				2007
	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	237,172		$	5.15	139,584		$	5.04	11,375		$	6.44
Granted	169,182			4.42	130,514			5.27	132,500			4.96
Vested	(56,278	)		5.22	(31,676	)		5.17	(3,791	)		6.44
Forfeited	—			—	(1,250	)		4.90	(500	)		4.90
Unvested options, end of period	350,076		$	4.78	237,172		$	5.15	139,584		$	5.04

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows:

(dollars in thousands)	2009		2008		2007
Proceeds from strike price of value of options exercised	$	514	$	1,130	$	918
Related tax benefit recognized		66		185		182
Proceeds of options exercised	$	580	$	1,315	$	1,100
Intrinsic value of options exercised	$	690	$	529	$	520

The following table provides information about options outstanding and exercisable options at December 31:

	2009				2008				2007
	Options Outstanding		Exercisable Options		Options Outstanding		Exercisable Options		Options Outstanding		Exercisable Options
Number		1,013,396		663,320		901,814		664,642		860,750		721,166
Weighted average exercise price	$	19.75	$	19.15	$	19.70	$	18.43	$	18.52	$	17.83
Aggregate intrinsic value	$	167,536	$	167,536	$	1,449,701	$	1,449,701	$	3,981,430	$	3,831,493
Weighted average contractual term		6.1		4.6		6.0		4.9		6.1		5.4

The unamortized stock based compensation expense at December 31, 2009 was $1.4 million which will be recognized over the next 45 months.

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19. EARNINGS PER SHARE

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,
	2009		2008		2007
Numerator - Net income available to common shareholders	$	10,337	$	9,325	$	13,600
Denominator for basic earnings per share - Weighted average shares outstanding		8,732,004		8,566,938		8,539,904
Effect of dilutive potential common shares		16,719		34,233		93,638
Denominator for diluted earnings per share - Adjusted weighted average shares outstanding		8,748,723		8,601,171		8,633,542
Basic earnings per share	$	1.18	$	1.09	$	1.59
Diluted earnings per share	$	1.18	$	1.08	$	1.58
Antidulitive shares excluded from computation of average dilutive earnings per share		806,396		321,812		58,946

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. OTHER OPERATING INCOME

Components of other operating income for the years ended December 31 include:

(dollars in thousands)	2009		2008		2007
Cash management	$	306	$	679	$	689
Other		708		308		337
Insurance commissions		394		365		337
Safe deposit rental income		334		318		328
Other investment income		67		476		271
Interest rate floor income		—		268		155
Rent		222		179		126
Gain on sale of OREO		6		—		110
Title insurance		355		52		65
Gain on trading investment		255		—		—
Commissions and fees		372		340		275
Other operating income	$	3,019	$	2,985	$	2,693

21. OTHER OPERATING EXPENSE

Components of other operating expense for the years ended December 31 include:

(dollars in thousands)	2009		2008		2007
Other	$	1,925	$	1,750	$	1,632
Temporary help & recruiting		377		430		561
Loan processing and closing		1,046		568		510
Computer processing		508		525		504
Other taxes		650		587		500
Travel and entertainment		323		400		388
Postage		351		350		342
Director fees		312		333		339
Telephone		371		342		291
Stationary & supplies		276		272		248
Other operating expense	$	6,139	$	5,557	$	5,315

22. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank granted loans to principal officers, directors and their affiliates. Loan activity during 2009 and 2008 was as follows:

Following is a summary of these transactions:

(dollars in thousands)	2009			2008
Balance, January 1	$	3,600		$	11,754
Additions		1,004			263
Amounts collected		(132	)		(8,417	)
Balance, December 31	$	4,472		$	3,600

Related party deposits amounted to $728 thousand and $442 thousand at December 31, 2009 and 2008, respectively.

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK CONTINGENCIES AND CONCENTRATION OF CREDIT RISK

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.

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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 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, 2009 were $334.0 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, 2009 amounted to $18.4 million. There were no outstanding bankers’ acceptances as of December 31, 2009.

Contingencies

The Corporation is periodically subject to various pending and threatened legal actions, which involve claims for monetary relief. Based upon information presently available to the Corporation, it is the Corporation’s opinion that any legal and financial responsibility arising from such claims will not have a material adverse effect on the Corporation’s results of operations.

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 4 – Loans and Leases for additional information.

At December 31, 2009, the total first lien interest only residential loans of $49.5 million included $43.6 million of adjustable rate loans that convert to principal and interest payments between five and ten years after inception and $5.9 million of fixed rate loans that continue as interest only loans until reaching maturity. At December 31, 2009, the balance sheet also included $528 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, 2009, the Corporation had no loans sold with recourse outstanding.

24. DIVIDEND RESTRICTIONS

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 $15.6 million as of December 31, 2009. 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. REGULATORY CAPITAL REQUIREMENTS

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. 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.

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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 Global Markets 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 1.7% of the outstanding shares of the Corporation’s common stock, as determined immediately after the closing of the sale.

C. S-3 Shelf Registration Statement and Dividend Reinvestment and Stock Purchase Plan

On June 17, 2009, the SEC declared effective a shelf registration statement on Form S-3/A (“Shelf Registration Statement”) filed by the Corporation on June 15, 2009. The Shelf Registration Statement is intended to allow 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. The Corporation also registered for resale in the Shelf Registration Statement the Shares issued in the private placement of securities discussed in the preceding paragraph.

On July 20, 2009, the Corporation filed with the Securities and Exchange Commission a prospectus supplement pursuant to Section 424(b)(2) of the Securities Act (“Prospectus Supplement”) in order to take securities down from the Shelf Registration Statement in connection with a newly established Dividend Reinvestment and Stock Purchase Plan (the “Plan”). The Plan may grant a request for waiver (“RFW”) above the Plan maximum investment of $120 thousand per account per year. A RFW is granted on a variety of factors, which may include: 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. As of December 31, 2009 the Corporation had 81,641 shares registered within the DRIP and raised $1.2 million in capital through the RFW.

D. 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 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, 2009 and 2008, 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, 2009 and 2008.

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, 2009 and 2008 are presented in the following table:

	Actual				Minimum to be Well Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio
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	%
December 31, 2008
Total (Tier II) Capital to Risk Weighted Assets:
Corporation	$	115,367	11.29	%	$	102,171	10	%
Bank		111,739	10.98	%		101,742	10	%
Tier I Capital to Risk Weighted Assets:
Corporation		90,035	8.81	%		61,303	6	%
Bank		86,407	8.49	%		61,045	6	%
Tier I Capital to Quarterly Average Assets:
Corporation		90,035	8.03	%		56,086	5	%
Bank		86,407	7.70	%		56,116	5	%

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26. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	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
	Quarters Ending 2008
(dollars in thousands, except per share data)	03/31		6/30		9/30		12/31
Interest income	$	14,062	$	14,232	$	14,802	$	14,838
Interest expense		5,454		4,929		5,106		5,307
Net interest income		8,608		9,303		9,696		9,531
Provision for loan losses		854		781		1,063		2,898
Income before income taxes		4,305		4,751		3,830		1,452
Tax expense		1,407		1,586		1,575		445
Net income	$	2,898	$	3,165	$	2,255	$	1,007
Basic earnings per common share	$	0.34	$	0.37	$	0.26	$	0.12
Diluted earnings per common share	$	0.34	$	0.37	$	0.26	$	0.12
Dividend declared	$	0.13	$	0.13	$	0.14	$	0.14

27. CONDENSED FINANCIAL STATEMENTS

The condensed balance sheet of the Corporation (parent company only) as of December 31, 2009 and 2008 is as follows:

A. Condensed Balance Sheets

(dollars in thousands)	2009			2008
Assets:
Cash	$	3,676		$	57
Investments in subsidiaries, at equity in net assets		100,103			89,132
Premises and equipment, net		2,975			3,074
Other assets		1,311			1,111
Total assets	$	108,065		$	93,374
Liabilities and shareholders’ equity:
Borrowings – mortgage payable	$	2,062		$	—
Accrued taxes payable		19			37
Other liabilities		2,048			924
Total liabilities	$	4,129		$	961
Common stock, par value $1, authorized 100,000,000 issued 11,786,084 shares and 11,513,782 shares as of December 31, 2009 and 2008, respectively and outstanding 8,866,420 shares and 8,592,259 shares as of December 31, 2009 and 2008, respectively	$	11,786		$	11,514
Paid-in capital in excess of par value		17,705			12,983
Accumulated other comprehensive income, net of deferred income taxes		(6,913	)		(7,995	)
Retained earnings		111,290			105,845
Less common stock in treasury, at cost—2,919,664 shares and 2,921,523 shares as of December 31, 2009 and 2008		(29,932	)		(29,934	)
Total shareholders’ equity	$	103,936		$	92,413
Total liabilities and shareholders’ equity	$	108,065		$	93,374

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)	2009			2008			2007
Dividends from The Bryn Mawr Trust Company	$	1,204		$	4,625		$	4,269
Interest and other income		1,012			933			732
Total operating income		2,216			5,558			5,001
Expenses		918			831			682
Income before equity in undistributed income of subsidiaries		1,298			4,727			4,319
Equity in undistributed income of subsidiaries		9,071			4,632			9,298
Income before income taxes		10,369			9,359			13,617
Federal income tax (expense) benefit		(32	)		(34	)		(17	)
State income tax		—			—			—
Net income	$	10,337		$	9,325		$	13,600

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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)	2009			2008			2007
Operating activities:
Net Income	$	10,337		$	9,325		$	13,600
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of subsidiaries		(9,071	)		4,632			(9,298	)
Depreciation and amortization		98			98			98
Other, net		227			(2,126	)		83
Net cash provided by operating activities		1,591			11,929			4,483
Investing Activities:
Investment in Subsidiaries		660			(10,632	)		21
Net cash provided (used) by investing activities		660			(10,632	)		21
Financing activities:
Dividends paid		(4,892	)		(4,625	)		(4,269	)
Mortgage payable		2,062			—			—
Repurchase of treasury stock		(42	)		(361	)		(2,420	)
Proceeds from issuance of common stock		3,660			—			—
Tax benefit on exercise of stock option		66			185			182
Proceeds from exercise of stock options		514			1,230			918
Net cash provided (used) by financing activities		1,368			(3,571	)		(5,589	)
Change in cash and cash equivalents		3,619			(2,274	)		(1,085	)
Cash and cash equivalents at beginning of year		57			2,331			3,416
Cash and cash equivalents at end of year	$	3,676		$	57		$	2,331

These statements should be read in conjunction with the Notes to the Consolidated Financial Statements.

28. SEGMENT INFORMATION

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. Lau Associates is 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 and interest income from notes receivable which ceased in 2006.

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.

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Segment information for the years ended December 31:

	2009															2008															2007
(dollars in thousands)	Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consolidated			Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consolidated			Banking			Wealth Manage- ment			Mortgage Banking			All Other			Consolidated
Net interest income	$	40,834		$	12		$	28		$	(81	)	$	40,793		$	37,069		$	—		$	57		$	12		$	37,138		$	34,155		$	—		$	79		$	8		$	34,242
Less loan loss provision		6,884			—			—			—			6,884			5,596			—			—			—			5,596			891			—			—			—			891
Net interest income after loan loss provision		33,950			12			28			(81	)		33,909			31,473			—			57			12			31,542			33,264			—			79			8			33,351
Other income:
Fees for wealth management services		—			14,178			—			—			14,178			—			13,842			—			—			13,842			—			13,502			—			—			13,502
Service charges on deposit accounts		1,951			—			—			—			1,951			1,685			—			—			—			1,685			1,464			—			—			—			1,464
Loan servicing and other fees		217			—			1,170			—			1,387			259			—			935			—			1,194			137			—			978			—			1,115
Net gain on sale of loans		—			—			6,012			—			6,012			—			—			1,275			—			1,275			—			—			1,250			—			1,250
Net gain on sale of real estate		—			—			—			—			—			—			—			—			—			—			1,333			—			—			—			1,333
Other operating income		4,306			55			411			170			4,942			3,137			13			150			176			3,476			2,671			—			256			190			3,117
Total other income		6,474			14,233			7,593			170			28,470			5,081			13,855			2,360			176			21,472			5,605			13,502			2,484			190			21,781
Other expenses:
Salaries & wages		12,774			6,697			2,184			620			22,275			12,156			5,439			864			530			18,989			11,242			4,576			1,003			295			17,116
Employee benefits		4,113			1,454			85			(74	)		5,578			2,918			1,080			118			56			4,172			3,515			843			148			42			4,548
Occupancy & equipment		5,200			848			197			(201	)		6,044			4,791			625			251			(178	)		5,489			4,380			551			173			(164	)		4,940
Other operating expenses		10,179			1,547			1,435			(516	)		12,645			7,595			1,417			1,422			(408	)		10,026			6,749			1,049			724			(167	)		8,355
Total other expenses		32,266			10,546			3,901			(171	)		46,542			27,460			8,561			2,655			—			38,676			25,886			7,019			2,048			6			34,959
Segment profit (loss)		8,159			3,699			3,720			259			15,837			9,094			5,294			(238	)		188			14,338			12,983			6,483			515			192			20,173
Intersegment (revenues) expenses*		885			187			40			(1,112	)		—			818			181			40			(1,039	)		—			618			181			40			(839	)		—
Pre-tax segment profit after eliminations	$	9,044		$	3,886		$	3,760		$	(853	)	$	15,837		$	9,912		$	5,475		$	(198	)	$	(851	)	$	14,338		$	13,601		$	6,664		$	555		$	(647	)	$	20,173
% of segment (loss) pre-tax profit (loss) after eliminations		57.1	%		24.5	%		23.7	%		(5.3	)%		100.0	%		69.1	%		38.2	%		(1.4	)%		(5.9	)%		100	%		67.4	%		33.0	%		2.8	%		(3.2	)%		100
Segment assets (in millions)	$	1,216.9		$	12.9		$	4.8		$	4.2		$	1,238.8		$	1,132.8		$	11.5		$	2.9		$	4.1		$	1,151.3		$	993.7		$	0.7		$	3.6		$	4.1		$	1,002.1

* Intersegment revenues consist of rental payments, insurance commissions and management fees.

Other Segment Data

	2009		2008		2007
Wealth Management Segment:
(dollars in millions)
Assets Under Management and Administration and Brokerage Assets	$	2,871.2	$	2,146.4	$	2,277.1
Mortgage Banking Segment:
(dollars in thousands)
Mortgage Loans Serviced for Others	$	514,875	$	350,199	$	357,363
Mortgage Servicing Rights	$	4,059	$	2,205	$	2,820

29. SUBSEQUENT EVENTS

A. Amendment to the Corporation’s 2001 and 2004 Stock Option Plans

In January 2010, the Compensation Committee of the Corporation’s Board of Directors amended the 2001 and 2004 Corporation’s stock option plans. The period for exercising options in the event of death, disability or retirement was extended to five years from the date of such event.

B. FKF Vote

On March 2, 2010, First Keystone held a shareholder vote to approve the Transaction. There were 2,432,998 shares of First Keystone common stock eligible to be voted at the meeting and 1,984,657 shares represented in person or by proxy. The shareholders approved the Transaction with more than 81% of the issued and outstanding shares voting in favor.

55

Price Range of Shares

BRYN MAWR BANK CORPORATION

(NASDAQ: BMTC)

	2009						2008
	High-Low Quotations						High-Low Quotations
	High Bid		Low Bid		Dividend Declared		High Bid		Low Bid		Dividend Declared
Quarter
1st	$	20.98	$	12.50	$	0.14	$	23.13	$	18.75	$	0.13
2nd	$	20.50	$	15.52	$	0.14	$	22.26	$	17.00	$	0.13
3rd	$	19.03	$	16.00	$	0.14	$	28.01	$	16.30	$	0.14
4th	$	18.24	$	13.01	$	0.14	$	24.48	$	15.08	$	0.14

The approximate number of registered holders of record of common stock as of December 31, 2009 was 290.

The shares are traded on the NASDAQ Global Market System under the symbol BMTC. The price information was obtained from NASDQ, OMX.

56

Performance Graph

Comparison of Cumulative Total Return of One or More Companies, Peer Groups,

Industry Indexes and/or Broad Market

57

  BRYN MAWR BANK CORPORATION 801 LANCASTER AVENUE BRYN MAWR, PENNSYLVANIA 19010

BRYN MAWR

BANK CORPORATION

801 LANCASTER AVENUE

BRYN MAWR, PA 19010

www.bmtc.com

EX-21.1

Exhibit 21.1

List of Subsidiaries

Subsidiaries of the Corporation:

Name	State of Incorporation	Status
The Bryn Mawr Trust Company	Pennsylvania	Active
Lau Associates LLC	Delaware	Active
The Bryn Mawr Trust Company of Delaware	Delaware	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

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

EX-23.1

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, and 033-61881) 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 15, 2010, with respect to the consolidated balance sheets of the Corporation as of December 31, 2009 and 2008, 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, 2009, and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear in the December 31, 2009 annual report on Form 10-K of the Corporation.

KPMG LLP

Philadelphia, Pennsylvania

March 15, 2010

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Frederick C. Peters II, certify that:

1. I have reviewed this annual report on Form 10-K of Bryn Mawr Bank Corporation;

2. 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;

3. 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;

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

a) 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;

b) 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;

c) 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

d) 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

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

a) 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

b) 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 15, 2010	/S/ FREDERICK C. PETERS II
	Frederick C. Peters II, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, J. Duncan Smith, certify that:

1. I have reviewed this annual report on Form 10-K of Bryn Mawr Bank Corporation;

2. 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;

3. 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;

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

a) 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;

b) 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;

c) 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

d) 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

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

a) 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

b) 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 15, 2010	/s/ J. DUNCAN SMITH
	J. Duncan Smith, Treasurer and Principal Financial Officer

EX-32.1

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 annual report of Bryn Mawr Bank Corporation (the “Corporation”) on Form 10-K for the period ending December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick C. Peters II, Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/S/ FREDERICK C. PETERS II

Frederick C. Peters II

Chief Executive Officer

March 15, 2010

EX-32.2

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 annual report of Bryn Mawr Bank Corporation (the “Corporation”) on Form 10-K for the period ending December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Duncan Smith, Treasurer and Principal Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/S/ J. DUNCAN SMITH

J. Duncan Smith

Treasurer and Principal Financial Officer

March 15, 2010