10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2007
OR
o	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: 1-33476

BENEFICIAL MUTUAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

United States	56-2480744
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
510 Walnut Street, Philadelphia, Pennsylvania	19106
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (215) 864-6000

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

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.01 per share	Nasdaq Stock Market, LLC

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 o No x

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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. x

          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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):	Large Accelerated Filer o	Accelerated Filer o
	Non-Accelerated Filer x	Smaller Reporting Company o

          Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).
Yes o No x

          The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2007 was approximately $0.

          The number of shares outstanding of the registrant’s common stock as of March 21, 2008 was 82,264,600. Of such shares outstanding, 45,792,775 were held by Beneficial Savings Bank MHC.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s 2007 Annual Report to Stockholders and Proxy Statement for the 2008 Annual Meeting of Stockholders are incorporated by reference into Part II and III, respectively, of this Form 10-K.

INDEX

		Page
Part I
Item 1.	Business	1
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	21
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	21
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 8.	Financial Statements and Supplementary Data	22
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	22
Item 9A.	Controls and Procedures	22
Item 9B.	Other Information	22
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	22
Item 11.	Executive Compensation	23
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
Item 13.	Certain Relationships and Related Transactions, and Director Independence	24
Item 14.	Principal Accounting Fees and Services	24
Part IV
Item 15.	Exhibits and Financial Statement Schedules	24
SIGNATURES

          This annual report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of Beneficial Mutual Bancorp, Inc. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions. Beneficial Mutual Bancorp, Inc.’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of Beneficial Mutual Bancorp, Inc. and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in Beneficial Mutual Bancorp, Inc.’s market area, changes in real estate market values in Beneficial Mutual Bancorp, Inc.’s market area, changes in relevant accounting principles and guidelines and inability of third party service providers to perform. Additional factors that may affect our results are discussed in Item 1A to this annual report titled “Risk Factors” below.

          These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, Beneficial Mutual Bancorp, Inc. does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

          Unless the context indicates otherwise, all references in this annual report to “Company,” “we,” “us” and “our” refer to Beneficial Mutual Bancorp, Inc. and its subsidiaries.

PART I

Item 1. BUSINESS

General

          Beneficial Mutual Bancorp, Inc. (the “Company”) was organized on August 24, 2004 under the laws of the United States in connection with the mutual holding company reorganization of Beneficial Bank (the “Bank”), a Pennsylvania chartered savings bank. In connection with the reorganization, the Company became the wholly owned subsidiary of Beneficial Savings Bank MHC (the “MHC”), a federally chartered mutual holding company. In addition, the Company acquired 100% of the outstanding common stock of the Bank.

          On July 13, 2007, the Company completed its initial public offering in which it sold 23,606,625 shares, or 28.70%, of its outstanding common stock to the public, including 3,224,772 shares purchased by the Beneficial Mutual Savings Bank Employee Stock Ownership Plan Trust (the “ESOP”). In addition, 45,792,775 shares, or 55.67% of the Company’s outstanding common stock, were issued to the MHC. To further emphasize the Bank’s existing community activities, the Company also contributed $500,000 in cash and issued 950,000 shares, or 1.15% of the Company’s outstanding common stock, to The Beneficial Foundation (the “Foundation”), a Pennsylvania nonstock charitable foundation organized by the Company in connection with the Company’s initial public offering.

          In addition to completing its initial public offering on July 13, 2007, the Company also issued 11,915,200 shares, or 14.50% of its outstanding common stock, to stockholders of FMS Financial Corporation (“FMS Financial”) in connection with the Company’s acquisition of FMS Financial. The merger was consummated pursuant to an agreement and plan of merger whereby FMS Financial merged with and into the Company and FMS Financial’s wholly owned subsidiary, Farmers & Mechanics Bank, merged with and into the Bank.

          The Company’s business activities are the ownership of the Bank’s capital stock and the management of the proceeds it retained in connection with its initial public offering. The Company does not own or lease any property but instead uses the premises, equipment and other property of the Bank with the payment of appropriate rental fees, as required by applicable law and regulations, under the terms of an expense allocation agreement.

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          The Bank, which has also operated under the name Beneficial Mutual Savings Bank, is a Pennsylvania chartered savings bank originally founded in 1853. We have served the financial needs of our depositors and the local community since our founding and are a community-minded, customer service-focused institution. We offer traditional financial services to consumers and businesses in our market areas. We attract deposits from the general public and use those funds to originate a variety of loans, including commercial real estate loans, consumer loans, home equity loans, one-to-four family real estate loans, commercial business loans and construction loans. We offer insurance brokerage and investment advisory services through our wholly owned subsidiaries, Beneficial Insurance Services, LLC and Beneficial Advisors, LLC, respectively. We also maintain an investment portfolio. Our primary market consists of Chester, Delaware, Montgomery, Philadelphia and Bucks Counties, Pennsylvania and Burlington, Camden, and Gloucester Counties, New Jersey. The acquisition of FMS Financial and its wholly owned subsidiary, Farmers & Mechanics Bank, in July 2007 expanded our market presence in Burlington, Camden and Gloucester Counties, New Jersey.

          The Company’s and the Bank’s executive offices are located at 510 Walnut Street, Philadelphia, Pennsylvania and our main telephone number is (215) 864-6000. Our website address is www.thebeneficial.com. Information on our website should not be considered part of this filing.

Market Area

          The Company is headquartered in Philadelphia, Pennsylvania. We operate 39 full-service banking offices in Chester, Delaware, Montgomery, Philadelphia and Bucks Counties, Pennsylvania and 33 full-service offices in Burlington, Camden and Gloucester Counties, New Jersey.

          The acquisition of FMS Financial has substantially enhanced our market share. On July 13, 2007, the Company completed its merger with FMS Financial. In connection with the merger, FMS Financial’s wholly owned subsidiary, Farmers & Mechanics Bank, which had a network of 31 branch offices located primarily in Burlington County, New Jersey and branches in parts of Camden County, New Jersey, merged with and into the Bank. The merger solidified the Bank’s position as the largest Philadelphia-based bank operating solely in the greater Philadelphia metropolitan area, with more than $3.5 billion in assets and a greatly expanded network of neighborhood banking offices throughout the region.

          Our retail market area is the greater Philadelphia metropolitan area and primarily includes the area surrounding our 72 banking offices located in Bucks, Chester, Delaware, Montgomery and Philadelphia Counties in Pennsylvania and Burlington and Camden Counties in New Jersey, while our lending market also includes Gloucester and Mercer Counties in New Jersey. In Pennsylvania, we serve our customers through our four offices in Bucks County, seven offices in Delaware County, eight offices in Montgomery County, 19 offices in Philadelphia County, and one office in Chester County. In New Jersey, we serve our customers through our 30 offices in Burlington County and three offices in Camden County. In addition, Beneficial Insurance Services, LLC (“Beneficial Insurance”) operates two offices in Pennsylvania, one in Philadelphia County and one in Delaware County.

          The economy of our market area is predominated by the service sector. According to published statistics, the 2007 population of the nine-county area served by our branches totaled 5.6 million. The economy in the Philadelphia metropolitan area has grown in recent years due to the presence of a highly-educated workforce and the diversity of the local economy as traditional employers in the manufacturing and financial services industry have been bolstered by growth in the life services and health care industries, as well as the information technology and communication sectors. The median household and per capita income in our market area exceeds comparable national figures.

          The Company has sought to expand its franchise in recent years through acquisition opportunities and by opening new branch offices and continues to evaluate opportunities for further expansion. Our branch expansion has been within our existing market area as we have sought to penetrate more of our primary market area. In 2005, we opened three new branch offices in Northeast Philadelphia. In 2006, we opened one new branch in Bucks County, Pennsylvania and relocated two branches within Philadelphia, Pennsylvania and Delaware County, Pennsylvania. We opened a new branch office in Camden County, New Jersey in January 2007 and another in Montgomery County, Pennsylvania in March 2007. In January 2008, we opened a new branch office in Montgomery County, Pennsylvania.

          Overall, the nine counties that comprise our market area provide attractive growth potential by demonstrating relatively strong population, household and wealth growth trends.

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Competition

          We face significant competition for the attraction of deposits and origination of loans. Our most direct competition for deposits has historically come from the many financial institutions operating in our market area and, to a lesser extent, from other financial service companies such as brokerage firms, credit unions and insurance companies. Several large holding companies operate banks in our market area, including Bank of America, Wachovia, Commerce Bank and PNC Bank. These institutions are significantly larger than us and, therefore, have significantly greater resources. We also face competition for investors’ funds from money market funds, mutual funds and other corporate and government securities.

          Our competition for loans comes primarily from financial institutions in our market area and, to a lesser extent, from other financial service providers, such as mortgage companies and mortgage brokers. Competition for loans also comes from the increasing number of non-depository financial service companies participating in the mortgage market, such as insurance companies, securities companies and specialty finance companies, although the recent credit market disruptions stemming from the deterioration of sub-prime loans have reduced the number of non-depository competitors in the residential mortgage market.

          Notwithstanding these recent credit market disruptions, we expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Technological advances, for example, have lowered barriers to entry, allowed banks to expand their geographic reach by providing services over the Internet and made it possible for non-depository institutions to offer products and services that traditionally have been provided by banks. Changes in federal law permit affiliation among banks, securities firms and insurance companies, which promotes a competitive environment in the financial services industry. Competition for deposits and the origination of loans could limit our growth in the future.

Lending Activities

          We offer a variety of loans. Historically, we have had a substantial portion of our loan portfolio concentrated in consumer loans, which have primarily consisted of automobile loans and leases, and home equity loans and lines of credit. In 2004, we stopped providing automobile lease financing and our automobile loan portfolio has decreased in recent years. It is likely that our automobile loan portfolio will continue to decline as we place greater emphasis on originating commercial real estate and commercial business loans. Since 2002, our commercial real estate loan portfolio has grown steadily and at December 31, 2007 and 2006 comprised 32.8% and 24.4% of our total loan portfolio, respectively, which, at December 31, 2007 was greater than any other loan category.

          In the future, we intend to continue to emphasize commercial real estate and commercial business lending. We have added to our experienced staff of commercial lenders and continue to seek participation opportunities with other local lenders. Participation opportunities will be subject to our internal underwriting guidelines, which are consistently applied. We will also continue to proactively monitor and manage existing credit relationships. In addition, we intend to increase our share of the local market for home equity loans, as a result of recent additional investments in advertising, and the introduction of home equity lending as a new product in our recently expanded New Jersey branch network.

          The Bank does not engage in sub-prime lending, which is defined as mortgage loans advanced to borrowers who do not qualify for market interest rates because of problems with their credit history. The Bank focuses its lending efforts within its market area.

          One-to-Four Family Residential Loans. We offer two types of residential mortgage loans: fixed-rate loans and adjustable-rate loans. We offer fixed-rate mortgage loans with terms of up to 40 years, although we generally do not originate fixed-rate mortgages with terms in excess of 30 years. We offer adjustable-rate mortgage loans with interest rates and payments that adjust annually after an initial fixed period of one, three or five years. Interest rates and payments on our adjustable-rate loans generally are adjusted to a rate equal to a percentage above the U.S. Treasury Security Index. The Bank’s adjustable-rate single-family residential real estate loans generally have a cap of 2% on any increase or decrease in the interest rate at any adjustment date, and a maximum adjustment limit of 6% on any such increase or decrease over the life of the loan. In order to increase the originations of adjustable-rate loans, the Bank has been originating loans which bear a fixed interest rate for a period of three to five years after which they convert to one-year adjustable-rate loans. The Bank’s adjustable-rate loans require that any payment adjustment resulting from a change in the interest rate of an adjustable-rate loan be sufficient to result in full amortization of the loan by the end of the loan term and, thus, do not permit any of the increased payment to be added to the principal amount of the loan, creating negative amortization. Although the Bank does offer adjustable-rate loans with initial rates below the fully indexed rate, loans tied to the one-year constant maturity treasury (“CMT”) are underwritten using methods approved by the Federal Home Loan Mortgage Corporation (“FHLMC”) or the Federal National Mortgage Association (“FNMA”), which require borrowers to be qualified at 2% above the discounted loan rate under certain conditions.

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          Borrower demand for adjustable-rate loans compared to fixed-rate loans is a function of the level of interest rates, the expectations of changes in the level of interest rates, and the difference between the interest rates and loan fees offered for fixed-rate mortgage loans as compared to the interest rates and loan fees for adjustable-rate loans. The relative amount of fixed-rate and adjustable-rate mortgage loans that can be originated at any time is largely determined by the demand for each in a competitive environment. The loan fees, interest rates and other provisions of mortgage loans are determined by us on the basis of our own pricing criteria and competitive market conditions.

          All of our residential mortgage loans are consistently underwritten to standards established by FNMA and FHLMC.

          While one-to-four family residential real estate loans are normally originated with up to 30-year terms, such loans typically remain outstanding for substantially shorter periods because borrowers often prepay their loans in full either upon sale of the property pledged as security or upon refinancing the original loan. Therefore, average loan maturity is a function of, among other factors, the level of purchase and sale activity in the real estate market, prevailing interest rates and the interest rates payable on outstanding loans. We do not offer loans with negative amortization or interest only loans.

          It is our general policy not to make high loan-to-value loans (defined as loans with a loan-to-value ratio of 80% or more) without private mortgage insurance; however, we do offer loans with loan-to-value ratios of up to 90% under a special low income loan program consisting of $15.4 million in loans as of December 31, 2007. The maximum loan-to-value ratio we generally permit is 95% with private mortgage insurance, although occasionally we do originate loans with loan-to-value ratios as high as 97% under special loan programs, including our first time home owner loan program. We require all properties securing mortgage loans to be appraised by a board-approved independent appraiser. We generally require title insurance on all first mortgage loans. Borrowers must obtain hazard insurance, and flood insurance is required for loans on properties located in a flood zone.

          Commercial Real Estate Loans. At December 31, 2007, we had commercial real estate loans totaling $693.7 million, or 32.8%, of our total loan portfolio, which was greater than any other loan category, including one-to-four family loans.

          We offer commercial real estate loans secured by real estate primarily with adjustable rates. We originate a variety of commercial real estate loans generally for terms up to 25 years and payments based on an amortization schedule of up to 25 years. These loans are typically based on either the Federal Home Loan Bank (“FHLB”) of Pittsburgh’s borrowing rate or U.S. Treasury rate and adjust every five years. Commercial real estate loans also are originated for the acquisition and development of land. Conditions of acquisition and development loans we originate generally limit the number of model homes and homes built on speculation, and draws are scheduled against executed agreements of sale. Commercial real estate loans for the acquisition and development of land are typically based upon the prime rate as published in The Wall Street Journal and/or LIBOR. Commercial real estate loans for developed real estate and for real estate acquisition and development are originated with loan-to-value ratios of up to 75%, while loans for the acquisition of land are originated with a maximum loan to value ratio of 65%.

          As of December 31, 2007, our largest commercial real estate loan was a $20.0 million non-revolving line of credit for the acquisition and development of land into a development for 170 homes. The loan is secured by the land being developed. The loan balance was $13.3 million at December 31, 2007. This loan was performing in accordance with its original terms at December 31, 2007.

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          Commercial Loans. We offer commercial business loans to professionals, sole proprietorships and small businesses in our market area. We offer installment loans for capital improvements, equipment acquisition and long-term working capital. These loans are typically based on the prime rate as published in The Wall Street Journal and/or LIBOR. These loans are secured by business assets other than real estate, such as business equipment and inventory, or are backed by the personal guarantee of the borrower. We originate lines of credit to finance the working capital needs of businesses to be repaid by seasonal cash flows or to provide a period of time during which the business can borrow funds for planned equipment purchases. We also offer accounts receivable lines of credit.

          When making commercial business loans, we consider the financial statements of the borrower, the borrower’s payment history of both corporate and personal debt, the debt service capabilities of the borrower, the projected cash flows of the business, the viability of the industry in which the customer operates and the value of the collateral.

          At December 31, 2007, our largest commercial business loan relationship was a $7.5 million loan secured by a mortgage on commercial real estate and general business assets. This loan was performing in accordance with its original terms at December 31, 2007.

          Consumer Loans. We offer a variety of consumer loans, including home equity loans and lines of credit, automobile loans, including loans for recreational vehicles, marine loans for the purchase of new and used boats, guaranteed student loans and loans secured by passbook accounts and certificates of deposit. We also offer unsecured lines of credit.

          We generally offer home equity loans and lines of credit with a maximum combined loan-to-value ratio of 80%. Home equity loans have fixed-rates of interest and are originated with terms of up to 20 years. Home equity lines of credit have adjustable rates and are based upon the prime rate as published in The Wall Street Journal. Home equity lines of credit require that 2.0% of the principal and interest be paid each month. We hold a first mortgage position on the majority of the homes that secure our home equity loans.

          We offer loans secured by new and used automobiles. These loans have fixed interest rates and generally have terms up to six years. We offer automobile loans with loan-to-value ratios of up to 100% of the purchase price of the vehicle depending upon the credit history of the borrower and other factors. We also offer loans on recreational vehicles, which we will originate for terms of up to 20 years depending upon the loan amount and the loan-to-value ratio on such loans generally does not exceed 90%. We also offer marine loans for up to $500,000 for the purchase of new and used boats with terms up to 20 years. The maximum loan-to-value ratio for such a loan is 85% for loans up to $249,999 and 80% for loans over $249,999. Although we continue to hold some automobile leases, we no longer originate or purchase automobile lease financing. At December 31, 2007, we had 113 leases totaling $1.7 million.

          We offer consumer loans secured by passbook accounts and certificates of deposit held at the Bank based upon the prime rate as published in The Wall Street Journal with terms up to four years. We will offer such loans up to 100% of the principal balance of the certificate of deposit or balance in the passbook account. We also offer unsecured loans and lines of credit with terms up to five years. Our unsecured loans and lines of credit bear a substantially higher interest rate than our secured loans and lines of credit. For more information on our loan commitments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risk Management—Liquidity Management” included as Item 7 to this Annual Report on Form 10-K.

          The procedures for underwriting consumer loans include an assessment of the applicant’s payment history on other debts and ability to meet existing obligations and payments on the proposed loan. Although the applicant’s creditworthiness is a primary consideration, the underwriting process also includes a comparison of the value of the collateral, if any, to the proposed loan amount.

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          Loan Underwriting Risks.

          Adjustable-Rate Loans. While we anticipate that adjustable-rate loans will better offset the adverse effects of an increase in interest rates as compared to fixed-rate mortgages, an increased monthly mortgage payment required of adjustable-rate loan borrowers in a rising interest rate environment could cause an increase in delinquencies and defaults. The marketability of the underlying property also may be adversely affected in a high interest rate environment. In addition, although adjustable-rate mortgage loans make our asset base more responsive to changes in interest rates, the extent of this interest sensitivity is limited by the annual and lifetime interest rate adjustment limits.

          Commercial Real Estate Loans. Loans secured by commercial real estate generally have larger balances and involve a greater degree of risk than one-to-four family residential mortgage loans. Of primary concern in commercial real estate lending is the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors, if any, to provide annual financial statements on commercial real estate loans and rent rolls where applicable. In reaching a decision on whether to make a commercial real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability and the value of the underlying property. We have generally required that the properties securing these real estate loans have debt service coverage ratios (the ratio of earnings before debt service to debt service) of at least 1.2x. An environmental report is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

          Commercial Business Loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property, the value of which tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may depend substantially on the success of the business itself. Further, any collateral securing such loans may depreciate over time, may be difficult to appraise and may fluctuate in value.

          Consumer Loans. Consumer loans may entail greater risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly, such as motor vehicles, recreational vehicles and boats. In the latter case, repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

          Loan Originations and Purchases. Loan originations come from a number of sources. The primary source of loan originations are existing customers, walk-in traffic, advertising and referrals from customers. We also purchase home equity, automobile, recreational vehicle and marine loans.

          We will purchase participations in loans from local banks to supplement our lending portfolio.Loan participations totaled $60.4 million at December 31, 2007. Loan participations are subject to the same credit analysis and loan approvals as loans we originate. We are permitted to review all of the documentation relating to any loan in which we participate. However, in a purchased participation loan, we do not service the loan and thus are subject to the policies and practices of the lead lender with regard to monitoring delinquencies, pursuing collections and instituting foreclosure proceedings.

          Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our board of trustees and management. The Board of Directors has granted loan approval authority to certain officers or groups of officers up to prescribed limits, based on the officer’s experience and tenure. Individual loans or lending relationships with aggregate exposure of $5.0 million must be approved by the senior loan committee, which is comprised of senior bank officers and five non-employee directors. All loans in excess of $20.0 million must be approved by the Senior Loan Committee of the Bank’s Board, as well as the Executive Committee of the Board, which includes six non-employee directors.

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          Loans to One Borrower. The maximum amount that we may lend to one borrower and the borrower’s related entities is limited, by regulation, to generally 15% of our stated capital and reserves. At December 31, 2007, our regulatory limit on loans to one borrower was $84.2 million. At that date, our largest lending relationship was $13.3 million and was secured by real estate being developed for 170 homes. This loan was performing in accordance with its original terms at December 31, 2007.

          Loan Commitments. We issue commitments for fixed and adjustable-rate mortgage loans conditioned upon the occurrence of certain events. Commitments to originate mortgage loans are legally binding agreements to lend to our customers. Generally, our loan commitments expire after 60 days.

          Delinquent Loans. We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectibility. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan as well as a shortfall in collateral value may result in a write down to management’s estimate of net realizable value. Personal loans are typically charged off at 120 days delinquent.

Investment Activities

          We have authority to invest in various types of assets, including United States Treasury obligations, securities of various U.S. government sponsored enterprises, federal agencies and state and municipal governments, mortgage-backed securities and certificates of deposit of federally insured institutions. Within certain regulatory limits, we also may invest a portion of our assets in corporate securities and mutual funds. As a member of the FHLB of Pittsburgh, we are required to acquire and hold shares of capital stock in that FHLB. We assumed Farmers & Mechanics Bank’s obligation to the FHLB of New York as part of our acquisition of FMS Financial on July 13, 2007. The Bank is a non-member of the FHLB of New York, but is required to hold shares of capital stock in the FHLB of New York as a result of the FMS Financial acquisition. While we have the authority under applicable law to invest in derivative instruments for hedging activities, we had no such investments at December 31, 2007.

          At December 31, 2007, our investment portfolio excluding FHLB stock totaled $1.1 billion and consisted primarily of mortgage-backed securities, including collateralized mortgage obligations (“CMOs”), United States government and agency securities, including securities issued by government sponsored enterprises, municipal and other bonds including collateralized debt obligations (“CDOs”) backed by bank trust preferred capital securities, equity securities, and mutual funds.

          Our investment objectives are to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to generate a favorable return. The Company’s Board of Directors approves the investment policy and any revisions, at least annually.

Deposit Activities and Other Sources of Funds

          General. Deposits, borrowings and loan repayments are the major sources of our funds for lending and other investment purposes. Scheduled loan repayments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general interest rates and money market conditions.

          Deposit Accounts. Deposits are primarily attracted from within our market area through the offering of a broad selection of deposit instruments, including non-interest bearing demand deposits (such as checking accounts), interest-bearing demand accounts (such as NOW and money market accounts), savings accounts and certificates of deposit. From time to time, we solicit brokered time deposits as an alternative source of funds.

          We also offer a variety of deposit accounts designed for the businesses operating in our market area. Our business banking deposit products include a commercial checking account and a checking account specifically designed for small businesses. Additionally, we offer cash management, including remote deposit, lockbox service and sweep accounts.

          Deposit account terms vary according to the minimum balance required, the time periods the funds must remain on deposit and the interest rate, among other factors. In determining the terms of our deposit accounts, we consider the rates offered by our competition, the rates on borrowings, brokered deposits, our liquidity needs, profitability to us, and customer preferences and concerns. We generally review our deposit mix and pricing bi-weekly. Our deposit pricing strategy has generally been to offer competitive rates on all types of deposit products, and to periodically offer special rates in order to attract deposits of a specific type or term.

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          Borrowings. We have the ability to utilize advances from the FHLB of Pittsburgh to supplement our investable funds. The FHLB functions as a central reserve bank providing credit for member financial institutions. As a member, we are required to own capital stock in the FHLB and are authorized to apply for advances on the security of such stock and certain of our mortgage loans and other assets (principally securities which are obligations of, or guaranteed by, the United States), provided certain standards related to creditworthiness have been met. Advances are made under several different programs, each having its own interest rate and range of maturities. Depending on the program, limitations on the amount of advances are based either on a fixed percentage of an institution’s net worth or on the FHLB’s assessment of the institution’s creditworthiness. We also utilize securities sold under agreements to repurchase and overnight repurchase agreements to supplement our supply of investable funds and to meet deposit withdrawal requirements.

Personnel

          As of December 31, 2007, we had 728 full-time employees and 184 part-time employees, none of whom is represented by a collective bargaining unit. We believe our relationship with our employees is good.

Subsidiaries

          Beneficial Insurance Services, LLC is a Pennsylvania Limited Liability Company formed in 2004. In 2005, Beneficial Insurance Services LLC acquired the assets of a Philadelphia-based insurance brokerage firm, Paul Hertel & Co., Inc., which provides property, casualty, life, health and benefits insurance services to individuals and businesses. Beneficial Insurance conducts business under the trade name of Paul Hertel & Company. Beneficial Insurance also acquired a majority interest in Graphic Arts Insurance Agency, Inc. through its acquisition of the assets of Paul Hertel & Co. Inc. On October 5, 2007, Beneficial Insurance acquired the business of CLA Agency, Inc., a full-service property and casualty and professional liability insurance brokerage company headquartered in Newtown Square, Pennsylvania. Beneficial Insurance also operates under the trade name CLA Insurance Agency.

          Beneficial Advisors, LLC is a Pennsylvania Limited Liability Company formed in 2000 for the purpose of offering investment and insurance related products, including, but not limited to, fixed- and variable-rate annuities and the sale of mutual funds and securities through INVEST, a third party broker dealer.

          Neumann Corporation, which was formed in 1990, is a Delaware Investment Holding Company and holds title to various Bank securities and other investments. At December 31, 2007, Neumann Corporation held $433.7 million in assets.

          BSB Union Corporation was formed in 1994 for the purpose of engaging in the business of owning and leasing automobiles. In 1998, BSB Union Corporation obtained approval to hold an interest in a “titling trust.”

          St. Ignatius Senior Housing I, L.P. is a limited partnership formed in 2002 and sponsored by St. Ignatius Nursing Home, a subsidiary of which is the general partner. The Bank owns 99.99% of the partnership. The limited partnership was sponsored as an affordable housing project providing low income housing tax credits pursuant to Section 42 of the Internal Revenue Code.

          St. Ignatius Senior Housing II, L.P. is a limited partnership formed in 2007 and sponsored by St. Ignatius Nursing Home, a subsidiary of which is the general partner. The Bank owns 99.99% of the partnership. The limited partnership was sponsored as an affordable housing project providing low income housing tax credits pursuant to Section 42 of the Internal Revenue Code.

          Graphic Arts Insurance Agency is an insurance agency in which Beneficial Insurance purchased a 51% ownership interest in 2005.

          Beneficial Abstract, LLC is a title insurance company in which the Bank purchased a 40% ownership interest in 2006. Beneficial Abstract, LLC was inactive as of December 31, 2007.

          Beneficial Equity Holdings, LLC was formed in 2004 and is currently inactive.

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REGULATION AND SUPERVISION

          The following discussion describes elements of an extensive regulatory framework applicable to savings and loan holding companies and banks and specific information about the Bank, the Company and the MHC. Federal and state regulation of banks and bank holding companies is intended primarily for the protection of depositors and the Deposit Insurance Fund, rather than for the protection of potential shareholders and creditors.

General

          The Bank is a Pennsylvania-chartered savings bank that is subject to extensive regulation, examination and supervision by the Pennsylvania Department of Banking (the “Department”), as its primary regulator, and the Federal Deposit Insurance Corporation (“FDIC”), as its deposits insurer. The Bank is a member of the FHLB system and, with respect to deposit insurance, of the Deposit Insurance Fund managed by the FDIC. The Bank must file reports with the Department and the FDIC concerning its activities and financial condition, in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other savings institutions. The Department and/or the FDIC conduct periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements. This regulatory structure gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in the regulatory requirements and policies, whether by the Department, the FDIC or Congress, could have a material adverse impact on the Bank, the Company, the MHC and their operations.

          Certain regulatory requirements applicable to the Bank, the Company and the MHC are referred to below or elsewhere herein. This description of statutes and regulations is not intended to be a complete explanation of such statutes and regulations and their effects on the Bank, the Company and the MHC and is qualified in its entirety by reference to the actual statutes and regulations.

Bank Regulation

          Pennsylvania Savings Bank Law. The Pennsylvania Banking Code of 1965, as amended (the “1965 Code”), and the Pennsylvania Department of Banking Code, as amended (the “Department Code,” and collectively, the “Codes”), contain detailed provisions governing the organization, location of offices, rights and responsibilities of directors, officers and employees, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The Codes delegate extensive rule-making power and administrative discretion to the Department so that the supervision and regulation of state-chartered savings banks may be flexible and readily responsive to changes in economic conditions and in savings and lending practices. Specifically, under the Department Code, the Department is given the authority to exercise such supervision over state-chartered savings banks as to afford the greatest safety to creditors, shareholders and depositors, ensure business safety and soundness, conserve assets, protect the public interest and maintain public confidence in such institutions.

          The 1965 Code provides, among other powers, that state-chartered savings banks may engage in any activity permissible for a national banking association or federal savings association, subject to regulation by the Department (which shall not be more restrictive than the regulation imposed upon a national banking association or federal savings association, respectively). Before it engages in such an activity allowable for a national banking association or federal savings association, a state-chartered savings bank must either obtain prior approval from the Department or provide at least 30 days’ prior written notice to the Department. The authority of the Bank under Pennsylvania law, however, may be constrained by federal law and regulation. See “Investments and Activities” below.

          Regulatory Capital Requirements. Under FDIC regulations, federally insured state-chartered banks that are not members of the Federal Reserve System (“state non-member banks”), such as the Bank, are required to comply with minimum leverage capital requirements. For an institution determined by the FDIC to not be anticipating or experiencing significant growth and to be in general a strong banking institution, rated composite 1 under the Uniform Financial Institutions Rating System established by the Federal Financial Institutions Examinations Council, the minimum capital leverage requirement is a ratio of Tier 1 capital to total assets of 3%. For all other institutions, the minimum leverage capital ratio is not less than 4%. Tier 1 capital is the sum of common stockholders’ equity, noncumulative perpetual preferred stock (including any related surplus) and minority investments in certain subsidiaries, less intangible assets (except for certain servicing rights and credit card relationships) and a percentage of certain nonfinancial equity investments.

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          The Bank must also comply with the FDIC risk-based capital guidelines. The FDIC guidelines require state non-member banks to maintain certain levels of regulatory capital in relation to regulatory risk-weighted assets. Risk-based capital ratios are determined by allocating assets and specified off-balance sheet items to four risk-weighted categories ranging from 0% to 100%, with higher levels of capital being required for the categories perceived as representing greater risk.

          State non-member banks must maintain a minimum ratio of total capital to risk-weighted assets of at least 8%, of which at least one-half must be Tier 1 capital. Total capital consists of Tier 1 capital plus Tier 2 or supplementary capital items, which include allowances for loan losses in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock, long-term preferred stock, hybrid capital instruments, including mandatory convertible debt securities, term subordinated debt and certain other capital instruments and a portion of the net unrealized gain on equity securities. The includable amount of Tier 2 capital cannot exceed the amount of the institution’s Tier 1 capital. At December 31, 2007, the Bank met each of these capital requirements. As savings and loan holding companies regulated by the Office of Thrift Supervision (the “OTS”), the Company and the MHC are not subject to any separate regulatory capital requirements.

          Restrictions on Dividends. The Company’s ability to declare and pay dividends may depend in part on dividends received from the Bank. The 1965 Code regulates the distribution of dividends by savings banks and provides that dividends may be declared and paid only out of accumulated net earnings and may be paid in cash or property other than its own shares. Dividends may not be declared or paid unless stockholders’ equity is at least equal to contributed capital.

          Interstate Banking and Branching. Federal law permits a bank, such as the Bank, to acquire an institution by merger in a state other than Pennsylvania unless the other state has opted out. Federal law also authorizes de novo branching into another state if the host state enacts a law expressly permitting out of state banks to establish such branches within its borders. The Bank currently has 33 full-service locations in Burlington and Camden, New Jersey. At its interstate branches, the Bank may conduct any activity that is authorized under Pennsylvania law that is permissible either for a New Jersey savings bank (subject to applicable federal restrictions) or a New Jersey branch of an out-of-state national bank. The New Jersey Department of Banking and Insurance may exercise certain regulatory authority over the Bank’s New Jersey branches.

          Prompt Corrective Regulatory Action. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes three categories of capital deficient institutions: undercapitalized, significantly undercapitalized and critically undercapitalized.

          The FDIC has adopted regulations to implement the prompt corrective action legislation. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or greater and generally a leverage ratio of 4% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8%, a Tier 1 risk-based capital ratio of less than 4%, or generally a leverage ratio of less than 4% (3% or less for institutions with the highest examination rating). An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less than 3%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2%. As of December 31, 2007, the Bank met the conditions to be classified as a “well capitalized” institution.

          “Undercapitalized” banks must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. No institution may make a capital distribution, including payment as a dividend, if it would be “undercapitalized” after the payment. A bank’s compliance with such plans is required to be guaranteed by its parent holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount needed to comply with regulatory capital requirements. If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions must comply with additional sanctions including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

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          Investments and Activities. Under federal law, all state-chartered FDIC-insured banks have generally been limited to activities as principal and equity investments of the type and in the amount authorized for national banks, notwithstanding state law. The FDIC Improvement Act and the FDIC permit exceptions to these limitations. For example, state chartered banks, such as the Bank, may, with FDIC approval, continue to exercise grandfathered state authority to invest in common or preferred stocks listed on a national securities exchange or the Nasdaq Global Select Market and in the shares of an investment company registered under federal law. All non-subsidiary equity investments, unless otherwise authorized or approved by the FDIC, must have been divested by December 19, 1996, under an FDIC-approved divesture plan, unless such investments were grandfathered by the FDIC. The Bank received grandfathering authority from the FDIC to invest in listed stocks and/or registered shares. The maximum permissible investment is 100% of Tier I capital, as specified by the FDIC’s regulations, or the maximum amount permitted by Pennsylvania Banking Law, whichever is less. Such grandfathering authority may be terminated upon the FDIC’s determination that such investments pose a safety and soundness risk to the Bank or if the Bank converts its charter or undergoes a change in control. In addition, the FDIC is authorized to permit such institutions to engage in other state authorized activities or investments (other than non-subsidiary equity investments) that meet all applicable capital requirements if it is determined that such activities or investments do not pose a significant risk to the Deposit Insurance Fund. As of December 31, 2007, the Bank held no marketable equity securities under such grandfathering authority.

          Transactions with Related Parties. Federal law limits the Bank’s authority to lend to, and engage in certain other transactions with (collectively, “covered transactions”), “affiliates” (e.g., any company that controls or is under common control with an institution, including the Company, the MHC and their non-savings institution subsidiaries). The aggregate amount of covered transactions with any individual affiliate is limited to 10% of the capital and surplus of the savings institution. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type specified by federal law. The purchase of low quality assets from affiliates is generally prohibited. Transactions with affiliates must generally be on terms and under circumstances, that are at least as favorable to the institution as those prevailing at the time for comparable transactions with non-affiliated companies. In addition, savings institutions are prohibited from lending to any affiliate that is engaged in activities that are not permissible for bank holding companies and no savings institution may purchase the securities of any affiliate other than a subsidiary.

          The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Bank to its executive officers and directors. However, the law contains a specific exception for loans by the Bank to its executive officers and directors in compliance with federal banking laws. Under such laws, the Bank’s authority to extend credit to executive officers, directors and 10% shareholders (“insiders”), as well as entities such persons control, is limited. The law limits both the individual and aggregate amount of loans the Company may make to insiders based, in part, on the Company’s capital position and requires certain board approval procedures to be followed. Such loans are required to be made on terms substantially the same as those offered to unaffiliated individuals and not involve more than the normal risk of repayment. There is an exception for loans made pursuant to a benefit or compensation program that is widely available to all employees of the institution and does not give preference to insiders over other employees. Loans to executives are subject to further limitations based on the type of loan involved.

          Enforcement. The FDIC has extensive enforcement authority over insured savings banks, including the Bank. This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease and desist orders and to remove directors and officers. In general, these enforcement actions may be initiated in response to violations of laws and regulations and unsafe or unsound practices. The FDIC has authority under federal law to appoint a conservator or receiver for an insured bank under limited circumstances.

          Standards for Safety and Soundness. As required by statute, the federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the FDIC determines that a savings institution fails to meet any standard prescribed by the guidelines, the FDIC may require the institution to submit an acceptable plan to achieve compliance with the standard.

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          Insurance of Deposit Accounts. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The Deposit Insurance Fund is the successor to the Bank Insurance Fund and the Savings Association Insurance Fund, which were merged in 2006. The FDIC recently amended its risk-based assessment system for 2007 to implement authority granted by the Federal Deposit Insurance Reform Act of 2005 (the “Reform Act”). Under the revised system, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors by which institutions are assigned to one of three categories based on their capitalization and one of three subcategories based on examination ratings and other supervisory information. An institution’s assessment rate depends upon the category to which it is assigned. Risk Category I, which contains the least risky depository institutions, is expected to include more than 90% of all institutions. Unlike the other categories, Risk Category I contains further risk differentiation based on the FDIC’s analysis of financial ratios, examination component ratings and other information. Assessment rates are determined semi-annually by the FDIC and currently range from five to seven basis points for the healthiest institutions (Risk Category I) to 43 basis points of assessable deposits for the riskiest (Risk Category IV). The FDIC may adjust rates uniformly from one quarter to the next, except that no single adjustment can exceed three basis points. No institution may pay a dividend if in default of its FDIC assessment.

          The Reform Act also provides for a one-time credit for eligible institutions based on their assessment base as of December 31, 1996. Subject to certain limitations with respect to institutions that are exhibiting weaknesses, credits can be used to offset assessments until exhausted. The Bank’s one-time credit approximates $1.7 million. The Reform Act also provides for the possibility that the FDIC may pay dividends to insured institutions once the Deposit Insurance Fund reserve ratio equals or exceeds 1.35% of estimated insured deposits.

          In addition to the assessment for deposit insurance, institutions are required to make payments on bonds issued in the late 1980s by the Financing Corporation to recapitalize a predecessor deposit insurance fund. This payment is established quarterly and during the calendar year ending December 31, 2007 averaged 1.18 basis points of assessable deposits.

          The Reform Act provides the FDIC with authority to adjust the Deposit Insurance Fund ratio to insured deposits within a range of 1.15% and 1.50%, in contrast to the prior statutorily fixed ratio of 1.25%. The ratio, which is viewed by the FDIC as the level that the fund should achieve, was established by the agency at 1.25% for 2008, which is unchanged from 2007.

          The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future.

          Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or the Office of Thrift Supervision. The management of the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance.

          Federal Home Loan Bank System. The Bank is a member of the FHLB system, which consists of 12 regional Federal Home Loan Banks. The FHLB provides a central credit facility primarily for member institutions. The Bank, as a member of the FHLB of Pittsburgh, is required to acquire and hold shares of capital stock in that FHLB. The Bank assumed Farmers & Mechanics Bank’s obligation to the FHLB of New York as part of the Company’s acquisition of FMS Financial on July 13, 2007. The Bank is a non member of the FHLB of New York, but is required to hold shares of capital stock in the FHLB of New York as a result of the FMS Financial acquisition. The Bank was in compliance with these requirements with a combined investment of $18.8 million in FHLB Bank of Pittsburgh and New York stock at December 31, 2007.

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          Community Reinvestment Act. Under the Community Reinvestment Act, as implemented by FDIC regulations, a state non-member bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate-income neighborhoods. The Community Reinvestment Act neither establishes specific lending requirements or programs for financial institutions nor limits an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The Community Reinvestment Act requires the FDIC, in connection with its examination of an institution, to assess the institution’s record of meeting the credit needs of its community and to consider such record when it evaluates applications made by such institution. The Community Reinvestment Act requires public disclosure of an institution’s Community Reinvestment Act rating. The Bank’s latest Community Reinvestment Act rating received from the FDIC was “satisfactory.”

Other Regulations

          Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

· Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

· Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

· Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

· Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

· Fair Debt Collection Practices Act, governing the manner in which consumer debts may be collected by collection agencies; and

· rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of the Bank also are subject to the:

· Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

· Electronic Funds Transfer Act and Regulation E promulgated thereunder, which establishes the rights, liabilities and responsibilities of consumers who use electronic fund transfer (EFT) services and financial institutions that offer these services; its primary objective is the protection of individual consumers in their dealings with these services;

· Check Clearing for the 21^st Century Act (also known as “Check 21”), which allows banks to create and receive “substitute checks” (paper reproduction of the original check), and discloses the customers rights regarding “substitute checks” pertaining to these items having the “same legal standing as the original paper check”;

· Title III of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (referred to as the “USA PATRIOT Act”), and the related regulations of the OTS, which require savings associations operating in the United States to develop new anti-money laundering compliance programs (including a customer identification program that must be incorporated into the AML compliance program), due diligence policies and controls to ensure the detection and reporting of money laundering; and

· The Gramm-Leach-Bliley Act, which prohibits a financial institution from disclosing nonpublic personal information about a consumer to nonaffiliated third parties, unless the institution satisfies various notice and opt-out requirements.

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Holding Company Regulation

          General. The Company and the MHC are savings and loan holding companies within the meaning of federal law. As such, they are registered with the OTS and are subject to OTS regulations, examinations, supervision, reporting requirements and regulations concerning corporate governance and activities. In addition, the OTS has enforcement authority over the Company and the MHC and their non-savings institution subsidiaries. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the Bank.

          The OTS also takes the position that its capital distribution regulations apply to state savings banks in savings and loan holding company structures. Those regulations impose limitations upon all capital distributions by an institution, including cash dividends, payments to repurchase its shares and payments to shareholders of another institution in a cash-out merger. Under the regulations, an application to and prior approval of the OTS is required prior to any capital distribution if the institution does not meet the criteria for “expedited treatment” of applications under OTS regulations (i.e., generally, examination and Community Reinvestment Act ratings in the two top categories), the total capital distributions for the calendar year exceed net income for that year plus the amount of retained net income for the preceding two years, the institution would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OTS. If an application is not required, the institution must still provide prior notice to the OTS of the capital distribution if, like the Bank, it is a subsidiary of a holding company. In the event the Bank’s capital fell below its regulatory requirements or the OTS notified it that it was in need of increased supervision, the Bank’s ability to make capital distributions could be restricted. In addition, the OTS could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafe or unsound practice.

          To be regulated as a savings and loan holding company by the OTS (rather than as a bank holding company by the Federal Reserve Board), the Bank must qualify as a Qualified Thrift Lender (“QTL”). To qualify as a QTL, the Bank must maintain compliance with the test for a “domestic building and loan association,” as defined in the Internal Revenue Code, or with a Qualified Thrift Test. Under the QTL Test, a savings institution is required to maintain at least 65% of its “portfolio assets” (total assets less: (1) specified liquid assets up to 20% of total assets; (2) intangibles, including goodwill; and (3) the value of property used to conduct business) in certain “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed and related securities, but also including education, credit and small business loans) in at least nine months out of each 12-month period. At year end 2007, the Bank maintained 78.06% of its portfolio assets in qualified thrift investments. The Bank also met the QTL test in each of the prior four quarters.

          Restrictions Applicable to Mutual Holding Companies. According to federal law and OTS regulations, a mutual holding company, such as the MHC, may generally engage in the following activities: (1) investing in the stock of a stock savings association; (2) acquiring a mutual association through the merger of such association into a stock savings association subsidiary of such holding company or an interim savings association subsidiary of such holding company; (3) merging with or acquiring another mutual or stock savings and loan holding company; (4) investing in a corporation the capital stock of which could be purchased by a federal savings association or a state savings association under Pennsylvania law; and (5) any activity approved by the Federal Reserve Board for a bank holding company or financial holding company or approved by the OTS for multiple savings and loan holding companies.

          Federal law prohibits a savings and loan holding company, including a federal mutual holding company, from directly or indirectly, or through one or more subsidiaries, acquiring more than 5% of the voting stock of another savings institution, or its holding company, without prior written approval of the Office of Thrift Supervision. Federal law also prohibits a savings and loan holding company from acquiring more than 5% of a company engaged in activities other than those authorized for savings and loan holding companies by federal law; or acquiring or retaining control of a depository institution that is not insured by the FDIC. In evaluating applications by holding companies to acquire savings institutions, the OTS must consider the financial and managerial resources and future prospects of the company and institution involved the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

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          The OTS is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, except: (1) the approval of interstate supervisory acquisitions by savings and loan holding companies, and (2) the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisitions. The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

          If the savings institution subsidiary of a savings and loan holding company fails to meet the QTL test, the holding company must register with the Federal Reserve Board as a bank holding company within one year of the savings institution’s failure to so qualify.

          Stock Holding Company Subsidiary Regulation. The OTS has adopted regulations governing the two-tier mutual holding company form of organization and subsidiary stock holding companies that are controlled by mutual holding companies. We have adopted this form of organization, pursuant to which the Company is permitted to engage in activities that are permitted for the MHC subject to the same restrictions and conditions.

          Waivers of Dividends by Beneficial Savings Bank MHC. OTS regulations require the MHC to notify the OTS if it proposes to waive receipt of dividends from the Company. The OTS reviews dividend waiver notices on a case-by-case basis, and, in general, does not object to a waiver if: (1) the waiver would not be detrimental to the safe and sound operation of the savings association; and (2) the mutual holding company’s board of directors determines that such waiver is consistent with such directors’ fiduciary duties to the mutual holding company’s members. We anticipate that the MHC will waive dividends that the Company may pay, if any.

          Conversion of Beneficial Savings Bank MHC to Stock Form. OTS regulations permit the MHC to convert from the mutual form of organization to the capital stock form of organization. There can be no assurance when, if ever, a conversion transaction will occur, and the board of directors has no current intention or plan to undertake a conversion transaction. In a conversion transaction, a new holding company would be formed as the successor to the Company, the MHC’s corporate existence would end, and certain depositors of the Bank would receive the right to subscribe for additional shares of the new holding company. In a conversion transaction, each share of common stock held by stockholders other than the MHC would be automatically converted into a number of shares of common stock of the new holding company based on an exchange ratio determined at the time of conversion that ensures that stockholders other than the MHC own the same percentage of common stock in the new holding company as they owned in the Company immediately before conversion. The total number of shares held by stockholders other than the MHC after a conversion transaction would be increased by any purchases by such stockholders in the stock offering conducted as part of the conversion transaction.

          Acquisition of Control. Under the federal Change in Bank Control Act, a notice must be submitted to the OTS if any person (including a company), or group acting in concert, seeks to acquire “control” of a savings and loan holding company. An acquisition of “control” can occur upon the acquisition of 10% or more of the voting stock of a savings and loan holding company or as otherwise defined by the OTS. Under the Change in Bank Control Act, the OTS has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the anti-trust effects of the acquisition. Any company that so acquires control would then be subject to regulation as a savings and loan holding company.

Federal Income Taxation

          General. We report our income on a fiscal year basis using the accrual method of accounting. The federal income tax laws apply to us in the same manner as to other corporations with some exceptions, including particularly our reserve for bad debts discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to us. Our federal income tax returns have been either audited or closed under the statute of limitations through tax year 2003. For its 2007 fiscal year, the Bank’s maximum federal income tax rate was 35%.

          The Company and the Bank have entered into a tax allocation agreement. Because the Company owns 100% of the issued and outstanding capital stock of the Bank, the Company and the Bank are members of an affiliated group within the meaning of Section 1504(a) of the Internal Revenue Code, of which group the Company is the common parent corporation. As a result of this affiliation, the Bank may be included in the filing of a consolidated federal income tax return with the Company and, if a decision to file a consolidated tax return is made, the parties agree to compensate each other for their individual share of the consolidated tax liability and/or any tax benefits provided by them in the filing of the consolidated federal income tax return.

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          Bad Debt Reserves. For fiscal years beginning before June 30, 1996, thrift institutions that qualified under certain definitional tests and other conditions of the Internal Revenue Code were permitted to use certain favorable provisions to calculate their deductions from taxable income for annual additions to their bad debt reserve. A reserve could be established for bad debts on qualifying real property loans, generally secured by interests in real property improved or to be improved, under the percentage of taxable income method or the experience method. The reserve for nonqualifying loans was computed using the experience method. Federal legislation enacted in 1996 repealed the reserve method of accounting for bad debts and the percentage of taxable income method for tax years beginning after 1995 and required savings institutions to recapture or take into income certain portions of their accumulated bad debt reserves as of December 31, 1987. Approximately $2.3 million of our accumulated bad debt reserves would not be recaptured into taxable income unless the Bank makes a “non-dividend distribution” to the Company as described below.

          Distributions. If the Bank makes “non-dividend distributions” to the Company, the distributions will be considered to have been made from the Bank’s unrecaptured tax bad debt reserves, including the balance of its reserves as of December 31, 1987, to the extent of the “non-dividend distributions,” and then from the Bank’s supplemental reserve for losses on loans, to the extent of those reserves, and an amount based on the amount distributed, but not more than the amount of those reserves, will be included in the Bank’s taxable income. Non-dividend distributions include distributions in excess of the Bank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of the Bank’s current or accumulated earnings and profits will not be so included in the Bank’s taxable income.

          The amount of additional taxable income triggered by a non-dividend is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Therefore, if the Bank makes a non-dividend distribution to the Company, approximately one and one-half times the amount of the distribution not in excess of the amount of the reserves would be includable in income for federal income tax purposes, assuming a 35% federal corporate income tax rate. The Bank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

State Taxation

          Pennsylvania Taxation. The Bank, as a savings bank conducting business in Pennsylvania, is subject to tax under the Pennsylvania Mutual Thrift Institutions Tax Act, as amended to include thrift institutions having capital stock. Pursuant to the Mutual Thrift Institutions Tax, the tax rate is 11.5%. The Mutual Thrift Institutions Tax exempts the Bank from other taxes imposed by the Commonwealth of Pennsylvania for state income tax purposes and from all local taxation imposed by political subdivisions, except taxes on real estate and real estate transfers. The Mutual Thrift Institutions Tax is a tax upon net income, determined in accordance with generally accepted accounting principles with certain adjustments. The Mutual Thrift Institutions Tax, in computing income according to generally accepted accounting principles, allows for the deduction of interest earned on state, federal and local obligations, while disallowing a portion of a thrift’s interest expense associated with tax-exempt income. Net operating losses, if any, can be carried forward a maximum of three years for Mutual Thrift Institutions Tax purposes.

          Philadelphia Taxation. In addition, as a savings bank conducting business in Philadelphia, the Bank is also subject to the City of Philadelphia Business Privilege Tax. The City of Philadelphia Business Privilege Tax is a tax upon net income or taxable receipts imposed on persons carrying on or exercising for gain or profit certain business activities within Philadelphia. Pursuant to the City of Philadelphia Business Privilege Tax, the 2007 tax rate was 6.5% on net income and .154% on gross receipts. For regulated industry taxpayers, the tax is the lesser of the tax on net income or the tax on gross receipts. The City of Philadelphia Business Privilege Tax allows for the deduction by financial businesses from receipts of (a) the cost of securities and other intangible property and monetary metals sold, exchanged, paid at maturity or redeemed, but only to the extent of the total gross receipts from securities and other intangible property and monetary metals sold, exchanged, paid out at maturity or redeemed; (b) moneys or credits received in repayment of the principal amount of deposits, advances, credits, loans and other obligations; (c) interest received on account of deposits, advances, credits, loans and other obligations made to persons resident or having their principal place of business outside Philadelphia; (d) interest received on account of other deposits, advances, credits, loans and other obligations but only to the extent of interest expenses attributable to such deposits, advances, credits, loans and other obligations; and (e) payments received on account of shares purchased by shareholders. An apportioned net operating loss may be carried forward for three tax years following the tax year for which it was first reported.

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          New Jersey Taxation. The Bank and BSB Union Corporation are subject to New Jersey’s Corporation Business Tax at the rate of 9.0% on their taxable income, before net operating loss deductions and special deductions for federal income tax purposes. For this purpose, “taxable income” generally means federal taxable income subject to certain adjustments (including addition of interest income on state and municipal obligations).

Executive Officers of the Registrant

          The Board of Directors annually elects the executive officers of MHC, the Company, and the Bank, who serve at the Board’s discretion. Our executive officers are:

Name	Position
Gerard P. Cuddy	President and Chief Executive Officer of the MHC, the Company and the Bank
Joseph F. Conners	Executive Vice President and Chief Financial Officer of the MHC, the Company and the Bank
Andrew J. Miller	Executive Vice President and Chief Lending Officer of the MHC, the Company and the Bank
Robert J. Bush	Executive Vice President of the MHC, the Company and the Bank

          Below is information regarding our executive officers who are not also directors. Each executive officer has held his current position for at least the last five years, unless otherwise stated. Ages presented are as of December 31, 2007.

          Joseph F. Conners has been Executive Vice President and Chief Financial Officer of Beneficial Bank since 2000. He joined Beneficial Bank in 1994. Age 50.

          Andrew J. Miller has been Executive Vice President and Chief Lending Officer of Beneficial Bank since 2000. He joined Beneficial Bank in 1973. Age 52.

          Robert J. Bush was a Senior Vice President of Beneficial Bank and President of Beneficial Insurance Services LLC since our acquisition of Paul Hertel & Co., Inc. in January 2005. Prior to that time, Mr. Bush served as the President and Chief Executive Officer of Paul Hertel & Co., Inc. Age 49.

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Item 1A. RISK FACTORS

Our business is subject to interest rate risk and variations in interest rates may negatively affect our financial performance.

          Changes in the interest rate environment may reduce profits. The primary source of our income is the differential or “spread” between the interest earned on loans, securities and other interest-earning assets, and interest paid on deposits, borrowings and other interest-bearing liabilities. As prevailing interest rates change, net interest spreads are affected by the difference between the maturities and re-pricing characteristics of interest-earning assets and interest-bearing liabilities. In addition, loan volume and yields are affected by market interest rates on loans, and rising interest rates generally are associated with a lower volume of loan originations. An increase in the general level of interest rates may also adversely affect the ability of certain borrowers to pay the interest on and principal of their obligations. Accordingly, changes in levels of market interest rates could materially adversely affect our net interest spread, asset quality, loan origination volume and overall profitability.

Our increased emphasis on commercial real estate loans and commercial business loans may expose us to increased lending risks.

          At December 31, 2007, $693.7 million, or 32.80%, of our loan portfolio consisted of commercial real estate loans, including loans for the acquisition and development of property. Commercial real estate loans constitute a greater percentage of our loan portfolio than any other loan category, including one-to-four family loans, which totaled only $479.8 million, or 22.69%, of our total loan portfolio at December 31, 2007. In addition, at December 31, 2007, $136.3 million, or 6.45%, of our loan portfolio consisted of commercial business loans. We have increased the percentage of commercial real estate and commercial business loans in our loan portfolio in recent years and intend to continue to emphasize these types of lending. Commercial real estate loans and commercial business loans generally expose a lender to a greater risk of loss than one-to-four family residential loans. Repayment of commercial real estate and commercial business loans generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. Changes in economic conditions that are out of the control of the borrower and lender could impact the value of the security for the loan, the future cash flow of the affected property, or the marketability of a construction project with respect to loans originated for the acquisition and development of property. Additionally, any decline in real estate values may be more pronounced with respect to commercial real estate properties than residential properties.

          At December 31, 2007 there were a total of 143 land acquisition and development loans totaling $161.3 million, which consist of 96 residential land acquisition and development loans totaling $93.3 million and 47 commercial land acquisition and development loans totaling $68.0 million.

A substantial portion of our loan portfolio consists of consumer loans secured by rapidly depreciable assets.

          At December 31, 2007, our loan portfolio included $174.7 million in automobile loans, which represented 8.26% of our total loan portfolio at that date. In addition, at December 31, 2007, other consumer loans totaled $237.4 million, or 11.23%, of our loan portfolio. Included in other consumer loans is $1.7 million in automobile lease financing, $7.6 million in loans secured by manufactured housing and mobile homes, $67.2 million in loans secured by recreational vehicles and $67.3 million in loans secured by boats. Consumer loans secured by rapidly depreciable assets such as automobiles, recreational vehicles and boats, may subject us to greater risk of loss than loans secured by real estate because any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance.

A downturn in the local economy or a decline in real estate values could hurt our profits.

          A majority of our loans, including our commercial real estate and commercial loans are secured by real estate or made to businesses in areas where our offices are located. As a result of this concentration, a downturn in the local economy could cause significant increases in nonperforming loans, which would hurt our profits. In recent years, there has been a significant increase in real estate values in our market area. As a result of rising real estate prices in recent years, our loans have been well collateralized. A decline in real estate values could cause some of our mortgage loans to become inadequately collateralized, which would expose us to a greater risk of loss. Additionally, a decline in real estate values could adversely impact our portfolio of commercial real estate loans and could result in a decline in the origination of such loans.

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Strong competition within our market area could hurt our profits and slow growth.

           We face substantial competition in originating loans, both commercial and consumer. This competition comes principally from other banks, savings institutions, mortgage banking companies and other lenders. Many of our competitors enjoy advantages that we do not, including greater financial resources and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs. This competition could reduce our net income by decreasing the number and size of loans that we originate and the interest rates we may charge on these loans.

           In attracting business and consumer deposits, the Company faces substantial competition from other insured depository institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds. Many of our competitors enjoy advantages that we do not, including greater financial resources, more aggressive marketing campaigns, better brand recognition and more branch locations. These competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to retain existing deposits or attract new deposits. Increased deposit competition could adversely affect our ability to generate the funds necessary for lending operations. As a result, we may need to seek other sources of funds that may be more expensive to obtain and could increase our cost of funds.

          Our banking and non-banking subsidiaries also compete with non-bank providers of financial services, such as brokerage firms, consumer finance companies, credit unions, insurance agencies and governmental organizations which may offer more favorable terms. Some of our non-bank competitors are not subject to the same extensive regulations that govern our banking operations. As a result, such non-bank competitors may have advantages over our banking and non-banking subsidiaries in providing certain products and services. This competition may reduce or limit our margins on banking and non-banking services, reduce our market share, and adversely affect our earnings and financial condition.

We operate in a highly regulated environment and we may be adversely affected by changes in laws and regulations.

          We are subject to extensive regulation, supervision and examination by the FDIC, as insurer of our deposits, and by the Department as our primary regulator. The MHC and the Company are subject to regulation and supervision by the OTS. Such regulation and supervision governs the activities in which an institution and its holding company may engage and are intended primarily for the protection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of the Company common stock. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the level of our allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may increase our costs of operations and have a material impact on our operations.

Expenses from operating as a public company and from new stock-based benefit plans will continue to adversely affect our profitability.

          Our non-interest expenses are impacted as a result of the financial, accounting, and legal and various other additional expenses usually associated with operating as a public company. We also recognize additional annual employee compensation and benefit expenses stemming from the shares that are purchased or granted to employees and executives under the employee stock ownership plan and other new benefit plans. These additional expenses adversely affect our profitability. We recognize expenses for our employee stock ownership plan when shares are committed to be released to participants’ accounts and will recognize expenses for restricted stock awards and stock options over the vesting period of awards made to recipients.

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The issuance of shares for benefit programs may dilute your ownership interest.

          We intend to adopt an equity incentive plan. If stockholders approve the new equity incentive plan, we intend to issue shares to our officers and directors through this plan. If the restricted stock awards under the equity incentive plan are funded from authorized but unissued stock, or if the shares issued upon the exercise of stock options under the equity incentive plan are issued from authorized but unissued stock, your ownership interest in the shares issued to persons other than the MHC could be diluted.

Our low return on equity may negatively affect our stock price.

          Net income divided by average equity, known as “return on equity,” is a ratio many investors use to compare the performance of a financial institution to its peers. Our return on equity was reduced due to the large amount of capital that we raised in our 2007 stock offering and to expenses we will incur in pursuing our growth strategies, the costs of being a public company and added expenses associated with our employee stock ownership plan and planned equity incentive plan. Until we can increase our net interest income and non-interest income, we expect our return on equity to be below the median return on equity for publicly traded thrifts, which may negatively affect the value of our common stock. For the twelve months ended December 31, 2007, our return on equity was (.35%).

Beneficial Savings Bank MHC’s majority control of our common stock enables it to exercise voting control over most matters put to a vote of stockholders and will prevent stockholders from forcing a sale or a second-step conversion transaction they may find advantageous.

          The MHC owns a majority of the Company’s common stock and, through its board of directors, exercises voting control over most matters put to a vote of stockholders. The members of the boards of the Company, the MHC and the Bank are the same. As a federally chartered mutual holding company, the board of directors of MHC must ensure that the interests of depositors of the Bank are represented and considered in matters put to a vote of stockholders of the Company. Therefore, the votes cast by the MHC may not be in your personal best interests as a stockholder. For example, the MHC may exercise its voting control to defeat a stockholder nominee for election to the board of directors of the Company. The MHC’s ability to control the outcome of the election of the board of directors of the Company restricts the ability of minority stockholders to effect a change of management. In addition, stockholders will not be able to force a merger or second-step conversion transaction without the consent of the MHC, as such transactions require the approval of at least two-thirds of all outstanding voting stock, which can only be achieved if the MHC voted to approve such transactions. Some stockholders may desire a sale or merger transaction, since stockholders typically receive a premium for their shares, or a second-step conversion transaction, since fully converted institutions tend to trade at higher multiples than mutual holding companies.

OTS regulations and anti-takeover provisions in our charter restrict the accumulation of our common stock, which may adversely affect our stock price.

          OTS regulations provide that for a period of three years following the date of the completion of the stock offering, no person, acting alone, together with associates or in a group of persons acting in concert, will directly or indirectly offer to acquire or acquire the beneficial ownership of more than 10% of our common stock without the prior written approval of the OTS. In addition, the Company’s charter provides that, for a period of five years from the date of the stock offering, no person, other than the MHC may acquire directly or indirectly the beneficial ownership of more than 10% of any class of any equity security of the Company. In the event a person acquires shares in violation of this charter provision, all shares beneficially owned by such person in excess of 10% will be considered “excess shares” and will not be counted as shares entitled to vote or counted as voting shares in connection with any matters submitted to the stockholders for a vote. These restrictions make it more difficult and less attractive for stockholders to acquire a significant amount of our common stock, which may adversely affect our stock price.

Item 1B. UNRESOLVED STAFF COMMENTS

          None.

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ITEM 2. PROPERTIES

          We conduct our business through our main office and branch offices. During fiscal 2007, we opened two new branch offices, one in Camden County, New Jersey and one in Montgomery County, Pennsylvania. We also acquired an additional 31 branch offices as a result of our acquisition of FMS Financial. Our retail market area primarily includes all of the area surrounding our 72 banking offices located in Bucks, Chester, Delaware, Montgomery and Philadelphia Counties in Pennsylvania and Burlington and Camden Counties in New Jersey, while our lending market also includes Gloucester, Camden, Burlington and Mercer Counties in New Jersey. The Company owns 43 properties and leases 29 other properties. In Pennsylvania, we serve our customers through our four offices in Bucks County, seven offices in Delaware County, eight offices in Montgomery County, 19 offices in Philadelphia County, and one office in Chester County. In New Jersey, we serve our customers through our 30 offices in Burlington County and three offices in Camden County. In addition, Beneficial Insurance operates two offices in Pennsylvania, one in Philadelphia County and one in Delaware County. All branches and offices are adequate for business operation.

Item 3. LEGAL PROCEEDINGS

          Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

          None.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Equity and Related Stockholder Matters

          The information regarding the market for the Company’s common equity and related stockholder matters is incorporated herein by reference to the section captioned “Investor and Corporate Information” in the Company’s 2007 Annual Report to Stockholders.

Purchases of Equity Securities

          The Company did not repurchase any shares of its common stock during the quarter ended December 31, 2007.

Item 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

          The information required by this item is incorporated herein by reference to the section captioned “Selected Consolidated Financial and Other Data” in the 2007 Annual Report to Stockholders.

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

          The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the 2007 Annual Report to the Stockholders.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The information required by this item is incorporated herein by reference to the section captioned “Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the 2007 Annual Report to Stockholders.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The information required by this item is incorporated herein by reference to the section captioned “Consolidated Financial Statements” in the 2007 Annual Report to Stockholders.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          None.

Item 9A. CONTROLS AND PROCEDURES

          The Company’s management, including the Company’s principal executive officer and principal financial officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”): (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. In addition, based on that evaluation, no change in the Company’s internal control over financial reporting occurred during the quarter or year ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

          This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal controls over financial reporting or an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Item 9B. OTHER INFORMATION

          None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

          For information relating to the directors of Beneficial Mutual Bancorp, Inc., the section captioned “Items to be Voted on by Stockholders—Item 1—Election of Directors” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Executive Officers

          For information relating to officers of Beneficial Mutual Bancorp, Inc., see Part I, Item 1, “Business—Executive Officers of the Registrant” to this Annual Report on Form 10-K.

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Compliance with Section 16(a) of the Securities Exchange Act of 1934

          For information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, the cover page to this Annual Report on Form 10-K and the section captioned “Other Information Relating to Directors and Executive Officers—Section 16(a) Beneficial Ownership Reporting Compliance” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders are incorporated herein by reference.

Disclosure of Code of Ethics

          For information concerning Beneficial Mutual Bancorp, Inc.’s Code of Ethics, the information contained under the section captioned “Corporate Governance—Code of Ethics and Business Conduct” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated by reference. A copy of the Code of Ethics and Business Conduct is available to stockholders on Beneficial Mutual Bancorp, Inc.’s website at www.thebeneficial.com.

Corporate Governance

          For information regarding the Audit Committee and its composition and the audit committee financial expert, the section captioned “Corporate Governance – Committees of the Board of Directors – Audit Committee” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

Executive Compensation

          For information regarding executive compensation, the sections captioned “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders are incorporated herein by reference.

Corporate Governance

          For information regarding the compensation committee report, the section captioned “Report of the Compensation Committee” in Beneficial Mutual Bancorp, Inc’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

(a)	Security Ownership of Certain Beneficial Owners
	Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders.
(b)	Security Ownership of Management
	Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders.
(c)	Changes in Control
	Management of the Company knows of no arrangements, including any pledge by any person or securities of the Company the operation of which may at a subsequent date result in a change in control of the registrant.
(d)	Equity Compensation Plan Information
	Information required by this item is incorporated herein by reference to the section captioned “Items to be Voted on by Stockholders—Item 2—Approval of the Beneficial Mutual Bancorp, Inc. 2008 Equity Incentive Plan—Equity Compensation Plan Information” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders.

23

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

          For information regarding certain relationships and related transactions, the section captioned “Other Information Relating to Directors and Executive Officers—Transactions with Related Persons” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Corporate Governance

          For information regarding director independence, the section captioned “Corporate Governance—Director Independence” in Beneficial Mutual Bancorp, Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

          For information regarding the principal accountant fees and expenses, the section captioned “Items to Be Voted on By Stockholders—Item 3—Ratification of Independent Registered Public Accounting Firm” in Beneficial Mutual Bancorp Inc.’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated herein by reference.

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1)	The financial statements required in response to this item are incorporated herein by reference from Item 8 of this Annual Report on Form 10-K.
(2)	All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.
(3)	Exhibits

No.	Description
3.1	Charter of Beneficial Mutual Bancorp, Inc. (1)
3.2	Bylaws of Beneficial Mutual Bancorp, Inc. (1)
4.1	Stock Certificate of Beneficial Mutual Bancorp, Inc. (1)
10.1	Employment Agreement between Beneficial Mutual Bancorp, Inc., Beneficial Bank and Gerard P. Cuddy *
10.2	Employment Agreement between Beneficial Mutual Bancorp, Inc., Beneficial Bank and Joseph F. Conners *
10.3	Employment Agreement between Beneficial Mutual Bancorp, Inc., Beneficial Bank and Andrew J. Miller *
10.4	Employment Agreement between Beneficial Mutual Bancorp, Inc., Beneficial Bank and Robert J. Bush *
10.5	Supplemental Pension and Retirement Plan of Beneficial Bank * (1)
10.6	Beneficial Bank Board of Trustees’ Non-vested Deferred Compensation Plan * (1)
10.7	Beneficial Bank Stock-Based Deferral Plan * (1)
10.8	Severance Pay Plan for Eligible Employees of Beneficial Mutual Savings Bank * (2)

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10.9	Separation Agreement and General Release Between Beneficial Mutual Bancorp, Inc., Beneficial Mutual Savings Bank and Paul R. Driscoll * (3)
13.0	Annual Report to Stockholders
21.0	Subsidiary information is incorporated herein by reference to “Part I, Item 1 – Subsidiaries”
23.1	Consent of Deloitte & Touche LLP
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.0	Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
*	Management contract or compensatory plan, contract or arrangement.
(1)	Incorporated herein by reference to the exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-141289), as amended, initially filed with the Securities and Exchange Commission on March 14, 2007.
(2)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 12, 2007.
(3)	Incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 28, 2007.

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SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		BENEFICIAL MUTUAL BANCORP, INC.
Date: March 31, 2008	By:	/s/ Gerard P. Cuddy
		Gerard P. Cuddy President and Chief Executive Officer

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

Name	Title	Date
/s/ Gerard P. Cuddy	President, Chief Executive Officer and Director	March 31, 2008
	(principal executive officer)
Gerard P. Cuddy
/s/ Joseph F. Conners	Executive Vice President and Chief Financial Officer	March 31, 2008
	(principal financial and accounting officer)
Joseph F. Conners
/s/ Edward G. Boehne	Director	March 31, 2008
Edward G. Boehne
/s/ Frank A. Farnesi	Director	March 31, 2008
Frank A. Farnesi
/s/ Elizabeth H. Gemmill	Director	March 31, 2008
Elizabeth H. Gemmill
/s/ Thomas F. Hayes	Director	March 31, 2008
Thomas F. Hayes
/s/ Charles Kahn, Jr.	Director	March 31, 2008
Charles Kahn, Jr.
/s/ Thomas J. Lewis	Director	March 31, 2008
Thomas J. Lewis

/s/ Joseph J. McLaughlin	Director	March 31, 2008
Joseph J. McLaughlin
/s/ Michael J. Morris	Director	March 31, 2008
Michael J. Morris
/s/ George W. Nise	Director	March 31, 2008
George W. Nise
	Director
Donald F. O’Neill
/s/ Craig W. Yates	Director	March 31, 2008
Craig W. Yates
/s/ Roy D. Yates	Director	March 31, 2008
Roy D. Yates

EX-10.1

EXHIBIT 10.1

GERARD P. CUDDY
EMPLOYMENT AGREEMENT

          THIS AGREEMENT (the “Agreement”), made this 7th day of January, 2008, (the “Effective Date”) by and between BENEFICIAL MUTUAL BANCORP, INC., a federally-chartered corporation (the “Company”), BENEFICIAL MUTUAL SAVINGS BANK, a Pennsylvania chartered savings bank (the “Bank”), and GERARD P. CUDDY (the “Executive”).

          WHEREAS, Executive serves in a position of substantial responsibility; and

          WHEREAS, the Company and the Bank wish to assure the services of Executive for the period provided in this Agreement; and

          WHEREAS, Executive is willing to continue to serve in the employ of the Bank on a full-time basis for said period.

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

          1.       Employment. Executive is employed as President and Chief Executive Officer of the Company and the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the office of President and Chief Executive Officer or which, consistent with the office, are delegated to him by the Boards of Directors of the Company and the Bank. (All subsequent references herein to the Board shall be the Board of the Bank, unless otherwise indicated).

          2.       Location and Facilities. Executive will be furnished with the working facilities and staff as are necessary for him to perform his duties set forth in Section 1. The location of such facilities and staff shall be at the principal administrative offices of the Company, or at such other site or sites customary for such offices.

          3.       Term. The term of this Agreement shall commence on the date first written above and continue for twenty-four (24) months thereafter (or until such earlier date as determined pursuant to Section 11 of this Agreement). The term of this Agreement may be extended only if agreed to in writing by all parties to the Agreement.

          4.       Base Compensation.

a.	Effective January 1, 2008, the Bank agrees to pay Executive a base salary at the rate of $475,000 per year, payable in accordance with customary payroll practices.
b.	The Board shall review annually the rate of Executive’s base salary based upon factors they deem relevant, and may maintain or increase his salary, provided that no such action shall reduce the rate of salary below the rate set forth in paragraph a. of this Section 4.

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c. In the absence of action by the Board, Executive shall continue to receive salary at the annual rate specified in paragraph a. of this Section 4 or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Board under the provisions of this Section 4.

          5.       Bonuses. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise; provided, however, that Executive’s incentive compensation opportunity in each calendar year through 2009 shall not be less than the following: $75,000 (2007), $100,000 (2008) and $125,000 (2009). The determination of the amount payable to Executive as incentive compensation, if any, shall be determined at the Board’s discretion or pursuant to the terms of any incentive compensation plan adopted by the Board and such amount, if any, shall be payable not later December 31 of each year or as specified in the applicable plan.

          6.       Benefit Plans. Executive shall also be eligible to participate in such medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees.

          7.       Vacation and Leave.

a.

Executive shall be entitled to vacation and other leave in accordance with the Bank’s policy for senior executives, or otherwise as approved by the Board, but, in any event, not less than four (4) weeks of paid vacation annually.

b.

In addition to paid vacations and other leave, Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment for such additional periods of time and for such valid and legitimate reasons as the Board may, in its discretion, determine. Further, the Board may grant to Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board in its discretion may determine.

          8.       Expense Payments and Reimbursements. Executive shall be reimbursed for all reasonable out-of-pocket business expenses that he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

          9.       Fringe Benefits. In connection with the performance of his duties under this Agreement, the Bank shall provide Executive with the following perquisites: (i) use of a Bank-owned automobile and payment of related automobile expenses, including but not limited to, paid parking, (ii) the cost of Executive’s membership in the Union League and initiation fees and other costs related to Executive’s membership in the Merion Cricket Club, (iii) to the extent approved by the Board, dues for membership in other organizations that support Executive’s activities on behalf of the Bank, and (iv) a laptop computer, cell phone and other wireless devices of Executive’s choosing. To the extent required by applicable law, the Bank shall report as income to Executive the value of his personal use of any perquisites.

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          10.     Loyalty and Confidentiality.

a.	During the term of this Agreement Executive: (i) shall devote all his time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank.
b.	Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business.
c.	Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which he may be exposed during the course of his employment. Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor shall he employ such information in any way other than for the benefit of the Company and the Bank.

          11.     Termination and Termination Pay. Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:

a.	Death. Executive’s employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to Executive through the last day of the calendar month in which his death occurred.
b.	Retirement. This Agreement will terminate on Executive’s Retirement Date. For purposes of this Agreement, Retirement Date is defined as the date the Executive retires from the Bank under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement.

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c.	Disability.
	i.	The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company and the Bank (or, if there are no such plans in effect, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Board shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant. As a condition to any benefits, the Board may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.
	ii.	In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate. The Bank will pay Executive, as Disability pay, an amount equal to sixty-six and two thirds percent (66 2/3%) of Executive’s bi-weekly rate of base salary in effect as of the date of his termination of employment due to Disability. Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of: (A) the date Executive returns to full-time employment at the Bank in the same capacity as he was employed prior to his termination for Disability; (B) Executive’s death; (C) Executive’s attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company and the Bank. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company and the Bank, in which Executive participated prior to his Disability on the same terms as if Executive were actively employed by the Company and the Bank.

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d.	Termination for Cause.
	i.	The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time, for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause except for vested benefits. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:
		(1)	Personal dishonesty;
		(2)	Incompetence;
		(3)	Willful misconduct;
		(4)	Breach of fiduciary duty involving personal profit;
		(5)	Intentional failure to perform stated duties under this Agreement;
		(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Company and the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
		(7)	Material breach by Executive of any provision of this Agreement.
	ii.	Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that, in the good faith opinion of the Board, Executive was guilty of the conduct described above and specifying the particulars thereof.
e.	Voluntary Termination by Executive. In addition to his other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Boards of Directors of the Bank and the Company, in which case Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination.
f.	Without Cause or With Good Reason.
	i.	In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).

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ii.	Subject to Section 12 of this Agreement, in the event of termination under this Section 11f., Executive shall be entitled to receive a severance benefit equal to the sum of two (2) times the sum of Executive’s (i) then current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank. Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll. In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following his termination date. In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis. The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.
iii.	“Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective obligations under this Agreement. Without limitation, such a material breach shall be deemed to occur upon any of the following:
	(1)	A material reduction in Executive’s responsibilities or authority in connection with his employment with the Company or the Bank;
	(2)	Assignment to Executive of duties of a non-executive nature or duties for which he is not reasonably equipped by his skills and experience;
	(3)	A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts to which Executive was entitled prior to the Change in Control;
	(4)	Termination of incentive and benefit plans (other than the Bank’s tax-qualified plans), programs or arrangements, or reduction of Executive’s participation to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;

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	(5)	A relocation of Executive’s principal business office by more than thirty (30) miles from its current location; or
	(6)	Liquidation or dissolution of the Company or the Bank.
iv.	Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits thereunder applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans are not available to other officers of the Company and the Bank, or any company that controls either of them, under a plan or plans in or under which Executive is not entitled to participate subsequent to such reduction or elimination of benefits.
v.	The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

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g.	Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Company and the Bank or Executive pursuant to Section 11f.:
	i.	Executive’s obligations under Section 10c. of this Agreement will continue in effect; and
	ii.	During the period ending one year after such termination of employment, Executive shall not serve as an officer, director or employee of any bank holding company, bank, savings Bank, savings and loan holding company, or mortgage company (any of which, a “Financial Institution”) which Financial Institution offers products or services competing with those offered by the Bank from any office within thirty (30) miles from the main office or any branch of the Bank and shall not interfere with the relationship of the Company and the Bank and any of its employees, agents, or representatives.

          12.     Termination in Connection with a Change in Control.

a.	For purposes of this Agreement, a “Change in Control” means any of the following events:
	i.	Merger: The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation.
	ii.	Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.
	iii.	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
	iv.	Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.

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Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.

b.

Termination. If within the period ending twelve (12) months after a Change in Control, (i) the Company and the Bank shall terminate Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company and the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump-sum cash payment to him equal to three (3) times the sum of Executive’s (i) base salary and (ii) the most recent bonus paid by the Company and/or Bank. Also, in such event, Executive shall, for a thirty-six (36) month period following his termination of employment, receive continued medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Bank during such period. In the event that the Company or the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage under an individual policy. In addition, for a period of thirty-six (36) months following Executive’s termination date, the Bank shall pay all membership dues and fees relating to Executive’s membership in the Union League and the Merion Cricket Club. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

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c. The provisions of Section 12 and Sections 14 through 27, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one (1) year following a Change in Control.

          13.     Indemnification and Liability Insurance.

a.

Indemnification. The Company and the Bank agree to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been a director or Executive of the Company, the Bank or any of their subsidiaries (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in his capacity as an Executive or director of the Company and the Bank or any of their subsidiaries. Indemnification for expenses shall not extend to matters for which Executive has been terminated for Cause. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

b.

Insurance. During the period in which indemnification of Executive is required under this Section, the Company and the Bank shall provide Executive (and his heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior executives of the Company and the Bank.

          14.     Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company and the Bank shall reimburse Executive for all out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees, incurred by Executive in connection with successful enforcement by Executive of the obligations of the Company and the Bank to Executive under this Agreement. Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement: (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand.

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          15.     Limitation of Benefits under Certain Circumstances. If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank. In the event that the Company, the Bank and/or Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, which such opinion indicates there is a high probability do not result in any of such payments and benefits being non-deductible to the Company and the Bank and subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences. Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to Executive’s approval prior to filing, which shall not be unreasonably withheld. The Company, the Bank and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained herein shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12 below zero.

          16.     Injunctive Relief. If there is a breach or threatened breach of Section 11g. of this Agreement or the prohibitions upon disclosure contained in Section 10c. of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and that the Company and the Bank shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank under this Agreement.

          17.     Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor to the Company and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank.
b.	Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company and the Bank.

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          18.     No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.

          19.     Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company and/or the Bank at their principal business offices and to Executive at his home address as maintained in the records of the Company and the Bank.

          20.     No Plan Created by this Agreement. Executive, the Company and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

          21.     Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

          22.     Applicable Law. Except to the extent preempted by federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

          23.     Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

          24.     Headings. Headings contained herein are for convenience of reference only.

          25.     Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6.

          26.     Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

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          27.     Required Provisions. In the event any of the foregoing provisions of this Section 26 are in conflict with the terms of this Agreement, this Section 27 shall prevail.

a.	The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.
b.	If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.
c.	If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.
d.	If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
e.	All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his or her designee), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his or her designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

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f. Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

ATTEST:	BENEFICIAL MUTUAL BANCORP, INC.
/s/ Thomas M. Topley	By:	/s/ Frank A. Farnesi
Corporate Secretary		For the Entire Board of Directors
ATTEST:	BENEFICIAL MUTUAL SAVINGS BANK
/s/ Thomas M. Topley	By:	/s/ Frank A. Farnesi
Corporate Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE
/s/ Andrew J. Miller	By:	/s/ Gerard P. Cuddy
		Gerard P. Cuddy

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EX-10.2

EXHIBIT 10.2

JOSEPH F. CONNERS
EMPLOYMENT AGREEMENT

          THIS AGREEMENT (the “Agreement”), made this 7th day of January, 2008, (the “Effective Date”) by and between BENEFICIAL MUTUAL BANCORP, INC., a federally-chartered corporation (the “Company”), BENEFICIAL MUTUAL SAVINGS BANK, a Pennsylvania chartered savings bank (the “Bank”), and JOSEPH F. CONNERS (the “Executive”).

          WHEREAS, Executive serves in a position of substantial responsibility; and

          WHEREAS, the Company and the Bank wish to assure the services of Executive for the period provided in this Agreement; and

          WHEREAS, Executive is willing to continue to serve in the employ of the Bank on a full-time basis for said period.

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

          1.       Employment. Executive is employed as Executive Vice President and Chief Financial Officer of the Company and the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the office of Executive Vice President and Chief Financial Officer or which, consistent with the office, are delegated to him by the Chief Executive Officer of the Bank. (All subsequent references herein to the Board shall be the Board of the Bank, unless otherwise indicated).

          2.       Location and Facilities. Executive will be furnished with the working facilities and staff as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

          3.       Term. The term of this Agreement shall commence on the date first written above and continue for twenty-four (24) months thereafter (or until such earlier date as determined pursuant to Section 11 of this Agreement). The term of this Agreement may be extended only if agreed to in writing by all parties to the Agreement.

          4.        Base Compensation.

a.	Effective January 1, 2008, the Bank agrees to pay Executive a base salary at the rate of $280,800 per year, payable in accordance with customary payroll practices.
b.	The Board shall review annually the rate of Executive’s base salary based upon factors they deem relevant, and may maintain or increase his salary, provided that no such action shall reduce the rate of salary below the rate set forth in paragraph a. of this Section 4.

c. In the absence of action by the Board, Executive shall continue to receive salary at the annual rate specified in paragraph a. of this Section 4. or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Board under the provisions of this Section 4.

          5.       Bonuses. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise.

          6.       Benefit Plans. Executive shall also be eligible to participate in such medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees.

          7.       Vacation and Leave.

a.

Executive shall be entitled to vacation and other leave in accordance with the Bank’s policy for senior executives, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment for such additional periods of time and for such valid and legitimate reasons as the Board may, in its discretion, determine. Further, the Board may grant to Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board in its discretion may determine.

          8.       Expense Payments and Reimbursements. Executive shall be reimbursed for all reasonable out-of-pocket business expenses that he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

          9.       Automobile Allowance. During the term of this Agreement, Executive shall be entitled to use of a Bank-owned automobile. Executive shall comply with reasonable reporting and expense limitations on the use of such automobile as may be established by the Bank from time to time, and the Bank shall include on Executive’s Form W-2 any amount of income attributable to Executive’s personal use of such automobile.

          10.     Loyalty and Confidentiality.

a. During the term of this Agreement Executive: (i) shall devote all his time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank.

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b.

Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business.

c.

Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which he may be exposed during the course of his employment. Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor shall he employ such information in any way other than for the benefit of the Company and the Bank.

          11.     Termination and Termination Pay. Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:

a.	Death. Executive’s employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to Executive through the last day of the calendar month in which his death occurred.
b.	Retirement. This Agreement will terminate on Executive’s Retirement Date. For purposes of this Agreement, Retirement Date is defined as the date the Executive retires from the Bank under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement.
c.	Disability.

i. The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company and the Bank (or, if there are no such plans in effect, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Board shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant. As a condition to any benefits, the Board may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.

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ii. In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate. The Bank will pay Executive, as Disability pay, an amount equal to sixty-six and two thirds percent (66 2/3%) of Executive’s bi-weekly rate of base salary in effect as of the date of his termination of employment due to Disability. Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of: (A) the date Executive returns to full-time employment at the Bank in the same capacity as he was employed prior to his termination for Disability; (B) Executive’s death; (C) Executive’s attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company and the Bank. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company and the Bank, in which Executive participated prior to his Disability on the same terms as if Executive were actively employed by the Company and the Bank.

          d.      Termination for Cause.

i. The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time, for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause except for vested benefits. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	Intentional failure to perform stated duties under this Agreement;

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(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Company and the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach by Executive of any provision of this Agreement.

ii. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that, in the good faith opinion of the Board, Executive was guilty of the conduct described above and specifying the particulars thereof.

e.	Voluntary Termination by Executive. In addition to his other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Board, in which case Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination.
f.	Without Cause or With Good Reason.

i.

In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).

ii.

Subject to Section 12 of this Agreement, in the event of termination under this Section 11f., Executive shall be entitled to receive a severance benefit equal to two (2) times the sum of Executive’s (i) current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank. Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll. In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following his termination date. In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis. The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.

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iii.	“Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective obligations under this Agreement. Without limitation, such a material breach shall be deemed to occur upon any of the following:
	(1)	A material reduction in Executive’s responsibilities or authority in connection with his employment with the Company or the Bank;
	(2)	Assignment to Executive of duties of a non‑executive nature or duties for which he is not reasonably equipped by his skills and experience;
	(3)	A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts to which Executive was entitled prior to the Change in Control;
	(4)	Termination of incentive and benefit plans (other than the Bank’s tax-qualified plans), programs or arrangements, or reduction of Executive’s participation to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;
	(5)	A relocation of Executive’s principal business office by more than thirty (30) miles from its current location; or
	(6)	Liquidation or dissolution of the Company or the Bank.
iv.	Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits thereunder applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans are not available to other officers of the Company and the Bank, or any company that controls either of them, under a plan or plans in or under which Executive is not entitled to participate subsequent to such reduction or elimination of benefits.

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	v.	The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.
g.	Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Company and the Bank or Executive pursuant to Section 11f.:
	i.	Executive’s obligations under Section 10c. of this Agreement will continue in effect; and
	ii.	During the period ending one year after such termination of employment, Executive shall not serve as an officer, director or employee of any bank holding company, bank, savings Bank, savings and loan holding company, or mortgage company (any of which, a “Financial Institution”) which Financial Institution offers products or services competing with those offered by the Bank from any office within thirty (30) miles from the main office or any branch of the Bank and shall not interfere with the relationship of the Company and the Bank and any of its employees, agents, or representatives.

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          12.     Termination in Connection with a Change in Control.

a. For purposes of this Agreement, a “Change in Control” means any of the following events:

i.	Merger: The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation.
ii.	Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.
iii.	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
iv.	Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.
Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.

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b.

Termination. If within the period ending twelve (12) months after a Change in Control, (i) the Company and the Bank shall terminate Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company and the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump‑sum cash payment to him equal to three (3) times the sum of Executive’s (i) base salary and (ii) the most recent bonus paid by the Company and/or Bank. Also, in such event, Executive shall, for a thirty-six (36) month period following his termination of employment, receive continued medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Bank during such period. In the event that the Company or the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage under an individual policy. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

c.

The provisions of Section 12 and Sections 14 through 27, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one (1) year following a Change in Control.

          13.     Indemnification and Liability Insurance.

a. Indemnification. The Company and the Bank agree to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been a director or Executive of the Company, the Bank or any of their subsidiaries (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in his capacity as an Executive or director of the Company and the Bank or any of their subsidiaries. Indemnification for expenses shall not extend to matters for which Executive has been terminated for Cause. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b. Insurance. During the period in which indemnification of Executive is required under this Section, the Company and the Bank shall provide Executive (and his heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior executives of the Company and the Bank.

          14.     Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company and the Bank shall reimburse Executive for all out‑of‑pocket expenses, including, without limitation, reasonable attorneys’ fees, incurred by Executive in connection with successful enforcement by Executive of the obligations of the Company and the Bank to Executive under this Agreement. Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement: (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand.

          15.     Limitation of Benefits under Certain Circumstances. If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank. In the event that the Company, the Bank and/or Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, which such opinion indicates there is a high probability do not result in any of such payments and benefits being non-deductible to the Company and the Bank and subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences. Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to Executive’s approval prior to filing, which shall not be unreasonably withheld. The Company, the Bank and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained herein shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12 below zero.

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          16.     Injunctive Relief. If there is a breach or threatened breach of Section 11g. of this Agreement or the prohibitions upon disclosure contained in Section 10c. of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and that the Company and the Bank shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank under this Agreement.

          17.     Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor to the Company and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank.
b.	Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company and the Bank.

          18.     No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.

          19.     Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company and/or the Bank at their principal business offices and to Executive at his home address as maintained in the records of the Company and the Bank.

          20.     No Plan Created by this Agreement. Executive, the Company and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

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          21.     Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

          22.     Applicable Law. Except to the extent preempted by federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

          23.     Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

          24.     Headings. Headings contained herein are for convenience of reference only.

          25.     Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6.

          26.     Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

          27.     Required Provisions. In the event any of the foregoing provisions of this Section 26 are in conflict with the terms of this Agreement, this Section 27 shall prevail.

a.

The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.

b.

If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

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c.	If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.
d.	If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
e.	All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his or her designee), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his or her designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.
f.	Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

ATTEST:	BENEFICIAL MUTUAL BANCORP, INC.
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
ATTEST:	BENEFICIAL MUTUAL SAVINGS BANK
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE
/s/ Gerard P. Cuddy	By:	/s/ Joseph F. Conners
		Joseph F. Conners

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EX-10.3

EXHIBIT 10.3

ANDREW J. MILLER
EMPLOYMENT AGREEMENT

          THIS AGREEMENT (the “Agreement”), made this 7th day of January, 2008, (the “Effective Date”) by and between BENEFICIAL MUTUAL BANCORP, INC., a federally-chartered corporation (the “Company”), BENEFICIAL MUTUAL SAVINGS BANK, a Pennsylvania chartered savings bank (the “Bank”), and ANDREW J. MILLER (the “Executive”).

          WHEREAS, Executive serves in a position of substantial responsibility; and

          WHEREAS, the Company and the Bank wish to assure the services of Executive for the period provided in this Agreement; and

          WHEREAS, Executive is willing to continue to serve in the employ of the Bank on a full-time basis for said period.

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

          1.       Employment. Executive is employed as Executive Vice President and Chief Lending Officer of the Company and the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the office of Executive Vice President and Chief Lending Officer or which, consistent with the office, are delegated to him by the Chief Executive Officer of the Bank. (All subsequent references herein to the Board shall be the Board of the Bank, unless otherwise indicated).

          2.       Location and Facilities. Executive will be furnished with the working facilities and staff as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

          3.       Term. The term of this Agreement shall commence on the date first written above and continue for twenty-four (24) months thereafter (or until such earlier date as determined pursuant to Section 11 of this Agreement). The term of this Agreement may be extended only if agreed to in writing by all parties to the Agreement.

          4.       Base Compensation.

a.	Effective January 1, 2008, the Bank agrees to pay Executive a base salary at the rate of $280,800 per year, payable in accordance with customary payroll practices.
b.	The Board shall review annually the rate of Executive’s base salary based upon factors they deem relevant, and may maintain or increase his salary, provided that no such action shall reduce the rate of salary below the rate set forth in paragraph a. of this Section 4.

c. In the absence of action by the Board, Executive shall continue to receive salary at the annual rate specified in paragraph a. of this Section 4. or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Board under the provisions of this Section 4.

          5.       Bonuses. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise.

          6.       Benefit Plans. Executive shall also be eligible to participate in such medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees.

          7.       Vacation and Leave.

a.

Executive shall be entitled to vacation and other leave in accordance with the Bank’s policy for senior executives, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment for such additional periods of time and for such valid and legitimate reasons as the Board may, in its discretion, determine. Further, the Board may grant to Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board in its discretion may determine.

          8.       Expense Payments and Reimbursements. Executive shall be reimbursed for all reasonable out-of-pocket business expenses that he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

          9.       Automobile Allowance. During the term of this Agreement, Executive shall be entitled to use of a Bank-owned automobile. Executive shall comply with reasonable reporting and expense limitations on the use of such automobile as may be established by the Bank from time to time, and the Bank shall include on Executive’s Form W-2 any amount of income attributable to Executive’s personal use of such automobile.

          10.     Loyalty and Confidentiality.

a. During the term of this Agreement Executive: (i) shall devote all his time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank.

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b.

Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business.

c.

Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which he may be exposed during the course of his employment. Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor shall he employ such information in any way other than for the benefit of the Company and the Bank.

          11.     Termination and Termination Pay. Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:

a.	Death. Executive’s employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to Executive through the last day of the calendar month in which his death occurred.
b.	Retirement. This Agreement will terminate on Executive’s Retirement Date. For purposes of this Agreement, Retirement Date is defined as the date the Executive retires from the Bank under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement.
c.	Disability.

i. The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company and the Bank (or, if there are no such plans in effect, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Board shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant. As a condition to any benefits, the Board may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.

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ii. In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate. The Bank will pay Executive, as Disability pay, an amount equal to sixty-six and two thirds percent (66 2/3%) of Executive’s bi-weekly rate of base salary in effect as of the date of his termination of employment due to Disability. Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of: (A) the date Executive returns to full-time employment at the Bank in the same capacity as he was employed prior to his termination for Disability; (B) Executive’s death; (C) Executive’s attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company and the Bank. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company and the Bank, in which Executive participated prior to his Disability on the same terms as if Executive were actively employed by the Company and the Bank.

d. Termination for Cause.

i. The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time, for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause except for vested benefits. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:

(1)	Personal dishonesty;
(2)	Incompetence;
(3)	Willful misconduct;
(4)	Breach of fiduciary duty involving personal profit;
(5)	Intentional failure to perform stated duties under this Agreement;

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(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Company and the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
(7)	Material breach by Executive of any provision of this Agreement.

ii. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that, in the good faith opinion of the Board, Executive was guilty of the conduct described above and specifying the particulars thereof.

e.	Voluntary Termination by Executive. In addition to his other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Board, in which case Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination.
f.	Without Cause or With Good Reason.

i.

In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).

ii.

Subject to Section 12 of this Agreement, in the event of termination under this Section 11f., Executive shall be entitled to receive a severance benefit equal to two (2) times the sum of Executive’s (i) current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank. Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll. In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following his termination date. In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis. The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.

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iii. “Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective obligations under this Agreement. Without limitation, such a material breach shall be deemed to occur upon any of the following:

(1)	A material reduction in Executive’s responsibilities or authority in connection with his employment with the Company or the Bank;
(2)	Assignment to Executive of duties of a non-executive nature or duties for which he is not reasonably equipped by his skills and experience;
(3)	A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts to which Executive was entitled prior to the Change in Control;
(4)	Termination of incentive and benefit plans (other than the Bank’s tax-qualified plans), programs or arrangements, or reduction of Executive’s participation to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;
(5)	A relocation of Executive’s principal business office by more than thirty (30) miles from its current location; or
(6)	Liquidation or dissolution of the Company or the Bank.

iv. Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits thereunder applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans are not available to other officers of the Company and the Bank, or any company that controls either of them, under a plan or plans in or under which Executive is not entitled to participate subsequent to such reduction or elimination of benefits.

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v. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

g. Continuing Covenant Not to Compete or Interfere with Relationships. Regardless of anything herein to the contrary, following a termination by the Company and the Bank or Executive pursuant to Section 11f.:

i.

Executive’s obligations under Section 10c. of this Agreement will continue in effect; and

ii.

During the period ending one year after such termination of employment, Executive shall not serve as an officer, director or employee of any bank holding company, bank, savings Bank, savings and loan holding company, or mortgage company (any of which, a “Financial Institution”) which Financial Institution offers products or services competing with those offered by the Bank from any office within thirty (30) miles from the main office or any branch of the Bank and shall not interfere with the relationship of the Company and the Bank and any of its employees, agents, or representatives.

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          12.     Termination in Connection with a Change in Control.

a. For purposes of this Agreement, a “Change in Control” means any of the following events:

i.	Merger: The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation.
ii.	Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.
iii.	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
iv.	Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.
Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.

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b.

Termination. If within the period ending twelve (12) months after a Change in Control, (i) the Company and the Bank shall terminate Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company and the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump-sum cash payment to him equal to three (3) times the sum of Executive’s (i) base salary and (ii) the most recent bonus paid by the Company and/or Bank. Also, in such event, Executive shall, for a thirty-six (36) month period following his termination of employment, receive continued medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Bank during such period. In the event that the Company or the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage under an individual policy. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

c.

The provisions of Section 12 and Sections 14 through 27, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one (1) year following a Change in Control.

          13.     Indemnification and Liability Insurance.

a. Indemnification. The Company and the Bank agree to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been a director or Executive of the Company, the Bank or any of their subsidiaries (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in his capacity as an Executive or director of the Company and the Bank or any of their subsidiaries. Indemnification for expenses shall not extend to matters for which Executive has been terminated for Cause. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

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b. Insurance. During the period in which indemnification of Executive is required under this Section, the Company and the Bank shall provide Executive (and his heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior executives of the Company and the Bank.

          14.     Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company and the Bank shall reimburse Executive for all out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees, incurred by Executive in connection with successful enforcement by Executive of the obligations of the Company and the Bank to Executive under this Agreement. Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement: (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand.

          15.     Limitation of Benefits under Certain Circumstances. If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank. In the event that the Company, the Bank and/or Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, which such opinion indicates there is a high probability do not result in any of such payments and benefits being non-deductible to the Company and the Bank and subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences. Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to Executive’s approval prior to filing, which shall not be unreasonably withheld. The Company, the Bank and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained herein shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12 below zero.

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          16.     Injunctive Relief. If there is a breach or threatened breach of Section 11g. of this Agreement or the prohibitions upon disclosure contained in Section 10c. of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and that the Company and the Bank shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank under this Agreement.

          17.     Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor to the Company and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank.
b.	Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company and the Bank.

          18.     No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.

          19.     Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company and/or the Bank at their principal business offices and to Executive at his home address as maintained in the records of the Company and the Bank.

          20.     No Plan Created by this Agreement. Executive, the Company and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

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          21.     Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

          22.     Applicable Law. Except to the extent preempted by federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

          23.     Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

          24.     Headings. Headings contained herein are for convenience of reference only.

          25.     Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6.

          26.     Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

          27.     Required Provisions. In the event any of the foregoing provisions of this Section 26 are in conflict with the terms of this Agreement, this Section 27 shall prevail.

a.

The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.

b.

If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.

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c.	If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.
d.	If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
e.	All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his or her designee), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his or her designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.
f.	Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

ATTEST:	BENEFICIAL MUTUAL BANCORP, INC.
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
ATTEST:	BENEFICIAL MUTUAL SAVINGS BANK
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE
/s/ Gerard P. Cuddy	By:	/s/ Andrew J. Miller
		Andrew J. Miller

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EX-10.4

EXHIBIT 10.4

ROBERT J. BUSH
EMPLOYMENT AGREEMENT

          THIS AGREEMENT (the “Agreement”), made this 7^th day of January, 2008, (the “Effective Date”) by and between BENEFICIAL MUTUAL BANCORP, INC., a federally-chartered corporation (the “Company”), BENEFICIAL MUTUAL SAVINGS BANK, a Pennsylvania chartered savings bank (the “Bank”), and ROBERT J. BUSH (the “Executive”).

          WHEREAS, Executive serves in a position of substantial responsibility; and

          WHEREAS, the Company and the Bank wish to assure the services of Executive for the period provided in this Agreement; and

          WHEREAS, Executive is willing to continue to serve in the employ of the Bank on a full-time basis for said period.

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the other terms and conditions hereinafter provided, the parties hereby agree as follows:

          1.       Employment. Executive is employed as Executive Vice President of the Company and the Bank. Executive shall perform all duties and shall have all powers which are commonly incident to the office of Executive Vice President or which, consistent with the office, are delegated to him by the Chief Executive Officer of the Bank. (All subsequent references herein to the Board shall be the Board of the Bank, unless otherwise indicated).

          2.       Location and Facilities. Executive will be furnished with the working facilities and staff as are necessary for him to perform his duties. The location of such facilities and staff shall be at the principal administrative offices of the Bank, or at such other site or sites customary for such offices.

          3.       Term. The term of this Agreement shall commence on the date first written above and continue for twenty-four (24) months thereafter (or until such earlier date as determined pursuant to Section 11 of this Agreement). The term of this Agreement may be extended only if agreed to in writing by all parties to the Agreement.

          4.       Base Compensation.

a.	Effective January 1, 2008, the Bank or an affiliate of the Bank agrees to pay Executive a base salary at the rate of $312,000 per year, payable in accordance with customary payroll practices.
b.	The Board shall review annually the rate of Executive’s base salary based upon factors they deem relevant, and may maintain or increase his salary, provided that no such action shall reduce the rate of salary below the rate set forth in paragraph a. of this Section 4.

c. In the absence of action by the Board, Executive shall continue to receive salary at the annual rate specified in paragraph a. of this Section 4. or, if another rate has been established under the provisions of this Section 4, the rate last properly established by action of the Board under the provisions of this Section 4.

          5.       Bonuses. Executive shall be entitled to participate in discretionary bonuses or other incentive compensation programs that the Company and the Bank may award from time to time to senior management employees pursuant to bonus plans or otherwise.

          6.       Benefit Plans. Executive shall also be eligible to participate in such medical, dental, pension, profit sharing, retirement and stock-based compensation plans and other programs and arrangements as may be approved from time to time by the Company and the Bank for the benefit of their employees.

          7.       Vacation and Leave.

a.

Executive shall be entitled to vacation and other leave in accordance with the Bank’s policy for senior executives, or otherwise as approved by the Board.

b.

In addition to paid vacations and other leave, Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of his employment for such additional periods of time and for such valid and legitimate reasons as the Board may, in its discretion, determine. Further, the Board may grant to Executive a leave or leaves of absence, with or without pay, at such time or times and upon such terms and conditions as the Board in its discretion may determine.

          8.       Expense Payments and Reimbursements. Executive shall be reimbursed for all reasonable out-of-pocket business expenses that he shall incur in connection with his services under this Agreement upon substantiation of such expenses in accordance with applicable policies of the Bank.

          9.       Automobile Allowance. During the term of this Agreement, Executive shall be entitled to a monthly automobile allowance of $1,160, or such other amount as determined by the Board on an annually basis. Executive shall comply with reasonable reporting and expense limitations established by the Bank from time to time regarding Executive’s automobile benefit. The Bank shall include on Executive’s Form W-2 any amount of income attributable to Executive’s personal use of his automobile.

          10.     Loyalty and Confidentiality.

a. During the term of this Agreement Executive: (i) shall devote all his time, attention, skill, and efforts to the faithful performance of his duties hereunder; provided, however, that from time to time, Executive may serve on the boards of directors of, and hold any other offices or positions in, companies or organizations which will not present any conflict of interest with the Company and the Bank or any of their subsidiaries or affiliates, unfavorably affect the performance of Executive’s duties pursuant to this Agreement, or violate any applicable statute or regulation and (ii) shall not engage in any business or activity contrary to the business affairs or interests of the Company and the Bank.

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b.

Nothing contained in this Agreement shall prevent or limit Executive’s right to invest in the capital stock or other securities of any business dissimilar from that of the Company and the Bank, or, solely as a passive, minority investor, in any business.

c.

Executive agrees to maintain the confidentiality of any and all information concerning the operation or financial status of the Company and the Bank; the names or addresses of any of its borrowers, depositors and other customers; any information concerning or obtained from such customers; and any other information concerning the Company and the Bank to which he may be exposed during the course of his employment. Executive further agrees that, unless required by law or specifically permitted by the Board in writing, he will not disclose to any person or entity, either during or subsequent to his employment, any of the above-mentioned information which is not generally known to the public, nor shall he employ such information in any way other than for the benefit of the Company and the Bank.

          11.     Termination and Termination Pay. Subject to Section 12 of this Agreement, Executive’s employment under this Agreement may be terminated in the following circumstances:

a.	Death. Executive’s employment under this Agreement shall terminate upon his death during the term of this Agreement, in which event Executive’s estate shall be entitled to receive the compensation due to Executive through the last day of the calendar month in which his death occurred.
b.	Retirement. This Agreement will terminate on Executive’s Retirement Date. For purposes of this Agreement, Retirement Date is defined as the date the Executive retires from the Bank under the retirement benefit plan or plans in which he participates pursuant to Section 6 of this Agreement.
c.	Disability.

i. The Board or Executive may terminate Executive’s employment after having determined Executive has a Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity that impairs Executive’s ability to substantially perform his duties under this Agreement and that results in Executive becoming eligible for long-term disability benefits under any long-term disability plans of the Company and the Bank (or, if there are no such plans in effect, that impairs Executive’s ability to substantially perform his duties under this Agreement for a period of one hundred eighty (180) consecutive days). The Board shall determine whether or not Executive is and continues to be permanently disabled for purposes of this Agreement in good faith, based upon competent medical advice and other factors that they reasonably believe to be relevant. As a condition to any benefits, the Board may require Executive to submit to such physical or mental evaluations and tests as it deems reasonably appropriate.

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ii. In the event of such Disability, Executive’s obligation to perform services under this Agreement will terminate. The Bank will pay Executive, as Disability pay, an amount equal to sixty-six and two thirds percent (66 2/3%) of Executive’s bi-weekly rate of base salary in effect as of the date of his termination of employment due to Disability. Disability payments will be made on a monthly basis and will commence on the first day of the month following the effective date of Executive’s termination of employment for Disability and end on the earlier of: (A) the date Executive returns to full-time employment at the Bank in the same capacity as he was employed prior to his termination for Disability; (B) Executive’s death; (C) Executive’s attainment of age 65; or (D) the date the Agreement would have expired had Executive’s employment not terminated by reason of Disability. Such payments shall be reduced by the amount of any short- or long-term disability benefits payable to Executive under any other disability programs sponsored by the Company and the Bank. In addition, during any period of Executive’s Disability, Executive and his dependents shall, to the greatest extent possible, continue to be covered under all benefit plans (including, without limitation, retirement plans and medical, dental and life insurance plans) of the Company and the Bank, in which Executive participated prior to his Disability on the same terms as if Executive were actively employed by the Company and the Bank.

d. Termination for Cause.

i.	The Board may, by written notice to Executive in the form and manner specified in this paragraph, immediately terminate his employment at any time, for “Cause.” Executive shall have no right to receive compensation or other benefits for any period after termination for Cause except for vested benefits. Termination for Cause shall mean termination because of, in the good faith determination of the Board, Executive’s:
	(1)	Personal dishonesty;
	(2)	Incompetence;
	(3)	Willful misconduct;
	(4)	Breach of fiduciary duty involving personal profit;
	(5)	Intentional failure to perform stated duties under this Agreement;

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		(6)	Willful violation of any law, rule or regulation (other than traffic violations or similar offenses) that reflects adversely on the reputation of the Company and the Bank, any felony conviction, any violation of law involving moral turpitude, or any violation of a final cease-and-desist order; or
		(7)	Material breach by Executive of any provision of this Agreement.
	ii.	Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause by the Company and the Bank unless there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the entire membership of the Board at a meeting of such Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive to be heard before the Board with counsel), of finding that, in the good faith opinion of the Board, Executive was guilty of the conduct described above and specifying the particulars thereof.
e.	Voluntary Termination by Executive. In addition to his other rights to terminate under this Agreement, Executive may voluntarily terminate employment during the term of this Agreement upon at least sixty (60) days prior written notice to the Board, in which case Executive shall receive only his compensation, vested rights and employee benefits up to the date of his termination.
f.	Without Cause or With Good Reason.
	i.	In addition to termination pursuant to Sections 11a. through 11e., the Board may, by written notice to Executive, immediately terminate his employment at any time for a reason other than Cause (a termination “Without Cause”) and Executive may, by written notice to the Board, immediately terminate this Agreement at any time within ninety (90) days following an event constituting “Good Reason,” as defined below (a termination “With Good Reason”).
	ii.	Subject to Section 12 of this Agreement, in the event of termination under this Section 11f., Executive shall be entitled to receive a severance benefit equal to two (2) times the sum of Executive’s (i) current base salary and (ii) the most recent bonus paid to Executive by the Company and/or the Bank. Executive’s severance benefit shall be payable ratably over a two (2) year period through the Bank’s regular payroll. In addition, Executive shall receive continued medical, dental and life insurance coverage, upon terms no less favorable than the most favorable terms provided to senior executives of the Company and the Bank during the twenty-four (24) month period following his termination date. In the event that the Company and the Bank are unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage on an individual policy basis. The severance payments and benefits provided under this subparagraph (ii) are subject to Section 11f.(v) of this Agreement.

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iii.	“Good Reason” shall exist if, without Executive’s express written consent, the Company and the Bank materially breach any of their respective obligations under this Agreement. Without limitation, such a material breach shall be deemed to occur upon any of the following:
	(1)	A material reduction in Executive’s responsibilities or authority in connection with his employment with the Company or the Bank;
	(2)	Assignment to Executive of duties of a non-executive nature or duties for which he is not reasonably equipped by his skills and experience;
	(3)	A reduction in salary or benefits contrary to the terms of this Agreement, or, following a Change in Control as defined in Section 12 of this Agreement, any reduction in salary or material reduction in benefits below the amounts to which Executive was entitled prior to the Change in Control;
	(4)	Termination of incentive and benefit plans (other than the Bank’s tax-qualified plans), programs or arrangements, or reduction of Executive’s participation to such an extent as to materially reduce their aggregate value below their aggregate value as of the Effective Date;
	(5)	A relocation of Executive’s principal business office by more than thirty (30) miles from its current location; or
	(6)	Liquidation or dissolution of the Company or the Bank.
iv.	Notwithstanding the foregoing, a reduction or elimination of Executive’s benefits under one or more benefit plans maintained by the Company or the Bank as part of a good faith, overall reduction or elimination of such plans or benefits thereunder applicable to all participants in a manner that does not discriminate against Executive (except as such discrimination may be necessary to comply with law) shall not constitute an event of Good Reason or a material breach of this Agreement, provided that benefits of the same type or to the same general extent as those offered under such plans are not available to other officers of the Company and the Bank, or any company that controls either of them, under a plan or plans in or under which Executive is not entitled to participate subsequent to such reduction or elimination of benefits.

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v. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

          12.     Termination in Connection with a Change in Control.

a.	For purposes of this Agreement, a “Change in Control” means any of the following events:
	i.	Merger: The Company or the Bank merges into or consolidates with another corporation, or merges another corporation into the Company or the Bank, and as a result less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation.
	ii.	Acquisition of Significant Share Ownership: There is filed, or required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s voting securities, but this clause (b) shall not apply to beneficial ownership of Company voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities.

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	iii.	Change in Board Composition: During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s Board of Directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s Board of Directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period shall be deemed to have also been a director at the beginning of such period; or
	iv.	Sale of Assets: The Company or the Bank sells to a third party all or substantially all of its assets.
	Notwithstanding anything in this Agreement to the contrary, in no event shall the reorganization of the Bank from the mutual holding company form of organization to the full stock holding company form of organization (including the elimination of the mutual holding company) constitute a “Change in Control” for purposes of this Agreement.
b.	Termination. If within the period ending twelve (12) months after a Change in Control, (i) the Company and the Bank shall terminate Executive’s employment Without Cause, or (ii) Executive voluntarily terminates his employment With Good Reason, the Company and the Bank shall, within ten (10) calendar days of the termination of Executive’s employment, make a lump-sum cash payment to him equal to three (3) times the sum of Executive’s (i) base salary and (ii) the most recent bonus paid by the Company and/or Bank. Also, in such event, Executive shall, for a thirty-six (36) month period following his termination of employment, receive continued medical, dental and life insurance coverage upon terms no less favorable than the most favorable terms provided to senior executives of the Bank during such period. In the event that the Company or the Bank is unable to provide such coverage by reason of Executive no longer being an employee, the Company and the Bank shall provide Executive with comparable coverage under an individual policy. The parties to this Agreement intend for the payments to satisfy the short-term deferral exception under Section 409A of the Code or, in the case of health and welfare benefits, not constitute deferred compensation (since such amounts are not taxable to Executive). However, notwithstanding anything to the contrary in this Agreement, to the extent payments do not meet the short-term deferral exception of Section 409A of the Code and, in the event Executive is a “Specified Employee” (as defined herein) no payment shall be made to Executive under this Agreement prior to the first day of the seventh month following the Event of Termination in excess of the “permitted amount” under Section 409A of the Code. For these purposes the “permitted amount” shall be an amount that does not exceed two times the lesser of: (A) the sum of Executive’s annualized compensation based upon the annual rate of pay for services provided to the Company for the calendar year preceding the year in which Executive has an Event of Termination, or (B) the maximum amount that may be taken into account under a tax-qualified plan pursuant to Section 401(a)(17) of the Code for the calendar year in which occurs the Event of Termination. The payment of the “permitted amount” shall be made within sixty (60) days of the occurrence of the Event of Termination. Any payment in excess of the permitted amount shall be made to Executive on the first day of the seventh month following the Event of Termination. “Specified Employee” shall be interpreted to comply with Section 409A of the Code and shall mean a key employee within the meaning of Section 416(i) of the Code (without regard to paragraph 5 thereof), but an individual shall be a “Specified Employee” only if the Company is a publicly-traded institution or the subsidiary of a publicly-traded holding company.

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c. The provisions of Section 12 and Sections 14 through 27, including the defined terms used in such sections, shall continue in effect until the later of the expiration of this Agreement or one (1) year following a Change in Control.

          13.     Indemnification and Liability Insurance.

a.

Indemnification. The Company and the Bank agree to indemnify Executive (and his heirs, executors, and administrators), and to advance expenses related thereto, to the fullest extent permitted under applicable law and regulations against any and all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his having been a director or Executive of the Company, the Bank or any of their subsidiaries (whether or not he continues to be a director or Executive at the time of incurring any such expenses or liabilities) such expenses and liabilities to include, but not be limited to, judgments, court costs, and attorneys’ fees and the costs of reasonable settlements, such settlements to be approved by the Board, if such action is brought against Executive in his capacity as an Executive or director of the Company and the Bank or any of their subsidiaries. Indemnification for expenses shall not extend to matters for which Executive has been terminated for Cause. Nothing contained herein shall be deemed to provide indemnification prohibited by applicable law or regulation. Notwithstanding anything herein to the contrary, the obligations of this Section 13 shall survive the term of this Agreement by a period of six (6) years.

b.

Insurance. During the period in which indemnification of Executive is required under this Section, the Company and the Bank shall provide Executive (and his heirs, executors, and administrators) with coverage under a directors’ and officers’ liability policy at the expense of the Company and the Bank, at least equivalent to such coverage provided to directors and senior executives of the Company and the Bank.

          14.     Reimbursement of Executive’s Expenses to Enforce this Agreement. The Company and the Bank shall reimburse Executive for all out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees, incurred by Executive in connection with successful enforcement by Executive of the obligations of the Company and the Bank to Executive under this Agreement. Successful enforcement shall mean the grant of an award of money or the requirement that the Company and the Bank take some action specified by this Agreement: (i) as a result of court order; or (ii) otherwise by the Company and the Bank following an initial failure of the Company and the Bank to pay such money or take such action promptly after written demand therefor from Executive stating the reason that such money or action was due under this Agreement at or prior to the time of such demand.

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          15.     Limitation of Benefits under Certain Circumstances. If the payments and benefits pursuant to Section 12 of this Agreement, either alone or together with other payments and benefits which Executive has the right to receive from the Company and the Bank, would constitute a “parachute payment” under Section 280G of the Code, the payments and benefits pursuant to Section 12 shall be reduced or revised, in the manner determined by Executive, by the amount, if any, which is the minimum necessary to result in no portion of the payments and benefits under Section 12 being non-deductible to the Company and the Bank pursuant to Section 280G of the Code and subject to the excise tax imposed under Section 4999 of the Code. The determination of any reduction in the payments and benefits to be made pursuant to Section 12 shall be based upon the opinion of the Company and the Bank’s independent public accountants and paid for by the Company and the Bank. In the event that the Company, the Bank and/or Executive do not agree with the opinion of such counsel, (i) the Company and the Bank shall pay to Executive the maximum amount of payments and benefits pursuant to Section 12, as selected by Executive, which such opinion indicates there is a high probability do not result in any of such payments and benefits being non-deductible to the Company and the Bank and subject to the imposition of the excise tax imposed under Section 4999 of the Code and (ii) the Company and the Bank may request, and Executive shall have the right to demand that they request, a ruling from the IRS as to whether the disputed payments and benefits pursuant to Section 12 have such consequences. Any such request for a ruling from the IRS shall be promptly prepared and filed by the Company and the Bank, but in no event later than thirty (30) days from the date of the opinion of counsel referred to above, and shall be subject to Executive’s approval prior to filing, which shall not be unreasonably withheld. The Company, the Bank and Executive agree to be bound by any ruling received from the IRS and to make appropriate payments to each other to reflect any such rulings, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code. Nothing contained herein shall result in a reduction of any payments or benefits to which Executive may be entitled upon termination of employment other than pursuant to Section 12 hereof, or a reduction in the payments and benefits specified in Section 12 below zero.

          16.     Injunctive Relief. If there is a breach or threatened breach of Section 11g. of this Agreement or the prohibitions upon disclosure contained in Section 10c. of this Agreement, the parties agree that there is no adequate remedy at law for such breach, and that the Company and the Bank shall be entitled to injunctive relief restraining Executive from such breach or threatened breach, but such relief shall not be the exclusive remedy hereunder for such breach. The parties hereto likewise agree that Executive, without limitation, shall be entitled to injunctive relief to enforce the obligations of the Company and the Bank under this Agreement.

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          17.     Successors and Assigns.

a.	This Agreement shall inure to the benefit of and be binding upon any corporate or other successor to the Company and the Bank which shall acquire, directly or indirectly, by merger, consolidation, purchase or otherwise, all or substantially all of the assets or stock of the Company and the Bank.
b.	Since the Company and the Bank are contracting for the unique and personal skills of Executive, Executive shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Company and the Bank.

          18.     No Mitigation. Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.

          19.      Notices. All notices, requests, demands and other communications in connection with this Agreement shall be made in writing and shall be deemed to have been given when delivered by hand or 48 hours after mailing at any general or branch United States Post Office, by registered or certified mail, postage prepaid, addressed to the Company and/or the Bank at their principal business offices and to Executive at his home address as maintained in the records of the Company and the Bank.

          20.      No Plan Created by this Agreement. Executive, the Company and the Bank expressly declare and agree that this Agreement was negotiated among them and that no provision or provisions of this Agreement are intended to, or shall be deemed to, create any plan for purposes of the Employee Retirement Income Security Act or any other law or regulation, and each party expressly waives any right to assert the contrary. Any assertion in any judicial or administrative filing, hearing, or process that such a plan was so created by this Agreement shall be deemed a material breach of this Agreement by the party making such an assertion.

          21.       Amendments. No amendments or additions to this Agreement shall be binding unless made in writing and signed by all of the parties, except as herein otherwise specifically provided.

          22.       Applicable Law. Except to the extent preempted by federal law, the laws of the Commonwealth of Pennsylvania shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

          23.       Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

          24.       Headings. Headings contained herein are for convenience of reference only.

          25.       Entire Agreement. This Agreement, together with any understanding or modifications thereof as agreed to in writing by the parties, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, other than written agreements with respect to specific plans, programs or arrangements described in Sections 5 and 6 of this Agreement and the Non-competition, Non-solicitation and Confidentiality Agreement dated January 14, 2005 by and between the Executive and Beneficial Insurance Services, LLC.

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          26.       Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in Philadelphia, Pennsylvania, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction; provided, however, that Executive shall be entitled to seek specific performance of his right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

          27.       Non-Compete. During the term of this Agreement and for a period of two (2) years after the termination of the Executive’s employment with the Company, the Bank or an affiliate for any reason whatsoever, the Executive shall not, directly or indirectly, as employee, agent, consultant, equityholder, director, manager, co-partner or in any other individual or representative capacity, own, operate, manage, control, engage in, invest in or participate in any manner in, act as a consultant, advisor or lender to, render services for (alone or in association with any Person), or otherwise assist any Person that engages in or owns, invests in, operates, manages or controls any venture or enterprise that directly or indirectly engages or proposes to engage anywhere in Pennsylvania, New Jersey or Delaware or any other state in which the Company, the Bank or an affiliate has an office within 30 miles of a bank holding company, bank, savings bank, savings and loan holding company or mortgage company (the “Territory”), in the business or any business similar to, or competitive with, the business of the Company, the Bank or an affiliate of the Company or the Bank at the time of the termination of the Executive’s employment, unless the Board expressly and in its sole discretion waives in writing the Executive’s compliance with this Section 27; provided, however, that nothing contained herein shall be construed to prevent the Executive from investing in the stock of any competing corporation listed on a national securities exchange or traded in the over-the-counter market so long as the Executive is not involved in the business of said corporation and the Executive does not own more than one percent (1%) of the stock of such corporation (a “Permitted Investment”).

          28.       Confidential Information. During the term of this Agreement and thereafter, the Executive shall keep secret and retain in strictest confidence, and shall not, without the prior written consent of the Board, furnish, make available or disclose to any third party or use for the benefit of himself or herself or any third party, any Confidential Information. ^“Confidential Information” shall mean any trade secret or information relating to the business or affairs of the Company, the Bank, or any affiliate of the Company or the Bank (collectively referred to as the “Employer Group”), including, without limitation, information relating to financial statements, customer identities, potential customers, employees, suppliers, potential acquisition targets, servicing methods, equipment, programs, strategies and information, analyses, profit margins or other proprietary information used by any Employer Group member; provided, however, that Confidential Information shall not include any information that is in the public domain or becomes known in the public domain through no wrongful act on the part of the Executive. The Executive shall deliver to the Company, the Bank or an affiliate of the Company or the Bank at the termination of the Executive’s employment, or at any other time any Employer Group member may request, all memoranda, notes, plans, records, reports and other documents or materials, in any medium, (and copies thereof) relating to the Employer Group or other forms of Confidential Information which the Executive may then possess or have under the Executive’s control, as well as any property of any Employer Group member in the Executive’s possession or control.

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          29.       Interference with Relationships. During the term of this Agreement and for a period of five (5) years after termination of Executive’s employment with the Company, the Bank or an affiliate of the Company or the Bank for any reason whatsoever, the Executive shall not, directly or indirectly, as employee, agent, consultant, stockholder, director, co-partner or in any other individual or representative capacity without the prior written consent of the Board: (i) recruit, hire or solicit for employment or engagement, or assist, encourage or suggest to any other person to recruit, hire or solicit for employment or engagement, any person who is (or was within 12 months of the date such solicitation commences or occurs, as the case may be) employed or engaged by any Employer Group member, or otherwise seek to influence or alter any such person’s relationship with such Employer Group member, or (ii) solicit, contact, or attempt to solicit or contact, or assist, encourage or suggest to any other person to solicit, contact or attempt to solicit or contact, or conduct business with (A) any client or customer doing business with any Employer Group member, as of the date of the termination of the Executive’s employment or within the two year period prior to such termination, with whom or which the Executive had any contact or involvement during the Executive’s employment with the Company, the Bank or an affiliate of the Company or the Bank; or (B) any prospective client or customer of any Employer Group member whom or which is a prospective client of such Employer Group member as of the date of the termination of the Executive’s employment and with whom or which the Executive had any contact or involvement during the Executive’s employment with the Company, the Bank or an affiliate of the Company or the Bank.

          30.       Business Disparagement. The Executive shall not, directly or indirectly, make disparaging remarks about any Employer Group member or any of their respective directors, officers or employees.

          31.       Intellectual Property, Inventions and Patents. The Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) which relate to the Employer Group members’ actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by the Executive (whether above or jointly with others) while employed by the Employer Group and for a period of six (6) months after the termination of the Executive’s employment with the Employer Group, whether before or after the date of this Agreement (“Work Product”), belong to the Employer Group. The Executive shall promptly disclose such Work Product to the Company, the Bank or an affiliate and, at the Company’s expense, perform all actions reasonably requested by the Company (whether during or after the term of the Executive’s employment with the Employer Group) to establish and confirm such ownership (including, without limitation, assignments, consents, powers of attorney and other instruments). Any copyrightable work falling within the definition of Work Product shall be deemed a “work made for hire” under the applicable copyright laws to the maximum extent permitted under applicable copyright law, and ownership of all rights therein shall vest in the Employer Group. To the extent that any Work Product cannot be deemed to be a “work made for hire” under applicable copyright law, the Executive hereby assigns and agrees to assign to the Employer Group all right, title and interest, including without limitation, the intellectual property rights that the Executive may have in and to such Work Product. The Executive has identified and listed on Exhibit A attached hereto all items of intellectual property that are or were owned by the Executive or were written, discovered, made, conceived or first reduced to practice by the Executive alone or jointly with another person prior to the Executive’s employment under this Agreement and that relates to the Employer Group members’ business or actual or demonstrably anticipated research and development of the Employer Group. If no such intellectual property is listed, the Executive represents and warrants to the Employer Group that the Executive does not now nor has the Executive ever owned, nor has the Executive developed, any such intellectual property.

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          32.       New Employment. During the term of this Agreement, the Executive shall disclose to the Company, the Bank or an affiliate of the Company or the Bank, the name, address and description of business of any new employer or business affiliation, located within the Territory, within 10 days of the acceptance of such position. If the Executive fails to provide such notice, the period shall be extended by a period equal to the period of nondisclosure set forth in Section 28 of this Agreement.

          33.       Required Provisions. In the event any of the foregoing provisions of this Section 33 are in conflict with the terms of this Agreement, this Section 33 shall prevail.

a.	The Bank’s board of directors may terminate Executive’s employment at any time, but any termination by the Bank, other than termination for Cause, shall not prejudice Executive’s right to compensation or other benefits under this Agreement. Executive shall not have the right to receive compensation or other benefits for any period after termination for Cause.
b.	If Executive is suspended from office and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(3) or (g)(1); the Bank’s obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank may in its discretion: (i) pay Executive all or part of the compensation withheld while its contract obligations were suspended; and (ii) reinstate (in whole or in part) any of the obligations which were suspended.
c.	If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1818(e)(4) or (g)(1), all obligations of the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the contracting parties shall not be affected.

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d.	If the Bank is in default as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1) all obligations of the Bank under this Agreement shall terminate as of the date of default, but this paragraph shall not affect any vested rights of the contracting parties.
e.	All obligations under this Agreement shall be terminated, except to the extent determined that continuation of the contract is necessary for the continued operation of the Bank: (i) by the Director of the OTS (or his or her designee), at the time the Federal Deposit Insurance Corporation (FDIC) enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. §1823(c); or (ii) by the Director of the OTS (or his or her designee) at the time the Director (or his designee) approves a supervisory merger to resolve problems related to the operations of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.
f.	Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

ATTEST:	BENEFICIAL MUTUAL BANCORP, INC.
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
ATTEST:	BENEFICIAL MUTUAL SAVINGS BANK
/s/ Thomas M. Topley	By:	/s/ Gerard P. Cuddy
Corporate Secretary		For the Entire Board of Directors
WITNESS:	EXECUTIVE
/s/ Gerard P. Cuddy	By:	/s/ Robert J. Bush
		Robert J. Bush

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EX-13

EXHIBIT 13

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

At and For the Year Ended December 31, (Dollars in thousands, except per share amounts)	2007(1)			2006		2005		2004			2003
Financial Condition Data:
Total assets	$	3,557,818		$	2,300,219	$	2,392,394	$	2,332,730		$	2,255,277
Cash and cash equivalents (2)		58,327			21,074		32,927		32,352			25,109
Investment securities available-for-sale (2)		968,609			348,484		359,444		434,742			379,713
Investment securities held-to-maturity		111,986			130,357		163,320		205,584			264,812
Loans receivable, net		2,097,581			1,671,457		1,716,057		1,558,159			1,481,223
Deposits (2)		2,465,163			1,678,054		1,665,821		1,608,585			1,546,412
Federal Home Loan Bank		185,750			196,550		312,797		395,104			371,484
Other borrowed funds		221,372			98,346		95,414		14,232			20,000
Stockholders’ equity		619,797			280,415		278,372		270,116			258,414
Operating Data:
Interest income	$	157,894		$	127,326	$	117,091	$	108,080		$	113,629
Interest expense		73,774			62,896		51,363		41,943			46,488
Net interest income		84,120			64,430		65,728		66,137			67,141
Provision for loan losses		2,470			1,575		1,703		2,400			2,775
Net interest income after provision for loan losses		81,650			62,855		64,025		63,737			64,366
Non-interest income		13,372			10,531		10,862		3,168			7,073
Non-interest expenses		101,032			59,439		56,961		50,577			49,657
(Loss) Income before income taxes		(6,010	)		13,947		17,928		16,328			21,782
Income tax (benefit) expense		(4,465	)		2,322		4,728		4,704			6,322
Net (loss) income	$	(1,545	)	$	11,625	$	13,200	$	11,624		$	15,460
Average common shares outstanding – Basic and Diluted		61,374,792			45,792,775		45,792,775		45,792,775	(3)		N/A	(3)
Net (loss) earnings per share - Basic and Diluted	$	(0.03	)	$	0.25	$	0.29	$	0.25			N/A
Dividends per share (4)	$	0.01		$	0.00	$	0.00	$	0.00			N/A

(1)	2007 financial results reflect the acquisition of FMS Financial Corporation and the Company’s minority stock offering.
(2)	See Note 2, “Summary of Significant Accounting Policies”, of the Notes to the Consolidated Financial Statements for explanation of correction of error on the balance sheet.
(3)	Beneficial Savings Bank MHC was organized as Beneficial Mutual Bancorp’s federally-chartered mutual holding company in August 2004.
(4)	Reflects dividends paid to Beneficial Savings Bank MHC, in April 2007, prior to Beneficial Mutual Bancorp’s minority stock offering in July 2007. See Note 3, “Minority Stock Offering and Mergers and Acquisitions”, of the Notes to the Consolidated Financial Statements for further discussion.

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At and For the Year Ended December 31, (Dollars in thousands, except per share amounts)	2007		2006		2005		2004		2003
Performance Ratios:
Return on average assets	(0.05	)%	0.49	%	0.56	%	0.51	%	0.69	%
Return on average equity	(0.35	)	4.04		4.83		4.44		6.24
Interest rate spread (1)	2.59		2.45		2.57		2.73		2.81
Net interest margin (2)	3.17		2.87		2.90		3.03		3.15
Other expenses to average assets	3.48		2.51		2.40		2.22		2.23
Efficiency ratio (3)	102.68		79.29		74.37		72.98		66.91
Average interest-earning assets to average interest-bearing liabilities	120.96		114.86		114.80		115.75		115.43
Average equity to average assets	15.06		12.20		11.52		11.49		11.12
Capital Ratios (4):
Tier 1 capital to average assets	12.20		11.73		11.37		11.40		11.29
Tier 1 capital to risk-weighted assets	19.80		17.66		16.83		17.95		17.77
Total risk-based capital to risk-weighted assets	20.92		18.78		17.91		19.18		18.99
Asset Quality Ratios:
Allowance for loan losses as a percent of total loans	1.10		1.03		0.99		1.09		1.13
Allowance for loan losses as a percent of non-performing loans	143.10		213.09		331.32		278.17		252.90
Net charge-offs to average outstanding loans during the period	0.08		0.07		0.10		0.14		0.18
Nonperforming loans as a percent of total loans	0.77		0.48		0.30		0.39		0.45
Nonperforming assets as a percent of total assets	0.59		0.48		0.35		0.39		0.44
Other Data:
Number of offices (5)	72		39		38		35		33
Number of deposit accounts	284,742		163,140		163,740		164,827		169,915
Number of loans	62,017		61,478		67,242		70,430		73,327

(1)	Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost on average interest-bearing liabilities.
(2)	Represents net interest income as a percent of average interest-earning assets.
(3)	Represents other non-interest expenses divided by the sum of net interest income and non-interest income.
(4)	Ratios are for Beneficial Bank.
(5)	Two additional offices were opened in fiscal 2007 and 31 additional offices were acquired in the FMS Financial merger.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Overview

Our principal business is to acquire deposits from individuals and businesses in the communities surrounding our offices and to use these deposits to fund loans. We also seek to broaden relationships with our customers by offering insurance and investment advisory services. We focus on providing our products and services to two segments of customers: individuals and small businesses.

The history of Beneficial Bank (the “Bank”) dates back to 1853. Over the years, we have expanded primarily through internal growth, reaching $3.6 billion in assets at December 31, 2007. In 2004, the Bank reorganized into the mutual holding company structure, forming Beneficial Mutual Bancorp, Inc. (the “Company”) as its holding company and Beneficial Savings Bank MHC (the “MHC”) as the sole stockholder of the Company. In 2005, we completed the acquisition of Northwood Savings Bank, located in the Fishtown area of Philadelphia and acquired the insurance firm Paul Hertel & Co., Inc. through our subsidiary Beneficial Insurance Services, LLC, to provide property, casualty, life, health and benefits insurance to individual and business customers with a focus on strengthening our fee income and overall earnings. On July 13, 2007, the Company completed its minority stock offering, raising approximately $236.1 million, and acquired FMS Financial Corporation, the parent company of Farmers & Mechanics Bank (together, “FMS Financial”). FMS Financial, which had total assets of over $1.2 billion and a lower loan to deposit ratio than the Company, has provided us with an additional source of funds for our rising loan activity. On October 5, 2007, Beneficial Insurance Services, LLC acquired the business of CLA Agency, Inc. (“CLA”), a full-service property and casualty and professional liability insurance brokerage company headquartered in Newtown Square, Pennsylvania.

The Company was established to serve the financing needs of the public and has expanded its services over time to offer personal and business checking accounts, home equity loans and lines of credit, commercial real estate loans and other types of commercial and consumer loans. We also provide insurance services through our wholly owned subsidiary, Beneficial Insurance Services, LLC, and investment and non-deposit services through Beneficial Advisors, LLC. Our retail market area primarily includes all of the area surrounding our 72 banking offices located in Bucks, Chester, Delaware, Montgomery and Philadelphia Counties in Pennsylvania and Burlington and Camden Counties in New Jersey, while our lending market also includes Gloucester, and Mercer Counties in New Jersey. In Pennsylvania, we serve our customers through our four offices in Bucks County, seven offices in Delaware County, eight offices in Montgomery County, 19 offices in Philadelphia County, and one office in Chester County, Pennsylvania. In New Jersey, we serve our customers through our 30 offices in Burlington County and three offices in Camden County. In addition, Beneficial Insurance Services, LLC operates two offices in Pennsylvania, one in Philadelphia County and one in Delaware County.

In addition to expanding relationships with current customers, we plan to increase the number of households and customers we serve by continuing to expand our branch network. While our major focus will be organic growth, we will continue to evaluate acquisition opportunities, although we currently have no definitive plans regarding acquisition opportunities.

We have focused on attaining and maintaining a sound financial position and recognize that maintaining a strong financial position is a major consideration in strategic planning. We are aware that our vision must be pursued in conjunction with key financial objectives to ensure overall sound financial performance. At the time of our public offering in mid 2007, the credit markets began to experience serious disruptions. This began with concerns about delinquency and default rates on certain mortgage loans defined as “sub-prime.” Sub-prime loans are defined as mortgages advanced to borrowers who do not qualify for market interest rates because of problems with their credit history.

The Bank does not engage in sub-prime lending, which is defined as mortgage loans advanced to borrowers who do not qualify for market interest rates because of problems with their credit history. The Bank focuses its lending efforts within its market area.

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Through the balance of 2007 and into 2008, the volatility sparked by the sub-prime mortgage crisis has been accompanied by similar deterioration in other asset classes such as non-sub-prime mortgages, student loans, credit cards, and hedge funds. As a result, we have entered a period of uncertainty across markets fueled by instability throughout the commercial and investment banking sectors. The market aftermath has included concerns about core inflation, liquidity, personal and corporate debt levels and repayment risk, housing prices, and mortgage loan availability. In response to these concerns, the Federal Reserve has taken unprecedented steps to bolster the financial markets in an effort to restore confidence while avoiding a recession.

The disruptions in certain credit markets, while challenging for the entire industry, has led to significant easing in the Federal Reserve’s monetary policy, resulting in lower short-term interest rates, more rational competitive deposit pricing and a more normalized term structure of interest rates, which provide the Company with opportunities to grow its deposit base at a lower cost, as consumers seek the safety of insured deposits. In addition, these disruptions have led to a thinning in the ranks of non-bank lenders, pointing consumers to satisfy their borrowing needs by accessing the services offered by traditional community banks. As the largest bank headquartered in the Philadelphia, with a strong capital base, the Company is uniquely positioned to capitalize on these disruptions.

Income. Our primary source of pre-tax income is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and investments, and interest expense, which is the interest that we pay on our deposits and borrowings. Changes in levels of interest rates affect our net interest income. During the second half of 2007, the spread between short-term interest rates (which influence the rates we pay on deposits) and longer-term interest rates (which influence the rates we earn on loans) has widened. The widening of the spread between the interest we earn on loans and investments and the interest we pay on deposits has allowed us to maintain a stable net interest margin.

A secondary source of income is non-interest income, which is revenue that we receive from providing products and services. Traditionally, the majority of our non-interest income has generally come from service charges (mostly from service charges on deposit accounts). In some years, we recognize income from the sale of loans and securities. We have recently sought to increase non-interest income by expanding the insurance and investment products we can offer our customers. In 2005, Beneficial Insurance Services, LLC, a subsidiary of the Bank, acquired the assets of Paul Hertel & Co., Inc., an insurance agency and brokerage that has provided insurance services since 1908. In addition, on October 5, 2007, Beneficial Insurance Services, LLC acquired the business of CLA Agency, Inc., a full-service property and casualty and professional liability insurance brokerage company headquartered in Newtown Square, Pennsylvania.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Expenses. The non-interest expenses we incur in operating our business consist of salaries and employee benefits expenses, occupancy expenses, depreciation, amortization and maintenance expenses and other miscellaneous expenses, such as advertising, insurance, professional services and printing and supplies expenses.

Our largest non-interest expense is salaries and employee benefits, which consist primarily of salaries and wages paid to our employees, payroll taxes, and expenses for health insurance, retirement plans and other employee benefits. Our salaries and employee benefits expense has increased in recent periods as a result of the acquisition of FMS Financial, the addition of staff for our new branch offices, and the recruitment of new employees hired to help the Company achieve its growth objectives. In addition, we recognized additional salary and employee benefit expense resulting from severance payments made to former FMS Financial employees whose positions were made redundant in the acquisition, and to former employees of the Company affected by the first reduction in force in our history. In 2008, we expect to recognize additional annual employee compensation expenses stemming from the adoption of new equity benefit plans.

Occupancy expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Our occupancy expenses have increased in recent periods because of the expansion of our branch network resulting from the acquisition of FMS Financial and the new branch offices we have opened in our market area.

In conjunction with the offering, we contributed $10.0 million to establish The Beneficial Foundation, a charitable foundation committed to carrying forward the Company’s long standing tradition of community support. This contribution increased non-interest expense in 2007.

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Effective at the beginning of 2007, the Federal Deposit Insurance Corporation (“FDIC”) began assessing most insured depository institutions premiums for deposit insurance at a rate between five cents and seven cents for every one hundred dollars of deposits. Assessment credits have been provided to institutions that paid high premiums in the past. The Bank received an assessment credit of approximately $1.72 million, which was supplemented with an additional credit of approximately $0.4 million as a result of the acquisition of FMS Financial. Our assessment in 2007 equaled five cents for every one hundred dollars of deposits, resulting in a premium of approximately $0.8 million, which was entirely offset by our assessment credit. The FDIC has announced that it will keep its premium rates the same in 2008, and we expect that our 2008 premium will be largely offset by our assessment credit.

As a result of our initial public offering, we will continue to incur additional non-interest expenses as a result of operating as a public company. These additional expenses will consist primarily of legal and accounting fees, expenses of shareholder communications and meetings and expenses related to the addition of personnel.

The Management Discussion & Analysis has been revised as a result of correcting certain presentation errors, see Note 2, “Summary of Significant Accounting Policies”, of the notes to the consolidated financial statements for further discussion.

Critical Accounting Policies

In the preparation of our consolidated financial statements, we have adopted various accounting policies that govern the application of accounting principles generally accepted in the United States. Our significant accounting policies are described in note 2 to the consolidated financial statements included in this Annual Report.

Certain accounting policies involve significant judgments and assumptions by us that have a material impact on the carrying value of certain assets and liabilities. We consider these accounting policies to be critical accounting policies. The judgments and assumptions we use are based on historical experience and other factors, which we believe to be reasonable under the circumstances. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

Allowance for Loan Losses. We consider the allowance for loan losses to be a critical accounting policy. The allowance for loan losses is the amount estimated by management as necessary to cover losses inherent in the loan portfolio at the balance sheet date. The allowance is established through the provision for loan losses, which is charged to income. Determining the amount of the allowance for loan losses necessarily involves a high degree of judgment. Among the material estimates required to establish the allowance are: overall economic conditions; value of collateral; strength of guarantors; loss exposure at default; the amount and timing of future cash flows on impacted loans; and determination of loss factors to be applied to the various elements of the portfolio. All of these estimates are susceptible to significant change. Management reviews the level of the allowance at least quarterly and establishes the provision for loan losses based upon an evaluation of the portfolio, past loss experience, current economic conditions and other factors related to the collectibility of the loan portfolio. Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the Pennsylvania Department of Banking (“the Department”), as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize adjustments to the allowance based on judgments about information available to them at the time of their examination. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings. See note 7 to the consolidated financial statements included in this Annual Report.

Goodwill and Intangible Assets. Net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition and, as such, the historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Identified intangibles are amortized on an accelerated or straight-line basis over the period benefited. Goodwill is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The impairment test is performed in two phases. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit’s goodwill (as defined in Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”)) with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. In 2007 and 2006, our step one impairment analysis indicated goodwill was not impaired.

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Other intangible assets subject to amortization are evaluated for impairment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”). An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. At December 31, 2007, intangible assets included customer relationships and other related intangibles that are amortized on a straight-line basis using estimated lives of nine to 13 years for customer relationships and two to four years for other intangibles.

Income Taxes. The Company estimates income tax expense based on amounts expected to be owed to the various tax jurisdictions in which the Company conducts business. On a quarterly basis, management assesses the reasonableness of its effective tax rate based upon its current estimate of the amount and components of net income, tax credits and the applicable statutory tax rates expected for the full year. The estimated income tax expense is recorded in the Consolidated Statement of Operations. As of January 1, 2007, the Company adopted FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty of Income Taxes” (“FIN 48”) as described in greater detail in note 2 and note 15 of the notes to the consolidated financial statements.

We use the asset and liability method of accounting for income taxes as prescribed in SFAS No. 109,“Accounting for Income Taxes” (“SFAS No. 109”). Under this 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. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. 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. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. A valuation allowance would result in additional income tax expense in the period, which would negatively affect earnings.

Business Strategy

Our business strategy is to operate and grow a profitable community-oriented financial institution. We plan to achieve this by executing our strategy of:

· Expanding our franchise through the opening of additional branch offices in our primary market area and careful review of acquisition opportunities;

· Pursuing opportunities to increase commercial lending in our primary market area;

· Continuing to use consistent, disciplined underwriting practices to maintain the high quality of our loan portfolio;

· Growing non-interest income by expanding the products and services we offer our customers, including the expansion of our insurance services and investment services; and

· Building profitable business and consumer relationships by providing superior customer service with an emphasis on growing transaction deposit accounts and deposit balances.

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Expanding our franchise through the opening of additional branch offices in our primary market area and careful review of acquisition opportunities

The Bank has sought to expand its franchise in recent years through acquisition opportunities and by opening new branch offices and continues to evaluate opportunities for further expansion. In November 2005, we acquired Northwood Savings Bank, an $8.8 million Pennsylvania-chartered mutual savings bank with one branch office located in Philadelphia, Pennsylvania. This acquisition enabled the Bank to acquire nearly $8.0 million in deposits. The Bank has actively sought to expand its franchise through the opening of new branch offices. In 2005, we opened three new branch offices in Northeast Philadelphia. In 2006, we opened one new branch in Bucks County, Pennsylvania and relocated two branches, one to Philadelphia, Pennsylvania and another to Delaware County, Pennsylvania. Our branch expansion has been within our existing market area as we have sought to penetrate more of our primary market area. We opened a new branch office in Camden County, New Jersey in January 2007 and another in Montgomery County, Pennsylvania in March 2007. In January 2008, we opened a new branch office in Montgomery County, Pennsylvania.

On July 13, 2007, the Company completed its merger with FMS Financial. In connection with the merger, FMS Financial Corporation’s wholly owned subsidiary, Farmers & Mechanics Bank, which had a network of 31 branch offices located primarily in Burlington County, New Jersey and parts of Camden County, New Jersey, merged with and into the Bank. The merger solidified the Bank’s position as the largest Philadelphia-based bank operating solely in the greater metropolitan area, with more than $3.5 billion in assets and a greatly expanded network of neighborhood banking offices throughout the region. The combined bank now offers a full array of financial products encompassing retail and commercial banking, real estate, consumer and commercial lending, insurance and brokerage operations through 72 banking offices and two insurance offices.

Pursuing opportunities to increase commercial lending in our primary market area

We have a diversified loan portfolio which includes commercial real estate and commercial business loans. At December 31, 2007, we had $693.7 million and $136.3 million of commercial real estate and commercial business loans representing 32.80% and 6.45% of total loans, respectively. Commercial loans provide diversification to our loan portfolio and, because our commercial loans are based upon rate indices that are higher than those used for one-to-four family loans, improve the interest sensitivity of our assets. With the additional capital raised in the offering, we intend to continue to pursue the larger lending relationships associated with commercial lending. In 2007, we added to our experienced staff of commercial lenders and increased our efforts to seek participation opportunities with other local lenders. Participation opportunities are subject to our full internal underwriting practices.

Continuing to use consistent, disciplined underwriting practices to maintain the high quality of our loan portfolio

We believe that maintaining high asset quality is a key to long-term financial success. We have sought to grow and diversify our loan portfolio within our local market area while keeping nonperforming assets to a minimum. We consistently apply underwriting standards that we believe are prudent and disciplined and we diligently monitor collection efforts. At December 31, 2007, our nonperforming loans were .77% of our total loan portfolio. The increase in nonperforming loans during the year ended December 31, 2007 includes two loans to affiliates of a Philadelphia-based builder and development company that filed for Chapter 11 bankruptcy in June 2007. We maintain our philosophy of managing large loan exposures through our consistent, disciplined approach to lending, and our proactive approach to managing existing credits. Approximately 19%, or $159.5 million, of our commercial loan portfolio consists of loans to commercial and residential real estate developers. Most of the loans to residential real estate developers are structured in a way that strictly limits the construction of model and speculative homes. Loan proceeds are generally drawn against executed agreements of sale.

The Bank does not originate sub-prime loans. Sub-prime loans are defined as mortgages advanced to borrowers who do not qualify for market interest rates because of problems with their credit history. At origination, with few exceptions, the combined loan to value ratios in our home equity loan portfolio does not exceed 80%.

Growing non-interest income by expanding the products and services we offer our customers, including the expansion of our insurance services

We are seeking to expand the non-traditional financial products that we offer to serve the insurance and investment needs of our customers. In 2005, Beneficial Insurance Services, LLC, a wholly owned subsidiary of the Bank, acquired the assets of Philadelphia-based Paul Hertel & Co., Inc., an insurance brokerage firm that provides property, casualty, life, health and benefits insurance services to individuals and business customers. Additionally, on October 5, 2007, Beneficial Insurance Services, LLC acquired the business of CLA Agency, Inc., a full-service property and casualty and professional liability insurance brokerage company headquartered in Newtown Square, Pennsylvania. We intend to continue to seek opportunities to expand the products and services we make available to our customers.

7

Building profitable business and consumer relationships by providing superior customer service with an emphasis on growing transaction deposit accounts and deposit balances

We are a full-service financial services company offering our customers a broad range of loan and deposit products. On the lending side, we continue to seek to increase the commercial real estate and commercial business loans we originate and hope to serve a greater percentage of the small businesses in our market area. Following our merger with FMS Financial, we have aggressively sought lending relationships with the former customers of FMS Financial and have sought to capitalize on the reputation of Farmers & Mechanics Bank in the market area it served, particularly with small businesses throughout those counties. On the deposit side, we offer a broad array of services, including internet banking, which enables our customers to pay bills on-line, among other conveniences. We also offer a full array of cash management services, including remote deposit, an electronic device that is essentially a virtual branch office, to our commercial customers, which enables businesses to make deposits and conduct other banking business with us at their place of business.

We believe a solid banking relationship is best expressed in the form of the primary transaction account. For consumers, this is the household checking account from which they pay their bills. For businesses, it is one or more operating accounts and related cash management services. The primary transaction account provides us with a low-cost source of funds and enables us to build relationships with our customers. We intend to focus our resources on growing profitable business and consumer relationships by emphasizing the primary transaction account. This is becoming increasingly difficult as more of our competitors realize the inherent value of the primary consumer and business transaction account in solidifying banking relationships and growing the products and services that can be provided to a customer. The primary transaction account becomes linked to automated payment links in the form of direct debits and direct deposits and, coupled with superior customer service, tend to create a relationship between the bank and the customer. We believe that many opportunities remain to deliver what our customers want in the form of exceptional service and convenience and intend to continue to promote our transaction accounts, particularly when we originate loans for our customers.

Balance Sheet Analysis

Loans. At December 31, 2007, total loans, net, were $2.1 billion, or 58.95% of total assets. In 2007, our total loan portfolio increased $434.7 million, or 25.87%, while our commercial real estate loan portfolio increased $284.0 million, or 69.33%, primarily due to the acquisition of $134.9 million in commercial real estate loans in connection with our acquisition of FMS Financial, the addition of experienced commercial lenders and increased marketing efforts focused towards commercial real estate and commercial business loan origination. In 2006, our total loan portfolio decreased $42.5 million, or 2.47%, while commercial real estate loans and commercial business loans increased by 10.70% and 47.58%, respectively, resulting from an increase in commercial lending staff as well as continued marketing efforts. Primarily due to our acquisition of FMS Financial, one-to-four family loans increased to 22.69% of our loan portfolio at December 31, 2007 compared to 16.61% at December 31, 2006, respectively. Our home equity loan portfolio decreased slightly to 18.48% of our loan portfolio at December 31, 2007 compared to 22.88% at December 2006, respectively.

8

The following table shows the loan portfolio at the dates indicated:

	2007					2006					2005					2004					2003
December 31, (Dollars in thousands)	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
Real estate loans:
One-to-four family	$	479,817		22.69	%	$	278,970		16.61	%	$	294,960		17.12	%	$	278,011		17.75	%	$	292,708		19.66	%
Commercial real estate (1)		693,733		32.80			409,702		24.38			370,086		21.48			281,038		17.95			208,090		13.98
Residential construction		1,958		0.09			9,967		0.59			16,529		0.96			10,404		0.67			7,102		0.48
Total real estate loans		1,175,508		55.58			698,639		41.58			681,575		39.56			569,453		36.37			507,900		34.11
Commercial business loans		136,345		6.45			98,612		5.87			66,818		3.88			48,898		3.12			31,429		2.11
Consumer loans:
Home equity loans and lines of credit		390,762		18.48			384,370		22.88			394,432		22.90			347,727		22.20			263,079		17.67
Automobile loans		174,769		8.26			232,675		13.85			271,209		15.74			265,048		16.93			269,533		18.10
Other consumer loans (2)		237,442		11.23			265,878		15.82			308,605		17.92			334,834		21.38			417,066		28.01
Total consumer loans		802,973		37.97			882,923		52.55			974,246		56.56			947,609		60.51			949,678		63.78
Total loans		2,114,826		100.00	%		1,680,174		100.00	%		1,722,639		100.00	%		1,565,960		100.00	%		1,489,007		100.00	%
Net deferred loan costs		6,096					8,651					10,514					9,340					9,160
Allowance for losses		(23,341	)				(17,368	)				(17,096	)				(17,141	)				(16,944	)
Loans, net	$	2,097,581				$	1,671,457				$	1,716,057				$	1,558,159				$	1,481,223

(1)	At December 31, 2007, includes loans totaling $68.0 million originated for the acquisition and development of real estate. We continually communicate with borrowers and monitor on a regular basis the progress of these loans. These loans are within our local region and are not spread throughout the country.
(2)	At December 31, 2007, includes $1.8 million in personal loans, $1.7 million in automobile lease financing, $7.6 million in loans secured by mobile homes and manufactured housing, $67.3 million in loans secured by recreational vehicles, $67.4 million in loans secured by boats and $89.4 million in student loans, which are primarily guaranteed.

Loan Maturity

The following tables set forth certain information at December 31, 2007 regarding the dollar amount of loan principal repayments becoming due during the periods indicated. The tables do not include any estimate of prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below. Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. The amounts shown below exclude applicable loans in process and unearned interest in consumer loans and include net deferred loan costs. Our adjustable-rate mortgage loans generally do not provide for downward adjustments below the initial discounted contract rate. When market interest rates rise, as has occurred in recent periods, the interest rates on these loans may increase based on the contract rate (the index plus the margin) exceeding the initial interest rate floor.

December 31, 2007 (Dollars in thousands)	One-to-Four Family		Commercial Real Estate		Residential Construction		Commercial Business		Home Equity		Auto- mobile		Other Consumer		Total Loans
Amounts due in:
One year or less	$	36,902	$	162,030	$	1,593	$	39,483	$	7,211	$	7,170	$	4,287	$	258,676
More than one to five years		35,797		107,391		365		31,812		40,203		154,408		9,243		379,219
More than five to ten years		88,892		42,338		—		13,864		127,304		13,179		49,996	$	335,573
More than ten years		318,226		381,974		—		51,186		216,044		12		173,916		1,141,358
Total	$	479,817	$	693,733	$	1,958	$	136,345	$	390,762	$	174,769	$	237,442	$	2,114,826

9

The following table sets forth all loans at December 31, 2007 that are due after December 31, 2008 and have either fixed interest rates or floating or adjustable interest rates:

(Dollars in thousands)	Fixed Rates		Floating or Adjustable Rates		Total
One-to-four family	$	382,741	$	60,173	$	442,914
Commercial real estate		61,593		470,110		531,703
Construction		—		366		366
Commercial business		20,218		76,644		96,862
Consumer		741,198		43,107		784,305
Total	$	1,205,750	$	650,400	$	1,856,150

Loan Activity

The following table shows loans originated, purchased and sold during the periods indicated:

Year Ended December 31, (Dollars in thousands)	2007		2006		2005		2004		2003
Total loans at beginning of period	$	1,688,825	$	1,733,153	$	1,575,300	$	1,498,167	$	1,391,574
Originations:
Real estate loans:
One-to-four family		33,988		27,306		43,505		65,205		160,085
Commercial real estate		273,547		185,246		176,874		147,612		96,393
Residential construction		1,959		8,978		18,048		14,317		9,398
Total real estate loans		309,494		221,530		238,427		227,134		265,876
Commercial business loans		53,861		44,588		31,926		25,682		14,557
Consumer:
Home equity loans and lines of credit		71,783		87,377		153,824		199,099		207,217
Automobile loans		52,329		92,926		148,738		139,570		152,786
Other consumer loans		34,094		64,469		102,041		63,548		154,523
Total consumer loans		158,206		244,772		404,603		402,217		514,526
Total loans originated		521,561		510,890		674,956		655,033		794,959
Loans acquired from FMS Financial		443,016		—		—		—		—
Purchases		91		5,064		38,283		—		1,744
Less:
Principal payments and repayments		529,335		551,351		545,565		561,693		648,949
Loan sales		2,941		8,592		9,371		16,066		40,841
Transfers to foreclosed real estate		295		339		450		141		320
Total loans at end of period	$	2,120,922	$	1,688,825	$	1,733,153	$	1,575,300	$	1,498,167

10

Securities. At December 31, 2007, the investment securities portfolio excluding FHLB (“FHLB”) stock was $1.1 billion, or 29.8% of total assets. At December 31, 2007, 70.4% of the investment portfolio was invested in mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”) and government agency mortgage-backed securities (“GNMA”); including collateralized mortgage obligations (“CMO”) securities issued by the FHLMC, FNMA, and private issuer CMOs securities rated AAA by Standard & Poor’s. Private issuer CMOs totaled $132.7 million or 12.5% of our total securities portfolio at December 31, 2007. The remainder was invested primarily in United States government sponsored enterprises (“GSE”) and agency note securities, municipal and other bonds, corporate bonds and equity securities.

	2007				2006				2005
December 31, (Dollars in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities available-for-sale:
GSE and agency notes	$	184,756	$	187,063	$	72,644	$	71,786	$	54,507	$	53,649
Mortgage-backed securities:
GNMA guaranteed mortgage certificates		17,299		17,388		26,438		26,348		37,332		36,972
FNMA and FHLMC mortgage-backed securities		431,500		440,184		53,759		52,962		54,988		53,967
Collateralized mortgage obligations		206,842		206,007		144,339		140,400		156,196		152,480
Total mortgage-backed securities		655,641		663,578		224,536		219,710		248,516		243,419
Municipal and other bonds		74,330		74,226		31,632		31,732		29,875		29,917
Equity securities		9,391		9,802		6,453		7,639		13,066		14,119
Mutual Funds		14,717		15,125		2,073		2,073		3		3
Total available–for-sale		938,835		949,795		337,338		332,940		345,967		341,107
Securities held-to-maturity:
GSE and agency notes		27,498		27,487		27,499		26,880		37,494		36,550
Mortgage-backed securities:
GNMA guaranteed mortgage certificates		771		745		912		881		1,300		1,289
FNMA and FHLMC mortgage-backed securities		83,717		82,895		101,946		99,472		122,757		120,355
Total mortgage-backed securities		84,488		83,640		102,858		100,353		124,057		121,644
Municipal and other bonds		—		—		—		—		1,769		1,756
Total held–to-maturity		111,986		111,127		130,357		127,233		163,320		159,950
Total	$	1,050,821	$	1,060,922	$	467,695	$	460,173	$	509,287	$	501,057

Mortgage-backed securities are a type of asset-backed security that is secured by a mortgage, or a collection of mortgages. These securities must also be grouped in one of the top two ratings as determined by an accredited credit rating agency, and usually pay periodic payments that are similar to coupon payments. Furthermore, the mortgage must have originated from regulated and authorized financial institutions. The contractual cash flows of investments in government sponsored enterprises’ mortgage-backed securities are debt obligations of FHLMC and FNMA. The cash flows related to GNMA securities are direct obligations of the U.S. Government. Mortgage-backed securities are also known as mortgage pass-throughs. CMOs are a type of mortgage-backed security that creates separate pools of pass-through rates for different classes of bondholders with varying maturities, called tranches. The repayments from the pool of pass-through securities are used to retire the bonds in the order specified by the bonds’ prospectus. At December 31, 2007, we had no investments in a single company or entity (other than United States government sponsored enterprise securities) that had an aggregate book value in excess of 10% of our equity at December 31, 2007. All CMOs we hold carry the highest rating by an accredited credit rating agency.

Due to the condition of financial institutions in the fourth quarter of 2007, the Company recorded an impairment charge related to the value of common equity securities of various financial services companies that were deemed to be other-than-temporarily-impaired. The Company recognized an other-than-temporary impairment for these securities of $1.2 million in 2007.

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Investments that have been in a continuous unrealized loss position for periods of less than 12 months and 12 months or longer at December 31, 2007 and 2006 are summarized in the following table:

(Dollars in thousands)	2007
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
GSE and Agency Notes	$	—	$	—	$	63,979	$	174	$	63,979	$	174
Mortgage-backed securities		8,357		14		87,931		1,621		96,288		1,635
Municipal and other bonds		28,293		376		3,075		16		31,368		392
Collateralized mortgage obligations		37,414		408		97,324		2,300		134,738		2,708
Subtotal, debt securities		74,064		798		252,309		4,111		326,373		4,909
Equity securities		750		26		—		—		750		26
Mutual Funds		347		24		—		—		347		24
Total temporarily impaired securities	$	75,161	$	848	$	252,309	$	4,111	$	327,470	$	4,959
(Dollars in thousands)	2006
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
GSE and Agency Notes	$	6,859	$	17	$	73,385	$	1,466	$	80,244	$	1,483
Other mortgage-backed securities		9,869		30		126,346		3,941		136,215		3,971
Municipal and other bonds		4,804		16		5,891		76		10,695		92
Collateralized mortgage obligations		—		—		116,164		4,057		116,164		4,057
Subtotal, debt securities		21,532		63		321,786		9,540		343,318		9,603
Equity securities		1,434		66		—		—		1,434		66
Total temporarily impaired securities	$	22,966	$	129	$	321,786	$	9,540	$	344,752	$	9,669

GSE and Agency Notes

The Company’s investments in the preceding table in GSE Notes consist of debt obligations of the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Bank (“FHLB”) and the Federal Farm Credit Bank (“FFCB”). The Company’s investments in Government Agency Notes consist of debt obligations of the Department of Housing and Urban Development (“HUD”). Included in the 12 months or longer are 15 securities with a loss, on average, of .27%. The unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

12

Mortgage-Backed Securities

The Company’s investments in the preceding table in mortgage-backed securities consist of fixed rate GSE mortgage-backed securities and government agency mortgage-backed securities. Included in the less than 12 months are five securities with a loss, on average, of .17%. Included in the 12 months or longer are 32 securities with a loss, on average, of 1.84%. The unrealized losses on the Company’s investments in mortgage-backed securities are due to current interest rate levels relative to the Company’s cost. The contractual cash flows of those investments in GSE mortgage-backed securities are debt obligations of the Federal Home Loan Mortgage Corporation (“FHLMC”) and the FNMA. Fannie Mae issues guaranteed mortgage pass-through certificates or MBS certificates, which represent the beneficial ownership in a distinct pool of residential mortgage loans secured by single-family (one-to four-unit) dwellings, or in a pool of participation interests in loans of that type. Fannie Mae guarantees to the MBS trust that they will supplement amounts received by the MBS trust as required to permit timely payments of interest and principle on the certificates. They alone are responsible for making payments under their guarantee. The certificates and payments of principle and interest on the certificates are not guaranteed by the United States, and do not constitute a debt or obligation of the United States or any of its agencies or instrumentalities other than Fannie Mae. Freddie Mac issues and guarantees Mortgage Participation Certificates (or “PCs”), which are securities that represent undivided beneficial ownership interests in, and receive payments from, pools of one-to-four-family residential mortgages that are held in trust for investors. Freddie Mac guarantees the payment of interest and principle on the PCs. They alone are responsible for making payments on their guarantee. Principle and interest payments on the PCs are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. The cash flows related to government agency mortgage-backed securities are direct obligations of the U.S. Government. The decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Municipal and other bonds

The Company’s investments in the preceding table in this category comprise of municipal bonds, corporate bonds and trust preferred/collateralized debt obligations (“CDOs”). The municipals bonds consist of general obligation bonds of entities located in the state of Pennsylvania. These bonds are rated AAA by S&P and/or Aaa by Moody’s. Other bonds consist of corporate bonds and trust preferred/CDOs, which are rated investment grade at December 31, 2007. Included in the less than 12 months are three securities with a loss, on average, of 1.31%. Included in the 12 months or longer are eight securities with a loss, on average of .51%. The unrealized losses on the Company’s municipal and other bonds are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Collateralized Mortgage Obligations

The Company’s investments in the preceding table in this category consist of collateralized mortgage obligations issued by the FHLMC, the FNMA, and whole-loan mortgage-backed securities rated AAA by S&P. Included in the less than 12 months are eight securities with a loss, on average, of 2.07%. Included in the 12 months or longer are 28 securities with a loss, on average, of 2.31%. The unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Equity Securities

The Company’s investments in the preceding table in equity securities consist of bank issued common stocks and mutual funds. Included in the less than 12 months are three securities with a loss position, on average, of 4.3%. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. The Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

As with any type of investment there are risk factors to consider. The risks inherent in investments in mortgage-backed securities and CMOs include, but are not limited to, interest rate risk, which would affect the market value of the security, and prepayment risk, which would affect the cash flow and average life of the security. All of these risk factors are taken into consideration during prepurchase analysis of a security.

The following table sets forth the stated maturities and weighted average yields of the investment securities at December 31, 2007. Certain securities have adjustable interest rates and will reprice monthly, quarterly or annually within the various maturity ranges. Mutual funds and equity securities are not included in the table, based on lack of maturity. These repricing schedules are not reflected in the table below. All but approximately $121.6 million of the securities listed have fixed rates.

13

	One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
December 31, 2007 (Dollars in thousands)	Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield		Carrying Value		Weighted Average Yield
Securities available-for-sale:
GSE and agency notes	$	68,060	4.42	%	$	32,515	5.24	%	$	66,156	5.97	%	$	20,331	5.74	%	$	187,062	5.25	%
Mortgage-backed securities		3,125	4.28			46,480	4.61			23,161	5.22			590,811	5.65			663,578	5.55
Municipal and other bonds		14,846	3.49			9,113	4.83			22,355	3.83			27,913	5.7			74,226	4.59
Total available-for-sale		86,031	4.04			88,108	4.87			111,672	5.39			639,055	5.66			924,866	5.41
Securities held to maturity:
GSE and agency notes		5,000	4.63			22,498	4.05			—	—			—	—			27,498	4.16
Mortgage-backed securities		2	8.12			19,097	4.19			10,754	4.58			54,634	5.08			84,488	4.81
Total held to maturity		5,002	4.63			41,595	4.11			10,754	4.58			54,634	5.08			111,986	4.65
Total	$	91,033	4.07	%	$	129,703	4.62	%	$	122,426	5.32	%	$	693,689	5.61	%	$	1,036,852	5.33	%

Premises and Equipment. Premises and equipment totaled $79.0 million at December 31, 2007 as compared to $33.2 million at December 31, 2006. Land increased $13.2 million and bank premises increased $24.5 million primarily due to our acquisition of FMS Financial. In addition, construction in progress (“CIP”) increased $8.1 million primarily as a result of the transfer of costs relating to the acquisition of $1.9 million of CIP from FMS Financial, and the new branch offices placed into service in January 2008, as well as St. Ignatius Senior Housing II.

Deposits. Our deposit base is comprised of demand deposits, money market and passbook accounts and time deposits. We consider demand deposits and money market and passbook accounts to be core deposits. At December 31, 2007, core deposits were 57.72% of total deposits. Deposits increased $787.1 million, or 46.91%, in the year ended December 31, 2007, as core deposits increased $638.7 million, and time deposits increased $148.4 million, primarily due to the acquisition of FMS Financial. Our efforts to grow core deposits have been focused on the promotion of interest earning checking accounts. We have experienced an increase in our time deposit accounts as we have selectively competed for certain deposit maturities by adjusting our rates. However, we believe we are most successful attracting and retaining deposits by offering superior customer service.

The following table sets forth the deposits as a percentage of total deposits for the periods indicated:

	2007				2006				2005
At December 31, (Dollars in thousands)	Amount		Percent of Total Deposits		Amount		Percent of Total Deposits		Amount		Percent of Total Deposits
Non-interest bearing deposits	$	242,351	10	%	$	90,040	5	%	$	95,777	5	%
Interest-earning checking accounts		389,812	16			162,955	10			170,712	10
Money market accounts		376,300	15			281,044	17			263,973	16
Savings accounts		414,398	17			250,109	15			287,444	18
Time deposits		1,042,302	42			893,906	53			847,915	51
Total	$	2,465,163	100	%	$	1,678,054	100	%	$	1,665,821	100	%

14

The following table indicates the amount of certificates of deposit of $100,000 or more by time remaining until maturity as of December 31, 2007. We have solicited brokered time deposits as an alternative source of funds. The table below excludes brokered deposits. At December 31, 2007, we had $5.0 million in brokered deposits.

December 31, 2007 (Dollars in thousands)	Certificates of Deposit
Maturity Period:
Three months or less	$	71,497
Over three through six months		71,610
Over six through twelve months		63,547
Over twelve months		30,607
Total	$	237,261

The following table sets forth the time deposits classified by rates at the dates indicated:

At December 31, (Dollars in thousands)	2007		2006		2005
0.00 - 1.00%	$	37	$	7	$	2,564
1.01 - 2.00%		2,376		108		30,389
2.01 - 3.00%		80,943		93,997		269,875
3.01 - 4.00%		363,417		264,228		404,457
4.01 - 5.00%		496,178		267,819		139,222
5.01 - 6.00%		99,329		267,687		1,181
6.01 - 7.00%		22		60		227
Total	$	1,042,302	$	893,906	$	847,915

The following table sets forth the amount and maturities of time deposits classified by rates at December 31, 2007:

	Amount Due
(Dollars in thousands)	Less Than One Year		More Than One Year to Two Years		More Than Two Years to Three Years		More Than Three Years		Total
0.00 - 1.00%	$	37	$	—	$	—	$	—	$	37
1.01 - 2.00%		1,062		1,305		9		—		2,376
2.01 - 3.00%		78,191		2,674		29		49		80,943
3.01 - 4.00%		267,993		55,042		25,882		14,500		363,417
4.01 - 5.00%		412,681		50,813		27,026		5,658		496,178
5.01 - 6.00%		97,593		1,055		401		280		99,329
6.01 - 7.00%		—		—		22		—		22
Total	$	857,557	$	110,889	$	53,369	$	20,487	$	1,042,302

The following table sets forth the deposit activity for the periods indicated:

Year Ended December 31, (Dollars in thousands)	2007		2006			2005
Beginning balance	$	1,678,054	$	1,665,821		$	1,608,585
Increase (decrease) before interest credited		730,866		(32,154	)		25,191
Interest credited		56,243		44,387			32,045
Net increase in deposits		787,109		12,333			57,236
Ending balance	$	2,465,163	$	1,678,054		$	1,665,821

15

Borrowings. We use borrowings from the Federal Home Loan Bank of Pittsburgh and New York, as well as repurchase agreements and other sources of borrowings, to supplement our supply of funds for loans and investments. The following table sets forth the outstanding borrowings and weighted averages at the dates indicated:

Year Ended December 31, (Dollars in thousands)	2007			2006			2005
Maximum amount outstanding at any month-end during period:
Federal Home Loan Bank advances	$	196,550		$	255,697		$	340,397
Repurchase agreements		205,594			125,350			92,918
Federal Home Loan Bank overnight borrowings		—			70,000			102,507
Statutory Trust Debenture		25,264			—			—
Other		30,796			52,496			2,496
Average outstanding balance during period:
Federal Home Loan Bank advances	$	180,557		$	231,604		$	324,966
Repurchase agreements		129,741			101,883			45,650
Federal Home Loan Bank overnight borrowings		—			9,880			47,634
Statutory Trust Debenture		12,018			—			—
Other		8,702			29,930			2,496
Weighted average interest rate during period:
Federal Home Loan Bank advances		4.94	%		4.88	%		4.67	%
Repurchase agreements		4.87			4.92			3.77
Federal Home Loan Bank overnight borrowings		—			4.63			3.24
Statutory Trust Debenture		7.29			—			—
Other		4.64			5.05			2.40
Balance outstanding at end of period:
Federal Home Loan Bank advances	$	185,750		$	196,550		$	262,897
Repurchase agreements		185,562			88,600			92,918
Federal Home Loan Bank overnight borrowings		—			—			49,900
Statutory Trust Debenture		25,264
Other		10,546			9,746			2,496
Weighted average interest rate at end of period:
Federal Home Loan Bank advances		4.81	%		5.01	%		4.68	%
Repurchase agreements		4.78			4.93			4.43
Statutory Trust Debenture		6.57			—			—
Federal Home Loan Bank overnight borrowings		—			—			4.17
Other		3.57			4.47			2.38

Results of Operations for the Years Ended December 31, 2007, 2006 and 2005

Financial Highlights. We had a loss of ($1.5) million for the year ended December 31, 2007 compared to net income of $11.6 million for the year ended December 31, 2006. The decrease reflected a $41.6 million increase in non-interest expenses, including an expense of $10.0 million incurred in connection with the establishment of The Beneficial Foundation, which were partially offset by a $19.7 million increase in net interest income and a $6.8 million decrease in income tax expense. In 2006, net income decreased $1.6 million to $11.6 million from $13.2 million for the year ended December 31, 2005. The decrease reflected a $1.3 million decrease in net interest income and a $2.5 million increase in non-interest expenses, which were partially offset by a $2.4 million decrease in income tax expense.

16

Summary Income Statements

The following table sets forth the income summary for the periods indicated:

										Change 2007/2006					Change 2006/2005
Year Ended December 31,
(Dollars in thousands)	2007			2006			2005			$			%		$			%
Net interest income	$	84,120		$	64,430		$	65,728		$	19,690		30.56	%	$	(1,298	)	(1.97	)%
Provision for loan losses		2,470			1,575			1,703			895		56.83			(128	)	(8.00	)
Non-interest income		13,372			10,531			10,862			2,841		26.98			(331	)	(3.00	)
Non-interest expenses		101,032			59,439			56,961			41,593		69.98			2,478		4.35
Net income		(1,545	)		11,625			13,200			(13,170	)	(113.29	)		(1,575	)	(11.93	)
Return on average equity		(0.35	)%		4.04	%		4.83	%
Return on average assets		(0.05	)%		0.49	%		0.56	%

Net Interest Income

2007 vs. 2006. Net interest income increased $19.7 million or 30.56%, to $84.1 million for 2007 from $64.4 million in 2006. Total interest income increased $30.6 million or 24.01% to $157.9 million for 2007 primarily as a result of increases in interest and dividends on investments of 68.57% to $38.9 million for 2007 and an increase in interest and fees on loans of 12.67% to $117.3 million. The increase in income from interest and fees on loans and interest and dividends on investment securities was primarily due to an increase in the average balance of loans and investments and a 31 and 75 basis point increase in the yields, respectively. Total interest expense increased $10.9 million or 17.30% to $73.8 million for 2007 primarily due to an increase in the average balance of interest bearing deposits of $282.1 million, and an increase in cost on interest-bearing deposits of 25 basis points. Deposit increases are partially attributed to the acquisition of FMS Financial. During 2007, the average balance of our time deposits increased $44.9 million and the cost on time deposits increased 52 basis points.

2006 vs. 2005. Net interest income decreased $1.3 million or 1.97%, to $64.4 million for 2006 from $65.7 million for 2005. Total interest income increased $10.2 million or 8.74% to $127.3 million for 2006 as increases in interest and fees on loans were partially offset by decreases in interest and dividends on investment securities. Interest income and fees on loans increased 12.94% to $104.1 million primarily due to an increase in the average balance of loans and a 49 basis point increase in the yield. Total interest expense increased $11.5 million or 22.45% to $63.0 million for 2006 primarily due to an increase in the average balance of interest-bearing deposits of $29.7 million, and an increase in cost on interest-bearing deposits of 70 basis points. During 2006, the average balance of our time deposits increased $96.4 million and the cost on time deposits increased 85 basis points.

17

Analysis of Net Interest Income

The following table sets forth an analysis of net interest income for the periods indicated:

										Change 2007/2006					Change 2006/2005
December 31,
(Dollars in thousands)	2007			2006			2005			$			%		$			%
Components of net interest income
Loans	$	117,334		$	104,143		$	92,208		$	13,191		12.67	%	$	11,935		12.94	%
Investment securities		38,933			23,060			24,455			15,873		68.83			(1,395	)	(5.70	)
Other interest-earning assets		1,627			123			427			1,504		1222.76			(304	)	(71.19	)
Total interest income		157,894			127,326			117,091			30,568		24.01			10,235		8.74
Deposits		57,254			44,619			32,875			12,635		28.32			11,744		35.72
Borrowings		16,520			18,277			18,488			(1,757	)	(9.61	)		(211	)	(1.14	)
Total interest expense		73,774			62,896			51,363			10,878		17.30			11,533		22.45
Net interest income		84,120			64,430			65,728			19,690		30.56			(1,298	)	(1.97	)
Average yield and rates paid
Interest-earning assets		5.96	%		5.67	%		5.17	%		0.30	%	5.29	%		0.50	%	9.67	%
Interest-bearing liabilities		3.36			3.21			2.60			0.15		4.67			0.61		23.46
Interest rate spread		2.59			2.45			2.57			0.16		6.53			(0.12	)	(4.67	)
Net interest margin		3.17			2.87			2.90			0.32		11.15			(0.03	)	(1.03	)
Average balances
Loans		1,864,939			1,740,606			1,678,697			124,333		7.14			61,909		3.69
Investment securities		751,674			504,045			575,600			247,628		49.13			(71,554	)	(12.43	)
Other interest-earning assets		33,870			2,785			12,461			31,086		1,116.34			(9,677	)	(77.65	)
Deposits		1,862,617			1,580,540			1,550,761			282,077		17.85			29,778		1.92
Borrowings		331,019			373,297			420,746			(42,278	)	(11.33	)		(47,449	)	(11.28	)

Provision for Loan Losses.

Based on our evaluation of loan loss factors, management made a provision of $2.5 million for the year ended December 31, 2007, compared to provisions of $1.6 million for the year ended December 31, 2006 and $1.7 million for the year ended December 31, 2005. We had $1.5 million in net charge-offs for the year ended December 31, 2007 compared to net charge-offs of $1.3 million for the year ended December 31, 2006 and $1.7 million for the year ended December 31, 2005. We used the same methodology and generally similar assumptions to determine the provision for all three periods. The provision for loan losses was determined by management to be an amount necessary to maintain a balance of allowance for loan losses at a level that considers all known and current losses in the loan portfolio. Changes in the provision were based on management’s analysis of various factors such as: estimated fair value of underlying collateral, recent loss experience in particular segments of the portfolio, levels and trends in delinquent loans, and changes in general economic and business conditions.

The allowance for loan losses was $23.3 million or 1.10% of total loans outstanding as of December 31, 2007, as compared to $17.4 million, or 1.03% of total loans outstanding as of December 31, 2006 and $17.1 million, or 0.99% as of December 31, 2005. An analysis of the changes in the allowance for loan losses is presented under “Risk Management–Analysis and Determination of the Allowance for Loan Losses” below.

Non-interest Income. Non-interest income increased by $2.8 million to $13.4 million in fiscal 2007 primarily due to an increase of $3.5 million or 62.21% from service charges and other income as well as an increase of approximately $0.9 million or 22.08% in insurance commission income compared to 2006, the effect of which was partially offset by a decrease of $0.4 million in gains on sale of investment securities available–for-sale. Non-interest income decreased $0.3 million to $10.5 million in 2006. The decrease in non-interest income in 2006 was primarily a result of a decrease in the gain on sales of investment securities available-for-sale of $0.4 million in 2006 compared to 2005. Offsetting the decrease in the gain on sale of securities was a $0.3 million increase in income from insurance commissions, which increased to $4.3 million, or 6.92%, compared to 2005.

18

Non-interest Income Summary

The following table sets forth a summary of non-interest income for the periods indicated:

								Change 2007/2006					Change 2006/2005
Year Ended December 31,
(Dollars in thousands)	2007			2006		2005		$			%		$			%
Insurance commission income	$	5,223		$	4,278	$	4,001	$	945		22.09	%	$	277		6.92	%
Services charges and other income		9,053			5,581		5,791		3,472		62.21			(210	)	(3.63	)
Impairment charge on securities available-for-sale		(1,192	)		—		—		(1,192	)	100.00			—		—
Gains on sale of investment securities available-for-sale		288			672		1,070		(384	)	(57.14	)		(398	)	(37.20	)
Total	$	13,372		$	10,531	$	10,862	$	2,841		26.98	%	$	(331	)	(3.05	) %

Non-interest Expenses. Non-interest expense increased $41.6 million, or 69.98%, in 2007 from 2006. The increase in non-interest expense in 2007 was primarily due to a $10.0 million contribution to The Beneficial Foundation, severance and benefit expenses related to a reduction in force totaling $3.9 million, as well as increases in salaries, employee benefits, advertising expenses and professional fees incurred as a result of the Company’s minority stock offering and acquisition and integration of FMS Financial. Non-interest expense increased $2.5 million, or 4.35%, in 2006 over 2005. The increase in salaries and employee benefits, as well as occupancy expense, which accounted for much of the increase, was primarily due to the opening of one and three branches in 2006 and 2005, respectively.

Non-interest Expense Summary

The following table sets forth an analysis of non-interest expense for the periods indicated:

							Change 2007/2006				Change 2006/2005
Year Ended December 31,
(Dollars in thousands)	2007		2006		2005		$		%		$			%
Salaries and employee benefits	$	51,118	$	34,412	$	32,589	$	16,706	48.55	%	$	1,823		5.59	%
Contribution to The Beneficial Foundation		9,995		—		—		9,995	100.00			—		—
Occupancy expense		9,367		7,566		7,339		1,801	23.80			227		3.09
Depreciation, amortization and maintenance		6,970		5,269		5,093		1,701	32.28			176		3.46
Amortization of intangibles		3,434		426		408		3,008	706.10			18		4.41
Advertising		4,507		2,049		1,994		2,458	119.96			55		2.76
Insurance and protection		1,911		1,531		1,700		380	24.82			(169	)	(9.94	)
Professional fees		2,674		1,439		1,345		1,235	85.82			94		6.99
Printing and supplies		1,883		1,041		1,034		842	80.88			7		0.68
Correspondent Bank/ATM charges		1,952		1,086		1,030		866	79.74			56		5.44
Postage		882		595		544		287	48.24			51		9.38
Other		6,339		4,025		3,885		2,314	57.49			140		3.60
Total	$	101,032	$	59,439	$	56,961	$	41,593	69.98	%	$	2,480		4.35	%

Income Tax Expense. The provision (benefit) for income taxes was ($4.5) million for 2007, reflecting an effective tax rate benefit of (74.3%), compared to $2.3 million for 2006, reflecting an effective tax rate of 16.6%, and compared to $4.7 million for 2005, reflecting an effective tax rate of 26.4%. The change from 2007 to 2006 was primarily due to a decrease in pre-tax book income of $20.0 million resulting from our acquisition of FMS Financial and the $10.0 million charitable contribution to The Beneficial Foundation, along with an increased state tax provision. State taxes increased $0.4 million due to our expanded presence in New Jersey after the acquisition of FMS Financial. The tax rates differ from the statutory rate of 35% principally because of tax-exempt investments, non-taxable income related to bank-owned life insurance and tax credits received on low income housing partnerships. These credits relate to investments maintained by the Bank as a limited partner in partnerships that sponsor affordable housing projects utilizing low-income housing credits pursuant to Section 42 of the Internal Revenue Code.

19

Average Balance Table

The following table presents information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting annualized average yields and costs. The yields and costs for the periods indicated are derived by dividing income or expense by the average daily balances of assets or liabilities, respectively, for the periods presented. Loan fees are included in interest income on loans and are not material. In addition, non-accrual loans are included in the average balances but are not deemed material.

(Dollars in thousands)			2007							2006							2005
	Average Balance		Interest And Dividends		Yield/ Cost			Average Balance		Interest And Dividends		Yield/ Cost			Average Balance		Interest And Dividends		Yield/ Cost
Assets:
Interest-bearing demand deposits	$	2,895	$	139		4.82	%	$	2,519	$	93		3.69	%	$	865	$	51		5.90	%
Loans		1,864,939		117,334		6.29			1,740,606		104,143		5.98			1,678,697		92,208		5.49
Investment securities		261,642		12,988		4.96			160,493		6,755		4.21			144,769		5,201		3.59
Mortgage-backed securities		331,134		17,524		5.21			200,967		9,249		4.60			241,216		10,478		4.34
Collateralized mortgage obligations		160,819		8,295		5.16			141,163		7,008		4.96			189,161		8,771		4.64
Other interest-earning assets		31,943		1,613		5.05			1,688		78		4.62			12,050		382		3.17
Total interest-earning assets		2,653,372		157,894		5.96			2,247,436		127,326		5.67			2,266,758		117,091		5.17
Non-interest-earning assets		250,516							114,102							105,778
				157,894							127,326							117,091
Total Assets		2,903,888							2,361,538							2,372,536
Liabilities and Stockholders’ Equity:
Interest-earning checking accounts		265,951		4,250		1.60			162,368		1,747		1.08			145,005		1,085		0.75
Money market accounts		332,523		10,291		3.09			263,703		6,906		2.62			316,202		5,973		1.89
Savings accounts		332,196		2,212		0.67			267,426		1,991		0.74			298,958		2,243		0.75
Time deposits		931,970		40,501		4.35			887,043		33,975		3.83			790,596		23,574		2.98
Total interest-bearing deposits		1,862,640		57,254		3.07			1,580,540		44,619		2.82			1,550,761		32,875		2.12
Federal Home Loan Bank advances		180,557		8,925		4.94			231,604		11,294		4.88			324,966		15,164		4.67
Repurchase agreements		129,741		6,315		4.87			101,883		5,014		4.92			45,650		1,722		3.77
Federal Home Loan Bank overnight borrowings		—		—		—			9,880		457		4.63			47,634		1,542		3.24
Statutory Trust Debenture		12,018		876		7.29			—		—		—			—		—		—
Other borrowings		8,702		404		4.64			29,930		1,512		5.05			2,496		60		2.40
Total interest-bearing liabilities		2,193,658		73,744		3.36			1,953,833		62,896		3.22			1,971,507		51,363		2.61
Non-interest-bearing deposits		173,855							80,380							77,317
Other non-interest-bearing liabilities		98,974							39,289							50,518
Total liabilities		2,466,487		73,744					2,073,506		62,896					2,099,342		51,363
Total Stockholders’ Equity		437,401							288,032							273,194
Total Liabilities and Stockholders’ Equity	$	2,903,888						$	2,361,538						$	2,372,536
Net interest income			$	84,120						$	64,430						$	65,728
Interest rate spread						2.59	%						2.45	%						2.57	%
Net interest margin						3.17	%						2.87	%						2.90	%
Average interest-earning assets to average interest-bearing liabilities						120.96	%						114.86	%						114.80	%

20

Rate/Volume Analysis. The following table sets forth the effects of changing rates and volumes on our net interest income. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. Changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionally based on the changes due to rate and the changes due to volume.

	Year Ended December 31, 2007 Compared to Year Ended December 31, 2006									Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
	Increase (Decrease) Due to									Increase (Decrease) Due to
(Dollars in thousands)	Volume			Rate			Net			Volume			Rate			Net
Interest income:
Interest-bearing deposits	$	18		$	28		$	46		$	61		$	(19	)	$	42
Loans receivable		7,823			5,369			13,192			3,704			8,238			11,942
Investment securities		5,021			1,212			6,233			662			898			1,560
Mortgage-backed securities		6,889			1,386			8,275			(1,852	)		627			(1,224	)
Collateralized mortgage obligations		1,014			273			1,287			(2,383	)		605			(1,778	)
Other interest-earning assets		1,528			7			1,535			(479	)		172			(307	)
Total interest-earning assets		22,293			8,275			30,568			(287	)		10,522			10,235
Interest expense:
Interest-earning checking accounts		1,655			848			2,503			187			475			662
Money market		2,130			1,255			3,385			(1,375	)		2,308			933
Savings accounts		431			(210	)		221			(235	)		(17	)		(2,652	)
Time deposits		1,952			4,574			6,526			3,694			6,707			10,401
Total interest-bearing deposits		6,168			6,467			12,636			2,271			9,473			11,744
Federal Home Loan Bank advances		(2,523	)		154			(2,369	)		(4,553	)		683			(3,870	)
Repurchase agreements		1,356			(55	)		1,301			2,767			525			3,292
Federal Home Loan Bank overnight borrowings		—			(457	)		(457	)		(1,746	)		661			(1,085	)
Statutory Trust Debenture		876			—			876
Other borrowings		(985	)		(123	)		(1,108	)		1,386			66			1,452
Total interest-bearing liabilities		4,892			5,986			10,879			125			11,408			11,533
Net change in net interest income	$	17,401		$	2,289		$	19,690		$	(412	)	$	(886	)	$	(1,298	)

Risk Management

Overview. Managing risk is an essential part of successfully managing a financial institution. Our most prominent risk exposures are credit risk, interest rate risk and market risk. Credit risk is the risk of not collecting the interest and/or the principal balance of a loan or investment when it is due. Interest rate risk is the potential reduction of interest income as a result of changes in interest rates. Market risk arises from fluctuations in interest rates that may result in changes in the values of financial instruments, such as available-for-sale securities that are accounted for at fair value. Other risks that we face are operational risks, liquidity risks and reputation risk. Operational risks include risks related to fraud, regulatory compliance, processing errors, technology and disaster recovery. Liquidity risk is the possible inability to fund obligations to depositors, lenders or borrowers. Reputation risk is the risk that negative publicity or press, whether true or not, could cause a decline in our customer base or revenue.

Credit Risk Management. Our strategy for credit risk management focuses on having well-defined credit policies and uniform underwriting criteria and providing prompt attention to potential problem loans.

When a borrower fails to make a required loan payment, we take a number of steps to have the borrower cure the delinquency and restore the loan to current status, including contacting the borrower by letter and phone at regular intervals beginning on the seventh day of delinquency. When the borrower is in default, we may commence collection proceedings. If a foreclosure action is instituted and the loan is not brought current, paid in full, or refinanced before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Generally, collection proceedings begin as soon as a consumer loan becomes past due. When a consumer loan becomes 45 days past due, we institute attempts to repossess any personal property that secures the loan. Management informs the Board of Directors monthly of the amount of nonperforming loans to total loans and regarding charge-offs. More detailed information regarding delinquencies by loan type is provided to the Board of Directors on a quarterly basis.

21

Analysis of Nonperforming and Classified Assets. We consider repossessed assets and loans that are 90 days or more past due, except guaranteed student loans, to be nonperforming assets. Residential real estate loans are generally placed on nonaccrual status when they become 90 days delinquent and are not well secured and in the process of collection at which time the accrual of interest ceases and the allowance for any uncollectible accrued interest is established and charged against operations. Commercial loans are placed on non-accrual when the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Typically, payments received on a nonaccrual loan are applied to the outstanding principal and interest as determined at the time of collection of the loan.

Real estate that we acquire as a result of foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned until it is sold. When property is acquired it is recorded at the lower of its fair market value (“FMV”) or cost, which is the unpaid balance of the loan plus foreclosure costs, or fair market value at the date of foreclosure less estimated costs to sell. Holding costs and declines in fair value after acquisition of the property result in charges against income.

The following table sets forth information with respect to our nonperforming assets at the dates indicated. We had no troubled debt restructurings in the periods presented.

December 31, (Dollars in thousands)	2007			2006			2005			2004			2003
Nonaccrual loans:
Real estate loans:
One-to-four family	$	23		$	—		$	—		$	—		$	—
Commercial real estate		4,939			363			—			—			—
Residential construction		—			—			—			—			—
Total real estate loans		4,962			363			—			—			—
Commercial business loans		2,500			—			—			—			—
Consumer loans:
Home equity lines of credit		—			—			—			—			—
Automobile loans		223			171			385			363			500
Other consumer loans		—			—			—			74			26
Total consumer loans		223			171			385			437			526
Total nonaccrual loans		7,685			534			385			437			526
Accruing loans past due 90 days or more:
Real estate loans:
One-to-four family		3,700			2,425			2,540			3,185			3,374
Commercial real estate		1,343			2,662			—			52			752
Residential construction		—			—			—			—			—
Total real estate loans		5,043			5,087			2,540			3,237			4,126
Commercial business loans		64			83			—			12			50
Consumer loans:
Home equity lines of credit		36			54			1			1			41
Automobile loans		117			130			179			102			112
Other consumer loans		3,366			2,263			2,055			2,373			1,845
Total consumer loans		3,519			2,447			2,235			2,476			1,998
Total accruing loans past due 90 days or more		8,626			7,617			4,775			5,725			6,174
Total of nonaccrual and 90 days or more past due loans		16,311			8,151			5,160			6,162			6,700
Real estate owned		4,797			2,809			3,146			2,939			3,167
Total nonperforming assets	$	21,108		$	10,960		$	8,306		$	9,101		$	9,867
Total nonperforming loans to total loans		0.77	%		0.48	%		0.30	%		0.39	%		0.45	%
Total nonperforming loans to total assets		0.46	%		0.35	%		0.22	%		0.26	%		0.30	%
Total real estate owned to total assets		0.13	%		0.12	%		0.13	%		0.13	%		0.14	%

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Interest income that would have been recorded for the year ended December 31, 2007, had nonaccruing loans been current according to their original terms, amounted to approximately $0.4 million. No interest related to nonaccrual loans was included in interest income for the year ended December 31, 2007.

The increase in nonperforming loans during the year ended December 31, 2007 includes two loans to affiliates of a Philadelphia-based builder and development company that filed for Chapter 11 bankruptcy in June 2007.

At December 31, 2007, there were a total of 143 land acquisition and development loans totaling $161.3 million, which consist of 96 residential land acquisition and development loans totaling $93.3 million and 47 commercial land acquisition and development loans totaling $68.0 million. We continually monitor progress of our loans and communicate on a regular basis with the borrowers. Site visits are performed as needed.

Federal regulations require us to review and classify our assets on a regular basis. In addition, the FDIC has the authority to identify problem assets and, if appropriate, require them to be classified. There are three classifications for problem assets: substandard, doubtful and loss. “Substandard assets” must have one or more defined weaknesses and are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. “Doubtful assets” have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The regulations also provide for a “special mention” category, described as assets which do not currently expose us to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving our close attention. When we classify an asset as substandard or doubtful we establish a specific allowance for loan losses. If we classify an asset as loss, we charge off an amount equal to 100% of the portion of the asset classified loss.

The following table shows the aggregate amounts of our criticized assets at the dates included:

At December 31, (Dollars in thousands)	2007		2006		2005
Special mention assets	$	—	$	—	$	1,000
Substandard assets		9,295		7,015		1,056
Doubtful assets		370		—		—
Loss assets		—		—		—
Total classified assets	$	9,665	$	7,015	$	2,056

Other than disclosed in the above tables, there are no other loans that management has serious doubts about the ability of the borrowers to comply with the present loan repayment terms.

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Loan Delinquencies. The following table provides information about delinquencies in our loan portfolio at the dates indicated:

	2007				2006				2005				2004				2003
December 31, (Dollars in thousands)	30-59 DaysPast Due		60-89 DaysPast Due		30-59 DaysPast Due		60-89 DaysPast Due		30-59 DaysPast Due		60-89 DaysPast Due		30-59 DaysPast Due		60-89 DaysPast Due		30-59 DaysPast Due		60-89 DaysPast Due
Real estate loans:
One-to-four family	$	4,943	$	2,243	$	2,712	$	1,281	$	2,474	$	859	$	3,566	$	1,611	$	4,720	$	1,452
Commercial real estate		6,274		1,000		673		666		45		3		2,452		620		399		327
Residential construction		—		—		—		—		—		—		—		—		—		—
Total real estate		11,217		3,243		3,385		1,947		2,519		862		6,018		2,231		5,119		1,779
Commercial business		2,212		187		5,700		—		8		1		427		108		60		49
Consumer:
Home equity lines of credit		320		150		68		7		183		16		53		68		151		18
Automobile loans		1,468		291		1,028		217		1,014		310		963		194		799		295
Other consumer loans		2,458		998		2,756		1,147		2,728		1,148		2,700		1,269		2,447		1,144
Total consumer		4,246		1,439		3,852		1,371		3,925		1,474		3,716		1,531		3,397		1,457
Total	$	17,675	$	4,869	$	12,937	$	3,318	$	6,452	$	2,337	$	10,161	$	3,870	$	8,576	$	3,285

Analysis and Determination of the Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the adequacy of the allowances for loan losses balance on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a specific valuation allowance on identified problem loans; (2) a general valuation allowance on the remainder of the loan portfolio; and (3) an unallocated component. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available to absorb losses in the loan portfolio.

We evaluate all classified loans and establish a specific reserve if a determination is made that full collectibility may not be reasonably assured. When this occurs, we consider the estimated fair value of the underlying collateral, less selling costs and other market conditions. If a shortfall exists, we establish a specific allowance amount.

We establish a general allowance for loans that are not evaluated separately for impairment to recognize the inherent losses associated with lending activities. This general valuation allowance is determined by segregating the loans by loan category and assigning allowance percentages to each category. The percentages may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. These significant risk factors may include recent loss experience in particular segments of the portfolio, trends in loan volumes, levels and trends in delinquent loans, changes in existing general economic and business conditions affecting our primary lending areas, as well as other factors such as: concentrations, seasoning of the loan portfolio, and bank regulatory examination results. The applied loss factors are reevaluated quarterly to ensure their relevance in the current economic environment. An unallocated component covers uncertainties that could affect our estimate of probable losses.

We identify loans that may need to be charged off as a loss by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectibility. For individually reviewed loans, the borrower’s inability to make payments under the terms of the loan as well as a shortfall in collateral value may result in a write down to management’s estimate of net realizable value. Personal loans are typically charged off at 120 days delinquent.

The FDIC and Pennsylvania Department of Banking, as an integral part of their examination process, periodically review our allowance for loan losses. The FDIC and Pennsylvania Department of Banking may require us to make additional provisions for loan losses based on judgments different from ours.

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At December 31, 2007, our allowance for loan losses represented 1.10% of total gross loans. The allowance for loan losses increased 34.39% from December 31, 2006 to December 31, 2007, following the provision for loan losses of $2.5 million. The increase in the allowance reflected increases in the commercial loan portfolio by 69.32% and the residential portfolio by 72.00%.

The following table sets forth the breakdown of the allowance for loan losses by loan category at the dates indicated:

	2007					2006					2005
December 31, (Dollars in thousands)	Amount of Allowance Allocated to Loan Category		Loan Category as a % of Total Loans			Amount of Allowance Allocated to Loan Category		Loan Category as a % of Total Loans			Amount of Allowance Allocated to Loan Category		Loan Category as a % of Total Loans
Real estate loans:
One-to-four family	$	1,763		22.69	%	$	970		16.61	%	$	942		17.12	%
Commercial real estate		12,320		32.80			8,124		24.38			7,261		21.48
Residential construction		—		0.09			—		0.59			—		0.96
Total real estate		14,083		55.58			9,094		41.58			8,203		39.56
Commercial business		4,837		6.45			1,955		5.87			1,311		3.88
Consumer:
Home equity loans and lines of credit		2,370		18.48			2,326		22.88			2,623		22.90
Automobile loans		1,230		8.26			2,532		13.85			3,150		15.74
Other consumer loans		821		11.23			1,304		15.82			1,735		17.92
Total consumer		4,421		37.97			6,162		52.55			7,508		56.56
Unallocated		—					157					74
Total allowance for loan losses	$	23,341		100.00	%	$	17,368		100.00	%	$	17,096		100.00	%

	2004					2003
December 31, (Dollars in thousands)	Amount of Allowance Allocated to Loan Category		Loan Category as a % of Total Loans			Amount of Allowance Allocated to Loan Category		Loan Category as a % of Total Loans
Real estate loans:
One-to-four family	$	894		17.75	%	$	1,074		19.66	%
Commercial real estate		6,905		17.95			5,907		13.98
Residential construction		—		0.67			—		0.48
Total real estate		7,799		36.37			6,981		34.12
Commercial business		1,201		3.12			892		2.11
Consumer:
Home equity loans and lines of credit		2,659		22.20			2,815		17.67
Automobile loans		3,081		16.93			3,138		18.10
Other consumer loans		1,752		21.38			2,026		28.01
Total consumer		7,492		60.51			7,979		63.78
Unallocated		649					1,092
Total allowance for loan losses	$	17,141		100.00	%	$	16,944		100.00	%

Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses may be necessary and our results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. Furthermore, while we believe we have established our allowance for loan losses in conformity with generally accepted accounting principles, there can be no assurance that regulators, in reviewing our loan portfolio, will not require us to increase our allowance for loan losses. In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, there can be no assurance that the existing allowance for loan losses is adequate or that increases will not be necessary should the quality of any loans deteriorate as a result of the factors discussed above. Any material increase in the allowance for loan losses may adversely affect our financial condition and results of operations.

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The following table sets forth an analysis of the allowance for loan losses for the periods indicated:

Year Ended December 31, (Dollars in thousands)	2007			2006			2005			2004			2003
Allowance at beginning of period	$	17,368		$	17,096		$	17,141		$	16,944		$	16,804
Provision for loan losses		2,470			1,575			1,703			2,400			2,775
Charge offs:
Real estate loans:
One-to-four family		72			44			76			42			68
Commercial real estate		477			—			47			—			—
Total real estate loans		549			44			123			42			68
Commercial business loans		188			12			110			109			120
Consumer:
Home equity lines of credit		241			81			93			185			134
Automobile loans		969			1,347			1,427			1,915			1,760
Other consumer loans		444			813			1,157			904			1,554
Total consumer loans		1,654			2,241			2,677			3,004			3,448
Total charge-offs		2,391			2,297			2,910			3,155			3,636
Recoveries:
Real estate loans:
One-to-four family		1			36			8			59			23
Commercial real estate		—			—			47			76			7
Total real estate loans		1			36			55			135			30
Commercial business		—			1			8			1			20
Consumer:
Home equity lines of credit		137			123			223			90			160
Automobile loans		504			467			586			510			533
Other consumer loans		237			367			290			216			258
Total consumer loans		878			957			1,099			816			951
Total recoveries		879			994			1,162			952			1,001
Net charge-offs		1,512			1,303			1,748			2,203			2,635
Allowance acquired from merger		5,015			—			—			—			—
Allowance at end of period	$	23,341		$	17,368		$	17,096		$	17,141		$	16,944
Allowance to nonperforming loans		143.10	%		213.09	%		331.32	%		278.17	%		252.90	%
Allowance to total loans outstanding at the end of the period		1.10	%		1.03	%		0.99	%		1.09	%		1.13	%
Net charge-offs (recoveries) to average loans outstanding during the period		0.08	%		0.07	%		0.10	%		0.14	%		0.18	%

Interest Rate Risk Management. Interest rate risk is defined as the exposure to current and future earnings, and capital that arises from adverse movements in interest rates. Depending on a bank’s asset/liability structure, adverse movements in interest rates could be either rising or falling interest rates. For example, a bank with predominantly long-term fixed-rate loans, and short-term deposits could have an adverse earnings exposure to a rising rate environment. Conversely, a short-term or variable-rate asset base funded by longer-term liabilities could be negatively affected by falling rates. This is referred to as repricing or maturity mismatch risk.

Interest rate risk also arises from changes in the slope of the yield curve (yield curve risk); from imperfect correlations in the adjustment of rates earned and paid on different instruments with otherwise similar repricing characteristics (basis risk); and from interest rate related options embedded in the bank’s assets and liabilities (option risk).

Our goal is to manage our interest rate risk by determining whether a given movement in interest rates affects our net income and the market value of our portfolio equity in a positive or negative way, and to execute strategies to maintain interest rate risk within established limits.

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Model Simulation Analysis. We view interest rate risk from two different perspectives. The traditional accounting perspective, which defines and measures interest rate risk as the change in net interest income and earnings caused by a change in interest rates, provides the best view of short-term interest rate risk exposure. We also view interest rate risk from an economic perspective, which defines and measures interest rate risk as the change in the market value of portfolio equity caused by changes in the values of assets and liabilities, which were changed due to changes in interest rates. The market value of portfolio equity, also referred to as the economic value of equity is defined as the present value of future cash flows from existing assets, minus the present value of future cash flows from existing liabilities.

These two perspectives give rise to income simulation and economic value simulation, each of which presents a unique picture of our risk of any movement in interest rates. Income simulation identifies the timing and magnitude of changes in income resulting from changes in prevailing interest rates over a short-term time horizon (usually one year). Economic value simulation captures more information and reflects the entire asset and liability maturity spectrum. Economic value simulation reflects the interest rate sensitivity of assets and liabilities in a more comprehensive fashion, reflecting all future time periods. It can identify the quantity of interest rate risk as a function of the changes in the economic values of assets and liabilities, and the equity of the Company. Both types of simulation assist in identifying, measuring, monitoring and controlling interest rate risk and are employed by management to ensure that variations in interest rate risk exposure will be maintained within policy guidelines.

The Asset/Liability Management Committee produces reports on a quarterly basis, which compare baseline (no interest rate change) current positions showing forecasted net income, the economic value of equity and the duration of individual asset and liability classes, and of equity. Duration is defined as the weighted average time to the receipt of the present value of future cash flows. These baseline forecasts are subjected to a series of interest rate changes, in order to demonstrate or model the specific impact of the interest rate scenario tested on income, equity and duration. The model, which incorporates all asset and liability rate information, simulates the effect of various interest rate movements on income and equity value. The reports identify and measure our interest rate risk exposure present in our current asset/liability structure. If the results produce quantifiable interest rate risk exposure beyond our limits, then the testing will have served as a monitoring mechanism to allow us to initiate asset/liability strategies designed to reduce and therefore control interest rate risk.

The tables below set forth an approximation of our interest rate risk exposure. The simulation uses projected repricing of assets and liabilities at December 31, 2007 and at December 31, 2006. The primary interest rate exposure measurement applied to the entire balance sheet is the effect on net interest income and earnings of a gradual change in market interest rates of plus or minus 200 basis points over a one year time horizon, and the effect on economic value of equity of gradual change in market interest rates of plus or minus 200 basis points for all projected future cash flows. Various assumptions are made regarding the prepayment speed and optionality of loans, investments and deposits, which are based on analysis, market information. The assumptions regarding optionality, such as prepayments of loans and the effective maturity of non-maturity deposit products are documented periodically through evaluation under varying interest rate scenarios.

Because prospective effects of hypothetical interest rate changes are based on a number of assumptions, these computations should not be relied upon as indicative of actual results. While we believe such assumptions to be reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security, collateralized mortgage obligation and loan repayment activity. Further the computation does not reflect any actions that management may undertake in response to changes in interest rates. Management periodically reviews its rate assumptions based on existing and projected economic conditions.

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As of December 31, 2007 (Dollars in thousands):

Basis point change in rates	-200			Base Forecast		+200
Net Interest Income at Risk:
Net Interest Income	$	110,881		$	114,328	$	114,645
% change		(3.02	)%				0.28	%
Net Income at Risk:
Net income	$	22,792		$	25,037	$	25,253
% change		(8.97	)%				0.86	%
Economic Value at Risk:
Equity	$	587,842		$	681,498	$	685,901
% change		(13.74	)%				.65	%

As of December 31, 2007, based on the scenarios above, net interest income, net income and economic value would be adversely affected over a one-year time horizon in a declining rate environment.

The net interest income at risk results indicate a slightly asset sensitive profile, which provides net interest margin benefits in rising rate scenarios. The economic value at risk remains limited in magnitude and indicates potential moderate exposures in increasing rate environments.

For 2007, our results indicate that we are well positioned with limited net interest income and economic value at risk and that all interest risk results continue to be within our policy guidelines.

Liquidity Management. Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan repayments, maturities of and payments on investment securities and borrowings from the Federal Home Loan Bank of Pittsburgh. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

We regularly adjust our investments in liquid assets based upon our assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities and (4) the objectives of our asset/liability management policy.

Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending and investing activities during any given period. At December 31, 2007, cash and cash equivalents totaled $58.3 million. In addition, at December 31, 2007, we had arrangements to borrow up to $1.2 billion from the Federal Home Loan Banks of Pittsburgh and New York. On December 31, 2007, we had $185.8 million of Federal Home Loan Bank advances outstanding.

A significant use of our liquidity is the funding of loan originations. At December 31, 2007, we had $217.8 million in loan commitments outstanding, which consisted of $62.1 million and $6.8 million in commercial and consumer commitments to fund loans, respectively, $95.6 million and $37.2 million in commercial and consumer unused lines of credit, respectively, and $16.0 million in standby letters of credit. Historically, many of the commitments expire without being fully drawn; therefore, the total commitment amounts do not necessarily represent future cash requirements. Another significant use of our liquidity is the funding of deposit withdrawals. Certificates of deposit due within one year of December 31, 2007 totaled $857.6 million, or 82.28% of certificates of deposit. The large percentage of certificates of deposit that mature within one year reflects customers’ hesitancy to invest their funds for long periods in the recent low interest rate environment. If these maturing deposits do not remain with us, we will be required to seek other sources of funds, including other certificates of deposit and borrowings. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before December 31, 2008. We have the ability to attract and retain deposits by adjusting the interest rates offered.

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The following table presents certain of our contractual obligations at December 31, 2007:

			Payments due by period
(Dollars in thousands)	Total		Less than One Year		One to Three Years		Three to Five Years		More Than Five Years
Commitments to fund loans	$	68,953	$	62,147	$	—	$	—	$	6,806
Unused lines of credit		132,766		95,547		—		—		37,219
Standby letters of credit		16,041		16,041		—		—		—
Operating lease obligations		35,638		4,641		9,286		5,099		16,612
Total	$	253,398	$	178,376	$	9,286	$	5,099	$	60,637

Our primary investing activities are the origination and purchase of loans and the purchase of securities. Our primary financing activities consist of activity in deposit accounts and Federal Home Loan Bank advances. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors and other factors. We generally manage the pricing of our deposits to be competitive. Occasionally, we offer promotional rates on certain deposit products to attract deposits.

The following table presents our primary investing and financing activities during the periods indicated.

Year Ended December 31, (Dollars in thousands)	2007			2006			2005
Investing activities:
Loan purchases	$	(91	)	$	(5,064	)	$	(38,283	)
Loan originations		(518,897	)		(502,021	)		(661,965	)
Principal repayments on loans		528,703			550,048			544,164
Purchases of investment securities available-for-sale		2,255,047			(55,779	)		(61,767	)
Purchases of investment securities held–to-maturity		—			(474	)		(555	)
Proceeds from sales and maturities of investment securities available-for-sale		2,189,039			67,130			129,593
Proceeds from maturities, calls or repayments of investment securities held-to-maturity		18,167			33,162			42,345
Financing activities:
(Decrease) increase in deposits		(123,262	)		12,925			49,679
(Decrease) in Federal Home Loan Bank advances		(10,800	)		(66,347	)		(82,437	)
Increase (decrease) in repurchase agreements		(13,777	)		(4,318	)		78,686
Increase (decrease) in Federal Home Loan Bank overnight borrowings		—			(49,900	)		130
Increase in other borrowings		808			7,250			—

Capital Management. We are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At December 31, 2007, we exceeded all of our regulatory capital requirements. We are considered “well capitalized” under regulatory guidelines. See “Regulatory Capital Compliance” at note 14 to the consolidated financial statements.

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Our stock offering increased our equity by $328.8 million. We will manage our capital for maximum stockholder benefit. The capital from the offering significantly increased our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including the funding of lending activities. Our financial condition and results of operations were enhanced by the capital from the offering, resulting in increased net interest-earning assets and net income. However, the large increase in equity resulting from the capital raised in the offering will, initially, have an adverse impact on our return on equity. We may use capital management tools such as cash dividends and common share repurchases. However, under Office of Thrift Supervision (“OTS”) regulations, we will not be allowed to repurchase any shares during the first year following the offering, except: (1) in extraordinary circumstances, we may make open market repurchases of up to 5% of our outstanding stock if we receive the prior non-objection of the Office of Thrift Supervision of such repurchases; (2) repurchases of qualifying shares of a director or if we conduct an Office of Thrift Supervision-approved offer to repurchase made to all shareholders; (3) if we repurchase to fund a restricted stock award plan that has been approved by shareholders; or (4) if we repurchase stock to fund a tax-qualified employee stock benefit plan. All repurchases are prohibited, however, if the repurchase would reduce the Bank’s regulatory capital below regulatory required levels. On October 2, 2007, the Company announced that its Board of Directors authorized the Company to file a waiver request with the OTS requesting permission for the Company to repurchase up to five percent of the outstanding shares of its common stock during the first year following the Company’s initial public minority offering.

Off-Balance Sheet Arrangements. In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in our consolidated financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. For information about our loan commitments and unused lines of credit, see note 19 to the consolidated financial statements.

For the year ended December 31, 2007, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

Recent Accounting Pronouncements.

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141(R), “Business Combinations which replaces SFAS No. 141, “Business Combinations”. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (formerly referred to as the purchase method) be used for all business combinations and that an acquirer be identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as of the date that the acquirer takes control. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at fair values. This Statement requires the acquirer to recognize acquisition-related costs and restructuring costs separately from the business combination as period expense. This Statement is effective for business combinations for which the acquisition is on or after the first annual reporting period of the acquisition beginning on or after December 15, 2008. The adoption of this Statement will impact the accounting and reporting of acquisitions after January 1, 2008.

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an Amendment to Accounting Research Bulletin (“ARB”) No. 51.” This Statement established new accounting and reporting standards that require that ownership interests in subsidiaries held by parties other than the parent be clearly identified and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This Statement also requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary shall be initially measured at fair value, with the gain or loss on the deconsolidation of the subsidiary measured using fair value of any noncontroling equity investments rather than the carrying amount of that retained investment. SFAS No. 160 also clarifies that changes in parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. This Statement is effective for fiscal years on or after December 15, 2008. Early adoption is prohibited. The Company will evaluate the impact of adopting this statement on the Company’s consolidated financial statements.

In November 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 109, “Written Loan Commitments Recorded at Fair Value through Earnings” (“SAB 109”) This SAB supersedes SAB No. 105, “Application of Accounting Principles to Loan Commitments” (“SAB 105”), and expressed the current view of the staff that, consistent with guidance in SFAS No. 156 and 159, the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. Additionally, this SAB expands SAB 105’s view that internally developed intangible assets should not be recorded as part of the fair value for any written loan commitments that are accounted for at fair value through earnings. This SAB was effective for fiscal quarters beginning after December 15, 2007. The Company will adopt SAB 109 for any loan commitments issued or modified on or after January 1, 2008.

30

In June 2007, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 06-11, “Accounting for Income Tax Benefits of the Share-Based Payment Awards.” The Issue states that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase to additional paid-in capital. The amount recognized in additional paid in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. This Issue was effective for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The Company will prospectively apply this Issue to the applicable dividends declared on or after January 1, 2008.

In May 2007, the FASB issued FSP No. FIN 48-1, “Definition of Settlement in FASB FIN 48” (“FIN 48”). FSP 48-1 amends FIN 48 to provide guidance on determining whether a tax position is “effectively settled” for the purpose of recognizing previously unrecognized tax benefits. The concept of “effectively settled” replaces the concept of “ultimately settled” originally issued in FIN 48. The tax position can be considered “effectively settled” upon completion of an examination by the taxing authority if the entity does not plan to appeal or litigate any aspect of the tax position and it is remote that the taxing authority would examine any aspect of the tax position. For effectively settled tax positions, the full amount of the tax benefit can be recognized. The guidance in FSP No. FIN 48-1 was effective upon initial adoption of FIN 48. FIN 48 was effective for fiscal years beginning after December 15, 2006. The adoption of FSP No. FIN 48-1 did not have a material impact on the Company’s financial condition and result of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management does not plan to use the fair value option the Company’s financial condition and results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”), which requires the recognition of a plan’s over-funded or under-funded status as an asset or liability with an offsetting adjustment to Accumulated Other Comprehensive Income (Loss) (AOCI). SFAS No. 158 requires the determination of the fair values of a plan’s assets at a company’s year-end and recognition of actuarial gains and losses, prior service costs or credits, and transition assets or obligations as a component of AOCI. This statement is effective as of December 31, 2006. If the provisions of SFAS No. 158 had been applied as of December 31, 2005, retained earnings would have been reduced by approximately $10.2 million before tax and approximately $6.6 million after tax. Additionally, the initial adoption of SFAS No. 158 did not have a significant impact on the Company’s regulatory capital. For additional information on the Company’s pension and postretirement plans, see Note 16 of the Consolidated Financial Statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. SFAS No. 157 retains the exchange price notion and clarifies that the exchange price is the price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. SFAS No. 157 is effective for the Company’s financial statements for the year beginning on January 1, 2008, with earlier adoption permitted. Management is currently evaluating the effect of SFAS No. 157 on the Company’s financial condition and results of operations.

In September 2006, the Securities and Exchange Commission (“SEC”) issued SAB No. 108 (“SAB 108”). SAB 108 expresses the SEC Staff’s views regarding the process of quantifying financial statement misstatements. SAB 108 states that in evaluating the materiality of financial statement misstatements a corporation must quantify the impact of correcting misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. SAB No. 108 is effective January 1, 2007. Under certain circumstances, prior year financial statements will not have to be restated and the effects of initially applying SAB No. 108 on prior years will be recorded as a cumulative effect adjustment to beginning retained earnings, with disclosure of the items included in the cumulative effect. The adoption of SAB No. 108 did not have an impact on the Company’s financial condition and results of operations.

31

In September 2006, the FASB ratified EITF Issue 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” An endorsement split-dollar arrangement is an arrangement whereby an employer owns a life insurance policy that covers the life of an employee and using a separate agreement endorses a portion of the policy death benefit to the insured employee’s beneficiary. EITF No. 06-4 applies only to those endorsement split-dollar arrangements that provide a death benefit postretirement. This EITF requires an employer recognize a liability for future benefits if, in substance, the benefit exists. The liability would be accounted for in accordance with SFAS 106 “Employers Accounting for Postretirement Benefits Other Than Pensions” or Accounting Principles Board (“APB”) No. 12 “Omnibus Opinion”. The EITF’s requirement is effective for fiscal years beginning after December 15, 2007. Management is currently evaluating the effect of EITF 06-4 on the Company’s financial condition and results of operations.

In September 2006, the Task Force reached a conclusion on EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). EITF 06-5 clarifies certain factors that should be considered in the determination of the realizable asset to be reported in the statement of financial condition. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The guidance did not have a material impact on the Company’s consolidated financial statements.

In June 2006, the FASB released FIN 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the tax law may be uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007 and the initial adoption did not have a material impact on the Company’s financial condition and results of operations as described in Note 15, Income Taxes.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 133 and 140” (“SFAS No. 156”), which permits, but does not require, an entity to account for one or more classes of servicing rights (i.e., mortgage servicing rights, or MSRs) at fair value, with the changes in fair value recorded in the Consolidated Statement of Operations. SFAS No. 156 is effective for years beginning after September 15, 2006. The adoption of this standard did not have a material impact on the Company’s financial condition and results of operations.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Instruments” (“SFAS No. 155”), which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with SFAS No. 133. The statement also subjects beneficial interests issued by securitization vehicles to the requirements of SFAS No. 133. The statement is effective for years beginning after September 15, 2006. This standard did not have a material impact on the Company’s financial condition and results of operations.

Effect of Inflation and Changing Prices

The consolidated financial statements and related financial data presented in this prospectus have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on a financial institution’s performance than do general levels of inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

32

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Beneficial Mutual Bancorp, Inc. and Subsidiaries
Philadelphia, Pennsylvania

We have audited the accompanying consolidated statements of financial condition of Beneficial Mutual Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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, 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, such consolidated financial statements present fairly, in all material respects, the financial position of Beneficial Mutual Bancorp, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, on December 31, 2006, the Company adopted the provisions of the Statement of Financial Accounting Standards No. 158.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania

March 31, 2008

33

Beneficial Mutual Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands, except per share amounts)

As of December 31, 2007 and 2006

	2007			2006
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks	$	53,545		$	20,320
Interest-bearing deposits at other banks		4,782			252
Federal funds sold		—			502
Total cash and cash equivalents		58,327			21,074
INVESTMENT SECURITIES:
Available-for-sale (amortized cost of $938,835 and $337,338 at December 31, 2007 and 2006, respectively)		949,795			332,940
Held-to-maturity (estimated fair value of $111,127 and $127,233 at December 31, 2007 and 2006, respectively)		111,986			130,357
Federal Home Loan Bank stock, at cost		18,814			15,544
Total investment securities		1,080,595			478,841
LOANS		2,120,922			1,688,825
Allowance for loan losses		(23,341	)		(17,368	)
Net loans		2,097,581			1,671,457
ACCRUED INTEREST RECEIVABLE		18,089			11,565
BANK PREMISES AND EQUIPMENT, Net		79,027			33,168
OTHER ASSETS
Goodwill		110,335			6,679
Bank owned life insurance		29,405			28,003
Other intangibles		29,199			1,956
Other assets		55,260			47,476
Total other assets		224,199			84,114
TOTAL ASSETS	$	3,557,818		$	2,300,219
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Non-interest bearing deposits	$	242,351		$	90,040
Interest-bearing deposits		2,222,812			1,588,014
Total deposits		2,465,163			1,678,054
Borrowed funds		407,122			294,896
Other liabilities		65,736			46,854
Total liabilities		2,938,021			2,019,804
COMMITMENTS AND CONTINGENCIES (Note 19)
STOCKHOLDERS’ EQUITY:
Preferred Stock - $.01 par value; 100,000,000 shares authorized, none issued or outstanding as of December 31, 2007; none authorized issued or outstanding as of December 31, 2006		—			—
Common Stock - $.01 par value 300,000,000 shares authorized, 82,264,600 shares issued and outstanding as of December 31, 2007; $1.00 par value 100,000 shares authorized, 100 shares issued and outstanding as of December 31, 2006		823			—
Additional paid-in capital		360,126			—
Unearned common stock held by employee stock ownership plan		(30,635	)		—
Retained earnings (partially restricted)		291,360			293,157
Accumulated other comprehensive loss		(1,877	)		(12,742	)
Total stockholders’ equity		619,797			280,415
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	3,557,818		$	2,300,219

See accompanying notes to consolidated financial statements.

34

Beneficial Mutual Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share amounts)

For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006		2005
INTEREST INCOME
Interest and fees on loans	$	117,334		$	104,143	$	92,208
Interest on federal funds sold		1,613			78		382
Interest and dividends on investment securities:
Taxable		37,885			22,160		24,087
Tax-exempt		1,062			945		414
Total interest income		157,894			127,326		117,091
INTEREST EXPENSE
Interest on deposits:
Interest bearing checking accounts		4,250			1,747		1,085
Money market and savings deposits		12,503			8,898		8,215
Time deposits		40,501			33,974		23,575
Total		57,254			44,619		32,875
Interest on borrowed funds		16,520			18,277		18,488
Total interest expense		73,774			62,896		51,363
Net interest income		84,120			64,430		65,728
PROVISION FOR LOAN LOSSES		2,470			1,575		1,703
Net interest income after provision for loan losses		81,650			62,855		64,025
NON-INTEREST INCOME
Insurance commission income		5,223			4,278		4,001
Service charges and other income		9,053			5,581		5,791
Impairment charge on securities available-for-sale		(1,192	)		—		—
Gains on sale of investment securities available-for-sale		288			672		1,070
Total non-interest income		13,372			10,531		10,862
NON-INTEREST EXPENSE
Salaries and employee benefits		51,118			34,412		32,589
Contribution to the Foundation		9,995			—		—
Occupancy expense		9,367			7,566		7,339
Depreciation, amortization and maintenance		6,970			5,269		5,093
Advertising		4,507			2,049		1,994
Intangible amortization expense		3,434			426		408
Other		15,641			9,717		9,538
Total non-interest expense		101,032			59,439		56,961
(Loss) income before income taxes		(6,010	)		13,947		17,928
INCOME TAX (BENEFIT) EXPENSE		(4,465	)		2,322		4,728
Net (loss) income	$	(1,545	)	$	11,625	$	13,200
NET (LOSS) EARNINGS PER SHARE - Basic and Diluted	$	(0.03	)	$	0.25	$	0.29
Average common shares outstanding - Basic and Diluted		61,374,792			45,792,775		45,792,775
Dividends per share (1)	$	0.01		$	—	$	—

(1) Reflects dividends paid to Beneficial Savings Bank MHC, in April 2007, prior to Beneficial Mutual Bancorp’s minority stock offering in July 2007.

See accompanying notes to consolidated financial statements.

35

Beneficial Mutual Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Dollars in thousands, except per share amounts)

For the Years Ended December 31, 2007, 2006 and 2005

	Number of Shares		Common Stock		Additional Paid in Capital			Common Stock held by ESOP			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Comprehensive Income
BEGINNING BALANCE, JANUARY 1, 2005											$	267,414		$	2,702		$	270,116
Net income												13,200						13,200		$	13,200
Net unrealized gain on available-for-sale securities arising during the year (net of tax benefit of $2,781)															(5,166	)		(5,166	)		(5,166	)
Reclassification adjustment for net gains included in net income (net of tax of $375)															(696	)		(696	)		(696	)
Other - Increase due to merger with Northwood Savings												918						918			918
Comprehensive income																				$	8,256
BALANCE, DECEMBER 31, 2005		100	$	—	$	—		$	—		$	281,532		$	(3,160	)	$	278,372
Net income											$	11,625					$	11,625		$	11,625
Net unrealized gain on available-for-sale securities arising during the year (net of deferred tax of $593)															1,101			1,101			1,101
Reclassification adjustment for net gains included in net income (net of tax of $235)															(436	)		(436	)		(436	)
Comprehensive income																				$	12,290
Adjust to initially apply SFAS No. 158, net of tax															(10,247	)		(10,247	)
BALANCE, DECEMBER 31, 2006		100	$	—	$	—		$	—		$	293,157		$	(12,742	)	$	280,415
Net loss											$	(1,545	)	$			$	(1,545	)	$	(1,545	)
Stock dividend of 45,792,675 shares to Beneficial Savings Bank MHC		45,792,675
Sale of 23,606,625 shares of common stock in initial public offering and issuance of 950,000 shares to The Beneficial Foundation		24,556,625		704	$	241,166												241,870
Issuance of 11,915,200 shares in connection with FMS Financial Corporation acquisition		11,915,200		119		119,033												119,152
Unallocated ESOP shares committed to employees									(32,248	)								(32,248	)
ESOP shares committed to be released						(73	)		1,613									1,540
Net unrealized gain on available-for-sale securities arising during the year (net of deferred tax of $3,161)															9,032			9,032			9,032
Reclassification adjustment for net gains included in net income (net of tax of $101)															(187	)		(187	)		(187	)
Reclassification adjustment for other-than-temporary impairment (net of tax benefit of $417)															775			775			775
Pension, other post retirement and postemployment benefit plan adjustments (net of tax of $670)															1,245			1,245			1,245
Comprehensive income																				$	9,320
Cash dividend												(252	)					(252	)
BALANCE, DECEMBER 31, 2007		82,264,600	$	823	$	360,126		$	(30,635	)	$	291,360		$	(1,877	)	$	619,797

See accompanying notes to consolidated financial statements.

36

Beneficial Mutual Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)

For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006			2005
OPERATING ACTIVITIES:
Net income (loss)	$	(1,545	)	$	11,625		$	13,200
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Contribution of stock to The Beneficial Foundation		9,491			—			—
Provision for loan losses		2,470			1,575			1,703
Depreciation and amortization		4,563			3,520			3,522
Intangible amortization		3,434			426			408
Impairment charge		1,192
Net gain on sale of investments		(288	)		(672	)		(1,070	)
Accretion of discount		(2,487	)		(285	)		(308	)
Amortization of premium		326			417			671
Origination of loans held for sale		(2,664	)		(8,869	)		(7,933	)
Proceeds from sales of loans		2,941			8,634			9,471
Deferred income taxes		(10,648	)		(12,497	)		(14,045	)
Net gain (loss) from sales of premises and equipment		162			(72	)		(361	)
Decrease (increase) in bank owned life insurance		(1,402	)		(2,638	)		803
Changes in assets and liabilities that provided (used) cash:
Accrued interest receivable		(216	)		(1,538	)		(1,361	)
Accrued interest payable		(266	)		(51	)		783
Income taxes payable		(2,912	)		1,522			(887	)
Other liabilities		11,190			(2,339	)		5,615
Other assets		1,872			8,483			(1,855	)
Net cash provided by operating activities		15,213			7,241			8,356
INVESTING ACTIVITIES:
Net cash paid in business combination		(32,474	)		(1,000	)		(6,570	)
Loans originated or acquired		(518,988	)		(507,085	)		(700,248	)
Principal repayment on loans		528,703			550,048			544,164
Purchases of investment securities available for sale		(2,255,047	)		(55,779	)		(61,767	)
Purchases of investment securities held to maturity		—			(474	)		(555	)
Net purchases in money market fund		43,798			(2,070	)		3
Proceeds from sales and maturities of investment securities available-for-sale		2,189,039			67,130			129,593
Proceeds from maturities, calls or repayments of investment securities held-to-maturity		18,167			33,162			42,345
Redemption of Federal Home Loan Bank stock		2,707			2,794			5,646
Net decrease/(increase) in other real estate owned		2,796			336			(207	)
Purchases of premises and equipment		(11,473	)		(5,429	)		(5,936	)
Proceeds from sale of premises and equipment		370			272			1,163
Proceeds from other investing activities		53
Net cash (used in) provided by investing activities		(32,349	)		81,905			(52,369	)
FINANCING ACTIVITIES:
Net decrease in borrowed funds		(23,769	)		(113,315	)		(3,621	)
Net decrease in checking, savings and demand accounts		(19,340	)		(33,674	)		(94,807	)
Net increase/(decrease) in time deposits		(103,922	)		45,990			144,623
Cash dividend to parent company		(252	)		—			—
Proceeds from stock issuance		228,697			—			—
Stock issuance costs		3,683			—			—
Loan to employee stock ownership plan		(30,708	)		—			—
Net cash (used in) provided by financing activities		54,389			(100,999	)		46,195
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		37,253			(11,853	)		575
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		21,074			32,927			32,352
CASH AND CASH EQUIVALENTS, END OF YEAR	$	58,327		$	21,074		$	32,927
SUPPLEMENTAL DISCLOSURES OF CASH FLOW AND NON-CASH INFORMATION:
Cash payments for interest	$	187,410		$	62,950		$	50,583
Cash payments of income taxes		7,239			13,861			19,641
Transfers of loans to other real estate owned		295			339			450
Issuance of common stock for FMS Financial		119,152			—			—
Fair value of tangible assets acquired		1,073,387			—			—
Goodwill and identifiable intangible assets acquired		134,332			—			—
Liabilities assumed and note issued		1,055,870			—			—

See accompanying notes to consolidated financial statements.

37

Beneficial Mutual Bancorp, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005

(All dollar amounts are presented in thousands, except per share data)

1.	NATURE OF OPERATIONS
	Beneficial Mutual Bancorp, Inc. (“the “Company”) is a federally chartered stock holding company and owns 100% of the outstanding common stock of Beneficial Bank (the “Bank”), a Pennsylvania chartered stock savings bank. On July 13, 2007, the Company completed its initial minority public offering and acquisition of FMS Financial Corporation, the parent company of Farmers & Mechanics Bank (together “FMS Financial”), which are discussed in more detail below. Following the consummation of the merger and public offering, the Company had a total of 82,264,600 shares of common stock, par value $0.01 per share, issued and outstanding, of which 36,471,825 were held publicly and 45,792,775 were held by Beneficial Savings Bank MHC (the “MHC”), the Company’s federally chartered mutual holding company.
	At December 31, 2006, the Company was wholly owned by the MHC and had 100 shares of common stock, par value $1.00 per share, outstanding.
	The Bank offers a variety of consumer and commercial banking services to individuals, businesses, and nonprofit organizations through 72 offices throughout the Philadelphia and Southern New Jersey area. The Bank is supervised and regulated by the Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation (the “FDIC”). The Office of Thrift Supervision (the “OTS”) regulates the Company and the MHC. The deposits of the Bank are insured by the Deposit Insurance Fund of the FDIC.
2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
	Principles of Consolidation and Basis of Presentation – The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and two variable interest entities (“VIE”) where the Company is the primary beneficiary. The financial statements include the Bank and its wholly owned subsidiaries. The Bank’s wholly owned subsidiaries are as follows: Beneficial Advisors, LLC, which offers non-deposit products, Neumann Corporation, a Delaware corporation, which was formed for the purpose of managing certain investment securities, Beneficial Insurance Services, LLC, which was formed to provide insurance services to individual and business customers and BSB Union Corporation, a leasing company. All subsidiaries of the Company enhance or support the traditional banking services provided by the Bank. All intercompany accounts and transactions have been eliminated. In addition, VIE’s were consolidated in the financial statements. See Note 23 for further discussion. Under Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosures about Segments of an Enterprise and Related Information”, the Company determined it operates in one reporting segment which is community banking. While the company monitors revenue on various products and services, the operations and financial performance is evaluated on a company wide basis. Accordingly, all financial operations are included in one reportable segment.
	Prior to the issuance of its 2006 consolidated financial statements in its Registration Statement on Form S-1 initially filed with the Securities and Exchange Commission on March 14, 2007, the Company identified an error in the presentation of investment securities, specifically certain money market mutual funds. These money market mutual funds had been classified as cash and cash equivalents on the consolidated balance sheet as of December 31, 2006. The effect of correcting this error in the presentation of money market mutual funds was to increase investment securities by $2.1 million and decrease cash and cash equivalents by $2.1 million. In addition, the Company identified an error in the 2006 presentation of Non-interest bearing deposits. The Company determined that certain non-traditional deposit accounts should have been classified as non-interest bearing deposits, instead of being presented as other liabilities as of December 31, 2006. The effect of correcting this error in the presentation of non-traditional deposit accounts was to increase non-interest bearing deposits by $10.2 million and reduce other liabilities by $10.2 million. The Company has corrected the corresponding presentation in the consolidated statement of cash flows.

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Use of Estimates in the Preparation of Financial Statements – These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. The significant estimates include the allowance for loan losses, goodwill, other intangible assets and deferred tax asset valuation allowance. Actual results could differ from those estimates and assumptions.

Investment Securities - The Company classifies and accounts for debt and equity securities as follows:

Held-to-Maturity - Debt securities that management has the positive intent and ability to hold to maturity are classified as “held-to-maturity” and are recorded at amortized cost. Premiums are amortized and discounts are accreted using the interest method over the estimated remaining term of the underlying security.

Available-for-Sale – Debt securities that will be held for indefinite periods of time, including equity securities with readily determinable fair values, that may be sold in response to changes to market interest or prepayment rates, needs for liquidity, and changes in the availability of and the yield of alternative investments, are classified as “available-for-sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported net of tax in other comprehensive income. Realized gains and losses on the sale of investment securities are recorded as of trade date and reported in the consolidated statements of income and determined using the adjusted cost of the specific security sold.

In accordance with Financial Accounting Standards Board (“FASB”) Staff Position 115-1/124-1, “The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments”, the Company evaluates its securities portfolio for other-than-temporary impairment throughout the year. Each investment, which has an indicative market value less than the book value is reviewed on a quarterly basis by management. Management considers at a minimum the following factors that, both individually or in combination, could indicate that the decline is other-than-temporary: (1) the length of time and the extent to which the fair value has been less than book value, (2) the financial condition and the near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. Among the other factors that are considered in determining intent and ability is a review of capital adequacy, interest rate risk profile and liquidity position of the Company. Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. During 2007, the Company recorded an other-than-temporary impairment charge of $1.2 million as described in Note 6.

The Company invests in Federal Home Loan Bank of Pittsburgh and New York (“FHLB”) stock as required to support borrowing activities as detailed in Note 13. The Company reports its investment in FHLB stock at cost in the consolidated statements of financial condition.

Loans – The portfolio consists of personal loans, business loans and residential mortgage loans. Personal loans consist primarily of home equity loans and automobile loans. Business loans include commercial real estate loans. The residential mortgage portfolio includes loans secured primarily by first liens on one-to-four family residential properties. Loan balances are stated at their principal balances, net of unamortized fees/costs.

Origination fees, net of certain direct origination costs, on real estate and business loans, as well as deferred commission expenses on indirect personal loans are deferred and the balance is amortized to income as a yield adjustment over the life of the loans using the interest method.

Personal loans are typically charged off at 120 days delinquent. Business loans are placed on nonaccrual when the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Business loans are charged off when the loan is deemed uncollectible. Residential mortgage loans are typically placed on nonaccrual only when the loan becomes 90 days delinquent and is not well secured and in the process of collection. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans placed on nonaccrual or charged off is charged to interest income. Payments received on nonaccrual loans are generally applied first to principal balances and then to interest income. Loans are returned to accrual status when all of the principal and interest amounts contractually due are reasonably assured of repayment within a reasonable time frame.

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Allowance for Loan Losses – The allowance for loan losses is determined by management based upon past experience, evaluation of estimated loss and impairment in the loan portfolio, current economic conditions and other pertinent factors. The allowance for loan losses is maintained at a level that management considers adequate to provide for estimated losses and impairment based upon an evaluation of known and inherent risk in the loan portfolio. Loan impairment is evaluated based on the fair value of collateral or estimated net realizable value. While management uses the best information available to make such evaluations, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluations.

Loans acquired by the Company through a purchase business combination are evaluated for possible credit impairment. Reduction to the carrying value of the acquired loans as a result of credit impairment is recorded as a purchase accounting adjustment. The Company does not carry over the acquired company’s allowance for loan and lease losses on impaired loans, nor does the Company add to its existing allowance for the acquired loans as part of purchase accounting.

The allowance for loan losses is established through a provision for loan losses charged to expense which is based upon past loan and loss experience and an evaluation of estimated losses in the current loan portfolio, including the evaluation of impaired loans.

Under SFAS No. 114, “Accounting by Creditors for Impairment of a Loan- an amendment of FASB Statements No. 5 and 15”, a loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in the loan being identified as impaired. The measurement is based either on the present value of expected future cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral if the loan is collateral-dependent. Impairment losses are included in the provision for loan losses.

Mortgage Banking Activities - The Company originates mortgage loans held for investment and for sale. At origination, mortgage loans are identified as either held for sale or held for investment. Mortgage loans held for sale are carried at the lower of cost or forward committed contracts (which approximates market), determined on a net aggregate basis.

The Company originates mortgage loans for sale to institutional investors. In accordance with SFAS No. 156, “Accounting for Servicing of Financial Assets- an amendment of FASB Statement No. 140”, the cost of the loan sold is allocated between the servicing rights, the retained portion of the loan and the sold portion of the loan based on the relative fair values of each. The fair value of the loan servicing rights is determined by valuation techniques. The mortgage servicing rights are reviewed for impairment on a quarterly basis.

The servicing asset or liability is amortized in proportion to and over the period of estimated net servicing income. At December 31, 2007 and 2006, mortgage servicing rights totaling $0.5 million and $0.5 million, respectively, were included in Other Assets in the consolidated statements of financial condition.

At December 31, 2007 and 2006, loans serviced for others totaled $70.2 million and $71.7 million, respectively. Servicing loans for others consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and processing foreclosures. Loan servicing income is recorded when earned and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees. The Company had fiduciary responsibility for related escrow and custodial funds aggregating approximately $1.0 million and $0.9 million at December 31, 2007 and 2006, respectively.

Bank Premises and Equipment – Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using a straight-line method over the estimated useful lives of 10 to 40 years for buildings and 3 to 20 years for furniture, fixtures and equipment. Leasehold improvements are amortized using the straight-line method over the terms of the respective leases or the useful lives of the respective assets, whichever is less.

Real Estate Owned – Real estate owned includes properties acquired by foreclosure or deed in-lieu of foreclosure and premises no longer used in operations. These assets are initially recorded at the lower of carrying value of the loan or estimated fair value less selling costs at the time of foreclosure and at the lower of the new cost basis or net realizable value thereafter. Losses arising from foreclosure transactions are charged against the allowance for loan losses. The amounts recoverable from real estate owned could differ materially from the amounts used in arriving at the net carrying value of the assets at the time of foreclosure because of future market factors beyond the control of the Company. Costs relating to the development and improvement of real estate owned properties are capitalized and those relating to holding the property are charged to expense. Real estate owned is periodically evaluated for impairment and reductions in carrying value are recognized in the consolidated statements of operations.

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Income Taxes - Deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A deferred tax liability is recognized for temporary differences that will result in taxable amounts in future years. A deferred tax asset is recognized for temporary differences that will result in deductible amounts in future years and for carryforwards. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Goodwill and Other Intangibles - Net assets of companies acquired in purchase transactions are recorded at fair value at the date of acquisition and, as such, the historical cost basis of individual assets and liabilities are adjusted to reflect their fair value. Definite lived intangibles are amortized on an accelerated or straight-line basis over the period benefited. In accordance with SFAS No. 142, goodwill is not amortized but is reviewed for potential impairment on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. The impairment test is performed in two phases. The first step of the goodwill impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however, if the carrying amount of the reporting unit exceeds its fair value, an additional procedure must be performed. That additional procedure compares the implied fair value of the reporting unit’s goodwill in accordance with SFAS No. 142 with the carrying amount of that goodwill. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. In 2007 and 2006, goodwill was tested for impairment and no impairment charges were recorded.

Other intangible assets subject to amortization are evaluated for impairment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. An impairment loss will be recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the asset. At December 31, 2007, intangible assets included customer relationships and other related intangibles that are amortized on a straight-line basis using estimated lives of nine years for customer relationships and two to four years for other intangibles.

Cash Surrender Value of Life Insurance – The Company funds the purchase of insurance policies on the lives of certain officers and employees of the Company. The Company has recognized any increase in cash surrender value of life insurance, net of insurance costs in the consolidated statements of operations.

Comprehensive Income – The Company presents as a component of comprehensive income amounts from transactions and other events currently excluded from the consolidated statements of operations and recorded directly to retained earnings.

Postretirement Benefits - The Company currently provides certain postretirement benefits to qualified retired employees. These postretirement benefits principally pertain to health insurance coverage. The cost of such benefits are accrued during the years the employee provides service.

Accounting for Derivatives - The Company’s derivative instruments outstanding during the years ended December 31, 2007 and 2006 included commitments to fund loans held for sale and forward loan sale arrangements. Currently, the Company does not have any embedded derivatives that require bifurcation and does not employ hedging activities.

Consolidation of Variable Interest Entities - At December 31, 2007 and 2006, the assets and liabilities of the Company’s investment as a limited partner in partnerships that sponsor affordable housing projects utilizing low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code (“LIHTC investments”) have been consolidated in accordance with FASB Interpretation No. 46 (Revised December 2003), “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin (“ARB”) No. 51”. The Company’s involvement in variable interest entities is further described in Note 23.

Employee Stock Ownership Plan (“ESOP”) - The Company accounts for its ESOP based on guidance from American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 96-3 “Employer’s Accounting for Employee Stock Ownership Plans.” Shares are released to participants proportionately as the loan is repaid. If the Company declares a dividend, the dividends on the allocated shares would be recorded as dividends and charged to retained earnings. Dividends declared on common stock held by the ESOP and not allocated to the account of a participant can be used to repay the loan. Allocation of shares to the ESOP participants is contingent upon the repayment of the loan to the Company.

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Cash and Cash Equivalents - For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash and balances due from banks and federal funds sold.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” which replaces SFAS No. 141, “Business Combinations” (“SFAS No. 141”). This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (formerly referred to as the purchase method) be used for all business combinations and that an acquirer be identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as of the date that the acquirer takes control. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at fair values. This Statement requires the acquirer to recognize acquisition-related costs and restructuring costs separately from the business combination as period expense. This Statement is effective for business combinations for which the acquisition is on or after the first annual reporting period of the acquisition beginning on or after December 15, 2008. The adoption of this Statement will impact the accounting and reporting of acquisitions after January 1, 2009.

In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an Amendment to ARB No. 51.” This Statement established new accounting and reporting standards that require that ownership interests in subsidiaries held by parties other than the parent be clearly identified and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This Statement also requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary shall be initially measured at fair value, with the gain or loss on the deconsolidation of the subsidiary measured using fair value of any noncontrolling equity investments rather than the carrying amount of that retained investment. SFAS No. 160 also clarifies that changes in parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. This Statement is effective for fiscal years on or after December 15, 2008. Early adoption is prohibited. The Company will evaluate the impact of adopting this Statement on the Company’s consolidated financial statements.

In November 2007, the SEC issued Staff Accounting Bulletin (“SAB”) No. 109, “Written Loan Commitments Recorded at Fair Value through Earnings” (“SAB 109”). This SAB supersedes SAB No. 105, “Application of Accounting Principles to Loan Commitments” (“SAB 105”), and expresses the current view of the staff that, consistent with guidance in SFAS No. 156 and 159, the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. Additionally, this SAB expands SAB 105’s view that internally-developed intangible assets should not be recorded as part of the fair value for any written loan commitments that are accounted for at fair value through earnings. This SAB was effective for fiscal quarters beginning after December 15, 2007. The Company will adopt SAB 109 for any loan commitments issued or modified on or after January 1, 2008.

In June 2007, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 06-11, “Accounting for Income Tax Benefits of the Share-Based Payment Awards.” The Issue states that a realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings and are paid to employees for equity classified nonvested equity shares, nonvested equity share units, and outstanding equity share options should be recognized as an increase to additional paid-in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. This Issue was effective for fiscal years beginning after December 15, 2007, and interim periods within those fiscal years. The Company will prospectively apply this Issue to the applicable dividends declared on or after January 1, 2008.

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In May 2007, the FASB issued FSP No. FIN 48-1, “Definition of Settlement in FASB FIN 48.” FSP No. 48-1 amends FIN 48 to provide guidance on determining whether a tax position is “effectively settled” for the purpose of recognizing previously unrecognized tax benefits. The concept of “effectively settled” replaces the concept of “ultimately settled” originally issued in FIN 48. The tax position can be considered “effectively settled” upon completion of an examination by the taxing authority if the entity does not plan to appeal or litigate any aspect of the tax position and it is remote that the taxing authority would examine any aspect of the tax position. For effectively settled tax positions, the full amount of the tax benefit can be recognized. The guidance in FSP No. FIN 48-1 was effective upon initial adoption of FIN 48. FIN 48 was effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48-1 did not have a material impact on the Company’s financial condition and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. This statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Management adopted SFAS No. 159 on January 1, 2008 but has not elected to fair value any of the Company’s financial assets and financial liabilities that are not currently required to be measured at fair value.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)”, which requires the recognition of a plan’s over-funded or under-funded status as an asset or liability with an offsetting adjustment to Accumulated Other Comprehensive Income (Loss) (“AOCI”). SFAS No. 158 requires the determination of the fair values of a plan’s assets at a company’s year-end and recognition of actuarial gains and losses, prior service costs or credits, and transition assets or obligations as a component of AOCI. This statement is effective as of December 31, 2006. Additionally, the initial adoption of SFAS No. 158 did not have a significant impact on the Company’s regulatory capital.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements. SFAS No. 157 retains the exchange price notion and clarifies that the exchange price is the price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. SFAS No. 157 is effective for the Company’s financial statements for the year beginning on January 1, 2008, with earlier adoption permitted. Management is currently evaluating the effect of SFAS No. 157 on the Company’s financial condition and results of operations.

In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”). SAB No. 108 expresses the SEC Staff’s views regarding the process of quantifying financial statement misstatements. SAB 108 states that in evaluating the materiality of financial statement misstatements a corporation must quantify the impact of correcting misstatements, including both the carryover and reversing effects of prior year misstatements, on the current year financial statements. SAB 108 is effective January 1, 2007. Under certain circumstances, prior year financial statements will not have to be restated and the effects of initially applying SAB 108 on prior years will be recorded as a cumulative effect adjustment to beginning retained earnings, with disclosure of the items included in the cumulative effect. The adoption of SAB 108 did not have an impact on the Company’s financial condition and results of operations.

In September 2006, the FASB ratified EITF Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements” (“EITF No. 06-4”) An endorsement split-dollar arrangement is an arrangement whereby an employer owns a life insurance policy that covers the life of an employee and using a separate agreement endorses a portion of the policy death benefit to the insured employee’s beneficiary. EITF 06-4 applies only to those endorsement split-dollar arrangements that provide a death benefit postretirement. This EITF requires an employer recognize a liability for future benefits if, in substance, the benefit exists. The liability would be accounted for in accordance with SFAS No. 106 “Employers Accounting for Postretirement Benefits Other Than Pensions” (“SFAS No. 106”) or Accounting Principles Board (“APB”) No. 12 “Omnibus Opinion”. The EITF’s requirement is effective for fiscal years beginning after December 15, 2007. Management is currently evaluating the effect of EITF 06-4 on the Company’s financial condition and results of operations.

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In September 2006, the Task Force reached a conclusion on EITF Issue No. 06-5, “Accounting for Purchases of Life Insurance – Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance” (“EITF 06-5”). EITF 06-5 clarifies certain factors that should be considered in the determination of the realizable asset to be reported in the statement of financial condition. EITF 06-5 is effective for fiscal years beginning after December 15, 2006. The guidance did not have an impact on the Company’s consolidated financial statements.

In June 2006, the FASB released FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the tax law may be uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 on January 1, 2007 and the initial adoption did not have a material impact on the Company’s financial condition and results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 133 and 140” (“SFAS No. 156”), which permits, but does not require, an entity to account for one or more classes of servicing rights (i.e., mortgage servicing rights, or MSRs) at fair value, with the changes in fair value recorded in the consolidated statement of operations. SFAS No. 156 is effective for years beginning after September 15, 2006. The adoption of this standard did not have a material impact on the Company’s financial condition and results of operations.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Instruments” (“SFAS No. 155”), which permits, but does not require, fair value accounting for any hybrid financial instrument that contains an embedded derivative that would otherwise require bifurcation in accordance with SFAS No. 133. The statement also subjects beneficial interests issued by securitization vehicles to the requirements of SFAS No. 133. The statement is effective for years beginning after September 15, 2006. This standard did not have a material impact on the Company’s financial condition and results of operations.

3.

MINORITY STOCK OFFERING AND MERGERS AND ACQUISITIONS

On October 13, 2006, the Company announced that it had signed a definitive merger agreement with FMS Financial. Under the terms of the agreement, which was approved by the Boards of Directors of both companies, the Company conducted a minority stock offering to the qualifying Bank depositors and the public and immediately thereafter acquired FMS Financial. Upon completion of the merger, Farmers & Mechanics Bank was merged with and into the Bank. The transaction closed on July 13, 2007. FMS was acquired to increase the Bank’s deposit base and its loan portfolio, and provide the Bank with greater access to customers in New Jersey, particularly in Burlington County, New Jersey.

In connection with the Company’s acquisition of FMS Financial, FMS Financial shareholders received $28.00 per share in the form of stock, cash or a combination of cash and stock, subject to the election and proration procedures set forth in the merger agreement. There were 11,915,200 shares of Company common stock and $64.2 million in cash issued to former FMS Financial shareholders upon the consummation of the acquisition. The total purchase price was approximately $186.8 million, including $119.2 million in stock consideration, $64.1 million in cash consideration, and $3.5 million in direct acquisition costs.

The Company is authorized to issue a total of four hundred million shares, of which three hundred million shares shall be common stock, par value $0.01 per share, and of which one hundred million shares shall be preferred stock, par value $0.01 per share. Each share of the Company’s common stock has the same relative rights as, and is identical in all respects with, each other share of common stock.

In the event the Company pays dividends to its stockholders, it will also be required to pay dividends to the MHC, unless the MHC elects to waive the receipt of dividends. The Company declared a dividend of $0.3 million on April 13, 2007.

The Company also established The Beneficial Foundation (the “Foundation”), a charitable foundation, in connection with the offering. The Foundation was funded by a combination of 950,000 shares of Company common stock and $0.5 million in cash, resulting in a pre-tax non-interest expense charge of $10.0 million.

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The acquisition of FMS Financial resulted in an increase of $1.2 billion to the Company’s assets, including increases of $579.0 million of investment securities, $438.0 million of net loans, $100.0 million of goodwill, $41.3 million of bank premises and equipment and $23.2 million of core deposit intangible. Total liabilities increased $1.1 billion, including increases of $910.4 million of deposits, $110.7 million of securities sold under agreements to repurchase and $25.3 million of subordinated debentures.

In accordance with the purchase method of accounting, the Company’s results of operations and cash flows for the fiscal year ended December 31, 2007 only reflect the former FMS Financial’s results for the approximate six month period between July 13, 2007 and the fiscal year end date of December 31, 2007.

Presented below are the Company’s pro forma condensed consolidated statements of operations which have been prepared as if the stock offering and business combination with FMS Financial had been consummated as of the beginning of each of the years ended December 31, 2007 and 2006.

	2007			2006
Total interest income	$	191,811		$	196,021
Total interest expense		88,064			90,493
Net interest income		103,747			105,528
Provision for loan losses		2,500			1,905
Net interest income after provision for loan losses		101,247			103,623
Total non-interest income		16,282			17,694
Total non-interest expense		123,651			103,949
(Loss) income before income taxes		(6,122	)		17,368
Income tax (benefit) expense		(3,934	)		4,653
Net (loss) income	$	(2,188	)	$	12,715
Net (loss) earnings per share – Basic and Diluted	$	(0.03	)	$	(0.16	)
Average common shares outstanding – Basic and Diluted		79,113,729			79,113,729

The following table summarizes the estimated fair value of FMS Financial assets acquired and liabilities assumed at July 13, 2007:

	2007
Cash and due from banks	$	41,382
Interest-bearing deposits		35
Investment securities available for sale		579,018
FHLB stock		5,977
Net loans		438,002
Premises and equipment		41,313
Core deposit intangible		23,215
Goodwill		100,049
Other assets		7,932
Total assets acquired		1,236,923
Deposits		910,371
Repurchase agreement		110,739
Statutory debenture		25,256
Other liabilities		7,242
Total liabilities acquired		1,053,608
Net assets acquired	$	183,315

At December 31, 2007, purchase price allocations had not been finalized for all items related to the FMS Financial merger. The Company’s total value of assets that do not have finalized purchase price allocations is $7.4 million which includes other real estate in New Jersey of $4.6 million, construction in process of $1.9 million and leasehold improvements of $0.9 million. Additionally, two acquired impaired loans of $1.7 million are being evaluated under the cost recovery method under AICPA SOP 03-3 “Accounting for Certain Loans or Debt Securities Acquired in a Transfer” (“SOP 03-3”). In subsequent periods, the nature and amount of any material adjustments made to the initial allocation of the purchase price shall be disclosed.

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	On October 5, 2007, the Bank’s wholly owned subsidiary, Beneficial Insurance Services, LLC, acquired the business of CLA Agency, Inc., a full-service property and casualty and professional liability insurance brokerage company headquartered in Newtown Square, Pennsylvania. The acquisition was accounted for under the purchase method of accounting for business combinations in accordance with SFAS No. 141. Consideration for the purchase consisted of cash, a portion of which is contingent upon the achievement of certain earnings targets. We recognized goodwill and other intangibles as presented in Note 10, Goodwill and Other Intangibles. The acquisition of CLA is considered immaterial for purposes of the disclosures required for SFAS No. 141.
4.	EARNINGS PER SHARE
	As described in Note 3, on July 13, 2007, in connection with the closing of the minority stock offering, the Company issued 82,264,600 shares of common stock. On July 13, 2007, the 100 shares of the Company’s common stock previously issued to the MHC in connection with the Bank’s mutual holding company reorganization in 2004 were replaced with 45,792,775 shares, representing 55.67% of the shares of the Company’s outstanding common stock. The remaining shares were sold to the public, issued to former FMS Financial shareholders in connection with the Company’s acquisition of FMS Financial and contributed to the Foundation.
	The replacement of the MHC shares is analogous to a stock split or significant stock dividend. Therefore, the earnings per share information is calculated by giving retroactive application to the periods presented of the weighted average number of MHC shares outstanding on the minority offering’s July 13, 2007 closing date.
	The following table presents a calculation of basic and diluted earnings per share for the years ended December 31, 2007, 2006 and 2005, respectively. Earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock outstanding.

	For the Year Ended December 31,
	2007			2006		2005
Basic and diluted (loss) earnings per share:
Net (loss) income available to common shareholders	$	(1,545	)	$	11,625	$	13,200
Average common shares outstanding		61,374,792			45,792,775		45,792,775
Net (loss) earnings per share	$	(0.03	)	$	0.25	$	0.29

5.	CASH AND DUE FROM BANKS
	The Bank is required to maintain average reserve balances in accordance with federal requirements. Cash and due from banks in the consolidated statements of financial condition include $7.7 million and $2.6 million at December 31, 2007 and 2006, respectively, relating to this requirement.
	Cash and due from banks also includes fiduciary funds of $1.3 million and $1.4 million at December 31, 2007 and 2006, respectively, relating to insurance services.
	At December 31, 2007, $2.8 million of proceeds from a sale of other real estate owned was held by a Qualified Intermediary to be used for the acquisition of a property, which related to the Company entering into a Like-Kind Exchange transaction under Section 1031 of the Internal Revenue Code.

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6.	INVESTMENT SECURITIES
	The amortized cost and estimated fair value of investments in debt and equity securities at December 31, 2007 and 2006 are as follows:

	Available-for-Sale - 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Equity securities	$	9,391	$	437	$	(26	)	$	9,802
U.S. Government Sponsored Enterprise (“GSE”) and Agency Notes		184,756		2,437		(130	)		187,063
GNMA guaranteed mortgage certificates		17,299		89		—			17,388
Collateralized mortgage obligations		206,842		1,873		(2,709	)		206,006
Other mortgage-backed securities		431,500		8,987		(303	)		440,184
Municipal and other bonds		74,330		288		(392	)		74,226
Mutual funds		14,717		432		(23	)		15,126
Total	$	938,835	$	14,543	$	(3,583	)	$	949,795

	Held-to-Maturity - 2007
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
U.S. Government Sponsored Enterprise (“GSE”) and Agency Notes	$	27,498	$	33	$	(44	)	$	27,487
GNMA guaranteed mortgage certificates		771	$	0		(26	)		745
Other mortgage-backed securities		83,717		485		(1,307	)		82,895
Total	$	111,986	$	518	$	(1,377	)	$	111,127

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	Available-for-Sale - 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Equity securities	$	6,453	$	1,252	$	(66	)	$	7,639
GSE and Agency Notes		72,644		6		(864	)		71,786
GNMA guaranteed mortgage certificates		26,438		24		(114	)		26,348
Collateralized mortgage obligations		144,339		118		(4,057	)		140,400
Other mortgage-backed securities		53,759		203		(1,000	)		52,962
Municipal and other bonds		31,632		192		(92	)		31,732
Mutual funds		2,073		—		—			2,073
Total	$	337,338	$	1,795	$	(6,193	)	$	332,940

	Held-to-Maturity - 2006
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
GSE and Agency Notes	$	27,499	$	—	$	(619	)	$	26,880
GNMA guaranteed mortgage certificates		912		—		(31	)		881
Other mortgage-backed securities		101,946		352		(2,826	)		99,472
Total	$	130,357	$	352	$	(3,476	)	$	127,233

The Company sold available-for-sale securities of $384.9 million, $8.7 million and $32.0 million resulting in gross realized gains of $0.9 million, $0.8 million and $1.2 million and gross realized losses of $0.6 million, $0.2 million and $0.1 million in 2007, 2006 and 2005, respectively. The tax provision applicable to these net realized gains amounted to $(0.9) million, $0.2 million and $0.4 million, respectively.

Due to the condition of financial institutions in the fourth quarter of 2007 and the evaluation of the near term prospects of the issuers in relation to the severity of the decline, the Company recorded a charge related to the value of common equity securities of various financial services companies that were deemed to be other-than-temporarily-impaired. The Company has recognized an other-than-temporary impairment for these securities of $1.2 million in 2007.

At December 31, 2007, the Company owned 2 investments totaling $1.7 million that the Company carries at cost. The Company has the ability and intent to hold these investments and there were no indications that these investments were other-than-temporarily impaired at December 31, 2007.

Investments that have been in a continuous unrealized loss position for periods of less than 12 months and 12 months or longer at December 31, 2007 and 2006 are summarized in the following table:

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	2007
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
GSE and Agency Notes	$	—	$	—	$	63,979	$	174	$	63,979	$	174
Mortgage-backed securities		8,357		14		87,931		1,621		96,288		1,635
Municipal and other bonds		28,293		376		3,075		16		31,368		392
Collateralized mortgage obligations		37,414		408		97,324		2,300		134,738		2,708
Subtotal, debt securities		74,064		798		252,309		4,111		326,373		4,909
Equity securities		750		26		—		—		750		26
Mutual Funds		347		24		—		—		347		24
Total temporarily impaired securities	$	75,161	$	848	$	252,309	$	4,111	$	327,470	$	4,959

	2006
	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
GSE and Agency Notes	$	6,859	$	17	$	73,385	$	1,466	$	80,244	$	1,483
Other mortgage-backed securities		9,869		30		126,346		3,941		136,215		3,971
Municipal and other bonds		4,804		16		5,891		76		10,695		92
Collateralized mortgage obligations		—		—		116,164		4,057		116,164		4,057
Subtotal, debt securities		21,532		63		321,786		9,540		343,318		9,603
Equity securities		1,434		66		—		—		1,434		66
Total temporarily impaired securities	$	22,966	$	129	$	321,786	$	9,540	$	344,752	$	9,669

GSE and Agency Notes

The Company’s investments in the preceding table in GSE Notes consist of debt obligations of the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Bank (“FHLB”) and the Federal Farm Credit Bank (“FFCB”). The Company’s investments in Government Agency Notes consist of debt obligations of the Department of Housing and Urban Development (“HUD”). Included in the 12 months or longer are 15 securities with a loss, on average, of .27%. The unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Mortgage-Backed Securities

The Company’s investments in the preceding table in mortgage-backed securities consist of fixed rate GSE mortgage-backed securities and government agency mortgage-backed securities. Included in the less than 12 months are five securities with a loss, on average, of .17%. Included in the 12 months or longer are 32 securities with a loss, on average, of 1.84%. The unrealized losses on the Company’s investments in mortgage-backed securities are due to current interest rate levels relative to the Company’s cost. The contractual cash flows of those investments in GSE mortgage-backed securities are debt obligations of the Federal Home Loan Mortgage Corporation (“FHLMC”) and the FNMA. Fannie Mae issues guaranteed mortgage pass-through certificates or MBS certificates, which represent the beneficial ownership in a distinct pool of residential mortgage loans secured by single-family (one-to four-unit) dwellings, or in a pool of participation interests in loans of that type. Fannie Mae guarantees to the MBS trust that they will supplement amounts received by the MBS trust as required to permit timely payments of interest and principle on the certificates. They alone are responsible for making payments under their guarantee. The certificates and payments of principle and interest on the certificates are not guaranteed by the United States, and do not constitute a debt or obligation of the United States or any of its agencies or instrumentalities other than Fannie Mae. Freddie Mac issues and guarantees Mortgage Participation Certificates (or “PCs”), which are securities that represent undivided beneficial ownership interests in, and receive payments from, pools of one-to-four-family residential mortgages that are held in trust for investors. Freddie Mac guarantees the payment of interest and principle on the PCs. They alone are responsible for making payments on their guarantee. Principle and interest payments on the PCs are not guaranteed by and are not debts or obligations of the United States or any federal agency or instrumentality other than Freddie Mac. The cash flows related to government agency mortgage-backed securities are direct obligations of the U.S. Government. The decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

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Municipal and other bonds

The Company’s investments in the preceding table in this category consist of municipal bonds, corporate bonds and trust preferred/collateralized debt obligations (“CDOs”). The municipal bonds consist of general obligation bonds of entities located in the state of Pennsylvania. These bonds are rated AAA by S&P and/or Aaa by Moody’s. Other bonds consist of corporate bonds and trust preferred/CDOs, which are rated investment grade at December 31, 2007. Included in the less than 12 months are three securities with a loss, on average, of 1.31%. Included in the 12 months or longer are eight securities with a loss, on average of .51%. The unrealized losses on the Company’s municipal and other bonds are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Collateralized Mortgage Obligations

The Company’s investments in the preceding table in this category consist of collateralized mortgage obligations issued by the FHLMC, the FNMA, and whole-loan mortgage-backed securities rated AAA by S&P. Included in the less than 12 months are eight securities with a loss, on average, of 2.07%. Included in the 12 months or longer are 28 securities with a loss, on average, of 2.31%. The unrealized losses are due to current interest rate levels relative to the Company’s cost and not credit quality, and because the Company has the ability and intent to hold those investments until a recovery of fair value, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

Equity Securities

The Company’s investments in the preceding table in equity securities consist of bank issued common stocks and mutual funds. Included in the less than 12 months are three securities with a loss position, on average, of 4.3%. The Company evaluated the near-term prospects of the issuers in relation to the severity and duration of the impairment. The Company does not consider those investments to be other-than-temporarily impaired at December 31, 2007.

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The amortized cost and estimated fair value of debt securities at December 31, 2007 and 2006, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations.

+
	2007				2006
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available-for-sale:
Due in one year or less	$	82,907	$	82,906	$	18,966	$	18,964
Due after one year through five years		44,417		44,467		61,138		60,287
Due after five years through ten years		90,323		92,431		26,716		26,760
Due after ten years		248,281		247,492		141,795		137,907
Mortgage-backed securities		448,799		457,571		80,197		79,311
Total	$	914,727	$	924,867	$	328,812	$	323,229
Held-to-maturity:
Due in one year or less	$	5,000	$	5,013	$	—	$	—
Due after one year through five years		22,498		22,474		27,499		26,880
Due after five years through ten years		—		—		—		—
Due after ten years		—		—		—		—
Mortgage-backed securities		84,488		83,640		102,858		100,353
Total	$	111,986	$	111,127	$	130,357	$	127,233

	The Company pledges securities to secure its Treasury Tax and Loan account. At December 31, 2007, securities with an amortized cost of $7.1 million and an estimated fair value of $7.2 million were pledged. At December 31, 2006, securities with an amortized cost of $4.3 million and an estimated fair value of $4.2 million were pledged.
7.	LOANS
	The Company provides loans to borrowers, of which the majority of these loans are to borrowers located in the Mid-Atlantic region. The ultimate repayment of these loans is dependent to a certain degree on the economy of this region.

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Major classifications of loans at December 31, 2007 and 2006 are summarized as follows:

	2007			2006
Real estate loans:
One-to-four family	$	479,817		$	278,970
Commercial real estate		693,733			409,702
Residential construction		1,958			9,967
Total real estate loans		1,175,508			698,639
Commercial business loans		136,345			98,612
Consumer loans:
Home equity loans and lines of credit		390,762			384,370
Auto loans		174,769			232,675
Other consumer loans		237,442			265,878
Total consumer loans		802,973			882,923
Total loans		2,114,826			1,680,174
Net deferred loan costs		6,096			8,651
Allowance for loan losses		(23,341	)		(17,368	)
Loans, net	$	2,097,581		$	1,671,457

The activity in the allowance for loan losses for the years ended December 31, 2007, 2006 and 2005, is as follows:

	2007			2006			2005
Balance, beginning of year	$	17,368		$	17,096		$	17,141
Provision for loan losses		2,470			1,575			1,703
Allowance purchased		5,015			—			—
Charge-offs		(2,391	)		(2,297	)		(2,910	)
Recoveries		879			994			1,162
Balance, end of year	$	23,341		$	17,368		$	17,096

The provision for loan losses charged to expense is based upon past loan and loss experiences and an evaluation of estimated losses in the current loan and lease portfolio, including the evaluation of impaired loans. A loan is considered to be impaired when, based upon current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan. An insignificant delay or insignificant shortfall in amount of payments does not necessarily result in a loan being identified as impaired. For this purpose, delays less than 90 days are considered to be insignificant. As of December 31, 2007 and 2006, 100% of the impaired loan balance was measured for impairment based on the fair value of the loans’ collateral. Impairment losses are included in the provision for loan losses. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment, except for those loans restructured under a troubled debt restructuring. Loans collectively evaluated for impairment include personal loans and most residential mortgage loans, and are not included in the following paragraph.

The recorded investment in impaired loans not requiring an allowance for loan losses was $2.9 million at December 31, 2007 and $3.8 million at December 31, 2006. The recorded investment in impaired loans requiring an allowance for loan losses was $5.2 million and $3.3 million at December 31, 2007 and 2006, respectively. At December 31, 2007 and 2006, the related allowance for loan losses associated with those loans was $2.7 million and $0.1 million, respectively. For the years ended December 31, 2007, 2006 and 2005, the average recorded investment in these impaired loans was $7.8 million, $3.3 million and $0.02, respectively and the interest income recognized on impaired loans was $0.3 million for 2007, $0.3 million for 2006 and $0 for 2005.

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	Nonperforming loans (which includes nonaccrual loans and loans past 90 days or more and still accruing) at December 31, 2007 and 2006 amounted to approximately $16.3 million and $8.2 million, respectively. The loans include impaired loans acquired in a business combination that are accounted for under SOP 03-3. As of December 31, 2007, the impaired balance pertaining to loans accounted for under AICPA SOP 03-3 was $0.8 million.
	Nonaccrual loans at December 31, 2007 and 2006 amounted to approximately $7.7 million and $0.5 million, respectively.
	Interest income on impaired loans other than nonaccrual loans is recognized on an accrual basis. Interest income on nonaccrual loans is recognized only as collected.
	In the ordinary course of business, the Company has granted loans to executive officers and directors and their affiliates amounting to $0.4 million, $0.6 million and $0.8 million at December 31, 2007, 2006 and 2005, respectively. The amount of repayments in respect to such loans during the years ended December 31, 2007, 2006 and 2005 totaled $0.5 million, $0.6 million and $0.7 million, respectively. There were $0.3 million, $0.3 million and $0 of new related party loans granted during fiscal years 2007, 2006 and 2005, respectively.
8.	ACCRUED INTEREST RECEIVABLE
	The following table provides selected information on accrued interest receivable at December 31, 2007 and 2006.

	2007					2006
	Amount		% of Total			Amount		% of Total
Interest-Bearing Deposits	$	8		0.05	%	$	28		0.24	%
Investment Securities		7,178		39.68	%		2,646		22.88	%
Loans		10,903		60.27	%		8,891		76.88	%
Total Accrued Interest Receivable	$	18,089		100.00	%	$	11,565		100.00	%

9.	PREMISES AND EQUIPMENT
	Premises and equipment at December 31, 2007 and 2006 consist of the following:

	2007			2006
Land	$	17,012		$	3,764
Bank premises		42,828			18,366
Furniture, fixtures and equipment		22,957			21,123
Leasehold improvements		10,674			10,082
Construction in progress		9,870			1,778
Total		103,341			55,113
Accumulated depreciation and amortization		(24,314	)		(21,945	)
Total	$	79,027		$	33,168

Depreciation and amortization expense amounted to $4.6 million, $3.5 million and $3.5 million for the years ended December 31, 2007, 2006 and 2005, respectively.

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10.	GOODWILL AND OTHER INTANGIBLES
	Goodwill and other intangible assets arising from the Company’s acquisition of Paul Hertel & Co., Inc., FMS Financial and CLA Agency, Inc. (“CLA”), during 2007 and 2006 were accounted for in accordance with SFAS No. 142 As required under SFAS No. 142, goodwill is not amortized but rather reviewed for impairment at least annually. The other intangibles are amortizing intangibles, which primarily consist of a core deposit intangible, which is amortized over an estimated useful life of ten years. As of December 31, 2007, the core deposit intangible net of accumulated amortization totaled $20.3 million. The other amortizing intangibles, which include customer lists, trademarks and agreements not to compete, vary in estimated useful lives from two to 13 years.
	See Note 3, “Minority Stock Offering and Mergers and Acquisitions” for information regarding goodwill acquired in 2007.
	The following table summarizes the changes in goodwill and intangibles as of the dates indicated:

	Goodwill		Core Deposit Intangible			Customer Relationships and other
Balance at December 31, 2005	$	6,679	$	—		$	2,382
Amortization		—		—			(426	)
Balance at December 31, 2006		6,679		—			1,956
Additions and adjustments:
FMS Financial Corporation acquisistion		100,049		23,215
CLA acquisition		3,607					7,461
Amortization		—		(2,921	)		(512	)
Balance at December 31, 2007	$	110,335	$	20,294		$	8,905

The following table summarizes intangible assets at December 31, 2007 and 2006:

	2007							2006
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Amortizing Intangibles:
Core Deposits	$	23,215	$	(2,921	)	$	20,294	$	—	$	—		$	—
Customer Relationship and Other		10,251		(1,346	)		8,905		2,790		(834	)		1,956
Total Amortizing	$	33,466	$	(4,267	)	$	29,199	$	2,790	$	(834	)	$	1,956

Aggregate amortization expense was $3.4 million, $0.4 million, and $0.4 million for the years ended December 31, 2007, 2006 and 2005, respectively. Amortization expense for the next five years is expected to be as follows:

2008	$	5,172
2009		3,525
2010		3,479
2011		3,417
2012		2,798
2013 and thereafter		10,808

For purposes of impairment testing, the goodwill and intangibles are to be assigned to a reporting unit and segment. There was no impairment as of December 31, 2007 and 2006.

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11.	OTHER ASSETS
	The following table provides selected information on other assets at December 31, 2007 and 2006:

	2007		2006
Unconsolidated investments in affordable housing and other partnerships	$	7,111	$	5,004
Cash surrender value of life insurance		13,235		12,392
Prepaid assets		2,525		2,304
Net deferred tax asset		16,485		11,954
Other real estate		4,797		2,809
All other assets		11,107		13,013
Total other assets	$	55,260	$	47,476

12.	DEPOSITS
	At December 31, 2007 and 2006, the weighted average cost of deposits were 3.07% and 2.82%, respectively.
	Time deposit accounts outstanding at December 31, 2007 and 2006, mature as follows:

	2007		2006
0 to 6 months	$	579,287	$	520,725
7 to 12 months		278,269		225,369
13 to 24 months		110,890		115,109
Over 25 months		73,856		32,703
	$	1,042,302	$	893,906

The aggregate amount of certificate accounts in denominations of one hundred thousand dollars or more totaled $237.3 million and $163.9 million at December 31, 2007 and 2006, respectively. Deposits in excess of one hundred thousand dollars are not generally insured by the Deposit Insurance Fund of the FDIC.

Deposits consisted of the following major classifications at December 31, 2007 and 2006:

	2007		% of total assets			2006		% of total assets
Non interest-bearing deposits	$	242,351		6.81	%	$	90,040		3.91	%
Interest-earning checking accounts		389,812		10.96	%		162,955		7.08	%
Money market accounts		376,300		10.58	%		281,044		12.22	%
Savings accounts		414,398		11.65	%		250,109		10.87	%
Time deposits		1,042,302		29.30	%		893,906		38.86	%
Total deposits	$	2,465,163		69.29	%	$	1,678,054		72.95	%

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13.	BORROWED FUNDS
	A summary of borrowings is as follows:

	December 31,
	2007		2006
Federal Funds purchased	$	8,050	$	7,250
FHLB advances		185,750		196,550
Repurchase agreements		185,562		88,600
FHLB overnight borrowings		—		—
Statutory trust debenture		25,264		—
Other		2,496		2,496
Total borrowings	$	407,122	$	294,896

Advances from the FHLB bear fixed interest rates with remaining periods until maturity, summarized as follows:

	December 31,
	2007		2006
Due in one year or less	$	51,000	$	43,300
Due after one year through five years		104,750		118,250
Due after five years through ten years		30,000		35,000
Total	$	185,750	$	196,550

Included as “FHLB advances” at December 31, 2007 and 2006 in the above table are FHLB borrowings whereby the FHLB has the option at predetermined times to convert the fixed interest rate to an adjustable rate tied to the London Interbank Offered Rate (LIBOR). If the FHLB converts the interest rate, the Company would have the option to prepay these advances without penalty. These advances are included in the periods in which they mature. At December 31, 2007, $124.8 million, or 67.19% of the FHLB advances, are convertible at the option of the FHLB, of which $109.8 million are convertible in 2008.

FHLB advances are collateralized under a blanket collateral lien agreement.

The Company enters into sales of securities under agreements to repurchase. These agreements are recorded as financing transactions, and the obligation to repurchase is reflected as a liability in the consolidated statements of financial condition. The dollar amount of securities underlying the agreements remains recorded as an asset and carried in the Company’s securities portfolio.

At December 31, 2007 and 2006, outstanding repurchase agreements were $185.6 million and $88.6 million, respectively, with a weighted average maturity of 4.03 and 2.14 years, respectively, and a weighted average cost of 4.77% and 4.93%, respectively. The average balance of repurchase agreements during the year ended December 31, 2007 and 2006 was $129.7 million and $101.9 million, respectively. The maximum amount outstanding at any month end period during 2007 and 2006 was $205.6 million, and $125.4 million, respectively.

At December 31, 2007 and 2006, outstanding repurchase agreements were secured by GSE Notes and GSE Mortgage-Backed Securities. At December 31, 2007 and 2006, the market value of the securities held as collateral for repurchase agreements was $239.4 million and $93.6 million, respectively.

The Company assumed FMS Financial’s obligation to the FMS Statutory Trust II (the “Trust”) as part of the acquisition of FMS Financial on July 13, 2007. The Company’s debentures to the Trust as of December 31, 2007 were $25.8 million. The fair value of the debenture was recorded as of the acquisition date at $25.3 million. The difference between market value and the Company’s debenture is being amortized as interest expense over the expected life of the debt.

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	The Trust issued $25.8 million of floating rate capital securities and $0.8 million of common securities to the Company. The Trust’s capital securities are fully guaranteed by the Company’s debenture to the Trust. The Company has recorded its investment in the capital securities in the other asset section of the statement of condition.
	As of December 31, 2007, the rate was 6.57%. The debentures are redeemable at the Company’s option any time after June 2011. The redemption of the debentures would result in the mandatory redemption of the Trust’s capital and common securities at par. The statutory trust debenture is wholly owned by the Company, however under FIN 46 it is not a consolidated entity.
14.	REGULATORY CAPITAL REQUIREMENTS
	The Bank is subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
	Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of December 31, 2007 and 2006, the Bank met all capital adequacy requirements to which it was subject.
	As of December 31, 2007, the most recent date for which information is available, the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events that management believes have changed the Bank’s categorization since the most recent notification from the FDIC.
	The Bank’s actual capital amounts and ratios (under rules established by the FDIC) are presented in the following table:

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Capital Amount		Ratio			Capital Amount		Ratio			Capital Amount		Ratio
As of December 31, 2007:
Tier 1 Capital (to average assets)	$	412,551		12.20	%	$	101,485		3.00	%	$	169,141		5.00	%
Tier 1 Capital (to risk weighted assets)		412,551		19.80	%		83,348		4.00	%		125,021		6.00	%
Total Capital (to risk weighted assets)		435,892		20.92	%		166,695		8.00	%		208,369		10.00	%
As of December 31, 2006:
Tier 1 Capital (to average assets)	$	273,711		11.73	%	$	70,027		3.00	%	$	116,712		5.00	%
Tier 1 Capital (to risk weighted assets)		273,711		17.66	%		61,983		4.00	%		92,974		6.00	%
Total Capital (to risk weighted assets)		291,079		18.78	%		123,965		8.00	%		154,956		10.00	%

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	The Company’s capital at December 31, 2007 and 2006 for financial statement purposes was greater than the Tier 1 Capital amounts by $207.3 million and $6.7 million, respectively, due to the inclusion for regulatory capital purposes of unrealized losses on securities available-for-sale, the accumulated other comprehensive loss adjustments related to SFAS No. 158 and the exclusion of goodwill and other intangibles. The amounts in the above table are for the Bank only.
15.	INCOME TAXES
	The Company files a consolidated federal income tax return. The Company uses the specific charge-off method for computing bad debts.
	The provision for income taxes for the years ended December 31, 2007, 2006 and 2005 includes the following:

	2007			2006			2005
Current federal taxes	$	5,765		$	14,773		$	17,539
Current state and local taxes		418			46			1,234
Deferred federal and state taxes benefit		(10,648	)		(12,497	)		(14,045	)
Total	$	(4,465	)	$	2,322		$	4,728

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During 2007, the Company established the Foundation as described in Note 3, and contributed a total of $10.0 million. Under current federal income tax regulations, charitable contribution deductions are limited to 10% of taxable income. Accordingly, the $10.0 million contribution created a carry forward for income tax purposes and a deferred tax asset for financial statement purposes.

Items that gave rise to significant portions of the deferred tax accounts, calculated at 35%, at December 31, 2007 and 2006, are as follows:

	2007			2006
Deferred tax assets:
Reserve for bad debts	$	7,601		$	5,668
Pension liabilities		7,446			6,485
Postretirement benefits		4,039			3,827
Available-for-sale securities		—			1,343
Contribution carryforward		2,534			—
Purchase accounting		2,939			—
Deferred compensation		1,839			573
Lease accounting		527			514
Impairment of securities		417			—
State net operating loss carryover		1,277			1,012
Other		1,341			46
		29,960			19,468
Less: Valuation Allowance		(1,221	)		(1,003	)
Total		28,739			18,465
Deferred tax liabilities:
Automobile leasing activities		783			4,449
Available-for-sale securities		3,889			—
Property		106			465
Intangibles		5,460			131
Prepaid expenses and deferred loan fees		1,522			1,055
Mortgage servicing rights		166			164
Other		328			247
Total		12,254			6,511
Net deferred tax asset	$	16,485		$	11,954

The Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”) on January 1, 2007. FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the tax law may be uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. The initial adoption did not have a material impact on the Company’s financial condition and results of operations. At the adoption date of January 1, 2007, the Company had a liability for uncertain tax positions of $0.1 million, which represents the total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate. The Company recognizes, when applicable, interest and penalties related to unrecognized tax positions in the provision for income taxes in the consolidated statement of income. As of January 1, 2007, the Company had approximately $0.04 million of accrued interest and penalties, which were included in the liability for uncertain tax positions. The tax years 2004 through 2007 remain subject to examination by Federal, Pennsylvania, New Jersey and Philadelphia taxing authorities.

The following table provides a reconciliation of the beginning and ending amounts of the Company’s unrecognized tax benefits in 2007.

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	2007
Unrecognized tax benefits January 1, 2007	$	135
Increase/(Decrease) as a result of tax position taken in prior year		—
Increase/(Decrease) as a result of tax position taken during the year		—
Decreases realting to settlemtents with taxing authorities		—
Reductions as a result of a lapse of applicable statute of limitation		(135	)
Unrecognized tax benefits at December 31, 2007	$	—

A reconciliation of income tax computed at the statutory federal income tax rate to the expense included in the consolidated statements of income is as follows:

	2007					2006					2005
Tax at statutory rate	$	(2,104	)	(35.00	)%	$	4,881		35.00	%	$	6,275		35.00	%
Increase (reduction) in taxes resulting from:
Tax-exempt income		(1,003	)	(16.70	)		(957	)	(6.90	)		(698	)	(3.90	)
State and local income tax		272		4.50			30		0.20			802		4.50
Employee benefit programs		38		0.70			85		0.60			67		0.40
Federal income tax credits		(1,681	)	(28.00	)		(1,586	)	(11.40	)		(1,528	)	(8.50	)
Other		13		0.20			(131	)	(0.90	)		(190	)	(1.10	)
Total	$	(4,465	)	(74.30	)%(1)	$	2,322		16.60	%	$	4,728		26.40	%

	(1)     Not meaningful.
	The Company believes that it is more likely than not that the deferred tax assets, net of a valuation allowance, will be realized through taxable earnings or alternative tax strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible; the Company believes the net deferred tax assets are more likely than not to be realized.
	Pursuant to SFAS No. 109, the Company is not required to provide deferred taxes on its tax loan loss reserve as of December 31, 1987. The amount of this reserve on which no deferred taxes have been provided is approximately $2.3 million. This reserve could be recognized as taxable income and create a current and/or deferred tax liability using the income tax rates then in effect if one of the following occur: (1) the Company’s retained earnings represented by this reserve are used for distributions in liquidation or for any other purpose other than to absorb losses from bad debts; (2) the company fails to qualify as a Bank, as provided by the Internal Revenue Code; or (3) there is a change in federal tax law.
16.	BENEFIT PLANS
	The Bank has noncontributory defined benefit pension plans (“Plans”) covering most of its employees. Additionally, the Company sponsors nonqualified supplemental employee retirement plans for certain participants. The Bank also provides certain postretirement benefits to qualified retired employees. These postretirement benefits principally pertain to certain health insurance coverage. Information relating to these employee benefits program are included in the tables that follow.
	During 2007, the Bank assumed sponsorship of Farmers & Mechanics Pension Plan (“FMS Plan”) in conjunction with the FMS Financial merger as described in Note 1 and Note 3. As of December 31, 2007, the projected benefit obligation and fair value of assets of the FMS Plan were $15.0 million and $12.1 million, respectively, and is included in the following data.

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The following tables present a reconciliation of beginning and ending balances of benefit obligations and assets at December 31, 2007 and 2006:

	Pension Benefits						Postretirement Benefits
	2007			2006			2007			2006
Change in Benefit Obligation
Benefit obligation at beginning of year	$	63,120		$	52,816		$	10,935		$	9,486
FMS Plan		16,332			—		$	644			—
Service cost		2,452			1,492			220			180
Interest cost		4,110			3,501			686			621
Participants’ contributions		—			—			13			7
Actuarial (gain)/loss		(2,773	)		7,008			(187	)		873
Benefits paid		(5,446	)		(1,697	)		(361	)		(232	)
Benefit obligation at end of year	$	77,795		$	63,120		$	11,950		$	10,935
Change in Assets
Fair value of assets at beginning of year	$	44,486		$	40,676		$	—		$	—
FMS Plan		15,572			—			—			—
Actual return on assets		1,870			4,998			—			—
Employer contribution		844			509			348			225
Participants’ contributions		—			—			13			7
Benefits paid		(5,446	)		(1,697	)		(361	)		(232	)
Fair value of assets at end of year	$	57,326		$	44,486		$	—		$	—

The following table presents a reconciliation of the funded status of the pension benefits at December 31, 2007 and 2006:

	2007		2006
Projected benefit obligation	$	77,795	$	63,120
Fair value of plan assets		57,326		44,486
Accrued pension costs	$	20,469	$	18,634

Amounts recognized in accumulated other comprehensive income at December 31, 2007:

	Pension Benefits		Postretirement Benefits
Net loss	$	6,565	$	1,063
Prior service cost		94		535
Transition obligation		—		745

The Company’s total accumulated pension benefit obligations at December 31, 2007 and December 31, 2006 were $54.4 million and $46.8 million, respectively.

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Significant assumptions as of December 31, 2007, 2006 and 2005 are as follows:

	Pension Benefits									Postretirement Benefits
	2007			2006			2005			2007			2006			2005
Discount rate for periodic pension cost		6.00	%		6.75	%		6.75	%		6.00	%		6.75	%		6.75	%
Discount rate for benefit obligation		6.50	%		6.00	%		6.75	%		6.50	%		6.00	%		6.75	%
Rate of increase in compensation levels and social security wage base		5.50	%		5.50	%		5.50	%
Expected long-term rate of return on plan assets		8.00	%		8.00	%		8.00	%

The components of net pension cost are as follows:

	Pension Benefits									Postretirement Benefits
	2007			2006			2005			2007		2006		2005
Component of Net Periodic Benefit Cost
Service cost	$	2,435		$	1,491		$	1,409		$	260	$	180	$	181
Interest cost		4,128			3,501			3,305			647		621		620
Expected return on assets		(3,998	)		(3,186	)		(3,193	)		—		—		—
Amortization of transition obligation		—			—			—			164		164		164
Amortization of prior service cost		36			36			36			187		188		188
Recognized net actuarial loss		425			111			91			68		—		34
Net periodic pension cost	$	3,026		$	1,953		$	1,648		$	1,326	$	1,153	$	1,187

For benefit obligation measurement purposes, the annual rate of increase in the per capita cost of postretirement health care costs was: before age 65 - 2007, rates decrease from 10.0 percent to 6.0 percent for 2011 and remain level thereafter, and after age 65 - 2007 rates decrease from 12.0 percent to 6.0 percent for 2013 and remain level thereafter.

The impact of a 1.0% increase and decrease in assumed health care cost trend for each future year would be as follows:

	1.0% Increase		1.0% Decrease
Accumulated postretirement benefit obligation	$	292	$	(327)
Service and interest cost		31		(29)

The estimated net loss and prior service costs for the pension benefits that will be amortized from accumulated other comprehensive income into net periodic pension costs over the next fiscal year are $0.1 million and $0.05 million, respectively. The estimated transition, net loss and prior service cost for postretirement benefits that will be amortized from accumulated other comprehensive income into periodic pension cost over the next fiscal year are $0.2 million, $0.04 million and $0.2 million, respectively.

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Future benefit payments for all pension and post retirement plans are estimated to be paid as follows:

Pension Benefits			Post Retirement Benefits
2008	$	2,463	2008	$	428
2009		2,628	2009		480
2010		2,786	2010		553
2011		2,971	2011		624
2012		3,129	2012		680
2013-2017		23,673	2013-2017		4,460

The weighted-average asset allocations of the Plans at December 31, 2007 and 2006, by asset category are as follows:

	Plan Assets at December 31,						Target Asset
	2007			2006			Allocation
Equity securities		75	%		72	%		70% - 80%
Cash and fixed income securities		25	%		28	%		20% - 30%
Total		100	%		100	%

	The Plans invest in various securities including U.S. government securities, corporate debt instruments, mortgage-backed securities, common stocks and mutual funds. Plan assets are managed in accordance with investment guidelines approved by the Board of Directors. Expected future rates of return are determined by management based on factors such as asset allocation and actual returns over time.
	The Company’s funding policy is to contribute annually an amount, as determined by consulting actuaries and approved by the Board of Directors, which can be deducted for federal income tax purposes. In 2007 and 2006, $0.5 million and $0.3 million, respectively, was contributed to the Plans under the Bank’s funding policy. For 2008, the Bank expects to contribute $0.9 million to the Plans.
	The Company also maintains contributory savings plans (401(k) plans) covering substantially all of its employees. The Company may make contributions out of current or retained earnings. The Company made contributions of $0.4 million, $0.3 million and $0.2 million in 2007, 2006 and 2005, respectively.
	During 2005, the Company adopted FASB Staff Position FAS 106-2 relating to the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “Act”). The Act established a prescription drug benefit under Medicare, known as “Medicare Part D” and a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The benefit obligation was measured at December 31, 2005 to reflect the effects of the Act, which resulted in a reduction of the Company’s benefit obligation of $0.9 million.
	The Company provides life insurance benefits to eligible employees under an endorsement split-dollar life insurance program. At December 31, 2007 and 2006, $11.7 million and $10.4 million, respectively, in cash surrender value relating to this program was recognized in Other Assets in the consolidated statements of financial condition.
17.	EMPLOYEE STOCK OWNERSHIP PLAN
	In connection with the Company’s initial public offering, the Bank implemented an Employee Stock Ownership Plan (“ESOP”), which provides retirement benefits for substantially all full-time employees who were employed at the date of the initial public offering and are at least twenty-one years of age. Other salaried employees will be eligible after they have completed one year of service and have attained the age of 21. The Company makes annual contributions to the ESOP equal to the ESOP’s debt service or equal to the debt service less the dividends received by the ESOP on unallocated shares. The ESOP purchased 3,224,772 shares of Company common stock in the Company’s minority offering using funds provided by a loan from the Company and the cost of those shares is accordingly shown as a reduction of stockholders’ equity.

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	At December 31, 2007, shares allocated and committed to be released were 161,239. ESOP shares that were unallocated totaled 2,902,295 and had a fair market value of $28.2 million at that date. ESOP compensation expense for the year ended December 31, 2007 was $1.6 million, representing the fair market value of shares allocated or committed to be released during the year.
18.	REDUCTION IN FORCE
	On October 12, 2007, the Company announced that its Board of Directors had approved plans to reduce the Bank’s workforce in an effort to restructure the Bank’s management team and workforce. In connection with taking these steps, the Board of Directors approved severance plans, including the adoption of the Severance Pay Plan for Eligible Employees of the Bank, pursuant to which employees terminated as result of the reduction in force received certain severance benefits. The termination of employees and payment of benefits under the severance agreements resulted in $3.9 million of charges during the fourth quarter of 2007, consisting of the payment to or accrual of severance benefits for 40 employees. At December 31, 2007, $3.0 million of the reduction in force charge was unpaid. In the first quarter ended in 2008, $2.9 million of the remaining $3.0 million at December 31, 2007 was paid. The reduction in force costs are classified within salary and employee benefits expense on the consolidated statement of operations.
19.	COMMITMENTS AND CONTINGENCIES
	The Company leases a number of offices in its regular operations. Rental expense under such leases aggregated $4.3 million, $4.1 million and $4.0 million for the years ended December 31, 2007, 2006 and 2005, respectively. At December 31, 2007, the Company was committed under noncancelable operating lease agreements for minimum rental payments to lessors as follows:

2008	$	4,641
2009		4,685
2010		4,601
2011		2,880
2012		2,219
Thereafter		16,612
	$	35,638

In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit, which are not reflected in the consolidated financial statements. The Company has established specific reserves related to these commitments and contingencies that are not material to the Company.

At December 31, 2007 and 2006, the Company had outstanding commitments to purchase or make loans aggregating approximately $69.0 million and $55.1 million, respectively and commitments to customers on available lines of credit of $132.9 million and $58.3 million, respectively at competitive rates. Commitments are issued in accordance with the same policies and underwriting procedures as settled loans. We have a reserve for our commitments and contingencies of $.05 million and $0 at year end December 31, 2007 and 2006, respectively.

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

The Company is a member of the VISA USA Network. On October 3, 2007, Visa announced it had completed restructuring transactions in preparation for its initial public offering (“IPO”) expected to occur in the first quarter of 2008. As part of the restructuring, the Company’s indemnification obligation was modified to include only certain known litigation as of the date of restructuring. This modification triggered a requirement to fair value the indemnification obligation in accordance with FIN 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The Company determined that its potential indemnification obligations based on its’ proportionate share of ownership in VISA USA is not material at December 31, 2007.

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20.	INTEREST RATE RISK
	Interest rate risk refers to potential changes in net income and the economic value of equity resulting from changes in interest rates, product spreads and mismatches in the repricing between interest rate sensitive assets and liabilities. The goal of the Company’s interest rate risk management is to monitor, limit and control the effects of these changes on the Company’s earnings and economic value.
	The Company also monitors interest rate risk by utilizing a model that analyzes net income at risk and economic value of equity. The economic value of equity analysis measures the effect on the balance sheet of gradual shifts in interest rate risks in either direction. The net income at risk analysis simulates the effect on the income statement of gradual increases and decreases in market rates over the next twelve months. These results are compared to the results obtained in a flat interest rate scenario. The Company’s interest rate risk policy indicates that the level of interest rate risk is unacceptable if the immediate 200 basis point change would result in the loss of 30% or more of the economic value of equity or the gradual change in interest rates results in a loss of 20% or more of the value of forecasted net income.
	At December 31, 2007 and 2006, the Company had average interest-earning assets of approximately $2.7 billion and $2.3 billion, respectively, having a weighted average yield of 5.96% and 5.67%, respectively, and average interest-bearing liabilities of approximately $2.2 billion and $2.0 billion, respectively with a weighted average cost of 3.21% and 2.60%, respectively. The Company’s assets that earned interest at fixed and variable interest rates were funded primarily with liabilities that have interest rates that are fixed.
	The results at December 31, 2007 and 2006 indicate an acceptable level of risk. The net interest income at risk results indicate a slightly asset sensitive profile, which provides net interest margin benefits in rising rate scenarios. The economic value at risk remains limited in magnitude and indicates potential moderate exposures in increasing rate environments.
21.	DERIVATIVE FINANCIAL INSTRUMENTS
	The Company had no derivative instruments outstanding at December 31, 2007. The Company’s derivative instruments outstanding at December 31, 2006 included commitments to fund loans available-for-sale and forward loan sale agreements. The Company originates single-family residential loans for sale pursuant to a program with FNMA. At the time the interest rate is locked in by the borrower, the Company concurrently enters into a forward loan sale agreement with respect to the sale of such loan at a set price in an effort to manage the interest rate risk inherent in the locked loan commitment. Any change in the fair value of the loan commitment after the borrower locks in the interest rate is substantially offset by the corresponding change in the fair value of the forward loan sale agreement related to such loan. The period from the time the borrower locks in the interest rate to the time the Bank funds the loan and sells it to FNMA is generally within 60 days.
	At December 31, 2007 and 2006, the Company had $0 and $0.03 million, respectively, of loan commitments outstanding related to loans being originated for sale of which all were subject to interest rate locks. Also, at December 31, 2007 and 2006, the Company had entered into $0 and $0.03 million, respectively, of forward loan sale agreements related to loan commitments with interest rate locks. The Company concluded that the fair value of these derivative instruments involving loan commitments was not material to the consolidated statements of the financial condition and operations of the Company as of and for the years ended December 31, 2007 and 2006.

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22.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company’s financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

	2007				2006
			Estimated				Estimated
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Cash and cash equivalents	$	53,545	$	53,545	$	20,572	$	20,572
Investment securities		1,085,377		1,097,638		479,343		473,644
Loans - net		2,120,922		2,126,821		1,671,457		1,646,826
Liabilities:
Checking deposits		618,953		618,953		242,817		242,817
Money market and savings accounts		790,497		790,497		531,153		531,153
Time deposits		1,042,302		1,050,573		893,906		898,368
Borrowed funds		407,122		415,493		294,896		294,230

Cash and Cash Equivalents - For cash and cash equivalents, the carrying amount is a reasonable estimate of fair value.

Investments - The fair value of investment securities, mortgage-backed securities and collateralized mortgage obligations is based on quoted market prices, dealer quotes, and prices obtained from independent pricing services. The fair value of Federal Home Loan Bank stock is not determinable since there is no active market for the stock.

Loans Receivable - The fair value of loans is estimated using national or regional average lending rates. The source of the rates varies by product. FNMA rates are used for residential lending, the Federal Reserve Bank E2 release rates are used for commercial lending, and BankRate Monitor rates are used for consumer lending. These rates are not further adjusted for credit risk. Management believes that the risk factor embedded in the entry-value interest rates result in a fair valuation of loans.

Checking and Money Market Deposits, Savings Accounts, and Time Deposits - The fair value of checking and money market deposits and savings accounts is the amount reported in the consolidated financial statements. The fair value of time deposits is based on a present value estimate using rates currently offered for deposits of similar remaining maturity.

Borrowed Funds - The fair value of borrowed funds is based on a present value estimate using rates currently offered.

Commitments to Extend Credit and Letters of Credit - The majority of the Company’s commitments to extend credit and letters of credit carry current market interest rates if converted to loans. Because commitments to extend credit and letters of credit are generally unassignable by either the Company or the borrower, they only have value to the Company and the borrower. The estimated fair value approximates the recorded deferred fee amounts, which are not significant.

The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2007 and 2006. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since December 31, 2007 and 2006, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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23.	VARIABLE INTEREST ENTITIES
	The Company is involved with various entities in the normal course of business that may be deemed to be Variable Interest Entities (“VIE”). The Company has consolidated two VIE’s, one in 2005 and another in 2007, for which the Company was determined to be the primary beneficiary.
	At December 31, 2007 and 2006, the aggregate assets and liabilities of the VIEs that the Company consolidated in the financial statements are as follows:

                    Consolidated VIEs-Primary Beneficiary

	Aggregate		Aggregate
	Assets		Liabilities
December 31, 2007
Affordable housing projects	$	11,566	$	6,266
December 31, 2006
Affordable housing projects	$	7,910	$	2,924

	The Company makes certain equity investments in various limited partnerships that sponsor affordable housing projects utilizing the Low Income Housing Tax Credit pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactory return on capital, to facilitate affordable housing project offerings and to assist the Company in achieving goals associated with the Community Reinvestment Act. The primary activities of the limited partnerships include the identification, development and operation of housing that is leased to qualifying residential tenants. Generally, these types of investments are funded through a combination of debt and equity. The Company consolidated two partnerships in 2007 and one in 2005 for which it owns the majority of limited partnership interests. As a limited partner, the Company’s credit and investment are protected from any liabilities that occur within the low income housing operations.
	The Company also holds interests in other VIEs that have not been consolidated because the Company is not considered the primary beneficiary. The Company’s total investment in these VIEs was $5.7 million and $3.8 million as of 2007 and 2006, respectively, which are accounted for under the equity or cost methods of accounting as applicable to the individual investments. These investments were included in Other Assets in the consolidated statements of financial condition.
24.	RELATED PARTY TRANSACTIONS
	At December 31, 2007 and 2006, certain directors, executive officers, principal holders of the Company’s common stock, associates of such persons, and affiliated companies of such persons were indebted, including undrawn commitments to lend, to the Bank in the aggregate amount of $0.4 million and $0.6 million, respectively.
	Commitments to lend to related parties as of December 31, 2007 and 2006 were comprised of $0 and $0.6 million, respectively, to directors and $0.01 million and $0.03 million, respectively, to executive officers. The commitments are in the form of loans and guarantees for various business and personal interests. This indebtedness was incurred in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time of comparable transactions with unrelated parties. This indebtedness does not involve more than the normal risk of repayment or present other unfavorable features.
	None of the Company’s affiliates, officers, directors or employees has an interest in or receives renumeration from any special purpose entities or qualified special purpose entities which the Company transacts business.
	The Company maintains a written policy and procedures covering related party transactions. These procedures cover transactions such as employee-stock purchase loans, personal lines of credit, residential secured loans, overdrafts, letter of credit and increases in indebtedness. Such transactions are subject to the Bank’s normal underwriting and approval procedures. Prior to the loan closing, the Bank’s Senior Loan Committee must approve and determine whether the transaction requires approval from or a post notification be sent to the Company’s Board of Directors.

67

25.	PARENT COMPANY FINANCIAL INFORMATION
	Beneficial Mutual Bancorp, Inc.
	CONDENSED STATEMENTS OF FINANCIAL CONDITION - PARENT COMPANY ONLY
	(Dollars in thousands, except per share amounts)

	December 31,
	2007			2006
ASSETS
Cash on deposit at the Bank	$	4,491		$	4,547
Interest-bearing deposit at the Bank		44,960			—
Interest-bearing deposits at non-affiliated banks		107			100
Investment in the Bank		562,569			268,469
Investment in Statutory Trust		774			—
Investment securities available-for-sale		11,698			7,639
Loan Receivable from the Bank (interest earning)		15,500			—
Receivable from the Bank		288			—
Accrued Interest from the Bank		186			—
Deferred Income Taxes		3,147			—
Other assets		1,480			35
TOTAL ASSETS	$	645,200		$	280,790
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Payable to the Bank		—			1
Accrued and other liabilities		68			374
Accrued Interest Payable		71			—
Statutory Trust Debenture		25,264			—
Total liabilities		25,403			375
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Preferred Stock - $.01 par value; 100,000,000 shares authorized, none issued or outstanding as of December 31, 2007; none authorized issued or outstanding as of December 31, 2006
Common Stock - $.01 par value 300,000,000 shares authorized, 82,264,600 shares issued and outstanding as of December 31, 2007; $1.00 par value 100,000 shares authorized, 100 shares issued and outstanding as of December 31, 2006		823			—
Additional paid-in capital		360,126			—
Unearned common stock held by employee stock ownership plan		(30,635	)		—
Retained earnings		291,360			293,157
Accumulated other comprehensive loss		(1,877	)		(12,742	)
Total stockholders’ equity		619,797			280,415
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	645,200		$	280,790

68

Beneficial Mutual Bancorp, Inc.

CONDENSED STATEMENTS OF OPERATIONS - PARENT COMPANY ONLY

(Dollars in thousands, except per share amounts)

	December 31,
	2007			2006			2005
INCOME
Dividends from the Bank	$	—		$	7,368		$	1,000
Interest on interest-bearing deposits with the Bank		271			—			—
Interest from non-affilated banks		4			4			1
Interest and dividends on investment securities		245			49			52
Interest on loan to the Bank		186			—			—
Realized gain/(loss) on securities available-for-sale		(915	)		(57	)		77
Other income		26			—			—
Total income		(183	)		7,364			1,130
EXPENSES
Expenses paid to the Bank		4			12			11
Interest expense		876			—			—
Charitable contributions		10,000			5			—
Other expenses		546			11			12
Total expenses		11,426			28			23
(Loss) income before income tax benefit and equity in undistributed net income of affiliates		(11,609	)		7,392			1,153
Income tax (benefit) expense		3,695			(31	)		32
Equity in undistributed net income of the Bank		6,369			4,258			12,125
Net (loss) income	$	(1,545	)	$	11,625		$	13,200

69

Beneficial Mutual Bancorp, Inc.

CONDENSED STATEMENTS OF CASH FLOWS - PARENT COMPANY ONLY

(Dollars in thousands, except per share amounts)

	December 31,
	2007			2006			2005
OPERATING ACTIVITIES:
Net income (loss)	$	(1,545	)	$	11,625		$	13,200
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Contribution of stock to The Beneficial Foundation		9,491			—			—
Equity in undistributed net earnings of subsidiaries		(6,369	)		(4,258	)		(12,125	)
Investment securities (gains) losses		(277	)		57			(77	)
Impairment on equity securities		1,192			—			—
Accrued interest receivable		1,496			(4	)		—
Accrued interest payable		(74	)		—			—
Net intercompany transactions		968			—			—
Amortization of debt		8			—			—
Deferred income taxes		(2,948	)		—			—
Changes in assets and liabilities that provided (used) cash:
Other liabilities		68			(62	)		16
Other assets		(426	)		(29	)		—
Net cash provided by operating activities		1,584			7,329			1,014
INVESTING ACTIVITIES:
Dividends of investment securities from the Bank					(3,768	)
Purchases of investment securities available-for-sale		(9,431	)		436			335
Proceeds from sales and maturities of investment securities available-for-sale		5,577			(508	)		(380	)
Net change in money market account balance		(1,896	)
Cash paid in business combination		(62,913	)
Investment in the Bank		(77,888	)
Advance to the Bank		(10,000	)
Net cash used in investing activities		(156,551	)		(3,840	)		(45	)
FINANCING ACTIVITIES:
Cash proceeds from stock offering		232,379			—			—
Cash dividends		(252	)		—			—
Loan to employee stock ownership plan		(32,248	)		—			—
Net cash used in financing activities		199,879			—			—
NET INCREASE IN CASH AND CASH EQUIVALENTS		44,912			3,489			969
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		4,647			1,158			89
CASH AND CASH EQUIVALENTS, END OF YEAR	$	49,559		$	4,647		$	1,158

70

26.	CONSOLIDATED SUMMARY OF QUARTERLY EARNINGS (UNAUDITED)
	(Dollars in thousands, except per share amounts)
	The following table presents summarized quarterly data for 2007 and 2006

2007	1st Quarter		2nd Quarter		3rd Quarter			4th Quarter			Total Year
Total interest income	$	31,381	$	32,208	$	46,511		$	47,793		$	157,894
Total interest expense		15,994		15,682		20,393			21,705			73,774
Net interest income		15,387		16,526		26,118			26,088			84,120
Provision for loan losses		300		—		—			2,170			2,470
Net interest income after provision for loan losses		15,087		16,526		26,118			23,918			81,650
Total non-interest income		2,844		2,690		3,779			4,058			13,372
Total non-interest expense		15,982		17,080		35,411			32,559			101,032
(Loss) income before income taxes		1,949		2,136		(5,514	)		(4,583	)		(6,010	)
Income tax (benefit) expense		200		225		(475	)		(4,415	)		(4,465	)
Net (loss) income	$	1,749	$	1,911	$	(5,039	)	$	(168	)	$	(1,545	)
Basic and diluted earnings per common share (1)	$	0.03	$	0.03	$	(0.08	)	$	(0.00	)	$	(0.03	)

2006	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Total Year
Total interest income	$	30,491	$	31,323	$	32,476	$	33,037	$	127,326
Total interest expense		14,416		15,243		16,464		16,773		62,896
Net interest income		16,075		16,080		16,012		16,264		64,430
Provision for loan losses		600		600		375		—		1,575
Net interest income after provision for loan losses		15,475		15,480		15,637		16,264		62,855
Total non-interest income		3,068		2,442		2,435		2,586		10,531
Total non-interest expense		14,846		14,907		14,588		15,098		59,439
Income before income taxes		3,697		3,015		3,484		3,752		13,947
Income tax expense		927		576		502		317		2,322
Net income	$	2,770	$	2,439	$	2,982	$	3,435	$	11,625
Basic and diluted earnings per common share (1)	$	0.06	$	0.05	$	0.07	$	0.08	$	0.25

(1) EPS is computed independently for each period. The sum of the individual quarters may not be equal to the annual EPS.

************************************

71

INVESTOR AND CORPORATE INFORMATION

Market for Common Equity and Related Stockholder Matters

          The Company’s common stock is listed on the Nasdaq Global Select Market (“Nasdaq”) under the trading symbol “BNCL.” The following table sets forth the high and low sales prices of the Company’s common stock from July 16, 2007, the first day of trading of the Company’s common stock, through December 31, 2007, as reported by Nasdaq. The Company has not paid any dividends to its stockholders to date. See Item 1, “Business—Regulation and Supervision—Restrictions on Dividends.” As of March 21 2008, the Company had approximately 3,111 holders of record of common stock.

2007:	High		Low
First Quarter		N/A		N/A
Second Quarter		N/A		N/A
Third Quarter	$	9.75	$	8.70
Fourth Quarter	$	10.02	$	9.29

72

Stock Performance Graph

The following graph compares the cumulative total return of the Company’s common stock with the cumulative total return of the SNL Mid-Atlantic Thrift Index and the Index for the Nasdaq Stock Market (U.S. Companies, all Standard Industrial Classification, (“SIC”)). The graph assumes $100 was invested on July 16, 2007, the first day of trading of the Company’s common stock. Cumulative total return assumes reinvestment of all dividends.

	Period Ending
Index		07/16/07		07/31/07		08/31/07		09/30/07		10/31/07		11/30/07		12/31/07
Beneficial Mutual Bancorp, Inc.	$	100.00	$	99.67	$	103.15	$	105.86	$	104.34	$	105.86	$	105.54
NASDAQ Composite		100.00		94.40		96.26		100.15		106.00		98.65		98.33
SNL Mid-Atlantic Thrift Index		100.00		93.91		101.01		102.71		99.42		93.98		90.79

73

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-144749 on Form S-8 of our report dated March 31, 2008 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 158 on December 31, 2006), relating to the consolidated financial statements of Beneficial Mutual Bancorp, Inc. and subsidiaries appearing in this Annual Report on Form 10-K of Beneficial Mutual Bancorp, Inc. for the year ended December 31, 2007.

/s/ Deloitte & Touche LLP

Philadelphia, Pennsylvania
March 31, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Gerard P. Cuddy certify that:
1.	I have reviewed this Annual Report on Form 10-K of Beneficial Mutual Bancorp, Inc.:
2.	Based on my knowledge, this annual 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 annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) 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 annual report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period covered by this annual report based on such evaluation; and
	(c)	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 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 31, 2008
	/s/ Gerard P. Cuddy
	Gerard P. Cuddy
	President and Chief Executive Officer
	(principal executive officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Joseph F. Conners certify that:
1.	I have reviewed this Annual Report on Form 10-K of Beneficial Mutual Bancorp, Inc.:
2.	Based on my knowledge, this annual 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 annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) 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 annual report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as the end of the period covered by this annual report based on such evaluation; and
	(c)	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 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 31, 2008	/s/ Joseph F. Conners
	Joseph F. Conners
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADDED BY
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Annual Report of Beneficial Mutual Bancorp, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. §1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

/s/ Gerard P. Cuddy

Gerard P. Cuddy

President and Chief Executive Officer

/s/ Joseph F. Conners

Joseph F. Conners

Executive Vice President and Chief

Financial Officer

March 31, 2008