10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2005

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

for the transition period from                      to                     

Commission file number 0-15261.

BRYN MAWR BANK CORPORATION

(Exact name of registrant as specified in its charter)

Pennsylvania	23-2434506
(State of other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
801 Lancaster Avenue, Bryn Mawr, Pennsylvania	19010
(Address of principal executive offices)	(Zip Code)

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

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

Title of each class	Name of each exchange on which registered
NONE	NONE

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

Common Stock ($1 par value)

(Title of Class)

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

Yes  x    No  ¨

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

Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (& 229 405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated filer    ¨ Accelerated filer    x Non-accelerated filer    ¨

Indicate by checkmark whether the Registrant is a shell company (as defined by Rule 126-2 of the Exchange Act):

Yes  ¨    No  x

The aggregate market value of shares of common stock held by non-affiliates of Registrant (including fiduciary accounts administered by affiliates*) was $173,866,000 on June 30, 2005.

As of December 31, 2005 there were 8,556,255 shares of common stock outstanding.

Documents Incorporated by Reference: Parts I, II and IV - Portions of Registrant’s Annual Report to Shareholders for the year ended December 31, 2005, as indicated, Parts I and III - Definitive Proxy Statement of Registrant filed with respect to the Registrant’s 2006 Annual Meeting of Shareholders to be held on April 25, 2006 with the Commission pursuant to Regulation 14A.

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

The exhibit index is on pages 17 through 19. There are 88 pages in this report.

Form 10-K

Bryn Mawr Bank Corporation

Index

Item No.		Page
	Part I
1.	Business	1
1A.	Risk Factors	10
1B.	Unresolved Staff Comments	12
2.	Properties	12
3.	Legal Proceedings	12
4.	Submission of Matters to a Vote of Security Holders	12
	Part II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuers Purchase of Equity Securities	12
6.	Selected Financial Data	13
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)	13
7A.	Quantitative and Qualitative Disclosures about Market Risk	13
8.	Financial Statements and Supplementary Data	13
9.	Change in and Disagreements with Accountants on Accounting and Financial Disclosure	14
9A.	Controls and Procedures	14
	Part III
10.	Directors and Executive Officers of the Registrant	14
11.	Executive Compensation	16
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	16
13.	Certain Relationships and Related Transactions	16
14.	Principle Accounting Fees and Services	17
	Part IV
15.	Exhibits and Financial Statement Schedules	17

UNLESS OTHERWISE INDICATED, ALL INFORMATION IS AS OF MARCH 1, 2006.

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements contained in this report may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Bryn Mawr Bank Corporation (the “Corporation”) to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements with respect to the Corporation’s financial goals, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, mortgage servicing rights, the effect of changes in accounting standards, and market and pricing trends loss. The words “expect,” “anticipate,” “intended,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. The Corporation’s actual results may differ materially from the results anticipated by the forward-looking statements due to a variety of factors, including without limitation:

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

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

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

• changes in accounting requirements or interpretations;

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

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

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

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

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

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

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

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

• technological changes being more difficult or expensive than anticipated;

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

All written or oral forward-looking statements attributed to the Corporation are expressly qualified in their entirety by use of the foregoing cautionary statements. All forward-looking statements included in this Report are based upon information presently available, and the Corporation assumes no obligation to update any forward-looking statements.

PART I

ITEM 1. BUSINESS

GENERAL

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

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

The Corporation competes in a highly competitive market area and includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many regulatory agencies including the SEC, NASD, FDIC, the Federal Reserve and the Pennsylvania Department of Banking.

WEBSITE DISCLOSURES

The Corporation makes available, free of charge through its website, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonable practical after the reports are electronically filed with the Securities and Exchange Commission (“SEC”). These reports can be obtained by logging onto the Corporation’s website at www.bmtc.com and clicking on Bryn Mawr Bank Corporation’s SEC Filings.

OPERATIONS

• Bryn Mawr Bank Corporation

The Corporation has no active staff as of December 31, 2005. The Corporation holds the stock of the Bank and the Joseph W. Roskos & Company, Inc. (“JWR”). Additionally, the Corporation performs several functions including shareholder communications, shareholder recordkeeping, the distribution of dividends and the periodic filing of reports and payment of fees to NASDAQ, the SEC and other regulatory agencies.

A complete list of directors and executive officers of the Corporation and the Bank, as of March 1, 2006 is incorporated by reference to the last page of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

• The Bryn Mawr Trust Company

The Bank is engaged in commercial and retail banking business, providing basic banking services, including the acceptance of demand, time and savings deposits and the making of commercial, real estate and consumer loans and other extensions of credit. The Bank also provides a full range of wealth management services including trust and estate administration, investment advisory services, pension and profit sharing administration, custody and trust and tax preparation. As of December 31, 2005, the market value of assets under management and administration administered by the Bank’s Wealth Management Division was $2,248,000,000.

The Corporation, through its Bank subsidiary, is gradually expanding its branch footprint through the establishment of de-novo branch offices. The Corporation opened the Newtown Square, PA office in March, 2004 and the Exton, PA office in April, 2005. The Corporation presently has 8 full service branch offices, plus 7 retirement community locations. Plans are in place to relocate the Wynnewood, PA branch office to a new branch office in Ardmore, PA in the fourth quarter of 2006, and establish a new branch in the West Chester, PA area in 2007. Additionally, other branch sites are under review and consideration. See the section titled “COMPETITION” later in this item for additional information.

At December 31, 2005, the Corporation had 220 full time and 35 part time employees, equaling 237.5 full time equivalent staff.

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OTHER OPERATING SUBSIDIARIES OF THE BANK

The Bank has three operating subsidiaries providing various services as described below:

• Insurance Counsellors of Bryn Mawr, Inc.

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

ICBM employs five licensed insurance agents. ICBM generated $460 thousand of revenue during 2005. ICBM employees are included in the Corporation’s employment numbers above.

• BMT Settlement Services, Inc.

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

BMTS’ primary market area is located in southeastern Pennsylvania. BMTS is housed in the main office of the Bank, located at 801 Lancaster Avenue, Bryn Mawr, PA 19010. During 2005, BMTS earned $152 thousand in revenues. BMTS had no employees as of December 31, 2005.

• BMT Mortgage Services, Inc.

BMT Mortgage Services, Inc. (“BMTM”) began operations in February, 2005. BMTM is a member in BMT Mortgage Company, LLC, which was established in 2005 to provide mortgage services to customers of Keller Williams’ Bryn Mawr, PA office. Under the terms of the operating agreement, BMTM has a 40% interest in the entity, will perform certain accounting and administrative functions, and will process certain mortgage applications for a fee. BMTM is a wholly owned subsidiary of the Bank.

SOURCES OF THE CORPORATION’S REVENUE

• Continuing Operations

The following table shows the percentage of consolidated revenues from continuing operations (after intercompany eliminations).

(dollars in thousands)	2005				2004				2003
Interest Income on Loans and Investments	$	37,968	67.6	%	$	31,381	61.3	%	$	29,261	52.4	%
Other Banking Fees including Insurance		3,488	6.2	%		3,678	7.2	%		3,529	6.3	%
Wealth Management Segment		11,542	20.5	%		10,303	20.1	%		9,736	17.4	%
Mortgage Banking Segment		3,215	5.7	%		5,813	11.4	%		13,312	23.9	%
Total Revenues from Continuing Operations	$	56,213	100.0	%	$	51,175	100.0	%	$	55,838	100.0	%

See Note 24, Segment Information, in the Notes to the Consolidated Financial Statements for additional information.

• Discontinued Operations

Joseph W. Roskos & Co., Inc. (“JWR”) was acquired as of January 1, 1999 as a wholly owned subsidiary of the Corporation to offer high quality personalized family business office services to high net worth individuals, including accounting, tax preparation services, consulting and fiduciary support services. During 2003, Corporation management determined that JWR was not attaining its strategic goals and that it would be in the best interest of the Corporation to discontinue offering family business office services through JWR. The Corporation negotiated the sale of substantially all of the assets of JWR effective June 30, 2003 to Private Family Office, Inc. which is owned by the former president of JWR. JWR is a wholly owned subsidiary of the Corporation. See Note 20, Discontinued Operations, in the Notes to Consolidated Financial Statements for additional information.

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STATISTICAL INFORMATION

The statistical information required in this Part I Item I is incorporated by reference to the information appearing in the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005 in the sections captioned Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and Financial Statements and Supplementary Data.

• Financial Information About Segments

The financial information concerning the Corporation’s business segments is incorporated by reference to the MD&A of the Corporation’s Annual Report to the shareholders for the year ended December 31, 2005 and Note 24, Segment Information, to the financial statements accompanying that Annual Report.

COMPETITION

The Corporation and its subsidiaries including the Bank compete for deposits, loans and wealth management services in Delaware, Montgomery, Chester and Philadelphia Counties in southeastern Pennsylvania. The Corporation has a significant presence in the affluent Philadelphia suburbs known as the “Main Line”. The Corporation has eight full service branches and seven limited service offices in life care communities.

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

The Corporation is able to compete with the other firms because of its consistent level of customer service, excellent reputation, professional expertise, full product line, competitive rates and fees.

SUPERVISION AND REGULATION

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

Regulation of the Corporation

• The Bank Holding Company Act

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

The Act prohibits the Federal Reserve Board from approving a bank holding company’s application to acquire a bank or bank holding company located outside the state in which the operations of its banking subsidiaries are principally conducted, unless such acquisition is specifically authorized by statute of the state in which the bank or bank holding company to be acquired is located. Pennsylvania law permits bank holding companies located in any state to acquire Pennsylvania banks and bank holding companies, provided that the home state of the acquiring company has enacted “reciprocal” legislation. In this context, reciprocal legislation is generally defined as legislation that expressly authorizes Pennsylvania bank holding companies to acquire banks or bank holding companies located in another state on terms and conditions substantially no more restrictive than those applicable to such an acquisition in Pennsylvania by a bank holding company located in the other state.

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The Act requires each bank holding company to obtain prior approval by the Federal Reserve Board before it may acquire (i) direct or indirect ownership or control of more than 5% of the voting shares of any company, including another bank holding company or a bank, unless it already owns a majority of such voting shares, or (ii) all, or substantially all, of the assets of any company. The Act provides that the Federal Reserve Board shall not approve any acquisition by a bank holding company of more than 5% of the voting shares or substantially all of the assets of a bank located outside of the state in which the operation of the holding company’s bank subsidiaries are principally conducted, unless such acquisition is specifically authorized by a statute of the state in which the bank whose shares are to be acquired is located.

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

The Act further provides that the Federal Reserve Board shall not approve any such acquisition that would result in a monopoly or would be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the country, or that in any other manner would be in restraint of trade, unless the anti-competitive effects of the proposed transactions are clearly outweighed by the public interest and the probable effect of the transaction in meeting the convenience and needs of the communities to be served.

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

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

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

• Financial Institutions Reform, Recovery and Enforcement Act

Following enactment by the United States Congress, on August 9, 1989, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) became law. Although the more significant provisions of FIRREA relate to promoting the economic viability of thrift institutions through more stringent capital requirements and changes to the regulatory structure of such institutions, FIRREA also contains provisions that directly affect banks and bank holding companies, such as the Corporation. First, FIRREA abolished the Federal Savings and Loan Insurance Corporation and required the Federal Deposit Insurance Corporation (the “FDIC”) to establish two separate funds, the Bank Insurance Fund (“BIF”) to insure banks and the Savings Association Insurance Fund (“SAIF”) to insure savings and loan associations. Second, FIRREA amended the Act to permit bank holding companies to acquire thrift institutions. Prior to FIRREA, bank holding companies were permitted to acquire only failing thrift institutions. FIRREA also abolished the restrictions on tandem operations of acquired thrift institutions and the in-state preference for acquisitions of failing thrifts. Finally, FIRREA enhanced the authority of the regulatory authorities over financial institutions, including banks and bank holding companies, to regulate more effectively with the entire structure of a bank holding company.

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

• Federal Deposit Insurance Corporation Improvement Act of 1991

The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) is legislation designed to reform and provide funding for the deposit insurance system by, among other things, requiring early intervention and closure of troubled institutions by the regulatory authorities and the resolution of failed institutions on the least-cost basis.

The FDICIA substantially alters the deposit insurance assessment process. The requirement that the FDIC provide at least sixty (60) days notice before requiring changes to the semiannual insurance assessment has been removed and the FDIC has the ability to change deposit insurance assessment rates much more rapidly than in the past. FDICIA grants the FDIC the authority to impose special “emergency” assessments on member banks at any time if necessary to pay interest or principal on borrowings or for other appropriate purposes. FDICIA also requires the FDIC to establish a risk-based assessment system for the deposit insurance funds. In addition, FDICIA establishes capital categories, such as, “well-capitalized”, “adequately capitalized”, “undercapitalized”, “significantly undercapitalized”, and “critically undercapitalized”. Under the guidelines currently issued by the regulators, the Bank is currently considered “well-capitalized”.

FDICIA also requires the regulators to place a financial institution under more intense scrutiny if its capital falls into a lower capital category. In addition, FDICIA restricts the liquidity that is available, through the Federal Reserve discount window, to troubled financial institutions and increases the scope of the regulatory authorities supervisory powers over financial institutions, including the Bank and Corporation.

Pursuant to federal law, federal regulatory authorities review the performance of the Corporation and their subsidiaries in meeting the credit needs of the communities served by the Bank. The applicable federal regulatory authority considers compliance with this law in connection with applications for, among other things, approval of branches, branch relocations and acquisitions of banks and bank holding companies.

Pennsylvania Laws Affecting the Corporation

• Pennsylvania Anti-Takeover Legislation

The Corporation is also subject to the Pennsylvania Business Corporation Law of 1988, as amended and the general business and other laws of the Commonwealth of Pennsylvania regulating corporations.

The Pennsylvania Legislature passed the Pennsylvania Anti-Takeover Law Act 36 of the 1990 Pennsylvania Legislature (“Act 36”) on April 27, 1990 which adds additional provisions to and amends the law of Pennsylvania concerning business corporations (the “Corporation Law”). Specifically, Act 36 (i) modifies and limits the fiduciary obligations of a corporation’s directors, withholds voting rights from control shares of corporation stock until consent of the Corporation’s independent shareholders is obtained at a shareholders meeting, prevents “green mail” by providing for disgorgement of certain profits by a control person or group within eighteen (18) months after an attempt to acquire control of a corporation. Act 36 also provides for severance compensation for certain terminated employees following control share acquisitions, and regulates the effect of certain business combinations on labor contracts.

Act 36, which is the Legislature’s response to the large volume of hostile takeovers over recent years, contains provisions which permitted a corporation’s board of directors to “opt-out” of certain provisions of the Act by explicitly amending the corporation’s by-laws on or before July 26, 1990. On July 20, 1990, the Corporation’s Board amended the Corporation’s by-laws to explicitly opt-out of the provisions of Act 36 which modify and limit a director’s fiduciary duty to the Corporation, withhold voting rights from “control shares” of the Corporation stock, and provide for disgorgement of certain profits on certain shares of the Corporation stock by a control person or group within eighteen months after an attempt to acquire the Corporation’s stock. Because the Corporation’s Board of Directors opted out of the provisions of Act 36 concerning fiduciary duty, control share acquisitions, and disgorgement of profits, the severance compensation and labor contract provisions of Act 36 are inapplicable to the Corporation.

The Corporation’s Board opted-out of those provisions of the Act by amending the Corporation’s by-laws because it believed that those provisions of the Act were not in the best economic interests of the Corporation’s shareholders. In

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addition, the Board believed that, without those provisions of Act 36, the Board has sufficient flexibility under the applicable law to protect the interest of the shareholders. As outlined in the Corporation’s definitive proxy statement for the 1992 shareholders’ meeting, the Board of Directors recommended that the Corporation’s shareholders ratify and approve the amendment to the Corporation’s by-laws opting out of Act 36.

In February, 2006, the Pennsylvania Legislature amended the Corporation Law regarding the removal of directors by shareholders. The Amendment provides that unless there is a specific and unambiguous statement in a corporation’s articles of incorporation that directors may be removed from office without cause, directors of a corporation having a classified board of directors, pursuant to its articles of incorporation or a by-law adopted by the shareholders, may be removed from office by the shareholders only for cause.

• Shareholder Rights Plan

The Corporation adopted a Shareholder Rights Plan to enhance and protect the value of the shareholders’ investment in the Corporation and discourage unfair or financially inadequate takeover proposals and abusive takeover practices. The Plan provides for distribution of rights to purchase shares of the Corporation’s common stock. The rights would be distributed to shareholders as a dividend at a rate of one right for each share of common stock held by shareholders of record. The rights will be exercisable only if a person or group acquires beneficial ownership of twenty percent or more of the Corporation’s common stock.

• Regulation of the Bank

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

• Federal Reserve Board and Department of Banking Regulations

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

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

The Bank is insured by the FDIC, which currently insures the Bank’s deposits to a maximum of $100,000 per depositor. For this protection, each insured bank pays a semiannual statutory insurance assessment and is subject to certain rules and regulations of the FDIC. The amount of FDIC assessments paid by individual insured depository institutions, such as the Bank, is based on their relative risk as measured by regulatory capital ratios and certain other factors. Under this system, in establishing the insurance premium assessment for each bank, the FDIC will take into consideration the probability that the deposit insurance fund will incur a loss with respect to an institution, and will charge an institution with perceived higher inherent risks a higher insurance premium. The FDIC will also consider the different categories and concentrations of assets and liabilities of the institution, the revenue needs of the deposit insurance fund, and any other factors the FDIC deems relevant. A significant increase in the assessment rate or a special additional assessment with respect to insured deposits could have an adverse impact on the results of operations and capital levels of the Bank or the Corporation.

In February, 2006, Congress passed the Federal Deposit Insurance Reform Act of 2005. This legislation will merge the Bank Insurance Fund and the Savings Association Insurance Fund into one fund, increase insurance coverage for

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retirement accounts to $250,000, adjust the maximum deposit insurance for inflation after March 31, 2010 and give the FDIC greater flexibility in setting insurance assessments.

• Regulation of the Corporation — Government Monetary Policies

The earnings and operations of the Corporation and its subsidiaries are affected by the policies of regulatory authorities and legislative changes; in particular, the policies of the Federal Reserve Board in regulating the money supply and interest rates. Among the instruments used by the Federal Reserve Board to implement its objectives are open-market operations in U.S. Government securities, changes in the discount rate for member bank borrowings, changes in reserve requirements against bank deposits, and changes with respect to regulations affecting certain borrowing by banks and their affiliates.

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

The earnings of the Bank and, therefore, of the Corporation are affected by domestic economic conditions, particularly those conditions in the trade area as well as the monetary and fiscal policies of the United States government and its agencies. The payment of dividends by the Bank through the Corporation is the source on which the Corporation currently depends to pay dividends to its shareholders.

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

The passage of additional legislation by Congress authorizing additional continuing legal and regulatory supervision of financial institutions, requiring additional disclosure concerning deposit transactions and permitting more rapid increases in deposit insurance premiums may increase the cost and the operational expenses even for efficiently run and well-capitalized financial institutions and may adversely affect the profit margins of the Bank and the Corporation.

• Risk Based Capital Guidelines

The Federal Reserve Board has promulgated certain “Risk Based Capital Guidelines” which more narrowly define bank capital, as it relates to assets, than do prior regulatory guidelines. Under the guidelines, various types of Corporation assets are assigned risk categories and weighted based on their relative risk. In addition, certain off balance sheet items are translated into balance sheet equivalents and also weighted according to their potential risk. The sum of both of these asset categories, referred to as Total Risk Weighted Assets, is then compared to the Corporation’s total capital, providing a Tier I Capital Ratio, under the guidelines. A Tier II capital ratio is also computed for the Corporation, adding an allowable portion of the loan loss reserve to capital. Both the Tier I and Tier II ratios of the Corporation are in excess of those minimum capital ratios required. The focus of the guidelines is to measure the Corporation’s capital risk. The guidelines do not explicitly take into account other risks, such as interest rate changes or liquidity.

The Bank in its normal business originates off-balance sheet items, such as outstanding loan commitments and standby letters of credit. The Bank makes loan commitments to borrowers to assure the borrower of financing by the Bank for a specified period of time and/or at a specified interest rate. The obligation to the Bank, pursuant to an unfunded loan commitment, is limited by the terms of the commitment letter and other loan documentation issued by the Bank to each borrower. The Bank carefully reviews outstanding loan commitments on a periodic basis. A standby letter of credit is an instrument issued by the Bank, which represents a contingent obligation to make payments with respect to a specific transaction of a customer. The Bank carefully evaluates the creditworthiness of each of its letter of credit customers. The Corporation carefully monitors its risks as measured by the Risk Capital Guidelines and seeks to adhere to the Risk Capital Guidelines.

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• Financial Services Act

On March 11, 2000 the Financial Services Act of 1999 (the “FSA”), sometimes referred to as the Gramm-Leach-Bliley Act, became effective. The FSA repealed provisions of the Glass-Steagall Act, which had prohibited commercial banks and securities firms from affiliating with each other and engaging in each other’s businesses. Thus, many of the barriers prohibiting affiliations between commercial banks and securities firms have been eliminated.

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

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

• Privacy of Consumer Financial Information

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

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

The Regulators, among other things, provide guidance concerning what are “nonpublic personal information”, “consumers”, and “customers”, as well as about the required timing for notices to customers and the means by which customers can exercise their rights to opt-out of disclosure of their personal information.

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

• Consumer Protection Rules – Sale of Insurance Products

In addition, as mandated by the FSA, the Regulators have published consumer protection rules (the “Rules”) which apply to the retail sales practices, solicitation, advertising or offers of insurance products, including annuities, by depository institutions such as banks and their subsidiaries.

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

8

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

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

• The Fair and Accurate Credit Reporting Transactions Act

The Fair and Accurate Credit Reporting Transactions Act of 2003 (the “Fact Act”) became law on December 4, 2003. Among other things, the Fact Act permanently extended the provisions of the Fair Credit Reporting Act (the “FCR Act”) that would have expired on January 1, 2004 and had prevented the states from enforcing credit reporting laws that were more restrictive than the FCR Act provisions.

Specifically, the Fact Act now permanently prohibits the states from enforcing laws stricter that the Fact Act that regulate: the prescreening of consumer reports, (2) the time within which credit bureaus must respond to consumer disputes, (3) the duties of users of credit bureau information, (4) the information contained in the credit reports, (5) the duties of information providers, and (6) the exchange of credit information between affiliates.

The Fact Act also contains provisions designed to reduce identity thief and protect the confidentiality of a consumer’s private medical information. In addition the Fact Act contains provisions concerning (i) how often consumers may obtain free copies of their credit reports, (ii) the disclosure of credit scores used for credit decisions, (iii) a consumers opt-out procedure for exchange of credit information, that would otherwise be treated as a credit report, among affiliates, (iv) the duty of lenders to notify consumers that information contained in their credit reports resulted in their receiving credit on less than the most favorable terms.

• Sarbanes-Oxley Act

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

To implement the requirements of the Sarbanes-Oxley Act and its implementing regulations, Management, in 2004 (and continued in 2005), instituted a series of actions to strengthen and improve the Corporation’s already strong corporate governance practices. Included in those actions was the amendment and restatement of the Corporation’s code of business conduct and ethics and enhancement of our current systems designed to evaluate and monitor the continued effectiveness of the design and operation of the Corporation’s internal controls and procedures for financial reporting. The Corporation’s and the Bank’s systems of internal controls and procedures, which are in place, are designed to capture information from all segments of its business.

KPMG LLP (“KPMG”), the Corporation’s Independent Registered Public Accounting Firm, has issued an attestation report that management’s assessment that the Corporation maintained effective internal control over financial reporting as of December 31, 2005 is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Also in their opinion, KPMG stated that the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on COSO. The external cost of compliance with the Sarbanes-Oxley Act was approximately $470,000 in 2004 (which included approximately $250,000 to Jefferson Wells, an independent consultant) and $190,000 in 2005.

This series of actions described above by the Corporation’s and the Bank’s Management compliments and improves the Corporation’s long-standing committees, particularly the Audit Committees and Risk Management Committees of the Boards of the Corporation and the Bank, as well as, the adoption of a charter by the nominating committees of the Corporation’s and the Bank’s Board of Directors and the Corporation’s and Bank’s structures and processes which have

9

consistently provided an invaluable tool for strengthening internal controls, communications and disclosure of necessary information to those who must know and use it.

The rules and regulations, discussed above, which implement the Sarbanes-Oxley Act had a significant economic impact on the compliance cost of the Corporation and all publicly traded companies. It is not possible to assess the future impact on the Corporation or the Bank of any of the foregoing regulations and proposed regulations.

• Patriot Act of 2001

The Patriot Act of 2001, which was enacted in the wake of the September 11, 2001 attacks, includes provisions designed to combat international money laundering and advance the U.S. government’s war against terrorism. The Patriot Act and the regulations, which implement it, contain many obligations which must be satisfied by financial institutions, including the Bank, which will involve additional expenses for the Bank.

• Government Policies and Future Legislation

As the enactment of the FSA and the Sarbanes-Oxley Act confirm, from time to time, various laws are passed in the United States Congress as well as Pennsylvania legislature and by various bank regulatory authorities which would alter the powers of, and place restrictions on, different types of banks and financial organizations. Among current proposals of significance to the Corporation or its subsidiaries are the continued liberalization of the restrictions on the acquisitions of out-of-state banks by bank holding companies, the expansion of the powers of banks and thrift institutions, the liberalization of the restrictions upon the activities in which bank holding companies may engage, the imposition of limitations on service charges, elimination of the prohibition of paying interest on business deposit accounts, certain consumer legislation and the requirement to provide certain basic banking services. It is impossible to predict whether any of the proposals will be adopted and the impact, if any, of such adoption on the business of the Corporation or its subsidiaries, especially the Bank.

ITEM 1A. RISK FACTORS

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

• Future loan losses may exceed the Corporation’s allowance for loan losses

The Corporation is subject to credit risk, which is the risk of losing principal or interest due to borrowers’ failure to repay loans in accordance with their terms. A downturn in the economy or the real estate market in the Corporation’s market area or a rapid change in interest rates could have a negative effect on collateral values and borrowers’ ability to repay. This deterioration in economic conditions could result in losses to the Corporation in excess of loan loss allowances. To the extent loans are not paid timely by borrowers, the loans are placed on non-accrual, thereby reducing interest income. To the extent loan charge-offs exceed the Corporation’s projections, increased amounts allocated to the provision for loan losses would reduce income.

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

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

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• A General Economic Slowdown Could Impact Wealth Management Divisions Revenues

A general economic slowdown might decrease the value of Wealth Division assets under management and administration resulting in lower fee income. Such an economic downturn might also result in Wealth Division clients seeking alternative investment opportunities with other providers, resulting in lower fee income to the Corporation.

• Slower than anticipated growth in new branches and from lower than expected new business could result in reduced net income

The Corporation has placed a strategic emphasis on expanding the branch network through the opening of new branch locations. Executing this strategy carries risks of slower than anticipated growth in new branch locations and from lower than expected loan, deposit and other income from these new branches. New branches require a significant investment of both financial and personnel resources. Lower than expected loan, deposit and other revenue growth in new branches could result in additional expenses, lower revenue and might divert resources from current core operations, ultimately reducing net income.

• The financial services industry is very competitive

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

• Decreased mortgage origination, volume and pricing decisions of competitors

The Corporation originates, sells and services mortgage loans. Changes in interest rates and pricing decisions by our loan competitors affect demand for the Corporation’s mortgage loan products, the revenue realized on the sale of loans and revenues received from servicing such loans for others, ultimately reducing the Corporation’s net income.

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

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

• Changes in securities analysts estimates of financial performance

• Volatility of stock market prices and volumes

• Rumors or erroneous information changes in market values of similar companies

• New developments in the banking industry

• Variations in quarterly or annual operating results

• New litigation or changes in existing litigation

• Regulatory actions

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

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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

As part of the main office complex, the Corporation leases two buildings and owns a third building. Two of these buildings have accounting and other administrative functions and the Corporation’s Wealth Division. One of the three buildings is subleased to a tenant through 2006.

The Corporation’s operations center and Wayne branch office are located in a two story building in Wayne, PA, approximately 6 miles from the main office complex. The Corporation owns that building.

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

The Corporation recently entered into a ground lease for a new branch location in Ardmore, PA. with the goal of relocating the Wynnewood PA. Branch.

Total monthly minimum lease payments for office, branch office (including ground leases) and life care community locations amounts to $65,000 per month.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, which is required to be disclosed pursuant to the instructions contained in the form for this report.

PART II

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

• Price Range of Shares

The information required by this Item 5 is incorporated by reference to the information appearing under the caption “Price Range of Shares” on the last page of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

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• Issuers Purchases of Equity Securities

The following tables present the repurchasing activity of the Corporation during the fourth quarter of 2005:

Shares Repurchased in the 4^th Quarter of 2005 were as follows: ^{(1) (2) (3)}

Period:	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
Oct. 1, 2005 – Oct. 31, 2005	1,036	$	21.22	$	—	48,994
Nov. 1, 2005 – Nov. 30, 2005	10,325		21.06		10,000	38,994
Dec. 1, 2005 – Dec. 31, 2005	1,260		21.47		—	38,994
Total	12,621	$	21.11	$	10,000	38,994

Notes to these tables:

(1) The Corporation was authorized in 2003 to repurchase an amount of Corporation’s stock not to exceed the lesser of $7.500 million or 4% of the then outstanding shares of common stock, or 348,094 shares (the “2003 Program”). During 2005, the Corporation repurchased 95,500 shares of Corporation’s stock under the 2003 Program, having an average cost of $20.84 per share. During the fourth quarter of 2005, the Corporation repurchased 10,000 shares of the Corporation’s stock at an average price of $21.05. The 2003 Program was cancelled on February 24^th, 2006. All shares purchased through the 2003 Program were accomplished in open market transactions.

(2) On February 24, 2006, the Corporation announced a new stock repurchase program (the “2006 Program”) under which the Corporation may repurchase up to 450,000 shares of the Corporation’s common stock, not to exceed $10 million. There is no expiration date on the 2006 Program.

(3) The 2,621 shares purchased by the Corporation’s Thrift Plan were purchased through open market transactions by the Corporation’s Wealth Management Division investment personnel.

ITEM 6. SELECTED FINANCIAL DATA

The information required by this Item 6 is incorporated by reference to the information appearing under the caption “Selected Financial Data” in the financial section of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS (“MD&A”)

The information required by this Item 7 is incorporated by reference to the information appearing under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the financial section of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The quantitative and qualitative disclosures about market risks are included in the MD&A, in various sections beginning with “Net Interest Income” through “Contractual Cash Obligations of the Corporation”.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and the auditor’s report thereon and supplementary data required by this Item 8 are incorporated by reference to the financial section of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

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ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

• Evaluation of Disclosure Controls and Procedures

The Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Frederick C. Peters II and Chief Financial Officer, J. Duncan Smith, CPA, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2005 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures as of December 31, 2005, are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s periodic SEC filings.

• Changes in Internal Control over Financial Reporting

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

• Management’s Report on Internal Control over Financial Reporting

The information required in this Item 9A is incorporated by reference to the financial section of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

• Report of Independent Registered Public Accounting Firm

The information required in this Item 9A is incorporated by reference to the financial section of the Corporation’s Annual Report to Shareholders for the year ended December 31, 2005.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information with respect to Directors of the Corporation is incorporated by reference to the definitive proxy statement of the Corporation which is expected to be filed on or around March 13, 2006 with the SEC pursuant to Regulation 14A.

The Committees of the Corporation’s Board of Directors are incorporated by reference to the definitive proxy statement of the Corporation which is expected to be filed on or around March 13, 2006 with the SEC pursuant to Regulation 14A.

Each member of the Audit Committee is independent and financially literate as defined by NASDAQ. The Board of Directors of the Corporation has determined that William Harrell is a financial expert as defined by SEC regulations.

The Boards of Directors of the Corporation and the Bank have determined that all of its members are independent and meet the independence requirements of The NASDAQ Stock Market (“NASD”), except for Frederick C. Peters, II. Because Mr. Peters is the President and Chief Executive Officer of the Corporation and the Bank, he is not independent as defined by NASD. Mr. Peters also serves as Chairman of the Corporation and the Bank.

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• Executive Officers of the Corporation and the Bank

Below is certain information with respect to the executive officers of the Corporation and Bank as of March 1, 2006:

NAME	AGE AS OF MARCH 1, 2006	OFFICE WITH THE CORPORATION AND/OR BANK
Frederick C. Peters II	56	President and Chief Executive Officer and Chairman of Corporation and Bank
Alison E. Gers	48	Executive Vice President of Bank – Community Banking Division, Marketing, Technology and Information, Services and Operations
Joseph G. Keefer	47	Executive Vice President of Bank - Chief Lending Officer
John Pickering	50	Executive Vice President of Bank – Wealth Management Division
J. Duncan Smith, CPA	47	Treasurer and Chief Financial Officer of Corporation and Executive Vice President, Treasurer & Chief Financial Officer of Bank
Robert J. Ricciardi	57	Secretary of Corporation and Executive Vice President and Secretary of Bank, Chief Credit Policy Officer

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

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

• Mr. Keefer was employed by the Bank as Vice President and Commercial Lending manager in March 1991. He was promoted to Senior Vice President of Commercial and Real Estate Lending Services in July 1994 and was made the Bank’s Chief Lending Officer in December 1997. In December 2002 Mr. Keefer assumed responsibility for the Bank’s Credit Division which included Commercial and Real Estate Lending, Consumer and Small Business Lending, BMT Mortgage and Loan Operations. In February 2001, Mr. Keefer was designated Executive Vice President and Chief Lending Officer of the Bank.

• Mr. Pickering was appointed Executive Vice President of the Bank in charge of the Wealth Management Division in April, 2004. From January, 2001 through April 2004, Mr. Pickering was a Managing Director with Brown Brothers Harriman & Co. a private banking firm, and was responsible for the Americas Financial Institutions Department within the Global Custody Division. From March, 2002 through June, 2003, Mr. Pickering was also the Managing Director of Brown Brothers Harriman Investor Services, Ltd. in London. Prior to that, Mr. Pickering was a Senior Vice President at Brown Brothers Harriman in the Global Custody Division from July, 1998 through January, 2001. In addition to his management duties, Mr. Pickering was responsible for relationship management and business development for banking, custody and investment management clients.

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

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

None of the above executive officers has any family relationship with any other executive officer or with any director of the Corporation or Bank.

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

ITEM 11. EXECUTIVE COMPENSATION

• The information required by this Item 11 is incorporated by reference to the definitive proxy statement of the Corporation, filed with the SEC pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the information required to be disclosed for the Corporation’s Equity Compensation Plan.

Equity Compensation Table:

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options	(b) Weighted-average exercise price of outstanding options		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	934,308	$	17.44	21,064
Equity compensation plans not approved by security holders	—		—	—
Total	934,308	$	17.44	21,064

The Corporation has agreed to pay and its non-employee independent directors have agreed to accept payment of their annual $12,500 retainer compensation in the form of Corporation common stock, payable in April of each year at the market value of the stock on the day prior to day of payment. If all of the Corporation’s non-employee independent directors, including the directors elected at the annual meeting (seven directors) on April 2006, continue this compensation arrangement, for their 2006-2007 terms as directors, it is estimated, based on the $21.66 per share market price of the Corporation’s stock on December 31, 2005, that such directors, as a group, will receive an aggregate of 4,040 shares of the Corporation’s common stock as retainer compensation.

Additional information required by this Item 12 is incorporated by reference to the Corporation’s definitive proxy statement, filed with the SEC pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

• There were no relationships or transactions required to be disclosed in this Item 13 pursuant to the instructions contained in the form for this report, as discussed in the Corporation’s definitive proxy statement, filed with the SEC pursuant to Regulation 14A.

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ITEM 14. PRINCIPLE ACCOUNTING FEES AND SERVICES

• The information required by this Item 14 is incorporated by reference to the definitive proxy statement of the Corporation, filed with the SEC pursuant to Regulation 14A.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following exhibits are filed as a part of this report.

EXHIBIT TABLE

• 3 - Articles of Incorporation and By-Laws

(A)   (i) Articles of Incorporation, effective August 8, 1986, are incorporated by reference to Form S-4 of the Registrant, No. 33-9001.

(ii) Amendment to the Articles of Incorporation, effective April 23, 1998.

(iii) Articles of Merger / Consolidation, effective April 1, 1999.

(B) By-Laws of the Registrant, incorporated by reference as amended and restated January 20, 2000.

• 4 - Instruments defining the rights of security holders

(A) Articles of Incorporation and By-Laws: See Item 3(A) & (B) above.

(B) Shareholders Rights Plan: incorporated by reference to 8-K filed with the SEC on November 25, 2003.

• 10 - Material Contracts

(A) The Bryn Mawr Bank Corporation Amended and Restated 1986 Stock Option and Stock Appreciation Plan, is hereby incorporated by reference to the Corporation’s Proxy Statement dated march 14, 1994 and filed with the Commission as Appendix A to the proxy Statement on March 15, 1994.

(B) License Agreement dated December 30, 1994, between Bryn Mawr Bank Corporation and FIServ Cir, Inc. is incorporated by reference to the Corporation’s 10-K, filed with the Securities and Exchange Commission on March 31, 1995.

(C) The Bryn Mawr Bank Corporation Non-Employee Directors Stock Option Plan, is hereby incorporated by reference to the Corporation’s Proxy Statement dated March 10, 1995 and filed with the Commission as Appendix A to the Proxy Statement on March 10, 1995.

(D) The Bryn Mawr Bank Corporation 1998 Stock Option Plan, is hereby incorporated by reference to the Corporation’s Proxy Statement dated March 2, 1998 and filed with the Securities and Exchange Commission as Exhibit A to the Proxy Statement.

(E) Agreement dated January 1, 1999 between Bryn Mawr Brokerage Company, Inc. and UVEST Financial Services Group, Inc., to provide brokerage support services to BM Brokerage is incorporated by reference to the Corporation’s Form 10-K filed with the Securities and Exchange Commission on March 30, 1999.

(F) Lease dated March 1, 1999 between The Bryn Mawr Trust Company and Anthony J. Marcozzi and The Real Viking, Inc. for the property and the buildings known as 2 and 6 Bryn Mawr Avenue. The term of this lease is for an initial period of twenty-nine years with the option to extend for one-ten year period with the same terms and conditions as the initial lease. The lease is hereby incorporated by reference to the Corporation’s Form 10-K, filed with the Securities and Exchange Commission on March 30, 2000.

(G) Employment Agreement dated January 11, 2001 between Bryn Mawr Bank Corporation and Frederick C. Peters II is incorporated by reference to the Corporation’s From 10-K, filed with the Securities and Exchange Commission on March 30, 2001.

17

(H) The Bryn Mawr Bank Corporation 2001 Stock Option Plan, is hereby incorporated by reference to the Corporation’s Proxy Statement dated March 8, 2001 and filed with the Securities and Exchange Commission on March 8, 2001 as Appendix B to the Proxy Statement.

(I) Addendum, dated August 15, 2001, to the License agreement between Bryn Mawr Bank Corporation and Fiserv Solutions, Inc. dated December 30, 1994 is incorporated by reference to the Corporation’s Form 10-K, filed with the SEC on March 30, 2002.

(J) Amendment dated August 8, 2002 to the Agreement between Bryn Mawr Brokerage Company, Inc. and UVEST Financial Services, Group, Inc. dated January 1, 1999 and incorporated by reference to the Corporation’s Form 10-K filed with the SEC on March 30, 1999, to include The Bryn Mawr Trust Company as Subscriber to the original contract is incorporated by reference to the Corporation’s Form 10-K, filed with the Securities and Exchange Commission on March 26, 2003.

(K) Letter agreement between The Bryn Mawr Trust Company and John Pickering, dated March 24, 2004, describing the terms of his employment by the Bank is incorporated by reference to the Corporation’s Form 10-K, filed with the Securities and Exchange Commission on March 7, 2005.

(L) Bryn Mawr Bank Corporation 2004 Stock Option Plan is incorporated by reference to the Form S-8, filed with the Securities and Exchange Commission on March 15, 2004.

(M) Master Services agreement dated September 16, 2003, effective August 1, 2004 and an amendment to the master services agreement dated March 2, 2004, between SEI Investment Management Corporation and The Bryn Mawr Trust Company to provide data processing services for the Bank’s trust accounts incorporated by reference to the Corporation’s Form 10-K filed with the Securities and Exchange Commission on March 7, 2005.

(N) Agreement dated September 16, 2003, effective August 1, 2004, between The Bryn Mawr Trust Company and SEI Private Trust Company, to provide mutual fund clearing services for the Bank’s trust customers is incorporated by reference to the Corporations’ Form 10-K, filed with the Securities and Exchange Commission on March 7, 2005.

• 13 - Annual Report to Security Holders

The Registrant’s 2005 Annual Report to Shareholders is attached herewith as Exhibit 13.

• 21 - Subsidiaries of the Registrant

Subsidiaries of the Corporation:

Name	State of Incorporation	Status
The Bryn Mawr Trust Company	Pennsylvania	Active
Bryn Mawr Financial Services, Inc.	Pennsylvania	Inactive
Bryn Mawr Advisors, Inc.	Pennsylvania	Inactive
Bryn Mawr Brokerage Co., Inc.	Pennsylvania	Inactive
Joseph W. Roskos Co., Inc.	Pennsylvania	Active
Bryn Mawr Asset Management, Inc.	Pennsylvania	Inactive
Bryn Mawr Finance, Inc.	Delaware	Inactive

Subsidiaries of the Bank:

Name	State of Incorporation	Status
Insurance Counsellors of Bryn Mawr, Inc.	Pennsylvania	Active
BMT Settlement Services, Inc.	Pennsylvania	Active
BMT Mortgage Services, Inc.	Pennsylvania	Active

• 23 - Consent of Independent Registered Public Accounting Firms

.1  - Consent of KPMG LLP filed herewith as Exhibit 23.1.

.2  - Consent of PricewaterhouseCoopers LLP filed herewith as exhibit 23.2.

18

• 31 - Certification of Annual Report

.1  - Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

.2  - Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

• 32 - Certification Pursuant to 18 U.S.C. Section 1350

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

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

• 99 – Additional Exhibits

(A) Registrant’s Proxy Statement for its 2006 Annual Meeting to be held on April 25, 2006, was expected to be filed with the Securities and Exchange Commission on or around March 13, 2006 and is incorporated by reference as Exhibit 99(A).

(B) Report of PricewaterhouseCoopers, independent auditors for year ended December 31, 2003 dated February 27, 2004, attached hereto as Exhibit 99(B).

(b) INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS:

• Report of Independent Registered Public Accounting Firm

The report of Independent Registered Public Accounting Firm, KPMG LLP, as pertaining to the Consolidated Financial Statements of Bryn Mawr Bank Corporation for 2005 and related notes is incorporated by reference to the Corporation’s 2005 Annual Report to Shareholders.

• Consolidated Financial Statements and Related Notes

The Consolidated Financial Statements and related Notes are incorporated by reference to the financial section of the Corporation’s 2005 Annual Report to Shareholders: See the index to the financial statements for the specific page references.

• Supplementary Data

Quarterly Results of Operations are incorporated by reference to the information under the caption “Selected Quarterly Financial Data (Unaudited)”, in Note 22 of the financial section of the Corporation’s Annual Report to Shareholders for the fiscal years ended December 31, 2005 and 2004.

Financial Statement Schedules are omitted because of the absence of the conditions under which they are required or because the information called for is included in the Consolidated Financial Statements or Notes thereto.

19

• Exhibits:

For information regarding exhibits, including those incorporated by reference, see pages 17 through 19 of this report.

SIGNATURES

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

(Registrant) Bryn Mawr Bank Corporation
By (Signature and Title)	/s/    J. Duncan Smith, Treasurer and Chief Financial Officer

Date March 13, 2006

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

NAME	TITLE	DATE
/S/    FREDERICK C. PETERS II         Frederick C. Peters II	Chairman, President and Chief Executive Officer (Principal Executive Officer) and Director	March 10, 2006
/S/    J. DUNCAN SMITH, CPA         J. Duncan Smith	Treasurer and Chief Financial Officer (Principal Financial and Principal Accounting Officer)	March 10, 2006
/S/    DAVID E. LEES	Director	March 9, 2006
David E. Lees
/S/    ANDREA F. GILBERT         Andrea F. Gilbert	Director	March 9, 2006
/S/    WILLIAM HARRAL, III	Director	March 9, 2006
William Harral, III
	Director	March     , 2006
Wendell F. Holland
/S/    FRANCIS J. LETO         Francis J. Leto	Director	March 9, 2006
/S/    B. LOYALL TAYLOR, JR.	Director	March 9, 2006
B. Loyall Taylor, Jr.
	Director	March     , 2006
Nancy J. Vickers
	Director	March     , 2006
Thomas A. Williams

20

EX-13

Exhibit 13

Commission File No. 0-15261

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

THE SECURITIES AND EXCHANGE ACT OF 1934

For the Year Ended December 31, 2005

BRYN MAWR BANK CORPORATION

ANNUAL MEETING

The Annual Meeting of Shareholders of Bryn Mawr Bank Corporation will be held in The Gregg Conference Center at The American College, Bryn Mawr, Pennsylvania, on Tuesday, April 25, 2006, at 2:00 p.m.

STOCK LISTING

Bryn Mawr Bank Corporation common stock is traded over-the-counter and is listed on the NASDAQ National Market System under the symbol BMTC.

FORM 10-K

A copy of the Corporation’s Form 10-K, including financial statement schedules as filed with the Securities and Exchange Commission, is available without charge to shareholders upon written request to Robert J. Ricciardi, Secretary, Bryn Mawr Bank Corporation, 801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010-3396, or via e-mail to bricciardi@bmtc.com.

EQUAL EMPLOYMENT OPPORTUNITY

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

BRYN MAWR BANK CORPORATION

By expanding our network of branches and reaching out to new markets, our goal is to position Bryn MawrTrust as the dominant community bank and wealth management group in the region.

LETTER FROM THE CHAIRMAN

Dear Fellow Shareholders:

It is a pleasure to write to you this year and to report on the excellent progress of the Corporation in 2005. Earnings were up 29.4%, when adjusted for the one-time sale of “mortgage servicing rights” in 2004, and our return-on-equity and return-on-assets ratios of 15.44% and 1.66% respectively, put us among the top banks in the nation in terms of financial performance.

Leading the way was a tremendous performance by our Wealth Management Group, which in 2005 increased its assets under management and administration to $2.25 billion, up 16.0% over 2004. Similarly, our Business Banking group, led by Marty Gallagher, had another strong year as we continued to attract clients who are tired of the large, out-of-town banks that unfortunately dominate the Philadelphia banking scene.

Our strategy of concentrating on our core competencies is working.

Our strategy of sticking to the basics, on executing our straightforward and uncomplicated business plan, and of concentrating on our core competencies is working!

In March of 2005, we opened our eighth full-service office in Exton, which is in the heart of fast-growing Chester County. Annette McNee is heading up our efforts in that region and we are on target to meet our initial year’s projections. In addition, we are currently negotiating the construction of a regional Chester County office in the West Chester area. This large facility would house a Business Banking team as well as Wealth Management personnel, along with a full-service retail branch. To be successful in Chester County, we must have a meaningful presence there.

Furthermore, we will be building a new facility in Ardmore at a superb site providing good access and egress, excellent visibility, and a very high traffic-count. The projected completion date is November 2006. The full-service banking operation that we conduct from our Wynnewood office, which suffers from poor visibility and access, will be relocated to the Ardmore facility.

Accompanying all this good news are some serious challenges for 2006 and beyond. Attracting quality deposits to fund our loan growth is becoming more and more difficult. This is my 30th year in the banking industry and I have never seen deposit generation as competitive as it is now. A second serious challenge is protecting our balance sheet against the time when interest rates begin to fall. As our balance sheet is currently structured, rising interest rates benefit Bryn Mawr Trust because we re-price loans upward at a faster pace than we re-price deposits. In a falling rate environment, the opposite is true, resulting in a decline in net interest income. Not

PAGE TWO

BRYN MAWR BANK CORPORATION

only are we attempting to book more fixed rate loans to help correct this imbalance, but we are also examining other solutions such as interest rate swaps and floors.

Like you, I have been disappointed that despite our outstanding results, we have not seen a commensurate increase in the price of our shares. While the value of the stock has gone up 105% over the past five years, it has not done much of anything the last two years. To help address this problem, we have engaged an investor relations firm, Gregory FCA Communications, to enable us to tell our story better to the investment community. This is the same firm that has given our Wealth Management Group national visibility on television and in the print media.

I would like to note the retirement of Bill Harral from the Board of Directors after a decade of extraordinary service. Bill has been a major contributor to the success of this institution in many ways, but especially in the areas of corporate governance and organizational effectiveness. He will be missed.

As always, thank you for being a shareholder of the Corporation. Please call me on my direct line at 610-581-4800 if I can help you in any way.

Sincerely,

Ted Peters

Chairman and Chief Executive Officer

PAGE THREE

FINANCIAL HIGHLIGHTS 2005

Consolidated Financial Highlights

(Dollars in thousands, except per share amounts)

	2005			2004			CHANGE
FOR THE YEAR
Net interest income	$	31,368		$	26,828		$	4,540		16.9	%
Net interest income after loan loss provision		30,606			25,928			4,678		18.0
Other income		18,245			19,794			(1,549	)	-7.8
Other expenses		31,573			31,625			(52	)	-0.2
Income taxes		5,928			4,752			1,176		24.7
Net income		11,350			9,345			2,005		21.5
AT YEAR-END
Total assets	$	727,226		$	682,946		$	44,280		6.5	%
Total loans		597,930			564,597			33,333		5.9
Total deposits		636,260			600,965			35,295		5.9
Shareholders’ equity		77,513			71,238			6,275		8.8
Wealth assets under management and administration		2,248,000			1,938,000			310,000		16.0
PER COMMON SHARE
Basic earnings per common share	$	1.33		$	1.09		$	0.24		22.0	%
Diluted earnings per common share		1.31			1.07			0.24		22.4
Dividends declared		0.42			0.40			0.02		5.0
Book value		9.06			8.29			0.77		9.3
Closing price		21.66			21.99			(0.33	)	-1.5
SELECTED RATIOS
Return on average assets		1.66	%		1.45	%
Return on average shareholders’ equity		15.44			13.67
Net interest margin		5.00			4.57
Efficiency ratio		63.64			64.97

Note: Net income, earnings per share and selected ratios are from net income from continuing operations.

See Note 14, earnings per share, in the Notes to the Consolidated Financial Statements.

Primary Corporate Strategies

• Expand our footprint in targeted communities

• Concentrate on our core competencies: business banking, wealth management, mortgage services and value-added retail banking

• Maintain obsessive client service

• Cultivate aggressive sales culture

• Exercise diligent control of expenses

PAGE FOUR

BRYN MAWR BANK CORPORATION

SHAREHOLDERS’ EQUITY	DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS	ASSETS UNDER MANAGEMENT AND ADMINISTRATION
(Dollars in millions)	(Dollars)	(Dollars in billions)
TOTAL ASSETS	TOTAL LOANS	TOTAL DEPOSITS
(Dollars in millions)	(Dollars in millions)	(Dollars in millions)

* Reclassified for comparative purposes

PAGE FIVE

THE YEAR IN REVIEW 2005

Repositioning for Growth Based on a Foundation of Superior Client Service

Bryn Mawr Bank Corporation’s principal subsidiary, The Bryn Mawr Trust Company, was founded in 1889. Its eight full-service branches serve residents and businesses in the affluent

Executive Vice President and Chief Financial Officer

J. Duncan Smith oversees the Corporation’s financial well-being.

Net Interest Income shows a 16.9% increase in 2005.

“Main Line” suburbs of Philadelphia. It also maintains seven limited service offices located in upscale adult communities throughout the region. Bryn Mawr Trust has an extremely attractive clientele, including high-net-worth individuals, successful small businesses, and active adults who value the Bank’s long-standing tradition of providing excellent personal service.

In an effort to maximize the effectiveness of the organization, the responsibilities of the executive management team were realigned.

Community Banking now reports to Alison Gers in order to leverage her extensive retail and marketing experience. Marketing, Information Services and Banking & Trust Operations continue to report to her. Loan Operations now reports to Chief Financial Officer Duncan Smith to consolidate accounting resources, streamline processes, and to enable Chief Lending Officer Joe Keefer to concentrate all his efforts on developing new credit business. Bob Ricciardi continues as Corporate Secretary and Chief Credit Policy Officer. In addition, Human Resources and Facilities now report to him as well as Risk Management and Insurance Counsellors, the Corporation’s full-service insurance agency. His special focus is on managing new branch construction.

PAGE SIX

BRYN MAWR BANK CORPORATION

Growth Strategies Identified for Expanding the Footprint of our Branch Network

The Corporation’s growth strategy, which guides the selection of potential branch sites, targets two entirely different types of neighborhoods:

• Older, established neighborhoods that share similar demographic characteristics as established Bryn Mawr Trust branches. A good example of this type of target market is Newtown Square, where we opened a branch in 2004.

• Newer neighborhoods that provide exposure to growing communities with a high concentration of businesses. Our Exton Office, which opened in 2005, fits this profile.

Executive Vice President Robert J. Ricciardi focuses on managing

new branch construction for the Corporation.

New Exton branch deposits and loans are on target.

There are two branch initiatives expected to be announced in 2006. A handsome new building is to be constructed in Ardmore, which will be the new home for our Wynnewood office. Estimated completion date for this project is November of 2006. The other new branch location will involve a site in Chester County.

Construction of our new Exton Branch on Route 100 was completed in early 2005. The Branch began doing business in March with an official ribbon-cutting ceremony and a public grand opening in April. A reception for the business community followed in May. All these activities were well attended.

PAGE SEVEN

THE YEAR IN REVIEW 2005

A Myriad of Promotional Initiatives Foster the Development of an Aggressive Sales Culture

Throughout 2005, many initiatives were held to promote the Exton Branch. There were several direct mail campaigns supported by media blitzes, sweepstakes drawings, and special product offers. The Bank sponsored a free public summer concert, had free ice cream Saturdays, gave away bottled water at the train station, participated in Exton’s Little League Opening Day, and exhibited at the Exton Chamber of Commerce’s Business Expo.

Senior Vice President June M. Falcone discusses bank operations

with Executive Vice President Alison E. Gers who is responsible for

Community Banking, including Operations.

Positioning to meet the challenge of attracting quality deposits.

All of these efforts are designed to spotlight Bryn Mawr Trust as an integral part of the community. Special public events are planned for 2006. First on the docket is an open house to introduce our Wealth Management professionals and the services they provide to the Chester County business community.

Proven to be a successful initiative, the Share-the-Client Program started in 2001 is still going strong. This program rewards the efforts of staff members for making referrals to services provided by business units other than the one where they work. During 2005, there were 2,336 employee referrals generated — about the same number of referrals that were generated in 2004. The amount of revenue produced by the referrals in 2005 showed a 38% increase over revenues resulting from 2004 referrals.

PAGE EIGHT

BRYN MAWR BANK CORPORATION

High-touch Lending Services: the Hallmark of a Bryn Mawr Trust Lender

Our lending professionals continue to base all business development efforts on building banking relationships with privately-owned businesses, non-profits, quality residential builders and owners of commercial real estate. In addition, Bryn Mawr Trust continues to provide high-touch retail lending services to individuals throughout the Delaware Valley. For our lenders, whether commercial or retail, their ultimate overriding goal is establishing long-lasting relationships with individuals and businesses.

Executive Vice President and Chief Lending Officer Joseph G. Keefer

with Senior Vice President Martin F. Gallagher, Jr., who is in charge of

Commercial Lending.

Average loans increase by 8.1% in 2005.

The small business package of services, which was introduced in 2004, still gaining acceptance in the small business community. It has also provided our team small business lenders with a perfect entrée into the Exton Area business community.

Our Residential Mortgage business is still an important segment of the financial services that we provide for our customers, despite the effect of rising mortgage interest rates and the possible impending slowdown of residential construction. There are many efforts in place to heighten the awareness for this part of our business, primarily via newspaper and other forms of print advertising.

Based on the theory that an educated consumer is an excellent prospect for future business, plans were set in motion to present free homeownership seminars to the public. These seminars will provide, firsthand: information concerning real estate financing, homeowners insurance, home warranties, inspections and other important aspects of the ever-changing real estate market. The first program in this series is scheduled to be held in March of 2006.

PAGE NINE

THE YEAR IN REVIEW 2005

Wealth Management Professionals Continue to Gain Prominence in Financial Industry

Our Wealth Management Division provides comprehensive trust & estate services, investment management, retirement planning, brokerage, custody and philanthropic services, and tax planning & preparation. During the year 2005, the assets managed and administered by this Division surpassed the two billion-dollar mark.

Gilbert B. Mateer, Senior Vice President Wealth Management and

President of Retirement Services, with John Pickering, Executive

Vice President and Head of Wealth Management.

2005 Wealth Management assets up 16%.

Wealth Management staff members belong to a variety of professional, civic and philanthropic organizations. Many serve as board members. By doing so, they come in contact with many community leaders and high-net-worth individuals. The group sponsored special events and seminars to win referrals from financial intermediaries and sources of influence. The topics addressed in 2005 included: A New Framework for Tax Advisors, What’s New in Tax Planning, Enhancing the Advisor/Client Relationship, and Intervention Tips for Families in Crisis.

In September 2005, Gilbert B. Mateer joined Bryn Mawr Trust Wealth Management Group as President of Bryn Mawr Retirement Services and Senior Vice President of Business Development. He is responsible for acquiring new business with an emphasis on corporate executives, and family business owners with complex wealth management requirements.

Retirement Services manages 401k and qualified retirement plans on behalf of corporations and other entities. The demand for these services is expected to rise as more companies discontinue traditional pension plans.

PAGE TEN

BRYN MAWR BANK CORPORATION

Our Investment Managers and Wealth Consultants are Nationally Recognized for Their Expertise

During 2005, Bryn Mawr Trust wealth management professionals continued to be sought after for their opinions on current and future market conditions. Their views have been aired on CNBC, Bloomberg Radio and Television, and Fox News. They have been quoted in Barron’s, Forbes, SmartMoney, Buyside Magazine, the New York Times, the Chicago Tribune and other publications.

Miguel L. Biamon, Vice President and Chief Fixed Income Manager with

F. Peter Brodie, Senior Vice President and Director of Investments.

John M. Grib, Senior Vice President and Portfolio Manager, has been heard on KYW NewsRadio Market Reports for over five years. With his holiday stock report, broadcast on January 2, 2006, he achieved the milestone of having provided 1,000 market updates to KYW listeners.

Wealth professionals gain nationwide visibility.

In addition to its comprehensive menu of financial services, Wealth Management also brings the latest in financial information to our clients, referral sources, prospects and the public at large. The Economic Forecast & Market Review is issued quarterly and provides a handy synopsis of current market conditions. BMT in The News is a quarterly newsletter providing highlights of media appearances by our Wealth Management professionals. Wealth Watch, issued twice a year, provides general financial information, industry updates and the latest developments and news from the Wealth Management Division.

PAGE ELEVEN

THE YEAR IN REVIEW 2005

Corporate Information

CORPORATE HEADQUARTERS

801 Lancaster Avenue

Bryn Mawr, Pennsylvania 19010-3396

610-525-1700

www.bmtc.com

DIRECTORS

Andrea F. Gilbert

President, Bryn Mawr Hospital

William Harral, III

Chairman, C&D Technologies, Inc.; President,

The Barra Foundation

Wendell F. Holland

Chairman, Pennsylvania Public Utilities Commission

David E. Lees

Senior Partner, myCIO Wealth Partners

Francis J. Leto

Partner, Celli and Leto, LLP, Attorneys at Law;

President, The Brandywine Abstract Companies

Frederick C. “Ted” Peters II

Chairman, President and Chief Executive Officer,

Bryn Mawr Bank Corporation and

The Bryn Mawr Trust Company

B. Loyall Taylor, Jr.

President, Taylor Gifts, Inc.

Nancy J. Vickers

President, Bryn Mawr College

Thomas A. Williams

Retired, formerly Vice President,

Secretary/Treasurer,

Houghton International, Inc.

MARKET MAKERS

Boenning & Scattergood

Citigroup Global Markets

Goldman, Sachs & Co.

Janney Montgomery LLC

Keefe, Bruyette & Woods Inc.

Knight Equity Markets, L.P.

Lehman Brothers Inc.

McConnell Budd & Romano, Inc.

Morgan Stanley & Co., Inc.

Ryan Beck &Co., Inc.

UBS Capital Markets L.P.

UBS Securities LLC

AUDITORS

KPMG LLP

1601 Market Street

Philadelphia, Pennsylvania 19103-2499

REGISTRAR & TRANSFER AGENT

Mellon Investor Services L.L.C.

P.O. Box 3315

South Hackensack, NJ 07606

www.mellon-investor.com

PRINCIPAL SUBSIDIARY

The Bryn Mawr Trust Company

A Subsidiary of Bryn Mawr Bank Corporation

EXECUTIVE MANAGEMENT

Frederick C. “Ted” Peters II*

Chairman, President and Chief Executive Officer

Alison E. Gers

Executive Vice President, Retail Banking,

Marketing, Information Systems & Operations

Joseph G. Keefer

Executive Vice President and Chief Lending Officer

John Pickering

Executive Vice President, Wealth Management

Robert J. Ricciardi*

Executive Vice President, Chief Credit Policy Officer and Corporate Secretary

J. Duncan Smith*

Executive Vice President and Chief Financial Officer

* Also officer of the Corporation

BRANCH OFFICES

801 Lancaster Avenue

Bryn Mawr, Pennsylvania 19010

237 North Pottstown Pike

Exton, Pennsylvania 19341

18 West Eagle Road

Havertown, Pennsylvania 19083

3601 West Chester Pike

Newtown Square, PA 19073

39 West Lancaster Avenue

Paoli, Pennsylvania 19301

330 East Lancaster Avenue

Wayne, Pennsylvania 19087

One Tower Bridge

West Conshohocken,

Pennsylvania 19428

312 East Lancaster Avenue

Wynnewood, Pennsylvania 19096

WEALTH MANAGEMENT DIVISION

10 South Bryn Mawr Avenue

Bryn Mawr, Pennsylvania 19010

LIMITED SERVICE OFFICES

Beaumont at Bryn Mawr Retirement Community

Bryn Mawr, Pennsylvania

Bellingham Retirement Living

West Chester, Pennsylvania

Martins Run Life Care Community

Media, Pennsylvania

Rosemont Presbyterian Village

Rosemont, Pennsylvania

The Quadrangle

Haverford, Pennsylvania

Waverly Heights

Gladwyne, Pennsylvania

White Horse Village

Newtown Square, Pennsylvania

OTHER SUBSIDIARIES AND FINANCIAL SERVICES

BMT Mortgage Company

A Department of The Bryn Mawr Trust Company

Bryn Mawr, Pennsylvania

Myron H. Headen, President

BMT Mortgage Services, Inc.

A Subsidiary of The Bryn Mawr Trust Company

Bryn Mawr, Pennsylvania

Joseph G. Keefer, Chairman

Myron H. Headen, President

Bryn Mawr Retirement Services

A Department of The Bryn Mawr Trust

Company’s Wealth Management Division

Bryn Mawr, Pennsylvania

Gilbert B. Mateer, President

BMT Settlement Services, Inc.

A Subsidiary of The Bryn Mawr Trust Company

Bryn Mawr, Pennsylvania

Joseph G. Keefer, Chairman

Myron H. Headen, President

Insurance Counsellors of Bryn Mawr, Inc.

A Subsidiary of The Bryn Mawr Trust Company

Bryn Mawr, Pennsylvania

Thomas F. Drennan, President

LEGAL COUNSEL

Monteverde, McAlee & Hurd,P.C.

One Penn Center at Suburban Station

1617 John F. Kennedy Boulevard Suite 1500

Philadelnhia Pennsylvania 19103-1815

PAGE TWELVE

BRYN MAWR BANK CORPORATION ANNUAL REPORT 2005

Selected Financial Data 1

Management’s Discussion and Analysis of Financial Condition and Results of Operations 2

Management’s Report on Internal Control over Financial Reporting 15

Report of Independent Registered Public Accounting Firm on Management’s Report on Internal Control over Financial Reporting 16

Report of Independent Registered Public Accounting Firm 17

Consolidated Balance Sheets 18

Consolidated Statements of Income 19

Consolidated Statements of Cash Flows 20

Consolidated Statements of Changes in Shareholders’ Equity 21

Consolidated Statement of Comprehensive Income 21

Notes to Consolidated Financial Statements 22

Price Range of Shares 37

Selected Financial Data

For the years ended December 31,	2005			2004			2003			2002			2001
	(dollars in thousands, except for share and per share data)
Interest income	$	37,968		$	31,381		$	29,261		$	29,412			30,311
Interest expense		6,600			4,553			4,330			4,484			6,302
Net interest income		31,368			26,828			24,931			24,928			24,009
Loan loss provision		762			900			750			1,000			1,200
Net interest income after loan loss provision		30,606			25,928			24,181			23,928			22,809
Non-interest income		18,245			19,794			26,577			23,899			18,846
Non-interest expense		31,573			31,625			33,437			31,642			28,199
Income before income taxes and discontinued operations		17,278			14,097			17,321			16,185			13,456
Applicable income taxes		5,928			4,752			6,049			5,543			4,524
Income from continuing operations		11,350			9,345			11,272			10,642			8,932
(Loss) income from discontinued operations		—			—			(1,916	)		(435	)		194
Net Income	$	11,350		$	9,345		$	9,356		$	10,207		$	9,126
Per share data
Earnings per common share from continuing operations:
Basic	$	1.33		$	1.09		$	1.30		$	1.22		$	1.03
Diluted *	$	1.31		$	1.07		$	1.29		$	1.21		$	1.01
Earnings per common share
Basic	$	1.33		$	1.09		$	1.08		$	1.17		$	1.05
Diluted *	$	1.31		$	1.07		$	1.07		$	1.16		$	1.04
Dividends declared	$	.42		$	0.40		$	0.40		$	0.38		$	0.36
Weighted-average shares outstanding		8,563,027			8,610,171			8,657,527			8,706,390			8,651,040
Dilutive potential common shares *		101,200			110,854			103,107			84,606			165,216
Adjusted weighted-average shares		8,664,227			8,721,025			8,760,634			8,790,996			8,816,256
At December 31,	2005			2004			2003			2002			2001
	(dollars in thousands)
Total assets	$	727,226		$	682,946		$	604,848		$	577,242		$	476,823
Earning assets		665,667			628,754			547,637			520,562			427,805
Total loans		597,930			564,597			502,416			466,975			400,849
Deposits		636,260			600,965			527,139			483,620			391,059
Shareholders’ equity		77,513			71,238			67,382			62,607			57,307
Ratio of equity to assets		10.66	%		10.43	%		11.14	%		10.85	%		12.02	%
Loans serviced for others		417,649			507,421			797,326			631,105			442,373
Wealth assets under management & administration		2,248,000			1,938,000			1,752,000			1,551,000			1,708,000
For the years ended December 31,	2005			2004			2003			2002			2001
Selected financial ratios:
Net interest margin		5.00	%		4.57	%		4.83	%		5.47	%		5.99	%
Income from continuing operations to:
Average total assets		1.66	%		1.45	%		1.98	%		2.01	%		2.05	%
Average shareholders’ equity		15.44	%		13.67	%		17.76	%		17.26	%		16.95	%
Average shareholders’ equity to average total assets		10.76	%		10.64	%		11.13	%		11.67	%		12.09	%
Dividends declared per share to net income per basic common share		31.58	%		36.70	%		37.04	%		32.48	%		34.29	%

* See Note 14, Earnings Per Share, in the Notes to the Consolidated Financial Statements.

1

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

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS

Certain of the statements contained in this report and the documents incorporated by reference herein, may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended, and may involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements of the Corporation to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements with respect to the Corporation’s financial goals, business plans, business prospects, credit quality, credit risk, reserve adequacy, liquidity, origination and sale of residential mortgage loans, impairment of goodwill, the effect of changes in accounting standards, and market and pricing trends. The words “expect,” “anticipate,” “intended,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. The Corporation’s actual results may differ materially from the results anticipated by the forward-looking statement due to a variety of factors, including without limitation:

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

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

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

• changes in accounting requirements or interpretations;

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

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

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

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

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

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

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

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

• technological changes being more difficult or expensive than anticipated;

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

All written or oral forward-looking statements attributed to the Corporation are expressly qualified in their entirety by use of the foregoing cautionary statements. All forward-looking statements included in this Report are based upon information presently available, and the Corporation assumes no obligation to update any forward-looking statement.

2

BRIEF HISTORY OF THE CORPORATION

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

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

The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many regulatory agencies including the SEC, NASD, FDIC, the Federal Reserve and the Pennsylvania Department of Banking.

RESULTS OF OPERATIONS

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

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

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

The allowance for loan losses involves a higher degree of judgment and complexity than other significant accounting policies. The allowance for loan losses is calculated with the objective of maintaining a reserve level believed by Management to be sufficient to absorb estimated probable credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires significant estimates by Management. Consideration is given to a variety of factors in establishing these estimates, including, specific terms and conditions of loans, underwriting standards, delinquency statistics, industry concentration, overall exposure to a single customer, adequacy of collateral, the dependence on collateral, and results of internal loan review, including borrowers perceived financial and management strengths, the amounts and timing of the present value of future cash flows, and access to additional funds. The evaluation process also considers the impact of competition, current and expected economic conditions, national and international events, the regulatory and legislative environment and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from Management estimates, additional provisions for loan losses may be required that might adversely affect the Corporation’s results of operations in future periods.

The Corporation recognizes deferred tax assets and liabilities for the future tax effects of temporary differences, net of operating loss carry forwards and tax credits. Deferred tax assets are subject to Management’s judgment based upon available evidence that future realization is more likely than not. If Management determines that the Corporation may be unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.

The valuation of mortgage servicing rights (“MSRs”) is a critical accounting policy due to the complexity of the quarterly valuation process which is performed by an outside consultant based on data provided by Management. Changes in market interest rates, consumer behavior, demographic trends and other factors influence the value of MSRs. See Note 6 in the accompanying financial statements for additional information.

Other significant accounting policies are presented in Note 1 in the accompanying financial statements. The Corporation has not substantively changed any aspect of its overall approach in the application of the foregoing policies. There have been no material changes in assumptions or estimation techniques utilized as compared to prior periods.

3

EXECUTIVE OVERVIEW

2005 Compared to 2004

The Corporation had net income of $11.350 million for the year ended December 31, 2005, an increase of 21.5% or $2.005 million compared with $9.345 million in 2004. Diluted earnings per share for 2005 were $1.31, an increase of $0.24 or 22.4% compared with $1.07 in 2004. Return on Average Equity (ROE) and Return on Average Assets (ROA) for 2005 were 15.44% and 1.66%, respectively. ROE was 13.67% and ROA was 1.45% in 2004. Management attributes part of this year’s success to a focus on the Corporation’s core competencies which include Wealth, Business Banking, “High Touch” Retail Banking and Mortgage Banking, along with an obsession on client service, close control over expenses and the development of a more assertive sales culture.

The major factor contributing to the increase in earnings for 2005 compared to 2004 was a 43 basis point or 9.4% increase in the Corporation’s net interest margin to 5.00% from 4.57% as the Corporation’s asset sensitive loan portfolio continued to benefit from a series of Federal Reserve interest rate increases. Net interest income for 2005 increased $4.540 million or 16.9%, to $31.368 million from $26.828 million in the same period last year. Additionally, fees for Wealth Management services increased 12.0% or $1.236 million to $11.539 million in 2005 versus $10.303 million in 2004, partially offsetting declines in residential mortgage-related revenues.

In 2004, the Corporation sold mortgage-servicing rights (“MSRs”) that contributed $572 thousand to after tax income and increased diluted earnings per share $0.07. There were no sales of MSRs in 2005. Net income and diluted earnings per share for 2004, excluding the after tax impact of the MSRs sale, would have been $8.773 million and $1.01 per share, respectively. Excluding the impact of the MSRs sale, 2005 net income increased $2.577 million or 29.4% and diluted earnings per share increased $0.30 or 29.7% over the same period last year. (See accompanying reconcilement of GAAP net income and diluted earnings per share to net income and diluted earnings per share that exclude the MSRs sale).

Total loans increased $33.3 million or 5.9% to $597.9 million from $564.6 million over the past 12 months and average loans for 2005 increased $43.6 million or 8.1% to $582.4 million compared to $538.8 million in 2004. The Corporation’s asset quality remains strong as non-performing loans as a percent of total loans was 0.07% at December 31, 2005. The Corporation continues its business development efforts on building banking relationships with privately held businesses, non-profits, quality residential builders and owners of commercial real estate. In addition, the Corporation continues to provide high-touch retail lending services to consumers in the Philadelphia area.

Total deposits grew $35.3 million or 5.9% over the past 12 months to $636.3 million at December 31, 2005 from $601.0 million at December 31, 2004. Average deposits for 2005 increased $32.7 million or 5.8% to $596.4 million compared to $563.7 million in 2004. Deposit balances typically spike near year end as evidenced by an increase in deposits of $31.6 million at December 31, 2005 compared to September 30, 2005. Average deposits for the fourth quarter of 2005 were $600.6 million compared to third quarter 2005 average deposits of $603.3 million reflecting the competitive nature of the deposit gathering business in our market area.

The Corporation will continue with the expansion of its retail banking footprint with controlled de novo expansion in the suburban Philadelphia market. Management anticipates relocating the Wynnewood, PA branch to a new branch in Ardmore, PA in late 2006. Management also plans a new regional office in West Chester, PA some time in 2007 to complement the recently opened Exton, PA and Newtown Square, PA retail branch locations.

Non-interest income for 2005, excluding the $1.145 million gain on MSR sales in 2004, decreased $404 thousand or 2.2% to $18.245 million from $18.649 million in the same period last year. Non-interest income was negatively impacted by the slowdown in residential mortgage activity, as residential mortgage originations and sales declined 7.2% or $15.0 million and $13.3 million or 9.1%, respectively in 2005 compared to 2004. This decline in residential mortgage activity along with very competitive pricing resulted in a reduction in the gain on sale of loans of 44.5% or $1.298 million to $1.622 million in 2005 from $2.920 million in 2004. Non-interest income was also negatively impacted by a $234 thousand or 12.8% decrease in service charges on deposit accounts reflecting the impact of higher earnings credits on commercial checking accounts and the industry’s trend toward “free” checking.

Partially offsetting this decrease in non-interest income was a 2005 increase of $1.236 million or 12.0% in fees for Wealth Management services compared to 2004. Wealth assets under management and administration increased $310 million or 16.0% to $2.248 billion at December 31, 2005, compared to $1.938 billion at December 31, 2004. The increase in assets under management and administration is partly a result of a business acquisition by a significant client in the third quarter of 2005.

Non-interest expense for 2005, excluding $266 thousand of expenses related to the sale of the MSRs, increased $214 thousand or 0.7% to $31.573 million when compared to $31.359 million in the same period last year. The increase is a combination of many factors including increased medical benefit costs, staff merit raises, incentive compensation, and occupancy and furniture and fixture expenses related to the

4

new Exton, PA branch. Partially offsetting these increases were reduced levels of professional fees, lower amortization of mortgage servicing rights, and reduced residential mortgage staffing levels.

2004 Compared to 2003

The Corporation had net income from continuing operations of $9.345 million for the year ended December 31, 2004, a decrease of 17.1% or $1.927 million compared with $11.272 million in 2003. Diluted earnings per share from continuing operations for 2004 were $1.07, a decrease of $0.22 or 17.1% from $1.29 in 2003. ROE and ROA for 2004 on continuing operations were 13.67% and 1.45%, respectively. ROE and ROA for continuing operations in 2003 were 17.76% and 1.98%, respectively.

The major factors contributing to the decline in earnings from continuing operations in 2004 compared to 2003 were a significant drop in residential mortgage related activity, a decline in the Corporation’s net interest margin and compliance costs associated with the implementation of Sarbanes Oxley legislation. Partially offsetting these declines was a gain on the sale of mortgage servicing rights (there were no such sales in 2003) and improved Wealth Division performance (revenues and expense control).

During 2003, the Corporation sold the assets of its family office subsidiary, Joseph W. Roskos & Company (“JWR & Co.”) to its former owners. In accordance with SFAS No. 144 – Accounting for the Impairment or Disposal of Long Lived Assets, the Corporation classified all revenues, expenses, goodwill writedowns, related disposal expenses and applicable income taxes as a loss from discontinued operations. The disposal of the JWR & Co. subsidiary resulted in a loss, net of applicable income taxes, of $1.916 million or $0.22 per share (basic and diluted) in 2003. Additional details related to the disposal of JWR & Co.’s assets are included in Note 20 in the Notes to the Consolidated Financial Statements.

Key Performance Ratios

Key financial performance ratios for the years and years ended December 31, 2005, 2004 and 2003 are shown in the tables below. Ratios are from continuing operations unless noted otherwise.

	2005			2004			2003
Return on Average Equity (ROE)		15.44	%		13.67	%		17.76	%
Return on Average Assets (ROA)		1.66	%		1.45	%		1.98	%
Efficiency Ratio*		63.64	%		67.83	%		64.34	%
Net Interest Margin		5.00	%		4.57	%		4.83	%
Total Diluted Earnings Per Share (including discontinued operations)	$	1.31		$	1.07		$	1.07
Dividend Per Share	$	.42		$	0.40		$	0.40
Diluted Earnings Per Share**	$	1.31		$	1.07		$	1.29

	December 31,
	2005			2004			2003
Book Value Per Share	$	9.06		$	8.29		$	7.77
Allowance for Loan Losses as a Percentage of Loans		1.24	%		1.23	%		1.25	%
Wealth assets under management and administration (in billions)	$	2.248		$	1.938		$	1.752

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

** See Note 14, Earnings Per Share, in the Notes to Consolidated Financial Statements

Reconcilement of Non-GAAP Information

See the table below for a reconcilement of GAAP net income, diluted earnings per share, non-interest income and non-interest expense to comparable data that excludes the MSRs sale. Management believes that the presentation excluding the impact of the sale of MSRs in 2004 provides useful supplemental information essential to the proper understanding of the operating results of the Corporation’s core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures, which may be presented by other companies.

	Net Income From Continuing Operations							Diluted Earnings Per Share From Continuing Operations
	Year Ended December 31,
	2005		2004			2003		2005		2004			2003
	(dollars in thousands except per share data)
As reported2	$	11,350	$	9,345		$	11,272		1.31	$	1.07			1.29
After tax effect of MSR sale1,2		—		(572	)		—		—		(0.07	)
Adjusted for sale2	$	11,350	$	8,773		$	11,272		1.31	$	1.01			1.29
	Non-Interest Income							Non-Interest Expense
	2005		2004			2003		2005		2004			2003
As reported	$	18,245	$	19,794		$	26,577	$	31,573	$	31,625		$	33,437
MSR sale income		—		1,145			—		—		—			—
MSR sale expenses		—		—			—		—		266			—
Adjusted for sale	$	18,245	$	18,649		$	26,577	$	31,573	$	31,359		$	33,437

¹ MSR gain consists of revenues of $1.145 million, direct expenses of $266 thousand and allocated income taxes of $307 thousand netting to $572 thousand of net income.

² Dilutive potential shares have been adjusted to reflect the tax benefit of non-qualified stock options. This resulted in an increase to diluted earnings per share from continuing operations for the year 2004 and year 2003 of $0.01 per share. The difference in diluted earnings per share from continuing operations adjusted for the MSR sale is due to rounding.

5

COMPONENTS OF NET INCOME

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

NET INTEREST INCOME

Rate/Volume Analyses

The rate volume analysis in the table below analyzes changes in net interest income for the year ended December 31, 2005 over December 31, 2004 and December 31, 2004 over December 31, 2003 by its rate and volume components. The change in interest income/expense due to both volume and rate has been allocated to changes in volume.

	Year Ended December 31,
(dollars in thousands)	2005 Compared to 2004							2004 Compared to 2003
Increase/(decrease)	Volume			Rate		Total		Volume			Rate			Total
Interest Income:
Interest-bearing deposits with other banks	$	(11	)	$	39	$	28	$	(8	)	$	19		$	11
Federal funds sold		(99	)		118		19		25			56			81
Investment securities available for sale, taxable		122			42		164		209			(135	)		74
Investment securities available for sale, tax-exempt		—			—		—		82			(3	)		79
Loans		2,729			3,647		6,376		3,383			(1,508	)		1,875
Total interest income		2,741			3,846		6,587		3,691			(1,571	)		2,120
Interest expense:
Savings, NOW and market rate		(59	)		804		745		341			0			341
Time deposits		825			430		1,255		115			(235	)		(120	)
Short term borrowings		29			18		47		4			(2	)		2
Total interest expense		795			1,252		2,047		460			(237	)		223
Interest differential	$	1,946		$	2,594	$	4,540	$	3,231		$	(1,334	)	$	1,897

Analyses of Interest Rates and Interest Differential

The table below presents the major asset and liability categories on an average daily basis for the periods presented, along with interest income and expense and key rates and yields. The following table shows an analysis of the composition of net interest income for each of the last three years. Interest income on loans includes fees on loans of $645,000, $677,000 and $620,000 in 2004, 2003 and 2002 respectively. The average loan balances include non-accrual loans. All average balances are calculated on a daily basis. Yields on investment securities are not calculated on a tax-equivalent basis.

For the Year Ended December 31	2005							2004							2003
(dollars in thousands)	Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:
Interest-bearing deposits with other banks	$	2,398		$	76	3.17	%	$	3,079		$	48	1.56	%	$	3,737		$	37	0.99	%
Federal funds sold		6,281			210	3.34	%		13,052			191	1.46	%		10,638			110	1.03	%
Investment securities available for sale:
Taxable		30,848			1,018	3.30	%		27,173			854	3.14	%		21,087			780	3.70	%
Tax –Exempt		5,069			165	3.26	%		5,071			165	3.25	%		2,499			86	3.44	%
Total investment securities		35,917			1,183	3.29	%		32,244			1,019	3.16	%		23,586			866	3.67	%
Loans(1)		582,386			36,499	6.27	%		538,775			30,123	5.59	%		478,397			28,248	5.90	%
Total interest earning assets		626,982			37,968	6.06	%		587,150			31,381	5.34	%		516,358			29,261	5.67	%
Cash and due from banks		29,918							32,774							33,005
Allowance for loan losses		(7,283	)						(6,957	)						(6,519	)
Other assets		33,312							29,827							27,557
Total assets	$	682,929						$	642,794						$	570,401
Liabilities:
Savings, NOW and market rate	$	317,205		$	2,744	.87	%	$	323,972		$	1,999	0.62	%	$	263,646		$	1,658	0.63	%
Time deposits		130,667			3,799	2.91	%		102,369			2,544	2.49	%		96,996			2,664	2.75	%
Total interest-bearing deposits		447,872			6,543	1.46	%		426,341			4,543	1.07	%		360,642			4,322	1.20	%
Short term borrowings		1,700			57	3.35	%		850			10	1.18	%		496			8	1.61	%
Total interest-bearing liabilities		449,572			6,600	1.47	%		427,190			4,553	1.07	%		361,138			4,330	1.20	%
Demand deposits, non-interest-bearing		148,495							137,336							135,335
Other liabilities		11,370							9,900							10,454
Total non-interest-bearing liabilities		159,865							147,236							145,789
Total liabilities		609,437							574,426							506,927
Shareholder’s equity		73,492							68,367							63,474
Total liabilities and shareholders’ equity	$	682,929						$	642,794						$	570,401
Net interest spread						4.59	%						4.27	%						4.47	%
Effect of non-interest-bearing sources						.41	%						0.30	%						0.36	%
Net interest income/margin on earning assets				$	31,368	5.00	%				$	26,828	4.57	%				$	24,931	4.83	%

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

6

Net Interest Margin 2005 Compared to 2004 Commentary

Net interest income for the year ended December 31, 2005 of $31.368 million was $4.540 million or 16.9% higher than the net interest income for the same period in 2004 of $26.828 million. The analyses above indicate that both increased loan volume and an increase in rates contributed to the increase in net interest income. Average earning assets increased $39.8 million or 6.8% in 2005 compared to the same period in 2004. Average total loans grew $43.6 million or 8.1% in 2005 compared to 2004.

The average earning asset yield during 2005 of 6.06% was 72 basis points higher than the 5.34% during the same period in 2004. The rate paid on average interest bearing liabilities of 1.47% in 2005 was 40 basis points higher than the 1.07% in 2004. Average non-interest-bearing demand deposits grew 8.1%, while savings decreased 2.1% and time deposits increased 27.6% in 2005 compared to 2004.

Net Interest Margin 2004 Compared to 2003 Commentary

Net interest income for the year ended December 31, 2004 of $26.828 million was $1.897 million or 7.6% higher than the net interest income for the same period in 2003 of $24.931 million. The rate volume analysis and average balance sheet data above clearly show that the increase in interest earning assets, particularly loans, more than offset the decline in interest rates. Average earning assets increased $70.792 million or 13.7% for 2004 compared to the same period in 2003. Average total loans grew $60.378 million or 12.6% while investments increased $8.658 million or 36.7% in 2004 over 2003.

The average earning asset yield during 2004 of 5.34% was 33 basis points lower than the 5.67% in 2003. The rate paid on average interest bearing liabilities of 1.07% in 2004 was 13 basis points lower than the 1.20% in 2003. Average non-interest-bearing demand deposits grew 1.5%, while savings and time deposits increased 22.9% and 5.5%, respectively, in 2004 compared to 2003.

Net Interest Margin

The Corporation’s net interest margin increased 51 basis points to 5.15% in the fourth quarter of 2005 from 4.64% in the same period last year. The net interest margin and related components for the past five linked quarters are shown in the table below. The Corporation anticipates that continued increases in interest rates will have a positive effect on the Corporation’s net interest margin in the first half of 2006. However, factors such as competitive market conditions for deposits and competitive share driven loan pricing could impact the net interest margin in the second half of 2006 and beyond. The Corporation’s net interest margin was 5.00% in 2005 compared with 4.57% in 2004 and 4.83% in 2003. These results reflect the decline in interest rates during 2003 and the first half of 2004. Rates started to rise in 2004 as reflected in the five quarter and three year analyses below.

	Year	Earning Asset Yield		Interest Bearing Liability Cost		Net Interest Spread		Effect of Non-Interest Bearing Sources		Net Interest Margin
Net Interest Margin Last Five Quarters
4th Quarter	2005	6.37	%	1.73	%	4.64	%	0.51	%	5.15	%
3rd Quarter	2005	6.13	%	1.57	%	4.56	%	0.45	%	5.01	%
2nd Quarter	2005	5.94	%	1.37	%	4.57	%	0.37	%	4.94	%
1st Quarter	2005	5.76	%	1.19	%	4.57	%	0.32	%	4.89	%
4th Quarter	2004	5.45	%	1.10	%	4.35	%	0.29	%	4.64	%
Net Interest Margin Last Three Years
	2005	6.06	%	1.47	%	4.59	%	0.41	%	5.00	%
	2004	5.34	%	1.07	%	4.27	%	0.30	%	4.57	%
	2003	5.67	%	1.20	%	4.47	%	0.36	%	4.83	%

Interest Rate Sensitivity

The Corporation actively manages its interest rate sensitivity position. The objectives of interest rate risk management are to control exposure of net interest income to risks associated with interest rate movements and to achieve sustainable growth in net interest income. Management’s Asset Liability Committee (“ALCO”), using policies and procedures approved by the Corporation’s Board of Directors, is responsible for managing the interest rate sensitivity position. The Corporation manages interest rate sensitivity by changing the mix, pricing and repricing characteristics of its assets and liabilities, through the management of its investment portfolio, its offering of loan and selected deposit terms and through borrowings from the Federal Home Loan Bank of Pittsburgh (“FHLB”). The ALCO is presently evaluating various strategies including interest rate swaps and floors to mitigate the impact of future changes in interest rates on its net interest income.

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

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

Summary of Interest Rate Simulation

	December 31, 2005
(dollars in thousands)	Estimated Change In Net Interest Income Over Next 12 Months
Change in Interest Rates
+200 basis points	$	2,086		6.10	%
+100 basis points	$	1,235		3.61	%
-100 basis points	$	(1,496	)	(4.37	)%
-200 basis points	$	(3,684	)	(10.76	)%

The interest rate simulation above indicates that the Corporation’s balance sheet as of December 31, 2005 is asset sensitive meaning that an increase in interest rates should increase net interest income and a decline in interest rates will cause a decline in net interest income over the next 12 months when compared to projected net income under a flat or stable rate scenario.

GAP Report

The following table presents the Corporation’s interest rate sensitivity position or GAP Analysis as of December 31, 2005:

(dollars in thousands)	0 to 90 Days			90 to 365 Days			1 - 5 Years			Over 5 Years			Non- Rate Sensitive		Total
Assets:
Interest-bearing deposits with other banks	$	405		$	—		$	—		$	—		$	—	$	405
Federal Funds Sold		32,341			—			—			—			—		32,341
Investment securities		221			13,052			16,434			5,284					34,991
Loans, net of allowance		265,199			36,961			210,559			77,809					590,528
Cash and due from banks		—			—			—			—			33,896		33,896
Other assets		—			—			—			—			35,065		35,065
Total assets	$	298,166		$	50,013		$	226,993		$	83,093		$	68,961	$	727,226
Liabilities and shareholders’ equity:
Non-interest- bearing demand	$	47,707		$	18,429		$	98,290		$	—		$	3,616	$	168,042
Savings, NOW and market rate		51,318			43,222			166,806			51,550			—		312,896
Time deposits		74,302			55,651			25,233			136			—		155,322
Other liabilities		—			—			—			—			13,453		13,453
Shareholders’ equity		2,768			8,305			44,294			22,146			—		77,513
Total liabilities and shareholders’ equity	$	176,095		$	125,607		$	334,623		$	73,832		$	17,069	$	727,226
GAP	$	122,071		$	(75,594	)	$	(107,630	)	$	9,261		$	51,892	$	—
Cumulative GAP	$	122,071		$	46,477		$	(61,153	)	$	(51,892	)	$	—	$	—
Cumulative earning assets as a % of cumulative interest bearing liabilities		238	%		155	%		138	%		141	%		—		—

The table above indicates that the Corporation is asset sensitive in the immediate to 90 day time frame and should experience an increase in net interest income in the near term if interest rates rise. The converse is also true.

Maturity of Certificates of Deposit of $100,000 or Greater

(dollars in thousands)
Three months or less	$	61,148
Three to six months		8,424
Six to twelve months		12,567
Greater than twelve months		5,642
Total	$	87,781

PROVISION FOR LOAN LOSSES

General Discussion of the Allowance for Loan Losses

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

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

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

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

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

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

• Additional Factors Component – The loan portfolio is broken down into multiple homogenous subclassifications upon which multiple factors (such as delinquency trends, economic conditions, loan terms, and regulatory environment) are evaluated resulting in an allowance amount for each of the subclassifications. The sum of these amounts equals the Additional Factors Component.

• Unallocated Component – This amount represents a general reserve against all loans.

The Corporation has a material portion of its loans in real estate related loans. A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in the Corporation’s primary trade area which includes portions of Delaware, Chester, Montgomery and Philadelphia counties in Southeastern Pennsylvania.

Management is aware of this concentration and mitigates this risk to the extent possible in many ways, including the underwriting and assessment of the borrower’s capacity to repay.

Asset Quality and Analysis of Credit Risk

Asset quality remains strong at December 31, 2005 as non-performing loans as a percentage of total loans were 7 basis points. This compares with 24 basis points at December 31, 2004 and 9 basis points at December 31, 2003. The allowance for loan losses as a percentage of total loans was 1.24% at December 31, 2005 compared with 1.23% at December 31, 2004 and 1.33% at December 31, 2003. The provision for loan losses in 2005 was $762 thousand compared to $900 thousand in 2004. The lower provision is reflective of the high credit quality of the Corporation’s loan portfolio. The provision of $900 thousand in 2004 was higher than the $750 thousand in 2003 due to strong loan growth in 2004 and net charge-offs of $643 thousand. See table below for additional details.

Non-Performing Assets and Related Ratios

	December 31,
(dollars in thousands)	2005			2004			2003			2002			2001
Non-accrual loans	$	261		$	1,353		$	371		$	209		$	21
Loans 90 days or more past due		129			22			62			45			43
Total non-performing loans		390			1,375			433			254			64
Other real estate owned (“OREO”)		25			357			—			—			—
Total non-performing assets	$	415		$	1,732		$	433		$	254		$	64
Allowance for loan losses to non-performing assets		1,783.6	%		399.9	%		1,540.4	%		2,407.1	%		7,700.0	%
Allowance for loan losses to non-performing loans		1,897.9	%		503.8	%		1,540.4	%		2,407.1	%		7,700.0	%
Non-performing loans to total loans		0.07	%		0.24	%		0.09	%		0.05	%		0.02	%
Allowance for loan losses to total loans		1.24	%		1.23	%		1.33	%		1.31	%		1.23	%
Non-performing assets to total assets		0.06	%		0.25	%		0.07	%		0.04	%		0.01	%
Period end loans	$	597,930		$	564,597		$	502,416		$	466,975		$	400,868
Average loans (average for year)	$	582,386		$	538,775		$	478,397		$	421,904		$	367,571
Allowance for loan losses	$	7,402		$	6,927		$	6,670		$	6,114		$	4,928

Summary of Changes in the Allowance for Loan Losses

(dollars in thousands)	2005			2004			2003			2002			2001
Balance, beginning of period	$	6,927		$	6,670		$	6,114		$	4,928		$	4,320
Charge-offs:
Consumer		(158	)		(94	)		(102	)		(68	)		(178	)
Commercial and industrial		—			(167	)		(112	)		—			(940	)
Real estate		(156	)		(431	)		(13	)		—			(51	)
Total charge-offs		(314	)		(692	)		(227	)		(68	)		(1,169	)
Recoveries:
Consumer		11			47			32			24			38
Commercial and industrial		12			2			—			220			63
Real estate		4			—			1			10			476
Total Recoveries		27			49			33			254			577
Net (charge-offs) / recoveries		(287	)		(643	)		(194	)		186			(592	)
Provision for loan losses		762			900			750			1,000			1,200
Balance, end of period	$	7,402		$	6,927		$	6,670		$	6,114		$	4,928

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Allocation of Allowance for Loan Losses

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

	December 31,
	2005				2004				2003				2002				2001
(dollars in thousands)			% Loans to Total Loans				% Loans to Total Loans				% Loans to Total Loans				% Loans to Total Loans				% Loans to Total Loans
Balance at end of period applicable to:
Commercial and industrial	$	2,191	28.5	%	$	3,575	33.1	%	$	3,656	35.7	%	$	2,940	36.4	%	$	2,729	39.1	%
Real estate – construction		569	7.6	%		741	6.6			558	7.2			494	5.9			214	5.1
Real estate – mortgage		4,141	62.3	%		806	58.5			1,089	53.4			1,107	52.4			1,019	45.0
Consumer		143	1.6	%		1,174	1.8			906	3.7			907	5.3			316	10.8
Unallocated		358	—			631	—			461	—			666	—			650	—
Total	$	7,402	100.0	%	$	6,927	100.0	%	$	6,670	100.0	%	$	6,114	100.0	%	$	4,928	100.0	%

NON-INTEREST INCOME

2005 Compared to 2004

Non-Interest Income for 2005 was down $1.549 million or 7.8% compared to 2004 which included a gain related to the sale of mortgage servicing rights (MSR’s) in March 2004. Exclusive of the gain on the sale of MSR’s, Total Non-Interest Income decreased $404 thousand or 2.2%. The most significant decline was in gain on sale of loans, down $1.298 million or 44.5% compared to 2004 as a result of the slow down in the mortgage refinance activity compounded by very competitive pricing pressures which also contributed to the reduction in the gain from year to year. Other fees and service charges were down $337 thousand or 17.9% also as a result of the MSR sale in March 2004 and a decline in volume of loans sold servicing retained from year to year. Service charges on deposit accounts decreased $234 thousand or 12.8% compared to 2004 as a result of higher earnings credits on commercial checking accounts and the industry trend toward “free” checking. Partially offsetting these decreases was an increase in fees for Wealth Management services of $1.236 million or 12.0% compared to the same time last year. The growth in Wealth Management services revenue was primarily the result of new business development, estate revenue and a fee increase in the second quarter of 2005. Wealth Management assets under management and administration increased $310 million or 16.0% to $2.248 billion at December 31, 2005 compared to $1.938 billion at December 31, 2004, partly a result of a business acquisition by a significant client in the third quarter of 2005.

2004 Compared to 2003

Non-Interest Income for 2004 was down $6.783 million or 25.5% compared to 2003. The largest decline was in gain on loan sales, down $7.730 million or 72.6% as a result of the slow down in the mortgage refinance market from 2003 to 2004. Loan sale volume was down $483.136 million or 76.9% to $144.916 million in 2004 from $628.052 million in 2003. Partially offsetting this decrease was an increase of $1.145 million in 2004 related to the sale of MSR’s in 2004. Also contributing to the overall decrease in Total Non-Interest Income in 2004 were other fees and service charges, down $541 thousand or 22.4% directly related to the decline in mortgage activity. Fees for Wealth Management services increased $567 thousand or 5.8% in 2004 compared to 2003. The growth in Wealth Management services revenue was primarily the result of new business fees and an increase in the market value of assets under management and administration in 2004. Wealth assets under management and administration increased $186 million or 10.6% from $1.752 billion at December 31, 2003 to $1.938 billion at December 31, 2004.

NON-INTEREST EXPENSE

2005 Compared to 2004

Non-Interest Expense for 2005 remained level compared to 2004, down $52 thousand or 0.2%. Exclusive of expenses associated with the sale of MSR’s in March 2004, Total Non-Interest Expenses increased $214 thousand or 0.7%. The largest growth was in salaries, up $849 thousand or 56.6% as a result of increased incentive compensation based on overall corporate profitability. Other increases included occupancy expense, up $111 thousand and furniture, fixtures and equipment expense, up $156 thousand both related to the Newtown Square branch added in 2004 and the new Exton branch added in 2005. Partially offsetting these increases were decreases in employee benefits primarily related to pension and post-retirement medical benefit expenses, professional fees, lower amortization of MSR’s and reduced residential mortgage staffing levels.

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2004 Compared to 2003

Non-Interest Expense decreased $1.812 million or 5.4% in 2004 compared to 2003. The most significant decline was in amortization of MSR’s, down $1.975 million or 70.2% as well as other operating expenses, down $995 thousand or 17.0%. These decreases were both directly attributable to the 76.9% decline in volume of residential mortgage loans sold from year to year discussed above. The largest increase, partially offsetting these decreases, was professional fees, up $862 thousand in 2004 compared to 2003 as a result of increased fees associated with the required Sarbanes Oxley Act Section 404 compliance. Other significant increases included advertising expense, up $205 thousand or 30.4% and occupancy expense, up $200 thousand or 10.2% as a result of the new Newtown Square branch opened in 2004.

INCOME TAXES

Income taxes from operations for the year ended December 31, 2005 were $5.928 million compared to $4.752 million for the same period in 2004. This represents an effective tax rate for the year ended December 31, 2005 of 34.3% and an effective tax rate of 33.7% for the same period in 2004.

Income taxes from continuing operations for 2004 were $4.752 million compared to $6.049 million in 2003. This represents an effective tax rate of 33.7% for the year ended December 31, 2004 and an effective tax rate of 34.9% for the same period in 2003.

BALANCE SHEET ANALYSIS

Total assets increased $44.3 million or 6.5% from $682.9 million as of December 31, 2004 to $727.2 million as December 31, 2005. Total loans increased $33.3 million or 5.9% over the same time period from $564.6 million at December 31, 2004 to $597.9 million at December 31, 2005. Average assets increased $40.1 million or 6.2% to $682.9 million and average loans increased $43.6 million or 8.1% to $582.4 million, in 2005 compared to 2004. Although not reflected in quarter end totals (during the 2^nd half of 2005), loan balances grew steadily during the year, as average quarterly loans outstanding was $549.2, $567.8, $578.1, $588.7 and $594.4 million during the 4^th quarter of 2004, and the 1^st, 2^nd, 3^rd and 4^th quarters of 2005, respectively.

Federal Funds sold spiked at year end 2005 to $32.3 million compared to a 2005 average of $6.3 million at year end as clients temporarily moved deposits into the Bank from external sources. This spike also occurred at the end of 2004. Total deposits during 2005 averaged $596.4 million compared to an average of $563.7 million in 2004. At year end 2005 deposits grew $35.3 million or 5.9% to $636.3 million compared to $601.0 million at December 31, 2004. A more accurate reflection of stable deposit balances is the 4^th quarter 2005 average of $600.6 million compared with the 4^th quarter 2004 average deposits of $583.2 million, a growth of $17.4 million or 2.9%

Deposit trends during 2005 included a decrease in average Savings, Now and Market Rate accounts of $6.8 million or 2.1%, a large increase in average time deposit accounts of $28.3 million or 27.6%, and a $11.2 million or 8.1% increase in non-interest-bearing demand deposits. The decrease in Savings, Now and Market Rate accounts reflects the competitive nature of the Philadelphia regional banking market place. The combination of rising interest rates, aggressive and innovative marketing from new and established competitors, a more educated and commodity driven consumer, and the Corporation’s reluctance to compete on rate alone contributed to the decline in Savings, Now and Market Rate accounts.

The growth in Certificates of Deposit in 2005 is indicative of customers’ appetite for higher rates and the Corporation’s desire to retain these customers without negatively impacting lower rate “core” deposit accounts. The Corporation is evaluating the deposit market and is developing several new initiatives that are designed to grow “core” deposits.

Non-interest-bearing deposits grew nicely during 2005 ($11.2 million or 8.1% to an average of $148.5 million in 2005 from $137.3 million in 2004) correlating to the 8.1% growth in average loans during the same time period. As mentioned in the Executive Summary, the Corporation continues its business development efforts building banking relationships (loan, deposit and wealth management) with privately held businesses, non-profits, quality residential builders, and owners of commercial real estate. The Corporation anticipates that growth of “core” deposits will be one of its most difficult challenges for the foreseeable future.

Average borrowings over the past three years (2005, 2004 and 2003) have not averaged more than $2.0 million in any one year, as the Corporation has been able to fund earning asset growth through deposit growth. However, the average loan to deposit ratio has increased from 96.5% and 95.6% in 2003 and 2004 to 97.7% in 2005. The Corporation has significant capacity to borrow from the FHLB as discussed later in this document under the section titled “Liquidity”. The Corporation is evaluating other funding mechanisms, including the use of wholesale funding sources.

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Investment Portfolio

A maturity breakout of the investment portfolio by investment type at December 31, 2005 is as follows:

(dollars in thousands)	Maturing During 2006			Maturing From 2007 Through 2010			Maturing From 2011 Through 2015			Maturing After 2015			Total
Obligations of the U.S. Government and agencies:
Book value	$	5,431		$	20,562		$	—			—		$	25,993
Weighted average yield		2.96	%		3.58	%		—			—			3.45	%
State and political subdivisions:
Book value		—		$	990		$	4,024			—		$	5,014
Weighted average yield		—			3.32	%		3.16	%		—			3.19	%
Other investment securities:
Book value	$	115		$	246		$	412		$	1,182		$	1,955
Weighted average yield		3.36	%		4.25	%		2.45	%		3.32	%		3.26	%
Subtotal book value	$	5,546		$	21,798		$	4,436		$	1,182		$	32,962
Weighted average yield		2.96	%		3.57	%		3.10	%		3.32	%		3.36	%
Mortgage backed securities
Book value		—			—			—			—		$	2,029
Weighted average yield		—			—			—			—			4.44	%
Total book value	$	5,546		$	21,798		$	4,436		$	1,182		$	34,991
Weighted average yield		2.96	%		3.57	%		3.10	%		3.32	%		3.60	%

Loan Portfolio

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

	December 31
(dollars in thousands)	2005		2004		2003		2002		2001
Consumer	$	9,437	$	10,291	$	18,580	$	24,537	$	35,692
Commercial & Industrial		170,283		186,923		178,382		170,286		167,452
Commercial Mortgage		162,621		137,141		119,811		103,972		67,906
Construction		45,523		36,941		36,235		27,514		20,416
Residential Mortgage		99,602		75,081		59,714		51,096		45,483
Home Equity Lines & Loans		107,699		109,512		86,004		61,544		47,344
Total Portfolio Loans		595,165		555,889		498,726		438,949		384,293
Loans held for sale		2,765		8,708		3,690		28,026		16,556
	$	597,930	$	564,597	$	502,416	$	466,975	$	400,849

Loan Portfolio Maturity and Interest Rate Sensitivity

The loan maturity distribution and interest rate sensitivity table below excludes loans secured by one to four family residential properties and consumer loans as of December 31, 2005:

(dollars in thousands)	Maturing During 2006		Maturing From 2007 Through 2010		Maturing After 2010		Total
Loan Portfolio Maturity:
Commercial, financial, and agricultural	$	75,501	$	51,999	$	18,450	$	145,950
Real estate – construction		23,671		17,015		4,837		45,523
Real estate – other		2,391		15,238		144,992		162,621
Total	$	101,563	$	84,252	$	168,279	$	354,094
Interest sensitivity on the above loans:
Loans with predetermined rates	$	9,739	$	62,857	$	43,334	$	115,930
Loans with adjustable or floating rates		127,480		92,292		18,392		238,164
Total	$	137,219	$	155,149	$	61,726	$	354,094

DISCUSSION OF SEGMENTS

The Corporation has three principal segments (Residential Mortgage, Wealth Management, and Banking segments) as defined by SFAS No. 131 “Segment Reporting”. These segments are discussed below. The Detail segment information appears in Note 24 in the Notes to the Consolidated Financial Statements.

Residential Mortgage Segment Activity

All activity is for the year unless noted otherwise:

(dollars in thousands)	2005			2004			2003
Residential loans held in portfolio*	$	99,602		$	75,081		$	59,714
Mortgage originations		193,324			208,252			678,560
Mortgage loans sold:
Servicing retained		41,664			111,173			546,350
Servicing released		78,537			33,743			81,702
Servicing retained %		34.7	%		76.7	%		87.0	%
Servicing released %		65.3	%		23.3	%		13.0	%
Loans serviced for other*		417,649			507,421			797,326
Mortgage servicing rights*		2,982			3,172			4,390
Gain on sale of loans		1,622			2,920			10,637
Loans servicing & late fees		1,303			1,632			1,794
Gain on sale of MSRs		—			1,145			—
Amortization of MSRs		606			839			2,814
Basis point yield on loans sold		135			201			169

* Period end balance

12

The Corporation’s mortgage banking segment had a record year in 2003 with the mortgage originations and refinancings totaling $678.6 million. The increased volume of originations and refinancings was due to interest rates being at 30 year lows. During 2004 and 2005 increasing rates resulted in a slow down in mortgage refinancing activity and a decline in mortgage originations to $208.2 million and $193.3 million, respectively. Management anticipates lower volume in 2006.

Loans serviced for others have decreased from $797.3 million in 2003 to $507.4 million in 2004, with a further reduction to $417.6 million in 2005. The decline in loans serviced for others is due to a 2004 sale of $245 million in MSR’s and a 2005 decision by management to sell a higher percentage of loans servicing released. The increase in sale of loans servicing released provided the Corporation the ability to price mortgages more competitively and increase the gain on sale of loans. Competitive pricing pressures during 2005 combined with a smaller gain on sale on loans sold servicing retained resulted in reduced gains on the sale of servicing retained loans. Overall, the gain on sale of loans sold resulted in a gain per loan sold of 135 basis points, 201 basis points, and 169 basis points in 2005, 2004 and 2003, respectively.

Wealth Segment Activity

The Wealth Management segment reported a 34.3% increase in net operating profits for 2005 compared to 2004. This performance is attributed to an increase in Wealth revenues of 12.0% from 2004, while expenses decreased 1.4% from 2004.

The increase in wealth revenues is concentrated in investment management and special needs trusts and estates. Increased investment management fees are the result of new business development, as well as the conversion of custody accounts to investment management accounts. Special needs trust is a specialty niche that continues to expand due to the expertise of the wealth management staff.

Wealth Management assets under management and administration have grown to $2.248 billion as of December 31, 2005 from $1.938 billion at December 31, 2004 or 16.0%. This growth is a combination of a business acquisition by a significant client, along with an increase in other new wealth business, and an increase in the market value of existing accounts.

Banking Segment Activity

Bank segment data as presented in Note 24 of the Notes to Consolidated Financial Statements indicates a pretax segment profit of $11.359 million in 2005, $7.780 million in 2004 and $8.425 million in 2003. See Components of Net Income earlier in this documentation for a discussion of the Banking segment.

CAPITAL

Consolidated shareholder’s equity of the Corporation was $77.5 million or 10.7% of total assets, as of December 31, 2005, compared to $71.2 million or 10.4% of total assets, as of December 31, 2004. The Corporation’s and Bank’s regulatory capital ratios and the minimum capital requirements to be considered “Well Capitalized” by regulators as of December 31, 2005 and December 31, 2004 are displayed in Note 21 in the accompanying Notes to Consolidated Financial Statements for this information.

Both the Corporation and the Bank exceed the required capital levels to be considered “Well Capitalized” by their respective regulators at the end of each period presented.

Neither the Corporation nor the Bank are under any agreement with regulatory authorities, nor is Management aware of any current recommendations by the regulatory authorities, which, if such recommendations were implemented, would have a material effect on liquidity, capital resources or operations of the Corporation.

LIQUIDITY

The Corporation manages its liquidity position on a daily basis as part of the daily settlement function and monthly as part of the asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, and purchasing federal funds, selling loans in the secondary market, borrowing from the FHLB and selling securities as its secondary sources. Availability with the FHLB was approximately $232 million as of December 31, 2005. Overnight Fed Funds lines consist of lines from six banks totaling $48.0 million. Quarterly, ALCO reviews the Corporation’s liquidity needs and reports its findings to the Risk Management Committee of the Bank’s Board of Directors. There were no outstanding overnight borrowings at December 31, 2005.

OFF BALANCE SHEET RISK

The following chart presents the off-balance sheet commitments of the Bank as of December 31, 2005, listed by dates of funding or payment:

(dollars in thousands)	Total		Within 1 Year		2 - 3 years		4 - 5 years		After 5 years
Unfunded loan commitments	$	316,869	$	178,836	$	67,866	$	67,477	$	2,690
Standby letters of credit		11,200		8,326		820		2,025		29
Total	$	328,069	$	187,162	$	68,686	$	69,502	$	2,719

13

The Corporation becomes party to financial instruments in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit and create off-balance sheet risk.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at December 31, 2005 were $316.9 million.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation’s obligation under standby letters of credit at December 31, 2005 amounted to $11.2 million.

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

CONTRACTUAL CASH OBLIGATIONS OF THE CORPORATION AS OF DECEMBER 31, 2005

(dollars in thousands)	Total		Within 1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Deposits without a stated maturity	$	480,938	$	480,938	$	—	$	—	$	—
Consumer certificates of deposit		155,322		129,953		24,782		451		136
Operating leases		20,367		967		1,658		1,487		16,255
Purchase obligations		1,981		1,083		678		220		—
Non-discretionary pension contributions		131		131		—		—		—
Total	$	658,739	$	613,072	$	27,118	$	2,158	$	16,391

SECTION 404 OF SARBANES OXLEY ACT OF 2002

The Corporation and its Management completed compliance procedures relating to Section 404 of the Sarbanes Oxley Act of 2002 for the fiscal year ended December 31, 2005 as documented in the Corporation’s Form 10-K.

OTHER INFORMATION

Branch Office Expansion

During the first quarter of 2004 and the second quarter of 2005, the Corporation opened new full service branch bank offices in Newtown Square, PA, and Exton, PA, respectively. At December 31, 2005, the Newtown Square and Exton branches had deposits of approximately $22.3 and $6.0 million, respectively. During the third quarter of 2005, the Corporation entered into a ground lease in Ardmore, PA, with the goal of constructing a branch office and relocating the Wynnewood, PA office, with an expected opening in late 2006. The Corporation anticipates measured expansion of its branch footprint over the next few years including plans to enter the West Chester, PA market in 2007.

Regulatory Matters and Pending Legislation

Management is not aware of any other current specific recommendations by regulatory authorities or proposed legislation which, if they were implemented, would have a material adverse effect upon the liquidity, capital resources, or results of operations, although the general cost of compliance with numerous and multiple federal and state laws and regulations does have, and in the future may have, an impact on the Corporation’s results of operations.

In February, 2006, Congress passed the Federal Deposit Insurance Reform Act of 2005. This legislation will merge the Bank Insurance Fund and the Savings Association Insurance Fund into one fund, increase insurance coverage for retirement accounts to $250,000, adjust the maximum deposit insurance for inflation after March 31, 2010 and give the FDIC greater flexibility in setting insurance assessments.

Effects of Inflation

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

Effect of Government Monetary Policies

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

The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned

14

and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The quantitative and qualitative disclosures about market risks are included in the Management Discussion and Analysis, in various sections beginning with “Net Interest Income” through “Contractual Cash Obligations of the Corporation”.

Management’s Report on Internal Control over Financial Reporting

Corporation Management is responsible for both establishing and maintaining adequate internal controls over financial reporting. As of December 31, 2005, Management conducted an assessment of the effectiveness of the Corporation’s internal controls over financial reporting and concluded that such internal controls are effective and found no material weaknesses. The assessment was accomplished using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Management has concluded that, as of December 31, 2005, the Corporation’s internal control over financial reporting is effective, based on the COSO criteria.

Management’s assessment of the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2005 has been audited by KPMG LLP, (“KPMG”) the Corporation’s independent registered public accounting firm, having responsibility for auditing the Corporation’s financial statements. KPMG has expressed unqualified opinions on Management’s assessment and on the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2005 and has issued an attestation report on the Corporation’s management assessment of the Corporation’s internal controls over financial reporting as of December 31, 2005.

15

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Bryn Mawr Bank Corporation:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that Bryn Mawr Bank Corporation and subsidiaries (the “Corporation”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Corporation management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Corporation maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Corporation as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, comprehensive income and cash flows for each of the years in the two-year period ended December 31, 2005, and our report dated March 8, 2006 expressed an unqualified opinion on those consolidated financial statements. The accompanying consolidated financial statements of the Corporation for the year ended December 31, 2003, were audited by other auditors whose report thereon dated February 27, 2004, expressed an unqualified opinion on those statements.

Philadelphia, Pennsylvania

March 8, 2006

16

Report of Independent Registered Public Accounting Firm

The Board of Directors

Bryn Mawr Bank Corporation:

We have audited the accompanying consolidated balance sheets of Bryn Mawr Bank Corporation and subsidiaries (the “Corporation”) as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in shareholders’ equity, comprehensive income, and cash flows for each of the years in the two-year period ended December 31, 2005. These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The accompanying consolidated financial statements of the Corporation for the year ended December 31, 2003 were audited by other auditors whose report thereon dated February 27, 2004, expressed an unqualified opinion on those statements.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 8, 2006 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

March 8, 2006

Philadelphia, Pennsylvania

17

Consolidated Balance Sheets

As of December 31,	2005			2004
	(dollars in thousands)
Assets
Cash and due from banks	$	33,896		$	26,526
Interest bearing deposits with banks		405			15,293
Federal funds sold		32,341			13,423
Investment securities available for sale, at market (amortized cost of $35,608 and $35,654 as of December 31, 2005 and 2004 respectively)		34,991			35,441
Loans:
Portfolio Loans		595,165			555,889
Loans held for sale		2,765			8,708
Total loans		597,930			564,597
Less: Allowance for loan losses		(7,402	)		(6,927	)
Net loans		590,528			557,670
Premises and equipment, net		14,622			14,162
Accrued interest receivable		3,265			2,579
Deferred federal income taxes		709			—
Mortgage servicing rights		2,982			3,172
Other assets		13,487			14,680
Total assets	$	727,226		$	682,946
Liabilities
Deposits:
Non-interest-bearing demand	$	168,042		$	147,236
Savings, NOW and market rate accounts		312,896			343,259
Time deposits		155,322			110,470
Total deposits		636,260			600,965
Accrued interest payable		2,143			2,878
Other liabilities		11,310			7,865
Total liabilities		649,713			611,708
Shareholders’ equity
Common stock, par value $1; authorized 25,000,000 shares; issued 11,221,899 and 11,172,582 shares as of December 31, 2005 and 2004 respectively and outstanding of 8,556,255 and 8,597,958 shares as of December 31, 2005 and 2004, respectively		11,222			11,172
Paid-in capital in excess of par value		7,888			7,112
Accumulated other comprehensive income, net of taxes		(643	)		(288	)
Retained earnings		82,930			75,179
		101,397			93,175
Less: Common stock in treasury at cost – 2,665,644, and 2,574,624 shares as of December 31, 2005 and 2004 respectively		(23,884	)		(21,937	)
Total shareholders’ equity		77,513			71,238
Total liabilities and shareholders’ equity	$	727,226		$	682,946
Book Value per Share	$	9.06		$	8.29

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

18

Consolidated Statements of Income

For the years ended December 31,	2005		2004		2003
	(dollars in thousands, except per share data)
Net interest income:
Interest income:
Interest and fees on loans	$	36,499	$	30,123	$	28,248
Interest on federal funds sold		210		191		110
Interest on deposits with other banks		76		48		37
Interest and dividends on investment securities – taxable		1,018		854		780
Interest on investment securities – tax exempt		165		165		86
Total interest income		37,968		31,381		29,261
Interest expense on savings, NOW and market rate accounts		2,744		1,999		1,658
Interest expense on time deposits		3,799		2,544		2,664
Interest expense on other borrowings		57		10		8
Total interest expense		6,600		4,553		4,330
Net interest income		31,368		26,828		24,931
Loan loss provision		762		900		750
Net interest income after loan loss provision		30,606		25,928		24,181
Non-interest income:
Fees for Wealth management services		11,539		10,303		9,736
Service charges on deposit accounts		1,593		1,827		1,896
Other fees and service charges		1,542		1,879		2,420
Net gain on sale of loans		1,622		2,920		10,650
Net gain on sale of mortgage servicing rights		—		1,145		—
Other operating income		1,949		1,720		1,875
Total non-interest income		18,245		19,794		26,577
Non-interest expenses:
Salaries		15,862		15,013		15,034
Employee benefits		4,075		4,297		4,353
Occupancy expense		2,272		2,161		1,961
Furniture, fixtures, and equipment		1,941		1,785		1,806
Advertising		960		879		674
Professional fees		1,292		1,808		957
Amortization of MSRs		606		839		2,814
Other operating expense		4,565		4,843		5,838
Total non-interest expenses		31,573		31,625		33,437
Income before income taxes and discontinued operations		17,278		14,097		17,321
Applicable income taxes		5,928		4,752		6,049
Income from continuing operations		11,350		9,345		11,272
Loss from discontinued operations, net of income tax benefit of ($200,000) in 2003		—		—		(1,916	)
Net income	$	11,350	$	9,345	$	9,356
Basic earnings per common share:
Income from continuing operations	$	1.33	$	1.09	$	1.30
Loss from discontinued operations	$	0.00	$	0.00	$	(0.22	)
Total basic earnings per common share	$	1.33	$	1.09	$	1.08
Diluted earnings per common share:*
Income from continuing operations	$	1.31	$	1.07	$	1.29
Loss from discontinued operations	$	0.00	$	0.00	$	(0.22	)
Total diluted earnings per common share	$	1.31	$	1.07	$	1.07
Dividends per share	$	0.42	$	0.40	$	0.40
Weighted-average shares outstanding		8,563,027		8,610,171		8,657,527
Dilutive potential common shares*		101,200		110,854		103,107
Adjusted weighted-average shares		8,664,227		8,721,025		8,760,634

* See Note 14, Earnings Per Share, in the Notes to the Consolidated Financial Statements.

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

19

Consolidated Statements of Cash Flows

For the years ended December 31,	2005			2004			Revised 2003*
	(dollars in thousands)
Operating activities:
Income from continuing operations	$	11,350		$	9,345		$	11,272
Income from discontinued operations		—			—			(1,916	)
Net Income		11,350			9,345			9,356
Adjustments to reconcile income from continuing operations net cash provided by operating activities:
Provision for loan losses		762			900			750
Provision for depreciation and amortization		1,516			1,310			1,290
Impairment of goodwill		—			—			2,405
Loans originated for resale		(137,485	)		(144,916	)		(603,678	)
Proceeds from sale of loans		132,653			148,981			638,703
Net gain on sale of loans		(1,622	)		(2,920	)		(10,650	)
Net gain on sale of mortgage servicing rights		—			(1,145	)		—
Provision for deferred income taxes		(521	)		38			1,004
Change in income taxes payable/refundable		(354	)		(511	)		(1,189	)
Change in accrued interest receivable		(686	)		(305	)		(156	)
Change in accrued interest payable		(735	)		550			889
Change in mortgage servicing rights		190			1,219			(435	)
Other		4,343			(3,235	)		(628	)
Net cash provided (used) by operating activities		9,411			9,311			37,661
Investing activities:
Purchases of investment securities		(9,004	)		(17,568	)		(31,984	)
Proceeds from maturities of investment securities		3,500			—			1,000
Proceeds from sales of investment securities available for sale		1,586			204			1,039
Proceeds from calls of investment securities		4,000			13,147			20,440
Net repayments (originations) of notes receivable		387			435			(1,603	)
Net loan originations		(27,553	)		(63,258	)		(61,765	)
Sale of OREO		377			—			—
OREO Charge-off		(20	)		—			—
Purchases of premises and equipment		(1,859	)		(1,716	)		(2,886	)
Net cash used in investing activities		(28,586	)		(68,756	)		(75,759	)
Financing activities:
Change in demand and savings deposits		(9,558	)		60,547			42,197
Change in time deposits		44,852			13,279			1,322
Dividends paid		(3,599	)		(3,446	)		(3,465	)
Repayment of mortgage debt		—			—			(513	)
Proceeds from issuance of common stock		827			555			838
Change in borrowed funds		—			—			(20,000	)
Retirement of treasury stock		43			31			39
Purchase of treasury stock		(1,990	)		(2,574	)		(1,826	)
Net cash provided by financing activities		30,575			68,392			18,592
Change in cash and cash equivalents		11,400			8,947			(19,506	)
Cash and cash equivalents at beginning of year		55,242			46,295			65,801
Cash and cash equivalents at end of year	$	66,642		$	55,242		$	46,295
Supplemental cash flow information:
Cash paid during the year for:
Income taxes	$	4,646		$	5,476		$	6,595
Interest		7,335			4,003			3,454

* See Note 1, Summary of Significant Accounting Policies – Statement of Cash Flows in the Notes to Consolidated Financial Statements

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

20

Consolidated Statements of Changes in Shareholders’ Equity

For the years ended December 31, 2005, 2004 and 2003	Shares of Common Stock Issued		Common Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholder’s Equity
	(dollars in thousands, except for shares of common stock)
Balance, December 31, 2002	5,541,108		$	5,541		$	11,243		$	63,389		$	41		$	(17,607	)	$	62,607
Net income	—			—			—			9,356			—			—			9,356
Dividends declared, $0.40 per share	—			—			—			(3,465	)		—			—			(3,465	)
Accumulated other comprehensive (loss) income, net of income taxes Of ($90,000)	—			—			—			—			(167	)		—			(167	)
2-for-l stock split	5,563,816			5,564			(5,564	)		—			—			—			—
Tax benefit from gains on stock option exercise	—			—			168			—			—			—			168
Purchase of treasury stock	—			—						—			—			(1,826	)		(1,826	)
Retirement of treasury stock	(2,005	)		(2	)		(37	)		—			—			39			—
Common stock issued	32,313			32			677			—			—			—			709
Balance, December 31, 2003	11,135,232		$	11,135		$	6,487		$	69,280		$	(126	)	$	(19,394	)	$	67,382
Net income	—			—			—			9,345			—			—			9,345
Dividends declared, $0.40 per share	—			—			—			(3,446	)		—			—			(3,446	)
Accumulated other comprehensive (loss) income, net of income taxes of ($88,000)	—			—			—			—			(162	)		—			(162	)
Tax benefit from gains on stock option exercise	—			—			107			—			—			—			107
Purchase of treasury stock	—			—			—			—			—			(2,574	)		(2,574	)
Retirement of treasury stock	(4,234	)		(4	)		(38	)		—			—			31			(11	)
Common stock issued	41,584			41			556			—			—			—			597
Balance, December 31, 2004	11,172,582		$	11,172		$	7,112		$	75,179		$	(288	)	$	(21,937	)	$	71,238
Net income	—			—			—			11,350			—			—			11,350
Dividends declared, $0.42 per share	—			—			—			(3,599	)		—			—			(3,599	)
Accumulated other comprehensive (loss) income, net of income taxes of ($191,000)	—			—			—			—			(355	)		—			(355	)
Tax benefit from gains on stock option exercise	—			—			139			—			—			—			139
Purchase of treasury stock	—			—			—			—			—			(1,990	)		(1,990	)
Retirement of treasury stock	(4,480	)		(4	)		(39	)		—			—			43			—
Common stock issued	53,797			54			676			—			—			—			730
Balance, December 31, 2005	11,221,899		$	11,222		$	7,888		$	82,930		$	(643	)	$	(23,884	)	$	77,513

Consolidated Statement of Comprehensive Income

For the years ended December 31,	2005			2004			2003
	(dollars in thousands)
Net income	$	11,350		$	9,345		$	9,356
Other comprehensive income:
Unrealized investment portfolio losses arising during the period		(404	)		(199	)		(362	)
Change in unfunded pension liability, net of tax		(92	)		(33	)		68
Deferred income tax benefit on unrealized investment portfolio losses arising during the period		141			70			127
Comprehensive net income	$	10,995		$	9,183		$	9,189

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

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Notes to Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Nature of Business:

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

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

The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many regulatory agencies including the SEC, NASD, FDIC, the Federal Reserve and the Pennsylvania Department of Banking.

Basis of Presentation:

The accounting policies of the Corporation conform with accounting principles generally accepted in the United States of America (“GAAP”) and predominate practice with the banking industry.

The Consolidated Financial Statements include the accounts of the Corporation and its wholly owned subsidiaries. The Corporation’s consolidated financial condition and results of operations consist almost entirely of the Bank’s financial condition and results of operations. All material inter-company transactions and balances have been eliminated.

In preparing the Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the balance sheets, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash and cash equivalents:

Cash and cash equivalents include cash and due from banks, federal funds sold, and interest-bearing deposits with other banks with original maturities of three months or less. Cash balances required to meet regulatory reserve requirements of the Federal Reserve Board amounted to $1.175 and $10.400 million at December 31, 2005 and 2004, respectively.

Investment securities:

Investment securities which are held for indefinite periods of time, which management intends to use as part of its asset/liability strategy, or which may be sold in response to changes in interest rates, changes in prepayment risk, increases in capital requirements, or other similar factors, are classified as available for sale and are carried at fair value. Net unrealized gains and losses for such securities, net of tax, are required to be recognized as a separate component of shareholders’ equity and excluded from determination of net income. Gains or losses on disposition are based on the net proceeds and cost of the securities sold, adjusted for amortization of premiums and accretion of discounts, using the specific identification method.

Certain investment securities are classified as held to maturity. The Company has the positive intent and ability to hold these securities to maturity. Held-to-maturity securities are classified at amortized cost.

Mortgage Loans Held for Sale:

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated fair market value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Loans:

The Corporation grants construction, commercial, residential mortgage and consumer loans to customers primarily in Southeastern Pennsylvania. Although the Corporation has a diversified loan portfolio, its debtors’ ability to honor their contracts is substantially dependent upon the real estate and general economic conditions of the region.

Loans that the Corporation has the intent and ability to hold for the foreseeable future or until maturity or pay-off, generally are reported at their outstanding principal balance adjusted for charge-offs, the allowance for loan losses and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance.

Loan origination fees and loan origination costs are deferred and recognized as an adjustment of the related loan yield using the interest method.

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The accrual of interest on loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Loans are placed on non-accrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued, but not collected for loans that are placed on non-accrual status or charged-off is reversed against interest income. The interest received on these loans is applied to reduce the carrying value of the loan or, if principal is considered fully collectible, recognized as interest income until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses:

The allowance for loan losses is established through a provision for loan losses charged as an expense. Loans are charged against the allowance for loan losses when Management believes that the collectibility of principal is unlikely. The allowance for loan losses is maintained at a level that Management believes is sufficient to absorb estimated probable credit losses.

Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires significant estimates by Management. Consideration is given to a variety of factors in establishing these estimates including specific terms and conditions of loans, underwriting standards, delinquency statistics, industry concentration, overall exposure to a single customer, adequacy of collateral, the dependence on collateral, and results of internal loan review, including borrowers perceived financial and management strengths, the amounts and timing of the present value of future cash flows, and access to additional funds. The evaluation process also considers the impact of competition, current and expected economic conditions, national and international events, the regulatory and legislative environment and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from Management estimates, additional provisions for loan losses may be required that might adversely affect the Corporation’s results of operations in future periods. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance based on their judgment of information available to them at the time of their examination.

Impaired Loans:

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

Other Real Estate Owned:

Other real estate owned (“OREO”) consists of assets that the Corporation has acquired through foreclosure, by accepting a deed in lieu of foreclosure, or by taking possession of assets that were used as loan collateral. The Corporation reports OREO as a component of “Other Assets” on the balance sheet at the lower of cost or estimated fair value less cost to sell, adjusted periodically based on current appraisals.

Premises and Equipment:

Premises and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the non-cancelable lease term or the estimated useful lives, whichever is shorter.

Pension and Postretirement Benefit Plans:

The Corporation has two defined benefit pension plans and one postretirement benefit plan as discussed in Note 11, Pension and Postretirement Benefit Plans, in the Notes to Consolidated Financial Statements. The Corporation follows the disclosure provisions of SFAS No. 132R, Employer’s Disclosure About Pensions and Other Postretirement Benefits. Net pension expense consists of service cost, interest cost, return on plan assets, amortization of prior service cost, amortization of transition obligations and amortization of net actuarial gains and losses. The Corporation accrues pension costs as incurred.

Accounting for Stock-Based Compensation:

The Corporation has one Stock Option Plan (the “SOP”) that accounts for stock-based employee compensation under the “intrinsic value” approach in accordance with the provisions of APB Opinion No. 25, rather than under the “fair value” approach prescribed in the Statement of Accounting Standards (“SFAS”) No. 123R, “Accounting for Stock-based Compensation.” The “intrinsic value” approach limits compensation expense to the excess of a stock option’s market

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price on the grant date over the option’s exercise price. Since the Corporation’s SOP has exercise prices equal to market values on grant date, no compensation expense is recognized in the financial statements. The “fair value” approach under SFAS No. 123R takes into account the time value of the option and will generally result in compensation expense being recorded over the option’s vesting period.

In May of 2005, the FASB issued a second revision to SFAS 123R, which will disallow use of the “intrinsic value” approach beginning in the first quarter of 2006 and requires the Corporation to recognize in the income statement the expenses associated with the value of all stock options granted but not yet fully vested.

In June 2005, the Corporation accelerated the vesting of 83,916 out-of-the-money options, issued to employees, executive management and directors, which resulted in a proforma after-tax expense of $280,000 included in the stock based compensation cost in the table below. The purpose of this transaction was to avoid the expense treatment of SFAS No. 123R in 2006 and 2007.

Had the Corporation accounted for stock-based compensation using SFAS No. 123R, net income would have been as shown in the following pro forma disclosure.

(dollars in thousands)	2005		2004		2003
Net income – as reported	$	11,350	$	9,345	$	9,356
Stock-based compensation cost, net of related taxes		1,388		94		79
Net income – proforma	$	9,962	$	9,251	$	9,277
Basic earnings per share – as reported		1.33		1.09		1.08
Diluted earnings per share – as reported		1.31		1.07		1.07
Basic earnings per share – proforma		1.16		1.07		1.07
Diluted earnings per share – proforma		1.15		1.06		1.06

See Note 14, Earnings Per Share, and Note 13, Stock Option Plan, in these Consolidated Financial Statements for additional information regarding equity based compensation and earnings per share, respectively.

Earnings Per Common Share:

The Corporation follows the provisions of SFAS No. 128, “Earnings Per Share”. Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during this period. Diluted earnings per common share takes into account the potential dilution that could occur if stock options were exercised and converted into common stock. Proceeds assumed to have been received on such exercise are assumed to be used to purchase shares of the Corporation’s common stock at the average market price during the period, as required by the “treasury stock method” of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. All weighted average shares, actual shares and per share information in the financial statements have been adjusted retroactively for the effect of stock dividends and splits.

Income Taxes:

The Corporation files a consolidated Federal income tax return with its subsidiaries. Certain items of income and expense are reported in different periods for tax purposes. Deferred taxes are provided on such temporary differences existing between financial and income tax reporting, subject to the deferred tax asset realization criteria required under SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”).

Revenue Recognition:

With the exception of non-accrual loans, the Corporation recognizes all sources of income on the accrual basis. The Corporation recognizes interest income from non-accrual loans on a cash basis.

Mortgage Servicing:

The Corporation performs various servicing functions on loans owned by others. A fee, usually based on a percentage of the outstanding principal balance of the loan, is received for these services.

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

Servicing assets are evaluated quarterly for impairment based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rate and terms. Fair value is determined based upon discounted cash flows using market-based assumptions. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount for the stratum. A valuation allowance is utilized to record temporary impairment in MSRs. Temporary impairment is defined as impairment that is not deemed permanent. Permanent impairment is recorded as a reduction of the MSR and will not be reversed. There was no net impairment in mortgage servicing rights for the year ended December 31, 2005, 2004 and 2003. See Note 6, Mortgage Servicing Rights, for additional information including temporary impairment and subsequent recovery during 2005, 2004 and 2003.

Recently Issued Accounting Standards:

FASB Staff Position 13-1 (“FSP 13-1”), Accounting for Rental Costs Incurred during a Construction Period, was issued on October 6, 2005. FSP 13-1 states that a lessee may not capitalize rental costs associated with either ground or building operating leases during the construction period and is

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effective for reporting periods starting after December 15, 2005. The corporation has adopted FSP 13-1 beginning January 1, 2006. Adoption of FSP 13-1 is expected to increase the Corporation’s rent expense by $150,000 in 2006.

Statement of Cash Flows:

In 2003 the Corporation has combined cash flows from discontinued operations with cash flows from continuing operations for each category which in prior periods were reported on a combined basis as a single amount.

Reclassifications:

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

2. INVESTMENT SECURITIES:

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

As of December 31, 2005:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Obligations of the U.S. Government and agencies	$	26,440	$	—	$	(447	)	$	25,993
State & political subdivisions		5,185		—		(171	)		5,014
FNMA Mortgage Backed Securities		2,035		—		(6	)		2,029
Other securities*		1,948		11		(4	)		1,955
Total	$	35,608	$	11	$	(628	)	$	34,991

As of December 31, 2004:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Market Value
Obligations of the U.S. Government and agencies	$	28,939	$	8	$	(156	)	$	28,791
State & political subdivisions		5,181		18		(100	)		5,099
Other securities*		1,534		17		—			1,551
Total	$	35,654	$	43	$	(256	)	$	35,441

* Included in other securities are the following restricted stocks; Federal Reserve Bank, Federal Home Loan Bank of Pittsburgh and the Atlantic Central Banker’s Bank.

The following table shows the amount of securities that were in an unrealized loss position at December 31, 2005:

	Less than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
US Treasury obligations and direct obligations of US Government Agencies	$	7,422	$	(78	)	$	18,571	$	(369	)	$	25,993	$	(447	)
State and political subdivisions		1,486		(11	)		3,528		(160	)		5,014		(171	)
Federal agency mortgage-backed securities		2,029		(6	)		—		—			2,029		(6	)
Other		246		(4	)		—		—			246		(4	)
Total temporarily impaired securities	$	11,183	$	(99	)	$	22,099	$	(529	)	$	33,282	$	(628	)

The Corporation has concluded that the unrealized losses presented in the table above are temporary in nature as they are primarily related to market interest rates and are not related to the underlying credit quality of the issuers. None of the investments are believed to be other-than-temporarily impaired.

The Corporation has the ability and intent to hold the securities until maturity to recover the entire value.

At December 31, 2005, securities having a book value of $15.959 million were pledged as collateral for public funds, trust deposits, and other purposes.

The amortized cost and estimated market value of investment securities at December 31, 2005, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	2005
(dollars in thousands)	Amortized Cost		Estimated Market Value
Due in one year or less	$	5,615	$	5,546
Due after one year through five years		22,188		21,798
Due after five years through ten years		4,599		4,436
Due after ten years		—		—
Other securities		1,171		1,182
Subtotal	$	33,573	$	32,962
Mortgage backed securities		2,035		2,029
Total	$	35,608	$	34,991

There were no sales of debt securities during 2005, 2004 or 2003.

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3. LOANS:

Loans outstanding at December 31 are detailed by category as follows:

(dollars in thousands)	2005			2004
Loans held for sale	$	2,765		$	8,708
Real estate loans:
Commercial mortgage loans		162,621			137,141
Home equity lines and loans		107,699			109,512
Residential mortgage loans		99,602			75,081
Construction loans		45,523			36,941
Commercial and industrial loans		170,283			186,923
Consumer Loans		9,437			10,291
Total Portfolio Loans		595,165			555,889
Total Loans	$	597,930		$	564,597
Loans with predetermined rates		393,782			265,041
Loans with adjustable or floating rates		204,148			299,556
Total Loans	$	597,930		$	564,597
Total deferred loan origination cost and fees included in the above loan numbers	$	(594	)	$	(502	)

Non-accrual loans amounted to $261,000 and $1.353 million at December 31, 2005 and 2004, respectively. Loans past due 90 days or more and still accruing were $129,000 and $22,000 at December 31, 2005 and 2004, respectively. Forgone interest on non-accrual loans was $54,000, $88,000, and $1,000 in 2005, 2004, and 2003, respectively.

Information regarding impaired loans is as follows:

	December 31,
(dollars in thousands)	2005			2004			2003
Impaired Loans	$	261		$	1,353		$	371
Allowance for impaired loans
Balance January 1	$	5		$	1		$	—
Provision		200			600			125
Charge-offs		(156	)		(598	)		(125	)
Recoveries		17			2			1
Balance December 31	$	66		$	5		$	1
Cash received	$	1,356		$	142		$	277
Income recognized	$	22		$	5		$	23

4. ALLOWANCE FOR LOAN LOSSES:

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

(dollars in thousands)	2005			2004			2003
Balance, January 1	$	6,927		$	6,670		$	6,114
Charge-offs		(314	)		(692	)		(227	)
Recoveries		27			49			33
Provision for loan loss		762			900			750
Balance, December 31	$	7,402		$	6,927		$	6,670

5. PREMISES AND EQUIPMENT:

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

(dollars in thousands)	2005			2004
Land	$	2,974		$	2,974
Buildings		13,749			15,226
Furniture and equipment		15,642			14,996
Leasehold improvements		4,211			1,552
Less: accumulated depreciation		(21,954	)		(20,586	)
Total	$	14,622		$	14,162

Depreciation expense for the years ended December 31, 2005, 2004 and 2003 amounted to $1.398, $1.310 and $1.291 million respectively.

Future minimum rent commitments under various operating leases as of December 31, 2005 are as follows:

(dollars in thousands)
2006	$	968
2007	$	861
2008	$	797
2009	$	737
2010	$	750
Thereafter	$	16,255

6. MORTGAGE SERVICING:

The following summarizes the Corporation’s activity related to MSRs for the years ended December 31, 2005 and 2004:

(dollars in thousands)	2005			2004
Balance, January 1	$	3,172		$	4,391
Additions		416			1,019
Amortization		(606	)		(839	)
Impairment		—			—
Sales		—			(1,399	)
Balance, December 31	$	2,982		$	3,172
Fair Value	$	4,843		$	4,132

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The following summarizes the Corporation’s activity related to changes in the valuation allowance impairment of MSRs for the years ended December 31, 2005 and 2004:

	2005			2004
Balance, January 1	$	—		$	—
Impairment		42			—
Recovery		(42	)		—
Balance, December 31	$	—		$	—

At December 31, 2005, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:

(dollars in thousands)	December 31, 2005
Fair value amount of MSRs	$	4,843
Weighted average life (in years)		7.0
Prepayment speeds (constant prepayment rate)*		11.3	%
Impact on fair value:
10% adverse change		(139	)
20% adverse change		(1,363	)
Discount rate:		9.5	%
Impact on fair value:
10% adverse change		(135	)
20% adverse change		(212	)

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

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

7. DEPOSITS:

Following is a summary of deposits as of December 31,

(dollars in thousands)	2005		2004
Regular savings		46,258	$	50,300
NOW accounts		154,319		166,901
Market rate accounts		112,319		126,058
Time deposits (less than $100,000)		67,541		70,820
Time deposits, $100,000 or more		87,781		39,650
Total interest-bearing deposits		468,218		453,729
Non-interest-bearing deposits		168,042		147,236
Total deposits	$	636,260	$	600,965

The aggregate amount of deposit overdrafts included as loans as of December 31, 2005 and 2004 were $1.870 million and $393,000, respectively.

Maturity of certificates of deposit:

(dollars in thousands)	$100,000 or more		Less than $100,000
Maturing during:
2006	$	82,139	$	47,814
2007		5,432		17,932
2008		100		1,318
2009		110		246
2010		—		94
2011 and Thereafter		—		137
Total	$	87,781	$	67,541

8. SHORT TERM BORROWINGS:

Short term borrowings are presented below:

(dollars in thousands)	2005			2004			2003
Average balance during the year	$	1,700		$	849		$	496
Year end balance		—			—			—
Highest month end balance		12,385			13,100			8,000
Weighted-average interest rate during the year		3.34	%		1.17	%		1.90	%
Weighted-average interest rate at year end		—			—			—

9. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments” (“SFAS No. 107”), requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. SFAS No. 107 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Corporation.

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

Cash and Cash Equivalents:

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

Investment securities:

Estimated fair values for investment securities are based on quoted market price, where available.

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Loans:

For variable rate loans that reprice frequently and which have no significant change in credit risk, estimated fair values are based on carrying values. Fair values of certain mortgage loans and consumer loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The estimated fair value of nonperforming loans is based on discounted estimated cash flows as determined by the internal loan review of the Bank or the appraised market value of the underlying collateral, as determined by independent third party appraisers.

Deposits:

The estimated fair values disclosed for noninterest-bearing demand deposits, NOW accounts, and Market Rate accounts are, by definition, equal to the amounts payable on demand at the reporting date (i.e., their carrying amounts). Fair values for certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of expected monthly maturities on the certificate of deposit. SFAS No. 107 defines the fair value of demand deposits as the amount payable on demand and prohibits adjusting estimated fair value from any value derived from retaining those deposits for an expected future period of time.

Short Term Borrowings:

Due to the short term nature of the maturities the carrying amount of the borrowings approximates the fair value. There were no short term borrowings at December 31, 2005 and 2004.

Other liabilities:

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

Off-balance sheet instruments:

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

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

	2005				2004
(dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and due from banks	$	33,896	$	33,896	$	26,526	$	26,526
Interest-bearing deposits with other banks		405		405		15,293		15,293
Federal funds sold		32,341		32,341		13,423		13,423
Investment securities		34,991		34,991		35,441		35,441
Mortgage servicing rights		2,982		4,843		3,172		4,132
Net loans		590,528		583,135		557,670		554,515
Total financial assets	$	695,143	$	689,611	$	651,525	$	649,330
Financial liabilities:
Deposits	$	636,260	$	635,443	$	600,965	$	601,109
Other liabilities		2,143		2,143		2,878		2,878
Total financial liabilities	$	638,403	$	637,586	$	603,843	$	603,987
Off-balance sheet instruments	$	328,069	$	328,069	$	277,839	$	277,839

10. APPLICABLE INCOME TAXES:

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

(dollars in thousands)	2005			2004
Deferred tax assets:
Loan loss reserve	$	2,591		$	2,270
Other reserves		1,288			699
Unrealized depreciation on investment securities		346			155
Total deferred tax asset		4,225			3,124
Deferred tax liabilities:
Depreciation		(268	)		(261	)
Other reserves		(314	)		(399	)
Pension and other postretirement benefits		(1,890	)		(1,417	)
Originated mortgage servicing rights		(1,044	)		(1,110	)
Total deferred tax liability		(3,516	)		(3,127	)
Total net deferred tax assets (liabilities)	$	709		$	(3	)

There was no valuation allowance as of December 31, 2005 and 2004; since management believes that it is more likely than not that the net deferred tax asset will be realized.

The provision for income taxes consists of the following:

(dollars in thousands)	2005			2004		2003
Currently payable	$	6,449		$	4,714	$	5,245
Deferred		(521	)		38		1,004
Total	$	5,928		$	4,752	$	6,249

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

(dollars in thousands)	2005			2004			2003
Computed
Tax expense at statutory federal rate	$	6,047		$	4,934		$	6,062
Tax-exempt income		(187	)		(140	)		(103	)
Other, net		68			(42	)		90
Tax expense from continuing operations		5,928			4,752			6,049
Tax expense (benefit) from discontinued operations		—			—			200
Total income tax expense	$	5,928		$	4,752		$	6,249

11. PENSION AND POSTRETIREMENT BENEFIT PLANS:

The Corporation has two defined benefit pension plans. The qualified defined benefit plan (“QDBP”) covers all employees over age 20 1/2 who meet certain service requirements. The non-qualified defined benefit pension plan (“SERP”) is restricted to certain executive officers of the Corporation as discussed in the Corporation’s Proxy Statement to Shareholders. The Corporation also has a postretirement benefit plan (“PRBP”) that covers certain retired employees and a group of current employees. The PRBP was closed to new participants in 1994. The following tables provide a reconciliation of the changes in the plans’ three benefits obligation and fair value of assets over the two-year period ending December 31, 2005, and a statement of funded status as of December 31 of both years:

Reconciliation of Benefit Obligation and Plan Assets

	Defined Benefit Pension Plan						Postretirement Benefit Plan
(dollars in thousands)	2005			2004			2005			2004
Change in benefit obligation
Benefit obligation at January 1	$	28,406		$	25,149		$	3,152		$	2,375
Service cost		1,167			1,134			12			21
Interest cost		1,650			1,573			143			188
Amendments		—			—			(860	)		—
Actuarial (gain) loss		571			1,517			214			793
Benefits paid		(1,034	)		(967	)		(213	)		(225	)
Benefit obligation at December 31	$	30,760		$	28,406		$	2,448		$	3,152
Change in plan assets
Fair value of plan assets at January 1	$	25,838		$	22,615		$	—		$	—
Actual return on plan assets		902			1,441						—
Employer contribution		1,070			2,807			193			225
Plan participants’ contribution		—			—			20			—
Administrative expense		(50	)		(58	)
Benefits paid		(1,034	)		(967	)		(213	)		(225	)
Fair value of plan assets at December 31	$	26,726		$	25,838		$	—		$	—

Funded Status Reconciliation and Key Assumptions

	Defined Benefit Pension Plans						Postretirement Benefit Plan
(dollars in thousands)	2005			2004			2005			2004
Reconciliation of funded status
Funded Status	$	(4,033	)	$	(2,568	)	$	(2,448	)	$	(3,152	)
Unrecognized net actuarial (gain) loss		7,610			6,112			1,747			1,737
Unrecognized prior service cost		369			499			(742	)		—
Unrecognized transition obligation (asset)		—			—			181			207
Prepaid accrued (benefit) cost	$	3,946		$	4,043		$	(1,262	)	$	(1,208	)
Amounts recognized in financial statements consists of:
Prepaid benefit cost/ (Accrued benefit liability)	$	3,400		$	3,612			(1,262	)		(1,208	)
Intangible asset prior service cost		174			222			—			—
Accumulated other comprehensive income (loss)		372			209			—			—
Net amount recognized	$	3,946		$	4,043		$	(1,262	)	$	(1,208	)

The SERP was the only plan with an accumulated benefit obligation in excess of plan assets. The SERP’s accumulated benefit obligation was $2.000 million as of December 31, 2005 and $1.788 million as of December 31, 2004. There are no plan assets in the SERP due to the nature of the SERP. The PRBP also has no plan assets.

Key Assumptions

The assumptions used in the measurement of the Corporation’s benefit obligation are shown in the following table:

	Defined Benefit Pension Plan				Postretirement Benefit Plan
	2005		2004		2005		2004
Weighted-average assumptions as of end of year
Discount rate	5.75	%	6.00	%	5.75	%	6.00	%
Expected rate of return on plan assets	8.50	%	8.75	%	N/A		N/A
Rate of compensation increase	4.00	%	4.00	%	4.00	%	4.00	%

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

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The following table presents expected future benefit payments which reflect an expected future service requirement:

Expected Future Benefit Payments

(dollars in thousands)	Defined Benefit Pension Plans		Postretirement Benefit Plan
For the Fiscal Year Ending:
2006	$	1,204	$	289
2007		1,393		298
2008		1,519		286
2009		1,646		270
2010		1,740		255
Years 2011 – 2015		10,531		970
	$	18,033	$	2,368

Assumed health care cost trend rates at end of year

	2005		2004
Health care cost trend rate assumed for next year	8.10	%	11	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	0	%	6	%
Year that the rate reaches the ultimate trend rate	2006		2010

In 2005 the Corporation capped the maximum payment under the PRBP at 120% of the 2005 benefit.

The following table provides the components of net periodic cost (income) for the plans for years ended December 31, 2005, 2004 and 2003:

	Defined Benefit Pension Plans									Postretirement Benefit Plan
(dollars in thousands)	2005			2004			2003			2005			2004		2003
Service cost	$	1,167		$	1,134		$	923		$	12		$	21	$	17
Interest cost		1,650			1,573			1,455			143			188		151
Expected return on plan assets		(2,153	)		(1,937	)		(1,493	)		—			—		—
Amortization of prior service cost		130			130			181			(138	)		—		—
Amortization of transition obligation (asset)		—			—			—			26			26		26
Amortization of net actuarial (gain) loss		373			285			285			203			185		107
Net periodic (benefit) cost	$	1,167		$	1,185		$	1,351		$	246		$	420	$	301

Plan Assets

	Defined Benefit Pension Plan (QDBP)
	Target Allocation year ending	Percentage of plan assets at December 31
	Dec. 31, 2005	2005	2004
Asset Category
Equity Securities*	40% -60%	61%	60%
Debt Securities	25% -40%	31%	29%
Real Estate	5% - 15%	0%	0%
Other	5% - 15%	8%	11%
Total		100%	100%

* Includes Bryn Mawr Bank Corporation common stock in the amount of $661,000 (2%) and $600,000 (2%) at December 31, 2005 and 2004, respectively.

The investment strategy of the Plan is to maintain the investment ranges listed above. The target ranges are to be periodically reviewed based on the prevailing market conditions. Any modification to the current investment strategy must be ratified by the Executive Committee of the Corporation’s Board of Directors. The Plan will retain approximately 2.5% of Bryn Mawr Bank Corporation common stock.

Measurement Date

The measurement date used to determine pension and other postretirement benefit measures for the pension plan and other postretirement benefits plan was December 31^st for all respective years presented.

Expected contribution to be Paid in the Next Fiscal Year

Based on the status of the Corporation’s QDBP at December 31, 2005 no minimum funding requirement is anticipated for 2006. The 2006 expected contribution for the SERP is $131,000.

Health Care Cost

In 2005 the Corporation capped the maximum payment under the post retirement benefit plan at 120% of the 2005 benefit. The current trend of 10% will achieve the cap in two years. Long term the impact of the cap will have an immaterial impact on the change in the trend.

12. THRIFT AND SAVINGS PLAN (“THRIFT PLAN”):

The Corporation has a qualified defined contribution plan for all eligible employees under which the Corporation contributes $1.00 for each $1.00 that an employee contributes up to a maximum of 3.00% of the employee’s base salary. The Corporation’s expenses for the Thrift Plan were $339,000, $347,000 and $335,000 in 2005, 2004 and 2003 respectively.

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13. STOCK OPTION PLAN:

The Corporation’s Stock Option Plan ( the “SOP”) permits the issuance of options to key employees and Directors to purchase shares of the Corporation’s common stock. The option price is set at the last sale price for the stock on the day proceeding issuance of grants as determined by the Corporation’s Board of Directors. Options granted may either be “incentive stock options” within the meaning of the Internal Revenue Service code, or non-qualified options. The stock options are exercisable over a period determined by the Board of Directors; however, the option period will not be longer than ten years from the date of the grant. The SOP provides that the option price at the date of the grant will not be less than the fair market value of the corporation’s common stock. The following is a summary of transactions under the SOP:

(dollars in thousands)	Shares Under Option		Available for Option		Price per Share		Weighted Average Exercise Price
Balance at January 1, 2003	511,234		152,678		$	4.00 – $18.32
Options granted	142,500		(142,500	)	$	17.85 – $21.68	$	18.02
Options exercised	(53,016	)	—		$	4.00 – $18.32	$	11.72
Options cancelled	(6,334	)	6,334		$	15.15 – $18.32	$	17.06
Balance at December 31, 2003	594,384		16,512		$	4.34 – $21.68	$	14.66
Options authorized	—		431,143			—		—
Options granted	138,750		(138,750	)	$	20.47 – $22.68	$	20.51
Options exercised	(37,350	)	—		$	10.50 – $18.46	$	13.11
Options cancelled	(43,000	)	43,000		$	14.49 – $20.47	$	17.80
Balance at December 31, 2004	652,784		351,905		$	4.34 – $22.68	$	14.66
Options granted	342,175		(342,175	)	$	18.91 – $21.21		19.97
Options exercised	(49,317	)	—		$	12.25 – $18.91		13.09
Options cancelled	(11,334	)	11,334		$	15.15 –$20.47		18.21
Balance at December 31, 2005	934,308		21,064		$	6.25 – $22.68	$	17.44

Information pertaining to options outstanding at December 31, 2005 is as follows:

Price range of shares under option at December 31, 2005:

(dollars in thousands)	Shares Under Option	Price per Share		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
	67,200	$	6.25 – $10.75	3.18	$	9.55	67,200	$	9.55
	194,350	$	12.25 – $15.15	3.98		13.22	194,350		13.22
	377,333	$	16.25 – $18.91	8.13		18.33	343,999		18.36
	295,425	$	19.11 – $22.68	9.23		20.87	295,425		20.87
Balance at December 31, 2005	934,308	$	6.25 – $22.68	7.26	$	17.44	900,974	$	17.42

The weighted-average fair value of options granted during 2005, 2004 and 2003 were $4.42, $4.61 and $3.98, respectively.

The number of exercisable shares at December 31, 2005, 2004 and 2003 were 900,974, 412,479 and 336,551 respectively, with respective weighted average exercise prices of $17.42, $13.58 and $7.09.

The fair value of each option granted is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2005, 2004 and 2003 as follows:

	2005		2004		2003
Dividend	2.07	%	1.76	%	1.78	%
Volatility	20.5	%	21.1	%	21.0	%
Risk-free Interest Rate	4.5	%	3.9	%	3.5	%
Expected Life in Years	6		6		6

Stock appreciation rights may be granted in tandem with non-qualified stock options. No stock appreciation rights have been granted under the SOP.

14. EARNINGS PER SHARE:

The calculation of basic earnings per share and diluted earnings per share is presented below. All weighted average shares, actual shares and per share information in the financial statements have been adjusted retroactively for the effect of stock dividends and splits. See Note 1 of the consolidated financial statements for a discussion on the calculation of earnings per share.

Earnings Per Share Including Discontinued Operations:

	Year Ended December 31,
(dollars in thousands, except number of shares and per share date)	2005		2004		2003
Numerator:
Net income available to common shareholders	$	11,350	$	9,345	$	9,356
Denominator for basic earnings per share – Weighted average shares outstanding		8,563,027		8,610,171		8,657,527
Effect of dilutive potential common shares		101,200		110,854		103,107
Denominator for diluted earnings per share – Adjusted weighted average shares outstanding		8,664,227		8,721,025		8,760,634
Basic earnings per share	$	1.33	$	1.09	$	1.08
Diluted earnings per share	$	1.31	$	1.07	$	1.07

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Earnings Per Share From Continuing Operations:

	Year Ended December 31,
(dollars in thousands, except number of shares and per share date)	2005		2004		2003
Numerator:
Net income available to common shareholders	$	11,350	$	9,345	$	11,272
Denominator for basic earnings per share – Weighted average shares outstanding		8,563,027		8,610,171		8,657,527
Effect of dilutive potential common shares		101,200		110,854		103,107
Denominator for diluted earnings per share – Adjusted weighted average shares outstanding		8,664,227		8,721,025		8,760,634
Basic earnings per share	$	1.33	$	1.09	$	1.30
Diluted earnings per share	$	1.31	$	1.07	$	1.29

For 2005, 2004, and 2003 options to purchase 161,300, 3,250 and 1,000 shares of common stock at the weighted average price of $21.23, $22.37 and $21.68 per share respectively have been excluded in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common stock.

Dilutive potential common shares have been adjusted to reflect the tax benefit of non-qualified stock options in 2004, 2003, 2002 and 2001 resulting in lower dilutive shares of 59,691, 55,436, 45,414, and 88,964 in 2004, 2003, 2002 and 2001, respectively. This resulted in an increase to previously reported diluted earnings per share of $.01 in 2004, 2003 and 2002 and $.02 in 2001. This adjustment also resulted in an increase in previously reported diluted earnings per share from continuing operations of $.01 in 2004, 2003, 2002, and 2001.

15. OTHER OPERATING INCOME:

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

(dollars in thousands)	2005		2004		2003
Cash management fees	$	476	$	518	$	501
Safe deposit		339		321		321
Insurance commission		318		299		268
Rent Income		306		246		154
Title insurance income		153		112		454
Miscellaneous income		357		224		177
Other operating income	$	1,949	$	1,720	$	1,875

16. OTHER OPERATING EXPENSE:

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

(dollars in thousands)	2005		2004		2003
Computer processing	$	463	$	531	$	562
Stationery & supplies		295		336		368
Taxes (shares, sales & use)		622		466		554
Telephone		302		284		297
Loan processing and closing		489		799		1,759
Extra help & hiring		365		285		396
Travel and entertainment		317		348		305
Miscellaneous		1,712		1,794		1,597
Other operating expenses	$	4,565	$	4,843	$	5,838

17. RELATED PARTY TRANSACTIONS:

In the ordinary course of business, the Bank granted loans to principal officers, directors and their affiliates. Loan activity during 2005 and 2004 was as follows:

Following is a summary of these transactions:

(dollars in thousands)	2005			2004
Balance, beginning of year	$	6,255		$	5,150
Additions		2,473			2,009
Amounts collected		(1,508	)		(904	)
Balance, end of year	$	7,220		$	6,255

Related party deposits amounted to $3.230 million and $1.968 million at December 31, 2005 and 2004, respectively.

18. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATION OF CREDIT RISK:

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.

The Corporation’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument of commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.

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Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon, and the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit at December 31, 2005 are $316.9 million. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credits are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in extending loan facilities to customers. The collateral varies, but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and residential real estate for those commitments for which collateral is deemed necessary. The Corporation’s obligation under standby letters of credit as of December 31, 2005 amounted to $11.2 million. There were no outstanding bankers’ acceptances as of December 31, 2005.

The Corporation has a material portion of its loans in real estate related loans. A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in the Corporation’s primary trade area which includes portions of Delaware, Chester, Montgomery and Philadelphia counties in Southeastern Pennsylvania. Management is aware of this concentration and mitigates this risk to the extent possible in many ways, including the underwriting and assessment of borrower’s capacity to repay.

As of December 31, 2005, the Corporation had no loans sold with recourse outstanding.

19. DIVIDEND RESTRICTIONS:

The Bank is subject to the Pennsylvania Banking Code of 1965 (the “Code”), as amended, and is restricted in the amount of dividends that can be paid to its shareholder, the Corporation. The Code restricts the payment of dividends by the Bank to the amount of its retained earnings which was $64.294 million as of December 31, 2005. However, the amount of dividends paid by the Bank cannot reduce capital levels below levels that would cause the Bank to be less than adequately capitalized as detailed in Note 21, Regulatory Capital Requirements.

20. DISCONTINUED OPERATIONS:

During 2003, the Corporation sold the assets of its family office subsidiary, Joseph W. Roskos & Company (“JWR & Co.”) to a former owner. In accordance with SFAS No. 144 – Accounting for the Impairment or Disposal of Long Lived Assets, the Corporation classified all revenues, expenses, goodwill write downs, related disposal expenses and applicable income taxes as a loss from discontinued operations. The disposal of the JWR & Co. subsidiary resulted in a loss, net of applicable income taxes, of $1.916 million or $0.22 per share (basic and diluted) in 2003.

The table below presents the discontinued operations and related asset sale of JWR & Co. in 2003. There were no JWR & Co. related expenses in 2004 and 2005.

(dollars in thousands)	2003
Revenues of JWR & Co.	$	773
Expenses of JWR & Co.		(1,091	)
Pre-tax (loss) income		(318	)
Applicable income (tax) benefit		108
(Loss) Income		(210	)
Non-recurring transactions:
Write-down of Goodwill		(1,005	)
Accounts receivable change-off		(148	)
Other		(245	)
Income (tax) benefit		(308	)*
Total of non-recurring transactions		(1,706	)
Loss from discontinued operations	$	(1,916	)

* Includes $444,000 of income tax expense on the sale of JWR & Co.’s assets.

As of December 31, 2005, the Corporation held notes receivable totaling $954,000 from the purchase of the assets of JWR & Co. These notes bear interest at 6.00% and have various payments and due dates through 2013. The balance of these notes was $1.287 million and $1.671 million at December 31, 2004 and 2003 respectively. These notes were paid in full on February 17, 2006. These notes are included in the Corporation’s consolidated balance sheet as commercial loans.

21. REGULATORY CAPITAL REQUIREMENTS:

Both the Corporation and the Bank are subject to various regulatory capital requirements, administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if taken, could have a direct material effect on the Corporation’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as

33

calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

As set forth in the following table, quantitative measures have been established to ensure capital adequacy ratios required of both the Corporation and Bank. Both the Corporation’s and the Bank’s Tier II capital ratios are calculated by adding back a portion of the loan loss reserve to the Tier I capital. Management believes, as of December 31, 2005 and 2004 that the Corporation and the Bank have met all capital adequacy requirements to which they are subject. Federal banking regulators have defined specific capital categories, and categories range from a best of “well capitalized “to a worst of “critically under capitalized”. Both the Corporation and the Bank are classified as “well capitalized” as of December 31, 2005 and 2004.

The Corporation’s and the Bank’s actual capital amounts and ratios as of December 31, 2005 and 2004 are presented in the following table:

	Actual				Minimum to be Adequately Capitalized				Minimum to be Well Capitalized
(dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2005
Total (Tier II) Capital to Risk Weighted Assets:
Corporation	$	85,322	12.46	%		—	8.0	%		N/A	N/A
Bank		78,048	11.47	%	$	54,424	8.0	%	$	68,030	10.0	%
Tier I Capital to Risk Weighted Assets:
Corporation		77,915	11.38	%		—	4.0	%		N/A	NA
Bank		70,641	10.38	%		27,212	4.0	%		40,818	6.0	%
Tier I Capital to Quarterly Average Assets:
Corporation		77,915	11.25	%		—	4.0	%		N/A	N/A
Bank		70,641	10.26	%		27,529	4.0	%		34,412	5.0	%
December 31, 2004
Total (Tier II) Capital to Risk Weighted Assets:
Corporation	$	78,312	12.33	%		—	8.0	%		N/A	N/A
Bank		69,886	11.09	%		50,417	8.0	%		63,021	10.0	%
Tier I Capital to Risk Weighted Assets:
Corporation		71,378	11.24	%		—	4.0	%		N/A	N/A
Bank		62,952	9.99	%		25,209	4.0	%		37,813	6.0	%
Tier I Capital to Quarterly Average Assets:
Corporation		71,378	10.76	%		—	4.0	%		N/A	N/A
Bank		62,952	9.56	%		26,333	4.0	%		32,916	5.0	%

22. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

	Quarters Ending 2005
(dollars in thousands, except per share data)	3/31		6/30		9/30		12/31
Interest income	$	8,671	$	9,186	$	9,834	$	10,277
Interest expense		1,303		1,544		1,788		1,965
Net interest income		7,368		7,642		8,046		8,312
Provision for loan losses		187		193		209		173
Income before income taxes		4,211		4,305		4,375		4,387
Net income	$	2,802	$	2,788	$	2,876	$	2,884
Basic earnings per common share:
Total basic earnings per common share	$	0.33	$	0.33	$	0.34	$	0.34
Diluted earnings per common share:
Total diluted earnings per common share	$	0.32	$	0.32	$	0.33	$	0.33
	Quarters Ending 2004
(dollars in thousands, except per share data)	03/31		6/30		9/30		12/31
Interest income	$	7,452	$	7,632	$	7,969	$	8,328
Interest expense		1,083		1,083		1,155		1,232
Net interest income		6,369		6,549		6,814		7,096
Provision for loan losses		187		188		187		338
Income before income taxes		4,635		3,239		3,159		3,064
Net income	$	3,020	$	2,129	$	2,109	$	2,087
Basic earnings per common share:
Total basic earnings per common share	$	0.35	$	0.25	$	0.25	$	0.24
Diluted earnings per common share:
Total diluted earnings per common share	$	0.34	$	0.24	$	0.24		0.24

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23. CONDENSED FINANCIAL STATEMENTS:

The condensed financial statements of the Corporation (parent company only) as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, are as follows:

Condensed Balance Sheets

(dollars in thousands)	2005			2004
Assets:
Cash	$	3,135		$	1,174
Investments in subsidiaries, at equity in net assets		71,095			66,665
Premises and equipment, net		3,368			3,467
Other assets		582			543
Total assets	$	78,180		$	71,849
Liabilities and shareholders’ equity:
Other liabilities	$	667		$	611
Total liabilities		667			611
Common stock, par value $1, authorized 25,000,000 shares as of December 31, 2005 and 2004, respectively, issued 11,172,582 shares and 11,172,582 shares as of December 31, 2005 and 2004, respectively and outstanding 8,597,958 shares and 8,597,958 shares as of December 31, 2005 and 2004, respectively		11,222			11,172
Paid-in capital in excess of par value		7,888			7,112
Accumulated other comprehensive income, net of deferred income taxes		(643	)		(288	)
Retained earnings		82,930			75,179
Less common stock in treasury, at cost - 2,574,624 shares and 2,574,624 shares as of December 31, 2005 and 2004		(23,884	)		(21,937	)
Total shareholders’ equity		77,513			71,238
Total liabilities and shareholders’ equity	$	78,180		$	71,849

Condensed Statements of Income

(dollars in thousands)	2005		2004		2003
Dividends from The Bryn Mawr Trust Company	$	3,599	$	3,446	$	3,465
Interest and other income		326		236		236
Total operating income		3,925		3,682		3,701
Expenses		503		472		459
Income before equity in undistributed income of subsidiaries		3,422		3,210		3,242
Equity in undistributed income of subsidiaries		7,868		6,055		7,954
Income before income taxes and discontinued operations		11,290		9,265		11,196
Federal income tax benefit		60		80		76
Income from continuing operations		11,350		9,345		11,272
(Loss) income from discontinued operations		—		—		(1,916	)
Net income	$	11,350	$	9,345	$	9,356

Condensed Statements of Cash Flows

(in thousands)	2005			2004			Revised 2003*
Operating activities:
Income from continuing operations	$	11,350		$	9,345		$	11,272
Loss from discontinued operations		—			—			(1,916	)
Net Income		11,350			9,345			9,356
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income (losses) of subsidiaries		(7,868	)		(6,054	)		(7,954	)
Impairment of goodwill		—			—			2,405
Depreciation and amortization		99			98			98
Other		642			(19	)		(53	)
Net cash provided by operating activities		4,223			3,370			3,852
Investing Activities:
Investment in Subsidiaries		2,597			162			1,313
Net cash provided by investing activities		2,597			162			1,313
Financing activities:
Dividends paid		(3,599	)		(3,446	)		(3,465	)
Repayment of mortgage debt		—			—			(513	)
Repurchase of treasury stock		(1,990	)		(2,585	)		(1,826	)
Proceeds from issuance of common stock		730			597			709
Net cash used by financing activities		(4,859	)		(5,434	)		(5,095	)
Change in cash and cash equivalents		1,961			(1,902	)		70
Cash and cash equivalents at beginning of year		1,174			3,076			3,006
Cash and cash equivalents at end of year	$	3,135		$	1,174		$	3,076

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

* See Note 1, Summary of Significant Accounting Policies – Statement of Cash Flows, in the Notes to the Consolidated Financial Statements.

24. SEGMENT INFORMATION:

SFAS No. 131, “Segment Reporting”, identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s Chief Executive Officer in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in SFAS No. 131 to the results of its operations.

The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is managed as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including service charges on deposit accounts; cash sweep fees, overdraft fees and interchange revenue associated with its Visa Check Card offering.

35

The Wealth Management segment has responsibility for all fiduciary activities within the Corporation, including investment management, trust administration, brokerage, employee benefit administration, tax services and custodial services. This segment includes revenues and related expenses from an investment management agreement with another community bank.

The Mortgage Banking segment includes the origination of residential mortgage loans and the sale and servicing of such loans to the secondary mortgage market. This segment also includes the Corporation’s title insurance and joint mortgage origination activity with a real estate brokerage organization.

The “All Other” segment includes activities and expenses that do not fit into the other three segments including general corporate activities such as shareholder relations costs, NASDAQ fees and the annual meeting of shareholders. This segment also includes revenues and expenses from the Corporation’s insurance agency activities and interest income from the JWR notes receivable.

The banking, wealth management and mortgage banking segments consolidate and roll-up through the Bank.

Segment information for the years ended December 31, 2005, 2004, and 2003, from continuing operations, is as follows:

	2005															2004															2003
(dollars in thousands)	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated			Banking			Wealth Management			Mortgage Banking			All Other			Consolidated			Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Net interest income	$	31,200		$	—		$	92		$	76		$	31,368		$	26,487		$	—		$	255		$	86		$	26,828		$	24,707		$	—		$	160		$	64		$	24,931
Less loan loss provision		762			—			—			—			762			900			—			—			—			900			750			—			—			—			750
Net interest income after loan loss provision		30,438			—			92			76			30,606			25,587			—			255			86			25,928			23,957			—			160			64			24,181
Other income:
Fees for investment management and trust services		—			11,539			—			—			11,539			—			10,303			—			—			10,303			—			9,736			—			—			9,736
Service charges on deposit accounts		1,593			—			—			—			1,593			1,827			—			—			—			1,827			1,896			—			—			—			1,896
Other fees and service charges		191			—			1,351			—			1,542			209			—			1,670			—			1,879			199			—			2,221			—			2,420
Net gain on sale of loans		—			—			1,622			—			1,622			34			—			2,886			—			2,920			13			—			10,637			—			10,650
Net gain on sale of mortgage servicing rights		—			—			—			—			—			—			—			1,145			—			1,145			—			—			—			—			—
Other operating income		1,408			3			242			296			1,949			1,331			—			112			667			2,110			1,244			—			454			637			2,335
Total other income		3,192			11,542			3,215			296			18,245			3,401			10,303			5,813			667			20,184			3,352			9,736			13,312			637			27,037
Other expenses:
Salaries-regular		9,006			3,620			624			195			13,445			8,727			3,736			904			200			13,567			8,220			3,719			1,343			314			13,596
Salaries-other		1,879			359			157			22			2,417			878			386			171			11			1,446			394			198			833			13			1,438
Fringe benefits		3,041			857			129			48			4,075			3,245			835			165			52			4,297			3,254			852			195			52			4,353
Occupancy		3,453			641			242			(123	)		4,213			3,232			586			249			131			4,198			2,982			629			258			216			4,085
Other operating expenses		5,093			1,082			1,105			143			7,423			5,292			1,097			1,678			440			8,507			4,145			1,039			4,855			386			10,425
Total other expenses		22,472			6,559			2,257			285			31,573			21,374			6,640			3,167			834			32,015			18,995			6,437			7,484			981			33,897
Segment profit (loss)		11,158			4,983			1,050			87			17,278			7,614			3,663			2,901			(81	)		14,097			8,314			3,299			5,988			(280	)		17,321
Intersegment (revenues) expenses		201			181			—			(382	)		—			166			181			—			(347	)		—			111			181			—			(292	)		—
Segment profit after eliminations	$	11,359		$	5,164		$	1,050		$	(295	)	$	17,278		$	7,780		$	3,844		$	2,901		$	(428	)	$	14,097		$	8,425		$	3,480		$	5,988		$	(572	)	$	17,321
% of segment profit (loss)		65.7	%		29.9	%		6.1	%		(1.7	)%		100.0	%		55.2	%		27.3	%		20.6	%		(3.1	)%		100.0	%		48.6	%		20.1	%		34.6	%		(3.3	)%		100.0	%

36

Price Range of Shares

BRYN MAWR BANK CORPORATION

(NASDAQ: BMTC)

	High Bid		Low Bid		Dividend Declared
2005 HIGH-LOW QUOTATIONS
First Quarter	$	22.86	$	20.00	$	0.10
Second Quarter		21.18		17.98		0.10
Third Quarter		22.06		19.05		0.11
Fourth Quarter		22.00		20.75		0.11
2004 HIGH-LOW QUOTATIONS
First Quarter	$	24.26	$	21.50	$	0.10
Second Quarter		23.73		19.30		0.10
Third Quarter		22.82		19.67		0.10
Fourth Quarter		22.55		19.10		0.10

The approximate number of registered holders of record of common stock as of December 31, 2005 was 347.

The shares are traded on the NASDAQ National Market System under the symbol BMTC. The price information was obtained from The National Association of Securities Dealers (NASD).

37

EX-23.1

Exhibit 23-1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Bryn Mawr Bank Corporation:

We consent to the incorporation by reference in the Registration Statements on Form S-8 of Bryn Mawr Bank Corporation of our reports dated March 8, 2006, with respect to the consolidated balance sheets of Bryn Mawr Bank Corporation as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, comprehensive income and cash flows for the years ended December 31, 2005 and 2004, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005, which reports appear in the December 31, 2005 annual report on Form 10-K of Bryn Mawr Bank Corporation.

(signed) KPMG LLP

Philadelphia, Pennsylvania

March 8, 2006

EX-23.2

Exhibit 23-2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 033-12715 and 33-61881) of Bryn Mawr Bank Corporation of our report dated February 27, 2004 relating to the financial statements, for the year ended December 31, 2003 which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

March 8, 2006

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Frederick C. Peters II, Chief Executive Officer, certify that:

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

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

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

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

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

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

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

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

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

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 8, 2006	/s/    FREDERICK C. PETERS II
	Frederick C. Peters II, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, J. Duncan Smith, CPA, Treasurer and Chief Financial Officer, certify that:

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

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

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

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

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

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

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

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

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

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 8, 2006	/s/    J. DUNCAN SMITH , CPA
	J. Duncan Smith, Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

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

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

In connection with the Year End Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick C. Peters II, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/s/    FREDERICK C. PETERS II        

Frederick C. Peters II

Chief Executive Officer

March 8, 2006

EX-32.2

Exhibit 32.2

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

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

In connection with the Year End Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-K for the period ending December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Duncan Smith, CPA, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/s/    J. DUNCAN SMITH        

J. Duncan Smith

Treasurer and Chief Financial Officer

March 8, 2006

EX-99.B

Exhibit 99-B

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Bryn Mawr Bank Corporation:

In our opinion, the consolidated statements of income, comprehensive income, changes in shareholders’ equity and of cash flows for the year ended December 31, 2003 (included in the Bryn Mawr Bank Corporation 2005 Annual Report to Shareholders which has been incorporated by reference in this Form 10-K) present fairly, in all material respects, the results of operations and cash flows of Bryn Mawr Bank Corporation and its subsidiaries for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. 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 audit. We conducted our audit of these statements 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, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

Philadelphia, PA

February 27, 2004