First Keystone Financial Announces Second Quarter Fiscal 2010 Results

Share Name	Share Symbol	Market	Type
First Keystone Financial (MM)	NASDAQ:FKFS	NASDAQ	Common Stock

First Keystone Financial (MM) (NASDAQ:FKFS)
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First Keystone Financial, Inc. (NASDAQ: FKFS), the holding company for First Keystone Bank (the “Bank”), reported today a net loss for the quarter ended March 31, 2010 of $3.2 million, or $1.37 per diluted share, compared to a net loss of $806,000, or $0.35 per diluted share, for the same period last year. Net loss for the six months ended March 31, 2010 was $4.5 million, or $1.92 per diluted share, as compared to a net loss of $868,000, or $0.37 per diluted share, for the same period in 2009.

“Our loss for the quarter ended March 31, 2010 was primarily due to losses recognized on the sale of the Bank’s pooled trust preferred securities portfolio, which had continued to decline in value during the quarter,” stated Hugh J. Garchinsky, President. “Also contributing to the loss, the Bank experienced further deterioration in certain, previously identified commercial real estate and business loans which necessitated a provision for loan losses of $1.0 million for the quarter.” Garchinsky continued, “In spite of the significant loss for the current quarter, the Bank’s capital ratios remain well above regulatory requirements as well as the enhanced capital requirements imposed by the Supervisory Agreement with the Office of Thrift Supervision. In addition, the Bank’s net interest margin has continued to improve, increasing 17 basis points from the prior quarter to 2.64%. With regard to our pending merger, we continue to work closely with the management team from Bryn Mawr Bank Corporation to ensure that the integration of the two companies is successful. We currently anticipate completing the transaction in July 2010, subject to receipt of all necessary regulatory approvals.”

SIGNIFICANT ITEMS FOR THE QUARTER

Total assets of the Company decreased by $39.9 million, from $528.4 million at September 30, 2009 to $488.5 million at March 31, 2010. Loans receivable decreased by $9.2 million, from $311.3 million at September 30, 2009 to $302.0 million at March 31, 2010 with the majority of the decrease accounted for by declines in the residential mortgage and home equity loan portfolios. Cash and cash equivalents increased by $12.8 million to $60.5 million at March 31, 2010 from $47.7 million at September 30, 2009 primarily due to the receipt of proceeds from sales of mortgage-related and investment securities available for sale. The inflows of cash from investment sales were partially offset by outflows of cash as deposits decreased $15.8 million, or 4.5%, from $347.1 million at September 30, 2009 to $331.3 million at March 31, 2010. The decrease in deposits was attributable to a $27.1 million decrease in time deposits from $168.6 million at September 30, 2009 to $141.5 million at March 31, 2010 reflecting the Company’s determination to not aggressively price its time deposit products, partially offset by an $11.3 million increase in core deposits.
Investment securities available for sale and mortgage-related securities available for sale decreased by $42.2 million from $113.8 million at September 30, 2009, to $71.6 million at March 31, 2010. The decline reflected, in part, management's decision to liquidate the Bank's $5.6 million pooled trust preferred securities portfolio which resulted in a pre-tax loss of $3.7 million. In addition, in anticipation of a near-term rise in interest rates, management decided to reduce the Bank's position on longer term mortgage-backed securities through sales of $33.9 million of such securities, resulting in a pre-tax gain of $1.2 million.
At March 31, 2010, non-performing assets increased $4.7 million to $10.1 million, or 2.1%, of total assets, from $5.4 million, or 1.0%, at September 30, 2009. The increase in non-performing assets was the result, in part, of a $1.5 million increase in non-accrual loans which totaled $5.4 million at March 31, 2010 and were comprised of eight single-family residential mortgage loans aggregating $703,000, two commercial real estate loans aggregating $2.0 million, one land acquisition and development loan of $795,000 and two residential construction loans aggregating $1.8 million. In addition to the increase in non-accrual loans, as of March 31, 2010, troubled debt restructurings totaled $2.5 million, including nine loans aggregating $800,000 which had been modified in accordance with the federal government’s Home Affordable Modification Program.
At March 31, 2010, the allowance for loan and lease losses of $6.7 million was 2.21% of total loans, compared to $4.7 million, or 1.50% of total loans at September 30, 2009. The ratio of allowance for loan and lease losses to non-performing loans decreased from 86.0% at September 30, 2009 to 68.8% at March 31, 2010. While non-performing loans increased from September 30, 2009 to March 31, 2010, the level of collateral securing the loans comprising the increase was sufficient that a corresponding increase in provision for loan and lease losses to maintain the ratio was not deemed necessary.
The level of delinquencies, as defined in the merger agreement with Bryn Mawr Bank Corporation (which includes loans delinquent 30 days or more, non-accrual loans, other real estate owned, troubled debt restructurings and the aggregate amount of net loan charge-offs between October 1, 2008 and the month-end preceding the date of the closing of the merger that exceeds $2.5 million) was $13.1 million as of March 31, 2010, an increase of $600,000 from the level of delinquencies at December 31, 2009. The merger consideration to be received by the Company’s shareholders in connection with the merger with Bryn Mawr Bank Corporation is subject to downward adjustment based upon, among other factors, the amount of delinquencies as of the month-end immediately prior to the closing of the merger. Depending on the amount of the Company’s delinquencies as of the month-end preceding the merger, the consideration to be received upon consummation of the merger for each share of common stock of the Company may be reduced in incremental amounts. The actual amount of merger consideration will not be determined until the month-end prior to closing, which is expected to occur in July 2010.
Net interest income increased $197,000, or 7.0%, to $3.0 million for the three months ended March 31, 2010, as compared to the same period in 2009. The increase in net interest income for the three months ended March 31, 2010 was primarily due to a decrease in interest expense of $576,000 or 18.8%, partially offset by a decrease in interest income of $379,000, or 6.4%, as compared to the same period in 2009. The weighted average yield earned on interest-earning assets for the three months ended March 31, 2010 decreased 39 basis points to 4.82% as compared to the same period in 2009. However, for the three months ended March 31, 2010, the weighted average rate paid on interest-bearing liabilities decreased to a greater degree, declining 56 basis points to 2.19% from 2.75% for the same period in 2009 as interest-bearing liabilities repriced downward more rapidly than interest-earning assets.
For the three months ended March 31, 2010, as compared to the three months ended December 31, 2009, the provision for loan losses decreased $100,000 to $1.0 million, but increased $300,000 by comparison to the same period in 2009. Although the Bank did not experience any charge-offs during the quarter, as a result of the level of criticized and classified assets at March 31, 2010 as well as the ongoing evaluation of the Bank’s loan portfolio, management made a decision to increase the allowance for loan and lease losses by $1.0 million, or 17.9%, to $6.7 million.
For the quarter ended March 31, 2009, non-interest income decreased $1.9 million to a loss of $2.1 million as compared to the same period last year. The decrease was primarily due to losses on the sale of the Bank's pooled trust preferred securities portfolio, partially offset by gains on sales of mortgage-related securities available for sale, as discussed above.
Non-interest expense decreased by $321,000, or 9.3% for the quarter ended March 31, 2010 as compared to the quarter ended December 31, 2009. The decrease was primarily due to decreases of $221,000 and $37,000 in merger-related costs and salaries and employee benefits, respectively. Non-interest expense for the quarter ended March 31, 2010 remained virtually unchanged as compared to the same period last year.

First Keystone Bank, the Company's wholly owned subsidiary, serves its customers from eight full-service offices in Delaware and Chester Counties.

Certain information in this release may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those estimated due to a number of factors. Persons are cautioned that such forward-looking statements are not guarantees of future performance and are subject to various factors, which could cause actual results to differ materially from those estimated. These factors include, but are not limited to, changes in general economic and market conditions, the continuation of an interest rate environment that adversely affects the interest rate spread or other income from the Company's and the Bank's investments and operations, the amount of the Company’s delinquent and non-accrual loans, troubled debt restructurings, other real estate owned and loan charge-offs; the effects of competition, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products and services; interest rate movements; the proposed merger with Bryn Mawr Bank Corporation ("BMBC") fails to be completed, or if completed, the anticipated benefits from the merger may not be fully realized due to, among other factors, the failure to combine the Company’s business with BMBC, the anticipated synergies not being achieved or the integration proves to be more difficult, time consuming or costly than expected; difficulties in integrating distinct business operations, including information technology difficulties; disruption from the transaction making it more difficult to maintain relationships with customers and employees, and challenges in establishing and maintaining operations in new markets; volatilities in the securities markets; and deteriorating economic conditions. The Company does not undertake and specifically disclaims any obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

BMBC filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) in connection with the proposed merger of the Company with BMBC and the Company filed with the SEC a definitive proxy statement/prospectus in connection with the transaction. The Company’s shareholders and investors are urged to read the proxy statement/prospectus because it contains important information about the Company, BMBC and the transaction. You may obtain a free copy of the proxy statement/prospectus as well as other filings containing information about BMBC, at the SEC's web site at www.sec.gov. A free copy of the proxy statement/prospectus may also be obtained from the Company, by directing the request to First Keystone Financial, Inc., 22 West State Street, Media, Pennsylvania 19063, Attention: Carol Walsh, Secretary, telephone (610) 565-6210. A free copy of the filings with the SEC by BMBC that are incorporated by reference in the proxy statement/prospectus can be obtained by directing the request to Bryn Mawr Bank Corporation, 801 Lancaster Avenue, Bryn Mawr, Pennsylvania 19010, Attention: Geoff Halberstadt, Secretary, telephone (610) 581−4873.

First Keystone Financial, Inc. Consolidated Selected Financial Data (GAAP) (Dollars in thousands, except per share data) March 31, 2010 (unaudited) For The Three Months Ended Results of Operations For the quarter ended: Mar 31, Dec 31,

Sep 30,

Jun 30,

Mar 31, 2010 2009 2009 2009 2009 Interest income $ 5,515 $ 5,780 $ 6,014 $ 6,037 $ 5,894 Interest expense 2,488 2,782 2,920 2,999 3,064 Net interest income 3,027 2,998 3,094 3,038 2,830 Provision for loan losses 1,000 1,100 1,475 750 700

Net interest income after provision for loan losses

2,027 1,898 1,619 2,288 2,130 Service charges and other fees 329 376 351 347 331 Net gain on sale of residential mortgage loans 32 15 4 39 75 Net gain (loss) on sale of investments (2,560 ) 10 471 2 (10 ) Other-than-temporary impairment of investments (41 ) (843 ) (6 ) - (749 ) Increase in cash surrender value of life insurance 101 108 99 96 90 Other operating income 67 69 83 78 98 Non-interest income (2,072 ) (265 ) 1,002 562 (165 ) Salaries and employee benefits 1,367 1,404 1,507 1,406 1,438 Occupancy and equipment 403 394 452 398 415 Professional fees 342 316 371 321 297 Federal deposit insurance premium 202 228 185 169 219 Federal deposit insurance - one-time assessment - - - 240 - Data processing 160 156 157 161 140 Advertising 44 68 69 75 84 Deposit processing 169 154 166 140 177 Merger-related expenses 164 385 - - - Other expenses 281 348 347 516 384 Non-interest expense 3,132 3,453 3,254 3,426 3,154 Loss before income taxes (3,177 ) (1,820 ) (633 ) (576 ) (1,189 ) Income tax benefit - (540 ) (292 ) (240 ) (402 ) Net loss (3,177 ) (1,280 ) (341 ) (336 ) (787 ) Less: Net income attributable to noncontrolling interest (17 ) (14 ) (18 ) (17 ) (19 ) Net loss attributable to First Keystone Financial, Inc. $ (3,194 ) $ (1,294 ) $ (359 ) $ (353 ) $ (806 ) Per share data: Weighted average shares outstanding 2,334,456 2,332,284 2,330,104 2,327,940 2,325,768 Dilutive potential common shares - - - - - Adjusted weighted average dilutive shares 2,334,456 2,332,284 2,330,104 2,327,940 2,325,768 Basic earnings per common share $ (1.37 ) $ (0.55 ) $ (0.15 ) $ (0.15 ) $ (0.35 ) Diluted earnings per common share $ (1.37 ) $ (0.55 ) $ (0.15 ) $ (0.15 ) $ (0.35 ) Dividends declared per share $ - $ - $ - $ - $ - Effective tax rate 0.0 % 29.4 % 44.9 % 40.5 % 33.3 % Net interest margin 2.64 % 2.47 % 2.59 % 2.55 % 2.50 % First Keystone Financial, Inc. Consolidated Selected Financial Data (GAAP) (Dollars in thousands) March 31, 2010 (unaudited) Balance Sheet As of: Mar 31, Dec 31,

Sep 30,

Jun 30,

Mar 31, 2010 2009 2009 2009 2009 Assets Interest bearing deposits with banks $ 58,042 $ 26,515 $ 45,381 $ 32,756 $ 43,322 Investment and mortgage-related securities - AFS (at fair value) 71,619 113,964 113,761 124,866 123,599 Investment and mortgage-related securities - HTM (at amortized cost) 19,234 20,544 21,963 23,710 25,953 Total investment securities 90,853 134,508 135,724 148,576 149,552 Portfolio loans: Residential mortgages 142,137 143,194 146,258 146,083 144,234 Construction 19,011 18,974 18,756 19,248 18,614 Multi-family and nonresidential mortgages 67,066 66,901 67,241 61,365 54,507 Home equity lines & loans 51,518 53,238 54,612 55,322 54,952 Consumer 1,340 2,184 2,030 1,607 1,487 Commercial business 20,747 21,466 22,180 22,270 19,886 Deferred loan origination costs 201 186 180 203 232 Total portfolio loans 302,020 306,143 311,257 306,098 293,912 Earning assets 450,915 467,166 492,362 487,430 486,786 Cash and due from banks 2,416 2,371 2,277 2,407 2,950 Allowance for loan losses (6,674 ) (5,588 ) (4,657 ) (3,491 ) (3,998 ) Bank owned life insurance 18,591 18,489 18,381 18,282 18,186 FHLB stock 7,060 7,060 7,060 7,060 7,060 Other assets 16,193 16,444 12,978 13,688 13,287 Total assets $ 488,501 $ 505,942 $ 528,401 $ 525,376 $ 524,271 Liabilities and stockholders' equity Passbook and savings $ 42,818 $ 41,769 $ 39,361 $ 39,682 $ 37,067 Money market 50,063 50,987 46,604 46,805 44,641 NOW 75,407 74,302 73,620 80,350 68,461 Time deposits 141,451 162,993 168,568 168,874 157,175 Interest-bearing deposits 309,739 330,051 328,153 335,711 307,344 Non-interest bearing deposits 21,603 17,385 18,971 18,038 16,660 Total deposits 331,342 347,436 347,124 353,749 324,004 Junior subordinated debentures 11,649 11,648 11,646 11,644 11,642 FHLBank and other borrowings 102,649 102,651 123,653 110,156 126,658 Repurchase agreements 6,072 5,431 6,395 8,734 21,665 Other liabilities 6,138 6,371 5,863 8,305 7,066 Total liabilities 457,850 473,537 494,681 492,588 491,035 Total First Keystone Financial, Inc. equity 30,579 32,287 33,616 32,702 33,167 Noncontrolling interest 72 118 104 86 69 Total stockholders' equity 30,651 32,405 33,720 32,788 33,236 Total liabilities and stockholders' equity $ 488,501 $ 505,942 $ 528,401 $ 525,376 $ 524,271

First Keystone Financial, Inc.

Consolidated Selected Financial Data (GAAP) (Dollars in thousands, except per share data) March 31, 2010 (unaudited) For the period end: Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2010 2009 2009 2009 2009 Asset Quality Data Nonaccrual loans $ 5,393 $ 3,897 $ 3,876 $ 2,993 $ 3,697 90 days or more past due loans - still accruing 1,851 1,068 1,541 215 196 Troubled debt restructuring 2,459 733 - - - Nonperforming loans 9,703 5,698 5,417 3,208 3,893 Other non-performing assets 370 1,410 - - - Nonperforming assets $ 10,073 $ 7,108 $ 5,417 $ 3,208 $ 3,893 Nonperforming loans / total loans* 3.21 % 1.86 % 1.74 % 1.05 % 1.33 % Nonperforming assets / total assets 2.06 % 1.40 % 1.03 % 0.61 % 0.74 % Net loan charge-offs (annualized)/ average loans -0.11 % 0.22 % 0.40 % 1.67 % 0.00 %

Changes in the Allowance for Loan Losses

For the three months ended and as of: Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2010 2009 2009 2009 2009 Balance, beginning of quarter ending $ 5,588 $ 4,657 $ 3,491 $ 3,998 $ 3,300 Charge-offs - (171 ) (350 )

(1,286

)

(21 ) Recoveries 86 2

29 19 Net (charge-offs) / recoveries 86 (169 ) (309 ) (1,257 ) (2 ) Provision for loan losses 1,000 1,100 1,475 750 700 Balance, end of period $ 6,674 $ 5,588 $ 4,657 $ 3,491 $ 3,998 Allowance for loan losses / total loans* 2.21 % 1.83 % 1.50 % 1.14 % 1.36 % Allowance for loan losses / nonperforming loans 68.8 % 98.1 % 86.0 % 108.8 % 102.7 % *Gross loans net of loans in process

First Keystone Financial, Inc.

Consolidated Selected Financial Data (GAAP)

(Dollars in thousands, except per share data)

March 31, 2010

(unaudited)

For the three months ended and as of: Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, 2010 2009 2009 2009 2009 Selected ratios (annualized): Return on average assets -2.58 % -1.00 % -0.28 % -0.28 % -0.66 % Return on average stockholders' equity -39.24 % -15.27 % -4.28 % -4.26 % -9.72 % Yield on loans 5.51 % 5.63 % 5.65 % 5.66 % 5.74 % Yield on interest-earning assets 4.82 % 4.76 % 5.03 % 5.07 % 5.21 % Cost of interest-bearing funds 2.19 % 2.33 % 2.49 % 2.56 % 2.75 % Net interest margin 2.64 % 2.47 % 2.59 % 2.55 % 2.50 % Book value per share $ 12.57 $ 13.27 $ 13.82 $ 13.44 $ 13.63 Period end shares outstanding 2,432,998 2,432,998 2,432,998 2,432,998 2,432,998 For the six months ended: Mar 31, Mar 31, 2010 2009 Selected data: Net interest income $ 6,026 $ 5,654 Provision for loan losses 2,100 775 Non-interest income (2,337 ) 268 Non-interest expense 6,586 6,289 Loss before taxes (4,997 ) (1,142 ) Income tax benefit (540 ) (310 ) Net loss (4,457 ) (832 ) Less: Net income attributable to noncontrolling interest (31 ) (36 ) Net loss attributable to First Keystone Financial, Inc. $ (4,488 ) $ (868 ) Per share data: Weighted average shares outstanding 2,333,358 2,324,670 Dilutive potential common shares - - Adjusted weighted average dilutive shares 2,333,358 2,324,670 Basic earnings per common share $ (1.92 ) $ (0.37 ) Diluted earnings per common share $ (1.92 ) $ (0.37 ) Selected ratios (annualized): Return on average assets -1.77 % -0.35 % Return on average stockholders' equity -27.01 % -5.33 % Yield on loans 5.57 % 5.85 % Yield on interest-earning assets 4.79 % 5.32 % Cost of interest-bearing funds 2.26 % 2.87 % Net interest margin 2.55 % 2.48 % First Keystone Financial, Inc. Consolidated Selected Financial Data (GAAP) (Dollars in thousands) March 31, 2010 (unaudited) Selected data: Investment Portfolio As of March 31, 2010 As of March 31, 2009 Amortized Fair Unrealized Amortized Fair Unrealized SECURITY DESCRIPTION Cost Value Gain / (Loss) Cost Value Gain / (Loss) Available for sale portfolio: U. S. government agency securities $ 17,062 $ 17,016 $ (46 ) $ - $ - $ - Mortgage-related securities 34,209 35,532 1,323 100,432 101,714 1,282 State, county & municipal securities 7,868 8,378 510 5,412 5,607 195 Pooled trust preferred securities - - - 8,534 5,645 (2,889 ) Corporate bonds 6,700 6,974 274 5,619 5,706 87 Mutual funds 2,917 3,041 124 3,865 3,885 20 Other equity securities 735 678 (57 ) 1,040 1,042 2 Total 69,491 71,619 2,128 124,902 123,599 (1,303 ) Held to maturity portfolio: Mortgage-related securities 16,430 17,100 670 22,699 23,331 632 State, county & municipal securities 2,804 2,984 180 3,254 3,379 125 Total 19,234 20,084 850 25,953 26,710 757 Total Investment Portfolio $ 88,725 $ 91,703 $ 2,978 $ 150,855 $ 150,309 $ (546 ) Capital Ratios (First Keystone Bank) Regulatory Minimum To Be Well Capitalized 3/31/2010 12/31/2009 9/30/2009 6/30/2009 3/31/2009 Core capital (to adj tangible assets) 5.00 % 8.11 % 8.40 % 8.23 % 8.31 % 8.35 % Tier 1 capital (to risk-wtd assets) 6.00 % 12.84 % 12.42 % 12.75 % 12.64 % 13.35 % Total capital (to risk-wtd assets) 10.00 % 14.05 % 13.37 % 13.77 % 13.56 % 14.26 % Tangible capital (to tangible assets) n/a 8.10 % 8.40 % 8.22 % 8.30 % 8.34 %

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FKFS First Keystone Financial (MM)