Document:

AGREEMENT

          THIS AGREEMENT ("Agreement") made as of the __th day
of June, 2001, by and among PSB BANCORP, INC., a Pennsylvania
bank holding company (the "Company"), FIRST PENN BANK, a
Pennsylvania-chartered commercial bank (the "Bank"), and JOHN J.
O'CONNELL, an individual (the "Executive").

                            WITNESSETH

          WHEREAS, the Company, the Bank and the Executive
desire to enter into an agreement regarding, among other things,
the employment of the Executive by the Company and the Bank, all
as hereinafter set forth.

                            AGREEMENT:

          NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:

          1.  Employment.  The Company and the Bank each hereby
employ the Executive, and the Executive hereby accepts
employment with the Company and the Bank, on the terms and
conditions set forth in this Agreement.

          2.  Duties of Employee.  The Executive shall perform
and discharge well and faithfully such duties as an executive
officer of the Company and of the Bank as may be assigned to the
Executive from time to time by the respective Boards of
Directors of the Company and the Bank.  The Executive shall be
employed as the Chairman of the Board of the Bank and shall hold
such other titles as may be given to him from time to time by
the respective Boards of Directors of the Company and the Bank.

          3.  Term of Employment.  The Executive's employment
under this Agreement shall be for a period (the "Employment
Period") commencing upon the date of this Agreement and ending
at the end of the term of this Agreement pursuant to Section 16
hereof, unless the Executive's employment is sooner terminated
in accordance with Section 5 hereof or one of the following
provisions:

               (a)  Termination for Cause.  The Executive's
employment under this Agreement may be terminated at any time
during the Employment Period for "Cause" (as herein defined), by
action of the Boards of Directors of the Company and of the
Bank, upon giving notice of such termination to the Executive at
least fifteen (15) days prior to the date upon which such
termination shall take effect.  As used in this Agreement,
"Cause" means any of the following events:

                    (i)  The Executive willfully violates any
     law, rule or regulation (other than traffic violations or
     similar offenses that would not in the Boards'
     determination effect his ability to perform and discharge
     his duties hereunder);

                    (ii)  The Executive breaches his fiduciary
     duty involving personal profit or engages in an act of
     personal dishonesty in the performance of his duties;

                    (iii)  The Executive fails to perform his
     duties to the Board's satisfaction;

                    (iv)  A court of competent jurisdiction
     makes a determination that the Executive is incompetent by
     reason of the fact that he is unable to manage his own
     affairs by reason of insanity or feeble mindedness;

                    (v)  The Executive willfully fails to follow
     the lawful instructions of the Board of Directors of the
     Company or the Bank after the Executive's receipt of
     written notice of such instructions, other than a failure
     resulting from the Executive's incapacity because of
     physical or mental illness; or

                    (vi)  The Executive violates the covenant
     not to compete contained in Section 7 hereof.

In addition, the Executive's employment under this Agreement
shall not be deemed to have been terminated for "Cause" under
Sections 3(a)(i), (ii) or (iv) above if such termination took
place solely as a result of:

                    (i)  Any act or omission believed by the
     Executive, in good faith, to have been in, or not opposed
     to, the best interests of the Company and the Bank; or

                    (ii)  Any act or omission in respect of
     which a determination could properly be made that the
     Executive met the applicable standard of conduct prescribed
     for indemnification or reimbursement or payment of expenses
     under the Articles of Incorporation or By-laws of the
     Company or the Bank or the directors' and officers'
     liability insurance of the Company or the Bank, in each
     case as in effect at the time of such act or omission.

If the Executive's employment is terminated under the provisions
of this Section 3(a), then all rights of the Executive under
Section 4 hereof shall cease as of the effective date of such
termination.

               (b)  Suspension Pursuant to Notice.  If the
Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. Section1818(e)(3) and (g)(1)), the
Company's and the Bank's obligations under this Agreement shall
be suspended as of the date of service unless stayed by
appropriate proceedings.  If the charges in the notice are
dismissed, the Company and the Bank may in their discretion (i)
pay the Executive all or part of the compensation withheld while
the Company's and Bank's obligations under this Agreement were
suspended and (ii) reinstate (in whole or in part) any of the
obligations under this Agreement which were suspended.

               (c)  Termination Pursuant to Order.  If the
Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C. Section1818(e)(4) or (g)(1)), all
obligations of the Company and Bank under this Agreement shall
terminate as of the effective date of the order, but vested
rights of the Company, the Bank and the Executive shall not be
affected.

               (d)  Termination Upon Default.  If the Bank is in
default (as defined in Section 3(x) of the Federal Deposit
Insurance Act (the "FDIA")), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Company,
the Bank or the Executive.

               (e)  Termination by the Federal Deposit Insurance
Corporation.  All obligations under this Agreement shall
terminate, if the Chairman of the Federal Deposit Insurance
Corporation (the "FDIC") or his or her designee (i) enters into
an agreement to provide assistance to or on behalf of the Bank
under the authority contained in Section 13(c) of the FDIA; or
(ii) approves a supervisory merger to resolve problems related
to operation of the Bank or when the Bank is determined by such
Chairman or designee to be in an unsafe and unsound condition.
Any rights of the Company, the Bank or the Executive that have
already vested, however, shall not be affected by such action.

               (f)  Termination Without Cause.  The Executive's
employment under this Agreement may be terminated at any time
during the Employment Period without "Cause" (as defined in
Section 3(a) hereof), by action of the Boards of Directors of
the Company and of the Bank, upon giving notice of such
termination to the Executive at least thirty (30) days prior to
the date upon which such termination shall take effect.  If the
Executive's employment is terminated under the provisions of
this Section 3(f), then the Executive shall be entitled to
receive the compensation set forth in Section 6 hereof.

               (g)  Retirement; Death.  If the Executive retires
or dies, the Executive's employment under this Agreement shall
be deemed terminated as of the date of the Executive's
retirement or death, and all rights of the Executive under
Section 4 hereof shall cease as of the date of such termination
and any benefits payable to the Executive shall be determined in
accordance with the retirement and insurance programs of the
Company and of the Bank then in effect.

               (h)  Incapacity.  If the Executive is
incapacitated by accident, sickness, or otherwise so as to
render the Executive mentally or physically incapable of
performing the services required of the Executive under Section
2 of this Agreement for a continuous period of six (6) months,
then, upon the expiration of such period or at any time
thereafter, by action of the Boards of Directors of the Company
and of the Bank, the Executive's employment under this Agreement
may be terminated immediately upon giving the Executive notice
to that effect.  If the Executive's employment is terminated
under the provisions of this Section 3(h), then all rights of
the Executive under Section 4 hereof shall cease as of the last
business day of the week in which such termination occurs and
any benefits payable to the Executive shall be determined in
accordance with the retirement and insurance programs of the
Company and of the Bank then in effect.

          4. Employment Period Compensation.

               (a)  Salary.  For services performed by the
Executive under this Agreement, the Bank shall pay the Executive
a salary during the Employment Period, at the rate of $160,000
per year, payable at the same times as salaries are payable to
other executive employees of the Bank.  The Bank may, from time
to time, increase the Executive's salary, and any and all such
increases shall be deemed to constitute amendments to this
Section 4(a) to reflect the increased amounts, effective as of
the dates established for such increases by the Board of
Directors of the Bank in the resolutions authorizing such
increases.

               (b)  Bonus.  For services performed by the
Executive under this Agreement, the Bank may pay the Executive
an annual bonus and such other bonus or bonuses as the Bank, in
its sole discretion, deems appropriate.  The payment of any such
bonuses shall not reduce or otherwise affect any other
obligation of the Company and/or the Bank to the Executive
provided for in this Agreement.

               (c)  Other Benefits.  The Company and/or the Bank
will provide the Executive, during the Employment Period, with
benefits in the aggregate not less favorable than those received
by executives of the Bank, as such benefits exist on the date
hereof (including, without limitation, the use of an automobile
at the Bank's expense).

               (d)  Salary Deferral.  The Executive may request
that the payment of any portion of his base salary for any year
be deferred.  Such request must be made in writing to the Bank
before the beginning of such calendar year and must include the
period of deferral requested by the Executive (the "Deferral
Period").  If the Board of Directors of the Bank approve such
request, the Executive shall be entitled to receive, at the end
of the Deferral Period, the deferred portion of his base salary
plus interest, which interest shall be computed by reference to
an annual interest rate determined each year by the Board of
Directors of the Bank.  Any salary which is deferred as
described herein shall be credited to an account on the books of
the Bank established in the name of the Executive.  However,
this account shall not be funded, and neither the Company nor
the Bank shall be deemed to be a trustee for the Executive with
respect to any deferred salary.  The liabilities of the Company
and the Bank to the Executive hereunder are those of a debtor
pursuant to such contractual obligations as are created by this
Agreement.  No liabilities which arise under this Section 4(d)
shall be deemed to be secured by any pledge or other encumbrance
on any property of the Company or of the Bank.  The Company and
the Bank shall not be required to segregate any funds
representing such deferred salary, and nothing herein shall be
construed as providing for such segregation.

          5.  Resignation of the Executive for Good Reason.

               (a)  The Executive may resign for "Good Reason"
(as herein defined) at any time during the Employment Period, as
hereinafter set forth.  As used in this Agreement, "Good Reason"
means any of the following:

                    (i)  Any material adverse change in the
     Executive's responsibilities or authority which is
     inconsistent with the Executive's status as Chairman of the
     Board of the Bank;

                    (ii)  Any reduction in title;

                    (iii)  Any reassignment of the Executive to
     a principal place of employment which requires the
     Executive to move his principal residence and is more than
     thirty (30) miles from the Bank's principal executive
     office on the date of this Agreement;

                    (iv) Any removal of the Executive from
     office except for any termination of the Executive's
     employment for Cause under the provisions of Section 3(a)
     hereof;

                    (v)  Any reduction in the Executive's annual
     base salary as in effect on the date hereof or as the same
     may be increased from time to time;

                    (vi)  Any failure by the Company and/or the
     Bank to provide the Executive with benefits at least as
     favorable as those enjoyed by the Executive under any of
     the pension, life insurance, medical, health and accident,
     disability or other employee benefit plans of the Company
     or of the Bank in which the Executive participated on the
     date hereof, or the taking of any action that would
     materially reduce any of such benefits, unless such
     reduction is part of a reduction applicable in each case to
     all participant employees;

                    (vii)  Any material breach of this Agreement
     on the part of the Company or the Bank.

               (b)  At the option of the Executive, exercisable
by the Executive within 90 days after the occurrence of the
event constituting "Good Reason," the Executive may resign from
employment under this Agreement by a notice in writing (the
"Notice of Termination") delivered to the Company and the Bank
and the provisions of Section 6 hereof shall thereupon apply.

          6.  Rights in Event of Termination of Employment.  In
the event that the Executive resigns from employment for Good
Reason by delivery of a Notice of Termination to the Company and
the Bank, or the Executive's employment is terminated by the
Company or the Bank without Cause pursuant to Section 3(f) (and
so long as the Executive is not terminated pursuant to Sections
3(b), (c), (d), (e), (g) or (h) hereof) the Executive shall be
entitled to receive the amounts and benefits set forth in this
Section 6.

               (a)  Over a period of 36 months from the date of
termination of employment, the Bank shall pay the Executive
three times his Average Annual Compensation (as hereinafter
defined), reduce to present value at the Bank's discretion.

                    (i)  For purposes of this Agreement, the
     term "Average Annual Compensation" means the sum of (A) a
     dollar amount equal to the average of the Executive's base
     salary during each of his five most recent years of
     employment hereunder (or such fewer number of years as the
     Executive is employed under the terms of this Agreement),
     and (B) a dollar amount equal to the average of the bonuses
     the Executive received during each of the five most recent
     years of employment hereunder (or such fewer number of
     years as Executive is employed under the terms of this
     Agreement).

                    (ii)  Amounts required to be paid to the
     Executive under Section 6(a) shall be paid in equal monthly
     installments, beginning thirty (30) days following the date
     of termination of employment.

               (b)  For a period of 36 months from the date of
termination of employment, the Company and the Bank shall
continue to provide the Executive with all life, disability,
medical insurance and other employee insurance benefits in
effect with respect to the Executive during the year prior to
his termination of employment, or, if the Company or the Bank
cannot provide such benefits because the Executive is no longer
an employee, a dollar amount equal to the cost to the Executive
of obtaining such benefits (or substantially similar benefits).

               (c)  Upon full payment of the compensation due
under Section 6(a) hereof or upon reaching the earliest age at
which the Executive could retire under plans of the Company or
of the Bank then in effect, whichever is later, the Bank shall
pay to the Executive annual benefits for life equal to the
difference between (i) what the Executive would be entitled to
under the retirement plan of the Bank in effect on the date
hereof if he had remained in his position (at his Average Annual
Compensation at Termination) until normal retirement at age 65
and assuming that such benefit were paid in the form of a
straight life annuity, and (ii) what he is in fact entitled to
pursuant to the applicable plan, calculated on the basis of a
straight life annuity, based on the actual date of termination.

               (d)  The Executive shall have the unilateral
right to reduce the benefits otherwise payable to him, or on his
behalf, under this section to the extent such reduction would
result in his netting, after all applicable taxes, more
benefits.

               (e)  Any payments made to Executive hereunder or
otherwise are subject to and conditioned upon their compliance
with both 12 USC Section1828(k) and Section 280G of the Internal
Revenue Code, as amended and any regulations promulgated under
either.

          7.  Covenant Not to Compete.

               (a)  The Executive hereby acknowledges and
recognizes the highly competitive nature of the business of the
Company and of the Bank and accordingly agrees that, during and
for the applicable period set forth in Section 7(c) hereof, the
Executive shall not:

                    (i)  Be engaged, directly or indirectly,
     either for his own account or as agent, consultant,
     employee, partner, officer, director, proprietor, investor
     (except as an investor owning less than 5% of the stock of
     a publicly owned company) or otherwise of, any person,
     firm, corporation, or enterprise engaged, in (1) the
     banking or financial services industry, or (2) any other
     activity in which the Company, the Bank or their
     subsidiaries are engaged during the Employment Period, in
     any county in which, at any time during the Employment
     Period or at the date of termination of the Executive's
     employment, a branch, office or other facility of the
     Company, the Bank or their subsidiaries are located, or in
     any county contiguous to such a county, including
     contiguous counties located outside of the Commonwealth of
     Pennsylvania (the "Non-Competition Area");

                    (ii)  Provide financial or other assistance
     to any person, firm, corporation, or enterprise engaged in
     (1) the banking or financial services industry, or (2) any
     other activity in which the Company, the Bank or their
     subsidiaries are engaged during the Employment Period, in
     the Non-Competition Area.

               (b)  It is expressly understood and agreed that,
although the Executive, the Company and the Bank consider the
restrictions contained in Section 7(a) hereof reasonable for the
purpose of preserving for the Company, the Bank and their
subsidiaries their good will and other proprietary rights, if a
final judicial determination is made by a court having
jurisdiction that the time or territory or any other restriction
contained in Section 7(a) hereof is an unreasonable or otherwise
unenforceable restriction, the provisions of Section 7(a) hereof
shall not be rendered void but shall be deemed amended to apply
as to such maximum time and territory and to such other extent
as such court may determine or indicate to be reasonable.

               (c)  The provisions of this Section 7 shall be
applicable commencing on the date of this Agreement and ending
on one of the following dates, as applicable:

                    (i)  If the Executive's employment is
     terminated in accordance with the provisions of Sections
     3(d), (e), (f) or (h) or Section 16 hereof, the effective
     date of termination of employment;

                    (ii)  If Executive's employment is
     terminated in accordance with the provisions of Section
     3(a), (b), (c) or (g) hereof or Executive voluntarily
     terminates his employment other than in accordance with the
     provisions of Section 5 hereof, twenty-four (24) months
     following the effective date of termination of employment;
     or

                    (iii) If Executive voluntarily terminates
     his employment in accordance with the provisions of Section
     5 hereof, the date of the Notice of Termination.

               (d)  The provisions of this Section 7 do not
apply if the Executives employment is terminated in accordance
with the provisions of Section 3(a)(iii).

          8.  Remedies.  The Executive acknowledges and agrees
that the remedy at law of the Company and of the Bank for a
breach or threatened breach of any of the provisions of Section
7 hereof would be inadequate and, in recognition of this fact,
in the event of a breach or threatened breach by the Executive
of any of the provisions of Section 7 hereof, it is agreed that,
in addition to any remedy at law, the Company and the Bank shall
be entitled to, without posting any bond, and the Executive
agrees not to oppose any request of the Company and the Bank
for, equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent
injunction, or any other equitable remedy which may then be
available.  Nothing herein contained shall be construed as
prohibiting the Company and the Bank from pursuing any other
remedies available to them for such breach or threatened breach.

          9.  Arbitration.  The Company, the Bank and the
Executive recognize that in the event a dispute should arise
between them concerning the interpretation or implementation of
this Agreement, lengthy and expensive litigation will not afford
a practical resolution of the issues within a reasonable period
of time.  Consequently, each party agrees that all disputes,
disagreements and questions of interpretation concerning this
Agreement, except those arising from the enforcement of the
Covenant Not to Compete, are to be submitted for resolution to
the American Arbitration Association ("Association") in
Philadelphia, Pennsylvania.  The Company and the Bank, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the others in accordance with the rules of the
Association.  The Association shall designate a single
arbitrator to conduct the proceeding, but the Company and the
Bank, and the Executive, may, as a matter of right, require the
substitution of a different arbitrator chosen by the
Association.  Each such right of substitution may be exercised
only once.  The arbitrator shall not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of
Pennsylvania but shall be bound by the substantive law
applicable to this Agreement.  The decision of the arbitrator,
absent fraud, duress, incompetence or gross and obvious error of
fact, shall be final and binding upon the parties and shall be
enforceable in courts of proper jurisdiction.  Following written
notice of a request for arbitration, the Company and the Bank,
and the Executive, shall be entitled to an injunction
restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement, except
as otherwise provided herein.

          10.  Legal Expenses.  If the Executive obtains a
judgment or settlement which enforces a right or benefit under
this Agreement, the Company and/or the Bank shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit.

          11.  Notices.  Any notice required or permitted to be
given under this Agreement shall, to be effective hereunder, be
given to both the Company and the Bank, in the case of notices
given by the Executive, and shall, to be effective hereunder, be
given by both the Company and the Bank.  Any such notice shall
be deemed properly given if in writing and if mailed by express,
registered or certified mail, postage prepaid with return
receipt requested, to the residence of the Executive, in the
case of notices to the Executive, and to the respective
principal offices of the Company and of the Bank, in the case of
notices to the Company and to the Bank.

          12.  Waiver.  No provision of this Agreement may be
modified, waived, or discharged unless such waiver,
modification, or discharge is agreed to in writing and signed by
the Executive, an executive officer of the Company, and an
executive officer of the Bank, each such officer specifically
designated by the Boards of Directors of the Company and of the
Bank, respectively.  No waiver by any party hereto at any time
of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time.

          13.  Assignment.  This Agreement shall not be
assignable by any party hereto, except by the Company and the
Bank to any successor in interest to the respective businesses
of the Company and the Bank.

          14.  Entire Agreement.  This Agreement contains the
entire agreement of the parties relating to the subject matter
of this Agreement and supersedes any prior agreement of the
parties.

          15.  Successors, Binding Agreement.

               (a)  The Company and the Bank will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the
business and/or assets of the Company and/or the Bank to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company and the Bank
would be required to perform it if no such succession had taken
place.  Failure by the Company and the Bank to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall constitute a material breach of this Agreement.
As used in this Agreement, "the Company" and the "Bank" shall
mean the Company and the Bank as hereinbefore defined and any
successor to the business and/or assets of the Company and/or
the Bank as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

               (b)  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.  If the Executive should die while any
amount would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or
other designee, or, if there is no such designee, to the
Executive's estate.

          16.  Termination.

               (a)  Unless the Executive's employment is
terminated pursuant to the provisions of Section 3 or Section 5
hereof, the term of this Agreement shall be for a three (3) year
period commencing on June 29, 2001 and ending on June 29, 2004.
This Agreement shall be automatically renewed on June 29th of
each year (the "Annual Renewal Date") for a period ending three
(3) years from each Annual Renewal Date unless either party
shall give written notice of nonrenewal to the other party at
least sixty (60) days prior to an Annual Renewal Date or the
Boards of Directors of the Company and the Bank fail to approve
the extension at a duly called meeting of such Boards.  In
furtherance of the foregoing, the Company and the Bank shall
each use their best efforts to cause its Board of Directors to
meet in the month preceding each notice date to vote upon the
extension of the term.

               (b) Any termination of the Executive's employment
under this Agreement or of this Agreement shall not affect the
provisions of Sections 7, 8 or 9 hereof, which shall survive any
such termination and remain in full force and effect in
accordance with their respective terms.

          17.  Mitigation/Offset.  The Executive shall not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; provided,
however, that for each dollar of compensation earned by the
Executive from another employer, a corresponding dollar amount
of any sum otherwise payable to, or for the benefit of, the
Executive under Section 6 hereof shall be reduced by twenty
percent (20%).  Application of this Section shall be subject to
the following rules:

                    (i)  The reduction provision of this
     subsection shall apply only to compensation earned by the
     Executive during the period of time he is receiving
     payments described in Section 6(a) hereof.

                    (ii)  Compensation earned from another
     employer shall include compensation deferred under any
     qualified or nonqualified arrangement.

                    (iii)  Compensation earned from another
     employer shall be determined on an annual basis by
     reference to the Executive's date of termination of
     employment.

                    (iv)  Within fifteen (15) days following
     each anniversary date of the Executive's termination of
     employment (and within fifteen (15) days following receipt
     of the last Section 6(a) payment), he shall provide the
     Company and the Bank with such detailed information and
     records as may have been reasonably requested to confirm
     the compensation he earned during the preceding twelve (12)
     months (or shorter period, if applicable).  In the absence
     of a specific request for detailed information, he shall
     only be required to deliver written notice of the total of
     such compensation amount.

                    (v)  Upon receipt of the earned compensation
     information from Executive, the Bank shall withhold
     subsequent monthly payments until the amount withheld
     equals the reduction required with respect to the prior
     year.  If no monthly payments remain to be paid, the
     Company or the Bank will remit to Executive a bill, setting
     forth the amount overpaid to him by reason of this
     subsection, which bill shall become due and payable thirty
     (30) days following its receipt.

          18.  Indemnification of Executive.  The Company and
the Bank shall indemnify the Executive against any action
brought against him by reason of the fact that he serves or had
served as a trustee and/or officer of the Company and the Bank
for (i) reasonable costs and expenses, including reasonable
attorneys fees, actually paid or incurred by the Executive in
connection with proceedings relating to the defense or
settlement of such action, (ii) any amount for which he becomes
liable by reason of any judgment in such action, and (iii)
reasonable costs and expenses, including reasonable attorney
fees, actually paid or incurred by the Executive in any action
to enforce his rights under this Section, if the Executive
obtains a final judgment in his favor in such enforcement
action.  Notwithstanding the foregoing, the indemnification
provided for herein shall be made to the Executive only if (i)
the final judgment on the merits is in the Executive's favor, or
(ii) in case of (a) a settlement, (b) a final judgment against
the Executive, or (c) a final judgment in the Executive's favor,
other than on the merits, if a majority of the disinterested
Directors of the Bank determine that he was acting in good faith
in the scope of his employment or authority as he could have
reasonably have perceived it under the circumstances and for a
purpose he reasonably believed under the circumstances was in
the best interest of the Bank or the Company.

               (b)  In addition, the Executive shall be
indemnified by the Company and the Bank to the fullest extent
provided under their respective Articles of Incorporation and
Bylaws.

               (c)  For purposes of this Section, the following
terms shall have the meanings set forth below:

                    (i)  "Action" means any action, suit or
     other judicial or administrative proceeding, or
     threatened proceeding, whether civil, criminal, or
     otherwise, including any appeal or other proceeding
     for review;

                    (ii)  "Final Judgment" means a judgment,
     decree, or order which is appealable and as to which the
     period for appeal has expired and no appeal has been taken;

                    (iii)  "Settlement" includes the entry of a
     judgment by consent or by confession or upon a plea of
     guilty or of nolo contendere.

          19.  Separability.  The invalidity or unenforceability
of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

          20.  Applicable Law.  This Agreement shall be governed
by and construed in accordance with the domestic laws (but not
the law of conflict of laws) of the Commonwealth of
Pennsylvania.

          21.  Headings/References to Directors.  The headings
of the Sections of this Agreement are for convenience only and
shall not control or affect the meaning or construction or limit
the scope or intent of any of the provisions of this Agreement.
References to Directors in this Agreement shall include trustees
to the extent that the Articles of Incorporation of the Company,
the Bank or any successor hereunder provide for management by
trustees rather than Directors.

          22.  Guaranty.  The Company hereby guarantees to the
Executive the full and timely performance by the Bank of each
and every obligation of the Bank contained in this Agreement.

          23.  Effective Date; Termination of Prior Agreement.
This Agreement shall become effective immediately upon the
execution and delivery of this Agreement by the parties hereto.
Upon the execution and delivery of this Agreement by the parties
hereto, any prior agreement relating to the subject matter
hereof, shall be automatically terminated and be of no further
force or effect.

          IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

                              PSB BANCORP, INC.

                              By________________________________
                                     Anthony DiSandro,
                                     President

                              Attest:___________________________
                                     Rosanne Pauciello,
                                     Secretary

                                          ("Company")

                              FIRST PENN BANK

                              By________________________________
                                     Anthony DiSandro,
                                     President

                              Attest:___________________________
                                     Rosanne Pauciello,
                                     Secretary

                                            ("Bank")

Witness:

__________________________    __________________________________
                              John J. O'Connell

                                         ("Executive")Exhibit 10.12

                            AGREEMENT

          THIS AGREEMENT ("Agreement") made as of the __th day
of June, 2001, by and among PSB BANCORP, INC., a Pennsylvania
bank holding company (the "Company"), FIRST PENN BANK, a
Pennsylvania-chartered commercial bank (the "Bank"), and MARIO
L. INCOLLINGO, JR., an individual (the "Executive").

                            WITNESSETH

          WHEREAS, the Company, the Bank and the Executive
desire to enter into an agreement regarding, among other things,
the employment of the Executive by the Company and the Bank, all
as hereinafter set forth.

                           AGREEMENT:

          NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:

          1. Employment.  The Company and the Bank each hereby
employ the Executive, and the Executive hereby accepts
employment with the Company and the Bank, on the terms and
conditions set forth in this Agreement.

          2.  Duties of Employee.  The Executive shall perform
and discharge well and faithfully such duties as an executive
officer of the Company and of the Bank as may be assigned to the
Executive from time to time by the respective Directors of the
Company and the Bank.  The Executive shall be employed as the
Chief Operating Officer and Executive Vice President of the Bank
and shall hold such other titles as may be given to him from
time to time by the respective Boards of Directors of the
Company and the Bank.

          3.  Term of Employment.  The Executive's employment
under this Agreement shall be for a period (the "Employment
Period") commencing upon the date of this Agreement and ending
at the end of the term of this Agreement pursuant to Section 16
hereof, unless the Executive's employment is sooner terminated
in accordance with Section 5 hereof or one of the following
provisions:

               (a)  Termination for Cause.  The Executive's
employment under this Agreement may be terminated at any time
during the Employment Period for "Cause" (as herein defined), by
action of the Boards of Directors of the Company and of the
Bank, upon giving notice of such termination to the Executive at
least fifteen (15) days prior to the date upon which such
termination shall take effect.  As used in this Agreement,
"Cause" means any of the following events:

                    (i)  The Executive willfully violates any
     law, rule or regulation (other than traffic violations or
     similar offenses that would not in the Boards'
     determination effect his ability to perform and discharge
     his duties hereunder);

                    (ii)  The Executive breaches his fiduciary
     duty involving personal profit or engages in an act of
     personal dishonesty in the performance of his duties;

                    (iii)  The Executive fails to perform his
     duties to the Board's satisfaction;

                    (iv)  A court of competent jurisdiction
     makes a determination that the Executive is incompetent by
     reason of the fact that he is unable to manage his own
     affairs by reason of insanity or feeble mindedness;

                    (v)  The Executive willfully fails to follow
     the lawful instructions of the Board of Directors of the
     Company or the Bank after the Executive's receipt of
     written notice of such instructions, other than a failure
     resulting from the Executive's incapacity because of
     physical or mental illness; or

                    (vi)  The Executive violates the covenant
     not to compete contained in Section 7 hereof.

In addition, the Executive's employment under this Agreement
shall not be deemed to have been terminated for "Cause" under
Sections 3(a)(i), (ii) or (iv) above if such termination took
place solely as a result of:

                    (i)  Any act or omission believed by the
     Executive, in good faith, to have been in, or not opposed
     to, the best interests of the Company and the Bank; or

                    (ii)  Any act or omission in respect of
     which a determination could properly be made that the
     Executive met the applicable standard of conduct prescribed
     for indemnification or reimbursement or payment of expenses
     under the Articles of Incorporation or By-laws of the
     Company or the Bank or the directors' and officers'
     liability insurance of the Company or the Bank, in each
     case as in effect at the time of such act or omission.

If the Executive's employment is terminated under the provisions
of this Section 3(a), then all rights of the Executive under
Section 4 hereof shall cease as of the effective date of such
termination.

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

               (c)  Termination Pursuant to Order.  If the
Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order
issued under Section 8(e)(4) or (g)(1) of the Federal Deposit
Insurance Act (12 U.S.C.  1818(e)(4) or (g)(1)), all obligations
of the Company and Bank under this Agreement shall terminate as
of the effective date of the order, but vested rights of the
Company, the Bank and the Executive shall not be affected.

                    (d)  Termination Upon Default.  If the Bank
is in default (as defined in Section 3(x) of the Federal Deposit
Insurance Act (the "FDIA")), all obligations under this
Agreement shall terminate as of the date of default, but this
subsection shall not affect any vested rights of the Company,
the Bank or the Executive.

                    (e)  Termination by the Federal Deposit
Insurance Corporation.  All obligations under this Agreement
shall terminate, if the Chairman of the Federal Deposit
Insurance Corporation (the "FDIC") or his or her designee (i)
enters into an agreement to provide assistance to or on behalf
of the Bank under the authority contained in Section 13(c) of
the FDIA; or (ii) approves a supervisory merger to resolve
problems related to operation of the Bank or when the Bank is
determined by such Chairman or designee to be in an unsafe and
unsound condition.  Any rights of the Company, the Bank or the
Executive that have already vested, however, shall not be
affected by such action.

               (f)  Termination Without Cause.  The Executive's
employment under this Agreement may be terminated at any time
during the Employment Period without "Cause" (as defined in
Section 3(a) hereof), by action of the Boards of Directors of
the Company and of the Bank, upon giving notice of such
termination to the Executive at least thirty (30) days prior to
the date upon which such termination shall take effect.  If the
Executive's employment is terminated under the provisions of
this Section 3(f), then the Executive shall be entitled to
receive the compensation set forth in Section 6 hereof.

               (g)  Retirement; Death.  If the Executive retires
or dies, the Executive's employment under this Agreement shall
be deemed terminated as of the date of the Executive's
retirement or death, and all rights of the Executive under
Section 4 hereof shall cease as of the date of such termination
and any benefits payable to the Executive shall be determined in
accordance with the retirement and insurance programs of the
Company and of the Bank then in effect.

               (h)  Incapacity.  If the Executive is
incapacitated by accident, sickness, or otherwise so as to
render the Executive mentally or physically incapable of
performing the services required of the Executive under Section
2 of this Agreement for a continuous period of six (6) months,
then, upon the expiration of such period or at any time
thereafter, by action of the Boards of Directors of the Company
and of the Bank, the Executive's employment under this Agreement
may be terminated immediately upon giving the Executive notice
to that effect.  If the Executive's employment is terminated
under the provisions of this Section 3(h), then all rights of
the Executive under Section 4 hereof shall cease as of the last
business day of the week in which such termination occurs and
any benefits payable to the Executive shall be determined in
accordance with the retirement and insurance programs of the
Company and of the Bank then in effect.

          4.  Employment Period Compensation.

               (a)  Salary.  For services performed by the
Executive under this Agreement, the Bank shall pay the Executive
a salary during the Employment Period, at the rate of $155,000
per year, payable at the same times as salaries are payable to
other executive employees of the Bank.  The Bank may, from time
to time, increase the Executive's salary, and any and all such
increases shall be deemed to constitute amendments to this
Section 4(a) to reflect the increased amounts, effective as of
the dates established for such increases by the Board of
Directors of the Bank in the resolutions authorizing such
increases.

               (b)  Bonus.  For services performed by the
Executive under this Agreement, the Bank may pay the Executive
an annual bonus and such other bonus or bonuses as the Bank, in
its sole discretion, deems appropriate.  The payment of any such
bonuses shall not reduce or otherwise affect any other
obligation of the Company and/or the Bank to the Executive
provided for in this Agreement.

               (c)  Other Benefits.  The Company and/or the Bank
will provide the Executive, during the Employment Period, with
benefits in the aggregate not less favorable than those received
by executives of the Bank, as such benefits exist on the date
hereof (including, without limitation, the use of an automobile
at the Bank's expense).

               (d)  Salary Deferral.  The Executive may request
that the payment of any portion of his base salary for any year
be deferred.  Such request must be made in writing to the Bank
before the beginning of such calendar year and must include the
period of deferral requested by the Executive (the "Deferral
Period").  If the Board of Directors of the Bank approve such
request, the Executive shall be entitled to receive, at the end
of the Deferral Period, the deferred portion of his base salary
plus interest, which interest shall be computed by reference to
an annual interest rate determined each year by the Board of
Directors of the Bank.  Any salary which is deferred as
described herein shall be credited to an account on the books of
the Bank established in the name of the Executive.  However,
this account shall not be funded, and neither the Company nor
the Bank shall be deemed to be a trustee for the Executive with
respect to any deferred salary.  The liabilities of the Company
and the Bank to the Executive hereunder are those of a debtor
pursuant to such contractual obligations as are created by this
Agreement.  No liabilities which arise under this Section 4(d)
shall be deemed to be secured by any pledge or other encumbrance
on any property of the Company or of the Bank.  The Company and
the Bank shall not be required to segregate any funds
representing such deferred salary, and nothing herein shall be
construed as providing for such segregation.

          5.  Resignation of the Executive for Good Reason.

               (a)  The Executive may resign for "Good Reason"
(as herein defined) at any time during the Employment Period, as
hereinafter set forth.  As used in this Agreement, "Good Reason"
means any of the following:

                    (i)  Any material adverse change in the
     Executive's responsibilities or authority which is
     inconsistent with the Executive's status as Executive Vice
     President and Chief Operating Officer of the Company and
     the Bank;

                    (ii)  Any reduction in title;

                    (iii) Any reassignment of the Executive to a
     principal place of employment which requires the Executive
     to move his principal residence and is more than thirty
     (30) miles from the Bank's principal executive office on
     the date of this Agreement;

                    (iv)  Any removal of the Executive from
     office except for any termination of the Executive's
     employment for Cause under the provisions of Section 3(a)
     hereof;

                    (v)  Any reduction in the Executive's annual
     base salary as in effect on the date hereof or as the same
     may be increased from time to time;

                    (vi)  Any failure by the Company and/or the
     Bank to provide the Executive with benefits at least as
     favorable as those enjoyed by the Executive under any of
     the pension, life insurance, medical, health and accident,
     disability or other employee benefit plans of the Company
     or of the Bank in which the Executive participated on the
     date hereof, or the taking of any action that would
     materially reduce any of such benefits, unless such
     reduction is part of a reduction applicable in each case to
     all participant employees;

                    (vii)  Any material breach of this Agreement
     on the part of the Company or the Bank.

               (b)  At the option of the Executive, exercisable
by the Executive within 90 days after the occurrence of the
event constituting "Good Reason," the Executive may resign from
employment under this Agreement by a notice in writing (the
"Notice of Termination") delivered to the Company and the Bank
and the provisions of Section 6 hereof shall thereupon apply.

          6.  Rights in Event of Termination of Employment.  In
the event that the Executive resigns from employment for Good
Reason by delivery of a Notice of Termination to the Company and
the Bank, or the Executive's employment is terminated by the
Company or the Bank without Cause pursuant to Section 3(f) (and
so long as the Executive is not terminated pursuant to Sections
3(b), (c), (d), (e), (g) or (h) hereof) the Executive shall be
entitled to receive the amounts and benefits set forth in this
Section 6.

               (a)  Over a period of 36 months from the date of
termination of employment, the Bank shall pay the Executive
three times his Average Annual Compensation (as hereinafter
defined), reduced to present value at the Bank's discretion..

                    (i)  For purposes of this Agreement, the
     term "Average Annual Compensation" means the sum of (A) a
     dollar amount equal to the average of the Executive's base
     salary during each of his five most recent years of
     employment hereunder (or such fewer number of years as the
     Executive is employed under the terms of this Agreement),
     and (B) a dollar amount equal to the average of the bonuses
     the Executive received during each of the five most recent
     years of employment hereunder (or such fewer number of
     years as Executive is employed under the terms of this
     Agreement).

                    (ii)  Amounts required to be paid to the
     Executive under Section 6(a) shall be paid in equal monthly
     installments, beginning thirty (30) days following the date
     of termination of employment.

               (b)  For a period of 36 months from the date of
termination of employment, the Company and the Bank shall
continue to provide the Executive with all life, disability,
medical insurance and other employee insurance benefits in
effect with respect to the Executive during the year prior to
his termination of employment, or, if the Company or the Bank
cannot provide such benefits because the Executive is no longer
an employee, a dollar amount equal to the cost to the Executive
of obtaining such benefits (or substantially similar benefits).

               (c)  Upon full payment of the compensation due
under Section 6(a) hereof or upon reaching the earliest age at
which the Executive could retire under plans of the Company or
of the Bank then in effect, whichever is later, the Bank shall
pay to the Executive annual benefits for life equal to the
difference between (i) what the Executive would be entitled to
under the retirement plan of the Bank in effect on the date
hereof if he had remained in his position (at his Average Annual
Compensation at Termination) until normal retirement at age 65
and assuming that such benefit were paid in the form of a
straight life annuity, and (ii) what he is in fact entitled to
pursuant to the applicable plan, calculated on the basis of a
straight life annuity, based on the actual date of termination.

               (d) The Executive shall have the unilateral right
to reduce the benefits otherwise payable to him, or on his
behalf, under this section to the extent such reduction would
result in his netting, after all applicable taxes, more
benefits.

               (e) Any payments made to Executive hereunder or
otherwise are subject to and conditioned upon their compliance
with both 12 USC  1828(k) and Section 280G of the Internal
Revenue Code, as amended and any regulations promulgated under
either.

          7.  Covenant Not to Compete.

               (a)  The Executive hereby acknowledges and
recognizes the highly competitive nature of the business of the
Company and of the Bank and accordingly agrees that, during and
for the applicable period set forth in Section 7(c) hereof, the
Executive shall not:

                    (i)  Be engaged, directly or indirectly,
     either for his own account or as agent, consultant,
     employee, partner, officer, director, proprietor, investor
     (except as an investor owning less than 5% of the stock of
     a publicly owned company) or otherwise of, any person,
     firm, corporation, or enterprise engaged, in (1) the
     banking or financial services industry, or (2) any other
     activity in which the Company, the Bank or their
     subsidiaries are engaged during the Employment Period, in
     any county in which, at any time during the Employment
     Period or at the date of termination of the Executive's
     employment, a branch, office or other facility of the
     Company, the Bank or their subsidiaries are located, or in
     any county contiguous to such a county, including
     contiguous counties located outside of the Commonwealth of
     Pennsylvania (the "Non-Competition Area");

                    (ii)  Provide financial or other assistance
     to any person, firm, corporation, or enterprise engaged in
     (1) the banking or financial services industry, or (2) any
     other activity in which the Company, the Bank or their
     subsidiaries are engaged during the Employment Period, in
     the Non-Competition Area.

               (b)  It is expressly understood and agreed that,
although the Executive, the Company and the Bank consider the
restrictions contained in Section 7(a) hereof reasonable for the
purpose of preserving for the Company, the Bank and their
subsidiaries their good will and other proprietary rights, if a
final judicial determination is made by a court having
jurisdiction that the time or territory or any other restriction
contained in Section 7(a) hereof is an unreasonable or otherwise
unenforceable restriction, the provisions of Section 7(a) hereof
shall not be rendered void but shall be deemed amended to apply
as to such maximum time and territory and to such other extent
as such court may determine or indicate to be reasonable.

               (c)  The provisions of this Section 7 shall be
applicable commencing on the date of this Agreement and ending
on one of the following dates, as applicable:

                    (i)  If the Executive's employment is
     terminated in accordance with the provisions of Sections
     3(d), (e), (f) or (h) or Section 16 hereof, the effective
     date of termination of employment;

                    (ii)  If Executive's employment is
     terminated in accordance with the provisions of Section
     3(a), (b), (c) or (g) hereof or Executive voluntarily
     terminates his employment other than in accordance with the
     provisions of Section 5 hereof, twenty-four (24) months
     following the effective date of termination of employment;
     or

                    (iii)  If Executive voluntarily terminates
     his employment in accordance with the provisions of Section
     5 hereof, the date of the Notice of Termination.

               (d)  The provisions of this Section 7 do not
apply if the Executives employment is terminated in accordance
with the provisions of Section 3(a)(iii).

          8.  Remedies.  The Executive acknowledges and agrees
that the remedy at law of the Company and of the Bank for a
breach or threatened breach of any of the provisions of Section
7 hereof would be inadequate and, in recognition of this fact,
in the event of a breach or threatened breach by the Executive
of any of the provisions of Section 7 hereof, it is agreed that,
in addition to any remedy at law, the Company and the Bank shall
be entitled to, without posting any bond, and the Executive
agrees not to oppose any request of the Company and the Bank
for, equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent
injunction, or any other equitable remedy which may then be
available.  Nothing herein contained shall be construed as
prohibiting the Company and the Bank from pursuing any other
remedies available to them for such breach or threatened breach.

          9.  Arbitration.  The Company, the Bank and the
Executive recognize that in the event a dispute should arise
between them concerning the interpretation or implementation of
this Agreement, lengthy and expensive litigation will not afford
a practical resolution of the issues within a reasonable period
of time.  Consequently, each party agrees that all disputes,
disagreements and questions of interpretation concerning this
Agreement, except those arising from the enforcement of the
Covenant Not to Compete, are to be submitted for resolution to
the American Arbitration Association ("Association") in
Philadelphia, Pennsylvania.  The Company and the Bank, or the
Executive, may initiate an arbitration proceeding at any time by
giving notice to the others in accordance with the rules of the
Association.  The Association shall designate a single
arbitrator to conduct the proceeding, but the Company and the
Bank, and the Executive, may, as a matter of right, require the
substitution of a different arbitrator chosen by the
Association.  Each such right of substitution may be exercised
only once.  The arbitrator shall not be bound by the rules of
evidence and procedure of the courts of the Commonwealth of
Pennsylvania but shall be bound by the substantive law
applicable to this Agreement.  The decision of the arbitrator,
absent fraud, duress, incompetence or gross and obvious error of
fact, shall be final and binding upon the parties and shall be
enforceable in courts of proper jurisdiction.  Following written
notice of a request for arbitration, the Company and the Bank,
and the Executive, shall be entitled to an injunction
restraining all further proceedings in any pending or
subsequently filed litigation concerning this Agreement, except
as otherwise provided herein.

          10.  Legal Expenses.  If the Executive obtains a
judgment or settlement which enforces a right or benefit under
this Agreement, the Company and/or the Bank shall pay to the
Executive all reasonable legal fees and expenses incurred by the
Executive in seeking to obtain or enforce such right or benefit.

          11.  Notices.  Any notice required or permitted to be
given under this Agreement shall, to be effective hereunder, be
given to both the Company and the Bank, in the case of notices
given by the Executive, and shall, to be effective hereunder, be
given by both the Company and the Bank.  Any such notice shall
be deemed properly given if in writing and if mailed by express,
registered or certified mail, postage prepaid with return
receipt requested, to the residence of the Executive, in the
case of notices to the Executive, and to the respective
principal offices of the Company and of the Bank, in the case of
notices to the Company and to the Bank.

          12.  Waiver.  No provision of this Agreement may be
modified, waived, or discharged unless such waiver,
modification, or discharge is agreed to in writing and signed by
the Executive, an executive officer of the Company, and an
executive officer of the Bank, each such officer specifically
designated by the Boards of Directors of the Company and of the
Bank, respectively.  No waiver by any party hereto at any time
of any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior
or subsequent time.

          13.  Assignment.  This Agreement shall not be
assignable by any party hereto, except by the Company and the
Bank to any successor in interest to the respective businesses
of the Company and the Bank.

          14.  Entire Agreement.  This Agreement contains the
entire agreement of the parties relating to the subject matter
of this Agreement and supersedes any prior agreement of the
parties.

          15.  Successors, Binding Agreement.

               (a)  The Company and the Bank will require any
successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the
business and/or assets of the Company and/or the Bank to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company and the Bank
would be required to perform it if no such succession had taken
place.  Failure by the Company and the Bank to obtain such
assumption and agreement prior to the effectiveness of any such
succession shall constitute a material breach of this Agreement.
As used in this Agreement, "the Company" and the "Bank" shall
mean the Company and the Bank as hereinbefore defined and any
successor to the business and/or assets of the Company and/or
the Bank as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.

               (b)  This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs, distributees,
devisees, and legatees.  If the Executive should die while any
amount would be payable to the Executive under this Agreement if
the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or
other designee, or, if there is no such designee, to the
Executive's estate.

          16.  Termination.

               (a)  Unless the Executive's employment is
terminated pursuant to the provisions of Section 3 or Section 5
hereof, the term of this Agreement shall be for a three (3) year
period commencing on June 29, 2001 and ending on June 29, 2004.
This Agreement shall be automatically renewed on June 29th of
each year (the "Annual Renewal Date") for a period ending three
(3) years from each Annual Renewal Date unless either party
shall give written notice of nonrenewal to the other party at
least sixty (60) days prior to an Annual Renewal Date or the
Boards of Directors of the Company and the Bank fail to approve
the extension at a duly called meeting of such Boards.  In
furtherance of the foregoing, the Company and the Bank shall
each use their best efforts to cause its Board of Directors to
meet in the month preceding each notice date to vote upon the
extension of the term.

               (b)  Any termination of the Executive's
employment under this Agreement or of this Agreement shall not
affect the provisions of Sections 7, 8 or 9 hereof, which shall
survive any such termination and remain in full force and effect
in accordance with their respective terms.

          17.  Mitigation/Offset.  The Executive shall not be
required to mitigate the amount of any payment provided for in
this Agreement by seeking employment or otherwise; provided,
however, that for each dollar of compensation earned by the
Executive from another employer, a corresponding dollar amount
of any sum otherwise payable to, or for the benefit of, the
Executive under Section 6 hereof shall be reduced by twenty
percent (20%).  Application of this Section shall be subject to
the following rules:

                    (i)  The reduction provision of this
     subsection shall apply only to compensation earned by the
     Executive during the period of time he is receiving
     payments described in Section 6(a) hereof.

                    (ii)  Compensation earned from another
     employer shall include compensation deferred under any
     qualified or nonqualified arrangement.

                    (iii)  Compensation earned from another
     employer shall be determined on an annual basis by
     reference to the Executive's date of termination of
     employment.

                    (iv)  Within fifteen (15) days following
     each anniversary date of the Executive's termination of
     employment (and within fifteen (15) days following receipt
     of the last Section 6(a) payment), he shall provide the
     Company and the Bank with such detailed information and
     records as may have been reasonably requested to confirm
     the compensation he earned during the preceding twelve (12)
     months (or shorter period, if applicable).  In the absence
     of a specific request for detailed information, he shall
     only be required to deliver written notice of the total of
     such compensation amount.

                    (v)  Upon receipt of the earned compensation
     information from Executive, the Bank shall withhold
     subsequent monthly payments until the amount withheld
     equals the reduction required with respect to the prior
     year.  If no monthly payments remain to be paid, the
     Company or the Bank will remit to Executive a bill, setting
     forth the amount overpaid to him by reason of this
     subsection, which bill shall become due and payable thirty
     (30) days following its receipt.

          18.  Indemnification of Executive.  The Company and
the Bank shall indemnify the Executive against any action
brought against him by reason of the fact that he serves or had
served as a trustee and/or officer of the Company and the Bank
for (i) reasonable costs and expenses, including reasonable
attorneys fees, actually paid or incurred by the Executive in
connection with proceedings relating to the defense or
settlement of such action, (ii) any amount for which he becomes
liable by reason of any judgment in such action, and (iii)
reasonable costs and expenses, including reasonable attorney
fees, actually paid or incurred by the Executive in any action
to enforce his rights under this Section, if the Executive
obtains a final judgment in his favor in such enforcement
action.  Notwithstanding the foregoing, the indemnification
provided for herein shall be made to the Executive only if (i)
the final judgment on the merits is in the Executive's favor, or
(ii) in case of (a) a settlement, (b) a final judgment against
the Executive, or (c) a final judgment in the Executive's favor,
other than on the merits, if a majority of the disinterested
Directors of the Bank determine that he was acting in good faith
in the scope of his employment or authority as he could have
reasonably have perceived it under the circumstances and for a
purpose he reasonably believed under the circumstances was in
the best interest of the Bank or the Company.

               (b)  In addition, the Executive shall be
indemnified by the Company and the Bank to the fullest extent
provided under their respective Articles of Incorporation and
Bylaws.

               (c)  For purposes of this Section, the following
terms shall have the meanings set forth below:

                    (i)  "Action" means any action, suit or
     other judicial or administrative proceeding, or threatened
     proceeding, whether civil, criminal, or otherwise,
     including any appeal or other proceeding for review;

                    (ii)  "Final Judgment" means a judgment,
     decree, or order which is appealable and as to which the
     period for appeal has expired and no appeal has been taken;

                    (iii)  "Settlement" includes the entry of a
     judgment by consent or by confession or upon a plea of
     guilty or of nolo contendere.

          19.  Separability.  The invalidity or unenforceability
of any provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

          20.  Applicable Law.  This Agreement shall be governed
by and construed in accordance with the domestic laws (but not
the law of conflict of laws) of the Commonwealth of
Pennsylvania.

          21.  Headings/References to Directors.  The headings
of the Sections of this Agreement are for convenience only and
shall not control or affect the meaning or construction or limit
the scope or intent of any of the provisions of this Agreement.
References to Directors in this Agreement shall include trustees
to the extent that the Articles of Incorporation of the Company,
the Bank or any successor hereunder provide for management by
trustees rather than Directors.

          22.  Guaranty.  The Company hereby guarantees to the
Executive the full and timely performance by the Bank of each
and every obligation of the Bank contained in this Agreement.

          23.  Effective Date; Termination of Prior Agreement.
This Agreement shall become effective immediately upon the
execution and delivery of this Agreement by the parties hereto.
Upon the execution and delivery of this Agreement by the parties
hereto, any prior agreement relating to the subject matter
hereof, shall be automatically terminated and be of no further
force or effect.

          IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

                              PSB BANCORP, INC.

                              By________________________________
                                     Anthony DiSandro,
                                     President

                              Attest:___________________________
                                     Rosanne Pauciello,
                                     Secretary

                                             ("Company")

                              FIRST PENN BANK

                              By________________________________
                                     Anthony DiSandro,
                                     President

                              Attest:___________________________
                                     Rosanne Pauciello,
                                     Secretary

                                             ("Bank")

Witness:

__________________________    __________________________________
                              Mario L. Incollingo, Jr.

                                        ("Executive")

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