CHESTER VALLEY BANCORP INC.

                             1997 STOCK OPTION PLAN


     1.   Definitions


          As used in this Plan,  the  following  definitions  apply to the terms
indicated below:

          A. "Board" means the Board of Directors of the Company.

          B.  "Committee"  means the  Compensation  and Stock  Option  Committee
appointed  by the Board from time to time.  The  Committee  shall  consist of at
least two persons, who shall be directors of the Company.

          C.  "Company"  means  Chester  Valley  Bancorp  Inc.,  a  Pennsylvania
corporation.

          D.   "Disinterested   Director"   means  a   director   defined  as  a
"disinterested  director"  in  Rule  16b-3  promulgated  by the  Securities  and
Exchange  Commission  under  the  Exchange  Act,  or in any  successor  rule  or
regulation adopted by the Securities and Exchange Commission.

          E. "Fair Market Value" of a Share on a given day means,  if the Shares
are traded in a public market, the average of the last bid and asked prices of a
Share as reported on the principal  securities  exchange on which the Shares are
then listed or admitted to trading,  or as reported on the National  Association
of Securities Dealers Automated Quotation System on the business day immediately
preceding  the date of grant.  If the Shares  shall not be so  traded,  the Fair
Market  Value shall be  determined  by the  Committee  taking  into  account all
relevant facts and circumstances.

          F.  "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as
amended.

          G.  "Grantee"  means  a  person  who  is  either  an  Optionee  or  an
Optionee-Shareholder.

          H.  "Incentive  Stock Option" means an option,  whether  granted under
this Plan or otherwise,  that qualifies as an incentive  stock option within the
meaning of Section 422 of the Internal Revenue Code.

          I.  Non-qualified  Option"  means an Option  that is not an  Incentive
Stock Option.

          J.  "Option"  means a right to  purchase  Shares  under  the terms and
conditions  of  this  Plan.

          K.  "Optionee"  means a person other than an  Optionee-Shareholder  to
whom an option is granted under this Plan.

          L. "Optionee-Shareholder"  means a person to whom an option is granted
under this Plan and who at the time such  option is granted  owns,  actually  or
constructively,  stock of the  Company or of a Parent or  Subsidiary  possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of such Parent or Subsidiary.

          M.  "Parent"  means any  corporation  (other  than the  Company) in an
unbroken  chain of  corporations  ending  with the  Company  if,  at the time of
granting an Option,  each of the  corporations in the unbroken chain (other than
the Company)  owns stock  possessing  fifty  percent  (50%) or more of the total
combined  voting power of all classes of stock in one of the other  corporations
in the chain.

          N. "Plan" means this  Chester  Valley  Bancorp Inc.  1997 Stock Option
Plan, including any amendments to the Plan.

          O. "Share"  means a share of the  Company's  common  stock,  par value
$1.00 per share,  either now or hereafter owned by the Company as treasury stock
or authorized but unissued.

          P. "Subsidiary"  means any corporation  (other than the Company) in an
unbroken  chain of  corporations  beginning  with the Company if, at the time of
granting an Option,  each of the  corporations in the unbroken chain (other than
the last  corporation in the chain) owns stock possessing fifty percent (50%) or
more of the total  combined  voting  power of all classes of stock in one of the
other corporations in the chain.

          Q. Options  shall be deemed  "granted"  under this Plan on the date on
which the Committee or the Board, by appropriate  action,  approves the grant of
an Option hereunder or on such subsequent date as the Committee or the Board may
designate.

          R. As used herein,  the masculine  includes the  feminine,  the plural
includes the singular, and the singular includes the plural.


     2.   Purpose


          The purposes of the Plan are as follows.

          A. To secure for the Company and its shareholders the benefits arising
from  share  ownership  by  those  directors,  officers  and key  employees  and
consultants of the Company and its  Subsidiaries who will be responsible for the
Company's future growth and continued  success.  The Plan is intended to provide
an incentive  to  directors,  officers  and key  employees  and  consultants  by
providing them with an opportunity to acquire an equity  interest or increase an
existing equity interest in the Company, thereby increasing their personal stake
in its continued success and progress.

          B. To enable the Company and its Subsidiaries to obtain and retain the
services of directors  and key  employees  and  consultants,  by providing  such
directors and key  employees  and  consultants  with an  opportunity  to acquire
Shares under the terms and  conditions  and in the manner  contemplated  by this
Plan.


     3.   Plan Adoption and Term


          A. This Plan shall  become  effective  upon its adoption by the Board,
and Options may be issued upon such  adoption and from time to time  thereafter;
provided,   however,   that  the  Plan  shall  be  submitted  to  the  Company's
shareholders for their approval at the next annual meeting of  shareholders,  or
prior thereto at a special  meeting of  shareholders  expressly  called for such
purpose; and provided further,  that the approval of the Company's  shareholders
shall be obtained  within 12 months of the date of adoption of the Plan.  If the
Plan is not approved by the affirmative vote of the holders of a majority of all
shares present in person or by proxy, at a duly called shareholders'  meeting at
which a quorum  representing a majority of all voting stock is present in person
or by proxy  and  voting on this  Plan,  then  this  Plan and all  Options  then
outstanding under it shall forthwith  automatically terminate and be of no force
and effect.

          B.  Subject  to  the  provisions  hereinafter  contained  relating  to
amendment or  discontinuance,  this Plan shall  continue to be in effect for ten
(10) years from the date of adoption  of this Plan by the Board.  No Options may
be granted  hereunder  except  within  such period of ten (10) years but Options
granted within such ten (10) year period may extend beyond the termination  date
of this Plan.


     4.   Administration of Plan


          A. This  Plan  shall be  administered  by the  Board  or,  subject  to
Paragraph 4.C below, the Committee.  Except as otherwise  expressly  provided in
this Plan,  the Board shall have  authority to interpret  the  provisions of the
Plan, to construe the terms of any Option, to prescribe, amend and rescind rules
and  regulations  relating to the Plan, to determine the terms and provisions of
Options granted hereunder,  and to make all other determinations in the judgment
of the Board necessary or desirable for the  administration of the Plan. Without
limiting  the  foregoing,  the Board  shall,  to the  extent  and in the  manner
contemplated herein,  exercise the discretion granted to it to determine to whom
Incentive  Stock Options and  Non-qualified  Options shall be granted,  how many
Shares shall be subject to each such Option, whether a Grantee shall be required
to surrender for cancellation an outstanding  Option as a condition to the grant
of a new Option,  and the prices at which Shares shall be sold to Grantees.  The
Board  may  correct  any  defect  or  supply  any  omission  or  reconcile   any
inconsistency  in the Plan or in any  Option in the  manner and to the extent it
shall  deem  expedient  to carry the Plan into  effect and shall be the sole and
final judge of such expediency.

          B. No member of the Board  shall be  liable  for any  action  taken or
omitted or any determination made by him in good faith relating to the Plan, and
the Company shall  indemnify and hold harmless each member of the Board and each
other  director or employee of the Company to whom any duty or power relating to
the  administration or interpretation of the Plan has been delegated against any
cost or expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of the Board)  arising out of any act or
omission in connection  with the Plan,  unless  arising out of such person's own
fault or bad faith.

          C. The Board may (but is not required to) to appoint the Committee. If
all members of the Committee are  Disinterested  Directors,  the Committee shall
have the authority to administer  the Plan and exercise any power granted to the
Board  in the  Plan.  If all  members  of the  Committee  are not  Disinterested
Directors, the Committee shall have the authority solely to make recommendations
to the Board for the administration of the Plan.

     5.   Eligibility


          Directors,  officers, key employees and consultants of the Company and
its  Subsidiaries  shall be eligible  for  selection  by the Board to be granted
Options.  Consultants and directors who are not also employees of the Company or
a  Subsidiary  shall be eligible to be granted  only  Non-qualified  Options.  A
director, officer, employee or consultant who has been granted an Option may, if
he or she is otherwise  eligible,  be granted an additional Option or Options if
the Board shall so determine.


     6.   Options


          A. Subject to adjustment  as provided in Paragraph 13 hereof,  Options
may be granted  pursuant to the Plan for the  purchase of not more than  150,000
Shares;  provided,  how ever,  that if prior to the  termination of the Plan, an
Option shall expire or terminate for any reason without having been exercised in
full, the  unpurchased  Shares subject  thereto shall again be available for the
purposes of the Plan.

          B. Each Option  granted under the Plan shall be evidenced by an option
certificate  or agreement for Shares in such form,  not  inconsistent  with this
Plan, as the Board may adopt for general use or for specific  cases from time to
time. Such option  certificate shall designate each Option as an Incentive Stock
Option or a Non-qualified Option.

          C. The aggregate Fair Market Value  (determined as of the time Options
are granted) of the Shares with respect to which  Incentive Stock Options may be
or become  exercisable  for the first time by a Grantee during any calendar year
(whether  granted under this Plan or any other plan of the Company or any Parent
or Subsidiary corporation) shall not exceed $100,000. To the extent (and only to
the extent)  that an  Incentive  Stock  Option may be or become  exercisable  in
violation of this limitation, it shall be deemed to be a Non-qualified Option.


     7.   Option Price


          A. The purchase  price per Share  deliverable  upon the exercise of an
Option shall be determined by the Board,  but in the case of an Incentive  Stock
Option  shall not be less than 100% of the Fair  Market  Value of a Share on the
date the Incentive  Stock Option is granted to an Optionee and shall not be less
than 110% of the Fair Market  Value of a Share on the date the  Incentive  Stock
Option is granted to an Optionee-Shareholder.

          B.  Payment  for Shares  purchased  under an Option may be made (1) in
cash;  (2) in Shares  valued at their Fair Market Value on the date of exercise,
or (3) in a combination of cash and Shares.


     8.   Duration of Options


          Each  Option and all  rights  thereunder  shall  expire and the Option
shall no longer be  exercisable on a date not later than ten (10) years from the
date on which  the  Option  was  granted.  Options  may  expire  and cease to be
exercisable  on such  earlier  date as the  Board may  determine  at the time of
grant.  Options shall be subject to termination  before their expiration date as
provided herein.


     9.   Conditions Relating to Exercise of Options


          A. The  Shares  subject to any  Option  may be  purchased  at any time
during the term of the Option,  unless,  at the time an Option is  granted,  the
Board shall have fixed a specific period or periods required to have passed as a
condition to exercise of an option or a part thereof. To the extent an Option is
not exercised  when it becomes  initially  exercisable,  or is exercised only in
part, the Option or remaining part thereof shall not expire but shall be carried
forward and shall be  exercisable  until the  expiration or  termination  of the
Option.  Partial  exercise as to whole  Shares is  permitted  from time to time,
provided  that no partial  exercise of an Option shall be for a number of Shares
having a purchase price of less than $1,000 unless the Grantee represents to the
Company that he or she is purchasing the Shares for investment.

          B. No Option shall be  transferable  by the Grantee thereof other than
by will or by the  laws of  descent  and  distribution,  and  Options  shall  be
exercisable  during the  lifetime of a Grantee  only by such  Grantee or, to the
extent that such  exercise  would not prevent an Option  from  qualifying  as an
Incentive  Stock Option under the Internal  Revenue Code, by his or her guardian
or legal representative.

          C. Certificates for Shares purchased upon exercise of Options shall be
issued  either  in the name of the  Grantee  or in the name of the  Grantee  and
another person jointly with the right of survivorship.  Such certificates  shall
be delivered as soon as practical following the date the Option is exercised.

          D. An Option  shall be exercised by the delivery to the Company at its
principal  office, to the attention of its Chief Financial  Officer,  of written
notice of the  number  of  Shares  with  respect  to which  the  Option is being
exercised,  and of the name or names in which the  certificate for the Shares is
to be issued, and by paying the purchase price for the Shares in accordance with
paragraph 7 hereof.  At the time of exercise of an Incentive  Stock Option,  the
Grantee  also shall sign and deliver to the Company the  Grantee's  agreement to
notify the  Company if the  Grantee  sells or  otherwise  disposes of any of the
Shares being  purchased  within two years after the date such Option was granted
or one year after the date of exercise.

          E.  Notwithstanding any other provision in this Plan, no Option may be
exercised  unless and until (i) this Plan has been approved by the  shareholders
of the Company,  and (ii) the Shares to be issued upon the exercise thereof have
been registered under the Securities Act of 1933 and applicable state securities
laws,  or are,  in the  opinion  of  counsel to the  Company,  exempt  from such
registration.  The Company shall not be under any  obligation to register  under
applicable  Federal or state  securities  laws any Shares to be issued  upon the
exercise  of an  Option  granted  hereunder,  or to comply  with an  appropriate
exemption from  registration  under such laws in order to permit the exercise of
an Option or the  issuance  and sale of Shares  subject to such  Option.  If the
Company  chooses  to  comply  with  such an  exemption  from  registration,  the
certificates  for Shares  issued  under the Plan,  may, at the  direction of the
Board, bear an appropriate restrictive legend restricting the transfer or pledge
of the  Shares  represented  thereby,  and the Board  may also give  appropriate
stop-transfer instructions to the transfer agent of the Company.

          F. Any person exercising an Option or transferring or receiving Shares
shall comply with all regulations and requirements of any governmental authority
having  jurisdiction  over the  issuance,  transfer or sale of securities of the
Company  or over the  extension  of credit for the  purposes  of  purchasing  or
carrying any margin  securities,  or the  requirements  of any stock exchange on
which the Shares may be listed,  and as a  condition  to  receiving  any Shares,
shall execute all such  instruments as the Board in its sole discretion may deem
necessary or advisable.

          G. Each Option shall be subject to the  requirement  that if the Board
shall determine that the listing,  registration or  qualification  of the Shares
subject  to such  Option  upon any  securities  exchange  or under  any state or
Federal law, or the consent or approval of any  governmental or regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of such Option or the issuance or purchase of Shares thereunder, such Option may
not be  exercised  in  whole  or in  part  unless  such  listing,  registration,
qualification, consent or approval shall have been effective or obtained free of
any conditions not acceptable to the Board.


     10.  Effect of Termination of Employment or Death


          A. In the event of termination of a Grantee's  employment or status as
a director by reason of such Grantee's death, disability, or retirement with the
consent of the Board or in accordance  with an applicable  retirement  plan, any
outstanding  Option held by such Grantee  shall,  notwithstanding  the extent to
which  such  Option  was   exercisable   prior  to  termination  of  employment,
immediately  become  exercisable  as to the total  number of Shares  purchasable
there- under.  Any such Option shall remain so  exercisable at any time prior to
its expiration date or, if earlier,  the first anniversary of termination of the
Grantee's  employment  or status as a  director.  Grantees  of  Incentive  Stock
Options shall be notified that certain  Federal income tax  provisions  granting
favorable  treatment to Incentive  Stock  Options will not apply if such Options
are  not  exercised  within  three  months  after  the  date of  termination  of
employment  (twelve  months if  employment  terminates  as a result of total and
permanent  disability  as defined in Section  22(e)(3) of the  Internal  Revenue
Code).

          B. In the event of termination of a Grantee's  employment or status as
a director for any reason other than death,  disability,  or retirement with the
consent of the Board or in accordance  with an applicable  retirement  plan, all
rights of any kind under any  outstanding  Incentive  Stock  Option held by such
Grantee shall immediately lapse and terminate, except that the Board may, in its
discretion,  elect to permit  exercise for a period ending on the earlier of the
expiration  date of the Incentive  Stock Option and a date thirty days after the
termination of employment or status as director as to the total number of Shares
purchasable under the Incentive Stock Option as of the date of the termination.

          C.  Whether an  authorized  leave of absence or absence in military or
government  service shall  constitute  termination  of employment or status as a
director  shall be determined by the Board.  Transfer of employment  between the
Company and a Subsidiary  corporation or between one Subsidiary  corporation and
another shall not constitute termination of employment.


     11.  No Special Employment Rights


          Nothing  contained  in the Plan or in any Option shall confer upon any
Grantee  any  right  with  respect  to his or her  status as a  director  or the
continuation  of  his or  her  employment  by the  Company  or a  Subsidiary  or
interfere in any way with the right of the Company or a  Subsidiary,  subject to
the terms of any separate employment  agreement to the contrary,  at any time to
terminate  such  employment or to increase or decrease the  compensation  of the
Grantee from the rate in existence at the time of the grant of an Option.


     12.  Rights as a Shareholder


          The Grantee of an Option  shall have no rights as a  shareholder  with
respect  to any  Shares  covered by an Option  until the date of  issuance  of a
certificate to him for such Shares.  Except as otherwise  expressly  provided in
the Plan,  no  adjustment  shall be made for dividends or other rights for which
the record date occurs prior to the date of issuance of such certificate.


     13.  Anti-dilution Provision


          A. In case the Company  shall (i) declare a dividend or  dividends  on
its  Shares  payable  in  shares  of  its  capital  stock,  (ii)  subdivide  its
outstanding  Shares,  (iii) combine its outstanding Shares into a smaller number
of Shares, or (iv) issue any shares of capital stock by  reclassification of its
Shares (including any such  reclassification  in connection with a consolidation
or merger in which the  Company is the  continuing  corporation),  the number of
Shares authorized under the Plan will be adjusted proportionately. Similarly, in
any such event,  there will be a  proportionate  adjustment in the number and to
the  purchase  price per Share of Shares  subject to  unexercised  Options  (but
without adjustment to the aggregate option price).

          B. In the event of (i) any transaction  which  constitutes a change in
control of the Company,  (ii) any  transaction  which  results in the sale of at
least  fifty  percent  (50%) or more of the  business  or assets of the  Company
during a period of twelve  consecutive  months,  or (iii) any transaction  which
involves a merger or consolidation  of the Company in which  stockholders of the
Company before such merger or consolidation do not, as a result of the merger or
consolidation,  own at least fifty percent (50%) of the outstanding voting power
of the surviving entity following such merger or consolidation,  the Board shall
modify all  outstanding  Options so as to accelerate,  as a consequence of or in
connection with such transaction, a Grantee's right to exercise any such Option.

          C. The Board,  in its sole  discretion,  may determine  that, upon the
occurrence of a transaction  described in Paragraph 13B, each Option outstanding
hereunder shall terminate  within a specified number of days after notice to the
holder,  and such holder shall  receive,  with respect to each Share  subject to
such  Option,  an amount  equal to the excess of the Fair  Market  Value of such
Shares immediately prior to the occurrence of such transaction over the exercise
price per Share of such Option;  such amount shall be payable in cash, in one or
more of the kinds of property payable in such  transaction,  or in a combination
thereof,  as the  Board  in  its  discretion  shall  determine.  The  provisions
contained in the preceding  sentence shall be  inapplicable to an Option granted
within six (6) months before the  occurrence of such a transaction if the holder
of such Option is subject to the reporting  requirements of Section 16(a) of the
Exchange Act and no exemption  from  liability  under Section 16(b) is otherwise
available to such holder.

          D. Each Grantee will be notified of any such  adjustment  and any such
adjustment,  or the  failure  to make such  adjustment,  shall be binding on the
Grantee.


14. Withholding Taxes


          Whenever  an Option is to be  exercised  under the Plan,  the  Company
shall have the right to require the  Grantee,  as a condition of exercise of the
Option,  to remit to the Company an amount  sufficient  to satisfy the Company's
(or a Subsidiary's) Federal, state and local withholding tax obligation, if any,
that will,  in the sole  opinion  of the Board,  result  from the  exercise.  In
addition,  the Board may permit a Grantee,  to satisfy any such  withholding tax
obligation  by making an  irrevocable  election at least six (6) months prior to
exercise  of an option to have the  Company  retain  Shares  issuable  upon such
exercise  having a Fair Market Value on the date of exercise equal to the amount
to be withheld.


     15.  Amendment of the Plan


          The Board may at any time and from time to time terminate or modify or
amend the Plan in any respect,  except that, without shareholder  approval,  the
Board may not (a)  increase  the number of Shares  which may be issued under the
Plan or (b) modify the  requirements as to eligibility for  participation  under
the Plan. The  termination or  modification  or amendment of the Plan shall not,
without  the  consent  of a Grantee,  affect  his or her rights  under an Option
previously granted to him or her. With the consent of the Grantee, the Board may
amend outstanding Options in a manner not inconsistent with the Plan.


     16.  Miscellaneous


          A. It is  expressly  understood  that this Plan  grants  powers to the
Board but does not require their  exercise;  nor shall any person,  by reason of
the adoption of this Plan,  be deemed to be entitled to the grant of any Option;
nor shall any rights  begin to accrue  under the Plan  except as Options  may be
granted hereunder.

          B.  All  expenses  of the  Plan,  including  the  cost of  maintaining
records, shall be borne by Company.


     17.  Governing Law


          This  Plan  and  all  rights   hereunder  shall  be  governed  by  and
interpreted in accordance with the laws of the Commonwealth of Pennsylvania.
<PAGE>
                           CHESTER VALLEY BANCORP INC.

                       INCENTIVE STOCK OPTION CERTIFICATE

                               (Not Transferable)


THIS CERTIFIES THAT ___________________________ ("Optionee") has been granted an


                               INCENTIVE STOCK OPTION


to purchase  ___________  shares of the common stock of CHESTER VALLEY  BANCORP,
INC., a Pennsylvania corporation, at a price of $_________ per share, subject to
adjustment as provided in the CHESTER VALLEY BANCORP INC. 1997 Stock Option Plan
("Plan").  This option is granted  under and pursuant to the Plan and is subject
to the  conditions  and  limitations  set  forth  in the Plan as the same may be
amended  from  time to time.  All of the terms and  provisions  of the Plan,  as
amended from time to time,  are  incorporated  herein by  reference  and nothing
herein  contained  shall be deemed to vary or be given effect as  modifying  the
terms of the Plan.

SUBJECT TO THE FOREGOING, THIS OPTION MAY BE EXERCISED ONLY AS FOLLOWS:



     THIS OPTION SHALL EXPIRE AND BE VOID AND SHALL NOT BE EXERCISABLE AFTER THE
EXPIRATION OF __________ YEARS FROM THE DATE HEREOF AND MAY BE EXERCISED ONLY IN
THE MANNER PROVIDED IN THE PLAN.

     This option is not  transferable  except by will or the laws of descent and
distribution.

     IN WITNESS  WHEREOF,  CHESTER  VALLEY  BANCORP  INC.  has caused this Stock
Option Certificate to be issued as of _______________, 19__ (the date of grant).


ATTEST:   [Corporate Seal]                  CHESTER VALLEY BANCORP INC.



____________________________                ____________________________________