BRYN MAWR BANK CORP (Form: 10-Q, Received: 05/10/2007 15:41:12)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly Report Under Section 13 or 15 (d)

of the Securities and Exchange Act of 1934.

For Quarter ended March 31, 2007

Commission File Number 0-15261

Bryn Mawr Bank Corporation

(Exact name of registrant as specified in its charter)


Pennsylvania		23-2434506
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer identification No.)

801 Lancaster Avenue, Bryn Mawr, Pennsylvania		19010
(Address of principal executive offices)		(Zip Code)

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

Not Applicable

Former name, former address and fiscal year, if changed since last report.

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

Indicate by check whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

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

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

Indicate the number of shares outstanding of each of the issuer’s class of common stock, as of the latest practicable date.


Class		Outstanding at May 3, 2007
Common Stock, par value $1		8,541,280

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

FORM 10-Q

QUARTER ENDED March 31, 2007

Index


PART I -	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (unaudited)

	Consolidated Financial Statements	Page 1

	Notes to Consolidated Financial Statements	Page 5

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	Page 12

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risks	Page 27

ITEM 4.	Controls and Procedures	Page 27

PART II –	OTHER INFORMATION	Page 27

ITEM 1.	Legal Proceedings	Page 28

ITEM 1A.	Risk Factors	Page 28

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	Page 28

ITEM 3.	Defaults Upon Senior Securities	Page 28

ITEM 4.	Submission of Matters to Vote of Security Holders	Page 28

ITEM 5.	Other Information	Page 28

ITEM 6.	Exhibits	Page 29

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income

Unaudited


(dollars in thousands, except per share data)	Three Months Ended March 31
(dollars in thousands, except per share data)	2007		2006
Net interest income:
Interest income:
Interest and fees on loans	$	11,911	$	9,914
Interest on federal funds sold		34		66
Interest on interest bearing deposits with banks		6		5
Interest on investment securities		570		360

Total interest income		12,521		10,345
Interest expense:
Savings, NOW, and market rate accounts		998		821
Wholesale and time deposits		2,606		1,301
Borrowed funds		541		42

Total interest expense		4,145		2,164

Net interest income		8,376		8,181
Loan and lease loss provision		250		154

Net interest income after loan and lease loss provision		8,126		8,027

Non-interest income:
Fees for wealth management services		3,287		3,120
Service charges on deposit accounts		360		379
Loan servicing and other fees		337		363
Net gain on sale of loans		280		250
Net gain on sale of real estate		1,333		—
Other operating income		549		487

Total non-interest income		6,146		4,599

Non-interest expenses:
Salaries and wages		4,048		3,829
Employee benefits		1,221		1,318
Occupancy and bank premises		686		624
Furniture, fixtures, and equipment		507		482
Advertising		316		200
Amortization of mortgage servicing rights		92		86
Professional fees		401		297
Other operating expenses		1,164		1,009

Total non-interest expenses		8,435		7,845

Income before income taxes		5,837		4,781
Income taxes		1,861		1,645

Net income	$	3,976	$	3,136

Basic earnings per share	$	0.46	$	0.37
Diluted earnings per share	$	0.46	$	0.36
Dividends declared per share	$	0.12	$	0.11
Weighted-average basic shares outstanding		8,575,172		8,570,675
Dilutive potential common shares		121,519		109,837

Weighted-average dilutive shares outstanding		8,696,691		8,680,512

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

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

Unaudited


(dollars in thousands, except per share data)	March 31, 2007			December 31, 2006
Assets
Cash and due from banks	$	25,114		$	61,473
Interest bearing deposits with banks		407			532
Federal funds sold		7,885			—

Total cash and cash equivalents		33,406			62,005
Investment securities available for sale, at fair value (amortized cost of $46,046 and $48,632 as of March 31, 2007 and December 31, 2006, respectively)		45,772			48,232
Loans held for sale		7,448			3,726
Portfolio loans and leases		691,549			681,291
Less: Allowance for loan and lease losses		(8,366	)		(8,122	)

Net portfolio loans and leases		683,183			673,169

Premises and equipment, net		16,477			16,571
Accrued interest receivable		3,985			4,232
Deferred income taxes		3,114			2,946
Mortgage servicing rights		2,847			2,883
Other assets		14,690			12,896

Total assets	$	810,922		$	826,660

Liabilities
Deposits:
Noninterest-bearing demand	$	152,926		$	198,546
Savings, NOW and market rate accounts		279,117			295,521
Time deposits		166,967			200,446
Wholesale deposits		65,270			19,976

Total deposits		664,280			714,489

Borrowed funds		45,000			15,000
Accrued interest payable		4,549			4,346
Other liabilities		11,512			10,442

Total liabilities		725,341			744,277

Shareholders’ equity
Common stock, par value $1; authorized 25,000,000 shares; issued 11,419,432 and 11,373,182 shares as of March 31, 2007 and December 31, 2006 respectively and outstanding of 8,582,172 and 8,562,209 shares as of March 31, 2007 and December 31, 2006, respectively		11,419			11,373
Paid-in capital in excess of par value		11,375			10,598
Accumulated other comprehensive income, net of taxes		(4,404	)		(4,450	)
Retained earnings		95,052			92,106

		113,442			109,627

Less: Common stock in treasury at cost — 2,837,260, and 2,810,973 shares as of March 31, 2007 and December 31, 2006 respectively		(27,861	)		(27,244	)

Total shareholders’ equity		85,581			82,383

Total liabilities and shareholders’ equity	$	810,922		$	826,660

Book value per share	$	9.97		$	9.62

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

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Unaudited


(dollars in thousands)	Three Months Ended March 31
(dollars in thousands)	2007			2006
Operating activities:
Net income	$	3,976		$	3,136
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Provision for loan and lease losses		250			154
Provision for depreciation and amortization		388			367
Loans originated for resale		(23,248	)		(15,597	)
Proceeds from loans sold		19,806			14,551
Gain on sale of loans		(280	)		(250	)
Gain on sale of real estate		(1,333	)		—
Provision for deferred income taxes (benefit)		(187	)		(580	)
Change in income tax payable/receivable		1,968			1,945
Change in accrued interest receivable		247			(35	)
Change in accrued interest payable		203			285
Change in mortgage servicing rights, net		36			2
Other, net		(2,849	)		(2,604	)

Net cash (used) provided by operating activities		(1,023	)		1,374

Investing activities:
Purchases of investment securities		(421	)		(8,810	)
Proceeds from maturity of investment securities and mortgage-backed securities pay downs		3,070			—
Proceeds from calls of investment securities		—			200
Proceeds from sale of real estate		1,850			—
Net portfolio loan and lease (originations) repayments		(10,264	)		(11,398	)
Net change in premises and equipment		(779	)		(371	)

Net cash used by investing activities		(6,544	)		(20,379	)

Financing activities:
Change in demand, NOW, savings and market rate deposit accounts		(62,024	)		(26,256	)
Change in time deposits		(33,479	)		(6,911	)
Change in wholesale deposits		45,294			5,000
Dividends paid		(1,029	)		(944	)
Change in borrowed funds		30,000			8,000
Purchase of treasury stock		(617	)		(889	)
Tax benefit from exercise of stock options		146			158
Proceeds from exercise of stock options		677			845

Net cash used by financing activities		(21,032	)		(20,997	)

Change in cash and cash equivalents		(28,599	)		(40,002	)
Cash and cash equivalents at beginning of period		62,005			66,642

Cash and cash equivalents at end of period	$	33,406		$	26,640

Supplemental cash flow information:
Cash paid during the year for:
Income taxes paid	$	39		$	20
Interest paid	$	3,942		$	1,879

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

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Unaudited


(dollars in thousands)	Three Months Ended March 31,
(dollars in thousands)	2007			2006
Net income	$	3,976		$	3,136
Other comprehensive income:
Unrealized investment gains (losses), net of tax expense (benefit) $44 and ($81), respectively		83			(151	)
Change in unfunded pension liability, net of tax (benefit) expense of $19 and $0, respectively		(37	)		—

Total comprehensive income	$	4,022		$	2,985

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

BRYN MAWR BANK CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

March 31, 2007 and 2006

(Unaudited)

1. Basis of Presentation:

The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. In the opinion of Bryn Mawr Bank Corporation’s (the “Corporation”) Management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the consolidated financial position and the results of operations for the interim period presented have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Corporation’s 2006 Annual Report on Form 10-K. The Corporation’s consolidated financial condition and results of operations consist almost entirely of The Bryn Mawr Trust Company’s (the “Bank”) financial condition and results of operations.

The results of operations for the three month period ended March 31, 2007 are not necessarily indicative of the results to be expected for the full year.

Statements of the Financial Accounting Standards Board are noted in these statements by the abbreviation “FAS”.

2. Earnings Per Common Share:

The Corporation follows the provisions of FAS No. 128, “Earnings Per Share” (“FAS 128”). Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution, computed pursuant to the treasury stock method, that could occur if stock options were exercised and converted into common stock. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. All weighted average shares, actual shares and per share information in the financial statements have been adjusted retroactively for the effect of stock dividends and splits.


(dollars in thousands, except per share data)	Three Months Ended March 31,
(dollars in thousands, except per share data)	2007		2006
Numerator:
Net income available to common shareholders	$	3,976	$	3,136

Denominator for basic earnings per share – weighted average basic shares outstanding		8,575,172		8,570,675
Effect of dilutive potential common shares		121,519		109,837

Denominator for diluted earnings per share —weighted average dilutive shares outstanding		8,696,691		8,680,512

Basic earnings per share	$	0.46	$	0.37
Diluted earnings per share	$	0.46	$	0.36

Antidulitive shares excluded from computation of average dilutive earnings per share		8,444		3,250

3. Allowance for Loan and Lease Losses

The allowance for loan and lease losses is established through a provision for loan and lease losses charged as an expense. Loans are charged against the allowance for loan and lease losses when Management believes that such amounts are uncollectible. The allowance for loan and lease losses is maintained at a level that Management believes is sufficient to absorb estimated probable credit losses. Note 1, – Summary of Significant Accounting Policies – Allowance for Loan and lease losses, included in the Corporation’s 2006 Annual Report on Form 10K contains additional information relative to Management’s determination of the adequacy of the allowance for loan and lease losses.

4. Stock Based Compensation

The Corporation adopted FAS No. 123R “Share-Based Payments” (“FAS 123R”) effective January 1, 2006. FAS 123R establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock based compensation cost is measured at the grant date, based on the fair value of the award and is recognized as an expense over the vesting period.

The Corporation previously applied Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations and provided the required pro forma disclosures of FAS No. 123, “Accounting for Stock-Based Compensation” (“FAS 123”).

Generally, the approach in FAS 123R to stock-based payment accounting is similar to FAS 123. However, FAS 123R requires all share-based payments, including grants of stock options, be recognized as compensation cost in the statement of income at their fair value. Pro forma disclosure for periods beginning after January 1, 2006 is not an alternative under FAS 123R.

The Corporation elected to adopt FAS 123R using the modified prospective application method in which compensation cost is recognized beginning with the effective date (a) based upon the requirements of FAS 123R for all share-based payments granted after the effective date, and (b) based on the requirements of FAS 123 for all awards granted prior to the effective date of FAS 123R that remain unvested on the effective date.

The Corporation’s stock-based compensation expense for the three months ended March 31, 2007 and 2006 was $7 thousand and $39 thousand, respectively. This expense had no material impact on earnings or diluted earnings per share in either period.

The Corporation’s Stock Option Plan (“SOP”) permits the issuance of options to key employees and Directors to purchase shares of the Corporation’s common stock. A total of 431,143 shares were authorized in 2004 by the Board of Directors. As of March 31, 2007 there are 10,189 shares available for future grant. The option price is set at the closing price for the stock on the day preceeding issuance of grants as determined by the Corporation’s Board of Directors. Options granted may either be “incentive stock options” within the meaning of the Internal Revenue Code, or non-qualified options. The stock options are exercisable over a period determined by the Board of Directors; however, the option period will not be longer than ten years from the date of the grant. The vesting period of option grants issued is also determined by the Corporation’s Board of Directors. During 2007 all grants were issued with a three-year vesting period. The Corporation’s practice is to issue option related shares from authorized but unissued shares.

On April 25, 2007 the Shareholders approved the Corporation’s “2007 Long-Term Incentive Plan” (“LTIP”). The purpose of the LTIP is to promote the success and enhance the value of the Corporation by providing long term incentives to directors and employees of the Corporation. Details of the LTIP are documented in detail in the Corporation’s 2007 Proxy Statement.

The following table provides information about options outstanding for the three-months ended March 31, 2007:


	Shares		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Options outstanding December 31, 2006	789,900		$	17.66	$	3.81
Granted	4,000			23.77		6.82
Forfeited	—			—		—
Expired	—			—		—
Exercised	(46,250	)	$	14.64	$	3.02

Options outstanding March 31, 2007	747,650		$	17.88	$	3.88

The following table provides information about unvested options for the three-months ended March 31, 2007:


	Shares	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Unvested options December 31, 2006	11,375	$	22.89	$	6.44
Granted	4,000		23.77		6.82
Vested	—		—		—
Forfeited	—		—		—

Unvested options March 31, 2007	15,375	$	23.12	$	6.54

The total not-yet-recognized compensation expense of unvested stock options is $88,254. This expense will be recognized over a weighted average period of 31 months.

Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised during the quarters ended March 31, 2007 and 2006 were as follows:


	2007		2006
Proceeds from strike price of value of options exercised	$	677,023	$	845,406
Related tax benefit recognized		145,638		158,191

Proceeds of options exercised	$	822,661	$	1,003,597

Intrinsic value of options exercised	$	416,110	$	451,968

The following table provides information about options outstanding and exercisable options at March 31, 2007:


	Outstanding		Exercisable
Number		747,650		732,275
Weighted average exercise price	$	17.88	$	17.77
Aggregate intrinsic value	$	3,945,632	$	3,939,553
Weighted average contractual term (in years)		6.3		6.3

For the three months ended March 31, 2007 the fair value of options granted was determined at the date of grant using the Black-Scholes Option Pricing Model and the following assumptions:


Expected average risk-free interest rate	5	%
Expected average life (in years)	7
Expected volatility	23.90	%
Expected dividend yield	2.02	%

5. Pension and Other Post-Retirement Benefit Plans

The Corporation sponsors two pension plans, the qualified defined benefit pension plan (“QDBP”) and the non-qualified defined benefit pension plan (“SERP”), and a post-retirement benefit plan (“PRBP”).

The following table provides a reconciliation of the components of the net periodic benefits cost for the three months ended March 31, 2007 and 2006:


	For Three Months Ended March 31
	Non-Qualified Defined Benefit Pension Plan				Qualified Defined Benefit Pension Plan						Post- Retirement Benefit Plan
	2007		2006		2007			2006			2007			2006
Service cost	$	10	$	9	$	300		$	314		$	4		$	3
Interest cost		28		25		425			409			28			35
Expected return on plan assets		—		—		(575	)		(557	)		—			—
Amortization of transition obligation		—		—		—			—			6			6
Amortization of prior service costs		11		12		25			20			(34	)		(34	)
Amortization of net (gain) loss		—		—		100			141			33			51

Net periodic benefit cost	$	49	$	46	$	275		$	327		$	37		$	61

As stated in the Corporation’s 2006 Annual Report, the Corporation does not have any minimum funding requirement for its QDBP for 2007. The Corporation contributed $33 thousand during the first quarter of 2007 and is expected to contribute approximately $132 thousand to the SERP plan for 2007. Additionally, the Corporation contributed $49 thousand to the PRBP in the first quarter of 2007 and expects to contribute an additional $150 thousand in 2007. As of March 31, 2007 no contributions have been made to QDBP for 2007.

6. Segment Information

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

The Corporation has identified four “segments” as defined by FAS 131 as follows: Banking, Wealth Management, Mortgage Banking and All Other. Footnote 24 – Segment Information, in the Notes to the Consolidated Financial Statements in the Corporation’s 2006 Annual Report on Form 10K provides additional descriptions of the identified segments.

Segment information for the quarter ended March 31, 2007 and 2006 is as follows:


(Dollars in thousands)	2007
	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Net interest income	$	8,338		$	—		$	36		$	2		$	8,376
Less: Loan loss provision		250			—			—			—			250

Net interest income after loan and lease loss provision		8,088			—			36			2			8,126
Other income:
Fees for wealth management services		—			3,287			—			—			3,287
Service charges on deposit accounts		360			—						—			360
Loan servicing and other fees		73			—			264			—			337
Net gain on sale of loans		—			—			280			—			280
Net gain on sale of real estate		1,333			—			—			—			1,333
Other income		481			—			23			45			549

Total other income		2,247			3,287			567			45			6,146
Other expenses:
Salaries and wages		2,681			1,125			182			60			4,048
Employee benefits		971			209			30			11			1,221
Occupancy and bank premises		1,057			137			38			(39	)		1,193
Other operating expense		1,516			268			161			28			1,973

Total other expense		6,225			1,739			411			60			8,435

Segment profit (loss) before income taxes		4,110			1,548			192			(13	)		5,837
Intersegment pretax revenues (expenses) *		125			45			10			(180	)		—

Segment pretax profit (loss)	$	4,235		$	1,593		$	202		$	(193	)	$	5,837

% of segment pretax profit (loss)		72.6	%		27.3	%		3.5	%		(3.3	)%		100	%


	2006**
	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Net interest income	$	8,151		$	—		$	20		$	10		$	8,181
Less: Loan loss provision		154			—			—			—			154

Net interest income after loan loss provision		7,997			—			20			10			8,027
Other income:
Fees for wealth management services		—			3,120			—			—			3,120
Service charges on deposit accounts		379			—			—			—			379
Loan servicing and other fees		64			—			299			—			363
Net gain on sale of loans		—			—			250			—			250
Net gain on sale of real estate		—			—						—			—
Other operating income		407			—			15			65			487

Total other income		850			3,120			564			65			4,599
Other expenses:
Salaries and wages		2,530			1,062			147			90			3,829
Employee benefits		1,061			215			29			13			1,318
Occupancy and bank premises		929			159			49			(31	)		1,106
Other operating expense		1,295			258			153			(114	)		1,592

Total other expense		5,815			1,694			378			(42	)		7,845

Segment profit (loss) before income taxes		3,032			1,426			206			117			4,781
Intersegment pretax revenues (expenses) *		(20	)		45			—			(25	)		—

Segment pretax profit (loss)	$	3,012		$	1,471		$	206		$	92		$	4,781

% of segment pretax profit (loss)		63.0	%		30.8	%		4.3	%		(1.9	)%		100.0	%

*	Intersegment revenues consist of rental payments, insurance commissions and a management fee.

**	Reclassified for comparative purposes.

Other segment information for the quarter ended March 31, 2007 and 2006 is as follows:


(dollars in millions)	2007		2006
Wealth Management Segment:
Wealth Assets Under Management and Administration	$	2,522.4	$	2,262.1
Mortgage Banking Segment:
Mortgage Loans Serviced for Others	$	377.5	$	409.4
Mortgage Servicing Rights	$	2.8	$	3.0

Banking Segment: Substantially all of the assets of the Corporation and its’ subsidiaries are related to the Banking Segment and are reflected on the consolidated balance sheet in these financial statements.

7. Mortgage Servicing Rights

The following summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three months ended March 31, 2007 and 2006:


(dollars in thousands)	2007			2006
Balance, January 1	$	2,883		$	2,982
Additions		56			84
Amortization		(84	)		(86	)
Impairment		(8	)		—

Balance, March 31	$	2,847		$	2,980

Fair Value	$	4,165		$	4,828

There was $8 thousand of temporary impairment on MSRs for the three months ended March 31, 2007. For the three months ended March 31, 2006 there was no impairment. The temporary impairment is concentrated in higher rate mortgages.

At March 31, 2007, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:


(dollars in thousands)	March 31, 2007
Fair value amount of MSRs	$	4,165
Weighted average life (in years)		6.6
Prepayment speeds (constant prepayment rate)*:		11.8
Impact on fair value:
10% adverse change	$	(165	)
20% adverse change	$	(334	)
Discount rate:
Impact on fair value:		10.00	%
10% adverse change	$	(108	)
20% adverse change	$	(223	)

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

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

8. Impaired Loans and Leases

The following summarizes the Corporation’s impaired loans and leases for the periods ended:


	For The Three Months Ended				For The Twelve Months Ended
(dollars in thousands)	March 31, 2007		March 31, 2006		December 31, 2006
Period end balance	$	371	$	773	$	704
Average period to date balance		270		778		801
Loans and leases with specific loss allowances		—		—		—
Charge offs and recoveries		6		—		114
Loss allowances reserved		—		—		—
Period to date income recognized	$	—	$	22	$	38

9. Capital

The Corporation declared and paid a regular dividend of $0.12 per share, during the first quarter of 2007. This payment totaled $1,029 thousand.

During the first quarter of 2007, the Corporation repurchased 26,287 shares of its common stock for $617,000 at an average purchase price of $23.47 per share.

10. New Accounting Pronouncements

FIN 48

The Corporation adopted the provisions of FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48) on January 1, 2007. As required by FIN 48, which clarifies FAS 109, “Accounting for Income Taxes,” the Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would more likely than not sustain the position following an examination. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon settlement with the relevant tax authority. At the adoption date, the Corporation applied for these criteria to all tax positions for which the statute of limitations remained open. There were no adjustments to retained earnings for unrecognized tax benefits as a result of the implementation of FIN 48.

The Corporation is subject to income taxes in the U.S. federal jurisdiction, and in multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by tax authorities for the years before 2003.

The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. At March 31, 2007, the Corporation has no amounts recorded for uncertain tax positions, interest or penalties in the accompanying consolidated financial statements.

FAS 155

In February 2006, the FASB issued FAS No. 155 – “Accounting for Certain Hybrid Financial Instruments” (“FAS 155”). Among other things, this Statement permits fair value re-measurement for certain hybrid financial instruments and requires that entities evaluate whether beneficial interests contain embedded derivatives or are derivatives in their entirety.

This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Corporation adopted FAS 155 effective January 1, 2007. The Corporation has determined that the adoption of FAS 155 did not have a material impact during the first quarter of 2007 on its consolidated financial statements.

FAS 156

In March 2006, the FASB issued FAS No. 156, “Accounting for Servicing of Financial Assets” (“FAS 156”). FAS 156 requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset. FAS 158 also requires fair value measurement of a servicing asset or liability upon initial recognition and permits different methods to subsequently measure each class of separately recognized servicing assets and servicing

liabilities. This Statement additionally permits under certain circumstances a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115.

This Statement becomes effective at the beginning of its first fiscal year that begins after September 15, 2006. The Corporation adopted FAS 156 effective January 1, 2007. The Corporation has determined that the adoption of FAS 156 did not have a material impact during the first quarter of 2007 on its consolidated financial statements.

FAS 157

In September 2006, the FASB issued FAS No. 157 – “Fair Value Measurements” (“FAS 157”). FAS 157 establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The Statement applies only to fair-value measurements that are already required or permitted by other accounting standards.

FAS 157 is effective for fair-value measures already required or permitted by other standards for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Corporation did not early adopt FAS 157 and has not yet determined whether this Statement will have a material impact on its consolidated financial statements upon adoption.

FAS 159

In February, 2007 the FASB issued FAS No. 159– “The Fair Value Option for Financial Assets and Liabilities – Including an Amendment of FASB Statement No. 115” (“FAS 159”). FAS 159 permits entities to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings without having to apply complex hedge accounting provisions.

FAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption was available subject to certain conditions. The Corporation did not early adopt FAS 159, and has not yet determined whether this statement will have a material impact on its consolidated financial statements upon adoption.

11. Subsequent Event

On May 1, 2007 a significant Wealth Division customer announced its intention to be acquired by a financial institution. The acquiring financial institution provides wealth management services similar to that of the Corporation’s Wealth Management Division. The press release announcing this transaction anticipates completion during the fourth quarter of 2007.

Revenues from this customer for the three months ended March 31, 2007 and 2006 were $177 thousand and $103 thousand, respectively. Wealth Division revenue in 2006 included $403 thousand from this customer. Wealth Division assets under management and administration, not included in the consolidated balance sheet, associated with this customer were $413 million and $412 million as of March 31, 2007 and December 31, 2006, respectively.

ITEM 2 Management’s Discussion and Analysis of Results of Operation and Financial Condition

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

•

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

•

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

•

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

•

changes in accounting requirements or interpretations;

•

changes in laws, regulatory guidance or legislation in income and non-income taxes;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

the accuracy of assumptions underlying the establishment of reserves for loan and lease losses and estimates in the value of collateral, and various financial assets and liabilities;

•

technological changes being more difficult or expensive than anticipated; and

•

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

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

Brief History of the Corporation

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

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

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

Results of Operations

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

Critical Accounting Policies, Judgments and Estimates

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

The allowance for loan and lease losses involves a higher degree of judgment and complexity than other significant accounting policies. The allowance for loan and lease losses is calculated with the objective of maintaining a reserve level believed by Management to be sufficient to absorb estimated probable credit losses. Management’s determination of the adequacy of the allowance is based on periodic evaluations of the loan and lease portfolio and other relevant factors. However, this evaluation is inherently subjective as it requires material estimates, including, among others, expected default probabilities, expected commitment usage, the amounts and timing of expected future cash flows on impaired loans and leases, value of collateral, estimated losses on consumer loans and residential mortgages and general amounts for historical loss experience. The process also considers economic conditions, international events, and inherent risks in the loan and lease portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from Management estimates, additional provisions for loan and lease losses may be required that would adversely impact earnings in future periods.

Other significant accounting policies are presented in Note 1 to the Corporation’s audited consolidated financial statements filed as part of the 2006 Annual Report on Form 10-K. There have been no material changes in assumptions or estimation techniques utilized as compared to prior periods.

Executive Overview

The Corporation reported first quarter 2007 diluted earnings per share of $0.46, an increase of $0.10 or 27.8% compared to $0.36 in the same period of 2006. Net income for the first quarter of 2007 was $3.976 million, an increase of 26.8% or $840,000, compared to $3.136 million in last year’s first quarter. The primary factor contributing to the increase in earnings for the first quarter of 2007 compared to the same period last year was a $0.10 per diluted share or an $866,000 after tax gain on the sale of real estate that previously served as the Bank’s Wynnewood branch location. Excluding the real estate gain, first quarter 2007 diluted earnings per share and net income were $0.36 per share and $3.110 million, respectively, essentially unchanged from first quarter 2006 results but in line with management’s expected internal projections.

Having anticipated a large one-time gain on the sale of real estate during this first quarter, the Corporation began a number of initiatives in the latter part of 2006. All of these initiatives are expected to be dilutive to earnings in 2007. They include the formation of an equipment leasing company, the start-up of a loan production office in West Chester, the opening of our new Ardmore Office and the re-tooling of our Wealth Services area. In addition, on May 1, 2007, the Bank is starting a Private Banking Group to better meet the needs of the Bank’s most affluent clients. These initiatives are expected to be accretive to earnings in 2008.

Additionally, first quarter 2007 results reflect the continued unfavorable interest rate environment as net interest income grew only $195,000 or 2.4% from the first quarter of 2006 and actually decreased $49,000 or 0.6% from the fourth quarter of 2006.

Return on average equity (ROE) and return on average assets (ROA) for the quarter ended March 31, 2007 were 19.36% (15.15% excluding the real estate gain) and 2.03% (1.59% excluding the real estate gain), respectively. ROE was 16.27% and ROA was 1.83% for the same period last year. The tax equivalent net interest margin for the first quarter of 2007 was 4.65% compared with 5.22% in the first quarter of 2006. This decrease reflects the Corporation’s need to fund earning asset growth in 2007 with wholesale funding at a rate of 5.42% and a continued change in deposit mix which is discussed later in this document. The net interest margin of 4.65% for the first quarter of 2007 is unchanged from the fourth quarter of 2006, reflecting higher earning asset yields provided by the leasing company, offset by higher funding costs.

Total portfolio loans and leases at March 31, 2007 were $691.5 million, an increase of $84.9 million or 14.0% from $606.6 million at March 31, 2006 and an increase of $10.2 million or 6.0% (annualized) from year end balances of $681.3 million. Leases at March 31, 2007 of $16.9 million were 2.4% of total portfolio loans and leases. The lease portfolio is presently growing at a rate of over $3 million per month. Credit quality on the entire loan and lease portfolio continues to be very strong as nonperforming loans and leases of $417,000 represents less than 0.07% of total loans and leases. The Corporation expects lease charge-offs to increase as the lease portfolio matures and grows over the next two years. However, lease charge-offs are expected to be below industry norms as the Corporation has an experienced underwriting team, the lease portfolio is geographically diverse, and the average customer exposure is less than $25,000. At March 31, 2007, the allowance for loan and lease losses of $8.366 million represents 1.21% of portfolio loans and leases compared with 1.19% at December 31, 2006.

Total liabilities declined $18.9 million from $744.2 million at December 31, 2006 to $725.3 million at March 31, 2007. This decline was driven by a decrease in deposits of $50.2 million or 7.0% over the past three months to $664.3 million at March 31, 2007 from $714.5 million at December 31, 2006 partially offset by an increase in borrowed funds of $30 million. The decrease in deposits is primarily due to the competitive environment for retaining and gathering deposits and the larger deposit inflows of approximately $35.0 million that temporarily boosted year-end deposits. The decline is concentrated in savings, NOW and market rate accounts which decreased $16.4 million or 5.5% to $279.1 million from $295.5 million at December 31, 2006.

The Corporation’s plans to increase core funding include the opening of a West Chester Branch location in 2008, the refurbishment of the Wayne branch location in the Fall of 2007 and the introduction of “Easy Banking”, a remote capture product that allows high volume commercial customers to electronically transmit their check deposits from their office. Once implemented, these plans should have a positive impact on deposit growth over the next few years.

Revenues from this customer for the three months ended March 31, 2007 and 2006 were $177 thousand and $103 thousand, respectively. Wealth Division revenue in 2006 includes $403 thousand from this customer. Wealth Division assets under management and administration, not included in the consolidated balance sheet, associated with this customer were $413 million and $412 million as of March 31, 2007 and December 31, 2006, respectively.

Key Performance Ratios

Key financial performance ratios for the three months ended March 31, 2007 and 2006 are shown in the table below:


	2007*			Three Months Ended March 31,
	2007*			2007			2006
Return on Average Equity (ROE)		15.15	%		19.36	%		16.27	%
Return on Average Assets (ROA)		1.59	%		2.03	%		1.83	%
Efficiency Ratio		63.96	%		58.08	%		61.39	%
Net Interest Margin		4.65	%		4.65	%		5.22	%
Diluted Earnings Per Share	$	0.36		$	0.46		$	0.36
Dividend Per Share	$	0.12		$	0.12		$	0.11

*	The ratios are also presented for the three months ended March 31, 2007 excluding the gain on sale of real estate.


	March 31 2007			December 31 2006			March 31 2006
Book Value Per Share	$	9.97		$	9.62		$	9.29
Allowance for Loan and lease losses as a Percentage of Loans		1.21	%		1.19	%		1.25	%

Reconciliation of Non-GAAP Information for the three months ended March 31, 2007

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

(dollars in thousands, except per share data)


	Net Income					Change					Non-interest Income						Change
	2007			2006		Dollars			Percentage		2007			2006			Dollars			Percentage
As reported (GAAP)	$	3,976		$	3,136	$	840		26.8	%	$	6,146		$	4,599		$	1,547		33.6	%
Non-GAAP adjustment ¹		(866	)		—		(866	)	(27.6	)%		(1,333	)		—			(1,333	)	(29.0	)%
Adjusted (Non-GAAP)	$	3,110		$	3,136	$	(26	)	(0.8	)%	$	4,813		$	4,599		$	214		4.7	%

	Diluted Earnings Per Share					Change					Return on Equity						Return on Assets
	2007			2006		Dollars			Percentage		2007			2006			2007			2006
As reported (GAAP)	$	0.46		$	0.36	$	0.10		27.8	%		19.36	%		16.27	%		2.03	%	1.83	%
Non-GAAP adjustment ¹		(0.10	)		—		(0.10	)	(27.8	)%		(4.21	)%		—			(0.44	)%	—
Adjusted (Non-GAAP)	$	0.36		$	0.36		—		(0.0	)%		15.15	%		16.27	%		1.59	%	1.83	%


	Efficiency Ratio
	2007		2006
As reported (GAAP)	58.08	%	61.39	%
Non-GAAP adjustment ¹	5.88	%	—
Adjusted (Non-GAAP)	63.96	%	61.39	%

¹	The non-GAAP adjustment in 2007 represents the reduction of the effect of the after tax gain on sale of real estate of $866,000. The gain was calculated as the excess of the net sale proceeds over net book value, less income taxes.

The table below reconciles the segment pretax profit to comparable data that excludes the gain on sale of real estate. Management believes that the presentation provides useful supplemental information essential to the proper understanding of the operation results of the Corporation’s segments. These disclosures should not be viewed as or substituted for operating results determined in accordance with GAAP.


(Dollars in thousands)	2007
	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Segment pretax profit (loss) (GAAP)	$	4,235		$	1,593		$	202		$	(193	)	$	5,837

% of segment pretax profit (loss) (GAAP)		72.6	%		27.3	%		3.5	%		(3.3	)%		100	%

Segment pretax profit (loss) - excluding gain on sale of real estate (Non-GAAP)	$	2,902		$	1,593		$	202		$	(193	)	$	4,504

% of segment pretax profit (loss) – excluding gain on sale of real estate (Non-GAAP)		64.4	%		35.4	%		4.5	%		(4.3	)%		100	%


	2006
	Banking			Wealth Management			Mortgage Banking			All Other			Consolidated
Segment pretax profit (loss) (GAAP)	$	3,012		$	1,471		$	206		$	92		$	4,781

% of segment pretax profit (loss) (GAAP)		63.0	%		30.8	%		4.3	%		(1.9	)%		100.0	%

Components of Net Income

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

NET INTEREST INCOME ON A TAX EQUIVALENT BASIS

The tax equivalent net interest income for the three months ended March 31, 2007 of $8.475 million was $215 thousand or 2.6% higher than the net interest income for the same period in 2006 of $8.260 million. The analyses below indicate that increased loan volume was the primary driver of the increase in net interest income. However, the growth in interest income was partially offset by an increase in interest expense as the deposit mix continues to shift to higher rate products and the Corporation is using more wholesale certificates of deposit as a source of funding. Average earning assets increased $96.4 million or 15.0% in the first quarter of 2007 compared to the same period in 2006.

Average loans grew $90.0 million or 15% while investments increased $10.0 million or 26.9% over 2006. The average earning asset yield during the first quarter of 2007 of 6.93% was 35 basis points higher than the 6.58% during the same period in 2006 as rates and volume increased. The rate paid on average interest bearing liabilities of 3.08% in 2007 was 116 basis points higher than the 1.92% in 2006 due to the payment of higher rates on interest bearing deposits and the increase in wholesale CD’s. Average time deposits increased 30.0% in the first quarter of 2007 compared to the same period in 2006, while savings, NOW and money market accounts decreased 7.7% during the same time period.

The rate volume analysis in the table below analyzes dollar changes in the components (interest income and interest expense) of tax equivalent net interest income for the quarter ended March 31, 2007 compared to March 31, 2006 broken out by rate and volume.

Rate /Volume Analysis on a tax equivalent basis


(in thousands) Increase/(Decrease)	Three Months Ended March 31, 2007 Compared to 2006
(in thousands) Increase/(Decrease)	Volume			Rate			Total
Interest Income:
Interest-bearing deposits with other banks	$	1		$	—		$	1
Federal funds sold		(38	)		6			(32	)
Investment securities available for sale		95			126			221
Loans		1,511			495			2,006

Total interest income		1,569			627			2,196

Interest expense:
Savings, NOW and market rate accounts		(64	)		241			177
Wholesale deposits		422			—			422
Time deposits		388			495			883
Borrowed funds		436			63			499

Total interest expense		1,182			799			1,981

Interest differential	$	387		$	(172	)	$	215

Analyses of Interest Rates and Interest Differential

The table below presents the major asset and liability categories on an average daily basis for the periods presented, along with interest income and expense and key rates and yields.


	For the Three Months ended March 31,
	2007							2006
(dollars in thousands)	Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid		Average Balance			Interest Income/ Expense		Average Rates Earned/ Paid
Assets:
Interest-bearing deposits with other banks	$	486		$	6	5.01	%	$	439		$	5	4.62	%
Federal funds sold		2,597			34	5.31	%		6,161			66	4.34	%
Investment securities available for sale:
Taxable		42,023			529	5.11	%		32,053			306	3.87	%
Tax-exempt		5,006			58	4.70	%		5,014			60	4.85	%

Total investment securities		47,029			587	5.06	%		37,069			366	4.00	%

Loans and leases ^{(1) (2)}		688,616			11,993	7.06	%		598,663			9,987	6.77	%

Total interest earning assets		738,728			12,620	6.93	%		642,332			10,424	6.58	%
Cash and due from banks		24,766							24,332
Allowance for loan and lease losses		(8,254	)						(7,524	)
Other assets		38,297							35,819

Total assets	$	793,537						$	694,959

Liabilities:
Savings, NOW and market rate accounts	$	281,373		$	998	1.44	%	$	304,942		$	821	1.09	%
Wholesale deposits		31,573			422	5.42	%		—			—	—
Time deposits		191,838			2,184	4.62	%		147,610			1,301	3.57	%

Total interest-bearing deposits		504,784			3,604	2.90	%		452,552			2,122	1.90	%
Borrowed funds		40,363			541	5.44	%		3,544			42	4.81	%

Total interest-bearing liabilities		545,147			4,145	3.08	%		456,096			2,164	1.92	%
Noninterest-bearing demand deposits		149,420							147,274
Other liabilities		15,704							13,419

Total noninterest-bearing liabilities		165,124							160,693

Total liabilities		710,271							616,789
Shareholders’ equity		83,266							78,170

Total liabilities and shareholders’ equity	$	793,537						$	694,959

Net interest spread						3.85	%						4.66	%
Effect of noninterest-bearing sources						.80	%						0.56	%

Net interest income/ margin on earning assets				$	8,475	4.65	%				$	8,260	5.22	%

Tax equivalent adjustment				$	99	0.05	%				$	79	0.05	%

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

⁽²⁾	Loans include portfolio loans and loans and leases held for sale.

Tax Equivalent Net Interest Margin

The Corporation’s net interest margin decreased 57 basis points to 4.65% in the first quarter of 2007 from 5.22% in the same period last year. The yield on earning assets increased due to an increase in market rates and the impact of higher yielding leases. Conversely, the cost of interest bearing deposits increased more than the yield on earning assets, a result of the increasing rate environment and the need to remain competitive with pricing in order to be successful in deposit retention and gathering. The impact of the increasing cost of deposits for the first quarter of 2007 was offset by higher asset yields when compared to the fourth quarter of 2006, resulting in no change in the net interest margin. The net interest margin and related components for the past five linked quarters are as follows:


Year	Quarter	Earning Asset Yield		Interest Bearing Liability Cost		Net Interest Spread		Effect of Non-Interest Bearing Sources		Net Interest Margin
2007	1 ^st	6.93	%	3.08	%	3.85	%	0.80	%	4.65	%
2006	4 ^th	6.85	%	2.99	%	3.86	%	0.79	%	4.65	%
2006	3 ^rd	6.82	%	2.80	%	4.02	%	0.76	%	4.78	%
2006	2 ^nd	6.72	%	2.35	%	4.37	%	0.67	%	5.04	%
2006	1 ^st	6.58	%	1.92	%	4.66	%	0.56	%	5.22	%

Interest Rate Sensitivity

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

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

The following table demonstrates the annualized result of an interest rate simulation and the expected effect that a parallel interest rate shift in the yield curve and subjective adjustments in deposit pricing might have on the Corporation’s projected net interest income over the next 12 months. The changes to net interest income shown below are in compliance with the Corporation’s policy guidelines.

Summary of Interest Rate Simulation


(dollars in thousands)	March 31, 2007
(dollars in thousands)	Change In Net Interest Income Over Next 12 Months
Change in Interest Rates
+200 basis points	$	756		2.00	%
+100 basis points	$	436		1.15	%
-100 basis points	$	(459	)	(1.21	)%
-200 basis points	$	(928	)	(2.46	)%

The interest rate simulation above indicates that the Corporation’s balance sheet as of March 31, 2007 is asset sensitive meaning that an increase in interest rates should increase net interest income and a decline in interest rates will cause a decline in net interest income over the next 12 months. The asset sensitivity position has been reduced over the past year with the addition of fixed rate commercial loans, residential mortgages and mortgage-backed securities to the asset mix. Additionally, the Corporation purchased a $25 million three-year interest rate floor in April, 2006 to mitigate the impact on earnings of declining rates over the next three years.

GAP Report

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

The following table presents the Corporation’s interest rate sensitivity position or GAP Analysis as of March 31, 2007:


(dollars in thousands)	0 to 90 Days			90 to 365 Days			1-5 Years			Over 5 Years			Non-Rate Sensitive		Total
Assets:
Interest-bearing deposits with banks	$	407		$	—		$	—		$	—		$	—	$	407
Federal funds sold		7,885			—			—			—			—		7,885
Investment securities		6,761			9,092			19,492			10,427			—		45,772
Loans and leases ⁽¹⁾		271,085			61,067			270,069			96,776			—		698,997
Allowance		(299	)		(896	)		(4,781	)		(2,390	)		—		(8,366	)
Cash and due from banks		—			—			—			—			25,114		25,114
Other assets		—			—			136			400			40,577		41,113

Total assets	$	285,839		$	69,263		$	284,916		$	105,213		$	65,691	$	810,922

Liabilities and shareholders’ equity:
Non-interest-bearing demand	$	31,686		$	19,143		$	102,097		$	—		$	—	$	152,926
Savings, NOW and market rate		46,455			39,441			149,199			44,022			—		279,117
Time deposits		119,212			104,001			8,900			124			—		232,237
Borrowed funds		15,000			30,000			—			—			—		45,000
Other liabilities		—			—			—			—			16,061		16,061
Shareholders’ equity		3,056			9,169			48,903			24,453			—		85,581

Total liabilities and shareholders’ equity	$	215,409		$	201,754		$	309,099		$	68,599		$	16,061	$	810,922

Interest earning assets	$	286,138		$	70,159		$	289,561		$	107,203			—	$	753,061
Interest bearing liabilities		180,667			173,442			158,099			44,146			—		556,354

Difference between interest earning assets and interest bearing liabilities	$	105,471		$	(103,283	)	$	131,462		$	63,057		$	—	$	196,707

Cumulative difference between interest earning assets and interest bearing liabilities	$	105,471		$	2,188		$	133,650		$	196,707		$	—	$	196,707

Cumulative earning assets as a % of cumulative interest bearing liabilities		158	%		101	%		126	%		135	%		—		—

⁽¹⁾	Loans include portfolio loans and loans and leases held for sale.

PROVISION FOR LOAN AND LEASE LOSSES

General Discussion of the Allowance for Loan and Lease Losses

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

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

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

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

•

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

•

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

•

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

•

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

Asset Quality and Analysis of Credit risk

Asset quality remains strong at March 31, 2007 as nonperforming loans as a percentage of total loans were 6 basis points. This compares with 12 basis points at December 31, 2006 and 13 basis points at March 31, 2006. The allowance for loan and lease losses as a percentage of total loans was 1.21% at March 31, 2007 compared with 1.19% at December 31, 2006 and 1.25% at March 31, 2006. The provision for loan and lease losses in the first quarter of 2007 was $250 thousand, compared to $154 thousand in the same period last year. The Corporation expects lease charge-offs to increase as the lease portfolio matures and grows over the next two years. However, lease charge-offs are expected to be below industry norms as the Corporation has an experienced underwriting team, the lease portfolio is geographically diverse, and the average customer exposure is less than $25,000.

Additional factors considered by management during the first quarter of 2007 were national delinquency trends in sub-prime mortgages. The Corporation has no exposure to sub-prime mortgage loans.

Non Performing Assets and Related Ratios


(dollars in thousands)	March 31, 2007			December 31, 2006			March 31, 2006
Non-accrual loans	$	371		$	704		$	773
Loans 90 days or more past due		46			119			5

Total non performing loans		417			823			778
Other real estate owned (“OREO”)		561		$	—			25

Total non performing assets	$	978		$	823		$	803

Allowance for loan and lease losses to non performing assets		855.4	%		986.9	%		942.8	%
Allowance for loan and lease losses to non performing loans and leases		2,006.2	%		986.9	%		973.1	%
Non performing loans and leases to total portfolio loans		0.06	%		.12	%		0.13	%
Allowance for loan losses to portfolio loans		1.21	%		1.19	%		1.25	%
Non performing assets to assets		0.12	%		0.10	%		0.11	%
Period end portfolio loans	$	691,549		$	681,291		$	606,578
Average portfolio loans (quarterly average)	$	684,870		$	669,036		$	595,446
Allowance for loan and lease losses	$	8,366		$	8,122		$	7,571

Summary of Changes in the Allowance For Loan and lease losses


	Three Months Ended March 31,						Year Ended December 31, 2006
(dollars in thousands)	2007			2006			Year Ended December 31, 2006
Balance, beginning of period	$	8,122		$	7,402		$	7,402
Charge-offs:
Consumer		(10	)		(10	)		(31	)
Commercial and industrial		—			—			—
Real estate		—			—			(120	)

Total charge-offs		(10	)		(10	)		(151	)
Recoveries:
Consumer		4			23			34
Commercial and industrial					2			3
Real estate		—			—			2

Total recoveries		4			25			39

Net (charge-offs) / recoveries		6			15			(112	)

Provision for loan and lease losses		250			154			832

Balance, end of period	$	8,366		$	7,571		$	8,122

NON-INTEREST INCOME

Three months ended March 31, 2007 Compared to March 31, 2006

Non-interest income for the first quarter of 2007 excluding the $1.333 million (pre-tax) real estate gain, was $4.813 million, an increase of $214,000 or 4.7% over the $4.599 million in the first quarter of 2006. The primary factor for this increase was first quarter Wealth Division revenue of $3.287 million which was $167,000 or 5.4% higher than the same period last year. The Corporation is investing in additional personnel and service enhancements in the Wealth Division with the goal of stronger revenue growth. Wealth Management assets under management and administration were $2.522 billion at March 31, 2007 compared to $2.262 billion at March 31, 2006. A slight improvement in mortgage loan sale revenue due to increased sales also contributed to the growth in non-interest income. See the last two paragraphs in the Executive Summary regarding a large Wealth Division customer.

NON-INTEREST EXPENSE

Three months ended March 31, 2007 Compared to March 31, 2006

Non-interest expense for the first quarter of 2007 was $8.435 million, an increase of $590,000 or 7.5% over $7.845 million in the first quarter of 2006. This increase is due to several factors including staffing costs relating to the leasing company and the West Chester loan production office, annual merit increases, the opening of the Ardmore branch and increased advertising costs due to timing and professional fees, specifically consulting and audit fees. The increase in professional fees is related to the adoption of new accounting standards. The costs of the Wealth Division and Private Banking Group initiatives will be phased in over the second and third quarters of 2007. Fourth quarter 2006 non-interest expense was $7.846 million.

INCOME TAXES

Income taxes from operations for the three months ended March 31, 2007 were $1.861 million compared to $1.645 million for the same period in 2006. This represents an effective tax rate for the three months ended March 31, 2007 of 31.9% and an effective tax rate of 34.4% for the same period in 2006. The decrease in the effective tax rate is due an immaterial over-accrual of taxes in the fourth quarter of 2006 that was applied against the current quarter’s provision.

BALANCE SHEET ANALYSIS

Total assets decreased $15.8 million or 1.9% from $826.7 million as of December 31, 2006 to $810.9 million as of March 31, 2007. This decrease is related to a decline in cash and cash equivalents of $28.6 million from December 31, 2006 to March 31, 2007. The decrease in cash and cash equivalents is due to the short term inflows of certain deposit accounts at year end 2006. Partially offsetting this decline was an increase in portfolio loans of $10.2 million or 1.5% from $681.3 as of December 31, 2006 to $691.5 million as of March 31, 2007.

Average loans for the first quarter of 2007 increased $15.9 million or 2.4% to $684.9 million compared to $669.0 million in the fourth quarter of 2006.

The table below compares portfolio loans and leases outstanding at March 31, 2007 and December 31, 2006. The increase in leases of $9.9 million is the primary reason for the increase in total loans and leases of $10.2 million. The Corporation continues to focus its business development efforts on building banking relationships with privately held businesses, non-profits, high quality residential builders and owners of commercial real estate.

Total portfolio loans outstanding are detailed by category as follows:


	March 31, 2007		December 31, 2006		Change
(dollars in millions)	March 31, 2007		December 31, 2006		Dollars			Percentage
Real estate loans:
Commercial mortgage loans	$	200.1	$	198.4	$	1.7		0.9	%
Home equity lines and loans		107.5		113.1		(5.6	)	(4.9	)%
Residential mortgage loans		105.1		103.6		1.5		1.5	%
Construction loans		74.3		74.8		(0.5	)	(0.7	)%
Commercial and industrial loans		179.5		175.3		4.2		2.4	%
Consumer loans		8.1		9.1		(1.0	)	(11.0	)%
Leases		16.9		7.0		9.9		141.4	%

Total portfolio loans and leases	$	691.5	$	681.3		10.2		1.5	%

Quarterly average portfolio loans and leases	$	684.9	$	669.0		15.9		2.4	%

Total liabilities declined $18.9 million from $744.3 million at December 31, 2006 to $725.3 million at March 31, 2007. This decline is driven by a decrease in deposits of $50.2 million or 7.0% over the past three months to $664.3 million at March 31, 2007 from $714.5 million at December 31, 2006 partially offset by an increase in borrowed funds of $30 million. The decrease in deposits is primarily due to the competitive environment for retaining and gathering deposits and the larger deposit inflows of approximately $35.0 million that temporarily boosted year-end deposits. The decline is concentrated in savings, NOW and market rate accounts which decreased $16.4 million or 5.5% to $279.1 million from $295.5 million at December 31, 2006.

Average deposits for the first quarter of 2007 increased $4.4 million or 0.7% to $654.2 million compared to $649.8 million in the fourth quarter of 2006.

Deposits and borrowings at March 31, 2007 and December 31, 2006 are as follows:


(dollars in millions)	March 31, 2007		December 31, 2006		Change
(dollars in millions)	March 31, 2007		December 31, 2006		Dollars			Percentage
Non-interest bearing demand	$	152.9	$	198.5	$	(45.6	)	(23.0	)%
Savings, NOW and market rate accounts		279.1		295.5		(16.4	)	(5.5	)%
Non-wholesale time deposits		167.0		170.5		(3.5	)	(2.0	)%
Time deposits from brokers		30.3		20.0		10.3		51.5	%
Time deposits from public fund sources		35.0		30.0		5.0		16.7	%

Total deposits		664.3		714.5		(50.2	)	(7.0	)%
Fed funds purchased		15.0		—		15.0		100.0	%
FHLB advances		30.0		15.0		15.0		100.0	%

Borrowed funds		45.0		15.0		30.0		200.0	%
Total deposits and borrowings	$	709.3	$	729.5	$	(20.2	)	(2.8	)%

Quarterly average deposits	$	654.2	$	649.8		4.4		0.7	%
Quarterly average borrowings		40.4		35.7		4.7		13.2	%

Quarterly average deposits and borrowings	$	694.6	$	685.5	$	9.1		1.3	%

Residential Mortgage Segment Activity


	1 ^st Qtr 2007			4 ^th Qtr 2006		3 ^rd Qtr 2006		2 ^nd Qtr 2006		1 ^st Qtr 2006
Residential loans held in portfolio *	$	105,065		103,572		107,021		108,820			106,196

Mortgage originations		28,271		23,030		37,860		31,966			34,451

Mortgage loans sold:
Servicing retained		4,831		4,242		6,043		3,615			7,010
Servicing released		14,844		15,320		10,867		13,127			7,436

Total mortgage loans sold		19,675		19,562		16,910		16,742			14,446

Servicing retained %		24.6	%	21.7	%	35.7	%	21.6	%		48.5	%
Servicing released %		75.4	%	78.3	%	64.3	%	78.4	%		51.5	%

Loans serviced for others *		377,512		382,141		385,861		395,091			409,429

Mortgage servicing rights *		2,847		2,941		2,934		2.887			2,980

Gain on sale of loans		280		182		268		254			250

Loan servicing and late fees		280		283		271		282			290

Amortization of MSRs	$	92		90		88		84		$	86

Basis point yield on loans sold		142bp		93bp		158bp		152bp			173bp

*	period end balance

Capital

Consolidated shareholder’s equity of the Corporation was $85.6 million or 10.6% of total assets, as of March 31, 2007, compared to $82.3 million or 10.0% of total assets, as of December 31, 2006. The following table presents the Corporation’s and Bank’s capital ratios and the minimum capital requirements to be considered “Well Capitalized” by regulators as of March 31, 2007 and December 31, 2006:


	Ratio		Minimum Ratio to be Well Capitalized
March 31, 2007:
Total (Tier II) Capital to Risk Weighted Assets
Consolidated	12.57	%	10	%
Bank	11.70	%	10	%
Tier I Capital to Risk Weighted Assets
Consolidated	11.49	%	6	%
Bank	10.65	%	6	%
Tier I Leverage Ratio (Tier I Capital to Total Quarterly Average Assets)
Consolidated	11.34	%	5	%
Bank	10.50	%	5	%
December 31, 2006:
Total (Tier II) Capital to Risk Weighted Assets
Consolidated	12.46	%	10	%
Bank	11.60	%	10	%
Tier I Capital to Risk Weighted Assets
Consolidated	11.38	%	6	%
Bank	10.53	%	6	%
Tier I Leverage Ratio (Tier I Capital to Total Quarterly Average Assets)
Consolidated	11.04	%	5	%
Bank	10.20	%	5	%

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

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

Liquidity

The Corporation manages its liquidity position on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, and purchasing federal funds, selling loans in the secondary market, borrowing from the FHLB, purchasing wholesale certificates of deposit and selling securities as its secondary sources. Availability with the FHLB was approximately $246 million as of March 31, 2007. Overnight Fed Funds lines consist of lines from six banks totaling $68.0 million. Quarterly, ALCO reviews the Corporation’s liquidity needs and reports its findings to the Risk Management Committee of the Bank’s Board of Directors. As of March 31, 2007, the Bank had $15 million in overnight fed funds borrowings and $30 million in FHLB advances. Alternative funding sources are being investigated to offset the results of the competitive environment that exists for core deposit gathering.

Off Balance Sheet Risk

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

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at March 31, 2007 were $330.0 million.

Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Corporation’s obligation under standby letters of credit at March 31, 2007 amounted to $7.9 million.

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

Contractual Cash Obligations of the Corporation as of March 31, 2007:


(In thousands)	Total		Within 1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
Deposits without a stated maturity	$	432,043	$	432,043		—		—		—
Wholesale and time deposits		232,237		223,213		8,366		534		124
Operating leases		21,925		905		1,820		1,782		17,418
Purchase obligations		3,982		1,798		1,759		425		—
Non-discretionary pension contributions		—		—		—		—		—

Total	$	690,187	$	657,959	$	11,945	$	2,741	$	17,542

Section 404 of Sarbanes Oxley Act of 2002

The Corporation and its Management completed compliance procedures relating to Section 404 of the Sarbanes Oxley Act of 2002 (“SOX 404”) for the fiscal year ended December 31, 2006 as documented in the Corporation’s Form 10-K. Management continues to devote considerable effort in 2007 to assure continued compliance with all aspects of SOX 404.

The PCAOB and SEC have issued a draft of management standards pertaining to management’s evaluation of controls over financial reporting, along with a new auditing standard. Since these new standards are still in draft form, the Corporation is unable to determine what impact they may have on the Corporation’s SOX 404 compliance procedures.

Other Information

•

Branch Office Expansion

During the first quarter of 2004 and the second quarter of 2005, the Corporation opened full service branch bank offices in Newtown Square and Exton, PA, respectively. In January of 2007, the Corporation’s Wynnewood branch was closed and customer accounts were transferred to the new Ardmore branch office. As discussed earlier, the Wynnewood branch real estate was sold during the first quarter of 2007. The Corporation hopes to break ground for construction of a West Chester, PA branch site later this year. The Corporation anticipates measured expansion of its branch footprint over the next few years.

•

Regulatory Matters and Pending Legislation

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

In February, 2006, Congress passed the Federal Deposit Insurance Reform Act of 2005 (FDIRA-2005”). This legislation will merge the Bank Insurance Fund and the Savings Association Insurance Fund into one fund, increase insurance coverage for retirement accounts to $250,000, adjust the maximum deposit insurance for inflation after March 31, 2010 and give the FDIC greater flexibility in setting insurance assessments. As part of the FDIRA-2005, the Corporation’s primary operating subsidiary, the Bank, has been granted a one-time credit of approximately $409 thousand for utilization against future FDIC insurance premiums. The FDIC announced that 2007 assessments will range from 5 to 7 basis points for well capitalized institutions with composite regulatory examination ratings of one or two. The Corporation anticipates that the $409 thousand credit will offset all of the 2007 premium assessment and a significant portion of the 2008 assessment. The actual assessment for the first quarter of 2007 will be issued by the FDIC on or around June 15, 2007.

•

Effects of Inflation

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

•

Effect of Government Monetary Policies

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

The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.

ITEM 3 . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

There has been no material change in the Corporation’s assessment of its sensitivity to market risks since its presentation in the 2006 Annual Report on Form 10-K filed with the SEC.

ITEM 4 . CONTROLS AND PROCEDURES

As of the end of the period covered by the report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Frederick C. Peters

II, and Chief Financial Officer, J. Duncan Smith, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Corporation (including its consolidated subsidiaries) required to be included in the Corporation’s periodic SEC filings.

There have not been any changes in the Corporation’s internal controls over financial reporting during the quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II OTHER INFORMATION.

ITEM 1 . Legal Proceedings.

None.

ITEM 1A . Risk Factors.

There have been no material changes to the risk factors disclosed in the Corporation’s 2006 Annual Report on Form 10-K.

ITEM 2 .

The following tables present the shares repurchased by the Corporation during the first quarter of 2007 ^{(1) (2)} :


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plan or Programs
January 1, 2007 – January 31, 2007	1,403	$	24.10	1,403	308,597
February 1, 2007 – February 28, 2007	2,978	$	23.34	1,650	306,947
March 1, 2007 – March 31, 2007	24,042	$	23.43	23,234	283,713

Total	28,423	$	23.45	26,287	283,713

Notes to this table:

(1)

On February 24, 2006, the Board of Directors of the Corporation adopted a new stock repurchase program (the “2006 Program”) under which the Corporation may repurchase up to 450,000 shares of the Corporation’s common stock, not to exceed $10 million and terminated the 2003 Program. The 2006 Program was publicly announced in a Press Release dated February 24, 2006. There is no expiration date on the 2006 Program and the Corporation has no plans for an early termination of the 2006 Program. All shares purchased through the 2006 Program were accomplished in open market transactions.

(2)	In February and March 2007, 1,328 and 808 shares, respectfully, were purchased by the Corporation’s Thrift Plan and Deferred Compensation plans through open market transactions by the Corporation’s Wealth Management Division investment personnel.

ITEM 3 . Defaults Upon Senior Securities

None

ITEM 4 . Submission of Matters to Vote of Security Holders

None

ITEM 5 . Other Information

None

ITEM 6 . Exhibits

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Bryn Mawr Bank Corporation

Date: May 10, 2007	By:	/s/ F REDERICK C. P ETERS II
		Frederick C. Peters II
		President & Chief Executive Officer

Date: May 10, 2007	By:	/s/ J. D UNCAN S MITH
		J. Duncan Smith
		Treasurer & Chief Financial Officer

Form 10-Q

Index to Exhibits

a) Exhibits


Exhibit 10.1		-Bryn Mawr Bank Corporation Long Term Incentive Plan (“LTIP”) Approved by the Shareholders of the Corporation on April 25, 2007 filed herewith.

Exhibit 31.1		-Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a).

Exhibit 31.2		-Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a).

Exhibit 32.1		-Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2		-Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Form 10-Q

Exhibit 10.1

BRYN MAWR BANK CORPORATION 2007 LONG-TERM INCENTIVE PLAN

ARTICLE I

ESTABLISHMENT OF THE PLAN

1.1 PLAN NAME. As of the Effective Date, the name of this plan shall be the Bryn Mawr Bank Corporation (“Corporation”) “2007 Long-Term Incentive Plan” (hereinafter called the “Plan”).

1.2 EFFECTIVE DATE. This Plan shall become effective on April 25, 2007 (the “Effective Date”), subject to its approval by the holders of a majority of the voting power of the shares deemed present and entitled to vote at the Corporation’s Annual Meeting of Shareholders to be held on that date.

1.3 PURPOSE. The purpose of the Plan is to promote the success and enhance the value of the Corporation by providing long term incentives to directors and employees of the Corporation and its subsidiaries linking their personal interest to that of the Corporation’s shareholders. The Plan is further intended to provide flexibility to the Corporation by increasing its ability to motivate, attract and retain the services of employees and directors upon whose judgment, interest and special effort the successful conduct of the Corporation’s operations are largely dependent.

ARTICLE II

DEFINITIONS

2.1 AWARD. An “Award” is a grant of Stock Options, Stock Appreciation Rights, Dividend Equivalents, Performance Awards, Restricted Stock or Restricted Stock Units under the Plan.

2.2 BOARD. The “Board” is the Board of Directors of the Corporation.

2.3 CAUSE. “Cause” means, (i) the willful and continued failure to substantially perform the Participant’s duties (other than failure resulting from incapacity due to physical or mental illness) after receipt of a written demand for such performance specifically identifying such failure; (ii) the willful engaging by the Participant in illegal conduct or gross misconduct that is materially and demonstrably injurious to the Corporation or its successor; (iii) breach of fiduciary duty, or (iv) breach of any confidentiality, non-compete, non-solicitation agreement, non-disparagement or any other stipulated agreement.

2.4 CHANGE IN CONTROL. A “Change in Control” with respect to any Award has the meaning assigned to the term in the change in control agreement, if any, between the Participant and the Corporation, provided, however, that if there is no such change in control agreement, it shall mean: (a) the acquisition by any Person (as the term “Person” is used for the purposes of Section 13 (d) or 15 (d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of direct or indirect beneficial ownership (within the meaning of Rule 13D promulgated under the Exchange Act) of fifty percent (50%) of the combined voting power of the then outstanding securities of the Corporation entitled to vote in the election of directors (the “Voting Securities”); or (b) during any period of two (2) consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Corporation’s shareholders, was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or (c) the consummation of (i) the sale or disposition of all or substantially all of the Corporations’ assets, or (ii) a merger or consolidation of the Corporation with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the Voting Securities of the Corporation (or such surviving entity) outstanding immediately after such merger or consolidation or (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation.

However, in no event shall a Change in Control be deemed to have occurred with respect to a Participant, if the Participant is part of a purchasing group which consummates the Change in Control transaction.

2.5 CODE. The “Code” is the Internal Revenue Code of 1986, as amended, and rules and regulations thereunder, as now in force or as hereafter amended.

2.6 COMMITTEE. The “Committee” is the committee described in Section 8.1 hereof.

2.7 COMMON STOCK. “Common Stock” is the common stock, $1.00 par value per share (as such par value may be adjusted from time to time) of the Corporation.

2.8 CORPORATION. The “Corporation” is Bryn Mawr Bank Corporation, a Pennsylvania corporation, and any successor thereof.

2.9 DATE OF GRANT. The “Date of Grant” of an Award is the date designated in the resolution by the Committee as the date of an Award, which shall not be earlier than the date of the resolution and action thereon by the Committee. In the absence of a designated date or a fixed method of computing such date being specifically set forth in the Committee’s resolution, then the Date of Grant shall be the date of the Committee’s resolution or action. In no event shall the Date of Grant of any Award that is authorized by the Committee on or after the Effective Date be earlier than the Effective Date.

2.10 DIRECTOR. A “Director” of the Corporation or its Subsidiary.

2.11 DIVIDEND EQUIVALENT. A “Dividend Equivalent” is a right to receive an amount equal to the regular cash dividend paid on one share of Common Stock. Dividend Equivalents may only be granted in connection with the grant of an Award that is based on but does not consist of shares of Common Stock (whether or not restricted). The number of Dividend Equivalents so granted shall not exceed the number of related stock-based rights. (For example, the number of Dividend Equivalents granted in connection with a grant of Stock Appreciation Rights may equal the number of such Stock Appreciation Rights, even though the number of shares actually paid upon exercise of those Stock Appreciation Rights necessarily will be less than the number of Stock Appreciation Rights and Dividend Equivalents granted.) Dividend Equivalents shall be subject to such terms and conditions as may be established by the Committee, but they shall expire no later than the date on which their related stock-based rights are either exercised, expire or are forfeited (whichever occurs first). The amounts payable due to a grant of Dividend Equivalents may be paid in cash, either currently or deferred, or converted into shares of Common Stock, as determined by the Committee.

2.12 EXCHANGE ACT. The “Exchange Act” is the Securities Exchange Act of 1934, as amended, and rules and regulations thereunder, as now in force or as hereafter amended.

2.13 FAIR MARKET VALUE. “Fair Market Value” of a share of Common Stock on any date is the last sale price as reported by the NASDAQ Global Market on the preceding day, but if no sales are reported on that day, for the last preceding day on which a sale was reported.

2.14 GOOD REASON. “Good Reason” means any material diminution of the Participant’s position, authority, duties or responsibilities (including the assignment of duties materially inconsistent with the Participant’s position or a material increase in the time Participant is required by the Corporation or its successor to travel), any reduction in salary or in the Participant’s aggregate bonus and incentive opportunities, any material reduction in the aggregate value of the Participant’s employee benefits (including retirement, welfare and fringe benefits), or relocation to a principal work site that is more than 40 miles from the Participant’s principal work site immediately prior to the Change in Control;

2.15 INCENTIVE STOCK OPTIONS. An “Incentive Stock Option” means a Stock Option granted under the Plan which satisfies the requirements of Section 422 of the Code or such successor provision as may be in effect from time to time.

2.16 NON-QUALIFIED OPTIONS. A “Non-Qualified Option” is a Stock Option under the Plan which is not an Incentive Stock Option intended to satisfy the requirements of Section 422 of the Code or such successor provision as may be in effect from time to time.

2.17 PARTICIPANT. A “Participant” is a person who has been designated as such by the Committee and granted an Award under this Plan pursuant to Article III hereof.

2.18 PERFORMANCE AWARD. A “Performance Award” is a right to either a number of shares of Common Stock (“Performance Shares”) or a cash amount (“Performance Units”) determined (in either case) in accordance with Article IV of this Plan based on the extent to which the applicable Performance Goals are achieved. A Performance Share shall be of no value to a Participant unless and until earned in accordance with Article IV hereof.

2.19 PERFORMANCE GOALS. “Performance Goals” are the performance conditions, if any, established pursuant to Section 4.1 hereof by the Committee in connection with an Award.

2.20 PERFORMANCE PERIOD. The “Performance Period” with respect to a Performance Award is a period of not less than one calendar year or one fiscal year of the Corporation, beginning not earlier than the year in which such Performance Award is granted, which may be referred to herein and by the Committee by use of the calendar or fiscal year in which a particular Performance Period commences.

2.21 PLAN YEAR. The “Plan Year” shall be a fiscal year of the Corporation falling within the term of this Plan.

2.22 RESTRICTED STOCK. “Restricted Stock” is Common Stock granted subject to terms and conditions, including a risk of forfeiture, established by the Committee pursuant to Article VI of this Plan.

2.23 RESTRICTED STOCK UNIT. A “Restricted Stock Unit” is a right to receive one share of Common Stock at a future date that has been granted subject to terms and conditions, including a risk of forfeiture, established by the Committee pursuant to Article VI of this Plan.

2.24 STOCK APPRECIATION RIGHT. A “Stock Appreciation Right” is a right to receive, upon exercise of that right, an amount, which may be paid in cash, shares of Common Stock or a combination thereof in the discretion of the Committee, equal to the difference between the Fair Market Value of one share of Common Stock as of the date of exercise and the exercise price for that right as determined by the Committee on the Date of Grant. Stock Appreciation Rights may be granted in tandem with Stock Options or other Awards or may be freestanding.

2.25 STOCK OPTION. A “Stock Option” is a right to purchase from the Corporation at any time not more than ten years following the Date of Grant, one share of Common Stock for an exercise price not less than the Fair Market Value of a share of Common Stock on the Date of Grant, subject to such terms and conditions established pursuant to Article V hereof. Stock Options may be either Non-Qualified Options or Incentive Stock Options.

2.26 SUBSIDIARY. The terms “Subsidiary” or “Subsidiary Corporation” mean any corporation, partnership, joint venture or other entity during any period in which at least fifty percent (50%) voting or profit interest is owned, directly or indirectly, by the Corporation, including all business entities that, at the time in question, are subsidiaries of the Corporation within the meaning of Section 424(f) of the Code.

ARTICLE III

GRANTING OF AWARDS TO PARTICIPANTS

3.1 ELIGIBLE PARTICIPANTS. Awards may be granted by the Committee to any employee of the Corporation or a Subsidiary, including any employee who is also a director of the Corporation or a Subsidiary. Awards other than grants of Incentive Stock Options may also be granted to a director of the Corporation who is not an employee of the Corporation or a Subsidiary. References in this Plan to “employment” and similar terms (except “employee”) shall include the providing of services in the capacity of a director. A person who has been engaged by the Corporation for employment shall be eligible for Awards other than Incentive Stock Options, provided such person actually reports for and commences such employment within 90 days after the Date of Grant. Incentive Stock Options may be granted only to individuals who are employees on the Date of Grant.

3.2 DESIGNATION OF PARTICIPANTS. At any time and from time to time during the Plan Year, the Committee may designate the employees and directors of the Corporation and its Subsidiaries eligible for Awards.

3.3 ALLOCATION OF AWARDS. Contemporaneously with the designation of a Participant pursuant to Section 3.2 hereof, the Committee shall determine the size, type and Date of Grant for each Award, taking into consideration such factors as it deems relevant, which may include the following: (a) the total number of shares of Common Stock available for Awards under the Plan; (b) the work assignment or the position of the Participant and its sensitivity and/or impact in relationship to the profitability and growth of the Corporation and its Subsidiaries; and (c) the Participant’s performance in reference to such factors.

The Committee may grant a Participant only one type of Award or it may grant any combination of Awards in whatever relationship one to the other, if any, as the Committee in its discretion so determines.

3.4 NOTIFICATION TO PARTICIPANTS AND DELIVERY OF DOCUMENTS. As soon as practicable after such determinations have been made, each Participant shall be notified of (a) his/her designation as a Participant, (b) the Date of Grant, (c) the number and type of Awards granted to the Participant, (d) in the case of Performance Awards, the Performance Period and Performance Goals, and (e) in the case of Restricted Stock or Restricted Stock Units, the Restriction Period. The Participant shall thereafter be supplied with written evidence of any such Awards.

3.5 AWARD AGREEMENTS. Each Award shall be evidenced by an Award Agreement, which will be provided to the Participant. Each Award Agreement shall include such provisions, not inconsistent with the Plan, as may be specified by the Committee.

ARTICLE IV

PERFORMANCE AWARDS

4.1 ESTABLISHMENT OF PERFORMANCE GOALS. Performance Goals applicable to a Performance Award shall be established by the Committee in its sole discretion on or before the Date of Grant and not more than a reasonable period of time after the beginning of the relevant performance Period. Such Performance Goals may include or be based upon any of the following criteria: pretax operating contribution; economic value added; consolidated profits of the Corporation expressed as a percent; earnings per share; return on capital; return on investment; return on shareholders’ equity; internal rate of return; efficiency ratio; revenue; working capital; pre-tax segment profit; net profit; net interest margin; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; return on assets; growth of loans and/or deposits; market share; business expansions; cash flow; stock price or performance; and total shareholder return. Performance Goals may be absolute in their terms or be measured against or in relationship to other companies comparably, similarly or otherwise situated. The Committee, in its sole discretion, may modify the Performance Goals if it determines that circumstances have changed and modification is required to reflect the original intent of the Performance Goals; provided, however, that no such change or modification may be made to the extent it increases the amount of compensation payable to any Participant who is a “covered employee” within the meaning of Code Section 162(m). The Committee may in its sole discretion classify Participants into as many groups as it determines, and as to any Participant relate his/her Performance Goals partially, or entirely, to the measured performance, either absolutely or relatively, of an identified Subsidiary, operating company or test strategy or new venture of the Corporation.

4.2 LEVELS OF PERFORMANCE REQUIRED TO EARN PERFORMANCE AWARDS. At or about the same time that Performance Goals are established for a specific period, the Committee shall in its absolute discretion establish the percentage of the Performance Awards granted for such Performance Period which shall be earned by the Participant for various levels of performance measured in relation to achievement of Performance Goals for such Performance Period.

4.3 OTHER RESTRICTIONS. The Committee shall determine the terms and conditions applicable to any Performance Award, which may include restrictions on the delivery of Common Stock payable in connection with the Performance Award and restrictions that could result in the future forfeiture of all or part of any Common Stock earned. The Committee may provide that shares of Common Stock issued in connection with a Performance Award be held in escrow and/or legended.

4.4 NOTIFICATION TO PARTICIPANTS. Promptly after the Committee has established or modified the Performance Goals with respect to a Performance Award, the Participant shall be provided with written notice of the Performance Goals so established or modified. Performance Awards shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time.

4.5 MEASUREMENT OF PERFORMANCE AGAINST PERFORMANCE GOALS. The Committee shall, as soon as practicable after the close of a Performance Period, determine: (a) the extent to which the Performance Goals for such Performance Period have been achieved; and (b) the percentage of the Performance Awards earned as a result.

These determinations shall be absolute and final as to the facts and conclusions therein made and be binding on all parties. Promptly after the Committee has made the foregoing determination, each Participant who has earned Performance Awards shall be notified, in writing thereof. For all purposes of this Plan, notice shall be deemed to have been given the date action is taken by the Committee making the determination. Participants may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of all or any portion of their Performance Awards during the Performance Period, except that Performance Awards may be transferable by assignment by a Participant to the extent provided in the applicable Performance Award agreement.

4.6 TREATMENT OF PERFORMANCE AWARDS EARNED. Upon the Committee’s determination that a percentage of any Performance Awards has been earned for a Performance Period, Participants to whom such earned Performance Awards have been granted and who have been (or were) in the employ of the Corporation or a Subsidiary thereof continuously from the Date of Grant, subject to the exceptions set forth at Section 4.9 and Section 4.10 hereof, shall be entitled, subject to the other conditions of this Plan, to payment in accordance with the terms and conditions of their Performance Awards. Such terms and conditions may permit or require that any applicable tax withholding be deducted from the amount payable. Performance Awards shall under no circumstances become earned or have any value whatsoever for any Participant who is not in the employ of the Corporation or its Subsidiaries continuously during the entire Performance Period for which such Performance Award was granted, except as provided at Section 4.9 or Section 4.10 hereof.

4.7 DISTRIBUTION. Distributions payable pursuant to Section 4.6 above shall be made as soon as practicable after the Committee determines the Performance Awards have been earned unless the provisions of Section 4.8 hereof are applicable to a Participant.

4.8 DEFERRAL OF RECEIPT OF PERFORMANCE AWARD DISTRIBUTIONS. With the consent of the Committee, a Participant who has been granted a Performance Award may by compliance with the then applicable procedures under the Plan irrevocably elect in writing to defer receipt of all or any part of any distribution associated with that Performance Award. The terms of any deferral and the election to defer under this Plan must comply with Section 409(a) of the Code. The terms and conditions of any such deferral, including but not limited to, the period of time for, and form of, election; the manner and method of payout; the plan and form in which the deferred amount shall be held; the interest equivalent or other payment that shall accrue pending its payout; and the use and form of Dividend Equivalents in respect of stock-based units resulting from such deferral, shall be as determined by the Committee. The Committee may, at any time and from time to time, but prospectively only except as hereinafter provided, amend, modify, change, suspend or cancel any and all of the rights, procedures, mechanics and timing parameters relating to such deferrals. In addition, the Committee may, in its sole discretion, accelerate the payout of such deferrals (and any earnings thereon), or any portion thereof, either in a lump sum or in a series of payments, but under the following conditions only: (a) the Federal tax statutes, regulations or interpretations are amended, modified, or otherwise changed or affected in such a manner as to adversely alter or modify the tax effect of such deferrals; or (b) the Participant suffers or incurs an event that would qualify for a “withdrawal” of contributions that have not been accumulated for two years without adverse consequences on the tax status of a qualified profit-sharing or stock bonus plan under the Federal tax laws applicable from time to time to such types of plans.

4.9 NON-DISQUALIFYING TERMINATION OF EMPLOYMENT. Except for Section 4.10 hereof, the only exceptions to the requirement of continuous employment during a Performance Period for Performance Award distribution are termination of a Participant’s employment by reason of death (in which event the Performance Award may be transferable by will or the laws of descent and distribution only to such Participant’s beneficiary designated to receive the Performance Award or to the Participant’s applicable legal representatives, heirs or legatees), total and permanent disability, with the consent of the Committee, normal or late retirement or early retirement, with the consent of the Committee, or transfer of an executive in a spin-off, with the consent of the Committee, occurring during the Performance Period applicable to the subject Performance Award. In such instance a distribution of the Performance Award shall be made, as of the end of the Performance Period, and 100% of the total Performance Award that would have been earned during the Performance Period shall be earned and paid out; provided, however, in a spin-off situation the Committee may set additional conditions, such as, without limiting the generality of the foregoing, continuous employment with the spin-off entity.

4.10 CHANGE IN CONTROL. In the event of a Change in Control, a pro rata portion of all outstanding Performance Awards under the Plan shall be payable ten days after the Change in Control. The amount payable shall be determined by assuming that 100% of each Performance Award was earned at target levels, and by multiplying the earned amount by a fraction, the numerator of which shall be the number of months that have elapsed in the applicable Performance Period prior to the Change in Control and the denominator of which shall be the total number of months in the Performance Period.

ARTICLE V

STOCK OPTIONS AND

STOCK APPRECIATION RIGHTS

5.1 NON-QUALIFIED OPTION. Non-Qualified Options granted under the Plan are Stock Options that are not intended to be Incentive Stock Options under the provisions of Section 422 of the Code. Non-Qualified Options shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time, which agreements shall specify the number of shares to which they pertain and the purchase price of such shares.

5.2 INCENTIVE STOCK OPTION. Incentive Stock Options granted under the Plan are Stock Options that are intended to be “incentive stock options” under Section 422 of the Code, and the Plan shall be administered, except with respect to the right to exercise options after termination of employment, to qualify Incentive Stock Options issued hereunder as incentive stock options under Section 422 of the Code. An Incentive Stock Option shall not be granted to an employee who owns, or is deemed under Section 424(d) of the Code to own, stock of the Corporation (or of any parent or Subsidiary of the Corporation) possessing more than 10% of the total combined voting power of all classes of stock therein. The aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all incentive stock option plans of the Corporation or any parent or Subsidiary of the Corporation) shall not exceed $100,000. Incentive Stock Options shall be evidenced by written agreements in such form and not inconsistent with the Plan as the Committee shall in its sole discretion approve from time to time, which agreements shall specify the number of shares to which they pertain and the purchase price of such shares.

5.3 OPTION TERMS. Stock Options granted under this Plan shall be subject to the following terms and conditions:

(a) Option Period . Each Stock Option shall expire and all rights to purchase shares thereunder shall cease not more than ten years after its Date of Grant or on such date prior thereto as may be fixed by the Committee, or on such other date as is provided by this Plan in the event of termination of employment, death or reorganization. No Stock Option shall permit the purchase of any shares thereunder during the first year after its Date of Grant, except as provided in Section 5.5 hereof or as otherwise determined by the Committee.

(b) Exercise Price . The purchase price per share payable upon exercise of a Stock Option shall not be less than the Fair Market Value of a share of Common Stock on the Date of Grant of the Stock Option.

(c) Time and Conditions of Exercise . The Committee shall determine the time or times at which an Option may be vested and exercised in whole or in part. The Committee also shall determine the performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Committee may waive any exercise provisions at any time in whole or in part based upon factors as the Committee may determine in its sole discretion so that the Option becomes exercisable at an earlier date.

(d) Transferability and Termination of Options . During the lifetime of an individual to whom a Stock Option is granted, the Stock Option may be exercised only by such individual and only while such individual is an employee of the Corporation or a Subsidiary and only if the Participant has been continuously so employed by any one or combination thereof since the Date of Grant of the Stock Option, provided, however, that if the employment of such Participant by the Corporation or a Subsidiary Corporation terminates, the Stock Option may additionally be exercised as follows, or in any other manner provided by the Committee, but in no event later than ten years after the Date of Grant of the Stock Option:

(i) if a Participant’s termination of employment occurs by reason of normal or late retirement under any retirement plan of the Corporation or its Subsidiaries, such Participant’s Stock Options may be exercised within five years after the date of such termination of employment. If a Participant’s termination of employment occurs by reason of early retirement under any retirement plan of the Corporation or its Subsidiaries, or by reason of the transfer of a Participant in a spin-off, or by reason of total and permanent disability, as determined by the Committee, without retirement, then such Participant’s Stock Options shall be exercisable for a period of up to five years after the date of such termination of employment if the Committee consents to such an extension. During the extension period, the right to exercise Stock Options, if any, accruing in installments, shall continue unless the Committee provides otherwise; provided, however, that if the Stock Options are Incentive Stock Options all installments shall be immediately exercisable; and provided further, that the Committee may set additional conditions, such as, without limiting the generality of the foregoing, an agreement to not provide services to a competitor of the Corporation and its Subsidiaries and/or continuous employment with a spin-off entity;

(ii) if a Participant’s termination of employment occurs by reason of death, then such Participant’s outstanding Stock Options shall all become immediately exercisable and may be exercised within five years after the date of death or the life of the option, whichever is less, but in the case of Non-Qualified Options in no event less than one year after the date of death, unless the Committee provides otherwise;

(iii) if a Participant’s termination of employment occurs for any reason other than as specified in Section 5.3(d)(i) or (ii) hereof, the Committee has not approved an extension and Participant’s termination of employment is not for Cause, then, but only with respect to Options that are as of the date of termination vested, such Participant’s Stock Options may be exercised within ninety days after the date of such termination of employment;

(iv) rights accruing to a Participant under Sections 5.3(d)(i) and 5.3(d)(iii) may, upon the death of a Participant subsequent to his/her termination of employment, be exercised by his/her duly designated beneficiary or otherwise by his/her applicable legal representatives, heirs or legatees to the extent vested in and unexercised or perfected by the Participant at the date of his/her death. In the case of Non-Qualified Options, the period for such exercise shall not expire less than one year after the date of the Participant’s death;

(v) if a Participant’s termination of employment occurs for Cause, such Participant’s unexercised vested and unvested Stock Options shall be null and void immediately upon termination of the Participant’s service and may not be exercised; and

(vi) absence on an approved leave of absence communicated to the Committee shall not be deemed a termination or interruption of continuous employment for the purposes of the Plan.

No Stock Option shall be assignable or transferable by the individual to whom it is granted, except that it may be transferable (x) by assignment by the Participant to the extent provided in the applicable option agreement, or (y) by will or the laws of descent and distribution in accordance with the provisions of this Plan. An option transferred after the death of the Participant to whom it is granted may only be exercised by such individual’s beneficiary designated to exercise the option or otherwise by his/her applicable legal representatives, heirs or legatees, and only within the specific time period set forth above and only to the extent vested in and unexercised by the Participant at the date of his/her death, except as provided in Section 5.3(c)(ii).

In no event, whether by the Participant directly or by his/her proper assignee or beneficiary or other representative, shall any option be exercisable at any time after its expiration date as stated in the option agreement, except as provided in Section 5.3(d)(ii) and (iv). When an option is no longer exercisable it shall be deemed for all purposes and without further act to have lapsed and terminated. The Committee may, in its sole discretion, determine solely for the purposes of the Plan that a Participant is permanently and totally disabled, and the acts and decisions of the Committee made in good faith in relation to any such determination shall be conclusive upon all persons and interests affected thereby.

(e) Exercise of Options . An individual entitled to exercise Stock Options may, subject to their terms and conditions and the terms and conditions of the Plan, exercise them in whole or in part by delivery of written notice of exercise to the Corporation at its principal office, specifying the number of whole shares of Common Stock with respect to which the Stock Options are being exercised. Before shares may be issued, payment must be made in full, in legal United States tender, in the amount of the purchase price of the shares to be purchased at the time and any amounts for withholding as provided in Section 10.8 hereof; provided, however, in lieu of paying for the exercise price in cash as described above, the individual may pay (subject to such conditions and procedures as the Committee may establish) all or part of such exercise price by tendering (either actually or by attestation) owned and unencumbered shares of Common Stock acceptable to the Committee and having a Fair Market Value on the date of exercise of the Stock Options equal to or less than the exercise price of the Stock Options exercised, with cash, as set forth above, for the remainder, if any, of the purchase price; provided, further, that the Committee may permit a Participant to elect to pay the exercise price by authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Options and remit to the Corporation a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise. Subject to rules established by the Committee, the withholdings required by Section 10.8 hereof may be satisfied by the Corporation withholding shares of Common Stock issued on exercise that have a Fair Market Value on the date of exercise of the Stock Options equal to or less than the withholding required by Section 10.8 hereof.

(f) Repricing Prohibited . Subject to Sections 5.5, 7.3 and 10.7, outstanding Stock Options granted under this Plan shall not be repriced.

5.4 STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be granted to Participants either alone (“freestanding”) or in tandem with other Awards, including Performance Awards, Stock Options and Restricted Stock. Stock Appreciation Rights granted in tandem with Incentive Stock Options must be granted at the same time as the Incentive Stock Options are granted. Stock Appreciation Rights granted in tandem with any other Award may be granted at any time prior to the earlier of the exercise or expiration of such Award. Stock Appreciation Rights granted in tandem with Stock Options shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Options. The Committee shall establish the terms and conditions applicable to any Stock Appreciation Rights, which terms and conditions need not be uniform but may not be inconsistent with the terms of the Plan. Freestanding Stock Appreciation Rights shall generally be subject to terms and conditions substantially similar to those described in Section 5.3 for Stock Options, including the requirements of 5.3(a), (b) (c) and (f) regarding the maximum period, minimum price and prohibition on repricing.

5.5 CHANGE IN CONTROL. In the event of a Change in Control:

(a) If the Corporation is the surviving entity and any adjustments necessary to preserve the value of the Participant’s outstanding Stock Options and Stock Appreciation Rights have been made, or the Corporation’s successor at the time of the Change in Control irrevocably assumes the Corporation’s obligations under this Plan or replaces the Participant’s outstanding Stock Options and Stock Appreciation Rights with stock options and stock appreciation rights of equal or greater value and having terms and conditions no less favorable to the Participant than those applicable to the Participant’s Stock Options and Stock Appreciation Rights immediately prior to the Change in Control, then such Awards or their replacement awards shall become immediately exercisable in full only if within two years after the Change in Control:

(i) the Participant’s employment is terminated without Cause;

(ii) the Participant terminates employment with Good Reason;

(iii) the Participant’s employment terminates under circumstances that entitle the Participant to benefit under Participant’s change of control agreement or any income continuation benefits under any plan of the Corporation, a Subsidiary, or an entity that is a successor to the Corporation or a Subsidiary as a result of the Change in Control, or that would have entitled the Participant to such benefits if the Participant participated in such plan (for this purpose only, any such plan terminated in connection with the Change in Control shall be taken into account); or

(iv) the Participant’s employment terminates under circumstances that entitle the Participant to income continuation benefits under any change of control agreement or employment agreement between the Participant and the Corporation, a Subsidiary, or any successor thereof.

(b) If 5.5(a) does not apply, then without any action by the Committee or the Board, each outstanding Stock Option and Stock Appreciation Right granted under the Plan that has not been previously exercised or otherwise lapsed and terminated shall become immediately exercisable in full; provided, however, that the Committee, in its sole discretion, and without the consent of any Participant affected thereby, may determine that a cash payment shall be made promptly following the Change in Control in lieu of all or any portion of the outstanding Stock Options and Stock Appreciation Rights granted under this Plan. The amount payable with respect to each share of Common Stock subject to an affected Stock Option and each affected Stock Appreciation Right shall equal the excess of the Fair Market Value of a share of Common Stock immediately prior to such Change in Control over the exercise price of such Stock Option or Stock Appreciation Right. After such a determination by the Committee, each Stock Option and Stock Appreciation Right, with respect to which a cash payment is to be made shall terminate, and the Participant shall have no further rights thereunder except the right to receive such cash payment.

ARTICLE VI

RESTRICTED STOCK AND RESTRICTED STOCK UNITS

6.1 RESTRICTION PERIOD. At the time an Award of Restricted Stock or Restricted Stock Units is made, the Committee shall establish the terms and conditions applicable to such Award, including the period of time (the “Restriction Period”) during which certain restrictions established by the Committee shall apply to the Award. The Restriction Period shall be not less than three years. Each such Award, and designated portions of the same Award, may have a different Restriction Period, at the discretion of the Committee. Except as permitted or pursuant to Sections 6.4, 6.5 or 10.7 hereof, the Restriction Period applicable to a particular Award shall not be changed.

6.2 RESTRICTED STOCK TERMS AND CONDITIONS. Restricted Stock shall be represented by a stock certificate registered in the name of the Participant granted such Restricted Stock. Such Participant shall have the right to enjoy all shareholder rights during the Restriction Period except that: (a) the Participant shall not be entitled to delivery of the stock certificate until the Restriction Period shall have expired; (b) the Corporation may either issue shares subject to such restrictive legends and/or stop-transfer instructions as it deems appropriate or provide for retention of custody of the Common Stock during the Restriction Period; (c) the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period, except that it may be transferable by assignment by the Participant to the extent provided in the applicable Restricted Stock Award agreement; (d) a breach of the terms and conditions established by the Committee with respect to the Restricted Stock shall cause a forfeiture of the Restricted Stock, and any dividends withheld thereon, and (e) dividends payable in cash or in shares of stock or otherwise may be either currently paid or withheld by the Corporation for the Participant’s account. At the discretion of the Committee, interest may be paid on the amount of cash dividends withheld, including cash dividends on stock dividends, at a rate and subject to such terms as determined by the Committee.

Provided, however, and the provisions of Section 6.4 to the contrary notwithstanding, in lieu of the foregoing, the Committee may provide that no shares of Common Stock be issued until the Restriction Period is over and further provide that the shares of Common Stock issued after the Restriction Period has been completed, be issued in escrow and/or be legended and that the Common Stock be subject to restrictions including the forfeiture of all or a part of the shares.

6.3 PAYMENT FOR RESTRICTED STOCK. A Participant shall not be required to make any payment for Restricted Stock unless the Committee so requires.

6.4 FORFEITURE PROVISIONS. Subject to Section 6.5, in the event a Participant terminates employment during a Restriction Period for the Participant’s Restricted Stock or Restricted Stock Units, such Awards will be forfeited; provided, however, that the Committee may provide for proration or full payout in the event of (a) a termination of employment because of normal or late retirement, (b) with the consent of the Committee, early retirement or spin-off, (c) death, or (d) total and permanent disability, as determined by the Committee, all subject to any other conditions the Committee may determine.

6.5 CHANGE IN CONTROL. In the event of a Change in Control, restrictions on a fraction of each Participant’s outstanding Restricted Stock and Restricted Stock Units granted under the Plan will lapse, and any shares not previously distributed shall be distributed within ten days after the Change in Control in accordance with the provisions set forth in Section 4.10. The numerator of such fraction with respect to an Award shall be the number of months that have elapsed in the applicable Restriction Period prior to the Change in Control and the denominator shall be the number of months in such Restriction Period.

ARTICLE VII

SHARES OF STOCK SUBJECT TO THE PLAN; MAXIMUM AWARDS

7.1 SHARES AVAILABLE. Subject to the other provisions of this Article VII, the total number of shares available for grant as Awards pursuant to the Plan shall not exceed in the aggregate five percent (5%) of the outstanding shares of the Corporation’s Common Stock as of March 8, 2007, the record date for the Corporation’s 2007 Annual Meeting, that is a maximum of 428,996 shares of the Corporation’s Common Stock. Solely for the purpose of applying the limitation in the preceding sentence and subject to the replenishment and adjustment provisions of Sections 7.2 and 7.3 below: (a) each Award granted under this Plan prior to the Effective Date shall reduce the number of shares available for grant by one share for every one share granted, and (b) each Stock Option or Stock Appreciation Right granted under this Plan on or after the Effective Date shall reduce the number of shares available for grant by one share for every one share granted.

Shares available for grant under the Plan may be authorized and unissued shares, treasury shares held by the Corporation or shares purchased or held by the Corporation or a Subsidiary for purposes of the Plan, or any combination thereof. Shares issued upon assumption or conversion of outstanding stock-based awards granted by an acquired company shall be disregarded in applying the limitation set forth in this Section 7.1.

7.2 SHARES AGAIN AVAILABLE. In the event all or any portion of an Award is forfeited or cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a portion of the shares subject to the Award in connection with the exercise or settlement of such Award, the number of shares not issued that were deducted for such Award pursuant to Section 7.1 above shall be restored and may again be used for Awards under the Plan.

Notwithstanding anything in this Section 7.2 to the contrary and solely for purposes of determining whether shares are available for the issuance of Incentive Stock Options, the maximum aggregate number of shares that may be granted under this Plan shall be determined without regard to any shares restored pursuant to this Section 7.2 that, if taken into account, would cause the Plan to fail the requirement under Code Section 422 that the Plan designate the maximum aggregate number of shares that may be issued.

7.3 RELEVANT CHANGE ADJUSTMENTS. Appropriate adjustments in the number of shares available for grant and in any outstanding Awards, including adjustments in the size of the Award and in the exercise price per share of Stock Options and Stock Appreciation Rights, as authorized herein shall be made by the Committee (except as provided in Section 10.7 hereof), to give effect to adjustments made in the number of shares of Common Stock through a merger, consolidation, recapitalization, reclassification, combination, spin-off, common stock dividend, stock split or other relevant change.

7.4 MAXIMUM PER PARTICIPANT AWARD. During any consecutive thirty-six month period, no Participant may receive Awards that, in the aggregate, could result in that Participant receiving, earning or acquiring, subject to the adjustments described in Section 7.3: (a) Stock Options and Stock Appreciation Rights for, in the aggregate, more than 100,000 shares of Common Stock; (b) Performance Shares, Restricted Stock and Restricted Stock Units for, in the aggregate, more than 100,000 shares of Common Stock; (c) a number of Dividend Equivalents greater than the number of shares of Common Stock the Participant could receive, earn or acquire in connection with the related stock-based Awards granted to the Participant; and (d) Performance Units with a value exceeding $500,000.

In addition, during any consecutive thirty-six month period, no Participant who is a non-employee director may receive Awards that, in the aggregate, could result in that Participant receiving, earning or acquiring, subject to the adjustments described in Section 7.3, more than 50,000 shares of Common Stock. For purposes of applying the limits described in this Section 7.4, if Awards subject to the same limit are granted in tandem, so that only one of the Awards may actually be exercised, only one of the Awards shall be counted.

ARTICLE VIII

ADMINISTRATION

8.1 COMMITTEE. The Plan will be administered by the Compensation Committee of the Board who are appointed from time to time by the Board and who are outside, independent Board members who, in the judgment of the Board, are

qualified to administer the Plan as contemplated by (a) Rule 16b-3 of the Securities and Exchange Act of 1934 (or any successor rule), (b) Section 162(m) of the Code, as amended, and the regulations thereunder (or any successor Section and regulations), and (c) any rules and regulations of a stock exchange on which Common Stock is traded. Any member of the Committee administering the Plan who does not satisfy or ceases to satisfy the qualifications set out in the preceding sentence may recuse himself or herself from any vote or other action taken by such Committee.

8.2 POWERS. The Committee shall have and exercise all of the powers and responsibilities granted expressly or by implication to it by the provisions of the Plan. Subject to and as limited by such provisions, the Committee may from time to time enact, amend and rescind such rules, regulations and procedures with respect to the administration of the Plan as it deems appropriate or convenient.

8.3 INTERPRETATION. All questions arising under the Plan, any Award agreement, or any rule, regulation or procedure adopted by the Committee shall be determined by the Committee, and its determination thereof shall be conclusive and binding upon all parties.

8.4 COMMITTEE PROCEDURE. Any action required or permitted to be taken by the Committee under the Plan shall require the affirmative vote of a majority of a quorum of the members of the Committee. A majority of all members of the Committee shall constitute a “quorum” for Committee business. The Committee may act by written determination instead of by affirmative vote at a meeting, provided that any written determination shall be signed by all members of the Committee, and any such written determination shall be as fully effective as a majority vote of a quorum at a meeting.

8.5 DELEGATION. The Committee may delegate all or any part of its authority under the Plan to a subcommittee of directors and/or officers of the Corporation for purposes of determining and administering Awards granted to persons who are not then subject to the reporting requirements of Section 16 of the Exchange Act.

ARTICLE IX

REDUCTION IN AWARDS

9.1 WHEN APPLICABLE. Anything in this Plan to the contrary notwithstanding, the provisions of this Article IX shall apply to a Participant if an independent auditor selected by the Committee (the “Auditor”) determines that each of (a) and (b) below are applicable.

(a) Payments or distributions hereunder, determined without application of this Article IX, either alone or together with other payments in the nature of compensation to the Participant which are contingent on a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, or otherwise (but after any elimination or reduction of such payments under the terms of the Corporation’s income continuance policy, if any), would result in any portion of the payments hereunder being subject to an excise tax on excess parachute payments imposed under Section 4999 of the Code.

(b) The excise tax imposed on the Participant under Section 4999 of the Code on excess parachute payments, from whatever source, would result in a lesser net aggregate present value of payments and distributions to the Participant (after subtraction of the excise tax) than if payments and distributions to the Participant were reduced to the maximum amount that could be made without incurring the excise tax.

9.2 REDUCED AMOUNT. Under this Article IX the payments and distributions under this Plan shall be reduced (but not below zero) so that the present value of such payments and distributions shall equal the Reduced Amount. The “Reduced Amount” (which may be zero) shall be an amount expressed in present value which maximizes the aggregate present value of payments and distributions under this Plan which can be made without causing any such payment to be subject to the excise tax under Section 4999 of the Code. The determinations and reductions under this Section 9.2 shall be made after eliminations or reductions, if any, have been made under the Corporation’s income continuance policy, if any.

9.3 PROCEDURE. If the Auditor determines that this Article IX is applicable to a Participant, the Auditor shall so advise the Committee in writing. The Committee shall then promptly give the Participant notice to that effect together with a copy of the detailed calculation supporting such determination which shall include a statement of the Reduced Amount. The Participant may then elect, in his/her sole discretion, which and how much of the Awards otherwise awarded under this Plan shall be eliminated or reduced (as long as after such election the aggregate present value of the remaining Awards under this Plan equals the Reduced Amount), and shall advise the Committee in writing of his/her election within ten days of his/her receipt of notice. If no such election is made by the Participant within such ten-day period, the Committee may elect which and how much of the Awards shall be eliminated or reduced (as long as after such election their aggregate present value equals the Reduced Amount) and shall notify the Participant promptly of such election. For purposes of this Article IX, present value shall be determined in accordance with Section 280G of the Code. All the foregoing determinations made by

the Auditor under this Article IX shall be made as promptly as practicable after it is determined that excess parachute payments (as defined in Section 280G of the Code) will be made to the Participant if an elimination or reduction is not made. As promptly as practicable following the election hereunder, the Corporation shall provide to or for the benefit of the Participant such amounts and shares as are then due to the Participant under this Plan and shall promptly provide to or for the benefit of the Participant in the future such amounts and shares as become due to the Participant under this Plan.

9.4 CORRECTIONS. As a result of the uncertainty in the application of Section 280G of the Code at the time of the initial determination by the Auditor hereunder, it is possible that payments or distributions under this Plan will have been made which should not have been made (“Overpayment”) or that additional payments or distributions which will have not been made could have been made (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Auditor, based upon the assertion of a deficiency by the Internal Revenue Service against the Corporation or the Participant which the Auditor believes has a high probability of success, determines that an Overpayment has been made, any such Overpayment shall be treated for all purposes as a loan to the Participant which the Participant shall repay together with interest at the applicable Federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Participant if and to the extent such payment would not reduce the amount which is subject to the excise tax under Section 4999 of the Code. In the event that the Auditor, based upon controlling precedent, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid to or for the benefit of the Participant together with interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.

9.5 NON-CASH BENEFITS. In making its determination under this Article IX, the value of any non-cash benefit shall be determined by the Auditor in accordance with the principles of Section 280G(d)(3) of the Code.

9.6 DETERMINATIONS BINDING. All determinations made by the Auditor under this Article IX shall be binding upon the Corporation, the Committee and the Participant.

ARTICLE X

GENERAL PROVISIONS

10.1 AMENDMENT OR TERMINATION OF PLAN. The Board may at any time amend, suspend, discontinue or terminate the Plan (including the making of any necessary enabling, conforming and procedural amendments to the Plan to authorize and implement the granting of Incentive Stock Options or other income tax preferred stock options which may be authorized by federal law subsequent to the effective date of this Plan); provided, however, that no amendment by the Board shall, without further approval of the shareholders of the Corporation, increase the total number of shares of Common Stock which may be made subject to the Plan, except as provided at Section 7.3 hereof, or make any other change for which shareholder approval is required by law or under the applicable rules of the NASDAQ Global Market. No action taken pursuant to this Section 10.1 of the Plan shall, without the consent of the Participant, alter or impair any Awards which have been previously granted to a Participant except pursuant to Section 10.5 of the Plan.

10.2 NON-ALIENATION OF RIGHTS AND BENEFITS. Except as expressly provided herein, no right or benefit under the Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to the debts, contracts, liabilities or torts of the person entitled to such right or benefit. If any Participant or beneficiary hereunder should become bankrupt or attempt to anticipate, alienate, sell, assign, pledge, encumber or charge any right or benefit hereunder (other than as expressly provided herein), then such right or benefit shall, in the sole discretion of the Committee, cease and in such event the Corporation may hold or apply the same or any or no part thereof for the benefit of the Participant or beneficiary, his/her spouse, children or other dependents or any of them in any such manner and in such proportion as the Committee in its sole discretion may deem proper.

10.3 NO RIGHTS AS SHAREHOLDER. The granting of Awards under the Plan shall not entitle a Participant or any other person succeeding to his/her rights, to any dividend, voting or other right as a shareholder of the Corporation unless and until the issuance of a stock certificate to the Participant or such other person pursuant to the provisions of the Plan and then only subsequent to the date of issuance thereof.

10.4 LIMITATION OF LIABILITY OR OBLIGATION OF THE CORPORATION. As illustrative only of the limitations of liability or obligation of the Corporation and not intended to be exhaustive thereof, nothing in the Plan shall be construed: (a) to give any employee of the Corporation any right to be granted any Award other than at the sole discretion of the Committee; (b) to give any Participant any rights whatsoever with respect to shares of Common Stock except as specifically provided in the Plan; (c) to limit in any way the right of the Corporation or any Subsidiary to terminate, change or modify, with or without Cause, the employment of any Participant at any time; or (d) to be evidence of any agreement or understanding, express or implied, that the Corporation or any Subsidiary will employ any Participant in any particular position at any particular rate of compensation or for any particular period of time.

Payments and other benefits received by a Participant under an Award shall not be deemed part of a Participant’s regular, recurring compensation for purposes of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Corporation or any Subsidiary, unless expressly so provided by such other plan, contract or arrangement or the Committee determines that an Award or portion of an Award should be included to reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation.

10.5 GOVERNMENT REGULATIONS. Notwithstanding any other provisions of the Plan seemingly to the contrary, the obligation of the Corporation with respect to Awards granted under the Plan shall at all times be subject to any and all applicable laws, rules and regulations and such approvals by any government agencies as may be required or deemed by the Board or Committee as reasonably necessary or appropriate for the protection of the Corporation. In connection with any sale, issuance or transfer hereunder, the Participant acquiring the shares shall, if requested by the Corporation, give assurances satisfactory to counsel of the Corporation that the shares are being acquired for investment and not with a view to resale or distribution thereof and assurances in respect of such other matters as the Corporation may deem desirable to assure compliance with all applicable legal requirements.

10.6 NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board nor the submission of the Plan to shareholders of the Corporation for approval shall be construed as creating any limitations on the power or authority of the Board to adopt such other or additional incentive or other compensation arrangements of whatever nature as the Board may deem necessary or desirable or preclude or limit the continuation of any other plan, practice or arrangement for the payment of compensation or fringe benefits to employees generally, or to any class or group of employees, which the Corporation or any Subsidiary now has lawfully put into effect, including, without limitation, any retirement, pension, savings, profit sharing or stock purchase plan, insurance, death and disability benefits, and executive short term incentive plans.

10.7 REORGANIZATION. In case the Corporation is merged or consolidated with another corporation, or in case the property or stock of the Corporation is acquired by another corporation, or in case of a separation, reorganization or liquidation of the Corporation (for purposes hereof any such occurrence being referred to as an “Event”), the Committee or a comparable committee of any corporation assuming the obligations of the Corporation hereunder, shall either:

(a) make appropriate provision for the protection of any outstanding stock-based Awards granted thereunder by the substitution on an equitable basis of appropriate stock, stock units, stock options or stock appreciation rights of the Corporation, or of the merged, consolidated or otherwise reorganized corporation which will be issuable in respect to the Awards. Stock to be issued pursuant to such substitute awards shall be limited so that the excess of the aggregate fair market value of the shares subject to such substitute awards immediately after such substitution over the purchase price thereof (if any) is not more than the excess of the aggregate fair market value of the shares subject to such substitute awards immediately before such substitution over the purchase price thereof (if any); or

(b) upon written notice to the Participant, declare that all Performance Awards granted to the Participant are deemed earned, that the Restriction Period of all Restricted Stock and Restricted Stock Units has been eliminated and that all outstanding Stock Options and Stock Appreciation Rights shall accelerate and become exercisable in full but that all outstanding Stock Options and Stock Appreciation Rights, whether or not exercisable prior to such acceleration, must be exercised within the period of time set forth in such notice or they will terminate. In connection with any declaration pursuant to this Section 10.7(b), the Committee may, but shall not be obligated to, cause a cash payment to be made to each Participant who holds a Stock Option or Stock Appreciation Right that is terminated in an amount equal to the product obtained by multiplying (x) the amount (if any) by which the Event Proceeds Per Share (as hereinafter defined) exceeds the exercise price per share covered by such Stock Option times (y) the number of shares of Common Stock covered by such Stock Option or Stock Appreciation Right. For purposes of this Section 10.7(b), “Event Proceeds Per Share” shall mean the cash plus the fair market value, as determined in good faith by the Committee, of the non-cash consideration to be received per share by the shareholders of the Corporation upon the occurrence of the Event.

10.8 WITHHOLDING TAXES, ETC. All distributions under the Plan shall be subject to any required withholding taxes and other withholdings and, in case of distributions in Common Stock, the Participant or other recipient may, as a condition precedent to the delivery of Common Stock, be required to pay to his/her participating employer the excess, if any, of the amount of required withholding over the withholdings, if any, from any distributions in cash under the Plan. All or a portion of such payment may, in the discretion of the Committee and upon the election of the Participant, be made (a) by withholding from shares that would otherwise be delivered to the Participant a number of shares sufficient to satisfy the remaining required tax withholding or (b) by tendering (either actually or by attestation) owned and unencumbered shares of Common Stock acceptable to the Committee and having a Fair Market Value on the date of tender equal to or less than the

remaining required tax withholding. No distribution under the Plan shall be made in fractional shares of Common Stock, but the proportional market value thereof shall be paid in cash.

10.9 GENERAL RESTRICTION. Each Award shall be subject to the requirement that, if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the shares subject to such option and/or right upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with the granting of such Award or the issue or purchase of shares respectively thereunder, such Award may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board.

10.10 USE OF PROCEEDS. The proceeds derived by the Corporation from the sale of the stock pursuant to Awards granted under the Plan shall constitute general funds of the Corporation.

10.11 DURATION OF PLAN. This Plan shall remain in effect until the earliest of the following events occurs: (a) distribution of all shares of Common Stock subject to the Plan, (b) termination of this Plan pursuant to Section 10.1 hereof, or (c) the tenth anniversary of the Effective Date.

10.12 SEVERABILITY. In the event any provision of this Plan shall be held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

10.13 GOVERNING LAW. To the extent that federal laws do not otherwise control, this Plan and all determinations made and actions taken pursuant to this Plan shall be governed by the laws of the Commonwealth of Pennsylvania and construed accordingly.

10.14 HEADINGS. The headings of the Articles and their subparts in this Plan are for convenience of reading only and are not meant to be of substantive significance and shall not add to or detract from the meaning of such Article or subpart to which it refers.

10.15 STOCK CERTIFICATES. Notwithstanding anything in the Plan to the contrary, to the extent the Plan provides for the issuance of stock certificates to reflect the issuance of shares of Common Stock or Restricted Stock, the issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange on which the Common Stock is traded.

10.16 FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued and the Committee shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down as appropriate.

ARTICLE XI

COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE

11.1 To the extent the Committee determines that any Award granted under the Plan is subject to Section 409A of the Internal Revenue Code, the Agreement evidencing such Award will incorporate the terms and conditions required by Section 409A of the Internal Revenue Code. To the extent applicable, the Plan and Agreement will be interpreted in accordance with Section 409A of the Internal Revenue Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidelines that may be issued after the Effective Date. Notwithstanding any provisions of the Plan, in the event that following the Effective Date the Committee determines that any Award may be subject to Section 409A of the Internal Revenue Code, the Committee may adopt such amendment to the Plan and/or the applicable Agreement or adopt policies and procedures or take any other action or actions, including an action or amendment with retroactive effect, that the Committee determines is necessary or appropriate to (i) exempt the Award from the application of Section 409A of the Internal Revenue Code or (ii) comply with the requirements of Section 409A of the Internal Revenue Code.

Exhibit 31.1

CERTIFICATIONS

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

I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank Corporation;

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

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

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

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

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

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

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

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

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2007		/ S / F REDERICK C. P ETERS II
		Frederick C. Peters II, Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

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

I have reviewed this quarterly report on Form 10-Q of Bryn Mawr Bank Corporation;

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

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 10, 2007		/ S / J. D UNCAN S MITH
		J. Duncan Smith, Chief Financial Officer

Exhibit 32.1

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

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

In connection with the Quarterly Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick C. Peters II, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/ S / F REDERICK C. P ETERS II

Frederick C. Peters II

Chief Executive Officer

Exhibit 32.2

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

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

In connection with the Quarterly Report of Bryn Mawr Bank Corporation (the “Company”) on Form 10-Q for the period ending March 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Duncan Smith, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

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

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

/ S / J. D UNCAN S MITH

J. Duncan Smith

Chief Financial Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents