LOGO







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LOGO







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Dear Shareholders,



It is a privilege for me to provide you with my 20th annual report on the financial condition of your banking company. Shore
Financial Corporation and its subsidiary, Shore Bank, completed 2004 with record income, record loan growth, and record deposit growth. Your community bank is alive and well on the Delmarva Peninsula, and like the cover of this report, the sun is
rising on both.



Twenty years ago I was fortunate to join many
of you as a shareholder and to become CEO of Shore Savings and Loan Association, a small thrift in a small town on the Eastern Shore of Virginia. Since that time, the Eastern Shore has been discovered by Tidewater Virginia to the south and urban
America to the north. That small thrift has become a $237 million asset commercial banking company traded on the NASDAQ and our shareholders investment has grown twenty fold.



Recently articles in The New York Times and TheWall Street Journal have featured Eastern Shore real
estate, suggesting that our markets have indeed been discovered. As the only independent bank in our Virginia market, Shore Bank capitalized on the vibrant real estate market during 2004 and is poised to continue doing so as the local economy
expands. While enjoying the growth from greater economic activity during 2004, Shore Bank also continued its twenty year trend of gaining market share, becoming the deposit market leader in Northampton County and exceeding 25% deposit market share
in Accomack County. We are pleased that this growth has come in the form of core deposits and not in high priced certificates of deposit and hot money. In Salisbury our banking operation exceeded expectations last year, growing loans and deposits
profitably, while expanding the offerings of our Shore Investments subsidiary. We have targeted 2005 as the year to identify locations for expansion of the banks footprint in the Maryland market.



As we look to the future, prospects for the next twenty years for your
banking company appear to be good. We began last year engrossed in a major construction project intended to support future growth. The new Shore Financial Corporation headquarters was completed under budget in August. The 19,000 square foot facility
will provide a platform for anticipated growth and expansion while putting a burden on near term earnings. It is a clear indication of the confidence that the board of directors has in your company and its ability to build long term shareholder
value.



As a publicly traded company on the NASDAQ National
Stock Market, Shore Financial Corporation common stock is valued in the market daily. Last year the value of a share of our stock increased by approximately 20%, exceeding the NASDAQ Composite Index and the NASDAQ Index of banks under $500 million
in assets. While we are pleased by this market price increase, we remain focused on building real value over the long term, driven by growth in assets, deposits, earnings, and equity.



Please review this 2004 annual report for more details on what was a successful year for your company. I sincerely
appreciate the opportunity to serve you and look forward to your comments at sharvard@shorebank.com.



LOGO

Scott C. Harvard

President and Chief Executive Officer



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FINANCIALHIGHLIGHTS



|                                                                   |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------------------------------ |  | ------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                   |  | Years Ended December 31,              |        
|                                                                   |  | 2004                                  |         |   | 2003 |   |         | 2002 |  |   | 2001    |   |  | 2000 |        
|                                                                   |  | (In thousands, except per share data) |        
|Income Statement Data:                                             |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Interest income                                                    |  | $                                     | 10,697  |   |      | $ | 9,501   |      |  | $ | 9,406   |   |  | $    | 9,917   |   |  | $ | 9,834   |  
|Interest expense                                                   |  |                                       | 3,275   |   |      |   | 3,275   |      |  |   | 3,716   |   |  |      | 4,929   |   |  |   | 5,041   |  
|Net interest income                                                |  |                                       | 7,422   |   |      |   | 6,226   |      |  |   | 5,690   |   |  |      | 4,988   |   |  |   | 4,793   |  
|Provision for loan losses                                          |  |                                       | 419     |   |      |   | 380     |      |  |   | 335     |   |  |      | 310     |   |  |   | 212     |  
|Noninterest income                                                 |  |                                       | 1,920   |   |      |   | 1,889   |      |  |   | 1,375   |   |  |      | 1,251   |   |  |   | 1,013   |  
|Noninterest expense                                                |  |                                       | 5,559   |   |      |   | 4,780   |      |  |   | 4,156   |   |  |      | 3,882   |   |  |   | 3,680   |  
|Income taxes                                                       |  |                                       | 1,011   |   |      |   | 893     |      |  |   | 802     |   |  |      | 616     |   |  |   | 601     |  
|                                                                   |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income                                                         |  | $                                     | 2,353   |   |      | $ | 2,062   |      |  | $ | 1,772   |   |  | $    | 1,431   |   |  | $ | 1,313   |  
|                                                                   |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|                                                                   |  |                                       |         |   |     
|Per Share Data:                                                    |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net incomebasic (3)                                               |  | $                                     | 1.14    |   |      | $ | 1.01    |      |  | $ | 0.87    |   |  | $    | 0.68    |   |  | $ | 0.60    |  
|Net incomedilutive (3)                                            |  |                                       | 1.12    |   |      |   | 1.00    |      |  |   | 0.86    |   |  |      | 0.68    |   |  |   | 0.60    |  
|Cash dividends (3)                                                 |  |                                       | 0.22    |   |      |   | 0.17    |      |  |   | 0.12    |   |  |      | 0.12    |   |  |   | 0.08    |  
|Book value at period end                                           |  |                                       | 10.64   |   |      |   | 9.80    |      |  |   | 10.73   |   |  |      | 9.58    |   |  |   | 8.50    |  
|Tangible book value at period end                                  |  |                                       | 10.39   |   |      |   | 9.51    |      |  |   | 10.35   |   |  |      | 9.56    |   |  |   | 8.48    |  
|Average shares outstanding (000s) (3)                             |  |                                       | 2,062   |   |      |   | 2,037   |      |  |   | 2,034   |   |  |      | 2,083   |   |  |   | 2,190   |  
|                                                                   |  |                                       |         |   |     
|Balance Sheet Data (period end):                                   |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Assets                                                             |  | $                                     | 237,689 |   |      | $ | 196,550 |      |  | $ | 179,993 |   |  | $    | 142,851 |   |  | $ | 139,814 |  
|Loans, net of unearned income and allowance                        |  |                                       | 175,995 |   |      |   | 140,207 |      |  |   | 116,810 |   |  |      | 104,096 |   |  |   | 91,345  |  
|Securities                                                         |  |                                       | 38,972  |   |      |   | 40,611  |      |  |   | 47,183  |   |  |      | 28,058  |   |  |   | 38,751  |  
|Deposits                                                           |  |                                       | 192,737 |   |      |   | 158,891 |      |  |   | 158,989 |   |  |      | 125,314 |   |  |   | 115,890 |  
|Stockholders equity                                               |  |                                       | 21,959  |   |      |   | 20,201  |      |  |   | 18,218  |   |  |      | 16,261  |   |  |   | 15,436  |  
|                                                                   |  |                                       |         |   |     
|Performance Ratios:                                                |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Return on average assets                                           |  |                                       | 1.08    | % |      |   | 1.11    | %    |  |   | 1.12    | % |  |      | 1.02    | % |  |   | 0.99    | %
|Return on average equity                                           |  |                                       | 11.01   | % |      |   | 10.64   | %    |  |   | 10.31   | % |  |      | 9.08    | % |  |   | 9.04    | %
|Net interest margin                                                |  |                                       | 3.72    | % |      |   | 3.63    | %    |  |   | 3.82    | % |  |      | 3.77    | % |  |   | 3.85    | %
|Efficiency (1)                                                     |  |                                       | 59.47   | % |      |   | 59.70   | %    |  |   | 59.01   | % |  |      | 62.45   | % |  |   | 63.48   | %
|                                                                   |  |                                       |         |   |     
|Asset Quality Ratios:                                              |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Allowance for loan losses to period end loans                      |  |                                       | 1.35    | % |      |   | 1.41    | %    |  |   | 1.35    | % |  |      | 1.26    | % |  |   | 1.44    | %
|Allowance for loan losses to nonaccrual loans                      |  |                                       | 253.05  | % |      |   | 362.68  | %    |  |   | 182.37  | % |  |      | 248.78  | % |  |   | 105.95  | %
|Nonperforming assets to period end loans and foreclosed properties |  |                                       | 0.53    | % |      |   | 0.39    | %    |  |   | 0.74    | % |  |      | 0.51    | % |  |   | 1.37    | %
|Net charge-offs (recoveries) to average loans                      |  |                                       | 0.01    | % |      |   | (0.01   | )%   |  |   | 0.05    | % |  |      | 0.33    | % |  |   | 0.04    | %
|                                                                   |  |                                       |         |   |     
|Capital and Liquidity Ratios:                                      |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Leverage (2)                                                       |  |                                       | 9.24    | % |      |   | 10.28   | %    |  |   | 10.12   | % |  |      | 11.38   | % |  |   | 11.04   | %
|Risk-based:                                                        |  |                                       |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Tier 1 capital                                                     |  |                                       | 12.74   | % |      |   | 14.37   | %    |  |   | 15.02   | % |  |      | 15.67   | % |  |   | 17.24   | %
|Total capital                                                      |  |                                       | 14.14   | % |      |   | 15.74   | %    |  |   | 16.24   | % |  |      | 16.89   | % |  |   | 18.46   | %
|Average loans to average deposits                                  |  |                                       | 87.60   | % |      |   | 79.78   | %    |  |   | 80.56   | % |  |      | 78.33   | % |  |   | 77.43   | %

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|(1) | Computed by dividing noninterest expense, net of nonrecurring expenses, by the sum of net interest income and noninterest income, net of security gains and losses.
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|(2) | Computed as a percentage of stockholders equity to period end assets.
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|(3) | Earnings per share, dividends per share and average share data adjusted in periods prior to 2004 to reflect 20% stock dividend paid by the Company during December 2003.
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Directors and Officers



SHORE FINANCIAL

CORPORATION



BOARD OF DIRECTORS



Henry P. Custis, Jr., Chairman

Law firm
of Custis, Lewis & Dix, L.L.P.



Terrell E. Boothe

Retired



The Honorable D. Page Elmore

Maryland House of Delegates



Scott C. Harvard

President & Chief Executive Officer

Shore Financial Corporation and Shore Bank



Richard F. Hall, III

Loblolly Farms

Seaside Produce



Dr. Lloyd J. Kellam, III

Eastern Shore Physicians and Surgeons



L. Dixon Leatherbury

Leatherbury Equipment Company

Wakefield Equipment Company



OFFICERS



Scott C. Harvard

President & Chief Executive Officer



Steven M. Belote

Vice President, Chief Financial Officer and Secretary



Vonda M. Smith

Assistant Secretary



SHORE BANK



OFFICERS



Scott C. Harvard

President & Chief Executive Officer



Steven M. Belote

Senior Vice President and Chief Financial Officer



J. Anderson Duer, Jr.

Senior Vice PresidentLending



Brenda P. Wallace

Senior Vice PresidentOperations



Craig H. McConnell

President, Maryland Division



Vonda M. Smith

Corporate Secretary



Natalie N. Binder

Vice President



Tammy V. Mason

Vice President



J. Scott Schreiber

Vice President



Donna E. Weaver

Vice President



Dennis J. Hebert

Vice President/Maryland Division



Jacqueline L. Carpenter

Assistant Vice President



William H. Deckert, III

Assistant Vice President



Anne H. J.
Dize

Assistant Vice President



Christine R. Gray

Assistant Vice President



Claire I. Hoff

Assistant Vice President



Martha H.
James

Assistant Vice President



Dawn M. Steelman

Assistant Vice President



Jane O. Wyatt

Assistant Vice President





SALISBURY BOARD OF DIRECTORS



John J. Evans, CPA, Chairman

Holloway & Marval, P.A.



Edward E. Henry

Retired



Craig H. McConnell

President, Maryland Division



Billye Lee
Sarbanes

Retired



John Charles Seipp

Attorney & Counselor at Law



Donald E. Williams

Advanced Property Rental



Dr. Donald Wood

Peninsula Cardiology Associates, P.A.







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Corporate Information



CORPORATE HEADQUARTERS



25020 Shore Parkway

Onley, Virginia 23418

(757) 787-1335

Fax (757) 787-3275



BRANCH LOCATIONS



25253 Lankford Highway

Onley, VA 23418



18426 Dunne Avenue

Parksley, Virginia 23421



6350 Maddox Boulevard

Chincoteague, Virginia 23336



21220 North Bayside Drive

Cheriton, Virginia 23316



4017 Lankford Highway

Exmore, Virginia 23350



1503 South Salisbury Boulevard

Salisbury, Maryland 21801



100 West Main Street

Salisbury, Maryland 21801



SHORE INVESTMENTS, INC.



OFFICES



25253 Lankford Highway

Onley, Virginia 23418



100 West Main Street

Salisbury, Maryland 21801



TRANSFER AGENT



Fulton Financial Services

One Penn Square

Lancaster, Pennsylvania 17604



SPECIAL COUNSEL



LeClair Ryan

707 East Main Street, 11thFloor

Richmond, Virginia 23219



INVESTOR INFORMATION



Lynn M. Badger

Shore Financial Corporation

P. O. Box 920

Onley, Virginia 23418

(757) 787-1335

investorinfo@shorebank.com



MEMBER



Federal Deposit Insurance Corporation

Federal
Reserve System



INDEPENDENT AUDITORS



Goodman & Company, LLP

One Commercial Place, Suite 800

Norfolk, Virginia 23514



INTERNET



Web site: www.shorebank.com

Address: shorebank.com



ANNUAL MEETING



The annual meeting of the stockholders of Shore Financial Corporation will be held at its headquarters in Onley, Virginia on Tuesday, April
19, 2005 at 2:00 p.m.



SECURITIES LISTING



The Companys shares are traded on the NASDAQ National Stock Market under ticker symbol
SHBK.



MARKET PARTICIPANTS



Anderson & Strudwick, Inc.



Boenning & Scattergood, Inc.



Davenport & Company, LLC



Ferris, Baker Watts, Incorporated



Hill Thompson Magid, L.P.



Knight Equity markets, L.P.



Koonce
Securities, Inc.



McKinnon & Company, Inc.



RBC Capital Markets Corporation



Sandler ONeill & Partners, L.P.



Schwab Capital Markets, L.P.



Scott & Stringfellow, Inc.



Susquehanna Capital Group





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BRANCH LOCATIONS



|                                                                                        |  |                                                                        |  |                                                                         
|--------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------------------------
|VIRGINIA                                                                               
|                                                                                        |  |                                                                       
|Onley Branch 25253 Lankford Hwy. Onley, Virginia 23418 (757) 787-1335 or (800) 852-8176 |  | Exmore Branch 4071 Lankford Hwy. Exmore, Virginia 23350 (757) 442-3911 |  | Parksley Branch 18426 Dunne Ave. Parksley, Virginia 23421 (757) 665-4188

| |  |                                                                                   |  |                                                                              |  | 
| |  | --------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- |  | 
| |  |                                                                                   | 
| |  | Chincoteague Branch 6350 Maddox Blvd. Chincoteague, Virginia 23336 (757) 336-3144 |  | Cheriton Branch 21220 N. Bayside Dr. Cheriton, Virginia 23316 (757) 331-3800 |  | 



|         |  |  |  | 
|-------- |  |  |  | 
|MARYLAND

|                                                                                          |  |                                                                                              
|----------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------
|                                                                                          | 
|Salisbury Route 13 Branch 1503 S Salisbury Blvd. Salisbury, Maryland 21801 (410) 543-2600 |  | Salisbury Downtown Plaza Branch 100 West Main Street Salisbury, Maryland 21801 (410) 548-7125



CORPORATE HEADQUARTERS



LOGO



25020 Shore Parkway  Onley,
Virginia 23418

(757) 787-1335 or (800) 852-8176





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LOGO