U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-QSB


  X     QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------  ACT OF 1934
             For the quarterly period ended March 31, 1999

        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
------  ACT OF 1934
             For the transition period from _________ to _________

                        Commission file number 000-23847

                          SHORE FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

        Virginia                                             54-1873994
--------------------------                                ----------------
(State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                        Identification Number)

   25253 Lankford Highway
    Onley, Virginia                                             23418
-------------------------                                     ----------
  (Address of Principal                                       (Zip Code)
  Executive Offices)


                    Issuer's telephone number: (757) 787-1335


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court. Yes ___ No ___

Number of shares of Common Stock outstanding as of May 13, 1999:  1,810,812

Transitional Small Business Disclosure Format:  Yes_______  No   X




<PAGE>



                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                               Index - Form 10-QSB

                         PART I - FINANCIAL INFORMATION

      Item 1 - Consolidated Financial Statements (Unaudited)

                  Consolidated Balance Sheets as of March 31, 1999 and
                  December 31, 1998

                  Consolidated Statements of Income for the Three Months
                  Ended March 31, 1999 and 1998

                  Consolidated Statements of Cash Flows for the Three Months
                  Ended March 31, 1999 and 1998

                  Consolidated Statement of Stockholders' Equity for the Three
                  Months Ended March 31, 1999

                  Notes to Unaudited Consolidated Financial Statements

      Item 2 - Management's Discussion and Analysis of Financial Condition
                  and Results of Operations

                  Results of Operations

                  Financial Condition

                  Asset Quality

                  Liquidity and Capital Resources

                  Interest Sensitivity

                  Impact of Accounting Pronouncements

                  Year 2000 Project

                           PART II - OTHER INFORMATION
      Item 1 - Legal Proceedings
      Item 2 - Changes in Securities
      Item 3 - Defaults Upon Senior Securities
      Item 4 - Submission of Matters to Vote of Security Holders
      Item 5 - Other Information
      Item 6 - Exhibits and Reports on Form 8-K

                                   SIGNATURES
<PAGE>



                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                 Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                               March 31,      December 31,
                                                                 1999             1998
----------------------------------------------------------------------------------------------------
                                                              (Unaudited)
                               ASSETS
<S> <C>

Cash (including interest - earning deposits of
     approximately $3,549,000 and $1,442,000, respectively)   $  5,406,008   $  3,900,861
Investment securities:
     Held to maturity (fair value of $1,184,000 and
        $3,702,000, respectively)                                1,183,676      3,696,685
     Available for sale (amortized cost of $28,513,000 and
        $27,836,000, respectively)                              28,723,006     28,352,312
Investment in Federal Home Loan Bank stock,
     at cost                                                       580,500        580,500
Investment in Federal Reserve Bank stock, at cost                  124,800        124,800
Loans receivable, net                                           84,388,432     79,659,005
Premises and equipment, net                                      2,458,667      2,308,181
Real estate owned                                                   71,178         49,177
Accrued interest receivable                                      1,008,394      1,023,522
Prepaid expenses and other assets                                  334,446        252,805
                                  ----------------------------------------------------------------------

                                                              $124,279,107   $119,947,848
                                  ----------------------------------------------------------------------

                LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                      $108,590,736   $104,308,906
Advances from Federal Home Loan Bank                             1,072,635      1,073,853
Advance payments by borrowers for taxes
     and insurance                                                 332,100        205,815
Accrued interest payable                                            47,871         37,292
Accrued expenses and other liabilities                             436,340        533,195
                                  ----------------------------------------------------------------------
          Total liabilities                                    110,479,682    106,159,061
                                  ----------------------------------------------------------------------

Stockholders' equity
     Preferred stock, par value $1 per share, 500,000
        shares authorized; none issued and
        outstanding                                                   --             --
     Common stock, par value $.33 per share, 5,000,000
        shares authorized; 1,810,812 shares issued and
        outstanding                                                597,568        597,568
     Additional capital                                          3,584,652      3,584,652
     Retained earnings, substantially restricted                 9,487,905      9,265,567
     Accumulated other comprehensive income                        129,300        341,000
                                  ----------------------------------------------------------------------
          Total stockholders' equity                            13,799,425     13,788,787
                                  ----------------------------------------------------------------------

                                                              $124,279,107   $119,947,848
                                  ======================================================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.




<PAGE>

                        SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                            Consolidated Statements of Income


<TABLE>
<CAPTION>

                                                         Three Months Ended March 31,
                                                    -----------------------------------------
                                                           1999               1998
-------------------------------------------------------------------------------------------
<S> <C>

Interest income
     Loans                                              $    1,725,532      $    1,673,162
     Investments                                               440,889             424,536
                                                    ---------------------------------------
        Total interest income                                2,166,421           2,097,698
                                                    ---------------------------------------

Interest expense
     Deposits                                                1,090,514           1,072,596
     FHLB advances                                              18,420                 546
                                                    ---------------------------------------
        Total interest expense                               1,108,934           1,073,142
                                                    ---------------------------------------

Net interest income                                          1,057,487           1,024,556

Provision for loan losses                                       58,300              36,300
                                                    ---------------------------------------

Net interest income after
     provision for loan losses                                 999,187             988,256
                                                    ---------------------------------------

Noninterest income
     Deposit account fees                                      158,635             117,268
     Loan fees                                                  41,603              32,185
     Other                                                      48,614              56,510
                                                    ---------------------------------------
        Total noninterest income                               248,852             205,963
                                                    ---------------------------------------

Noninterest expense
     Compensation and employee
        benefits                                               310,088             324,532
     Occupancy and equipment                                   168,974             159,237
     Advertising                                                13,027              15,664
     Data processing                                           120,445             110,984
     Federal insurance premium                                  15,345              15,212
     Other                                                      91,265              82,180
                                                    ---------------------------------------
        Total noninterest expense                              719,144             707,809
                                                    ---------------------------------------

Income before income taxes                                     528,895             486,410

Income taxes                                                   179,800             180,000
                                                    ---------------------------------------

Net income                                              $      349,095      $      306,410
                                                    =======================================


Earnings Per Common Share:
        Basic                                           $         0.19      $         0.17
                                                    =======================================

        Diluted                                         $         0.19      $         0.17
                                                    =======================================
</TABLE>


   The accompanying notes are an integral part of these financial statements.



<PAGE>

                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>

Three Months Ended March 31, 1999
------------------------------------------------------------------------------------------------------------------------------

                                                                                             Accumulated
                                                                                                Other
                                              Common       Additional      Retained        Comprehensive
                                              Stock         Capital        Earnings           Income              Total
                                          --------------- --------------  --------------  ------------------  ----------------
<S> <C>
Balance, December 31, 1998                       597,568      3,584,652       9,265,567             341,000        13,788,787

Common stock dividend declared                         -              -        (126,757)                  -          (126,757)

Comprehensive income                                   -              -         349,095            (211,700)          137,395
                                          ------------------------------------------------------------------------------------

Balance, March 31, 1999                    $     597,568   $  3,584,652    $  9,487,905    $        129,300    $   13,799,425
                                          ====================================================================================
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>



                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                             Three Months Ended March 31,
                                                                          ------------------------------------
                                                                                 1999              1998
--------------------------------------------------------------------------------------------- ----------------
<S> <C>
Cash flows from operating activities
     Net income                                                            $         349,095   $      306,410
     Adjustments to reconcile to net cash
        provided by operating activities:
          Provision for loan losses                                                   58,300           36,300
          Depreciation and amortization                                               65,729           68,966
          Amortization of premium and accretion
             of discount on securities, net                                           (1,081)            (669)
          Gain on sale of securities                                                 (16,243)         (27,676)
          Loss on sale of premises and
             equipment                                                                     -            1,146
          Change in net deferred loan fees                                           (26,939)         (32,753)
          Loss  on sale of repossessed assets                                              -            2,450
          (Increase) decrease in other assets                                        (68,622)          36,012
          Increase in other liabilities                                              149,109          200,572
                                                                          ------------------------------------
             Net cash provided by operating activities                               509,348          590,758
                                                                          ------------------------------------

Cash flows from investing activities
     Purchase of available-for-sale securities                                    (3,467,654)      (5,182,609)
     Proceeds from maturities and sales of
        available-for-sale securities                                              2,785,000        3,885,502
     Purchase of held-to-maturity securities                                               -                -
     Proceeds from maturities of held-to-maturity
        securities                                                                 2,521,493          500,000
     Loan origination, net of repayments                                          (4,782,789)      (1,476,575)
     Proceeds from sale of premises and equipment                                          -            1,844
     Purchase of premises and equipment                                             (214,106)        (121,056)
     Proceeds from sale of real estate owned                                               -            1,331
                                                                          ------------------------------------
             Net cash used by investing activities                                (3,158,056)      (2,391,563)
                                                                          ------------------------------------

Cash flows from financing activities
     Net increase in demand deposits                                               3,065,762        3,161,691
     Net increase in time deposits                                                 1,216,068          276,562
     Proceeds from FHLB advances                                                   1,800,000                -
     Repayments of FHLB advances                                                  (1,801,218)          (1,147)
     Payment of dividend on common stock                                            (126,757)               -
                                                                          ------------------------------------
             Net cash provided by financing activities                             4,153,855        3,437,106
                                                                          ------------------------------------

Increase (decrease) in cash and cash equivalents                                   1,505,147        1,636,301

Cash and cash equivalents, beginning of period                                     3,900,861        4,190,551
                                                                          ------------------------------------

Cash and cash equivalents, end of period                                   $       5,406,008   $    5,826,852
                                                                          ====================================


Supplemental disclosure of cash flow information

     Cash paid during the period for interest                              $       1,098,355   $    1,038,867
     Cash paid for income taxes                                            $         142,000   $      190,114


Supplemental schedule of non-cash investing and
     financing activities

     Transfers from loans to real estate acquired
        through foreclosure                                                $          22,001   $            -

</TABLE>

   The accompanying notes are an integral part of these financial statements.





<PAGE>




                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
              Notes to Unaudited Consolidated Financial Statements

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying  unaudited consolidated financial statements of Shore Financial
Corporation and Subsidiary (the "Company") have been prepared in accordance with
generally accepted  accounting  principles ("GAAP") and with the instructions to
Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,  they do not include
all of the  information  and footnotes  required by GAAP for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  accruals)  necessary  for a fair  presentation  of  the  consolidated
financial statements have been included.

In preparing the  consolidated  financial  statements  in conformity  with GAAP,
management is required to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. Actual
results  could  differ  from  those  estimates.   The  consolidated  results  of
operations  and other data for the three month  period  ended March 31, 1999 are
not  necessarily  indicative  of the results  that may be expected for any other
interim  period or the entire year  ending  December  31,  1999.  The  unaudited
consolidated financial statements presented herein should be read in conjunction
with the audited consolidated  financial statements and related notes thereto in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998.


<PAGE>


Principles of Consolidation

The  consolidated  financial  statements  of the Company  include and  primarily
consist of the accounts of its wholly-owned  subsidiary Shore Bank (the "Bank").
All significant  intercompany  balances and transactions have been eliminated in
consolidation.


NOTE 2 - ORGANIZATION

The Company is a Virginia  corporation  organized in September  1997 by the Bank
for the purpose of becoming a unitary  holding  company of the Bank. The Company
became a unitary holding company of the Bank on March 16, 1998. The business and
management of the Company  consists of the business and  management of the Bank.
The Bank became a Virginia chartered, Federal Reserve member, commercial bank on
March 31, 1998. Prior to that the Bank was a federally  chartered  savings bank.
The  Company  and the Bank are  headquartered  on the  Eastern  Shore in  Onley,
Virginia.



<PAGE>



NOTE 3 - EARNINGS PER SHARE

The following is an unaudited  reconciliation of the numerators and denominators
of the basic and diluted  earnings per share  computations for the periods ended
March 31, 1999 and 1998.



<TABLE>
<CAPTION>



                                                        Three Months Ended March 31,
                                                      -------------------------------------
                                                            1999              1998
                                                         ------------     --------------

<S> <C>
Net income (numerator, basic and diluted)              $     349,095    $       306,410
Weighted average shares outstanding
(denominator)                                              1,810,812          1,804,812
                                                         ------------     --------------

Earnings per common share - basic                      $        0.19    $          0.17
                                                         ============     ==============

Effect of dilutive securities:

Weighted average shares outstanding                        1,810,812          1,804,812
Effect of stock options                                       15,585             20,640
                                                         ------------     --------------
Diluted average shares outstanding
(denominator)                                              1,826,397          1,825,452
                                                         ------------     --------------

Earnings per common share -
assuming dilution                                      $        0.19    $          0.17
                                                         ============     ==============


</TABLE>



NOTE 4 - COMPREHENSIVE INCOME

Total comprehensive  income consists of the following for the three months ended
March 31, 1999 and 1998:


Shore Financial Corporation
Comprehensive Income



                                   Three Months Ended March 31,
                                 ---------------------------------
                                      1999            1998
                                 ---------------  ----------------

Net income                        $     349,095    $      306,410
Other comprehensive income             (211,700)           11,200
                                    ------------     -------------

Total comprehensive income        $     137,395    $      317,610
                                    ============     =============





<PAGE>



The  following  is an  unaudited  reconciliation  of  the  related  tax  effects
allocated to each component of other comprehensive  income at March 31, 1999 and
1998.



                                             Three Months Ended March 31,
                                            --------------------------------
                                                1999            1998
                                            --------------  ----------------

Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
      arising during the period             $    (304,600)   $       45,500
Less: reclassification adjustment
      for gains (losses) included in income        16,200            27,700
                                              --------------   -------------

Total other comprehensice income (loss)
     before income tax expense                   (320,800)           17,800

Income tax (expense) benefit                      109,100            (6,600)
                                              --------------   -------------

Net unrealized gains (losses)               $    (211,700)   $       11,200
                                              ==============   =============



NOTE 5 - STOCKHOLDERS' EQUITY

During the period ended March 31, 1999,  the Company  declared a $0.07 per share
cash dividend paid on March 21, 1999 to all  shareholders  of record on March 1,
1999.  The  dividend  totaled  approximately  $127,000,  or 10% of  1998  annual
earnings.


NOTE 6 - FEDERAL HOME LOAN BANK ADVANCES

During the three  months ended March 31, 1999,  the Bank  borrowed  $1.0 million
from the  Federal  Home Loan Bank to fund  fixed  rate loans with terms of up to
fifteen years. The repayment terms of the borrowing call for quarterly principal
and interest payments for fifteen years at a 5.55% annual rate of interest.  The
borrowing will be  collateralized  by specific fifteen year fixed rate loans and
the Bank is subject to a penalty if it prepays the borrowing.


<PAGE>



Item 2 - Management's Discussion and Analysis of
        Consolidated Financial Condition and Results of Operations

Results of Operations

General

Net income for the three  months  ended March 31,  1999  increased  $43,000,  or
14.0%,  to  $349,100,  compared to net income of $306,400 for the same period in
the prior year.  Earnings were positively impacted during the March 1999 quarter
by a 20.8%  increase in  noninterest  income and a 3.3% increase in net interest
income as compared to the March 1998 period.  Additionally,  noninterest expense
remained  relatively  flat with an increase of 1.6% over the March 1998  period.
Earnings  for the March  1998  quarter  include  approximately  $60,000  in cost
associated  with  operating  the newest  branch  office,  located in  Salisbury,
Maryland,  which opened in November  1997.  This branch  operated at  break-even
during the three months ended March 31, 1999.

Net Interest Income

Net interest income increased  $33,000 for the three months ended March 31, 1999
as  compared  to the same  period  in 1998.  This  increase  occurred  despite a
decrease  in net  interest  margin to 3.88%  during  the March  1999  quarter as
compared to 3.96% for the March 1998 period.  The interest rate spread decreased
to 3.24% for the three months ended March 31, 1999, as compared to 3.36% for the
1998 three month period. The interest rate spread does not reflect the impact of
noninterest-bearing  deposits on the Bank's cost of funds and the  corresponding
net  interest  spread.  Noninterest-bearing  demand  deposits  increased to $8.5
million at March 31, 1999 as compared $6.5 million at March 31, 1998.  Including
average noninterest-bearing deposits in calculating the cost of funds results in
an interest  rate spread of 3.55% for the three  months  ended March 31, 1999 as
compared to 3.66% for the same period in 1998.  This  comparison more accurately
reflects how management  evaluates the Bank's cost of funds and makes  decisions
regarding  deposit  pricing.  Decreases in net interest  margin and net interest
spread for the three months ended March 31, 1999 reflect the lower interest rate
environment  in existence  during the March 1999 quarter as compared to the same
period of 1998.

Interest income  increased  $69,000 for the three months ended March 31, 1999 as
compared  to the same period in 1998.  The  increase  resulted  from the average
balance of loans  increasing by $8.1 during the period,  primarily in commercial
and consumer lending and home equity lines. Additionally, the average balance of
securities  increased by $1.8  million.  Although  outstanding  loans  increased
significantly  during the period,  lower interest rates caused a decrease in the
yield on loans to 8.33% for the three months ended March 31, 1999 as compared to
8.94% for the 1998 period.

Interest expense  increased $36,000 for the three months ended March 31, 1999 as
compared  to the same  period  in  1998.  This is due  average  interest-bearing
liabilities  increasing by $9.3 million  during the quarter ended March 31, 1999
as compared to the same period of 1998.  This  increase was offset by a decrease
in the average rate on interest-bearing  liabilities from 4.76% in 1998 to 4.46%
for the March 1999 period.  An increased  emphasis on  attracting  lower costing
interest-bearing  and   noninterest-bearing   commercial  and  consumer  deposit
relationships  and a lower  interest rate  environment  have  contributed to the
lower deposit rates.




<PAGE>


The  following  table  illustrates  average  balances of total  interest-earning
assets and total interest-bearing liabilities for the periods indicated, showing
the average  distribution of assets,  liabilities,  stockholders' equity and the
related income, expense and corresponding weighted average yields and costs. The
average balances used in these tables and other statistical data were calculated
using daily averages.

             Average Balances, Income and Expenses, Yields and Rates

<TABLE>
<CAPTION>

                                                              Three Months Ended March 31,
                                          ---------------------------------------------------------------------
                                                         1999                              1998
                                          ----------------------------------- ---------------------------------
                                           Average     Income/      Yield/     Average     Income/    Yield/
                                           Balance     Expense       Rate      Balance     Expense     Rate
                                          ----------  -----------  ---------- ----------  ---------- ----------
<S> <C>
Assets:
        Securities (1)                      $30,873         $483       6.26%    $25,661        $386      6.02%
        Loans (net of unearned income):
             Real Estate Mortgage            44,505          887       7.97%     47,829       1,038      8.68%
             Real Estate Construction         1,536           31       8.00%      1,119          23      8.22%
             Commercial                      23,641          519       8.78%     15,410         358      9.29%
             Home Equity Lines                5,633          121       8.62%      5,449         130      9.54%
             Consumer                         7,530          167       8.84%      4,974         123      9.89%
                                          ----------  -----------             ----------  ----------
                    Total loans              82,845        1,725       8.33%     74,781       1,672      8.94%
                                          ----------  -----------             ----------  ----------
        Federal funds sold                        0            0       0.00%          0           0      0.00%
        Interest-bearing deposits
             in other banks                   2,482           28       4.51%      2,874          39      5.43%
                                          ----------  -----------             ----------  ----------
                  Total earning assets      116,200        2,236       7.70%    103,316       2,097      8.12%
                                          ----------  -----------             ----------  ----------
        Less: allowance for loan losses        (923)                               (765)
        Total nonearning assets               6,620                               6,980
                                          ----------                          ----------
        Total assets                       $121,897                            $109,531
                                          ==========                          ==========

Liabilities
        Interest-bearing deposits:
             Checking and savings           $29,701         $190       2.56%    $20,832        $122      2.34%
             Time deposits                   68,292          901       5.28%     69,188         950      5.49%
                                          ----------  -----------             ----------  ----------

                  Total interest-bearing
                       deposits              97,993        1,091       4.45%     90,020       1,072      4.76%

        FHLB advances                         1,436           18       5.01%         74           1      3.00%
                                          ----------  -----------             ----------  ----------
                  Total interest-bearing
                    liabilities              99,429        1,109       4.46%     90,094       1,073      4.76%
                                                      -----------                         ----------
        Non-interest bearing liabilities:
             Demand deposits                  7,515                               6,200
             Other liabilities                1,128                                 719
                                          ----------                          ----------

        Total liabilities                   108,072                              97,013
        Stockholders' equity                 13,825                              12,518
                                          ----------                          ----------

        Total liabilities and stockholders'
             equity                        $121,897                            $109,531
                                          ==========                          ==========

        Net interest income                               $1,127                             $1,024
                                                      ===========                         ==========

        Interest rate spread (1)                                       3.24%                             3.36%
        Net interest margin (1)                                        3.88%                             3.96%

          (1) Tax equivalent basis.
</TABLE>


Noninterest Income

Noninterest  income was $249,000 during the three months ended March 31, 1999 as
compared  to  $206,000  for the same  period in 1998,  an increase of $43,000 or
20.8%.  Increases in deposit account and loan fees resulting from the additional
commercial and consumer  relationships  obtained  during the period  contributed
significantly to this increase in income.

Noninterest Expense

Noninterest expense was $719,000 during the three months ended March 31, 1999 as
compared  to  $708,000  for the same  period in 1998,  an increase of $11,000 or
1.6%.  This  relatively  nominal  increase  was  primarily  due to cost  control
measures implemented during the later part of 1998 and a significant increase in
loan  activity  during the March 1999 period that caused an increase in expenses
deferred and amortized over the life of the loans.


<PAGE>



Financial Condition

During the three months ended March 31, 1999,  the Company  increased its assets
$4.4 million from $119.9  million at December  31,  1998,  to $124.3  million at
March 31, 1999.  This  increase  was due  primarily to increases in net loans of
$4.7 million. Consolidation and other changes in the local banking market during
1998 created increased lending  opportunities for the Bank. These  opportunities
along with a lower interest rate environment have continued to positively affect
loan demand through the first quarter of 1999. Additionally, continued growth in
the Bank's Maryland market has improved lending activity.  Increased loan demand
more  than  offset  the $4.3  million  in  deposit  growth  during  the  period.
Securities and interest-earning deposits were flat during the period.

Deposits  increased  $4.3 million  during the three months ended March 31, 1999.
The increase was due primarily to growth in demand deposit accounts.  During the
period,  the Bank  borrowed $1.0 million from the Federal Home Loan Bank to fund
fixed rate loans with terms of up to fifteen years.  Approximately  $1.0 million
of short-term  Federal Home Loan Bank advances  outstanding at December 31, 1998
were paid during the period.

Stockholders'  equity  remained  relatively  flat at $13.8 million for the three
months ended March 31, 1999. Net income of $349,000 for the period was offset by
the $127,000 common stock dividend  declared and reductions in unrealized  gains
on available-for-sale securities.

Asset Quality

Loans are placed on nonaccrual  status when, in the judgment of management,  the
probability  of collection of interest is deemed to be  insufficient  to warrant
further  accrual or the loan  reaches  90 days  delinquent  whereby  the loan no
longer accrues interest.

Total  nonperforming  assets,  which consist of nonaccrual  loans and foreclosed
properties,  adjusted  for  estimated  losses upon sale and the related  selling
expenses  and  holding  costs,  were  $685,000  at March 31,  1999,  compared to
$717,000 at December  31, 1998.  As to  nonaccrual  loans  existing at March 31,
1999, approximately $20,000 of interest income would have been recognized during
the three months then ended if interest thereon had accrued.

At March 31, 1999, all loans 60 days or more delinquent, including nonperforming
loans,  totaled  $971,000.  Performing loans totaling $595,000 existed that have
possible  credit  problems  and  cause  management  to have  concerns  about the
borrowers  continuing  ability to comply with existing repayment terms. Loans in
this  category,  along  with the  delinquent  loans,  are  subject  to  constant
management attention, and their status is reviewed on a regular basis.


<PAGE>



The  following  table details  information  concerning  nonaccrual  and past due
loans, as well as foreclosed assets.




                                         Nonperforming Assets


                                            March 31,              December 31,
                                               1999                 1998
                                          ---------------     -----------------

Nonaccrual loans:
      Commercial                        $              0    $                0
      Real Estate Construction                         0                     0
      Real Estate Mortgage                           590                   555
      Home equity lines of credit                      0                     0
      Consumer                                        24                   113
                                          ---------------     -----------------

      Total nonaccrual loans                         614                   668
Other real estate owned                               71                    49
                                          ---------------     -----------------

      Total nonperforming assets        $            685    $              717
                                          ===============     =================

Loans past due 90 or more days
      accruing interest                               $0                    $0
Allowance for loan losses to
      nonaccrual loans                           154.89%               137.72%
Nonperforming assets to period end
      loans and other real estate owned            0.80%                 0.89%







<PAGE>



Set forth  below is a table  detailing  the  allowance  for loan  losses for the
periods indicated.


                                       Allowance for Loan Losses


                                           Three Months Ended March 31,
                                       -------------------------------------
                                            1999                 1998
                                       ---------------     -----------------

Balance, beginning of period         $            920    $              770
Loans charged off:
      Commercial                                    0                    26
      Real estate construction                      0                     0
      Real estate mortgage                         14                     0
      Home equity lines of credit                   0                     0
      Consumer                                     21                     8
                                       ---------------     -----------------

      Total loans charged-off                      35                    34
                                       ---------------     -----------------

Recoveries:
      Commercial                                    0                     0
      Real estate construction                      0                     0
      Real estate mortgage                          0                     0
      Home equity lines of credit                   0                     0
      Consumer                                      8                     3
                                       ---------------     -----------------

      Total recoveries                              8                     3
                                       ---------------     -----------------

Net charge-offs                                   (27)                  (31)
Provision for loan losses                          58                    36
                                       ---------------     -----------------

Balance, end of period               $            951    $              775
                                       ===============     =================

Allowance for loan losses to loans
      outstanding at end of period              1.11%                 1.03%

Allowance for loan losses to nonaccrual
      loans outstanding at end of period      154.89%               119.97%

Net charge-offs to average loans
      outstanding during period                -0.03%                -0.04%









<PAGE>



Liquidity and Capital Resources

Liquidity  represents the Bank's ability to meet present and future  obligations
through  the  sale  and  maturity  of  existing  assets  or the  acquisition  of
additional  funds through  liability  management.  Liquid  assets  include cash,
interest-bearing  deposits with banks,  federal  funds sold,  available-for-sale
investments  and  investments  and loans  maturing  within one year.  The Bank's
ability to obtain deposits and purchase funds at favorable rates  determines its
liability liquidity.

At March 31, 1999, the Bank had outstanding loan and line of credit  commitments
of $10.7 million.  Scheduled  maturities of  certificate of deposits  during the
twelve months following March 31, 1999 amounted to $45.3 million.  Historically,
the Bank has been able to retain a significant  amount of their deposits as they
mature. As a result of the Bank's management of liquid assets and the ability to
generate liquidity through liability funding,  management believes that the Bank
maintains  overall  liquidity  that is  sufficient  to satisfy  its  depositor's
requirements and meet its customers' credit needs.

Total cash and cash  equivalents  increased  $1.5  million for the three  months
ended  March 31,  1999,  compared  to a increase  of $1.6  million for the three
months  ended March 31, 1998.  Net cash  provided by  operating  activities  was
$509,000 for the three months ended March 31, 1999,  compared to $591,000 during
the same period in 1998. The  fluctuations  in amounts during these periods were
primarily the result of normal operating activities.

Net cash used in investing  activities  was $3.2 million during the three months
ended March 31, 1999,  compared to $2.4 million for the three months ended March
31, 1998.  The  fluctuations  in amounts during these periods were primarily the
result of increased  loan growth offset by  maturities of investment  securities
during the three months ended March 31, 1999,  as compared to the same period of
1998.

Net cash provided by financing  activities was $4.2 million for the three months
ended March 31, 1999,  compared to $3.4 million for the three months ended March
31, 1998.  The  fluctuations  in amounts during these periods were primarily the
result of increased  deposit growth during the March 1999 quarter as compared to
the March 1998 period.

The Company is subject to various regulatory capital  requirements  administered
by the federal banking  agencies.  Failure to meet minimum capital  requirements
can initiate certain mandatory and possibly additional  discretionary actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Company's  financial  statements.  Under  capital  adequacy  guidelines  and the
regulatory  framework for prompt corrective  action, the Company and its Banking
Subsidiary  must meet  specific  capital  guidelines  that involve  quantitative
measures  of  assets,  liabilities,   and  certain  off-balance-sheet  items  as
calculated  under  regulatory  accounting  practices.  The  capital  amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company and its Banking  Subsidiary to maintain  minimum amounts and
ratios  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as  defined).  At March 31,  1999,  that the  Company  meets all capital
adequacy requirements to which it is subject.



<PAGE>


The  following  table  details the  components  of Tier 1 and Tier 2 capital and
related ratios at March 31, 1999.


                                             Analysis of Capital

                                             March 31,    December 31,
                                               1999          1998
                                        -------------- -----------------

Tier 1 Capital:
        Common stock                     $     598    $       598
        Additional paid-in capital           3,585          3,585
        Retained earnings                    9,487          9,265
        Comprehensive income                   129            341
                                        -----------  -------------
             Total capital (GAAP)           13,799         13,789
        Less:Intangibles                       (40)           (41)
        Unrealized (gains) losses             (129)          (341)
                                        -----------  -------------
             Total Tier 1 capital        $  13,630    $    13,407
                                        -----------  -------------


Tier 2 Capital:
        Allowances for loan losses             951            801
        Other required deductions                0            246
                                        -----------  -------------
             Total Tier 2 capital        $  14,581    $    14,454
                                        -----------  -------------

Risk-weighted assets                     $  80,880    $    74,400

Capital Ratios (1):
        Tier 1 risk-based capital ratio     16.85%         18.02%
        Total risk-based capital ratio      18.03%         19.43%
        Tier 1 capital to average adjusted
             total assets                   11.18%         11.80%




Interest Sensitivity

An  important  element  of both  earnings  performance  and the  maintenance  of
sufficient  liquidity is proper management of the interest  sensitivity gap. The
interest sensitivity gap is the difference between interest sensitive assets and
interest sensitive  liabilities at a specific time interval. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities,  and is considered negative when the amount
of interest  rate  sensitive  liabilities  exceeds  the amount of interest  rate
sensitive  assets  during a given period.  Generally,  during a period of rising
interest rates, a negative gap within shorter  maturities would adversely affect
the net interest  income,  while a positive gap within shorter  maturities would
result in an increase in net  interest  income.  Conversely,  during a period of
falling interest rates, a negative gap within shorter maturities would result in
an  increase  in net  interest  income  while  a  positive  gap  within  shorter
maturities would have the opposite effect.  This gap can be managed by repricing
assets or liabilities,  by selling investments  available for sale, by replacing
assets or liability at maturity,  or by adjusting  the interest  rate during the
life of an asset or  liability.  Matching  amounts  of  assets  and  liabilities
maturing in the same time interval  helps hedge the risk and minimize the impact
on net interest income in periods of rising or falling interest rates.

The Bank determines the overall magnitude of interest  sensitivity risk and then
formulates policies governing asset generation and pricing,  funding sources and
pricing, and off-balance-sheet  commitments in order to reduce sensitivity risk.
These decisions are based on management's outlook regarding future interest rate
movements,  the state of the local and national economy, and other financial and
business risk factors.

<PAGE>

The following table presents the Bank's interest  sensitivity  position at March
31,  1999.  This  one-day  position,  which  continually  is  changing,  is  not
necessarily indicative of the Bank's position at any other time.

                          Interest Sensitivity Analysis
<TABLE>
<CAPTION>

                                                                                               March 31, 1999
                                                        ----------------------------------------------------------------------------
                                                           With-in       91-365            1 to 5         Over
                                                           90 Days        Days              Years       5 Years           Total
                                                        ---------------  ----------     ------------- ----------       -------------
<S> <C>
Interest-Earning Assets:
      Loans                                                  $ 15,214       $ 22,822        $ 30,472        $ 16,831       $ 85,339
      Securities                                                1,000          2,385          16,032          10,298         29,715
      Money market and other
      short term securities                                     3,549              0               0               0          3,549
                                                      ----------------------------------------------   -------------  -------------

      Total earning assets                                   $ 19,763       $ 25,207        $ 46,504        $ 27,129       $118,603
                                                      ==============================================   =============  =============
      Cummulative earning assets                             $ 19,763       $ 44,970        $ 91,474        $118,603       $118,603
                                                      ==============================================   =============  =============


Interest-Bearing Liabilities:
      Money market savings                                      7,397              0               0               0          7,397
      Interest checking                                             0              0          10,254               0         10,254
      Savings                                                       0              0          13,183               0         13,183
      Certificates of deposit                                  11,705         33,635          19,206           4,700         69,246
       FHLB advances                                                0              0               0           1,073          1,073
                                                      ----------------------------------------------   -------------  -------------

      Total interest-bearing liabilities                     $ 19,102       $ 33,635        $ 42,643        $  5,773       $101,153
                                                      ==============================================   =============  =============
      Cummulative interest-bearing liabilities                 19,102         52,737          95,380         101,153        101,153
                                                      ==============================================   =============  =============

          Period gap                                         $    661       $ (8,428)       $  3,861        $ 21,356       $ 17,450
      Cummulative gap                                        $    661       $ (7,767)       $ (3,906)       $ 17,450       $ 17,450
      Ratio of cummulative interest-earning
      assets to interest-bearing liabilities                   103.46%         85.27%          95.90%         117.25%        117.25%
      Ratio of cummulative gap to total
      earning assets                                             0.56%         -6.55%          -3.29%          14.71%         14.71%

</TABLE>


<PAGE>



Impact of Accounting Pronouncements

Financial   Accounting   Standards  Board  Statement  No.  133,  Accounting  for
Derivative  Instruments  and Hedging  Activities,  was issued in June 1998. This
Statement   establishes   accounting  and  reporting  standards  for  derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts, (collectively referred to as derivatives) and for hedging activities.
It  requires  that an entity  recognize  all  derivatives  as  either  assets or
liabilities in the statement of financial position and measure those instruments
at fair value.  This  Statement is effective  for all fiscal  quarters of fiscal
years beginning after June 15, 1999.  Management will assess the impact, if any,
on the Company's financial statements.

The American  Institute  of Certified  Public  Accountants  issued  Statement of
Position  (SOP) 98-1,  Accounting  for Costs of Computer  Software  Developed or
Obtained for Internal Use. This SOP is effective  for financial  statements  for
fiscal years  beginning  after December 31, 1998.  The SOP requires  entities to
capitalize  certain  internal-use  software costs once certain criteria are met.
Generally,  internal costs with respect to software configuration and interface,
coding,  installation to hardware, testing (including parallel processing),  and
data  conversion  costs  allowing  access of old data by new  systems  should be
capitalized. All other data conversion costs, training, application maintenance,
and ongoing support  activities  should be expensed.  The Company's  adoption of
this SOP on January 1, 1999 did not materially impact the Company's consolidated
financial condition or consolidated results of operations.

The American  Institute  of Certified  Public  Accountants  issued  Statement of
Position  (SOP) 98-5,  Reporting  on the Costs of Startup  Activities,  in April
1998.  The SOP requires  such costs to be expensed as incurred  instead of being
capitalized  and  amortized.  It  applies  to  startup  activities  and costs of
organization of both development state and established operating activities, and
it changes  existing  practice  for some  industries.  The SOP  broadly  defines
startup activities as those one-time  activities that relate to the opening of a
new facility,  introduction of a new product or service, doing business in a new
territory, initiating a new process in an existing facility, doing business with
a new class of customer or beneficiary,  or commencing  some new operation.  The
SOP is effective  for  financial  statements  for fiscal years  beginning  after
December  15,  1998.  Consistent  with  banking  industry  practice  its  is the
Company's  policy to expense such costs.  Therefore,  its adoption on January 1,
1999 did not materially  affect the Company's  financial  position or results of
operations.

Year 2000 Project

The Year 2000 presents  problems for  businesses  that are dependent on computer
hardware  and  software  to  perform  date  dependent   calculations  and  logic
comparisons.  A great deal of software and  microchip  technology  was developed
utilizing two digit years rather than four digit years  (example:  97 instead of
1997).  Technology  utilizing  two digit  years most  likely will not be able to
distinguish  the year 2000 from  1900,  and  therefore  may shut down or perform
miscalculations  and  comparisons as much as 100 years off.  Management is fully
aware this presents a potential business disruption,  and is well into a program
of due  diligence in  addressing  the impact of the Year 2000 on the Company and
the Bank.

The Company and the Bank  (collectively the Company) have adopted the five phase
plan of action  developed  by the  Federal  Financial  Institutions  Examination
Council to address Year 2000 issues.  During phase one,  awareness,  the Company
developed an overall  strategy and timetable for the completion of all Year 2000
requirements  by  mid  1999.   Phase  two,   assessment,   involved   analyzing,
prioritizing  and putting  each  computer  driven  system on track for Year 2000
compliance  according to the timetable  establish in the awareness phase. During
the third phase,  renovation,  necessary  upgrades were ordered for hardware and
software.  In  addition,  each vendor was  contacted  regarding  their Year 2000
progress. Phases one through three have been completed.  Phase four, validation,
involves the actual real life  testing of all the new  upgrades and  components.
Furthermore,  the Company is testing with its third party  service  providers to
make sure all new or updated year 2000 compliant  systems work with its business
partners.  Due to the complexity  and enormity of this phase,  it is anticipated
that it will take until June 30, 1999 for  exhaustive  testing to be  completed.
The final phase is the actual  implementation  of the new systems at the turn of
the century, with the readiness to execute contingency plans if needed.


<PAGE>



      The number one  priority is to minimize or  eliminate  the impact the Year
2000 date change will have on the  Company's  customers  and  shareholders.  The
Company has been working with due diligence on this  challenge  since 1996.  The
Company  is in the  enviable  position  of  having  a  technologically  advanced
computer system already in place. The Manager of Information  Systems has tested
all the in house hardware and software for Year 2000  compliance.  Management is
working in conjunction with the Company's major service provider to perform Year
2000 application  testing for its day-to-day bank operations.  Using a simulated
customer  base,  the  Company  will be testing  virtually  every type of banking
transaction  it performs for Year 2000  compatibility.  Management  has analyzed
infrastructure components, like ATMs, security systems, telephones,  vaults, and
has  acquired  necessary  upgrades  and  installations  when  necessary.  It  is
anticipated  that  company-wide  systems will be deemed Year 2000 compliant with
testing which will occur through mid-1999.

      In addition to collaborating with outside service  providers,  the Company
is working with its banking customers to ensure a smooth transition into the new
millennium.  The  Company  has  contacted  all  significant  commercial  deposit
customers to assess their Year 2000 readiness and each quarter  reviews its list
of new commercial  deposit  customers so that they may be contacted and assessed
also. The Company has assessed the risk of all its commercial loan customers and
monitors those that possess  significant  risk. Loan officers assess the risk of
new  commercial  loan  customers  when they apply for the loan and monitor  them
accordingly.

      To date, the Company has spent approximately  $30,000 in expenses directly
relating to Year 2000. An estimated  $25,000 more will be spent throughout 1999.
New hardware, new software,  upgrades for the automated teller machines, seminar
training for the staff,  and  sophisticated  testing services have comprised the
bulk of the Year 2000  expense.  These costs are based on the best  estimates of
management. It is impossible to accurately predict every expense that may result
from the Year 2000  issue;  actual  expenses  could  differ  from the  estimated
expenses.

      At this time, the Company  anticipates  that even the worst case Year 2000
scenario  would  not have a long  lasting,  significant  adverse  effect  on the
Company's  financial  condition  and results of  operations  for the year ending
December 31, 2000 and beyond. The Company has been developing  contingency plans
throughout each  remediation  phase,  but it will not finalize these plans until
all testing is complete; most likely during the second quarter of 1999. Although
the Company has faith in its ability to develop adequate  contingency  plans and
the success of the testing being conducted, it is the opinion of management that
no one can  exactly  predict  all the  possible  ramifications  of the Year 2000
issue.

      To  summarize,   the  Company  has  completed  phases  one  through  three
(awareness,  assessment, and renovation) and will continue to be deeply involved
with the validation  phase through mid 1999. All vendors and suppliers have been
contacted  and have provided  comprehensive  and  reassuring  Year 2000 progress
reports.  Presently,  the Company sees no need to replace any vendor,  although,
alternative  vendors have been compiled for contingency  planning.  In addition,
all commercial  loan and deposit  customers have been contacted  regarding their
Year 2000 progress.  The Company  expects the adverse effect of Year 2000 on its
commercial customers to be immaterial.


<PAGE>




                           PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

In the ordinary course of its  operations,  the Bank is a party to various legal
proceedings.  Based upon information  currently  available,  management believes
that such legal proceedings,  in the aggregate, will not have a material adverse
effect on the  business,  financial  condition,  or results of operations of the
Bank.

Item 2 - Changes in Securities

None.

Item 3 - Defaults Upon Senior Securities

Not applicable.

Item 4 - Submission of Matters to a Vote of Stockholders

None.

Item 5 - Other Information

None.

Item 6 - Exhibits and Reports on Form 8-K

None.




<PAGE>



                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.


/s/ Scott C. Harvard                                      May 13, 1999
--------------------------
Scott C. Harvard
President and
Chief Executive Officer

/s/ Steven M. Belote                                      May 13, 1999
--------------------------
Steven M. Belote
Treasurer and
Chief Financial Officer