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 June 30, 2002

        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 August 10, 2002:  1,693,817

Transitional Small Business Disclosure Format:  Yes_____    No___X___




<PAGE>


                                   SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                                                Index - Form 10-QSB

                                          PART I - FINANCIAL INFORMATION

         Item 1 - Consolidated Financial Statements (Unaudited)

                         Consolidated Statements of Financial Condition as
                         of June 30, 2002 and December 31, 2001

                         Consolidated Statements of Income for the Three Months
                         and Six Months Ended June 30, 2002 and 2001

                         Consolidated Statements of Cash Flows for the Six
                         Months Ended June 30, 2002 and 2001

                         Consolidated Statement of Stockholders' Equity for the
                         Six Months Ended June 30, 2002

                         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


                           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>


<TABLE>

                             SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                            Consolidated Statements of Financial Condition



                                                                      June 30,          December 31,
                                                                        2002                2001
--------------------------------------------------------------------------------------------------------
                                                                     (Unaudited)
                            ASSETS

 <c>

Cash (including interest - earning deposits of
     approximately $2,446,800 and $4,890,000, respectively)     $        6,961,600     $      6,605,900
Investment securities:
     Held to maturity (fair value of $6,036,600 and
        $2,007,500, respectively)                                        5,998,200            1,999,700
     Available for sale (amortized cost of $28,793,700 and
        $25,175,200, respectively)                                      29,068,300           25,422,300
     Federal Home Loan Bank stock, at cost                                 542,700              510,500
     Federal Reserve Bank stock, at cost                                   124,800              124,800
Loans receivable, net                                                  112,769,200          104,095,800
Premises and equipment, net                                              3,528,400            2,778,500
Accrued interest receivable                                              1,039,400              981,400
Prepaid expenses and other assets                                          355,900              332,300
                                                                ----------------------------------------

                                                                $      160,388,500     $    142,851,200
                                                                ----------------------------------------

             LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                        $      140,745,500     $    125,313,700
Advances from Federal Home Loan Bank                                     2,183,300              816,700
Advance payments by borrowers for taxes
     and insurance                                                         218,700              198,400
Accrued interest payable                                                    32,500               27,000
Accrued expenses and other liabilities                                     188,800              234,600
                                                                ----------------------------------------
           Total liabilities                                           143,368,800          126,590,400
                                                                ----------------------------------------

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; 1,693,817 and 1,697,667 shares
        issued and outstanding, respectively                               559,000              560,200
     Additional capital                                                  2,638,700            2,677,200
     Retained earnings, substantially restricted                        13,643,700           12,859,600
     Accumulated other comprehensive income                                178,300              163,800
                                                                ----------------------------------------
           Total stockholders' equity                                   17,019,700           16,260,800
                                                                ----------------------------------------

                                                                $      160,388,500     $    142,851,200
                                                                ----------------------------------------


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

<PAGE>


                                   SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                                        Consolidated Statements of Income



                                               Three Months Ended June 30,         Six Months Ended June 30,
                                             -------------------------------   --------------------------------
                                                  2002              2001               2002             2001
----------------------------------------------------------------------------  ---------------------------------

 <c>
Interest and dividend income
  Loans                                    $     1,954,700    $   1,981,100    $    3,878,700   $    3,962,800
  Investments
     Taxable interest                              352,200          454,000           661,600          945,900
     Tax-exempt interest                            34,100           37,500            68,400           75,600
     Dividends                                      34,000           32,700            68,000           67,200
                                           ---------------------------------  ---------------------------------
        Total interest and dividend income       2,375,000        2,505,300         4,676,700        5,051,500
                                           ---------------------------------  ---------------------------------

Interest expense
  Deposits                                         921,500        1,269,800         1,852,100        2,575,800
  FHLB advances                                     19,600           13,000            31,500           63,700
                                           ---------------------------------  ---------------------------------
     Total interest expense                        941,100        1,282,800         1,883,600        2,639,500
                                           ---------------------------------  ---------------------------------

Net interest income                              1,433,900        1,222,500         2,793,100        2,412,000

Provision for loan losses                           81,600           46,500           157,700          105,000
                                           ---------------------------------  ---------------------------------

Net interest income after
    provision for loan losses                    1,352,300        1,176,000         2,635,400        2,307,000
                                           ---------------------------------  ---------------------------------

Noninterest income
    Deposit account fees                           258,900          222,300           479,700          414,200
    Loan fees                                       17,300           36,900            63,300           70,600
    Commissions on investment brokerage sales       11,500           19,600            27,600           26,700
    Gains on sales of securities                         -           12,300                 -           12,300
    Gains on sales of fixed assets                   5,800                -             5,800                -
    Gains on sale of real estate                     3,200                -             3,200                -
    Other                                           21,900           19,400            68,100           54,800
                                           ---------------------------------  ---------------------------------
       Total noninterest income                    318,600          310,500           647,700          578,600
                                           ---------------------------------  ---------------------------------

Noninterest expense
    Compensation and employee
       benefits                                    418,400          452,900           891,200          907,000
    Occupancy and equipment                        259,700          231,000           525,400          478,500
    Data processing                                126,000          118,600           244,400          224,700
    Advertising                                     15,800           14,600            34,900           27,600
    Federal insurance premium                        5,500            5,500            11,500           11,300
    Other                                          144,200          152,900           272,900          255,200
                                           ---------------------------------  ---------------------------------
       Total noninterest expense                   969,600          975,500         1,980,300        1,904,300
                                           ---------------------------------  ---------------------------------

Income before income taxes                         701,300          511,000         1,302,800          981,300

Income taxes                                       224,500          163,500           417,000          314,000
                                           ---------------------------------  ---------------------------------

Net income                                 $       476,800    $     347,500    $      885,800   $      667,300
                                           =================================  =================================

Cash Dividends Declared Per Share          $          0.03   $         0.00    $         0.06   $         0.09
                                           =================================  =================================

Earnings Per Common Share:
       Basic                               $          0.28   $         0.20    $         0.52   $         0.38
                                           =================================  =================================

       Diluted                             $          0.28   $         0.20    $         0.52   $         0.38
                                           =================================  =================================



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

<PAGE>

                                               SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                                              Consolidated Statement of Stockholders' Equity


Six Months Ended June 30, 2002
---------------------------------------------------------------------------------------------------------------

                                                                                                   Accumulated
                                                                                                      Other
                                 Number of       Common        Additional         Retained        Comprehensive
                                  Shares         Stock           Capital          Earnings            Income             Total
                               ------------  -------------  ----------------  ----------------  -----------------  ----------------

 <c>
Balance, December 31, 2001       1,697,667    $   560,200    $    2,677,200    $   12,859,600    $       163,800    $   16,260,800

Common stock cash dividend
     declared                            -              -                 -          (101,700)                 -          (101,700)

Exercise of stock options            1,150            400             8,200                 -                  -             8,600

Repurchase of common stock          (5,000)        (1,600)          (46,700)                -                  -           (48,300)

Comprehensive income                     -              -                 -           885,800             14,500           900,300
                               ----------------------------------------------------------------------------------------------------


Balance, June 30, 2002           1,693,817    $   559,000    $    2,638,700    $   13,643,700    $       178,300    $   17,019,700
                               ====================================================================================================



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


<PAGE>
                SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows



                                                   Six Months Ended June 30,
                                                   ---------------------------
                                                       2002          2001
------------------------------------------------------------------------------

 <c>
Cash flows from operating activities
    Net income                                     $    885,800    $  667,300
    Adjustments to reconcile to net cash
      provided by operating activities:
         Provision for loan losses                      157,700       105,000
         Depreciation and amortization                  164,700       162,000
         Amortization of premium and accretion
           of discount on securities, net                31,200      (157,400)
         Gain on sale of investment securities                -       (12,300)
         (Gain) loss on disposal of fixed assets         (5,800)        7,700
         Gain on sale of repossessed assets              (3,200)            -
         Change in net deferred loan fees               (40,000)        5,800
         (Increase) decrease in other assets            (95,100)       22,400
         (Decrease) increase in other liabilities       (20,000)      146,500
                                                   ---------------------------
        Net cash provided by operating activities     1,075,300       947,000
                                                   ---------------------------

Cash flows from investing activities
    Purchase of available-for-sale securities        (4,777,400)   (5,116,200)
    Proceeds from maturities, sales and calls of
      available-for-sale securities                   1,120,000     7,787,400
    Purchase of held-to-maturity securities          (5,990,300)   (4,185,200)
    Proceeds from maturities, prepayments and calls
      of held-to-maturity securities                  2,000,000     5,000,000
    Purchase of Federal Home Loan Bank stock            (32,200)      (18,700)
    Loan originations, net of repayments             (8,877,100)   (5,262,100)
    Purchase of premises and equipment                 (908,800)      (43,400)
    Proceeds from sale of real estate owned,
          net of costs                                   89,200             -
                                                   ---------------------------
        Net cash used by investing activities       (17,376,600)   (1,838,200)
                                                   ---------------------------

<PAGE>

                SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                    Consolidated Statements of Cash Flows


                                                   Six Months Ended June 30,
                                                   ---------------------------
                                                       2002       2001
------------------------------------------------------------------------------

 <c>
Cash flows from financing activities
    Net increase in demand deposits                  12,981,100     6,746,300
    Net increase in time deposits                     2,450,700     2,530,700
    Proceeds from FHLB advances                       8,600,000     8,300,000
    Repayments of FHLB advances                      (7,233,400)  (14,134,700)
    Repurchase of common stock                          (48,300)     (834,700)
    Proceeds from exercise of stock options               8,600             -
    Payment of dividend on common stock                (101,700)     (161,000)
                                                   ---------------------------
        Net cash provided by financing activities    16,657,000     2,446,600
                                                   ---------------------------

Increase in cash and cash equivalents                   355,700     1,555,400

Cash and cash equivalents, beginning of period        6,605,900     5,096,300
                                                   ---------------------------

Cash and cash equivalents, end of period           $  6,961,600    $6,651,700
                                                   ===========================


Supplemental disclosure of cash flow information

    Cash paid during the period for interest       $  1,878,100    $2,675,000
    Cash paid during the period for income taxes   $    450,000    $  180,000

Supplemental schedule of non-cash investing and
    financing activities

    Transfers from loans to real estate acquired
      through foreclosure                          $     86,000    $  319,200


 The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>


                  SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
              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  Subsidiaries  (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  United  States  of  America.  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 in
the United  States of America,  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 six
month period ended June 30, 2002 are not  necessarily  indicative of the results
that may be  expected  for any other  interim  period or the entire  year ending
December 31, 2002. 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, 2001.

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")
and the Bank's wholly-owned subsidiary Shore Investments,  Inc.. 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.  During  March,  1999,  the  Bank  activated  its  subsidiary,   Shore
Investments,  Inc.,  to engage in  financial  activities  supporting  the Bank's
operations.  These  activities  include the selling of investment  and insurance
products.

<PAGE>


NOTE 3 - EARNINGS PER SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted earnings per share computations for the periods ended June 30,
2002 and 2001.

<TABLE>
                                                   Three Months Ended June 30,                Six Months Ended June 30,
                                               -------------------------------------   -----------------------------------------
                                                    2002                 2001                  2002                   2001
                                               ----------------    -----------------   ------------------     ------------------

 <c>
Net income (numerator, basic and diluted)      $       476,800     $        347,500    $         885,800      $         667,300
Weighted average shares outstanding
(denominator)                                        1,693,500            1,742,900            1,694,900              1,768,900
                                               ----------------    -----------------   ------------------     ------------------

Earnings per common share - basic              $          0.28     $           0.20    $            0.52      $            0.38
                                               ================    =================   ==================     ==================

Effect of dilutive securities:

Weighted average shares outstanding                  1,693,500            1,742,900             1,694,900             1,768,900
Effect of stock options                                 17,600                    -                12,200                     -
                                               ----------------    -----------------   -------------------    ------------------
Diluted average shares outstanding
(denominator)                                        1,711,100            1,742,900             1,707,100             1,768,900
                                               ----------------    -----------------   -------------------    ------------------

Earnings per common share -
assuming dilution                              $          0.28     $           0.20    $             0.52    $             0.38
                                               ================    =================   ===================   ===================

</TABLE>



The effect of potentially  dilutive  securities was not used to compute dilutive
earnings  per share for the three  months  and six months  ended  June 30,  2001
because the effect would have been anti-dilutive.


NOTE 4 - COMPREHENSIVE INCOME

Total comprehensive income consists of the following for the six months
ended June 30, 2002 and 2001:

<TABLE>

                                                         Six Months Ended June 30,
                                                 ----------------------------------------------
                                                         2002                    2001
                                                 ---------------------  -----------------------


 <c>
Net income                                         $        885,800       $          667,300
Other comprehensive income                                   14,500                  238,400
                                                     ---------------        -----------------

Total comprehensive income                         $        900,300       $          905,700
                                                     ===============        =================

</TABLE>

<PAGE>



The following is a reconciliation  of the related tax effects  allocated to each
component of other comprehensive income at June 30, 2002 and 2001.

<TABLE>

                                                         Six Months Ended June 30,
                                                 ----------------------------------------------
                                                         2002                    2001
                                                 ---------------------  -----------------------

 <c>

Unrealized gains on securities:
Unrealized holding gains
      arising during the period                    $         28,000       $          379,300
Less: reclassification adjustment
      for gains included in income                                -                  (12,300)
                                                     -----------------      -------------------

Total other comprehensive income
     before income tax expense                               28,000                  367,000

Income tax expense                                          (13,500)                (128,600)
                                                     -----------------      -------------------

Net unrealized gain                                $         14,500       $          238,400
                                                     =================      ===================


</TABLE>


NOTE 5 - SEGMENT INFORMATION

Segment information  consists of the following for the six months ended June 30,
2002 and 2001:

<TABLE>

                                                                                      Elimination of
                                                                                      Intersegment
(In thousands)                            Virginia      Maryland         Other        Transactions         Total
                                         ----------    ----------     ----------     ----------------    ----------

 <c>

Net Interest Income:
    Six months ended June 30, 2002       $    2,016    $      355     $      767     $        (345)      $   2,793
    Six months ended June 30, 2001       $    1,648    $      321     $    1,026     $        (583)      $   2,412

Assets:
    June 30, 2002                        $  142,245    $   20,245     $   40,700     $     (42,802)      $ 160,389
    December 31, 2001                    $  130,426    $   19,060     $   33,641     $     (40,276)      $ 142,851

</TABLE>

NOTE 6 - SUBSEQUENT EVENT

During July 2002, the Company declared a $0.04 per share quarterly cash dividend
on its common stock payable on August 1, 2002 to  shareholders of record on July
15, 2002.

<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 June 30, 2002 was  $476,800,  compared to
net income of $347,500 for the same period of the prior year. Net income for the
six months ended June 30, 2002 was $885,800,  compared to net income of $667,300
for the same period of the prior year.  Quarterly  and six month  earnings  were
positively  impacted  by loan growth of 17.4% and  nominal  noninterest  expense
increases as compared to the June 2001 period.  Strong loan production continued
during a period of lower interest rates and the Company continued to grow assets
with a minimal impact on noninterest expense.  Additionally, the Bank's trend of
maintaining  strong credit  quality in its loan  portfolio and of sustaining its
net interest margin positively impacted earnings for the June 2002 period.

Net Interest Income

Net interest income  increased 17.3% to $1.43 million for the three months ended
June 30, 2002,  compared to $1.22 million for the same period in 2001, while net
interest  income  increased 15.8% to $2.79 million for the six months ended June
30, 2002,  compared to $2.41 million during the June 2001 six month period.  The
net interest  margin  increased to 3.92% for the six months ended June 30, 2002,
as compared to 3.73%  during the 2001  period,  while the  interest  rate spread
increased to 3.43% from 3.03% for the same period in 2001. Average earning asset
growth of $12.7 million during the June 2002 period as compared to the June 2001
period,  reductions  in  nonperforming  assets and a decrease  in funding  costs
positively  impacted net interest  income.  Average  noninterest-bearing  demand
deposits  increased  32.6% to $13.2 million during the six months ended June 30,
2002,  as compared to $9.9 million  during the June 2001 period,  while  average
interest-bearing liabilities increased 8.3% or $9.3 million during the June 2002
period as compared to 2001.

Interest income  decreased 5.2% to $2.38 million for the three months ended June
30, 2002,  compared to $2.51 million for the same period in 2001, while interest
income  decreased  7.4% to $4.68 million for the six months ended June 30, 2002,
compared  to  $5.05  million  during  the  June  2001  six  month  period.   The
market-driven  134 basis  point  decline in loan yields more than offset a $15.3
million  increase  in the average  loan  balance,  primarily  in real estate and
consumer  lending.  Additionally,  the yield on  securities  decreased  95 basis
points, while the average balance of securities decreased by $3.7 million during
the period ended June 30, 2002 as compared to June 30, 2001.

Interest expense decreased 26.6% to $941,100 for the three months ended June 30,
2002,  compared to $1.28  million for the same  period in 2001,  while  interest
expense decreased 28.6% to $1.88 million for the six months ended June 30, 2002,
compared to $2.64 million during the June 2001 six month period.  As with yields
on earning assets,  the Company  experienced a reduction in funding costs during
the past year with the average rate on interest-bearing  liabilities  decreasing
from 4.71% in 2001 to 3.11% for the June 2002  period.  Time  deposits  provided
most of the impact  with a 167 basis  point  decline.  This  decrease  more than
offset a $9.7 million increase in average  interest-bearing  deposits during the
six months ended June 30, 2002, as compared to the same period of 2001.

<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.

<TABLE>

                                 Average Balances, Income and Expenses, Yields and Rates

                                                                            Six Months June 30,
                                              -----------------------------------------------------------------------------
                                                             2002                                    2001
                                              -------------------------------------   -------------------------------------
                                               Average      Income/       Yield/       Average      Income/       Yield/
(In Thousands)                                 Balance      Expense      Rate (2)      Balance      Expense      Rate (2)
                                              -----------  -----------  -----------   -----------  -----------  -----------

 <c>
Assets:
       Securities (1)                             32,188          806        5.01%        35,886        1,070        5.96%
       Loans (net of unearned income):
             Real estate mortgage                 49,052        1,779        7.25%        44,918        1,845        8.21%
             Real estate construction              1,694           51        6.02%         1,296           60        9.26%
             Commercial                           37,530        1,348        7.18%        29,100        1,273        8.75%
             Home equity lines                     9,227          247        5.35%         6,798          288        8.47%
             Consumer                             11,212          454        8.10%        11,319          497        8.78%
                                              -----------  -----------                -----------  -----------
                  Total loans                    108,715        3,879        7.14%        93,431        3,963        8.48%
       Interest-bearing deposits
             in other banks                        3,295           27        1.64%         2,227           58        5.21%
                                              -----------  -----------                -----------  -----------
                  Total earning assets           144,198        4,712        6.54%       131,544        5,091        7.74%
                                              -----------  -----------                -----------  -----------
       Less: allowance for loan losses            (1,381)                                 (1,216)
       Total nonearning assets                     8,881                                   7,765
                                              -----------                             -----------
       Total assets                              151,698                                 138,093
                                              ===========                             ===========

Liabilities
       Interest-bearing deposits:
             Checking and savings                 44,065          256        1.16%        34,699          360        2.07%
             Time deposits                        75,434        1,596        4.23%        75,079        2,216        5.90%
                                              -----------  -----------                -----------  -----------

                  Total interest-bearing
                  deposits                       119,499        1,852        3.10%       109,778        2,576        4.69%

       FHLB advances                               1,770           32        3.62%         2,210           64        5.79%
                                              -----------  -----------                -----------  -----------
                  Total interest-bearing
                  liabilities                    121,269        1,884        3.11%       111,988        2,640        4.71%
                                                           -----------                             -----------
       Non-interest bearing liabilities:
             Demand deposits                      13,193                                   9,949
             Other liabilities                       626                                     602
                                              -----------                             -----------

       Total liabilities                         135,088                                 122,539
       Stockholders' equity                       16,610                                  15,554
                                              -----------                             -----------

       Total liabilities and stockholders'
             equity                              151,698                                 138,093
                                              ===========                             ===========

       Net interest income (1)                                  2,828                                   2,451
                                                           ===========                             ===========

       Interest rate spread (1)(3)                                           3.43%                                   3.03%
       Net interest margin (1)(4)                                            3.92%                                   3.73%

       (1)   Tax equivalent basis. The tax equivalent adjustment to net interest
             income was $35,000  and  $39,000 for the six months  ended June 30,
             2002 and 2001, respectively.
       (2)   Yield  and  rate   percentages   are  all   computed   through  the
             annualization  of interest  income and  expense  divided by average
             daily balances based on amortized costs.
       (3)   Interest rate spread is the average yield earned on earning  assets
             less the average rate incurred on interest-bearing liabilities.
       (4)   Net interest margin is annualized net interest income  expressed as
             a percentage of average earning assets.
</TABLE>
<PAGE>

Noninterest Income

Noninterest  income was $318,600 during the three months ended June 30, 2002, as
compared to $310,500 for the same period in 2001,  representing  a 2.6% increase
over the prior  period.  During the six months ended June 30, 2002,  noninterest
income was $647,700,  representing  an 11.9%  increase over the $578,600  earned
during the same period in 2001. The  improvement in noninterest  income resulted
from increases in deposit account and check card fees.

Provision for Loan Losses

Provision  for loan losses was $81,600 for the three months ended June 30, 2002,
as compared to $46,500 for the same period of 2001, while the provision for loan
losses was  $157,700  for the six months  ended June 30,  2002,  as  compared to
$105,000 for the same 2001 period.  See Asset Quality for additional  discussion
of the allowance for loan losses.

Noninterest Expense

Noninterest  expense was  relatively  flat at $969,600  during the three  months
ended June 30, 2002, as compared to $975,500 for the same period of 2001,  while
noninterest  expense increased 4.0% to $1.98 million during the six months ended
June 30, 2002,  as compared to $1.90  million for the same period of 2001.  This
increase  resulted from normal  operating  activities  related to Company growth
since June 2001.

Financial Condition

During the six months ended June 30, 2002,  the  Company's  assets  increased by
$17.5 million from $142.9 million at December 31, 2001 to $160.4 million at June
30, 2002.  Net loans grew $8.7 million and cash and  investments  increased $8.0
million during the period.  Continued  improvements in the commercial loan area,
increased  loan  officer  production  and  the  low  interest  rate  environment
contributed to loan growth,  while excess liquidity  generated by deposit growth
drove investment security growth.

Deposits  increased  $15.4  million  during the six months  ended June 30, 2002.
Interest-bearing and  noninterest-bearing  demand deposits grew $7.8 million and
$3.3 million,  respectively,  during the period,  while time deposits  increased
$4.3  million  during the  period.  Federal  Home Loan Bank  advances  increased
slightly during the period from $817,000 at December 31, 2001 to $2.2 million at
June 30, 2002.

Stockholders'  equity was $17.0  million  at June 30,  2002,  compared  to $16.3
million at  December  31,  2001.  Net income of  $885,800  offset the payment of
$101,700 ($0.06 per share) in common stock dividends and the repurchase of 5,000
shares of the Company's common stock at an average price of $9.66.

During  April  2002,  the  Company  declared  a $0.03 per share  quarterly  cash
dividend on its common stock payable on May 1, 2002 to shareholders of record on
April 15,  2002.  During  July  2002,  the  Company  declared  a $0.04 per share
quarterly  cash  dividend  on its  common  stock  payable  on  August 1, 2002 to
shareholders of record on July 15, 2002.

<PAGE>

Asset Quality

Loans are placed on nonaccrual  status when, in the judgment of management,  the
probability  of  interest  collection  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 $313,000 at June 30, 2002, compared to $533,000
at  December  31,  2001.  As to  nonaccrual  loans  existing  at June 30,  2002,
approximately  $10,800 of interest income would have been recognized  during the
six months then ended if interest  thereon had accrued.  During the period ended
June 30, 2002, the Company  foreclosed on collateral  relating to loans totaling
approximately  $300,000  to one  borrower  that were  previously  in  nonaccrual
status.  The  sale  of  the  existing  collateral  upon  and  subsequent  to the
foreclosure  date  resulted in the full recovery of  nonaccrual  interest,  late
charges  and  selling  costs.  At June  30,  2002  and  December  31,  2001,  no
significant  loans exist that  management  has  identified as impaired under the
guidelines  established by SFAS No. 114,  Accounting by Creditors for Impairment
of a Loan, as amended by SFAS No. 118, Accounting by Creditors for Impairment of
a Loan - Income Recognition and Disclosures.

At June 30, 2002, all loans 60 days or more delinquent,  including nonperforming
loans, totaled $736,000.  In addition,  other performing loans totaling $967,000
existed  that have other  potential  weaknesses  that  management  considers  to
warrant additional monitoring. Loans in this category, along with the delinquent
loans,  are  subject  to  constant  management  attention,  and their  status is
reviewed on a regular basis.

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

<TABLE>

                                        Nonperforming Assets


                                                                   June 30,           December 31,
(In Thousands)                                                       2002                 2001
                                                                ---------------     -----------------

 <c>
Nonaccrual loans:
      Commercial                                              $             63    $                -
      Real estate mortgage                                                 182                   453
      Home equity lines of credit                                           44                    22
      Consumer                                                              24                    58
                                                                ---------------     -----------------

      Total nonaccrual loans                                               313                   533
Other real estate owned                                                      -                     -
                                                                ---------------     -----------------

      Total nonperforming assets                              $            313    $              533
                                                                ===============     =================

Loans past due 90 or more days
      accruing interest                                                      -                     -
Allowance for loan losses to
      nonaccrual loans                                                 471.25%               248.78%
Nonperforming assets to period end
      loans and other real estate owned                                  0.27%                 0.51%

</TABLE>
<PAGE>

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

<TABLE>

                               Allowance for Loan Losses


                                                                    Six Months Ended June 30,
                                                                -------------------------------------
(In Thousands)                                                       2002                 2001
                                                                ---------------     -----------------

 <c>
Balance, beginning of period                                  $          1,326    $            1,336
Loans charged off:
      Commercial                                                             -                     -
      Real estate mortgage                                                   -                  (235)
      Consumer                                                             (32)                  (45)
                                                                ---------------     -----------------

      Total loans charged-off                                              (32)                 (280)
                                                                ---------------     -----------------

Recoveries:
      Commercial                                                             -                     -
      Real estate mortgage                                                   -                     -
      Consumer                                                              23                     4
                                                                ---------------     -----------------

      Total recoveries                                                      23                     4
                                                                ---------------     -----------------

Net recoveries (charge-offs)                                                (9)                 (276)
Provision for loan losses                                                  158                   105
                                                                ---------------     -----------------

Balance, end of period                                        $          1,475    $            1,165
                                                                ===============     =================

Allowance for loan losses to loans
      outstanding at end of period                                       1.29%                 1.20%

Allowance for loan losses to nonaccrual
      loans outstanding at end of period                               471.25%               163.39%

Net charge-offs to average loans
      outstanding during period                                         -0.01%                -0.30%

</TABLE>


Liquidity and Capital Resources

Liquidity   represents  the  Company'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 Company's
ability to obtain deposits and purchase funds at favorable rates  determines its
liability liquidity.

<PAGE>

At June  30,  2002,  the  Company  had  outstanding  loan  and  line  of  credit
commitments  of $28.1 million.  Scheduled  maturities of certificate of deposits
during the twelve  months  following  June 30, 2002  amounted to $52.2  million.
Historically,  the Company has been able to retain a  significant  amount of its
deposits  as they  mature.  As a result of the  Company's  management  of liquid
assets  and  the  ability  to  generate  liquidity  through  liability  funding,
management  believes  that  the  Company  maintains  overall  liquidity  that is
sufficient  to satisfy  its  depositors'  requirements  and meet its  customers'
credit needs.

Total cash and cash equivalents increased $355,700 for the six months ended June
30, 2002, compared to an increase of $1.56 million for the six months ended June
30, 2001.  Net cash provided by operating  activities  was $1.08 million for the
six months ended June 30, 2002,  compared to $947,000  during the same period of
2001.

Net cash used by investing  activities  was $17.4 million  during the six months
ended June 30, 2002,  compared to net cash used by investing  activities of $1.8
million for the six months ended June 30, 2001. The fluctuation in these amounts
resulted  primarily  from  increased  loan growth and an  increase in  liquidity
available for investment purposes created by deposit growth during 2002.

Net cash provided by financing  activities  was $16.7 million for the six months
ended June 30, 2002,  compared to net cash  provided by financing  activities of
$2.4 million for the six months ended June 30, 2001. The fluctuations in amounts
during these periods were primarily the result of stronger deposit growth during
2002 versus 2001, an increase in repayments of borrowings  with the Federal Home
Loan Bank and increased  stock  repurchase  activity during the June 2001 period
and two quarterly dividend payments during the June 2002 period versus an annual
dividend payment during the June 2001 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.   Additionally,   certain
restrictions  exist on dividends  paid and loans or advances made by the Bank to
the  Company.  The  total  amount of  dividends  that may be paid at any date is
generally  limited to the retained earnings for the Bank, and loans and advances
are limited to 10 percent of the Bank's  capital and surplus on a secured basis.
During the six months ended June 30, 2002,  the Bank paid  $500,000 in dividends
to the Company to fund  operations,  pay  shareholder  dividends and to purchase
real estate for the Company's planned  operations  center. At June 30, 2002, the
Bank's  retained  earnings  available  for the  payment  of  dividends  was $1.4
million.  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 June 30, 2002,  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 June 30, 2002 and December 31, 2001.

<TABLE>

                                          Analysis of Capital

                                                                     June 30,           December 31,
(In Thousands)                                                         2002                 2001
                                                                 ------------------  -------------------

 <c>
Tier 1 Capital:
       Common stock                                               $            559     $            560
       Additional paid-in capital                                            2,639                2,677
       Retained earnings                                                    13,644               12,860
       Comprehensive income                                                    178                  164
                                                                 ------------------  -------------------
             Total capital (GAAP)                                           17,020               16,261
       Less: Intangibles                                                       (30)                 (30)
       Net unrealized gain on securities                                      (178)                (164)
       Net unrealized losses on equity securities                             (114)                (137)
                                                                 ------------------  -------------------
             Total Tier 1 capital                                           16,698               15,930


Tier 2 Capital:
       Allowable allowances for loan losses                                  1,359                1,232
                                                                 ==================  ===================
             Total Tier 2 capital                                 $         18,057     $         17,162
                                                                 ==================  ===================

Risk-weighted assets                                              $        112,122     $        101,638

Capital Ratios (1):
       Tier 1 risk-based capital ratio                                      14.89%               15.67%
       Total risk-based capital ratio                                       16.10%               16.89%
       Tier 1 capital to average adjusted
             total assets                                                   11.01%               11.30%

</TABLE>

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 liabilities 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.

<PAGE>

The Company  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  interest
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.

The following table presents the Company's interest sensitivity position at June
30, 2002 based on the  repricing  or maturity of interest  sensitive  assets and
liabilities,  whichever is shorter. This one-day position,  which continually is
changing,  is not necessarily  indicative of the Company's position at any other
time.

<TABLE>

                          Interest Sensitivity Analysis

                                                                           June 30, 2002
                              ----------------------------------------------------------------------------------------------------
                                Within               91-365                 1 to 5                Over
(In Thousands)                  90 Days               Days                  Years                5 Years              Total
                             ---------------     -----------------      ----------------      ---------------     ---------------

 <c>
Interest-Earning Assets:
      Loans (1)               $      24,145       $        13,077        $       52,214        $      24,808       $     114,244
      Securities                      1,512                 5,040                27,076                2,106              35,734
      Money market and
       other short term
       securities                     2,447                     -                     -                    -               2,447
                             ---------------     -----------------      ----------------      ---------------     ---------------

      Total earning assets    $      28,104       $        18,117        $       79,290        $      26,914       $     152,425
                             ===============     =================      ================      ===============     ===============
      Cumulative earning
       assets                 $      28,104       $        46,221        $      125,511        $     152,425       $     152,425
                             ===============     =================      ================      ===============     ===============


Interest-Bearing Liabilities:
      Money market savings           12,859                     -                     -                    -              12,859
      Interest checking (2)               -                     -                17,640                    -              17,640
      Savings (2)                         -                     -                16,184                    -              16,184
      Certificates of deposit        14,128                38,064                22,635                3,285              78,112
      FHLB advances                   1,400                     -                     -                  783               2,183
                             ---------------     -----------------      ----------------      ---------------     ---------------

      Total interest-bearing
       liabilities            $      28,387       $        38,064        $       56,459        $       4,068       $     126,978
                             ===============     =================      ================      ===============     ===============
      Cumulative interest-
       bearing liabilities           28,387                66,451               122,910              126,978             126,978
                             ===============     =================      ================      ===============     ===============

      Period gap              $        (283)      $       (19,947)       $       22,831        $      22,846       $      25,447
      Cumulative gap          $        (283)      $       (20,230)       $        2,601        $      25,447       $      25,447
      Ratio of cumulative
       interest-earning
       assets to interest-
       bearing liabilities            99.00%                69.56%               102.12%              120.04%             120.04%
      Ratio of cumulative
       gap to total
       earning assets                 -0.19%               -13.27%                 1.71%               16.69%              16.69%


(1)  Includes nonaccrual loans of $313,000, which are included in the 1 to 5 years category.
(2)  Management has determined that interest  checking and savings  accounts are
     not sensitive to changes in related market rates and,  therefore,  they are
     placed in the 1 to 5 years category.

</TABLE>


<PAGE>



Recent Accounting Pronouncements

The FASB has issued Statement No. 146, Accounting for Costs Associated with Exit
or Disposal  Activities.  This  Statement  addresses  financial  accounting  and
reporting for costs  associated  with exit or disposal  activities and nullifies
EITF No. 94-3,  Liability  Recognition for Certain Employee Termination Benefits
and Other  Costs to Exit an  Activity  (including  Certain  Costs  Incurred in a
Restructuring).  This Statement requires  recognition of a liabitlity for a cost
associated with an exit or disposal activity when the liability is incurred,  as
opposed to when the netity  commits  to ab exit plan  under EITF No.  94-3.  The
Statement is effective for exit and disposal activities initiated after December
31, 2002.  The Company is currently  assessing  the effect of this  Statement on
financial condition and results of operations, but does not currently expect the
Statement  to  have  a  material  effect  on  its  financial  statements  in the
foreseeable future.


<PAGE>



                           PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

In the  ordinary  course of its  operations,  the  Company 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 Company.

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

Certification pursuant to Subsection 906 of the Sarbanes-Oxley Act of 2002
filed in conjunction with this document.


<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                                           August 13, 2002
---------------------------------------------------------------
Scott C. Harvard
President and
Chief Executive Officer

/s/ Steven M. Belote                                           August 13, 2002
---------------------------------------------------------------
Steven M. Belote
Vice President and
Chief Financial Officer