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, 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 August 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 June 30, 1999 and
                   December 31, 1998

                   Consolidated Statements of Income for the Three Months and
                   Six Months Ended June 30, 1999 and 1998

                   Consolidated Statements of Cash Flows for the Six Months
                   Ended June 30, 1999 and 1998

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

                                       1
<PAGE>


                      SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                    Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                              June 30,    December 31,
                                                               1999           1998
----------------------------------------------------------------------------------------
                                                           (Unaudited)
<S>     <C>
                         ASSETS


Cash (including interest - earning deposits of
    approximately $1,775,000 and $1,442,000, respectively) $   5,169,218  $   3,900,861
Investment securities:
    Held to maturity (fair value of $1,379,000 and
       $3,702,000, respectively)                               1,391,166      3,696,685
    Available for sale (amortized cost of $27,767,000 and
       $27,836,000, respectively)                             27,208,911     28,352,312
Investment in Federal Home Loan Bank stock,
    at cost                                                      491,800        580,500
Investment in Federal Reserve Bank stock, at cost                124,800        124,800
Loans receivable, net                                         87,019,656     79,659,005
Premises and equipment, net                                    2,520,849      2,308,181
Real estate owned                                                 78,307         49,177
Accrued interest receivable                                    1,073,816      1,023,522
Prepaid expenses and other assets                                520,584        252,805
                                                          ------------------------------

                                                           $ 125,599,107  $ 119,947,848
                                                          ------------------------------

          LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                   $ 107,505,455  $ 104,308,906
Advances from Federal Home Loan Bank                           3,955,968      1,073,853
Advance payments by borrowers for taxes
    and insurance                                                287,721        205,815
Accrued interest payable                                          37,984         37,292
Accrued expenses and other liabilities                           210,996        533,195
                                                          ------------------------------
         Total liabilities                                   111,998,124    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                9,798,963      9,265,567
    Accumulated other comprehensive income                      (380,200)       341,000
                                                          ------------------------------
         Total stockholders' equity                           13,600,983     13,788,787
                                                          ------------------------------

                                                           $ 125,599,107  $ 119,947,848
                                                          ==============================
</TABLE>


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


                                       2

<PAGE>



                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                        Consolidated Statements of Income

<TABLE>
<CAPTION>



                                                                                                    Six Months Ended
                                          Three Months Ended June 30,                                   June 30,
                                   --------------------------------------------------- ---------------------------------------------
                                             1999                    1998                    1999                     1998
-------------------------------------------------------------------------------------- ---------------------------------------------
<S>     <C>
Interest income
     Loans                                $       1,753,712     $       1,681,247        $      3,479,244        $       3,354,409
     Investments                                    426,338               421,414                 867,227                  845,950
                                     --------------------------------------------- ------------------------------------------------
         Total interest income                    2,180,050             2,102,661               4,346,471                4,200,359
                                     --------------------------------------------- ------------------------------------------------

Interest expense
     Deposits                                     1,063,010             1,085,907               2,153,524                2,158,502
     FHLB advances                                   28,986                   588                  47,406                    1,134
                                     --------------------------------------------- ------------------------------------------------
         Total interest expense                   1,091,996             1,086,495               2,200,930                2,159,636
                                     --------------------------------------------- ------------------------------------------------

Net interest income                               1,088,054             1,016,166               2,145,541                2,040,723

Provision for loan losses                           267,300                39,300                 325,600                   75,600
                                     --------------------------------------------- ------------------------------------------------

Net interest income after
     provision for loan losses                      820,754               976,866               1,819,941                1,965,123
                                     --------------------------------------------- ------------------------------------------------

Noninterest income
     Deposit account fees                           175,578               138,886                 334,213                  256,155
     Loan fees                                       41,163                27,522                  82,767                   59,707
     Gains on sales of securities                   225,956                 2,970                 242,199                   30,646
     Other                                           22,923                32,483                  55,292                   61,318
                                     --------------------------------------------- ------------------------------------------------
         Total noninterest income                   465,620               201,861                 714,471                  407,826
                                     --------------------------------------------- ------------------------------------------------

Noninterest expense
     Compensation and employee
         benefits                                   348,541               296,619                 658,629                  621,151
     Occupancy and equipment                        205,516               162,417                 374,490                  321,654
     Advertising                                     16,461                16,413                  29,488                   32,078
     Data processing                                144,172                92,214                 264,618                  231,282
     Federal insurance premium                       15,269                14,764                  30,614                   29,976
     Other                                           85,093               136,001                 176,320                  190,098
                                     --------------------------------------------- ------------------------------------------------
         Total noninterest expense                  815,052               718,428               1,534,159                1,426,239
                                     --------------------------------------------- ------------------------------------------------

Income before income taxes                          471,322               460,299               1,000,253                  946,710

Income taxes                                        160,300               174,900                 340,100                  354,900
                                     --------------------------------------------- ------------------------------------------------

Net income                                $         311,022     $         285,399        $        660,153        $         591,810
                                     ============================================= ================================================


Earnings Per Common Share:
         Basic                            $            0.17     $            0.16        $           0.36        $            0.33
                                     ============================================= ================================================

         Diluted                          $            0.17     $            0.16        $           0.36        $            0.32
                                     ============================================= ================================================
</TABLE>



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

                                       3

<PAGE>


                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                 Consolidated Statement of Stockholders' Equity

<TABLE>
<CAPTION>

Six Months Ended June 30, 1999
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>

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

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                               -                  -            660,153           (721,200)              (61,047)
                                   -------------------------------------------------------------------------------------------------


Balance, June 30, 1999               $       597,568    $     3,584,652    $     9,798,963    $      (380,200)        $  13,600,983
                                   =================================================================================================

</TABLE>

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

                                       4

<PAGE>


                   SHORE FINANCIAL CORPORATION AND SUBSIDIARY
                      Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>



                                                                              Six Months Ended June 30,
                                                                     --------------------------------------------
                                                                             1999                  1998
-------------------------------------------------------------------------------------------  --------------------
<S>     <C>
Cash flows from operating activities
     Net income                                                       $            660,153     $         591,810
     Adjustments to reconcile to net cash
         provided by operating activities:
            Provision for loan losses                                              325,600                75,600
            Depreciation and amortization                                          135,313               135,645
            Amortization of premium and accretion
                of discount on securities, net                                       5,767                 1,165
            Gain on sale of securities                                            (242,199)              (30,646)
            Loss on sale of premises and
                equipment                                                                -                 3,450
            Change in net deferred loan fees                                       (51,484)              (67,664)
            Loss on sale of repossessed assets                                           -                 2,450
            (Increase) decrease in other assets                                   (113,689)             (212,333)
            Increase in other liabilities                                          (76,600)              128,246
                                                                     --------------------------------------------
                Net cash provided by operating activities                          642,861               627,723
                                                                     --------------------------------------------

Cash flows from investing activities
     Purchase of available-for-sale securities                                  (3,736,643)           (9,557,490)
     Proceeds from maturities and sales of
         available-for-sale securities                                           4,015,068             8,226,626
     Purchase of held-to-maturity securities                                      (300,000)                    -
     Proceeds from maturities of held-to-maturity
         securities                                                              2,614,127             1,000,000
     Redemption of Federal Home Loan Bank stock                                     88,700                     -
     Loan origination, net of repayments                                        (7,656,769)           (2,836,319)
     Proceeds from sale of premises and equipment                                        -                 1,439
     Purchase of premises and equipment                                           (343,766)             (127,394)
     Proceeds from sale of real estate owned                                         2,500               430,611
     Improvements to real estate owned                                              (9,628)                    -
                                                                     --------------------------------------------
                Net cash used by investing activities                           (5,326,411)           (2,862,527)
                                                                     --------------------------------------------

Cash flows from financing activities
     Net increase in demand deposits                                             1,980,481             2,326,424
     Net increase in time deposits                                               1,216,068               276,562
     Proceeds from FHLB advances                                                 6,300,000               200,000
     Repayments of FHLB advances                                                (3,417,885)               (1,147)
     Payment of dividend on common stock                                          (126,757)               23,040
                                                                     --------------------------------------------
                Net cash provided by financing activities                        5,951,907             2,824,879
                                                                     --------------------------------------------

Increase (decrease) in cash and cash equivalents                                 1,268,357               590,075

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

Cash and cash equivalents, end of period                              $          5,169,218     $       4,780,626
                                                                     ============================================


Supplemental disclosure of cash flow information

     Cash paid during the period for interest                         $          2,200,238     $       2,148,494
     Cash paid for income taxes                                       $            492,000     $         387,714


Supplemental schedule of non-cash investing and
     financing activities

     Transfers from loans to real estate acquired
         through foreclosure                                          $             22,002     $         103,769
</TABLE>


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

                                       5

<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 six month  period ended June 30, 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.

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.

                                       6

<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
June 30, 1999 and 1998.

<TABLE>
<CAPTION>

                                                                                                    Six Months Ended
                                                         Three Months Ended June 30,                    June 30,
                                                      -------------------------------------      -----------------------------
                                                            1999              1998                   1999            1998
                                                         ------------     --------------         -------------   -------------
<S>     <C>

Net income (numerator, basic and diluted)              $     311,022    $       285,399        $      660,153         591,810
Weighted average shares outstanding
(denominator)                                              1,810,812          1,810,812             1,810,812       1,807,829
                                                         ------------     --------------         -------------   -------------

Earnings per common share - basic                      $        0.17    $          0.16        $         0.36            0.33
                                                         ============     ==============         =============   =============

Effect of dilutive securities:

Weighted average shares outstanding                        1,810,812          1,810,812             1,810,812       1,807,829
Effect of stock options                                       11,837             18,206                13,778          20,373
                                                         ------------     --------------         -------------   -------------
Diluted average shares outstanding
(denominator)                                              1,822,649          1,829,018             1,824,590       1,828,202
                                                         ------------     --------------         -------------   -------------

Earnings per common share -
assuming dilution                                      $        0.17    $          0.16        $         0.36            0.32
                                                         ============     ==============         =============   =============
</TABLE>



NOTE 4 - COMPREHENSIVE INCOME

Total comprehensive  income consists of the following for the three months ended
June 30, 1999 and 1998:



                                           Six Months Ended June 30,
                                        ---------------------------------
                                             1999            1998
                                        ---------------  ----------------

Net income                               $     660,153    $      591,810
Other comprehensive income                    (721,200)           48,656
                                           ------------     -------------

Total comprehensive income               $     (61,047)   $      640,466
                                           ============     =============

                                       7

<PAGE>


The  following  is an  unaudited  reconciliation  of  the  related  tax  effects
allocated to each component of other  comprehensive  income at June 30, 1999 and
1998

                                                 Six Months Ended June 30,
                                              ---------------------------------
                                                   1999            1998
                                              ---------------  ----------------

Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
      arising during the period                $    (850,600)   $      107,900
Less: reclassification adjustment
      for gains (losses) included in income          242,200            30,600
                                                 ------------     -------------

Total other comprehensice income (loss)
     before income tax expense                    (1,092,800)           77,300

Income tax (expense) benefit                         371,600           (28,644)
                                                 ------------     -------------

Net unrealized gains (losses)                  $    (721,200)   $       48,656
                                                 ============     =============

                                       8

<PAGE>

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

Results of Operations

General

Net income for the six months ended June 30, 1999 increased  $68,400,  or 11.6%,
to $660,200, compared to net income of $591,800 for the same period in the prior
year. Earnings were positively impacted by loan growth of $7.7 million, or 9.6%,
during the 1999 six month  period and a 25.2%  increase in  noninterest  income,
excluding  gains on sales of securities  of $242,200 and $30,600  during the six
months ended June 30, 1999 and 1998,  respectively.  Conversely,  earnings  were
negatively  impacted by additional  noninterest  expense  resulting from the new
operations  center that was opened during April,  1999. The operations center is
home to the  accounting  and data  processing  departments  of the Bank and will
begin  providing item  processing for the Bank in mid August.  During the second
quarter,  the Bank incurred expenses related to running these systems internally
while  continuing to pay the outside vendor until the item processing in brought
in house.  These  additional  expenses  were  approximately  $40,000  during the
quarter.  Earnings for the June 1998 period  include  approximately  $113,000 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  most of the six  months  ended  June  30,  1999  and is  expected  to be
accretive to earnings during the remainder of 1999.


Net Interest Income

Net interest income increased $104,900 for the six months ended June 30, 1999 as
compared to the same period in 1998. This increase  occurred  despite a decrease
in net interest margin to 3.86% during the June 1999 period as compared to 4.07%
for the June 1998 period.  The interest  rate spread  decreased to 3.22% for the
six months  ended June 30,  1999,  as  compared  to 3.47% for the 1998 six 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 $9.1
million at June 30, 1999 as compared  $6.0 million at June 30,  1998.  Including
average noninterest-bearing deposits in calculating the cost of funds results in
an  interest  rate  spread of 3.54% for the six months  ended  June 30,  1999 as
compared to 3.77% for the same period in 1998.  Decreases in net interest margin
and net interest spread for the six months ended June 30, 1999 reflect the lower
interest rate  environment in existence  during the June 1999 period as compared
to the same period of 1998.

Interest  income  increased  $146,100  for the six months ended June 30, 1999 as
compared  to the same period in 1998.  The  increase  resulted  from the average
balance of loans  increasing  by $9.6  million  during the period,  primarily in
commercial and consumer lending and home equity lines. Additionally, the average
balance of securities  increased by $3.9  million.  Although  outstanding  loans
increased  significantly  during  the  period,  lower  interest  rates  caused a
decrease  in the yield on loans to 8.19% for the six months  ended June 30, 1999
as compared to 8.90% for the 1998 period.

Interest  expense  increased  $41,300 for the six months  ended June 30, 1999 as
compared to the same period in 1998.  This is due to increased  borrowings  from
the Federal  Home Loan Bank to fund the  significant  loan growth that  occurred
during the 1999  period.  Average  interest-bearing  deposits  increased by $7.1
million during the six months ended June 30, 1999 as compared to the same period
of 1998, but this increase was not sufficient to fund loan growth. This increase
was offset by a decrease in the  average  rate on  interest-bearing  liabilities
from 4.73% in 1998 to 4.39% for the June 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.

                                       9

<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.

                                       10

<PAGE>

<TABLE>
<CAPTION>

                                                               Six Months Ended June 30,
                                          ---------------------------------------------------------------------
                                                         1999                              1998
                                          ----------------------------------- ---------------------------------
                                           Average     Income/      Yield/     Average     Income/    Yield/
                                           Balance     Expense       Rate      Balance     Expense     Rate
                                          ----------  -----------  ---------- ----------  ---------- ----------
<S>     <C>

Assets:
        Securities (1)                      $30,250         $937       6.19%    $26,395        $864      6.55%
        Loans (net of unearned income):
             Real Estate Mortgage            44,410        1,743       7.85%     43,436       1,859      8.56%
             Real Estate Construction         1,719           67       7.74%      1,494          62      8.30%
             Commercial                      24,730        1,057       8.55%     19,789         920      9.30%
             Home Equity Lines                5,718          245       8.57%      5,307         251      9.46%
             Consumer                         8,374          367       8.77%      5,345         262      9.80%
                                          ----------  -----------             ----------  ----------
                    Total loans              84,951        3,479       8.19%     75,371       3,354      8.90%
                                          ----------  -----------             ----------  ----------
        Federal funds sold                        0            0       0.00%          0           0      0.00%
        Interest-bearing deposits
             in other banks                   1,987           45       4.53%      2,891          73      5.05%
                                          ----------  -----------             ----------  ----------
                  Total earning assets      117,188        4,461       7.61%    104,657       4,291      8.20%
                                          ----------  -----------             ----------  ----------
        Less: allowance for loan losses        (951)                               (770)
        Total nonearning assets               6,874                               7,110
                                          ----------                          ----------
        Total assets                       $123,111                            $110,997
                                          ==========                          ==========

Liabilities
        Interest-bearing deposits:
             Checking and savings           $30,680         $385       2.51%    $22,828        $273      2.39%
             Time deposits                   67,646        1,768       5.23%     68,420       1,886      5.51%
                                          ----------  -----------             ----------  ----------

                  Total interest-bearing
                       deposits              98,326        2,153       4.38%     91,248       2,159      4.73%

        FHLB advances                         1,845           47       5.09%         75           1      2.67%
                                          ----------  -----------             ----------  ----------
                  Total interest-bearing
                    liabilities             100,171        2,200       4.39%     91,323       2,160      4.73%
                                                      -----------                         ----------
        Non-interest bearing liabilities:
             Demand deposits                  7,835                               6,169
             Other liabilities                1,128                                 780
                                          ----------                          ----------

        Total liabilities                   109,134                              98,272
        Stockholders' equity                 13,977                              12,725
                                          ----------                          ----------

        Total liabilities and stockholders'
             equity                        $123,111                            $110,997
                                          ==========                          ==========

        Net interest income                               $2,261                             $2,131
                                                      ===========                         ==========

        Interest rate spread (1)                                       3.22%                             3.47%
        Net interest margin (1)                                        3.86%                             4.07%
</TABLE>

          (1) Tax equivalent basis.

                                       11

<PAGE>

Noninterest Income

Noninterest  income was  $714,500  during the six months  ended June 30, 1999 as
compared  to $407,800  for the same  period in 1998,  an increase of $306,700 or
75.2%.  Included in these  amounts are gains on sales of  securities of $242,200
and  $30,600  for the six  months  ended June 30,  1999 and 1998,  respectively.
Excluding these amounts noninterest income increased $95,100 or 25.2% during the
June 1999 period as compared to the 1998 period.  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.

Provision for Loan Losses

Provision for loan losses was $325,600 for the six months ended June 30, 1999 as
compared to $75,600 for the same period in 1998,  an increase of $250,000.  This
increase  primarily  relates to  provisions  established  for two specific  loan
customers in the bank's  commercial loan portfolio that management has concluded
the risk of loss to be probable.  General loan loss  reserves  maintained by the
Bank normally would be sufficient to absorb losses  incurred on impaired  loans.
However, with the bank's significant loan growth over the past twelve months and
the need to reserve for these two loans,  management decided an increase in loan
loss reserves was  warranted.  See Asset Quality for  additional  discussions of
these loans.

Noninterest Expense

Noninterest  expense was $1.53 million during the six months ended June 30, 1999
as  compared  to $1.43  million  for the same  period in 1998,  an  increase  of
$100,000 or 7.0%.  This  increase is  primarily  due to  additional  noninterest
expense  resulting from the new operations  center that was opened during April,
1999.  The  operations  center  is home to the  accounting  and data  processing
departments of the Bank and will begin providing item processing for the Bank in
mid August.  During the second quarter,  the Bank incurred  expenses  related to
operating  these systems  internally  while  continuing to pay an outside vendor
until the item processing is brought in house.  These  additional  expenses were
approximately $40,000 during the quarter.  Additionally, the Bank incurred added
telecommunication  expense while converting the bank's data processing system to
a network  environment.  The bank's old  system and its new  network  system ran
concurrently  with  the  Bank's  data  processing   provider  for  approximately
forty-five days during the second quarter of 1999.

Financial Condition

During the six months ended June 30, 1999, the Company increased its assets $5.7
million from $119.9  million at December 31, 1998, to $125.6 million at June 30,
1999. This increase was due primarily to increases in net loans of $7.4 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 second of 1999.  Additionally,  continued growth in the Bank's
Maryland market has improved lending  activity.  Increased loan demand more than
offset the $3.2  million in deposit  growth  during the period.  Securities  and
interest-earning  deposits  decreased  $3.1  million  during  the  period due to
funding  requirements  resulting from the  significant  loan growth incurred and
fair  market  value  adjustments  to  available-for-sale  securities  within the
portfolio.

                                       12

<PAGE>

Deposits  increased  $3.2 million during the six months ended June 30, 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.  The  Bank  also  had
outstanding  at June 1999  approximately  $1.9 million of additional  short-term
Federal Home Loan Bank  advances used to meet loan funding  requirements  during
the period.

Stockholders'  equity was $13.6  million  at June 30,  1999,  compared  to $13.8
million at December 31,  1998.  Net income of $660,200 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 $1.27  million at June 30, 1999,  compared to
$717,000 at December 31, 1998. As to nonaccrual loans existing at June 30, 1999,
approximately  $50,000 of interest income would have been recognized  during the
six months then ended if interest thereon had accrued. Included in nonperforming
assets  are  two  loan  relationships  totaling  $457,000  that  management  has
categorized  as  impaired  under the  guidelines  established  by SFAS No.  114,
Accounting  for Creditors for  Impairment of a Loan, as amended by SFAS No. 118,
Accounting  by  Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosures.  The loan relationships are secured by real estate, vehicles and/or
accounts receivable. Approximately $15,000 has been recovered subsequent to June
30,  1999  from  the  sale of  collateral  securing  these  loans.  The Bank has
specifically  reserved  approximately  $300,000 towards these loans representing
the amount that management anticipates will not be collected due to deficiencies
in the collateral and costs associated with any collection proceedings.

At June 30, 1999, all loans 60 days or more delinquent,  including nonperforming
loans,  totaled $1.8 million.  Performing  loans totaling  $561,000 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.

                                       13

<PAGE>


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

                              Nonperforming Assets

<TABLE>
<CAPTION>

                                                   June 30,                December 31,
                                                     1999                 1998
                                                ---------------     -----------------
<S>     <C>

Nonaccrual loans:
      Commercial                              $            215    $                0
      Real Estate Construction                               0                     0
      Real Estate Mortgage                                 908                   555
      Home equity lines of credit                            0                     0
      Consumer                                              72                   113
                                                ---------------     -----------------

      Total nonaccrual loans                             1,195                   668
Other real estate owned                                     78                    49
                                                ---------------     -----------------

      Total nonperforming assets              $          1,273    $              717
                                                ===============     =================

Loans past due 90 or more days
      accruing interest                                     $0                    $0
Allowance for loan losses to
      nonaccrual loans                                 101.92%               137.72%
Nonperforming assets to period end
      loans and other real estate owned                  1.42%                 0.89%

</TABLE>

                                       14

<PAGE>


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


                            Allowance for Loan Losses

<TABLE>
<CAPTION>

                                                                        Six Months Ended June 30,
                                                                   -------------------------------------
                                                                        1999                 1998
                                                                   ---------------     -----------------
<S>     <C>

Balance, beginning of period                                     $            920    $              770
Loans charged off:
      Commercial                                                                0                    26
      Real estate construction                                                  0                     0
      Real estate mortgage                                                     14                    24
      Home equity lines of credit                                               0                     0
      Consumer                                                                 23                    35
                                                                   ---------------     -----------------

      Total loans charged-off                                                  37                    85
                                                                   ---------------     -----------------

Recoveries:
      Commercial                                                                0                     0
      Real estate construction                                                  0                     0
      Real estate mortgage                                                      0                     0
      Home equity lines of credit                                               0                     0
      Consumer                                                                  9                     3
                                                                   ---------------     -----------------

      Total recoveries                                                          9                     3
                                                                   ---------------     -----------------

Net charge-offs                                                               (28)                  (82)
Provision for loan losses                                                     326                    76
                                                                   ---------------     -----------------

Balance, end of period                                           $          1,218    $              764
                                                                   ===============     =================

Allowance for loan losses to loans
      outstanding at end of period                                          1.38%                 1.00%

Allowance for loan losses to nonaccrual
      loans outstanding at end of period                                  101.92%               132.64%

Net charge-offs to average loans
      outstanding during period                                            -0.03%                -0.11%
</TABLE>

                                       15

<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 June 30, 1999, the Bank had outstanding  loan and line of credit  commitments
of $11.8 million.  Scheduled  maturities of  certificate of deposits  during the
twelve months  following June 30, 1999 amounted to $43.4 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 $1.3 million for the six months ended
June 30, 1999,  compared to a increase of $590,000 for the six months ended June
30, 1998.  Net cash  provided by operating  activities  was $643,000 for the six
months ended June 30, 1999, compared to $628,000 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 $5.3  million  during the six months
ended June 30, 1999,  compared to $2.9 million for the six months ended June 30,
1998. The fluctuations in amounts during these periods were primarily the result
of increased  loan growth offset by maturities of investment  securities  during
the six months ended June 30, 1999, as compared to the same period of 1998.

Net cash  provided by financing  activities  was $6.0 million for the six months
ended June 30, 1999,  compared to $2.8 million for the six months ended June 30,
1998. The fluctuations in amounts during these periods were primarily the result
of increased deposit growth and increased  borrowings from the Federal Home Loan
Bank during June 1999 period as compared to the June 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 June 30, 1999,  the Company meets all capital  adequacy
requirements to which it is subject.

                                       16

<PAGE>

The  following  table  details the  components of Tier 1 and Tier 2 capital and
related ratios at June 30, 1999.


                               Analysis of Capital

<TABLE>
<CAPTION>

                                                                         June 30,           December 31,
                                                                           1999                 1998
                                                                    --------------------  --------------------
<S>     <C>

Tier 1 Capital:
        Common stock                                                 $              598    $              598
        Additional paid-in capital                                                3,585                 3,585
        Retained earnings                                                         9,798                 9,265
        Comprehensive income                                                       (380)                  341
                                                                    --------------------  --------------------
             Total capital (GAAP)                                                13,601                13,789
        Less: Intangibles                                                           (39)                  (41)
        Unrealized (gains) losses                                                   255                  (341)
                                                                    --------------------  --------------------
             Total Tier 1 capital                                    $           13,817    $           13,407
                                                                    --------------------  --------------------


Tier 2 Capital:
        Allowances for loan losses                                                1,218                 1,068
        Other required deductions                                                     0                   (21)
                                                                    --------------------  --------------------
             Total Tier 2 capital                                    $           15,035    $           14,454
                                                                    --------------------  --------------------

Risk-weighted assets                                                 $           83,995    $           74,400

Capital Ratios (1):
        Tier 1 risk-based capital ratio                                          16.45%                18.02%
        Total risk-based capital ratio                                           17.90%                19.43%
        Tier 1 capital to average adjusted
             total assets                                                        11.22%                11.80%
</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 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.

                                       17
<PAGE>

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.

The following  table presents the Bank's interest  sensitivity  position at June
30,  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>

                                                                                    June 30, 1999
                                            ----------------------------------------------------------------------------------------
                                               With-in               91-365               1 to 5          Over
                                               90 Days                Days                 Years        5 Years           Total
                                            ---------------     -----------------    --------------- -------------    -------------
<S>     <C>

Interest-Earning Assets:
      Loans                                 $         15,439    $      23,159        $      30,415   $       19,225   $       88,238
      Securities                                       1,887              857               16,219            9,637           28,600
      Money market and other
      short term securities                            1,775                0                    0                0            1,775
                                            ----------------     ------------         ------------    -------------    -------------

      Total earning assets                  $         19,101    $      24,016        $      46,634   $       28,862   $      118,613
                                            ================    ============          ============    =============    =============
      Cummulative earning assets            $         19,101    $      43,117        $      89,751   $      118,613   $      118,613
                                            ================    ============          ============    =============    =============


Interest-Bearing Liabilities:
      Money market savings                             8,166                0                   0                 0            8,166
      Interest checking                                    0                0              11,157                 0           11,157
      Savings                                              0                0              13,973                 0           13,973
      Certificates of deposit                         10,123           33,316              16,743             4,936           65,118
      FHLB advances                                    2,900                0                   0             1,056            3,956
                                            ----------------     ------------        ------------     -------------    -------------

      Total interest-bearing liabilities    $         21,189    $      33,316        $     41,873    $        5,992   $      102,370
                                            ================     ============        ============     =============    =============
      Cummulative interest-bearing
         liabilities                                  21,189           54,505              96,378           102,370          102,370
                                            ================     ============        ============     =============    =============

      Period gap                            $         (2,088)   $      (9,300)       $      4,761    $       22,870   $       16,243
      Cummulative gap                       $         (2,088)   $     (11,388)       $     (6,627)   $       16,243   $       16,243
      Ratio of cummulative interest-earning
      assets to interest-bearing liabilities          90.15%           79.11%              93.12%           115.87%          115.87%
      Ratio of cummulative gap to total
      earning assets                                  -1.76%           -9.60%              -5.59%            13.69%           13.69%
                                                     -10.93%           -38.72%             10.21%            79.24%
</TABLE>

                                       18
<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 has determined that applying the
pronouncement's  will not have a  material  impact  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  successfully
completing 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) 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

                                       19

<PAGE>

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. Phase four, validation,
involved the actual real life  testing of all the new  upgrades and  components.
Furthermore,  the Company tested with its third party service  providers to make
sure all new or  updated  year  2000  compliant  systems  worked  with  business
partners.  Due to the complexity and enormity of this phase,  it took until June
30, 1999 for the exhaustive testing to be completed.  Phases one through four of
the  Company's  Y2K Project have been  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.  During the quarter ended June 30, 1999,
contingency  plans  were  drafted.   During  the  third  quarter  of  1999,  the
contingency plans will be tested, independently approved by the Board and senior
management,  and all employees will be trained on  implementing  the contingency
policies and procedures into branch operations if conditions warrant.

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  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  $50,000 to $75,000 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. The Company does not separately track the internal
costs incurred for the Y2K project;  however, such costs are principally related
to  payroll  costs  for  information  systems  employees.  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.  Although the Company has faith in the adequacy of
its  contingency  plans and the  success of the  testing,  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 four  (awareness,
assessment,  renovation, and validation) and will continue to be deeply involved
with customer awareness  projects  throughout the remainder of 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 any adverse
effect of Year 2000 on its commercial customers to be immaterial.

                                       20

<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

The annual meeting of the  stockholders of Shore Financial  Corporation was held
on April 20,  1999.  Matters  voted on included the election of Lloyd J. Kellam,
III,  Henry P.  Custis,  Jr.,  and L. Dixon  Leatherbury  for  three-year  terms
expiring in 2002.  Another  matter voted on during the meeting  consisted of the
appointment of Goodman & Company,  L.L.P. as the Company's  independent auditors
for the fiscal year ending  December  31, 1999.  No other  matters were voted on
during the meeting or by proxy or other means during the period.

Item 5 - Other Information

None.

Item 6 - Exhibits and Reports on Form 8-K

None.

                                       21


<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.


Scott C. Harvard                                      August 13, 1999
-----------------------
Scott C. Harvard
President and
Chief Executive Officer

Steven M. Belote                                      August 13, 1999
-----------------------
Steven M. Belote
Treasurer and
Chief Financial Officer