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 September 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 November 11, 2002:  1,695,817

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 September 30, 2002
          and December 31, 2001

         Consolidated Statements of Income for the Three Months and
          Nine Months Ended September 30, 2002 and 2001

         Consolidated Statements of Cash Flows for the Nine Months
          Ended September 30, 2002 and 2001

         Consolidated Statement of Stockholders' Equity for the Nine Months
          Ended September 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

Item 3 - Controls and Procedures


                           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



                                                                     September 30,       December 31,
                                                                         2002                2001
-----------------------------------------------------------------------------------------------------------

 <c>
                                                                      (Unaudited)
                             ASSETS


Cash (including interest - earning deposits of
     approximately $6,764,300 and $4,890,000, respectively)      $       11,880,900     $      6,605,900
Investment securities:
     Held to maturity (fair value of $6,077,600 and
        $2,007,500, respectively)                                         6,004,600            1,999,700
     Available for sale (amortized cost of $27,804,100 and
        $25,175,200, respectively)                                       28,495,100           25,422,300
     Federal Home Loan Bank stock, at cost                                  542,700              510,500
     Federal Reserve Bank stock, at cost                                    124,800              124,800
     Community Bankers' Bank stock, at cost                                  21,100                    -
Loans receivable, net                                                   113,223,700          104,095,800
Premises and equipment, net                                               3,528,600            2,778,500
Accrued interest receivable                                                 978,100              981,400
Prepaid expenses and other assets                                           354,400              332,300
                                                                 ----------------------------------------

                                                                 $      165,154,000     $    142,851,200
                                                                 ========================================

              LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                         $      146,104,200     $    125,313,700
Advances from Federal Home Loan Bank                                        766,700              816,700
Advance payments by borrowers for taxes
     and insurance                                                          251,100              198,400
Accrued interest payable                                                     32,500               27,000
Accrued expenses and other liabilities                                      314,000              234,600
                                                                 ----------------------------------------
           Total liabilities                                            147,468,500          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; 1,695,817 and 1,697,667 shares
        issued and outstanding, respectively                                559,600              560,200
     Additional capital                                                   2,654,500            2,677,200
     Retained earnings, substantially restricted                         14,020,800           12,859,600
     Accumulated other comprehensive income                                 450,600              163,800
                                                                 ----------------------------------------
           Total stockholders' equity                                    17,685,500           16,260,800
                                                                 ----------------------------------------

                                                                 $      165,154,000     $    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 September 30,     Nine Months Ended September 30,
                                             ---------------------------------   ---------------------------------
                                                  2002              2001               2002             2001
-------------------------------------------------------------------------------------------------------------------

 <c>
Interest and dividend income
    Loans                                    $     1,965,200    $   1,993,300      $    5,843,900   $    5,956,100
    Investments
       Taxable interest                              348,400          427,800           1,010,000        1,409,000
       Tax-exempt interest                            28,900           35,500              97,300           75,800
       Dividends                                      34,400           33,400             102,400          100,600
                                             -----------------------------------  ---------------------------------
          Total interest and dividend income       2,376,900        2,490,000           7,053,600        7,541,500
                                             -----------------------------------  ---------------------------------

Interest expense
    Deposits                                         916,100        1,211,300           2,768,200        3,787,100
    FHLB advances                                     10,800           12,100              42,300           75,800
                                             -----------------------------------  ---------------------------------
       Total interest expense                        926,900        1,223,400           2,810,500        3,862,900
                                             -----------------------------------  ---------------------------------

Net interest income                                1,450,000        1,266,600           4,243,100        3,678,600

Provision for loan losses                             84,000           58,500             241,700          163,500
                                             -----------------------------------  ---------------------------------

Net interest income after
    provision for loan losses                      1,366,000        1,208,100           4,001,400        3,515,100
                                             -----------------------------------  ---------------------------------

Noninterest income
    Deposit account fees                             267,600          217,000             747,300          631,200
    Loan fees                                         41,300           29,300             104,600           99,900
    Commissions on investment brokerage sales          9,900            9,600              37,500           36,300
    Gains (losses) on sales of securities             (2,800)          10,900              (2,800)          23,200
    Other                                             19,400           18,200              96,500           73,000
                                             -----------------------------------  ---------------------------------
       Total noninterest income                      335,400          285,000             983,100          863,600
                                             -----------------------------------  ---------------------------------

Noninterest expense
    Compensation and employee
       benefits                                      478,500          463,500           1,369,700        1,370,500
    Occupancy and equipment                          287,700          182,700             813,100          661,200
    Data processing                                  121,900          111,800             366,300          336,500
    Advertising                                       25,800           16,100              60,700           43,700
    Federal insurance premium                          5,700            5,600              17,200           16,900
    Other                                            124,700          207,600             397,600          462,800
                                                  -----------       ----------
                                             -----           -------------------  ---------------------------------
       Total noninterest expense                   1,044,300          987,300           3,024,600        2,891,600
                                             -----------------------------------  ---------------------------------

Income before income taxes                           657,100          505,800           1,959,900        1,487,100

Income taxes                                         212,300          161,900             629,300          475,900
                                             -----------------------------------  ---------------------------------

Net income                                   $       444,800    $     343,900      $    1,330,600   $    1,011,200
                                             ===================================  =================================

Cash Dividends Declared Per Share            $          0.04   $         0.00     $          0.10  $          0.09
                                             ===================================  =================================

Earnings Per Common Share:
       Basic                                 $          0.26   $         0.20     $          0.78  $          0.58
                                             ===================================  =================================

       Diluted                               $          0.26   $         0.20     $          0.78  $          0.58
                                             ===================================  =================================



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

<PAGE>

                                                         SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                                                        Consolidated Statement of Stockholders' Equity


Nine Months Ended September 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                        -            -                -               (169,400)              -               (169,400)

Exercise of stock options           3,150        1,000           24,000                -                  -                 25,000

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

Comprehensive income                 -            -                -              1,330,600            286,800           1,617,400
                                ---------------------------------------------------------------------------------------------------

Balance, September 30, 2002     1,695,817    $ 559,600      $ 2,654,500         $14,020,800         $  450,600         $17,685,500
                                ===================================================================================================





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

<PAGE>

               SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                  Consolidated Statements of Cash Flows



                                                            Nine Months Ended September 30,
                                                            --------------------------------
                                                                 2002            2001
--------------------------------------------------------------------------------------------

 <c>

Cash flows from operating activities
    Net income                                              $  1,330,600      $  1,011,200
    Adjustments to reconcile to net cash
      provided by operating activities:
         Provision for loan losses                               241,700           163,500
         Depreciation and amortization                           257,100           244,200
         Amortization of premium and accretion
           of discount on securities, net                         45,600          (163,700)
         (Gain) loss on sale of investment securities              2,800           (23,200)
         (Gain) loss on disposal of fixed assets                  (5,800)            7,700
         Gain on sale of repossessed assets                       (3,200)             (300)
         Change in net deferred loan fees                        (42,000)            3,500
         Increase in other assets                               (179,000)          (43,600)
         Increase in other liabilities                           137,600           309,600
                                                            --------------------------------
           Net cash provided by operating activities           1,785,400         1,508,900
                                                            --------------------------------

Cash flows from investing activities
    Purchase of available-for-sale securities                 (7,889,100)       (9,530,300)
    Proceeds from maturities, sales and calls of
      available-for-sale securities                            5,198,300         9,861,300
    Purchase of held-to-maturity securities                   (5,990,300)       (4,260,800)
    Proceeds from maturities, prepayments and calls
      of held-to-maturity securities                           2,000,000         9,000,000
    Purchase of Federal Home Loan Bank stock                     (32,200)          (18,700)
    Purchase of Community Bankers' Bank stock                    (21,100)             -
    Loan originations, net of repayments                      (9,413,600)       (6,408,300)
    Purchase of premises and equipment                          (999,300)         (111,800)
    Proceeds from sale of real estate owned, net of costs         89,100            69,500
                                                            --------------------------------
           Net cash used by investing activities             (17,058,200)       (1,399,100)
                                                            --------------------------------

Cash flows from financing activities
    Net increase in demand deposits                           14,952,600        11,012,700
    Net increase in time deposits                              5,837,900         2,530,700
    Proceeds from FHLB advances                                8,600,000         8,300,000
    Repayments of FHLB advances                               (8,650,000)      (15,521,400)
    Repurchase of common stock                                   (48,300)         (834,700)
    Proceeds from exercise of stock options                       25,000              -
    Payment of dividend on common stock                         (169,400)         (160,900)
                                                            --------------------------------
           Net cash provided by financing activities          20,547,800         5,326,400
                                                            --------------------------------

Increase in cash and cash equivalents                          5,275,000         5,436,200

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

Cash and cash equivalents, end of period                    $ 11,880,900      $ 10,532,500
                                                            ================================


Supplemental disclosure of cash flow information

    Cash paid during the period for interest                $  2,805,000      $  3,888,200
    Cash paid during the period for income taxes            $    725,000      $    355,000

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 nine
month period ended  September  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 products,  title
insurance and trust services.

<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
September 30, 2002 and 2001.
<TABLE>

                                                 Three Months Ended September 30,          Nine Months Ended September 30,
                                               -------------------------------------   ----------------------------------------
                                                    2002                 2001                  2002                   2001
                                               -----------------   -----------------   ----------------      ------------------

 <c>

Net income (numerator, basic and diluted)      $      444,800      $     343,900       $    1,330,600        $     1,011,200
Weighted average shares outstanding
(denominator)                                       1,694,800          1,706,400            1,694,900              1,747,800
                                               -----------------   -----------------   ----------------      ------------------

Earnings per common share - basic              $         0.26      $        0.20       $         0.78        $          0.58
                                               =================   =================   ================      ==================

Effect of dilutive securities:

Weighted average shares outstanding                 1,694,800          1,706,400            1,694,900              1,747,800
Effect of stock options                                18,300              4,700               14,200                   -
                                               ----------------    -----------------   ----------------      ------------------
Diluted average shares outstanding
(denominator)                                       1,713,100          1,711,100            1,709,100              1,747,800
                                               ----------------    -----------------   ----------------      ------------------

Earnings per common share -
assuming dilution                              $         0.26      $        0.20       $         0.78        $          0.58
                                               ================    =================   ================      ==================

</TABLE>


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


NOTE 4 - COMPREHENSIVE INCOME

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

<TABLE>

                                                        Nine Months Ended September 30,
                                                 ----------------------------------------------
                                                         2002                    2001
                                                 ---------------------  -----------------------

 <c>

Net income                                           $      1,330,600       $        1,011,200
Other comprehensive income                                    286,800                  596,500
                                                       ---------------        -----------------

Total comprehensive income                           $      1,617,400       $        1,607,700
                                                       ===============        =================

</TABLE>




<PAGE>



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

<TABLE>


                                                            Nine Months Ended September 30,
                                                 ----------------------------------------------
                                                         2002                    2001
                                                 ---------------------  -----------------------

 <c>

Unrealized gains on securities:
Unrealized holding gains
      arising during the period                      $        442,200       $          935,200
Less: reclassification adjustment
      for gains included in income                              2,800                  (23,200)
                                                       -----------------      -----------------

Total other comprehensive income
     before income tax expense                                445,000                  912,000

Income tax expense                                           (158,200)                (315,500)
                                                       -----------------      -----------------

Net unrealized gain                                  $        286,800       $          596,500
                                                       =================      =================


</TABLE>


NOTE 5 - SEGMENT INFORMATION

Segment  information  consists  of the  following  for  the  nine  months  ended
September 30, 2002 and 2001:

<TABLE>

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

  <c>

Net Interest Income:
  Nine months ended September 30, 2002   $   3,080     $     549      $   1,168      $      (554)      $   4,243
  Nine months ended September 30, 2001   $   2,563     $     479      $   1,512      $      (875)      $   3,679

Assets:
  September 30, 2002                     $ 144,124     $  20,268      $  45,035      $   (44,273)      $ 165,154
  December 31, 2001                      $ 130,426     $  19,060      $  33,641      $   (40,276)      $ 142,851

</TABLE>


NOTE 6 - PURCHASES AND AQUISITIONS

On September 13, 2002, Shore Bank, a wholly-owned  subsidiary of Shore Financial
Corporation,  entered into a definitive  purchase  and  assumption  agreement to
acquire the deposits of the Salisbury,  Maryland  branch of Susquehanna  Bank, a
wholly-owned  subsidiary of Susquehanna Bankshares Inc. The proposed transaction
is to include approximately $18.0 million in deposits.  The purchase,  which has
received regulatory approval, will enhance the Bank's position in the Salisbury,
Maryland  market.  The  acquisition  is expected to be completed by December 31,
2002.

NOTE 7 - SUBSEQUENT EVENT

During  October  2002,  the Company  declared a $0.04 per share  quarterly  cash
dividend on its common  stock  payable on November 15, 2002 to  shareholders  of
record on November 1, 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  September 30, 2002 was $444,800,
compared  to net income of $343,900  for the same period of the prior year.  Net
income for the nine months ended September 30, 2002 was $1.33 million,  compared
to net income of $1.01 million for the same period of the prior year.  Quarterly
and nine month  earnings  were  positively  impacted  by loan growth of 16.6% as
compared to the  September  2001 period and the  reduction in the Bank's cost of
funds. Loan production remained strong during the period, fueled by low interest
rates and improved marketing efforts by loan production personnel. Additionally,
the Bank's trend of maintaining credit quality continued in its loan portfolio.

Net Interest Income

Net interest income  increased 14.5% to $1.45 million for the three months ended
September 30, 2002, compared to $1.27 million for the same period in 2001, while
net interest  income  increased 15.4% to $4.24 million for the nine months ended
September  30, 2002,  compared to $3.68 million  during the September  2001 nine
month  period.  The net interest  margin  increased to 3.88% for the nine months
ended September 30, 2002, as compared to 3.73% during the 2001 period, while the
interest rate spread  increased to 3.39% from 3.05% for the same period in 2001.
Average earning assets  increased $14.3 million during the September 2002 period
as compared to the September 2001 period, reductions in nonperforming assets and
a decrease in funding costs  positively  impacted net interest  income.  Average
noninterest-bearing  demand deposits increased 30.9% to $13.8 million during the
nine months ended  September 30, 2002,  as compared to $10.5 million  during the
September 2001 period, while average interest-bearing liabilities increased 9.5%
to $124.1 million during the September 2002 period as compared to 2001.

Interest  and  dividend  income  decreased  4.5% to $2.38  million for the three
months ended  September 30, 2002,  compared to $2.49 million for the same period
in 2001,  while interest and dividend income decreased 6.5% to $7.05 million for
the nine months ended  September 30, 2002,  compared to $7.54 million during the
September 2001 nine month period.  The  market-driven 134 basis point decline in
loan  yields  more than offset a $15.9  million  increase  in the  average  loan
balance.  The  increase  in the  average  loan  balance  occurred  primarily  in
residential  and  commercial  real  estate  and  consumer  lending   categories.
Additionally,  the yield on  securities  decreased  87 basis  points,  while the
average balance of securities  decreased by $2.9 million during the period ended
September 30, 2002 as compared to September 30, 2001.


Interest  expense  decreased  24.2%  to  $926,900  for the  three  months  ended
September 30, 2002, compared to $1.22 million for the same period in 2001, while
interest  expense  decreased  27.2% to $2.81  million for the nine months  ended
September  30, 2002,  compared to $3.86 million  during the September  2001 nine
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  4.55% in 2001 to 3.02%  for the
September  2002 period.  Time  deposits  provided  most of the impact with a 168
basis point decline.  This decrease more than offset a $11.1 million increase in
average  interest-bearing  deposits  during the nine months ended  September 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

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


 <c>
Assets:
       Securities (1)                      $     32,872   $      1,212        4.92%   $     35,737   $      1,551        5.79%
       Loans (net of unearned income):
             Real estate mortgage                49,911          2,723        7.28%         45,259          2,752        8.11%
             Real estate construction             1,961             87        5.92%          1,374             92        8.93%
             Commercial                          37,704          1,994        7.05%         29,916          1,933        8.62%
             Home equity lines                   10,401            384        4.92%          6,955            422        8.09%
             Consumer                            10,818            656        8.09%         11,418            757        8.84%
                                             -----------    -----------                 -----------    -----------
                  Total loans                   110,795          5,844        7.03%         94,922          5,956        8.37%
       Interest-bearing deposits
             in other banks                       4,023             47        1.56%          2,714             91        4.47%
                                             -----------    -----------                 -----------    -----------
                  Total earning assets          147,690          7,103        6.41%        133,373          7,598        7.60%
                                             -----------    -----------                 -----------    -----------
       Less: allowance for loan losses           (1,421)                                    (1,201)
       Total nonearning assets                    9,075                                      7,866
                                             -----------                                -----------
       Total assets                        $    155,344                               $    140,038
                                             ===========                                ===========

Liabilities
       Interest-bearing deposits:
             Checking and savings          $     45,973   $        386        1.12%   $     36,338   $        506        1.86%
             Time deposits                       76,675          2,382        4.14%         75,202          3,281        5.82%
                                             -----------    -----------                 -----------    -----------

                  Total interest-bearing
                  deposits                      122,648          2,768        3.01%        111,540          3,787        4.53%

       FHLB advances                              1,435             42        3.90%          1,766             76        5.74%
                                             -----------    -----------                 -----------    -----------
                  Total interest-bearing
                  liabilities                   124,083          2,810        3.02%        113,306          3,863        4.55%
                                                            -----------                                -----------
       Non-interest bearing liabilities:
             Demand deposits                     13,798                                     10,540
             Other liabilities                      613                                        621
                                             -----------                                -----------

       Total liabilities                        138,494                                    124,467
       Stockholders' equity                      16,850                                     15,571
                                             -----------                                -----------

       Total liabilities and stockholders'
             equity                        $    155,344                               $    140,038
                                             ===========                                ===========

       Net interest income (1)                            $      4,293                               $      3,735
                                                            ===========                                ===========

       Interest rate spread (1)(3)                                            3.39%                                      3.05%
       Net interest margin (1)(4)                                             3.88%                                      3.73%



(1)      Tax equivalent  basis.  The tax equivalent  adjustment to net interest  income was $50,000 and $56,000 for the nine months
         ended September 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 derived by dividing  net interest  income by average total earning assets.

</TABLE>

<PAGE>


Noninterest Income

Noninterest  income was $335,400  during the three months  ended  September  30,
2002, as compared to $285,000 for the same period in 2001,  representing a 17.7%
increase over the prior period. During the nine months ended September 30, 2002,
noninterest  income  was  $983,100,  representing  an  13.8%  increase  over the
$863,600  earned during the same period in 2001. The  improvement in noninterest
income resulted from increases in deposit account and check card fees associated
with growth in deposit accounts and use of the Bank's check card product.

Provision for Loan Losses

Provision  for loan losses was $84,000 for the three months ended  September 30,
2002,  as compared to $58,500 for the same period of 2001,  while the  provision
for loan losses was $241,700 for the nine months ended  September  30, 2002,  as
compared to $163,500 for the same 2001 period.  See Asset Quality for additional
discussion relating to the allowance for loan losses.

Noninterest Expense

Noninterest  expense was $1.04 million  during the three months ended  September
30, 2002, an increase of 5.8% over the $987,300  incurred during the same period
of 2001, while  noninterest  expense  increased 4.6% to $3.02 million during the
nine months ended  September 30, 2002, as compared to $2.89 million for the same
period of 2001. This increase resulted from normal operating  activities related
to Company growth since September 2001.

Financial Condition

During the nine months ended September 30, 2002, the Company's  assets increased
by $22.3 million from $142.9  million at December 31, 2001 to $165.2  million at
September  30,  2002.  Net loans  grew  $9.1  million  and cash and  investments
increased  $12.3 million  during the period.  Continued  expansion of commercial
banking  relationships,  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  $20.8  million  during the nine months ended  September 30,
2002.   Interest-bearing   demand  and  savings  deposit  account  balances  and
noninterest-bearing  demand deposit  account balance grew $12.5 million and $2.4
million,  respectively,  during the period,  while time deposits  increased $5.8
million during the period.  Federal Home Loan Bank advances  decreased  slightly
during the period from  $817,000 at December  31, 2001 to $766,700 at  September
30, 2002.

Stockholders'  equity was $17.7 million at September 30, 2002, compared to $16.3
million at December 31, 2001.  Net income of $1.33 million offset the payment of
$169,400 ($0.10 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 paid 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  paid  on  August  1,  2002  to
shareholders  of record on July 15,  2002.  During  October  2002,  the  Company
declared a $0.04 per share  quarterly  cash dividend on its common stock payable
on November 15, 2002 to shareholders of
record on November 1, 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 $201,000 at September  30, 2002,  compared to
$533,000 at December 31, 2001. As to nonaccrual  loans existing at September 30,
2002,  approximately $7,600 of interest income would have been recognized during
the nine  months then ended if interest  thereon  had  accrued.  During the nine
months ended September 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 September  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  September  30,  2002,  all  loans  60  days or  more  delinquent,  including
nonperforming  loans,  totaled  $648,000.  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


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


 <c>
Nonaccrual loans:
      Commercial                                              $             15    $                -
      Real estate mortgage                                                 152                   453
      Home equity lines of credit                                            9                    22
      Consumer                                                              25                    58
                                                                ---------------     -----------------

      Total nonaccrual loans                                               201                   533
Other real estate owned                                                      -                     -
                                                                ---------------     -----------------

      Total nonperforming assets                              $            201    $              533
                                                                ===============     =================

Loans past due 90 or more days
      accruing interest                                                      -                     -
Allowance for loan losses to
      nonaccrual loans                                                 771.64%               248.78%
Nonperforming assets to period end
      loans and other real estate owned                                  0.18%                 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


                                                                  Nine Months Ended September 30,
                                                                -------------------------------------
(In Thousands)                                                       2002                 2001
                                                                ---------------     -----------------


 <c>
Balance, beginning of period                                  $          1,326    $            1,336
Loans charged off:
      Commercial                                                             -                     -
      Real estate mortgage                                                   -                  (282)
      Consumer                                                             (40)                  (45)
                                                                ---------------     -----------------

      Total loans charged-off                                              (40)                 (327)
                                                                ---------------     -----------------

Recoveries:
      Commercial                                                             -                     -
      Real estate mortgage                                                   -                     -
      Consumer                                                              23                     6
                                                                ---------------     -----------------

      Total recoveries                                                      23                     6
                                                                ---------------     -----------------

Net recoveries (charge-offs)                                               (17)                 (321)
Provision for loan losses                                                  242                   163
                                                                ---------------     -----------------

Balance, end of period                                        $          1,551    $            1,178
                                                                ===============     =================

Allowance for loan losses to loans
      outstanding at end of period                                       1.35%                 1.20%

Allowance for loan losses to nonaccrual
      loans outstanding at end of period                               771.64%               189.39%

Net charge-offs to average loans
      outstanding during period                                         -0.02%                -0.34%

</TABLE>

<PAGE>

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.

At  September  30,  2002,  the Company had  outstanding  loan and line of credit
commitments  of $27.9 million.  Scheduled  maturities of certificate of deposits
during the twelve months following September 30, 2002 amounted to $52.4 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 $5.3 million for the nine months ended
September 30, 2002,  compared to an increase of $5.4 million for the nine months
ended  September 30, 2001.  Net cash provided by operating  activities  was $1.8
million for the nine months ended  September 30, 2002,  compared to $1.5 million
during the same period of 2001.  This  improvement  reflects the increase in net
income over the prior period.

Net cash used by investing  activities  was $17.1 million during the nine months
ended September 30, 2002,  compared to net cash used by investing  activities of
$1.4 million for the nine months ended  September 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 $20.5 million for the nine months
ended September 30, 2002, compared to net cash provided by financing  activities
of $5.3 million for the nine months ended  September 30, 2001. The  fluctuations
in amounts  during these periods were  primarily the result of stronger  deposit
growth during 2002 versus 2001,  and greater  repayments of borrowings  with the
Federal Home Loan Bank and in stock  repurchase  activity during the 2001 period
versus 2002.

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 nine months  ended  September  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 September
30, 2002, the Bank's  retained  earnings  available for the payment of dividends
was $1.86 million.  The capital amounts and  classification  are also subject to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.

<PAGE>

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  September  30,  2002,  the Company  meets all capital
adequacy requirements to which it is subject.

The  following  table  details the  components  of Tier 1 and Tier 2 capital and
related ratios at September 30, 2002 and December 31, 2001.

<TABLE>

                                        Analysis of Capital

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

 <c>
Tier 1 Capital:
       Common stock                                               $            560     $            560
       Additional paid-in capital                                            2,654                2,677
       Retained earnings                                                    14,021               12,860
       Comprehensive income                                                    451                  164
                                                                 ------------------  -------------------
             Total capital (GAAP)                                           17,686               16,261
       Less: Intangibles                                                       (30)                 (30)
       Net unrealized gain on debt and equity securities                      (451)                (164)
       Net unrealized losses on equity securities                             (109)                (137)
                                                                 ------------------  -------------------
             Total Tier 1 capital                                           17,096               15,930


Tier 2 Capital:
       Allowable allowances for loan losses                                  1,284                1,232
                                                                 ==================  ===================
             Total Tier 2 capital                                 $         18,380     $         17,162
                                                                 ==================  ===================

Risk-weighted assets                                              $        106,165     $        101,638

Capital Ratios (1):
       Tier 1 risk-based capital ratio                                      16.10%               15.67%
       Total risk-based capital ratio                                       17.31%               16.89%
       Tier 1 capital to average adjusted
             total assets                                                   11.01%               11.30%

</TABLE>

<PAGE>

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.

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
September  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

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

 <c>
Interest-Earning Assets:
 Loans (1)                          $     22,875     $     12,766     $     54,729     $     24,405     $    114,775
 Securities                                2,996            4,070           27,040            1,082           35,188
 Money market and other
     short term securities                 6,764             -                -                -               6,764
                                    -------------    -------------    -------------    -------------    -------------

 Total earning assets               $     32,635     $     16,836     $     81,769     $     25,487     $    156,727
                                    =============    =============    =============    =============    =============
 Cumulative earning assets          $     32,635     $     49,471     $    131,240     $    156,727     $    156,727
                                    =============    =============    =============    =============    =============


Interest-Bearing Liabilities:
 Money market savings               $     15,142     $       -        $       -        $       -        $     15,142
 Interest checking (2)                      -                -              19,098             -              19,098
 Savings (2)                                -                -              15,961             -              15,961
 Certificates of deposit                  17,145           35,243           24,475            2,737           79,600
 FHLB advances                              -                -                -                 767              767
                                    --------------   -------------    -------------    -------------    -------------

 Total interest-bearing liabilities $     32,287    $      35,243     $     59,534     $      3,504     $    130,568
                                    ==============  ==============    =============    =============    =============
 Cumulative interest-bearing
     liabilities                    $     32,287    $      67,530     $    127,064     $    130,568     $    130,568
                                    ==============  ==============    =============    =============    =============

 Period gap                         $        348    $     (18,407)    $     22,235     $     21,983     $     26,159
 Cumulative gap                     $        348    $     (18,059)    $      4,176     $     26,159     $     26,159
 Ratio of cumulative interest-
     earning assets to interest-
     bearing liabilities                  101.08%           73.26%          103.29%          120.03%          120.03%
 Ratio of cumulative gap to total
     earning assets                         0.22%          (11.52%)           2.66%           16.69%           16.69%





(1)  Includes nonaccrual loans of $201,000, 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  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting   Standard  (SFAS)  No.  147,   Acquisitions  of  Certain   Financial
Institutions,  an  amendment  of  FASB  Statements  No.  72  and  144  and  FASB
Interpretation  No.  9 (SFAS  147),  in  October  2002.  SFAS  147  removes  the
acquisition  of  financial  institutions  from  the  scope  of both  SFAS 72 and
Interpretation  9, and requires  that those  transactions  be  accounted  for in
accordance with SFAS 141, Business Combinations and SFAS 142, Goodwill and Other
Intangible  Assets.  Thus the requirement in paragraph 5 of SFAS 72 to recognize
(and subsequently  amortize) any excess of the fair value of liabilities assumed
over the fair value of tangible and identifiable  intangible  assets acquired as
an unidentifiable  intangible asset no longer applies to acquisitions within the
scope  of  this  statement.   Additionally,  this  statement  amends  SFAS  144,
Accounting  for Impairment or Disposal of Long-Lived  Assets,  to include in its
scope   long-term   customer-relationship   intangible   assets   of   financial
institutions.  Consequently,  those  intangible  assets are  subject to the same
undiscounted cash flow  recoverability  test and impairment loss recognition and
measurement  provisions that SFAS 144 requires for other long-lived  assets that
are  held  and  used.  The  provisions  of  this  Statement  are  effective  for
transactions dated on or after October 1, 2002.

Item 3 - Controls and Procedures

Under the supervision and with the  participation  of our management,  including
our  principal  executive  officer  and  principal  financial  officer,  we have
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls  and  procedures  within 90 days of the filing  date of this  quarterly
report. Based on that evaluation,  our principal executive officer and principal
financial  officer  have  concluded  that  these  controls  and  procedures  are
effective.  There were no  significant  changes in our  internal  controls or in
other factors that could  significantly  affect these controls subsequent to the
date of their evaluation.

Disclosure  controls and procedures are our controls and other  procedures  that
are  designed to ensure that  information  required to be disclosed by us in the
reports  that we file or  submit  under  the  Exchange  Act is  accumulated  and
communicated to our management,  including our principal  executive  officer and
principal financial officer, as appropriate, to allow timely decisions regarding
required disclosure.


<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

(a)      Certifications pursuant to subsections 302 and 906 of the Sarbanes-
         Oxley Act of 2002.
(b)      Form 8-K was filed  during  the most  recent  quarter  relative  to our
         purchase of a Susquehanna Bank branch in Salisbury, Maryland.


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

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