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, 2001

     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 9, 2001: 1,702,167

            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, 2001 and December 31, 2000

                    Consolidated  Statements  of Income for the Three  Months
                    and Nine Months Ended September 30, 2001 and 2000

                    Consolidated  Statements  of Cash Flows for the Nine Months
                    Ended  September 30, 2001 and 2000

                    Consolidated  Statement  of  Stockholders'  Equity  for the
                    Nine  Months  Ended September 30, 2001

                    Notes to Unaudited Consolidated Financial Statements

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

                    Results of Operations

                    Financial Condition

                    Asset Quality

                    Liquidity and Capital Resources

                    Interest Sensitivity


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

                                   SIGNATURES

<PAGE>

<TABLE>
                             SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
                            Consolidated Statements of Financial Condition


                                                                    September 30,       December 31,
                                                                        2001                2000
--------------------------------------------------------------------------------------------------------
                                                                     (Unaudited)
                            ASSETS


  <c>
Cash (including interest - earning deposits of
     approximately $5,917,000 and $1,154,000, respectively)     $       10,532,500    $       5,096,300
Investment securities:
     Held to maturity (fair value of $7,730,000 and
        $12,356,000, respectively)                                       7,685,200           12,303,100
     Available for sale (amortized cost of $26,129,000 and
        $26,394,000, respectively)                                      26,477,900           25,831,300
     Federal Home Loan Bank stock, at cost                                 510,500              491,800
     Federal Reserve Bank stock, at cost                                   124,800              124,800
Loans receivable, net                                                   97,266,800           91,344,700
Premises and equipment, net                                              2,708,200            2,843,400
Real estate owned                                                          255,000                5,000
Accrued interest receivable                                              1,148,600            1,131,500
Prepaid expenses and other assets                                          347,900              641,800
                                                                ----------------------------------------

                                                                $      147,057,400    $     139,813,700
                                                                ----------------------------------------

             LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                        $      129,433,600    $     115,890,200
Advances from Federal Home Loan Bank                                       833,300            8,054,700
Advance payments by borrowers for taxes
     and insurance                                                         294,300              190,500
Accrued interest payable                                                    52,900               78,200
Accrued expenses and other liabilities                                     395,700              164,600
                                                                ----------------------------------------
           Total liabilities                                           131,009,800          124,378,200
                                                                ----------------------------------------

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; 1,706,367 and 1,815,212 shares
        issued and outstanding, respectively                               563,100              599,000
     Additional capital                                                  2,757,700            3,556,500
     Retained earnings, substantially restricted                        12,491,000           11,640,700
     Accumulated other comprehensive income (loss)                         235,800             (360,700)
                                                                ----------------------------------------
           Total stockholders' equity                                   16,047,600           15,435,500
                                                                ----------------------------------------

                                                                $      147,057,400    $     139,813,700
                                                                ----------------------------------------


              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,
                                             ---------------------------------    ---------------------------------
                                                     2001              2000               2001             2000
--------------------------------------------------------------------------------  ---------------------------------

Interest and dividend income
    Loans                                    $     1,993,300   $    1,925,700     $     5,956,100  $     5,643,700
    Investments
          Taxable                                    461,200          596,200           1,474,300        1,463,100
          Tax-exempt                                  35,500           45,000             111,100          155,700
                                             -----------------------------------  ---------------------------------
       Total interest income                       2,490,000        2,566,900           7,541,500        7,262,500
                                             -----------------------------------  ---------------------------------

Interest expense
    Deposits                                       1,211,300        1,308,100           3,787,100        3,600,700
    FHLB advances                                     12,100           14,200              75,800           78,500
                                             -----------------------------------  ---------------------------------
       Total interest expense                      1,223,400        1,322,300           3,862,900        3,679,200
                                             -----------------------------------  ---------------------------------

Net interest income                                1,266,600        1,244,600           3,678,600        3,583,300

Provision for loan losses                             58,500           53,100             163,500          159,300
                                             -----------------------------------  ---------------------------------

Net interest income after
    provision for loan losses                      1,208,100        1,191,500           3,515,100        3,424,000
                                             -----------------------------------  ---------------------------------

Noninterest income
    Deposit account fees                             217,000          192,900             631,200          545,100
    Loan fees                                         29,300           36,600              99,900          104,300
    Gains on sales of securities                      10,900            8,500              23,200            8,500
    Other                                             27,800            1,000             109,300           76,200
                                             -----------------------------------  ---------------------------------
       Total noninterest income                      285,000          239,000             863,600          734,100
                                             -----------------------------------  ---------------------------------

Noninterest expense
    Compensation and employee
       benefits                                      463,500          455,700           1,370,500        1,301,400
    Occupancy and equipment                          182,700          244,300             661,200          735,000
    Data processing                                  111,800          106,800             336,500          314,400
    Advertising                                       16,100           13,600              43,700           41,800
    Federal insurance premium                          5,600            5,900              16,900           17,200
    Other                                            207,600          113,400             462,800          351,300
                                             -----------------------------------  ---------------------------------
       Total noninterest expense                     987,300          939,700           2,891,600        2,761,100
                                             -----------------------------------  ---------------------------------

Income before income taxes                           505,800          490,800           1,487,100        1,397,000

Income taxes                                         161,900          159,900             475,900          468,400
                                             -----------------------------------  ---------------------------------

Net income                                   $       343,900   $      330,900     $     1,011,200  $       928,600
                                             -----------------------------------  ---------------------------------

Cash Dividends Declared Per Share            $          0.00   $         0.00     $          0.09  $          0.08
                                             -----------------------------------  ---------------------------------

Earnings Per Common Share:
       Basic                                 $          0.20   $         0.18     $          0.58  $          0.51
                                             -----------------------------------  ---------------------------------

       Diluted                               $          0.20   $         0.18     $          0.58  $          0.51
                                             -----------------------------------  ---------------------------------



                    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, 2001
--------------------------------------------------------------------------------------------------------------------------

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

Balance, December 31, 2000         1,815,212   $ 599,000   $ 3,556,500      $11,640,700    $ (360,700)       $ 15,435,500

Common stock cash dividend
   declared                             -           -             -            (160,900)         -               (160,900)

Repurchase of common stock          (108,845)    (35,900)     (798,800)            -             -               (834,700)

Comprehensive income                    -           -             -           1,011,200       596,500           1,607,700
                                   ---------------------------------------------------------------------------------------

Balance, September 30, 2001        1,706,367   $ 563,100   $ 2,757,700     $ 12,491,000    $  235,800        $ 16,047,600
                                   ---------------------------------------------------------------------------------------






   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,
                                                                    ------------------------------------
                                                                          2001                 2000
-------------------------------------------------------------------------------------   ----------------

Cash flows from operating activities
     Net income                                                     $      1,011,200    $       928,600
     Adjustments to reconcile to net cash
        provided by operating activities:
           Provision for loan losses                                         163,500            159,300
           Depreciation and amortization                                     244,200            257,800
           Amortization of premium and accretion
               of discount on securities, net                               (163,700)          (102,200)
           Gain on sale of investments                                       (23,200)            (8,500)
           Loss on disposal of fixed assets                                    7,700                  0
           Change in net deferred loan fees                                    3,500              4,800
           (Gain) loss on sale of repossessed assets                            (300)            28,500
           Increaase in other assets                                         (43,600)          (150,100)
           Increase in other liabilities                                     309,600             78,100
                                                                    ------------------------------------
               Net cash provided by operating activities                   1,508,900          1,196,300
                                                                    ------------------------------------

Cash flows from investing activities
     Purchase of available-for-sale securities                            (9,530,300)        (1,581,000)
     Proceeds from maturities, sales and calls of
        available-for-sale securities                                      9,861,300          2,650,000
     Purchase of held-to-maturity securities                              (4,260,800)       (13,701,000)
     Proceeds from maturities, prepayments and calls
        of held-to-maturity securities                                     9,000,000          2,849,100
     Purchase of Federal Home Loan Bank stock                                (18,700)                 0
     Loan originations, net of repayments                                 (6,408,300)        (1,315,400)
     Purchase of premises and equipment                                     (111,800)          (105,600)
     Proceeds from sale of real estate owned                                  69,500            159,800
                                                                    ------------------------------------
               Net cash used by investing activities                      (1,399,100)       (11,044,100)
                                                                    ------------------------------------

Cash flows from financing activities
     Net increase in demand deposits                                      11,012,700          8,363,900
     Net increase in time deposits                                         2,530,700          5,057,300
     Proceeds from FHLB advances                                           8,300,000          3,700,000
     Repayments of FHLB advances                                         (15,521,400)        (7,931,300)
     Repurchase of common stock                                             (834,700)           -
     Proceeds from exercise of stock options                                       0             58,200
     Payment of dividend on common stock                                    (160,900)          (145,800)
                                                                    ------------------------------------
               Net cash provided by financing activities                   5,326,400          9,102,300
                                                                    ------------------------------------

Increase (decrease) in cash and cash equivalents                           5,436,200           (745,500)

Cash and cash equivalents, beginning of period                             5,096,300          6,821,400
                                                                    ------------------------------------

Cash and cash equivalents, end of period                            $     10,532,500    $     6,075,900
                                                                    ------------------------------------


Supplemental disclosure of cash flow information

     Cash paid during the period for interest                       $      3,888,200    $     3,674,500


Supplemental schedule of non-cash investing and
     financing activities

     Transfers from loans to real estate acquired
        through foreclosure                                         $        319,200    $             0


              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, 2001 are not  necessarily  indicative  of the
results  that may be expected  for any other  interim  period or the entire year
ending  December 31,  2001.  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, 2000.

Principles of Consolidation

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


NOTE 2 - ORGANIZATION

The Company is a Virginia  corporation  organized in September  1997 by the Bank
for the purpose of becoming a unitary  holding  company of the Bank. The Company
became a unitary holding company of the Bank on March 16, 1998. The business and
management of the Company  consists of the business and  management of the Bank.
The Bank became a Virginia chartered, Federal Reserve member, commercial bank on
March 31, 1998. Prior to that the Bank was a federally  chartered  savings bank.
The  Company  and the Bank are  headquartered  on the  Eastern  Shore in  Onley,
Virginia.  During  March,  1999,  the  Bank  activated  its  subsidiary,   Shore
Investments,  Inc.,  to engage in  financial  activities  supporting  the Bank's
operations.  These  activities  include the selling of investment  and insurance
products.

<PAGE>


NOTE 3 - EARNINGS PER SHARE

The following is a  reconciliation  of the  numerators and  denominators  of the
basic  and  diluted  earnings  per  share  computations  for the  periods  ended
September 30, 2001 and 2000.

<TABLE>

                                                 Three Months Ended September 30,       Nine Months Ended September 30,
                                               -------------------------------------   -----------------------------------
                                                    2001                 2000               2001               2000
                                               ----------------     ----------------   ----------------   ----------------


  <c>
Net income (numerator, basic and diluted)    $         343,900    $         330,900         $1,011,200           $928,600
Weighted average shares outstanding
(denominator)                                        1,706,400            1,826,700          1,747,800          1,824,100
                                               ----------------     ----------------   ----------------   ----------------

Earnings per common share - basic            $            0.20    $            0.18              $0.58              $0.51
                                               ================     ================   ================   ================

Effect of dilutive securities:

Weighted average shares outstanding                  1,706,400            1,826,700          1,747,800          1,824,100
Effect of stock options                                  4,700                    0                  0                  0
                                               ----------------     ----------------   ----------------   ----------------
Diluted average shares outstanding
(denominator)                                        1,711,100            1,826,700          1,747,800          1,824,100
                                               ----------------     ----------------   ----------------   ----------------

Earnings per common share -
assuming dilution                            $            0.20    $            0.18              $0.58              $0.51
                                               ================     ================   ================   ================

</TABLE>


The effect of dilutive  securities was not used to compute dilutive earnings per
share for the nine months  ended  September  30, 2001 and 2000 and for the three
months   ended   September   30,  2000   because  the  effect  would  have  been
anti-dilutive.

<PAGE>

NOTE 4 - COMPREHENSIVE INCOME

Total  comprehensive  income consists of the following for the nine months ended
September 30, 2001 and 2000:

<TABLE>

                                                        Nine Months Ended September 30,
                                                 ----------------------------------------------
                                                         2001                    2000
                                                 ---------------------  -----------------------

  <c>

Net income                                           $      1,011,200       $          928,600
Other comprehensive income (loss)                             596,500                  131,100
                                                       ---------------        -----------------

Total comprehensive income                           $      1,607,700       $        1,059,700
                                                       ===============        =================

</TABLE>

The following is a reconciliation  of the related tax effects  allocated to each
component of other comprehensive income at September 30, 2001 and 2000.

<TABLE>

                                                        Nine Months Ended September 30,
                                                 ----------------------------------------------
                                                         2001                    2000
                                                 ---------------------  -----------------------


  <c>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
      arising during the period                      $        935,200       $          197,500
Less: reclassification adjustment
      for gains included in income                            (23,200)                  (8,500)
                                                       -----------------      -----------------

Total other comprehensive income (loss)
     before income tax expense                                912,000                  189,000

Income tax (expense) benefit                                 (315,500)                 (57,900)
                                                       -----------------      -----------------

Net unrealized gains (losses)                        $        596,500       $          131,100
                                                       =================      =================

</TABLE>

NOTE 5 - SEGMMENT INFORMATION

Segment  information  consists  of the  following  for  the  nine  months  ended
September 30, 2001 and 2000:

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


  <c>
Net Interest Income:
     Nine months ended September 30, 2001      $      2,563     $         479    $       1,511    $           (874)   $       3,679
     Nine months ended September 30, 2000      $      2,418     $         488    $       1,543    $           (866)   $       3,583

Assets:
     September 30, 2001                        $    132,439     $      17,191    $      45,164    $        (47,737)   $     147,057
     December 31, 2000                         $    116,851     $      17,150    $      48,731    $        (42,918)   $     139,814

</TABLE>

<PAGE>

NOTE 6 - STOCKHOLDERS' EQUITY

During the nine months ended  September  30,  2001,  the Company  completed  its
repurchase  of  approximately  90,000  shares  of common  stock  under the stock
repurchase plan approved during November 2000. The weighted average price of the
90,000 shares purchased under the November plan was $7.29. During June 2001, the
Company  authorized the repurchase of up to 85,000  additional  shares of common
stock on the open market.  Under this plan, the Company has  repurchased  45,200
shares of  common  stock at a  weighted  average  price of $8.76,  or 93% of the
Company's  book value of $9.40 at September 30, 2001.  During 2001,  the Company
has  repurchased a total of 115,545 shares of common stock under both plans at a
weighted  average  price of $8.03 per share,  including  6,700  shares of common
stock  repurchased  subsequent to September 30, 2001 at a weighted average price
of $9.19 per share.

NOTE 7 - SUBSEQUENT EVENT

During  October  2001,  the  Company  declared a $.03 per share  quarterly  cash
dividend on its common stock  payable on Novermber 15, 2001 to  shareholders  of
record on November 1, 2001.

During  October  2001,  the  Company's  Board of  Directors  approved a Dividend
Reinvestment  Plan ("DRIP  Plan")  whereby  shareholders  may elect to have cash
dividends paid by the Company reinvested in its common stock, subject to certain
limitations.  Shareholders  may also make  optional  cash  payments  to purchase
additional  shares of the Company's common stock. The DRIP Plan document details
the plan and will be sent to each shareholder along with their November 15, 2001
dividend payment.

<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, 2001 was $343,900,  compared
to net income of $330,900 for the same period of the prior year.  Net income for
the nine months  ended  September  30, 2001 was $1.01  million,  compared to net
income of  $928,600  for the 2000  period.  Earnings  throughout  2001 have been
positively  impacted  by  loan  growth  of  approximately  10.0%  and  continued
improvements  in  noninterest  income,  up 17.6%  during the nine  months  ended
September 30, 2001 as compared to the same period of 2000.  Increases in deposit
account and check card fees and in returns from  investments  made during recent
years in nontraditional banking products continue to drive growth in noninterest
income.  This coupled with the Company's  ability to maintain a 5.0% growth rate
in noninterest  expenses  resulted in improved earnings for the quarter and nine
months ended September 30, 2001.

Net Interest Income

Net interest  income  increased 1.8% to $1.27 million for the three months ended
September 30, 2001, compared to $1.24 million for the same period in 2000, while
net interest  income  increased  2.7% to $3.68 million for the nine months ended
September  30, 2001,  compared to $3.58 million  during the September  2000 nine
month  period.  The net interest  margin  decreased to 3.73% for the nine months
ended September 30, 2001, as compared to 3.89% during the 2000 period, while the
interest rate spread  decreased to 3.05% from 3.19% for the same period of 2000.
Average earning asset growth of $7.8 million during the September 2001 period as
compared to the September  2000 period and  reductions in  nonperforming  assets
positively  impacted net interest  income.  Average  noninterest-bearing  demand
deposits  increased to $10.5 million during the nine months ended  September 30,
2001,  as compared to $10.0  million  during the  September  2000 period,  while
average interest-bearing demand deposits and savings accounts increased 8.9%, or
$2.9 million. Average higher costing time deposits increased 5.6%.

Interest  income  decreased  3.0% to $2.49  million for the three  months  ended
September  30,  2001,  compared to $2.57  million for the same period in 2000 in
spite of a 10.0%  increase  in loans over the perior  year.  For the nine months
ended  September 30, 2001,  interest  income  increased  3.8% to $7.54  million,
compared to $7.26 million during the September 2000 nine month period. Declining
yields on loans and  investments  contributed  to the interest  income  decrease
during the third quarter of 2001,  despite  increases in loan balances.  For the
nine months ended  September  30, 2001,  average loan  balances  increased  $6.1
million and the Company  experienced  $86,000 in net  recoveries  of  previously
nonaccrual loan interest,  resulting in improved  interest income as compared to
the 2000 period.  Yields on  securities  decreased  37 basis  points  during the
September  2001 nine month period as compared the the September  2000 period.  A
significant  repricing of the Company's  investment portfolio during a period of
declining interest rates negatively impacted security yields.

<PAGE>

Interest  expense  decreased  7.5% to $1.22  million for the three  months ended
September 30, 2001, compared to $1.32 million for the same period of 2000, while
interest  expense  increased  5.0% to $3.86  million for the nine  months  ended
September  30, 2001,  compared to $3.68 million  during the September  2000 nine
month period.  During the September  2001 quarter,  the declining  interest rate
environment  began to positively  impact the Company's cost of funding.  For the
majority of 2001,  funding  costs had  increased  over 2000  levels  despite the
declining  interest rate  environment.  This resulted from efforts by management
during late 2000 to generate business and personal relationships through various
deposit specials. Several of these deposit specials contained terms resulting in
repricing dates that lagged the falling rate environment  occurring during 2001.
Average  interest-bearing  deposits  increased by $6.9  million  during the nine
months  ended  September  30,  2001,  as  compared  to the same  period of 2000.
However, the average rate on interest-bearing  liabilities  decreased from 4.60%
during 2000 to 4.55% for the September 2001 period.  Average borrowings from the
Federal Home Loan Bank were flat for the September  2001 period,  as compared to
the same period of 2000.

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.

<PAGE>

<TABLE>

                                Average Balances, Income and Expenses, Yields and Rates

                                                                  Nine Months Ended September 30,
                                             ---------------------------------------------------------------------------
                                                            2001                                  2000
                                             ------------------------------------  -------------------------------------
                                              Average      Income/      Yield/      Average      Income/       Yield/
(In Thousands)                                Balance      Expense     Rate (2)     Balance      Expense      Rate (2)
                                             -----------  ----------  -----------  -----------  -----------  -----------

  <c>
Assets:
       Securities (1)                           $35,737      $1,551        5.79%      $34,008       $1,571        6.16%
       Loans (net of unearned income):
             Real estate mortgage                45,259       2,752        8.11%       43,979        2,581        7.82%
             Real estate construction             1,374          92        8.93%          679           38        7.46%
             Commercial                          29,916       1,933        8.62%       28,015        1,875        8.92%
             Home equity lines                    6,955         422        8.09%        5,631          414        9.80%
             Consumer                            11,418         757        8.84%       10,564          736        9.29%
                                             -----------  ----------               -----------  -----------
                  Total loans                    94,922       5,956        8.37%       88,868        5,644        8.47%
       Interest-bearing deposits
             in other banks                       2,714          91        4.47%        2,721          129        6.32%
                                             -----------  ----------               -----------  -----------
                  Total earning assets          133,373       7,598        7.60%      125,597        7,344        7.80%
                                             -----------  ----------               -----------  -----------
       Less: allowance for loan losses           (1,201)                               (1,306)
       Total nonearning assets                    7,866                                 6,711
                                             -----------                           -----------
       Total assets                            $140,038                              $131,002
                                             ===========                           ===========

Liabilities
       Interest-bearing deposits:
             Checking and savings               $36,338        $506        1.86%      $33,432         $629        2.51%
             Time deposits                       75,202       3,281        5.82%       71,215        2,971        5.56%
                                             -----------  ----------               -----------  -----------

                  Total interest-bearing
                  deposits                      111,540       3,787        4.53%      104,647        3,600        4.59%

       FHLB advances                              1,766          76        5.74%        1,865           78        5.58%
                                             -----------  ----------               -----------  -----------
                  Total interest-bearing
                  liabilities                   113,306       3,863        4.55%      106,512        3,678        4.60%
                                                          ----------                            -----------
       Non-interest bearing liabilities:
             Demand deposits                     10,540                                10,039
             Other liabilities                      621                                   232
                                             -----------                           -----------

       Total liabilities                        124,467                               116,783
       Stockholders' equity                      15,571                                14,219
                                             -----------                           -----------

       Total liabilities and stockholders'
             equity                            $140,038                              $131,002
                                             ===========                           ===========

       Net interest income (1)                               $3,735                                 $3,666
                                                          ==========                            ===========

       Interest rate spread (1)                                            3.05%                                  3.19%
       Net interest margin (1)                                             3.73%                                  3.89%

(1) Tax equivalent  basis. The tax equivalent  adjustment to net interest income
was $56,000 and $80,000 for the nine months ended  September  30, 2001 and 2000,
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.

</TABLE>

<PAGE>


Noninterest Income

Noninterest  income was $285,000  during the three months  ended  September  30,
2001,  as compared to $239,000  for the same period in 2000,  while  noninterest
income was $863,600 during the nine months ended September 30, 2001, as compared
to $734,100 for the same period of 2000.  This  represented an increase of 19.2%
and 17.6%,  respectively,  for the two periods.  The  improvement in noninterest
income  resulted from  increases in deposit  account and check card fees, and an
improvement in revenues  generated by the Bank's non deposit  subsidiary,  Shore
Investments, Inc.

Provision for Loan Losses

Provision  for loan losses was $58,500 for the three months ended  September 30,
2001,  as compared to $53,100 for the same period of 2000,  while the  provision
for loan loss was $163,500  during the nine months ended  September 30, 2001, as
compared  to  $159,300  for the same  period  of 2000.  See  Asset  Quality  for
additional discussion of the allowance for loan losses.

Noninterest Expense

Noninterest  expense was $987,300  during the three months ended  September  30,
2001,  as compared to $939,700  for the same period of 2000,  while  noninterest
expense was $2.89  million  during the nine months ended  September 30, 2001, as
compared  to $2.76  million  for the same period of 2000.  This  represented  an
increase of 5.1% and 4.7%,  respectively,  for the two  periods.  This  increase
resulted primarily from annual compensation adjustments and increases associated
with normal growth of operating activities.

Financial Condition

During the nine months ended September 30, 2001, the Company's  assets increased
by $7.2  million from $139.8  million at December 31, 2000 to $147.1  million at
September  30,  2001.  Net loans  grew  $5.9  million  and cash and  investments
increased  $1.5 million during the period.  The Company's  increased loan demand
during the period resulted  primarily from additional  experience gained by loan
producers added during the last two years.

Deposits  increased  $13.5  million  during the nine months ended  September 30,
2001. Time deposits and demand deposit accounts  increased by approximately $3.0
million and $10.5  million,  respectively,  during the period.  The Company used
this  growth  to pay the $7.0  million  in  short-term  Federal  Home  Loan Bank
advances  outstanding  at December  31, 2000 and to fund loan growth  during the
period.

Stockholders'  equity was $16.0 million at September 30, 2001, compared to $15.4
million at December 31, 2000.  Net income of $1.01 million and  improvements  in
fair market values on  available-for-sale  securities were offset by the payment
of $160,900  ($.09 per share) in common stock  dividends  and the  repurchase of
108,845  shares of the  Company's  common  stock at an  average  price of $7.67.
During the period ended September 30, 2001, the Company completed the repurchase
of 90,000  shares of common  stock  under it's stock  repurchase  plan  approved
during  November 2000, and the Board  authorized a second stock  repurchase plan
during June 2001 allowing for the  repurchase of an additional  85,000 shares in
the open  market.  Since  authorizing  the plan in June 2001,  the  Company  has
repurchased  45,200 shares at $8.76, or 93% of the Company's book value of $9.40
at September 30, 2001.

<PAGE>

During  October  2001,  the  Company  declared a $.03 per share  quarterly  cash
dividend on its common stock  payable on Novermber 15, 2001 to  shareholders  of
record on November 1, 2001.

During  October  2001,  the  Company's  Board of  Directors  approved a Dividend
Reinvestment  Plan ("DRIP  Plan")  whereby  shareholders  may elect to have cash
dividends paid by the Company reinvested in its common stock, subject to certain
limitations.  The DRIP Plan  document  details the plan and will be sent to each
shareholder along with their November 15, 2001 dividend payment.


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 $877,000 at September  30, 2001,  compared to
$1.27 million at December 31, 2000. As to nonaccrual loans existing at September
30, 2001,  approximately  $24,000 of interest  income would have been recognized
during the nine months then ended if interest  thereon had  accrued.  During the
period ended September 30, 2001, the Company  foreclosed on collateral  relating
to loans totaling  approximately  $267,000 to one borrower that were  previously
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.  In conjunction  with the  foreclosure,  the Company wrote down the
related  properties to their fair market value less estimated  selling and other
miscellaneous  cost.  Subsequent to September 30, 2001,  the Company  received a
contract  on one of  these  properties  that  would  net more  than the  current
carrying  value of all the  properties,  assuming the  contract is executed.  At
September  30, 2001,  no other loans exist that  management  has  identified  as
impaired.

At  September  30,  2001,  all  loans  60  days or  more  delinquent,  including
nonperforming  loans,  totaled  $703,000.  In addition,  other  performing loans
totaling  $217,000  existed  that  have  documentation   deficiencies  or  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.

<PAGE>


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)                                                      2001                 2000
                                                                --------------      ---------------

  <c>
Nonaccrual loans:
      Commercial                                              $             0   $               13
      Real estate mortgage                                                538                1,180
      Home equity lines of credit                                          23                   25
      Consumer                                                             61                   43
                                                                --------------      ---------------

      Total nonaccrual loans                                              622                1,261
Other real estate owned                                                   255                    5
                                                                --------------      ---------------

      Total nonperforming assets                              $           877   $            1,266
                                                                ==============      ===============

Loans past due 90 or more days
      accruing interest                                                    $0                   $0
Allowance for loan losses to
      nonaccrual loans                                                189.39%              105.95%
Nonperforming assets to period end
      loans and other real estate owned                                 0.89%                1.37%

</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)                                                      2001                 2000
                                                                --------------      ---------------

  <c>
Balance, beginning of period                                  $         1,336   $            1,163
Loans charged off:
      Commercial                                                            0                    7
      Real estate mortgage                                                282                    0
      Consumer                                                             45                   24
                                                                --------------      ---------------

      Total loans charged-off                                             327                   31
                                                                --------------      ---------------

Recoveries:
      Commercial                                                            0                   38
      Real estate mortgage                                                  0                    0
      Consumer                                                              6                   14
                                                                --------------      ---------------

      Total recoveries                                                      6                   52
                                                                --------------      ---------------

Net recoveries (charge-offs)                                             (321)                  21
Provision for loan losses                                                 163                  159
                                                                --------------      ---------------

Balance, end of period                                        $         1,178   $            1,343
                                                                ==============      ===============

Allowance for loan losses to loans
      outstanding at end of period                                      1.20%                1.50%

Allowance for loan losses to nonaccrual
      loans outstanding at end of period                              189.39%              155.08%

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

</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,  2001,  the Company had  outstanding  loan and line of credit
commitments  of $18.0 million.  Scheduled  maturities of certificate of deposits
during the twelve months following September 30, 2001 amounted to $49.7 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 $5.4 million for the nine months ended
September 30, 2001, compared to a decrease of $745,500 for the nine months ended
September 30, 2000. Net cash provided by operating  activities was $1.51 million
for the nine months ended  September 30, 2001,  compared to $1.20 million during
the same  period of 2000.  The  fluctuations  in amounts  during  these  periods
resulted  primarily  from  increased  net  income  and  other  normal  operating
activities.

Net cash used by investing  activities  was $1.40 million during the nine months
ended  September 30, 2001,  compared to $11.04 million for the nine months ended
September 30, 2000.  The reduction in these amounts  resulted  primarily from an
increase in investment  maturities  and calls during 2001.  Although the Company
experienced an increase in loan funding  activities during 2001,  deposit growth
did not  result  in  enough  excess  liquidity  to fund  significant  investment
activities beyond the funding of loans.

Net cash provided by financing  activities was $5.33 million for the nine months
ended  September  30, 2001,  compared to $9.10 million for the nine months ended
September  30, 2000.  The  fluctuations  in amounts  during  these  periods were
primarily the result of an increase in repayments of borrowings with the Federal
Home Loan Bank and the  repurchase of 108,845  shares of common stock during the
September 2001 period, as compared to the September 2000 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  September  30,  2001,  the Company  meets all capital
adequacy  requirements  to which it is subject.

<PAGE>

The  following  table  details the  components  of Tier 1 and Tier 2 capital and
related ratios at September 30, 2001 and December 31, 2000.

<TABLE>

                                          Analysis of Capital

                                                                   September 30,        December 31,
(In Thousands)                                                         2001                 2000
                                                                 ------------------  -------------------

  <c>
Tier 1 Capital:
       Common stock                                               $            563     $            599
       Additional paid-in capital                                            2,758                3,556
       Retained earnings                                                    12,491               11,641
       Comprehensive income (loss)                                             236                 (361)
                                                                 ------------------  -------------------
             Total capital (GAAP)                                           16,048               15,435
       Less: Intangibles                                                       (31)                 (34)
       Net unrealized (gain) loss on securities                               (236)                 361
       Net unrealized losses on equity securities                             (177)                (213)
                                                                 ------------------  -------------------
             Total Tier 1 capital                                           15,604               15,549


Tier 2 Capital:
       Allowable allowances for loan losses                                  1,178                1,099
                                                                 ==================  ===================
             Total Tier 2 capital                                 $         16,782     $         16,648
                                                                 ==================  ===================

Risk-weighted assets                                              $         98,921     $         90,165

Capital Ratios (1):
       Tier 1 risk-based capital ratio                                      15.77%               17.24%
       Total risk-based capital ratio                                       16.96%               18.46%
       Tier 1 capital to average adjusted
             total assets                                                   11.14%               11.74%

</TABLE>


Interest Sensitivity

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

<PAGE>

The Company  determines the overall  magnitude of interest  sensitivity risk and
then formulates policies governing asset generation and pricing, funding sources
and pricing,  and  off-balance-sheet  commitments in order to reduce 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, 2001 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, 2001
                                       ------------------------------------------------------------------------------------------
                                            With-in              91-365              1 to 5              Over
(In Thousands)                              90 Days               Days                Years             5 Years           Total
                                       --------------      ---------------     ----------------     ------------      -----------

  <c>
Interest-Earning Assets:
      Loans (1)                        $     10,800        $      18,774       $       44,555       $   24,316        $  98,445
      Securities                              6,680                4,177               21,861            2,080           34,798
      Money market and other
          short term securities               5,917                    0                    0                0            5,917
                                       --------------      ---------------     ----------------     ------------      -----------

      Total earning assets             $     23,397        $      22,951       $       66,416       $   26,396        $ 139,160
                                       ==============      ===============     ================     ============      ===========
      Cummulative earning assets       $     23,397        $      46,348       $      112,764       $  139,160        $ 139,160
                                       ==============      ===============     ================     ============      ===========


Interest-Bearing Liabilities:
      Money market savings                    8,802                    0                    0                0            8,802
      Interest checking (2)                       0                    0               16,186                0           16,186
      Savings (2)                                 0                    0               15,135                0           15,135
      Certificates of deposit                19,874               29,779               23,381            3,001           76,035
      FHLB advances                               0                    0                    0              833              833
                                       --------------      ---------------     ----------------     ------------      -----------

      Total interest-bearing
          liabilities                  $     28,676        $      29,779       $       54,702       $    3,834        $ 116,991
                                       ==============      ===============     ================     ============      ===========
      Cummulative interest-bearing
          liabilities                        28,676               58,455              113,157          116,991          116,991
                                       ==============      ===============     ================     ============      ===========

      Period gap                       $     (5,279)       $      (6,828)      $       11,714       $   22,562        $  22,169
      Cummulative gap                  $     (5,279)       $     (12,107)      $         (393)      $   22,169        $  22,169
      Ratio of cummulative interest-
          earning assets to interest-
          bearing liabilities                 81.59%               79.29%               99.65%          118.95%          118.95%
      Ratio of cummulative gap to total
          earning assets                      -3.79%               -8.70%               -0.28%           15.93%           15.93%


(1)  Includes  nonaccrual  loans of  $622,000,  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

In July 2001,  the  Securities  and Exchange  Commission  (SEC) issued SEC Staff
Accounting  Bulletin  No. 102 - Selected  Loan Loss  Allowance  Methodology  and
Documentation Issues. The bulletin expresses certain of the staff's views on the
development,  documentation,  and  application  of a systematic  methodology  as
required by Financial  Reporting  Release No. 28 for determining  allowances for
loan  and  lease  losses  in  accordance  with  generally  accepted   accounting
principles.  In particular,  the guidance focuses on the documentation the staff
normally  would expect  registrants  to prepare and maintain in support of their
allowances for loan losses.  Management  does not expect this bulletin to have a
material impact on the Company's financial statements.

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
No. 141,  Business  Combinations,  and  Statement  No. 142,  Goodwill  and Other
Intangibles.

Statement No. 141 improves the  transparency of the accounting and reporting for
business  combinations by requiring that all business  combinations be accounted
for under a single method - the purchase method. Use of the pooling-of-interests
method is no longer  permitted.  Statement  No. 141  requires  that the purchase
method be used for business combinations initiated after June 30, 2001.

Statement No. 142 requires that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment.  This change provides investors with greater
transparency  regarding  the  economic  value  of  goodwill  and its  impact  on
earnings.  The  amortization  of goodwill ceases upon adoption of the statement,
which for most  companies  will be January 1, 2002.  Management  will assess the
impact,  if any, of this statement on the Company's  financial  statements,  but
does not expect its  adoption to  significantly  affect  financial  condition or
results of operations.

<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

None.

<PAGE>

                                  SIGNATURES

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


/s/ Scott C. Harvard                                          November 9, 2001
-------------------------------------------------------------
Scott C. Harvard
President and
Chief Executive Officer

/s/ Steven M. Belote                                          November 9, 2001
-------------------------------------------------------------
Steven M. Belote
Treasurer and
Chief Financial Officer