10-Q 1 sep0610q.txt SHORE FINANCIAL CORP 10Q U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE -------- ACT OF 1934 For the quarterly period ended September 30, 2006 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 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ---- ------ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ____ Accelerated filer ____ Non-accelerated filer _X_ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No __X__ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No ____ Number of shares of Common Stock outstanding as of November 13, 2006: 2,492,143 SHORE FINANCIAL CORPORATION AND SUBSIDIARIES Index - Form 10-Q PART I - FINANCIAL INFORMATION Item 1 - Consolidated Financial Statements (Unaudited) Consolidated Statements of Financial Condition as of September 30, 2006 and December 31, 2005 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2006 and 2005 Consolidated Statements of Stockholders' Equity for the Nine Months Ended September 30, 2006 and 2005 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 Notes to Unaudited Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Interest Sensitivity Financial Condition Asset Quality Liquidity and Capital Resources Item 3 - Quantitative and Qualitative Disclosures about Market Risk Item 4 - Controls and Procedures PART II - OTHER INFORMATION Item 1 - Legal Proceedings Item 1A - Risk Factors Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds Item 3 - Defaults Upon Senior Securities Item 4 - Submission of Matters to Vote of Security Holders Item 5 - Other Information Item 6 - Exhibits SIGNATURES Consolidated Statements of Financial Condition September 30, December 31, 2006 2005 ------------------------------------------------------------------------------------------------------------------- ASSETS Cash (including interest - earning deposits of approximately $5,564,400 and $1,775,300, respectively) $ 11,984,400 $ 9,176,000 Investment securities: Available-for-sale (amortized cost of $28,686,900 and $29,781,900, respectively) 28,870,900 29,889,900 Other investments, at cost 2,282,900 2,460,900 Loans receivable, net 206,807,400 192,696,500 Premises and equipment, net 7,111,300 7,464,600 Other assets 5,869,500 5,731,000 -------------------------------------------- $ 262,926,400 $ 247,418,900 ============================================ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Interest-bearing $ 174,792,000 $ 160,105,000 Noninterest-bearing 30,038,600 28,864,700 --------------------- -------------------- Total deposits 204,830,600 188,969,700 Advances from Federal Home Loan Bank 31,900,000 34,050,000 Other liabilities 760,200 770,600 -------------------------------------------- Total liabilities 237,490,800 223,790,300 -------------------------------------------- Stockholders' equity Preferred stock, par value $1 per share, 500,000 shares authorized; none issued and outstanding - - Common stock, par value $.275 and $.33 per share, respectively; 6,000,000 and 5,000,000 shares authorized, respectively; 2,492,143 and 2,074,207 issued and outstanding, respectively 685,300 684,500 Additional capital 8,333,400 8,267,400 Retained earnings 16,296,800 14,631,400 Accumulated other comprehensive income 120,100 45,300 -------------------------------------------- Total stockholders' equity 25,435,600 23,628,600 -------------------------------------------- $ 262,926,400 $ 247,418,900 ============================================ The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Income Three Months Ended September 30, Nine Months Ended September 30, ----------------------------------- ------------------------------------- 2006 2005 2006 2005 ---------------------------------------------------------------------------------- ------------------------------------- Interest and dividend income Loans $ 3,480,400 $ 2,898,400 $ 9,984,200 $ 8,241,600 Investments Taxable interest 264,400 332,800 847,100 976,800 Tax-exempt interest 39,300 34,300 110,300 103,700 Dividends 68,000 45,900 180,800 127,400 ----------------------------------- ------------------------------------- Total interest and dividend income 3,852,100 3,311,400 11,122,400 9,449,500 ----------------------------------- ------------------------------------- Interest expense Deposits 1,374,900 854,300 3,500,200 2,512,800 FHLB/other advances 398,000 312,000 1,254,800 671,800 ----------------------------------- ------------------------------------- Total interest expense 1,772,900 1,166,300 4,755,000 3,184,600 ----------------------------------- ------------------------------------- Net interest income 2,079,200 2,145,100 6,367,400 6,264,900 Provision for loan losses 33,800 86,200 125,600 246,400 ----------------------------------- ------------------------------------- Net interest income after provision for loan losses 2,045,400 2,058,900 6,241,800 6,018,500 ----------------------------------- ------------------------------------- Noninterest income Deposit account fees 598,900 327,100 1,813,400 934,600 Loan fees 28,800 28,900 82,400 80,000 Mortgage banking fees 29,300 45,200 78,700 123,100 Commissions on investment brokerage sales 67,100 43,500 257,600 107,900 Gains on sales of securities 52,600 10,100 52,600 170,300 Gains on sale of real estate - 150,800 - 150,800 Other 61,800 67,000 191,400 192,000 ----------------------------------- ------------------------------------- Total noninterest income 838,500 672,600 2,476,100 1,758,700 ----------------------------------- ------------------------------------- Noninterest expense Compensation and employee benefits 954,200 809,400 2,810,200 2,330,100 Occupancy and equipment 453,700 392,300 1,292,500 1,204,000 Data processing 188,100 196,500 604,000 569,400 Professional fees 90,800 98,000 283,800 222,700 Advertising and promotion 34,100 34,000 97,300 119,600 Other 190,700 186,700 583,600 510,700 ----------------------------------- ------------------------------------- Total noninterest expense 1,911,600 1,716,900 5,671,400 4,956,500 ----------------------------------- ------------------------------------- Income before income taxes 972,300 1,014,600 3,046,500 2,820,700 Income taxes 301,400 314,500 944,400 875,800 ----------------------------------- ------------------------------------- Net income $ 670,900 $ 700,100 $ 2,102,100 $ 1,944,900 =================================== ===================================== Cash Dividends Declared Per Share $ 0.06 $ 0.06 $ 0.18 $ 0.16 =================================== ===================================== Earnings Per Common Share: Basic $ 0.27 $ 0.28 $ 0.84 $ 0.78 =================================== ===================================== Diluted $ 0.27 $ 0.28 $ 0.83 $ 0.77 =================================== ===================================== The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Stockholders' Equity ----------------------------------------------------------------------------------------------------------------------------------- Accumulated Other Number of Common Additional Retained Comprehensive Shares Stock Capital Earnings Income (Loss) Total ------------ -------------------------------------------------------------------------------------- Balance, December 31, 2004 2,063,284 $ 680,900 $ 8,199,000 $ 12,494,400 $ 584,700 $ 21,959,000 Common stock cash dividend declared - - - (393,100) - (393,100) Exercise of stock options 8,283 2,700 42,400 - - 45,100 Comprehensive income (loss) - - - 1,944,900 (578,500) 1,366,400 ------------ -------------------------------------------------------------------------------------- Balance, September 30, 2005 2,071,567 $ 683,600 $ 8,241,400 $ 14,046,200 $ 6,200 $ 22,977,400 ============ ====================================================================================== Balance, December 31, 2005 2,074,207 $ 684,500 $ 8,267,400 $ 14,631,400 $ 45,300 $ 23,628,600 Common stock cash dividend declared - - - (435,900) - (435,900) Exercise of stock options 2,620 900 57,900 - - 58,800 Tax benefit associated with the exercise of stock options - - 8,100 - - 8,100 6-for-5 Stock Split 415,316 (100) - (800) - (900) Comprehensive income (loss) - - - 2,102,100 74,800 2,176,900 ------------ -------------------------------------------------------------------------------------- Balance, September 30, 2006 2,492,143 $ 685,300 $ 8,333,400 $ 16,296,800 $ 120,100 $ 25,435,600 ============ ====================================================================================== The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Cash Flows Nine Months Ended September 30, ------------------------------- 2006 2005 --------------------------------------------------------------------------------------- Cash flows from operating activities Net income $ 2,102,100 $1,944,900 Adjustments to reconcile to net cash provided by operating activities: Provision for loan losses 125,600 246,400 Depreciation and amortization 566,800 543,800 Amortization of premium and accretion of discount on securities, net 8,400 51,400 Gain on sale of investment securities (52,600) (170,300) Gain on sale of real estate - (150,800) Loss on disposal of fixed assets - 6,800 Increase in cash surrender value of life (109,500) (100,600) Tax benefit of stock options exercised 8,100 - Changes in: Deferred loan fees 60,400 102,600 Other assets (76,500) 36,900 Other liabilities (10,400) (469,100) -------------------------- Net cash flows from operating activities 2,622,400 2,042,000 -------------------------- Cash flows from investing activities Purchase of available-for-sale securities (3,094,200) (1,476,800) Proceeds from maturities, sales and calls of available-for-sale securities 4,233,400 2,882,100 Purchase of other investments (1,798,700) (2,961,700) Proceeds from maturities, sales and calls of other investments 1,976,700 2,311,500 Proceeds from sale of real estate - 323,100 Loan originations, net of repayments (14,296,900) (13,472,700) Purchase of premises and equipment (167,200) (191,800) -------------------------- Net cash flows from investing activities (13,146,900) (12,586,300) -------------------------- Consolidated Statements of Cash Flows Nine Months Ended September 30, ------------------------------- 2006 2005 --------------------------------------------------------------------------------------- Cash flows from financing activities Net increase (decrease) in demand deposits $ (7,183,800) $4,439,200 Net increase (decrease) in time deposits 23,043,800 (1,590,000) Proceeds from FHLB advances 169,400,000 106,000,000 Repayments of FHLB advances (171,550,000) (96,700,000) Proceeds from exercise of stock options 58,800 45,100 Payment of dividends on common stock (435,900) (393,100) -------------------------- Net cash flows from financing activities 13,332,900 11,801,200 -------------------------- Change in cash and cash equivalents 2,808,400 1,256,900 Cash and cash equivalents, beginning of period 9,176,000 9,415,000 -------------------------- Cash and cash equivalents, end of period $ 11,984,400 $10,671,900 ========================== Supplemental disclosure of cash flow information Cash paid during the period for interest $ 4,623,700 $3,084,200 Cash paid during the period for income taxes $ 970,000 $ 728,500 Conversion of Trust Preferred Stock investment to common stock $ - $ 72,000 The accompanying notes are an integral part of these financial statements.

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-Q and Rule 10-01 of Regulation S-X. 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, 2006 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2006. 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-K for the year ended December 31, 2005. 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 - 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, 2006 and 2005. Three Months Ended September 30, Nine Months Ended September 30, --------------------------------------- ---------------------------------------- 2006 2005 2006 2005 ------------------ ------------------ ----------------- ------------------ Net income (numerator, basic and diluted) $ 670,900 $ 700,100 $ 2,102,100 $ 1,944,900 Weighted average shares outstanding (denominator) 2,492,192 2,485,561 2,491,460 2,480,569 ------------------ ------------------ ----------------- ------------------ Earnings per common share - basic $ 0.27 $ 0.28 $ 0.84 $ 0.78 ================== ================== ================= ================== Effect of dilutive securities: Weighted average shares outstanding $ 2,492,192 $ 2,485,561 $ 2,491,460 $ 2,480,569 Effect of stock options 28,695 34,039 26,341 31,608 ------------------ ------------------ ----------------- ------------------ Diluted average shares outstanding (denominator) 2,520,887 2,519,600 2,517,801 2,512,177 ------------------ ------------------ ----------------- ------------------ Earnings per common share - assuming dilution $ 0.27 $ 0.28 $ 0.83 $ 0.77 ================== ================== ================= ==================

NOTE 3 - COMPREHENSIVE INCOME Total comprehensive income consists of the following for the nine months ended September 30, 2006 and 2005: Nine Months Ended September 30, ------------------------------------ 2006 2005 ----------------- ----------------- Net income $ 2,102,100 $1,944,900 Other comprehensive income (loss) 74,800 (578,500) ----------------- ----------------- Total comprehensive income $ 2,176,900 $1,366,400 ================= =================

NOTE 3 - COMPREHENSIVE INCOME (concluded) The following is a reconciliation of the related tax effects allocated to each component of other comprehensive income at September 30, 2006 and 2005. Nine Months Ended September 30, ------------------------------------ 2006 2005 ----------------- ----------------- Unrealized gains (losses) on available-for-sale securities: Unrealized holding gains (losses) arising during the period $ 168,600 $ (745,700) Less: reclassification adjustment for gain included in income (52,600) (170,300) ----------------- ----------------- Total other comprehensive gain (loss) before tax effect 116,000 (916,000) Tax benefit (expense) (41,200) 337,500 ----------------- ----------------- Net unrealized gain (loss) $ 74,800 $ (578,500) ================= =================

NOTE 4 - SEGMENT INFORMATION Segment information consists of the following for the nine months ended September 30, 2006 and 2005: Elimination of Intersegment (In thousands) Virginia Maryland Other Transactions Total ------------- -------------- -------------- ----------------- -------------- Net Interest Income: Nine months ended September 30, 2006 $ 4,836 $ 1,323 $ (277) $ 485 $ 6,367 Nine months ended September 30, 2005 $ 4,469 $ 1,249 $ 454 $ 93 $ 6,265 Assets: September 30, 2006 $ 197,664 $ 51,779 $ 46,402 $ (32,919) $ 262,926 December 31, 2005 $ 186,922 $ 46,145 $ 45,042 $ (30,690) $ 247,419

NOTE 5 - STOCK-BASED COMPENSATION Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS 123, Accounting for Stock-Based Compensation, was issued by the Financial Accounting Standards Board (FASB) in December, 2002. SFAS 148 provides alternative methods of transition for a voluntary change to the fair value-based method of accounting for stock-based employee compensation. SFAS 148 also amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Management adopted the disclosure provisions of this Standard in 2002. In accordance with SFAS 148, the Company provides disclosures as if the fair value-based method of measuring all outstanding stock options was already adopted and recognized in 2005. The following table presents the effect on net income and on basic and diluted net income per share as if the fair value-based method had been applied to all outstanding and unvested awards at September 30, 2005. Three Months Nine Months Ended September 30, Ended September 30, 2005 2005 ------------------------- ------------------------- (Dollars in thousands, except per share data) Net income, as reported Deduct: $ 700,100 $ 1,944,900 Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects - (116,600) ------------------- ------------------- Pro forma net income $ 700,100 $ 1,828,300 =================== =================== Earnings per share: Basic - as reported $ 0.28 $ 0.78 =================== =================== Basic - pro forma $ 0.28 $ 0.73 =================== =================== Diluted - as reported $ 0.28 $ 0.77 =================== =================== Diluted - pro forma $ 0.28 $ 0.73 =================== ===================

On January 1, 2006, the Company adopted SFAS 123(r), Share-Based Payment. The standard eliminated the ability to account for share-based compensation transactions under the intrinsic value method and required that such transactions be accounted for using a fair value-based method which results in the recognition of compensation expense in the Company's statement of income. For the three and nine months ended September 30, 2006, the Company recognized $0 and $40,300 of such expense, respectively. NOTE 6 - SUBSEQUENT EVENT During October 2006, the Company declared a $0.07 per share quarterly cash dividend on its common stock payable on November 1, 2006 to shareholders of record on October 24, 2006, representing a 20% increase in the common stock dividend as compared to the September 2006 quarter. 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, 2006 was $670,900, or $0.27 per diluted share, compared to net income of $700,100, or $0.28 per diluted share, for the same period of the prior year. Earnings for the nine months ended September 30, 2006 increased to $2.10 million, or $0.83 per diluted share, compared to $1.94 million, or $0.77 per diluted share, for the 2005 nine month period. All per share amounts have been adjusted to reflect the six-for-five stock split the Company effected on August 30, 2006. Earnings in the third quarter of 2005 included a $100,000 after tax gain on the sale of real estate. Excluding gains on the sales of securities and real estate in all periods, core earnings for the three and nine months ended September 30, 2006 increased 7.7% and 19.8%, respectively, over comparable periods of the prior year. Core growth in noninterest income continued to drive earnings during the September quarter with an increase of 53.6%, while core noninterest income increased 68.6% for the nine months ending September 30, 2006. Excluding gains on the sales of securities and real estate, noninterest income for the September 2006 quarter was $785,900, compared to $511,700 for the September 2005 quarter end, while noninterest income was $2.42 million for the nine months ended September 30, 2006, compared to $1.44 million for the same period of 2005. Income from deposit accounts accounted for the majority of this growth, increasing to $598,900 and $1.81 million or 83.1% and 94.0% for the three and nine months ended September 30, 2006, respectively. The Company's investment subsidiary operations continued to post solid results by earning commissions of $67,100 and $257,600 during the 2006 three and nine month periods, respectively, compared to $43,500 and $107,900 for the same periods in 2005. Net Interest Income Net interest income was $2.08 million and $6.37 million for the three and nine month periods ended September 30, 2006, respectively, compared to $2.15 million and $6.26 million for the same periods of 2005, respectively. These results reflect the growing pressure on the Company's net interest margin due to the inverted interest rate yield curve, primarily as to its impact on funding costs. The Company has experienced solid loan growth during the first nine months of 2006 with loans averaging $205.7 million during the period, compared to $184.6 million for the 2005 nine month period. Average earning assets for the nine months ended September 2006 increased $13.5 million over the September 2005 period. The majority of this growth occurred in average loans which increased $21.0 million over 2005, while average investments declined $7.1 million during the period. During the first nine months of 2006 residential real estate loans increased 18.1% over comparable periods of 2005, representing a significant portion of the Company's overall loan growth. Average commercial loans increased $3.1 million, while other loan categories were flat during the period. The decline in investment securities reflects the liquidity demands generated by the loan growth and the limited investment opportunities that existed during the period primarily due to the inverted yield curve. Average total deposits increased to $196.5 million during the period, compared to $193.4 million during the 2005 period. During the nine months ended September 30, 2006, average interest-bearing checking and savings demand deposits declined $11.6 million when compared to the September 2005 nine month period. Decreases in the Bank's money market and savings products accounted for the majority of this decline due to increased rate competition from other banks, brokerage firms and insurance companies for all deposit products. During the September 2006 nine month period, average time deposit balances increased $15.1 million to $100.6 million when compared to the 2005 period. The Company purchased brokered certificates of deposit and ran several rate specials during the 2006 nine month period which accounted for the increase in time deposits. Federal Home Loan Bank ("FHLB") advances were used to fund any additional liquidity shortfalls during the period, resulting in average FHLB advances increasing $7.1 million during the period ended September 30, 2006 as compared to the September 2005 period. Interest and dividend income was $3.85 million and $11.12 million for the three and nine month periods ended September 30, 2006, representing increases of 16.3% and 17.7%, respectively, over the comparable 2005 amounts. Continued loan growth constituted the majority of these increases despite net interest margin pressures during the periods. Loan yields improved by 52 basis points from the nine months ended September 30, 2005 to the September 2006 comparable period, while investment yields increased by 57 basis points over the same period. Interest expense for the three and nine months ended September 30, 2006 was $1.77 million and $4.76 million, respectively, representing increases of 52.0% and 49.3%, respectively, over comparable 2005 amounts. A 17.7% and 26.0% increase in average time deposits and FHLB advances, respectively, and a 91 basis point increase in cost of total interest-bearing liabilities contributed to these increases. Market competition continue to force the Bank to raise its deposit rates and rely more on wholesale funding in order to meet funding needs. This competition along with the inverted yield curve have put added pressure on the Company's net interest margin which, in turn, has reduced the normally positive impact of being asset sensitive during a rising interest rate environment. The average rate on interest-bearing liabilities for the nine months ended September 30, 2006 was 3.11%, compared to 2.20% incurred in 2005. Interest rates on time deposit accounts and FHLB advances represented the greatest impact on the Bank's cost of funding by increasing 89 basis points and 158 basis points, respectively, while checking and savings deposit costs increased 6 basis points during the 2006 nine month period as compared to the 2005 period. 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, and stockholders' equity and the related income, expense and corresponding weighted average yields and costs. The average balances used in these tables and other statistical data were calculated using daily averages. Average Balances, Income and Expenses, Yields and Rates Nine Months Ended September 30, ------------------------------------------------------------------------------------ 2006 2005 ----------------------------------------- ----------------------------------------- Average Income/ Yield/ Average Income/ Yield/ (In Thousands) Balance Expense Rate Balance Expense Rate ------------ ----------- ----------- ----------- ----------- ----------- Assets: Securities (1) $ 31,830 $ 1,119 4.69% $ 38,888 $ 1,202 4.12% Loans (net of unearned income): Real estate mortgage 114,076 5,024 5.87% 96,609 4,055 5.60% Commercial 73,078 3,827 6.98% 69,944 3,321 6.33% Home equity lines 15,584 932 7.97% 15,799 715 6.03% Consumer 2,950 201 9.08% 2,288 151 8.80% ----------- ----------- ----------- ----------- Total loans 205,688 9,984 6.47% 184,640 8,242 5.95% Interest-bearing deposits in other banks 2,433 76 4.16% 2,951 60 2.71% ----------- ----------- ----------- ----------- Total earning assets 239,951 11,179 6.21% 226,479 9,504 5.59% ----------- ----------- Less: allowance for loan losses (2,874) (2,535) Total nonearning assets 18,830 19,926 ----------- ----------- Total assets $ 255,907 $ 243,870 =========== =========== Liabilities Interest-bearing deposits: Checking and savings $ 68,988 $ 449 0.87% $ 80,597 $ 488 0.81% Time deposits 100,557 3,051 4.05% 85,409 2,025 3.16% ----------- ----------- ----------- ----------- Total interest-bearing deposits 169,545 3,500 2.75% 166,006 2,513 2.02% FHLB advances 34,423 1,255 4.86% 27,310 672 3.28% ----------- ----------- ----------- ----------- Total interest-bearing liabilities 203,968 4,755 3.11% 193,316 3,185 2.20% ----------- ----------- Non-interest bearing liabilities: Demand deposits 26,957 27,380 Other liabilities 392 581 ----------- ----------- Total liabilities 231,317 221,277 Stockholders' equity 24,590 22,593 ----------- ----------- Total liabilities and stockholders' equity $ 255,907 $ 243,870 =========== =========== Net interest income (1) $ 6,424 $ 6,319 =========== =========== Interest rate spread (1)(2)(3) 3.10% 3.39% Net interest margin (1)(2)(4) 3.57% 3.72% (1) Tax equivalent basis. The tax equivalent adjustment to net interest income was $57,000 and $54,000 for the nine months ended September 30, 2006 and 2005, 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.

Interest Sensitivity Management evaluates interest rate sensitivity periodically through the use of an asset/liability management reporting model. Using this model, management determines the overall magnitude of interest sensitivity risk and then formulates strategies 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. An important element of the Company's asset/liability management process is monitoring its 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 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 an asset or liability at maturity, or by adjusting the interest rate during the life of an asset or liability. Matching the amounts of assets and liabilities maturing in the same time interval helps to hedge the risk and minimize the impact on net interest income in periods of rising or falling interest rates. The following table presents the Company's interest sensitivity position at September 30, 2006. This one-day position, which continually is changing, is not necessarily indicative of the Company's position at any other time. September 30, 2006 --------------------------------------------------------------------------------------- Within 91-365 1 to 5 Over 90 Days Days Years 5 Years Total --------------- ------------- ---------------- -------------- ------------------ (In Thousands) Interest-Earning Assets: Loans (1) $ 51,653 $ 51,586 $ 99,203 $ 7,239 $ 209,681 Securities 4,604 4,394 20,431 1,541 30,970 Money market and other short term securities 5,564 - - - 5,564 Other earning assets - - - 3,525 3,525 --------------- ------------- ---------------- -------------- ------------------ Total earning assets $ 61,821 $ 55,980 $ 119,634 $ 12,305 $ 249,740 =============== ============= ================ ============== ================== Cumulative earning assets $ 61,821 $ 117,801 $ 237,435 $ 249,740 $ 249,740 =============== ============= ================ ============== ================== Interest-Bearing Liabilities: Money market savings $ 17,138 $ - $ - $ - $ 17,138 Interest checking (2) - - 24,358 - 24,358 Savings (2) 2,099 1,053 18,239 - 21,391 Certificates of deposit 23,138 50,251 37,627 889 111,905 FHLB advances 19,400 2,000 10,000 500 31,900 --------------- ------------- ---------------- -------------- ------------------ Total interest-bearing liabilities $ 61,775 $ 53,304 $ 90,224 $ 1,389 $ 206,692 =============== ============= ================ ============== ================== Cumulative interest-bearing liabilities $ 61,775 $ 115,079 $ 205,303 $ 206,692 $ 206,692 =============== ============= ================ ============== ================== Period gap $ 46 $ 2,676 $ 29,410 $ 10,916 $ 43,048 Cumulative gap $ 46 $ 2,722 $ 32,132 $ 43,048 $ 43,048 Ratio of cumulative interest-earning assets to interest-bearing liabilities 100.07% 102.37% 115.65% 120.83% 120.83% Ratio of cumulative gap to total earning assets 0.02% 1.09% 12.87% 17.24% 17.24% (1) Includes nonaccrual loans of $694,000, which are included in the 91-365 days and 1 to 5 years categories. (2) Management has determined that interest checking and savings accounts are not as sensitive to changes in related market rates and, therefore, they are placed in the 1 to 5 years category.

Noninterest Income As discussed earlier, core growth in noninterest income continued during the September quarter with an increase of 53.6%, while core noninterest income increased 68.6% for the nine months ending September 30, 2006. Excluding gains on the sales of securities and real estate, noninterest income for the September 2006 quarter was $785,900, compared to $511,700 for the September 2005 quarter end, while noninterest income was $2.42 million for the nine months ended September 30, 2006, compared to $1.44 million for the same period of 2005. Income from deposit accounts accounted for the majority of this growth, increasing to $598,900 and $1.81 million or 83.1% and 94.0% for the three and nine months ended September 30, 2006, respectively. The Company's investment subsidiary operations continued to post solid results by earning commissions of $67,100 and $257,600 during the 2006 three and nine month periods, respectively, compared to $43,500 and $107,900 for the same periods in 2005. Provision for Loan Losses Provision for loan losses was $40,200 and $132,000 for the three and nine months ended September 30, 2006, respectively, compared to $86,200 and $246,400 for the same periods of 2005. With asset quality remaining strong during the quarter, management considers the allowance for loan loss to be commensurate with the risk existing in the Bank's loan portfolio. See Asset Quality for additional discussion relating to the allowance for loan losses and related risk in the loan portfolio. Noninterest Expense Noninterest expense for the September 2006 quarter and nine month periods was $1.91 million and $5.67 million, respectively, as compared to $1.72 million and $4.96 million, respectively, during the same periods of 2005. Employee compensation and benefits expense increases resulted primarily from commission driven expense associated with operating the Company's mortgage and investment brokerage services and the expensing of employee stock options granted to non-executive employees during March 2006. During 2006, the Company has invested in long range planning initiatives that it anticipates will pay dividends in the future, but has resulted in a negative effect on earnings during 2006. The Bank also expanded its ATM network and internet banking activities during the year and took on new deposit product initiatives which resulted in a significant increase in income, but cost approximately $100,000 in administrative expenses during the first nine months of 2006. Finally, the Company experienced several weather related incidences during the summer that resulted in approximately $30,000 of additional operating expense during the September 2006 quarter. Financial Condition During the first nine months of 2006, the Company's assets increased by $15.5 million from $247.4 million at December 31, 2005 to $262.9 million at September 30, 2006. Growth in net loans of $14.1 million accounted for this increase while other asset categories remained relatively flat during the period. Favorable market conditions during the first half of 2006 benefited loan volumes, although some softening in the market occurred during the third quarter. Deposits grew to $204.8 million from December 2005 to September 2006. Interest-bearing demand, savings and time deposit account balances increased by a total of $14.7 million, while noninterest-bearing deposits increased by $1.2 million. Time deposits and brokered certificates of deposit were primarily used to fund liquidity needs during the period. Stockholders' equity was $25.4 million at September 30, 2006, representing an increase of $1.8 million since December 31, 2005. This increase is made up of comprehensive income of $2.2 million consisting primarily of $2.1 million of net income earned during the nine month period offset by common stock dividends of $435,900 ($0.18 per share as adjusted for the stock split) during the period. Additionally, the Company executed a 6-for-5 stock split during the September 2006 quarter that resulted in a 20% increase in the number of common shares outstanding. During October 2006, the Company declared a $0.07 per share quarterly cash dividend on its common stock payable on November 1, 2006 to shareholders of record on October 24, 2006, representing a 20% increase in the common stock dividend as compared to the September 2006 quarter. 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 until it has remained current for six months. 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 $694,000 at September 30, 2006, compared to $1.1 million at December 31, 2005. As to nonaccrual loans existing at September 30, 2006, approximately $23,000 of interest income would have been recognized during the nine months then ended if interest thereon had accrued. The Company has identified $29,000 of other loans deemed 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. Impaired loans have a valuation allowance allocation of $5,000 at September 30, 2006. At September 30, 2006, all loans 60 days or more delinquent, including nonperforming loans, totaled $810,000. In addition, other performing loans, totaling $5.9 million, existed that were current, but had other potential weaknesses that management considers to warrant additional monitoring. Loans in this category, along with the delinquent loans, are subject to 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. Nonperforming Assets September 30, December 31, (In Thousands) 2006 2005 ---------------------- ------------------------ Nonaccrual loans: Commercial $ 282 $ 194 Real estate mortgage 307 811 Home equity lines of credit 25 - Consumer 80 59 ------------------ ------------------- Total nonaccrual loans 694 1,064 Other real estate owned - - ------------------ ------------------- Total nonperforming assets $ 694 $ 1,064 ================== =================== Loans past due 90 or more days accruing interest - - Allowance for loan losses to nonaccrual loans 414.12% 267.95% Nonperforming assets to period end loans and other real estate owned 0.33% 0.56%

Set forth below is a table detailing the allowance for loan losses for the periods indicated. Allowance for Loan Losses Nine Months Ended September 30, -------------------------------------------- (In Thousands) 2006 2005 ------------------ ------------------- Balance, beginning of period $ 2,851 $ 2,404 Loans charged off: Commercial - - Real estate mortgage - - Consumer (196) (14) ------------------ ------------------- Total loans charged-off (196) (14) ------------------ ------------------- Recoveries: Commercial 19 173 Real estate mortgage - - Consumer 74 17 ------------------ ------------------- Total recoveries 93 190 ------------------ ------------------- Net recoveries (charge-offs) (103) 176 Provision for loan losses 126 246 ------------------ ------------------- Balance, end of period $ 2,874 $ 2,826 ================== =================== Allowance for loan losses to loans outstanding at end of period 1.37% 1.47% Allowance for loan losses to nonaccrual loans outstanding at end of period 414.12% 238.28% Net charge-offs (recoveries) to average loans outstanding during period 0.05% -0.10%

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. In addition to liquid assets, the Company maintains several lines of credit with other institutions, the largest of which is with the Federal Home Loan Bank of Atlanta, and is able to draw on other wholesale funding sources, such as the brokered certificate of deposit market, to support liquidity. The Company's ability to obtain deposits and purchase funds at favorable rates determines its liability liquidity. At September 30, 2006, the Company had outstanding loan, line of credit and letter of credit commitments of $50.7 million. Scheduled maturities of certificate of deposits during the twelve months following September 30, 2006 amounted to $73.3 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 $2.8 million for the nine months ended September 30, 2006, compared to an increase of $1.3 million for the nine months ended September 30, 2005. Net cash from operating activities was $2.6 million for the nine months ended September 30, 2006, compared to $2.0 million during the same period of 2005. The changes reflect the earnings growth experienced during the period and other fluctuations in normal operating activities. Net cash used in investing activities was $13.2 million during the nine months ended September 30, 2006, compared to net cash from investing activities of $12.6 million for the nine months ended September 30, 2005. Slightly stronger loan growth during the first nine months of 2006 than what occurred during 2005 constituted the majority of the difference. Net cash from financing activities was $13.3 million for the nine months ended September 30, 2006, compared to net cash from financing activities of $11.8 million for the nine months ended September 30, 2005. Greater growth in time deposits offset by a reduction in demand deposits and FHLB borrowing activity during the September 2006 nine month period represented the majority of this increase. The Company is subject to various capital requirements administered by the regulatory 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. The Bank paid $1,000,000 in dividends and made $1,000,000 in loans to the Company during the nine months ended September 30, 2006. The Bank did not make any loans, but paid $500,000 of dividends to the Company during the first nine months of 2005. At September 30, 2006, the Bank's retained earnings available for the payment of dividends was $4.9 million. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and its banking subsidiary to maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). At September 30, 2006, 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, 2006 and December 31, 2005. Analysis of Capital September 30, December 31, (In Thousands) 2006 2005 ------------------- ------------------ Tier 1 Capital: Common stock $ 685 $ 685 Additional paid-in capital 8,333 8,267 Retained earnings 16,298 14,632 Accumulated other comprehensive income 120 45 ------------------ ----------------- Total capital (GAAP) 25,436 23,629 Less: Intangibles (417) (464) Net unrealized gain on debt and equity securities (120) (45) ------------------ ----------------- Total Tier 1 capital 24,899 23,120 Tier 2 Capital: Allowable allowances for loan losses 2,274 2,152 Net unrealized gains on equity securities 185 161 ------------------ ----------------- Total Tier 2 capital $ 27,358 $ 25,433 ================== ================= Risk-weighted assets $ 186,229 $ 174,986 Capital Ratios: Tier 1 risk-based capital ratio 13.37% 13.21% Total risk-based capital ratio 14.69% 14.53% Tier 1 capital to average adjusted total assets 9.49% 9.44%

Item 3 - Quantitative and Qualitative Disclosures about Market Risk The Company uses a third party provider to perform computer modeling methodologies that assist in determining the overall magnitude of interest sensitivity risk. Based on these methodologies, management formulates policies governing asset generation and pricing, funding sources and pricing, and off-balance-sheet commitments in order to reduce sensitivity risk. Management considers the current interest rate environment, the state of the local and national economy and other financial and business risk factors when making these decisions. The modeling methodologies used measure interest rate sensitivity by analyzing the potential impact on net interest income under various interest rate scenarios. One such scenario would assume a hypothetical 200 basis point instantaneous and parallel shift in the interest rate yield curve. Accordingly, management modeled the impact of a 200 basis point decline in interest rates and a 200 basis point increase in interest rates at September 30, 2006. In the model, a 200 basis point instantaneous and parallel decrease in the yield curve in interest rates would cause net interest income to decrease by $36,000, while a 200 basis point instantaneous and parallel increase in the yield curve in interest rates would cause net interest income to decrease by $86,000. The computer model uses a standard algebraic formula for calculating present value. The calculation discounts the future cash flows of the Company's portfolio of interest rate sensitive instruments to present value utilizing techniques designed to approximate current market rates for securities, current offering rates for loans, and the cost of alternative funding for the given maturity of deposits and then assumes an instantaneous and parallel shift in these rates. The difference between these numbers represents the resulting hypothetical change in the fair value of interest rate sensitive instruments. As with any modeling techniques, certain limitations and shortcomings are inherent in the Company's methodology. Significant assumptions must be made in the calculation including: (1) growth in volume or balance sheet mix; (2) constant market interest rates reflecting the average rate from the last month of the given quarter; and (3) pricing spreads to market rates derived from an historical analysis, or from assumptions by instrument type. Additionally, the computations do not contemplate certain actions management could undertake in response to changes in interest rates. Item 4 - 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 as of the end of the quarter. 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. Controls and other procedures 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. 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 1A - Risk Factors There has been no material changes in the risk factors as previously disclosed in response to Item 1A. Part I of the Company's December 31, 2005 Form 10-K. Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds 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 (a) Certifications pursuant to subsections 302 and 906 of the Sarbanes-Oxley Act of 2002. (b) Form 8-K was filed during July 2006 relative to the Company's June 30, 2006 earnings release dated July 15, 2006. 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, 2006 ------------------------------------------------------------------------------- Scott C. Harvard President and Chief Executive Officer /s/ Steven M. Belote November 13, 2006 ------------------------------------------------------------------------------- Steven M. Belote Vice President and Chief Financial Officer Exhibit 31.1 CERTIFICATIONS I, Scott C. Harvard, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Shore Financial Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2006 /s/ Scott C. Harvard ------------------------------------- Scott C. Harvard President and Chief Executive Officer Exhibit 31.2 CERTIFICATIONS I, Steven M. Belote, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Shore Financial Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 13, 2006 /s/ Steven M. Belote ------------------------------------------ Steven M. Belote Chief Financial Officer and Vice President Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Shore Financial Corporation (the "Company") on Form 10-Q for the three months ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott C. Harvard, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Scott C. Harvard ------------------------------------- Scott C. Harvard President and Chief Executive Officer Date: November 13, 2006 This certificate accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and will not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Shore Financial Corporation (the "Company") on Form 10-Q for the three months ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven M. Belote, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Steven M. Belote ----------------------- Steven M. Belote Chief Financial Officer Date: November 13, 2006 This certificate accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and will not be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SHORE FINANCIAL CORP 10-Q