10-Q 1 jun0710q.txt FORM 10-Q 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 June 30, 2007 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 August 10, 2007: 2,500,927 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 June 30, 2007 and December 31, 2006 Consolidated Statements of Income for the Three and Six Months Ended June 30, 2007 and 2006 Consolidated Statements of Stockholders' Equity for the Six Months Ended June 30, 2007 and 2006 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006 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 June 30, December 31, 2007 2006 ------------------------------------------------------------------------------------------------------------------ ASSETS Cash (including interest-earning deposits of approximately $2,789,600 and $2,267,000, respectively) $ 10,101,200 $ 9,469,800 Investment securities: Available-for-sale (amortized cost of $27,332,300 and $27,791,300, respectively) 27,110,300 27,965,300 Other investments, at cost 2,320,600 2,442,700 Loans receivable, net 210,838,400 207,725,200 Premises and equipment, net 6,877,300 7,044,300 Other assets 6,204,100 6,028,700 -------------------------------------------- $ 263,451,900 $ 260,676,000 ============================================ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Interest-bearing $ 175,007,600 $ 172,548,300 Noninterest-bearing 28,749,200 25,554,500 --------------------- -------------------- Total deposits 203,756,800 198,102,800 Advances from Federal Home Loan Bank 32,200,000 35,233,300 Other liabilities 748,400 1,213,600 -------------------------------------------- Total liabilities 236,705,200 234,549,700 -------------------------------------------- Stockholders' equity Preferred stock, par value $1 per share, 500,000 shares authorized; none issued and outstanding - - Common stock, par value $.275; 6,000,000 shares authorized; 2,499,487 and 2,497,327 issued and outstanding, respectively 687,400 686,800 Additional capital 8,392,200 8,372,600 Retained earnings 17,815,000 16,953,400 Accumulated other comprehensive income (loss) (147,900) 113,500 -------------------------------------------- Total stockholders' equity 26,746,700 26,126,300 -------------------------------------------- $ 263,451,900 $ 260,676,000 ============================================ The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Income Three Months Ended June 30, Six Months Ended June 30, --------------------------------- ---------------------------------------- 2007 2006 2007 2006 ------------------------------------------------------------------------------- ---------------------------------------- Interest and dividend income Loans $ 3,678,700 $ 3,368,900 $ 7,250,200 $ 6,503,800 Investments Taxable interest 247,700 304,800 469,200 582,700 Tax-exempt interest 60,400 38,400 120,700 71,000 Dividends 62,800 62,400 136,200 112,800 --------------------------------- ---------------------------------------- Total interest and dividend income 4,049,600 3,774,500 7,976,300 7,270,300 --------------------------------- ---------------------------------------- Interest expense Deposits 1,480,100 1,192,000 2,942,800 2,125,300 FHLB/other advances 362,600 436,700 758,700 856,800 --------------------------------- ---------------------------------------- Total interest expense 1,842,700 1,628,700 3,701,500 2,982,100 --------------------------------- ---------------------------------------- Net interest income 2,206,900 2,145,800 4,274,800 4,288,200 Provision for loan losses 11,100 20,800 11,700 36,700 --------------------------------- ---------------------------------------- Net interest income after provision for loan losses 2,195,800 2,125,000 4,263,100 4,251,500 --------------------------------- ---------------------------------------- Noninterest income Deposit account fees 589,100 590,800 1,115,500 1,159,400 Loan fees 20,400 26,600 55,900 53,600 Mortgage banking fees 57,900 19,800 125,400 49,400 Commissions on investment brokerage sales 89,700 112,100 181,700 190,500 Gains (losses) on sales of securities (23,100) - 23,500 - Other 77,700 61,800 139,000 129,600 --------------------------------- ---------------------------------------- Total noninterest income 811,700 811,100 1,641,000 1,582,500 --------------------------------- ---------------------------------------- Noninterest expense Compensation and employee benefits 1,105,500 937,900 2,129,300 1,856,000 Occupancy and equipment 427,800 406,300 854,900 838,800 Data processing 222,400 203,500 424,800 415,900 Professional fees 100,200 97,700 199,800 193,000 Advertising and promotion 39,200 33,500 75,600 63,200 Loss on disposals of fixed assets 147,900 - 147,900 - Other 201,900 190,200 385,900 392,900 --------------------------------- ---------------------------------------- Total noninterest expense 2,244,900 1,869,100 4,218,200 3,759,800 --------------------------------- ---------------------------------------- Income before income taxes 762,600 1,067,000 1,685,900 2,074,200 Income taxes 188,300 330,800 474,500 643,000 --------------------------------- ---------------------------------------- Net income $ 574,300 $ 736,200 $ 1,211,400 $ 1,431,200 ================================= ======================================== Cash Dividends Declared Per Share $ 0.07 $ 0.06 $ 0.14 $ 0.12 ================================= ======================================== Earnings Per Common Share: Basic (1) $ 0.23 $ 0.30 $ 0.48 $ 0.57 ================================= ======================================== Diluted (1) $ 0.23 $ 0.29 $ 0.48 $ 0.57 ================================= ======================================== (1) The June 2006 amounts have been retroactively adjusted to reflect the August 2006 six-for-five stock split. 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, 2005 2,074,207 $ 684,500 $ 8,267,400 $ 14,631,400 $ 45,300 $ 23,628,600 Common stock cash dividend declared - - - (290,500) - (290,500) Exercise of stock options 2,620 900 57,900 - - 58,800 Tax benefit associated with the exercise of stock options - - 8,100 - - 8,100 Repurchase of common stock - - - - - - Comprehensive income (loss) - - - 1,431,200 (240,700) 1,190,500 ----------- ----------------------------------------------------------------------------------- Balance, June 30, 2006 2,076,827 $ 685,400 $ 8,333,400 $ 15,772,100 $ (195,400) $ 24,595,500 =========== =================================================================================== Balance, December 31, 2006 2,497,327 $ 686,800 $ 8,372,600 $ 16,953,400 $ 113,500 $ 26,126,300 Common stock cash dividend declared - - - (349,800) - (349,800) Exercise of stock options 2,160 600 13,900 - - 14,500 Tax benefit associated with the exercise of stock options - - 5,700 - - 5,700 Comprehensive income - - - 1,211,400 (261,400) 950,000 ----------- ----------------------------------------------------------------------------------- Balance, June 30, 2007 2,499,487 $ 687,400 $ 8,392,200 $ 17,815,000 $ (147,900) $ 26,746,700 =========== =================================================================================== The accompanying notes are an integral part of these financial statements.

Consolidated Statements of Cash Flows Six Months Ended June 30, -------------------------------- 2007 2006 ------------------------------------------------------------------------------------------ Cash flows from operating activities Net income $ 1,211,400 $ 1,431,200 Adjustments to reconcile to net cash provided by operating activities: Provision for loan losses 11,700 36,700 Depreciation and amortization 353,200 380,600 Amortization of premium and accretion of discount on securities, net (4,900) 4,600 Gain on sale of investment securities (23,500) - Loss on disposal of fixed assets 147,900 - Increase in cash surrender value of life insurance (77,800) (72,200) Tax benefit of stock options exercised 5,700 8,100 Changes in: Deferred loan fees (3,900) 63,200 Other assets (71,600) (65,300) Other liabilities (389,200) 40,800 --------------------------------- Net cash flows from operating activities 1,159,000 1,827,700 --------------------------------- Cash flows from investing activities Purchase of available-for-sale securities (349,800) (2,055,100) Proceeds from maturities, sales and calls of available-for-sale securities 837,200 3,146,800 Purchase of other investments (1,410,500) (1,323,300) Proceeds from maturities, sales and calls of other investments 1,532,600 1,391,700 Loan originations, net of repayments (3,121,000) (17,626,300) Purchase of premises and equipment (301,600) (127,800) --------------------------------- Net cash flows from investing activities (2,813,100) (16,594,000) ---------------------------------

Consolidated Statements of Cash Flows Six Months Ended June 30, --------------------------------- 2007 2006 ------------------------------------------------------------------------------------------- Cash flows from financing activities Net increase (decrease) in demand deposits $ 11,742,400 $(4,095,300) Net increase (decrease) in time deposits (6,088,400) 22,074,600 Proceeds from FHLB advances 148,300,000 148,500,000 Repayments of FHLB advances (151,333,300) (150,333,300) Proceeds from exercise of stock options 14,500 58,800 Payment of dividends on common stock (349,800) (290,500) --------------------------------- Net cash flows from financing activities 2,285,400 15,914,300 --------------------------------- Change in cash and cash equivalents 631,300 1,148,000 Cash and cash equivalents, beginning of period 9,469,800 9,176,000 --------------------------------- Cash and cash equivalents, end of period $ 10,101,100 $10,324,000 ================================= Supplemental disclosure of cash flow information Cash paid during the period for interest $ 3,815,300 $ 2,709,200 Cash paid during the period for income taxes $ 685,000 $ 630,000 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 six month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for any other interim period or the entire year ending December 31, 2007. 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, 2006. 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. Reclassifications Certain reclassifications of the prior period's information have been made to conform to the June 30, 2007 presentation. 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 June 30, 2007 and 2006. The June 2006 amounts have been retroactively adjusted to reflect the August 2006 six-for-five stock split. Three Months Ended June 30, Six Months Ended June 30, ------------------------------------- ------------------------------------ 2007 2006 2007 2006 ------------------ ------------------ ----------------- ------------------ Net income (numerator, basic and diluted) $ 574,300 $ 736,200 $ 1,211,400 $ 1,431,200 Weighted average shares outstanding (denominator) 2,499,500 2,491,900 2,498,800 2,491,100 ------------------ ------------------ ----------------- ------------------ Earnings per common share - basic $ 0.23 $ 0.30 $ 0.48 $ 0.57 ================== ================== ================= ================== Effect of dilutive securities: Weighted average shares outstanding 2,499,500 2,491,900 2,498,800 2,491,100 Effect of stock options 20,900 31,100 24,900 30,400 ------------------ ------------------ ----------------- ------------------ Diluted average shares outstanding (denominator) 2,520,400 2,523,000 2,523,700 2,521,500 ------------------ ------------------ ----------------- ------------------ Earnings per common share - assuming dilution $ 0.23 $ 0.29 $ 0.48 $ 0.57 ================== ================== ================= ==================

NOTE 3 - COMPREHENSIVE INCOME Total comprehensive income consists of the following for the six months ended June 30, 2007 and 2006: Six Months Ended June 30, ------------------------------------- 2007 2006 ------------------ ----------------- Net income $ 1,211,400 $1,431,200 Other comprehensive income (loss) (261,400) (240,700) ------------------ ----------------- Total comprehensive income $ 950,000 $1,190,500 ================== =================

NOTE 3 - COMPREHENSIVE INCOME (concluded) The following is a reconciliation of the related tax effects allocated to each component of other comprehensive income at June 30, 2007 and 2006. Six Months Ended June 30, ------------------------------------- 2007 2006 ------------------ ----------------- Unrealized gains (losses) on available-for-sale securities: Unrealized holding gains (losses) arising during the period $ (372,500) $ (402,000) Less: reclassification adjustment for gain included in income (23,500) - ------------------ ----------------- Total other comprehensive gain (loss) before tax effect (396,000) (402,000) Tax benefit (expense) 134,600 161,300 ------------------ ----------------- Net unrealized gain (loss) $ (261,400) $ (240,700) ================== =================

NOTE 4 - SEGMENT INFORMATION Segment information consists of the following for the six months ended June 30, 2007 and 2006: Elimination of Intersegment (In thousands) Virginia Maryland Other Transactions Total ------------- -------------- -------------- ---------------- -------------- Net Interest Income: Six Months ended June 30, 2007 $ 3,182 $ 901 $ (253) $ 445 $ 4,275 Six Months ended June 30, 2006 $ 3,238 $ 890 $ (134) $ 294 $ 4,288 Assets: June 30, 2007 $ 204,425 $ 49,388 $ 45,113 $ (35,474) $ 263,452 December 31, 2006 $ 198,692 $ 49,441 $ 43,531 $ (30,988) $ 260,676

NOTE 5 - DISPOSAL OF LONG-LIVED ASSET During the quarter ended June 30, 2007, the Bank initiated plans to raze its branch on South Salisbury Boulevard in Salisbury, Maryland and build a new full-service banking facility at that location. As a result, the Bank incurred a $147,900 charge to earnings during the quarter related to the planned disposal of the existing facility. The Bank is no longer using the facility and is leasing a temporary location nearby to accommodate its customers during construction of the new banking facility. NOTE 6 - SUBSEQUENT EVENT During July 2007, the Company declared a $0.07 per share quarterly cash dividend on its common stock payable on August 1, 2007 to shareholders of record on July 23, 2007. Item 2 - Management's Discussion and Analysis of Consolidated Financial Condition and Results of Operations Results of Operations General Net income for the three months ended June 30, 2007 was $574,300, or $0.23 per diluted share, compared to net income of $736,200, or $0.29 per diluted share, for the same period of the prior year. All per share amounts have been adjusted to reflect the six-for-five stock split the Company effected on August 30, 2006. Earnings for the six months ended June 30, 2007 were $1.21 million, or $0.48 per diluted share, compared to $1.43 million, or $0.57 per diluted share, for the 2006 six month period. The Company continues to operate in an environment where bank consolidation and restructuring is rampant, resulting in growth opportunities unlike any in recent years. Accordingly, the Company has embarked on several strategic initiatives to position itself for future growth and to capitalize on these opportunities existing in its banking markets. In Salisbury, Maryland, the Bank plans to raze one of its existing branch buildings and build a new full service facility on that site. As a result, the Bank incurred a $148,000 charge during the second quarter to write off the existing structure and is leasing a temporary location to accommodate its customers during the construction phase. The Bank also has signed a lease to open its eighth branch location in Pocomoke City, Maryland. This market offers a great opportunity for the Bank to expand its footprint while complimenting the Bank's existing markets. Finally, the Bank intends to relocate its Cheriton, Virginia branch location to a new site that is located near the entrance to the Bay Creek Community in Cape Charles, Virginia. The Bank intends to build a full service banking facility on the new site. As the Company undertakes these strategic endeavors, it continues to be impacted by a flat interest rate yield curve and a softening real estate market. The Company's outstanding loan balances on June 30, 2007 were $213.7 million, representing a nominal increase from a year ago. However, asset quality remained strong during the quarter. The Bank's non current loan to total loan ratio was 0.45% at June 30, 2007, while the Bank's allowance for loan losses to period end loans ratio was 1.34%. Since the Bank does not engage in any sub prime lending activities, it is not exposed to some of the risks currently affecting some financial companies. Accordingly, management considers the Bank's exposure levels manageable and commensurate with the risk existing in the Bank's loan portfolio. Net Interest Income The Company's net interest margin was 3.56% during the first six months of 2007, compared to 3.64% during the 2006 six month period. However, the Company realized a 21 basis point increase in its net interest margin during the second quarter of 2007 as compared to the 2007 first quarter. This increase resulted from the successful introduction of several new products and promotions initiated by the Bank to attract new lower costing checking accounts. The Company also benefited from effective liquidity management initiatives and by limiting its reliance on higher costing time deposits. As a result, net interest income was $2.21 million and $4.27 million, respectively, during the three and six month periods ended June 30, 2007, compared to $2.15 million and $4.29 million, respectively, during the same periods of 2006. Average earning assets for the six months ended June 2007 increased $6.2 million over the June 2006 period. The majority of this growth occurred in average loans which increased $8.8 million over 2006, while average investments declined $2.0 million during the period. The loan growth occurred in residential real estate and commercial loans which increased 7.0% and 3.7%, respectively, over comparable period of 2006. 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 $202.8 million during the period, compared to $193.1 million during the 2006 period. During the six months ended June 30, 2007, average interest-bearing checking and savings demand deposits declined $6.2 million when compared to the June 2006 six month period. Decreases in the Bank's money market and savings products since June 2006 accounted for the majority of this decline due to increased rate competition from other banks, brokerage firms and insurance companies for all deposit products. However, the Bank realized growth in these products during the first six months of 2007 when compared to December 2006 year end amounts. During the June 2007 six month period, time deposit balances averaged $110.6 million, representing a $14.9 million increase over average time deposit balances during the 2006 period. The Company purchased brokered certificates of deposit and offered several rate specials during the second quarter of 2006 and continues to offer several short-term rate specials, accounting for the increase in time deposits. As brokered deposits and time deposits became a better alternative to Federal Home Loan Bank ("FHLB") advances, the Company relied less on these advances as a source of liquidity funding. This resulted in a $5.8 million decrease in the average balance of FHLB advances during the June 2007 six month period as compared to the June 2006 period. Interest and dividend income was $4.05 million and $7.98 million for the three and six month periods ended June 30, 2007, representing increases of 7.3% and 9.7%, respectively, over the comparable 2006 amounts. An increase in average loans outstanding during the June 2007 six month period in relation to the comparable 2006 period accounted for this increase, despite net interest margin pressures during the period. The yield on earning assets increased 44 basis points to 6.59% during the June 2007 period as compared to the 2006 comparable period. Loan and investment yields improved by 44 and 25 basis points, respectively, during the six months ended June 30, 2007 over the June 2006 comparable period. Interest expense for the three and six months ended June 30, 2007 was $1.84 million and $3.70 million, respectively, representing an increase of 13.1% and 24.1%, respectively, over comparable 2006 amounts. The 15.6% increase in average time deposits and a 66 basis point increase in the cost of total interest-bearing liabilities were the primary contributing factors to this increase. However, the Company realized an 11 basis point decrease in its cost of funding during the second quarter of 2007 as compared to the 2007 first quarter. This improvement resulted from the successful introduction of several new products and promotions initiated by the Bank to attract new lower costing checking accounts. The Company also benefited from actively managing its liquidity and limiting its reliance on higher costing time deposits. The average rate on interest-bearing liabilities for the six months ended June 30, 2007 was 3.60%, compared to 2.94% incurred in 2006. Interest rates on checking and savings accounts and time deposits represented the greatest impact on the Bank's cost of funding by increasing 66 basis points and 62 basis points, respectively, while FHLB advance cost increased 26 basis points during the 2007 six month period as compared to the 2006 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 Six Months Ended June 30, -------------------------------------------------------------------------- 2007 2006 ------------------------------------ ----------------------------------- Average Income/ Yield/ Average Income/ Yield/ (Dollars In Thousands) Balance Expense Rate Balance Expense Rate ----------- --------- ----------- ---------- --------- ---------- Assets: Securities (1) $ 30,202 $ 743 4.92% $ 32,232 $ 753 4.67% Loans (net of unearned income): Real estate mortgage 119,653 3,738 6.25% 111,817 3,275 5.86% Commercial 74,986 2,782 7.42% 72,325 2,486 6.87% Home equity lines 14,028 594 8.47% 15,851 611 7.71% Consumer 3,012 136 9.03% 2,922 131 8.97% --------- --------- ---------- --------- Total loans 211,679 7,250 6.85% 202,915 6,503 6.41% Interest-bearing deposits in other banks 1,976 45 4.55% 2,518 51 4.05% --------- ---------- --------- --------- Total earning assets 243,857 8,038 6.59% 237,665 7,307 6.15% --------- --------- Less: allowance for loan losses (2,866) (2,872) Total nonearning assets 19,709 19,374 --------- ---------- Total assets $ 260,700 $ 254,167 ========= ========== Liabilities Interest-bearing deposits: Checking and savings $ 64,446 $ 456 1.42% $ 70,678 $ 267 0.76% Time deposits 110,620 2,487 4.50% 95,697 1,858 3.88% --------- --------- ---------- --------- Total interest-bearing deposits 175,066 2,943 3.36% 166,375 2,125 2.55% FHLB advances 30,443 759 4.99% 36,251 857 4.73% --------- --------- ---------- --------- Total interest-bearing liabilities 205,509 3,702 3.60% 202,626 2,982 2.94% --------- --------- Non-interest bearing liabilities: Demand deposits 27,703 26,769 Other liabilities 722 391 --------- ---------- Total liabilities 233,934 229,786 Stockholders' equity 26,766 24,381 --------- ---------- Total liabilities and stockholders' equity $ 260,700 $ 254,167 ========= ========== Net interest income (1) $ 4,336 $ 4,325 ========= ========= Interest rate spread (1)(2)(3) 2.99% 3.21% Net interest margin (1)(4) 3.56% 3.64% (1) Tax equivalent basis. The tax equivalent adjustment to net interest income was $62,000 and $37,000 for the six months ended June 30, 2007 and 2006, 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 interest rate trends, 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 June 30, 2007. This one-day position, which continually is changing, is not necessarily indicative of the Company's position at any other time. Interest Sensitivity Analysis June 30, 2007 ------------------------------------------------------------------------------- Within 91-365 1 to 5 Over (Dollars In Thousands) 90 Days Days Years 5 Years Total -------------- -------------- ----------------- ------------- ----------------- Interest-Earning Assets: Loans (1) $ 60,406 $ 61,411 $ 83,916 $ 7,968 $ 213,701 Securities (2) 5,007 5,145 13,599 5,680 29,431 Money market and other short term securities 2,790 - - - 2,790 Other earning assets - - - 3,641 3,641 -------------- -------------- ----------------- ------------- ----------------- Total earning assets $ 68,203 $ 66,556 $ 97,515 $ 17,289 $ 249,563 ============== ============== ================= ============= ================= Cumulative earning assets $ 68,203 $ 134,759 $ 232,274 $ 249,563 $ 249,563 ============== ============== ================= ============= ================= Interest-Bearing Liabilities: Money market savings $ 19,045 $ - $ - $ - $ 19,045 Interest checking (3) - - 29,533 - 29,533 Savings (3) 1,889 1,522 17,203 - 20,614 Certificates of deposit 38,258 40,596 26,074 888 105,816 FHLB advances 16,750 8,000 7,000 450 32,200 -------------- -------------- ----------------- ------------- ----------------- Total interest-bearing liabilities $ 75,942 $ 50,118 $ 79,810 $ 1,338 $ 207,208 ============== ============== ================= ============= ================= Cumulative interest-bearing liabilities $ 75,942 $ 126,060 $ 205,870 $ 207,208 $ 207,208 ============== ============== ================= ============= ================= Period gap $ (7,739) $ 16,438 $ 17,705 $ 15,951 $ 42,355 Cumulative gap $ (7,739) $ 8,699 $ 26,404 $ 42,355 $ 42,355 Ratio of cumulative interest-earning assets to interest-bearing liabilities 89.81% 106.90% 112.83% 120.44% 120.44% Ratio of cumulative gap to total earning assets (3.10%) 3.49% 10.58% 16.97% 16.97% (1) Includes nonaccrual loans of $958,000, which are spread throughout the 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 The Company's noninterest income was $811,700 for the June 2007 quarter, compared to $811,100 for the June 2006 quarter end, while non interest income increased to $1.64 million for the six months ended June 30, 2007, compared to $1.58 million for the 2006 six month period. The Bank's mortgage banking division has posted significant gains in fee income during 2007 with an increase from $49,400 during the 2006 six month period to $125,400 during the 2007 comparable quarter. The Company's noninterest income was impacted by a decline in deposit fee income during the first six months of 2007, as compared to the 2006 six month period. This decline occurred primarily in charges levied on overdraft deposit balances. The mortgage banking division continues to represent a strong segment of the Company's operations. In its efforts to further capitalize on the success of this division, the Company hired a mortgage banking representative during the second quarter to cover its Maryland markets. In addition to providing profitable alternative loan products in the Bank's markets, these representatives have proven to be effective ambassadors of the Bank and strong referral sources for the Bank's traditional loan and deposit products. Provision for Loan Losses With asset quality remaining strong during the last several quarters, the Company has not been required to make significant contributions to the provision for loan loss. The $11,700 and $36,700 contributed during the June 2007 and 2006 quarters, respectively, primarily related to overdraft deposit accounts. 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 Excluding the branch property write off, the Company's noninterest expense was $2.10 million during the June 2007 quarter, compared to $1.87 million during the 2006 three month period. For the six months ended June 30, 2007, the Company's noninterest expense was $4.07 million, compared to $3.76 million during the 2006 six month period. Compensation and benefits expense accounted for the majority of this increase. The expense for the first six months of 2007 included two former senior level officers from Mercantile Bank's local affiliate that were not employed with the Company during the first six months of 2006. Compensation expense also increased due to commissions paid as a result of the growth and expansion of the mortgage brokerage business, additional personnel employed to enhance the Company's internet banking division and normal annual salary and benefit adjustments. These additional personnel and enhancements should enable the Company to further capitalize on the growth opportunities existing in its markets. The Company's other expense categories were generally flat during the June 2007 six month period when compared to the 2006 period. Financial Condition The Company's total assets were $263.5 million at June 30, 2007, compared to $260.7 million at December 31, 2006. Growth in net loans of $3.1 million accounted for this increase while other asset categories remained relatively flat during the period. A softening real estate market impacted loan demand during the first six months of 2007. Deposits were $203.8 million at June 30, 2007, compared to $198.1 million at December 31, 2006. Growth in demand and savings account balances accounted for the majority of the $2.5 million increase in interest-bearing deposits with time deposits being flat during the period, while noninterest-bearing deposits increased by $3.2 million. Stockholders' equity was $26.7 million at June 30, 2007, representing an increase of $620,400 since December 31, 2006. This increase is made up of comprehensive income of $950,000, consisting primarily of $1.21 million of net income earned during the three month period, offset by common stock dividends of $349,700 ($0.14 per share) during the period. During July 2007, the Company declared a $0.07 per share quarterly cash dividend on its common stock payable on August 1, 2007 to shareholders of record on July 23, 2007. 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 $958,000 at June 30, 2007, compared to $931,000 at December 31, 2006. As to nonaccrual loans existing at June 30, 2007, approximately $10,000 of interest income would have been recognized during the six months then ended if interest thereon had accrued. The Company has not identified any 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. At June 30, 2007, all loans 60 days or more delinquent, including nonperforming loans, totaled $1.1 million. In addition, other performing loans, totaling $6.0 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 June 30, December 31, (Dollars In Thousands) 2007 2006 ---------------------- ------------------------ Nonaccrual loans: Commercial $ - $ 73 Real estate mortgage 852 832 Home equity lines of credit 100 24 Consumer 6 2 ---------------------- ------------------------ Total nonaccrual loans 958 931 Other real estate owned - - ---------------------- ------------------------ Total nonperforming assets $ 958 $ 931 ====================== ======================== Loans past due 90 or more days accruing interest - - Allowance for loan losses to nonaccrual loans 298.85% 308.59% Nonperforming assets to period end loans and other real estate owned 0.45% 0.44%

Set forth below is a table detailing the allowance for loan losses for the periods indicated. Allowance for Loan Losses June 30, ------------------------------------------------ (Dollars In Thousands) 2007 2006 ---------------------- ------------------------ Balance, beginning of period $ 2,873 $ 2,851 Loans charged off: Commercial - - Real estate mortgage - - Consumer (82) (68) ---------------------- ------------------------ Total loans charged-off (82) (68) ---------------------- ------------------------ Recoveries: Commercial - 19 Real estate mortgage - - Consumer 60 45 ---------------------- ------------------------ Total recoveries 60 64 ---------------------- ------------------------ Net recoveries (charge-offs) (22) (4) Provision for loan losses 12 37 ---------------------- ------------------------ Balance, end of period $ 2,863 $ 2,884 ====================== ======================== Allowance for loan losses to loans outstanding at end of period 1.34% 1.35% Allowance for loan losses to nonaccrual loans outstanding at end of period 298.85% 454.89% Net charge-offs (recoveries) to average loans outstanding during period 0.010% 0.002%

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 June 30, 2007, the Company had outstanding loan, line of credit and letter of credit commitments of $53.8 million. Scheduled maturities of certificate of deposits during the twelve months following June 30, 2007 amounted to $78.7 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 $631,300 for the six months ended June 30, 2007, compared to an increase of $1.15 million for the six months ended June 30, 2006. Net cash from operating activities was $1.16 million for the six months ended June 30, 2007, compared to $1.83 million during the same period of 2006. The changes reflect fluctuations in normal operating activities. Net cash used in investing activities was $2.8 million during the six months ended June 30, 2007, compared to net cash used in investing activities of $16.6 million for the six months ended June 30, 2006. Stronger loan growth during the first six months of 2006 than what occurred during 2007 constituted the majority of the difference. Net cash from financing activities was $2.3 million for the six months ended June 30, 2007, compared to net cash from financing activities of $15.9 million for the six months ended June 30, 2006. Less growth in time deposits offset by an increase in demand deposits during the June 2007 six month period represented the majority of this decrease. This decline reflects the lower required liquidity levels needed in 2007 to fund loan growth when compared to 2006. 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 $700,000 of dividends to the Company during the first six months of 2007, while it paid $1.0 million in dividends to the Company during the six months ended June 30, 2006. At June 30, 2007, the Bank's retained earnings available for the payment of dividends was $3.3 million. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and its banking subsidiary to maintain minimum amounts and ratios of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). At June 30, 2007, 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 June 30, 2007 and December 31, 2006. Analysis of Capital June 30, December 31, (Dollars In Thousands) 2007 2006 ------------------- ------------------ Tier 1 Capital: Common stock $ 687 $ 687 Additional paid-in capital 8,392 8,373 Retained earnings 17,815 16,953 Accumulated other comprehensive income (148) 113 ------------------- ------------------ Total capital (GAAP) 26,746 26,126 Less: Intangibles (387) (402) Net unrealized gain on debt and equity securities 148 (113) ------------------- ------------------ Total Tier 1 capital 26,507 25,611 Tier 2 Capital: Allowable allowances for loan losses 2,289 2,269 Net unrealized gains on equity securities 65 180 ------------------- ------------------ Total Tier 2 capital $ 28,861 $ 28,060 =================== ================== Risk-weighted assets $ 187,217 $ 185,991 Capital Ratios (1): Tier 1 risk-based capital ratio 14.16% 13.77% Total risk-based capital ratio 15.42% 15.09% Tier 1 capital to average adjusted total assets 10.18% 9.93%

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 March 31, 2007. 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 $208,000, while a 200 basis point instantaneous and parallel increase in the yield curve in interest rates would cause net interest income to increase by $19,000. 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, 2006 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 During the Company's Annual Meeting on April 17, 2007, the Stockholders voted to reelect Terrell E. Boothe and D. Page Elmore as directors of the Company. 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 April 2007 relative to the Company's March 31, 2007 earnings release dated April 19, 2007. (c) Form 8-K was filed during June 2007 relative to razing and rebuilding plans of one of the Company's subsidiary bank branch locations. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Scott C. Harvard August 14, 2007 -------------------------------------------------------------------------------- Scott C. Harvard President and Chief Executive Officer /s/ Steven M. Belote August 14, 2007 -------------------------------------------------------------------------------- Steven M. Belote Senior 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: August 14, 2007 /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: August 14, 2007 /s/ Steven M. Belote ------------------------------------------------- Steven M. Belote Chief Financial Officer and Senior 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 June 30, 2007 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: August 14, 2007 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 June 30, 2007 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 and Senior Vice President Date: August 14, 2007 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