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 March 31, 2008
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)
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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, a non-accelerated filer or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ____ Accelerated filer ____
Non-accelerated filer __X__ Smaller reporting company ____
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ____ No __X__
Number of shares of Common Stock outstanding as of May 12, 2008: 2,506,783
SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
Index - Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Statements of Financial Condition as of
March 31, 2008 and December 31, 2007
Consolidated Statements of Income for the Three
Months Ended March 31, 2008 and 2007
Consolidated Statements of Stockholders' Equity for
the Three Months Ended March 31, 2008 and 2007
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2008 and 2007
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
March 31, December 31,
2008 2007
-------------------------------------------------------------------------------------------------------------------
ASSETS
Cash (including interest-earning deposits of
approximately $4,791,100 and $4,036,500, respectively) $ 13,468,200 $ 11,265,300
Investment securities:
Available-for-sale (amortized cost of $19,688,100 and
$20,716,600, respectively) 19,251,200 20,224,400
Other investments, at cost 2,413,100 2,669,600
Loans receivable, net 217,903,800 218,887,300
Premises and equipment, net 7,772,000 7,371,000
Other assets 6,323,000 6,249,700
-------------------------------------------
Total Assets $ 267,131,300 $ 266,667,300
===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest-bearing $ 175,072,900 $ 168,579,200
Noninterest-bearing 27,651,100 27,984,700
-------------------- --------------------
Total deposits 202,724,000 196,563,900
Advances from Federal Home Loan Bank 35,200,000 41,116,700
Other liabilities 1,143,700 1,266,000
-------------------------------------------
Total liabilities 239,067,700 238,946,600
-------------------------------------------
Stockholders' equity
Preferred stock, par value $1 per share, 500,000
shares authorized; none issued and
outstanding - -
Common stock, par value $0.275; 6,000,000
shares authorized; 2,504,983 and
2,500,927 issued and outstanding, respectively 688,900 687,800
Additional capital 8,451,300 8,400,000
Retained earnings 19,213,200 18,959,200
Accumulated other comprehensive loss (289,800) (326,300)
-------------------------------------------
Total stockholders' equity 28,063,600 27,720,700
-------------------------------------------
Total Liabilities and Stockholders' Equity $ 267,131,300 $ 266,667,300
===========================================
The accompanying notes are an integral part of these financial statements.
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Consolidated Statements of Income
Three Months Ended March 31,
--------------------------------------
2008 2007
------------------- ---------------
Interest and dividend income
Loans $ 3,767,000 $ 3,571,500
Investments
Taxable interest 182,700 221,500
Tax-exempt interest 60,400 60,300
Dividends 58,700 73,400
--------------------------------------
Total interest and dividend income 4,068,800 3,926,700
--------------------------------------
Interest expense
Deposits 1,338,800 1,462,700
FHLB/other advances 433,500 396,100
--------------------------------------
Total interest expense 1,772,300 1,858,800
--------------------------------------
Net interest income 2,296,500 2,067,900
Provision for loan losses 5,100 600
--------------------------------------
Net interest income after
provision for loan losses 2,291,400 2,067,300
--------------------------------------
Noninterest income
Deposit account fees 590,000 526,400
Loan fees 34,000 35,500
Mortgage banking fees 49,000 67,500
Commissions on investment brokerage sales 106,100 92,000
Gains from investment securities activities - 46,600
Other 68,700 61,300
--------------------------------------
Total noninterest income 847,800 829,300
--------------------------------------
Noninterest expense
Compensation and employee
benefits 1,093,700 1,023,800
Occupancy and equipment 517,700 427,100
Data processing 200,800 202,400
Professional fees 97,800 103,500
Marketing and promotion 53,100 36,400
Merger costs 250,000 -
Other 184,900 180,100
--------------------------------------
Total noninterest expense 2,398,000 1,973,300
--------------------------------------
Income before income taxes 741,200 923,300
Income taxes 287,100 286,200
--------------------------------------
Net income $ 454,100 $ 637,100
======================================
Cash Dividends Declared Per Share $ 0.08 $ 0.07
======================================
Earnings Per Common Share:
Basic $ 0.18 $ 0.26
======================================
Diluted $ 0.18 $ 0.25
======================================
The accompanying notes are an integral part of these financial statements.
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Consolidated Statements of Stockholders' Equity
-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Number of Common Additional Retained Comprehensive
Shares Stock Capital Earnings Income (Loss) Total
----------- -------------- --------------- ---------------- ----------------- -------------
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 - - - (174,800) - (174,800)
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 (loss) - - - 637,100 (55,500) 581,600
----------- -----------------------------------------------------------------------------------
Balance, March 31, 2007 2,499,487 $ 687,400 $ 8,392,200 $ 17,415,700 $ 58,000 $ 26,553,300
=========== ===================================================================================
Balance, December 31, 2007 2,500,927 $ 687,800 $ 8,400,000 $ 18,959,200 $ (326,300) $ 27,720,700
Common stock cash dividend
declared - - - (200,100) - (200,100)
Exercise of stock options 4,056 1,100 40,400 - - 41,500
Tax benefit associated with the
exercise of stock options - - 10,900 - - 10,900
Comprehensive income - - - 454,100 36,500 490,600
----------- -------------- --------------- ---------------- ----------------- --------------
Balance, March 31, 2008 2,504,983 $ 688,900 $ 8,451,300 $ 19,213,200 $ (289,800) $ 28,063,600
=========== ===================================================================================
The accompanying notes are an integral part of these financial statements.
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Consolidated Statements of Cash Flows
Three Months Ended March 31,
-----------------------------
2008 2007
------------ ------------
Cash flows from operating activities
Net income $ 454,100 $ 637,100
Adjustments to reconcile to net cash
provided by operating activities:
Provision for loan losses 5,100 600
Depreciation and amortization 170,000 181,300
Gains from investment securities activities - (46,600)
Other noncash operating activities (29,500) (35,100)
Changes in:
Deferred loan fees (79,500) 59,800
Other assets (51,700) (88,500)
Other liabilities (141,000) (298,200)
------------ ------------
Net cash flows from operating activities 327,500 410,400
------------ ------------
Cash flows from investing activities
Purchase of available-for-sale securities - (349,900)
Proceeds from maturities, sales and calls of
available-for-sale securities 1,031,700 276,200
Purchase of other investments (625,500) (483,100)
Proceeds from maturities, sales and calls of
other investments 882,000 563,900
Loan originations, net of repayments 1,057,900 (2,382,900)
Purchase of premises and equipment (555,500) (226,600)
------------ ------------
Net cash flows from investing activities 1,790,600 (2,602,400)
------------ ------------
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Consolidated Statements of Cash Flows
Three Months Ended March 31,
-----------------------------
2008 2007
------------- ------------
Cash flows from financing activities
Net increase in demand deposits $ 4,298,500 $9,276,700
Net increase (decrease) in time deposits 1,861,600 (67,800)
Proceeds from FHLB advances 40,000,000 78,350,000
Repayments of FHLB advances (45,916,700) (82,366,600)
Proceeds from exercise of stock options 41,500 14,500
Payment of dividends on common stock (200,100) (174,800)
------------ ------------
Net cash flows from financing activities 84,800 5,032,000
------------ ------------
Change in cash and cash equivalents 2,202,900 2,840,000
Cash and cash equivalents, beginning of period 11,265,300 9,469,800
------------ ------------
Cash and cash equivalents, end of period $13,468,200 $12,309,800
============ ============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 1,862,400 $1,988,400
Cash paid during the period for income tax$s 325,000 $ 485,000
The accompanying notes are an integral part of these financial statements.
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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 three
month period ended March 31, 2008 are not necessarily indicative of the results
that may be expected for any other interim period or the entire year ending
December 31, 2008. 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, 2007.
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 March 31, 2008 presentation. The reclassification had no effect
on prior year's net income.
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 March
31, 2008 and 2007.
Three Months Ended March 31,
-------------------------------------
2008 2007
----------------- ----------------
Net income (numerator, basic and diluted) $ 454,100 $ 637,100
Weighted average shares outstanding
(denominator) 2,502,900 2,498,100
----------------- ----------------
Earnings per common share - basic $ 0.18 $ 0.26
================= ================
Effect of dilutive securities:
Weighted average shares outstanding 2,502,900 2,498,100
Effect of stock options 44,400 28,600
----------------- ----------------
Diluted average shares outstanding
(denominator) 2,547,300 2,526,700
----------------- ----------------
Earnings per common share -
assuming dilution $ 0.18 $ 0.25
================= ================
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NOTE 3 - COMPREHENSIVE INCOME
Total comprehensive income consists of the following for the three months ended
March 31, 2008 and 2007:
Three Months Ended March 31,
-------------------------------------
2008 2007
------------------ -----------------
Net income $ 454,100 $ 637,100
Other comprehensive income (loss) 36,500 (55,500)
------------------ -----------------
Total comprehensive income $ 490,600 $ 581,600
================== ---==============
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NOTE 3 - COMPREHENSIVE INCOME (concluded)
The following is a reconciliation of the related tax effects allocated to each
component of other comprehensive income at March 31, 2008 and 2007.
Three Months Ended March 31,
-------------------------------------
2008 2007
------------------ -----------------
Unrealized gains (losses) on
available-for-sale securities:
Unrealized holding gains (losses)
arising during the period $ 55,200 $ (37,400)
Less: reclassification adjustment
for gain included in income - (46,600)
------------------ -----------------
Total other comprehensive gain (loss)
before tax effect 55,200 (84,000)
Tax benefit (expense) (18,700) 28,500
------------------ -----------------
Net unrealized gain (loss) $ 36,500 $ (55,500)
================== =================
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NOTE 4 - SEGMENT INFORMATION
Segment information consists of net interest income for the three months ended
March 31, 2008 and 2007 and assets as of March 31, 2008 and December 31, 2007:
Elimination of
Intersegment
(In thousands) Virginia Maryland Other Transactions Total
-------------- --------------- ------------- ----------------- ---------------
Net Interest Income:
Three months ended March 31, 2008 $ 1,658 $ 457 $ (146) $ 328 $ 2,297
Three months ended March 31, 2007 $ 1,538 $ 433 $ (159) $ 256 $ 2,068
Assets:
March 31, 2008 $ 204,162 $ 58,158 $ 38,481 $ (33,670) $ 267,131
December 31, 2007 $ 206,469 $ 53,949 $ 38,745 $ (32,496) $ 266,667
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NOTE 5 - FAIR VALUE ACCOUNTING
Effective January 1, 2008, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 157 and No. 159. Both standards
address aspects of the expanding application of fair value accounting.
Fair Value Measurements (SFAS 157)
SFAS 157 defines fair value, establishes a consistent framework for measuring
fair value and expands disclosure requirements about fair value measurements.
SFAS 157, among other things, requires the Company to maximize the use of
observable inputs and minimize the use of unobservable inputs when measuring
fair value. SFAS 157 establishes a framework for measuring fair value in GAAP,
and expands disclosures about fair value measurements. While the Statement
applies under other accounting pronouncements that require or permit fair value
measurements, it does not require any new fair value measurements. SFAS No. 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability (an exit price) in an orderly transaction between market
participants at the measurement date. In addition, the Statement establishes a
fair value hierarchy, which prioritizes the inputs to valuation techniques used
to measure fair value into three broad levels. Lastly, SFAS No. 157 requires
additional disclosures for each interim and annual period separately for each
major category of assets and liabilities.
These valuation techniques are based upon observable and unobservable inputs.
Observable inputs reflect market data obtained from independent sources, while
unobservable inputs reflect the Company's market assumptions. These two types of
inputs create the following fair value hierarchy:
o Level 1--Quoted prices for identical instruments in active markets
o Level 2--Quoted prices for similar instruments in active markets;
quoted prices for identical or similar o instruments in markets that
are not active; and model-derived valuations whose inputs are
observable or whose significant value drivers are observable.
o Level 3--Instruments whose significant value drivers are unobservable.
The Company determines fair value based upon quoted prices when available or
through the use of alternative approaches, such as discounting the expected cash
flows using market interest rates commensurate with the credit quality and
duration of the investment. The methods the Company uses to determine fair value
on an instrument specific basis are detailed in the section titled "Valuation
Methods", below.
The following table presents for each of the fair value hierarchy levels, the
Company's assets which are measured at fair value on a recurring basis as of
March 31, 2008:
Fair Value Measurements at Reporting Date Using
--------------------------------------------------------------------------------
Quoted Prices in Significant
Active Markets Other Significant
Fair Value at for Identical Observable Unobservable
March 31, 2008 Assets (Level 1) Inputs (Level 2) Inputs (Level 3)
--------------------------------------------------------------------------------
(in thousands)
Investment Securities - available-for-sale $ 19,251 $ 2,448 $ 15,674 $ 1,129
================ ================ ================ ================
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NOTE 5 - FAIR VALUE ACCOUNTING (continued)
The following table provides a reconciliation of the beginning and ending
balances for the Company's investment securities which are measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) from
December 31, 2007 to March 31, 2008:
Estimated
Value of
Cost Unrealized Investment
Basis Gain (Loss) Securities
---------------------------------------------------------------------
(in thousands)
As of December 31, 2007 $ 1,129 $ - $ 1,129
Increases (decreases) to investment securities:
Net investment activities - - -
-------------------- -------------------- --------------------
Net increase (decrease) to investment securities - - -
-------------------- -------------------- --------------------
As of March 31, 2008 $ 1,129 $ - $ 1,129
==================== ==================== ====================
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The following table provides a summary of the impact to net assets for the three
months ended March 31, 2008 from the Company's assets which are measured at fair
value on a recurring basis as of March 31, 2008:
Fair Value
Adjustments
Included In
Fair Value Current Period
Measurement Changes In
Asset Measured at Fair Value Frequency Net Assets Statement of Financial Condition Line Item Impared
------------------------------------------- ---------------- -------------------- --------------------------------------------------
(in thousands)
Investment Securities - available-for-sale Recurring $ 36 Accumulated other comprehensive income (loss)
====================
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Valuation Methods
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value.
Investment Securities
Investment securities classified as available for sale are reported at their
estimated fair value with unrealized gains and losses reported in accumulated
other comprehensive income. To the extent that the cost basis of investment
securities exceeds the fair value and the unrealized loss is considered to be
other than temporary, an impairment charge is recognized and the amount recorded
in accumulated other comprehensive income or loss is reclassified to earnings as
a realized loss. The Company uses three methodologies for determining the fair
value of investment securities classified as available for sale: 1) quoted
market prices; 2) dealer quotes; and 3) market values of similar securities in
conjunction with other factors that may impact the investment's value. For
restricted securities without readily determinable values, the carrying amount
is considered a reasonable estimate of fair value.
NOTE 5 - FAIR VALUE ACCOUNTING (concluded)
Fair Value Option for Financial Assets and Liabilities (SFAS 159)
SFAS 159 permits the Company to choose to measure many financial instruments and
certain other items at fair value and also establishes fair presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. After initial adoption, the election to report an eligible
financial asset, financial liability or firm commitment at fair value is made
upon the acquisition of said item and all changes in the fair value of elected
items is reported in earnings. The fair value election may not be revoked once
made.
Although the Company adopted SFAS 159 on January 1, 2008, it has not elected
fair value accounting for any balance sheet items as allowed under the standard.
NOTE 6 - SUBSEQUENT EVENT
On January 9, 2008, the Shore Financial Corporation announced the signing of a
definitive merger agreement with Hampton Roads Bankshares, Inc. pursuant to
which the Company will be merged into Hampton Roads Bankshares.
On March 13, 2008, Hampton Roads Bankshares, Inc. filed a registration statement
on Form S-4, including a preliminary joint proxy statement/prospectus
constituting a part thereof, with the Securities and Exchange Commission (the
"SEC") containing information about the proposed merger. On April 17, 2008,
Hampton Roads Bankshares, Inc. filed the final joint proxy statement/prospectus
on Form 424(b)(2) with the SEC. Shareholders are urged to read the registration
statement and final joint proxy statement/prospectus filed with the SEC, and any
other relevant materials filed or that will be filed, as they become available,
because they will contain important information about Hampton Roads Bankshares,
Inc., the Company and the proposed merger. The final joint proxy
statement/prospectus was first mailed to shareholders of the Company on or about
April 18, 2008.
During April 2008, the Company declared a $0.08 per share quarterly cash
dividend on its common stock payable on May 1, 2008 to shareholders of record on
April 25, 2008.
Item 2 - Management's Discussion and Analysis of
Consolidated Financial Condition and Results of Operations
Results of Operations
General
The Company's net income for the three months ended March 31, 2008 was $454,100,
or $0.18 per diluted share, compared to earnings of $637,100, or $0.25 per
diluted share, for the same period of 2007. Earnings for the 2008 three month
period include $250,000 of costs related to the Company's pending merger with
Hampton Roads Bankshares, Inc. Excluding these costs, core net income for the
2008 quarter was $704,100, or $0.28 per diluted share, compared to core earnings
of $604,900, or $0.24 per diluted share, for the 2007 three month period. The
2007 amount excludes $46,600 in gains from investment activities during the
period.
During the first quarter, the Company's net interest margin continued to hold up
despite the turmoil existing in the financial markets and the additional
downward interest rate adjustments instituted by the Federal Reserve during the
period. The Company benefited from a steeper yield curve and the relatively
short duration of its funding portfolios. Additionally, the Company realized
growth in noninterest income while noninterest expenses were reasonably
controlled.
Although loan activity was steady during the quarter, the softness of the Bank's
residential real estate market and an increase in refinancing activity continued
to impact loan growth during the quarter. Outstanding loan balances on March 31,
2008 were $220.6 million, compared to $221.6 million and $212.9 million at
December 31, 2007 and March 31, 2007 respectively. The Bank's asset quality
remained strong during the quarter with a non current loan to total loan ratio
of 1.05% at March 31, 2008, while the Bank's allowance for loan losses to period
end loans ratio was 1.22%, representing levels management considers manageable
and commensurate with the risk existing in the Bank's loan portfolio.
Net Interest Income
The Company's net interest margin for the 2008 quarter was 3.75%, compared to
3.46% during the March 2007 quarter. This 29 basis point increase resulted from
a steeper yield curve existing during the March 2008 period as compared to the
prior year period. Additionally, average loans outstanding during the 2008
quarter were $220.9 million, compared to $210.4 million during 2007,
representing a 5.0% increase. These factors contributed to net interest income
growing to $2.30 million during the 2008 quarter, compared to $2.07 million
during the March 2007 quarter.
Average earning assets for the three months ended March 2008 increased $5.6
million over the March 2007 period. Growth of $10.4 million occurred in average
loans while average investment securities declined $7.2 million. Increases in
the residential real estate and commercial lending sectors represented the bulk
of the loan growth, while the Company continues to use investment maturities to
fund liquidity demands as spreads between alternative funding sources and
investment opportunities remain thin. Yields on earning assets increased 8 basis
points to 6.82% during the March 2008 period which was comprised of 47 basis
points and 3 basis points increases in yields on investment securities and
loans, respectively. As a result, interest and dividend income improved to $4.07
million for the three months ended March 31, 2008, compared to $3.93 million
during the 2007 period.
Average total deposits were $196.3 million during the period, compared to $199.1
million during the 2007 period. Increases in interest-bearing checking and
savings account balances were offset by declines in the Bank's time deposits.
Average interest-bearing checking and savings demand deposits increased $7.0
million when compared to the March 2007 three month period, while time deposits
decreased $10.3 million during the same period. A successful first six months of
operation in the Bank's new Pocomoke City, Maryland market resulted in new
deposits balances in that location of $9.5 million at March 31, 2008. The Bank
also has enjoyed great success with its new premium checking account product
introduced during the first half of 2007. The growth in checking account
balances allowed the Bank to be less aggressive towards attracting higher
costing retail time deposits
Since early 2007, the Bank has been taking advantage of any pricing
opportunities in the wholesale funding market either through Federal Home Loan
Bank ("FHLB") advances or brokered certificates of deposit. Accordingly, average
FHLB outstanding balances increased $8.0 million during the March 2008 quarter
as compared to the 2007 period. Additionally, the Bank took advantage of a dip
in brokered certificates of deposit pricing during the March quarter by issuing
$3.5 million of this product.
The shifts in funding mix and the change in the interest rate environment since
March 2007 resulted in interest expense declining to $1.77 million for the three
months ended March 31, 2008, compared to $1.86 million for the 2007 period. The
costs of total interest-bearing liabilities decreased 25 basis points during the
2008 three month period as compared to the 2007 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
Periods Ended March 31,
--------------------------------------------------------------------------
2008 2007
------------------------------------ ----------------------------------
Average Income/ Yield/ Average Income/ Yield/
(Dollars In Thousands) Balance Expense Rate Balance Expense Rate
----------- ---------- --------- --------- ---------- ----------
Assets:
Investment securities (1) $ 23,187 $ 305 5.27% $ 30,397 $ 365 4.80%
Loans (net of unearned income):
Real estate mortgage 123,535 2,009 6.51% 118,637 1,836 6.19%
Commercial 79,735 1,442 7.23% 74,231 1,363 7.34%
Home equity lines 14,104 239 6.78% 14,292 301 8.42%
Consumer 3,490 77 8.83% 3,257 72 8.84%
--------- ---------- --------- ----------
Total loans 220,864 3,767 6.82% 210,417 3,572 6.79%
Interest-bearing deposits
in other banks 4,206 28 2.66% 1,807 21 4.65%
--------- ---------
---------- ----------
Total earning assets 248,257 4,100 6.61% 242,621 3,958 6.53%
---------- ----------
Less: allowance for loan losses (2,692) (2,869)
Total nonearning assets 20,678 19,064
--------- ---------
Total assets $ 266,243 $ 258,816
========= =========
Liabilities
Interest-bearing deposits:
Checking and savings $ 67,879 $ 293 1.73% $ 60,919 $ 201 1.32%
Time deposits 101,672 1,046 4.12% 111,964 1,262 4.51%
--------- ---------- --------- ----------
Total interest-bearing
deposits 169,551 1,339 3.16% 172,883 1,463 3.38%
FHLB advances 40,505 433 4.28% 32,504 396 4.87%
--------- ---------- --------- ----------
Total interest-bearing
liabilities 210,056 1,772 3.37% 205,387 1,859 3.62%
---------- ----------
Non-interest bearing liabilities:
Demand deposits 26,703 26,202
Other liabilities 1,214 714
--------- ---------
Total liabilities 237,973 232,303
Stockholders' equity 28,270 26,513
--------- ---------
Total liabilities and stockholders'
equity $ 266,243 $ 258,816
========= =========
Net interest income (1) $ 2,328 $ 2,099
========== ==========
Interest rate spread (1)(2)(3) 3.24% 2.91%
Net interest margin (1)(4) 3.75% 3.46%
(1) Tax equivalent basis. The tax equivalent adjustment to net interest income was $31,000 for both three month periods
ended March 31, 2008 and 2007.
(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.
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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
March 31, 2008. This one-day position, which continually is changing, is not
necessarily indicative of the Company's position at any other time.
Interest Sensitivity Analysis
March 31, 2008
------------------------------------------------------------------------------------
Within 91-365 1 to 5 Over
(Dollars In Thousands) 90 Days Days Years 5 Years Total
--------------- --------------- --------------- --------------- ---------------
Interest-Earning Assets:
Loans (1) $ 55,190 $ 73,537 $ 86,146 $ 5,721 $ 220,594
Securities (2) 5,025 2,330 11,931 2,378 21,664
Money market and other
short term securities 4,791 - - - 4,791
Other earning assets - - - 3,758 3,758
--------------- --------------- --------------- --------------- ---------------
Total earning assets $ 65,006 $ 75,867 $ 98,077 $ 11,857 $ 250,807
=============== =============== =============== =============== ===============
Cumulative earning assets $ 65,006 $ 140,873 $ 238,950 $ 250,807 $ 250,807
=============== =============== =============== =============== ===============
Interest-Bearing Liabilities:
Money market savings $ 18,121 $ - $ - $ - $ 18,121
Interest checking (3) 15,410 - 19,149 - 34,559
Savings (3) 3,367 1,090 14,438 - 18,895
Certificates of deposit 35,550 42,346 25,031 571 103,498
FHLB advances 7,800 10,000 17,000 400 35,200
--------------- --------------- --------------- --------------- ---------------
Total interest-bearing liabilities $ 80,248 $ 53,436 $ 75,618 $ 971 $ 210,273
=============== =============== =============== =============== ===============
Cumulative interest-bearing liabilities $ 80,248 $ 133,684 $ 209,302 $ 210,273 $ 210,273
=============== =============== =============== =============== ===============
Period gap $ (15,242) $ 22,431 $ 22,459 $ 10,886 $ 40,534
Cumulative gap $ (15,242) $ 7,189 $ 29,648 $ 40,534 $ 40,534
Ratio of cumulative interest-earning
assets to interest-bearing liabilities 81.01% 105.38% 114.17% 119.28% 119.28%
Ratio of cumulative gap to total
earning assets (6.08%) 2.87% 11.82% 16.16% 16.16%
(1) Includes nonaccrual loans of $986,000, which are spread throughout the
categories.
(2) All securities without specific maturities are included in the 1 to 5 years
category since they are not considered as sensitive to interest rate
changes.
(3) Management has determined that interest checking and savings accounts,
excluding savings accounts with more frequent rate adjustment terms and
premium checking accounts, are not 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 $847,800 for the March 2008 quarter,
compared to $829,300 for the 2007 three month period. The 2007 quarter includes
$46,600 in gains on investment securities activities that, when excluded, the
resulting increase in core noninterest income is 8.3% over the prior period.
Noninterest income benefited from 12.1% growth in deposit fees, primarily in
business checking and check card fees, and a 15.3% increase in investment
brokerage sales.
Provision for Loan Losses
With asset quality being strong during recent periods, there hasn't been a need
for significant adjustments to the Company's allowance for loan loss. Therefore,
the provision for loan losses was $5,100 and $600 for the three months ended
March 31, 2008 and 2007, 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
The Company's core noninterest expense, excluding merger related costs of
$250,000, was $2.15 million during the March 2008 quarter, compared to $1.97
million during the 2007 three month period. Increased operating costs associated
with the Bank's eighth banking facility that was added during September 2007 and
leasing temporary locations while two new banking facilities are being
constructed represented the largest impact on noninterest expense. Other cost
increases related to normal annual salary and benefits adjustments and
additional expenses associated with enhancing the Bank's online banking product.
The merger costs incurred during the quarter are not tax deductible and,
accordingly, resulted in an effective tax rate of 39% for the Company.
Financial Condition
The Company's total assets were $267.1 million at March 31, 2008, compared to
$266.7 million at December 31, 2007. Although loan activity was steady during
the quarter, the softness of the Bank's residential real estate market and an
increase in refinancing activity impacted loans balances during the quarter.
Outstanding loan balances on March 31, 2008 were $220.6 million, compared to
$221.6 million and $212.9 million at December 31, 2007 and March 31, 2007,
respectively.
Deposits were $202.7 million at March 31, 2008, compared to $196.6 million at
December 31, 2007. The Bank has enjoyed a successful first six months of
operation in its new Pocomoke City, Maryland market, resulting in new deposits
balances at that location of $9.5 million at March 31, 2008. The Bank also has
enjoyed great success with its new high rate checking account product introduced
during the first half of 2007. The growth in checking account balances allowed
the Bank to be less aggressive towards growing the higher costing retail time
deposits, although the Bank took advantage of a dip in brokered certificates of
deposit pricing during the quarter by issuing $3.5 million of this product.
Stockholders' equity was $28.1 million at March 31, 2008, compared to $27.7
million at December 31, 2007. This increase is made up of comprehensive income
of $490,600, consisting primarily of $454,100 million of net income.
Additionally, the Company paid common stock dividends of $200,100 ($0.08 per
share) during the period.
During April 2008, the Company declared a $0.08 per share quarterly cash
dividend on its common stock payable on May 1, 2008 to shareholders of record on
April 25, 2008.
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 $986,000 at March 31, 2008, compared to
$793,000 at December 31, 2007. As to nonaccrual loans existing at March 31,
2008, approximately $14,000 of interest income would have been recognized during
the three 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 March 31, 2008, all loans 60 days or more delinquent, including nonperforming
loans, totaled $1.5 million. Additionally, other performing loans totaling $11.8
million existed that were current, but for various reasons management considers
them to warrant additional monitoring. Loans in this category, along with the
delinquent loans, are subject to constant management attention, and their status
is reviewed on a regular basis.
The following table details information concerning nonaccrual and past due
loans, as well as foreclosed assets.
Nonperforming Assets
March 31, Dec 31,
(Dollars In Thousands) 2008 2007
---------------------- ----------------------
Nonaccrual loans:
Commercial $ 391 $ 135
Real estate mortgage 469 482
Home equity lines of credit 126 171
Consumer - 5
---------------------- ----------------------
Total nonaccrual loans 986 793
Other real estate owned - -
---------------------- ----------------------
Total nonperforming assets $ 986 $ 793
====================== ======================
Loans past due 90 or more days
accruing interest - -
Allowance for loan losses to
nonaccrual loans 272.82% 340.35%
Nonperforming assets to period end
loans and other real estate owned 0.45% 0.36%
|
Set forth below is a table detailing the allowance for loan losses for the
periods indicated.
Allowance for Loan Losses
March 31,
----------------------------------------------
(Dollars In Thousands) 2008 2007
---------------------- ----------------------
Balance, beginning of period $ 2,699 $ 2,873
Loans charged off:
Commercial - -
Real estate mortgage - -
Consumer (38) (56)
---------------------- ----------------------
Total loans charged-off (38) (56)
---------------------- ----------------------
Recoveries:
Commercial - -
Real estate mortgage - -
Consumer 24 42
---------------------- ----------------------
Total recoveries 24 42
---------------------- ----------------------
Net recoveries (charge-offs) (14) (14)
Provision (recovery) for loan losses 5 -
---------------------- ----------------------
Balance, end of period $ 2,690 $ 2,859
====================== ======================
Allowance for loan losses to loans
outstanding at end of period 1.22% 1.34%
Allowance for loan losses to nonaccrual
loans outstanding at end of period 272.82% 308.41%
Net charge-offs (recoveries) to average
loans outstanding during period 0.01% 0.01%
|
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 March 31, 2008, the Company had outstanding loan, line of credit and letter
of credit commitments of $49.1 million. Scheduled maturities of certificate of
deposits during the twelve months following March 31, 2008 amounted to $77.9
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 $2.20 million for the three months
ended March 31, 2008, compared to an increase of $2.84 million for the three
months ended March 31, 2007. Net cash from operating activities was $327,500
million for the 2008 three month period, compared to $410,400 during the same
period of 2007. The changes reflect the reduction in net income and fluctuations
in normal operating activities.
Net cash from investing activities was $1.79 million during the three months
ended March 31, 2008, compared to net cash used in investing activities of $2.60
million for the 2007 three month period. The Bank experienced stronger loan
growth during the first three months of 2007 than what occurred during 2008
period and several investments matured during the 2008 three month period.
Net cash from financing activities was $84,800 for the three months ended March
31, 2008, compared to net cash from financing activities of $5.03 million for
the 2007 three month period. This decline primarily relates to stronger deposit
growth during the first three months of 2007 as compared to 2008.
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 did not paid any dividends to the Company during the first three months
of 2008, while it paid $700,000 in dividends to the Company during the three
months ended March 31, 2007. At March 31, 2008, 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 March 31, 2008, 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 March 31, 2008 and December 31, 2007.
Analysis of Capital
March 31, December 31,
(Dollars In Thousands) 2008 2007
------------------- ------------------
Tier 1 Capital:
Common stock $ 689 $ 688
Additional paid-in capital 8,452 8,400
Retained earnings 19,213 18,959
Accumulated other comprehensive income (290) (326)
---------------- ---------------
Total capital (GAAP) 28,064 27,721
Less: Intangibles (325) (340)
Net unrealized gain (loss) on debt and equity securities 290 326
Net unrealized losses on equity securities (470) (399)
---------------- ---------------
Total Tier 1 capital 27,559 27,308
Tier 2 Capital:
Allowable allowances for loan losses 2,353 2,341
Net unrealized gains on equity securities 20 15
---------------- ---------------
Total Tier 2 capital $ 29,932 $ 29,664
================ ===============
Risk-weighted assets $ 190,940 $ 190,197
Capital Ratios (1):
Tier 1 risk-based capital ratio 14.43% 14.36%
Total risk-based capital ratio 15.68% 15.60%
Tier 1 capital to average adjusted
total assets 10.36% 10.28%
|
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. However, due
to the current rate environment, management has determined that modeling a 200
basis point instantaneous and parallel downward shift in the interest rate yield
curve would not yield realistic results. Accordingly, management modeled the
impact of a 100 basis point decline in interest rates and a 200 basis point
increase in interest rates at March 31, 2008. In the model, a 100 basis point
instantaneous and parallel decrease in the yield curve in interest rates would
cause net interest income to increase by $9,000 while a 200 basis point
instantaneous and parallel increase in the yield curve in interest rates would
cause net interest income to increase by $28,000.
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 Securities
Exchange Act of 1934 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, 2007 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
2.1 Agreement and Plan of Merger, dated as of January 8, 2008, by
and between Hampton Roads Bankshares, Inc. and Shore Financial
Corporation (incorporated by reference to the Company's
Current Report on Form 8-K filed on January 9, 2008).
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.2 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Shore Financial Corporation
By: /s/ Scott C. Harvard May 13, 2008
--------------------------------------------------------------------------
Scott C. Harvard
President and
Chief Executive Officer
By: /s/ Steven M. Belote May 13, 2008
--------------------------------------------------------------------------
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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) 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
(d) 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: May 13, 2008
/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)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or
caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles;
(c) 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
(d) 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: May 13, 2008
/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 March 31, 2008 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: May 13, 2008
|
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 March 31, 2008 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: May 13, 2008
|
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.
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