For immediate release

The Federal Reserve Board today announced its approval of the proposal of Shore Financial Corporation ("Shore Financial") to become a bank holding company by acquiring Shore Bank ("Bank"), both of Onley, Virginia, to merge Shore Financial's subsidiary federal savings bank into Bank, and for Bank to become a member of the Federal Reserve System. Attached is the Board's Order relating to this action.

Shore Financial Corporation Onley, Virginia Order Approving Formation of a Bank Holding Company, Merger of a Savings Association into a Bank, and Membership in the Federal Reserve System

Shore Financial Corporation ("Shore Financial") has applied under section 3 of the Bank Holding Company Act ("BHC Act") (12 U.S.C. § 1842) for the Board's approval to become a bank holding company by acquiring all the voting shares of Shore Bank, Onley, Virginia ("Bank"), a de novo state chartered bank.1 Bank also has applied under section 9 of the Federal Reserve Act (12 U.S.C. § 321) to become a state member bank and to continue to operate branches in Virginia and Maryland at locations at which Bank's predecessor currently operates branches.2 Notice of the proposal, affording interested persons an opportunity to submit comments, has been published (62 Federal Register 66,371 (1997)). The time for filing comments has expired, and the Board has considered the application and all comments received in light of the factors set forth in the BHC Act, the Bank Merger Act, and the Federal Reserve Act. Shore Financial, with total consolidated assets of approximately $111 million, operates Thrift, which has branches in Virginia and Maryland.3 Shore is the 95th largest insured depository institution in Virginia, controlling deposits of approximately $79 million, representing less than 1 percent of total deposits in insured depository institutions in the state ("state deposits"), and is the 142d largest insured depository institution in Maryland, controlling deposits of approximately $8 million, representing less than 1 percent of Maryland state deposits.4 As noted, the proposal represents a reorganization of subsidiaries owned by Shore Financial, and Bank would continue the current operations of Thrift. Based on all the facts of record, the Board concludes that consummation of the proposal would not have a significantly adverse effect on competition in any relevant banking market. The Board also has considered the financial and managerial resources and future prospects of Shore Financial and Bank in light of all the facts of record, including supervisory reports of examination assessing the financial and managerial resources of the organization and financial information provided by Shore Financial. The Board notes that Shore Financial is in satisfactory financial condition and would remain so after consummation of the proposal. Reports of examination assessing the managerial resources of Shore Financial and its subsidiaries indicate this factor is consistent with approval. Based on all the facts of record, the Board concludes that considerations related to the financial and managerial resources and future prospects of Shore Financial and Bank are consistent with approval under the BHC Act. Convenience and Needs Considerations The Board has carefully considered the effect of the proposal on the convenience and needs of the community to be served in light of all the facts of record, including comments maintaining that Thrift does not adequately serve the credit needs of commercial farmers in its assessment area and requesting the Board to require Bank to increase its agricultural lending. The Board has long held that consideration of the convenience and needs factor includes a review of the records of the relevant depository institutions under the Community Reinvestment Act (12 U.S.C. § 2901 et seq.) ("CRA"). As provided in the CRA, the Board has evaluated the convenience and needs factor in light of examinations of the CRA performance records of the relevant institutions by their primary federal supervisors. An institution's most recent CRA performance evaluation is a particularly important consideration in the application process because it represents a detailed, on-site evaluation of the institution's overall record of performance under the CRA by its primary federal supervisor.5 Thrift is a small saving association that is primarily engaged in residential mortgage lending. Thrift received an "outstanding" rating from the Office of Thrift Supervision at its most recent CRA performance examination as of February 1996 (the "1996 Examination"). Examiners characterized Thrift as having a strong record of lending within its assessment area (approximately 98 percent of its loans), a high loan-to-deposit ratio (92.5 percent), and an excellent dispersion of loans throughout all the communities within its assessment area. The 1996 Examination found Thrift's overall lending program to be particularly noteworthy because its assessment area was one of the poorest areas in Virginia in terms of average family income and had recently experienced little population increase. The examination also included a review of selected loan files and found no evidence of illegal discrimination. Although residential mortgage lending constituted Thrift's primary lending activity, examiners also commended Thrift's additional emphasis on small business lending. In 1995, Thrift originated 61 small business loans totalling approximately $1.7 million. In evaluating the commenter's allegations that Thrift has not engaged in sufficient agricultural lending, the Board notes that the CRA provides banks with substantial flexibility in developing specific CRA-related policies and programs and does not require a bank to engage in any particular type of lending. Shore Financial states, moreover, that Thrift had more than $3 million in agricultural loans outstanding as of December 1997, and maintains that the service of two farmers on its eight-member board of directors reflects its commitment to helping meet the credit needs of all its communities, including the farming community. The Board has carefully considered the entire record in its review of the convenience and needs factor under the BHC Act. Based on all the facts of record, including information provided by the commenter, the response of Shore Financial, and the relevant reports of examination, the Board concludes that considerations relating to convenience and needs, including the CRA performance records of the relevant institutions, are consistent with approval. The Board also has considered the other supervisory factors it is required to consider under section 3 of the BHC Act as well as the factors it is required to consider under section 9 of the Federal Reserve Act for Bank to become a member of the Federal Reserve System and to operate branches and under other provisions of law.6 The Board finds these factors to be consistent with approval.7 Conclusion Based on the foregoing and all the facts of record, the Board has determined that the applications should be, and hereby are, approved.8 The Board's approval of the proposal is specifically conditioned on compliance by Shore Financial with all the commitments made in connection with this application. For purposes of this action, the commitments and conditions relied on in reaching this decision are deemed to be conditions imposed in writing by the Board and, as such, may be enforced in proceedings under applicable law. The proposal shall not be consummated before the fifteenth calendar day following the effective date of this order, or later than three months after the effective date of this order, unless such period is extended for good cause by the Board or by the Federal Reserve Bank of Richmond, acting pursuant to delegated authority.

By order of the Board of Governors,9 effective February 9, 1998. (signed) Jennifer J. Johnson Jennifer J. Johnson Deputy Secretary of the Board

Appendix Branches to Be Established by Shore Bank Virginia: 21220 North Bayside Drive, Cheriton 6350 Maddox Boulevard, Chincoteague 4071 Lankford Highway, Exmore Maryland: 100 West Main Street, Salisbury 1503 South Salisbury Boulevard, Salisbury

Footnotes 1 Shore Financial's wholly owned subsidiary federal savings bank, Shore Bank, Onley, Virginia ("Thrift"), would merge with and into Bank, with Bank as the surviving institution. Bank has requested the Board's approval for the merger under section 18(c) of the Federal Deposit Insurance Act ("FDI Act") (12 U.S.C. § 1828(c)) ("Bank Merger Act") and section 5(d)(3) of the FDI Act (12 U.S.C. § 1815(d)(3)). 2 The locations of the branches are described in the Appendix. 3 Asset data are as of September 30, 1997, and deposit data are as of June 30, 1996. 4 In this context, insured depository institutions include commercial banks, savings banks, and savings institutions. 5 The Statement of the Federal Financial Supervisory Agencies Regarding the Community Reinvestment Act provides that a CRA examination is an important and often controlling factor in the consideration of an institution's CRA record and that reports of these examinations will be given great weight in the applications process. See 54 Federal Register 13,742 and 13,745 (1989). 6 Bank is authorized to operate its branches under the laws of Virginia and Maryland, and under section 9 of the Federal Reserve Act. See Va. Code Ann. §§ 6.1-39.3 and 6.1-44.3 (Michie 1996); Md. Code Ann., Fin. Inst. § 5-1003 (1996). 7 The Board has reviewed the merger of Bank and Thrift under the Bank Merger Act and section 5(d)(3) of the FDI Act. With respect to the specific factors the Board must review under section 5(d)(3), the record in this case shows that (1) the transaction would not result in the transfer of any federally insured deposits from one federal deposit insurance fund to the other; (2) Bank, on consummation of the proposal, will meet all applicable capital standards; and (3) the proposal would comply with the interstate banking provisions of the BHC Act if Thrift were a state bank that Bank was applying to acquire directly. See 12 U.S.C. § 1815(d)(3). 8 The commenter has requested that the Board hold a public hearing on the application to consider the views of other farmers. Section 3(b) of the BHC Act does not require the Board to hold a public hearing on an application unless the appropriate supervisory authority for the bank to be acquired makes a timely written recommendation of denial. The Board has not received such a recommendation from the Office of Thrift Supervision or any state supervisory authority. In addition, neither the Federal Reserve Act nor the Bank Merger Act requires a public hearing on an application. Under its rules, the Board also may, in its discretion, hold a public hearing or meeting on an application to acquire a bank if a hearing is necessary or appropriate to clarify factual issues related to the application and to provide an opportunity for testimony, if appropriate. 12 C.F.R. 225.16(e). The Board has carefully considered the commenter's request for a hearing in light of all the facts of record. In the Board's view, the commenter has had ample opportunity to submit his views, and has submitted written comments that have been carefully considered by the Board in action on the application. The commenter's request fails to demonstrate why his written presentation does not adequately present his evidence, allegations, or views. The commenter also fails to indicate the matters that may be presented by others and why a public meeting or hearing is necessary for the proper presentation or consideration of their views. After careful review of all the facts of record, moreover, the Board has concluded that commenter disputes the weight that should be accorded to, and the conclusions that the Board should draw from, the facts of record, but does not identify disputed issues of fact that are material to the Board's decision. For these reasons, and based on all the facts of record, the Board has determined that a public hearing or meeting is not required or warranted in this case. Accordingly, the request for a hearing or meeting on the proposal is hereby denied. 9 Voting for this action: Vice Chair Rivlin and Governors Kelley, Phillips, Meyer, Ferguson, and Gramlich. Absent and not voting: Chairman Greenspan.

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1998 Orders on banking applications