Our association begins its fifty-fifth year of service to the Lower Shore with total assets of $298,959,170 and net worth of $30,223,965, an increase of 5.3% for the year. Our capital ratio of 10.1% is more than two and a half times the level required by federal law and our regulator, the Office of Thrift Supervision.

Making sound loans at highly competitive rates to local customers is a key part of our mission at First Shore Federal. We fulfilled that mission impressively during 2007, originating more than $42 million in new mortgage loans, an increase of more than 22% compared to the prior year. As a result, the association’s mortgage loan portfolio grew by 8.3% and now totals $188,379,598 invested in the properties of our neighbors on the Lower Shore. This growth is particularly impressive in light of the decline in property sales in our local real estate market.

And, perhaps most significantly, First Shore Federal avoided the problem of delinquent or foreclosed loans experienced by other lenders across the country. In fact, at yearend, the association had no mortgages in foreclosure out of more than 1,600 loans. Credit quality in other sectors of our loan portfolio continued to be excellent. In light of our longstanding policy of making loans to hold in our portfolio, not to sell to Wall Street investors, that outstanding credit position is particularly relevant and desirable.

First Shore’s deposits increased $2 million for the year and the association held deposits of $252,641,679 at yearend. As always, these deposits were insured to $100,000 per title by the Federal Deposit Insurance Corporation, an agency of the federal government and backed by the substantial capital of the association. Changes in federal law provide additional deposit insurance coverage for many retirement accounts up to $250,000

First Shore paid $9,290,176 in interest to our savings customers during 2007, an increase of 10.6% as certificates of deposits and savings accounts were priced at highly competitive levels throughout the year.

Even with that increased deposit expense, and continued modest loan rates, the association realized a net income of slightly more than $1.5 million for 2007.

First Shore Federal continued to improve its Internet banking, debit cards and electronic bill pay programs and to develop the use of technology. The association further expanded and improved its branch system. Construction of a new Pocomoke City branch is proceeding rapidly and significant improvements are planned to our Snow Hill and Ocean Pines branches.

First Shore Federal continued to be a leading corporate citizen in 2007, supporting numerous community activities and programs throughout our market area and adding to an outstanding record of service to those communities. We were particularly proud that our Cedar Lane branch in Fruitland was named “business of the year” and several of our employees were recognized for their service to community efforts.

We are proud to have a rating of outstanding for community reinvestment from the Office of Thrift Supervision. As the Lower Shore of Delmarva prospers, so does our association. First Shore Federal was founded on that principle – and it continues to guide all the association does.

We look forward to 2008 with confidence and enthusiasm. We recognize our challenge to continue to thrive in a highly competitive business and challenging economic and regulatory environments. We reaffirm our commitment to provide the high level of service and quality products our customers, the members of our association, deserve and expect.