8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):  April 26, 2011

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland	0-22345	52-1974638
(State or other jurisdiction of	(Commission file number)	(IRS Employer
incorporation or organization)		Identification No.)

18 East Dover Street, Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (410) 763-7800

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

£ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

£ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

£ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

£ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operation and Financial Condition.

On April 26, 2011, Shore Bancshares, Inc. (the “Company”) issued a press release describing its financial results for the quarter ended March 31, 2011. The press release, as issued, contained a typographical error on page 2, in that the amount stated as the decrease in total noninterest expense for the first quarter of 2011 when compared to the first quarter of 2010 should have read “$430 thousand” rather than “$430”.  A copy of the press release, revised to correct this error, is furnished herewith as Exhibit 99.1.

The information contained in this Item 2.02 and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 5.07 Submission of Matters to a Vote of Security Holders.

At the Annual Meeting of Stockholders of the Company held on April 27, 2011, the stockholders voted on:  (i) the election of five director nominees (Proposal 1), (ii) the ratification of the appointment of the Company’s independent registered public accounting firm for fiscal year 2011 (Proposal 2); (iii) the adoption of non-binding advisory resolution approving the compensation of the Company’s named executive officers (Proposal 3); and (iv) the frequency (every one, two or three years) of future stockholder advisory votes on the compensation of the named executive officers (non-binding advisory vote).  These matters were submitted to a vote through the solicitation of proxies.  The results of the votes are set forth below:

Proposal 1 - To elect one individual to serve as a Class I Director until the 2013 Annual Meeting of Stockholders and four individuals to serve as Class II Directors until the 2014 Annual Meeting of Stockholders.

	For		Withheld		Abstain		Broker Non-Votes
Class I Director
Frank E. Mason, III		3,561,984		138,115		-		1,809,850
Class II Directors
Herbert L. Andrew, III		3,326,092		374,007		-		1,809,850
Blenda W. Armistead		3,568,920		131,179		-		1,809,850
Neil R. LeCompte		3,576,790		123,309		-		1,809,850
F. Winfield Trice, Jr.		3,563,091		137,008		-		1,809,850

Proposal 2 - To ratify the appointment of Stegman & Company as the Company’s independent registered public accounting firm for fiscal year 2011.

For		Against		Abstain		Broker Non-Votes
	5,438,616		39,627		31,706		-

- 2 -

Proposal 3 - To adopt a non-binding advisory resolution approving the compensation of the Company’s named executive officers.

For		Against		Abstain		Broker Non-Votes
	3,355,359		269,456		75,283		1,809,851

Proposal 4 - To recommend, by non-binding advisory vote, the frequency (every one, two or three years) of future stockholder advisory votes on the compensation of the named executive officers.

Every Year		Every Two Years		Every Three Years		Abstain		Broker Non-Votes
	3,373,874		50,322		201,955		73,688		1,810,110

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit 99.1      Press release dated April 26, 2011 (furnished herewith).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 BANCSHARES, INC.
Dated:  April 28, 2011	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		Chief Executive Officer

- 3 -

EXHIBIT INDEX

Exhibit
Number	Description
99.1	Press release dated April 26, 2011 (furnished herewith).

- 4 -

EX-99.1

Exhibit 99.1

Shore Bancshares, Inc.

18 E. Dover Street

Easton, Maryland 21601

Phone 410-763-7800

PRESS RELEASE

Shore Bancshares Reports First Quarter 2011 Financial Results

Easton, Maryland (04/26/2011) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported a net loss of $1.1 million or $(0.13) per diluted common share for the first quarter of 2011, compared to net income of $850 thousand or $0.10 per diluted common share for the fourth quarter of 2010, and a net loss of $1.6 million or $(0.19) per diluted common share for the first quarter of 2010.  The first quarter of 2011 included a provision for credit losses of $6.4 million, which was $2.0 million higher than the provision for the fourth quarter of 2010 and $1.2 million lower than the provision for the first quarter of 2010.

“We are not yet seeing meaningful improvement in general economic conditions across our Delmarva markets.  The values of both commercial and residential real estate remain well below historical levels. As is the case with every banking organization operating in the market, real estate comprises a substantial portion of the underlying collateral for the loan portfolios, so declining property values are largely driving credit quality and our ongoing higher provisioning for possible credit losses,” said W. Moorhead Vermilye, chief executive officer.  “Thus, the $6.4 million provision for the first quarter was the main factor affecting our disappointing financial performance.  We are moving as aggressively as possible to resolve and work out of troubled credits and to eventually dispose of them, as evidenced by the recent quarterly trend in net charge-offs.  We remain confident that our reserve coverage of problem loans is adequate, and we believe our solid capital position should enable us to patiently outlast this cycle to resume our track record of consistent growth and profitability.”

The Company’s return on average assets for the first quarter of 2011 was (0.39)%, compared to 0.30% and (0.55)% for the quarters ended December 31, 2010 and March 31, 2010, respectively.  The return on average stockholders’ equity was (3.59)% for the first quarter of 2011, compared to 2.73% for the fourth quarter of 2010 and (4.95)% for the first quarter of 2010.

Total assets were $1.131 billion at March 31, 2011, compared to $1.130 billion at the end of 2010.  Total loans decreased 1.2% to $884.7 million and total deposits increased slightly to $986.5 million, when compared to December 31, 2010.  Total stockholders’ equity decreased 1.3% from the end of 2010.

Review of Quarterly Financial Results

Net interest income was $9.9 million for the first quarter of 2011, compared to $10.9 million for the fourth quarter of 2010 and $10.4 million for the first quarter of 2010.  A decline in the yields earned on average earning assets was primarily the reason for the decrease in net interest income when compared to the fourth quarter of 2010.  The decrease in net interest income when compared to the first quarter of 2010 was primarily due to a decrease in the balances of and yields earned on average earning assets.  The Company’s net interest margin was 3.79% for the first quarter of 2011, a decrease of 30 basis points (bp) when compared to the fourth quarter of 2010 and a decrease of 16 bp when compared to the first quarter of 2010.

Page 2 of 11

As previously mentioned, the provision for credit losses was $6.4 million for the three months ended March 31, 2011. The comparable amounts were $4.4 million and $7.6 million for the three months ended December 31, 2010 and March 31, 2010, respectively.  The ratio of the allowance for credit losses to period-end loans increased to 1.97% at March 31, 2011, compared to 1.59% at December 31, 2010 and 1.41% at March 31, 2010.  Management believes that the provision for credit losses and the resulting allowance were adequate at March 31, 2011.

The level of provision for credit losses in the first quarter of 2011 was primarily in response to the overall increase in nonperforming assets.  In addition, loan charge-offs remain at historically high levels and overall economic conditions have not improved.  Net charge-offs were $3.1 million for the first quarter of 2011, compared to $3.3 million for the fourth quarter of 2010 and $5.7 million for the first quarter of 2010.  The ratio of quarter-to-date annualized net charge-offs to average loans was 1.44% for the first quarter of 2011, compared to 1.46% for the fourth quarter of 2010 and 2.54% for the first quarter of 2010.  The ratio of nonperforming assets to total assets was 4.73% at March 31, 2011.  The comparable nonperforming asset ratio was 3.53% at December 31, 2010 and 2.87% at March 31, 2010.

Total noninterest income for the first quarter of 2011 increased $447 thousand when compared to the fourth quarter of 2010 but declined $487 thousand when compared to the first quarter of 2010. The increase when compared to the fourth quarter of 2010 was primarily a result of an increase in insurance agency commissions of $394 thousand, due to contingency payments which are typically received in the first quarter of each year and are based on the prior year’s performance.  The decline in noninterest income during the first quarter of 2011 when compared to the first quarter of 2010 was primarily due to a decline in insurance agency commissions of $379 thousand, resulting from lower contingency payments.

Total noninterest expense for the first quarter of 2011 increased $809 thousand when compared to the fourth quarter of 2010.  Other employee benefits increased $260 thousand mainly due to higher payroll taxes, data processing increased $231 thousand primarily due to charges relating to the merger of The Felton Bank into CNB, and other noninterest expenses increased $158 thousand mainly due to higher expenses related to collection and other real estate owned activities when compared to the fourth quarter of 2010.

Total noninterest expense for the first quarter of 2011 decreased $430 thousand when compared to the first quarter of 2010.  Salaries and wages decreased $244 thousand mainly due to lower bonus and stock-based compensation expense, employee benefits decreased $128 thousand primarily due to lower profit sharing expense, and other noninterest expenses decreased $136 thousand mainly due to lower expenses related to other real estate owned activities.  Partially offsetting these decreases when compared to the first quarter of 2010 was a $220 thousand increase in data processing mainly due to the charges relating to the merger of The Felton Bank into CNB.

Shore Bancshares Information

Shore Bancshares, Inc. is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland’s Eastern Shore.  It is the parent company of two banks, The Talbot Bank of Easton, Maryland, and CNB; three insurance producer firms, The Avon-Dixon Agency, LLC, Elliott Wilson Insurance, LLC and Jack Martin and Associates, Inc; a wholesale insurance company, TSGIA, Inc; two insurance premium finance companies, Mubell Finance, LLC and ESFS, Inc; and a registered investment adviser firm, Wye Financial Services, LLC.  Shore Bancshares, Inc. engages in the mortgage broker business under the name “Wye Mortgage Group” through a minority series investment in an unrelated Delaware limited liability company. Additional information is available at www.shbi.com.

Page 3 of 11

Forward-Looking Statements

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.  Forward-looking statements do not represent historical facts, but statements about management’s beliefs, plans and objectives.  These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions.  Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true.  These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements.  For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled “Risk Factors”.

For further information contact:  W. Moorhead Vermilye, Chief Executive Officer, 410-763-7800

Shore Bancshares, Inc. Page 4 of 11

Financial Highlights

(Dollars in thousands, except per share data)

	For the Three Months Ended
	March 31,
	2011			2010			Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	9,862		$	10,395			(5.1	) %
Provision for credit losses		6,390			7,617			(16.1	)
Noninterest income		4,395			4,882			(10.0	)
Noninterest expense		9,891			10,321			(4.2	)
Loss before income tax benefit		(2,024	)		(2,661	)		23.9
Income tax benefit		(941	)		(1,099	)		14.4
Net loss	$	(1,083	)	$	(1,562	)		30.7
Return on average assets		(0.39	) %		(0.55	) %		16	bp
Return on average equity		(3.59	)		(4.95	)		136
Return on average tangible equity (1)		(3.92	)		(5.64	)		172
Net interest margin		3.79			3.95			(16	)
Efficiency ratio - GAAP		69.38			67.56			182
Efficiency ratio - Non-GAAP (1)		68.85			66.71			214
PER SHARE DATA
Basic net loss per common share	$	(0.13	)	$	(0.19	)		31.6	%
Diluted net loss per common share		(0.13	)		(0.19	)		31.6
Dividends paid per common share		0.06			0.06			-
Book value per common share at period end		14.32			14.82			(3.4	)
Tangible book value per common share at period end (1)		12.14			12.30			(1.3	)
Market value at period end		9.75			14.25			(31.6	)
Market range:
High		11.11			14.75			(24.7	)
Low		9.42			10.21			(7.7	)
PERIOD-END BALANCE SHEET DATA
Loans	$	884,715		$	905,194			(2.3	) %
Securities		106,920			112,929			(5.3	)
Assets		1,131,334			1,146,334			(1.3	)
Deposits		986,486			990,750			(0.4	)
Stockholders' equity		120,926			125,108			(3.3	)
AVERAGE BALANCE SHEET DATA
Loans	$	887,531		$	910,374			(2.5	) %
Securities		106,235			110,252			(3.6	)
Earning assets		1,062,164			1,075,425			(1.2	)
Assets		1,131,259			1,145,607			(1.3	)
Deposits		982,249			982,265			-
Stockholders' equity		122,466			128,081			(4.4	)
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		10.83	%		11.18	%		(35	) bp
Average tangible equity to average tangible assets (1)		9.35			9.50			(15	)
Annualized net charge-offs to average loans		1.44			2.54			(110	)
Allowance for credit losses to period-end loans		1.97			1.41			56
Nonperforming assets to total loans+other real estate owned		6.02			3.62			240
Nonperforming assets to total assets		4.73			2.87			186
Nonperforming assets+Loans 90 days past due and still accruing to total loans+other real estate owned		6.64			3.93			271
Nonperforming assets+Loans 90 days past due and still accruing to total assets		5.22			3.11			211

(1) See the reconciliation table on page 11 of 11.

Shore Bancshares, Inc. Page 5 of 11

Consolidated Balance Sheets

(In thousands, except per share data)

										March 31, 2011			March 31, 2011
	March 31,			December 31,			March 31,			compared to			compared to
	2011			2010			2010			December 31, 2010			March 31, 2010
ASSETS
Cash and due from banks	$	19,074		$	19,680		$	14,351			(3.1	) %		32.9	%
Interest-bearing deposits with other banks		31,311			21,593			11,648			45.0			168.8
Federal funds sold		39,597			36,691			46,121			7.9			(14.1	)
Investments available for sale (at fair value)		100,234			99,055			104,109			1.2			(3.7	)
Investments held to maturity		6,686			6,727			8,820			(0.6	)		(24.2	)
Loans		884,715			895,404			905,194			(1.2	)		(2.3	)
Less: allowance for credit losses		(17,471	)		(14,227	)		(12,791	)		22.8			36.6
Loans, net		867,244			881,177			892,403			(1.6	)		(2.8	)
Premises and equipment, net		14,304			14,483			14,682			(1.2	)		(2.6	)
Goodwill		13,678			13,678			15,954			-			(14.3	)
Other intangible assets, net		4,711			4,840			5,277			(2.7	)		(10.7	)
Other real estate and other assets owned, net		4,802			3,702			2,403			29.7			99.8
Other assets		29,693			28,685			30,566			3.5			(2.9	)
Total assets	$	1,131,334		$	1,130,311		$	1,146,334			0.1			(1.3	)
LIABILITIES
Noninterest-bearing deposits	$	122,490		$	124,188		$	119,271			(1.4	)		2.7
Interest-bearing deposits		863,996			855,328			871,479			1.0			(0.9	)
Total deposits		986,486			979,516			990,750			0.7			(0.4	)
Short-term borrowings		12,078			16,041			14,001			(24.7	)		(13.7	)
Accrued expenses and other liabilities		10,912			11,309			15,046			(3.5	)		(27.5	)
Long-term debt		932			932			1,429			-			(34.8	)
Total liabilities		1,010,408			1,007,798			1,021,226			0.3			(1.1	)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares		84			84			84			-			-
Warrant		1,543			1,543			1,543			-			-
Additional paid in capital		30,290			30,242			29,988			0.2			1.0
Retained earnings		90,868			92,458			94,083			(1.7	)		(3.4	)
Accumulated other comprehensive loss		(1,859	)		(1,814	)		(590	)		(2.5	)		(215.1	)
Total stockholders' equity		120,926			122,513			125,108			(1.3	)		(3.3	)
Total liabilities and stockholders' equity	$	1,131,334		$	1,130,311		$	1,146,334			0.1			(1.3	)
Period-end common shares outstanding		8,443			8,443			8,443			-			-
Book value per common share	$	14.32		$	14.51		$	14.82			(1.3	)		(3.4	)

Shore Bancshares, Inc. Page 6 of 11

Consolidated Statements of Income

(In thousands, except per share data)

	For the Three Months Ended
	March 31,
	2011			2010			% Change
INTEREST INCOME
Interest and fees on loans	$	12,001		$	12,874			(6.8	) %
Interest and dividends on investment securities:
Taxable		657			882			(25.5	)
Tax-exempt		38			59			(35.6	)
Interest on federal funds sold		16			12			33.3
Interest on deposits with other banks		6			1			500.0
Total interest income		12,718			13,828			(8.0	)
INTEREST EXPENSE
Interest on deposits		2,833			3,385			(16.3	)
Interest on short-term borrowings		13			32			(59.4	)
Interest on long-term debt		10			16			(37.5	)
Total interest expense		2,856			3,433			(16.8	)
NET INTEREST INCOME		9,862			10,395			(5.1	)
Provision for credit losses		6,390			7,617			(16.1	)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		3,472			2,778			25.0
NONINTEREST INCOME
Service charges on deposit accounts		704			786			(10.4	)
Trust and investment fee income		376			416			(9.6	)
Investment securities gains		79			-			-
Insurance agency commissions		2,510			2,889			(13.1	)
Other noninterest income		726			791			(8.2	)
Total noninterest income		4,395			4,882			(10.0	)
NONINTEREST EXPENSE
Salaries and wages		4,246			4,490			(5.4	)
Employee benefits		1,153			1,281			(10.0	)
Occupancy expense		596			622			(4.2	)
Furniture and equipment expense		272			300			(9.3	)
Data processing		851			631			34.9
Directors' fees		107			121			(11.6	)
Amortization of intangible assets		129			129			-
Insurance agency commissions expense		375			428			(12.4	)
FDIC insurance premium expense		460			481			(4.4	)
Other noninterest expenses		1,702			1,838			(7.4	)
Total noninterest expense		9,891			10,321			(4.2	)
Loss before income tax benefit		(2,024	)		(2,661	)		23.9
Income tax benefit		(941	)		(1,099	)		14.4
NET LOSS	$	(1,083	)	$	(1,562	)		30.7
Weighted average shares outstanding - basic		8,443			8,436			0.1
Weighted average shares outstanding - diluted		8,443			8,436			0.1
Basic net loss per common share	$	(0.13	)	$	(0.19	)		31.6
Diluted net loss per common share		(0.13	)		(0.19	)		31.6
Dividends paid per common share		0.06			0.06			-

Shore Bancshares, Inc. Page 7 of 11

Consolidated Average Balance Sheets

(Dollars in thousands)

	For the Three Months Ended
	March 31,
	2011						2010
	Average			Yield/			Average			Yield/
	balance			rate			balance			rate
Earning assets
Loans	$	887,531			5.50	%	$	910,374			5.75	%
Investment securities
Taxable		101,625			2.62			103,488			3.45
Tax-exempt		4,610			5.08			6,764			5.39
Federal funds sold		46,813			0.14			46,553			0.11
Interest-bearing deposits		21,585			0.12			8,246			0.06
Total earning assets		1,062,164			4.88	%		1,075,425			5.24	%
Cash and due from banks		19,316						14,422
Other assets		65,426						67,914
Allowance for credit losses		(15,647	)					(12,154	)
Total assets	$	1,131,259					$	1,145,607
Interest-bearing liabilities
Demand deposits	$	131,628			0.22	%	$	127,986			0.25	%
Money market and savings deposits		260,841			0.93			256,818			0.68
Certificates of deposit $100,000 or more		259,179			1.70			259,538			2.24
Other time deposits		208,301			2.10			219,731			2.67
Interest-bearing deposits		859,949			1.34			864,073			1.59
Short-term borrowings		14,165			0.37			18,032			0.71
Long-term debt		932			4.56			1,429			4.45
Total interest-bearing liabilities		875,046			1.32	%		883,534			1.58	%
Noninterest-bearing deposits		122,300						118,192
Accrued expenses and other liabilities		11,447						15,800
Stockholders' equity		122,466						128,081
Total liabilities and stockholders' equity	$	1,131,259					$	1,145,607
Net interest spread					3.56	%					3.66	%
Net interest margin					3.79	%					3.95	%

Shore Bancshares, Inc.	Page 8 of 11
Financial Highlights By Quarter
(Dollars in thousands, except per share data)

	1st quarter			4th quarter			3rd quarter			2nd quarter			1st quarter			1Q 11			1Q 11
	2011			2010			2010			2010			2010			compared to			compared to
	(1Q 11)			(4Q 10)			(3Q 10)			(2Q 10)			(1Q 10)			4Q 10			1Q 10
PROFITABILITY FOR THE PERIOD
Net interest income	$	9,862		$	10,866		$	10,687		$	10,691		$	10,395			(9.2	) %		(5.1	) %
Provision for credit losses		6,390			4,392			4,193			4,917			7,617			45.5			(16.1	)
Noninterest income		4,395			3,948			4,643			4,568			4,882			11.3			(10.0	)
Noninterest expense		9,891			9,082			12,629			9,688			10,321			8.9			(4.2	)
(Loss) income before income taxes		(2,024	)		1,340			(1,492	)		654			(2,661	)		(251.0	)		23.9
Income tax (benefit) expense		(941	)		490			(92	)		209			(1,099	)		(292.0	)		14.4
Net (loss) income	$	(1,083	)	$	850		$	(1,400	)	$	445		$	(1,562	)		(227.4	)		30.7
Return on average assets		(0.39	) %		0.30	%		(0.49	) %		0.16	%		(0.55	) %		(69	) bp		16	bp
Return on average equity		(3.59	)		2.73			(4.43	)		1.42			(4.95	)		(632	)		136
Return on average tangible equity (1)		(3.92	)		3.49			(1.56	)		2.01			(5.64	)		(741	)		172
Net interest margin		3.79			4.09			4.00			4.03			3.95			(30	)		(16	)
Efficiency ratio - GAAP		69.38			61.31			82.38			63.49			67.56			807			182
Efficiency ratio - non-GAAP (1)		68.85			60.44			62.56			62.64			66.71			841			214
PER SHARE DATA
Basic net (loss) income per common share	$	(0.13	)	$	0.10		$	(0.17	)	$	0.05		$	(0.19	)		(230.0	) %		31.6	%
Diluted net (loss) income per common share		(0.13	)		0.10			(0.17	)		0.05			(0.19	)		(230.0	)		31.6
Dividends paid per common share		0.06			0.06			0.06			0.06			0.06			-			-
Book value per common share at period end		14.32			14.51			14.49			14.77			14.82			(1.3	)		(3.4	)
Tangible book value per common share at period end (1)		12.14			12.32			12.37			12.27			12.30			(1.5	)		(1.3	)
Market value at period end		9.75			10.54			9.48			11.91			14.25			(7.5	)		(31.6	)
Market range:
High		11.11			10.73			12.10			14.80			14.75			3.5			(24.7	)
Low		9.42			9.25			9.20			11.75			10.21			1.8			(7.7	)
PERIOD-END BALANCE SHEET DATA
Loans	$	884,715		$	895,404		$	906,490		$	905,477		$	905,194			(1.2	) %		(2.3	) %
Securities		106,920			105,782			104,075			106,556			112,929			1.1			(5.3	)
Assets		1,131,334			1,130,311			1,134,503			1,129,196			1,146,334			0.1			(1.3	)
Deposits		986,486			979,516			982,428			971,608			990,750			0.7			(0.4	)
Stockholders' equity		120,926			122,513			122,355			124,666			125,108			(1.3	)		(3.3	)
AVERAGE BALANCE SHEET DATA
Loans	$	887,531		$	903,075		$	904,293		$	909,295		$	910,374			(1.7	) %		(2.5	) %
Securities		106,235			103,600			105,466			109,744			110,252			2.5			(3.6	)
Earning assets		1,062,164			1,060,645			1,066,063			1,071,115			1,075,425			0.1			(1.2	)
Assets		1,131,259			1,128,517			1,139,043			1,134,662			1,145,607			0.2			(1.3	)
Deposits		982,249			978,444			984,018			976,749			982,265			0.4			-
Stockholders' equity		122,466			123,341			125,308			125,670			128,081			(0.7	)		(4.4	)
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		10.83	%		10.93	%		11.00	%		11.08	%		11.18	%		(10	) bp		(35	) bp
Average tangible equity to average tangible assets (1)		9.35			9.50			9.33			9.38			9.50			(15	)		(15	)
Annualized net charge-offs to average loans		1.44			1.46			1.90			1.95			2.54			(2	)		(110	)
Allowance for credit losses to period-end loans		1.97			1.59			1.45			1.47			1.41			38			56
Nonperforming assets to total loans+other real estate owned		6.02			4.44			4.22			4.29			3.62			158			240
Nonperforming assets to total assets		4.73			3.53			3.38			3.45			2.87			120			186
Nonperforming assets+Loans 90 days past due and still accruing to total loans+other real estate owned		6.64			4.97			4.58			4.81			3.93			167			271
Nonperforming assets+Loans 90 days past due and still accruing to total assets		5.22			3.95			3.67			3.86			3.11			127			211

(1)  See the reconciliation table on page 11 of 11.

Shore Bancshares, Inc.	Page 9 of 11
Consolidated Statements of Income By Quarter
(In thousands, except per share data)

														1Q 11			1Q 11
														compared to			compared to
	1Q 11			4Q 10		3Q 10			2Q 10		1Q 10			4Q 10			1Q 10
INTEREST INCOME
Interest and fees on loans	$	12,001		$	12,958	$	13,083		$	13,047	$	12,874			(7.4	) %		(6.8	) %
Interest and dividends on investment securities:
Taxable		657			804		677			846		882			(18.3	)		(25.5	)
Tax-exempt		38			47		50			56		59			(19.1	)		(35.6	)
Interest on federal funds sold		16			13		21			14		12			23.1			33.3
Interest on deposits with other banks		6			7		6			4		1			(14.3	)		500.0
Total interest income		12,718			13,829		13,837			13,967		13,828			(8.0	)		(8.0	)
INTEREST EXPENSE
Interest on deposits		2,833			2,937		3,117			3,242		3,385			(3.5	)		(16.3	)
Interest on short-term borrowings		13			15		17			19		32			(13.3	)		(59.4	)
Interest on long-term debt		10			11		16			15		16			(9.1	)		(37.5	)
Total interest expense		2,856			2,963		3,150			3,276		3,433			(3.6	)		(16.8	)
NET INTEREST INCOME		9,862			10,866		10,687			10,691		10,395			(9.2	)		(5.1	)
Provision for credit losses		6,390			4,392		4,193			4,917		7,617			45.5			(16.1	)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		3,472			6,474		6,494			5,774		2,778			(46.4	)		25.0
NONINTEREST INCOME
Service charges on deposit accounts		704			799		841			831		786			(11.9	)		(10.4	)
Trust and investment fee income		376			358		357			372		416			5.0			(9.6	)
Investment securities gains		79			-		-			-		-			-			-
Insurance agency commissions		2,510			2,116		2,513			2,595		2,889			18.6			(13.1	)
Other noninterest income		726			675		932			770		791			7.6			(8.2	)
Total noninterest income		4,395			3,948		4,643			4,568		4,882			11.3			(10.0	)
NONINTEREST EXPENSE
Salaries and wages		4,246			4,220		4,404			4,363		4,490			0.6			(5.4	)
Employee benefits		1,153			893		897			758		1,281			29.1			(10.0	)
Occupancy expense		596			562		547			597		622			6.0			(4.2	)
Furniture and equipment expense		272			262		325			313		300			3.8			(9.3	)
Data processing		851			620		696			660		631			37.3			34.9
Directors' fees		107			68		118			105		121			57.4			(11.6	)
Goodwill and other intangible assets impairment		-			-		3,051			-		-			-			-
Amortization of intangible assets		129			129		128			129		129			-			-
Insurance agency commissions expense		375			339		338			464		428			10.6			(12.4	)
FDIC insurance premium expense		460			445		448			460		481			3.4			(4.4	)
Other noninterest expenses		1,702			1,544		1,677			1,839		1,838			10.2			(7.4	)
Total noninterest expense		9,891			9,082		12,629			9,688		10,321			8.9			(4.2	)
(Loss) income before income taxes		(2,024	)		1,340		(1,492	)		654		(2,661	)		(251.0	)		23.9
Income tax (benefit) expense		(941	)		490		(92	)		209		(1,099	)		(292.0	)		14.4
NET (LOSS) INCOME	$	(1,083	)	$	850	$	(1,400	)	$	445	$	(1,562	)		(227.4	)		30.7
Weighted average shares outstanding - basic		8,443			8,443		8,443			8,443		8,436			-			0.1
Weighted average shares outstanding - diluted		8,443			8,443		8,443			8,443		8,436			-			0.1
Basic net (loss) income per common share	$	(0.13	)	$	0.10	$	(0.17	)	$	0.05	$	(0.19	)		(230.0	)		31.6
Diluted net (loss) income per common share		(0.13	)		0.10		(0.17	)		0.05		(0.19	)		(230.0	)		31.6
Dividends paid per common share		0.06			0.06		0.06			0.06		0.06			-			-

Shore Bancshares, Inc.	Page 10 of 11
Consolidated Average Balance Sheets By Quarter
(Dollars in thousands)

																															Average balance
																															1Q 11			1Q 11
																															compared to			compared to
	1Q 11						4Q 10						3Q 10						2Q 10						1Q 10						4Q 10			1Q 10
	Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/			Average			Yield/
	balance			rate			balance			rate			balance			rate			balance			rate			balance			rate
Earning assets
Loans	$	887,531			5.50	%	$	903,075			5.71	%	$	904,293			5.76	%	$	909,295			5.77	%	$	910,374			5.75	%		(1.7	) %		(2.5	) %
Investment securities
Taxable		101,625			2.62			98,378			3.24			99,572			2.70			103,284			3.29			103,488			3.45			3.3			(1.8	)
Tax-exempt		4,610			5.08			5,222			5.40			5,894			5.16			6,460			5.30			6,764			5.39			(11.7	)		(31.9	)
Federal funds sold		46,813			0.14			34,018			0.16			40,638			0.20			38,001			0.15			46,553			0.11			37.6			0.6
Interest-bearing deposits		21,585			0.12			19,952			0.12			15,666			0.15			14,075			0.12			8,246			0.06			8.2			161.8
Total earning assets		1,062,164			4.88	%		1,060,645			5.20	%		1,066,063			5.18	%		1,071,115			5.26	%		1,075,425			5.24	%		0.1			(1.2	)
Cash and due from banks		19,316						19,867						21,865						9,997						14,422						(2.8	)		33.9
Other assets		65,426						62,305						65,081						67,860						67,914						5.0			(3.7	)
Allowance for credit losses		(15,647	)					(14,300	)					(13,966	)					(14,310	)					(12,154	)					9.4			28.7
Total assets	$	1,131,259					$	1,128,517					$	1,139,043					$	1,134,662					$	1,145,607						0.2			(1.3	)
Interest-bearing liabilities
Demand deposits	$	131,628			0.22	%	$	128,592			0.22	%	$	132,023			0.24	%	$	132,563			0.25	%	$	127,986			0.25	%		2.4			2.9
Money market and savings deposits		260,841			0.93			258,713			0.84			259,511			0.81			259,273			0.72			256,818			0.68			0.8			1.6
Certificates of deposit $100,000 or more		259,179			1.70			256,167			1.77			258,542			1.91			251,340			2.09			259,538			2.24			1.2			(0.1	)
Other time deposits		208,301			2.10			208,808			2.23			212,098			2.37			215,987			2.56			219,731			2.67			(0.2	)		(5.2	)
Interest-bearing deposits		859,949			1.34			852,280			1.37			862,174			1.44			859,163			1.51			864,073			1.59			0.9			(0.5	)
Short-term borrowings		14,165			0.37			15,381			0.39			16,092			0.38			15,771			0.48			18,032			0.71			(7.9	)		(21.5	)
Long-term debt		932			4.56			932			4.46			1,429			4.36			1,429			4.40			1,429			4.45			-			(34.8	)
Total interest-bearing liabilities		875,046			1.32	%		868,593			1.35	%		879,695			1.42	%		876,363			1.50	%		883,534			1.58	%		0.7			(1.0	)
Noninterest-bearing deposits		122,300						126,164						121,844						117,586						118,192						(3.1	)		3.5
Accrued expenses and other liabilities		11,447						10,419						12,196						15,043						15,800						9.9			(27.6	)
Stockholders' equity		122,466						123,341						125,308						125,670						128,081						(0.7	)		(4.4	)
Total liabilities and stockholders' equity	$	1,131,259					$	1,128,517					$	1,139,043					$	1,134,662					$	1,145,607						0.2			(1.3	)
Net interest spread					3.56	%					3.85	%					3.76	%					3.76	%					3.66	%
Net interest margin					3.79	%					4.09	%					4.00	%					4.03	%					3.95	%

Shore Bancshares, Inc.	Page 11 of 11
Reconciliation of Non-GAAP Measures
(In thousands, except per share data)

	1Q 11			4Q 10			3Q 10			2Q 10			1Q 10
The following reconciles return on average equity and return on average tangible equity (Note 1):
Net (loss) income	$	(1,083	)	$	850		$	(1,400	)	$	445		$	(1,562	)
Net (loss) income - annualized (A)	$	(4,392	)	$	3,372		$	(5,554	)	$	1,785		$	(6,335	)
Net (loss) income, excluding net amortization and impairment charges of intangible assets	$	(1,005	)	$	928		$	(409	)	$	523		$	(1,484	)
Net (loss) income, excluding net amortization and impairment charges of intangible assets - annualized (B)	$	(4,076	)	$	3,682		$	(1,623	)	$	2,098		$	(6,018	)
Average stockholders' equity (C)	$	122,466		$	123,341		$	125,308		$	125,670		$	128,081
Less:  Average goodwill and other intangible assets		(18,465	)		(17,877	)		(21,016	)		(21,178	)		(21,309	)
Average tangible equity (D)	$	104,001		$	105,464		$	104,292		$	104,492		$	106,772
Return on average equity (GAAP)  (A)/(C)		(3.59	) %		2.73	%		(4.43	) %		1.42	%		(4.95	) %
Return on average tangible equity (Non-GAAP)  (B)/(D)		(3.92	) %		3.49	%		(1.56	) %		2.01	%		(5.64	) %
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)	$	9,891		$	9,082		$	12,629		$	9,688		$	10,321
Less:  Amortization of intangible assets		(129	)		(129	)		(128	)		(129	)		(129	)
Impairment charges		-			-			(3,051	)		-			-
Adjusted noninterest expense (F)	$	9,762		$	8,953		$	9,450		$	9,559		$	10,192
Net interest income (G)	$	9,862		$	10,866		$	10,687		$	10,691		$	10,395
Noninterest income (H)	$	4,395		$	3,948		$	4,643		$	4,568		$	4,882
Less:  Investment securities (gains)/losses		(79	)		-			-			-			-
Other nonrecurring (gains)/losses		-			-			(224	)		-			-
Adjusted noninterest income (I)	$	4,316		$	3,948		$	4,419		$	4,568		$	4,882
Efficiency ratio (GAAP)  (E)/(G)+(H)		69.38	%		61.31	%		82.38	%		63.49	%		67.56	%
Efficiency ratio (Non-GAAP)  (F)/(G)+(I)		68.85	%		60.44	%		62.56	%		62.64	%		66.71	%
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (J)	$	120,926		$	122,513		$	122,355		$	124,666		$	125,108
Less:  Goodwill and other intangible assets		(18,389	)		(18,518	)		(17,923	)		(21,102	)		(21,231	)
Tangible equity (K)	$	102,537		$	103,995		$	104,432		$	103,564		$	103,877
Shares outstanding (L)		8,443			8,443			8,443			8,443			8,443
Book value per common share (GAAP)  (J)/(L)	$	14.32		$	14.51		$	14.49		$	14.77		$	14.82
Tangible book value per common share (Non-GAAP)  (K)/(L)	$	12.14		$	12.32		$	12.37		$	12.27		$	12.30
The following reconciles average equity to average assets and average tangible equity to average tangible assets (Note 1):
Average stockholders' equity (M)	$	122,466		$	123,341		$	125,308		$	125,670		$	128,081
Less:  Average goodwill and other intangible assets		(18,465	)		(17,877	)		(21,016	)		(21,178	)		(21,309	)
Average tangible equity (N)	$	104,001		$	105,464		$	104,292		$	104,492		$	106,772
Average assets (O)	$	1,131,259		$	1,128,517		$	1,139,043		$	1,134,662		$	1,145,607
Less:  Average goodwill and other intangible assets		(18,465	)		(17,877	)		(21,016	)		(21,178	)		(21,309	)
Average tangible assets (P)	$	1,112,794		$	1,110,640		$	1,118,027		$	1,113,484		$	1,124,298
Average equity/average assets (GAAP)  (M)/(O)		10.83	%		10.93	%		11.00	%		11.08	%		11.18	%
Average tangible equity/average tangible assets (Non-GAAP)  (N)/(P)		9.35	%		9.50	%		9.33	%		9.38	%		9.50	%

Note 1:  Management believes that reporting tangible equity and tangible assets more closely approximates the adequacy of capital for regulatory purposes.

Note 2:  Management believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling cash-based operating activities.