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):  July 28, 2009

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

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

18 East Dover Street, Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (410) 822-1400

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:

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

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

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))

ITEM 2.02.      Results of Operation and Financial Condition.

On July 28, 2009, Shore Bancshares, Inc. issued a press release describing its financial results for the three and six months ended June 30, 2009. This press release was corrected and superseded by a press release issued on July 29, 2009, a copy of which is furnished herewith as Exhibit 99.1.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 9.01.     Financial Statements and Exhibits.

(d)   Exhibits.

Exhibit 99.1     Press release dated July 29, 2009 (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:  July 29, 2009	By:	/s/ W. Moorhead Vermilye
		W. Moorhead Vermilye
		President and CEO

-2-

EXHIBIT INDEX

Exhibit

Number               Description

99.1                      Press release dated July 29, 2009 (furnished herewith).

-3-

EX-99.1

 Exhibit 99.1

Shore Bancshares, Inc.

18 E. Dover Street

Easton, Maryland 21601

Phone 410-822-1400

Correction - - Shore Bancshares, Inc.

In the news release, Shore Bancshares Reports Second Quarter and First-Half Results, issued July 28, 2009 by Shore Bancshares, Inc. over PR Newswire, we are advised by the company that the fifth paragraph, first sentence, should read "Nonperforming assets as a percentage of total assets grew to 1.37% during the quarter..." rather than "1.26%." The sixth sentence in the second paragraph under the subheading "Review of Quarterly Financial Results" should also read "Nonperforming assets to total assets was 1.37% at June 30, 2009" rather than "1.26%" as originally issued inadvertently.  We have also been advised by the company that changes have been made to the tabular material. Complete, corrected release follows:

PRESS RELEASE

Shore Bancshares Reports Second Quarter and First-Half Results

Easton, Maryland (07/28/2009) - Shore Bancshares, Inc. (NASDAQ - SHBI) reported net income available to common stockholders of $354 thousand or $0.04 per diluted common share for the second quarter of 2009, compared to $1.9 million or $0.22 per diluted common share for the first quarter of 2009 and $2.8 million or $0.33 per diluted common share for the second quarter of 2008.  Net income available to common stockholders for the first half of 2009 was $2.2 million or $0.27 per diluted common share, compared to $6.1 million or $0.73 per diluted common share for the first half of 2008.

Net income available to common stockholders was negatively impacted by dividends and discount accretion associated with the sale and subsequent repurchase of preferred stock under the U.S. Department of the Treasury’s Troubled Asset Relief Program Capital Purchase Program.  The dividends and accretion for the second quarter of 2009 was $1.5 million or $0.18 per share.  The comparable amount for the first six months of 2009 was $1.9 million or $0.22 per share.

“We are pleased to have reported net income in each of the first two quarters of 2009, given the ongoing tough operating environment locally and across the community banking industry. Three main factors contributed to the reduction of our second quarter net income to $354 thousand. These included: $1.5 million on an after tax basis ($0.18 per share) of one-time charges related to our participation in and exit from the Capital Purchase Program via repayment of Treasury’s investment; a $513 thousand ($0.04 per share on an after tax basis) one-time deposit insurance special assessment from the FDIC; and a $1.7 million ($0.12 per share on an after tax basis) quarterly provision for credit losses that was set aside to support sustained growth in the loan portfolio plus the overall increase in nonperforming assets and loan charge-offs,” said W. Moorhead Vermilye, President & Chief Executive Officer.

“The underlying strength of our organization enabled us to grow loans by 9.2% during the second quarter versus a year ago, and supported an excellent increase in total deposits of 19.9% during the second quarter when compared to the comparable period of last year. We see the deposit growth as evidence of our ability to bring in new relationships as a result of ongoing market disruption, which we believe is solidifying our position as the leading independent banking company serving the Delaware-Maryland-Virginia peninsula.”

“Nonperforming assets as a percentage of total assets grew to 1.37% during the quarter, annualized net charge-offs as a percentage of average loans amounted to 0.71%, and the allowance for credit losses as a percentage of period-end loans was 1.17% and remained essentially unchanged from the linked first quarter.

We believe these asset quality measures will compare favorably to our Mid-Atlantic peers, after all of the mid-year results are compiled for the group,” Vermilye said.

The Company’s return on average assets for the second quarter of 2009 was 0.13%, compared to 0.72% and 1.12% for the quarters ended March 31, 2009 and June 30, 2008, respectively.  The return on average stockholders’ equity was 1.07% for the second quarter of 2009, compared to 5.05% for the first quarter of 2009 and 8.98% for the second quarter of 2008.

The Company’s return on average assets for the first six months of 2009 was 0.41%, compared to 1.25% for the first six months of 2008.  The return on average stockholders’ equity was 3.18% for the first half of 2009, compared to 10.02% for the first half of 2008.

Total assets were $1.158 billion at June 30, 2009, compared to $1.045 billion at the end of 2008, an increase of $113.6 million.  Total loans were $919.1 million and total deposits were $981.3 million, an increase of $30.1 million and $136.0 million, respectively, when compared to December 31, 2008.  Total stockholders’ equity increased slightly from the end of 2008.

Review of Quarterly Financial Results

Net interest income for the second quarter of 2009 was $10.1 million, a small increase from the first quarter of 2009 and an increase of 4.7% from the same period last year.  Higher average balances on earning assets was the primary reason for the increase.  The Company’s net interest margin was 3.85% for the second quarter of 2009, a decrease of 24 basis points when compared to the first quarter of 2009 and a decrease of 32 basis points when compared to the second quarter of 2008.

The provision for credit losses was $1.7 million for the three months ended June 30, 2009. The comparable amounts were $1.9 million and $615 thousand for the three months ended March 31, 2009 and June 30, 2008, respectively.  The continued large level of  provision expense was primarily in response to sustained growth in the loan portfolio, the overall increase in nonperforming assets and loan charge-offs, as well as overall economic conditions.  Net charge-offs were $1.6 million for the second quarter of 2009, $546 thousand for the first quarter of 2009 and $259 thousand for the second quarter of 2008.  Quarter-to-date annualized net charge-offs to average loans was 0.71% for the second quarter of 2009, 0.25% for the first quarter of 2009 and 0.13% for the second quarter of 2008. Nonperforming assets to total assets was 1.37% at June 30, 2009.  The comparable nonperforming asset ratio was 0.85% at March 31, 2009, and 0.47% at June 30, 2008.  The allowance for credit losses to period-end loans was 1.17% at  June 30, 2009, compared to 1.18% at March 31, 2009 and 0.98% at June 30, 2008.  Management believes that the provision for credit losses and the resulting allowance were adequate at June 30, 2009.

Noninterest income for the second quarter of 2009 remained relatively unchanged when compared to the first quarter of 2009 and increased 2.9% when compared to the second quarter of 2008.  During the second quarter the Company recorded a $420 thousand gain on an interest rate swap transaction which was offset by a reduction in insurance agency commissions.

Noninterest expense for the second quarter of 2009 increased 8.2% when compared to the first quarter of 2009 and increased 9.9% when compared to the second quarter of 2008.  A significant portion of the increase was due to increased FDIC insurance premium expense of $676 thousand when compared to the first quarter of 2009 and $860 thousand when compared to the second quarter of 2008.  These increases included a special one-time assessment as of June 30, 2009 which totaled $513 thousand.

Review of Six-Month Financial Results

Net interest income for the first six months of 2009 was $20.1 million, an increase of 2.5% when compared to the first six months of 2008.  Higher average balances on earning assets was the primary reason for the increase.  The net interest margin declined 34 basis points from 4.30% for the first half of 2008 to 3.96% for the first half of 2009.

The provisions for credit losses for the six months ended June 30, 2009 and 2008 were $3.6 million and $1.1 million, respectively.  Net charge-offs were $2.2 million and $346 thousand for the six months ended June 30, 2009 and 2008, respectively.  Year-to-date annualized net charge-offs to average loans was 0.48% for the first half of 2009 and 0.09% for the first half of 2008.

Noninterest income for the six months ended June 30, 2009 remained unchanged when compared to the same period in 2008.  The increase in other noninterest income was primarily offset by a decrease in insurance agency commissions.

Noninterest expense for the six months ended June 30, 2009 increased 6.5% when compared to the same period in 2008.  A significant portion of the increase was due to increased FDIC insurance premium expense of $1.1 million when compared to the first six months of 2008.  The increase in FDIC insurance premiums was attributable to higher overall rates, a one-time special assessment as of June 30, 2009 which totaled $513 thousand and growth in the company’s total deposits.

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 three banks, The Talbot Bank of Easton, Maryland, The Centreville National Bank of Maryland, and The Felton Bank; 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; a registered investment adviser firm, Wye Financial Services, LLC; and a mortgage broker subsidiary, Wye Mortgage Group, LLC.

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, President and CEO

Page 4 of 8

Shore Bancshares, Inc.
Financial Highlights
(Dollars in thousands, except per share data)
	For the Three Months Ended									For the Six Months Ended
	June 30,									June 30,
	2009			2008			% Change			2009			2008			% Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,086		$	9,632			4.7	%	$	20,144		$	19,662			2.5	%
Provision for credit losses		1,681			615			173.3			3,616			1,077			235.7
Noninterest income		5,347			5,194			2.9			10,697			10,696			0.0
Noninterest expense		10,693			9,729			9.9			20,576			19,320			6.5
Income before income taxes		3,059			4,482			(31.7	)		6,649			9,961			(33.2	)
Income tax expense		1,166			1,716			(32.1	)		2,543			3,823			(33.5	)
Net income		1,893			2,766			(31.6	)		4,106			6,138			(33.1	)
Preferred stock dividends and discount accretion		1,539			-			-			1,876			-			-
Net income available to common shareholders	$	354		$	2,766			(87.2	)	$	2,230		$	6,138			(63.7	)
Return on average assets (1)		0.13	%		1.12	%		(88.4	)%		0.41	%		1.25	%		(67.2	)%
Return on average equity (1)		1.07			8.98			(88.1	)		3.18			10.02			(68.3	)
Net interest margin		3.85			4.17			(7.7	)		3.96			4.30			(7.9	)
Efficiency ratio - GAAP based		69.29			65.62			5.6			66.72			63.64			4.8
PER SHARE DATA
Basic net income per share	$	0.23		$	0.33			(30.3	)%	$	0.49		$	0.73			(32.9	)%
Basic net income per common share		0.04			0.33			(87.9	)		0.27			0.73			(63.0	)
Diluted net income per share		0.22			0.33			(33.3	)		0.49			0.73			(32.9	)
Diluted net income per common share		0.04			0.33			(87.9	)		0.27			0.73			(63.0	)
Dividends paid per common share		0.16			0.16			-			0.32			0.32			-
Book value per common share at period end		15.19			14.65			3.7
Tangible book value per common share at period end		12.62			12.01			5.1
Market value at period end		17.94			18.72			(4.2	)
Market range:
High		21.46			26.47			(18.9	)		24.43			26.47			(7.7	)
Low		15.18			18.52			(18.0	)		11.00			18.52			(40.6	)
AT PERIOD END
Loans	$	919,088		$	841,600			9.2	%
Securities		89,272			91,842			(2.8	)
Assets		1,158,212			1,019,463			13.6
Deposits		981,334			818,656			19.9
Stockholders' equity		127,876			123,038			3.9
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.84	%		12.41	%					12.99	%		12.45	%
Annualized net charge-offs to average loans		0.71			0.13						0.48			0.09
Allowance for credit losses to period-end loans		1.17			0.98
Nonperforming assets to total assets		1.37			0.47
(1) Calculation uses net income available to common shareholders.

Page 5 of 8

Shore Bancshares, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
										June 30, 2009			June 30, 2009
	June 30,			Dec. 31,			June 30,			compared to			compared to
	2009			2008			2008			Dec. 31, 2008			June 30, 2008
ASSETS
Cash and due from banks	$	20,498		$	16,803		$	19,532			22.0	%		4.9	%
Interest-bearing deposits with other banks		1,622			481			343			237.2			372.9
Federal funds sold		85,242			10,010			23,111			751.6			268.8
Investments available-for-sale (at fair value)		80,278			79,204			80,721			1.4			(0.5	)
Investments held-to-maturity		8,994			10,252			11,121			(12.3	)		(19.1	)
Loans		919,088			888,528			841,600			3.4			9.2
Less: allowance for credit losses		(10,784	)		(9,320	)		(8,282	)		15.7			30.2
Loans, net		908,304			879,208			833,318			3.3			9.0
Premises and equipment, net		14,018			13,855			14,465			1.2			(3.1	)
Accrued interest receivable		4,355			4,606			4,843			(5.4	)		(10.1	)
Goodwill		15,954			15,954			15,954			-			-
Other intangible assets, net		5,663			5,921			6,179			(4.4	)		(8.4	)
Other real estate owned		2,212			148			-			1,394.6			-
Other assets		11,072			8,199			9,876			35.0			12.1
Total assets	$	1,158,212		$	1,044,641		$	1,019,463			10.9			13.6
LIABILITIES
Noninterest-bearing deposits	$	113,111		$	102,584		$	109,718			10.3			3.1
Interest-bearing deposits		868,223			742,787			708,938			16.9			22.5
Total deposits		981,334			845,371			818,656			16.1			19.9
Short-term borrowings		28,096			52,969			58,263			(47.0	)		(51.8	)
Long-term debt		7,947			7,947			8,485			-			(6.3	)
Accrued interest payable and other liabilities		12,959			10,969			11,021			18.1			17.6
Total liabilities		1,030,336			917,256			896,425			12.3			14.9
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized
35,000,000 shares		84			84			84			-			-
Warrants		1,543			-			-			-			-
Additional paid in capital		29,816			29,768			29,663			0.2			0.5
Retained earnings		95,679			96,140			93,498			(0.5	)		2.3
Accumulated other comprehensive income (expense)		754			1,393			(207	)		(45.9	)		464.3
Total stockholders' equity		127,876			127,385			123,038			0.4			3.9
Total liabilities and stockholders' equity	$	1,158,212		$	1,044,641		$	1,019,463			10.9			13.6
Period-end common shares outstanding		8,419			8,405			8,400			0.2			0.2
Book value per common share	$	15.19		$	15.16		$	14.65			0.2			3.7

Page 6 of 8

Shore Bancshares, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
	For the Three Months Ended							For the Six Months Ended
	June 30,							June 30,
	2009		2008		% Change			2009		2008		% Change
INTEREST INCOME
Interest and fees on loans	$	13,754	$	13,961		(1.5	)  %	$	27,371	$	28,521		(4.0	)%
Interest and dividends on investment securities:
Taxable		768		945		(18.7	)		1,524		2,025		(24.7	)
Tax-exempt		79		109		(27.5	)		164		232		(29.3	)
Interest on federal funds sold		23		83		(72.3	)		30		205		(85.4	)
Interest on deposits with other banks		6		29		(79.3	)		7		67		(89.6	)
Total interest income		14,630		15,127		(3.3	)		29,096		31,050		(6.3	)
INTEREST EXPENSE
Interest on deposits		4,441		4,997		(11.1	)		8,726		10,340		(15.6	)
Interest on short-term borrowings		28		316		(91.1	)		77		682		(88.7	)
Interest on long-term debt		75		182		(58.8	)		149		366		(59.3	)
Total interest expense		4,544		5,495		(17.3	)		8,952		11,388		(21.4	)
NET INTEREST INCOME		10,086		9,632		4.7			20,144		19,662		2.5
Provision for credit losses		1,681		615		173.3			3,616		1,077		235.7
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		8,405		9,017		(6.8	)		16,528		18,585		(11.1	)
NONINTEREST INCOME
Service charges on deposit accounts		888		917		(3.2	)		1,697		1,788		(5.1	)
Investment securities gains (losses)		-		-		-			49		-		-
Insurance agency commissions		2,893		3,219		(10.1	)		6,228		6,750		(7.7	)
Other noninterest income		1,566		1,058		48.0			2,723		2,158		26.2
Total noninterest income		5,347		5,194		2.9			10,697		10,696		0.0
NONINTEREST EXPENSE
Salaries and employee benefits		5,959		5,759		3.5			11,879		11,743		1.2
Occupancy expense		587		537		9.3			1,136		1,036		9.7
Furniture and equipment expense		302		298		1.3			616		584		5.5
Data processing		580		550		5.5			1,190		1,118		6.4
Directors' fees		117		130		(10.0	)		285		295		(3.4	)
Amortization of intangible assets		129		129		-			258		258		-
Other noninterest expenses		3,019		2,326		29.8			5,212		4,286		21.6
Total noninterest expense		10,693		9,729		9.9			20,576		19,320		6.5
Income before income taxes		3,059		4,482		(31.7	)		6,649		9,961		(33.2	)
Income tax expense		1,166		1,716		(32.1	)		2,543		3,823		(33.5	)
NET INCOME		1,893		2,766		(31.6	)		4,106		6,138		(33.1	)
Preferred stock dividends and discount accretion		1,539		-		-			1,876		-		-
Net income available to common shareholders	$	354	$	2,766		(87.2	)	$	2,230	$	6,138		(63.7	)
Weighted average shares outstanding - basic		8,413		8,398		0.2			8,409		8,394		0.2
Weighted average shares outstanding - diluted		8,417		8,405		0.1			8,413		8,402		0.1
Basic net income per share	$	0.23	$	0.33		(30.3	)	$	0.49	$	0.73		(32.9	)
Basic net income per common share		0.04		0.33		(87.9	)		0.27		0.73		(63.0	)
Diluted net income per share		0.22		0.33		(33.3	)		0.49		0.73		(32.9	)
Diluted net income per common share		0.04		0.33		(87.9	)		0.27		0.73		(63.0	)
Dividends paid per common share		0.16		0.16		-			0.32		0.32		-

Page 7 of 8

Shore Bancshares, Inc.
Financial Highlights By Quarter
(Dollars in thousands, except per share data)
	2nd quarter			1st quarter			4th quarter			3rd quarter			2nd quarter				2Q 09			2Q 09
	2009			2009			2008			2008			2008			compared to			compared to
		(2Q 09)			(1Q 09)			(4Q 08)			(3Q 08)			(2Q 08)			1Q 09			2Q 08
PROFITABILITY FOR THE PERIOD
Net interest income	$	10,086		$	10,058		$	10,348		$	9,909		$	9,632			0.3	%		4.7	%
Provision for credit losses		1,681			1,935			1,385			875			615			(13.1	)		173.3
Noninterest income		5,347			5,350			4,408			5,246			5,194			(0.1	)		2.9
Noninterest expense		10,693			9,883			9,621			9,429			9,729			8.2			9.9
Income before income taxes		3,059			3,590			3,750			4,851			4,482			(14.8	)		(31.7	)
Income tax expense		1,166			1,377			1,489			1,780			1,716			(15.3	)		(32.1	)
Net income		1,893			2,213			2,261			3,071			2,766			(14.5	)		(31.6	)
Preferred stock dividends and discount accretion		1,539			337			-			-			-			356.7			-
Net income available to common shareholders	$	354		$	1,876		$	2,261		$	3,071		$	2,766			(81.1	)		(87.2	)
Return on average assets (1)		0.13	%		0.72	%		0.87	%		1.19	%		1.12	%		(81.9	)%		(88.4	)%
Return on average equity (1)		1.07			5.05			7.11			9.81			8.98			(78.8	)		(88.1	)
Net interest margin		3.85			4.09			4.24			4.10			4.17			(5.9	)		(7.7	)
Efficiency ratio - GAAP based		69.29			64.14			65.20			62.22			65.62			8.0			5.6
PER SHARE DATA
Basic net income per share	$	0.23		$	0.26		$	0.27		$	0.37		$	0.33			(11.5	)%		(30.3	)%
Basic net income per common share		0.04			0.22			0.27			0.37			0.33			(81.8	)		(87.9	)
Diluted net income per share		0.22			0.26			0.27			0.37			0.33			(15.4	)		(33.3	)
Diluted net income per common share		0.04			0.22			0.27			0.37			0.33			(81.8	)		(87.9	)
Dividends paid per common share		0.16			0.16			0.16			0.16			0.16			-			-
Book value per common share at period end		15.19			15.38			15.16			14.92			14.65			(1.2	)		3.7
Tangible book value per common share at period end		12.62			12.79			12.55			12.30			12.01			(1.3	)		5.1
Market value at period end		17.94			16.75			23.99			25.70			18.72			7.1			(4.2	)
Market range:
High		21.46			24.43			25.97			27.25			26.47			(12.2	)		(18.9	)
Low		15.18			11.00			17.50			18.00			18.52			38.0			(18.0	)
AT PERIOD END
Loans	$	919,088		$	908,118		$	888,528		$	865,437		$	841,600			1.2	%		9.2	%
Securities		89,272			78,953			89,456			93,149			91,842			13.1			(2.8	)
Assets		1,158,212			1,075,934			1,044,641			1,037,026			1,019,463			7.6			13.6
Deposits		981,334			873,089			845,371			839,217			818,656			12.4			19.9
Stockholders' equity		127,876			152,781			127,385			125,401			123,038			(16.3	)		3.9
CAPITAL AND CREDIT QUALITY RATIOS
Average equity to average assets		11.84	%		14.23	%		12.22	%		12.12	%		12.41	%
Annualized net charge-offs to average loans		0.71			0.25			0.31			0.25			0.13
Allowance for credit losses to period-end loans		1.17			1.18			1.05			1.00			0.98
Nonperforming assets to total assets		1.37			0.85			0.79			0.72			0.47
(1) Calculation uses net income available to common shareholders.

Page 8 of 8

Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter
(In thousands, except per share data)
														2Q 09			2Q 09
													compared to			compared to
		2Q 09		1Q 09		4Q 08			3Q 08			2Q 08		1Q 09			2Q 08
INTEREST INCOME
Interest and fees on loans		0	$	13,617	$	14,166		$	14,179		$	13,961		1.0	%		(1.5	)%
Interest and dividends on investment securities:
Taxable		768		756		839			924			945		1.6			(18.7	)
Tax-exempt		79		85		93			95			109		(7.1	)		(27.5	)
Interest on federal funds sold		23		7		24			79			83		228.6			(72.3	)
Interest on deposits with other banks		6		1		4			21			29		500.0			(79.3	)
Total interest income		14,630		14,466		15,126			15,298			15,127		1.1			(3.3	)
INTEREST EXPENSE
Interest on deposits		4,441		4,285		4,582			4,955			4,997		3.6			(11.1	)
Interest on short-term borrowings		28		49		121			344			316		(42.9	)		(91.1	)
Interest on long-term debt		75		74		75			90			182		1.4			(58.8	)
Total interest expense		4,544		4,408		4,778			5,389			5,495		3.1			(17.3	)
NET INTEREST INCOME		10,086		10,058		10,348			9,909			9,632		0.3			4.7
Provision for credit losses		1,681		1,935		1,385			875			615		(13.1	)		173.3
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		8,405		8,123		8,963			9,034			9,017		3.5			(6.8	)
NONINTEREST INCOME
Service charges on deposit accounts		888		809		889			923			917		9.8			(3.2	)
Investment securities gains (losses)		-		49		(15	)		-			-		(100.0	)		-
Other than temporary impairment of securities		-		-		-			(371	)		-		-			-
Insurance agency commissions		2,893		3,335		2,495			2,845			3,219		(13.3	)		(10.1	)
Other noninterest income		1,566		1,157		1,039			1,849			1,058		35.4			48.0
Total noninterest income		5,347		5,350		4,408			5,246			5,194		(0.1	)		2.9
NONINTEREST EXPENSE
Salaries and employee benefits		5,959		5,920		5,776			5,802			5,759		0.7			3.5
Occupancy expense		587		549		585			558			537		6.9			9.3
Furniture and equipment expense		302		314		291			310			298		(3.8	)		1.3
Data processing		580		610		595			610			550		(4.9	)		5.5
Directors' fees		117		168		132			131			130		(30.4	)		(10.0	)
Amortization of intangible assets		129		129		129			128			129		-			-
Other noninterest expenses		3,019		2,193		2,113			1,890			2,326		37.7			29.8
Total noninterest expense		10,693		9,883		9,621			9,429			9,729		8.2			9.9
Income before income taxes		3,059		3,590		3,750			4,851			4,482		(14.8	)		(31.7	)
Income tax expense		1,166		1,377		1,489			1,780			1,716		(15.3	)		(32.1	)
NET INCOME		1,893		2,213		2,261			3,071			2,766		(14.5	)		(31.6	)
Preferred stock dividends and discount accretion		1,539		337		-			-			-		356.7			-
Net income available to common shareholders	$	354	$	1,876	$	2,261		$	3,071		$	2,766		(81.1	)		(87.2	)
Weighted average shares outstanding - basic		8,413		8,405		8,405			8,405			8,398		0.1			0.2
Weighted average shares outstanding - diluted		8,417		8,408		8,410			8,411			8,405		0.1			0.1
Basic net income per share		0.23		0.26		0.27			0.37			0.33		(11.5	)		(30.3	)
Basic net income per common share		0.04		0.22		0.27			0.37			0.33		(81.8	)		(87.9	)
Diluted net income per share		0.22		0.26		0.27			0.37			0.33		(15.4	)		(33.3	)
Diluted net income per common share		0.04		0.22		0.27			0.37			0.33		(81.8	)		(87.9	)
Dividends paid per common share		0.16		0.16		0.16			0.16			0.16		-			-