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CORRESP
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    August
18, 2009

    VIA
EDGAR

    Securities
and Exchange Commission

    Division
of Corporation Finance

    100 F
Street, N.E.

    Washington,
D.C. 20549

    Attn:
Kevin W. Vaughn

                Re:

              Response to
      Comments

                Form
      10-K for Fiscal Year Ended December 31, 2008

                Form
      10-Q/A for Fiscal Quarter Ended March 31, 2009

                File
      No. 000-22345

    Ladies
and Gentlemen:

    This letter responds to the July 30,
2009 comment letter from the Staff (the “Staff”) of the Securities and Exchange
Commission (the “Commission”) with respect to the above-captioned
matters.  As we discussed with the Staff during our telephone
conversations, the purpose of this letter is to furnish the Staff with the
proposed responses by Shore Bancshares, Inc. (the “Company”, “we”, “us” and
“our”) to each of the Staff’s comments so that any additional concerns may be
addressed before we further amend our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2009.

    Each of the Staff’s comments, as well
as our proposed response, is set forth below.

    Comment
1.  We note the disclosure that loans to related persons were
made on substantially the same terms as those prevailing at the time for
comparable transactions with other persons.  Please confirm, and
revise future filings to disclose, if accurate, that the loans were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable loans with persons not related to
the lender.  Refer to Instruction 4.c to Item 404(a) of
Regulation S-K.

    Response:  Our
proxy statement disclosure provided as follows:  “[d]uring the past
year Talbot Bank, Centreville National Bank, and Felton Bank have had banking
transactions in the ordinary course of their businesses with their directors and
officers and with the associates of such persons on substantially the same
terms, including interest rates, collateral, and repayment terms on loans, as
those prevailing at the same time for comparable transactions with
others.”  Our use of the term “others” was intended as a reference to
unrelated persons.  We will use the words “with persons unrelated to
our bank subsidiaries” in future filings.  We hereby confirm the
accuracy of that statement, as applied to persons unrelated to our bank
subsidiaries and as of the time it was made.

    Comment
2.  Please revise to provide the disclosure required by
paragraph 26 of SFAS 154 regarding your recent correction of an
error.  Please more clearly discuss the nature of the error and
provide a tabular reconciliation of the amounts involved before and after the
correction.  Clearly label the columns affected on the face of the
financial statements as Restated.

          August
18, 2009

          Page
2

    Response:  We
propose to further amend the Form 10-Q for the quarter ended March 31, 2009 to
add the following Note 11 to the consolidated financial statements required by
paragraph 26 of SFAS 154.

    Note
11.  Restatement of Financial Information

    On July
2, 2009, the Company reported that the Board of Directors had determined to
restate its earnings results for the quarter ended March 31,
2009.  The restatement resulted in an increase in the allowance for
credit losses of $1.023 million and a resulting decrease in net income of $665
thousand.  The error, which was discovered during an examination of
The Felton Bank by the FDIC, related to a failure to recognize the full losses
on certain collateral dependent loans pursuant to SFAS No. 114 in the Bank’s
allowance calculation at March 31, 2009.  The loans involved in the
error are primarily loans secured by 1-4 family or commercial real estate and/or
business assets of the borrowers.  One loan totaling $224 thousand was
on nonaccrual at March 31, 2009, while all of the remaining loans were current
or less than 90 days past due at March 31, 2009.

    The
identification of the error did not result in any change to the methodology for
determining the allowance for credit losses although management has implemented
additional controls to prevent such an error from occurring in the
future.  In addition, management reviewed the March 31, 2009 allowance
calculations of each of the bank subsidiaries and discussed the error with
management at each bank to determine that such error did not exist outside of
the Felton Bank at March 31, 2009.

    The
following table summarizes the impact of the restatement on the Company’s
consolidated balance sheet, consolidated statement of income, consolidated
statement of changes in stockholders equity and consolidated statement of cash
flows as of and for the three months ended March 31, 2009 (in thousands, except
per share amounts).

              Consolidated Balance Sheet

              As
      Originally Reported

              Adjustment

              As Restated

                Allowance
      for Credit Losses

            $
            (9,686
            )

            $
            (1,023
            )

            $
            (10,709
            )

                Loans,
      Net

            898,432

            (1,023
            )

            897,409

                Deferred
      Income Taxes

            1,982

            358

            2,340

                Retained
      Earnings

            97,492

            (665
            )

            96,827

              Consolidated Statements of
      Income

              As
      Originally Reported

              Adjustment

              As Restated

                Provision
      for Credit Losses

            $
            912

            $
            1,023

            $
            1,935

                Net
      income before taxes

            4,613

            (1,023
            )

            3,590

                Income
      tax expense

            1,735

            (358
            )

            1,377

                Net
      income

            2,878

            (665
            )

            2,213

                Net
      income available to common
      shareholders

            2,541

            (665
            )

            1,876

                Basic
      earnings per common share

            0.30

            (0.08
            )

            0.22

                Diluted
      earnings per common share

            0.30

            (0.08
            )

            0.22

            August
18, 2009

            Page
3

              Consolidated
      Statement of Changes in Stockholder’s Equity

              As
      Originally Reported

              Adjustment

              As Restated

                Net
      Income

            $
            2,878

            $
            (665
            )

            $
            2,213

                Retained
      Earnings

            97,492

            (665
            )

            96,827

              Consolidated Statement of Cash
      Flows

              As
      Originally Reported

              Adjustment

              As Restated

                Net
      Income

            $
            2,878

            $
            (665
            )

            $
            2,213

                Net
      change in other assets

            139

            (358
            )

            (219
            )

                Provision
      for credit losses

            912

            1,023

            1,935

    The
restatement also affects Notes 2, 3, 6 and 7.

    Comment
3(a).  Please identify the regulatory agency involved in the
identification of the error.

    Response:  We
have identified the regulatory agency in our proposed Note 11 in response to
Comment 2.

    Comment
3(b).  More clearly discuss the loans involved, including their
type, payment status, accrual status, nature of collateral, and your methodology
for determining the related allowance.

    Response:  We
have discussed the loans involved and the methodology for determining the
related allowance in our proposed Note 11 in response to Comment 2.

    Comment
3(c):  Discuss any changes made to your methodology in
determining the allowance for these loans as a result of the
examination.

    Response:  The
Company’s methodology for determining the adequacy of the allowance for credit
losses has not changed as a result of the error.  See information
included in our proposed Note 11 in response to Comment 2.

    Comment
3(d):  You note that the error was detected in connection with
one of your bank subsidiaries.  Disclose how you determined that the
nature of the error would not be applicable to the similar loans held by that
bank or your other bank subsidiaries.

    Response:  We
have discussed the fact that this error did not affect other loans of the bank
or loans held by our other bank subsidiaries in our proposed Note 11 in response
to Comment 2.

    Comment
3(e):  Please tell us and consider revising you Form 10-Q as
amended for March 31, 2009 as well as your Form 10-Q for June 30, 2009 to
disclose whether you had a material weakness in your internal control over
financial reporting relating to the error.

    Response:  Management
did not become aware of the error until June 23, 2009.  The error
resulted because certain of the policies and procedures for evaluating and
recording loans that make up our internal control over financial reporting were
not correctly followed or applied by employees of The Felton Bank with respect
to the identified loans at the time our interim financial statements were being
prepared.

            August
18, 2009

            Page
4

    After
considering the facts and circumstances surrounding the error, management
believes that the failure of management to detect the improper application of
the policies and procedures to which we are subject constituted a material
weakness in our internal control over financial reporting as of March 31,
2009.  Management has taken steps to ensure, to the extent reasonably
possible, that such an error does not re-occur and we have disclosed these steps
in Item 4 of Part I of our Quarterly Report on Form 10-Q that was filed with the
Commission with respect for the quarter ended June 30, 2009.

    With
respect to the Staff’s suggestion that we disclose in our quarterly reports,
including the Quarterly Report on Form 10-Q, as amended, for the quarter ended
March 31, 2009, how we considered whether we had a material weakness in internal
control over financial reporting relating to the error, we respectfully believe,
for the reasons set forth below, that such disclosure is neither warranted nor
required, especially considering the disclosure that we propose to make pursuant
to Comment 3(f) (see below).

    In Final
Rule Release 33-8328 (June 5, 2003) (the “Release”), the Securities and Exchange
Commission (the “Commission”) specifically provided that the “rules [adopted
under the Sarbanes-Oxley Act of 2002] do not require a company to state the
conclusions of the certifying officers regarding the effectiveness of the
company’s internal control over financial reporting as of a particular date on a
quarterly basis as proposed[.]”  Release, Item II(F)(3).  In
reaching this conclusion, the Commission recognized that such an evaluation
should be performed “over a period of time that is adequate for [management] to
determinate whether, as of the end of the company’s fiscal year, the design and
operation of the company’s internal control over financial reporting are
effective[,]” such that, as required by the rules, management’s evaluation may
be presented in the Annual Report on Form 10-K.  See id., Item
II(C)(3).

    Disclosure
regarding whether we had a material weakness in internal control over financial
reporting, and how we considered whether we had such a material weakness, is
disclosure about the effectiveness of our internal control over financial
reporting, and we believe that the most appropriate place for such a disclosure
is our Annual Reports on Form 10-K.

    Disclosure
in a Quarterly Report on Form 10-Q with respect to internal control over
financial reporting is limited to a discussion, in Item 4 of Part II (and not in
Item 2 of Part I), of management’s evaluation of “any change in the company’s
internal control over financial reporting that occurred during a fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
company’s internal control over financial reporting.”  This
fact/requirement is borne out by paragraph 4(e) and paragraph 5(a) of the
Section 302 certifications to the report that are required from the chief
executive officer and the principal accounting officer.

    There was
no change in our internal control over financial reporting during the quarter
ended March 31, 2009 that materially affected, or was reasonably likely to
materially affect, our internal control over financial reporting.

            August
18, 2009

            Page
5

    Comment
3(f).  Please tell us and consider revising your Form 10-Q as
amended for March 31, 2009 as well as your Form 10-Q for June 30, 2009 to
disclose how the certifying officers were able to conclude that your disclosure
controls and procedures were effective in light of the identification of the
error that resulted in the restatement of your financial
statements.

    Response:  We
propose to further amend the Form 10-Q, as amended, for the quarter ended March
31, 2009 by revising Item 4 of Part I to read as follows:

    Item 4.  Controls and
Procedures.

    We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports that Shore Bancshares, Inc.
files under the Securities Exchange Act of 1934 with the SEC, such as this
Quarterly Report, is recorded, processed, summarized and reported within the
time periods specified in those rules and forms, and that such information is
accumulated and communicated to management, including Shore Bancshares, Inc.’s
Chief Executive Officer (“CEO”) and the Principal Accounting Officer (“PAO”), as
appropriate, to allow for timely decisions regarding required
disclosure.  A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their
costs.  These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake.  Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control.  The design of any
system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions;
over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.

    Prior to
May 11, 2009, an evaluation of the effectiveness of these disclosure controls as
of March 31, 2009 was carried out under the supervision and with the
participation of management, including the CEO and the PAO.  Based on
that evaluation, management, including the CEO and the PAO, concluded that our
disclosure controls and procedures were, in fact, effective at the reasonable
assurance level.  As discussed in the Explanatory Note to this report
and in Note 11 to the financial statements presented herein, however, management
subsequently became aware that The Felton Bank’s calculation of the allowance
for credit los