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Item 9A. Controls and Procedures

2021-03-26 compared with 2020-03-13 · 54 added, 62 removed, 76 unchanged (60% of the section changed)

Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act with the SEC, such as this annual 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 the Company’s management, including the principal executive officer (the “PEO”) and the principal financial officer (“PFO”), 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.

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over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of these disclosure controls as of December 31, 2019 was carried out under the supervision and with the participation of the Company’s management, including the PEO and the PFO.

Based on that evaluation, the Company’s management, including the PEO and the PFO, has concluded that the Company’s disclosure controls and procedures are, in fact, effective at the reasonable assurance level.

During the fourth quarter of 2019, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has performed an evaluation and testing of the Company’s internal control over financial reporting as of December 31, 2019.

Management’s report on the Company’s internal control over financial reporting and the related attestation report of the Company’s independent registered public accounting firm are included in Item 8 of Part II of this annual report, and each such report is incorporated into this Item 9A by reference thereto.

An evaluation of the effectiveness of these disclosure controls as of December 31, 2020 was carried out under the supervision and with the participation of the Company’s management, including the PEO and the PFO.

During the fourth quarter of 2020, there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management has performed an evaluation and testing of the Company’s internal control over financial reporting as of December 31, 2020.

Management’s report on the Company’s internal control over financial reporting is included in Item 8 of Part II of this annual report.

Other Information.

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The Company has adopted a Code of Ethics that applies to all of its directors, officers, and employees, including its principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions.

A written copy of the Company’s Code of Ethics will be provided to stockholders, free of charge, upon request to:

David Morse, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or (410) 763-7800.

All other information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement to be filed in connection with the 2020 Annual Meeting of Stockholders:

● Election of Directors (Proposal 1);

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● Delinquent Section 16(a) Reports;

Corporate Governance Matters (under the heading, “Board Committees”).

● Corporate Governance Matters (under the heading, “Board Committees”);

● New Employee Stock Purchase Plan (Proposal 4).

Executive Compensation.

The information required by this item is incorporated herein by reference to the following sections of the Company’s definitive proxy statement to be filed in connection with the 2020 Annual Meeting of Stockholders:

● Executive Compensation

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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The Company maintains the Shore Bancshares, Inc.

2016 Stock and Incentive Compensation Plan (the “2016 Plan”) under which it may issue shares of common stock or grant other equity-based awards (stock options, stock appreciation rights, stock awards, stock units, and performance units) to directors, executive officers, and key employees at the discretion of the Compensation Committee of the Board of Shore Bancshares, Inc.

The plan was approved by the Company’s Board of Directors and its stockholders.

The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to the sections of the Company’s definitive proxy statement to be filed in connection with the 2021 Annual Meeting of the Stockholders entitled “Beneficial Ownership of Common Stock.” Information relating to securities authorized for issuance under the Company’s equity compensation plans is included in Part II of this Annual Report on Form 10-K under “Item 5.

Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities.”

Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated herein by reference to the sections of the Company’s definitive proxy statement to be filed in connection with the 2020 Annual Meeting of Stockholders entitled “Certain Relationships and Related Transactions”

and “Corporate Governance Matters”

(under the heading, “Director Independence”).

The information required by this item is incorporated herein by reference to the sections of the Company’s definitive proxy statement to be filed in connection with the 2021 Annual Meeting of Stockholders entitled “Certain Relationships and Related Transactions” and “Corporate Governance Matters” (under the heading, “Director Independence”).

Principal Accounting Fees and Services.

The information required by this item is incorporated herein by reference to the section of the Company’s definitive proxy statement to be filed in connection with the 2020 Annual Meeting of Stockholders entitled “Audit Fees and Services”.

The information required by this item is incorporated herein by reference to the section of the Company’s definitive proxy statement to be filed in connection with the 2021 Annual Meeting of Stockholders entitled “Audit Fees and Services”.

Exhibits, Financial Statement Schedules.

(a)(1), (2) and (c) Financial statements and schedules:

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2020 and 2019

Consolidated Statements of Income —

Years Ended December 31, 2019 and 2018

Consolidated Statements of Comprehensive Income —

Years Ended December 31, 2019 and 2018

Consolidated Statements of Changes in Stockholders’

Equity —

Years Ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows —

Years Ended December 31, 2019 and 2018

Consolidated Statements of Income — Years Ended December 31, 2020 and 2019

Consolidated Statements of Comprehensive Income — Years Ended December 31, 2020 and 2019

Consolidated Statements of Changes in Stockholders’ Equity — Years Ended December 31, 2020 and 2019

Consolidated Statements of Cash Flows — Years Ended December 31, 2020 and 2019

Notes to Consolidated Financial Statements for the years ended December 31, 2020 and 2019

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Form 10-K Summary.

Not applicable

Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 8‑K filed on December 14, 2000)

Articles Supplementary relating to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by reference Exhibit 4.1 of the Company’s Form 8‑K filed on January 13, 2009)

Articles Supplementary relating to the reclassification of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, as common stock (incorporated by reference Exhibit 3.1(i) of the Company’s Form 8‑K filed on June 17, 2009)

Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2(i) of the Company’s Form 10‑K for the year ended December 31, 2010)

First Amendment to Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2(ii) of the Company’s Form 10‑K for the year ended December 31, 2010)

Second Amendment to Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2(iii) of the Company’s Form 10‑K for the year ended December 31, 2010)

Third Amendment to Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2(iv) of the Company’s Form 10‑K for the year ended December 31, 2010)

Description of Registrant’s Securities (filed herewith)

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Form S-3 filed on June 25, 2010)

Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on December 14, 2000)

Articles Supplementary relating to the Fixed Rate Cumulative Perpetual Preferred Stock, Series A (incorporated by reference Exhibit 4.1 of the Company’s Form 8-K filed on January 13, 2009)

Amended and Restated By-Laws (filed herewith)

Description of Registrant’s Securities (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K filed on March 13, 2020).

Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Form S-3 filed on June 25, 2010)

Shore Bancshares, Inc.

Management Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K filed on April 21, 2010)

Management Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on April 21, 2010)

Shore Bancshares, Inc.

Amended and Restated Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K filed on February 14, 2007)

Amended and Restated Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on February 14, 2007)

Shore Bancshares, Inc.

2006 Stock and Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s 2006 definitive proxy statement filed on March 24, 2006)

Form of Restricted Stock Award Agreement under the 2006 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8‑K filed on April 11, 2007)

Form of Performance Share/Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8‑K filed on July 8, 2015).

2006 Stock and Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s 2006 definitive proxy statement filed on March 24, 2006)

Form of Restricted Stock Award Agreement under the 2006 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on April 11, 2007)

Form of Performance Share/Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 8, 2015).

Shore Bancshares, Inc.

2016 Stock and Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s 2016 definitive proxy statement filed on March 15, 2016)

Form of Restricted Stock Award Agreement under the 2016 Stock and Incentive Compensation Plan (filed herewith)

Form of Restricted Stock Units Award under the 2016 Stock and Incentive Compensation Plan (filed herewith)

2016 Stock and Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s 2016 definitive proxy statement filed on March 15, 2016)

Form of Restricted Stock Award Agreement under the 2016 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K filed on March 13, 2020).

Form of Restricted Stock Units Award under the 2016 Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.8 to the Company’s Form 10-K filed on March 13, 2020).

Change in Control Agreement, dated October 31, 2017, between Shore United Bank and Edward C.

Allen (incorporated by reference to Exhibit 10.4 to the Company’s Form 8‑K filed on November 1, 2017)

Allen (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on November 1, 2017)

Change in Control Agreement, dated November 2, 2018 between Shore United Bank and Lloyd L.

(incorporated by reference to Exhibit 10.1 to the Company’s Form 8‑K filed on November 2, 2018)

(incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on November 2, 2018)

Change in Control Agreement, dated November 2, 2018 between Shore United Bank and Donna J.

Stevens (incorporated by reference to Exhibit 10.2 to the Company’s Form 8‑K filed on November 2, 2018)

Shore Bancshares Announces Stock Repurchase Plan (Incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed on April 24, 2019).

Stevens (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on November 2, 2018)

Shore Bancshares Announces Stock Repurchase Plan (Incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed on April 24, 2019).

Supplemental Executive Retirement Plan for Lloyd L.

(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on July 25, 2019).

Supplemental Executive Retirement Plan for Edward C.

Allen (Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on July 25, 2019).

Supplemental Executive Retirement Plan for Donna J.

Stevens (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on July 25, 2019).

2019 Deferred Compensation Plan (filed herewith)

Subsidiaries of the Company (included in the “BUSINESS—General”

section of Item 1 of Part I of this Annual Report on Form 10‑K)

Stevens (Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on July 25, 2019).

2019 Deferred Compensation Plan (incorporated by reference to Exhibit 10.16 to the Company’s Form 10-K filed on March 13, 2020).

Subsidiaries of the Company (included in the “BUSINESS—General” section of Item 1 of Part I of this Annual Report on Form 10-K)

Consent of Yount, Hyde & Barbour, P.C.

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Certification pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith)

XBRL Instance Document (filed herewith)

XBRL Taxonomy Extension Schema (filed herewith)

XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

XBRL Taxonomy Extension Definition Linkbase (filed herewith)

XBRL Taxonomy Extension Label Linkbase (filed herewith)

XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

Inline XBRL Instance Document (filed herewith)

Inline XBRL Taxonomy Extension Schema (filed herewith)

Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith)

Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith)

Inline XBRL Taxonomy Extension Label Linkbase (filed herewith)

Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith)

The cover page of Shore Bancshares, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (contained in Exhibit 101).

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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March 26, 2021

/s/ William E.

/s/ Jeffery E.

Fike, Director

Esham, III, Director

Thompson, Director

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Michael Clemmer, Jr., Director

Willey, Director

March 26, 2021

/s/ Edward C.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures