What changed in this filing

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Item 1. Financial Statements

2021-08-13 compared with 2021-05-14 · 155 added, 117 removed, 728 unchanged (27% of the section changed)

39 unchanged sentences

For Three Months Ended

For Six Months Ended

(In thousands, except per share data)

15 unchanged sentences

Trust and investment fee income

Gains on sales and calls of investment securities

Other noninterest income

11 unchanged sentences

Legal and professional fees

Merger-related expenses

Other noninterest expenses

3 unchanged sentences

Earnings per common share - Basic and diluted

Basic and diluted net income per common share

Dividends paid per common share

3 unchanged sentences

For Three Months Ended

For Six Months Ended

(In thousands)

2 unchanged sentences

Unrealized holding (losses) gains on available-for-sale-securities

Reclassification of (gains) recognized in net income

Amortization of unrealized loss on securities transferred from available-for-sale to held-to-maturity

4 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

For the Three months Ended March 31, 2021 and 2020

For the Three and Six months Ended June 30, 2021 and 2020

Comprehensive

7 unchanged sentences

Balances, March 31, 2021

Other comprehensive (loss)

Stock-based compensation

Cash dividends declared

Balances, June 30, 2021

Comprehensive

7 unchanged sentences

Balances, March 31, 2020

Other comprehensive income

Stock-based compensation

Cash dividends declared

Balances, June 30, 2020

See accompanying notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For Three Months Ended

For Six Months Ended

(In thousands)

8 unchanged sentences

Deferred income tax (benefit)

(Gains) on sales and calls of securities

Losses on sales and disposals of premises and equipment

Losses on sales and valuation adjustments on other real estate owned

8 unchanged sentences

Proceeds from maturities and principal payments of investment securities available for sale

Proceeds from sales and calls of investment securities available for sale

Proceeds from maturities and principal payments of investment securities held to maturity

3 unchanged sentences

Purchases of premises and equipment

Proceeds from sales of premises and equipment

Proceeds from sales of other real estate owned

Net redemption (purchase) of restricted securities

Net redemption of restricted securities

Purchases of bank owned life insurance

5 unchanged sentences

Short-term borrowings

Long-term borrowings

Common stock dividends paid

15 unchanged sentences

Notes to Consolidated Financial Statements

For the Three Months Ended March 31, 2021 and 2020

For the Three and Six Months Ended June 30, 2021 and 2020

Note 1 – Basis of Presentation

3 unchanged sentences

The accompanying interim financial statements are unaudited;

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at March 31, 2021, the consolidated results of income and comprehensive income for the three months ended March 31, 2021 and 2020, changes in stockholders’ equity for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020, have been included.

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at June 30, 2021, the consolidated results of income and comprehensive income for the three and six months ended June 30, 2021 and 2020, changes in stockholders’ equity for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020, have been included.

All such adjustments are of a normal recurring nature.

The amounts as of December 31, 2020 were derived from the 2020 audited financial statements.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report of Shore Bancshares, Inc.

17 unchanged sentences

At the FASB’s October 16, 2019 meeting, the Board affirmed its decision to amend the effective date of this ASU for many companies.

Public business entities that are SEC filers, excluding those meeting the smaller reporting company definition, will retain the initial required implementation date of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

Public business entities that are SEC filers, excluding those meeting the smaller reporting company definition, retained the initial required implementation date of fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

All other entities will be required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022 .

21 unchanged sentences

The Bank further acknowledges the volatility will be greatly influenced by the support provided by the Federal Reserve.

In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs.” This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

Early adoption is not permitted.

All entities should apply ASU No.

2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities.

2021-04 - In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic.

For both public and private companies, the ASU is effective for fiscal years beginning after December 15, 2021.

Transition is prospective.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2021-04 to have a material impact on its consolidated financial statements.

Recently Adopted Accounting Developments

2019-12 – In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes.” The ASU is expected to reduce cost and complexity related to the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminating the need for an organization to analyze whether certain exceptions apply in a given period) and improving financial statement preparers’ application of certain income tax-related guidance.

This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects.

The amendments were effective in the first quarter of 2021 for the Company and there was no material impact on the Company’s Consolidated Financial Statements.

2020-01 – In January 2020, the FASB issued ASU 2020-01, “Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” The ASU is based on a consensus of the Emerging Issues Task Force and is expected to increase comparability in accounting for these transactions.

ASU 2016-01 made targeted improvements to accounting for financial instruments, including providing an entity the ability to measure certain equity securities without a readily determinable fair value at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Among other topics, the amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting.

The amendments were effective in the first quarter of 2021 for the Company and there was no material impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In December 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was passed.

Under Section 541 of the CAA, Congress extended or modified many of the relief programs first created by the CARES Act, including the PPP loan program and treatment of certain loan modifications related to the COVID-19 pandemic.

The Bank participated in the second round of PPP lending under the CAA, which resulted in 959 PPP loans for approximately $ 67.3 million.

In addition, two hospitality loans remained in the COVID-19 relief program under the CARES Act.

Note 2 – Earnings Per Share

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

(In thousands, except per share data)

3 unchanged sentences

Earnings per common share - Basic and Diluted

There were no weighted average common stock equivalents excluded from the calculation of diluted earnings per share for the three months ended March 31, 2021 and 2020.

There were no weighted average common stock equivalents excluded from the calculation of diluted earnings per share for the three and six months ended June 30, 2021 and 2020.

Note 3 – Investment Securities

2 unchanged sentences

Available-for-sale securities:

March 31, 2021

June 30, 2021

Government agencies

3 unchanged sentences

Mortgage-backed

No available for sale securities were sold during the three months ended March 31, 2021 and 2020.

No available for sale securities were sold during the three and six months ended June 30, 2021.

During the three and six months ended June 30, 2020, the Company sold available for sale securities for proceeds of $ 13.0 million and recognized gross gains of $ 347 thousand.

(Dollars in thousands)

Held-to-maturity securities:

March 31, 2021

June 30, 2021

Government agencies

7 unchanged sentences

Other debt securities

Equity securities with an aggregate fair value of $ 1.4 million at March 31, 2021 and $ 1.4 million at December 31, 2020 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled $( 18 ) thousand for the three months ended March 31, 2021 and $ 1 thousand for the three months ended March 31, 2020, respectively.

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020.

Equity securities with an aggregate fair value of $ 1.4 million at June 30, 2021 and December 31, 2020 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled $( 20 ) thousand for the six months ended June 30, 2021 and $ 32 thousand for the six months ended June 30, 2020, respectively.

(Dollars in thousands)

March 31, 2021

June 30, 2021

Available-for-sale securities:

17 unchanged sentences

Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary.

There were eighteen available-for-sale securities and nineteen held-to-maturity securities in an unrealized loss position at March 31, 2021.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at March 31, 2021.

There were eighteen available-for-sale securities and twenty-four held-to-maturity securities in an unrealized loss position at June 30, 2021.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at June 30, 2021.

Available for sale

9 unchanged sentences

Howard County in Maryland, Kent County, Delaware and Accomack County, Virginia.

The following table provides information about the principal classes of the loan portfolio at March 31, 2021 and December 31, 2020.

The following table provides information about the principal classes of the loan portfolio at June 30, 2021 and December 31, 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

4 unchanged sentences

Loans are stated at their principal amount outstanding net of any purchase premiums/discounts, deferred fees and costs.

Loans included deferred fees, net of costs, of $ 751 thousand and discounts on acquired loans of $ 677 thousand at March 31, 2021.

Loans included deferred fees, net of costs, of $ 549 thousand and discounts on acquired loans of $ 625 thousand at June 30, 2021.

Loans included deferred costs, net of deferred fees, of $ 622 thousand and discounts on acquired loans of $ 754 thousand at December 31, 2020.

At March 31, 2021 and December 31, 2020, included in total loans were $ 44.6 million and $ 52.3 million in loans, respectively, acquired as part of the NWBI branch acquisition in 2017.

At June 30, 2021 and December 31, 2020, included in total loans were $ 42.5 million and $ 52.3 million in loans, respectively, acquired as part of the NWBI branch acquisition in 2017.

Interest income on loans is accrued at the contractual rate based on the principal amount outstanding.

29 unchanged sentences

Following a full analysis, the determination of the appropriate loan structure is made.

In 2020, the Company began its participation in the Paycheck Protection Program (PPP).

In April 2020, the Company began its participation in the Paycheck Protection Program (“PPP”).

The PPP commenced subsequent to the passage of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act in March 2020, and was later expanded by the Paycheck Protection Program and Health Care Enhancement Act of April 2020.

1 unchanged sentence

small businesses with cash-flow assistance during the COVID-19 pandemic through loans that are fully guaranteed by the Small Business Administration (“SBA”) which may be forgiven upon satisfaction of certain criteria.

As of March 31, 2021, the Company held PPP loans with a total outstanding balance of $ 129.1 million, which is included in the commercial loan segment in the table above.

In December 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was passed.

This extension of PPP lending expired on May 31, 2021.

Under both the CARES and CAA, the Company funded 2,454 loans for a cumulative balance of $ 196.0 million.

As of June 30, 2021, the Company held PPP loans with a total outstanding balance of $ 86.8 million, which is included in the commercial loan segment in the table above.

The decrease is due to repayment and forgiveness received as of June 30, 2021.

As compensation for originating the loans, the Company received lender processing fees from the SBA, which were deferred, along with the related loan origination costs.

1 unchanged sentence

Upon forgiveness of a PPP loan and repayment by the SBA, which may be prior to the loan’s maturity, the remainder of any unrecognized net fees are recognized as interest income.

The Company has continued to participate in the newest round of the PPP during the first quarter of 2021.

In the normal course of banking business, risks related to specific loan categories are as follows:

14 unchanged sentences

Credit risk is similar to residential real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

The following tables include impairment information relating to loans and the allowance for credit losses as of March 31, 2021 and December 31, 2020.

The following tables include impairment information relating to loans and the allowance for credit losses as of June 30, 2021 and December 31, 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

Loans individually evaluated for impairment

12 unchanged sentences

Total allowance

The following tables provide information on impaired loans and any related allowance by loan class as of March 31, 2021 and December 31, 2020.

The following tables provide information on impaired loans and any related allowance by loan class as of June 30, 2021 and December 31, 2020.

The difference between the unpaid principal balance and the recorded investment is the amount of partial charge-offs that have been taken and interest paid on nonaccrual loans that has been applied to principal.

1 unchanged sentence

average recorded

(Dollars in thousands)

March 31, 2021

June 30, 2021

Impaired nonaccrual loans:

10 unchanged sentences

Commercial real estate

March 31, 2020

June 30, 2020

Quarter-to-date

average recorded

(Dollars in thousands)

12 unchanged sentences

Commercial real estate

The following tables provide a roll-forward for TDRs as of March 31, 2021 and March 31, 2020.

The following tables provide a roll-forward for TDRs as of June 30, 2021 and June 30, 2020.

Disbursements

2 unchanged sentences

Transfer In/(Out)

For three months ended

March 31, 2021

For six months ended

June 30, 2021

Accruing TDRs

8 unchanged sentences

Transfer In/(Out)

For three months ended

March 31, 2020

For six months ended

June 30, 2020

Accruing TDRs

4 unchanged sentences

Commercial real estate

There were no loans modified and considered to be TDRs during the three months ended March 31, 2021 and 1 loan modified and considered to be TDR during the three months ended March 31, 2020.

The following tables provide information on loans that were modified and considered to be TDRs during the three months ended March 31, 2021 and March 31, 2020.

There were no loans modified and considered to be TDRs during the three months ended June 30, 2021 and June 30, 2020.

The following tables provide information on loans that were modified and considered to be TDRs during the six months ended June 30, 2021 and June 30, 2020.

Premodification

1 unchanged sentence

(Dollars in thousands)

For three months ended

March 31, 2021

For six months ended

June 30, 2021

Residential real estate

Commercial real estate

For three months ended

March 31, 2020

For six months ended

June 30, 2020

Residential real estate

Commercial real estate

For the three months ended March 31, 2021, the Company had executed principal and/or interest deferrals on outstanding loan balances of $ 221.1 million, of which only $ 16.1 million, or 1.10 % of the total portfolio remained on deferral as of March 31, 2021.

These deferrals were no more than six months in duration and were for loans not more than 30 days past due as of March 31, 2021.

As such, they were not considered TDRs based on the relief provisions of the CARES Act and recent interagency regulatory guidance.

There were no TDRs which subsequently defaulted within 12 months of modification for the three months ended March 31, 2021 and 2020.

Since the beginning of the pandemic and through June 30, 2021, the Company had executed principal and/or interest deferrals on outstanding loan balances of $ 221.1 million, of which only $ 9.5 million, or 0.65 % of the total portfolio, remained on deferral as of June 30, 2021.

These deferrals were not considered TDRs based on the relief provisions of the CARES Act and CAA or recent interagency regulatory guidance.

There were no TDRs which subsequently defaulted within 12 months of modification for the three and six months ended June 30, 2021 and 2020.

Generally, a loan is considered in default when principal or interest is past due 90 days or more, the loan is placed on nonaccrual, the loan is charged off, or there is a transfer to OREO or repossessed assets.

2 unchanged sentences

These loans and the pass/watch loans are assigned higher qualitative factors than favorably rated loans in the calculation of the formula portion of the allowance for credit losses.

At March 31, 2021, there were no nonaccrual loans classified as special mention or doubtful and $ 4.9 million of nonaccrual loans were classified as substandard.

At June 30, 2021, there were no nonaccrual loans classified as special mention or doubtful and $ 3.9 million of nonaccrual loans were classified as substandard.

Similarly, at December 31, 2020, there were no nonaccrual loans classified as special mention or doubtful and $ 5.5 million of nonaccrual loans were classified as substandard.

The following tables provide information on loan risk ratings as of March 31, 2021 and December 31, 2020.

The following tables provide information on loan risk ratings as of June 30, 2021 and December 31, 2020.

(Dollars in thousands)

Pass/Performing

March 31, 2021

June 30, 2021

Residential real estate

5 unchanged sentences

Commercial real estate

The following tables provide information on the aging of the loan portfolio as of March 31, 2021 and December 31, 2020.

The following tables provide information on the aging of the loan portfolio as of June 30, 2021 and December 31, 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

Residential real estate

6 unchanged sentences

Percent of total loans

The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three months ended March 31, 2021 and March 31, 2020.

The following tables provide a summary of the activity in the allowance for credit losses allocated by loan class for the three and six months ended June 30, 2021 and June 30, 2020.

Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses in other loan classes.

1 unchanged sentence

For three months ended

March 31, 2021

June 30, 2021

Allowance for credit losses:

4 unchanged sentences

For three months ended

March 31, 2020

June 30, 2020

Allowance for credit losses:

2 unchanged sentences

Ending Balance

(Dollars in thousands)

For six months ended

June 30, 2021

Allowance for credit losses:

Beginning Balance

Net (charge-offs) recoveries

Ending Balance

(Dollars in thousands)

For six months ended

June 30, 2020

Allowance for credit losses:

Beginning Balance

Net (charge-offs) recoveries

Ending Balance

Foreclosure Proceedings

There were no consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of March 31, 2021 and December 31, 2020, respectively.

There was 1 residential real estate property included in the balance of other real estate owned totaling $ 205 thousand at March 31, 2021 and $ 0 at December 31, 2020.

There were no consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of June 30, 2021 and December 31, 2020, respectively.

There was 1 residential real estate property included in the balance of other real estate owned totaling $ 203 thousand at June 30, 2021 and $ 0 at December 31, 2020.

All accruing TDRs were in compliance with their modified terms.

Both performing and non-performing TDRs had no further commitments associated with them as of March 31, 2021 and December 31, 2020.

Both performing and non-performing TDRs had no further commitments associated with them as of June 30, 2021 and December 31, 2020.

Note 5 – Leases

5 unchanged sentences

The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

During the second quarter of 2021, one of the Company’s long-term branch leases was reassessed by management and it was determined that it was not reasonably certain that the options to renew would be exercised after the initial lease term of 10 years .

This resulted in a shorter lease term and a reduction of the lease liability and right-to-use assets as compared to the first quarter of 2021 when the lease was initially placed into service.

The following tables present information about the Company’s leases:

(Dollars in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Lease cost (in thousands)

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Operating lease cost

4 unchanged sentences

Lease payments due (in thousands)

March 31, 2021

Nine months ending December 31, 2021

June 30, 2021

Six months ending December 31, 2021

Twelve months ending December 31, 2022

9 unchanged sentences

The Company will continue to monitor the impact of COVID-19 on the Company as well as the financial markets in evaluating the necessity of interim testing during 2021.

The following table provides information on the significant components of goodwill and other acquired intangible assets at March 31, 2021 and December 31, 2020.

March 31, 2021

The following table provides information on the significant components of goodwill and other acquired intangible assets at June 30, 2021 and December 31, 2020.

June 30, 2021

Remaining Life

9 unchanged sentences

Total other intangible assets

The aggregate amortization expense was $ 126 thousand for the three months ended March 31, 2021 and $ 144 thousand for the three months ended March 31, 2020.

At March 31, 2021, estimated future remaining amortization for amortizing intangibles within the years ending December 31, is as follows:

The aggregate amortization expense was $ 246 thousand for the six months ended June 30, 2021 and $ 282 thousand for the six months ended June 30, 2020.

At June 30, 2021, estimated future remaining amortization for amortizing intangibles within the years ending December 31, is as follows:

(Dollars in thousands)

1 unchanged sentence

Note 7 – Other Assets

The Company had the following other assets at March 31, 2021 and December 31, 2020.

The Company had the following other assets at June 30, 2021 and December 31, 2020.

(Dollars in thousands)

4 unchanged sentences

Income taxes receivable

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of March 31, 2021 and December 31, 2020.

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of June 30, 2021 and December 31, 2020.

(Dollars in thousands)

14 unchanged sentences

On August 25, 2020, the Company entered into Subordinated Note Purchase Agreements with certain Purchasers pursuant to which the Company issued and sold $ 25.0 million in aggregate principal amount with an initial interest rate of 5.375 % Fixed-to-Floating Rate Subordinated Notes due September 1, 2030.

The Company plans to use the net proceeds of this offering for general corporate purposes, organic growth and to support the Bank’s regulatory capital ratios.

The Company has and continues to use the net proceeds of this offering for general corporate purposes, organic growth and to support the Bank’s regulatory capital ratios.

The Notes were structured to qualify as Tier 2 capital for regulatory capital purposes and bear an initial interest rate of 5.375 % until September 1, 2025, with interest during this period payable semi-annually in arrears.

2 unchanged sentences

Initial debt issuance costs were $ 611 thousand.

The debt balance of $ 24.5 million is presented net of unamortized issuance costs of $ 540 thousand at March 31, 2021.

The debt balance of $ 24.5 million is presented net of unamortized issuance costs of $ 510 thousand at June 30, 2021.

Note 9 – Other Liabilities

The Company had the following other liabilities at March 31, 2021 and December 31, 2020.

The Company had the following other liabilities at June 30, 2021 and December 31, 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

11 unchanged sentences

Stock-based compensation expense based on the grant date fair value is recognized ratably over the requisite service period for all awards and reflects forfeitures as they occur.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 583,831 shares remained available for grant at March 31, 2021.

The following tables provide information on stock-based compensation expense for the three months ended March 31, 2021 and 2020.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 583,831 shares remained available for grant at June 30, 2021.

The following tables provide information on stock-based compensation expense for the three and six months ended June 30, 2021 and 2020.

For Three Months Ended

For Six Months Ended

(Dollars in thousands)

4 unchanged sentences

Weighted average period unrecognized expense is expected to be recognized

The following table summarizes restricted stock award activity for the Company under the 2016 Equity Plan for the three months ended March 31, 2021.

Three Months Ended March 31, 2021

The following table summarizes restricted stock award activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2021.

Six Months Ended June 30, 2021

Weighted Average

1 unchanged sentence

Nonvested at end of period

The fair value of restricted stock awards that vested during the first three months of 2021 and 2020 was $ 230 thousand and $ 254 thousand, respectively.

The following table summarizes stock option activity for the Company under the 2016 Equity Plan for the three months ended March 31, 2021.

Three Months Ended March 31, 2021

The fair value of restricted stock awards that vested during the first six months of 2021 and 2020 was $ 236 thousand and $ 254 thousand, respectively.

The following table summarizes stock option activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2021.

Six Months Ended June 30, 2021

Weighted Average

4 unchanged sentences

Exercisable at end of period

There were no stock options granted during the three months ended March 31, 2021 and March 31, 2020.

At the end of the first quarter of 2021, the aggregate intrinsic value of the options outstanding under the 2016 Equity Plan was $ 28 thousand based on the $ 17.02 market value per share of the Company’s common stock at March 31, 2021.

Similarly, the aggregate intrinsic value of the options exercisable was $ 28 thousand at March 31, 2021.

At March 31, 2021, the weighted average remaining contract life of options outstanding and exercisable was 1 year .

There were no stock options granted during the three and six months ended June 30, 2021 and June 30, 2020.

At the end of the second quarter of 2021, the aggregate intrinsic value of the options outstanding under the 2016 Equity Plan was $ 27 thousand based on the $ 16.75 market value per share of the Company’s common stock at June 30, 2021.

Similarly, the aggregate intrinsic value of the options exercisable was $ 27 thousand at June 30, 2021.

At June 30, 2021, the weighted average remaining contract life of options outstanding and exercisable was 9 months .

Note 11 – Accumulated Other Comprehensive Income

The Company records unrealized holding gains (losses), net of tax, on investment securities available for sale as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The following table provides information on the changes in the components of accumulated other comprehensive income (loss) for the three months ended March 31, 2021 and 2020.

The following table provides information on the changes in the components of accumulated other comprehensive income (loss) for the six months ended June 30, 2021 and 2020.

Unrealized gains

10 unchanged sentences

Other comprehensive loss

Balance, March 31, 2021

Balance, June 30, 2021

Balance, December 31, 2019

Other comprehensive income

Balances, March 31, 2020

Reclassification of (gain) recognized

Balances, June 30, 2020

Note 12 – Fair Value Measurements

23 unchanged sentences

Although these securities have readily available fair market values, the Company determined that they should be classified as level 2 investments in the fair value hierarchy due to not being considered traded in a highly active market.

The tables below present the recorded amount of assets measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020.

No assets were transferred from one hierarchy level to another during the first three months of 2021 or 2020.

The tables below present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020.

No assets were transferred from one hierarchy level to another during the first six months of 2021 or 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

Securities available for sale:

21 unchanged sentences

Valuation techniques are consistent with those techniques applied in prior periods.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at March 31, 2021 and December 31, 2020, that are valued at the lower of cost or market.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2021 and December 31, 2020, that are valued at the lower of cost or market.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

3 unchanged sentences

Unobservable Input

March 31, 2021

June 30, 2021

Nonrecurring measurements:

20 unchanged sentences

Discount rate

Other real estate owned

Appraisal of collateral

Appraisal adjustments

(1) Fair value is generally determined through independent appraisals of the underlying collateral (impaired loans and OREO) or discounted cash flow analyses (impaired loans), which generally include various level III inputs which are not identifiable.

3 unchanged sentences

The carrying amounts and estimated fair values of the Company’s financial instruments not carried at fair value on the Company’s Consolidated Balance Sheets are presented in the following table.

Fair values for March 31, 2021 and December 31, 2020 were estimated using an exit price notion.

March 31, 2021

Fair values for June 30, 2021 and December 31, 2020 were estimated using an exit price notion.

June 30, 2021

December 31, 2020

14 unchanged sentences

Securities sold under retail repurchase agreement

Advances from FHLB - long-term

Subordinated debt

6 unchanged sentences

Because many of the letters of credit and commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

The following table provides information on commitments outstanding at March 31, 2021 and December 31, 2020.

The following table provides information on commitments outstanding at June 30, 2021 and December 31, 2020.

(Dollars in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

30 unchanged sentences

The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

The following presents noninterest income from continuing operations, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2021 and 2020.

The following presents noninterest income from continuing operations, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2021 and 2020.

For Three Months Ended

For Six Months Ended

(Dollars in thousands)

14 unchanged sentences

The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances.

As of March 31, 2021, and December 31, 2020, the Company did not have any significant contract balances.

As of June 30, 2021, and December 31, 2020, the Company did not have any significant contract balances.

Note 15 – Proposed Merger

5 unchanged sentences

Under the terms of the agreement, Severn shareholders will receive 0.6207 shares of Shore common stock and $ 1.59 in cash for each share of Severn common stock.

Upon closing, Shore shareholders will own approximately 59.6 % of the combined Company and Severn will own approximately 40.4 % of the combined Company.

Upon closing, Shore shareholders will own approximately 59.6 % of the combined Company and Severn shareholders will own approximately 40.4 % of the combined Company.

The transaction is still subject to satisfaction of customary closing conditions, including regulatory approvals and shareholder approval from Shore and Severn shareholders.

The transaction is expected to close in the third quarter of 2021.

As of December 31, 2020, Severn had more than $ 950 million in assets and operated 7 full-service community banking offices throughout Anne Arundel County, Maryland.

The transaction is expected to close in the fourth quarter of 2021.

As of June 30, 2021, Severn had more than $ 1.1 billion in assets and operated 7 full-service community banking offices throughout Anne Arundel County, Maryland.

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-Q

Item 1. Financial Statements