What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-15 compared with 2021-08-13 · 179 added, 120 removed, 763 unchanged (28% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

(In thousands, except share and per share data)

35 unchanged sentences

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

(In thousands, except per share data)

40 unchanged sentences

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

(In thousands)

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

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

For the Three and Nine months Ended September 30, 2021 and 2020

Comprehensive

11 unchanged sentences

Balances, June 30, 2021

Other comprehensive (loss)

Stock-based compensation

Exercise of options, net of shares surrendered

Cash dividends declared

Balances, September 30, 2021

Comprehensive

11 unchanged sentences

Balances, June 30, 2020

Other comprehensive (loss)

Retirement of common stock

Stock-based compensation

Cash dividends declared

Balances, September 30, 2020

See accompanying notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For Six Months Ended

For Nine Months Ended

September 30,

(In thousands)

21 unchanged sentences

Proceeds from sales and calls of investment securities available for sale

Purchases of investment securities available for sale

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

14 unchanged sentences

Long-term borrowings

Proceeds from the issuance of subordinated debt, net of issuance costs

Common stock dividends paid

1 unchanged sentence

Repurchase of shares for tax withholding on exercised options and vested restricted stock

Stock options exercised, net of shares surrendered

Net cash provided by financing activities

12 unchanged sentences

Notes to Consolidated Financial Statements

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

For the Three and Nine Months Ended September 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 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.

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

The results of operations for the three and nine months ended September 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.

16 unchanged sentences

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

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, 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 .

At this time, the Company has established a project management team which meets periodically to discuss and assign roles and responsibilities, key tasks to complete, and a general timeline to be followed for implementation.

The FASB has issued multiple updates to ASU 2016-13 as codified in Topic 326, including ASU’s 2019-04, 2019-05, 2019-10, 2019-11, 2020-02, and 2020-03.

These ASU’s have provided for various minor technical corrections and improvements to the codification as well as other transition matters.

Smaller reporting companies who file with the U.S.

Securities and Exchange Commission (SEC) and all other entities who do not file with the SEC are required to apply the guidance for fiscal years, and interim periods within those years, beginning after December 15, 2022.

At this time, the Company has established a project management team which meets periodically

to discuss and assign roles and responsibilities, key tasks to complete, and a general timeline to be followed for implementation.

The team has been working with an advisory consultant and has purchased a vendor model for implementation.

Historical data has been collected and uploaded to the new model and the team is in the process of finalizing the methodologies that will be utilized.

The team is currently running a parallel simulation to its current incurred loss impairment model.

The team is currently running a parallel simulation to its current incurred loss model.

The Company is continuing to evaluate the extent of the potential impact of this standard and continues to keep current on evolving interpretations and industry practices via webcasts, publications, conferences, and peer bank meetings.

10 unchanged sentences

The guidance is effective for all entities as of March 12, 2020 through December 31, 2022.

Subsequently, in January 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2021-01 “Reference Rate Reform (Topic 848):

Scope.” This ASU clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

The ASU also amends the expedients and exceptions in Topic 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition.

An entity may elect to apply ASU No.

2021-01 on contract modifications that change the interest rate used for margining, discounting, or contract price alignment retrospectively as of any date from the beginning of the interim period that includes March 12, 2020, or prospectively to new modifications from any date within the interim period that includes or is subsequent to January 7, 2021, up to the date that financial statements are available to be issued.

An entity may elect to apply ASU No.

2021-01 to eligible hedging relationships existing as of the beginning of the interim period that includes March 12, 2020, and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020.

At present, the Bank has limited exposure to LIBOR based pricing.

4 unchanged sentences

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

2020-06 - In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2020-06 “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S.

Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it.

The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.

In addition, the amendment updates the disclosure requirements for convertible instruments to increase the information transparency.

For public business entities, excluding smaller reporting companies, the amendments in the ASU are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

For all other entities, the standard will be effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted.

The Bank does not expect the adoption of ASU 2020-06 to have a material impact on its (consolidated) financial statements.

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):

4 unchanged sentences

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

2021-06 - In August 2021, the FASB issued ASU 2021-06, “'Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946):

Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants.

This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No.

33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No.

33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants”.

The ASU is effective upon addition to the FASB Codification.

The Company does not expect the adoption of ASU 2021-06 to have a material impact on its consolidated financial statements.

Recent Accounting Developments

2 unchanged sentences

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

For the Nine Months Ended

September 30,

(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 and six months ended June 30, 2021 and 2020.

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

Note 3 – Investment Securities

2 unchanged sentences

Available-for-sale securities:

June 30, 2021

September 30, 2021

Government agencies

3 unchanged sentences

Mortgage-backed

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.

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

During the three months ended September 30, 2020, no available for sale securities were sold.

During the nine months ended September 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:

June 30, 2021

September 30, 2021

Government agencies

7 unchanged sentences

Other debt securities

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.

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 June 30, 2021 and December 31, 2020.

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

The fair value adjustment recorded through earnings totaled $( 24 ) thousand for the nine months ended September 30, 2021 and $ 34 thousand for the nine months ended September 30, 2020, respectively.

(Dollars in thousands)

June 30, 2021

September 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 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.

There were nineteen available-for-sale securities and forty-six held-to-maturity securities in an unrealized loss position at September 30, 2021.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at September 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 June 30, 2021 and December 31, 2020.

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

(Dollars in thousands)

June 30, 2021

September 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 $ 549 thousand and discounts on acquired loans of $ 625 thousand at June 30, 2021.

Loans included deferred fees, net of costs, of $ 376 thousand and discounts on acquired loans of $ 577 thousand at September 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 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.

At September 30, 2021 and December 31, 2020, included in total loans were $ 40.5 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.

37 unchanged sentences

Under both the CARES and CAA, the Company funded 2,454 loans for a cumulative balance of $ 196.3 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 of September 30, 2021, the Company held PPP loans with a total outstanding balance of $ 41.5 million, which is included in the commercial loan segment in the table above.

The decrease is due to repayment and forgiveness received as of September 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.

17 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 June 30, 2021 and December 31, 2020.

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

(Dollars in thousands)

June 30, 2021

September 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 June 30, 2021 and December 31, 2020.

The following tables provide information on impaired loans and any related allowance by loan class as of September 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.

3 unchanged sentences

(Dollars in thousands)

June 30, 2021

September 30, 2021

Impaired nonaccrual loans:

10 unchanged sentences

Commercial real estate

June 30, 2020

September 30, 2020

Quarter-to-date

15 unchanged sentences

Commercial real estate

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

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

Disbursements

2 unchanged sentences

Transfer In/(Out)

For six months ended

June 30, 2021

For nine months ended

September 30, 2021

Accruing TDRs

8 unchanged sentences

Transfer In/(Out)

For six months ended

June 30, 2020

For nine months ended

September 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 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.

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

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

Premodification

1 unchanged sentence

(Dollars in thousands)

For six months ended

June 30, 2021

For nine months ended

September 30, 2021

Residential real estate

Commercial real estate

For six months ended

June 30, 2020

For nine months ended

September 30, 2020

Residential real estate

Commercial real estate

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.

Since the beginning of the pandemic and through September 30, 2021, the Company had executed principal and/or interest deferrals on outstanding loan balances of $ 221.1 million.

As of September 30, 2021, the Company had no COVID related deferrals remaining.

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.

There were no TDRs which subsequently defaulted within 12 months of modification for the three and nine months ended September 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 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.

At September 30, 2021, there were no nonaccrual loans classified as special mention or doubtful and $ 3.5 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 June 30, 2021 and December 31, 2020.

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

(Dollars in thousands)

Pass/Performing

June 30, 2021

September 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 June 30, 2021 and December 31, 2020.

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

(Dollars in thousands)

June 30, 2021

September 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 and six months ended June 30, 2021 and June 30, 2020.

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

June 30, 2021

September 30, 2021

Allowance for credit losses:

4 unchanged sentences

For three months ended

June 30, 2020

September 30, 2020

Allowance for credit losses:

3 unchanged sentences

(Dollars in thousands)

For six months ended

June 30, 2021

For nine months ended

September 30, 2021

Allowance for credit losses:

3 unchanged sentences

(Dollars in thousands)

For six months ended

June 30, 2020

For nine months ended

September 30, 2020

Allowance for credit losses:

3 unchanged sentences

Foreclosure Proceedings

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.

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

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

Note 5 – Leases

9 unchanged sentences

(Dollars in thousands)

June 30, 2021

September 30, 2021

December 31, 2020

4 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Lease cost (in thousands)

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Operating lease cost

4 unchanged sentences

Lease payments due (in thousands)

June 30, 2021

Six months ending December 31, 2021

September 30, 2021

Three 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 June 30, 2021 and December 31, 2020.

June 30, 2021

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

September 30, 2021

Remaining Life

9 unchanged sentences

Total other intangible assets

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:

The aggregate amortization expense was $ 353 thousand for the nine months ended September 30, 2021 and $ 407 thousand for the nine months ended September 30, 2020.

At September 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 June 30, 2021 and December 31, 2020.

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

September 30,

(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 June 30, 2021 and December 31, 2020.

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

September 30,

(Dollars in thousands)

19 unchanged sentences

Initial debt issuance costs were $ 611 thousand.

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

The debt balance of $ 24.5 million is presented net of unamortized issuance costs of $ 479 thousand at September 30, 2021.

Note 9 – Other Liabilities

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

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

(Dollars in thousands)

June 30, 2021

September 30, 2021

December 31, 2020

1 unchanged sentence

Deferred compensation liability

Income taxes payable

Other liabilities

7 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 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.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 581,822 shares remained available for grant at September 30, 2021.

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

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

(Dollars in thousands)

1 unchanged sentence

Excess tax benefits related to stock-based compensation

September 30,

(Dollars in thousands)

1 unchanged sentence

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 six months ended June 30, 2021.

Six Months Ended June 30, 2021

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

Nine Months Ended September 30, 2021

Weighted Average

1 unchanged sentence

Nonvested at end of period

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

The fair value of restricted stock awards that vested during the first nine months of 2021 and 2020 was $ 268 thousand and $ 254 thousand, respectively.

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

Nine Months Ended September 30, 2021

Weighted Average

4 unchanged sentences

Exercisable at end of period

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 .

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

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 six months ended June 30, 2021 and 2020.

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

Unrealized gains

10 unchanged sentences

Other comprehensive loss

Balance, June 30, 2021

Reclassification of gains recognized

Balance, September 30, 2021

Balance, December 31, 2019

1 unchanged sentence

Reclassification of (gain) recognized

Balances, June 30, 2020

Balances, September 30, 2020

Note 12 – Fair Value Measurements

3 unchanged sentences

Securities available for sale are recorded at fair value on a recurring basis.

Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as

impaired loans, loans held for sale and other real estate owned (foreclosed assets).

Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans, loans held for sale and other real estate owned (foreclosed assets).

These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

16 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 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.

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

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

(Dollars in thousands)

June 30, 2021

September 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 June 30, 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 September 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

June 30, 2021

September 30, 2021

Nonrecurring measurements:

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

June 30, 2021

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

September 30, 2021

December 31, 2020

22 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 June 30, 2021 and December 31, 2020.

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

(Dollars in thousands)

June 30, 2021

September 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 and six months ended June 30, 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 nine months ended September 30, 2021 and 2020.

For Three Months Ended

For Six Months Ended

For Nine Months Ended

September 30,

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

Note 15 – Proposed Merger

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

Note 15 – Subsequent Event

On March 3, 2021, the Company and Severn Bancorp, Inc.

(“Severn”) entered into a definitive agreement for the Company to acquire the Maryland-based Severn.

This transaction will create the third largest community bank headquartered in Maryland.

One of the primary reasons for the proposed acquisition of Severn was the ability to access and deploy excess capital and deposits into a high growth market, while also enhancing scale to drive efficiency and profitability.

Additionally, this transaction will create a competitive position in the Columbia/Baltimore/Towson MSA, while filling in our current market footprint.

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 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 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.

On September 27, 2021, the Company and Severn received regulatory approval from the Office of the Comptroller of the Currency to convert Shore United Bank to a national bank and, for Severn to be merged with and into Shore United Bank, National Association.

The Company also received regulatory approval from the Federal Reserve Bank of Richmond for Severn to be merged with and into the Company.

On October 22, 2021, the shareholders of the Company and Severn approved the merger of Severn with and into the Company, with the Company as the surviving corporation.

The transaction closed on October 31, 2021, and as of that date, Severn had approximately, $ 1.3 billion in total assets, $ 950.0 million in total deposits and $ 589.6 million in total loans.

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

The following table represents the consideration paid by the Company to acquire Severn:

(Dollars in thousands)

Purchase Price:

Shore Bancshares, Inc common stock paid at closing price of $ 18.48

Cash consideration

Cash consideration for Severn options

Total purchase price

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