About Shore Bancshares

Shore Bancshares, Inc. operates as a bank holding company for Shore United Bank, N.A. that provides various commercial and consumer banking products and services. The company is the largest independent financial holding company located on the Eastern Shore of Maryland. The company conducts business primarily through two wholly owned subsidiaries, Shore United Bank, N.A. (the ‘bank’) and Mid-Maryland Title Company, Inc. (the ‘Title Company’). The bank provides consumer and commercial banking products and services, including secondary mortgage lending, trust, wealth management and financial planning services. The Title Company engages in title work related to real estate transactions. Banking Products and Services The bank operates full-service branches, ATMs, and loan production offices. The bank provides a full range of commercial and consumer banking products and services to individuals, businesses, and other organizations in Baltimore City, Baltimore County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County, Anne Arundel County and Worcester County in Maryland, Kent County and Sussex County in Delaware and in Accomack County, Virginia. The bank’s deposits are insured up to applicable legal limits by the Federal Deposit Insurance Corporation (the ‘FDIC’). The bank is an independent community bank that serves businesses and individuals in their respective market areas. Services offered are essentially the same as those offered by larger regional institutions that compete with the bank. Services provided to businesses include commercial checking, savings, certificates of deposit and overnight investment sweep accounts. The bank offers all forms of commercial lending, including secured and unsecured loans, working capital loans, lines of credit, term loans, accounts receivable financing, real estate acquisition and development, construction loans and letters of credit. Merchant credit card clearing services are available, as well as direct deposit of payroll, internet banking and telephone banking services. Services to individuals include checking accounts, various savings programs, mortgage loans, home improvement loans, installment and other personal loans, credit cards, personal lines of credit, automobile and other consumer financing, safe deposit boxes, debit cards, 24-hour telephone banking, internet banking, mobile banking, and 24-hour automatic teller machine services. The bank also offers non-deposit products, such as mutual funds and annuities, and discount brokerage services to their customers. Additionally, the bank has Saturday hours and extended hours on certain evenings during the week for added customer convenience. Cannabis Related Business The bank provides banking services to customers that are licensed by various states to do business in the cannabis industry as growers, processors and dispensaries. The bank maintains stringent written policies and procedures related to the on-boarding of such businesses and to the monitoring and maintenance of such business accounts. In accordance with Federal regulatory guidance, and industry best practices, the bank performs a multilayered due diligence review of a cannabis business before the business is on-boarded, including site visits and confirmation that the business is properly licensed by the state in which it is conducting business. Throughout the relationship, the bank continues to monitor the business, including site visits, to ensure that the cannabis business continues to meet stringent requirements, including maintenance of required licenses. The bank performs periodic financial reviews of the business and monitors the business in accordance with the Bank Secrecy Act (‘BSA’) and Maryland Medical Cannabis Commission requirements. Lending Activities The bank originates loans of all types, including commercial, commercial mortgage, commercial construction, residential construction, residential mortgage and consumer loans. The bank originates secured and unsecured loans for business purposes. Commercial loans are typically secured by real estate, accounts receivable, inventory, equipment and/or other assets of the business. The bank’s commercial real estate loans are primarily secured by land for residential and commercial development, agricultural purpose properties, service industry buildings, such as restaurants and motels, retail buildings, and general purpose business space. The bank provides residential real estate construction loans to builders and individuals for single family dwellings. Residential construction loans are usually granted based upon ‘as completed’ appraisals and are secured by the property under construction. These loans typically have maturities of six to twelve months and may have fixed or variable rate features. Permanent financing options for individuals include fixed and variable rate loans with three- and five-year balloon features and one-, three- and five-year adjustable rate mortgage loans. The bank originates residential mortgage loans that are to be held in the company’s loan portfolio, as well as loans that are intended for sale in the secondary market. Loans sold in the secondary market are primarily sold to investors with which the bank maintains a correspondent relationship. These loans are made in conformity with standard government-sponsored enterprise (‘GSE’) underwriting criteria required by the investors to assure maximum eligibility for resale in the secondary market and are approved either by the bank’s underwriter or the correspondent’s underwriter. Additionally, loans that are sold into the secondary market are typically residential long-term loans (15 or more years), generally with fixed rates of interest. Loans retained for the bank’s portfolio typically include construction loans and loans that periodically reprice or mature prior to the end of an amortized term. A variety of consumer loans are offered to customers, including home equity loans, credit cards, marine loans and other secured and unsecured lines of credit and term loans. Deposit Activities The bank offers a full array of deposit products, including checking, savings and money market accounts, and regular and IRA certificates of deposit. The bank also offers the CDARS program, providing up to $50 million of FDIC insurance to the company’s customers. Another program offered by the bank is the ICS program, which is an insured cash sweep program allowing customers the ability to insure deposits over $250 thousand among other banks that participate in the ICS network while providing competitive rates and easy access to funds. In addition, the company offers its commercial customers packages, which include cash management services and various checking opportunities and other cash sweep products. Trust Services The bank has a trust department through which it offers trust, asset management and financial planning services to customers within the company’s market areas using the trade name Wye Financial Partners. Investment Portfolio As of December 31, 2022, the company’s investment securities included U.S. government agencies, mortgage-backed securities, and other debt securities. Supervision and Regulation The company is a financial holding company registered under the Bank Holding Company Act of 1956, as amended (the ‘BHC Act’). The company is a financial holding company registered with the Board of Governors of the Federal Reserve System (the ‘FRB’) under the BHC Act and, as such, is subject to the supervision, examination and reporting requirements of the BHC Act and the regulations of the FRB. The bank is now a national banking association, chartered by and subject to the supervision of the Office of the Comptroller of the Currency (‘OCC’). The deposits of the bank are insured by the FDIC, so certain laws and regulations administered by the FDIC also govern its deposit taking operations. The Dodd-Frank Act, enacted in 2010, made sweeping changes to the financial regulatory landscape that impacts all financial institutions, including the company and the bank. The bank is subject to the provisions of Section 23A and Section 23B of the Federal Reserve Act. Section 23A limits the amount of loans or extensions of credit to, and investments in, the company and its nonbank affiliates by the bank. Section 23B requires that transactions between the bank and the company and its nonbank affiliates be on terms and under circumstances that are substantially the same as with non-affiliates. The company’s deposits are insured up to applicable limits by the DIF of the FDIC. The bank received a ‘satisfactory’ rating in its most recent CRA (Community Reinvestment Act) evaluation. The bank is subject to the BSA and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the ‘USA PATRIOT Act’). The Gramm-Leach-Bliley Act requires disclosures to consumers on policies and procedures regarding the disclosure of such non-public personal information and, except as otherwise required by law, prohibit disclosing such information except as provided in the bank’s policies and procedures. The company has implemented privacy policies addressing these restrictions that are distributed regularly to all existing and new customers of the bank. The company’s operations are subject to several additional laws, some of which are specific to banking and others of which are applicable to commercial operations generally. For example, with respect to the company’s lending practices, it is subject to the following laws and regulations, among several others: Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; HMDA, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed, or other prohibited factors in extending credit; Fair Credit Reporting Act of 1978, as amended by the Fair and Accurate Credit Transactions Act, governing the use and provision of information to credit reporting agencies, certain identity theft protections, and certain credit and other disclosures; Fair Debt Collection Practices Act, governing how consumer debts may be collected by collection agencies; Real Estate Settlement Procedures Act, requiring certain disclosures concerning loan closing costs and escrows, and governing transfers of loan servicing and the amounts of escrows for loans secured by one-to-four family residential properties; Rules and regulations established by the National Flood Insurance Program; and Rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws. The company’s deposit operations are subject to federal laws applicable to depository accounts, including: Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; Truth-In-Savings Act, requiring certain disclosures for consumer deposit accounts; Electronic Funds Transfer Act and Regulation E of the FRB, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; and Rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws. The shares of the company’s common stock are registered with the SEC under Section 12(b) of the Act and listed on the NASDAQ Global Select Market. The company is subject to information reporting requirements, proxy solicitation requirements, insider trading restrictions and other requirements of the Exchange Act, including the requirements imposed under the Sarbanes-Oxley Act of 2002 and the rules of The NASDAQ Stock Market, LLC. History Shore Bancshares, Inc. was founded in 1876. The company was incorporated under the laws of Maryland in 1996.