UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Securities Exchange Act of 1934 (Amendment
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Shore Bancshares, Inc.
| ☒ | No fee required. | ||||||||||
| Fee paid previously with preliminary materials. |
| Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules | |||||||||||
28969 Information Lane
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Our30, 2024:
shorebancshares.q4ir.com/documents/default.aspx
28969 Information Lane,
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FOR” proposal 2. | |
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Time and Date | |||||
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| 30, 2024 Place | |||||
| The Annual Meeting will be completely virtual and held via a live audio webcast. You will be able to attend the |
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| Voting Agenda | Board Recommendation | For More Information, See Page | ||||||
| Proposal 1 – Election of Directors | FOR each nominee | 8 | ||||||
| Proposal 2 – Advisory Vote on | FOR | 45 | ||||||
the technical support number that will be posted on the virtual shareholder meeting log-in page.
Whether or not you participate in the virtual meeting, it is important that your shares be part of the voting process. You may log on to
VOTING MATTERS AND BOARD RECOMMENDATIONS
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1
2021 BUSINESS PERFORMANCE HIGHLIGHTS
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CORPORATE GOVERNANCE HIGHLIGHTS
•90% of directors are independent | •Annual director self-evaluation and committee assessment to ensure Board effectiveness | ||||
•20% of our directors are women | •All directors attended over 75% of 2023 Board and meetings of committees on which they served | ||||
•Lead Independent Director who is Board Vice-Chair | •Independent directors meet regularly in executive session | ||||
•Board refreshment: 13 new Board members, including three women, since 2021 | •Robust risk management oversight | ||||
•Balance of new and experienced directors | •Active shareholder engagement program | ||||
•Transparent public policy engagement | •Board review of company’s financial performance, strategy and succession plan | ||||||
•Independent Board | •Clawback Policy for executive compensation programs | ||||
•No over-boarding | •Code of | |||||
•Stock ownership guidelines for directors and | ||||
Class I Directors (three-year term ending 2025):
John A. Lamon, III — see profile on pg. 9
Jeffrey E. Thompson — see profile on pg. 8
Frank E. Mason, IIII — see profile on pg. 8
William E. Esham, III — see profile on pg. 9
| executives | •Commitment to human capital and environmental, social and governance responsibility | |||
The Proxy Statement proxy materials? Quorum Requirement: The presence, in person or by proxy, of shareholders entitled to cast a majority of all votes entitled to be cast at the Annual Meeting will constitute a quorum. In the event there are not sufficient shares present for a quorum, or to approve or ratify any matter being presented at the Annual Meeting, the Annual Meeting may be adjourned or postponed in order to permit the further solicitation of proxies. Advisory Vote on the Compensation of our Named Executive Officers: The affirmative vote of the holders of at least the majority of the shares for which votes are cast on the proposal at the Annual Meeting is required for approval, on an advisory basis, of our executive compensation. Abstentions and broker non-votes will be counted for purposes of determining the presence of a quorum but will have no impact on the outcome of the vote on Proposal 2. The vote with respect to Proposal 2 is not binding on the Company, the Board or the Compensation Committee. However, the Board and the Compensation Committee will review the results of the vote and take it into consideration when making future decisions regarding compensation of the Company’s named executive officers. Shareholders of record who choose to attend, vote, and for more information. revoke my proxy? Board Diversity Matrix (As of February 25, 2022) The Whether recommended by a shareholder or chosen independently by the reviews management’s assessment of the Company’s core risks and alignment of its enterprise-wide risk profile with the Company’s strategic plan, goals, and objectives. In addition to our committees’ work in overseeing risk management, our full Board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed. The Board regularly receives reports and other information on areas of material risk to the Company including compliance, credit, cybersecurity, financial, liquidity, market/interest rate, operational, reputational, strategic, and technology risks. Those reports enable the Board to understand the risk identification, risk management and risk mitigation strategies, which are then employed by management and the enterprise risk management function. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by the Board and its committees. technology. Number of Shares Beneficially Percent of Class Beneficially 2020 2021 2021 (“2023 STIP”) Stock Awards Non-equity incentive plan compensation Change in non-qualified deferred compensation earnings All other compensation change in control occurs. The Agreement Ms. Stevens entered into Retention Agreement with the Company, under which she waived he right to terminate for “good reason” based on the changes in responsibility or duties as a result of the merger. The term “Good Reason” is defined as the termination by the officer within 12 months following a Change in Control based on: (i) without the officer’s express written consent, a material adverse change made by the Company which would reduce the officer’s functions, duties or responsibilities; (ii) without the officer’s express written consent, a 5% or greater reduction by the Company in the officer’s base salary as the same may be increased from time to time; or (iii) without the officer’s express written consent, the previous three years, compensation actually paid to each of our Chief Executive Officers and named executive officers has aligned with the Company’s financial performance and successful execution of merger-related activities.3QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING1.What is the Notice of Internet Availability of Proxy Materials that I received in the mail and why am I receiving it?1.What is the Notice of Internet Availability of Proxy Materials that I received in the mail and why am I receiving it?In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), except for shareholders who have requested otherwise, we have generally mailed to our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”).Availability. The Notice of Internet Availability provides instructions either for accessing our proxy materials, including this Proxy Statement and the 2021our Annual Report which includes our annual report on Form 10-K for the year ended December 31, 20212023 (the “2021“2023 Annual Report”), at the website address referred to in the Notice of Internet Availability, or for requesting printed copies of the proxy materials by mail or electronically by e-mail. If you would like to receive a paper or e-mail copy of our proxy materials either for this Annual Meeting or for all future meetings, you should follow the instructions for requesting such materials included in the Notice of Internet Availability we mailed to you.Our Board provided the Notice of Internet Availability and is making the proxy materials available to you in connection with our Annual Meeting, which will take place on May 24, 2022.30, 2024. As a shareholder, you are invited to attend the Annual Meeting and are entitled to, and requested to, vote on the proposals described in this Proxy Statement.2.What information is contained in the Proxy Statement?2.What information is contained in the Proxy Statement?This Proxy Statement describes the proposals to be voted on at the Annual Meeting, the voting process, compensation of our directors and executive officers, and certain other required information.3.How can I access the Company’s proxy materials electronically?3.How can I access the Company’s proxy materials electronically?form of proxy and 20212023 Annual Report are available at http://viewproxy.com/ShoreBancshares/2022 and on our corporate website at www.shorebancshares.com underhttps://shorebancshares.q4ir.com/documents/default.aspx.4.What does it mean if I receive more than one Notice of Internet Availability or set of the “Governance Documents” link.4.What does it mean if I receive more than one Notice of Internet Availability or set of the proxy materials?It means your shares are registered differently or are in more than one account. Please provide voting instructions for each account for which you have received a Notice of Internet Availability or set of proxy materials.5.Who is soliciting my vote pursuant to this Proxy Statement?5.Who is soliciting my vote pursuant to this Proxy Statement?Our Board is soliciting your vote at the Annual Meeting.6.Who is entitled to vote?6.Who is entitled to vote?Only shareholders of record at the close of business on March 28, 2022April 2, 2024 (the “Record Date”) are entitled to notice of and to vote at the 2022 Annual Meeting.7.How many shares are eligible to be voted?7.How many shares are eligible to be voted?As of the Record Date, we had 19,843,37933,210,522 shares of common stock, par value $.01$0.01 per share (“Common Stock”) outstanding. Each outstanding share of our Common Stock will entitle its holder to one vote on each of the director nominees to be elected and one vote on each other matter to be voted on at the Annual Meeting.8.What am I voting on?8.What am I voting on?You are voting on the following matters:·election of four Class I directors to serve for a three-year term ending at the 2025 annual meeting of shareholders (Proposal 1);·ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022 (Proposal 2); and4•the election of four Class III directors to serve for a three-year term ending at the 2027 annual meeting of shareholders (Proposal 1); and·advisory approval of the compensation of our named executive officers (Proposal 3).9.How does our Board recommend that I vote?•the advisory approval of the compensation of our named executive officers (Proposal 2).9.How does our Board recommend that I vote?Our Board recommends that shareholders vote their shares as follows:·•“FOR” each director nominee; and4•“FOR” the approval of the compensation of our named executive officers.10.Why am I not being asked to vote on the ratification of the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024?As discussed under the section of this Proxy Statement captioned “Audit Related Matters,” the Audit Committee has appointed Yount, Hyde & Barbour as independent registered public accounting firm for the fiscal year ending December 31, 2024; however, we have submitted a request for proposal to several independent registered public accounting firms for the 2024 audit. We anticipate this process will be completed in the second quarter of 2024. In light of this ongoing process, we are not submitting a proposal for the ratification of appointment of an independent registered public accounting firm at the Annual Meeting.11.How many votes are required to hold the Annual Meeting and what are the voting procedures?“FOR” each director nominee;·“FOR” the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022; and·“FOR” the approval of the compensation of our named executive officers.10.How many votes are required to hold the Annual Meeting and what are the voting procedures?Required Votes: Each outstanding share of Common Stock is entitled to one vote on each proposal at the Annual Meeting.If there is a quorum at the Annual Meeting, the matters to be voted upon by the shareholders require the following votes for such matter to be approved:Election of Directors: Directors are elected by a plurality of all votes cast at the Annual Meeting. Withholding of a vote, abstentions and broker non-votes will have no effect on the outcome of this vote, although they are counted towards establishing a quorum for the Annual Meeting.Ratification of the Appointment of the Independent Registered Public Accounting Firm: The affirmative vote of the holders of at least the majority of the shares for which votes are cast on the proposal at the Annual Meeting is required for ratification of the appointment of Yount, Hyde & Barbour, P.C. as our independent registered public accounting firm. Abstentions will be counted for purposes of determining the presence of a quorum but will have no impact on the outcome of the vote on Proposal 2.3.If a broker indicates on its proxy that it submits to the Company that it does not have authority to vote certain shares held in “street name,” the shares not voted are referred to as “broker non-votes.” Broker non-votes occur when brokers do not have discretionary voting authority to vote certain shares held in “street name” on particular proposals under the rules of the New York Stock Exchange, and the “beneficial owner” of those shares has not instructed the broker how to vote on those proposals. If you are a beneficial owner and you do not provide instructions to your broker, bank or other nominee, your broker, bank or other nominee is permitted to vote your shares for or against “routine” matters such as Proposal 2, the ratification of the appointment of our independent registered public accounting firm.matters. Brokers are not permitted to exercise discretionary voting authority to vote your shares for or against “non-routine” matters. Proposals 1 and 32 are “non-routine” matters.12.How do I attend the Annual Meeting?11.How do I attend the Annual Meeting?vote atsubmit questions during the Annual Meeting must first register at https://viewproxy.com/ShoreBancshares/2022/htype.asp. You will receive a meeting invitation by e-mail withvisit www.virtualshareholdermeeting.com/SHBI2024and enter your unique join link along with a password prior to the Annual Meeting. If you are a shareholder of record, your virtual16-digit control number will beincluded on your Notice of Internet Availability, on your proxy card.
card, or on the instructions that accompanied your proxy materials. We encourage shareholders to log in to the website and access the webcast approximately 15 minutes before the Annual Meeting starts at 9:30 a.m., Eastern Time.513.How can I vote? Must I attend the Annual Meeting to do so?12.How can I vote? Must I attend the Annual Meeting to do so?If you are a shareholder of record, you may vote at the Annual Meeting on May 24, 2022,30, 2024, or you may direct how your shares are voted without attending the Annual Meeting in one of the other following ways:·Internet. You can submit a proxy over the Internet to vote your shares at the Annual Meeting by following the instructions provided either in the Notice of Internet Availability or on the proxy card or voting instruction form you received if you requested and received a printed set of the proxy materials.·Telephone. If you requested and received a printed set of the proxy materials, you can submit a proxy over the telephone to vote your shares at the Annual Meeting by following the instructions provided on the proxy card or voting instruction form enclosed with the proxy materials you received. If you received a Notice of Internet Availability only, you can submit a proxy over the telephone to vote your shares by following the instructions at the Internet website address referred to in the Notice of Internet Availability.·Mail. If you requested and received a printed set of the proxy materials, you can submit a proxy by mail to vote your shares at the Annual Meeting by completing, signing and returning the proxy card or voting instruction form enclosed with the proxy materials you received.•Internet. You can submit a proxy over the Internet to vote your shares at the Annual Meeting by following the instructions provided either in the Notice of Internet Availability or on the proxy card or voting instruction form you received if you requested and received a printed set of the proxy materials.•Telephone. If you requested and received a printed set of the proxy materials, you can submit a proxy over the telephone to vote your shares at the Annual Meeting by following the instructions provided on the proxy card or5voting instruction form enclosed with the proxy materials you received. If you received a Notice of Internet Availability only, you can submit a proxy over the telephone to vote your shares by following the instructions at the Internet website address referred to in the Notice of Internet Availability.•Mail. If you requested and received a printed set of the proxy materials, you can submit a proxy by mail to vote your shares at the Annual Meeting by completing, signing and returning the proxy card or voting instruction form enclosed with the proxy materials you received.Whichever method of voting you use, the proxies identified on the proxy card will vote the shares of which you are the shareholder of record in accordance with your instructions. If you submit a proxy card properly voted and returned through available channels without giving specific voting instructions, the proxies will vote the shares as recommended by our Board.13.How may a shareholder vote if their shares are still held in the Severn Employee Stock Ownership Plan (“ESOP”)?14. How may a shareholder vote if their shares are still held in the Community Bank of the Chesapeake Employee StockOwnership Plan (“ESOP”)?On October 31, 2021,July 1, 2023, we completed the acquisition of Severn.our merger with Community Financial. Prior to the closing, SevernCommunity Financial paid into the ESOP all employer contributions and adopted resolutions to (i) terminate the ESOP and (ii) provide for full vesting of all account balances in the ESOP. A determination letter has been filed with the IRSInternal Revenue Service (the “IRS”) to terminate the ESOP and the ESOP will be terminated if and when the IRS issues a favorable determination letter. If you are a participant in the ESOP and have not received your shares of Company common stockCommon Stock prior to the Record Date, the trustee of the ESOP will vote all the shares held by the ESOP. Each participant may direct the trustee how to vote the shares of Company common stockCommon Stock allocated to his or her plan account. If you own shares through the ESOP and you do not direct the trustee how to vote by May 17, 2022,23, 2024, the ESOP trustee will vote your shares in accordance with the terms of the ESOP.14.How may a shareholder nominate someone at the Meeting to be a director or bring any other business before the Meeting?15. How may a shareholder nominate someone at the Meeting to be a director or bring any other business before the Meeting?The Company’s Second Amended and Restated By-Laws, as amended (the “Bylaws”) require advance notice to the Company if a shareholder intends to nominate someone for election as a director or to bring other business before the Annual Meeting. Such a notice may be made only by a shareholder of record within the time period established in the Bylaws. See “Shareholderthe section of this Proxy Statement captioned “Shareholder Proposals for the 20232025 Annual Meeting” beginning on page 43.15.How do I request electronic or printed copies of this and future proxy materials?16. How do I request electronic or printed copies of this and future proxy materials?You may request and consent to delivery of electronic or printed copies of future proxy statements, annual reports and other shareholder communications by:·visiting http://viewproxy.com/ShoreBancshares/2022, or·calling 1-877-777-2857, or·sending an email to requests@viewproxy.com.•visiting www.ProxyVote.com or•calling 1-800-579-1639, or•sending an email to sendmaterial@proxyvote.com.When requesting copies of proxy materials and other shareholder communications, you should have available the control number located on the Notice of Internet Availability or proxy card or, if shares are held in the name of a broker, bank or other nominee, the voting instruction form.16.What happens if my shares are held in street name?17. What happens if my shares are held in street name?If you have selected a broker, bank, or other intermediary to hold your shares of Common Stock, rather than having the shares directly registered in your name with our transfer agent, you will receive separate instructions directly from your broker, bank, or other intermediary in order to vote your shares. If you, as the beneficial owner of the shares of Common Stock, do not submit voting instructions to the organization that holds your shares, that organization may still be permitted to vote your shares. In general, the organization that holds your shares of Common Stock may generally vote on routine matters. Proposal 2, the approval and appointment of the Company’s independent auditor, Yount, Hyde & Barbour, P.C., is a routine matter. However, absent specific instructions from beneficial owners, brokers may not vote for non-routine matters. Proposal 1 the(the election of directorsdirectors) and Proposal 3, the2 (the advisory approval of the compensation of our named executive officersofficers) are non-routine matters. Therefore, there may be broker non- votes with respect to Proposals 1 and 3.2. Accordingly, we urge you to vote by following the instructions provided by your broker, bank, or other intermediary.66Please note that if your shares are held in street name and you wish to attend and vote your shares at the Annual Meeting, you must first obtain a legal proxy from your broker, bank, or other intermediary that is the holder of record of your shares and provide it during registration and you will be assigned a virtual control number in order to vote your shares during the Annual Meeting. Otherwise you will not be permitted to vote in person at the Annual Meeting. Instructions on how to participate atlog into the Annual Meeting via the internet are posted at https://viewproxy.com/ShoreBancshares/2022/htype.asp. On the day of the Annual Meeting, shareholders who hold their sharesas a shareholder using your valid control number included in street name through banks, brokers or nominees may only vote during the meeting by emailing a copy of their legalyour proxy materials.18. What steps can I take if I want to virtualmeeting@viewproxy.com in advance of the Annual Meeting.17.What steps can I take if I want to revoke my proxy?Any shareholder giving a proxy may revoke it at any time by submission of a later dated proxy, subsequent Internet or telephonic proxy, or by written notice delivered to Lloyd L. Beatty, Jr.,James M. Burke, President and Chief Executive Officer (“CEO”) of the Company, at the Company’s address listed above or at the Annual Meeting. Shareholders entitled to vote at the Annual Meeting who attend may revoke any proxy previously granted and vote in person at the Annual Meeting by written ballot. Unless so revoked, the shares represented by such proxies will be voted at the Annual Meeting and all adjournments or postponements of the Annual Meeting.All properly executed proxies received pursuant to this solicitation will be voted as directed by the shareholder on the proxy. If no direction is given, the proxy will be voted “FOR”“FOR” all nominees named in Proposal 1 “FOR” the ratification of the appointment of Yount, Hyde & Barbour, P.C. as the Company’s independent registered public accounting firm, as described in Proposal 2 and “FOR”“FOR” the adoption of the resolution approving the compensation of theour named executive officers, as described in Proposal 3.18.2. 19. How are the votes tabulated?Alliance Advisors will tabulate all votes which are received prior to the date of the Annual Meeting. tabulated?We have appointed Tina ConnollyChristy Lombardi, our Executive Vice President and Chief Human Resources Officer, as Inspector of Election of the Annual Meeting and to receive Alliance Advisors’ tabulation, to tabulate all otherthe votes and to certify the voting results. We intend to publish the final voting results in a Current Report on Form 8-K to be filed with the SEC within four business days of the Annual Meeting.19.Who pays the cost of this solicitation?20. Who pays the cost of this solicitation?We will pay the cost of this solicitation. In addition, arrangements may be made with brokerage houses and other custodians, nominees, and fiduciaries to send proxies and proxy material to their principals. Solicitation of proxies may be made by mail, telephone, personal interviews or by other means by our officers and employees who will not be additionally compensated therefor.77Classification of the Company’s DirectorsThe Company completed its merger of equals with Community Financial effective July 1, 2023. In accordance with the terms of the merger agreement, the number of directors constituting our Board is currently set at 14. In20 members including 12 directors who served on the Company’s Board immediately prior to the effective time of the merger, and eight former directors of Community Financial. The 12 legacy members of the Company’s Board who currently serve on the Board are: Alan J. Hyatt, William E. Esham, III, John A. Lamon, III, Frank E. Mason, III, Esther A. Streete, David S. Jones, Clyde V. Kelly, III, David W. Moore, Dawn M. Willey, R. Michael Clemmer, Jr., James A. Judge and Konrad M. Wayson. The eight former members of the Community Financial Board of Directors who currently serve on the Company’s Board are: Mary Todd Peterson, Rebecca M. McDonald, Michael B. Adams, James M. Burke, Austin J. Slater, Jr., Louis P. Jenkins, Jr., Joseph V. Stone, Jr. and E. Lawrence Sanders, III.Consistent with the terms of the merger agreement and in accordance with the terms of the Company’s Amended and Restated Articles of Incorporation, as amended and supplemented (the “Charter”), our Board is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, as follows:·The Class I directors are Frank E. Mason, III, Jeffrey E. Thompson, John A. Lamon, III and William E. Esham, III and their terms will expire at the Annual Meeting;·The Class II directors are Blenda W. Armistead, Clyde V. Kelly, III, David W. Moore, Dawn M. Willey and David S. Jones and their terms will expire at the annual meeting of the shareholders to be held in 2023;·The Class III directors are Lloyd L. Beatty, Jr., James A. Judge, Alan J. Hyatt, Konrad M. Wayson and R. Michael Clemmer, Jr. and their terms will expire at the annual meeting of the shareholders to be held in 2024.•The Class I directors are William E. Esham, III, John A. Lamon, III, Frank E. Mason, III, Rebecca M. McDonald, Mary Todd Peterson and Esther A. Streete, whose terms will expire at the annual meeting of shareholders to be held in 2025;•The Class II directors are Michael B. Adams, James M. Burke, Louis P. Jenkins, Jr., David S. Jones, Clyde V. Kelly, III, David W. Moore, Austin J. Slater, Jr. and Dawn M. Willey, whose terms will expire at the annual meeting of shareholders to be held in 2026; and•The Class III directors are R. Michael Clemmer, Jr., Alan J. Hyatt, E. Lawrence Sanders, III, Konrad M. Wayson, Joseph V. Stone, Jr. and James A. Judge, whose terms will expire at the Annual Meeting.Following the merger, the Board evaluated the number of members serving on the Board and determined to decrease the size of the Board from 20 to 18 directors effective as of the Annual Meeting. In connection with the plan to reduce the size of the Board, Messrs. Judge and Stone were not nominated for re-election to the Board at the Annual Meeting. The Board currently expects that the size of the Board may be further reduced in future years to as few as 13 members. As a result, the Board has determined not to balance the class sizes at this time. The plan to reduce the size of the Board is subject to the Board’s further evaluation and discretion. Changes to the size of the Board will be structured so that, over time, the number of directors in each Board class will be as nearly equal as possible.Election Procedures; Term of OfficeAt each annual meeting of shareholders, or special meeting in lieu thereof, upon the expiration of the term of a class of directors, the successors to such directors will be elected to serve from the time of election and qualification until the third annual meeting following his or her election and the election and qualification of his or her successor. Any change in the Board resulting from an increase or decrease in the number of directors will be distributed by the Board among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.Board Diversity MatrixOur Board has approved the nominationvalues diversity and seeks to include directors with a broad range of Frank E. Mason, III, Jeffrey E. Thompson, John A. Lamon, IIIbackgrounds, professional experience, skills and William E. Esham, III, for re- election as Class I directors.Information about the principal occupations, business experience and qualifications of these nominees is provided below under the heading “Qualifications of 2022 Director Nominees and Continuing Directors.”QUALIFICATIONS OF 2022 DIRECTOR NOMINEES AND CONTINUING DIRECTORSClass I DirectorNominees:Frank E. Mason, IIIAge: 59Director Since: 2011Committees: Executive;Nominating & GovernanceMr. Mason served as a director of the Company and The Talbot Bank since 2011 and subsequently became a director of Shore United Bank, National Association (also referred to as the “Bank”) after the merger of Talbot Bank and CNB in 2016. Mr. Mason served as Chairman of the Board for the Company and Bank from 2017 through October 31, 2021. Mr. Mason is the President and Chief Executive Officer of JASCO Incorporated, a manufacturer and distributor of analytical instrumentation for the scientific research community, a position he has held since 2004. JASCO Incorporated, which is a subsidiary of JASCO Corporation located in Tokyo, Japan, operates throughout North and South America. Prior to becoming President and Chief Executive Officer, Mr. Mason served as JASCO Incorporated’s Chief Operations Officer from 1996 to 2004 and as its Sales Director for North America from 1987 to 1995. Mr. Mason has a Bachelor of Arts degree from the University of Maryland, College Park, and an MBA from Johns Hopkins University.perspectives. In nominating Mr. Mason, the Nominating Committee considered as important factors Mr. Mason’s experience in leading a large corporation, his financial and operational knowledge.Jeffrey E. ThompsonAge: 66Director Since: 2016Committees: Compensation Mr. Thompson served as a director of CNB since 2005 and subsequently became a director of Shore United Bank, National Association and the Company after the merger of CNB and Talbot Bank in 2016. He also served as legal counsel for CNB from 1986 to July 2016. Mr. Thompson is a managing partner for the law firm of Thompson & Richard, LLP, located in Centreville, Maryland. The law firm has a concentration in all matters pertaining to commercial and residential real estate, estates and trust. The law firm owns and operates a title insurance agency, Chesapeake Title Group. In nominating Mr. Thompson, the Nominating Committee considered as important factors Mr. Thompson’s experience as an attorney, his expertise in real estate law, and his extensive service on a bank board.8William E. Esham, IIIAge: 56Director Since: 2020Committees: Executive; Risk ManagementMr. Esham was appointed to serve as a director of both the Company and Shore United Bank, National Association in June of 2020. Mr. Esham is a partner in the law firm of Ayres, Jenkins, Gordy & Almand, P.A., specializing in real estate law, located in Ocean City, Maryland. Mr. Esham also serves on the Board of Trustees for Worcester Preparatory School and the Board of Directors for Atlantic General Hospital. Mr. Esham holds a BA from Washington and Lee University and JD from University of Baltimore. In nominating Mr. Esham, the Nominating Committee considered as important factors his legal expertise in real estate law and his prior bank board of director experience with Shore Bank during the period of 2012-2016 (which was acquired by Xenith Bank in 2016) and Peninsula Bank's Advisory Board during the period of 1996-2006.John A. Lamon, IIIAge: 64Director Since: 2021Committees: Compensation; Nominating & GovernanceMr. Lamon served as a director of Severn since 2009 and as a director of Severn Savings Bank, FSB since 2008 and subsequently became a director of both the Company and Shore United Bank, National Association after the merger of the Company and Severn in 2021. Mr. Lamon has been a Senior Account Executive with G&G Outfitters, Inc. since 2000, a promotional products and marketing company that focuses on branded merchandise. Prior to that, Mr. Lamon was President and Owner of John A. Lamon & Associates, a promotional and marketing company. Mr. Lamon was with the company for 20 years before selling the business to G&G Outfitters, Inc. After 20 years with G&G Outfitters, Inc. Mr. Lamon accepted a position as Director of Business Development for Ironmark, a leading marketing agency in Maryland. Mr. Lamon received his Bachelor’s degree from the University of Maryland, where he was a two-time All American lacrosse player. Mr. Lamon has received the Willis Bilderback Volunteer Award and the Willie Gateau Youth Services Award. He has served on various boards including St. Mary’s School, the Annapolis Touchdown Club, St. Mary’s Royal Blue Club and the University of Maryland M Club. In nominating Mr. Lamon, the Nominating Committee considered as important factors his business and marketing experience, which is important to the oversight of the Company’s financial reporting, enterprise and operational risk management.Continuing Directors:Class II Directors:Blenda W. ArmisteadAge: 70Director Since: 2002Committees: Audit; Nominating & GovernanceMs. Armistead is a self-employed investor. Ms. Armistead has been a director of the Company since 2002 and served as a director of Talbot Bank since 1992 and subsequently became a director of Shore United Bank, National Association after the merger of CNB and Talbot Bank in 2016. Ms. Armistead served as the County Manager and Finance Officer of Talbot County, Maryland from 1982 to 1999 and has served on the boards of numerous community-based organizations within Talbot County and the Mid- Shore. Ms. Armistead received her MBA from the University of North Carolina in 1974. Ms. Armistead’s qualifications to serve on our Board include her banking experience, her managerial, governance and financial expertise relating to her career in local government, and her familiarity with and involvement in one of our key market areas.Clyde V. Kelly, IIIAge: 68Director Since: 2016Committees: Nominating & Governance (Chair); CompensationMr. Kelly served as a director of CNB since 2005, and subsequently became a director of Shore United Bank, National Association and the Company after the merger of CNB and Talbot Bank in 2016. Mr. Kelly has been the President and General Manager of Kelly Distributors since 1987, a company that distributes Anheuser-Busch InBev and craft brewery brands in Talbot, Queen Anne’s, Caroline, Dorchester, and Kent counties of Maryland. Mr. Kelly’s qualifications to serve on our Board include his experience in leading a large corporation, his financial and operational knowledge and familiarity with our market area.9David W. MooreAge: 57Director Since: 2014Committees: Compensation (Chair)Mr. Moore has been a director of the Company since 2014. He previously served as a director of Felton Bank since 2001 and subsequently became a director of CNB after the merger of Felton Bank and CNB in 2010. He was the Chairman of the ALCO Committee and was a member of CNB’s Executive Committee. He became a director of Shore United Bank, National Association after the merger of Talbot Bank and CNB in 2016. Currently, Mr. Moore is the Chairman of Shore Bancshares and Shore United Bank National Association’s Compensation Committees. Mr. Moore has served as President and CEO of Milford Housing Development Corporation (MHDC) since 2004 and President of East Coast Property Management since 2011. He received his Associate degree in Construction Management from Delaware Technical and Community College in 1984 and his Bachelor of Science degree in Business Management in 1994. Mr. Moore’s qualifications to serve on our Board include his banking experience and his experience in the housing industry.Dawn M. WilleyAge:59Director Since:2020Committees:Audit; Risk ManagementMrs. Willey joined the Company as a director in December 2020. Mrs. Willey was the founding CEO of Bridgeforce Inc., a trusted advisor to many of the largest lenders in the world. Mrs. Willey retired in 2013 and served as Board Chairperson through 2019. Mrs. Willey has also served on the Board of Katabat, a financial service SAS cloud computing company until its sale in 2020. Prior to launching an entrepreneurial career in 2000, Mrs. Willey held the position of Executive Vice President with MBNA, later purchased by Bank of America. Mrs. Willey has a Bachelor of Arts degree from the University of Delaware. Mrs. Willey’s qualifications to serve on our Board include a 16-year career with MBNA, where she was responsible for the oversight and implementation of a variety of operations including: portfolio risk strategies, investment evaluation and development of strategic business technology initiatives for collections, fraud, credit acquisition and portfolio risk management.David S. JonesAge: 62Director Since:2021Committees: CompensationMr. Jones was a director of Severn since 2012, serving on the Governance Committee, and a director of Severn Savings Bank, FSB since 2011. He was subsequently appointed as a director of the Company and Shore United Bank, National Association in connection with the merger of the Company and Severn in 2021. In 1983 Mr. Jones cofounded Southern Drywell, Inc., a septic system contractor, and serves as its President. Mr. Jones also cofounded Jones of Annapolis, Inc., a demolition and excavation contractor, in 1980 and serves as the Secretary/Treasurer. Both companies are located in Annapolis. He has developed, owned and leased commercial and residential real estate throughout Anne Arundel County since 1985. In addition, he also cofounded and is President of Baystar Precast Corporation, a concrete products manufacturer in the Southern Maryland region. Mr. Jones’ qualifications to serve on our Board include his many years of business experience, which is important to the oversight of the Company’s financial reporting, enterprise and operational risk management.Class III Directors:Lloyd L. Beatty, Jr.Age: 69Director Since: 2000Committees: Executive; Risk ManagementMr. Beatty has served as the Company's President and Chief Executive Officer (“CEO”) since June 2013 and as a director of the Company since 2000. He was appointed CEO of Shore United Bank, National Association in December 2018 and President in January 2019. Prior to the merger of our banking subsidiaries, CNB and Talbot Bank, which formed Shore United Bank, in 2016, Mr. Beatty served as a director of the Talbot Bank since 1992 and as a director of CNB since 2015 and subsequently became a director of the Bank following the merger. Since January 2011, Mr. Beatty has served as our President and Chief Operating Officer (“COO”) and previously served as our Executive Vice President and COO since August 2007. Prior to that and since October 2004, Mr. Beatty has been employed by us in various executive level operating officer capacities. Prior to joining the Company, Mr. Beatty was the Chief Operating Officer of Darby Overseas Investments, LP, a global private equity firm, and President of Darby Advisors, Inc., a privately held family investment business, from 1998 to 2005. Mr. Beatty was also a practicing certified public accountant for 25 years and a principal in the accounting firm Beatty, Satchell & Company from 1977 to 1998. Mr. Beatty’s qualifications to serve on our Board include his extensive financial knowledge and operational experience, as well as his familiarity with an important market area in which we compete, his experience with the Bank and his experience in advising companies in financial and tax matters, mergers and acquisition transactions, and insurance operations.10James A. JudgeAge: 63Director Since: 2009Committees: Audit (Chair); Risk ManagementMr. Judge has been a director of the Company since 2009. He previously served as a director of CNB since 2005 and subsequently became a director of Shore United Bank, National Association after the merger of Talbot Bank and CNB in 2016. Mr. Judge has been a certified public accountant for over 30 years and partner since 1985 with Anthony, Judge & Ware, LLC, an accounting and tax services company located in Chestertown, Maryland. Mr. Judge’s qualifications to serve on our Board include his qualifications as a certified public accountant, his expertise in the preparation and examination of financial statements, his familiarity with the banking business, and his experience in owning and operating his own business.R. Michael Clemmer, Jr.Age: 54Director Since: 2016Committees: Risk Management (Chair)Mr. Clemmer served as a director of Talbot Bank since 2012 and subsequently became a director of Shore United Bank, National Association and the Company after the merger of Talbot Bank and CNB in 2016. Mr. Clemmer is President of Salisbury, Inc., a company that designs and manufactures pewter, sterling silver and other metal giftware, a position he has held since 1991. In 1995, Mr. Clemmer founded Executive Decision, Inc. a corporate recognition company. Since 1992, Mr. Clemmer has been involved in the development, acquisition and renovation of industrial and commercial property. He is founder of Waterside Properties LLC, a property development and management company. Mr. Clemmer is a graduate of the University of Richmond and has been a resident of Talbot County since 1982. Mr. Clemmer’s qualifications to serve on our Board include his leadership capabilities, real estate development in our key market area, and his civic participation in the business community.Alan J. HyattAge: 68Director Since: 2021(Chairman since 2021)Committees: Executive, Risk ManagementMr. Hyatt was appointed to serve as a director of both the Company and Shore United Bank, National Association in September 2021 in connection with the Company’s merger with Severn. He was Chairman of Severn and its subsidiary, Severn Savings Bank, FSB and was appointed as Chairman of the Company and the Bank in November 2021. Mr. Hyatt has set the tone for the organization for over four decades. He first rose to the title of chairman in the late 1970’s when, as a young law student, he became involved in the bank’s predecessor, Pompeii Permanent Building and Loan Association, a neighborhood building and loan located in Baltimore. Over the next four decades, under Mr. Hyatt’s guidance, the company was completely transformed from a Baltimore-based neighborhood building and loan association to an Anne Arundel County based full-service community bank with seven retail outlets and a signature headquarters in downtown Annapolis, Maryland. Along the way, Severn has become one of the most respected small banks in the United States, routinely recognized for its excellence. Mr. Hyatt is also a partner with the Annapolis law firm of Hyatt & Weber, P.A., concentrating his practice on banking, real estate and commercial law. Mr. Hyatt serves as counsel to area real estate developers and entrepreneurs, with active representation in land use cases, commercial transactions and commercial litigation. He serves as Chairman of Severn and its subsidiary, Severn Savings Bank, FSB. Mr. Hyatt received his law degree from the University of Baltimore School of Law in 1978, and is an honors graduate of Bryant College of Business Administration (now Bryant University). He is a member of the Maryland State Bar Association and the Anne Arundel County Bar Association. He serves on the Board of Trustees of Anne Arundel Medical Center, Anne Arundel County Retirement and Pension System and The Annapolis Community Foundation. Mr. Hyatt is a native of Annapolis, and resides in the area with his wife. Mr. Hyatt’s qualifications to serve on our Board include his experience as an attorney and businessman, Mr. Hyatt brings strong legal and financial skills important to the oversight of the Company’s financial reporting, enterprise and operational risk management.Konrad M. WaysonAge: 61Director Since: 2021Committees: Audit; Risk ManagementMr. Wayson was a director of Severn since 2009 and a director of Severn Savings Bank, FSB since 2008 and was subsequently appointed to serve as a director of both the Company and Shore United Bank, National Association after the merger of the Company with Severn in 2021. He previously served as the Vice Chairman of the board of directors of Severn. Mr. Wayson graduated in 1983 from Salisbury University where he received a BS in business administration and has served as Secretary and Treasurer of Hopkins & Wayson, Inc., a general contractor servicing Maryland, Washington DC and Virginia, since 1984. He has been a Partner of Wayson Landholdings since its start in 1996 and has been serving as its managing partner since 2007. He currently serves as chairman for the Anne Arundel County Public Schools Ethics Panel. He also served as Chief Financial Officer of Childs Landscaping from 1997 until 2004 when the company was sold. Mr. Wayson has served on the Anne Arundel Medical Foundation Board, the Anne Arundel Economic Development Corporation Board and the Anne Arundel School Board. Mr. Wayson served on Severn’s Audit and Examining Committee and the Compensation Committee. Mr. Wayson’s qualifications to serve on our Board include his experience as a treasurer and businessman and his strong financial skills, which is important to the oversight of the Company’s financial reporting, enterprise and operational risk management.11EXECUTIVE OFFICERS WHO ARE NOT SERVING AS DIRECTORSBelow is information regarding each of our current executive officers who are not directors of the Company, including their title, age and brief biography describing each executive officer’s business experience.NameAgePositionVance W. Adkins41Executive Vice President and TreasurerEdward C. Allen74Executive Vice President and Chief Financial OfficerMichael T. Cavey65Executive Vice President and Chief Lending OfficerAndrea E. Colender58Executive Vice President, Chief Legal Officer and SecretaryChrista J. Heron55Executive Vice President and Chief Risk OfficerJennifer M. Joseph54Executive Vice President and Chief Retail Banking OfficerW. David Morse60Executive Vice President, General Counsel and Assistant SecretaryCharles E. Ruch, Jr.62Executive Vice President and Chief Credit OfficerDonna J. Stevens59Executive Vice President and Chief Operating OfficerVance W. Adkins was appointed Executive Vice President and Treasurer of the Company on November 1, 2021, after the merger of the Company and Severn Bancorp, Inc. He has over 15 years of experience in the financial services industry. Previously, he was Chief Financial Officer with Severn Bank in Annapolis, Maryland from 2019 to 2021. Prior to joining Severn Bank, he worked with various commercial banks including American National Bank & Trust Company and Home Town Bank. Prior to working for commercial banks, he was an audit supervisor for Yount, Hyde & Barbour, P.C. where he managed engagements across over 40 public and private financial institutions. Mr. Adkins received both his Bachelor of Science in Accounting and his Masters of Science, Accounting & Information Systems from Virginia Polytechnic Institute and State University. He is a Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA).Edward C. Allen was appointed Senior Vice President and Chief Financial Officer of the Company and the Bank in June 2016 and was recently promoted to Executive Vice President in April 2019. Mr. Allen was previously CNB’s President and Chief Executive Officer from September 2014 to June 2016 and prior to that he was CNB’s Chief Financial Officer from October 2011 when he started with the company. Mr. Allen is a career banker with 40 years’ experience in community banks. He has been CFO or COO of banks ranging in asset size from $400 million to $2.5 billion. He has a Bachelor of Science degree in accounting and an MBA in finance. Most of his career has been on the finance side of the business, although he was COO of a $500 million bank for 12 years. He has extensive experience in budgeting, investment portfolio management and board presentations. He has been active in civic affairs, serving on Boards of Compass Regional Hospice and Mid-Shore Community Foundation.Michael T. Cavey joined the Bank in 2014 as a Senior Vice President and Commercial Sales Manager and currently serves as the Executive Vice President and Chief Lending Officer of the Bank (formerly the Talbot Bank). Prior to his employment in 2014 with The Talbot Bank, Mr. Cavey worked for Howard Bank as a Senior Vice President and Regional Executive for Howard and Anne Arundel Counties for five years. Prior to his position at Howard Bank, Mr. Cavey held a Senior Vice President and Commercial Team Leader positions at Sandy Spring Bank and M& T Bank. Mr. Cavey received his Bachelor of Science degree from Duke University.Andrea E. Colender was appointed Executive Vice President, Chief Legal Officer, and Secretary of the Company on November 1, 2021, after the merger of the Company and Severn. Prior to joining the Company, Ms. Colender served as General Counsel to Severn Bancorp and Severn Bank beginning in March 2009. She was later appointed to act as Corporate Secretary. She has served on the Board of Mid-Maryland Title, Inc., a wholly owned subsidiary of the Company, since September 2017. She also founded and serves as Chair of the Company’s Advisory Board, which is comprised of all women, to help promote the financial success of women in business. Ms. Colender graduated from the University of Maryland School of Law with honors in 1988. She received her B.A. from New College, University of South Florida, in 1985. Professional affiliations include the Maryland State Bar Association, Maryland Banker’s Association, Anne Arundel Bar Association, Anne Arundel Estate Planning Council, and Executive Alliance.Christa J. Heron was appointed Executive Vice President and Chief Risk Officer of the Company on November 1, 2021, after the merger of the Company and Severn Bancorp, Inc. Prior to joining the Company, Ms. Heron served in several capacities at Severn Bank including Chief Risk Officer from 2019 to 2021. Ms. Heron has led Severn Bank’s medical cannabis banking program since inception in 2017, and continues to oversee the program for the Company. Her career has spanned over thirty-five years where she started as a Teller and progressed through a variety of departments and leadership positions including: Loan Processing Manager, Loan Officer, Underwriting Manager, Chief Compliance Officer, Information Security Officer, Vendor Management Coordinator and Business Continuity Administrator, as well as being heavily involved in Bank Secrecy Act compliance and supervision. She obtained an Associate of Arts Degree from Anne Arundel Community College in 1989 and Certified Regulatory Compliance Manager (CRCM) designation from the Institute of Certified Bankers in 2016. Ms. Heron was a recipient of the YWCA Tribute to Women and Industry (TWIN) Award in 2010, a graduate of the Executive Leadership Series Program, Leadership Anne Arundel County in 2011, and recipient of the 2021 Lifetime Achievement Award from the Maryland Banker’s Association Council of Professional Women in Banking and Finance.12 Jennifer M. Joseph has served as Executive Vice President and Chief Retail Officer of the Bank since November 2016. Prior to her employment with the Bank, Mrs. Joseph served as the Market Executive of PNC Bank, N.A. from 2011 to 2015. Mrs. Joseph entered into banking in 1986, holding various retail and lending positions, including Business Banking Sales Manager. She is a graduate of ABA Stonier Graduate School of Banking and CBA Graduate School of Retail Bank Management.W. David Morse has served as General Counsel for the Company since 2008 and was promoted to Executive Vice President in April 2019. He also serves as Assistant Secretary of the Company. He began employment with Shore United Bank, National Association (formerly the Talbot Bank) in 1991. He received his Juris Doctorate from the University of Baltimore and was admitted to the Maryland State Bar in 1986. He received his Bachelor of Arts degree from High Point College, NC in 1983. He also serves as Executive Vice President, Legal Counsel for Shore United Bank, National Association.Charles E. Ruch Jr. has served as Executive Vice President and Chief Credit Officer of the Bank (formerly CNB) since 2010 and joined CNB in 2006. Entered banking in 1977, holding various retail positions from teller to core manager through the 1980s with Equitable Bank. He joined AB&T as a commercial lender in 1987 and was AB&T’s Senior Commercial Lender for 10 years. He graduated from the University of Maryland in 1983.Donna. J. Stevens was appointed Senior Vice President and Chief Operating Officer of the Company in July 2015 and for the Bank in July 2016 and promoted to Executive Vice President in April 2019. She served as the Company’s Chief Operations Officer from July 2013 to July 2015. She is a career banker since 1980 and joined the company in 1997 serving in various senior officer positions responsible for retail and bank operations, compliance, loan and credit administration. She is a graduate of Maryland Banking School, ABA Compliance School and Stonier Graduate School of Banking.13 Director IndependencePursuant to Rule 5605(b)(1) of the Nasdaq Rules, a majority of the members of the Board must be “independent directors” as that term is defined by Nasdaq Rule 5605(a)(2). In accordance with Nasdaq Rules, the matrix below shows the diversity of the Board.As of March 27, 2023 As of April 2, 2024 Total Number of Directors 15 20 Female Male Female Male Gender Identity Directors 3 12 4 16 Demographic Background African American or Black 1 1 White 2 12 3 16 8Board considered transactionsSkills and relationships between each director or any memberExperience MatrixOur Board members have a broad set of his or her immediate familyqualifications, attributes, skills and experience that are well suited to oversee the Company’s strategy and operations. A summary of the attributes and qualifications of our directors is presented below. These skills collectively allow our directors to effectively oversee the Company and its subsidiariescreate an engaged, effective, and affiliates. Our Board has determined that all of our currently serving directors, with the exception of Lloyd L. Beatty, Jr., our President and Chief Executive Officer, are “independent directors” under the Nasdaq Rules and these independent directors constitute a majority of ourstrategically-oriented Board.Board Diversity Matrix Female Male Did Not Disclose
Gender Identity Gender Identity Directors 2 12 _ Demographics African American/Black _ Hispanic or Latinx _ White 2 12 Did Not Disclose Demographic Background _ Board Leadership Structure and Executive SessionsOur Board currently separates the roles of Chairman of the Board and Chief Executive Officer. The Board’s philosophy is and has been to fill the position of Chairman with an independent director. The foregoing structure is not mandated by any provision of law or our Charter or Bylaws, but the Board believes that this governance structure provides the best balance between the Board’s independent authority to oversee our business and the Chief Executive Officer’s management of our business on a day-to-day basis.The duties of the Chairman include: (i) acting as a liaison and channel for communication between the independent directors and the Chief Executive Officer; (ii) providing leadership to ensure the Board works cohesively and independently and during times of crisis; (iii) advising the Chief Executive Officer as to the quality, quantity and timeliness of information from executive management to the independent directors; (iv) being available to consult with the Chief Executive Officer and other directors on corporate governance practices and policies; (v) coordinating the assessment of Board committee structure, organization and charters and evaluating the need for change, as well as committee membership; (vi) together with the Chair of the Nominating and Governance Committee, interviewing all Board candidates and making recommendations concerning such candidates; (vii) coordinating, developing the agenda and leading executive sessions of the independent directors and communicating the results thereof to the Chief Executive Officer; (viii) ensuring appropriate segregation of duties between Board members and management; (ix) suggesting agenda items for Board meetings; and (x) together with the Chair of the Compensation Committee, communicating the Board’s evaluation of the performance of the Chief Executive Officer.14 
To further strengthen the oversight of the full Board, the Board’s independent directors hold executive sessions at which only non-management directors are present. The executive sessions are scheduled in connection with regularly scheduled Board meetings. Additional executive sessions may be called by any of the independent directors as often as necessary. During fiscal year 2021, the independent directors met ten times in executive session without the presence of management.For these reasons, the Board believes that our corporate governance structure is in the best interests of the Company and our shareholders at this time. The Board retains authority to modify this structure as it deems appropriate.Board and Committee Oversight of RiskThe Board is actively involved in overseeing our risk management through the work of its various committees and through the work of the boards of directors and committees of our subsidiaries, a number of which have Company directors as members. Each committee of the Board is responsible for evaluating certain risks and overseeing the management of such risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee oversees the process by which senior management and the relevant departments assess and manage our exposure to, and management of, financial and operational risks. The Nominating and Governance Committee manages risks by setting criteria for nomination of director candidates, nominating qualified candidates, and establishing and periodically reviewing our governance policies. In addition, the Board implemented a comprehensive Enterprise Risk Management (“ERM”) program during 2014 and established the ERM Oversight Committee in 2015 as one of the Board’s designated standing committees. As part of its responsibilities, the ERM Oversight Committee reviews management’s assessment of the Company’s core risks and alignment of its enterprise-wide risk profile with the Company’s strategic plan, goals, and objectives. In addition to our committees’ work in overseeing risk management, our full Board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed. The Board regularly receives reports and other information on areas of material risk to the Company including compliance, credit, cybersecurity, financial, liquidity, market/interest rate, operational, reputational, strategic, and technology risks. Those reports enable the Board to understand the risk identification, risk management and risk mitigation strategies, which are then employed by management and the ERM function. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant committee or the full Board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by the Board and its committees.15 Business Conduct and Code of EthicsWe have adopted a Code of Ethics, as amended, that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions. The Code of Ethics provides fundamental ethical principles to which these individuals are expected to adhere. The Code of Ethics operates as a tool to help directors, officers, and employees understand and adhere to the high ethical standards required for employment by, or association with, the Company.The Code of Ethics is available on our website at www.shorebancshares.com under the “Governance Documents” link. Shareholders can also obtain a written copy of the Code of Ethics, free of charge, upon request to: Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or (410) 763-7800. Any future changes or amendments to the Code of Ethics and any waiver that applies to one of our senior financial officers or a member of the Board will be posted to our website.Shareholder Communications and Annual Meeting AttendanceShareholders may communicate with our Board by contacting Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or (410) 763-7800. All communications will be forwarded directly to the Chairman of the Board for consideration.The Board members are not required to attend our annual meetings of shareholders. However, all directors are encouraged to attend every annual meeting of shareholders as we believe that the annual meeting is an opportunity for shareholders to communicate directly with directors. If you would like an opportunity to discuss issues directly with the members of the Board, please consider attending this year’s Annual Meeting. At the 2021 annual meeting of shareholders, nine directors (who were serving as such) were in attendance.16 Company and its subsidiaries have adopted policies and procedures to ensure compliance with the foregoing requirements.COMMITTEES OF THE BOARD OF DIRECTORS Nominating & Risk Executive Audit Compensation Governance Management Blenda W. Armistead X X Lloyd L. Beatty, Jr. X X R. Michael Clemmer, Jr. Chair William E. Esham, III X X Alan J. Hyatt X X David S. Jones X James A. Judge Chair X Clyde V. Kelly, III X Chair John A. Lamon X X Frank E. Mason, III Chair X David W. Moore Chair Jeffery E. Thompson X Konrad M. Wayson X X Dawn M. Willey X X Number of Meetings in 2021 1 4 3 2 4 Executive CommitteeOur Executive Committee consists of Frank E. Mason, III, Chair, Alan J. Hyatt, William E. Esham, III and Lloyd L. Beatty. The Executive Committee has the authority to exercise the powers of our Board in the management of the business and affairs of the Company, subject to any restrictions imposed by law and to subsequent revision or alteration of any such action by the Board. The Executive Committee met one time during fiscal year 2021.Audit CommitteeThe current members of the Audit Committee are James A. Judge, Chair, Blenda W. Armistead, Konrad M. Wayson and Dawn M. Willey. Our Board has determined that each current member of the Audit Committee is “independent” and financially literate as required in the Audit Committee charter and as required by the rules and regulations promulgated by the SEC and The Nasdaq Stock Market. Our Audit Committee has adopted a charter, which is posted on our website at www.shorebancshares.com under the “Governance Documents” link. The Audit Committee met four times during fiscal year 2021.The principal functions of the Audit Committee are to review the financial information to be provided to our shareholders and others, our financial reporting process, our system of internal controls, our independent auditors’ independence, our audit process and the process for monitoring compliance with laws and regulations. Under our Audit Committee charter, the Audit Committee is solely responsible for hiring and firing the independent auditors and approving their fees and engagement terms; resolving any disagreement between the independent auditors and our management; and pre-approving all audit and non-audit services performed by the independent auditors, subject to a de minimis exception.Our Board has determined that James A. Judge, Chairman of the Audit Committee, qualifies as an audit committee financial expert within the meaning of applicable SEC rules because he has the following attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, and experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal control and procedures for financial reporting; and (v) an understanding of audit committee functions. Mr. Judge has acquired these attributes by means of having held various positions that provided relevant experience, as described in his biography above.17 Compensation CommitteeThe members of the Compensation Committee, all of whom are independent directors as that term is defined in the Nasdaq Rules, are David W. Moore, Chair, Clyde V. Kelly, III, John A. Lamon, Davis S. Jones and Jeffrey E. Thompson. The Compensation Committee has adopted a charter, which is posted on our website at www.shorebancshares.com under the “Governance Documents” link. The Compensation Committee met three times during fiscal year 2021.The Compensation Committee is generally responsible for overseeing and, as appropriate, determining our director and executive officer compensation, recommending executive promotions to the full Board, providing assistance and recommendations with respect to our compensation policies and practices, and assisting with the administration of our compensation plans. The Compensation Committee determines executive compensation pursuant to the principles discussed in the section below entitled “Overview of Compensation Philosophy and Objectives” and determines director compensation by periodically reviewing the compensation practice of peer group institutions.Pursuant to its charter, the Compensation Committee may retain or obtain the advice of a compensation consultant, legal counsel or other advisers as it deems necessary and appropriate to carry out its duties and, in connection with such retention of consultants, the Compensation Committee will consider the independence factors as required by the applicable rules of The Nasdaq Stock Market and the SEC. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other advisers retained by them. During fiscal year 2021, the Compensation Committee engaged Hunt Benefits & Associates to perform executive and director compensation market reviews.Nominating and Governance CommitteeThe members of the Nominating and Governance Committee, all of whom are independent directors as that term is defined in the Nasdaq Rules, are Clyde V. Kelly, III, Chair, Blenda W. Armistead, John A. Lamon and Frank E. Mason III. The Nominating and Governance Committee has adopted a charter, which is posted on our website at www.shorebancshares.com under the “Governance Documents” link. The Nominating and Governance Committee met two times during fiscal year 2021.The Nominating and Governance Committee is responsible for overseeing and, as appropriate, determining or making recommendations to the Board regarding membership and constitution of the Board and its role in overseeing our affairs. The Nominating and Governance Committee manages the process for evaluating the performance of the Board and for nominating candidates (including current Board members) for election by our shareholders after considering the appropriate skills and characteristics required for the Board, the current makeup of the Board, the results of the evaluations and the wishes of the Board members to be re-nominated.The Nominating and Governance Committee is responsible for assembling and maintaining a list of qualified candidates to fill vacancies on the Board, and it periodically reviews this list and researches the talent, skills, expertise, and general background of these candidates. The Nominating and Governance Committee will from time to time review and consider candidates recommended by shareholders. Shareholder recommendations should be submitted in writing to: Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601, Attn: Andrea E. Colender, Secretary; and must specify (i) the recommending shareholder’s contact information, (ii) the class and number of shares of capital stock beneficially owned by the recommending shareholder, (iii) the name, address and credentials of the candidate for nomination, and (iv) the candidate’s consent to be considered as a candidate.18 Nominating and Governance Committee, a candidate will be selected for nomination based on his or her talents and the needs of the Board. The Nominating and Governance Committee does not have a formal policy pursuant to which it considers specific diversity criteria when selecting nominees, such as education, professional experience, skills, race or gender. Rather, the Nominating and Governance Committee’s goal in selecting nominees is to identify persons who have business and other ties to the communities and industries we serve, and who have skills, education and other attributes that will meet the needs of the Board at that time and, generally, that are complimentary to the skills and attributes possessed by existing directors. When searching for and appointing directors to fill a particular committee position, the Nominating and Governance Committee searches for persons who will meet the independence standards required for those committees and who possess skills and attributes that will allow the committee to be effective. The Nominating and Governance Committee also strives to select individuals who it believes will work well with the other directors at the highest level of integrity and effectiveness.A candidate, whether recommended by a shareholder or otherwise, will not be considered for nomination unless he or she is of good character and is willing to devote adequate time to Board duties. In assessing the qualifications of potential candidates, the Nominating and Governance Committee will also consider the candidate’s experience, judgment, and civic and community relationships, and the diversity of backgrounds and experience among existing directors. Certain Board positions, such as Audit Committee membership, may require other special skills, expertise, or independence from the Company.It should be noted that a shareholder recommendation is not a nomination, and there is no guarantee that a candidate recommended by a shareholder will be approved by the Nominating and Governance Committee or nominated by the Board. A shareholder who desires to nominate a candidate for election may do so only in accordance with Article II, Section 4 of our Bylaws which provides that directors may be nominated by shareholders by written request to the Secretary of the Company received not less than 120 days nor more than 180 days prior to the date fixed for the meeting. Additional time constraints are applicable in the cases of a change in shareholder meeting date or a special meeting called for the purpose of electing directors. As provided in the Bylaws, the notice of nomination must specify: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the number of shares of our capital stock owned by each proposed nominee; (d) the name and residence address of the notifying shareholder; (e) the number of9shares of our capital stock owned by the notifying shareholder; (f) the consent in writing of the proposed nominee as to the proposed nominee’s name being placed in nomination for director; (g) a description of all arrangements or understandings between such notifying shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such notifying shareholder; (h) a representation that such notifying shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (i) all information relating to such proposed nominee that would be required to be disclosed by Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), assuming such provisions would be applicable to the solicitation of proxies for such proposed nominee.EnterpriseNominees for ElectionOur Board has approved the nomination of R. Michael Clemmer, Jr., Alan J. Hyatt, E. Lawrence Sanders, III and Konrad M. Wayson for re-election as Class III directors at the Annual Meeting.Information about the principal occupations, business experience and qualifications of these nominees is provided below under the heading “Qualifications of 2024 Director Nominees and Continuing Directors.” Ages presented are as of December 31, 2023.QUALIFICATIONS OF 2024 DIRECTOR NOMINEES AND CONTINUING DIRECTORSClass III Director NomineesR. MICHAEL CLEMMER, JR.
Age: 56Director Since: 2016Committees: Executive Board Risk Oversight (Chair)Mr. Clemmer served as a director of Talbot Bank since 2012 and subsequently became a director of Shore United Bank (the “Bank”) and the Company after the merger of Talbot Bank and CNB in 2016. Mr. Clemmer is President of Salisbury, Inc., a company that designs and manufactures pewter, sterling silver and other metal giftware, a position he has held since 1991. In 1995, Mr. Clemmer founded Executive Decision, Inc., a corporate recognition company. Since 1992, Mr. Clemmer has been involved in the development, acquisition and renovation of industrial and commercial property. He is founder of Waterside Properties LLC, a property development and management company. Mr. Clemmer is a graduate of the University of Richmond and has been a resident of Talbot County since 1982.In nominating Mr. Clemmer, the Governance Committee considered as important factors Mr. Clemmer’s leadership capabilities, real estate development in our key market area, and his civic participation in the business community.ALAN J. HYATT
Age: 70Director Since: 2021
(Chairman since 2021)Committees: Executive (Chair)Mr. Hyatt joined the Company’s Board as the Chairman on November 1, 2021, as a result of the merger between the Company and Severn Bancorp, Inc. (“Severn”). Prior to joining the Company’s Board, Mr. Hyatt served as the Chairman and CEO of Severn and Severn Bank, FSB (“Severn Bank”). Mr. Hyatt is a partner with the Annapolis law firm Hyatt & Weber, P.A., concentrating his practice on banking, land use, real estate, and commercial law. Mr. Hyatt serves as counsel to area real estate developers and entrepreneurs, with active representation in land use cases, commercial transactions and commercial litigation. Mr. Hyatt received his law degree from the University of Baltimore School of Law in 1978 and is an honors graduate of Bryant College of Business Administration (now Bryant University). He is a member of the Maryland State Bar Association and the Anne Arundel County Bar Association. He serves on the Board of Trustees of Luminis Health, The Anne Arundel County Retirement and Pension System, and The Annapolis Community Foundation.In nominating Mr. Hyatt, the Governance Committee considered as important factors Mr. Hyatt’s experience as an attorney and businessman, Mr. Hyatt brings strong legal and financial skills important to the oversight of the Company’s financial reporting, and enterprise and operational risk management.10E. LAWRENCE SANDERS, IIIAge: 67Director Since: 2023Committees: BoardRisk OversightMr. Sanders was appointed as a director of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s Board, Mr. Sanders served as a director of Community Financial and Community Bank of the Chesapeake since 2018. He is President of Edward L. Sanders Insurance Agency, which provides multi-line insurance services to clients in Maryland since 1903. Mr. Sanders graduated from NC State University in 1978, obtained his Certified Insurance Counselor designation in 1979 and became a licensed Insurance Advisor in 1981. Mr. Sanders served on the board of directors of County First Bank for 28 years and served as chairman of the board from 2013 to 2018. He is a current member and past President of the Charles County Rotary, past director for the Professional Insurance Agent’s Association, past director and past President for the Civista Foundation and current director for the Charles County Rotary Foundation.In nominating Mr. Sanders, the Governance Committee considered as important factors Mr. Sander’s extensive financial, and operational knowledge from his experience as an owner of an insurance agency. His years of experience serving as a bank director provides the Board valuable insight regarding corporate governance, regulatory compliance, risk assessment practices and bank operations.KONRAD M. WAYSON
Age: 63Director Since: 2021Committees: Audit Board Risk OversightMr. Wayson joined the Company’s Board on November 1, 2021, as a result of the merger between the Company and Severn. Prior to joining the Company’s board, Mr. Wayson served as a director of Severn since 2009 and a director of Severn Bank, since 2008. Mr. Wayson is a partner of Wayson Landholdings since 1996 and has been the managing partner since 2007. Mr. Wayson also serves as the Secretary and Treasurer of Hopkins & Wayson, Inc., a general contractor servicing Maryland, Washington D.C. and Virginia since 1984. Mr. Wayson was the Chief Financial Officer of Childs Landscaping from 1997 until 2004 when the company was sold. Mr. Wayson served as chairman of the Anne Arundel County Public Schools Ethics Panel for 15 years. Stepping down in 2023, Mr. Wayson has served on the Anne Arundel Medical Foundation Board, the Anne Arundel Economic Development Corporation Board, and the Anne Arundel School Board. Mr. Wayson is a graduate of Salisbury University where he received a Bachelor of Science degree in business administration.In nominating Mr. Wayson, the Governance Committee considered as important factors Mr. Wayson’s experience as a treasurer and businessman and his strong financial skills, which is important to the oversight of the Company’s financial reporting, and enterprise and operational risk management.Continuing DirectorsClass I DirectorsWILLIAM E. ESHAM, III
Age: 58Director Since: 2020Committees: Compensation ExecutiveMr. Esham was appointed to serve as a director of both the Company and the Bank in June of 2020. Mr. Esham is a partner in the law firm of Ayres, Jenkins, Gordy & Almand, P.A., specializing in real estate law, located in Ocean City, Maryland. Mr. Esham also serves on the Board of Trustees for Worcester Preparatory School and the Board of Directors for Atlantic General Hospital. Mr. Esham holds a Bachelor of Arts from Washington and Lee University and a Juris Doctor from University of Baltimore.Mr. Esham’s qualifications to serve on our Board include his legal expertise in real estate law and his prior bank board of director experience with Shore Bank during the period of 2012-2016 (which was acquired by Xenith Bank in 2016) and Peninsula Bank's Advisory Board during the period of 1996-2006.11JOHN A. LAMON, III
Age: 66Director Since: 2021Committees:Compensation GovernanceMr. Lamon joined the Company’s Board on November 1, 2021, as a result of the merger between the Company and Severn Bancorp, Inc. Prior to joining the Company’s board, Mr. Lamon served as a director of Severn Bancorp since 2009 and a director of Severn Savings Bank, FSB, since 2008. Mr. Lamon currently serves as the Director of Business Development for Ironmark, a leading marketing agency in Maryland. Prior to this position, Mr. Lamon was the President and Owner of John A. Lamon & Associates, a promotional marketing company, before selling the business to G&G Outfitters, Inc. Mr. Lamon received his Bachelor of Arts degree from the University of Maryland, College Park, where he was a two-time All American lacrosse player. Mr. Lamon has received the Willis Bilderback Volunteer Award and the Wille Gateau Youth Services Award. Mr. Lamon has served on various boards including, St. Mary’s School, The Annapolis Touchdown Club, St. Mary’s Royal Blue Club and the University of Maryland M Club.Mr. Lamon’s qualifications to serve on our Board include his business and marketing experience, which is important to the oversight of the Company’s financial reporting, and enterprise and operational risk management.FRANK E. MASON, III
Age: 61Director Since: 2011Committees: Governance Board Risk Oversight Strategic Initiatives & TechnologyMr. Mason served as a director of the Company and The Talbot Bank of Easton, Maryland a wholly-owned bank subsidiary of the Company (“Talbot Bank”) since 2011 and subsequently became a director of Shore United Bank after the merger of Talbot Bank and CNB, a wholly-owned bank subsidiary of the Company (“CNB”) in 2016. Mr. Mason served as Chairman of the Board for the Company and Bank from 2017 through October 31, 2021. Mr. Mason is the President and Chief Executive Officer of JASCO Incorporated, a manufacturer and distributor of analytical instrumentation for the scientific research community, a position he has held since 2004. JASCO Incorporated, which is a subsidiary of JASCO Corporation located in Tokyo, Japan, operates throughout North and South America. Prior to becoming President and Chief Executive Officer, Mr. Mason served as JASCO Incorporated’s Chief Operations Officer from 1996 to 2004 and as its Sales Director for North America from 1987 to 1995. Mr. Mason has a Bachelor of Arts degree from the University of Maryland, College Park, and a Master of Business Administration from Johns Hopkins University.Mr. Mason’s qualifications to serve on the Board include his experience in leading a large corporation, his financial and operational knowledge.REBECCA MIDDLETON MCDONALD, CPAAge: 50Director Since: 2023Committees: Audit Board Risk Oversight Strategic Initiatives & TechnologyMs. McDonald was appointed as a director of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s Board, Ms. McDonald served as a director of Community Financial and Community Bank of the Chesapeake since 2020. She is a partner at Cherry Bekaert Advisory, LLC a national business advisory firm. She has 28 years of experience providing accounting advisory services and financial transformation support to both private and public companies. Ms. McDonald specializes in a range of services, such as outsourced and project based accounting, SEC reporting, audit and IPO readiness, internal control and process improvement analysis, and due diligence support for mergers and acquisitions. Ms. McDonald has also held various finance roles with a publicly traded company. Ms. McDonald is a member of the American Society of Certified Public Accountants. She serves as the Treasurer on the Board of Trustees of Commonwealth Academy. Ms. McDonald holds a Bachelor of Science from Elon University.Ms. McDonald’s qualifications to serve on the Board include her extensive audit, public accounting, and executive level experience. Ms. McDonald’s proficiencies provide the Board with a skill set critical to successfully operating the Company and Bank.12MARY TODD PETERSON
Age: 69Director Since: 2023Committees:Audit (Chair) Compensation ExecutiveMs. Peterson was appointed as a director of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s Board, Ms. Peterson served as a director of Community Financial and Community Bank of the Chesapeake since 2010. She retired in May 2018 as the senior advisor to the Chairman and CEO of ProAssurance Corporation supporting key strategic initiatives. In February 2016, she retired as the President and Chief Executive Officer of Medmarc Insurance Group and as a Director of Medmarc Casualty Insurance Company and its subsidiary Noetic Specialty Insurance Company, both of which are subsidiaries of ProAssurance. Ms. Peterson had been associated with Medmarc since 2001 where she also held the positions of Chief Financial Officer and Chief Operating Officer. From 1993 to 2001, Ms. Peterson was a Partner with Johnson Lambert & Co., a certified public accounting firm. Ms. Peterson also held positions with Acacia Life Insurance Company, Oxford Development Corporation and Ernst & Whinney (now Ernst & Young). Prior to her retirement from Medmarc, Ms. Peterson served as a member of the Property Casualty Insurers Association of America (“PCI”) Board of Governors, Chair of PCI’s Investment Committee and a member of PCI’s Executive and Finance Committees. In September 2020, Ms. Peterson joined the Board of Directors of ProAssurance American Mutual, A Risk Retention Group where she serves on the Executive and Investment Committees. Ms. Peterson is a member of the American Institute of Certified Public Accountants.Ms. Peterson’s qualifications to serve on the Board include her extensive executive-level experience in a mid-size company setting within the financial services industry combined with extensive experience in public accounting. Ms. Peterson’s financial and operational expertise within the insurance industry, including proficiencies in corporate governance and risk assessment, provide the Board with a skill set critical to successfully operating the Company and Bank.ESTHER A. STREETE
Age: 48Director Since: 2022Committees:Audit ExecutiveMs. Streete was appointed to serve as a director of both the Company and the Bank on August 1, 2022. Ms. Streete is a Principal at McNamee Hosea, a full-service Maryland business law firm. She has worked at McNamee Hosea since 2005. She is a Certified Public Accountant (CPA) and an attorney who specializes in tax, estate & business planning, business succession planning, estate administration, probate and trust administration. Ms. Streete has affiliations with the Maryland Association of Certified Public Accountants, Maryland State Bar Association, and Anne Arundel County Bar Association. Ms. Streete holds a Bachelor of Science from Frostburg State University, a Juris Doctor from the University of Maryland School of Law and a Master of Laws in Taxation from the University of Baltimore School of Law.Ms. Streete’s qualifications to serve on our Board include her experience as an attorney, certified public accountant, and her expertise in financial planning, estate and trust administration.13Class II DirectorsMICHAEL B. ADAMSAge: 57Director Since: 2023Committees:Executive Strategic Initiatives & Technology (Chair)Mr. Adams was appointed as a director of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s board, Mr. Adams served as a director of Community Financial and Community Bank of the Chesapeake since 2021. He is the President of JON Properties, LLC., a full service commercial real estate company in Fredericksburg, Virginia. JON Properties has won numerous awards, particularly for its work on Historic Renovation and tax credit projects in the Fredericksburg, Virginia region. Mr. Adams founded JON Properties in 2006. It is located at 900 Princess Anne Street Fredericksburg, VA 22401. Prior to starting JON Properties, Mr. Adams worked at WEB Equipment, Inc., a dealer in rough terrain forklifts. Mr. Adams served as President of WEB Equipment, Inc. from 1995 to 2006. Mr. Adams serves, or has served, on numerous boards of community organizations. These include the Fredericksburg Rotary Club, the Cal Ripken, Sr. Foundation, the Fredericksburg Area Museum, the Central Virginia Housing Coalition, Loisann’s Hope House and the Germanna Community College Education Foundation. Mr. Adams is also a member of the Fredericksburg Builders Association, the National Association of Home Builders, the Fredericksburg Realtors Association and the National Realtors Association. Mr. Adams attended Prince George’s Community College and the University of Maryland where he studied business management. Mr. Adams holds a Class A General Contractors License and is a licensed real estate broker in the state of Virginia.Mr. Adams’ qualifications to serve on our Board include his management and strategic knowledge through his experience as founder and owner of a local business. His experience as a business owner adds valuable expertise regarding local issues and provides first-hand understanding of the needs of business owners in the environment in which the Bank operates.JAMES M. BURKEAge: 55Director Since: 2023Mr. Burke was appointed President and CEO and director of the Company and the Bank on July 1, 2023 as a result of the merger between the Company and Community Financial. Prior to the merger, Mr. Burke served as the President and CEO and director of Community Financial and Community Bank of the Chesapeake. Mr. Burke has over 30 years of banking experience. He currently serves on the Board of directors of the Federal Home Loan Bank of Atlanta. Mr. Burke is the former Chairman of the Board of Directors of University of Maryland Charles Regional Medical Center, former Chairman of the Board of Directors for St. Mary’s Ryken High School, Trustee for Historic Sotterley and is active in other civic groups. Mr. Burke is a Maryland Bankers School graduate and holds a Bachelor of Arts from High Point University. He is also a graduate of the East Carolina Advanced School of Commercial Lending and attended the Harvard Business School Program on Negotiation.Mr. Burke’s qualifications to serve on our Board include his extensive experience in the banking industry that affords our Board valuable insight regarding the business and operations of the Bank and the Company. Mr. Burke’s strategic leadership abilities, financial acumen and knowledge of the Company’s and the Bank’s business position him well to serve as President and CEO and as a director.14LOUIS P. JENKINS, JR.Age: 52Director Since: 2023Committees:Compensation (Chair) Executive GovernanceMr. Jenkins was appointed as a director of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s Board, Mr. Jenkins served as a director of Community Financial and Community Bank of the Chesapeake since 2000. He is the principal of Jenkins Law Firm, LLC, located in LaPlata, Maryland. Before entering private practice, Mr. Jenkins served as an Assistant State’s Attorney in Charles County, Maryland from 1997 to 1999. In addition to his private practice, Mr. Jenkins serves as Court Auditor for the Circuit Court for Charles County, Maryland and attorney for the Charles County Board of Elections. From 2017-2019, Mr. Jenkins served as a member of the Board of Directors of the University of Maryland Medical System. Mr. Jenkins has also served as a board member of several other public service organizations including the University of Maryland Charles Regional Medical Center, Southern Maryland Chapter of the American Red Cross, Charles County Chamber of Commerce and the Charles County Bar Association.Mr. Jenkins’ qualifications to serve on our Board include his experience as an attorney, which provides the Board with substantial knowledge regarding issues facing the Company and the Bank. In addition, Mr. Jenkins brings a critical perspective to the lending and governance function of the Company and the Bank. Mr. Jenkins’ experience in the public sector adds valuable expertise regarding local issues and provides first-hand understanding of the local political and business environment in which the Bank operates.DAVID S. JONES
Age: 64Director Since: 2021Committees:Compensation GovernanceMr. Jones joined the Company’s Board on November 1, 2021, as a result of the merger between the Company and Severn Bancorp, Inc. Prior to joining the Company’s Board, Mr. Jones served as a director of Severn Bancorp since 2012 and a director of Severn Savings Bank, FSB, since 2011. Mr. Jones cofounded Southern Drywell, Inc., a septic system contractor in Annapolis and currently serves as the company’s President. Mr. Jones also cofounded Jones of Annapolis, Inc. a demolition and excavation contractor in Annapolis and currently serves as the company’s Secretary and Treasurer.Mr. Jones qualifications to serve on our Board include his many years of business experience, which is important to the oversight of the Company’s financial reporting, and enterprise and operational risk management.CLYDE V. KELLY, III
Age: 70Director Since: 2016Committees: Compensation Executive Governance (Chair)Mr. Kelly served as a director of CNB since 2005 and subsequently became a director of the Company and the Bank after the merger of CNB and Talbot Bank in 2016. Mr. Kelly has been the President and General Manager of Kelly Distributors, Inc Distributors since 1987, a company that distributes Anheuser-Busch InBev and craft brewery brands in Talbot, Queen Anne’s, Caroline, Dorchester and Kent counties of Maryland.Mr. Kelly’s qualifications to serve on our Board include his leadership of a large company, familiarity with an important market area in which we compete, and his experience on a bank board.DAVID W. MOORE
Age: 59Director Since: 2014Committees:CompensationMr. Moore has been a director of the Company since 2014. He previously served as a director of The Felton Bank since 2001 and subsequently became a director of CNB after the merger of The Felton Bank and CNB in 2010. He became a director of the Bank after the merger of Talbot Bank and CNB in 2016. Mr. Moore has served as President and CEO of The Milford Housing Development Corporation (MHDC) since 2004 and President of East Coast Property Management since 2011. He received his associate degree in construction management from Delaware Technical and Community College in 1984 and his Bachelor of Science degree in business management in 1994.Mr. Moore’s qualifications to serve on our Board include his experience in banking in both Delaware and Maryland as well as his expertise in our key market areas.15AUSTIN J. SLATER, JR.Age: 70Director Since: 2023Mr. Slater was appointed as Lead Independent Director and Vice Chair of the Company and the Bank in 2023 as a result of the merger between the Company and Community Financial. Prior to joining the Company’s Board, Mr. Slater served as Chairman of the Board of Directors of Community Financial and Community Bank of the Chesapeake since 2020. Prior to becoming Chair, he served as a director since 2002. He is a retired executive from the electric energy industry. Mr. Slater formerly served on the Board of Directors of the Federal Reserve Bank of Richmond, Baltimore Branch, as Chairman of the Board of the Maryland Chamber of Commerce and Chairman of the Board of Trustees for the College of Southern Maryland. He currently serves on the Board of Governors for the Shepherd University and as Treasurer for the Shepherd University Foundation, as well as numerous other industry and civic organizations. Mr. Slater holds a Master of Business Administration in finance from the George Washington University and a Bachelor of Science in accounting from Shepherd University.Mr. Slater’s qualifications to serve on our Board include his extensive management level experience in a large company setting outside of the financial services industry. Mr. Slater’s financial acumen and operational experience allow him to understand the complexities of the Company and the Bank. His experience in a regulated industry has exposed Mr. Slater to many of the issues facing companies today, particularly regulated entities, making Mr. Slater a valued component of a well-rounded board.DAWN M. WILLEY
Age: 61Director Since: 2020Committees:Audit Board Risk Oversight Strategic Initiatives & TechnologyMrs. Willey joined the Company as a director in December of 2020. Mrs. Willey was the founding CEO of Bridgeforce Inc., a trusted advisor to many of the largest lenders in the world. Mrs. Willey retired in 2013 and served as Board Chairperson through 2019. Mrs. Willey has also served on the Board of Katabat, a financial service SAS cloud computing company until its sale in 2020. Prior to launching an entrepreneurial career in 2000, Mrs. Willey held the position of Executive Vice President with MBNA, later purchased by Bank of America.Mrs. Willey’s qualifications to serve on our Board include a 16-year career with MBNA, where she was responsible for the oversight and implementation of a variety of operations including: portfolio risk strategies, investment evaluation and development of strategic business technology initiatives for collections, fraud, credit acquisition and portfolio risk management.16CORPORATE GOVERNANCEDirector IndependencePursuant to Nasdaq Rule 5605(b)(1), a majority of the members of the Board must be “independent directors” as that term is defined by Nasdaq Rule 5605(a)(2). In accordance with Nasdaq Rules, the Board considered transactions and relationships between each director (or any member of his or her immediate family) and between certain entities in which any director (or any member of his or her immediate family) has an interest, on the one hand, and the Company and its subsidiaries and affiliates, on the other hand, including the transactions and relationships with Michael B. Adams, Alan J. Hyatt and Louis P. Jenkins, Jr. disclosed below under the heading “Certain Relationships and Related Transactions.” Our Board has determined that all of our currently serving directors, with the exception of Alan J. Hyatt, our Chairman, and James M. Burke, our President and CEO, are “independent directors” under the Nasdaq Rules, and these independent directors constitute a majority of our Board.Board Leadership Structure and Executive SessionsOur Board currently separates the roles of Chairman of the Board and Chief Executive Officer. The foregoing structure is not mandated by any provision of law or our Charter or Bylaws, but the Board believes that this governance structure provides the best balance between the Board’s independent authority to oversee our business and the Chief Executive Officer’s management of our business on a day-to-day basis. Consistent with this determination, Alan J. Hyatt serves as our Chairman of the Board and James M. Burke serves as our President and Chief Executive Officer.The duties of the Chairman include: (i) acting as a liaison and channel for communication between the independent directors and the Chief Executive Officer; (ii) providing leadership to ensure the Board works cohesively and independently and during times of crisis; (iii) advising the Chief Executive Officer as to the quality, quantity and timeliness of information from executive management to the independent directors; (iv) being available to consult with the Chief Executive Officer and other directors on corporate governance practices and policies; (v) coordinating the assessment of Board committee structure, organization and charters and evaluating the need for change, as well as committee membership; (vi) together with the Chair of the Governance Committee, interviewing all Board candidates and making recommendations concerning such candidates; (vii) coordinating, developing the agenda and leading executive sessions of the independent directors and communicating the results thereof to the Chief Executive Officer; (viii) ensuring appropriate segregation of duties between Board members and management; (ix) suggesting agenda items for Board meetings; and (x) together with the Chair of the Compensation Committee, communicating the Board’s evaluation of the performance of the Chief Executive Officer.The Board of Directors has also appointed Austin J. Slater, Jr., the Vice Chair of the Board of Directors, to serve as the Company’s lead independent director and provide enhanced independent leadership for the Board. The duties of the lead independent director include: (i) presiding at Board meetings when the Chair is not present; (ii) calling meetings of the independent directors as appropriate; (iii) assisting the Board in complying with corporate governance guidelines and best practices; (iv) contributing to the annual performance reviews of the Chief Executive Officer and Chairman of the Board and participating in Chief Executive Officer succession planning; (v) assisting in the planning and reviewing of Board meeting agendas and meeting schedules; (vii) serving as a liaison between the Chief Executive Officer and independent directors; (viii) attending Board committee meetings on an ex-officio basis; (ix) promoting the efficiency and effective performance of the Board and consulting with the Governance Committee on the Board’s annual self-assessment; (x) providing guidance on the ongoing development of directors; and (xi) leading the director emeritus program.To further strengthen the oversight of the full Board, the Board’s independent directors hold executive sessions at which only non- management directors are present. The executive sessions are scheduled in connection with regularly scheduled Board meetings. Additional executive sessions may be called by any of the independent directors as often as necessary. During fiscal year 2023, the independent directors met eleven times in executive session without the presence of management.For these reasons, the Board believes that our corporate governance structure is in the best interests of the Company and our shareholders at this time. The Board retains authority to modify this structure as it deems appropriate.Board and Committee Oversight of Risk ManagementThe Board is actively involved in overseeing our risk management through the work of its various committees and through the work of the boards of directors and committees of our subsidiaries, a number of which have Company directors as members. Each committee of the Board is responsible for evaluating certain risks and overseeing the management of such risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements. The Audit Committee oversees the process by which senior management and the relevant departments assess and manage our exposure to, and management of, financial and operational risks. The Governance Committee manages risks by setting criteria for nomination of director candidates, nominating qualified candidates, and establishing and periodically reviewing our governance policies. The Strategic Initiatives & Technology Committee is responsible for overseeing the management of risks associated with major projects17related to strategic initiatives and key technology platforms. The Board Risk Oversight CommitteeBusiness Conduct and Code of EthicsWe have adopted a Code of Ethics, as amended, that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. The Code of Ethics provides fundamental ethical principles to which these individuals are expected to adhere. The Code of Ethics operates as a tool to help directors, officers, and employees understand and adhere to the high ethical standards required for employment by, or association with, the Company.The Code of Ethics is available on our corporate website at www.shorebancshares.comunder the “Governance Documents” link. Shareholders can also obtain a written copy of the Code of Ethics, free of charge, upon request to: Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or (410) 763-7800. Any future changes or amendments to the Code of Ethics and any waiver that applies to one of our senior financial officers or a member of the Board will be posted to our website.Shareholder Communications and Annual Meeting AttendanceShareholders may communicate with our Board by contacting Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or (410) 763-7800. All communications will be forwarded directly to the Chairman of the Board for consideration.The Board members are not required to attend our annual meetings of shareholders. However, all directors are encouraged to attend every annual meeting of shareholders as we believe that the annual meeting is an opportunity for shareholders to communicate directly with directors. If you would like an opportunity to discuss issues directly with the members of the Board, please consider attending this year’s Annual Meeting. At the 2023 annual meeting of shareholders, 12 directors (who were serving as such) were in attendance.The Company and its subsidiaries have adopted policies and procedures to ensure compliance with the foregoing requirements.18COMMITTEES OF THE BOARD OF DIRECTORSExecutive CommitteeOur Executive Committee consists of Alan J. Hyatt, (Chair), Michael B. Adams, R. Michael Clemmer, Jr., William E. Esham, III, Louis P. Jenkins, Jr., Clyde V. Kelly, III, Mary Todd Peterson, and Esther A. Streete. The Executive Committee has the authority to exercise the powers of our Board in the management of the business and affairs of the Company, subject to any restrictions imposed by law and to subsequent revision or alteration of any such action by the Board.Audit CommitteeThe current members of the Audit Committee are Mary Todd Peterson (Chair), James A. Judge, Rebecca M. McDonald, Esther A. Streete, Konrad M. Wayson and Dawn M. Willey. Our Board has determined that each current member of the Audit Committee is “independent” and financially literate as required in the Audit Committee charter and as required by the rules and regulations promulgated by the SEC and Nasdaq. Our Audit Committee has adopted a charter, which is posted on our website at www.shorebancshares.comunder the “Governance Documents” link.The principal functions of the Audit Committee are to review the financial information to be provided to our shareholders and others, our financial reporting process, our system of internal controls, our independent auditors’ independence, our audit process and the process for monitoring compliance with laws and regulations. Under our Audit Committee charter, the Audit Committee is solely responsible for hiring and firing the independent auditors and approving their fees and engagement terms; resolving any disagreement between the independent auditors and our management; and pre-approving all audit and non-audit services performed by the independent auditors, subject to a de minimis exception.Our Board has determined that James A. Judge qualifies as an audit committee financial expert within the meaning of applicable SEC rules because he has the following attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with accounting for estimates, accruals and reserves; (iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by our financial statements, and experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal control and procedures for financial reporting; and (v) an understanding of audit committee functions. Mr. Judge has acquired these attributes by means of having held various positions that provided relevant experience, as described in his biography above.Compensation CommitteeThe members of the ERMCompensation Committee, all of whom are independent directors as that term is defined in the Nasdaq Rules, are Louis P. Jenkins, Jr. (Chair), William E. Esham, III, David S. Jones, Clyde V. Kelly, III, John A. Lamon, III, David W. Moore and Mary Todd Peterson. The Compensation Committee has adopted a charter, which is posted on our corporate website at www.shorebancshares.comunder the “Governance Documents” link.The Compensation Committee is generally responsible for overseeing and, as appropriate, determining our director and executive officer compensation, recommending executive promotions to the full Board, providing assistance and recommendations with respect to our compensation policies and practices, and assisting with the administration of our compensation plans. The Compensation Committee determines executive compensation pursuant to the principles discussed in the section below entitled “Compensation Discussion and Analysis” and determines director compensation by periodically reviewing the compensation practices of peer group institutions.Pursuant to its charter, the Compensation Committee may retain or obtain the advice of a compensation consultant, legal counsel or other advisers as it deems necessary and appropriate to carry out its duties and, in connection with such retention of consultants, the Compensation Committee will consider the independence factors as required by the applicable rules of Nasdaq and the SEC. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other advisers retained by them. During fiscal year 2023, the Legacy Committee (as defined below) engaged Hunt Financial Group to perform an executive compensation market review for purposes of making 2023 compensation decisions.Governance CommitteeThe members of the Governance Committee, all of whom are independent directors as that term is defined in the Nasdaq Rules, are Clyde V. Kelly, III (Chair), Louis P. Jenkins, Jr., David S. Jones, John A. Lamon, III, Frank E. Mason III and Joseph V. Stone, Jr. The19Governance Committee has adopted a charter, which is posted on our corporate website at www.shorebancshares.comunder the “Governance Documents” link.The Governance Committee is responsible for overseeing and, as appropriate, determining or making recommendations to the Board regarding membership and constitution of the Board and its role in overseeing our affairs. The Governance Committee manages the process for evaluating the performance of the Board and for nominating candidates (including current Board members) for election by our shareholders after considering the appropriate skills and characteristics required for the Board, the current makeup of the Board, the results of the evaluations and the willingness of the Board members to be re-nominated.Board Risk Oversight CommitteeThe members of the Board Risk Oversight Committee are R. Michael Clemmer, Jr. (Chair),Chair, Lloyd L. Beatty, Jr., William E. Esham, III, Alan J. Hyatt, James A. Judge, Frank E. Mason, III, Rebecca M. McDonald, E. Lawrence Sanders, III, Konrad M. Wayson and Dawn.Dawn M. Willey. . To direct the ERM function, the ERMThe Board Risk Oversight Committee has adopted a charter, which is responsible for establishingposted on our corporate website at www.shorebancshares.com under the “Governance Documents” link.The Board Risk Oversight Committee assists the Board in its oversight responsibilities by focusing specifically on the Company’s enterprise risk management activities including the significant policies, procedures and monitoringpractices employed to manage capital adequacy, earnings, market risk, credit risk, liquidity, compliance, regulatory, legal, reputation, and strategic operational risk and by providing recommendations to the volumeBoard and mixmanagement on strategic guidance with respect to the assumption, management and mitigation of our assetsrisk.Strategic Initiatives & Technology CommitteeThe members of the Strategic Initiatives & Technology Committee are Michael B. Adams (Chair), Frank E. Mason, III, Rebecca M. McDonald, and funding sources. Dawn M. Willey.The ERM OversightStrategic Initiatives & Technology Committee’s overall objective is to provide oversight and strategic guidance to management related to the Company’s planning and execution of key organizational initiatives and strategic projects, technology, physical/structural assets, products, acquisitions, and key market actions. The Committee reviews and provides recommendations to the Board with respect to polices, processes and systems that management uses to manage our liquidity, capital adequacy, growth, risk,projects, new products, facilities and profitability goals. ERM will be the primary forum for discussion and analysis of our investment plans, lending plans, liability structure, and overall interest rate risk. The ERM Oversight Committee met four times during fiscal year 2021.Board and Committee Meetings and AttendanceOur Board held thirteen11 meetings during fiscal year 2021. During fiscal year 2021,2023. All directors of the Board had five separately designated standing committees: the Executive Committee, the Audit Committee, the Nominating and Governance Committee, the Compensation Committee, and the ERM Oversight Committee.In fiscal year 2021, thirteen incumbent directorsCompany attended at least 75% of the aggregate of (1) the total number of meetings of the Board (heldand committees on which such directors served during their tenure as a director in fiscal year 2023.Governance and Risk ManagementWe are committed to achieving excellence in our governance and risk management practices to support the periodCompany’s long-term success. The Company’s Code of Ethics and Whistleblower Procedure ensure that our directors, officers, and employees are apprised of the requirements for maintaining compliance with all applicable rules and regulations. Our corporate governance policies and practices also include evaluations of the Board and its committees, which are responsible for broad oversight of Company and Bank operations.Our internal risk management teams oversee compliance with applicable laws and regulations and coordinate with subject matter experts throughout the business to identify, monitor, and mitigate risk including information security risk management and cyber defense programs. These teams maintain rigorous testing programs and regularly provide updates to the Board and the Board Risk Oversight Committee, which periodically evaluates, and makes recommendations to the Board in regards to the Company’s risk policies and procedures. The Company has a robust Information Security program that incorporates multiple layers of physical, logical, and written controls. We leverage the latest encryption configurations and technologies on our systems, devices, and third-party connections and further vet third-party vendors’ encryption, as required, through the organization’s vendor management process.ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) MATTERSSustainabilityThe Company is committed to operating in a sustainable manner and has undertaken initiatives designed to reduce our impact on the environment and to promote environmentally friendly projects and practices. With a view to increasing efficiency and reducing waste, we are continuing to digitize manual back office and banking center functions. Over the past several years, we migrated our technology infrastructure to a cloud environment, which reduced our energy usage. Many of the Bank’s locations have been converted20to energy efficient systems and finishes to minimize the carbon footprint, and any new buildings or locations will be constructed in this manner. We continue to embrace the use of digitized records and e-signing technology resulting in a reduction of paper waste.We believe that a focus on environmental sustainability, with the objective of reducing costs and improving sustainability of our operations, will provide a strategic benefit to the Company. Furthermore, the Company recognizes that climate change is a growing risk for our planet, and we are committed to doing our part to mitigate this risk by placing increased focus and emphasis on environmental consciousness.Human CapitalOur Mission and CultureThe Bank is built around the character of our people and our communities. We are dedicated to our clients, our employees, our communities, and our shareholders – our mission is your success. The Bank’s corporate culture is defined by core values which include integrity, family, performance, dedication and empowerment. We value our employees by investing in competitive compensation and benefit packages and fostering a team environment centered on professional service and open communication. Attracting, retaining and developing qualified, engaged employees who embody these values are crucial to the success of the Bank and Company. We believe that relations with our employees are good.Employee DemographicsAs of December 31, 2023, the Bank employed 630 individuals, of which 610 were employed on a full-time basis (620 full time equivalent employees). The Bank’s employees were not represented by a collective bargaining agreement.The Company has no employees and reimburses the Bank for estimated expenses, including an allocation of salaries and benefits.Diversity and InclusionWe are committed to building a diverse workforce and an inclusive work environment which are supported by our culture and values. We strive to attract and retain employees with diverse characteristics, backgrounds and perspectives, which inspires our team to achieve more creative and innovative solutions for our customers. With a commitment to equality, inclusion and workplace diversity, we focus on understanding, accepting, and valuing the differences between people. Our commitment to equal employment opportunities is demonstrated through an affirmative action plan which includes annual compensation analyses, ongoing reviews of our selection and hiring practices and an annual review of our plan to ensure we build and maintain a diverse workforce.Compensation and BenefitsThe Bank’s compensation and benefits package is designed to attract and retain a talented workforce. In addition to salaries, benefits include a 401(k) plan with an employer matching contribution, an employee stock purchase plan, medical insurance benefits, paid short-term and long-term disability and life insurance, flexible spending accounts, and tuition assistance.Employee Health, Safety and WellnessWe are committed to supporting the safety, health and wellness of our employees. We provide paid time off (including parental and adoption leave), an employee assistance program and wellness benefits which include mental health support, coaching and other resources for employees and their immediate family members. We have adopted a flexible approach to remote work which designates roles as remote, on-site or hybrid (a combination of on-site and remote work) based on specific job responsibilities and requirements.Professional DevelopmentThe Bank invests in the growth of its employees by providing access to professional development and continuing education courses and seminars that are relevant to the banking industry and their job function within the Company. We offer our employees the opportunity to participate in various professional and leadership development programs. On-demand training opportunities include a variety of industry, technical, professional, business development, leadership and regulatory topics.Social ImpactWe are a community bank committed to investing in the financial health and well-being of our neighbors, and we believe that the success of our communities is a shared responsibility. In 2023, the Bank supported over 517 community organizations and donated over $761,652 and countless volunteer hours. Shore United Bank’s 2023 Community Impact Report, which is not incorporated into this Proxy Statement by reference, is available at https://www.shoreunitedbank.com/assets/files/x57kcWuh.21COMPENSATION OF NON-EMPLOYEE DIRECTORSOverviewOur directors who are not also our employees or employees of our subsidiaries, referred to as “non-employee directors,” receive an annual retainer for their service on the Boards of both the Bank and Company. Non-employee directors are permitted to elect to receive their quarterly installments of the annual retainer in either cash or stock pursuant to the Shore Bancshares, Inc. 2016 Stock and Incentive Compensation Plan (the “2016 Equity Plan”). These compensatory arrangements are discussed in detail below.The following table provides information about the compensation paid to or earned by our non-employee directors during fiscal year 2023. Information regarding compensation paid to or earned by directors who are also Named Executive Officers (“NEO”) is presented in the Summary Compensation Table that appears below in the section entitled “Compensation Discussion and Analysis.”Director Compensation TableName Fees earned or paid in cash
($)(1)Fees earned or paid in restricted stock ($)(2)Non-qualified Deferred Compensation Earnings ($)(3)All Other Compensation ($)(4)Total
($)Michael B. Adams(5)20,008 26,992 - 739 47,739 Blenda Armistead(9)14,625 11,254 - 525 26,404 R. Michael Clemmer, Jr. 40,013 26,987 - 1,838 68,838 William E. Esham, III 37,513 26,987 - - 64,500 Alan J. Hyatt(6)50,013 26,987 - 150,741 (7)227,741 Louis P. Jenkins, Jr.(5)20,008 26,992 - 510 47,510 David S. Jones 35,013 26,987 - 1,701 63,701 James A. Judge 37,513 26,987 - 741 65,241 Clyde V. Kelly, III 40,013 26,987 - 741 67,741 John A. Lamon 35,013 26,987 - 741 62,741 Rebecca M. McDonald(5)17,508 26,992 - 510 45,010 David W. Moore 37,513 26,987 - - 64,500 Mary Todd Peterson(5)20,008 26,992 - 510 47,510 E. Lawrence Sanders, III(5)17,508 26,992 6,637 510 51,647 Austin J. Slater, Jr.(5)17,508 26,992 - 759 45,259 Joseph V. Stone, Jr.(5)17,508 26,992 29,269 510 74,279 Esther A. Streete 37,513 26,987 - 139 64,639 Jeffrey E. Thompson(8)20,013 13,494 - 556 34,063 Konrad M. Wayson 35,013 26,987 - 1,701 63,701 Dawn M. Willey 35,013 26,987 - 1,701 63,701 (1) Includes fees for which the director has elected to receive shares of our Common Stock in lieu of cash. The number of shares of stock received by each director in lieu of cash during 2023 was as follows: Mr. Mason 2,287 shares for $40,000; Mr. Clemmer 2,287 shares for $40,000; Ms. Willey 2,001 shares for $35,000; Mr. Wayson 2,001 shares for $35,000; Mr. Jones 2,001 shares for $35,000; and Mr. Adams 1,901 for $20,000.(2) Includes amounts earned for serving on the Board of the Company paid in the form of restricted stock. The amounts reflect the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718, “Accounting for Stock Compensation” (“ASC 718”). See Note 14 to the consolidated audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 regarding assumptions underlying valuation of equity awards.(3) Represents the portion of non-qualified deferred compensation earnings that person servedwas above the Internal Revenue Service long-term rate. Under the plan, interest is credited at a rate equal to the Company’s annualized return on equity or based on the gains or losses on the deemed investments.(4) Represents dividends paid on unvested restricted stock.(5) Messrs. Adams, Jenkins, Sanders, Slater, Stone, and Ms. McDonald and Ms. Peterson joined the Board effective July 1, 2023 upon completion of the Company’s merger with Community Financial.(6) The position of Chairman of the Board is paid a higher annual retainer than the remaining directors.(7) Represents compensation of $150,000 for consulting services performed by Mr. Hyatt pursuant to the terms of a consulting agreement between Mr. Hyatt and the Bank and $741 in dividends paid on unvested restricted stock.(8) Mr. Thompson resigned from the Board of Directors of Company effective July 1, 2023 upon the closing of the Company’s acquisition of Community Financial.(9) Ms. Armistead’s service on the Board of Directors concluded with the expiration of her term as a director)director on May 23, 2023.22Company Director CompensationIn 2023, our non-employee directors received an annual retainer of $35,000, paid quarterly. In addition, the Chairman of the Board receives an additional annual retainer fee of $15,000 and (2) the total numberChairs for each of meetings held by allthe remaining committees of the Board receive an additional annual retainer fee of $5,000. Directors have the option to receive their retainers in the form of cash or restricted stock issued pursuant to the 2016 Equity Plan. Retainers paid in stock have a one-year vesting period. Directors also received an equity retainer valued at $27,000 in 2023.EXECUTIVE OFFICERS WHO ARE NOT SERVING AS DIRECTORSBelow is information regarding each of our current executive officers who are not directors of the Company, including their title, age and brief biography describing each executive officer’s business experience. Ages presented are as of December 31, 2023.Name Age Position Todd L. Capitani 57 Executive Vice President and Chief Financial Officer Andrea E. Colender 60 Executive Vice President, Chief Legal Officer and Corporate Secretary B. Scot Ebron 55 Executive Vice President and Chief Banking Officer Christy Lombardi 47 Executive Vice President and Chief Human Resources Officer Lacey A. Pierce 38 Executive Vice President and Chief Administrative Officer Charles E. Ruch, Jr. 64 Executive Vice President and Chief Credit Officer Donna J. Stevens 61 Executive Vice President and Chief Operating Officer Talal Tay 46 Executive Vice President and Chief Risk Officer Todd Capitani was appointed Executive Vice President and Chief Financial Officer of the Company and Bank in July 2023, upon the completion of the merger of the Company and Community Financial. Prior to joining the Company, Mr. Capitani served as Executive Vice President and Chief Financial Officer of Community Financial and Community Bank of the Chesapeake from 2009 to 2023. Prior to that, Mr. Capitani served as a Senior Finance Manager at Deloitte Consulting and as Chief Financial Officer at Ruesch International, Inc. He has over 30 years of experience in corporate finance, controllership and external audit. Mr. Capitani is involved with several local charities, religious and community organizations. Mr. Capitani is a member of the American Institute of Certified Public Accountants and other civic groups. He serves as the Treasurer on the Board of Directors for Annmarie Sculpture Garden & Arts Center. Mr. Capitani is a Certified Public Accountant and holds a Bachelor of Arts from the University of California at Santa Barbara. He also attended the Harvard Business School Program on Negotiation and the Yale School of Management Strategic Leadership Conference.Andrea E. Colender was appointed Executive Vice President, Chief Legal Officer, and Secretary of the Company on November 1, 2021, upon the completion of the merger of the Company and Severn. Prior to joining the Company, Ms. Colender served as General Counsel to Severn and Severn Bank beginning in March 2009. She was later appointed to act as Corporate Secretary. She has served on the Board of Mid- Maryland Title, Inc., a wholly owned subsidiary of the Company, since September 2017. She also founded and serves as Chair of the Company’s Advisory Board, which is comprised of all women, to help promote the financial success of women in business. Ms. Colender graduated from the University of Maryland School of Law with honors in 1988. She received her Bachelor of Arts from New College, University of South Florida, in 1985. Professional affiliations include the Maryland State Bar Association, Maryland Banker’s Association, Anne Arundel Bar Association, and Executive Alliance.B. Scot Ebron was appointed Executive Vice President and Chief Banking Officer of the Company and Bank in July 2023, upon the completion of the merger of the Company and Community Financial. Prior to joining the Company, Mr. Ebron served as the Executive Vice President and Chief Banking Officer of Community Financial and Community Bank of the Chesapeake. Mr. Ebron oversees the Bank’s business development efforts, as well as the Bank’s wealth management division, cannabis banking and residential mortgage teams. Mr. Ebron has worked in banking for over 30 years. He serves on the Board of Gwyneth’s Gift Foundation and also on the College of Southern Maryland’s Business Advisory Council. He holds a bachelor’s degree in economics from the University of North Carolina.Christy Lombardi was appointed Executive Vice President and Chief Human Resources Officer of the Company and Bank in July 2023, upon the completion of the merger of the Company and Community Financial. Prior to joining the Company, Ms. Lombardi served as Executive Vice President, Chief Operating Officer of Community Financial and Community Bank of the Chesapeake and was responsible for overseeing operations, human resources, information technology and shareholder relations. Ms. Lombardi has 25 years of banking experience. She serves on the Board of Trustees of the College of Southern Maryland, the Maryland Bankers23Association Board of Directors, the Tri-County Council for Southern Maryland Board, and on the Southern Maryland Workforce Development Board. Ms. Lombardi served on the Board of Directors of the Calvert County Chamber of Commerce from 2012-2018. She completed the ABA Stonier Graduate School of Banking program, is a Maryland Bankers School graduate and holds a Masters in Management from University of Maryland University College as well as a Master of Business Administration.Lacey A. Pierce was appointed Executive Vice President and Chief Administrative Officer of the Company and the Bank upon the completion of the Company’s merger with Community Financial. Prior to joining the Company and the Bank, Ms. Pierce served as Executive Vice President and Chief Administrative Officer of Community Financial and Community Bank of the Chesapeake and was responsible for corporate administration matters and overseeing lending administration, marketing, facilities and community shareholder relations. She has more than 10 years banking experience. Ms. Pierce serves on the Board of Directors of The Arc of Southern Maryland and Farming 4 Hunger. She is a Maryland Banking School graduate and holds a bachelor’s degree from Towson University. Ms. Pierce completed the ABA Stonier Graduate School of Banking program.Charles E. Ruch, Jr. was appointed as Executive Vice President and Chief Credit Officer of the Company (formerly CNB) in 2016. Prior to that, personMr. Ruch served (held duringas the period served).19 Donna J. Stevens was appointed Executive Vice President and Chief Operating Officer of the Company in July 2015 and Shore United Bank in July 2016. Her banking career began in 1980 and she has been employed by the Company in various officer capacities since 1997, including Chief Operations Officer; Senior Vice President, Senior Operations and Compliance Officer and Corporate Secretary for CNB the Company’s wholly-owned commercial bank subsidiary from February 2010 to June 2013. Management responsibilities have included retail branch banking, loan operations and documentation, credit administration, bank operations and compliance. Professional affiliations include Maryland Banker’s Association Regulatory Affairs Committee and Mid-Atlantic Regional Compliance Group. Ms. Stevens holds an associate degree in business management. She is a Maryland Banking School graduate and completed the ABA Stonier Graduate School of Banking program.Talal Tay was appointed Executive Vice President and Chief Risk Officer of the Company and Bank in July 2023, upon the completion of the merger of the Company and Community Financial. Prior to joining the Company, Mr. Tay served as Executive Vice President, Chief Risk Officer of Community Financial and Community Bank of the Chesapeake and was responsible for enterprise risk management, credit administration, loan review as well as compliance and BSA. He has extensive experience working in the audit and risk areas of financial services. Mr. Tay holds a bachelor’s degree in business marketing from Florida State University and accounting studies from the University of Texas at San Antonio. He holds a Certified Anti-Money Laundering Specialist designation.24BENEFICIAL OWNERSHIP OF COMMON STOCKThe following table sets forth information as of the Record Date relating to the beneficial ownership of the Common Stock by (i) each person or group known by us to own beneficially more than five (5%) of the outstanding shares of Common Stock; (ii) each of our directors and named executive officers named in the Summary Compensation Table (such executive officers are referred to herein as the “Named Executive Officers”);officers; and (iii) all of our directors and executive officers as a group; and includes all shares of Common Stock that may be acquired within 60 days of the Record Date. The address of each of the persons named below is the address of the Company except as otherwise indicated. Name Owned Owned Directors, Nominees and Named Executive Officers Edward C. Allen 14,758 * Blenda W. Armistead 23,364 (1) * Lloyd L. Beatty, Jr. 112,523 (2) * R. Michael Clemmer, Jr. 18,351 (3) * William E. Esham, III 5,966 * Alan J. Hyatt 1,760,944 (4) 8.9 % David S. Jones 46,522 (5) * James A. Judge 15,861 (6) * Clyde V. Kelly 13,077 * John A. Lamon 50,352 * Frank E. Mason, III 33,287 * David W. Moore 6,967 (7) * Donna J. Stevens 12,561 (8) * Jeffrey E. Thompson 16,637 (9) * Konrad M. Wayson 51,245 * Dawn M. Willey 13,078 * All Directors, Nominees and Named Executive Officers as a Group (16 Persons) 2,195,495 11.1 % 5% Shareholders Fourthstone, LLC 13476 Clayton Road St. Louis, MO 63131 1,951,427 (10) 9.8 % FJ Capital Management LLC 1313 Dolley Madison Blvd, Ste 306
McLean, VA 22101 1,524,040 (11) 7.7 % All 5% Shareholders as a Group 3,475,467 17.5 % Total 5,670,962 28.6 % Name of Beneficial Owners Number of SharesBeneficially Owned(1)(2)(3)Percent of Shares of Common Stock Outstanding(4)Directors: Michael B. Adams 38,796 * James M. Burke 69,933(5)* R. Michael Clemmer, Jr. 25,472(6)* William E. Esham, III 7,881 * Alan J. Hyatt 1,766,435(7)5.32% Louis P. Jenkins, Jr. 54,751 * David S. Jones 66,250(8)* James A. Judge 17,403(9)* Clyde V. Kelly, III 18,888 * John A. Lamon, III 57,732 * Frank E. Mason, III 38,987 * Rebecca M. McDonald 91,683(10)* David W. Moore 7,846(11)* Mary Todd Peterson 23,661(12)* E. Lawrence Sanders, III 77,677(13)* Austin J. Slater, Jr. 65,130 * Joseph V. Stone, Jr. 84,048(14)* Esther A. Streete 627 * Konrad M. Wayson 66,044(15)* Dawn M. Willey 40,863 * Named Executive Officers Who are Not Also Directors Donna J. Stevens 16,079(16)* Christy Lombardi 37,923(5)* All Directors, Executive Officers and Nominees as a Group (28 persons) 2,846,178(17)8.57% 5% Owner(s): Fourthstone LLCFourthstone Master Opportunity Fund LtdFourthstone GP LLCFourthstone QP Opportunity Fund LP13476 Clayton RoadSt Louis, MO 631313,289,744 (18)9.91% BlackRock, Inc.50 Hudson YardsNew York, NY 100013,008,321(19)9.05% * Amount constitutes lessLess than 1%.20 Notes:(1)Includes 1,305 shares held individually by Bruce C. Armistead; 2,532 shares held by Bruce C. Armistead under an Individual Retirement Account arrangement; and 2,545 shares held by Bruce C. Armistead, as custodian for a minor child.(2)Includes 15,026 shares held jointly with Nancy W. Beatty; 855 shares held individually by Nancy W. Beatty.(3)Includes 1,500 shares held jointly with Dina Clemmer and 350 shares held by Dina Clemmer, as custodian for a minor child.(4)Includes 214,229 shares owned by Mr. Hyatt, including 94,819 ESOP shares; 849,961 shares held jointly with Sharon G. Hyatt; Includes 7,603 shares held by a Company of which Mr. Hyatt is a general partner; Includes 688,080 shares held by Trusts for which Mr. Hyatt is co-trustee.(5)Includes (5) Includes 17,287 shares Mr. Jones controls as custodian for his children; 27,699 shares owned by Southern Drywell, Inc., of which Mr. Jones has a 50% interest as a co-owner; and 4,089 shares owned by a trust that Mr. Jones controls as a co-trustee and beneficiary.(6)Includes 5,740 shares held individually by Margaret B. Judge.(7)Includes 96 shares held jointly with Evelyn W. Moore.(8)Includes 179 shares held jointly with Clay Stevens; 30 shares held as joint tenant with Laura Stevens; and 30 shares held as joint tenant with Taylor Stevens.(9)Includes 1,200 shares held jointly with Barbara Thompson; 1,000 shares held as joint tenant with James R. Thompson; and 1,000 shares held as joint tenant with Katelyn J. Thompson.(10)As reported in a Schedule 13 G/A filed with the SEC on February 14, 2022 for the calendar year ended December 31, 2021.(11)As reported in a Schedule 13 G/A filed with the SEC on February 11, 2022 for the calendar year ended December 31, 2021.21 COMPENSATION OF NON-EMPLOYEE DIRECTORSOverviewOur directors who are not also our employees or employees of our subsidiaries, referred to as “outside directors,” receive an annual retainer for their service on the Boards of both the Bank and Company. Outside directors are permitted to elect to receive their quarterly installments of the annual retainer in either cashshares outstanding(1) Includes shares of unvested restricted stock, with respect to which the individual has voting but no investment power as follows: Mr. Adams – 4,028 shares; Mr. Burke - 293 shares; Mr. Jenkins – 2,127 shares; Ms. McDonald - 2,127 shares; Ms. Peterson – 2,127 shares; Mr. Sanders – 2,127 shares; Mr. Slater – 2,616 shares; Mr. Stone - 2,127 shares; Mr. Wayson – 2,663 shares; Ms. Willey 2,663 shares.25(2)As to shares reported herein, except as otherwise noted, each person effectively exercises sole voting or stock pursuant todispositive power, or shares voting or dispositive power with spouse.(3)Includes shares purchased under the Shore Bancshares, Inc. 20162021 Employee Stock Purchase Plan (“ESPP”) with respect to which the individual has sole voting and Incentive Compensation Plan (the “2016 Equity Plan”). These compensatory arrangementsinvestment power as follows: Scot Ebron – 265 shares; Talal Tay – 424 shares; Donna Stevens – 1,187 shares; Andrea Colender – 1,558 shares; Lacey Pierce – 686 shares of which 343 shares are discussedheld by the ESPP of Ms. Pierce’s spouse.(4)Based upon 33,210,522 shares of Company Common Stock outstanding as of April 2, 2024.(5)The ESOP was terminated in detail below.The following table provides information aboutconnection with the compensation paidCompany’s merger with Community Financial and Mr. Burke and Ms. Lombardi have not received a distribution from the ESOP as of April 2, 2024. Mr. Burke holds 5,708 shares and Ms. Lombardi holds 6,555 shares with respect to or earnedwhich the individuals have voting but not investment power over the shares.(6)Includes 350 shares held by our outside directors during fiscal year 2021. Information regarding compensation paid to or earnedMr. Clemmer’s wife jointly with children.(7)Includes 7,603 shares held by directors whoa company of which Mr. Hyatt is a general partner; includes 688,080 shares held by Trusts for which Mr. Hyatt is co-trustee; includes 5,929 shares beneficially owned by Mr. Hyatt’s wife.(8)Includes 37,192 shares owned by Southern Drywell, Inc., of which Mr. Jones has a 50% interest as a co-owner; 9,279 shares owned by Jones of Annapolis, Inc., of which Mr. Jones has a 22 1/2 % interest as a co-owner; and 10,315 shares owned by Sonne Capital, of which Mr. Jones has a 16.67% interest as a co-owner.(9)Includes 5,740 shares beneficially owned by Mr. Judge’s wife.(10)Includes 2,619 shares beneficially owned by Ms. McDonald’s daughter and includes 32,602 shares held in two trusts which Ms. McDonald serves as trustee.(11)Includes 96 shares held jointly with Mr. Moore’s mother and 875 shares beneficially owned by Mr. Moore’s wife.(12)Includes 19,103 shares held in a trust account.(13)Includes 5,558 shares beneficially owned by the individual retirement account of Mr. Sanders’s wife.(14)Includes 47,174 shares held in a trust account and 4,657 shares beneficially owned by the individual retirement account of Mr. Stone’s wife.(15)Includes 50,266 shares held in two trusts for which Mr. Wayson serves as trustee.(16)Includes 60 shares held by Ms. Stevens jointly with children.(17)Includes shares beneficially owned as follows: Andrea E. Colender – 26,511 shares; Todd L. Capitani – 34,597 shares; B. Scot Ebron – 52,622 shares; Lacey A. Pierce – 46,253 shares; Charles E. Ruch, Jr. – 3,032 shares; and Talal Tay – 9,054 shares. Of those shares beneficially owned, some are also Named Executive Officers is presentedheld in the Summary Compensation Table that appears below inESOP which the section entitled “Compensation Discussionindividuals have voting but not investment power over the shares as follows: Mr. Capitani holds 5,033 shares, Mr. Ebron holds 819 shares, Mr. Tay holds 1,004 shares, and Analysis.”Director Compensation Table Fees earned Fees earned
or paid in or paid in
cash restricted
stock Total Name ($) ($)(1) ($) Blenda W. Armistead 30,002 21,998 52,000 David J. Bates (2) 12 37,995 38,007 R. Michael Clemmer, Jr. 12 56,988 57,000 William E. Esham, III 14 51,986 52,000 Alan J. Hyatt (3) 11,178 - 11,178 (4) David S. Jones (5) 8,677 - 8,677 James A. Judge 35,002 21,998 57,000 Clyde V. Kelly, III 35,002 21,998 57,000 John A. Lamon (5) 8,677 - 8,677 Frank E. Mason, III (6) 42,512 21,998 64,510 (4) David W. Moore 35,002 21,998 57,000 Jeffrey E. Thompson 35,002 21,998 57,000 Konrad M. Wayson (5) 8,677 - 8,677 Dawn M. Willey (7) 14 51,986 52,000 Notes:(1)Includes amounts earned for serving on the Board of the Company in which the director elected to receive payment in the form of restricted stock. The amounts reflect the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718, “Accounting for Stock Compensation” (“ASC 718”). See Note 14 to the consolidated audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 regarding assumptions underlying valuation of equity awards.(2)Mr. Bates retired from the Board on August 9, 2021.(3)Mr. Hyatt was appointed to the Board and made Chairman of the Board as of November 1, 2021.(4)The position of Chairman of the Board is paid a higher annual retainer than the remaining directors.(5)Director was appointed to the Board as of November 1, 2021(6)Mr. Mason served as Chairman of the Board from January 1, 2021 through October 31, 2021.(7)Ms. Willey was appointed to the Board as of January 1, 2021.22Company Director CompensationInMs. Pierce holds 8,882 shares of which 4,919 are held by the third quarterESOP of 2019, our outside director compensation was increased to provide for a $5,000 increase to both the annual retainer fee, which went from $25,000 to $30,000, and the director equity award, which went from $17,000 to $22,000. In addition, the separate fee for the ChairmanMs. Pierce’s spouse. All individuals are executive officers of the Board was increased $5,000, which went from $10,000 to $15,000. The Chairs for each committee ofCompany and Bank.(18)Based on information contained in a Schedule 13G/A filed with the Board also receive an additional annual retainer of $5,000. There were no outside director compensation increasesSEC on February 14, 2024.(19)Based on information contained in 2020 and 2021. Directors havea Schedule 13G/A filed with the option to receive their retainers in the form of cash or restricted stock issued pursuant to the 2016 Equity Plan with a one-year vesting period.Minimum Stock Ownership RequirementsMinimum stock ownership requirements for the CEO, Directors and Named Executive Officers as follows:CEO — minimum of 20,000 shares within 5 years of appointment;Directors — minimum of 4,000 shares within 3 years of being elected; andNamed Executive Officers — minimum of 4,000 shares within 5 years of appointment.All named executives and directors have met the required ownership levels.2326EXECUTIVE COMPENSATION DISCUSSION AND ANALYSISOur executive compensation program is designedWe are pleased to rewardprovide our senior management team not just for delivering short-term results but also for driving consistent sustainable growth, which is how we exceed customer expectations and produce positive returns for our shareholders. We believe that our compensation decisions reflect a balanced and responsible pay approach by tying pay outcomes over the short and long-term, while also considering the environment in which compensation decisions are made.Shareholders have the opportunity, at the Annual Meeting, to vote to endorse or not endorseshareholders with an overview of the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to the SEC’sprograms, process, and specific compensation disclosure rules. The Compensation Committee and the Board believe that this Compensation Discussion and Analysis, and the compensation tables and narrative discussion that follow, support their recommendation to approve the shareholder advisory resolutiondecisions for the following Named Executive Officers in 2021:·Lloyd L. Beatty, Jr. — Named Executive Officer Title James M. Burke President and Chief Executive Officer(1)·Edward C. Allen — Executive Vice President and Chief Financial Officer·Donna J. Stevens — Executive Vice President and Chief Operating Officer Christy Lombardi Executive Vice President and Chief Human Resources Officer(1)Lloyd L. Beatty, Jr. Former President and Chief Executive Officer(2)Vance Adkins Former Chief Financial Officer (3)(1)In connection with the merger of the Company and The Community Financial Corporation, James M. Burke, the former President and Chief Executive Officer of The Community Financial Corporation was appointed as President and Chief Executive Officer of the Company and the Bank and Christy Lombardi, former Chief Operating Officer of The Community Financial Corporation was appointed as the Chief Human Resources Officer of the Company and the Bank.(2)Mr. Beatty resigned his position as president and chief executive officer in connection with the merger of the Company and The Community Financial Corporation effective July 1, 2023 (“Merger Effective Date”).(3)Mr. Adkins terminated his employment effective as of the Merger Effective Date.OverviewThis Compensation Discussion and Analysis provides our shareholders with important information regarding the material components of our executive compensation program, including the following:•A summary of key business results and compensation decisions in 2023;•A discussion of our 2023 say-on-pay advisory vote;•An overview of our compensation philosophy;•A discussion of the governance practices for our executive compensation decisions;•A review of the process by which NEO compensation decisions are made and the parties involved;•A description of each element of our NEO compensation program and its purpose;•A discussion of the Compensation Committee’s 2023 incentive compensation decisions and the key factors that influenced those decisions; and•An overview of other factors that affect our executive compensation program, including clawbacks and tax considerations.Impact of Merger on Our Compensation CommitteePrior to the Merger Effective Date, our Compensation Committee consisted of the following directors: David W. Moore (Chair), Clyde V. Kelly, III, John A. Lamon, David S. Jones and Jeffrey E. Thompson (referred to herein as the “Legacy Committee”). As of the Merger Effective Date, Mr. Thompson resigned from the Board and as a member of the Compensation Committee and the following directors joined the Compensation Committee: Louis P. Jenkins, Jr. (Chair), William E. Esham, III and Mary Todd Peterson (referred to herein as the “Compensation Committee”).27EXECUTIVE SUMMARYKey Business and Financial Highlights•Merger - The Company merged with Community Financial and its wholly owned subsidiary Community Bank of the Chesapeake on July 1, 2023. The Company recorded the assets and liabilities of Community Financial at their respective fair values as of July 1, 2023. The transaction was valued at approximately $153.6 million and expanded the Bank’s footprint into the Southern Maryland Counties of Charles, St. Mary’s and Calvert and the greater Fredericksburg area in Virginia, which includes, Stafford and Spotsylvania Counties. At the time of the acquisition, Community Financial added $2.4 billion in assets, $454.5 million in investments, $1.8 billion in loans, $2.0 billion in deposits, $150.6 million in brokered deposits, $69.0 million in FHLB advances and $32.0 million in subordinated debt and trust preferred debentures. The excess of the fair value of Community Financial’s net assets acquired over the merger consideration resulted in a $8.8 million bargain purchase gain.•Net Income - The Company recorded net income of $11.2 million for 2023 and net income of $31.2 million for 2022. The basic and diluted income per share was $0.42 and $1.57 for fiscal year 2023 and 2022, respectively. When comparing net income for 2023 to 2022, earnings decreased primarily due to merger-related expenses and increased provision for credit losses due to the merger and the implementation of CECL.•Deposit Growth - Total deposits increased $2.4 billion, or 79.0%, to $5.4 billion at December 31, 2023 when compared to December 31, 2022. The increase in total deposits when compared to December 31, 2022 was primarily due to the merger. Increases within deposits during the year consisted of increases in time deposits of $760.3 million, demand deposits of $471.4 million, money market and savings of $748.6 million and noninterest-bearing deposits of $396.0 million.•Stable Funding and Liquidity - Total funding, which includes customer deposits, Federal Home Loan Bank (“FHLB”) advances, and brokered deposits were $5.4 billion at December 31, 2023. The Bank had no FHLB advances at December 31, 2023 and reduced brokered deposits $67.0 million during the fourth quarter of 2023 to $44.5 million or 0.8% of total deposits. The Bank's uninsured deposits at December 31, 2023 were $1.05 billion or 19.49% of total deposits. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, at December 31, 2023 were $893.5 million or 16.59% of total deposits. At December 31, 2023, the Bank had approximately $1.4 billion of available liquidity including: $372.4 million in cash, $1.0 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $45.0 million in unsecured lines of credit. At December 31, 2023, available liquidity of approximately $1.4 billion was 159% of uninsured deposits, excluding deposits secured with pledged collateral of $893.5 million.•Solid Asset Quality - Non-accrual loans, OREO and loan modifications to borrowers' experiencing financial difficulties ("BEFDs") were $13.3 million or 0.22% of total assets at December 31, 2023 compared to $6.5 million or 0.18% of total assets at December 31, 2022.28Key Compensation Developments for 2023Compensation Element Committee Determination Background Base Salary All base salaries adjusted based on peer data. In December 2022, the Legacy Committee determined that 2023 base salaries for Messrs. Beatty and Adkins and Ms. Stevens should be increased by 5.00%, 3.85% and 4.55%, respectively. As of the Merger Effective Date, Mr. Burke and Ms. Lombardi continued to receive the same base salaries they received while employed at Community Financial – no changes were made in connection with the merger. Short-Term Incentives Discretionary Bonuses were awarded to Mr. Burke, Ms. Stevens and Ms. Lombardi. The Legacy Committee did not establish formal performance metrics for the Company’s short-term incentive plan in 2023 in light of the merger between the Company and Community Financial. Rather, the Compensation Committee reviewed the Company’s overall financial performance at the end of the year and the individual performance of the NEOs and awarded discretionary bonuses to the NEOs. The Compensation Committee worked with Aon, the Company’s independent compensation consultant, during the first quarter of 2024 to establish a formal short-term incentive program for 2024 with robust performance metrics and incentive opportunities for the NEOs. Retention Agreements The Legacy Committee approved RetentionAgreements for Mr. Burke, Ms. Lombardi and Ms. Stevens.In accordance with the terms of the merger agreement, the Company entered into retention agreements with the active NEOs which provided each active NEO with a RSU grant that vests ratably over a two year period. Further, each active NEO waived “good reason” for terminating employment under their existing employment agreements that arose from changes in their responsibilities or duties as a result of the merger. Assumption and Amendment of Employment Agreements The Legacy Committee approved the assumption of the employment agreements by and between each of Mr. Burke and Ms. Lombardi and Community Financial as of the Merger Effective Date. In accordance with the terms of the merger agreement, the Company assumed all of the rights and obligations under the employment agreements between each of Mr. Burke and Ms. Lombardi and Community Financial. The assumed agreements expire on the second anniversary of the Merger Effective Date at which time Mr. Burke and Ms. Lombardi will each enter into a change of control agreement with the Company. Consulting Agreement The Legacy Committee approved consulting agreement with former President and CEO post-merger. In accordance with the terms of the merger agreement, the Company entered into a six-month consulting agreement with Mr. Beatty. Say-on-Pay Advisory Vote 88.36% voted in support of our legacy executive compensation program. Company continued to receive support of its executive compensation program pre-merger. Benchmarking The Legacy Committee made no changes to the peer group. Peer group was only used for base salary decisions for former NEOs. Compensation Committee approved new peer group for 2024 compensation decisions. The Legacy Committee approved the criteria and the inclusion of companies considered peers at the start of 2023. Following the Merger Effective Date, the Company engaged Aon to review its entire executive incentive program, and significant changes to the peer group were made to reflect the Company’s increased size as a result of the merger. Data from the revised peer group was reviewed in establishing executive compensation programs for 2024.Recoupment Policy The Compensation Committee approved a clawback policy for incentive compensation received on or after October 2, 2023. Clawback policy satisfies the requirements of the Nasdaq Rules. 29Looking Ahead to 2024The Compensation Committee worked with Aon to implement update compensation arrangements to reflect the Company’s larger size and complexity following the merger, post-merger. This included development and implementation of rigorous, objective short- and long-term incentive compensation programs for 2024 that support the Company’s strategic, financial and operational performance while aligning with the Company’s compensation philosophy and sound incentive compensation policies.2023 Say-on-Pay Advisory VoteAt the 2023 annual meeting of shareholders, 88.36% of the votes cast in our say-on-pay advisory vote were in favor of our executive compensation program. The Compensation Committee will continue to work diligently to ensure that our executive incentive compensation program is consistent with our compensation philosophy and the feedback we receive from our shareholders. The Compensation Committee will continue to monitor the results of the say-on-pay vote to ensure continued support for our incentive pay program among our shareholders.Compensation PhilosophyThe primary objective of the CompensationLegacy Committee’s approach iswas to provide competitive levels of compensation so that we maythe Company could attract, retain and reward outstanding executive officers. InThe Compensation Committee recognizes that in a highly competitive community banking marketplace, excellent leadership is essential. Our executive officers are expected to manage the business of the Company and its subsidiaries in a manner that promotes growth and profitability for the benefit of shareholders, while exceeding the requirements and service expectations of our customers. To that end, the Compensation Committee believes that:·Key executives should have compensation opportunities at levels that are competitive with peer institutions;·•Key executives should have compensation opportunities at levels that are competitive with peer institutions;•Total compensation should include “at risk” components that are linked to annual and long-term performance results; and•Stock-based compensation should form a key component of total compensation as a means of linking senior management to the long-term performance of the Company and aligning their interests with those of shareholders.Governance PracticesOur executive compensation program contains strong governance components that support our compensation philosophy and sound incentive compensation practices.•Active oversight by the Compensation Committee consisting solely of independent directors;•Assistance regularly provided to the Compensation Committee by an independent compensation consultant selected by the Compensation Committee;•Perquisites are limited;•No excise tax gross-ups, pursuant to Section 280G of the Internal Revenue Code, are contained in employment, change in control agreements or any other executive compensation arrangements;•Executives are discouraged from engaging in hedging transactions to offset the economic risk of owning our Common Stock; and•Executives are subject to robust share ownership guidelines.EXECUTIVE COMPENSATION DECISION MAKING PROCESSThe Compensation CommitteeThe Compensation Committee, consisting entirely of independent directors, makes decisions on the compensation of our active NEOs. This responsibility is discharged within the framework of a formal committee charter, which delegates a wide range of strategic and administrative issues to the Compensation Committee. Key among the Compensation Committee’s tasks is the development of, and monitoring adherence to, annual and long-term performance results; and·Stock-based compensation should form a key component of total compensation as a means of linking senior management to the long-term performance of the Company and aligning their interests with those of shareholders.Say on Pay Results and Shareholder OutreachAt the 2018 annual meeting of shareholders, the Company’s shareholders adopted a non-binding resolutionexecutive compensation philosophy. The Compensation Committee is responsible for, among other things: (a) reviewing and approving the Company’s compensation paidstrategy and practices with respect to ourthe executive officers as disclosedand certain other officers, (b) determining the CEO’s compensation levels, reviewing and approving the goals and objectives relevant to the CEO’s compensation and evaluating the performance of the CEO in light of such goals and objectives, (c) approving CEO and other executive officer employment agreements, severance arrangements, and change in control agreements, (d) overseeing,30and considering the results of, shareholder approval of certain executive compensation matters including advisory votes, (e) periodically reviewing and approving the peer group to be utilized in benchmarking executive and director compensation and (f) administering our senior executive incentive compensation program, including the development of plan design, the selection of performance metrics, the designation of specific performance goals and award opportunities, and the certification of performance results. See Board Committees – Compensation Committee for a detailed discussion of the Committee’s responsibilities and membership. The Compensation Committee’s charter is posted on the corporate governance pages within the Investor Relations portion of our website.The Compensation Committee met five times in 2023, each time, discussions were held in executive session without management present.The role of the Compensation Committee is to review the compensation of each NEO annually to evaluate whether the executive’s pay level is consistent with our compensation philosophy, risk profile, and the performance of both the company and the individual, and whether market practices dictate an adjustment in the definitive proxy statement for that meeting pursuant to Item 402form or level of the SEC’s Regulation S-K. executive’s compensation. As part of the annual review, the committee considers the executive’s individual contributions to the financial success of the company, management of subordinates, contribution to safety and soundness objectives, and their long-term potential as a senior executive.The measure was approvedCompensation Committee does not delegate any substantive responsibilities related to the determination of compensation for our active NEOs, and the Compensation Committee members exercise their independent judgment when they make executive compensation decisions.Timing of Executive Compensation DecisionsThe Compensation Committee meets throughout the year and periodically receives input from the independent compensation consultant on emerging industry trends and best practices. Each year, the Committee typically reviews peer group composition and benchmarking data for active NEOs, followed by approximately 51%consideration of all votes cast, which waschanges to active NEO base pay and short-and long-term incentive opportunities. Additionally, during the first calendar quarter, the Committee typically adopts short- and long-term incentive plans for the current year.CEO’s Role in the Compensation ProcessThe CEO is expected to provide the Compensation Committee with his evaluation of the other active NEOs’ performance and recommend compensation adjustments and incentive opportunities for the current year. While the CEO provides input, the Compensation Committee has absolute discretion to accept, reject, or modify the CEO’s recommendations. Our CEO plays no role in, and is not satisfactorypresent during, discussions regarding his own compensation or final decisions of the Compensation Committee regarding compensation of the other active NEOs.Compensation ConsultantAon, our current independent compensation consultant, works with the Compensation Committee to us or our Board. In an effort to increase our shareholder approval percentage, we undertook a comprehensive review of our executive compensation program design and governance practices with the view towards making necessary or advisable changes to the plan design and governance practices. We also engaged in a shareholder outreach process. Based upon the feedback received from this outreach, we adopted certain updatesrelative to our performance and similarly sized institutions. The independent consultant attends meetings and supports the Compensation Committee’s deliberations regarding executive compensation program, including our decision not to renew the employment agreements of our executive officers and transitioning such officers to change in control agreements and our decision not to continue our long-term incentive plan program. Due to our comprehensive changes and shareholder outreach, at the 2019 annual meeting of shareholders, the Company’s shareholders approved a non-binding resolution approving the compensation paid to our executive officers by approximately 84% of all votes cast and by approximately 82% of all vote cast at the 2020 annual meeting of the shareholders. At the 2021 annual meeting of shareholders, the Company’s shareholders approval of our compensation program remained strong at approximately 92% of all votes cast. Bothcompensation. While the Compensation Committee considers input from the independent consultant, the Compensation Committee’s decisions are the product of many factors and considerations. Management works with the Board intendindependent consultant at the direction of the Compensation Committee to continually evaluate our executive compensation philosophydevelop materials and analyses that are critical to the Compensation Committee’s evaluations and determinations. Such materials include data for use in determining an appropriate peer group, competitive market assessments and guidance on best practices in lightand regulatory developments.During the first half of 2023 (prior to the Merger Effective Date), the Company engaged Hunt Financial Group to provide the Company with advice on benchmarking base salaries. The Legacy Committee considered Hunt Financial Group’s independence for the 2023 fiscal year and whether its work raised conflicts of interest under the Nasdaq Rules. Considering these factors, the Legacy Committee determined that the work performed by Hunt Financial Group did not create any conflict of interest and that Hunt Financial Group was independent of the Company’s performance, needsmanagement.Benchmarking and developments, includingPeer Group AnalysisDuring 2023 the outcome of future non-binding advisory votes byLegacy Committee used the peer data provided from Hunt Financial Group, an independent compensation consulting firm, to evaluate base salaries for Mr. Beatty, Mr. Adkins and Ms. Stevens, the Company’s shareholders.24Role2022 named executive officers. In the fourth quarter of Compensation ConsultantsThe Compensation Committee’s consultant regularly attends committee meetings and attends executive sessions as requested by the Compensation Committee’s chair, Mr. Moore. The Compensation Committee’s consultant does not perform any services for the Company’s management, without express approval from the Compensation Committee.In 2021,2023, the Compensation Committee directly engaged Hunt Benefits & AssociatesAon to performprepare a new peer group for 2024 executive and director compensation market reviews.decisions. The Company paid fees totaling $5,000 to Hunt Benefits & Associates in 2021.Compensation Consultant IndependenceIn furtherance of maintaining the independence of the Compensation Committee’s compensation consultants, the Compensation Committee has the sole authority to retain, terminate and obtain the advice of Hunt Benefits & Associates, at the Company’s expense. Further, as discussed above, the Compensation Committee’s compensation consultants will not perform any services for the Company’s management unless approved in advancepeer group used by the Compensation Committee.In connection with its engagement of Hunt Benefits & Associates, the CompensationLegacy Committee considered various factors bearing upon such consultant’s independence including, but not limited to, the amount of fees received by such consultant from the Company as a percentage of such consultant’s total revenue, such consultant’s policies and procedures designed to prevent conflicts of interest, and the existence of any business or personal relationship that could impact such consultant’s independence. After reviewing these and other factors, the Compensation Committee determined that Hunt Benefits & Associates is independent and that its engagement does not present any conflicts of interest. The consultant also determined that it was independent from management and confirmed this in written statements delivered to the Chair of the Compensation Committee as shown below.Management’s Role in the Executive Compensation ProcessMr. Beatty, our President and Chief Executive Officer, as well as key members of our human resources function, each help support the Compensation Committee’s executive compensation process and regularly attend portions of committee meetings. As part of the executive compensation process, Mr. Beatty provides his perspective to the Compensation Committee regarding the performance of his Senior Leadership Team, which includes all of our Named Executive Officers and certain other senior officers of the Company. In accordance with NASDAQ rules, Mr. Beatty is not present when hisfor establishing 2023 compensation is being discussed or approved by the Compensation Committee and Mr. Beatty does not vote on executive compensation matters, and neither he nor other members of management attend executive sessions of the Compensation Committee.Risk ConsiderationsWe believe that the design and objectives of our executive compensation program provide an appropriate balance of incentives for executives and avoid inappropriate risks. In this regard, our executive compensation program includes, among other things, the following design features:31·Balanced mix of fixed versus variable compensation and cash-based versus equity-based compensation;·Variable compensation based on a variety of performance goals, including Company, business unit and individual performance goals;·Compensation Committee discretion to lower annual incentive award amounts;·Balanced mix of short-term and long-term incentives;·Stock ownership requirements; and·Clawback policy.25Compensation Peer Group and BenchmarkingThe Compensation Committee refers to executive compensation studies prepared by its independent consultants when it reviews and approves executive compensation. The studies reflect compensation levels and practices for executives holding comparable positions at peer group companies, which help the Compensation Committee set compensation at competitive levels. The Compensation Committee’s primary selection criteria are industry (commercially focused banks), asset size, and geography. The Compensation Committee compares each executive officer’s base salary, target total cash and target long-term incentive compensation value to amounts paid for similar positions at peer group companies.The Compensation Committee believes that the market median is a useful reference point in helping to achieve the executive compensation program objectives. However, the Compensation Committee also considers other factors when setting compensation; and target total direct compensation for each executive may vary from the market median based on the factors the Compensation Committee considers relevant each year, including particular job responsibilities and scope, adjustments for individual skills and expertise, and internal pay equity.The compensation peer group developed for the Company by Hunt Benefits & Associates is listed below.CompanyTickerCityState2021 Assets ($)Community Bankers Trust Corp.CompanyCity ESXBStateBusiness First Bancshares, Inc. Baton Rouge RichmondLACarter Bankshares, Inc Martinsville VA 1,771,300*Partners BancorpPTRSSalisburyMD1,644,979Parke Bancorp,Summit Financial Group, Inc.Moorefield PKBKSewellNJ2,136,445First United Corp.FUNCOaklandMD1,729,838WV Southern First Bancshares, Inc. SFSTGreenville SC 2,925,548CommunityPrimis Financial Corp.McLean TCFCWaldorfMD2,327,306VA C & F Financial Corp.First Community Bankshares, Inc.CFFIToanoBluefield VA 2,264,521Orrstown Financial Services, Inc. ORRFShippensburg PA 2,834,565Howard Bancorp, Inc.HBMDBaltimoreMD2,527,258*Primis Financial Corp.FRSTMcLeanVA3,407,353Investar Holdings Corp.ISTRBaton RougeLA2,513,203National Bankshares, Inc.NKSHBlacksburgVA1,702,175FVCBankcorp, Inc. FVCBFairfax VA Capital Bancorp, Inc. Rockville 2,202,924MD Shore Bancshares,Parke Bancorp, Inc.Sewell SHBIEastonMD3,460,136NJ * Most recent 10-Q filed (9/30/21)Compensation Elements at Shore BancsharesA competitive salary for senior management is essential. Furthermore, flexibility to adapt to the particular skills of an individual or the Company’s specific needs is required. We establish base salaries and assess market competitivenessIndividual Performance AssessmentsOur active NEOs receive annual performance assessments following a process established by comparing our executives’ qualifications, experience and responsibilities as well as their individual performance and value, with similar positions among our peers. Additionally, we consider special circumstances related to staffing needs and market situations and levels of compensation provided from other compensation components.The Compensation Committee generally reviews executive compensation in the fourth quarter. At that time, we review market studies on executive compensation and solicit input from our President and CEO, Mr. Beatty, on the performance of each officer that directly reports to him and his recommended base salary increases or decreases. Recommendations regarding adjustments to Mr. Beatty’s salary are discussed and approved in executive session of the Compensation Committee. Our CEO provides the Compensation Committee with an assessment of his direct reports, and the Compensation Committee, in turn, provides our CEO with an assessment of his performance and considers the CEO’s evaluation of his direct reports.32ELEMENTS OF COMPENSATION AND 2023 PAY DECISIONSCOMPENSATION ELEMENT PURPOSE Base Salary •Provide financial predictability and stability through fixed compensation;•Provide a salary that is market competitive;•Promote the retention of executives; and•Provide fixed compensation that reflects the scope, scale and complexity of the executive’s role.Short-Term Incentives •Align management and shareholder interests;•Provide appropriate incentives to achieve our annual operating plan;•Provide market competitive cash compensation when targeted performance objectives are met;•Provide appropriate incentives to exceed targeted results.Long-Term Equity Incentives •Align management and long-term shareholder interests;•Balance the short-term nature of other compensation elements with long-term retention of executive talent;•Focus our executives on the achievement of long-term strategies and results;•Create and sustain shareholder value; and•Support the growth and operational profitability of the Company.Employment and Retention Agreements •Enable us to attract and retain talented executives;•Protect Company interests through appropriate post-employment restrictive covenants, including non-competition and non-solicitation;•Ensure management is able to analyze any potential change in control transaction objectively; and•Provide for continuity of management in the event of a change in control.Non-Qualified Retirement and Deferred Compensation Benefits •Provide supplemental retirement benefits to certain executives to provide a competitive compensation package.Other Benefits •Limit perquisites and use as competitively appropriate and necessary only to attract and retain executive talent.2023 Base SalaryIn early 2023, the Legacy Committee reviewed base compensation philosophy islevels for the individuals identified as named executive officers in 2022, including Mr. Beatty, Mr. Adkins and Ms. Stevens. The Legacy Committee considered a range of factors including (i) peer data, (ii) the role of each executive in the Company’s leadership team, (iii) individual performance evaluations for the prior year, and (iv) the positioning of each executive’s base pay relative to set executiveother senior executives. Post-merger, Compensation Committee made no changes to the base salaries generally at the market median; however some adjustments may be made to take into consideration internal equity factors, additional functional responsibilities and each executive’s experience. Changes to the salaries of our Named Executive Officers were as follows:Executive Title
Salary
Salary
% Increase Lloyd L. Beatty, Jr. President & CEO $ 525,000 $ 540,750 3 % Edward C. Allen EVP & CFO 275,000 283,250 3 Donna J. Stevens EVP & COO 290,000 314,150 8 26Annual2023 Short-Term Incentive ProgramThe Company’sshort-term incentive program provides our NEOs with the Management Incentive Plan (the “MIP”), was developedopportunity to provide additionalearn cash incentive compensation for achieving specific Company performance goals. The program uses a balanced scorecard approach by establishing threshold, target and maximum incentive opportunities tied to key management personnel when corporate and individual performance meet or exceed specific predetermined goals. Incentivefactors aligned with the annual strategic plan approved by the Board.The total amount of each NEO’s incentive award targetsunder the short-term incentive plan is determined by considering performance against a scorecard of financial performance metrics that ties to our annual business plan, along with the results of a holistic assessment of each executive. All of these components are assignedpart of a scorecard that is provided to each executive based onNEO and used by the executive’s position and responsibilities. We also considerCompensation Committee to determine annual short-term incentive awards.The Legacy Committee did not establish formal performance metrics for the identified comparative compensation targets and pay mix outlinedCompany’s short term incentive plan in our executive compensation philosophy.Due to the uncertainty of how the coronavirus disease, COVID-19, would impact our performance2023 in fiscal 2020, we deemed it prudent to suspend uselight of the MIPmerger between the Company and Community Financial. This decision was influenced by the timing of the merger six months into the performance year, as well as the complexity associated with estimating the year-end financial performance for an organization being combined mid-year from two organizations that were previously operating independently and similar in 2020.size to one another. These challenges were accentuated by uncertainty in the broader banking industry. Instead, the Compensation Committee performedreviewed its overall financial performance at the end of the year assessmentsagainst a peer group of banks similar in size to the combined organization. Specifically, the company reviewed its performance on pre-tax pre-provision return on average assets, pre-tax pre-provision return on average equity, efficiency ratio, non-performing assets, and net interest margin for the last six months of 2023, corresponding to the performance period following the closing of the merger. After adjusting for one-time merger expenses, the Company’s performance was compared with both peer medians and peer 7533the Named Company’s performance on these metrics as well as the individual performance of the named executive officers and subjectively determined the bonus amount that would be awarded to each of the Company’s NEOs.2023 STIP Award DeterminationFollowing the Compensation Committee’s review in February 2024, the Compensation Committee awarded incentive payouts between threshold and target performance as noted below. The short-term incentive program payouts were distributed in cash.Executive Target Incentive(% of Salary)TargetIncentive($)Amount Awarded(% of Salary)AmountAwarded($)James M. Burke 30% 160,680 21.00% 112,476 Donna J. Stevens 25% 86,250 17.50% 60,375 Christy Lombardi 25% 87,250 17.50% 61,075 2023 Long Term Incentive ProgramNo equity awards were granted under the 2023 Long Term Incentive Program.Retirement Benefits and Deferred CompensationWe maintain broad-based tax-qualified pension and tax-qualified 401(k) plans. Generally, all employees of the Company are eligible to participate in these plans, including the active NEOs.In addition to the tax-qualified plans described above, we provide certain NEOs and other highly compensated employees (designated by the Compensation Committee) with benefits under supplemental executive retirement arrangements, split dollar arrangements and our deferred compensation plan. See the narrative following the Summary Compensation Table for details regarding these arrangements.Other BenefitsWe provide our NEOs with a set of core benefits that are generally available to our other full-time employees (e.g., coverage for medical, dental, vision care, prescription drugs, and basic life insurance and long-term disability coverage).Executive OfficersAgreementsWe maintain employment, retention, change-in-control, and consulting agreements with certain NEOs. For a detailed description of these agreements, please see the narrative following the Summary Compensation Table regarding these agreements.FACTORS THAT INFLUENCE OUR EXECUTIVE COMPENSATION PROGRAMClawback PolicyPursuant to assess performance and contributions towardthe Company’s clawback policy, incentive-based compensation awarded to, earned by, or vested with any of our NEOs is subject to recoupment by the Company to determine eligibilitythe extent it exceeds the compensation that properly would have been awarded to, earned by, or vested with that NEO but for discretionary bonus awards.We reinstatedaccounting errors impacting the MIP in 2021calculation of that compensation, and each Named Executive Officer participated inwhich are subject of an accounting restatement required to be prepared by the MIPCompany. Under the policy, any recoupment is limited to excess compensation received by the NEO during the three completed fiscal years preceding the date the Company is required to prepare the accounting restatement, and was assigned Company and individual goals at the beginningno finding of fault of the year. Target award opportunities underNEO is required. The Compensation Committee has the MIPexclusive power and authority to administer the policy, including to interpret the policy’s provisions and to make all determinations deemed necessary or advisable for 2021 were 30%the policy’s administration.Executive Stock Ownership PolicyThe Company maintains an Executive Stock Ownership Policy that reflects current corporate governance trends. Executives are expected to accumulate shares of Company Common Stock toward target ownership levels that are based on a multiple of base salary and a retention ratio for Mr. Beattyowned shares or shares acquired from equity awards. Our Chief Executive Officer has a target multiple of two (2) and 25%other Section 16 executive officers have a multiple of base salary for the other Named Executive Officers. Once earned, the Named Executive Officers has the optionone (1). The retention ratio is 100% of net profit shares. Executives are expected to receive the incentive in cash or equity in any proportion they desire. In 2021, all incentives were paid in cash.For fiscal year 2021, annual incentive bonuses were based on the achievementhold 100% of the objective performance goalsshares remaining after payment of earnings per share. Thean option exercise price and taxes owed upon exercise and/or hold 100% of newly vested shares of Company Common Stock after taxes are paid until the executive reaches his or her required multiple.34Anti-Hedging and Pledging PoliciesUnder the successful consolidation resulting from the acquisition of Severn, which together accounted for a potential of 70% of Mr. Beatty, Ms. Stevens and Mr. Allen’s incentive award. The remaining 30% of their incentive opportunities were tied to individual goals.We performed above our threshold EPS and achieved the target goal for the successful consolidation threshold in 2021, due to the consolidation not being fully completed until February 2022. Mr. Beatty and Ms. Stevens earned the maximum threshold for their individual goals and Mr. Allen received slightly above target for his individual goals.27 Threshold Target Maximum Actual
Company 2020 MIP 2021 MIP Executive Title Goals % of salary Goal % of salary Goal % of salary Goal Performance Award Award Lloyd L. Beatty, Jr. President & CEO SHBI EPS 6.00 % $ 1.10 12.00 % $ 1.29 24.00 % $ 2.00 $ 1.70 $ -- 24.0 % Successful Consolidation 4.50 % 50.00 % 9.00 % 100.00 % 18.00 % 200.00 % 100.00 % -- 9.0 CEO Evaluation 4.50 % 50.00 % 9.00 % 100.00 % 18.00 % 200.00 % 200.00 % -- 18.0 Total % of Salary 15.00 % 30.00 % 60.00 % -- 51.0 Donna J. Stevens COO SHBI EPS 3.25 % $ 1.10 7.50 % $ 1.29 15.00 % $ 1.48 $ 1.70 -- 15.0 Successful Consolidation 5.00 % 50.00 % 10.00 % 100.00 % 20.00 % 200.00 % 100.00 % -- 10.0 Individual Performance Review 3.75 % 50.00 % 7.50 % 100.00 % 15.00 % 200.00 % 200.00 % -- 15.0 Total % of Salary 12.50 % 25.00 % 50.00 % -- 40.0 Edward C. Allen CFO SHBI EPS 5.00 % $ 1.10 10.00 % $ 1.29 20.00 % $ 1.48 $ 1.70 -- 20.0 Successful Consolidation 3.27 % 50.00 % 7.50 % 100.00 % 15.00 % 200.00 % 100.00 % -- 7.5 Individual Performance Review 3.75 % 50.00 % 12.50 % 100.00 % 25.00 % 200.00 % 150.00 % -- 11.25 Total % of Salary 12.50 % 25.00 % 50.00 % -- 38.75 28Supplemental Executive Retirement PlansIn 2019, the Board’s Compensation Committee terminated the 2018 Long-Term Incentive Plan (“LTIP”) for allCompany’s Insider Trading Policy, directors, officers and the 2017 LTIP for Named Executive Officers, and all corresponding restricted stock units (“RSUs”) were forfeited. To replace the LTIP, the Compensation Committee elected to institute individual Supplemental Executive Retirement Plans (“SERPs”) with executive officers, which were executed in 2020. Three SERPs were instituted and began on July 19, 2019 for Mr. Beatty, Mr. Allen, and Mrs. Stevens. Executive Registrant Aggregate Aggregate Aggregate Contributions Contributions (loss) in last withdrawals/ balance at in last FY in last FY FY distributions last FYE Name Plan(1) ($) ($) ($) ($) ($) Mr. Beatty SERP - 441,855 - - 1,242,943 Mrs. Stevens SERP - 85,706 - - 199,244 Mr. Allen SERP - 380,916 - - 619,085 (1) “SERP” stands for Supplemental Executive Retirement Plan.All employee contributions to the 401(k) Profit Sharing Planemployees are immediately vested. Discretionary and matching contributions by the Company vest incrementally over a six-year period. For 2021, the Company matched 100% of employee contributions up to three percent of the employee’s compensation and matched 50% of the employee contributions up to an additional two percent of compensation. Discretionary, pre-tax and matching contributions may be withdrawn while a participant is employed by the Company if the participant has reached age 59½, in circumstances of financial hardship or in certain other circumstances pursuant to plan restrictions.2021 Deferred Compensation PlanThe Company sponsors the Shore Bancshares, Inc. Deferred Compensation Plan (the “Company Deferred Compensation Plan”), which is an unfunded nonqualified deferred compensation plan that provides an opportunity for our Board, a select group of management and highly compensated employees to voluntarily defer a portion of their compensation. The Compensation Committee designates and approves which eligible employee or director may participate in the Company Deferred Compensation Plan. Prior to the beginning of each calendar year, an eligible individual may elect to defer receipt of all or a portion of any Base Salary (as defined in the plan document) or retainer fees that will be earned by such person in the next calendar year. An eligible individual may elect to defer not less than 5% and up to a maximum of 50% of the eligible individual’s Base Salary or 100% of other compensation (such as bonuses or other incentive compensation). The Company, in its sole discretion, may also credit any amount to a non-director participant’s Employer Discretionary Contribution Account (the “Employer Discretionary Contributions”).At the choice of the participant, the Company credits a non-director participant’s account with earnings based on the hypothetical earnings of an investment fund, or default to a money market fund if no election is made. The Company credits a director’s account for the deferral of retainer fees as deemed to be invested in units of Company shares of common stock. Participants are fully vestedprohibited at all times from writing any options or short-selling securities of the Company. Directors, officers and employees are also discouraged from engaging in all deferred compensationhedging transactions (such as “cashless” collars, forward sales, equity swaps and other similar or retainer fees credited to each participant’s account. Participants receiving Employer Discretionary Contributions vest atrelated arrangements) that may indirectly involve a rate toshort sale, and any such transaction must be determinedcarefully reviewed by the CompanyCompany’s Insider Trading Compliance Officer under the Company’s Insider Trading Policy. The Insider Trading Compliance Officer will assess the proposed transaction and, in light of the facts and circumstances, make a determination as to whether the proposed transaction may be completed or would violate the Company’s Insider Trading Policy.PerquisitesWe annually review the perquisites that we make available to our named executive officers. The primary perquisites for these individuals include automobile allowances and certain club dues. See “Executive Compensation Decision Making Process — Summary Compensation Table” for detailed information on the perquisites provided to our NEOs.Tax and Accounting ConsiderationsIn consultation with our advisors, we evaluate the tax and accounting treatment of each of our compensation programs at the time of adoption and periodically thereafter to ensure that we understand the financial impact of each program on the Company. Our analysis includes a detailed review of recently adopted and pending changes in tax and accounting requirements. As part of our review, we consider modifications and/or alternatives to existing programs to take advantage of favorable changes in the tax or accounting environment or to avoid adverse consequences. To the greatest extent possible, we structure our compensation programs in a tax efficient manner. However, for taxable years beginning on and after January 1, 2018, the Tax Cuts and Jobs Act of 2017 eliminated the "performance-based" compensation exception under Section 162(m), and expanded the $1 million per covered employee annual limitation on deductibility to cover all named executive officers. While the Company has sought to preserve deductibility of compensation paid to the named executive officers to the extent permitted by law, we have retained the flexibility to provide nondeductible compensation arrangements if we believe it makes such contribution, or ifis necessary to attract, incentivize, and retain key executives. We do not otherwise defined atintend to change our pay-for-performance approach to awarding executive compensation even though the time, uponrecent tax law changes eliminated the third anniversaryspecific tax benefits under the prior law associated with awards of performance-based compensation.Equity Compensation Grant and Award PracticesAs a general matter, the Compensation Committee's process is independent of any consideration of the contribution. A non-director participant’s benefit is paid on the earliest datetiming of the following: Retirement, Separation from Service, Fixed Payment Date, or Hardship (as those terms are defined inrelease of material non-public information, including with respect to the plan document), and are paid in cash either in a lump sum or annual installments as described indetermination of grant dates. Similarly, the Company Deferred Compensation Plan. A director participant’s benefit is paid only upon a Separation from Servicehas never timed the release of material non-public information with the purpose or intent of affecting the value of executive compensation. In general, the release of such information reflects long-established timetables for the disclosure of material non-public information such as earnings releases or, with respect to other than for Cause (including, but limitedevents reportable under federal securities laws, the applicable requirements of such laws with respect to a Separation from Service due to Retirement, death, or Disability), and are distributed in sharesthe timing of Company common stock.disclosure. The Company entered into an agreement with Matrix Trust Company as trustee to make contributions to a trust that provides the Company with a source of funds to assist in meeting its liabilities under the Company Deferred Compensation Plan.The Compensation Committee believes that certain perquisites and other personal benefits can be effective elements of a compensation package because they facilitate and encourage better executive performance and business generation for the Company. Perquisites provided by the Company may include vehicle allowances and country club dues.2935SUMMARY COMPENSATION TABLEThe following table sets forth for the last two fiscal years the total remuneration for services in all capacities awarded to, earned by, or paid to our Named Executive Officers (the Company’s former CEO and CFO, the Company’s current CEO and the two most highly compensated executive officers and other significant executive officers of the Company and its subsidiaries other than the CEO who were serving as executive officers as of December 31,2021)31, 2023).Name and principal Salary Bonus
Pension value
and Total position Year ($) ($)(1) ($)(2) ($) ($) ($)(3) - (5) ($) Lloyd L. Beatty, Jr. 2021 540,750 275,783 199,986 - 56,754 32,467 1,105,740 President and CEO 2020 525,000 170,137 - - 39,469 28,208 762,813 Donna J. Stevens 2021 314,150 125,661 11,983 - 31,768 8,804 491,646 Chief Operating Officer 2020 290,000 (6) 80,000 20,380 (7) - 26,820 8,128 425,329 Edward C. Allen 2021 283,250 109,760 9,982 - 29,952 10,565 443,510 Senior Vice President, CFO and PFO 2020 275,000 70,000 - - 12,157 10,433 367,591 (1)Amounts reflect cash bonuses awarded to the Named Executive Officers under the 2021 MIP Plan.(2)The 2021 amounts reflect grant date fair value of discretionary restricted stock awards paid to the Named Executive OfficersName and Principal Position Year Salary
($)Bonus
($)(1)(2)Stock Awards
($)(3)Nonqualified Deferred Compensation Earnings
($)(4)All Other Compensation ($) (5)Total ($) James M. Burke(6)President Chief Executive Officer20232022247,200-312,476-155,008-58,825-25,511-799,020-Donna J. StevensChief Operating Officer20232022345,000330,000105,941141,68545,570-132,07128,30014,9098,453643,491508,438Christy Lombardi(7)Chief Human Resources Officer20232022161,077-104,939-261,140-37,843-17,844-582,843-Lloyd L. Beatty, Jr.(8)Former President and Chief Executive Officer20232022331,962600,000–264,130--23,74512,2212,785,15533,4273,140,862909,778Vance Adkins(9)Former Chief Financial Officer20232022142,269260,000––--(6,006)-716,67310,820852,936270,820(1)Amounts reflect cash bonuses awarded to the NEOs under the 2023 Short-term Incentive Program.(2)Includes cash retention bonuses paid to Mr. Burke, Ms. Stevens and Ms. Lombardi in the amounts of $200,000, $45,566, and $43,864, respectively.(3)Represents the aggregate grant date fair value of the granting of 13,409, 3,942, and 22,590 restricted stock units (“RSUs”) to Mr. Burke, Ms. Stevens, and Ms. Lombardi respectively as retention awards related to the change in control. The RSUs were granted in July 2023 and will vest over two years beginning on the first anniversary date of the grant.(4)Represents the sum of above-market earnings under the Company’s deferred compensation plan and the aggregate change in the present value of accumulated benefits under the Supplemental Executive Retirement Plans (“SERPs”) from the prior completed fiscal year to the current fiscal year. Includes an aggregate change in the present value of accumulated benefits under the SERPs of $58,825, $132,071, $37,843, $23,745, and $(6,006) to Mr. Burke, Ms. Stevens, Ms. Lombardi, Mr. Beatty, and Mr. Adkins, respectively.(5)Details of the amounts reported in the “All Other Compensation” column for 2023 are provided in the table below.(6)In connection with the financial performance of the Company for 2021 and the work performed on the acquisition of Severn. The 2021 amounts reflect the aggregate grant date fair value of restricted stock awards issued under the 2016 LTIP in February 2022, which will not fully vest until February 2023. See below under “Grants of Plan-Based Awards” regarding assumptions underlying valuation of equity awards. See Note 14 to the consolidated audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information regarding stock-based compensation.(3)For Mr. Beatty, the 2021 amount includes a $15,224 matching contribution under the 401(k) plan, $5,668 for use of an automobile and $11,576 for club dues. The 2020 amount includes a $15,278 matching contribution under the 401(k) plan, $5,670 for use of an automobile and $7,260 for club dues.(4)For Mrs. Stevens, the 2021 amount includes an $8,804 matching contribution under the 401(k) plan. The 2020 amount includes a $10,433 matching contribution under the 401(k) plan. (5)For Mr. Allen, the 2021 amount includes a $10,565 matching contribution under the 401(k) plan. The 2020 amount includes a $10,433 matching contribution under the 401(k) plan.(6)Mrs. Stevens began 2020 with the merger of the Company and Community Financial, James M. Burke, the former President and Chief Executive Officer of Community Financial, was appointed as President and Chief Executive Officer of the Company and the Bank effective as of July 1, 2023. This table only include amounts paid to Mr. Burke post-merger.(7)In connection with the merger of the Company and Community Financial, Christy Lombardi, the former Chief Operating Officer of Community Financial, was appointed as the Chief Human Resources Officer of the Company and the Bank effective as of July 1, 2023. This table only includes amounts paid to Ms. Lombardi post-merger.(8)Mr. Beatty, Jr. resigned from his position as President and Chief Executive Officer, in connection with the merger of the Company and Community Financial, effective as of July 1, 2023.(9)Mr. Adkins terminated his employment with the Company effective as of July 1, 2023.36Item Burke Stevens Lombardi Beatty Adkins Employer contribution to 401(k) Plan $10,438 $ 9,416 $ - $17,638 $ 9,487 Imputed income under split-dollar life insurance arrangement 639 1,615 343 4,748 - Automobile 3,465 - 10,218 30,063 - Club dues 2,654 - - 5,498 - Dividends paid on unvested restricted stock 7,551 1,106 7,016 - - Group term life benefit 764 2,772 267 1,360 210 Change-in-control severance payments - - - 2,673,449 684,130 Accrued paid leave payments - - - 52,399 22,846 EXECUTIVE AGREEMENTS AND PLANSEmployment Agreements – James M. Burke and Christy LombardiEffective as of the closing of the merger, Mr. Burke and Ms. Lombardi each entered into an Assumption and Amendment of Employment Agreement pursuant to which the Company agreed to assume all of the rights and obligations under each executive’s employment agreement with Community Financial, as described below, and as amended to provide that each employment agreement will expire on the second anniversary of the closing of the merger, at which time, if the executive remains employed with the Company, the executive will be eligible to enter into a change of control agreement with the Company.As amended, the employment agreements provide for an annual salary, eligibility to participate in employee benefit plans and programs maintained by the Company for the benefit of their employees, including discretionary bonuses, incentive compensation programs, medical, dental, pension, profit sharing, retirement and stock-based compensation plans and certain fringe benefits applicable to executive personnel.Under the employment agreements if the executive’s employment is terminated for cause, he or she will receive only his base salary or other compensation earned through the date of termination and any other compensation or vested benefits provided under applicable plans or programs. All other obligations of the Company terminate on the date of termination.Further, under Mr. Burke’s employment agreement, if his employment is terminated without cause (as defined in his employment agreement), he will receive a lump sum payment equal to three times his base salary and three times his most recent annual incentive compensation payment. Mr. Burke would also receive an amount equal to the monthly COBRA premium that he would be required to pay to continue the benefits in effect as of his termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36. Under the employment agreement for Ms. Lombardi, if her employment is terminated without cause (as defined in her employment agreement), she would receive a lump sum payment equal to two times her base salary and two times her most recent annual incentive compensation payment. Ms. Lombardi would also receive an amount equal to the monthly COBRA premium that she would be required to pay to continue the benefits in effect as of her termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36.Upon voluntary termination of employment, Mr. Burke and Ms. Lombardi would receive accrued and earned base salary of $275,000 and was increased to $305,000 in June of 2020. The base salary reflected above is the amount actually paid for 2020.(7)2,000 shares of common stock were issued to Mrs. Stevens on June 23, 2020 due to the design and implementation of the PPP. These awards vest 33% on June 23, 2021, 33% on June 23, 2022 and 34% on June 23, 2023.The 2016 Equity Plan reserves 636,465 shares of Common Stock, subject to adjustment for stock splits and other similar reclassification events, for issuancecompensation and benefits provided under the Bank’s benefit plans and programs as of the date of termination.The employment agreements also provide each executive with disability benefits. If an executive terminates employment after becoming disabled pursuant to awards. The Compensation Committee granted a total of 10,539 restricted shares of Common Stock in 2022 for service during 2021. During 2021, no RSUs and no incentive stock options were granted to the Named Executive Officers under the 2016 Equity Plan. During 2020, the Compensation Committee granted a total of 2,000 restricted shares of Common Stock, no RSUs and no incentive stock options to the Named Executive Officers under the 2016 Equity Plan. Under the terms of outstanding awards, all unvested sharesthe agreement, the executive will lapsereceive the compensation and be forfeited uponbenefits provided for under the executive’s employment agreement for (1) any period during the term of the agreement and before the establishment of the executive’s disability; or (2) any period of disability before the executive’s termination of employment due to disability.Upon an executive’s death, the participant’s employment agreements provide that the Company will pay the executives or their respective beneficiaries or estate any compensation due to the executive through the end of the month in which the executive’s death occurred, plus any other compensation or benefits to be provided in accordance with the Company. The 2016 Equity Plan will terminate on April 27, 2026terms and no further awards may be granted under the 2016 Equity Plan after that date.302021 Employee Stock Purchase PlanIn 2021, our Board adopted, and our shareholders approved, the 2021 Employee Stock Purchase Plan (the “Stock Purchase Plan”) to provide an incentive for our employees, and the employees of our subsidiaries that are designated by our Board as eligible, by allowing them to purchase our common stock at a 15% discount from market value, subject to such limits provided in the Stock Purchase Plan. The Plan is not intended to qualify as an “employee stock purchase plan” under Section 423provisions of the Code. 100,000 shares of our common stock are reserved for issuance underBank’s benefit plans and programs in which the Stock Purchase Plan. If any option granted under the Stock Purchase Plan expires or terminates for any reason without having been exercised in full, the unpurchased shares subject to that option will again be available for issuance under the Stock Purchase Plan. The Compensation Committee of our Board administers the Stock Purchase Plan, which is generally implemented through a series of 3-month-long Purchasing Periods, beginning on each February 11, May 11, August 11, and November 11 (each a “Purchase Period”). Shares of our common stock are available for purchase under the Stock Purchase Plan on the last date the national stock exchanges are open within each Purchase Period. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the Stock Purchase Plan and may contribute, normally through payroll deductions. No stock purchases were made in 2021.Grant of Plan Based Awards Table All other Grant Stock Date Estimated Future Payouts Awards: Fair Under Number of Value Non-Equity Incentive Shares of Stock or Units of Stock Name Award Date ($) ($) ($) (#) ($)(4) Lloyd L. Beatty, Jr. Annual cash incentive 2/11/2022(1) 81,113 162,225 324,450 Restricted Stock 2/18/2022(2) 9,496 199,986 Edward C. Allen Annual cash incentive 2/11/2022(1) 35,406 70,813 141,625 Restricted Stock 2/18/2022(2) 474 9,982 Donna J. Stevens Annual cash incentive 2/11/2022(1) 39,269 78,538 157,075 Restricted Stock 2/18/2022(2) 569 11,983 (1)The cash awards noted in the table above were approved by the Compensation Committee pursuant to the 2021 MIP established at the beginning of fiscal year 2021. The performance goals outlined in the 2021 MIP were evaluated by the Compensation Committee at the end of fiscal year 2021 and the cash awards were granted on February 11, 2022.(2)The amounts for restricted stock represent the number of shares received by each participant on February 18, 2022participated as incentive awards.31The following table provides information with respect to outstanding equity awards held by the Named Executive Officers at December 31, 2021.Outstanding Equity Awards At Fiscal Year-End Option Awards Stock Awards Market value Number of Number of Number of of shares securities securities shares or units of underlying underlying Option or units that stock that unexercised unexercised exercise have not have not options (#) options (#) price Option vested vested Name exercisable unexercisable ($) expiration date (#) ($) Mr. Beatty - - - 10,289 (1)(3) 214,526 Mrs. Stevens - - - 2,259 (1)(2)(3) 47,100 Mr. Allen - - - 790 (1)(3) 16,472 (1)This represents 25% of the 2019 MIP Award, which vests one-half on February 3, 2022, one-half on February 3, 2023.(2)2,000 shares of common stock were issued to Mrs. Stevens on June 23, 2020 due to the design and implementation of the PPP. These awards vest 33% on June 23, 2021, 33% on June 23, 2022 and 34% on June 23, 2023.(3)100% of 2021 discretionary award vests on February 18, 2023.The following table sets forth the number of restricted shares of Common Stock acquired by the Named Executive Officers pursuant to stock awards that vested during 2021 and the value realized upon vesting of stock awards.Option Exercises and Stock Vested Option Awards Stock Awards Number of Number of Shares Value Shares Value Acquired on Realized on Acquired on Realized on Exercise Exercise Vesting Vesting Name (#) ($) (#) ($) Mr. Beatty - - 793 15,606 Mrs. Stevens - - 1,023 (1) 18,028 Mr. Allen - - 316 6,219 (1) 666 shares vested on June 23, 2021 with a closing stock price of $16.52; 357 shares vested on February 3, 2022 at a stock price of $19.68.The following table provides information regarding 2021 contributions, earnings, and other financial information in respect of the Company’s Deferred Compensation Plan:Nonqualified Deferred Compensation Aggregate Executive Registrant earnings Aggregate Aggregate contributions contributions (loss) in last withdrawals/ balance at in last FY in last FY FY distributions last FYE Name Plan(1) ($) ($) ($) ($) ($) Mr. Beatty CDCP - - 19,227 - 154,468 Mrs. Stevens CDCP 87,666 - 31,768 - 273,893 Mr. Allen CDCP 28,230 - 29,953 - 192,326 (1)“CDCP” stands for the Company Deferred Compensation Plan.32Under the Company’s Deferred Compensation Plan, amounts deferred at the electiondate of the employee are credited to an account maintained on behalf of the participantexecutive’s death.Upon a change in control, Mr. Burke’s employment agreement provides that if (1) his employment is terminated without cause or without his consent and are deemed to be investedfor a reason other than cause in certain investment options established from time to time by the Compensation Committee. Mandatory, matching and discretionary contributions will be credited to an Employer Funded Accountconnection with or within 12 months after a change in control (as defined in the plan) established by the Company and will be deemed to be investedagreement); or (2) Mr. Burke voluntary terminates employment within 12 months following a change in the manner specified in the participant’s election form for that Plan Year in respect of his or her voluntary deferrals. An employee’s account is credited with the gain or loss generated on the investments in which the funds in those accounts are deemed to be invested. Mandatory contributions will be reduced on a pro-rata basis in the event a participant has a Separation from Service (generally defined as a termination of employment other than because of death, Disability (as defined in the plan) or the taking of leave of absence).A participant is fully vested at all times in employee deferrals (and earnings thereon). Starting in the second year of participation, a participant vests in his or her Employer Funded Account at the rate of 25% each year. If, however, (i) the participant reaches age 70 while employed, (ii) the participant’s service with the Company terminates because of death or Disability, or because of retirement at or after age 70, or (iii) the Company experiences a Change in Control (as defined in the plan), then in each such case the participant’s interest in his or her Employer Funded Account will be automatically 100% vested regardless of years in the plan. If the participant separates from service for any other reason, then any non-vested portion of his or her Employer Funded Account will be forfeited.The Company’s Deferred Compensation Plan contemplates automatic distributionscontrol upon the occurrence of certain “good reason” events and elective distributions.If a participant dies or experiences a Disability while employed by the Company or if the Company experiences a Change in Control (as defineddescribed in the plan), then the vested portions of a participant’s accountsagreement, he will be distributed inreceive a lump sum payment equal to three times his annual base salary and three times his most recent annual incentive compensation payment, plus an amount equal to the participant or,monthly37COBRA premium that he would be required to pay to continue the benefits in effect as of his termination date under the case of death, to his or her designated beneficiaries. If a participant experiences a Separation from Service, then the vested portions of a participant’s accountsBank’s medical, dental and life insurance plans, multiplied by 36. Under Ms. Lombardi’s employment agreement, she will be distributed inreceive a lump sum or in installments, as specified in thepayment equal to two times her annual base salary and two times her most recent election form. Certain restrictionsannual incentive compensation payment, plus an amount equal to the monthly COBRA premium that she would be required to pay to continue the benefits in effect as of her termination date under the Bank’s medical, dental and life insurance plans, multiplied by 36. Both Mr. Burke and Ms. Lombardi entered into Retention Agreements with the Company, under which they waived their right to terminate for “good reason” based on the commencement of automatic distributions apply to Key Employees (as definedchanges in the plan).A participant may elect in hisresponsibility or her annual election form to receive elective distributions, or “In-Service Distributions,” of his or her employee deferrals (and earnings thereon) forduties as a given Plan Year as soon as three years after the end of that Plan Year. At the timeresult of the election, the participant must also elect whether to receive the elective distribution in a lump sum or in installments over a period of up to 10 years. If a participant fails to make a payment method election, then the distribution will be made in one lump sum. A participant may change his or her election to postpone a distribution or change the form of payment, but such change must be made at least 12 months prior to the original distribution date, cannot be effective until at least 12 months following the subsequent election, and must postpone the commencementmerger.Section 280G of the paymentInternal Revenue Code provides that severance payments that equal or exceed three times an individual’s base amount are deemed to be “excess parachute payments” if they are contingent upon a change in control. An individual’s base amount is generally equal to an average of the individual’s taxable compensation for the five taxable years preceding the year a period of at least five years from the original distribution date.Company’s Deferred Compensation Plan also permits certain limited distributions upon the occurrence of an Unforeseen Emergency (as defined in the plan) andemployment agreements apply a lump sum distribution, at the administrator’s sole discretion,“best net benefits” approach in the event that severance benefits under the participant’s accounts haveagreement or otherwise result in “excess parachute payments” under Section 280G. Applying the “best net benefits” methodology, the Agreement provides for two separate calculations to address the application of Section 280G to payments that are contingent on a value of less than $10,000.For information about amounts that could be payablechange in control. The first calculation establishes the after-tax benefit to the Named Executive Officers under these deferred compensation plans upon a terminationexecutive if the aggregate change in control-related payments are reduced below his Section 280G threshold, thereby avoiding the excise tax. The second calculation determines the after-tax benefit if the payments are made without reduction, and the executive’s after-tax benefit reflects payment of employment, see the section below entitled “Benefits Upon Terminationgolden parachute excise tax by the executive. The executive’s benefits will be reduced unless the after-tax benefit to the executive of Employment.”
paying the full amount exceeds the after-tax benefits of paying the reduced amount by at least $50,000.33Donna J. Stevens Change in Control AgreementsOn October 31, 2018, the Company’s employment agreements with Lloyd L. Beatty, Jr., President and Chief Executive Officer, and Donna J. Stevens, Executive Vice President and Chief Operating Officer, expired and were exchanged for change in control agreements that became effective November 1, 2018.Lloyd L. Beatty, Jr.On November 1, 2018, the Company and Mr. BeattyMs. Stevens entered into a Change in Control Agreement. Pursuant to the Change in Control Agreement, in the event the executive is terminated (i) by the Company without “Cause”, or (ii) by the executive for “Good Reason” within 12 months of a “Change in Control” of the Company (the terms “Cause,” “Change in Control” and “Good Reason” are defined below), the executive will be entitled to receive an amount equal to 2.992.0 times the executive’s base salary and bonus (not to include the exercise of any stock options) paid or scheduled to be paid under the Company’s annual incentive plan in the calendar year of the Change in Control. However, as discussed in the Accounting and Tax Considerations section below, the Change in Control Agreement provides for a reduction in the amounts payable under the Change in Control Agreement to the extent necessary so that such payments are not deemed to be “excess parachute payments” under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”). The Change in Control benefit will be paid in one lump sum on the 60th day following termination of employment, provided that the executive has executed and delivered a release of claims and the statutory period during which heshe may revoke that release has expired on or before that 60th day.The Change in Control Agreement has a twelve-month term, which will automatically renew for successive twelve- month terms unless a party notifies the other party at least 60 days prior to the end of the then-current term of its or hisher decision not to renew the Change in Control Agreement. At least 120 days prior to the commencement of a new term, the Board or a committee thereof will conduct a comprehensive performance evaluation and review of Mr. BeattyMs. Stevens to determine whether to give notice of non-renewal.The Change in Control Agreements define the term “Cause” as: (i) the officer’s “Disability” (as defined in the Change in Control Agreement); (ii) an action or failure to act by the officer constituting fraud, misappropriation or damage to the property or business of the Company; (iii) conduct by officer that amounts to fraud, personal dishonesty or breach of fiduciary duty; (iv) officer’s conviction (from which no appeal may be, or is, timely taken) of a felony or willful violation of any law, rule or regulation (other than traffic violations or similar offenses); (v) the officer’s breach of any of hisher obligations hereunder; (vi) the unauthorized use, misappropriation or disclosure by the officer of any confidential information of the Company or of any confidential information of any other party to whom the officer owes an obligation of nondisclosure as a result of his relationship with the Company; (vii) the willful violation of any final cease and desist or consent order; (viii) a knowing violation by officer of federal and state banking laws or regulations which is likely to have a material adverse effect on the Company, as determined by the Board; (ix) the determination by the Board, in the exercise of its reasonable judgment and in good faith, that officer’s job performance is substantially unsatisfactory and that heshe has failed to cure such performance within a reasonable period (but in no event more than thirty (30) days) after written notice specifying in reasonable detail the nature of the unsatisfactory performance; (x) officer’s material breach of any of the Company’s written policies; or (xi) the issuance of any order by the Maryland Commissioner of Financial Regulation, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, or any other supervisory agency with jurisdiction over the Company permanently prohibiting the continued service of the officer with the Company. No act or failure to act on the part of the officer shall be considered “willful” unless it is done, or omitted to be done, by the officer in bad faith or without reasonable belief that the officer’s action or omission was in the best interests of the Company. Any act or failure to act that is based upon authority given pursuant to a resolution duly adopted by the Board, or upon the advice of legal counsel for the Company, shall be conclusively presumed to be done, or omitted to be done, by the officer in good faith and in the best interest of the Company.3438Company requires the officer to be based at a location more than 50 miles from Easton, Maryland (which requirement shall be deemed to be a material change in the geographic location at which the officer must perform services for the Company), except for required travel on business of the Company to an extent substantially consistent with the officer’s present business travel obligations. Good Reason shall, for all purposes under the Change in Control Agreement, be construed and administered in manner consistent with the definition of “good reason” under Treasury Regulation §1.409A-1(n).The term “Change inIn Control” is defined as the occurrence of any of the following events: (i) a person, or group of persons acting together, acquires ownership of securities of the Company that, together with such person’s or group’s other securities, constitutes more than 50% of the total fair market value or total voting power of the Company’s securities; (ii) any person, or group of persons acting together, acquires (or has acquired during the preceding 12-month period) ownership of securities of the Company possessing 35% or more of the total voting power of the Company’s securities, (iii) a majority of the Company’s Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board prior to the date of the appointment or election; or (iv) any person, or group of persons acting together, acquires (or has acquired during the preceding 12-month period) assets from the Company that have a total gross fair market value equal of at least 40% of the total gross fair market value of all of the Company’s assets.Donna J. StevensLloyd L. Beatty, Jr. Change in Control Agreement and Consulting AgreementPursuant to the terms of the merger agreement, effective as of the closing of the merger, Mr. Beatty resigned from his positions as President and Chief Executive Officer of the Company and the Bank. In connection with his resignation, Mr. Beatty received the benefits pursuant to his existing Change in Control Agreement with the Company.On November 1, 2018, the Company and Mrs. StevensMr. Beatty entered into a Change in Control Agreement. Pursuant to the Change in Control Agreement, in the event the executive is terminated (i)upon Mr. Beatty’s termination by the Company without “Cause”cause (as defined in the agreement), or (ii) by the executive for “Good Reason” within 12 months of a “Change in Control” of the Company (the terms “Cause,” “Change in Control” and “Good Reason” are defined above under the description of Mr. Beatty’s Change in Control Agreement), the executive will beBeatty became entitled to receive an amount equal to 2.02.99 times the executive’s base salary and bonus (not to include the exercise of any stock options) paid or scheduled to be paid under the Company’s annual incentive plan in the calendar year of the Change in Control. TheThis amount was paid in a lump sum shortly after the merger. In connection with the payment under his Change in Control benefit will be paid in one lump sum on the 60th day following termination of employment, provided that the executive hasAgreement, Mr. Beatty executed and delivered a separation agreement, which includes a general release of claims and non-competition and non-solicitation covenants for the statutorytwo-year period during which she may revoke that release has expiredfollowing his termination of employment.Mr. Beatty entered into a consulting agreement with the Company. The term of the consulting agreement commenced on or before that 60th day.Thethe closing date of the merger and continued for six months. Mr. Beatty did not receive consideration for the service as a consultant.Vance W. Adkins Change in Control Agreement has a twelve-month term, which will automatically renew for successive twelve- month terms unless a party notifies the other party at least 60 days priorPursuant to the endterms of the then-current termmerger agreement, effective as of its or her decision notthe closing of the merger, Mr. Adkins terminated his employment with the Company. Mr. Adkins received the benefits pursuant to renew thehis existing Change in Control Agreement. At least 120 days prior toAgreement with the commencement of a new term,Company.On November 22, 2021, the Board or a committee thereof will conduct a comprehensive performance evaluation and review of Mrs. Stevens to determine whether to give notice of non-renewal.Edward C. AllenOn October 31, 2017, the BankCompany and Mr. AllenAdkins entered into a Change in Control Agreement. Pursuant to the Change in Control Agreement, upon Mr. Adkins’ termination by the Company without cause (as defined in the event the executive is terminated (i) by the Bank without Cause, or (ii) by the executive for Good Reason within 12 months of a Change in Control of the Company or the Bank, as the case may be (the terms “Cause,” “Change in Control” and “Good Reason” are defined above under the description ofagreement), Mr. Beatty’s Change in Control Agreement), the executive will beAdkins became entitled to receive an amount equal to 1.52.0 times the executive’s base salary and bonus (not to include the exercise of any stock options). This amount was paid or scheduled to be paidin a lump sum shortly after the merger. In connection with the payments under the Company’s annual incentive plan in the calendar year of the Change in Control. Thehis Change in Control Agreement, Mr. Adkins executed a separation agreement, which includes a general release of claims and non-competition and non-solicitation covenants for one year following his termination of employment.Executive Retention AgreementsIn connection with the merger, Mr. Burke, Ms. Lombardi and Ms. Stevens entered into retention agreements with the Company. In exchange for a cash retention payment payable in a lump sum no later than the first regular payroll period following the closing date of the merger and a grant of restricted stock units that would vest fifty percent on each of the first and second anniversaries of the closing date of the merger if the executive remained employed through each date, each executive agreed to waive “good reason” to terminate employment as a result of the merger or any changes to the executive’s role, title, position, status, authority, duties and/or responsibilities that occur subsequent to the merger and that were not clearly communicated to the executive prior to the merger.Supplemental Executive Retirement Plans - Lloyd L. Beatty, Jr. and Donna StevensThe Company maintains supplemental executive retirement plans for Mr. Beatty and Ms. Stevens (collectively the “Shore SERPs”). Mr. Beatty is currently in pay status under his supplemental executive retirement plan., Under the terms of Ms. Steven’s supplemental executive retirement plan, if she remains continuously employed by the Bank until on or after attaining age 65, then following the date on which she experiences a separation from service on or after attaining age 65 (her “Normal Retirement Date”) for any reason other than (i) termination for cause, (ii) death or disability, or (iii) on or within twelve (12) months following the effective date of a Change39in Control, the Bank will pay Ms. Stevens a normal retirement benefit, equal to $100,000 (“Normal Retirement Benefit”) for each year for ten (10) years. Payment of the Normal Retirement Benefit commences upon her Normal Retirement Date, beginning with the month immediately following her Normal Retirement Date, and will be paid in onetwelve (12) equal monthly installments (without interest) on the first day of each month thereafter until paid in full. If Ms. Stevens terminates her employment prior to attainment of age 65, the Bank will distribute her benefit in a single lump sum on or within thirty (30) days after her separation from service in an amount equal to the 60th day followingaccrual balance in her supplemental executive retirement plan as of her separation date. In the event of a change in control followed by a termination of Ms. Steven’s employment before, on or after attainment of age 65, Ms. Stevens is entitled to a lump sum payment on or within thirty (30) days after her separation from service in an amount equal to the present value of her Normal Retirement Benefit discounted using the current discount rate being utilized to calculate GAAP liabilities and assuming payments commence immediately. In the event Ms. Stevens becomes permanently disabled the benefit under her supplemental executive retirement plan will be equal to the accrual balance as of the date she becomes disabled. In the event of her death while in continuous service with the Bank, but before the occurrence of any event that would entitle her to a benefit and prior to the payment of the entire accrual balance, Ms. Steven’s beneficiary will receive in a single lump sum on or within thirty (30) days after her death an amount equal to the remaining accrual balance at the time of her death.2021 Deferred Compensation PlanThe Company sponsors the Shore Bancshares, Inc. Deferred Compensation Plan (the “Company Deferred Compensation Plan”), which is an unfunded nonqualified deferred compensation plan that provides an opportunity for our Board, a select group of management and highly compensated employees to voluntarily defer a portion of their compensation. Prior to the beginning of each calendar year, an eligible individual may elect to defer receipt of all or a portion of any Base Salary (as defined in the plan document) or retainer fees that will be earned by such person in the next calendar year. An eligible individual may elect to defer not less than 5% and up to a maximum of 50% of the eligible individual’s Base Salary or 100% of other compensation (such as bonuses or other incentive compensation). The Company, in its sole discretion, may also credit any amount to a non-director participant’s Employer Discretionary Contribution Account (the “Employer Discretionary Contributions”). During 2023, only Ms. Stevens participated in the Company Deferred Compensation Plan.At the choice of the participant, the Company credits a non-director participant’s account with earnings based on the hypothetical earnings of an investment fund, or default to a money market fund if no election is made. The Company credits a director’s account for the deferral of retainer fees as deemed to be invested in units of Company shares of Common Stock. Participants are fully vested at all times in all deferred compensation or retainer fees credited to each participant’s account. Participants receiving Employer Discretionary Contributions vest at a rate to be determined by the Company at the time it makes such contribution, or if not otherwise defined at the time, upon the third anniversary of the contribution. A non-director participant’s benefit is paid on the earliest date of the following: Retirement, Separation from Service, Fixed Payment Date, or Hardship (as those terms are defined in the plan document), and are paid in cash either in a lump sum or annual installments as described in the Company Deferred Compensation Plan. A director participant’s benefit is paid only upon a Separation from Service other than for Cause (including but limited to a Separation from Service due to Retirement, death, or Disability), and are distributed in shares of Company Common Stock. The Company entered into an agreement with Matrix Trust Company as trustee to make contributions to a trust that provides the Company with a source of funds to assist in meeting its liabilities under the Company Deferred Compensation Plan.Supplemental Executive Retirement Plans – James Burke and Christy LombardiThe Community Bank of the Chesapeake maintained, and the Company assumed in the merger, the 2011 and 2014 supplemental executive retirement plans with Mr. Burke and a 2014 supplemental executive retirement plan with Ms. Lombardi (collectively the “Community SERPs”) to provide the executives with additional compensation at retirement or upon termination of employment provided thatdue to death, disability or a change in control. If an executive remains employed with the Bank until his or her normal retirement age of 65, he or she is entitled to receive a retirement benefit payable annually for a period of 15 years. The annual benefits for Mr. Burke and Ms. Lombardi (in the aggregate) are $77,434, and $149,338, respectively. A reduced benefit is payable if the executive has executed and delivered a release of claims andretires before normal retirement age or terminates service with the statutory period during which he may revoke that release has expired on or before that 60th day.The Change in Control Agreement has a twelve-month term, whichBank for other reasons. If an executive’s employment is terminated for cause, the executive will automatically renew for successive twelve- month terms unless a party notifiesnot be entitled to any benefits under the other party at least 60 days prior toCommunity SERPs.In the end of the then-current term of its or his decision not to renew the Change in Control Agreement. At least 120 days prior to the commencementevent of a new term, the Board of Directors of the Bank or a committee thereof will conduct a comprehensive performance evaluation and review of Mr. Allen to determine whether to give notice of non-renewal.35Benefits Upon Termination of EmploymentThe following table shows the estimated present value of benefits (as of December 31, 2021) that could be payable to the Named Executive Officers under change in control agreements(which occurred as a result of the merger of Community Financial with the Company) prior to Mr. Burke’s and deferred compensation plans uponMs. Lombardi’s (i) attaining age 65, (ii) death, (iii) disability, (iv) retirement, or (v) Separation from Service (as defined in the Community SERP agreements), the SERP benefit will equal the accrued benefit calculated as of any subsequent separation from service following the change in control with 36 months of additional service for purposes of calculating the accrual. Payments will commence at the earliest of an executive’s attainment of age 65 or death. However, if an executive experiences a termination of employment. Information is provided only for those Named Executive Officers who are eligible to receive such benefits. Payment Under Payment Under Payment Under Change in Deferred Supplemental Executive Control Compensation Retirement Agreement Plans Plans Name Reason for Termination ($) ($) ($) Mr. Beatty Death or disability - 154,468 1,242,943 Change in control 1,616,843 154,468 1,242,943 Involuntary termination without cause 1,081,500 154,468 1,242,943 Termination for any other reason before age 68 - 154,468 1,242,943 Termination for any other reason after age 72 - 154,468 1,500,000 Mrs. Stevens Death or disability - 273,893 199,344 Change in control 628,300 273,893 828,561 Involuntary termination without cause 628,300 273,893 199,244 Termination for any other reason before age 58 - 273,893 199,244 Termination for any other reason after age 65 - 273,893 1,000,000 Mr. Allen Death or disability - 192,326 619,085 Change in control 424,875 192,326 1,000,000 Involuntary termination without cause - 192,326 619,085 Termination for any other reason before age 72 - 192,326 619,085 Termination for any other reason after age 76 - 192,326 1,000,000 Accounting and Tax ConsiderationsNo Tax Reimbursement of Parachute Payments and Deferred CompensationIf anSeparation from Service within 24 months following a change in control, the executive is entitled to nonqualified deferred compensation benefits that are subjecthis full accrued retirement benefit, with payments to Section 409A, and such benefits do not comply with Section 409A, thencommence no later than the benefits are taxable insecond month following his Separation from Service. Under the first year they are not subject to a substantial risk of forfeiture. In such case, the executive is subject to regular federal income tax, interest, and an additional federal income tax of 20% of the benefit includible in income. The Compensation Committee has structuredCommunity SERPs if the change in control benefit payment made to Mr. Burke and Ms. Lombardi would be treated as an “excess parachute payment” under Code Section 280G (“280G Limit”), the Bank will reduce such benefit payment to the extent necessary to avoid treating such benefit payment as an40excess parachute payment; however, the payments or benefits shall not be reduced if the net after tax benefit to the executive of receiving the total payments exceeds the net after tax benefit of receiving the reduced benefits by at least $50,000.Salary Continuation Agreement – James BurkeThe Salary Continuation Agreement (“SCA”) is a non-qualified deferred compensation arrangement that provides Mr. Burke with additional compensation at retirement or upon termination of employment due to death, disability or a change in control. Mr. Burke’s SCA provides him a total annual SCA benefit equal to $101,000. This benefit is payable upon normal retirement at or after age 65 (normal retirement age). A reduced benefit is payable if the named executive officer retires before normal retirement age. The annual SCA benefits are payable on a monthly basis to the executive or his designated beneficiaries over a 15 year period. If Mr. Burke dies while in active service with the Bank, the executive’s designated beneficiaries will be provided with an annual benefit, for a period of 15 years, equal to $101,000, commencing with the month following the executive’s death. If the executive dies after his employment has terminated, but before payments under the agreement have commenced, his designated beneficiaries will be entitled to the same payments beginning on the first day of the executives’month after the executive’s death. If the executive dies after the benefit payments have commenced, but before receiving all of the payments, the designated beneficiaries will be entitled to the remaining benefits that would have been paid to the executive if the executive had survived.Under the SCA if Mr. Burke’s employment is terminated for cause, he will not be entitled to any benefits under the terms of his SCA. Under the SCA, Mr. Burke is entitled to a change in control agreementsannual benefit ranging from $63,536 to minimize income tax penalties that could be imposed$101,000, (based on the Company and/or the executive under Section 280Gdate of the Code. Under Section 280G, an excise taxtermination) if his employment is imposed on an executive officer who receives payments that are deemedterminated within 12 months subsequent to be contingent on a change in control and before age 65. The SCA provides an annual disability benefit ranging from $84,876 to $101,000 for Mr. Burke depending on the ownership or effective controldate of termination, commencing with the month following the executive attaining age 65.Deferred Compensation Plan The Community Bank of the Chesapeake also maintained an Executive Deferred Compensation Plan, which was assumed by the Company toin the extent they exceed 2.99 timesmerger. Under the executive’s “annualized includable compensation forExecutive Deferred Compensation Plan, executives including Mr. Burke and Ms. Lombardi could defer all or any portion of their base salary. Upon the base period” (i.e., the average annual compensation that was includable in his or her gross income for the last five taxable years ending before the date onmerger, which theconstitutes a change in control, occurs)all deferred amounts were paid out to Mr. Burke and Ms. Lombardi within 90 days following the closing of the merger.Split Dollar Life Insurance AgreementsThe Bank is a party to individual split dollar life insurance arrangements with Mr. Burke and Ms. Lombardi. These arrangements provide each executive’s beneficiary with pre- and post-retirement death benefits. The Bank has purchased life insurance policies on the lives covered by these agreements in amounts sufficient to provide payments to the beneficiaries, and the Bank pays the premiums due on the policies as an additional employment benefit. The economic benefit (the imputed income amount of this insurance) for the year 2023 to the NEOs is included in the amounts for each of these executive officers set forth in the Summary Compensation Table under the column “All Other Compensation.” Under these arrangements, Mr. Burke and Ms. Lombardi are entitled to a pre-retirement split dollar benefit amount equal to the lesser of $500,000 and $250,000, respectively, or the net amount at risk insurance portion of the proceeds. These arrangements provide a post-retirement split dollar benefit to Mr. Burke and Ms. Lombardi equal to the lesser of $100,000 or the net amount at risk insurance portion of the proceeds. The net amount at risk portion is the total proceeds less the cash value of the policy.2016 Equity Plan – Shore Bancshares, Inc.The Company maintains the 2016 Equity Plan as part of its long-term incentive program. During 2023, Mr. Burke, Ms. Stevens and Ms. Lombardi each received a Retention Bonus in the form of an RSU award which vests ratably over a 2-year period. Under the terms of the outstanding equity awards, all unvested shares will lapse and be forfeited upon the termination of the participant’s employment with the Company. The 2016 Equity Plan will terminate on April 27, 2026, and no further awards may be granted under the 2016 Equity Plan after that date. No stock options were granted to the NEOs in 2023.2015 Equity Compensation Plan – The Community Financial Corporation, as assumed by Shore Bancshares, Inc.The Company assumed The Community Financial Corporation 2015 Equity Compensation Plan in connection with the merger (“Assumed Equity Plan”). Each time-based and performance-based restricted stock award granted under the Assumed Equity Plan and outstanding as of the effective date of the merger was assumed and converted into a restricted stock award for Company Common Stock in accordance with the merger exchange ratio. All assumed restricted stock awards continue to be subject to the same terms and conditions as were applicable prior to the merger, however performance-based awards were converted assuming that all performance goals had been satisfied at target and converted into time-based awards as of the effective date of the merger. 603,676 shares of Company Common Stock may be issued under the Assumed Equity Plan, subject to the terms of the plan and securities regulations. No additional equity awards were made under the Assumed Equity Plan during 2023.41OUTSTANDING EQUITY AWARDS AT FISCAL YEAR ENDThe following table provides information with respect to outstanding equity awards held by the NEOs at December 31, 2023.Stock Awards Name Grant Date Number of Shares or Units of Stock That Have Not Vested(#)Market Value of Shares or Units of Stock That Have Not Vested($)(1)Mr. Burke 02/04/202102/04/202102/10/202202/10/202202/02/202303/06/202303/06/202305/01/202307/01/2023950 (2)2,848 (3)1,192(4)1,788 (5)214(6)4,692 (7)4,695(8)293(6)13,409(9)13,53840,58416,98625,4793,05066,86166,9044,175191,078Ms. Stevens07/01/20233,942(9)56,174Ms. Lombardi 02/04/202102/04/202102/10/202202/10/202203/06/202303/06/202307/01/2023529(2)1,586(3)657(4)985(5)1,018(7)1,020(8)22,590(9)7,53822,6019,36214,03614,50714,535321,908Mr. Beatty - - - Mr. Adkins - - - (1) Based upon the Company’s closing stock price of $14.25 per share at December 29, 2023.(2) Units vest in three equal installments beginning on February 4, 2022.(3) Performance shares for the 2021-2023 performance period converted to time-based restricted stock units at merger and vest in full on February 4, 2024.(4) Units vest in three equal installments beginning on February 10, 2023.(5) Performance shares for 2022-2024 performance period converted to time-based restricted stock units at merger and vests in full on February 10, 2025.(6) Restricted shares vest on the first anniversary of the grant date.(7) Units vest in three equal installments beginning on March 6, 2024.(8) Performance shares for the 2023-2026 performance period converted to time-based restricted stock units at merger and vests in full on March 6, 2027.(9) Units vest in two equal installments beginning on July 1, 2024.PAY-VERSUS-PERFORMANCEYear Summary Compensation Table Total for CEO ($)(1) BeattyCompensation Actually Paid to CEO ($) Beatty Summary Compensation Table Total for CEO ($)(1) BurkeCompensation Actually Paid to CEO ($) Burke Average Summary Compensation Table Total for Non-CEO NEOs ($) Average Compensation Actually Paid to Non-CEO NEOs ($) Value of Initial Fixed $100 Investment based on Total Shareholder Return ($) Net Income ($) 2023 3,140,861 3,140,570 799,020 823,190 693,090 1,413,810 82.09 11,228 2022 909,778 864,130 - - 445,382 431,495 100.40 31,177 2021 1,105,740 816,533 - - 467,578 416,411 120.10 15,367 (1)Compensation Actually paid makes required adjustments to the total amount of compensation shown for our Principal Executive Officer (“PEO”) and Former PEO, Mr. James M. Burke and Mr. Lloyd L. Beatty, and NEOs other than our PEO, in the Summary42Compensation Table included above. These NEOs were Ms. Stevens, Ms. Lombardi and Mr. Adkins for 2023 and Ms. Stevens and Mr. Allen for 2022 and 2021.Relationship Between Compensation Actually Paid and PerformanceAs we discussed above, we completed our merger with Community Financial on July 1, 2023, and continue on-going integration efforts. It is not uncommon for TSR to take time to stabilize following a period of merger activity, and this is exhibited in the decline in our TSR following the merger and integration with Community Financial. In addition, economic factors including inflation, elevated interest rates and bank failures in early 2023 have had a significant impact on financial institutions stock performance and consequently TSR’s over the last 13 months. The Company believes these external economic factors to be outside of the Company’s control, but also believe it is the responsibility of the Company’s Chief Executive Officer and named executive officers to navigate, adapt, and execute the Company’s strategic objectives despite these rapidly changing economic conditions.When assessing the compensation actually paid to our current Chief Executive Officer, Mr. Burke and other named executive officers, over the same period of 2023, the Company considers their performance to be satisfactory based on completing a successful merger and integration while restructuring the Company’s balance sheet to withstand recent economic challenges previously mentioned above. In addition, the Company is not entitled to treat such excess asCompensation Committee has established a compensation expensepackage for federal income tax purposes. We did not provide anythe newly appointed Chief Executive Officer and named executive officer, including any NEO,officers it believes are commensurate with other peer financial institutions of a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999, or 409A of the Code during fiscal year 2018similar size and we have not agreed and are not otherwise obligated to provide any NEO with such a “gross-up” or other reimbursement.
earnings potential.36Limitation on Deductibility of Executive CompensationUnder Section 162(m), a limitation was placed on tax deductions of any publicly held corporation for individual compensation to certain executives of such corporation exceeding $1,000,000 in any taxable year, unlessWhen assessing the compensation is performance-based. Following the Tax Cut and Jobs Act of 2017, Section 162(m) of the Code only exempts qualifying performance-based compensation with respect to taxable years beginning on or before December 31, 2017 and payable pursuant to a binding written agreement in effect on November 2, 2017. Thus, only performance-based awards outstanding on that date or awarded pursuant to a binding written agreement on that date may be exempt from the Section 162(m) deductibility cap. Effectively, The Tax Cut and Jobs Act of 2017 eliminated the ability to rely on the ‘performance-based’ exception under Section 162(m) of the Code with respect to new awards and compensationactually paid to our covered executive officersformer Chief Executive Officers, Mr. Beatty, it is noted that his compensation in excess of $1,000,000 will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. Despite the Compensation Committee’s efforts to structure the executive team annual cash incentives and performance-based awards in a manner intended to be exempt from Section 162(m) and therefore not subject to its deduction limits, because of ambiguities and uncertainties as2023 included his change-in-control severance payment which was directly tied to the applicationmerger with Community Financial and interpretationconstituted 85% of Section 162(m)total compensation actually paid. The remaining compensation paid in 2023 excluding the change-in-control severance payment, represented approximately six months of compensation and the regulations issued thereunder, including the uncertain scopewhen compared to 2022 represented an increase of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) in fact will apply. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent7.5%, which aligns with our business needs.Despite the changes to Section 162(m) of the Code, the Committee and the Board believe that performance-based compensation rewards executive officers for the achievement of specific annual strategic goals, and promotes sustainable growth as well as creates long-term shareholder value even though some compensation awards may result in non-deductible compensation expenses and will continue to grant performance-based awards. Therefore, the Committee and the Board may grant awards and approve compensation that may not be deductible for income tax purposes.Accounting TreatmentThe Compensation Committee’s stock option grant policies have been impacted by the implementation of Financial Accounting Standards Board ASC Topic 718 (“ASC 718”). Details related to the adoption of ASC 718 and the impact to the Company’s financial statements are discussedperformance.The slight increases in the Notescompensation actually paid to the Consolidated Financial Statements included in the accompanying Annual Report on Form 10-K under the heading “Stock Based Compensation”.37The Compensation Committee has reviewedour former Chief Executive Officer and discussed with management the section of this Proxy Statement entitled “COMPENSATION DISCUSSION AND ANALYSIS”. Based on this reviewother named executive officers between 2022 and these discussions, the Compensation Committee recommended to the Board that the section of this Proxy Statement entitled “COMPENSATION DISCUSSION AND ANALYSIS” be included in this Proxy Statement and that it be incorporated by reference into2021 period reflect the Company’s Annual Report on Form 10-K forotherwise strong performance, including an increase in net income of over 100%. Observing the year ended December 31, 2021.By:COMPENSATION COMMITTEEDavid W. Moore, ChairClyde V. Kelly, IIIJohn A. LamonDavid S. JonesJeffrey E. ThompsonCompensation Committee Interlocks and Insider ParticipationThe Compensation Committee oversees executive compensation matters. Louis P. Jenkins, Jr., (Chair), William E. Esham, III, David S. Jones, Clyde V. Kelly, III, John A. Lamon, III, David W. Moore Chairand Mary Todd Peterson served on the Compensation Committee beginning on July 1, 2023 to the present and David W. Moore, (prior Chair), Clyde V. Kelly, III, III, John A. Lamon, III, David S. Jones and Jeffrey E. Thompson served on the Compensation Committee during 2021.prior to our merger with Community Financial. None of the foregoing persons was,were, during 2021,2023, an officer or employee of the Company, waswere formerly an officer of the Company, had any relationship requiring disclosure pursuant to Item 404 of Regulation S-K, or had any interlocking relationship contemplated by Item 407(e)(4)(iii) of Regulation S-K.38CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSReview, Approval and Ratification of Related Party TransactionsIt is the policy of the Company that all permissible transactions between the Company and its executive officers, directors, holders of 5% or more of the shares of its Common Stock and affiliates thereof, contain terms no less favorable to the Company than could have been obtained by it in arm’s-length negotiations with unaffiliated persons and are required to be approved by a majority of independent outside directors of the Company not having any interest in the transaction.Related Party TransactionsShore United Bank, National Association has banking transactions in the ordinary course of their businesses with their directors and officers and with the associates of such persons on substantially the same terms, including interest rates, collateral, and repayment terms on loans, as those prevailing at the time for comparable transactions with persons not related to the Company and its subsidiaries. Extensions of credit by Shore United Bank, National Association to these persons have not and do not currently involve more than the normal risk of collectability or present other unfavorable features.Review, Approval and Ratification of Related Party TransactionsNasdaq Rule 5630 requires the Company to conduct an appropriate review of all related party transactions for potential conflict of interest situations on an ongoing basis and further requires all such transactions to be approved by the Company’s Audit Committee or another “independent body” of the Board. The term “related party transaction” is generally defined as any transaction (or series of related transactions) in which the Company is a participant and the amount involved exceeds $120,000, and in which any director, director nominee, or executive officer of the Company, any holder of more than 5% of the outstanding voting securities of the Company, or any immediate family member of the foregoing persons will have a direct or indirect interest.LeasesThe Company leases a portion of one of its facilities to a law firm, in which Alan J. Hyatt is a partner. In January 2022, the lease entered the final five-year renewal option under the leasing agreement. The total rent payments received were $110,790 for 202443(through the date of this Proxy Statement), $324,705 for the year ended December 31, 2023 and $312,679 for the year ended December 31, 2022. The law firm also reimburses the Company for its share of common area maintenance and utilities. The total reimbursements for 2023 and 2022 were $202,031 and $141,556, respectively and the total reimbursement for 2024 (through the date of this Proxy Statement) were $48,718. In addition, the law firm represents the Company and the Bank in certain legal matters.The Bank leases its Fredericksburg, Virginia lending center from GAFR Holdings in which Michael B. Adams, a director of the Company and Bank, is a 25% owner and managing member. The Bank paid GAFR Holdings $116,381 in 2023 (in which Mr. Adams had a 25% interest of approximately $29,095). In addition, from the beginning of 2024 through the date of this Proxy Statement, the Bank paid GAFR Holdings $26,215 (in which Mr. Adams had a 25% interest of approximately $6,554) in connection with the lease. Mr. Adams is also the 100% owner and President of JON Properties, LLC (“JON Properties”). The Bank pays monthly fees to JON Properties in connection with common area maintenance for the Virginia lending center. The Bank paid JON Properties $14,208 in 2023 in common area maintenance fees. Since the beginning of 2024 through the date of this Proxy Statement, the Bank has paid the entity $2,892 in 2024 in common area maintenance fees.Legal FeesAlan J. Hyatt, who is the Chairman of the Board of the Company and the Bank, is a partner of the law firm of Hyatt & Weber, P.A., which serves as general counsel to the Company and the Bank. The law firm of Hyatt & Weber, P.A. received fees in the amount of $42,239 and $36,756 for services rendered to the Company and to the Bank and its subsidiaries for the years ended December 31, 2023 and 2022, respectively. Since the beginning of 2024 through the date of this Proxy Statement, Hyatt & Weber, P.A. received fees in the amount of $3,670 for services rendered to the Company and to the Bank and its subsidiaries during 2024.Louis P. Jenkins, Jr., who serves on the Board of the Company and the Bank, is the principal of Jenkins Law Firm, LLC, which serves as general counsel to the Company and the Bank. Jenkins Law Firm, LLC received fees in the amount of $1,061 for services rendered to the Company and to the Bank for the year ended December 31, 2023 and did not receive any fees in 2024. As of the date of this Proxy Statement, the Company and the Bank have not paid any fees to Jenkins Law Firm, LLC in 2024.Consulting AgreementThe Bank maintains a 5-year Consulting Agreement with Alan J. Hyatt which commenced on the closing date of the merger of Severn with the Company. Under the terms of the Consulting Agreement, Mr. Hyatt’s consulting services consist of assisting the Bank in business introductions, business development calls and business referrals; attending community functions sponsored by the Bank; and assisting in any other matters or duties Executive Management may request. In consideration of the consulting services, Mr. Hyatt receives an annual consulting fee of $150,000 payable in equal monthly installments.Ordinary Banking RelationshipsThe Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to the Bank and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee. The Bank does not currently have such a program in place. From time to time, the Bank engages in banking transactions in the ordinary course of businesses with the Bank’s directors and officers and with the associates of such persons on substantially the same terms, including interest rates, collateral, and repayment terms on loans, as those prevailing at the time for comparable transactions with persons not related to the Company and its subsidiaries. Extensions of credit by the Bank to these persons have not and do not currently involve more than the normal risk of collectability or present other unfavorable features. Any loans we originate with officers, directors or principal shareholders, as well as their immediate family members and affiliates, are approved by our Board of Directors in accordance with the applicable regulatory requirements.As of December 31, 2023 and 2022, such loans outstanding, both direct and indirect (including guarantees), to directors, their associates and policy-making officers, totaled approximately $44.5 million and $24.1 million, respectively. As of December 31, 2023 and 2022, deposits, both direct and indirect, from directors, their associates and policy-making officers, totaled approximately $35.6 million and $11.9 million, respectively.44DELINQUENT SECTION 16(a)16(A) REPORTSSection 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of the outstanding shares of Common Stock to file reports with the SEC disclosing their ownership of Common Stock at the time they become subject to Section 16(a) and changes in such ownership that occur during the year. Based solely on a review of copies of such reports furnished to us, or on written representations that no reports were required, we believe that all directors, executive officers and holders of more than 10% of the Common Stock complied in a timely manner with the filing requirements applicable to them with respect to transactions during the year ended December 31, 2021,2023, except for a Form 4 that was not timely filed for Mr. Lloyd L. Beatty.
each of David S. Jones and Donna J. Stevens.39PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF YOUNT, HYDE & BARBOUR, P.C.AS THE COMPANY’S INDEPENDENT REGISTERED ACCOUNTING FIRM FORFISCAL YEAR 2022Shareholders will also be asked to ratify the Audit Committee’s appointment of Yount, Hyde & Barbour, P.C. to audit the books and accounts of the Company for the fiscal year ended December 31, 2022. Yount, Hyde & Barbour, P.C. has served as the Company’s independent registered public accounting firm since September 22, 2017.A representative of Yount, Hyde & Barbour, P.C. is expected to be present at the Annual Meeting, will have an opportunity to make a statement if he or she desires to do so, and will be available to respond to appropriate questions.Because your vote is advisory, it will not be binding upon the Audit Committee, overrule any decision made by the Audit Committee, or create or imply any additional fiduciary duty by the Audit Committee. The Audit Committee may, however, take into account the outcome of the vote when considering future auditor appointments.The following table shows the fees paid or accrued by the Company for the audit and other services provided by Yount, Hyde & Barbour, P.C. during fiscal years 2021 and 2020:Yount, Hyde & Barbour, P.C. 2021 2020 Audit Fees $ 238,000 139,850 Audit-Related Fees 92,800 60,400 Tax Fees - - All Other Fees - - Total $ 330,800 200,250 Audit Fees incurred in fiscal years 2021 and 2020 include charges for the audit of our consolidated financial statements, quarterly reviews of financial statements, issuance of consents and attestation regarding the adequacy of internal control over financial reporting. Audit-Related Fees incurred in fiscal year 2021 and 2020 include charges related to the audit of the 401(k) and profit-sharing plan as well as the audit of internal control over financial reporting in accordance with the Federal Deposit Insuanrce Corporation Improvement Act (FDICIA). The Audit Committee has reviewed summaries of the services provided and the related fees and has determined that the provision of non-audit services is compatible with maintaining the independence of Yount, Hyde & Barbour, P.C.Audit Committee Pre-Approval Policies and ProceduresThe Audit Committee’s policy is to pre-approve all audit and permitted non-audit services, except that de minimis non-audit services, as defined in Section 10A(i)(1) of the Exchange Act, may be approved prior to the completion of the independent auditor’s audit. All of the 2021 and 2020 services described above were pre-approved by the Audit Committee.40Pursuant to Section 14A of the Exchange Act and the rules promulgated thereunder, our shareholders are entitled to cast an advisory vote to approve the Named Executive Officers’ compensation at least once every three years. This proposal, commonly known as a “Say-on-Pay” vote, gives our shareholders the opportunity to express their views on the Named Executive Officers’ compensation. In a vote held at the 20172023 annual meeting of shareholders, our shareholders voted in favor of holding Say-on-Pay votes annually.Our goal for the executive compensation program is to attract, motivate and retain a talented team of executives who will provide leadership for the Company’s success in dynamic and competitive markets. The section of this Proxy Statement entitled “COMPENSATION DISCUSSION AND ANALYSIS”“Compensation Discussion and Analysis” contains the information required by Item 402 of Regulation S-K and discusses in detail our executive compensation program, the decisions made by the Compensation Committee during 2021,2023, and the compensation that was earned by, awarded to or paid to the Named Executive Officers.The Board and itsthe Compensation Committee believe that our compensation policies and procedures are reasonable in comparison both to our peer group and to our performance during 2021.2023. The Board and itsthe Compensation Committee also believe that our compensation program strongly aligns executive officers with the interests of shareholders in the long-term value of the Company as well as the components that drive long-term value.At the Annual Meeting, shareholders will be asked to adopt the following non-binding advisory resolution:RESOLVED, that the compensation paid to the named executive officers of Shore Bancshares, Inc., as disclosed in its definitive proxy statement for the Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including in the section entitled “COMPENSATION DISCUSSION AND ANALYSIS,“Compensation Discussion and Analysis,” is hereby approved.Because this advisory vote relates to, and may impact, our executive compensation policies and practices, the Named Executive Officers have an interest in the outcome of this vote. However, it should be noted that your vote is advisory, so it will not be binding on the Board or itsthe Compensation Committee, overrule any decision made by the Board or itsthe Compensation Committee, or create or imply any additional fiduciary duty by the Board or itsthe Compensation Committee. The Board and itsthe Compensation Committee may, however, take into account the outcome of the vote when considering future executive compensation arrangements.41AUDIT RELATED MATTERSOur Audit Committee, in accordance with its Charter, routinely reviews the performance and retention of our independent registered public accounting firm, and has determined that it is an appropriate time to revisit its selection of our independent registered public accounting firm. The Audit Committee has appointed Yount, Hyde & Barbour as independent registered public accounting firm for the fiscal year ending December 31, 2024. However, we have submitted a request for proposal to several independent registered public accounting firms and have asked such firms to submit proposals to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2024. After receiving and reviewing these proposals, the Audit Committee will select and appoint an independent registered public accounting firm for the fiscal year ending December 31, 2024.In light of this ongoing process, we are not submitting a proposal for the ratification of appointment of an independent registered public accounting firm at the Annual Meeting. While not required to do so, our practice has been to submit the selection of the independent registered public accounting firm for ratification in order to ascertain the views of our shareholders, and we expect to resume this practice once a decision has been made. We also expect that representatives from Yount, Hyde & Barbour, P.C. and, in the event a new independent auditor for the Company has been selected prior to the Annual Meeting, representatives from the independent auditing firm that has been engaged, will be present at the Annual Meeting and that they will have the opportunity to make a statement if they desire to do so and to be available to respond to appropriate questions.45REPORT OF THE AUDIT COMMITTEEThe Audit Committee has (i) reviewed and discussed our consolidated audited financial statements for fiscal year ended December 31, 20212023 with our management; (ii) discussed with Yount, Hyde & Barbour, P.C., our independent registered public accounting firm for the year ended December 31, 2023, all matters required to be discussed by the statement on Auditing Standards No. 16, as amended (AICPA, Professional Standards, Vol. 1, AU §380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (iii) received the written disclosures and the letter from Yount, Hyde & Barbour, P.C. required by applicable requirements of the Public Company Accounting Oversight Board regarding Yount, Hyde & Barbour, P.C.’s communications with the Audit Committee concerning independence, and discussed with Yount, Hyde & Barbour, P.C. its independence. Based on the foregoing review and discussions, the Audit Committee recommended to the Board that our consolidated audited financial statements for the year ended December 31, 20212023 be included in our Annual Report on Form 10-K for the year ended December 31, 2021.AUDIT COMMITTEEBy:James A. Judge, Chair2023.Blenda W. ArmisteadKonrad M. WaysonDawn M. Willey42AUDIT COMMITTEEBy: Mary Todd Peterson, ChairJames A. Judge
Rebecca M. McDonaldEsther A. StreeteKonrad M. Wayson
Dawn M. WilleyAudit Fees and ServicesYount, Hyde & Barbour, P.C. has served as the Company’s principal independent registered public accounting firm since September 22, 2017.The following table shows the fees paid or accrued by the Company for the audit and other services provided by Yount, Hyde & Barbour, P.C. during fiscal years 2023 and 2022:Yount, Hyde & Barbour, P.C. 2023 2022 Audit Fees $871,522 144,250 Audit-Related Fees 43,750 102,330 Tax Fees 19,175 21,750 All Other Fees — — Total $934,447 268,330 Audit fees incurred for the fiscal years 2023 and 2022 include charges for the audit of the consolidated financial statements, quarterly reviews of interim financial statements, issuance of consents, and review of documents filed with the SEC. Audit fees for 2023, also include the audit of internal control over financial reporting required by Section 404(b) of the Sarbanes Oxley Act.Audit related fees incurred for the fiscal years 2023 and 2022, include charges related to audits of employee benefit plans and the performance of HUD compliance audits. Audit related fees for 2022, also include the audit of internal control over financial reporting required by the Company’s annual FDICIA regulatory filing.Tax fees incurred for the fiscal years 2023 and 2022, relate to the preparation of the final tax returns for recently acquired entities, as well as associated tax compliance matters.Audit Committee Pre-Approval Policies and ProceduresThe Audit Committee’s policy is to pre-approve all audit and permitted non-audit services, except that de minimis non-audit services, as defined in Section 10A(i)(1) of the Exchange Act, may be approved prior to the completion of the independent auditor’s audit. All of the 2023 and 2022 services described above were pre-approved by the Audit Committee.46ANNUAL REPORT TO SHAREHOLDERSOur 20212023 Annual Report has been made available to shareholders and is posted on our corporate website at www.shorebancshares.com under the “Governance Documents” link. at:https://shorebancshares.q4ir.com/documents/default.aspxAdditional copies of the 20212023 Annual Report may be obtained without charge upon written request to Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601.The 20212023 Annual Report shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing (except to the extent that we specifically incorporate this information by reference) and shall not otherwise be deemed “soliciting material” or “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act (except to the extent that we specifically request that this information be treated as soliciting material or specifically incorporate this information by reference).SHAREHOLDER PROPOSALS FOR THE 20232025 ANNUAL MEETINGAny shareholder desiring to present anominations or proposal pursuant to Rule 14a-8 of the Exchange Actfor other business intended to be included in the definitive proxy statement and voted on by the shareholderspresented at the 2023Company’s 2025 annual meeting of shareholder must be submitted to the Company as set forth below.SEC Rule 14a-8In order for a shareholder proposal for the 2025 annual meeting of shareholders must submit a written proposal, including all supporting information, to be eligible for inclusion in the Company’s proxy statement pursuant to SEC Rule 14a-8, the Company must have received the proposal and supporting statements at its principal executive offices at 18 E. Dover Street, Easton, Maryland 21601 no later than December 12, 2022 (120 days before17, 2024 unless the date of mailing based on this year’s Proxy Statement date),the 2025 annual meeting of shareholders is changed by more than 30 days from May 30, 2025, the one-year anniversary of SHBI’s 2024 annual meeting of shareholders, in which case the proposal must be received a reasonable time before SHBI begins to print and send its proxy materials. A shareholder must meet all otherprovide its proposal to the Company in writing, and such proposal must comply with the requirements for inclusion in the proxy statement. As provided inof Rule 14a-8.Advance Notice ProceduresPursuant to the Bylaws, if a shareholder intends to present a proposal for business to be considered at the 20232025 annual meeting of shareholders but does not seek inclusion of the proposal in the Company’s proxy statement for that meeting, then such proposal, including all supporting information, must be delivered to and received by the Company’s Secretary at ourits principal executive offices at 18 E. Dover Street, Easton, Maryland 21601 no earlier than February 24, 2023March 1, 2025 and no later than March 24, 2023 (not31, 2025, which is not more than 90 days nor less than 60 days before May 30, 2025, which is the firstone-year anniversary of the prior year’s2024 annual meeting). Additional time constraints are applicable wheremeeting of shareholders. However, if the date of the Annual Meeting2025 annual meeting shareholders is changed. Proposals receivedadvanced by more than 30 days or delayed by more than 60 days from May 30, 2025, notice by the shareholder must be so delivered not earlier than the 90th day prior to the 2025 annual meeting of shareholders and not later than the close of business on the later of the 60th day prior to the 2025 annual meeting of shareholders or the 10th day following the day on which public announcement of the date of the 2025 annual meeting of shareholders is first made by the Company.In addition, the Bylaws generally provide that for a shareholder to make nominations for the election of directors, a shareholder must deliver written notice of such nominations to the Company’s Secretary at its principal executive offices at 18 E. Dover Street, Easton, Maryland 21601 not less than 120 days nor more than 180 days prior to May 30, 2025, the date of the meeting of shareholders called for the election of directors which is deemed to be on the same date as the annual meeting of shareholders for the preceding year. However, if the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from May 30, 2025, the one-year anniversary date of the 2024 annual meeting of shareholders, in which case such notice must be so delivered not earlier than the 180th day prior to the 2025 annual meeting of shareholders and not later than the close of business on the later of the 100th and 120th day prior to the 2025 annual meeting of shareholders or the 10th day following the day on which public announcement of the date of the 2025 annual meeting of shareholders is first made by the Company. The nomination notice must include certain information specified in the Bylaws.In addition to the notice and information requirements contained in the Bylaws, to comply with the SEC universal proxy rules, shareholders who, in connection with the 2025 annual meeting of shareholders, intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to the Company outsidethat sets forth the information required by the SEC’s Rule 14a-19 no later than March 31, 2025, unless the date of these timelines willthe 2025 annual meeting of shareholders has changed by more than 30 calendar days from the previous year, in which case such notice must be considered untimely. Ifprovided by the later of 60 calendar days prior to the date of the 2025 annual meeting of shareholders or the 10th calendar day following the day on which public announcement of the date of the 2025 annual meeting of shareholders is first made by the Company.47These advance notice procedures are separate from the SEC’s requirements that a shareholder must meet in order to have a shareholder proposal is not timely received, thenincluded in the proxies will be authorizedCompany’s proxy statement pursuant to exercise discretionary authority with respect to the proposal.OTHER BUSINESSAs of the date of this Proxy Statement, management does not know of any other matters that will be brought before the Annual Meeting requiring action of the shareholders. However, if any other matters requiring the vote of the shareholders properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form of proxy to vote the proxies in accordance with the discretion of management. The persons designated as proxies will also have the right to approve any and all adjournments of the Annual Meeting for any reason.43SHAREHOLDERS SHARING THE SAME ADDRESSThe SEC has adopted rules that permit companies and intermediaries (such as brokers, banks and other nominees) to implement a delivery procedure called “householding.” Under this procedure, multiple shareholders who reside at the same address may receive a single copy of the Proxy Statement, the 2023 Annual Report and other proxy materials, unless the affected shareholder has provided contrary instructions. This procedure reduces printing costs and postage fees.Under applicable law, if you consented or were deemed to have consented, your broker, bank or other intermediary may send only one copy of the Proxy Statement, the 20212023 Annual Report, and other proxy materials to your address for all residents that own shares of Company Common Stock in street name. If you wish to revoke your consent to householding, you must contact your broker, bank or other intermediary. If you are receiving multiple copies of the Proxy Statement, the 20212023 Annual Report, and other proxy materials, you may be able to request house holding by contacting your broker, bank or other intermediary. Upon written or oral request, we will promptly deliver a separate set of the Proxy Statement, the 20212023 Annual Report or other proxy materials to any beneficial owner at a shared address to which a single copy of any of those documents was delivered. If you wish to request copies free of charge of the Proxy Statement, the 20212023 Annual Report or other proxy materials, please send your request to Andrea E. Colender, Secretary, at Shore Bancshares, Inc., 18 East Dover Street, Easton, Maryland 21601 or call the Company with your request at (410) 763-7800.By Order of the Board of Directors,
Alan J. HyattChairman of the BoardApril 11, 20224448
Virtual Annual Meeting of Shareholders May 24, 2022 at 9:00 a.m. EDT This Proxy is solicited on
Dear ESOP Participant:On behalf of the Board of Directors, The undersigned hereby appoints Lloyd L . “Scott” BeattyI am forwarding to you the attached vote authorization form to convey your voting instructions to Austin J. Slater, Jr. and James A . Judge, and each or either of them, asJoseph V. Stone, Jr., Trustees for the true and lawful attorneysCommunity Bank of the undersigned, with full powerChesapeake Employee Stock Ownership Plan and Trust (the “ESOP”) on the proposals presented at the Annual Meeting of substitutionStockholders of Shore Bancshares, Inc. (the “Company”) on May 30, 2024. Also attached is a Notice of Annual Meeting and revocation,Proxy Statement for the Company’s Annual Meeting of Stockholders and hereby authorizes them, and each of them,the 2023 Annual Report on Form 10-K.As an ESOP participant, you are entitled to represent andinstruct the ESOP Trustees how to vote the shares of Company common stock allocated to your ESOP account as designatedof April 2, 2024, the record date for the Annual Meeting. The Trustees will vote all allocated shares of Company common stock as directed by ESOP participants. The Trustees will vote unallocated shares of common stock held in the ESOP Trust and the shares for which timely instructions are not received in a manner calculated to most accurately reflect the instructions received from ESOP participants, subject to the exercise of their fiduciary duties.To direct the ESOP Trustees how to vote the shares of common stock allocated to your ESOP account, please complete and sign the attached vote authorization form and return it to Barbara Lucas by following the instructions indicated on the reverse sidevote authorization form no later than May 23, 2024.Sincerely,
Alan J. HyattChairman of this ballot,the Board18 E. Dover Street • EASTON, MARYLAND 21601
WEBshorebancshares.com NASDAQ SHBIVOTE AUTHORIZATION FORMCOMMUNITY BANK OF THE CHESAPEAKEEMPLOYEE STOCK OWNERSHIP PLAN AND TRUSTShore Bancshares, Inc.Annual Meeting of Stockholders – May 30, 2024With respect to all of the shares of common stock of Shore Bancshares, Inc .Inc. (the “Company”) that are allocated to the account of the undersigned is entitledpursuant to the Community Bank of the Chesapeake Employee Stock Ownership Plan and Trust (the “ESOP”), the undersigned hereby directs Austin J. Slater, Jr, and Joseph V. Stone, Jr. as Trustees of the Trust established under the ESOP, to vote such shares at the Virtual Annual Meeting of ShareholdersStockholders (the “Annual Meeting”“Meeting”) to be held on Thursday, May 30, 2024, at 9 : 00 a . m . EDT on May 24 9:30 a.m., 2022local time, and at any adjournment or postponementand all adjournments thereof conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given . The Annual Meeting will be held virtually . In order to attend the Annual Meeting, you must register at www . viewproxy . com/ ShoreBancshares/ 2022 /htype . asp by 11 : 59 PM Eastern time on May 21 , 2022 . On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by clicking on the link provided and the password you received via email in your registration confirmations . Further instructions on how to attend and vote during the Annual Meeting are contained in the Pro xy Statement in the sections titled “Questions and Answers About These Proxy Materials and Voting – How do I attend the Annual Meeting?” and “Questions and Answers About These Proxy Materials and Voting – How can I vote?” THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN . IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS . (Continued and to be marked, dated and signed on other side) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the virtual Annual Meeting: The Notice and Proxy Statement and 2021 Annual Report are available at: http://viewproxy.com/ShoreBancshares/2022follows:
The Board of Directors recommends youa vote “FOR” eachall of the following nominees: nominees and “FOR” Proposals 2.You are to vote my shares as follows:☒ PLEASE MARK VOTES AS IN THIS EXAMPLE1. ElectionELECTION OF DIRECTORSFOR all nominees ☐ WITHHOLD AUTHORITY to vote ☐ *EXCEPTIONS ☐listed below for all nominees listed belowAlan J. Hyatt, Konrad M. Wayson, R. Michael Clemmer, Jr., E. Lawrence Sanders, III(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below).*Exceptions: ____________________________________________2. ADOPTION OF A NON-BINDING ADVISORY RESOLUTION APPROVING THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS.FORAGAINSTABSTAIN☐ ☐ ☐The undersigned acknowledges receipt from the Company prior to the execution of Directors Please mark your votes like this The Board of Directors recommends you vote “FOR” proposals 2 and 3. 2. Ratify the appointment of Yount, Hyde & Barbour P.C. as the independent registered public accounting firm for 2022. FOR AGAINST ABSTAIN 3. Adopt a non - binding advisory resolution approving the compensationauthorization form of the named executive officers. FOR AGAINST ABSTAIN NOTE: To conduct any other business properly brought before the meeting or any adjournment thereof. Nominees: John A. Lamon, III Class I (term expires 2025) Frank E. Mason, III Class I (term expires 2025) Jeffrey E. Thompson Class I (term expires 2025) William E. Esham, III Class I (term expires 2025) FOR AGAINST ABSTAIN Date: Signature Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) VIRTUAL CONTROL NUMBER Signature (if held jointly) NOTE : This proxy should be marked, dated and signed by each stockholder exactly as such stockholder’s name appears hereon, and returned promptly in the enclosed envelope . When shares are held jointly, each holder should sign . When signing as an executor, administrator, attorney, trustee or guardian, please give full title as such . If the signatory isNotice of Annual Meeting, a corporation, please sign full corporate name by duly authorized officer, giving full title as such . If the signatory is a partnership, please sign in the partnership name by authorized person . PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. As a shareholder of Shore Bancshares, Inc . you have the option of voting your shares electronically through the Internet or by telephone, eliminating the need to return the proxy card . Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card . As a Registered Holder, you may vote your shares atProxy Statement for the Annual Meeting by first registering at http : //viewproxy . com/ShoreBancshares/ 2022 /htype . asp using your Virtual Control Number below . Your registration must be received by 11 : 59 PM Eastern time on May 21 , 2022 . On the day of the Annual Meeting, if you have properly registered you may log in to the Annual Meeting by clicking on the link provided and the password you received via email in your registration confirmationsCompany’s 2023 Annual Report on Form 10-K. PARTICIPANT’S NAME Dated: ____________________, 2024 ___________________________________SIGNATURE OF PARTICIPANTPlease complete this direction form and follow instructions to vote your shares . Please have your Virtual Control Number with you during the Annual Meeting in order to vote . Further instructions on how to attend and vote during the Annual Meeting are contained in the Proxy Statement in the sections titled “Questions and Answers About These Proxy Materials and Voting – How do I attend the Annual Meeting?” and “Questions and Answers About These Proxy Materials and Voting – How can I vote?” VIRTUAL CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 - digit Virtual Control Number ready when voting by Internet or Telephone, or when voting during the Virtual Annual Meeting INTERNET Vote Your Proxy on the Internet: Go to Go to www.aalvote.com/SHBI Have your proxy card available when you access the above website. Follow the prompts to vote your shares. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804 - 9616 Use any touch - tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage - paid envelope provided.by email to barbara.lucas@shoreunitedbank.com or by mail to Barbara Lucas, Shore United Bank, P. O. Box 38, Waldorf, MD 20604 by May 23, 2024.
