UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Securities Exchange Act of 1934 (Amendment
Shore Bancshares, Inc.
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| 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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Please note that the Proxy Statement relates solely to our 2023 Annual Meeting of Shareholders and does not contain information regarding the Company’s proposed merger with The Community Financial Corporation and does not ask you to consider the merger agreement or the transactions contemplated thereby. We do not intend to discuss the proposed merger or the merger agreement at our 2023 Annual Meeting of Shareholders. Instead, we will hold a separate, special meeting of shareholders on a future date to consider and approve the issuance of shares
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| SHAREHOLDERS SHARING THE SAME ADDRESS | |||||
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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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2022 BUSINESS PERFORMANCE HIGHLIGHTS
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 | •Commitment to human capital and environmental, social and governance responsibility | ||||||
Class II Directors (three-year term ending 2026):
Clyde V. Kelly, III — see profile on pg. 10
David W. Moore — see profile on pg. 10
Dawn M. Willey — see profile on pg. 10
David S. Jones — see profile on pg. 10
The Proxy Statement proxy materials?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 2022 Annual Report, which includes our Annual Report on Form 10-K for the year ended December 31, 20222023 (the “2022“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 23, 2023.30, 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 20222023 Annual Report are available at http://viewproxy.com/ShoreBancshares/2023 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 27, 2023April 2, 2024 (the “Record Date”) are entitled to notice of and to vote at the 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 19,898,38833,210,522 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:
•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●election of four Class II directors to serve for a three-year term ending at the 2026 annual meeting of shareholders (Proposal 1);
•“FOR” each director nominee; and 4 •“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? |
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 3.2. The vote with respect to Proposal 32 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.
Advisory Vote to Approve the Frequency of Advisory Votes to Approve 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 the frequency of advisory votes to approve the compensation of our named executive officers, 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 4. Even if none of the frequency options receive the majority vote, the Board and the Compensation Committee will take into account the outcome of the advisory vote when making future decisions about how often the Company conducts a non-binding advisory shareholder vote on the Company’s compensation of its named executive officers.
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 3 and 42 are “non-routine” matters.
12.How do I attend the Annual Meeting? |
Shareholders of record who choose to attend, vote, and vote atsubmit questions during the Annual Meeting must first register at https://viewproxy.com/ShoreBancshares/2023/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.
14. How may a shareholder vote if their shares are still held in the Community Bank of the Chesapeake Employee Stock Ownership Plan (“ESOP”)? On July 1, 2023, we completed our merger with Community Financial. Prior to the closing, Community 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 Internal 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 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 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 23, 2024, the ESOP trustee will vote your shares in accordance with the terms of the ESOP. 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 20242025 Annual Meeting” beginning on page 52.
revoke my proxy?
Alliance Advisors will tabulate all votes which are received prior to the date of the Annual Meeting. 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.
Board Diversity Matrix (As of March 27, 2023)7Classification 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 15. Ms. Blenda W. Armistead,20 members including 12 directors who is currently a memberserved 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 will not stand for re-election at the Annual Meeting and will retire fromwho currently serve on the Board at the endare: 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 current term. TheCommunity Financial Board will reduceof Directors who currently serve on the number of directors to 14 atCompany’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 Annual Meeting and would like to thank Ms. Armistead for her extensive service and valuable contributions as a memberterms of the Board. Inmerger 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, William E. Esham, III and Esther A. Streete and their•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 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; and●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.Subject 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 completionannual 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 Company’s proposed merger with TCFC, and immediately following the effective time ofAnnual Meeting.Following the merger, the Company has agreedBoard evaluated the number of members serving on the Board and determined to expanddecrease the size of the Board from 20 to 2018 directors cause three existing directors to resign and appoint eight existing members of TCFC’s board of directors to the Board. Ms. Armistead is resigningeffective as of the Annual Meeting and Mr. Beatty will resign inMeeting. In connection with the closing ofplan to reduce the merger. Determinations regarding the appointment of TCFC directors and the resignation of the additional Company director have not been made. A joint committeesize of the Board, Messrs. Judge and TCFC’s boardStone 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 has been formed to evaluate board and committee composition of the combined company.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 Clyde V. Kelly, III, David W. Moore, Dawn M. Willeybackgrounds, professional experience, skills and David S. Jones for re-election as Class II directors.Information about the principal occupations, business experience and qualifications of these nominees is provided below under the heading “Qualifications of 2023 Director Nominees and Continuing Directors.”QUALIFICATIONS OF 2023 DIRECTOR NOMINEES AND CONTINUING DIRECTORSClass II DirectorNominees:Clyde V. Kelly, IIIAge: 69Director Since: 2016Committees: Nominating & Governance (Chair); CompensationMr. Kelly served as a director of CNB since 2005, and subsequently became a director of the Bank 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 a variety of beverages with multinational companies in Talbot, Queen Anne’s, Caroline, Dorchester, and Kent counties of Maryland.perspectives. In nominating Mr. Kelly, the Nominating Committee considered as important factors Mr. Kelly’s experience in leading a large corporation, his financial and operational knowledge and familiarity with our market area.David W. MooreAge: 58Director 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 the Bank after the merger of Talbot Bank and CNB in 2016. Currently, Mr. Moore is the Chairman of the Company and the Bank’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. In nominating Mr. Moore, the Nominating Committee considered as important factors Mr. Moore’s banking experience and his experience in the housing industry.Dawn M. WilleyAge:60Director Since:2020Committees:Audit; Risk ManagementMrs. Willey joined the Company as a director in December 2020. Mrs. Willey has also been a director of the Bank since 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. In nominating Mrs. Willey, the Nominating Committee considered as important factors, Mrs. Willey’s 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: 63Director 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 the Bank 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. In nominating Mr. Jones, the Nominating Committee considered Mr. Jones’ many years of business experience, which is important to the oversight of the Company’s financial reporting, enterprise and operational risk management.Retiring Class II Director:Blenda W. ArmisteadAge: 71Director 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 (the “Bank”) 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.Continuing Directors:Class I Directors:Frank E. Mason, IIIAge: 60Director 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 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. Mr. Mason’s qualifications to serve on our Board include his experience in leading a large corporation and his financial and operational knowledge.Jeffrey E. ThompsonAge: 67Director Since: 2016Committees: Compensation Mr. Thompson served as a director of CNB since 2005 and subsequently became a director of the Bank 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. Mr. Thompson’s qualifications to serve on our Board include his experience as an attorney, his expertise in real estate law, and his extensive service on a bank board.William E. Esham, IIIAge: 57Director Since: 2020Committees: Executive; Risk ManagementMr. 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 BA from Washington and Lee University and JD 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.John A. Lamon, IIIAge: 65Director 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 the Bank 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. 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, enterprise and operational risk management.Esther A. StreeteAge: 47Director Since: 2022Committees: AuditMs. Streete was appointed to serve as a director of both the Company and Shore United Bank, National Association on August 1, 2022. Ms. Streete is a Principal at McNamee Hosea, a full-service Maryland business law firm. 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 B.S. from Frostburg State University, a J.D. from the University of Maryland School of Law and an LL.M. 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.Class III Directors:Lloyd L. Beatty, Jr.Age: 70Director Since: 2000Committees: Executive; Risk ManagementMr. Beatty has served as the Company's President and CEO since June 2013 and as a director of the Company since 2000. He was appointed CEO of the Bank in December 2018 and President in January 2019. Prior to the merger of our banking subsidiaries, CNB and Talbot Bank, which formed the Bank in 2016, Mr. Beatty served as a director of 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.James A. JudgeAge: 64Director 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 the Bank 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: 55Director Since: 2016Committees: Risk Management (Chair)Mr. Clemmer served as a director of Talbot Bank since 2012 and subsequently became a director of 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. 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: 69Director Since: 2021(Chairman since 2021)Committees: Executive, Risk ManagementMr. Hyatt was appointed to serve as a director of both the Company and the Bank 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: 62Director 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 the Bank 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.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.NameAgePositionVance W. Adkins42Executive Vice President and Chief Financial OfficerEdward C. Allen75Former Executive Vice President and Chief Financial OfficerMichael T. Cavey66Executive Vice President and Chief Lending OfficerAndrea E. Colender59Executive Vice President, Chief Legal Officer and SecretaryChrista J. Heron56Executive Vice President and Chief Risk OfficerJennifer M. Joseph55Executive Vice President and Chief Retail Banking OfficerW. David Morse61Executive Vice President, General Counsel and Assistant SecretaryCharles E. Ruch, Jr.63Executive Vice President and Chief Credit OfficerDonna J. Stevens60Executive 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 and recently assumed the role of Executive Vice President and Chief Financial Officer in January 2023. He has over 15 years of experience in the financial services industry. Previously, he was Chief Financial Officer with Severn Savings Bank, FSB (“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 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. Mr. Allen retired from his role as Executive Vice President and Chief Financial Officer of the Company and the Bank effective as of December 31, 2022.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 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. Prior to joining the Company, Ms. Heron served in several capacities at Severn Bank including Chief Risk Officer from 2019 to 2021. Ms. Heron 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.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. Ms. Stevens 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.Director 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 membermatrix below shows the diversity of his or her immediate family and the Company and its subsidiaries and affiliates. Our Board has determined that all of our currently serving directors, with the exception of Lloyd L. Beatty, Jr., our President and CEO, are “independent directors” under the Nasdaq Rules and these independent directors constitute a majority of our Board.Board Diversity Matrix Female Male Did Not
Disclose
Gender
IdentityGender Identity Directors 3 12 — Demographics African American/Black 1 — — Hispanic or Latinx — — — White 2 12 — Did Not Disclose Demographic Background — — — 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
Board Leadership Structure and Executive Sessions
Our Board currently separates the roles of Chairman of the Board and CEO. The Board’s philosophy is and has been These skills collectively allow our directors 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 toeffectively oversee our business and the CEO’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 CEO; (ii) providing leadership to ensure the Board works cohesively and independently and during times of crisis; (iii) advising the CEP as to the quality, quantity and timeliness of information from executive management to the independent directors; (iv) being available to consult with the CEO 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 CEO.
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 2022, 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.
Boardcreate an engaged, effective, and Committee Oversight of Risk
The 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.
Business Conduct and Code of Ethics
We 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 corporate 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 Attendance
Shareholders 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 2022 annual meeting of shareholders, 13 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.
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 | ||||||||||
| Esther A. Streete | X | ||||||||||
| Jeffery E. Thompson | X | ||||||||||
| Konrad M. Wayson | X | X | |||||||||
| Dawn M. Willey | X | X | |||||||||
| Number of Meetings in 2022 | 1 | 5 | 3 | 3 | 4 |
Executive Committee
Our 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 thestrategically-oriented Board.
Audit Committee
The current members of the Audit Committee are James A. Judge, Chair, Blenda W. Armistead, Konrad M. Wayson, Dawn M. Willey and Esther A. Streete. 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.com under the “Governance Documents” link. The Audit Committee met five times during fiscal year 2022.
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, Chair 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.
Compensation Committee
The 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 corporate website at www.shorebancshares.com under the “Governance Documents” link. The Compensation Committee met three times during fiscal year 2022.
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 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 2022, the Compensation Committee engaged Hunt Benefits & Associates to perform executive and director compensation market reviews.
Nominating and Governance Committee
The 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 corporate website at www.shorebancshares.com under the “Governance Documents” link. The Nominating and Governance Committee met three times during fiscal year 2022.
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.
Whether recommended by a shareholder or chosen independently by the 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.
Enterprise
R. MICHAEL CLEMMER, JR. Age: 56 Director Since: 2016 Committees: 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: 70 Director 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. | ||||
E. LAWRENCE SANDERS, III Age: 67 Director Since: 2023 Committees: BoardRisk Oversight | Mr. 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: 63 Director Since: 2021 Committees: Audit Board Risk Oversight | Mr. 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. | ||||
WILLIAM E. ESHAM, III Age: 58 Director Since: 2020 Committees: Compensation Executive | Mr. 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. | ||||||||||
JOHN A. LAMON, III Age: 66 Director Since: 2021 Committees: Compensation Governance | Mr. 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: 61 Director Since: 2011 Committees: Governance Board Risk Oversight Strategic Initiatives & Technology | Mr. 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, CPA Age: 50 Director Since: 2023 Committees: Audit Board Risk Oversight Strategic Initiatives & Technology | Ms. 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. | ||||||||||
MARY TODD PETERSON Age: 69 Director Since: 2023 Committees: Audit (Chair) Compensation Executive | Ms. 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: 48 Director Since: 2022 Committees: Audit Executive | Ms. 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. | ||||||||||
MICHAEL B. ADAMS Age: 57 Director Since: 2023 Committees: 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. BURKE Age: 55 Director Since: 2023 | Mr. 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. | ||||
LOUIS P. JENKINS, JR. Age: 52 Director Since: 2023 Committees: Compensation (Chair) Executive Governance | Mr. 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: 64 Director Since: 2021 Committees: Compensation Governance | Mr. 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: 70 Director Since: 2016 Committees: 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: 59 Director Since: 2014 Committees: Compensation | Mr. 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. | ||||
AUSTIN J. SLATER, JR. Age: 70 Director Since: 2023 | Mr. 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: 61 Director Since: 2020 Committees: Audit Board Risk Oversight Strategic Initiatives & Technology | Mrs. 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. | ||||
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.
In fiscal year 2022, 14 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.
| Name | 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 | |||||||||||||||
| 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 | ||||||
Number of Shares Beneficially Percent of Class Beneficially 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; 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 Vance Adkins 6,389 * Edward C Allen 14,758 * Blenda W. Armistead 24,907 (1) * Lloyd L. Beatty, Jr. 115,561 (2) * R. Michael Clemmer, Jr. 22,474 (3) * William E. Esham, III 7,880 * Alan J. Hyatt 1,770,522 (4) 8.9 % David S. Jones 50,099 (5) * James A. Judge 17,403 (6) * Clyde V. Kelly 14,645 * John A. Lamon 54,241 * Frank E. Mason, III 37,691 * David W. Moore 6,967 (7) * Donna J. Stevens 13,723 (8) * Esther A. Streete 609 * Jeffrey E. Thompson 20,453 (9) * Konrad M. Wayson 57,864 * Dawn M. Willey 20,622 * All Directors, Nominees and Named Executive Officers as a Group (18 Persons) 2,256,808 11.3 % 5% Shareholders FJ Capital Management 1313 Dolley Madison Blvd, Ste 306 McLean, VA 22101 1,880,651 (10) 9.5 % Fourthstone, LLC 13476 Clayton Road St. Louis, MO 63131 1,748,027 (11) 8.8 % BlackRock, Inc. 55 East 52nd Street New York, NY 10055 1,138,326 (12) 5.7 % All 5% Shareholders as a Group 4,767,004 24.0 % Total 7,023,812 35.3 % 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%.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 215,670 shares owned by Mr. Hyatt and 7,603 shares held by a company of which Mr. Hyatt is a general partner; includes 849,691 shares held jointly with Sharon G. Hyatt; includes 688,080 shares held by Trusts for which Mr. Hyatt is co-trustee.(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 1,764 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 8, 2023 for the calendar year ended December 31, 2022.(11)As reported in a Schedule 13 G/A filed with the SEC on February 14, 2023 for the calendar year ended December 31, 2022.(12)As reported in Schedule 13G/A filed with the SEC on February 3, 2023 for the calendar year ended December 31, 2022.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 2022. 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 (“NEO”) 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 35,019 26,981 62,000 R. Michael Clemmer, Jr. — 67,000 67,000 William E. Esham, III 10 61,990 62,000 Alan J. Hyatt 50,019 26,981 77,000 (2) David S. Jones 62,000 — 62,000 James A. Judge 40,019 26,981 67,000 Clyde V. Kelly, III 40,019 26,981 67,000 John A. Lamon 35,019 26,981 62,000 Frank E. Mason, III 40,019 26,981 67,000 David W. Moore 40,019 26,981 67,000 Esther A. Streete(3) 14,589 11,244 25,833 Jeffrey E. Thompson 40,019 26,981 67,000 Konrad M. Wayson 10 61,990 62,000 Dawn M. Willey 10 61,990 62,000 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, 2022 regarding assumptions underlying valuation of equity awards.(2)The position of Chairman of the Board is paid a higher annual retainer than the remaining directors.(3)Ms. Streete was appointed to the Board as of August 8, 2022.Company Director CompensationIn 2022, our outside director compensation was increased to provide for a $5,000 increase to bothMs. Pierce holds 8,882 shares of which 4,919 are held by the annual retainer, which went from $30,000 to $35,000, and the director equity award, which went from $22,000 to $27,000. In addition, the ChairmanESOP of Ms. Pierce’s spouse. All individuals are executive officers of the Board receives an additional annual retainer fee of $15,000Company and Bank.(18)Based on information contained in a Schedule 13G/A filed with the Chairs for each committee ofSEC on February 14, 2024.(19)Based on information contained in a Schedule 13G/A filed with the Board receive an additional annual retainer of $5,000. There have been no outside director compensation increases since 2019. Directors have 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.
26EXECUTIVE 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 2022:●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 (*)Mr. Allen retired from his position as 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 Bank effectiveCompensation 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 December 31, 2022.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;●Total compensation should include “at risk” components that are linked to annual and long-term performance results; and●•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.Say on Pay Results and Shareholder OutreachAt the 2022 annual meeting of shareholders, the Company’s shareholders adopted a non-binding resolution approving the compensation paid to our named executive officers, as disclosed in the definitive proxy statement for that meeting pursuant to Item 402 of the SEC’s Regulation S-K. The measure was approved by approximately 92.71%Company and aligning their interests with those of all the votes cast. The Compensation Committee and the Board consider this vote to be an endorsement ofshareholders.Governance PracticesOur executive compensation program contains strong governance components that support our compensation philosophy and practices, including our balance between cash and equity compensation. Bothsound incentive compensation practices.•Active oversight by the Compensation Committee andconsisting solely of independent directors;•Assistance regularly provided to the Board intendCompensation Committee by an independent compensation consultant selected by the Compensation Committee;•Perquisites are limited;•No excise tax gross-ups, pursuant to continually evaluate ourSection 280G of the Internal Revenue Code, are contained in employment, change in control agreements or any other executive compensation philosophyarrangements;•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, the Company’s executive compensation philosophy. The Compensation Committee is responsible for, among other things: (a) reviewing and approving the Company’s compensation strategy and practices with respect to the executive officers and 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 Company’s performance, needs and developments,results of, shareholder approval of certain executive compensation matters including the outcome of future non-binding advisory votes, by(e) periodically reviewing and approving the Company’s shareholders.Role of Compensation ConsultantThe Compensation Committee’s compensation consultant regularly attends Compensation 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 2022, the Compensation Committee directly engaged Hunt Benefits & Associatespeer group to performbe utilized in benchmarking executive and director compensation market reviews.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 Company paid fees totaling $5,000 to Hunt Benefits & AssociatesCompensation 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 2022.Compensation Consultant IndependenceIn furtherance of maintaining the independence2023, each time, discussions were held in executive session without management present.The role of the Compensation Committee’sCommittee is to review the compensation consultants,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 form or level of the 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 Compensation 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 consideration of changes 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 sole authority to retain, terminateCEO’s recommendations. Our CEO plays no role in, 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 advance by the Compensation Committee.In connection with its engagement of Hunt Benefits & Associates, the Compensation 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 Chairduring, discussions regarding his own compensation or final decisions of the Compensation Committee as shown below.Management’s Role in the Executive Compensation ProcessMr. Beatty, our President and CEO, as well as key members of our human resources function, each help support the Compensation Committee’s executiveregarding compensation process and regularly attend portions of committee meetings. As part of the executiveother active NEOs.Compensation ConsultantAon, our current independent compensation process, Mr. Beatty provides his perspective toconsultant, works with 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 his 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 ofto review our executive compensation program provide an appropriate balance of incentives for executivesrelative to our performance and avoid inappropriate risks. In this regard, our executive compensation program includes, among other things,similarly sized institutions. The independent consultant attends meetings and supports the following design features:●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.Compensation Peer Group and BenchmarkingThe Compensation Committee refers to executive compensation studies prepared by its independent consultants when it reviews and approvesCommittee’s deliberations regarding 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 factorsWhile the Compensation Committee considers relevant each year, including particular job responsibilitiesinput from the independent consultant, the Compensation Committee’s decisions are the product of many factors and scope, adjustmentsconsiderations. Management works with the independent consultant at the direction of the Compensation Committee to develop materials and analyses that are critical to the Compensation Committee’s evaluations and determinations. Such materials include data for individual skills and expertise, and internal pay equity.The compensationuse in determining an appropriate peer group, developedcompetitive market assessments and guidance on best practices and 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 Company2023 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 Benefits & AssociatesFinancial Group did not create any conflict of interest and that Hunt Financial Group was independent of the Company’s management.Benchmarking and Peer Group AnalysisDuring 2023 the Legacy 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 2022 named executive officers. In the fourth quarter of 2023, the Compensation Committee engaged Aon to prepare a new peer group for 2024 executive and director compensation decisions. The peer group used by the Legacy Committee for establishing 2023 compensation is listed below.as follows:31Company TickerCity State 2022 AssetsBusiness First Bancshares, Inc. BFSTBaton Rouge LA 5,990,460Carter Bankshares, Inc CAREMartinsville VA 4,204,519Summit Financial Group, Inc. SMMFMoorefiledMoorefield WV 3,916,692Southern First Bancshares, Inc. SFSTGreenville SC 3,691,981Primis Financial Corp. FRSTMcLean VA 3,571,537Shore Bancshares, IncSHBIEastonMD3,477,276First Community Bankshares, Inc. FCBCBluefield VA 3,135,572Orrstown Financial Services, Inc. ORRFShippensburg PA 2,922,408Investar Holdings Corp.ISTRBaton RougeLA2,753,807Community Financial Corp.TCFCWaldorfMD2,410,017FVCBankcorp, Inc. FVCBFairfax VA 2,344,322C & F Financial Corp.CFFIToanoVA2,332,317Capital Bancorp, Inc. CBNKRockville MD 2,123,655Parke Bancorp, Inc. PKBKSewell NJ 1,984,915First United Corp.FUNCOaklandMD1,848,169National Bankshares, Inc.NKSHBlacksburgVA1,677,551Partners BancorpPTRSSalisburyMD1,574,612Reported in 2022 as Peer GroupCommunity Bankers TrustMerged with United Banksahres, Inc.Howard Bancorp, Inc.Merged with F.N.B. CorporationCompensation 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 generallyfor NEOs.2023 Short-Term Incentive Program (“2023 STIP”)The short-term incentive program provides our NEOs with the opportunity to earn 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 performance factors aligned with the annual strategic plan approved by the Board.The total amount of each NEO’s incentive award under 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 part of a scorecard that is provided to each NEO and used by the Compensation Committee to determine annual short-term incentive awards.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. 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 size to one another. These challenges were accentuated by uncertainty in the broader banking industry. Instead, the Compensation Committee reviewed its overall financial performance at the market median; however some adjustmentsend of the year against 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 75th percentiles for each of these measures. The Compensation Committee evaluated33the 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 AgreementsWe 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 the 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 the extent it exceeds the compensation that properly would have been awarded to, earned by, or vested with that NEO but for accounting errors impacting the calculation of that compensation, and which are subject of an accounting restatement required to be prepared by the Company. 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 no finding of fault of the NEO is required. The Compensation Committee has the exclusive power and authority to administer the policy, including to interpret the policy’s provisions and to make all determinations deemed necessary or advisable for 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 owned shares or shares acquired from equity awards. Our Chief Executive Officer has a target multiple of two (2) and other Section 16 executive officers have a multiple of one (1). The retention ratio is 100% of net profit shares. Executives are expected to hold 100% of the shares remaining after payment of an 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 Company’s Insider Trading Policy, directors, officers and employees are prohibited at all times from writing any options or short-selling securities of the Company. Directors, officers and employees are also discouraged from engaging in hedging transactions (such as “cashless” collars, forward sales, equity swaps and other similar or related arrangements) that may indirectly involve a short sale, and any such transaction must be carefully reviewed by the Company’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 madecompleted 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 into consideration internal equity factors, additional functional responsibilitiesadvantage 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 each executive’s experience. Changesafter 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 salariesnamed executive officers to the extent permitted by law, we have retained the flexibility to provide nondeductible compensation arrangements if we believe it is necessary to attract, incentivize, and retain key executives. We do not intend to change our pay-for-performance approach to awarding executive compensation even though the recent tax law changes eliminated the specific 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 timing of the release of material non-public information, including with respect to the determination of grant dates. Similarly, the Company has 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 events reportable under federal securities laws, the applicable requirements of such laws with respect to the timing of disclosure. The Company has not granted stock options since February 6, 2017.35SUMMARY 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 other than the CEO who were serving as follows:executive officers as of December 31, 2023).Executive Title 2021
Salary 2022
Salary 2022
% Increase Lloyd L. Beatty, Jr. President & CEO $ 540,750 $ 600,000 10 % Edward C. Allen EVP & CFO 283,250 300,000 6 Donna J. Stevens EVP & COO 314,150 330,000 5
The Company’s incentive program,
| Name 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 Officer | 2023 2022 | 247,200 - | 312,476 - | 155,008 - | 58,825 - | 25,511 - | 799,020 - | ||||||||||||||||
Donna J. Stevens Chief Operating Officer | 2023 2022 | 345,000 330,000 | 105,941 141,685 | 45,570 - | 132,071 28,300 | 14,909 8,453 | 643,491 508,438 | ||||||||||||||||
Christy Lombardi(7) Chief Human Resources Officer | 2023 2022 | 161,077 - | 104,939 - | 261,140 - | 37,843 - | 17,844 - | 582,843 - | ||||||||||||||||
Lloyd L. Beatty, Jr.(8) Former President and Chief Executive Officer | 2023 2022 | 331,962 600,000 | – 264,130 | - - | 23,745 12,221 | 2,785,155 33,427 | 3,140,862 909,778 | ||||||||||||||||
Vance Adkins(9) Former Chief Financial Officer | 2023 2022 | 142,269 260,000 | – – | - - | (6,006) - | 716,673 10,820 | 852,936 270,820 | ||||||||||||||||
In fiscal year 2022, each Named Executive Officer participated in the MIP and was assigned Company and individual goals at the beginning of the year. Target award opportunitiesNEOs under the MIP for 2022 were 30% of base salary for2023 Short-term Incentive Program.
For fiscal year 2022, annual incentive bonuses were based on the achievement of the objective performance goals of earnings per share (“EPS”) (50% weight) and the successful consolidation resulting from the acquisition of Severn (20% weight), which together accounted for a potential of 70% of Mr. Beatty,Burke, 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. Ms. Stevens earned the maximum threshold for her individual goals, Mr. Beatty received slightly above target for his individual goals and Mr. Allen received target for his individual goals. EPS goals in 2022 were slightly lower than in 2021 due to the merger with Severn on November 1, 2021, which resultedLombardi in the issuanceamounts of approximately eight million shares.
| Threshold | Target | Maximum | |||||||||||||||||||||||||||||||||
| Executive | Title | Goals | % of salary | Goal | % of salary | Goal | % of salary | Goal | Actual Company Performance | 2022 MIP Award | 2022 MIP Award | ||||||||||||||||||||||||
| Lloyd L. Beatty, Jr. | President & CEO | SHBI EPS | 7.50 | % | $ | 1.32 | 15.00 | % | $ | 1.55 | 30.00 | % | $ | 1.78 | $ | 1.65 | $ | 129,130 | 21.5 | % | |||||||||||||||
| Successful Merger Integration | 3.00 | % | 50.00 | % | 6.00 | % | 100 | % | 12.00 | % | 200.00 | % | 150.00 | % | 54,000 | 9.00 | |||||||||||||||||||
| Committee Review | 4.50 | % | 50.00 | % | 9.00 | % | 100 | % | 18.00 | % | 200.00 | % | 150.00 | % | 81,000 | 13.5 | |||||||||||||||||||
| Total % of Salary | 15.00% | 30.00% | 60.00% | 264,130 | 44.0 | ||||||||||||||||||||||||||||||
| Donna J. Stevens | COO | SHBI EPS | 6.25 | % | $ | 1.32 | 12.50 | % | $ | 1.55 | 25.00 | % | $ | 1.78 | $ | 1.65 | 59,185 | 17.9 | |||||||||||||||||
| Successful Merger Integration | 2.50 | % | 50.00 | % | 5.00 | % | 100.00 | % | 10.00 | % | 200.00 | % | 200.00 | % | 33,000 | 10.0 | |||||||||||||||||||
| Individual Performance Review | 3.75 | % | 50.00 | % | 7.50 | % | 100.00 | % | 15.00 | % | 200.00 | % | 200.00 | % | 49,500 | 15.0 | |||||||||||||||||||
| Total % of Salary | 12.50% | 25.00% | 50.00% | 141,685 | 42.9 | ||||||||||||||||||||||||||||||
| Edward C. Allen | CFO | SHBI EPS | 6.25 | % | $ | 1.32 | 12.50 | % | $ | 1.55 | 25.00 | % | $ | 1.78 | $ | 1.65 | 53,804 | 17.9 | |||||||||||||||||
| Successful Handoff to New CFO | 2.50 | % | 50.00 | % | 5.00 | % | 100.00 | % | 10.00 | % | 200.00 | % | 100.00 | % | 15,000 | 5.0 | |||||||||||||||||||
| Individual Performance Review | 3.75 | % | 50.00 | % | 7.50 | % | 100.00 | % | 15.00 | % | 200.00 | % | 100.00 | % | 22,500 | 7.5 | |||||||||||||||||||
| Total % of Salary | 12.50% | 25.00% | 50.00% | 91,304 | 30.4 | ||||||||||||||||||||||||||||||
Supplemental Executive Retirement Plans
In 2019,(3)Represents the Board’s Compensation Committee terminatedaggregate grant date fair value of the 2018 Long-Term Incentive Plan (“LTIP”) for all officersgranting of 13,409, 3,942, and the 2017 LTIP for Named Executive Officers, and all corresponding22,590 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 forfeited. To replacegranted in July 2023 and will vest over two years beginning on the LTIP,first anniversary date of the Compensation Committee elected to institute individualgrant.
| Item | 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 | ||||||||||||
| Aggregate | ||||||||||||||||||
| Executive Contributions | Registrant Contributions | (loss) in last | Aggregate withdrawals/ | Aggregate balance at | ||||||||||||||
| in last FY | in last FY | FY | distributions | last FYE | ||||||||||||||
| Name | Plan(1) | ($) | ($) | ($) | ($) | ($) | ||||||||||||
| Mr. Beatty | SERP | — | — | — | — | 1,242,943 | ||||||||||||
| Mrs. Stevens | SERP | — | 122,584 | — | — | 321,828 | ||||||||||||
| Mr. Allen | SERP | — | 380,915 | — | — | 1,000,000 | ||||||||||||
(1) “SERP” stands for Supplemental Executive Retirement Plan.
All employee contributions toBeatty is currently in pay status under his supplemental executive retirement plan., Under the 401(k) Profit Sharing Plan are immediately vested. Discretionary and matching contributions by the Company vest incrementally over a six-year period. For 2021, the Company matched 100%terms 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 isMs. Steven’s supplemental executive retirement plan, if she remains continuously employed by the Company ifBank until on or after attaining age 65, then following the participant has reacheddate on which she experiences a separation from service on or after attaining age 59½, 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 Change
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.
During 2023, only Ms. Stevens participated in the Company Deferred Compensation Plan.
Ms. Lombardi could defer all or any portion of their base salary. Upon the merger, which constitutes a change in control, all deferred amounts were paid out to Mr. Burke and Ms. Lombardi within 90 days following the closing of the merger.
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 $100,000 or the net amount at risk insurance portion of the proceeds. The following table sets forth for the last two fiscal yearsnet amount at risk portion is the total remuneration for services in all capacities awarded to, earned by, or paid to our Named Executive Officers (the Company’s CEO andproceeds less the two most highly compensated executive officers and other significant executive officerscash value of the Company and its subsidiaries other than the CEO who were serving as executive officers as of December 31, 2022).
| Name and principal | Salary | Bonus | Stock Awards | Non-equity incentive plan compensation | Change in non-qualified deferred compensation earnings | All other compensation | Total | |||||||||||||||||
| position | Year | ($) | ($)(1) | ($)(2) | ($) | ($) | ($)(3) - (5) | ($) | ||||||||||||||||
| Lloyd L. Beatty, Jr. | 2022 | 600,000 | 264,130 | — | — | 12,221 | 33,427 | 909,778 | ||||||||||||||||
| President and CEO | 2021 | 540,750 | 275,783 | 199,986 | — | 56,754 | 32,467 | 1,105,742 | ||||||||||||||||
| Donna J. Stevens | 2022 | 330,000 | 141,685 | — | — | 28,300 | 8,453 | 508,439 | ||||||||||||||||
| COO | 2021 | 314,150 | (6) | 125,661 | 11,983 | (7) | — | 31,768 | 8,804 | 491,646 | ||||||||||||||
| Edward C. Allen | 2022 | 300,000 | 91,304 | — | — | (19,857 | ) | 10,876 | 382,324 | |||||||||||||||
| EVP and CFO(8) | 2021 | 283,250 | 109,760 | 9,982 | — | 29,952 | 10,565 | 443,510 | ||||||||||||||||
The
Estimated Future Payouts 2021 Employee Stock Purchase2015 Equity Compensation PlanIn 2021, our Board adopted, – 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 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 Stock Purchase Plan is not intended to qualify as an “employeeperformance-based restricted stock purchase plan” under Section 423 of the Code. 100,000 shares of our Common Stock are reserved for issuance under the Stock Purchase Plan. If any optionaward 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 Purchase Plan expires or terminates for any reason without having been exercised in full,accordance with the unpurchased sharesmerger 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 option will againall 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 available for issuanceissued under the Stock Purchase Plan. The Compensation CommitteeAssumed Equity Plan, subject to the terms 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,plan and November 11 (each a “Purchase Period”). Shares of our Common Stock are available for purchasesecurities regulations. No additional equity awards were made under the Stock PurchaseAssumed Equity 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. There were 23,239 shares of Common Stock purchased under the Stock Purchase Plan in 2022.Grant of Plan Based Awards Table
Under Non-Equity Incentive Plan
Award All other
Option
Awards:
Number of
Securities
Underlying Exercise
or Base
Price of
Option Grant Date Fair Threshold Target Maximum Options Awards Value of Stock Name Award Date ($) ($) ($) (#) ($/sh) ($) Lloyd L. Beatty, Jr. Annual cash incentive 3/1/2023(1) 90,000 180,000 360,000 — — — Edward C. Allen Annual cash incentive 3/1/2023(1) 37,500 75,000 150,000 — — — Donna J. Stevens Annual cash incentive 3/1/2023(1) 41,250 82,500 165,000 — — — (1) 2022 MIP Plan
Outstanding Equity Awards At Fiscal Year-End
| Option Awards | Stock Awards | ||||||||||||||||
| Number of securities underlying | Number of securities underlying | Option | Number or units | Market of shares or units of stock that | |||||||||||||
| unexercised | unexercised | exercise | have not | have not | |||||||||||||
| options (#) | options (#) | price | Option | vested | vested | ||||||||||||
| Name | exercisable | unexercisable | ($) | expiration date | (#) | ($) | |||||||||||
| Mr. Beatty | — | — | — | 4,748 | (1) | 82,758 | |||||||||||
| Mrs. Stevens | — | — | — | 667 | (2) | 11,626 | |||||||||||
| Mr. Allen | — | — | — | — | — | ||||||||||||
The following table sets forth the number of restricted shares of Common Stock acquired by the Named Executive Officers pursuant to stock awards that vested during 2022 and the value realized upon vesting of stock awards.
Option Exercises and Stock Vested
| Option Awards | Stock Awards | |||||||||
| Number of | Number of | |||||||||
| Shares | Value | Shares | Value | |||||||
| Acquired on | Realized on | Acquired on | Realized on | |||||||
| Exercise | Exercise | Vesting | Vesting | |||||||
| Name | (#) | ($) | (#) | ($) | ||||||
| Mr. Beatty | — | — | 4,748 | (1) | 82,378 | |||||
| Mrs. Stevens | — | — | 1,236 | (2) | 22,619 | |||||
| Mr. Allen | — | — | 790 | (3) | 13,370 | |||||
| Name | Grant Date | Number of (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | ||||||||
| Mr. Burke | 02/04/2021 02/04/2021 02/10/2022 02/10/2022 02/02/2023 03/06/2023 03/06/2023 05/01/2023 07/01/2023 | 950 (2) 2,848 (3) 1,192(4) 1,788 (5) 214(6) 4,692 (7) 4,695(8) 293(6) 13,409(9) | 13,538 40,584 16,986 25,479 3,050 66,861 66,904 4,175 191,078 | ||||||||
Ms. Stevens | 07/01/2023 | 3,942(9) | 56,174 | ||||||||
| Ms. Lombardi | 02/04/2021 02/04/2021 02/10/2022 02/10/2022 03/06/2023 03/06/2023 07/01/2023 | 529(2) 1,586(3) 657(4) 985(5) 1,018(7) 1,020(8) 22,590(9) | 7,538 22,601 9,362 14,036 14,507 14,535 321,908 | ||||||||
| Mr. Beatty | - | - | - | ||||||||
| Mr. Adkins | - | - | - | ||||||||
The following table provides information regarding 2022 contributions, earnings,
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 | — | — | 17,398 | — | 171,866 | ||||||||||||||
| Mrs. Stevens | CDCP | — | — | 28,300 | (72,367 | ) | 229,827 | |||||||||||||
| Mr. Allen | CDCP | — | — | (19,856 | ) | — | 172,469 | |||||||||||||
(7) Units vest in three equal installments beginning on March 6, 2024. (8) Performance shares for |
Under the Company’s Deferred Compensation Plan, amounts deferred2023-2026 performance period converted to time-based restricted stock units at the election of the employee are credited to an account maintained on behalf of the participant merger and are deemed to be invested 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 Account (as defined in the CDCP) established by the Company and will be deemed to be invested 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 CDCP) 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 Changefull on March 6, 2027.
The Company’s Deferred two equal installments beginning on July 1, 2024.
| Year | Summary Compensation Table Total for CEO ($)(1) Beatty | Compensation Actually Paid to CEO ($) Beatty | Summary Compensation Table Total for CEO ($)(1) Burke | Compensation 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 | ||||||||||||||||||
If a participant dies or experiences a Disability while employed by the Company or if the Company experiences a Change in Control (as defined in the CDCP), then the vested portions of a participant’s accounts will be distributed in a lump sum paymentActually paid makes required adjustments to the participant or, in the casetotal amount of death, to his or her designated beneficiaries. If a participant experiences a Separation from Service, then the vested portions of a participant’s accounts will be distributed in a lump sum or in installments, as specified in the most recent election form. Certain restrictions on the commencement of automatic distributions apply to Key Employees (as defined in the CDCP).
A participant may elect in his or her annual election form to receive elective distributions, or “In-Service Distributions,” of his or her employee deferrals (and earnings thereon)compensation shown for a given Plan Year as soon as three years after the end of that Plan Year. At the time 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,our Principal Executive Officer (“PEO”) and must postpone the commencement of the payment for a period of at least five years from the original distribution date.
The Company’s Deferred Compensation Plan also permits certain limited distributions upon the occurrence of an Unforeseen Emergency (as defined in the CDCP)Former PEO, Mr. James M. Burke and a lump sum distribution, at the administrator’s sole discretion, in the event the participant’s accounts have a value of less than $10,000.
For information about amounts that could be payable to the Named Executive Officers under these deferred compensation plans upon a termination of employment, see the section below entitled “Benefits Upon Termination of Employment.”
On October 31, 2018, the Company’s employment agreements withMr. Lloyd L. Beatty, Jr., President and Chief Executive Officer, and Donna J.NEOs other than our PEO, in the Summary
Lloyd L. Beatty, Jr.
On November 1, 2018, the CompanyMs. Lombardi and Mr. Beatty 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 executiveAdkins for “Good Reason” within 12 months of a “Change in Control” of the Company (the terms “Cause,” “Change in Control”2023 and “Good Reason” are defined below), the executive will be entitled to receive an amount equal to 2.99 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. 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 he 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 his 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. Beatty 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 his 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 he 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.
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 Company 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 in 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.Ms. Stevens
On November 1, 2018, the Company and Mrs. 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 above under the description of Mr. Beatty’s Change in Control Agreement), the executive will be entitled to receive an amount equal to 2.0 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. 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 she 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 her 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 Mrs. Stevens to determine whether to give notice of non-renewal.
Edward C. Allen
On October 31, 2017, the Bank and Mr. Allen entered into a Change in Control Agreement. Pursuant to the Change in Control Agreement, 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”2022 and “Good Reason” are defined above under the description of Mr. Beatty’s Change in Control Agreement), the executive will be entitled to receive an amount equal to 1.5 times the executive’s “base amount” as defined in Section 280G(b)(3) of 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 he 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 his decision not to renew the Change in Control Agreement. At least 120 days prior to the commencement 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.
Benefits Upon Termination of Employment
The following table shows the estimated present value of benefits (as of December 31, 2022) that could be payable to the Named Executive Officers under change in control agreements and deferred compensation plans upon a termination of employment. Information is provided only for those Named Executive Officers who are eligible to receive such benefits.
| Payment Under | |||||||||
Payment Under Change in | Payment Under Deferred | Supplemental Executive | |||||||
| Control | Compensation | Retirement | |||||||
| Agreement | Plans | Plans | |||||||
| Name | Reason for Termination | ($) | ($) | ($) | |||||
| Mr. Beatty | Death or disability | — | 171,866 | 1,242,943 | |||||
| Change in control | 2,673,449 | 171,866 | 1,242,943 | ||||||
| Involuntary termination without cause | 1,200,000 | 171,866 | 1,242,943 | ||||||
| Termination for any other reason before age 68 | — | 171,866 | 1,242,943 | ||||||
| Termination for any other reason after age 72 | — | 171,866 | 1,500,000 | ||||||
| Mrs. Stevens | Death or disability | — | 229,827 | 321,828 | |||||
| Change in control | 973,370 | 229,827 | 1,035,702 | ||||||
| Involuntary termination without cause | 660,000 | 229,827 | 321,828 | ||||||
| Termination for any other reason before age 58 | — | 229,827 | 321,828 | ||||||
| Termination for any other reason after age 65 | — | 229,827 | 1,250,000 | ||||||
| Mr. Allen | Death or disability | — | |||||||
| Change in control | 450,000 | 172,469 | 1,000,000 | ||||||
| Involuntary termination without cause | — | 172,469 | 1,000,000 | ||||||
| Termination for any other reason before age 72 | — | 172,469 | 1,000,000 | ||||||
| Termination for any other reason after age 76 | — | 172,469 | 1,000,000 |
Accounting and Tax Considerations
No Tax Reimbursement of Parachute Payments and Deferred Compensation
If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409Aof the Code, and such benefits do not comply with Section 409A of the Code, then the benefits are taxable in 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 structured the change in control benefit of the executives’ change in control agreements to minimize income tax penalties that could be imposed on the Company and/or the executive under Section 280G of the Code. Under Section 280G of the Code, an excise tax is imposed on an executive officer who receives payments that are deemed to be contingent on a change in the ownership or effective control of the Company to the extent they exceed 2.99 times the executive’s “annualized includable compensation for 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 on which the change in control occurs). In addition, the Company is not entitled to treat such excess as compensation expense for federal income tax purposes. We did not provide any executive officer, including any NEO, with 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 2018 and we have not agreed and are not otherwise obligated to provide any NEO with such a “gross-up” or other reimbursement.
Limitation on Deductibility of Executive Compensation
Under Section 162(m) of the Code, 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, unless 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 compensation paid to our covered executive officers 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) of the Code and therefore not subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, including the uncertain scope 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) of the Code 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) of the Code if it determines that such modifications are consistent with our business needs.
Despite the changes to Section 162(m) of the Code, the Compensation 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 Compensation Committee and the Board may grant awards and approve compensation that may not be deductible for income tax purposes.
Accounting Treatment
The 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 discussed in the Notes to the Consolidated Financial Statements included in the accompanying Annual Report on Form 10-K under the heading “Stock Based Compensation.”
| Year | Summary Comp Table Total for PEO | Comp Actually Paid to PEO(1) | Average Summary Comp. Total Table for non-PEO Named Executive Officers | Average Comp. Actually Paid to non-PEO Names Executive Officers | Value of Initial Fixed $100 Investment based on Total Share Holder Return | Net Income | ||||||||||||||
| 2022 | $ | 909,778 | $ | 864,130 | $ | 445,381 | $ | 431,495 | $ | 100.40 | $ | 31,176,965 | ||||||||
| 2021 | 1,105,740 | 816,533 | 467,578 | 416,411 | 120.10 | 15,367,490 | ||||||||||||||
| 2020 | 762,813 | 695,137 | 396,459 | 357,500 | 85.02 | 15,730,201 | ||||||||||||||
Relationship Between Compensation Actually Paid and Performance
This section sets forth the information required by Item 402(t)successful execution of Regulation S-K regarding certain compensation that will or may be paid or become payable to each of the Company’s Named Executive Officers that is based on or otherwise relates to the merger with TCFC and that will or may become payable to each Named Executive Officer at the effective time of the merger or a qualifying termination of employment in connection with the merger. The “golden parachute” compensation payable to the Named Executive Officers is included as part of Proposal 3 (advisory vote on executive compensation).
The estimated potential payments in the table below are based on the following assumptions:
The calculations in the tables do not include amounts that the Named Executive Officers were already entitled to receive or vested in as of the date of this Proxy Statement. The calculations in the tables also do not reflect compensation actions that may occur after the date of this Proxy Statement but before the effective time of the merger (including any additional equity award grants, issuances or forfeitures that may occur, or future dividends or dividend equivalents that may be accrued, after the date of this Proxy Statement but before the effective time of the merger) and do not include compensation amounts that do not relate to and are not impacted by the merger. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the tables, the actual amounts, if any, to be received by a Named Executive Officer may materially differ from the amounts set forth below.
| Name | Cash ($)(1) | Equity ($)(2) | Pension / NQDC ($)(4) | Perquisites/ Benefits ($) | Tax Reimbursement ($) | Other ($)(3) | Total ($) | |||||||
| Named Executive Officers(a) | ||||||||||||||
| Lloyd L. Beatty Jr. | 2,583,749 | 82,758 | 12,221 | — | — | — | 2,678,727 | |||||||
| Donna J. Stevens | 943,370 | 11,626 | 28,300 | — | — | 91,132 | 1,074,428 | |||||||
| Edward C. Allen | — | — | — | — | — | — | — | |||||||
| Vance W. Adkins (b) | 664,130 | — | — | — | — | — | 664,130 |
(a) Former Named Executive Officer: Edward C. Allen, retired as the Company’s Chief Financial Officer, effective as of December 31, 2022 and is not entitled to receive any compensation in connection with, or as a result of, the merger.
(b) Because the merger is anticipated to close in 2023, we have also included golden parachute compensation disclosure for Vance W. Adkins, our principal financial officer for 2023.
(1) For Mr. Beatty and Mrs. Stevens, this amount represents the lump sum cash severance payment of 2.99 (2.00 for Mrs. Stevens) times base salary plus bonus paid or scheduled to be paid in the year of the change in control, in the event that the executive is terminated without cause or resigns for good reason within twelve (12) months following a change in control. These amounts represent a “double trigger” payment because the payment is conditioned on the executive’s involuntary termination upon or following a change in control, such as the merger.
(2) Upon the closing of the merger, all restricted stock held by the executives will accelerate. The estimated payments in respect of the unvested restricted stock are “single trigger” benefits in that their vesting will accelerate at the effective time of the merger pursuant to their terms.
(3) For Mrs. Stevens, this amount reflects the retention award expected to be received provided that Mrs. Stevens remains employed with the Company for a period not to exceed one year following the closing of the merger. This amount represents a "double trigger" payment because the payment is contingent upon both the closing of the merger and Mrs. Stevens' continued employment for a period not to exceed one year following the closing of the merger.
(4) For Mr. Beatty and Mrs. Stevens, this amount represents the value of employer discretionary contributions under the Company Deferred Compensation Plan that will vest upon a change in control. These amounts represent “single trigger” payments because their vesting will accelerate at the effective time of the merger pursuant to their terms.
The Compensation Committee has reviewed and discussed with management the section of this Proxy Statement entitled “COMPENSATION DISCUSSION AND ANALYSIS”. Based on this review 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 into the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
CERTAIN 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.Ordinary Banking RelationshipsThe Bank 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 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 Bank’s regulatory requirements.As of December 31, 2022 and 2021, such loans outstanding, both direct and indirect (including guarantees), to directors, their associates and policy-making officers, totaled approximately $24.1 million and $18.7 million, respectively. As of December 31, 2022 and 2021, deposits, both direct and indirect, from directors, their associates and policy-making officers, totaled approximately $11.9 million and $7.7 million, respectively.LeaseThe Company leases a portion of one of its facilities to a law firm, in which the Chairman of the Board of the Company and the Bank 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 $305 thousand for the year ended December 31, 2022 and $50 thousand for the year ended December 31, 2021. The law firm also reimburses the Company for its share of common area maintenance and utilities. In addition, the law firm represents the Company and the Bank in certain legal matters.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, 2022,2023, except for a Form 4 that was not timely filed for each of William E. Esham, III,David S. Jones and Donna Stevens and Jeffrey E. Thompson.J. Stevens.
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF YOUNT, HYDE & BARBOUR, P.C.AS THE COMPANY’S INDEPENDENT REGISTERED ACCOUNTING FIRM FORFISCAL YEAR 2023Shareholders 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, 2023. 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 2022 and 2021:Yount, Hyde & Barbour, P.C. 2022 2021 Audit Fees $ 144,250 238,000 Audit-Related Fees 102,330 92,800 Tax Fees 21,750 — All Other Fees — — Total $ 268,330 330,800 Audit fees incurred in fiscal years 2022 and 2021 include charges for the audit of our consolidated financial statements, quarterly reviews of interim financial statements, issuance of consents, and review of documents filed with the SEC. Audit related fees incurred in fiscal years 2022 and 2021, include charges related to audits of employee benefit plans, performance of our HUD compliance audits, and audits of internal control over financial reporting required by the Company’s annual FDICIA regulatory filing. Tax fees incurred in fiscal year 2022 relate to the preparation of final tax returns for Severn, including related tax compliance matters of Severn. There were no amounts billed for tax services by Yount, Hyde & Barbour, P.C. in 2021.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 2022 and 2021 services described above were pre-approved by the Audit Committee.Pursuant 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 2022,2023, and the compensation that was earned by, awarded to or paid to the Named Executive Officers.The Board and the Compensation Committee believe that our compensation policies and procedures are reasonable in comparison both to our peer group and to our performance during 2022.2023. The Board and the 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 the Compensation Committee, overrule any decision made by the Board or the Compensation Committee, or create or imply any additional fiduciary duty by the Board or the Compensation Committee. The Board and the Compensation Committee may, however, take into account the outcome of the vote when considering future executive compensation arrangements.
As discussed
The BoardAnnual Meeting and the Compensation Committee continue to believe that shareholders shouldthey will have the opportunity to express their views on our compensation programmake a statement if they desire to do so and policies for our Named Executive Officers on an annual basis. The Board believes that a Say-on-Pay vote occurring every year allows our shareholders to provide timely input regarding the compensation of the Company’s Named Executive Offices and is consistent with the Company’s effortsbe available to engage in an ongoing dialogue with shareholders on executive compensation and corporate governance matters. The Board and the Compensation Committee, which administers the executive compensation program, value the opinions expressed by the shareholders pursuantrespond to the Say-on-Pay votes and will consider the outcome of those votes in making its annual decisions on executive compensation.
Because your vote on this Proposal 4 is advisory, it will not be binding on the Board or the Compensation Committee, overrule any decision made by the Board or the Compensation Committee, or create or imply any additional fiduciary duty by the Board or the Compensation Committee. The Board and the Compensation Committee may, however, take into account the outcome of the vote on this Proposal 4 when considering its policy on the frequency Say-on-Pay votes.
The Board recommends that shareholders vote to hold future Say-on-Pay votes ANNUALLY.
2023. AUDIT COMMITTEE By: Mary Todd Peterson, Chair James A. Judge Rebecca M. McDonald Esther A. Streete Konrad M. Wayson Dawn M. Willey
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Audit 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 20222023 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 20222023 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 20222023 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 20242025 ANNUAL MEETINGAny shareholder nominations or proposal for other business intended to be presented at the Company’s 20242025 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 20242025 annual meeting of shareholders 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 14, 202317, 2024 unless the date of the 20242025 annual meeting of shareholders is changed by more than 30 days from May 23, 2024,30, 2025, the one-year anniversary of SHBI’s 20232024 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 provide its proposal to the Company in writing, and such proposal must comply with the requirements of Rule 14a-8.Advance Notice ProceduresPursuant to the Bylaws, if a shareholder intends to present a proposal for business to be considered at the 20242025 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 its principal executive offices at 18 E. Dover Street, Easton, Maryland 21601 no earlier than February 23, 2024March 1, 2025 and no later than March 25, 2024,31, 2025, which is not more than 90 days nor less than 60 days before May 23, 2024,30, 2025, which is the one-year anniversary of the 20232024 annual meeting of shareholders. However, if the date of the 20242025 annual meeting shareholders is advanced by more than 30 days or delayed by more than 60 days from May 23, 2024,30, 2025, notice by the shareholder must be so delivered not earlier than the 90th day prior to the 20242025 annual meeting of shareholders and not later than the close of business on the later of the 60th day prior to the 20242025 annual meeting of shareholders or the 10th day following the day on which public announcement of the date of the 20242025 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 23, 2024,30, 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 23, 2024,30, 2025, the one-year anniversary date of the 20232024 annual meeting of shareholders, in which case such notice must be so delivered not earlier than the 180th day prior to the 20242025 annual meeting of shareholders and not later than the close of business on the later of the 100th and 120th day prior to the 20242025 annual meeting of shareholders or the 10th day following the day on which public announcement of the date of the 20242025 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 20242025 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 that sets forth the information required by the SEC’s Rule 14a-19 no later than March 24, 2024,31, 2025, unless the date of the 20242025 annual meeting of shareholders has changed by more than 30 calendar days from the previous year, in which case such notice must be provided by the later of 60 calendar days prior to the date of the 20242025 annual meeting of shareholders or the 10th calendar day following the day on which public announcement of the date of the 20242025 annual meeting of shareholders is first made by the Company.
SHAREHOLDERS 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 20222023 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 20222023 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 20222023 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 20222023 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 20222023 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 12, 202348
Virtual Annual Meeting of Shareholders May 23, 2023 at 9:00 a.m. EDT This Proxy is solicited on behalf of the Board of Directors The undersigned hereby appoints Lloyd L. “Scott” Beatty and James A. Judge, and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and hereby authorizes them, and each of them, to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Shore Bancshares, Inc. (the “Company”) that the undersigned is entitled to vote at the Annual Meeting of Shareholders (the “Annual Meeting”) to be held at 9:00 a.m. EDT on May 23, 2023 and any adjournment or postponement 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/2023/htype.asp by 11:59 PM Eastern time on May 20, 2023. 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 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?” 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 2022 Annual Report are available at: http://viewproxy.com/ShoreBancshares/2023
Dear ESOP Participant:On behalf of the Board of Directors, I am forwarding to you the attached vote authorization form to convey your voting instructions to Austin J. Slater, Jr. and Joseph V. Stone, Jr., Trustees for the Community Bank of the Chesapeake Employee Stock Ownership Plan and Trust (the “ESOP”) on the proposals presented at the Annual Meeting of Stockholders of Shore Bancshares, Inc. (the “Company”) on May 30, 2024. Also attached is a Notice of Annual Meeting and Proxy Statement for the Company’s Annual Meeting of Stockholders and the 2023 Annual Report on Form 10-K.As an ESOP participant, you are entitled to instruct the ESOP Trustees how to vote the shares of Company common stock allocated to your ESOP account as of 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 vote authorization form no later than May 23, 2024.Sincerely,
Alan J. HyattChairman of the Board18 E. Dover Street • EASTON, MARYLAND 21601
WEBshorebancshares.com NASDAQ SHBI
The Board of Directors recommends you vote “FOR” each of the following nominees: 1. Election 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 Nominees: David S. Jones Class II (term expires 2026) Clyde V. Kelly, III Class II (term expires 2026) David W. Moore Class II (term expires 2026) Dawn M. Willey Class II (term expires 2026) FOR AGAINST ABSTAIN independent registered public accounting firm for 2023. • FOR AGAINST ABSTAIN 3. Adopt a non-binding advisory resolution approving the compensation of the named executive officers. FOR AGAINST ABSTAIN The Board of Directors recommends you vote “FOR” “1 YEAR” on proposal 4. 4. Advisory vote on the frequency of the non-binding resolution to approve the compensation of the named executive officers. 1 YEAR 2 YEARS 3 YEARS ABSTAIN NOTE: To conduct any other business properly brought before the meeting or any adjournment thereof. Date: Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) VIRTUAL CONTROL NUMBER Signature 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 is 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.VOTE AUTHORIZATION FORMCOMMUNITY BANK OF THE CHESAPEAKEEMPLOYEE STOCK OWNERSHIP PLAN AND TRUSTShore Bancshares, Inc.Annual Meeting of Stockholders – May 30, 2024With respect to all shares of common stock of Shore Bancshares, Inc. (the “Company”) that are allocated to the account of the undersigned pursuant 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 Stockholders (the “Meeting”) to be held on Thursday, May 30, 2024, at 9:30 a.m., local time, and at any and all adjournments thereof as follows:The Board of Directors recommends a vote “FOR” all of the nominees and “FOR” Proposals 2.You are to vote my shares as follows:☒ PLEASE MARK VOTES AS IN THIS EXAMPLE1. ELECTION 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 this vote authorization form of the Notice of Annual Meeting, a Proxy Statement for the Annual Meeting and the Company’s 2023 Annual Report on Form 10-K. PARTICIPANT’S NAME Dated: ____________________, 2024 ___________________________________SIGNATURE OF PARTICIPANTPlease complete this direction form and sign, date and return it 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.
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 at the Annual Meeting by first registering at http://viewproxy.com/ShoreBancshares/2023/htype.asp using your Virtual Control Number below. Your registration must be received by 11:59 PM Eastern time on May 20, 2023. 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 confirmations and follow instructions to vote your shares. Please have yourVirtual 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 andAnswersAboutTheseProxyMaterialsandVoting–Howdo IattendtheAnnual Meeting?” and “Questions and Answers About These Proxy Materials and Voting – How can Ivote?” 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 INTERNET Vote Your Proxy on the Internet: Go to Go to www.aalvote.com/SHBI 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:
SHORE BANCSHARES, INC. Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be held virtually on May 23, 2023 at 9:00 A.M. EDT This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The Notice and Proxy Statement and Annual Report to Stockholders are available at: http://viewproxy.com/ShoreBancshares/2023 If you want to receive a paper or e-mail copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed below on or before May 15, 2023 to facilitate timely delivery. Important information regarding the Internet availability of the Company’s proxy materials, instructions for accessing your proxy materials and voting online and instructions forrequesting paper or e-mail copies of your proxy materials are provided on the reverse side of this Notice. STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE VIRTUAL ANNUAL MEETING. The Securities and Exchange Commission rules permit us to make our proxy materials available to our stockholders via the Internet. Material for this Annual Meeting and future meetings may be requested by one of the following methods: By logging on to http://viewproxy.com/ShoreBancshares/2023. Have the 11 digit control number available when you access the website and follow the instructions. 877-777-2857 TOLL FREE By e-mail at requests@viewproxy.com * If requesting material by e-mail, please send a blank e-mail with the company name and your 11 digit control number (located below) in the subject line. No other requests, instructions or other inquiries should be included with your e-mail requesting material. You must use the 11 digit control number located in the box below. To the Stockholders of Shore Bancshares, Inc. The 2023 Annual Meeting of Stockholders of Shore Bancshares, Inc. will be held virtually on May 23, 2023 at 9:00 a.m. EDT. As a Registered Holder, you may vote your shares at the Annual Meeting of Stockholders by first registering at http://viewproxy.com/ShoreBancshares/2023/ htype.asp and then using your Virtual Control Number below. Your registration must be received by 11:59 PM EDT on May 20, 2023. On the day of the Annual Meeting of Stockholders, if you have properly registered, you will log in using the password you received via email in your registration confirmation and follow instructions to vote your shares. Please have your Virtual Control Number with you during the 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?” Voting Items 1. Election of Directors Nominees: David S. Jones Class II (term expires 2026) Clyde V. Kelly, III Class II (term expires 2026) David W. Moore Class II (term expires 2026) Dawn M. Willey Class II (term expires 2026) 2. Ratify the appointment of Yount, Hyde & Barbour P.C. as the independent registered public accounting firm for 2023. 3. Adopt a non-binding advisory resolution approving the compensation of the named executive officers. 4. Advisory vote on the frequency of the non-binding resolution to approve the compensation of the named executive officers. THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR EACH OF THE DIRECTOR NOMINEES AND FOR PROPOSALS 2 AND 3 AND “1 YEAR” ON PROPOSAL 4. VIRTUAL CONTROL NO. INTERNET TELEPHONE E-MAIL
SHORE BANCSHARES, INC. 18 E. Dover St. Easton, MD 21601 The following proxy materials are available for you to review at: http://viewproxy.com/ShoreBancshares/2023 • 2022 Annual Report to Stockholders • Notice and Proxy Statement ACCESSING YOUR PROXY MATERIALS ONLINE Have this notice available when you request a paper copy of the proxy materials or to vote your proxy electronically. You must reference your control number to vote by Internet or request a hard copy. You May Vote Your Proxy When You View The Material On The Internet. You Will Be Asked To Follow The Prompts To Vote Your Shares. 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. Internet and telephone voting is available through 11:59 P.M. Eastern Daylight Time on May 22, 2023. REQUESTING A PAPER COPY OF THE PROXY MATERIALS By telephone please call 1-877-777-2857 toll free or By logging onto http://viewproxy.com/ShoreBancshares/2023 or By email at: requests@viewproxy.com Please include the company name and your control number in the subject line.