Shore Bancshares (SHBI) risk factors, FY2024 10-K

Risks Relating to Our Business

1. 01Our business is adversely affected by unfavorable economic, market, and political conditions
2. 02affect businesses’ ability to raise capital and/or service their debts. Political and electoral changes, developments, conflicts, and conditions have in the past introduced, and may in the future introduce, additional uncertainty which may also affect our operating results
3. 03Interest rates and other economic conditions will impact our results of operations
4. 04Adverse developments affecting financial institutions or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity
5. 05A majority of our business is concentrated in Maryland, Delaware and Virginia, a significant amount of which is concentrated in real estate lending, so a decline in the local economy and real estate markets could adversely impact our financial condition and results of operations
6. 06Our concentrations of CRE loans could subject us to increased regulatory scrutiny and directives, which could force us to preserve or raise capital and/or limit our future commercial lending activities
7. 07The Bank may experience credit losses in excess of its allowances, which would adversely impact our financial condition and results of operations
8. 08Our investment securities portfolio is subject to credit risk, market risk and liquidity risk
9. 09The Bank is a member of the FHLB of Atlanta and our investments include stock issued by the FHLB of Atlanta. These investments could be subject to future impairment charges and there can be no guaranty of future dividends
10. 10Impairment of investment securities, goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which could result in a negative impact on our results of operations
11. 11Our future success will depend on our ability to compete effectively in the highly competitive financial services industry
12. 12Our funding sources may prove insufficient to replace deposits and support our future growth
13. 13Acquisitions may disrupt our business
14. 14The loss of key personnel could disrupt our operations and result in reduced earnings
15. 15Income from mortgage-banking operations is volatile and we may incur losses with respect to our mortgage-banking operations that could negatively affect our earnings
16. 16We provide banking services to customers who do business in the cannabis industry and the strict enforcement of federal laws regarding cannabis would likely result in our inability to continue to provide banking services to these customers and we could have legal action taken against us by the federal government

Risks Related to Our Operations, Cybersecurity and Technology

1. 17We depend on the accuracy and completeness of information about customers and counterparties and our financial condition could be adversely affected if we rely on misleading information
2. 18Our exposure to operational, technological and organizational risk may adversely affect us
3. 19Our information systems may experience an interruption or breach in security
4. 20Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, including Artificial Intelligence, and the use of the internet and telecommunications technologies to conduct financial transactions
5. 21Our reliance on third party vendors could expose us to additional cyber risk and liability
6. 22We outsource certain aspects of our data processing to certain third-party providers which may expose us to additional risk
7. 23We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations
8. 24Technological changes affect our business, and we may have fewer resources than many competitors to invest in technological improvements
9. 25Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business
10. 26We have previously identified material weaknesses in our internal controls, and cannot provide assurances that additional material weaknesses will not occur in the future

Risks Relating to the Regulation of our Industry

1. 27We operate in a highly regulated environment, which could restrain our growth and profitability
2. 28Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings
3. 29Our FDIC deposit insurance premiums and assessments may increase
4. 30We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
5. 31We are subject to evolving and extensive regulations and requirements. Our failure to adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business
6. 32We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statues and regulations

Risks Relating to the Company’s Securities

1. 33Our common stock is not insured by any governmental entity
2. 34Our ability to pay dividends is limited by law and contract
3. 35Our subordinated debentures contain restrictions on our ability to declare and pay dividends on or repurchase our common stock
4. 36Future sales of our common stock or other securities may dilute the value and adversely affect the market price of our common stock
5. 37Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies
6. 38We may issue debt and equity securities that are senior to the common stock as to distributions and in liquidation, which could negatively affect the value of the common stock