Shore Bancshares (SHBI) risk factors, FY2025 10-K

Shore Bancshares's FY2025 10-K, filed Mar 02, 2026, lists 54 risk factors in 7 groups. Against the prior year's 38: 27 new, 11 dropped, 20 substantially reworded.

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Risk factors listed
547 groups
New this year
27vs 38 last year
Dropped
11since the prior 10-K
Substantially reworded
20of those kept
Section length
12k wordsItem 1A

What the changes say

  • Shore Bancshares faces heavy geographic and real estate lending concentrations in Maryland, Delaware, and Virginia.
  • Commercial real estate loans total 2.64 billion dollars, representing 53.95 percent of the total portfolio.
  • Rising interest rates, inflation, and federal government spending cuts pose significant earnings risks.

What changed since the prior 10-K

New

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    The geographic concentration of our operations makes us susceptible to downturns in local economic conditions

    Reductions in federal government spending or workforce layoffs in the Washington D.C. area could hurt our local business customers and our regional economy.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Changes in interest rates may adversely affect our earnings and financial condition

    Shifts in market interest rates could cause our interest-bearing liabilities to re-price faster than our assets, reducing net interest income.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Inflation can have an adverse impact on our business and on our customers

    Elevated inflation increases our operating and labor costs while depressing loan demand and making it harder to retain deposits.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Insufficient liquidity could impair our ability to fund operations and jeopardize our financial condition, growth and prospects

    An inability to access adequate liquidity from core deposits or FHLB advances could impair our ability to fund operations and meet cash commitments.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Our allowance for credit losses may not be adequate to cover our actual credit losses; additions to the allowance for credit losses could adversely affect our financial condition and results of operations

    Our allowance for credit losses may prove inadequate if we fail to identify deteriorating credits or if economic conditions worsen.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses

    Ineffective risk management could lead to unexpected loan losses, particularly given our exposure to smaller businesses.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Our commercial real estate lending activities expose us to increased lending risks and related loan losses

    Commercial real estate loans totaled 2.64 billion dollars, or 53.95 percent of total loans, exposing us to higher default risks and office sector vacancy issues.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Imposition of limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings

    Commercial investor real estate loans at 342.55 percent of total risk-based capital exceed supervisory thresholds, risking regulatory restrictions if scrutiny increases.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Our concentration of residential mortgage loans exposes us to increased lending risks

    Residential real estate loans represent 33.60 percent of our total loan portfolio, exposing us to local market declines and collateral devaluation.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    An increase in nonperforming assets would adversely impact earnings

    An increase in nonperforming assets would reduce interest income, increase legal and carrying costs, and require higher credit loss reserves.

  • NewRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Appraisals may not accurately describe the value of our collateral

    Inaccurate real estate appraisals could result in inadequate collateral recovery and misstated financial statements upon loan default.

  • NewOperational Risks

    Any delays in our ability to foreclose on delinquent mortgage loans may increase our costs and expose us to greater losses

    Foreclosure delays can increase carrying costs and expose us to greater losses from declining collateral values.

  • NewOperational Risks

    Our risk management framework may not be effective in mitigating risks and/or losses to us

  • NewRisks Related to our Financial Statements

    We may incur impairment charges on our investment securities, which could adversely impact our results of operations, liquidity, financial condition, or growth prospects

  • NewRisks Related to our Financial Statements

    Changes in accounting standards or interpretation of new or existing standards may affect how we report our financial condition and results of operations

  • NewRisks Related to our Financial Statements

    The Current Expected Credit Loss (“CECL”) accounting standard could require us to increase our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations

  • NewRisks Related to our Financial Statements

    Our accounting estimates and risk management processes rely on analytical and forecasting models

  • NewRisks Related to our Financial Statements

    We have previously identified material weaknesses in our internal controls

  • NewRisks Related to our Financial Statements

    Operational risks, including system failures, human error, and third-party dependencies could adversely affect our business

  • NewRisks Related to Cybersecurity and Technology

    Failure to comply with privacy and information security laws could expose us to liability

  • NewRisks Related to Cybersecurity and Technology

    We are at risk of increased losses from fraud

  • NewRisks Related to Cybersecurity and Technology

    Failure to keep up with technological change in the financial services industry could have a material adverse effect on our competitive position or profitability

  • NewRisks Relating to the Regulation of our Industry

    able to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations

  • NewRisks Relating to Our Securities

    The market price for our stock may be volatile

  • NewRisks Relating to Our Securities

    Climate change could have a material adverse impact on us and our clients

  • NewRisks Relating to Our Securities

    Negative public opinion regarding us or failure to maintain our reputation in the communities we serve could adversely affect our business and prevent us from growing our business

  • NewRisks Relating to Our Securities

    Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may negatively impact our financial performance

Dropped

  • DroppedRisks Relating to Our Business

    affect 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

  • DroppedRisks Relating to Our Business

    Interest rates and other economic conditions will impact our results of operations

    Political developments and global uncertainty

  • DroppedRisks Relating to Our Business

    Adverse 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

    General economic conditions and FHLB advances

  • DroppedRisks Relating to Our Business

    A 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

    Banking industry liquidity events and rumors

  • DroppedRisks Relating to Our Business

    Our 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

    Federal government workforce reduction plans under the Trump administration

  • DroppedRisks Relating to Our Business

    The Bank may experience credit losses in excess of its allowances, which would adversely impact our financial condition and results of operations

    Commercial real estate concentration guidance from FRB and FDIC

  • DroppedRisks Relating to Our Business

    The 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

    Credit losses exceeding allowance based on historical experience

  • DroppedRisks Related to Our Operations, Cybersecurity and Technology

    Our exposure to operational, technological and organizational risk may adversely affect us

  • DroppedRisks Related to Our Operations, Cybersecurity and Technology

    Technological changes affect our business, and we may have fewer resources than many competitors to invest in technological improvements

    FHLB of Atlanta stock investments and market values

  • DroppedRisks Related to Our Operations, Cybersecurity and Technology

    We have previously identified material weaknesses in our internal controls, and cannot provide assurances that additional material weaknesses will not occur in the future

  • DroppedRisks Relating to the Regulation of our Industry

    We 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

Reworded

  • 100% rewrittenRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Our investment securities portfolio is subject to credit risk, market risk, and liquidity risk

    Removed detailed accounting definitions for AFS and HTM securities, focusing instead on fair value risks, credit ratings, defaults, and unobservable inputs.

  • 100% rewrittenStrategic and Other Risks

    The loss of key personnel could disrupt our business

    Expanded key personnel risk to emphasize management team skills, executive retention difficulties, and the specific difficulty of replicating leadership knowledge.

    Was: The loss of key personnel could disrupt our operations and result in reduced earnings

  • 99% rewrittenRisks Relating to the Regulation of our Industry

    We operate in a highly regulated environment, which could restrain our growth and profitability

    Removed references to the Biden and Trump administration transitions and refocused on core statutory restrictions and OCC and Federal Reserve supervision.

  • 83% rewrittenRisks Relating to the Regulation of our Industry

    Our FDIC deposit insurance assessments may increase

    Streamlined FDIC deposit insurance assessment explanations to focus on deposit insurance fund funding and risk profile changes.

    Was: Our FDIC deposit insurance premiums and assessments may increase

  • 78% rewrittenOperational Risks

    The strict enforcement of federal laws regarding cannabis could result in our inability to continue to provide banking services to marijuana-related businesses and expose us to legal action by the federal government

    Removed a reference to a pre-2018 U.S. Supreme Court ruling regarding cannabis banking authority.

    Was: We 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

  • 77% rewrittenRisks Relating to the Regulation of our Industry

    Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings

    Added asset sensitivity and risk management to the list of specific examination topics evaluated by the Federal Reserve and OCC.

  • 76% rewrittenRisks Relating to the Regulation of our Industry

    We 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

    Replaced references to DOJ enforcement and private class action litigation with a focus on OCC CRA performance assessments and consumer protection rules.

  • 75% rewrittenRisks Related to the Economy, Financial Markets, Interest Rates and Liquidity

    Our business may be adversely affected by unfavorable economic, market, and political conditions

    Removed specific mentions of debt market credit availability and tightened wording on global economic and trade policy impacts.

    Was: Our business is adversely affected by unfavorable economic, market, and political conditions

  • 72% rewrittenOperational Risks

    Income from mortgage-banking operations is volatile and we may incur losses with respect to our mortgage-banking operations that could negatively affect our earnings

  • 69% rewrittenRisks Relating to Our Securities

    Our ability to pay dividends is limited by law and contract

  • 65% rewrittenStrategic and Other Risks

    Our future success will depend on our ability to compete effectively in the highly competitive financial services industry

  • 65% rewrittenRisks Related to Cybersecurity and Technology

    Cybersecurity 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

  • 57% rewrittenRisks Related to Cybersecurity and Technology

    Our reliance on third party vendors could expose us to additional cyber risk and liability

  • 52% rewrittenRisks Related to our Financial Statements

    Impairment goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which would adversely impact on our results of operations

    Was: Impairment 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

  • 42% rewrittenRisks Relating to the Regulation of our Industry

    We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statues and regulations

  • 33% rewrittenRisks Relating to Our Securities

    Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business

    Was: Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business

  • 28% rewrittenRisks Relating to Our Securities

    Our subordinated debt instruments contain restrictions on our ability to declare and pay dividends on or repurchase our common stock

    Was: Our subordinated debentures contain restrictions on our ability to declare and pay dividends on or repurchase our common stock

  • 26% rewrittenRisks Relating to Our Securities

    Future sales of our common stock or other securities may dilute the value and adversely affect the market price of our common stock

  • 26% rewrittenRisks Related to Cybersecurity and Technology

    Our information systems may experience an interruption or breach in security

  • 24% rewrittenStrategic and Other Risks

    Acquisitions could disrupt our business

    Was: Acquisitions may disrupt our business

All 54 risk factors

Headings as the filing states them, in filing order.

Risks Related to the Economy, Financial Markets, Interest Rates and Liquidity

  1. 01The geographic concentration of our operations makes us susceptible to downturns in local economic conditionsNew
  2. 02Changes in interest rates may adversely affect our earnings and financial conditionNew
  3. 03Inflation can have an adverse impact on our business and on our customersNew
  4. 04Insufficient liquidity could impair our ability to fund operations and jeopardize our financial condition, growth and prospectsNew
  5. 05Our business may be adversely affected by unfavorable economic, market, and political conditions75% rewritten
  6. 06Our investment securities portfolio is subject to credit risk, market risk, and liquidity risk100% rewritten
  7. 07Our allowance for credit losses may not be adequate to cover our actual credit losses; additions to the allowance for credit losses could adversely affect our financial condition and results of operationsNew
  8. 08We may not be able to adequately measure and limit our credit risk, which could lead to unexpected lossesNew
  9. 09Our commercial real estate lending activities expose us to increased lending risks and related loan lossesNew
  10. 10Imposition of limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earningsNew
  11. 11Our concentration of residential mortgage loans exposes us to increased lending risksNew
  12. 12An increase in nonperforming assets would adversely impact earningsNew
  13. 13Appraisals may not accurately describe the value of our collateralNew

Strategic and Other Risks

  1. 14Our future success will depend on our ability to compete effectively in the highly competitive financial services industry65% rewritten
  2. 15The loss of key personnel could disrupt our business100% rewritten
  3. 16Acquisitions could disrupt our business24% rewritten

Operational Risks

  1. 17Our funding sources may prove insufficient to replace deposits and support our future growth
  2. 18Income from mortgage-banking operations is volatile and we may incur losses with respect to our mortgage-banking operations that could negatively affect our earnings72% rewritten
  3. 19Any delays in our ability to foreclose on delinquent mortgage loans may increase our costs and expose us to greater lossesNew
  4. 20The strict enforcement of federal laws regarding cannabis could result in our inability to continue to provide banking services to marijuana-related businesses and expose us to legal action by the federal government78% rewritten
  5. 21Our risk management framework may not be effective in mitigating risks and/or losses to usNew

Risks Related to our Financial Statements

  1. 22We may incur impairment charges on our investment securities, which could adversely impact our results of operations, liquidity, financial condition, or growth prospectsNew
  2. 23Impairment goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which would adversely impact on our results of operations52% rewritten
  3. 24Changes in accounting standards or interpretation of new or existing standards may affect how we report our financial condition and results of operationsNew
  4. 25The Current Expected Credit Loss (“CECL”) accounting standard could require us to increase our allowance for credit losses and may have a material adverse effect on our financial condition and results of operationsNew
  5. 26Our accounting estimates and risk management processes rely on analytical and forecasting modelsNew
  6. 27We have previously identified material weaknesses in our internal controlsNew
  7. 28We depend on the accuracy and completeness of information about customers and counterparties and our financial condition could be adversely affected if we rely on inaccurate information
  8. 29Operational risks, including system failures, human error, and third-party dependencies could adversely affect our businessNew

Risks Related to Cybersecurity and Technology

  1. 30Our information systems may experience an interruption or breach in security26% rewritten
  2. 31Cybersecurity 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 transactions65% rewritten
  3. 32Failure to comply with privacy and information security laws could expose us to liabilityNew
  4. 33Our reliance on third party vendors could expose us to additional cyber risk and liability57% rewritten
  5. 34We outsource certain aspects of our data processing to certain third-party providers, which may expose us to additional risk
  6. 35We 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
  7. 36We are at risk of increased losses from fraudNew
  8. 37Failure to keep up with technological change in the financial services industry could have a material adverse effect on our competitive position or profitabilityNew

Risks Relating to the Regulation of our Industry

  1. 38We operate in a highly regulated environment, which could restrain our growth and profitability99% rewritten
  2. 39Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings77% rewritten
  3. 40Our FDIC deposit insurance assessments may increase83% rewritten
  4. 41We 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 sanctions76% rewritten
  5. 42able to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operationsNew
  6. 43We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statues and regulations42% rewritten

Risks Relating to Our Securities

  1. 44Our common stock is not insured by any governmental entity
  2. 45Our ability to pay dividends is limited by law and contract69% rewritten
  3. 46Our subordinated debt instruments contain restrictions on our ability to declare and pay dividends on or repurchase our common stock28% rewritten
  4. 47Future sales of our common stock or other securities may dilute the value and adversely affect the market price of our common stock26% rewritten
  5. 48Provisions 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. 49We 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
  7. 50The market price for our stock may be volatileNew
  8. 51Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business33% rewritten
  9. 52Climate change could have a material adverse impact on us and our clientsNew
  10. 53Negative public opinion regarding us or failure to maintain our reputation in the communities we serve could adversely affect our business and prevent us from growing our businessNew
  11. 54Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may negatively impact our financial performanceNew

Other Shore Bancshares 10-Ks

  • FY2024 10-K risk factors
    38 risks

    Shore Bancshares faces heightened risks from regional real estate lending concentration in Maryland, Delaware, and Virginia. The bank provides banking services to state-licensed cannabis businesses despite federal illegality. Prior material weaknesses in internal controls and cybersecurity threats from new technologies and AI pose significant operational challenges.

    Filed Mar 10, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.