Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 7 - Stock-Based Compensation

As of March 31, 2016, the Company maintained the Shore Bancshares, Inc. 2006 Stock and Incentive Compensation Plan (“2006 Equity Plan”) under which it may issue shares of common stock or grant other equity-based awards. Stock-based awards granted to date generally are time-based, vest in equal installments on each anniversary of the grant date over a three- to five-year period of time, and, in the case of stock options, expire 7 years from the grant date. On July 1, 2015, the Company's board of directors (the "Board") also adopted a form of performance share/restricted stock unit award agreement that will be used to grant performance equity incentive awards pursuant to and subject to the provisions of the 2006 Equity Plan. Stock-based compensation expense is recognized ratably over the requisite service period for all awards, is based on the grant-date fair value and reflects forfeitures as they occur.

The following tables provide information on stock-based compensation expense for the three months ended March 31, 2016 and 2015.

	For the Three Months Ended
	March 31,
(Dollars in thousands)	2016		2015
Stock-based compensation expense	$	111	$	136
Proceeds from issuance of common stock		3		-

	March 31,
(Dollars in thousands)	2016		2015
Unrecognized stock-based compensation expense	$	70	$	102
Weighted average period unrecognized expense is expected to be recognized		0.6 years		0.8 years

The following table summarizes restricted stock award activity for the Company under the 2006 Equity Plan for the three months ended March 31, 2016 and 2015.

	Number		Weighted Average Grant
	of Shares		Date Fair Value
March 31, 2016
Nonvested at beginning of period		12,488	$	8.74
Granted		8,524		11.16
Vested		(13,467)		9.49
Cancelled		-		-
Nonvested at end of period		7,545	$	10.16

	Number		Weighted Average Grant
	of Shares		Date Fair Value
March 31, 2015
Nonvested at beginning of period		14,251	$	8.33
Granted		6,763		9.18
Vested		(8,680)		8.55
Cancelled		-		-
Nonvested at end of period		12,334	$	8.22

The fair value of restricted stock awards that vested during the first three months of 2016 and 2015 was $128 thousand and $74 thousand, respectively.

The following table summarizes stock option activity for the Company under the 2006 Equity Plan for the three months ended March 31, 2016 and 2015.

			Weighted
	Number		Average
	of Shares		Exercise Price
March 31, 2016
Outstanding at beginning of period		61,327	$	8.05
Granted		12,443		11.12
Exercised		(450)		6.64
Expired/Cancelled		-		-
Outstanding at end of period		73,320	$	8.58

Exercisable at end of period		67,099	$	8.35

			Weighted
	Number		Average
	of Shares		Exercise Price
March 31, 2015
Outstanding at beginning of period		27,108	$	6.64
Granted		34,219		3.44
Exercised		-		-
Expired/Cancelled		-		-
Outstanding at end of period		61,327	$	4.85

Exercisable at end of period		27,108	$	6.64

The weighted average fair value of stock options granted during 2016 was $5.03. The Company estimates the fair value of options using the Black-Scholes valuation model with weighted average assumptions for dividend yield, expected volatility, risk-free interest rate and expected lives (in years). The expected dividend yield is calculated by dividing the total expected annual dividend payout by the average stock price. The expected volatility is based on historical volatility of the underlying securities. The risk-free interest rate is based on the Federal Reserve Bank’s constant maturities daily interest rate in effect at grant date. The expected contract life of the options represents the period of time that the Company expects the awards to be outstanding based on historical experience with similar awards. The following weighted average assumptions were used as inputs to the Black-Scholes valuation model for options granted in 2016.

Dividend yield	0.73	%
Expected volatility	38.60	%
Risk-free interest rate	1.75	%
Expected contract life (in years)	10 years

At the end of the first quarter of 2016, the aggregate intrinsic value of the options outstanding under the 2006 Equity Plan was $249 thousand based on the $11.98 market value per share of the Company’s common stock at March 31, 2016. Similarly, the aggregate intrinsic value of the options exercisable was $243 thousand at March 31, 2016. The intrinsic value on options exercised in 2016 was $2 thousand based on the $11.35 market value per share of the Company’s common stock at February 8, 2016. Since there were no options exercised during the first three months of 2015, there was no intrinsic value associated with stock options exercised and no cash received on exercise of options. At March 31, 2016, the weighted average remaining contract life of options outstanding was 5.9 years.