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Cover Page - shares | 9 Months Ended |
--- | --- | ---
Sep. 30, 2023 | Nov. 13, 2023
Cover [Abstract] |  |
Document Type | 10-Q/A |
Document Quarterly Report | true |
Document Period End Date | Sep. 30, 2023 |
Document Transition Report | false |
Entity File Number | 0-22345 |
Entity Registrant Name | SHORE BANCSHARES, INC. |
Entity Incorporation, State or Country Code | MD |
Entity Tax Identification Number | 52-1974638 |
Entity Address, Address Line One | 18 E. Dover Street |
Entity Address, City or Town | Easton |
Entity Address, State or Province | MD |
Entity Address, Postal Zip Code | 21601 |
City Area Code | 410 |
Local Phone Number | 763-7800 |
Title of 12(b) Security | Common Stock |
Trading Symbol | SHBI |
Security Exchange Name | NASDAQ |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding |  | 33,145,695
Amendment Description | EXPLANATORY NOTEShore Bancshares, Inc. (the “Company” or “SHBI”) is filing this Amendment No. 1 on Form 10-Q/A (this “Amended Quarterly Report” or “Form 10-Q/A”) to its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023, filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2023 (the “Original Quarterly Report”), to: (a) amend and restate its financial statements and related disclosures as of and for the three and nine months ended September 30, 2023 and (b) restate management’s conclusions regarding the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2023. Restatement Background As previously announced in the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2023, on December 13, 2023, the Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of the Company, in consultation with management and the Company’s independent registered public accounting firm, Yount, Hyde & Barbour, P.C. (“YHB”), concluded that the Company’s unaudited financial statements for the three and nine months ended September 30, 2023 (the “Unaudited Financial Statements”) included in the Original Quarterly Report contained an error related to the improper recording of the net deferred tax assets attributable to the Company’s acquisition of The Community Financial Corporation (“TCFC”). On July 1, 2023, the Company consummated the acquisition of TCFC (the “Merger”). The Merger required several valuation adjustments on the Company’s general ledger to properly account for the Merger in accordance with U.S. GAAP. The valuation adjustments on the acquired assets and liabilities resulted in the need for both deferred tax assets and liabilities to be created and ultimately a bargain purchase gain. The bargain purchase gain of $12.2 million was reported in the Original Quarterly Report, as other income for the three- and nine- month period ended September 30, 2023. The Company determined that the error in the Company’s Unaudited Financial Statements was due to improper recording of net deferred tax assets attributable to the Merger. This error resulted in an overstatement of $3.4 million of the reported bargain purchase gain for the three and nine months ended September 30, 2023, and the balance of deferred tax assets initially recorded in the Merger. The error did not have a material impact on the reported income tax provisions for either the three- or nine-month periods ended September 30, 2023, as the bargain purchase gain was treated as a non-taxable item. This error did have corresponding effects on the Consolidated Balance Sheets, Consolidated Statements of Income/(Loss), Consolidated Statements of Comprehensive Income/(Loss), Consolidated Statements of Changes in Stockholders’ Equity, and the Consolidated Statements of Cash Flows as of and for the three and nine months ended September 30, 2023, included in the Original Quarterly Report. The Audit Committee determined that the Unaudited Financial Statements included in the Original Quarterly Report needed to be restated and should no longer be relied upon. Similarly, any previously furnished or filed reports, related earnings releases or similar communications of the Company describing those Unaudited Financial Statements and other information related to the three and nine months ended September 30, 2023, should no longer be relied upon. For additional information about this restatement, please refer to Note 1A. Restatement of Previously Issued Financial Statements of the Notes to the consolidated financial statements included in Part I, Item 1 of this Amended Quarterly Report. Internal Control Considerations In connection with the Company’s evaluation of the restatement of the Unaudited Financial Statements, management of the Company has concluded that a material weakness in the Company’s internal control over financial reporting existed as of September 30, 2023. Specifically, the Company did not maintain effective controls over the recording of the net deferred tax assets attributable to the Merger and failed to detect the misstatement due to the non-performance of a quarterly book to tax reconciliation. Accordingly, the Company’s management has determined that the Company’s disclosure controls and procedures were not effective as of September 30, 2023. See additional discussion included in Part I, Item 4 of this Amended Quarterly Report.Items AmendedFor the convenience of the reader, this Amended Quarterly Report sets forth the complete form of the Original Quarterly Report, as modified where necessary to reflect the restatement and revisions. The following items have been amended in this Amended Quarterly Report:•Part I ─ Item 1. Financial Statements•Part I ─ Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations•Part I ─ Item 4. Controls and Procedures•Part II ─ Item 1A. Risk Factors•Part II ─ Item 6. ExhibitsIn accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is including with this Amended Quarterly Report newly dated certifications of the Company’s principal executive officer and principal financial officer.The risk factors included in Part II – Item 1A, “Risk Factors” herein have been amended to add a new risk factor regarding the material weakness in the Company’s internal control over financial reporting.Except as described above, this Amended Quarterly Report does not amend, update or change any other items or disclosures in the Original Quarterly Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Amended Quarterly Report speaks only as of the date of the Original Quarterly Report was filed, and the Company has not undertaken herein to amend, supplement or update any information contained in the Original Quarterly Report to give effect to any subsequent events. Accordingly, this Amended Quarterly Report should be read in conjunction with the Company’s filings made with the SEC subsequent to the filing of the Original Quarterly Report, including any amendment to those filings. |
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