As filed with the Securities and Exchange Commission on May 4, 2023

Registration No. 333-271273​

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1
TO

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

SHORE BANCSHARES, INC.

(Exact name of Registrant as specified in its articles)

(Address, including zip code and telephone number, including area code, of Registrant’s principal executive offices)

Lloyd L. Beatty, Jr.
President and Chief Executive Officer
Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601
(410) 763-7800

(Name, address, including zip code, and telephone number, including area code, of agent for service)​

with a copy to:

Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this Registration Statement, satisfaction or waiver of the other conditions to closing of the merger described herein, and consummation of the merger.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) ☐

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this joint proxy statement/prospectus is not complete and may be changed. Shore Bancshares, Inc. may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS SUBJECT TO COMPLETION,
DATED MAY 4, 2023

To the Shareholders of Shore Bancshares, Inc. and
the Shareholders of The Community Financial Corporation

MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT

On behalf of the board of directors of Shore Bancshares, Inc. (“SHBI”) and The Community Financial Corporation (“TCFC”), we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the proposed combination of SHBI and TCFC. We are requesting that you take certain actions as a holder of SHBI common stock (a “SHBI shareholder”) or as a holder of TCFC common stock (a “TCFC shareholder”).

On December 14, 2022, SHBI and TCFC entered into an agreement and plan of merger (as amended or modified from time to time in accordance with its terms, the “merger agreement”) pursuant to which SHBI and TCFC have agreed to combine their respective businesses in two mergers. The transaction will create a bank holding company with approximately $6.0 billion in total assets and a market capitalization of approximately $650 million, operating more than 40 branches through locations spanning Maryland, Virginia and Delaware.

Under the merger agreement, TCFC will be merged with and into SHBI (the “merger”), with SHBI as the surviving entity (the “combined company”). Promptly following the merger, TCFC’s wholly-owned bank subsidiary, Community Bank of the Chesapeake, will be merged with and into Shore United Bank, N.A., the wholly-owned bank subsidiary of SHBI (“Shore United Bank”), with Shore United Bank as the surviving bank.

In the merger, TCFC shareholders will receive 2.3287 shares of SHBI common stock for each share of TCFC common stock (the “exchange ratio”) they own. Based on the closing price of SHBI’s common stock on the NASDAQ Global Select Market (“NASDAQ”) on December 13, 2022, the last trading day before the public announcement of the merger, the exchange ratio represented approximately $44.71 in value for each share of TCFC common stock, representing merger consideration of approximately $254.4 million on an aggregate basis. Based on the closing price of SHBI common stock on the NASDAQ on May 2, 2023, the last practicable trading day before the date of the accompanying joint proxy statement/prospectus, of $11.69, the exchange ratio represented approximately $27.22 in value for each share of TCFC common stock.

SHBI shareholders will continue to own their existing shares of SHBI common stock following the merger.

The value of SHBI common stock at the time of completion of the merger could be greater than, less than or the same as the value of SHBI common stock on the date of the accompanying joint proxy statement/​prospectus. We urge you to obtain current market quotations of SHBI common stock (NASDAQ trading symbol “SHBI”) and TCFC common stock (NASDAQ trading symbol “TCFC”).

We expect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. Accordingly, TCFC shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of shares of TCFC common stock for SHBI common stock in the merger, except with respect to any cash received by TCFC shareholders in lieu of fractional shares of SHBI common stock.

Based on the number of shares of TCFC common stock outstanding as of May 2, 2023, SHBI expects to issue 13,296,910 shares of SHBI common stock to TCFC shareholders in the aggregate in the merger. We estimate that former TCFC shareholders will own approximately 40% and existing SHBI shareholders will own approximately 60% of the common stock of the combined company following the completion of the merger.

SHBI and TCFC will each hold a virtual special meeting of our respective shareholders in connection with the merger. At our respective special meetings, in addition to other business, SHBI will ask its shareholders to approve the merger and issuance of shares of SHBI common stock to TCFC shareholders pursuant to the merger agreement and TCFC will ask its shareholders to approve the merger agreement and a proposal approving the merger-related compensation of the named executive officers of TCFC on a non-binding, advisory basis. Information about these meetings and the merger is contained in this document. We urge you to read this document carefully and in its entirety.

The special meeting of SHBI shareholders will be held virtually via live audio webcast at 9:00 a.m., Eastern Time, on Tuesday, June 20, 2023. The special meeting of TCFC shareholders will be held virtually via live audio webcast at 10:00 a.m., Eastern Time, on Tuesday, June 20, 2023.

Each of our boards of directors unanimously recommends that holders of common stock vote “FOR” each of the proposals to be considered at the respective special meetings. We strongly support this combination of our companies and join our boards of directors in their recommendations.

The accompanying joint proxy statement/prospectus provides you with detailed information about the merger agreement and the merger. It also contains or references information about SHBI and TCFC and certain related matters. You are encouraged to read the accompanying joint proxy statement/prospectus carefully. In particular, you should read the section entitled “Risk Factors” beginning on page 27 for a discussion of the risks you should consider in evaluating the proposed merger and how it will affect you. You can also obtain information about SHBI and TCFC from documents that have been filed with the Securities and Exchange Commission that are incorporated into the accompanying joint proxy statement/prospectus by reference.

On behalf of SHBI and TCFC, thank you for your prompt attention to this important matter.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the shares of SHBI common stock to be issued in the merger or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The securities to be issued in connection with the merger are not savings accounts, deposits or other obligations of any bank or savings association and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

This joint proxy statement/prospectus is dated May 8, 2023 and is being first mailed to shareholders of SHBI and TCFC on or about May 12, 2023.

 

ADDITIONAL INFORMATION

Both SHBI and TCFC file annual, quarterly and special reports, proxy statements and other business and financial information electronically with the Securities and Exchange Commission (the “SEC”). In addition, this joint proxy statement/prospectus incorporates important business and financial information about SHBI and TCFC from documents filed with the SEC that are not included in or delivered with this joint proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in this document through the SEC website at http://www.sec.gov or by requesting them in writing or by telephone at the appropriate address below:

If you are a SHBI shareholder, you may contact SHBI or SHBI’s proxy solicitor at the following addresses or telephone numbers listed below:

If you are a TCFC shareholder, you may contact TCFC or TCFC’s proxy solicitor at the following addresses or telephone numbers listed below:

You will not be charged for any of these documents that you request. To obtain timely delivery of these documents, you must request them no later than five (5) business days before the date of the applicable special meeting. This means that holders of SHBI common stock requesting documents must do so by June 12, 2023 in order to receive them before the SHBI special meeting, and holders of TCFC common stock requesting documents must do so by June 12, 2023, in order to receive them before the TCFC special meeting.

You should only rely on the information contained or incorporated by reference into this document. We have not authorized anyone to provide shareholders of SHBI and TCFC with different information. The document is dated May 8, 2023. Shareholders of SHBI and TCFC should not assume that information contained in this document is accurate as of any date other than that date. Neither the mailing of this document to SHBI or TCFC shareholders nor the issuance by SHBI of SHBI common stock in connection with the transactions contemplated by the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy any securities, or the solicitation of a consent, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in, or incorporated by reference into, this joint proxy statement/prospectus regarding SHBI has been provided by SHBI and information contained in, or incorporated by reference into, this joint proxy statement/prospectus regarding TCFC has been provided by TCFC.

See the section entitled “Where You Can Find More Information” beginning on page 154 of the accompanying joint proxy statement/prospectus for further information.

 

 

Shore Bancshares, Inc.
18 E. Dover Street
Easton, Maryland 21601

NOTICE OF VIRTUAL SPECIAL MEETING OF SHAREHOLDERS
To Be Held on June 20, 2023

To the shareholders of Shore Bancshares, Inc.:

On December 14, 2022, Shore Bancshares, Inc. (“SHBI”) and The Community Financial Corporation (“TCFC”) entered into an agreement and plan of merger (as amended or modified from time to time in accordance with its terms, the “merger agreement”), pursuant to which TCFC will merge with and into SHBI (the “merger”), with SHBI as the surviving entity. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus of which this notice is a part.

NOTICE IS HEREBY GIVEN that we will hold a special meeting of shareholders of SHBI to be held virtually (the “SHBI special meeting”), solely by means of remote communication, at 9:00 a.m., Eastern Time, on Tuesday, June 20, 2023. The SHBI special meeting is being held for the following purposes:

1.

Approval of the Merger and Issuance of Shares of SHBI Common Stock.   To consider and vote upon a proposal to approve the merger and issuance of shares of SHBI common stock to the shareholders of TCFC, pursuant to the merger agreement (the “SHBI merger and share issuance proposal”); and

​

2.

Adjournment.   To consider and vote upon a proposal to adjourn the SHBI special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the SHBI special meeting to approve the SHBI merger and share issuance proposal (the “SHBI adjournment proposal”).

​

No other business may be conducted at the SHBI special meeting.

You will be able to attend the SHBI special meeting by first registering at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp no later than 11:59 p.m., Eastern Time, on Saturday, June 17, 2023. After registering, you will receive a meeting invitation and password via e-mail with your unique link to join the SHBI special meeting. Holders of SHBI common stock will be able to listen, vote and submit questions during the SHBI special meeting.

We have fixed the close of business on Tuesday, May 2, 2023 as the record date for the determination of shareholders entitled to notice of and to vote at the SHBI special meeting. Only holders of SHBI common stock of record at the close of business on that date will be entitled to notice of and to vote at the SHBI special meeting or any adjournment or postponement of the SHBI special meeting.

The SHBI board of directors unanimously recommends that shareholders vote “FOR” the SHBI merger and share issuance proposal and “FOR” the SHBI adjournment proposal.

If you have any questions concerning the merger, would like additional copies of the joint proxy statement/​prospectus or need help voting your shares of SHBI common stock, please contact our proxy solicitor, Alliance Advisors, by calling toll-free at (855) 742-8276, or via e-mail to SHBI@allianceadvisors.com.

Your vote is very important.   The merger cannot be completed unless the holders of at least a majority of the outstanding shares of SHBI common stock entitled to vote at the SHBI special meeting vote in favor of the SHBI merger and share issuance proposal. Whether or not you plan to attend the SHBI special

 

 

meeting, please promptly complete, sign, date and return your proxy card in the enclosed envelope or vote via the Internet or by telephone pursuant to the instructions provided on the enclosed proxy card.

By Order of the Board of Directors

Lloyd L. “Scott” Beatty, Jr.
President and Chief Executive Officer

Easton, Maryland
May 8, 2023

 

 

The Community Financial Corporation
3035 Leonardtown Road
Waldorf, Maryland 20601

NOTICE OF VIRTUAL SPECIAL MEETING OF SHAREHOLDERS
To Be Held on June 20, 2023

To the shareholders of The Community Financial Corporation:

On December 14, 2022, Shore Bancshares, Inc. (“SHBI”) and The Community Financial Corporation (“TCFC”), entered into an agreement and plan of merger (as amended or modified from time to time in accordance with its terms, the “merger agreement”), pursuant to which TCFC will merge with and into SHBI (the “merger”), with SHBI as the surviving entity. A copy of the merger agreement is attached as Appendix A to the accompanying joint proxy statement/prospectus of which this notice is a part.

NOTICE IS HEREBY GIVEN that we will hold a special meeting of shareholders of TCFC to be held virtually (the “TCFC special meeting”), solely by means of remote communication, at 10:00 a.m., Eastern Time, on Tuesday, June 20, 2023. You will be able to attend the TCFC special meeting by visiting www.virtualshareholdermeeting.com/TCFC2023SM. The TCFC special meeting is being held for the following purposes:

1.

Approval of the Merger Agreement and Merger.   To consider and vote upon a proposal to approve the merger agreement and the merger (the “TCFC merger proposal”);

​

2.

Compensation Proposal.   To consider and vote upon an advisory, non-binding proposal to approve the compensation payable to the named executive officers of TCFC in connection with the merger (the “TCFC compensation proposal”); and

​

3.

Adjournment.   To consider and vote upon a proposal to adjourn the TCFC special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the TCFC special meeting to approve the TCFC merger proposal (the “TCFC adjournment proposal”).

​

No other business may be conducted at the TCFC special meeting.

We have fixed the close of business on Tuesday, May 2, 2023 as the record date for the determination of shareholders entitled to notice of and to vote at the TCFC special meeting. Only holders of TCFC common stock of record at the close of business on that date will be entitled to notice of and to vote at the TCFC special meeting or any adjournment or postponement of the TCFC special meeting.

The TCFC board of directors unanimously recommends that shareholders vote “FOR” the TCFC merger proposal, “FOR” the TCFC compensation proposal and “FOR” the TCFC adjournment proposal.

If you have any questions concerning the merger, would like additional copies of the joint proxy statement/​prospectus or need help voting your shares of TCFC common stock, please contact our proxy solicitor, Alliance Advisors, by calling toll-free at (866) 584-0578, or via e-mail to TCFC@allianceadvisors.com.

 

 

Your vote is very important.   The merger cannot be completed unless the holders of at least two-thirds of the outstanding shares of TCFC common stock entitled to vote at the TCFC special meeting vote in favor of the TCFC merger proposal. Whether or not you plan to attend the TCFC special meeting, please promptly complete, sign, date and return your proxy card in the enclosed envelope or vote via the Internet or by telephone pursuant to the instructions provided on the enclosed proxy card.

By Order of the Board of Directors

James M. Burke
President and Chief Executive Officer

Waldorf, Maryland
May 8, 2023

 

 

TABLE OF CONTENTS

 

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QUESTIONS AND ANSWERS

The following are answers to certain questions that you may have regarding the merger, the SHBI special meeting and the TCFC special meeting. SHBI and TCFC advise you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not provide all of the information that might be important to you with respect to the merger, the SHBI special meeting and the TCFC special meeting. Additional important information is also contained in the Appendices to, and the documents incorporated by reference in, this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 154 of this joint proxy statement/prospectus for further information.

Q:

Why am I receiving this joint proxy statement/prospectus?

​

A:

You are receiving this joint proxy statement/prospectus because Shore Bancshares, Inc. (“SHBI”) and The Community Financial Corporation (“TCFC”) have entered into an agreement and plan of merger (as may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”), pursuant to which SHBI would acquire TCFC. If the required shareholder approvals are obtained and the merger is subsequently completed, TCFC will be merged with and into SHBI (the “merger”), with SHBI as the surviving entity (the “combined company”). Promptly thereafter, TCFC’s wholly-owned savings bank subsidiary, Community Bank of the Chesapeake, will be merged with and into Shore United Bank N.A. (the “bank merger”), the wholly-owned bank subsidiary of SHBI (“Shore United Bank”), with Shore United Bank as the surviving bank (the “combined bank”).

​

In order to complete the merger, among other things:

•

Holders of SHBI common stock (“SHBI shareholders”) must approve the merger and issuance of shares of SHBI common stock, par value $0.01 per share (“SHBI common stock”), to the shareholders of TCFC (“TCFC shareholders”), pursuant to the merger agreement (the “SHBI merger and share issuance proposal”); and

​

•

TCFC shareholders must approve the merger agreement and the merger (the “TCFC merger proposal”).

​

SHBI is holding a virtual special meeting of SHBI shareholders (the “SHBI special meeting”) to obtain approval of the SHBI merger and share issuance proposal.

In addition, SHBI shareholders will be asked to approve a proposal to adjourn the SHBI special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the SHBI special meeting to approve the SHBI merger and share issuance proposal (the “SHBI adjournment proposal”).

TCFC is holding a virtual special meeting of TCFC shareholders (the “TCFC special meeting”) to obtain approval of the TCFC merger proposal.

In addition, TCFC shareholders will be asked to approve, on an advisory, non-binding basis the compensation payable to the named executive officers of TCFC in connection with the merger (the “TCFC compensation proposal”) and to approve a proposal to adjourn the TCFC special meeting to a later date or dates, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the TCFC special meeting to approve the TCFC merger proposal (the “TCFC adjournment proposal”).

This document is also a prospectus that is being delivered to TCFC shareholders because, pursuant to the merger agreement, SHBI is offering shares of SHBI common stock to the TCFC shareholders.

We have included in this joint proxy statement/prospectus important information about the merger, the merger agreement, a copy of which is included as Appendix A to this joint proxy statement/​prospectus, the SHBI proxy solicitation and the TCFC proxy solicitation. You should read this information carefully and in its entirety. Your vote is important and we encourage you to submit your proxy as soon as possible.

 

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Q:

What will happen in the merger?

​

A:

In the merger, TCFC will merge with and into SHBI, with SHBI as the surviving entity. In the bank merger, which will promptly occur after the merger, Community Bank of the Chesapeake will be merged with and into Shore United Bank, with Shore United Bank as the surviving bank.

​

Each share of TCFC common stock, par value $0.01 per share (“TCFC common stock”) issued and outstanding immediately prior to the effective time of the merger (the “effective time”) will be canceled and converted into the right to receive 2.3287 shares (the “exchange ratio”) of SHBI common stock (the “merger consideration”), as further described in the section entitled “The Merger Agreement — Merger Consideration” beginning on page 108.

After completion of the merger, (i) TCFC will no longer be a public company and will cease to exist, (ii) TCFC common stock will be delisted from the NASDAQ Global Select Market (“NASDAQ”) and will cease to be publicly traded and (iii) TCFC common stock will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). After the completion of the merger, SHBI shareholders will continue to own their existing shares of SHBI common stock. See the information provided in the section entitled “The Merger — Structure of the Merger” beginning on page 51 and the merger agreement for more information about the merger.

Q:

When and where will each of the special meetings take place?

​

​

A:

The SHBI special meeting will be held virtually via live audio webcast (the “SHBI special meeting website”) at 9:00 a.m., Eastern Time, on Tuesday, June 20, 2023. You will be able to attend the SHBI special meeting by first registering at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp no later than 11:59 p.m., Eastern Time on Saturday, June 17, 2023. After registering, you will receive a meeting invitation and password via e-mail with your unique link to join the SHBI special meeting. SHBI shareholders will be able to listen, vote and submit questions during the SHBI special meeting.

​

The TCFC special meeting will be held virtually via the Internet at www.virtualshareholdermeeting.com/TCFC2023SM (the “TCFC special meeting website”) at 10:00 a.m., Eastern Time, on Tuesday, June 20, 2023.

Q:

What matters will be considered at each of the special meetings?

​

A:

At the SHBI special meeting, SHBI shareholders will be asked to consider and vote on the following proposals:

​

•

SHBI Proposal 1:   The SHBI merger and share issuance proposal; and

​

•

SHBI Proposal 2:   The SHBI adjournment proposal.

​

At the TCFC special meeting, TCFC shareholders will be asked to consider and vote on the following proposals:

•

TCFC Proposal 1:   The TCFC merger proposal;

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•

TCFC Proposal 2:   The TCFC compensation proposal; and

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•

TCFC Proposal 3:   The TCFC adjournment proposal.

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In order to complete the merger, among other things, SHBI shareholders must approve the SHBI merger and share issuance proposal (the “SHBI shareholder approval”) and TCFC shareholders must approve the TCFC merger proposal (the “TCFC shareholder approval”). None of the approvals of the SHBI adjournment proposal, the TCFC compensation proposal or the TCFC adjournment proposal is a condition to the obligations of SHBI or TCFC to complete the merger.

Q:

Why must the SHBI shareholders approve the merger and issuance of shares of SHBI common stock in connection with the merger (i.e., the SHBI merger and share issuance proposal)?

​

A:

The SHBI shareholders are required to approve the merger and issuance of shares of SHBI common stock in connection with the merger, which will require the affirmative vote of at least a majority of

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SHBI’s issued and outstanding shares of common stock, because SHBI is a Maryland corporation subject to the Maryland General Corporation Law (the “MGCL”), is listed on NASDAQ and is subject to NASDAQ listing rules. Because SHBI will issue in excess of 20% of its outstanding shares of SHBI common stock to the TCFC shareholders in connection with the merger, under the MGCL, SHBI shareholders are required to approve the merger, and under NASDAQ listing rules, SHBI shareholders are required to approve the issuance of shares of SHBI common stock in connection with the merger. The merger cannot be completed unless the SHBI shareholders approve the SHBI merger and share issuance proposal.

Q:

What will TCFC shareholders receive in the merger?

​

A:

In the merger, TCFC shareholders will receive 2.3287 shares of SHBI common stock for each share of TCFC common stock held immediately prior to the completion of the merger. SHBI will not issue any fractional shares of SHBI common stock in the merger. TCFC shareholders who would otherwise be entitled to a fractional share of SHBI common stock in the merger will instead receive an amount in cash (rounded to the nearest cent) determined by multiplying such fractional interest by the average closing price per share of SHBI common stock, as reported on NASDAQ, for the 20 trading days ending on and including the fifth trading day prior to the closing date of the merger (the “SHBI average share price”), rounded to the nearest whole cent.

​

Q:

What will SHBI shareholders receive in the merger?

​

A:

In the merger, SHBI shareholders will not receive any consideration, and their shares of SHBI common stock will remain outstanding and will constitute shares of SHBI common stock following the merger. Following the merger, shares of SHBI common stock will continue to be traded on NASDAQ.

​

Q:

Will the value of the merger consideration change between the date of the joint proxy statement/​prospectus and the time the merger is completed?

​

A:

Yes. Upon consummation of the merger, each issued and outstanding share of TCFC common stock will be canceled and converted into the right to receive a number of shares of SHBI common stock based upon a fixed exchange ratio. As such, the value of the merger consideration will largely depend on the market price for a share of SHBI common stock at the time the merger is completed. The market price for a share of SHBI common stock when TCFC shareholders receive such shares of SHBI common stock after the merger is completed could be greater than, less than or the same as the market price of shares of SHBI common stock on the date of this joint proxy statement/prospectus. Neither SHBI nor TCFC is permitted to terminate the merger agreement as a result of any increase or decrease in the market price of SHBI common stock or TCFC common stock.

​

Q:

How will the merger affect TCFC equity awards?

​

A:

The merger agreement provides that each award in respect of a share of TCFC common stock subject to vesting, repurchase or other lapse restriction (a “TCFC restricted stock award”) that is outstanding immediately prior to the effective time will automatically be converted into a restricted stock award (a “SHBI restricted stock award”) in respect of that number of shares of SHBI common stock equal to the product of the total number of shares of TCFC common stock subject to the TCFC restricted stock award multiplied by the exchange ratio.

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The merger agreement also provides that each time-vesting restricted stock unit award in respect of a share of TCFC common stock (a “TCFC RSU award”), that is outstanding immediately prior to the effective time will automatically be converted into a time-vesting restricted stock unit award (a “SHBI RSU award”), in respect of that number of shares of SHBI common stock equal to the product of the total number of shares of TCFC common stock subject to a TCFC RSU award multiplied by the exchange ratio.

The merger agreement also provides that each performance-vesting restricted stock unit award in respect of a share of TCFC common stock (a “TCFC PSU award”), that is outstanding immediately prior to the effective time will automatically be converted into a SHBI RSU award in respect of that number of shares of SHBI common stock equal to the product of the total number of shares of TCFC

 

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common stock subject to the TCFC PSU award multiplied by the exchange ratio. The number of shares of TCFC common stock subject to a TCFC PSU award immediately prior to the effective time will be determined assuming performance goals are satisfied based on target performance. Each resulting SHBI RSU award will be subject to the same terms and conditions as applied to the TCFC PSU award immediately prior to the effective time, except that the resulting SHBI RSU award will no longer be subject to any performance conditions and will instead be subject only to time-based vesting.

Q:

How will the merger affect TCFC’s or SHBI’s existing 401(k) plan?

​

A:

The merger agreement provides that, prior to the closing of the merger, TCFC and SHBI will review the TCFC 401(k) plan (the “TCFC 401(k) plan”) and the SHBI 401(k) plan (the “SHBI 401(k) plan”) and make a mutual determination as to whether the TCFC 401(k) plan will continue to be maintained by SHBI, as the surviving entity after the effective time, will be merged into the SHBI 401(k) plan or will be terminated prior to the effective time. Pursuant to the merger agreement, TCFC and SHBI are required to take any corporate action as necessary to effectuate such determination and provide the other party with evidence that such determination has been adopted (the form and substance of which shall be subject to reasonable review and comment by the other party) not later than two business days immediately preceding the closing date of the merger (the “closing date”). If the TCFC 401(k) plan is terminated, continuing employees who participated in the TCFC 401(k) plan prior to the effective time will be eligible to participate, effective as of the effective time, in the SHBI 401(k) plan. If applicable, SHBI and TCFC will take any and all actions that may be required, including amendments to the TCFC 401(k) plan and/or the SHBI 401(k) plan, to permit the continuing employees to make rollover contributions from the TCFC 401(k) plan to the SHBI 401(k) plan of “eligible rollover distributions” ​(within the meaning of Section 401(a)(31) of the Internal Revenue Code of 1986, as amended (the “Code”)) in the form of cash, notes (in the case of loans), SHBI common stock or a combination thereof in an amount equal to the full account balance distributed to such employee from the terminated 401(k) plan.

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Q:

How does the SHBI board of directors recommend that I vote at the SHBI special meeting?

​

A:

The SHBI board of directors (the “SHBI board”) has unanimously (i) determined that merger agreement and the transactions contemplated thereby, including the merger and the issuance of SHBI common stock, are advisable, fair to and in the best interests of SHBI and its shareholders and (ii) approved and adopted the merger, the merger agreement and the transactions contemplated thereby. The SHBI board unanimously recommends that SHBI shareholders vote “FOR” the SHBI merger and share issuance proposal and “FOR” the SHBI adjournment proposal.

​

See the sections entitled “The Merger — SHBI’s Reasons for the Merger and Factors Considered by the SHBI Board” beginning on page 59 and “The Merger — Recommendation of the SHBI Board” beginning on page 61 for a more detailed discussion of the SHBI board’s recommendations and reasons therefor. In addition, certain of SHBI’s officers and directors have financial interests in the transactions contemplated by the merger agreement that are different from, or in addition to, the interests of SHBI’s shareholders. These interests are described in more detail in the section titled “The Merger — Interests of Certain SHBI Directors and Executive Officers in the Merger” beginning on page 90.

Q:

How does the TCFC board of directors recommend that I vote at the TCFC special meeting?

​

A:

The TCFC board of directors (the “TCFC board”) has unanimously (i) determined that the merger, the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TCFC and its shareholders, (ii) approved and adopted the merger agreement and (iii) authorized and approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. The TCFC board unanimously recommends that TCFC shareholders vote “FOR” the TCFC merger proposal, “FOR” the TCFC compensation proposal and “FOR” the TCFC adjournment proposal.

​

See the sections entitled “The Merger — TCFC’s Reasons for the Merger and Factors Considered by the TCFC Board” beginning on page 61 and “The Merger — Recommendation of the TCFC Board” beginning on page 65 for a more detailed discussion of the TCFC board’s recommendations and reasons therefor. In addition, certain of TCFC’s officers and directors have financial interests in the transactions contemplated by the merger agreement that are different from, or in addition to, the interests of

 

4

 

TCFC’s shareholders. These interests are described in more detail in the section entitled “The Merger — Interests of Certain TCFC Directors and Executive Officers in the Merger” beginning on page 94.

Q:

Who is entitled to vote at the SHBI special meeting?

​

​

A:

The holders of record of SHBI common stock at the close of business on Tuesday, May 2, 2023, which is the date the SHBI board has fixed as the record date for the SHBI special meeting (the “SHBI record date”) are entitled to vote at the SHBI special meeting.

​

SHBI shareholders are entitled to one vote for each share of SHBI common stock held as of the SHBI record date. As of the close of business on the SHBI record date, there were 19,897,410 outstanding shares of SHBI common stock.

Attendance at the SHBI special meeting is not required to vote. See below and the section entitled “The SHBI Special Meeting — How to Vote Shares of SHBI Common Stock” beginning on page 38 for instructions on how to vote your shares of SHBI common stock without attending the SHBI special meeting.

Q:

Who is entitled to vote at the TCFC special meeting?

​

​

A:

The holders of record of TCFC common stock at the close of business on Tuesday, May 2, 2023, which is the date the TCFC board has fixed as the record date for the TCFC special meeting (the “TCFC record date”), are entitled to vote at the TCFC special meeting.

​

TCFC shareholders are entitled to one vote for each share of TCFC common stock held as of the TCFC record date. As of the close of business on the TCFC record date, there were 5,669,274 outstanding shares of TCFC common stock.

Attendance at the TCFC special meeting is not required to vote. See below and the section entitled “The TCFC Special Meeting — How to Vote Shares of TCFC Common Stock” beginning on page 44 for instructions on how to vote your shares of TCFC common stock without attending the TCFC special meeting.

Q:

What constitutes a quorum for the SHBI special meeting?

​

A:

A quorum, consisting of the holders of a majority of the shares of SHBI common stock entitled to vote at the SHBI special meeting, must be present in person or by proxy before any action may be taken at the SHBI special meeting. Once a share of SHBI common stock is represented at the SHBI special meeting, it will be counted for the purpose of determining a quorum not only at the SHBI special meeting but also at any adjournment or postponement of the SHBI special meeting. In the event that a quorum is not present at the SHBI special meeting, it is expected that the SHBI special meeting will be adjourned or postponed. Abstentions and broker non-votes (if any) will not be counted for purposes of determining the number of votes cast on a proposal, but abstentions will be treated as present for quorum purposes.

​

Q:

What constitutes a quorum for the TCFC special meeting?

​

A:

A quorum, consisting of the holders of a majority of the shares of TCFC common stock entitled to vote at the TCFC special meeting, must be present in person or by proxy before any action may be taken at the TCFC special meeting. Once a share of TCFC common stock is represented at the TCFC special meeting, it will be counted for the purpose of determining a quorum not only at the TCFC special meeting but also at any adjournment or postponement of the TCFC special meeting. In the event that a quorum is not present at the TCFC special meeting, it is expected that the TCFC special meeting will be adjourned or postponed. Abstentions and broker non-votes (if any) will not be counted for purposes of determining the number of votes cast on a proposal, but abstentions will be treated as present for quorum purposes.

​

 

5

 

Q:

What vote is required for the approval of each proposal at the SHBI special meeting?

​

A:

SHBI Proposal 1 — The SHBI Merger and Share Issuance Proposal.   Approval of the SHBI merger and share issuance proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of SHBI common stock entitled to vote at the SHBI special meeting. If you fail to submit a proxy or vote at the SHBI special meeting, mark “ABSTAIN” on your proxy or fail to instruct your bank, broker or other nominee with respect to the SHBI merger and share issuance proposal, it will have the same effect as a vote “AGAINST” such proposal.

​

SHBI Proposal 2 — The SHBI Adjournment Proposal.   Approval of the SHBI adjournment proposal requires the affirmative vote of a majority of the votes cast at the SHBI special meeting by the holders of SHBI common stock entitled to vote at the SHBI special meeting. If you fail to submit a proxy or vote in person at the SHBI special meeting, mark “ABSTAIN” on your proxy or fail to instruct your bank, broker or other nominee with respect to the SHBI adjournment proposal, it will have no effect on such proposal (assuming a quorum is present).

Q:

What vote is required for the approval of each proposal at the TCFC special meeting?

​

A:

TCFC Proposal 1 — The TCFC Merger Proposal.   Approval of the TCFC merger proposal requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of TCFC common stock entitled to vote at the TCFC special meeting. If you fail to submit a proxy or to vote in person at the TCFC special meeting, mark “ABSTAIN” on your proxy or fail to instruct your bank, broker or other nominee (which we refer to as a broker non-vote) with respect to the TCFC merger proposal, it will have the same effect as a vote “AGAINST” such proposal.

​

TCFC Proposal 2 — The TCFC Compensation Proposal.   Approval of the TCFC compensation proposal (a non-binding proposal) requires the affirmative vote of a majority of the votes cast at the TCFC special meeting by the shareholders present in person or represented by proxy and entitled to vote at the TCFC special meeting. If you fail to submit a proxy or vote in person at the TCFC special meeting, mark “ABSTAIN” on your proxy or fail to instruct your bank, broker or other nominee with respect to the TCFC compensation proposal, it will have no effect on such proposal (assuming a quorum is present).

TCFC Proposal 3 — The TCFC Adjournment Proposal.   Approval of the TCFC adjournment proposal requires the affirmative vote of a majority of the votes cast at the TCFC special meeting by the shareholders present in person or represented by proxy and entitled to vote at the TCFC special meeting. If you fail to submit a proxy or vote in person at the TCFC special meeting, mark “ABSTAIN” on your proxy or fail to instruct your bank, broker or other nominee with respect to the TCFC adjournment proposal, it will have no effect on such proposal (assuming a quorum is present).

Q:

Why am I being asked to consider and vote on a proposal to approve, by a non-binding, advisory vote, merger-related compensation arrangements for the TCFC named executive officers (i.e., the TCFC compensation proposal)?

​

A:

Under SEC rules, TCFC is required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to TCFC’s named executive officers that is based on or otherwise relates to the merger, or “golden parachute” compensation.

​

Q:

What will happen if TCFC shareholders do not approve the TCFC compensation proposal?

​

A:

The vote with respect to the TCFC compensation proposal is an advisory vote and will not be binding on TCFC or the TCFC board. Therefore, if the TCFC merger proposal is not approved by TCFC’s shareholders, the compensation described in the TCFC compensation proposal could still be paid to the TCFC named executive officers, if and to the extent required or allowed under applicable law, even if TCFC’s shareholders do not approve the TCFC compensation proposal.

​

Q:

What if I hold shares in both SHBI and TCFC?

​

A:

If you hold shares of both SHBI common stock and TCFC common stock, you will receive separate packages of proxy materials. A vote cast as a SHBI shareholder will not count as a vote cast as a TCFC

​

 

6

 

shareholder, and a vote cast as a TCFC shareholder will not count as a vote cast as a SHBI shareholder. Therefore, please submit separate proxies for your shares of SHBI common stock and your shares of TCFC common stock.

Q:

How can I attend, vote and ask questions at the SHBI special meeting or the TCFC special meeting?

​

A:

Record Holders.   If you hold shares directly in your name as the holder of record of SHBI common stock or TCFC common stock, you are a “record holder” and your shares may be voted at the SHBI special meeting or the TCFC special meeting by you. If you choose to vote your shares virtually at the respective special meeting via the applicable special meeting website, you will need the control number, as described below.

​

Beneficial Owners.   If you hold shares in a brokerage or other account in “street name,” you are a “beneficial owner” and your shares may be voted at the SHBI special meeting or the TCFC special meeting, as applicable, by you as described below. If you choose to vote your shares virtually at the respective special meeting via the applicable special meeting website, you will need the control number, as described below.

SHBI special meeting.   The SHBI special meeting will be completely virtual and conducted via live audio webcast. You will be able to attend the SHBI special meeting by first registering at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp. You will receive a meeting invitation by e-mail with your unique link to join the SHBI special meeting along with a password prior to the date of the SHBI special meeting.

Both shareholders of record and street name shareholders will be able to attend the SHBI special meeting online via live audio webcast, submit their questions during the SHBI special meeting and vote their shares of SHBI common stock electronically at the SHBI special meeting.

If you are a shareholder of record of SHBI common stock, your virtual control number can be found on your proxy card.

If you hold your shares of SHBI common stock beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares of SHBI common stock during the SHBI special meeting. If you are unable to obtain a legal proxy to vote your shares of SHBI common stock, you will still be able to attend the SHBI special meeting (but will not be able to vote your shares of SHBI common stock) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp. On the day of the SHBI special meeting, you may only vote during the SHBI special meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the SHBI special meeting.

SHBI encourages its shareholders to visit the SHBI special meeting website above in advance of the SHBI special meeting to familiarize themselves with the online access process. The SHBI special meeting platform is fully supported across browsers and devices that are equipped with the most updated version of applicable software and plugins. SHBI shareholders should verify their internet connection prior to the SHBI special meeting. SHBI shareholders encountering difficulty with the SHBI special meeting virtual platform during the sign-in process or at any time during the meeting may utilize technical support provided by SHBI through virtualmeeting@viewproxy.com. Technical support information is provided on the sign-in page for all SHBI shareholders. If you have difficulty accessing the SHBI special meeting during check-in or during the meeting, please contact technical support as indicated on the SHBI special meeting sign-in page. SHBI shareholders will have substantially the same opportunities to participate in the SHBI special meeting as they would have at a physical, in-person meeting. SHBI shareholders as of the SHBI record date will be able to attend, vote and submit questions during a portion of the SHBI special meeting via the online platform.

TCFC special meeting.   If you are a record holder or beneficial owner you will be able to attend the TCFC special meeting online, ask questions and vote during the meeting by visiting

 

7

 

www.virtualshareholdermeeting.com/TCFC2023SM and following the instructions. Please have your control number, which can be found on your proxy card, notice or e-mail previously received, to access the meeting.

TCFC encourages its shareholders to visit the TCFC special meeting website above in advance of the TCFC special meeting to familiarize themselves with the online access process. The TCFC special meeting platform is fully supported across browsers and devices that are equipped with the most updated version of applicable software and plugins. TCFC shareholders should verify their internet connection prior to the TCFC special meeting. TCFC shareholders encountering difficulty with the TCFC special meeting virtual platform during the sign-in process or at any time during the meeting may utilize technical support provided by TCFC by calling 844-986-0822 (U.S.) or 303-562-9302 (International). Technical support information is provided on the sign-in page for all TCFC shareholders 15 minutes before the meeting begins. If you have difficulty accessing the TCFC special meeting during check-in or during the meeting, please contact technical support as indicated on the TCFC special meeting sign-in page. TCFC shareholders will have substantially the same opportunities to participate in the TCFC special meeting as they would have at a physical, in-person meeting. TCFC shareholders as of the TCFC record date will be able to attend, vote and submit questions during a portion of the TCFC special meeting via the online platform.

Even if you plan to attend the SHBI special meeting or the TCFC special meeting, as applicable, virtually, SHBI and TCFC recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the respective special meeting.

Additional information on attending the virtual special meetings can be found under the section entitled “The SHBI Special Meeting — Attending the SHBI Special Meeting” on page 38 and under the section entitled “The TCFC Special Meeting — Attending the TCFC Special Meeting” on page 44.

Q:

How can I vote my shares without attending my respective special meeting?

​

A:

Whether you hold your shares directly as the holder of record of SHBI common stock or TCFC common stock or beneficially in “street name,” you may direct your vote by proxy without attending the SHBI special meeting or the TCFC special meeting, as applicable. If you are a record holder of SHBI common stock or TCFC common stock, you can vote your shares by proxy via the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold shares beneficially in “street name” as a beneficial owner of SHBI common stock or TCFC common stock, you should follow the voting instructions provided by your bank, broker, trustee or other nominee.

​

Additional information on voting procedures can be found under the section entitled “The SHBI Special Meeting — Attending the SHBI Special Meeting” on page 38 and under the section entitled “The TCFC Special Meeting — Attending the TCFC Special Meeting” on page 44.

Q:

How do I vote shares of TCFC common stock held in the TCFC employee stock ownership plan?

​

​

A:

Participants in the TCFC employee stock ownership plan (the “TCFC ESOP”) will each receive a voting instruction card that reflects all of the shares that the participant may direct the trustee to vote on his or her behalf under the TCFC ESOP. Under the terms of the TCFC ESOP, the TCFC ESOP trustee votes all shares held by the TCFC ESOP, but each TCFC ESOP participant may direct the trustee how to vote the shares of TCFC common stock allocated to his or her account. The TCFC ESOP trustee will vote all unallocated shares of TCFC common stock held by the TCFC ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions. The deadline for returning a voting instruction card to the TCFC ESOP trustee is 11:59 p.m., Eastern Time, on Monday, June 19, 2023.

​

Q:

What do I need to do now?

​

A:

Read and consider the information contained in this joint proxy statement/prospectus, including the appendices, carefully and then please submit as soon as possible either your SHBI proxy, in the case of SHBI shareholders, or your TCFC proxy, in the case of TCFC shareholders.

​

 

8

 

Q:

If my shares of SHBI common stock or TCFC common stock are held in street name by my broker, will my broker automatically vote my shares for me?

​

A:

No. Your bank, broker or other nominee will not be able to vote shares held by it in street name on your behalf without instructions from you. You should instruct your bank, broker or other nominee to vote your shares by following the directions your bank, broker or other nominee provides to you. Please check the voting instructions form used by your bank, broker or other nominee.

​

Q:

What is a “broker non-vote”?

​

A:

Banks, brokers, trustees and other nominees who hold shares in street name for a beneficial owner of those shares typically have the authority to vote in their discretion on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokers, trustees and other nominees are not allowed to exercise their voting discretion with respect to the approval of matters determined to be “non-routine” without specific instructions from the beneficial owner.

​

A broker non-vote occurs when a bank, broker, trustee or other nominee is not permitted to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. It is expected that all proposals to be voted on at each of the SHBI special meeting and the TCFC special meeting will be “non-routine” matters, and, as such, broker non-votes, if any, will not be counted as present and entitled to vote for purposes of determining a quorum at the SHBI special meeting or the TCFC special meeting. If your bank, broker, trustee or other nominee holds your shares of SHBI common stock or TCFC common stock in “street name,” such entity will vote your shares of SHBI common stock or TCFC common stock only if you provide instructions on how to vote by complying with the instructions provided to you by your bank, broker, trustee or other nominee with this joint proxy statement/prospectus.

Q:

What if I abstain from voting or fail to instruct my bank, broker or other nominee?

​

A:

For the purposes of the SHBI special meeting, an abstention occurs when a SHBI shareholder attends the SHBI special meeting and does not vote or returns a proxy with an “ABSTAIN” instruction. Abstentions and broker non-votes of shares of SHBI common stock will have the same effect as a vote “AGAINST” the SHBI merger and share issuance proposal, but will not have any effect on the approval of the SHBI adjournment proposal at the SHBI special meeting.

​

For purposes of the TCFC special meeting, an abstention occurs when a TCFC shareholder attends the TCFC special meeting and does not vote or returns a proxy with an “ABSTAIN” instruction. Abstentions and broker non-votes of shares of TCFC common stock will have the same effect as a vote “AGAINST” the TCFC merger proposal, but will not have any effect on the approval of the TCFC compensation proposal or the TCFC adjournment proposal at the TCFC special meeting.

Q:

Why is my vote important?

​

A:

The merger cannot be completed unless the SHBI shareholders approve the SHBI merger and share issuance proposal and the TCFC shareholders approve the TCFC merger proposal, which are the only applicable SHBI or TCFC shareholder proposals necessary to complete the merger. Information about the SHBI special meeting and the TCFC special meeting, the merger and other matters to be considered by shareholders of each of SHBI and TCFC is contained in this document.

​

As inducement for TCFC to enter into the merger agreement, each director and executive officer of SHBI, who own in the aggregate approximately 11.3% of the outstanding shares of SHBI common stock, as of the SHBI record date, entered into a shareholder agreement with TCFC pursuant to which he or she agreed, among other things, to vote their shares of SHBI common stock in favor of the issuance of SHBI common stock to TCFC shareholders as the merger consideration and any other matters required to be approved by SHBI’s shareholders for the consummation of the merger (the “SHBI shareholder agreement”). These shareholders also agreed to certain restrictions on their ability to transfer their shares of SHBI common stock until at least a majority of all issued and outstanding shares

 

9

 

of SHBI common stock have been irrevocably voted in favor of the SHBI merger and share issuance proposal and any other matters required to be approved by the SHBI shareholders for the consummation of the merger. The SHBI shareholder agreement is substantially in the form included as Annex B to the merger agreement.

As inducement for SHBI to enter into the merger agreement, each director and executive officer of TCFC, who own in the aggregate approximately 7.3% of the outstanding shares of TCFC common stock as of the TCFC record date, entered into a shareholder agreement with SHBI pursuant to which he or she agreed, among other things, to vote their shares of TCFC common stock in favor of the adoption and approval of the merger agreement and any other matters required to be approved by the TCFC shareholders for the consummation of the merger (the “TCFC shareholder agreement”). These shareholders also agreed to certain restrictions on their ability to transfer their shares of TCFC common stock until at least two-thirds of all issued and outstanding shares of TCFC common stock voting in favor of the TCFC merger proposal, the merger and the transactions contemplated thereby have been irrevocably delivered to TCFC. The TCFC shareholder agreement is substantially in the form included as Annex A to the merger agreement.

Q:

What if I am a record holder and I do not indicate a decision with respect to the matters required to be voted on?

​

A:

If you are a record holder of SHBI common stock or TCFC common stock and you returned a signed proxy card without indicating how to vote on any particular proposal, the shares of SHBI common stock represented by your proxy will be voted as recommended by the SHBI board with respect to such proposals, or the shares of TCFC common stock represented by your proxy will be voted as recommended by the TCFC board with respect to such proposals, as the case may be.

​

Q:

Can I change my vote?

​

A:

Yes. Regardless of the method used to cast a vote, you may change your vote at any time before your proxy is voted at the SHBI special meeting or the TCFC special meeting, as applicable. For SHBI shareholders, you may do so in one of the following ways:

​

•

by delivering to SHBI prior to the SHBI special meeting, a written notice of revocation addressed to Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 E. Dover Street, Easton, Maryland, 21601;

​

•

completing, signing and returning a new proxy card with a later date before the date of the SHBI special meeting, and any earlier proxy will be revoked automatically;

​

​

•

calling the toll free number listed on the SHBI proxy card or by accessing the Internet site listed on the SHBI proxy card to change his or her vote by 11:59 p.m., Eastern Time, on Monday, June 19, 2023, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy will be revoked; or

​

•

attending the SHBI special meeting virtually and voting during the meeting via the SHBI special meeting website and following the instructions, and any earlier proxy will be revoked. However, simply attending the SHBI special meeting without voting will not revoke an earlier proxy voted by such person.

​

If you have instructed a bank, broker or other nominee to vote your shares of SHBI common stock, you must follow directions received from the bank, broker or other nominee to change such vote.

For TCFC shareholders, you may change your vote in one of the following ways:

•

by delivering to TCFC prior to the TCFC special meeting, a written notice of revocation addressed to Christy Lombardi, Secretary, The Community Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601;

​

•

completing, signing and returning a new proxy card with a later date before the date of the TCFC special meeting, and any earlier proxy will be revoked automatically;

​

 

10

 

​

•

calling the toll free number listed on the TCFC proxy card or by accessing the Internet site listed on the TCFC proxy card to change his or her vote by 11:59 p.m., Eastern Time, on Monday, June 19, 2023, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy will be revoked; or

​

•

attending the TCFC special meeting and voting during the meeting by visiting www.virtualshareholdermeeting.com/TCFC2023SM and following the instructions, and any earlier proxy will be revoked. However, simply attending the TCFC special meeting without voting will not revoke an earlier proxy voted by such person.

​

If you have instructed a bank, broker or other nominee to vote your shares of TCFC common stock, you must follow directions received from the bank, broker or other nominee to change such vote.

Participants in the TCFC ESOP may revoke their instructions to the TCFC ESOP trustee with respect to voting of the shares of TCFC common stock held in their TCFC ESOP account by submitting to the TCFC ESOP trustee a signed instruction card bearing a later date, provided that such new instruction card must be received by the TCFC ESOP trustee on or prior to the last date for submission of such instructions with respect to the TCFC special meeting designated in the separate voting instructions provided by the TCFC ESOP trustee.

Q:

Will SHBI be required to submit the SHBI merger and share issuance proposal to its shareholders even if the SHBI board has withdrawn, modified or qualified its recommendation?

​

A:

Yes. Unless the merger agreement is terminated before the SHBI special meeting, SHBI is required to submit the SHBI merger and share issuance proposal to SHBI shareholders even if the SHBI board has withdrawn, modified or qualified its recommendation.

​

Q:

Will TCFC be required to submit the TCFC merger proposal to its shareholders even if the TCFC board has withdrawn, modified or qualified its recommendation?

​

A:

Yes. Unless the merger agreement is terminated before the TCFC special meeting, TCFC is required to submit the TCFC merger proposal to TCFC shareholders even if the TCFC board has withdrawn, modified or qualified its recommendation.

​

Q:

Will SHBI shareholders have appraisal or dissenters’ rights in connection with the merger?

​

A:

No. Under the provisions of the MGCL, SHBI shareholders are not entitled to appraisal or dissenters’ rights in the merger.

​

Q:

Will TCFC shareholders have appraisal or dissenters’ rights in connection with the merger?

​

A:

No. Under the provisions of the MGCL, TCFC shareholders are not entitled to appraisal or dissenters’ rights in the merger.

​

Q:

Are there any risks that should be considered in deciding whether to vote for the matters required to be voted on by the respective shareholders of SHBI and TCFC?

​

A:

Yes. Set forth under the section entitled “Risk Factors” beginning on page 27, are a number of risk factors that each of the shareholders of SHBI and TCFC should consider carefully.

​

Q:

What are the U.S. federal income tax consequences of the merger to TCFC shareholders?

​

​

A:

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes, and each of SHBI’s and TCFC’s obligations to complete the merger is conditioned on the receipt of a legal opinion to the effect that the merger will so qualify. Assuming the merger qualifies as a reorganization, subject to the limitations and more detailed discussion set forth in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 127, TCFC shareholders generally will not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their TCFC common stock for SHBI common stock in the merger, except for any gain or loss that may result from the receipt of cash in lieu of a fractional share of SHBI common stock.

​

 

11

 

TCFC shareholders who receive cash in lieu of fractional shares will be treated as having received the fractional share and then having the fractional share redeemed by SHBI for cash. Accordingly, a portion of their adjusted basis in shares of TCFC common stock surrendered pursuant to the merger will be allocated to the fractional share which is deemed to have been received and the TCFC shareholder will recognize gain (but not loss) in an amount equal to the cash received for the fractional share over the adjusted basis allocable to that share.

The tax consequences of the merger to a particular TCFC shareholder will depend in part on such shareholder’s individual circumstances. Accordingly, each TCFC shareholder is urged to consult his or her own tax advisor for a full understanding of the tax consequences of the merger to such shareholder, including the applicability and effect of U.S. federal, state, local and foreign income and other tax laws.

For further information concerning the U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 127.

Q:

When do SHBI and TCFC expect to complete the merger?

​

A:

The parties expect to complete the merger on or about July 1, 2023. However, there is no assurance when or if the merger will occur. Prior to the consummation of the merger, SHBI shareholders must approve the SHBI merger and share issuance proposal at the SHBI special meeting, TCFC shareholders must approve the TCFC merger proposal at the special meeting and other conditions to the consummation of the merger must be satisfied.

​

Q:

What are the conditions to complete the merger?

​

​

A:

The obligations of SHBI and TCFC to complete the merger are subject to the satisfaction or waiver of certain closing conditions contained in the merger agreement, including the receipt of requisite regulatory approvals and the expiration of all statutory waiting periods without the imposition of any materially burdensome regulatory condition, the receipt of certain tax opinions, the approval by SHBI shareholders of the SHBI merger and share issuance proposal, the approval by TCFC shareholders of the TCFC merger proposal, the authorization for listing on NASDAQ the shares of SHBI common stock to be issued in the merger, the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part, the absence of legal restraint prohibiting the merger, the parties’ performance of their respective obligations under the merger agreement subject to certain materiality qualifications, and the accuracy of the representations and warranties made in the merger agreement subject to certain materiality qualifications. For more information, see the section entitled “The Merger Agreement — Conditions to Complete the Merger” beginning on page 121.

​

Q:

What happens if the merger is not completed?

​

​

A:

If the merger is not completed, TCFC shareholders will not receive any consideration for their shares of TCFC common stock in connection with the merger. Instead TCFC will remain an independent public company and TCFC common stock will continue to be listed and traded on NASDAQ. In addition, if the merger agreement is terminated in certain circumstances, a termination fee of $10.5 million will be payable by either SHBI or TCFC, as applicable. See the section entitled “The Merger Agreement — Termination Fee” beginning on page 124 for a more detailed discussion of the circumstances under which a termination fee will be required to be paid.

​

Q:

What happens if I sell my shares after the applicable record date but before the SHBI special meeting or TCFC special meeting, as applicable?

​

A:

Each of the SHBI record date and TCFC record date is earlier than the date of the SHBI special meeting and the TCFC special meeting, as applicable, and earlier than the date that the merger is expected to be completed. If you sell or otherwise transfer your shares of SHBI common stock or TCFC common stock, as applicable, after the applicable record date but before the date of the applicable special meeting, you will retain your right to vote at such special meeting (provided that such shares remain outstanding on the date of such special meeting), but, with respect to TCFC common stock, you will not have the right to receive the merger consideration to be received by TCFC shareholders in

​

 

12

 

connection with the merger. In order to receive the merger consideration, you must hold your shares of TCFC common stock through the completion of the merger.

Q:

If the merger is completed, when can TCFC shareholders expect to receive the merger consideration?

​

A:

Promptly following the completion of the merger, SHBI will mail to each former TCFC shareholder of record written instructions detailing how such shareholders can exchange their shares of TCFC common stock for the merger consideration.

​

Q:

What should I do if I receive more than one set of voting materials for the same special meeting?

​

A:

If you are a beneficial owner and hold shares of SHBI common stock or TCFC common stock in “street name” and also are a record holder and hold shares directly in your name or otherwise or if you hold shares of SHBI common stock or TCFC common stock in more than one brokerage account, you may receive more than one set of voting materials relating to the same special meeting.

​

Record Holders.   For shares held directly, please complete, sign, date and return each proxy card (or cast your vote by telephone or the Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of SHBI common stock or TCFC common stock are voted.

Beneficial Owners.   For shares held in “street name” through a bank, broker, trustee or other nominee, you should follow the procedures provided by your bank, broker, trustee or other nominee in order to vote your shares.

Q:

Whom should I call if I have questions?

​

A:

If you are a SHBI shareholder and have any questions concerning the merger or joint proxy statement/​prospectus, would like additional copies of the joint proxy statement/prospectus or need help voting your shares of SHBI common stock, please contact SHBI’s proxy solicitor, Alliance Advisors, by calling toll-free at (855) 742-8276, or via e-mail to SHBI@allianceadvisors.com.

​

If you are a TCFC shareholder and have any questions concerning the merger or joint proxy statement/​prospectus, would like additional copies of the joint proxy statement/prospectus or need help voting your shares of TCFC common stock, please contact TCFC’s proxy solicitor, Alliance Advisors, by calling toll-free at (866) 584-0578, or via e-mail to TCFC@allianceadvisors.com.

Q:

Where can I find more information about SHBI and TCFC?

​

​

A:

You can find more information about SHBI and TCFC from the various sources described under the section entitled “Where You Can Find More Information” beginning on page 154.

​

Q:

What is householding and how does it affect me?

​

A:

The SEC permits companies to send a single set of proxy materials to any household at which two or more shareholders reside, unless contrary instructions have been received, but only if the applicable shareholders provide advance notice and follow certain procedures. In such cases, each shareholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of SHBI common stock and TCFC common stock, as applicable, held through brokerage firms. If your household has multiple accounts holding SHBI common stock or TCFC common stock, as applicable, you may have already received a householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this joint proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this joint proxy statement/prospectus promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.

​

 

13

 

14

 

​

​

​

SHBI Common Stock

​

​

TCFC Common Stock

​

​

Equivalent Market Value Per Share of TCFC Common Stock

​

At December 13, 2022

​

​

​

$

19.20

​

​

​

​

$

39.66

​

​

​

​

$

44.71

​

​

At May 2, 2023

​

​

​

$

11.69

​

​

​

​

$

26.82

​

​

​

​

$

27.22

​

​

15

 

16

 

17

 

​

18

 

​

19

 

​

20

 

​

21

 

22

 

23

 

24

 

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus contains a number of forward-looking statements regarding the financial condition, results of operations, earnings outlook and business prospects of SHBI, Shore United Bank, TCFC and Community Bank of the Chesapeake and the potential combined company and may include statements for the periods following the completion of the merger. Shareholders of either SHBI or TCFC can find many of these statements by looking for words such as “expects,” “projects,” “anticipates,” “believes,” “intends,” “estimates,” “strategy,” “plan,” “potential,” “possible” and other similar expressions. Statements about the expected timing, completion and effects of the merger and all other statements in this joint proxy statement/prospectus other than historical facts constitute forward-looking statements. Forward-looking statements involve certain risks and uncertainties that are subject to change based on factors which are, in many instances, beyond SHBI’s or TCFC’s control. The ability of either SHBI or TCFC to predict results or actual effects of its plans and strategies, or those of the combined company, is inherently uncertain. Accordingly, actual results may differ materially from those expressed in, or implied by, the forward-looking statements. Some of the factors that may cause actual results or earnings to differ materially from those contemplated by the forward-looking statements include, but are not limited to, those discussed under “Risk Factors” and those discussed in SHBI’s Annual Report on Form 10-K for the year ended December 31, 2022 and those discussed in TCFC’s Annual Report on Form 10-K for the year ended December 31, 2022, which are incorporated by reference into this joint proxy statement/prospectus, as well as the following:

•

the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement;

​

•

the possibility that the merger will not close when expected or at all because required shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated;

​

•

the ability of SHBI and TCFC to meet expectations regarding the timing, completion and accounting and tax treatments of the merger;

​

•

the risk that any announcements relating to the merger could have adverse effects on the market price of the common stock of either or both parties to the merger;

​

•

possibility that the anticipated benefits of the merger are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where SHBI and TCFC do business;

​

•

certain restrictions during the pendency of the merger that may impact the parties’ ability to pursue certain business opportunities and strategic transactions;

​

•

the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

​

•

diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships;

​

•

the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the merger within the expected timeframes or at all and to successfully integrate TCFC’s operations and those of SHBI;

​

•

such integration may be more difficult, time consuming or costly than expected;

​

•

estimated revenue enhancements, costs savings and financial benefits from the merger may not be fully realized within the expected time frames or at all;

​

•

SHBI’s and TCFC’s success in executing their respective business plans and strategies and managing the risks involved in the foregoing;

​

•

the dilution caused by SHBI’s issuance of additional shares of SHBI common stock in connection with the merger;

​

 

25

 

•

effects of the announcement, pendency or completion of the merger on the ability of SHBI and TCFC to retain customers and retain and hire key personnel and maintain relationships with their suppliers, and on their operating results and businesses generally;

​

•

risks related to the potential impact of general economic, political and market factors on the companies or the merger and other factors that may affect future results of SHBI and TCFC;

​

•

competitive pressure among depository and other financial institutions may increase significantly;

​

•

the outcome of pending or threatened litigation, or of matters before regulatory agencies, whether currently existing or commencing in the future, including litigation related to the merger;

​

•

changes in the interest rate environment may affect interest margins;

​

•

liquidity issues, including fluctuations in the fair value and liquidity of the securities SHBI or TCFC hold for sale and their ability to raise additional capital, if necessary;

​

•

the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board;

​

•

legislation or changes in regulatory requirements may adversely affect the businesses in which SHBI and TCFC are engaged;

​

•

adverse changes may occur in the securities markets;

​

•

volatility and disruptions in global or national capital, currency, and credit markets;

​

•

the possibility that revenues following the merger may be lower than expected;

​

•

the potential impact of general economic, political or market factors on the companies or the merger and other factors that may affect future results of SHBI or TCFC; and

​

•

competitors of SHBI and TCFC may have greater financial resources and develop products and technology that enable those competitors to compete more successfully than SHBI and TCFC.

​

Because these forward-looking statements are subject to assumptions and uncertainties, SHBI’s and TCFC’s actual results may differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are predicated on the beliefs and assumptions of the management of each of SHBI and TCFC based on information known to them as of the date of this joint proxy statement/prospectus. TCFC and SHBI shareholders are cautioned not to place undue reliance on these statements, which speak only as of the date of this joint proxy statement/prospectus.

For any forward-looking statements made in this joint proxy statement/prospectus or in any documents incorporated by reference into this joint proxy statement/prospectus, SHBI and TCFC claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the dates of the documents incorporated by reference in this joint proxy statement/prospectus. Annualized, pro forma, projected and estimated numbers are used for illustrative purposes only, are not forecasts and may not reflect actual results. Except as required by applicable law, neither SHBI nor TCFC undertakes to update these forward-looking statements to reflect facts, circumstances, assumptions or events that occur after the date the forward-looking statements are made.

For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the reports that SHBI and TCFC have filed with the SEC as described under the section entitled “Where You Can Find More Information” beginning on page 154.

All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this joint proxy statement/prospectus and attributable to SHBI or TCFC or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

26

 

RISK FACTORS

In addition to the other information included and incorporated by reference into this joint proxy statement/​prospectus, including the matters addressed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 25, you should be aware of and carefully consider the following risks and uncertainties that are applicable to the merger agreement, the merger, SHBI and TCFC before deciding whether to vote for (i) if you are a SHBI shareholder, the SHBI merger and share issuance proposal and the SHBI adjournment proposal, if necessary, to solicit additional proxies to approve the SHBI merger and share issuance proposal, or (ii) if you are a TCFC shareholder, the TCFC merger proposal, the TCFC compensation proposal and the TCFC adjournment proposal, if necessary, to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement. You should also consider the risks relating to the businesses of SHBI and ownership of SHBI common stock contained in Part I, Item 1A of SHBI’s Annual Report on Form 10-K for the year ended December 31, 2022 and risks relating to the businesses of TCFC and the ownership of TCFC common stock contained in Part I, Item 1A of TCFC’s Annual Report on Form 10-K for the year ended December 31, 2022, as well as any subsequent documents filed by SHBI or TCFC with the SEC, which are incorporated into this joint proxy statement/prospectus by reference. See the section entitled “Where You Can Find More Information” beginning on page 154.

Risks Relating to the Consummation of the Merger and SHBI Following the Merger

Because the market price of SHBI common stock may fluctuate prior to the effective time, including as a result of SHBI’s or TCFC’s financial performance prior to the effective time, shareholders cannot be certain of the market value of the merger consideration to be received by TCFC shareholders.

Upon the effective time, each share of TCFC common stock issued and outstanding will be canceled and converted into the right to receive the merger consideration, consisting of 2.3287 shares of SHBI common stock, plus cash in lieu of any fractional share interest. This exchange ratio is fixed and will not be adjusted for changes in the market price of either SHBI common stock or TCFC common stock. Changes in the price of SHBI common stock between now and the effective time will affect the value that TCFC shareholders will receive in the merger. Neither SHBI nor TCFC is permitted to terminate the merger agreement as a result of any increase or decrease in the market price of SHBI common stock or TCFC common stock.

Stock price changes may result from a variety of factors, including general market and economic conditions, changes in SHBI’s and TCFC’s businesses, operations and prospects, the performance of peer companies and other financial companies, volatility in the prices of securities in global financial markets, including market prices of SHBI, TCFC and other banking companies, the effects of the COVID-19 pandemic and regulatory considerations and tax laws, many of which are beyond SHBI’s and TCFC’s control. In particular and without limiting the foregoing, the prospective financial information, including the publicly available mean analyst estimates and estimated growth rates, as well as the other financial information included or incorporated by reference in this joint proxy statement/prospectus, was prepared prior to the recent failures of Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”), which has caused volatility in the financial markets and has contributed to a significant drop in the trading price of SHBI common stock and TCFC common stock. Continued financial market volatility and uncertainty will largely depend on future developments, which SHBI and TCFC cannot accurately predict or control, including actions taken by federal banking agencies, and reactions by companies, consumers, investors, governmental entities and financial markets to such actions. Therefore, at the time of the SHBI special meeting and the TCFC special meeting, SHBI shareholders and TCFC shareholders will not know the market value of the merger consideration that TCFC shareholders will receive at the effective time. You should obtain current market quotations for shares of SHBI common stock (NASDAQ: SHBI) and for shares of TCFC common stock (NASDAQ: TCFC).

Recent events impacting the financial services industry may adversely affect the business of SHBI, TCFC and the market price of their common stock.

Recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at SVB and Signature that resulted in the failure of those institutions

 

27

 

have resulted in decreased confidence in banks among depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets. These events have occurred against the backdrop of a rapidly rising interest rate environment which, among other things, has resulted in unrealized losses in longer duration securities and loans held by banks, more competition for bank deposits and may increase the risk of a potential recession. These events and developments could materially and adversely impact the business or financial condition of each of SHBI and TCFC and the combined company following completion of the merger, including through potential liquidity pressures, reduced net interest margins, and potential increased credit losses. These recent events and developments have, and could continue to, adversely impact the market price and volatility of SHBI common stock and TCFC common stock. These recent events may also result in changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material impact on the businesses of each of SHBI and TCFC and the combined company following completion of the merger. The cost of resolving the recent failures may prompt the Federal Deposit Insurance Corporation (the “FDIC”) to increase its premiums above the recently increased levels or to issue additional special assessments. SHBI and TCFC are generally unable to control the amount of premiums or special assessments that their respective banking subsidiaries may be required to pay for FDIC insurance.

The market price of SHBI common stock after the merger may be affected by factors different from those currently affecting the shares of TCFC common stock or SHBI common stock.

Upon completion of the merger, holders of TCFC common stock will become holders of SHBI common stock. SHBI’s business differs from that of TCFC and certain adjustments may be made to SHBI’s business as a result of the merger. Accordingly, the financial condition, results of operations of the combined company and the market price of SHBI common stock after the completion of the merger may be affected by factors different from those currently affecting the financial condition and results of operations of TCFC or SHBI on a standalone basis. For a discussion of the businesses of SHBI and TCFC and of certain factors to consider in connection with those businesses, see the documents incorporated by reference in this joint proxy statement/prospectus and referred to under the section entitled “Where You Can Find More Information” beginning on page 154.

The opinion of KBW to the SHBI board and the opinion of Piper Sandler to the TCFC board, will not reflect any changes since the date of such opinions, each of which was delivered prior to the signing of the merger agreement.

Each of the opinion of KBW, SHBI’s financial advisor, to the SHBI board and the opinion of Piper Sandler, TCFC’s financial advisor, to the TCFC board, was delivered on and dated December 14, 2022. Changes in the operations and prospects of SHBI or TCFC, general market and economic conditions and other factors that may be beyond the control of SHBI and TCFC may alter the value of SHBI or TCFC or the market price for shares of SHBI common stock or TCFC common stock as of the date of this joint proxy statement/prospectus, or may alter such values and prices by the effective time. Neither the opinion delivered by KBW to the SHBI board nor the opinion delivered by Piper Sandler to the TCFC board speaks as of any date other than the date of such opinion. KBW’s opinion is attached as Appendix B to this joint proxy statement/prospectus and Piper Sandler’s opinion is attached as Appendix C to this joint proxy statement/​prospectus. For a description of KBW’s opinion, see the section entitled “The Merger — Opinion of SHBI’s Financial Advisor” beginning on page 65. For a description of Piper Sandler’s opinion, see the section entitled “The Merger — Opinion of TCFC’s Financial Advisor” beginning on page 76. For a description of the other factors considered by the SHBI board in determining to approve the merger, see the section entitled “The Merger — SHBI’s Reasons for the Merger and Factors Considered by the SHBI Board” beginning on page 59. For a description of the other factors considered by the TCFC board in determining to approve the merger, see the section entitled “The Merger — TCFC’s Reasons for the Merger and Factors Considered by the TCFC Board” beginning on page 61.

SHBI and TCFC expect to incur substantial costs related to the merger and integration, and these costs may be greater than anticipated due to unexpected events.

SHBI and TCFC have incurred and expect to incur a number of non-recurring costs associated with the merger. These costs include legal, financial advisory, accounting, consulting and other advisory fees,

 

28

 

severance/employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs and other related costs. Some of these costs are payable by either SHBI or TCFC regardless of whether the merger is completed.

In addition, the combined company will incur integration costs following the completion of the merger as SHBI and TCFC integrate their businesses, including facilities and systems consolidation costs and employment-related costs. SHBI and TCFC may also incur additional costs to maintain employee morale and to retain key employees. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, payroll, compliance, treasury management, branch operations, vendor management, risk management, lines of business, pricing and benefits. While SHBI and TCFC have assumed that a certain level of costs will be incurred, there are many factors beyond their control that could affect the total amount or the timing of the integration costs. Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately. These integration costs may result in the combined company taking charges against earnings following the completion of the merger, and the amount and timing of such charges are uncertain at present. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction and integration costs over time.

Combining SHBI and TCFC may be more difficult, costly or time-consuming than expected, and SHBI and TCFC may fail to realize the anticipated benefits of the merger.

This is a merger transaction combining two financial institutions of relatively similar asset size. The success of the merger will depend on, among other things, the ability to realize the anticipated cost savings from combining the businesses of SHBI and TCFC. To realize the anticipated benefits and cost savings from the merger, SHBI and TCFC must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth. If SHBI and TCFC are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value of the common stock of the combined company following the completion of the merger.

SHBI and TCFC have operated and, until the effective time, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies could also divert management attention and resources. These integration matters could have an adverse effect on each of SHBI and TCFC during the transition period and on the combined company following completion of the merger.

Furthermore, the board of directors and executive leadership of the combined company will consist of former directors and executive officers from each of SHBI and TCFC. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

The future results of the combined company following the merger may suffer if the combined company does not effectively manage its expanded operations.

Following the merger, the size of the business of the combined company will increase beyond the current size of either SHBI’s or TCFC’s business. The combined company’s future success will depend, in part, upon its ability to manage this expanded business, which may pose challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs

 

29

 

and complexity. The combined company may also face increased scrutiny from governmental authorities as a result of the increased size of its business. There can be no assurances that the combined company will be successful or that it will realize the expected operating efficiencies, revenue enhancement or other benefits currently anticipated from the merger.

The combined company may be unable to retain SHBI and/or TCFC personnel successfully after the merger is completed.

The success of the merger will depend in part on the combined company’s ability to retain the talents and dedication of key employees currently employed by SHBI and TCFC. It is possible that these employees may decide not to remain with SHBI or TCFC, as applicable, while the merger is pending or with the combined company after the merger is consummated. If SHBI and TCFC are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, SHBI and TCFC could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, the combined company’s business activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. SHBI and TCFC also may not be able to locate or retain suitable replacements for any key employees who leave either company. See the section entitled “The Merger Agreement — Governance of the Combined Company” beginning on page 118.

The unaudited pro forma condensed combined financial data included in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be indicative of the combined company’s financial condition or results of operations of the combined company following the merger.

The unaudited pro forma condensed combined financial data contained in this joint proxy statement/​prospectus is presented for illustrative purposes only, is based on various adjustments, assumptions and preliminary estimates and may not be an indication of the combined company’s financial condition or results of operations following the merger. The actual financial condition and results of operations of the combined company following the merger may not be consistent with, or evident from, the unaudited pro forma condensed combined financial data.

In addition, the unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record TCFC’s identifiable assets acquired and liabilities assumed at fair value and the resulting preliminary bargain purchase gain recognized. The pro forma adjustments reflected in this joint proxy statement/prospectus are preliminary, and the final pro forma adjustments will be based upon the actual purchase price and the fair value of the assets and liabilities of TCFC as of the date of the completion of the merger. Financial markets generally, and the market prices of SHBI’s common stock and TCFC’s common stock, are experiencing higher than normal volatility and, therefore, the actual purchase price may vary significantly from the purchase price used in preparing the unaudited pro forma combined condensed financial information in this joint proxy statement/prospectus. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this joint proxy statement/prospectus. For more information, see the section entitled “Unaudited Pro Forma Condensed Combined Financial Data” beginning on page 130. Additionally, any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the stock price of the combined company.

Directors and officers of SHBI and TCFC may have interests in the merger that are in addition to, or different than, the interests of SHBI shareholders and TCFC shareholders.

SHBI shareholders and TCFC shareholders should be aware that some of SHBI’s and TCFC’s directors and officers may have interests in the merger as individuals and have arrangements that are different from, or in addition to, those of SHBI shareholders or TCFC shareholders. These interests and arrangements may create potential conflicts of interest and may cause some of these persons to view the proposed merger differently than how other SHBI shareholders or TCFC shareholders view it. The TCFC board and the SHBI board were aware of these interests and considered them, among other matters, when making their decisions to approve the merger, and in recommending that, in the case of the SHBI board,

 

30

 

SHBI shareholders vote to approve the issuance of SHBI common stock to TCFC shareholders as merger consideration pursuant to the merger agreement, and, in the case of the TCFC board, TCFC shareholders vote to approve the merger agreement. For a more complete description of these interests, see the sections entitled “The Merger — Interests of Certain SHBI Directors and Executive Officers in the Merger” beginning on page 90 and “The Merger — Interests of Certain TCFC Directors and Executive Officers in the Merger” beginning on page 94.

The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the prices of SHBI common stock and TCFC common stock to decline.

Consummation of the merger is subject to a number of conditions which much be fulfilled in order to complete the merger. Those conditions include: (i) the approval by SHBI shareholders of the SHBI merger and share issuance proposal and the approval by TCFC shareholders of the TCFC merger proposal; (ii) the receipt of the required regulatory approvals; (iii) the absence of any statute, rule, regulation, judgment, decree, injunction or other order that prohibits the consummation of the merger or the bank merger; (iv) effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part; and (v) approval for listing of the SHBI common stock to be issued in the merger. Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement and (c) the receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

If any condition to the merger is not satisfied or waived, to the extent permitted by law, the merger will not be completed. In addition, SHBI and TCFC may terminate the merger agreement under certain circumstances even if approval of the TCFC merger proposal and approval of the SHBI merger and share issuance proposal has been obtained, including if the merger has not been completed on or before December 31, 2023. If the merger is not completed, the respective trading prices of SHBI common stock and TCFC common stock on NASDAQ may decline to the extent that the current prices reflect a market assumption that the merger will be completed. In addition, neither company would realize any of the expected benefits of having completed the merger. For more information on closing conditions to the merger agreement, see the section entitled “The Merger Agreement — Conditions to Complete the Merger” beginning on page 121.

Failure to complete the merger could negatively impact SHBI or TCFC.

If the merger is not completed for any reason, including as a result of SHBI shareholders failing to approve the SHBI merger and share issuance proposal or TCFC shareholders failing to approve the TCFC merger proposal, there may be various adverse consequences and SHBI and/or TCFC may experience negative reactions from the financial markets and from their respective customers and employees. For example, SHBI’s or TCFC’s businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of SHBI common stock or TCFC common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. SHBI and/or TCFC also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against SHBI or TCFC to perform their respective obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, either SHBI or TCFC may be required to pay a termination fee of $10.5 million to the other party.

Additionally, each of SHBI and TCFC has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing this joint proxy statement/prospectus, and all filing and other fees paid in connection with the merger. If the merger is not completed, SHBI and TCFC would have to pay these expenses without realizing the expected benefits of the merger.

 

31

 

In connection with the merger, SHBI will assume TCFC’s outstanding debt obligations, and the combined company’s level of indebtedness following the completion of the merger could adversely affect the combined company’s ability to raise additional capital and meet its obligations under existing indebtedness.

In connection with the merger, SHBI has agreed to assume, or to cause its subsidiary to assume, TCFC’s obligations under the 4.75% fixed-to-floating rate subordinated notes due 2030 (the “subordinated notes”), the variable rate junior subordinated debentures due 2034 (the “2034 debentures”) and the variable rate junior subordinated debentures due 2035 (the “2035 debentures,” and together with the 2034 debentures, the “subordinated debentures”). In connection with the assumption of the subordinated notes and subordinated debentures, SHBI and TCFC will enter into any supplemental indentures or other documents reasonably required by the trustee to make such assumption effective.

SHBI’s existing debt, together with any future incurrence of additional indebtedness, and the assumption of TCFC’s outstanding indebtedness, could have important consequences for the combined company’s creditors and the combined company’s shareholders. For example, it could:

•

limit the combined company’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes;

​

•

restrict the combined company from making strategic acquisitions or cause the combined company to make non-strategic divestitures;

​

•

restrict the combined company from paying dividends to its shareholders;

​

•

increase the combined company’s vulnerability to general economic and industry conditions; and

​

•

require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the combined company’s indebtedness, thereby reducing the combined company’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.

​

SHBI and TCFC will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on SHBI and TCFC. These uncertainties may impair SHBI’s or TCFC’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others who deal with SHBI or TCFC to seek to change existing business relationships with SHBI or TCFC. In addition, the merger agreement requires that SHBI and TCFC conduct their business in the ordinary course of business consistent with past practice and restricts SHBI and TCFC from taking certain actions prior to the effective time or termination of the merger agreement without SHBI’s or TCFC’s consent in writing. These restrictions may prevent SHBI or TCFC from pursuing attractive business opportunities that may arise prior to the completion of the merger. See the section entitled “The Merger Agreement — Covenants and Agreements — Conduct of Business Prior to the Consummation of the Merger” on page 112.

The announcement of the proposed merger could disrupt SHBI’s and TCFC’s relationships with their customers, suppliers, business partners and others, as well as their operating results and businesses generally.

Whether or not the merger is ultimately consummated, as a result of uncertainty related to the proposed transactions, risks relating to the impact of the announcement of the merger on SHBI’s and TCFC’s businesses include the following:

•

their employees may experience uncertainty about their future roles, which might adversely affect SHBI’s and TCFC’s ability to retain and hire key personnel and other employees;

​

•

customers, suppliers, business partners and other parties with which SHBI and TCFC maintain business relationships may experience uncertainty about their respective futures and seek alternative relationships with third parties, seek to alter their business relationships with SHBI and TCFC or fail to extend an existing relationship with SHBI and TCFC; and

​

 

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•

SHBI and TCFC have each expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed merger.

​

If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact each party’s results of operations and financial condition.

The current volatile interest rate environment may adversely impact the fair value adjustments of investments and loans acquired in the merger.

Upon the closing of the merger, the combined company will need to adjust the fair value of TCFC’s investment and loan portfolios. The rising interest rate environment could have the effect of increasing the magnitude of the purchase accounting marks relating to such fair value adjustments, thereby increasing initial tangible book value dilution, extending the tangible book value earn-back period, and negatively impacting the combined company’s capital ratios, which may result in the combined company taking steps to strengthen its capital position.

The merger agreement limits TCFC’s and SHBI’s abilities to pursue alternatives to the merger and may discourage other companies from trying to acquire TCFC or SHBI.

The merger agreement contains “no shop” covenants that restrict each of TCFC’s and SHBI’s ability to, directly or indirectly, among other things initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by TCFC’s and SHBI’s respective boards, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposals. These provisions, which include a $10.5 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of TCFC or SHBI from considering or proposing that acquisition. For more information, see the sections entitled “The Merger Agreement — Agreement Not to Solicit Offers” and “The Merger Agreement — Termination Fee” beginning on pages 120 and 124, respectively.

The shares of SHBI common stock to be received by TCFC shareholders as a result of the merger will have different rights than shares of TCFC common stock.

Upon completion of the merger, the rights of former TCFC shareholders who receive shares of SHBI common stock in the merger and thereby become SHBI shareholders will be governed by the SHBI articles and the SHBI bylaws, as well as the MGCL. The rights associated with TCFC common stock are different from the rights associated with SHBI common stock. See the section entitled “Comparison of the Rights of Shareholders” beginning on page 142 for a discussion of the different rights associated with SHBI common stock.

SHBI shareholders and TCFC shareholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management of the combined organization.

SHBI shareholders and TCFC shareholders currently have the right to vote in the election of the board of directors and on various other matters affecting SHBI and TCFC, respectively. When the merger is completed, each SHBI shareholder and each TCFC shareholder will become a holder of common stock of the combined company, with a percentage ownership of the combined company that is smaller than the holder’s percentage ownership of either SHBI or TCFC individually, as applicable, prior to the consummation of the merger. Based on the number of shares of SHBI common stock and TCFC common stock outstanding as of the close of business on the respective record dates, and based on the number of shares of SHBI common stock expected to be issued in the merger, the former TCFC shareholders, as a group, are estimated to own approximately 40% of the fully diluted shares of the combined company immediately after the merger and current SHBI shareholders as a group are estimated to own approximately 60% of the fully diluted shares of the combined company immediately after the merger. Because of this, TCFC shareholders may have less influence on the management and policies of the combined company than they now have on the management and policies of TCFC, and SHBI shareholders may have less influence on the management and policies of the combined company than they now have on the management and policies of SHBI.

 

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Issuance of shares of SHBI common stock in connection with the merger may adversely affect the market price of SHBI common stock.

In connection with the payment of the merger consideration, SHBI expects to issue 13,296,910 shares of SHBI common stock to TCFC shareholders. The issuance of these new shares of SHBI common stock may result in fluctuations in the market price of SHBI common stock, including a stock price decrease.

Any goodwill incurred in the merger may negatively affect SHBI’s financial condition.

The merger will be accounted for under the acquisition method of accounting under GAAP. Under this method, TCFC’s assets and liabilities as of the date of the merger will be recorded at their respective fair values and added to those of SHBI. Any excess of the fair value of the net assets acquired as compared to the purchase price for TCFC will be recorded as a bargain purchase gain. Any excess of the purchase price for TCFC over the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. In accordance with current accounting guidance, goodwill will not be amortized but will be evaluated for impairment annually. As of the date hereof, the merger would result in a bargain purchase gain primarily due to the recent volatility in the banking industry and the resultant decrease in the market value of SHBI’s common stock. However, to the extent that goodwill is created upon consummation of the merger, failure to realize expected benefits of the merger could adversely impact the carrying value of the goodwill recognized in the merger, and in turn negatively affect SHBI’s financial condition. Changes in the price of SHBI’s common stock can and will impact the determination of a bargain purchase gain or resultant goodwill at the time of the merger.

SHBI shareholders and TCFC shareholders will not have appraisal or dissenters’ rights in the merger.

Appraisal rights (also known as dissenters’ rights) are statutory rights that, if applicable under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction.

Under Section 3-202 of the MGCL, the holders of SHBI common stock and TCFC common stock, respectively, will not be entitled to appraisal or dissenters’ rights in connection with the merger.

Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact the business and operations of SHBI and TCFC.

SHBI shareholders and/or TCFC shareholders may file lawsuits against SHBI, TCFC and/or the directors and officers of either company in connection with the merger. One of the conditions to the closing is that no judgment, decree, injunction or other order issued by any jurisdiction or governmental authority preventing the consummation of the merger, the bank merger or any of the other transactions contemplated by the merger agreement be in effect. If any plaintiff were successful in obtaining an injunction prohibiting SHBI or TCFC defendants from completing the merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to SHBI and/or TCFC, including any cost associated with the indemnification of directors and officers of each company or the defense or settlement of any shareholder lawsuits filed in connection with the merger. Such litigation could have an adverse effect on the financial condition and results of operations of SHBI and TCFC and could prevent or delay the completion of the merger.

Risks Relating to SHBI’s Business

You should read and consider risk factors specific to SHBI’s business that will also affect SHBI after the merger. These risks are described in the sections entitled “Risk Factors” in SHBI’s Annual Report on Form 10-K for the year ended December 31, 2022, SHBI’s Quarterly Reports on Form 10-Q and in other documents that are attached as appendices to this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 154 of this joint proxy statement/​prospectus for the location of information incorporated by reference into this joint proxy statement/​prospectus.

 

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Risks Relating to TCFC’s Business

You should read and consider risk factors specific to TCFC’s business that will also affect SHBI following the completion of the merger. These risks are described in the sections entitled “Risk Factors” in TCFC’s Annual Report on Form 10-K for the year ended December 31, 2022, TCFC’s Quarterly Reports on Form 10-Q and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 154 of this joint proxy statement/prospectus for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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THE SHBI SPECIAL MEETING

This section contains information for SHBI shareholders about the SHBI special meeting that SHBI has called to allow SHBI shareholders to consider and vote on the SHBI merger and share issuance proposal and the SHBI adjournment proposal. This joint proxy statement/prospectus is accompanied by a notice of the SHBI special meeting, and a form of proxy card that the SHBI board is soliciting for use by SHBI shareholders at the SHBI special meeting and at any adjournments or postponements of the SHBI special meeting.

Time, Date and Place

The SHBI special meeting will be held virtually and conducted via live audio webcast on Tuesday, June 20, 2023, at 9:00 a.m., Eastern Time. SHBI shareholders may participate in the SHBI special meeting by first registering at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp by 11:59 p.m., Eastern Time, on Saturday, June 17, 2023. SHBI shareholders will receive a meeting invitation by e-mail with a unique link to join the SHBI special meeting along with a password prior to the SHBI special meeting date.

Matters to be Considered

At the SHBI special meeting, SHBI shareholders will be asked to consider and vote upon the following proposals:

•

the SHBI merger and share issuance proposal; and

​

•

the SHBI adjournment proposal.

​

No other business may be conducted at the SHBI special meeting. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A, and SHBI shareholders are encouraged to read it carefully in its entirety.

Recommendation of the SHBI Board

The SHBI board has unanimously (i) determined that merger agreement and the transactions contemplated thereby, including the merger and the issuance of SHBI common stock, are advisable and fair to and in the best interests of SHBI and its shareholders and (ii) approved and adopted the merger, the merger agreement and the transactions contemplated thereby. The SHBI board unanimously recommends that SHBI shareholders vote “FOR” the SHBI merger and share issuance proposal. See the section entitled “The Merger — SHBI’s Reasons for the Merger and Factors Considered by the SHBI Board” beginning on page 59.

The SHBI board also unanimously recommends that SHBI shareholders vote “FOR” the SHBI adjournment proposal.

Shares Outstanding and Entitled to Vote; Record Date

The close of business on Tuesday, May 2, 2023 has been fixed by SHBI as the SHBI record date, for the determination of SHBI shareholders entitled to notice of and to vote at the SHBI special meeting and any adjournment or postponement of the SHBI special meeting. At the close of business on the SHBI record date, there were 19,897,410 shares of SHBI common stock outstanding and entitled to vote, held by 1,919 holders of record. Each share of SHBI common stock entitles the holder to one vote at the SHBI special meeting on all matters properly presented at the SHBI special meeting.

Quorum

A quorum, consisting of the holders of a majority of the shares entitled to vote at the SHBI special meeting, must be present in person or by proxy before any action may be taken at the SHBI special meeting. Once a share of SHBI common stock is represented at the SHBI special meeting, it will be counted for the purpose of determining a quorum not only at the SHBI special meeting but also at any adjournment or postponement of the SHBI special meeting. In the event that a quorum is not present at the SHBI special meeting, it is expected that the SHBI special meeting will be adjourned or postponed.

 

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Broker Non-Votes

A broker non-vote occurs when a bank, broker, trustee or other nominee is not permitted to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. It is expected that all proposals to be voted on at the SHBI special meeting will be “non-routine” matters, and, as such, broker non-votes, if any, will not be counted as present and entitled to vote for purposes of determining a quorum at the SHBI special meeting. If your bank, broker, trustee or other nominee holds your shares of SHBI common stock in “street name,” such entity will vote your shares of SHBI common stock only if you provide instructions on how to vote by complying with the instructions provided to you by your bank, broker, trustee or other nominee with this joint proxy statement/prospectus.

Adjournments and Postponements

Although it is not currently expected, the SHBI special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the SHBI special meeting to approve the SHBI merger and share issuance proposal or if a quorum is not present at the SHBI special meeting. Other than an announcement to be made at the SHBI special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the SHBI special meeting for the purpose of soliciting additional proxies will allow SHBI shareholders who have already sent in their proxies to revoke them at any time prior to their use at the SHBI special meeting as adjourned or postponed.

SHBI Shareholder Agreements

Each director and executive officer of SHBI, who own in the aggregate approximately 11.3% of the outstanding shares of SHBI common stock as of the SHBI record date, have entered into a SHBI shareholder agreement with TCFC. Subject to the terms of the SHBI shareholder agreement, such shareholders have agreed, among other things, to vote (or cause to be voted), in person, or by proxy, or deliver a written consent (or cause a consent to be delivered) covering all shares of SHBI common stock (whether acquired before or after the merger) beneficially owned by him, her or it (i) in favor of approval of the issuance of shares of SHBI common stock to TCFC shareholders as the merger consideration and any other matters required to be approved by the SHBI shareholders for the consummation of the merger; (ii) against any action or agreement that, to the knowledge of the shareholder, would result in a breach of any covenant, representation or warranty or any other material obligation or agreement of SHBI contained in the merger agreement or of the shareholder contained in the SHBI shareholder agreement; and (iii) against any alternative acquisition proposal and certain other actions that could impede the merger or the shareholder’s performance of the SHBI shareholder agreement. These shareholders also agreed to certain restrictions on their ability to transfer their shares of SHBI common stock or their voting rights of such shares while the SHBI shareholder agreement remains in effect. The SHBI shareholder agreement is substantially in the form included as Annex B to the merger agreement.

Vote Required

SHBI Merger and Share Issuance Proposal

Vote Required:   The affirmative vote of the holders of at least a majority of the outstanding shares of SHBI common stock is necessary to approve the SHBI merger and share issuance proposal. Approval of the SHBI merger and share issuance proposal is a condition to the completion of the merger.

Effect of abstentions, broker non-votes and failure to vote:   Because the SHBI merger and share issuance proposal is required to be approved by the holders of at least a majority of the outstanding shares of SHBI common stock, abstentions and broker non-votes, as well as the failure of a SHBI shareholder to vote by proxy or at the SHBI special meeting, will have the same effect as a vote “AGAINST” the proposal to approve the SHBI merger and share issuance proposal.

 

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SHBI Adjournment Proposal

Vote Required:   The affirmative vote of a majority of the shares of SHBI common stock represented and entitled to vote at the SHBI special meeting (which shares voting affirmatively must constitute a majority of the required quorum) is necessary to approve the SHBI adjournment proposal.

Effect of abstentions, broker non-votes and failure to vote:   Because the affirmative vote of a majority of shares of SHBI common stock represented and entitled to vote at the SHBI special meeting is needed to approve the SHBI adjournment proposal, abstentions and broker non-votes will not have any effect on the SHBI adjournment proposal.

Attending the SHBI Special Meeting

While not required, all holders of SHBI common stock, including shareholders of record and shareholders who hold their shares in street name through banks, brokers or other nominees, are invited to attend the SHBI special meeting. The SHBI special meeting may be accessed via the SHBI special meeting website, where SHBI shareholders will be able to listen to the SHBI special meeting, submit questions and vote online.

You are entitled to attend the SHBI special meeting via the SHBI special meeting website only if you were a shareholder of record at the close of business on the SHBI record date or you held your SHBI shares beneficially in the name of a bank, broker, trustee or other nominee as of the SHBI record date. If you were a shareholder of record at the close of business on the SHBI record date and wish to attend the SHBI special meeting via the SHBI special meeting website, you will need to first register at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp no later than 11:59 p.m., Eastern Time on Saturday, June 17, 2023. You will receive a meeting invitation by e-mail with your unique link to join the SHBI special meeting along with a password prior to the SHBI special meeting date. If you are a shareholder of record, your virtual control number will be on your proxy card.

If your shares are held in street name, please see the section entitled “— Shares Held in Street Name” below for further information. Please review this information prior to the SHBI special meeting to ensure you have access.

SHBI shareholders will have substantially the same opportunities to participate in the SHBI special meeting as they would have at a physical, in person meeting. Shareholders as of the SHBI record date will be able to attend, vote, examine the shareholder list and submit questions during a portion of the meeting via the online platform. You may submit questions in advance of the meeting by emailing your question, along with proof of stock ownership, to virtualmeeting@viewproxy.com. You may also submit questions during the live audio webcast of the SHBI special meeting via the SHBI special meeting website. To ensure the SHBI special meeting is conducted in a manner that is fair to all shareholders, we may exercise discretion in determining the order in which questions are answered and the amount of time devoted to any one question. We reserve the right to edit or reject questions we deem inappropriate or not relevant to the SHBI special meeting’s limited purpose.

Technical assistance will be available for SHBI shareholders who experience an issue accessing the SHBI special meeting. Please be sure to check-in 15 minutes prior to the start of the SHBI special meeting so that any technical difficulties may be addressed before the live audio webcast begins. If you encounter any difficulties accessing the SHBI special meeting webcast during the check-in or meeting time, please e-mail virtualmeeting@viewproxy.com or call 866-612-8937.

How to Vote Shares of SHBI Common Stock

SHBI shareholders may vote by proxy or at the SHBI special meeting via the SHBI special meeting website. If you hold shares of SHBI common stock in your name as a record holder, to submit a proxy, you, as a holder of SHBI common stock, may use one of the following methods:

​

•

By telephone:   by calling the toll-free number indicated on the accompanying proxy card and following the recorded instructions;

​

 

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​

•

Through the Internet:   by visiting the website indicated on the accompanying proxy card and following the instructions; or

​

​

•

By mail:   by completing and returning the accompanying proxy card in the enclosed postage-paid envelope. The envelope requires no additional postage if mailed in the United States.

​

SHBI requests that SHBI shareholders vote by telephone, via the Internet or by completing and signing the accompanying proxy card and returning it to SHBI as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of SHBI common stock represented by it will be voted at the SHBI special meeting in accordance with the instructions contained on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the SHBI merger and share issuance proposal and “FOR” the SHBI adjournment proposal.

If you are a beneficial owner, the holder should check the voting form used by your bank, broker, trustee or other nominee to determine whether the holder may vote by telephone or the Internet.

Every vote is important. Accordingly, you should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not you plan to attend the SHBI special meeting virtually via the SHBI special meeting website. Sending in your proxy card or voting by telephone or via the Internet will not prevent you from voting your shares personally via the SHBI special meeting website at the meeting because you may revoke your proxy at any time before it is voted.

Shares Held in Street Name

If your shares are held in “street name” through a bank, broker, trustee or other nominee, you must instruct the bank, broker, trustee or other nominee on how to vote your shares. Your bank, broker, trustee or other nominee will vote your shares only if you provide specific instructions on how to vote by following the instructions provided to you by your bank, broker, trustee or other nominee.

Further, banks, brokers, trustees or other nominees who hold shares of SHBI common stock on behalf of their customers may not give a proxy to SHBI to vote those shares with respect to any of the proposals without specific instructions from their customers, as banks, brokers, trustees and other nominees do not have discretionary voting power on the proposals that will be voted upon at the SHBI special meeting, including the SHBI merger and share issuance proposal and the SHBI adjournment proposal.

If you hold your shares of SHBI common stock beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares of SHBI common stock during the SHBI special meeting. If you are unable to obtain a legal proxy to vote your shares of SHBI common stock, you will still be able to attend the SHBI special meeting (but will not be able to vote your shares of SHBI common stock) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at https://viewproxy.com/ShoreBancsharesSM/2023/htype.asp. On the day of the SHBI special meeting, you may only vote during the SHBI special meeting by e-mailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the SHBI special meeting.

Revocation of Proxies

A SHBI shareholder can revoke a proxy at any time before his or her shares are voted. If the SHBI shareholder is a shareholder of record, the SHBI shareholder can revoke a proxy by:

•

delivering to SHBI prior to the SHBI special meeting a written notice of revocation addressed to: Andrea E. Colender, Secretary, Shore Bancshares, Inc., 18 E. Dover Street, Easton, Maryland 26101;

​

•

completing, signing and returning a new proxy card with a later date before the date of the SHBI special meeting, and any earlier dated proxy will be revoked automatically;

​

​

•

calling the toll free number listed on the SHBI proxy card or by accessing the Internet site listed on the SHBI proxy card to change his or her vote by 11:59 p.m., Eastern Time, on Monday,

​

 

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June 19, 2023, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy will be revoked; or

•

attending the SHBI special meeting virtually and voting during the meeting via the SHBI special meeting website and following the instructions, and any earlier proxy will be revoked. However, simply attending the SHBI special meeting without voting will not revoke a SHBI proxy.

​

If a SHBI shareholder has instructed a bank, broker or other nominee to vote such SHBI shareholder’s shares of SHBI common stock, the SHBI shareholder must follow directions received from the bank, broker or other nominee to change his or her vote. Revocation of a proxy or a later-dated proxy received by SHBI after the vote will not affect the vote.

Attendance at the SHBI special meeting will not, in and of itself, constitute revocation of a proxy.

Delivery of Proxy Materials

As permitted by applicable law, only one copy of this joint proxy statement/prospectus is being delivered to SHBI shareholders residing at the same address, unless such SHBI shareholders have notified SHBI of their desire to receive multiple copies of the joint proxy statement/prospectus.

SHBI will promptly deliver, upon oral or written request, a separate copy of the joint proxy statement/​prospectus to any SHBI shareholder residing at an address to which only one copy of such document was mailed. Requests for additional copies should be directed to SHBI’s proxy solicitor, Alliance Advisors, by calling toll-free at (855) 742-8276.

Solicitation of Proxies

SHBI will pay the costs of soliciting its shareholders’ proxies, as well as all other costs incurred by it in connection with the solicitation of proxies from its shareholders on behalf of the SHBI board. In addition to solicitation by mail, directors, officers and employees of SHBI may solicit proxies from shareholders of SHBI in person or by telephone, facsimile or other electronic methods without compensation other than reimbursement for their actual expenses. SHBI has engaged Alliance Advisors as its proxy solicitation firm. Such firm will be paid its customary fee of $25,000 and out of pocket expenses.

Arrangements also will be made with custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and SHBI will reimburse such custodians, nominees and fiduciaries for their reasonable out of pocket expenses in connection therewith.

Other Matters to Come Before the SHBI Special Meeting

SHBI management knows of no other business to be presented at the SHBI special meeting, but if any other matters are properly presented to the meeting or any adjournments thereof, the persons named in the proxies will vote upon them in accordance with the SHBI board’s recommendations.

Questions and Additional Information

If a SHBI shareholder has questions about the SHBI merger and share issuance proposal, or the process for voting, or if additional copies of this document or a replacement proxy card are needed, please contact SHBI’s proxy solicitor, Alliance Advisors, by calling toll-free at (855) 742-8276, or via e-mail to SHBI@allianceadvisors.com.

 

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SHBI PROPOSALS

PROPOSAL 1 — THE SHBI MERGER AND SHARE ISSUANCE PROPOSAL

SHBI is requesting that holders of the outstanding shares of SHBI common stock consider and vote upon a proposal to approve the merger and issuance of shares of SHBI common stock in connection with the merger pursuant to the terms of the merger agreement, a copy of which is attached as Appendix A to this joint proxy statement/prospectus.

Approval of the SHBI merger and share issuance proposal by SHBI shareholders is a condition to the closing of the merger. If the SHBI merger and share issuance proposal is not approved by SHBI’s shareholders, the merger will not occur.

Vote Required for Approval

The affirmative vote of the holders of at least a majority of the outstanding shares of SHBI common stock is necessary to approve the SHBI merger and share issuance proposal. Because the SHBI merger and share issuance proposal is required to be approved by the holders of at least a majority of the outstanding shares of SHBI common stock, abstentions and broker non-votes, as well as the failure of a SHBI shareholder to vote by proxy or at the SHBI special meeting, will have the same effect as a vote “AGAINST” the SHBI merger and share issuance proposal.

Recommendation of the SHBI Board

THE SHBI BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE SHBI MERGER AND SHARE ISSUANCE PROPOSAL.

PROPOSAL 2 — ADJOURNMENT OF THE SHBI SPECIAL MEETING

If there are not sufficient votes to constitute a quorum or to approve the SHBI merger and share issuance proposal at the time of the SHBI special meeting, the merger cannot be completed unless the SHBI special meeting is adjourned to a later date or dates to permit further solicitation of proxies. To allow proxies that have been received by SHBI at the time of the special meeting to be voted for an adjournment, if deemed necessary, SHBI has submitted the SHBI adjournment proposal to its shareholders as a separate matter for their consideration. If it is deemed necessary to adjourn the special meeting, no notice of the adjourned meeting is required to be given to SHBI shareholders, other than an announcement at the meeting of the time and place to which the meeting is adjourned, as well as the means, if any, by which SHBI shareholders can be present and vote at the adjourned meeting through the use of communications equipment.

Approval of the SHBI adjournment proposal by SHBI shareholders is not a condition to the closing of the merger.

Vote Required for Approval

The affirmative vote of a majority of the shares of SHBI common stock represented and entitled to vote at the SHBI special meeting (which shares voting affirmatively must constitute a majority of the required quorum) is necessary to approve the SHBI adjournment proposal. Because the affirmative vote of a majority of shares of SHBI common stock represented and entitled to vote at the SHBI special meeting is needed to approve the SHBI adjournment proposal, abstentions and broker non-votes will not have any effect on the SHBI adjournment proposal.

Recommendation of the SHBI Board

THE SHBI BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE SHBI ADJOURNMENT PROPOSAL.

 

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THE TCFC SPECIAL MEETING

This section contains information for TCFC shareholders about the TCFC special meeting that TCFC has called to allow TCFC shareholders to consider and vote on the TCFC merger proposal, the TCFC compensation proposal and the TCFC adjournment proposal. This joint proxy statement/prospectus is accompanied by a notice of the TCFC special meeting and a form of proxy card that the TCFC board is soliciting for use by TCFC shareholders at the TCFC special meeting and at any adjournments or postponements of the TCFC special meeting.

Time, Date and Place

The TCFC special meeting will be held virtually via live audio webcast at www.virtualshareholdermeeting.com/TCFC2023SM at 10:00 a.m., Eastern Time, on Tuesday, June 20, 2023.

Matters to be Considered

At the TCFC special meeting, TCFC shareholders will be asked to consider and vote upon the following proposals:

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the TCFC merger proposal;

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the TCFC compensation proposal; and

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the TCFC adjournment proposal.

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No other business may be conducted at the TCFC special meeting. A copy of the merger agreement is included in this joint proxy statement/prospectus as Appendix A, and TCFC shareholders are encouraged to read it carefully in its entirety.

Recommendation of the TCFC Board

The TCFC board has unanimously (i) determined that the merger, the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TCFC and its shareholders, (ii) approved and adopted the merger agreement and (iii) authorized and approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger. The TCFC board unanimously recommends that TCFC shareholders vote “FOR” the TCFC merger proposal. See the section entitled “The Merger — TCFC’s Reasons for the Merger and Factors Considered by the TCFC Board” beginning on page 61.

The TCFC board also unanimously recommends that TCFC shareholders vote “FOR” the TCFC compensation proposal and “FOR” the TCFC adjournment proposal.

Shares Outstanding and Entitled to Vote; Record Date

The close of business on Tuesday, May 2, 2023 has been fixed by TCFC as the TCFC record date, for the determination of TCFC shareholders entitled to notice of and to vote at the TCFC special meeting and any adjournment or postponement of the TCFC special meeting. At the close of business on the TCFC record date, there were 5,669,274 shares of TCFC common stock outstanding and entitled to vote, held by 741 holders of record. Each share of TCFC common stock entitles the holder to one vote at the TCFC special meeting on all matters properly presented at the TCFC special meeting.

Quorum

A quorum, consisting of the holders of a majority of the shares entitled to vote at the TCFC special meeting, must be present in person or by proxy before any action may be taken at the TCFC special meeting. Once a share of TCFC common stock is represented at the TCFC special meeting, it will be counted for the purpose of determining a quorum not only at the TCFC special meeting but also at any adjournment or postponement of the TCFC special meeting. In the event that a quorum is not present at the TCFC special meeting, it is expected that the TCFC special meeting will be adjourned or postponed.

 

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Broker Non-Votes

A broker non-vote occurs when a bank, broker, trustee or other nominee is not permitted to vote on a “non-routine” matter without instructions from the beneficial owner of the shares and the beneficial owner fails to provide the bank, broker, trustee or other nominee with such instructions. Broker non-votes only count toward a quorum if at least one proposal is presented with respect to which the bank, broker, trustee or other nominee has discretionary authority. It is expected that all proposals to be voted on at the TCFC special meeting will be “non-routine” matters, and, as such, broker non-votes, if any, will not be counted as present and entitled to vote for purposes of determining a quorum at the TCFC special meeting. If your bank, broker, trustee or other nominee holds your shares of TCFC common stock in “street name,” such entity will vote your shares of TCFC common stock only if you provide instructions on how to vote by complying with the instructions provided to you by your bank, broker, trustee or other nominee with this joint proxy statement/prospectus.

Adjournments and Postponements

Although it is not currently expected, the TCFC special meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, if there are insufficient votes at the time of the TCFC special meeting to approve the TCFC merger proposal or if a quorum is not present at the TCFC special meeting. Other than an announcement to be made at the TCFC special meeting of the time, date and place of an adjourned meeting, an adjournment generally may be made without notice. Any adjournment or postponement of the TCFC special meeting for the purpose of soliciting additional proxies will allow the TCFC shareholders who have already sent in their proxies to revoke them at any time prior to their use at the TCFC special meeting as adjourned or postponed.

TCFC Shareholder Agreements

Each director and executive officer of TCFC, who own in the aggregate approximately 7.3% of the outstanding shares of TCFC common stock as of the TCFC record date, has entered into a TCFC shareholder agreement with SHBI. Subject to the terms of the TCFC shareholder agreement, such shareholders have agreed, among other things, to vote (or cause to be voted), in person, or by proxy, or deliver a written consent (or cause a consent to be delivered) covering all shares of TCFC common stock (whether acquired before or after the merger) beneficially owned by such shareholder (i) in favor of approval of the merger, the merger agreement and the transactions contemplated thereby; (ii) against any action or agreement that, to the knowledge of the shareholder, would result in a breach of any covenant, representation or warranty or any other material obligation or agreement of TCFC contained in the merger agreement or of the shareholder contained in the TCFC shareholder agreement; and (iii) against any alternative acquisition proposal and certain other actions that could impede the merger or the shareholder’s performance of the TCFC shareholder agreement. These shareholders also agreed to certain restrictions on their ability to transfer their shares of TCFC common stock or their voting rights of such shares while the TCFC shareholder agreement remains in effect.

The TCFC shareholder agreement is substantially in the form included as Annex A to the merger agreement.

Vote Required

TCFC Merger Proposal

Vote Required:   The affirmative vote of the holders of at least two-thirds of the outstanding shares of TCFC common stock is necessary to approve the TCFC merger proposal.

Effect of abstentions, broker non-votes and failure to vote:   Because the proposal to approve the TCFC merger proposal is required to be approved by the holders of at least two-thirds of the outstanding shares of TCFC common stock, abstentions and broker non-votes, as well as the failure of a TCFC shareholder to vote by proxy or in person at the TCFC special meeting, will have the same effect as a vote “AGAINST” the TCFC merger proposal.

 

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TCFC Compensation Proposal

Vote Required:   The affirmative vote of a majority of the shares of TCFC common stock represented and entitled to vote at the TCFC special meeting is necessary to approve the TCFC compensation proposal.

Effect of abstentions, broker non-votes and failure to vote:   Because the affirmative vote of a majority of shares of TCFC common stock represented and entitled to vote at the TCFC special meeting (which shares voting affirmatively must constitute a majority of the required quorum) is needed to approve the TCFC compensation proposal, abstentions and broker non-votes will not have any effect on the TCFC compensation proposal.

TCFC Adjournment Proposal

Vote Required:   The affirmative vote of a majority of the shares of TCFC common stock represented and entitled to vote at the TCFC special meeting is necessary to approve the TCFC adjournment proposal.

Effect of abstentions, broker non-votes and failure to vote:   Because the affirmative vote of a majority of shares of TCFC common stock represented and entitled to vote at the TCFC special meeting (which shares voting affirmatively must constitute a majority of the required quorum) is needed to approve the TCFC adjournment proposal, abstentions and broker non-votes will not have any effect on the TCFC adjournment proposal.

Attending the TCFC Special Meeting

While not required, all holders of TCFC common stock, including shareholders of record and shareholders who hold their shares in street name through banks, brokers or other nominees, are invited to attend the TCFC special meeting. The TCFC special meeting may be accessed via the TCFC special meeting website, where TCFC shareholders will be able to listen to the TCFC special meeting, submit questions and vote online. You are entitled to attend the TCFC special meeting via the TCFC special meeting website only if you were a shareholder of record at the close of business on the TCFC record date or you held your TCFC shares beneficially in the name of a bank, broker, trustee or other nominee as of the TCFC record date.

Shareholders will have substantially the same opportunities to participate in the TCFC special meeting as they would have at a physical, in person meeting. Shareholders as of the TCFC record date will be able to attend, vote, examine the shareholder list, and submit questions during a portion of the meeting via the online platform. You may submit questions during the live audio webcast of the TCFC special meeting via the TCFC special meeting website. To ensure the TCFC special meeting is conducted in a manner that is fair to all shareholders, we may exercise discretion in determining the order in which questions are answered and the amount of time devoted to any one question. We reserve the right to edit or reject questions we deem inappropriate or not relevant to the TCFC special meeting’s limited purpose.

Technical assistance will be available for TCFC shareholders who experience an issue accessing the TCFC special meeting. Please be sure to check in 15 minutes prior to the start of the TCFC special meeting so that any technical difficulties may be addressed before the live audio webcast begins. If you encounter any difficulties accessing the TCFC special meeting webcast during the check-in or meeting time, please call 844-986-0822 (U.S.) or 303-562-9302 (International).

How to Vote Shares of TCFC Common Stock

TCFC shareholders may vote by proxy or at the TCFC special meeting via the TCFC special meeting website. If you hold your shares of TCFC common stock in your name as a record holder, to submit a proxy, you, as a holder of TCFC common stock, may use one of the following methods:

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By telephone:   by calling the toll-free number indicated on the accompanying proxy card and following the recorded instructions;

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Through the Internet:   by visiting the website indicated on the accompanying proxy card and following the instructions; or

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By mail:   by completing and returning the accompanying proxy card in the enclosed postage-paid envelope. The envelope requires no additional postage if mailed in the United States.

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TCFC requests that TCFC shareholders vote by telephone, via the Internet or by completing and signing the accompanying proxy card and returning it to TCFC as soon as possible in the enclosed postage-paid envelope. When the accompanying proxy card is returned properly executed, the shares of TCFC common stock represented by it will be voted at the TCFC special meeting in accordance with the instructions contained on the proxy card. If you make no specification on your proxy card as to how you want your shares voted before signing and returning it, your proxy will be voted “FOR” the TCFC merger proposal, “FOR” the TCFC compensation proposal, and “FOR” the TCFC adjournment proposal.

Every vote is important. Accordingly, you should sign, date and return the enclosed proxy card, or vote via the Internet or by telephone, whether or not you plan to attend the TCFC special meeting virtually via the TCFC special meeting website. Sending in your proxy card or voting by telephone or via the Internet will not prevent you from voting your shares personally via the TCFC special meeting website at the meeting because you may revoke your proxy at any time before it is voted.

Shares Held in Street Name

If your shares are held in “street name” through a bank, broker, trustee or other nominee, you must instruct the bank, broker, trustee or other nominee on how to vote your shares. Your bank, broker, trustee or other nominee will vote your shares only if you provide specific instructions on how to vote by following the instructions provided to you by your bank, broker, trustee or other nominee.

Further, banks, brokers, trustees or other nominees who hold shares of TCFC common stock on behalf of their customers may not give a proxy to TCFC to vote those shares with respect to any of the proposals without specific instructions from their customers, as banks, brokers, trustees and other nominees do not have discretionary voting power on the proposals that will be voted upon at the TCFC special meeting, including the TCFC merger proposal and the TCFC adjournment proposal.

Shares Held in TCFC Employee Stock Ownership Plan

Participants in the TCFC ESOP will each receive a voting instruction card that reflects all of the shares that the participant may direct the trustee to vote on his or her behalf under the TCFC ESOP. Under the terms of the TCFC ESOP, the TCFC ESOP trustee votes all shares held by the TCFC ESOP, but each TCFC ESOP participant may direct the trustee how to vote the shares of TCFC common stock allocated to his or her account. The TCFC ESOP trustee will vote all unallocated shares of TCFC common stock held by the TCFC ESOP and allocated shares for which no voting instructions are received in the same proportion as shares for which it has received timely voting instructions. The deadline for returning a voting instruction card to the TCFC ESOP trustee is 11:59 p.m., Eastern Time, on Monday, June 19, 2023.

Revocation of Proxies

A TCFC shareholder can revoke a proxy at any time before his or her shares are voted. If the TCFC shareholder is a shareholder of record, the TCFC shareholder can revoke a proxy by:

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delivering to TCFC prior to the TCFC special meeting a written notice of revocation addressed to: Christy Lombardi, Secretary, The Community Financial Corporation, 3035 Leonardtown Road, Waldorf, Maryland 20601;

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completing, signing and returning a new proxy card with a later date before the date of the TCFC special meeting, and any earlier dated proxy will be revoked automatically;

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calling the toll free number listed on the TCFC proxy card or by accessing the Internet site listed on the TCFC proxy card to change his or her vote by 11:59 p.m., Eastern Time, on Monday, June 19, 2023, in which case the later submitted proxy via telephone or Internet, as the case may be, will be recorded and the earlier dated proxy will be revoked; or

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attending the TCFC special meeting and voting during the meeting by visiting www.virtualshareholdermeeting.com/TCFC2023SM and following the instructions, and any

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earlier proxy will be revoked. However, simply attending the TCFC special meeting without voting will not revoke a TCFC proxy.

If a TCFC shareholder has instructed a bank, broker or other nominee to vote such TCFC shareholder’s shares of TCFC common stock, the TCFC shareholder must follow directions received from the bank, broker or other nominee to change his or her vote. Revocation of a proxy or a later-dated proxy received by TCFC after the vote will not affect the vote.

Attendance at the TCFC special meeting will not, in and of itself, constitute revocation of a proxy.

Delivery of Proxy Materials

As permitted by applicable law, only one copy of this joint proxy statement/prospectus is being delivered to TCFC shareholders residing at the same address, unless such TCFC shareholders have notified TCFC of their desire to receive multiple copies of the joint proxy statement/prospectus.

TCFC will promptly deliver, upon oral or written request, a separate copy of the joint proxy statement/​prospectus to any TCFC shareholder residing at an address to which only one copy of such document was mailed. Requests for additional copies should be directed to TCFC’s proxy solicitor, Alliance Advisors, by calling toll-free at (866) 584-0578.

Solicitation of Proxies

TCFC will pay the costs of soliciting its shareholders’ proxies, as well as all other costs incurred by it in connection with the solicitation of proxies from its shareholders on behalf of the TCFC board. In addition to solicitation by mail, directors, officers and employees of TCFC may solicit proxies from shareholders of TCFC in person or by telephone, facsimile or other electronic methods without compensation other than reimbursement for their actual expenses. TCFC has engaged Alliance Advisors as its proxy solicitation firm. Such firm will be paid a fee of $15,000, plus approved and reasonable out of pocket expenses and certain additional fees.

Arrangements also will be made with custodians, nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of stock held of record by such persons, and TCFC will reimburse such custodians, nominees and fiduciaries for their reasonable out of pocket expenses in connection therewith.

Other Matters to Come Before the TCFC Special Meeting

TCFC management knows of no other business to be presented at the TCFC special meeting, but if any other matters are properly presented to the meeting or any adjournments thereof, the persons named in the proxies will vote upon them in accordance with the TCFC board’s recommendations.

Questions and Additional Information

If a TCFC shareholder has questions about the merger, or the process for voting, or if additional copies of this document or a replacement proxy card are needed, please contact TCFC’s proxy solicitor, Alliance Advisors, by calling toll-free at (866) 584-0578, or via e-mail to TCFC@allianceadvisors.com.

 

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TCFC PROPOSALS

PROPOSAL 1 — THE TCFC MERGER PROPOSAL

TCFC is requesting that holders of the outstanding shares of TCFC common stock consider and vote upon a proposal to approve and adopt the merger agreement, a copy of which is attached as Appendix A to this joint proxy statement/prospectus.

Approval of the TCFC merger proposal by TCFC shareholders is a condition to the closing of the merger. If the TCFC merger proposal is not approved by TCFC’s shareholders, the merger will not occur.

Vote Required for Approval

The affirmative vote of the holders of at least two-thirds of the outstanding shares of TCFC common stock is necessary to approve the TCFC merger proposal. Because the TCFC merger proposal is required to be approved by the holders of at least two-thirds of the outstanding shares of TCFC common stock, abstentions and broker non-votes, as well as the failure of a TCFC shareholder to vote by proxy or in person at the TCFC special meeting, will have the same effect as a vote “AGAINST” the TCFC merger proposal.

Recommendation of the TCFC Board

THE TCFC BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE TCFC MERGER PROPOSAL.

PROPOSAL 2 — TCFC COMPENSATION PROPOSAL

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, TCFC is seeking a non-binding, advisory shareholder approval of the compensation that TCFC’s named executive officers may receive that is based on or otherwise relates to the merger as disclosed under the section entitled “The Merger — Interests of Certain TCFC Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to TCFC’s Named Executive Officers.” The TCFC compensation proposal gives TCFC shareholders the opportunity to express their views on the merger-related compensation of TCFC’s named executive officers.

Accordingly, TCFC is asking TCFC shareholders to vote “FOR” the adoption of the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that will or may be paid or become payable to the TCFC named executive officers, in connection with the merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “The Merger — Interests of Certain TCFC Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to TCFC’s Named Executive Officers” are hereby APPROVED.”

The TCFC compensation proposal is advisory, and therefore not binding on TCFC, the TCFC board’s Compensation Committee or the TCFC board. The approval of the compensation proposal by TCFC shareholders is not a condition to the completion of the merger. Further, the arrangements are contractual in nature and not, by their terms, subject to TCFC shareholder approval. Accordingly, regardless of the outcome of the TCFC compensation proposal, if the merger is completed, TCFC’s named executive officers may be or become entitled to receive the compensation that is based on or otherwise relates to the merger in accordance with the terms and conditions applicable to those payments.

Vote Required for Approval

Approval of the TCFC compensation proposal will require the affirmative vote of a majority of the votes cast at the TCFC special meeting by the shareholders present in person or represented by proxy and entitled to vote at the TCFC special meeting. Abstentions and broker non-votes will not affect whether the proposal is approved.

 

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Recommendation of the TCFC Board

THE TCFC BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE TCFC COMPENSATION PROPOSAL.

PROPOSAL 3 — ADJOURNMENT OF THE TCFC SPECIAL MEETING

If there are not sufficient votes to constitute a quorum or to approve and adopt the merger agreement and approve the merger at the time of the TCFC special meeting, the merger agreement cannot be approved unless the TCFC special meeting is adjourned to a later date or dates to permit further solicitation of proxies. To allow proxies that have been received by TCFC at the time of the special meeting to be voted for an adjournment, if deemed necessary, TCFC has submitted the question of adjournment to TCFC shareholders as a separate matter for their consideration. If it is deemed necessary to adjourn the special meeting, no notice of the adjourned meeting is required to be given to TCFC shareholders, other than an announcement at the meeting of the time and place to which the meeting is adjourned, as well as the means, if any, by which TCFC shareholders can be present and vote at the adjourned meeting through the use of communications equipment.

Vote Required for Approval

The affirmative vote of a majority of the votes cast at the TCFC special meeting by the TCFC shareholders present in person or represented by proxy and entitled to vote is required to approve the TCFC adjournment proposal. Because votes cast at the TCFC special meeting by the TCFC shareholders present in person or represented by proxy and entitled to vote is needed to approve the TCFC adjournment, abstentions and broker non-votes will not have any effect on the TCFC adjournment proposal.

Recommendation of the TCFC Board

THE TCFC BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE TCFC ADJOURNMENT PROPOSAL.

 

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INFORMATION ABOUT THE COMPANIES

SHBI

SHBI is a Maryland-chartered financial holding company for Shore United Bank, a national banking association. SHBI’s principal asset is all of the capital stock of Shore United Bank. Shore United Bank currently operates 31 full service branches, 32 ATMs, 5 loan production offices, and provides a full range of commercial and consumer banking products and services to individuals, businesses and other organizations in Anne Arundel County, Baltimore County, Caroline County, Dorchester County, Howard County, Kent County, Queen Anne’s County, Talbot County and Worcester County in Maryland, Kent County and Sussex County in Delaware and in Accomack County, Virginia. Shore United Bank is an independent community bank that serves businesses and individuals in their respective market areas. Services provided to businesses include commercial checking, savings, certificates of deposit and overnight investment sweep accounts. Services to individuals include checking accounts, various savings programs, mortgage loans, home improvement loans, installment and other personal loans, credit cards, personal lines of credit, automobile and other consumer financing, safe deposit boxes, debit cards, 24-hour telephone banking, internet banking, mobile banking and 24-hour automatic teller services. Shore United Bank also offers all forms of commercial lending such as secured and unsecured loans, working capital loans, lines of credit, term loans, accounts receivable financing, real estate acquisition and development, construction loans and letters of credit. Shore United Bank also offers non-deposit products, such as mutual funds and annuities, and discount brokerage services to their customers. SHBI engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc., and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

As of December 31, 2022, SHBI, on a consolidated basis, had total assets of $3.5 billion, total shareholders’ equity of $364.3 million and total deposits of $3.0 billion. At December 31, 2022, SHBI had gross loans of $2.6 billion.

SHBI’s common stock is traded on NASDAQ under the symbol “SHBI.”

SHBI’s principal executive offices are located at 18 E. Dover Street, Easton, Maryland 21601 and its telephone number is (410) 763-7800.

For more information about SHBI, please visits SHBI’s website at www.shoreunitedbank.com. The information provided on SHBI’s website (other than the documents incorporated by reference herein) is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. Additional information about SHBI is included in documents incorporated by reference in this joint proxy statement/​prospectus. See the section entitled “Where You Can Find More Information” beginning on page 154.

TCFC

TCFC is a Maryland-chartered bank holding company for Community Bank of the Chesapeake, a Maryland-chartered commercial bank. TCFC’s principal asset is all of the capital stock of Community Bank of the Chesapeake. Community Bank of the Chesapeake is a full-service commercial bank operating through its 12 branches located at its main office in Waldorf, Maryland, and branch offices in Bryans Road, Dunkirk, Leonardtown, La Plata, Charlotte Hall, Prince Frederick, Lusby and California, Maryland; and Fredericksburg — Downtown and Fredericksburg — Harrison Crossing, Virginia. Community Bank of the Chesapeake’s principal business is offering a broad range of financial products and services to individuals and businesses through its branch offices and commercial lending centers.

As of December 31, 2022, TCFC, on a consolidated basis, had total assets of $2.4 billion, total shareholders’ equity of $187.0 million and total deposits of $2.1 billion.

TCFC’s common stock is traded on the NASDAQ under the symbol “TCFC.”

TCFC principal executive offices are located at 3035 Leonardtown Road, Waldorf, Maryland 20601 and its telephone number is (301) 645-5601.

For more information about TCFC, please visits TCFC’s website at https://www.cbtc.com/about/investor-relations/. The information provided on TCFC’s website (other than

 

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the documents incorporated by reference herein) is not part of this joint proxy statement/prospectus and is not incorporated herein by reference. Additional information about TCFC is included in documents incorporated by reference in this joint proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page 154.

 

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THE MERGER

This section of the joint proxy statement/prospectus describes material aspects of the merger. This summary may not contain all of the information that is important to you. You should carefully read this entire joint proxy statement/prospectus and the other documents we refer you to for a more complete understanding of the merger. In addition, we incorporate important business and financial information about each of us into this document by reference. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section entitled “Where You Can Find More Information” beginning on page 154.

Structure of the Merger

Each of SHBI and TCFC’s respective boards has unanimously approved the merger agreement. The merger agreement provides that, pursuant to the terms and conditions set forth in the merger agreement, TCFC will be acquired by SHBI in a transaction in which TCFC will merge with and into SHBI, with SHBI as the surviving entity. Promptly following the consummation of the merger, Community Bank of the Chesapeake will be merged with and into Shore United Bank, with Shore United Bank as the surviving bank. Following consummation of the bank merger, Shore United Bank intends to continue to operate all of the branches acquired from Community Bank of the Chesapeake.

Each share of TCFC common stock issued and outstanding immediately prior to the effective time, will be canceled and converted into the right to receive 2.3287 shares of SHBI common stock. TCFC shareholders who would otherwise be entitled to a fraction of a share of SHBI common stock in the merger will instead receive, for the fraction of a share, an amount in cash (rounded to the nearest cent) based on the SHBI average share price.

SHBI shareholders are being asked to approve the SHBI merger and share issuance proposal and TCFC shareholders are being asked to approve the TCFC merger proposal. See the section entitled “The Merger Agreement” beginning on page 107 for additional and more detailed information regarding the legal documents that govern the merger, including information about the conditions to the completion of the merger and the provisions for terminating or amending the merger agreement.

Background of the Merger

The SHBI board, the TCFC board and the senior management teams of SHBI and TCFC regularly review the performance, strategy, competitive position, opportunities and prospects of their respective companies, as part of their goals and efforts to enhance value for their respective shareholders and to deliver the best possible products and services to their respective customers and communities. These reviews have included consideration of, among other things, the then-current business, economic and regulatory environments, as well as developments in the banking and financial services industries and the opportunities and challenges facing participants in those industries generally, and for SHBI and TCFC in particular. These reviews have also included assessments of ongoing consolidation in the financial services industry and periodic consideration of, and discussions with other companies regarding, potential strategic transactions, including business combinations, acquisitions and dispositions, as well as the benefits and risks of continued operations as standalone companies, all with the goal of furthering the companies’ strategic objectives and enhancing shareholder value. Factors assessed in connection with these reviews have also included the risks and opportunities associated with operating in existing and new markets, competition, potential positive and negative expense and revenue synergies, regulatory requirements, interest rate environment and prospects, scale, operational risk, credit risk, market risk and changes in technology and in delivery and marketing channels.

As part of SHBI’s continued growth and ongoing strategic planning activities, the SHBI board and members of SHBI’s senior management, regularly and from time to time with assistance from outside advisors, examine SHBI’s future growth prospects and strategic direction in light of changing market and economic conditions, and lack of smaller acquisition targets, with a view towards possible future strategic transactions to continue to strengthen the competitiveness of SHBI and enhance long-term shareholder value. In connection with SHBI’s business strategy and objectives, on October 31, 2021, SHBI completed the acquisition of Severn Bancorp, Inc. (“Severn”), the savings and loan holding company of Severn Savings

 

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Bank, FSB, a federally-chartered savings bank headquartered in Annapolis, Maryland. This transaction created the third largest community bank headquartered in Maryland and expanded SHBI’s Maryland market area with branches in the greater Annapolis market area. Following the Severn acquisition, one of Mr. Beatty’s board-approved goals as Chief Executive Officer was to establish a relationship with a potential merger partner.

As part of TCFC’s continuous efforts to strengthen its business and increase value for TCFC shareholders, the TCFC board, in consultation with TCFC senior management and, from time to time, with outside advisors, regularly reviews and considers TCFC’s business plans and its basic strategic options, including organic growth, potential acquisitions of other financial institutions by TCFC, mergers of equals and acquisitions of TCFC. These strategic discussions have been set against a backdrop of, among other things, business performance as well as prospects and developments in the financial services industry, the risks, costs, and benefits associated with acquiring or merging with another financial institution, the local and national economic environment, and the business and regulatory environment facing financial institutions generally and TCFC in particular. Among other things, these reviews and discussions have included considerations of possible strategic growth transactions and other strategic initiatives available to TCFC, such as capital management strategies, and new product development to augment non-interest income. In addition, the TCFC board discussed, among other things, the TCFC board’s view on the importance of scale in the banking industry, the vision that significant growth was critical to building long-term value for TCFC shareholders, that small financial institutions had generally fallen into disfavor among the investment community and the potential benefits of being included in the Russell 2000 Index. The TCFC board also reviewed and discussed topics that included, but are not limited to, analyses of the mergers and acquisitions environment, including multiples and premiums being paid in connection with acquisitions, an assessment of potential strategic partners for TCFC, and the benefits and risks to TCFC and TCFC shareholders of pursuing strategic business combinations and sale opportunities compared to the benefits and risks of continued operation as a standalone company. Additionally, the TCFC board regularly scheduled annual merger and acquisition educational programs facilitated by various financial advisors.

In connection with the evaluation of these strategic alternatives, Mr. James Burke, TCFC’s and Community Bank of the Chesapeake’s current President and Chief Executive Officer, and William Pasenelli, TCFC’s former President and Chief Executive Officer, as members of TCFC’s senior management team, have had, from time to time, high-level exploratory discussions with representatives of other financial institutions, including SHBI, relating to potential strategic transactions, including possible business combination opportunities, and regularly updated the TCFC board regarding such discussions. On December 8, 2021, TCFC announced that Mr. Burke had been appointed TCFC’s and Community Bank of the Chesapeake’s President and Chief Executive Officer effective August 31, 2022, upon Mr. Pasenelli’s retirement from that position. Prior to Mr. Burke’s appointment as TCFC’s and Community Bank of the Chesapeake’s President and Chief Executive Officer, Mr. Burke served as TCFC’s President since February 2021 and as President of Community Bank of the Chesapeake since 2016. Mr. Pasenelli served as TCFC’s Chief Executive Officer since 2014 until his retirement on August 31, 2022.

On June 5, 2022, Lloyd L. Beatty, Jr., President and Chief Executive Officer of SHBI, met informally with Mr. Burke at the Maryland Bankers Conference and discussed their general views with respect to market conditions, market demographics (including population growth), industry trends, particularly with regard to mergers and acquisitions, the role of technology in the banking industry and the need for scale to remain competitive. As part of these discussions, Mr. Beatty found his and Mr. Burke’s views as to strategic goals and business strategy to be complementary and their respective institutions could be a strong strategic and cultural fit.

After the initial meeting, Mr. Beatty called Mr. Burke to arrange a follow-up meeting. On July 14, 2022, Mr. Beatty and Mr. Burke met to conceptually discuss the potential framework for a merger-of-equals between TCFC and SHBI, the compatibility and complementary nature of the two companies’ business models and cultures, potential post-transaction executive management roles and enhanced post-transaction management depth. During this meeting the two executives expressed their beliefs that their respective institutions could be a strong strategic and cultural fit, subject to further discussions between their respective senior management teams and review with and approval of their respective boards. Messrs. Beatty and Burke agreed to inform their respective board chairs of their discussion and propose a follow-up introductory meeting between Messrs. Burke and Beatty and their respective board chairs.

 

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On July 15, 2022, Mr. Burke discussed with Mr. Slater, the chair of the TCFC board, and a representative of Kilpatrick Townsend & Stockton LLP, TCFC’s legal counsel (“Kilpatrick Townsend”), the substance of Mr. Burke’s meeting with Mr. Beatty and the proposal that a follow-up meeting be held between Messrs. Burke and Beatty and their respective board chairs.

On July 22, 2022, at a regularly scheduled meeting of the Executive Committee of the TCFC board (the “TCFC Executive Committee”), Messrs. Burke and Slater reported to the TCFC Executive Committee on Mr. Burke’s discussions with Mr. Beatty regarding a potential business combination of TCFC and SHBI, and that Mr. Beatty had proposed a follow-up meeting between Messrs. Beatty, Burke, Slater and Alan Hyatt, the chair of the SHBI board. The TCFC Executive Committee reviewed a high-level presentation of each of TCFC and SHBI and of the pro forma company that had been prepared by Piper Sandler, who at the time, had not been engaged by either TCFC or SHBI for the purposes of evaluating a potential business combination between the two companies. Following a discussion, the TCFC Executive Committee agreed that Messrs. Slater and Burke should meet with Messrs. Beatty and Hyatt. Given the preliminary stage of the discussions, the TCFC Executive Committee determined not to engage a financial advisor specifically to pursue the business combination between the two companies at the time, but did determine to request that TCFC’s long-time advisor, RP Financial, LC. (“RP Financial”) provide the TCFC Executive Committee with a preliminary financial and operational analysis regarding such a business combination, as well as a high-level summary of TCFC’s broader strategic alternatives.

On August 17, 2022, Messrs. Beatty, Burke, Hyatt and Slater met in Annapolis to discuss generally a potential strategic partnership between SHBI and TCFC since they agreed such a transaction could improve shareholder value for both companies and exploring the viability of such a transaction would be constructive. Discussions included a vision for a combined company, and each company’s strong commitment to preserving the community banking model for the communities served by both companies. Messrs. Beatty, Burke, Hyatt and Slater discussed that, if a merger were to occur, the management and governance arrangements should be based on a principle of equal representation so as to foster an environment that would leverage the cultural and competitive strengths of both institutions in a true merger-of-equals. Thereafter, Messrs. Beatty and Burke and senior members of their respective management teams remained in contact periodically. These initial conversations between Mr. Beatty, Burke, Hyatt and Slater were preliminary and informal in nature, and no actionable proposals or specific terms for, or other plans with respect to the implementation of, a strategic business combination transaction were discussed or agreed at that time or in subsequent, informal meetings. Messrs. Beatty and Burke kept their respective boards informed of their discussions and informal meetings.

On August 22, 2022, the TCFC Executive Committee held a regularly scheduled meeting at which representatives of Kilpatrick Townsend and RP Financial were present. Mr. Slater reported to the TCFC Executive Committee on the August 17, 2022 meeting between Messrs. Burke, Beatty, Hyatt and Slater. RP Financial provided the TCFC Executive Committee with a presentation evaluating recent merger-of-equals transactions, multiples and premiums being paid in the banking industry, a summary of potential partners for TCFC and their ability to pay merger consideration, and a high-level evaluation of a potential business combination between TCFC and SHBI. Following a discussion regarding the presentation, the potential benefits to TCFC shareholders, customers and employees, the TCFC Executive Committee recommended that the matter of evaluating a potential business combination between TCFC and SHBI be presented to the full TCFC board at the TCFC board meeting on August 26, 2022.

On August 26, 2022, the TCFC board held a regularly scheduled meeting at which representatives from Kilpatrick Townsend and RP Financial were also present. During an executive session, Mr. Slater reported to the TCFC board on the actions and events that had taken place following the directives received from the TCFC Executive Committee regarding the assessment of a potential business combination between TCFC and SHBI. RP Financial provided the TCFC board with a presentation evaluating recent merger-of-equals transactions, multiples and premiums being paid in the banking industry, a summary of potential strategic partners for TCFC and their ability to pay merger consideration, and an illustrative, high-level evaluation of a potential business combination between TCFC and SHBI, including the advantages of such a combination to TCFC shareholders. A discussion of TCFC’s strategic alternatives and of a potential business combination with SHBI followed, including execution risk considerations in connection with a merger-of-equals, legal and regulatory considerations and the importance of confidentiality regarding the consideration of such a

 

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business combination. The TCFC board unanimously indicated its support for continued examination of and discussions regarding a potential business combination with SHBI. The TCFC board also authorized Messrs. Slater and Burke to conduct a follow-up meeting with Messrs. Hyatt and Beatty to further examine the potential for a business combination. The TCFC board also discussed and determined to engage Piper Sandler to serve as financial advisor to TCFC regarding the evaluation of the proposed business combination.

In order to facilitate an informed discussion and involve additional members of their respective teams, on August 30, 2022, TCFC and SHBI entered into a mutual non-disclosure agreement to allow for the confidential exchange of information. Thereafter, the parties exchanged limited non-public financial information and discussed scheduling diligence meetings between their respective management teams.

On September 14, 2022, Messrs. Beatty, Burke, Slater and Hyatt met to share information regarding each company and each company’s strategic vision for the potential business combination, as well the combined company’s management team, board composition and corporate structure considerations. No discussion of transaction pricing occurred at the meeting.

On September 16, 2022, the TCFC Executive Committee held a regularly scheduled meeting. Representatives from Kilpatrick Townsend and Piper Sandler were also present at the meeting. Mr. Burke presented the results and findings of the September 14, 2022 meeting between Messrs. Beatty, Burke, Slater and Hyatt. Representatives of Piper Sandler provided a presentation on franchise overview, potential combined company board and management teams and a preliminary merger analysis. The ensuing discussion included the potential benefits to TCFC’s shareholders and the business of Shore United Bank. Following the discussion, the TCFC Executive Committee determined to adjourn for the weekend to further consider the presentation and reconvene on September 19, 2022.

On September 19, 2022, the TCFC Executive Committee reconvened its September 16, 2022 meeting. Representatives of Kilpatrick Townsend and Piper Sandler were present at the meeting. A discussion of bank regulatory due diligence considerations related to Shore United Bank’s products and services followed. Following the discussion, the TCFC Executive Committee determined that the agenda for the TCFC board’s upcoming strategic planning retreat focus on the potential business combination with SHBI. Piper Sandler’s engagement letter to serve as TCFC’s financial advisor for purposes of evaluating a potential business combination with SHBI was also executed on this date. In connection with the engagement of Piper Sandler, Piper Sandler provided to TCFC certain information regarding prior relationships between Piper Sandler, on the one hand, and each of SHBI and TCFC, on the other hand, and TCFC determined that such relationships would not impact Piper Sandler’s ability to act as TCFC’s financial advisor in connection with the proposed transaction.

On September 26, 2022 through September 28, 2022, the TCFC board and TCFC senior management team held its annual off-site strategic planning meeting in West Virginia (the “strategic planning meeting”). Representatives of Kilpatrick Townsend and Piper Sandler were also present at the strategic planning meeting. Discussions regarding the potential merger-of-equals with SHBI were held over the course of the strategic planning meeting. A representative of Kilpatrick Townsend provided an update on the banking market, banking mergers and acquisitions, bank mergers and acquisition litigation and the bank regulatory environment. Messrs. Slater and Burke updated the TCFC board on the discussions with SHBI since the August 22, 2022 board meeting. A representative of Piper Sandler discussed various considerations relating to the potential business combination. A representative of Kilpatrick Townsend provided a presentation that included a discussion on the fiduciary duties of the TCFC board in the context of a business combination under applicable law, including the ability of the TCFC board to utilize an independent committee to manage the merger process. Representatives of Piper Sandler provided a banking market and bank mergers and acquisitions update, discussed possible acquisition targets for TCFC, merger-of-equals candidates, including SHBI, and potential acquirors. The presentation and related discussion included illustrative pro forma financial effects of a potential merger-of-equals between TCFC and SHBI as well as other potential business combinations. In connection with the review of these matters, the TCFC board and TCFC senior management had extensive discussions regarding the opportunities and risks associated with, and the potential benefits to TCFC’s shareholders and other constituencies of TCFC, various strategic alternatives, including a potential merger-of-equals transaction with SHBI.

 

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During the strategic planning meeting, the TCFC board discussed Kilpatrick Townsend’s and Piper Sandler’s presentations and the possible business combination with SHBI and determined to support further discussions regarding, and a more detailed due diligence examination of, the potential business combination. The TCFC board also determined that TCFC should enter into an exclusivity agreement with SHBI to further evaluate the potential business combination. The TCFC board’s discussions included the fact that key TCFC executives, including Mr. Burke, would likely to serve in similar executive roles within the combined company, and the benefits of forming an independent committee to oversee the merger process. The TCFC board determined to form an independent merger committee (the “TCFC Independent Merger Committee”) comprised solely of independent directors. The duties of the TCFC Independent Merger Committee were to include (i) reviewing and providing guidance to senior management and the TCFC board with respect to, and making a recommendation to the TCFC board regarding, the proposed business combination, including, as necessary, reviewing, negotiating and recommending relevant terms for the proposed business combination to the TCFC board; (ii) overseeing the due diligence process with respect to the proposed business combination; and (iii) providing the full TCFC board with reports of its meetings and activities.

In light of the continued interest of TCFC and SHBI and their respective boards in evaluating a potential business combination, on October 4, 2022, the TCFC and SHBI senior management teams held a due diligence organizational meeting to discuss the scope of the materials that would be shared between the parties and the establishment of virtual data rooms to facilitate reciprocal due diligence. In connection with reciprocal due diligence, each of TCFC and SHBI established a virtual data room and began populating its respective data room with documents relating to business, credit, operational, technology, legal and compliance matters, among others. Also in October 2022, SHBI engaged KBW as SHBI’s financial advisor.

On October 6, 2022, in connection with the consideration of a potential transaction, SHBI and TCFC entered into a mutual exclusivity agreement, under which neither SHBI nor TCFC would pursue a business combination with another party until the earlier of the following: the execution of a definitive agreement, the mutual agreement not to pursue a business combination or December 9, 2022.

In the following weeks, each of SHBI and TCFC made available to representatives of the other party due diligence materials in an electronic data room, and the parties held in-person and telephonic meetings in connection with the parties’ respective due diligence investigations. Representatives of the parties’ respective legal and financial advisors also attended these meetings. At the meetings the management teams discussed possible ways to approach decisions regarding the name, headquarters, board of directors and executive leadership of the combined company in connection with the potential transaction. In addition, during this time period, SHBI and TCFC each commenced a third-party loan review of each other’s loan portfolio. The parties also reviewed and discussed certain financial information concerning each company, strategic objectives and cultural fit, plans for each company to undertake a credit review of the other, and leadership and governance matters.

Concurrently, the parties began to discuss certain proposed terms of the potential transaction, including terms relating to the composition of board of directors and executive leadership of the combined company, as well as the factors and data that should be used for determining the pricing of the potential transaction, taking into account the approach taken in prior mergers of equals in the banking industry, as well as considerations related to each company’s share price.

On October 18, 2022, the TCFC board held an introductory meeting with the SHBI board chair. In parallel with the TCFC meeting, the SHBI board held an introductory meeting with Mr. Burke. In parallel with the directors’ meetings, on October 18, 2022 the members of TCFC’s and SHBI’s senior management teams also participated in a social introductory dinner meeting. A joint board-senior management team social introductory meeting followed on October 18, 2022. The prospects for a business combination between the two companies were discussed in general at these meetings. There was no discussion of pricing at these meetings.

On October 20, 2022, members of TCFC’s senior management met with SHBI’s third-party loan reviewer to discuss the review of TCFC’s loan portfolio. On the same date, members of SHBI’s senior management met with TCFC’s third-party loan reviewer to discuss the review of SHBI’s loan portfolio.

 

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On October 24, 2022, the TCFC Independent Merger Committee held its first meeting. Also present at the meeting were Mr. Burke and representatives from Piper Sandler and Kilpatrick Townsend. Among other things, the TCFC Independent Merger Committee discussed the October 18, 2022 introductory meetings between the TCFC and SHBI board and senior management teams. Mr. Burke provided the TCFC Independent Merger Committee with a summary of his interview with the SHBI board and a report on the due diligence review process. A discussion was also held regarding the preparation of a definitive merger agreement and merger agreement-related timing considerations.

On October 31, 2022, the TCFC Independent Merger Committee held a meeting. Also present were Mr. Burke, and representatives from Piper Sandler and Kilpatrick Townsend. Mr. Burke provided the TCFC Independent Merger Committee with an update on the due diligence review process, which focused on the credit review of the two banks’ loan portfolios. Mr. Burke advised that he planned to meet with Mr. Beatty to discuss the management teams of the two banks and that the parties planned to hold management due diligence interviews on November 18, 2022. A representative of Piper Sandler provided an assessment of the credit review process and an assessment of SHBI’s third quarter financial performance. A representative of Kilpatrick Townsend provided an update on the legal due diligence process, ongoing discussions with H&K regarding the preparation of an initial draft definitive merger agreement and various other merger-related topics. A representative of RP Financial was also in attendance, having been invited by the TCFC Independent Merger Committee in connection with the TCFC Independent Merger Committee’s consideration of engaging RP Financial to serve as the TCFC Independent Merger Committee’s outside advisors regarding the potential combination. RP Financial’s fees for its financial advisory services would not be contingent upon the success of the proposed business combination. Once the Piper Sandler representatives were excused from the meeting, the TCFC Independent Merger Committee, together with a representative of Kilpatrick Townsend, met to discuss RP Financial’s prospective financial advisory role to the TCFC Independent Merger Committee. Following this discussion, the TCFC Independent Merger Committee determined to engage RP Financial to serve as a financial advisor to the TCFC Independent Merger Committee in connection with its review of the potential business combination.

Beginning in early November, representatives of senior management of SHBI and TCFC had a number of in-person meetings, as well as telephonic due diligence meetings, regarding the business prospects, credit profile and operations of each of the companies and continued to review due diligence materials provided through the electronic data room. On November 7, 2022, Mr. Burke again met with the members of the SHBI board for a follow-up interview related to his potential service as Chief Executive Officer of the combined company and combined bank. This discussion during also included Mr. Burke’s vision for the combined company and perceived challenges and execution risks associated with the merger-of-equals.

On November 8, 2022, the TCFC Independent Merger Committee held a meeting. Those present included Mr. Burke and representatives from Piper Sandler, Kilpatrick Townsend and RP Financial. A representative of Kilpatrick Townsend provided a presentation on various merger-related matters and considerations. Mr. Burke provided the TCFC Independent Merger Committee with an update on the due diligence process, including loan credit review, and discussed the details of his second interview with the SHBI board held on November 7, 2022. A representative of Piper Sandler provided an update on the status of due diligence and on the pricing model for the transaction, including updated implied pricing metrics, which were being updated to reflect third quarter financial results and projections. The TCFC Independent Merger Committee discussed with the representatives of Piper Sandler and RP Financial the importance of the transaction’s pricing metrics to the TCFC Independent Merger Committee’s overall assessment of, and ultimate recommendation regarding, the proposed business combination, which recommendation the TCFC Independent Merger Committee planned to provide to the full TCFC board at the TCFC board’s November 30, 2022 meeting.

During this period, members of TCFC senior management met with members of SHBI senior management to discuss credit quality due diligence and preliminary cost savings estimates expected to result from the potential business combination, among other things. Representatives of Piper Sandler and KBW were also present.

On November 17, 2022, representatives of Holland & Knight LLP (“H&K”), counsel to SHBI, sent an initial draft of the merger agreement to representatives of Kilpatrick Townsend. During the remainder of

 

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November 2022 and continuing until the merger agreement was executed, the parties and their counsel negotiated a draft merger agreement for the potential transaction, reflecting discussions between the parties regarding key transaction terms.

On November 18, 2022, TCFC and SHBI held management due diligence interviews at an offsite location. Representatives of KBW, Piper Sandler, RP Financial and Kilpatrick Townsend were also present.

On November 21, 2022, the TCFC Independent Merger Committee held a meeting. Those present included Mr. Burke and representatives from Piper Sandler, Kilpatrick Townsend and RP Financial. Representatives of Kilpatrick Townsend updated the TCFC Independent Merger Committee on the status of the negotiation regarding the draft definitive merger agreement. Following a discussion of the merger agreement process and related employee matters, representatives of Piper Sandler updated the TCFC Independent Merger Committee on the financial aspects of the transaction. An update on the due diligence process and the merger agreement process was also provided and discussed. The TCFC Independent Merger Committee met in executive session with representatives of RP Financial and Kilpatrick Townsend. The discussion included the transaction pricing model and metrics, the potential benefits to shareholder value of the proposed business combination compared to TCFC remaining independent, the potential increased dividend to be paid to TCFC shareholders, the benefits of the combined company’s stock being included in the Russell 2000, the advantages of scale as a combined company, the favorable projected pro forma earnings per share, the enhanced diversity of the combined geographic market area, the TCFC management team’s role in the combined company, the long-term value expected to be created through the business combination and other matters. As it was anticipated that the TCFC Independent Merger Committee would discuss its recommendation as to whether to proceed with the contemplated business combination at the TCFC Independent Merger Committee’s scheduled November 30, 2022 meeting, it was determined that all members of the TCFC board be present for a session at the TCFC Independent Merger Committee’s next November 30, 2022 meeting.

On November 30, 2022, the TCFC Independent Merger Committee held a meeting. Those present included Mr. Burke and other members of the TCFC board, as well as representatives from Piper Sandler, Kilpatrick Townsend and RP Financial. A representative of Piper Sandler provided projected financial metrics and assumptions. The yet to be completed interest rate mark analysis was discussed at length, including the challenge of calculating the mark in a rapidly rising interest rate environment. The discussion with Piper Sandler included a presentation of several anticipated model outputs. A representative of Kilpatrick Townsend provided an update on the negotiation of the definitive merger agreement, related ancillary documents and other merger-related diligence matters.

On December 5, 2022, the TCFC Independent Merger Committee held a meeting. Those present included Mr. Burke and representatives from Piper Sandler, Kilpatrick Townsend and RP Financial. A representative of Piper Sandler updated the TCFC Independent Merger Committee on the financial metrics of the potential transaction, which included a discussion on the projected exchange ratio of 2.3287 shares of SHBI common stock for each share of TCFC common stock and the resultant 40% ownership interest that TCFC shareholders would have in the combined company. A representative of Kilpatrick Townsend provided an update on the negotiation of the definitive merger agreement, related ancillary documents and other merger-related diligence matters. The schedule for finalizing the pricing model including the exchange ratio and the contemplated process to announce the proposed business combination, if the TCFC board determined to authorize the execution of the definitive merger agreement, was also discussed. Following these presentations and based on the information presented, the TCFC Independent Merger Committee unanimously determined to recommend to the full TCFC board that the merger discussions with SHBI should continue.

On December 6, 2022, at a special meeting of the SHBI board, SHBI’s management updated the SHBI board on the status of discussions with TCFC. Representatives of KBW and H&K also attended the meeting. The SHBI board was informed that, following recent discussions, there was general alignment on pricing, with the exchange ratio in the transaction to be set at 2.3287 shares of SHBI common stock for each share of TCFC common stock, subject to final review and approval by both boards. SHBI management then discussed the mutual due diligence process conducted, including relevant diligence findings, and presented certain key financial metrics for the proposed business combination, together with comparative metrics for prior mergers of equals in the banking industry. Also at the meeting, KBW reviewed and discussed with

 

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the SHBI board that the proposed exchange ratio would result in the TCFC shareholders owning approximately 40% of the combined company and reviewed and discussed certain financial aspects of the potential transaction on a preliminary basis as well as, among other things, comparative metrics for other recent merger transactions in the banking industry. Representatives of H&K delivered its due diligence findings, advised the SHBI board on its fiduciary duties in connection with the transaction and reviewed in detail the terms of the draft merger agreement, including the proposed board composition and executive leadership of the combined company. The SHBI board and management held an extensive discussion regarding the potential advantages and risks to SHBI and its shareholders and other constituencies of the potential transaction and SHBI’s possible advantages and risks in moving forward with the transaction. Following these discussions, the SHBI board directed management to move forward with finalizing the terms of the transaction over the next week.

During this time, members of TCFC’s senior management met with members of SHBI’s senior management to discuss merger logistics, internal communications and the preparation of investor presentation materials, among other things. Representatives of Piper Sandler and KBW were also present. Messrs. Slater, Hyatt, Beatty and Burke also held various discussions regarding SHBI’s and TCFC’s existing employment arrangements with certain existing executive officers.

On December 12, 2022, the TCFC Independent Merger Committee held a meeting. Those present included Mr. Burke and representatives from Piper Sandler, Kilpatrick Townsend and RP Financial. It was reported that the exchange ratio had been confirmed consistent with 2.3287 shares presented at the December 5, 2022 meeting. Messrs. Slater and Burke also updated the TCFC Independent Merger Committee on the discussions regarding SHBI’s and TCFC’s existing employment arrangements with certain of their respective executive officers. Representatives of Kilpatrick Townsend updated the TCFC Independent Merger Committee on the status of the negotiation regarding the draft definitive merger agreement and its ancillary documents. The schedules for the December 14, 2022 TCFC board meeting and anticipated merger process were also discussed.

On December 14, 2022, the TCFC board held a special meeting. Members of TCFC senior management and representatives of Kilpatrick Townsend, Piper Sandler and RP Financial were also present at the meeting. Representatives of Kilpatrick Townsend discussed the directors’ fiduciary duties in connection with the TCFC board’s evaluation of the potential transaction and provided a detailed review of the terms of the proposed merger agreement, including the various representations and warranties of the parties, the covenants affecting the businesses of the parties between signing of the merger agreement and the transaction’s closing, the conditions to the transaction’s closing and the merger agreement’s termination provisions, including the break-up fee payable under certain circumstances. The agreements ancillary to the definitive merger agreement were also discussed. Representatives of Piper Sandler reviewed the financial aspects of the transaction, including financial analyses performed by Piper Sandler, and rendered to the TCFC board its oral opinion, which was subsequently confirmed by its written opinion dated December 14, 2022, to the effect that, as of that date and subject to the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken as set forth in its opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to the holders of TCFC common stock. See “The Merger — Opinion of TCFC’s Financial Advisor” beginning on page 76 and Appendix C. Following a discussion of these matters, the TCFC board voted unanimously to approve the definitive merger agreement and the transactions contemplated thereby, and recommended the approval of the merger agreement by the TCFC shareholders.

On December 14, 2022, the SHBI board also held a special meeting for the purposes of considering the merger agreement. At that meeting, the SHBI board thoroughly discussed and considered the terms and conditions of the merger and the merger agreement. Representatives of H&K advised the SHBI board on its fiduciary duties in connection with the transaction and the terms of the merger agreement. KBW reviewed the financial aspects of the proposed merger with the SHBI board and rendered an opinion to the SHBI board to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to SHBI. After deliberation, the SHBI board voted unanimously to approve the merger agreement and the transactions contemplated thereby, and authorized SHBI management to execute the merger agreement.

 

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Later on December 14, 2022, the merger agreement was executed and delivered by TCFC and SHBI. The parties announced the transaction after the close of the financial markets in New York on December 14, 2022 in a press release jointly issued by TCFC and SHBI.

SHBI’s Reasons for the Merger and Factors Considered by the SHBI Board

After careful consideration, the SHBI board, at a meeting held on December 14, 2022, unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of SHBI common stock, are advisable and fair to and in the best interests of SHBI and its shareholders and (ii) approved and adopted the merger agreement and the transactions contemplated thereby.

In reaching its decision, the SHBI board evaluated the merger agreement, the merger, the bank merger and other matters contemplated by the merger agreement in consultation with SHBI’s senior management, as well as with SHBI’s legal and financial advisors, and considered a number of factors, including, but not limited to, the following:

•

each of SHBI’s, TCFC’s and the combined company’s business, operations, financial condition, asset quality, earnings, and prospects. In reviewing these factors, including the information obtained through due diligence, the SHBI board considered that TCFC’s business and operations and risk profile complement those of SHBI, and that the merger and the other transactions contemplated by the merger agreement would result in a combined company with an expanded distribution and scale that would position SHBI to serve an expanded customer base;

​

•

the strategic rationale for the merger, including the ability of SHBI to obtain lead market share positions in attractive Maryland markets and expand its presence into Virginia and Delaware;

​

•

the SHBI board’s belief that TCFC’s earnings and prospects, and the synergies potentially available in the merger, would significantly improve SHBI’s market position, increase scale to enhance efficiencies and leverage investments in technology, and provide greater revenue growth opportunities and diversification, which would potentially create superior future earnings and prospects for the combined company compared to SHBI’s earnings and prospects on a stand-alone basis;

​

•

the current and prospective environment in the financial services industry, including economic conditions and the interest rate and regulatory environments, the accelerating pace of technological change in the financial services industry, operating costs resulting from regulatory and compliance mandates, scale and marketing expenses, increasing competition from both banks and non-bank financial and financial technology firms, current financial market conditions, current employment market conditions and the likely effects of these factors on SHBI’s potential growth, development, productivity and strategic options both with and without the merger;

​

•

the expectation that, following the merger, the combined company will be the top community bank headquartered in Maryland with over 40 branch locations, providing increased market opportunities for current TCFC products and services;

​

•

the complementary nature of the cultures of the two companies, including with respect to corporate purpose, strategic focus, target markets, client service, credit cultures, risk profiles and community commitment, and the SHBI board’s belief that the complementary cultures will facilitate the successful integration and implementation of the transaction;

​

•

the complementary nature of the products, customers and markets of the two companies, which SHBI believes should provide the opportunity to mitigate risks and increase potential returns;

​

•

the ability to accelerate investments in digital capabilities, while also leveraging existing technology across a broader customer base;

​

•

the expanded possibilities for growth that would be available to the combined company, given its larger size, asset base, capital and footprint;

​

 

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•

the anticipated pro forma financial impact of the merger on the combined company, including the expected positive impact on financial metrics, including earnings per share, and the expectation that the tangible book value per share dilution from the merger would be earned back within a reasonable period following closing;

​

•

the expectation of significant cost savings resulting from the merger;

​

•

the SHBI board’s review and discussions with SHBI’s senior management concerning SHBI’s due diligence examination of TCFC, including with respect to, among other areas, its operations, financial condition, credit quality, loan portfolio and legal and regulatory compliance programs and prospects;

​

•

its understanding that SHBI’s shareholders will own approximately 60% of the combined company’s common stock;

​

•

the fact that the exchange ratio is fixed, with no adjustment in the merger consideration to be received by TCFC shareholders as a result of possible increases or decreases in the trade price of TCFC common stock or SHBI common stock following the announcement of the merger, which the SHBI board believed was consistent with market practice for transactions of this type and with the strategic purpose of the merger and related transactions;

​

•

the opinion, dated December 14, 2022, of KBW to the SHBI board as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio in the merger, as more fully described under the section entitled “The Merger — Opinion of SHBI’s Financial Advisor” beginning on page 65;

​

•

the SHBI board’s review with SHBI’s outside legal counsel of the material terms of the merger agreement, including the representations, covenants, deal protection and termination provisions, tax treatment and closing conditions;

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•

the SHBI board’s expectation that the requisite regulatory approvals could be obtained in a timely fashion;

​

•

the fact that SHBI’s shareholders will have the opportunity to vote to approve the merger and the share issuance;

​

•

the fact that SHBI’s current corporate headquarters in Easton, Maryland will remain the corporate headquarters for each of SHBI and Shore United Bank;

​

•

the fact that 12 of the 20 total directors of the combined company will be current members of the SHBI board; and

​

•

allowing SHBI to deploy a portion of its capital into what the SHBI board believes is a compelling investment.

​

The SHBI board also considered potential risks related to the merger but concluded that the anticipated benefits of the merger were likely to outweigh these risks. These potential risks include:

•

the regulatory and other approvals required in connection with the merger and the bank merger and the risk that such regulatory approvals may not be received in a timely manner or at all or may impose unacceptable conditions;

​

•

the possibility of encountering difficulties in achieving anticipated synergies and cost savings in the amounts estimated or in the timeframe contemplated;

​

•

the possibility that the anticipated pro forma impact of the merger on SHBI will not be realized when expected or at all as a result of unexpected changes in financial market or economic conditions, including as a result of sustained market volatility or significant changes in interest rates;

​

•

the costs to be incurred in connection with the merger and the integration of TCFC’s business into SHBI’s, and the possibility that the merger and the integration may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

​

 

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•

the possibility that the anticipated benefits of the merger will not be realized when expected or at all, including as a result of the impact of, or difficulties arising from, the integration of the two companies or as a result of general economic and market conditions and competitive factors in the areas where SHBI and TCFC operate businesses;

​

•

the possibility of encountering difficulties in successfully integrating SHBI’s and TCFC’s business, operations and workforce;

​

•

the risk of losing key SHBI or TCFC employees during the pendency of the merger and thereafter;

​

•

the dilution to current SHBI shareholders from the issuance of additional shares of SHBI common stock in the merger;

​

•

certain anticipated merger-related costs;

​

•

the possible diversion of management attention and resources from the operation of SHBI’s business towards the completion of the merger;

​

•

the potential for legal claims challenging the merger; and

​

•

the other risks described under the sections entitled “Risk Factors” beginning on page 27 and “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 25.

​

The foregoing discussion of the information and factors considered by the SHBI board is not intended to be exhaustive, but includes the material factors considered by the SHBI board. In reaching its decision to approve the merger, the merger agreement and the other transactions contemplated by the merger agreement, the SHBI board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The SHBI board considered all these factors as a whole, including through its discussions with SHBI’s management and financial and legal advisors, in evaluating the merger agreement, the merger, and the other transactions contemplated by the merger agreement.

For the reasons set forth above, the SHBI board determined that the merger agreement (including the merger, bank merger and the SHBI share issuance) are advisable and fair to and in the best interests of SHBI and its shareholders.

Certain of SHBI’s directors and executive officers have other interests in the merger that are different from, or in addition to, those of SHBI’s shareholders generally, as discussed under the section entitled “The Merger — Interests of SHBI Directors and Executive Officers in the Merger” beginning on page 90. The SHBI board was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to SHBI shareholders.

It should be noted that this explanation of the reasoning of the SHBI board and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 25.

Recommendation of the SHBI Board

Based on the reasons stated above, the SHBI unanimously recommends that SHBI shareholders vote “FOR” the SHBI merger and share issuance proposal and “FOR” the SHBI adjournment proposal.

TCFC’s Reasons for the Merger and Factors Considered by the TCFC Board

After careful consideration, the TCFC board, at a special meeting held on December 14, 2022, unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TCFC and its shareholders, (ii) approved and adopted the merger agreement and (iii) authorized and approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger.

 

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In reaching its decision, the TCFC board evaluated the merger agreement, the merger, the bank merger and the other matters contemplated by the merger agreement in consultation with TCFC’s senior management, as well as TCFC’s legal and financial advisors, and considered a number of factors, including but not limited to, the following, which are not intended to be exhaustive and are not presented in any relative order of importance:

•

the strategic rationale for the merger, including the combined company’s expected pro forma profitability, including the estimated 2024 return on average assets of 1.4%, estimated 2024 return on average tangible common equity of 18.8% and estimated 2024 efficiency ratio of 42.9%;

​

•

its view that the cost savings and synergies expected to be created by the merger would create material value for TCFC shareholders;

​

•

the historical stock market performance for TCFC common stock and the common stock performance of other companies in the banking industry;

​

•

its view of the enhanced trading liquidity of the combined company’s common stock and its view of the potential for significant upside trading based on the combined company’s pro forma 2024 earnings, among other factors;

​

•

the significantly enhanced scale of the combined company’s pro forma assets, loans and deposits, and the improved strategic position;

​

•

the fact that TCFC shareholders will become SHBI shareholders and will continue to share proportionately in the business successes of the legacy TCFC business, including in any potential future change of control transaction involving SHBI;

​

•

the combined company’s 40 banking locations, contiguous branch networks serving Maryland, Virginia and Delaware and position as the fourth largest bank headquartered in Maryland by assets and the largest Maryland bank headquartered outside of the Washington, DC MSA;

​

•

the combined company’s market footprint shall be substantially extended and cover a broader and more diverse geographic area in Delaware, Maryland, and Virginia; stretching from Bethany, Delaware to Charlottesville, Virginia;

​

•

the combined company’s strong capital position and enhanced ability to generate capital;

​

•

the fact that TCFC’s and SHBI’s respective geographic reach, products, customers and businesses complement each other, including strong community banking franchises with significant low-cost core deposits and the potential for incremental revenue opportunities from the addition of each company’s unique businesses;

​

•

the ability of the combined bank to have greater scale that may enable it to attract additional customers and employees and have the ability to invest and spread increasing costs more effectively in technology, risk management and compliance;

​

•

the minimal employee disruptions expected to result from the combination, particularly given the lack of branch overlap between the two companies;

​

•

the fact that, upon the closing, the combined company’s board of directors would include eight legacy TCFC directors, including Mr. Slater serving as vice chairman of the board of directors of the combined company, out of a total of 20 directors, which the TCFC board believes enhances the likelihood that the strategic benefits expected to be obtained from the merger will be realized;

​

•

the fact that, upon the closing, senior members of TCFC management will continue to have senior management leadership roles at the combined company, including Mr. Burke serving as the President and Chief Executive Officer, Mr. Capitani serving as the Chief Financial Officer and Mr. Ebron serving as the Chief Banking Officer;

​

•

its view that the combined company would have a stronger, deeper leadership team with complementary expertise to drive enhanced operational performance, strategic growth and risk management;

​

 

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its view that the combined company would have a strengthened ability to recruit and retain top-tier talent while offering colleagues more opportunities for career development and mobility;

​

•

its knowledge of the current and prospective environment in the financial services industry in general, including economic conditions and the interest rate and regulatory environments, increased operating costs resulting from regulatory and compliance mandates, increasing competition from both banks and non-bank financial and financial technology firms, current financial market conditions and the likely effects of these factors on TCFC’s and the combined company’s potential growth, development, productivity and strategic options;

​

•

its view with respect to other strategic alternatives potentially available to TCFC, including continuing as a stand-alone company, engaging in a strategic combination with another party or a sale to a potential acquirer, and its belief as to the availability of these alternatives and that any such available alternatives would not deliver the prospective financial and operational benefits that could be achieved in the proposed merger with SHBI;

​

•

the benefits to TCFC and its customers of operating as a significantly larger organization, the wider array of financial products and services that would be available to customers of TCFC and the communities served by TCFC, including enhancements in products and services, the ability to grow its commercial and residential lending, higher lending limits that would enable TCFC to serve customers whose lending relationships were approaching TCFC’s legal lending limit, and greater financial resources;

​

•

its belief that the two companies’ corporate cultures and business philosophies are complementary and compatible, including with respect to corporate purpose, strategic focus, commitment to corporate governance and ethical business practices, target markets, client service, credit, risk profiles, community commitment, local decision-making and its belief that the complementary cultures will facilitate the successful integration of the two companies and implementation of the transaction;

​

•

its review and discussions with TCFC’s management and outside advisors concerning TCFC’s due diligence examination of the operations, financial condition, credit quality, earnings, risk management and regulatory compliance programs and prospects of SHBI;

​

•

its knowledge of TCFC’s business, operations, regulatory and financial condition, asset quality, earnings, loan portfolio, capital and prospects both as an independent organization and as a part of a combined company with SHBI;

​

•

the expectation that the requisite regulatory approvals could be obtained in a timely fashion;

​

•

the benefits and opportunities SHBI will bring to the combined company;

​

•

the fact that the exchange ratio would be fixed, with no adjustment in the merger consideration to be received by TCFC shareholders as a result of possible increases or decreases in the trading price of TCFC or SHBI common stock following the announcement of the merger, which the TCFC board believed was consistent with market practice for transactions of this type and with the strategic purpose of the merger;

​

•

the premium to TCFC’s shareholders based on the fixed exchange ratio and the relative prices of the companies’ stock at the time of the merger announcement that affords TCFC shareholders a share of the anticipated transaction synergies at closing;

​

•

the fact that the implied value of the merger consideration based on the closing price of SHBI common stock as of December 13, 2022 of $44.71 for each share of TCFC common stock represented a 12.7% premium over the closing price of TCFC common stock on December 13, 2022 (the last trading day prior to the board meeting to approve the merger);

​

•

its expectation that, upon consummation of the merger, TCFC’s shareholders would own approximately 40% of the combined company on a fully diluted basis;

​

•

its expectation of an increase of more than 50% to TCFC’s shareholders in dividends per share based on anticipated dividend payments by the combined company, from the current annual

​

 

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TCFC dividend of $0.70 per share to a $0.74 TCFC dividend per share in 2024 and a $0.50 annual dividend per share of SHBI in 2024 (assuming a $0.02 and $0.01 dividend per share increase annually for TCFC and SHBI, respectively, through the projection period);

•

the fact that TCFC’s shareholders will have an opportunity to vote on the approval of the merger agreement and the merger;

​

•

the opinion, dated December 14, 2022, of Piper Sandler to the TCFC board as to the fairness, from a financial point of view and as of the date of the opinion, to the holders of TCFC common stock of the exchange ratio in the merger, as more fully described below under “The Merger — Opinion of TCFC’s Financial Advisor” beginning on page 76;

​

•

including the representations and warranties of the parties, the covenants, the consideration, the circumstances under which TCFC’s board may consider a superior proposal and the absence of burdensome contingencies in the merger agreement;

​

•

the review of the TCFC board, with Kilpatrick Townsend, of the material terms of the merger agreement, including (i) the representations and warranties of the parties, (ii) the covenants, (ii) the TCFC board’s ability, under certain circumstances, to consider an unsolicited acquisition proposal, and (iii) the TCFC board’s ability to terminate the merger agreement in order to enter into a definitive agreement with respect to a superior proposal (subject to payment of a $10.5 million termination fee); and

​

•

its view that the two management teams have significant integration experience through various acquisitions, which can be leveraged in successfully completing the integration process.

​

The TCFC board also considered a number of potential risks and uncertainties associated with the merger in connection with its deliberation of the merger and, including, without limitation, the following:

•

the possibility that the anticipated benefits of the transaction will not be realized when expected or at all, including as a result of the impact of, or difficulties arising from, the integration of the two companies or as a result of the strength of the economy, general market conditions and competitive factors in the areas where TCFC and SHBI operate businesses;

​

•

the possible diversion of management attention and resources from other strategic opportunities and operational matters while working to implement the transaction and integrate the two companies;

​

•

the risk of losing key employees during the pendency of the merger and thereafter;

​

•

the restrictions on the conduct of TCFC’s business during the period between execution of the merger agreement and the consummation of the merger, which could potentially delay or prevent TCFC from undertaking business opportunities that might arise or certain other actions it might otherwise take with respect to its operations absent the pendency of the merger;

​

•

the potential effect of the merger on TCFC’s overall business, including its relationships with customers, employees, suppliers and regulators;

​

•

the fact that TCFC’s shareholders would not be entitled to appraisal or dissenters’ rights in connection with the merger;

​

•

the possibility of encountering difficulties in achieving anticipated cost savings and synergies in the amounts currently estimated or within the time frame currently contemplated;

​

•

certain anticipated merger-related costs, which could also be higher than expected;

​

•

the regulatory and other approvals required in connection with the merger and the bank merger and the risk that such regulatory approvals will not be received or will not be received in a timely manner or may impose burdensome or unacceptable conditions that may adversely affect the anticipated operations, synergies and financial results of the combined company following the completion of the merger;

​

•

the potential for legal claims challenging the merger;

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•

the risk that the merger may not be completed despite the combined efforts of TCFC and SHBI or that completion may be unduly delayed, including as a result of delays in obtaining the requisite regulatory approvals; and

​

•

the other risks described under the sections entitled “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” beginning on pages 27 and 25, respectively.

​

The foregoing discussion of the information and factors considered by the TCFC board is not intended to be exhaustive, but includes the material factors considered by the TCFC board. In reaching its decision to approve the merger agreement, the merger and the other transactions contemplated by the merger agreement, the TCFC board did not quantify or assign any relative weights to the factors considered, and individual directors may have given different weights to different factors. The TCFC board considered all these factors as a whole, including through discussions with, and questioning of TCFC’s management and TCFC’s outside financial and legal advisors, and overall considered the factors to be favorable to, and to support, its determination.

The TCFC board realized that there can be no assurance about future results, including results expected or considered in the factors listed above, such as assumptions regarding anticipated cost savings. The TCFC board concluded, however, that the potential positive factors outweigh the potential risks of completing the merger.

Certain of TCFC’s directors and executive officers have other interests in the merger that are different from, or in addition to, those of TCFC’s shareholders generally, as discussed under the section entitled “The Merger — Interests of Certain TCFC Directors and Executive Officers in the Merger” beginning on page 94. The TCFC board was aware of and considered these potential interests, among other matters, in evaluating the merger and in making its recommendation to TCFC shareholders.

It should be noted that this explanation of the reasoning of the TCFC board and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 25.

Recommendation of the TCFC Board

Based on the reasons stated above, the TCFC board unanimously recommends that TCFC shareholders vote “FOR” the TCFC merger proposal, “FOR” the TCFC compensation proposal and “FOR” the TCFC adjournment proposal.

Opinion of SHBI’s Financial Advisor

SHBI engaged KBW to render financial advisory and investment banking services to SHBI, including an opinion to the SHBI board as to the fairness, from a financial point of view, to SHBI of the exchange ratio in the proposed merger. SHBI selected KBW because KBW is a nationally recognized investment banking firm with substantial experience in transactions similar to the merger. As part of its investment banking business, KBW is continually engaged in the valuation of financial services businesses and their securities in connection with mergers and acquisitions.

As part of its engagement, representatives of KBW attended the meeting of the SHBI board held on December 14, 2022 at which the SHBI board evaluated the proposed merger. At this meeting, KBW reviewed the financial aspects of the proposed merger and rendered an opinion to the SHBI board to the effect that, as of such date and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW as set forth in such opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to SHBI. The SHBI board approved the merger agreement at this meeting.

The description of the opinion set forth herein is qualified in its entirety by reference to the full text of the opinion, which is attached as Appendix B to this joint proxy statement/prospectus and is incorporated herein by reference, and describes the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by KBW in preparing the opinion.

 

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KBW’s opinion speaks only as of the date of the opinion. The opinion was for the information of, and was directed to, the SHBI board (in its capacity as such) in connection with its consideration of the financial terms of the merger. The opinion addressed only the fairness, from a financial point of view, of the exchange ratio in the merger to SHBI. It did not address the underlying business decision of SHBI to engage in the merger or enter into the merger agreement or constitute a recommendation to the SHBI board in connection with the merger, and it does not constitute a recommendation to any holder of SHBI common stock or any shareholder of any other entity as to how to vote in connection with the merger or any other matter, nor does it constitute a recommendation as to whether or not any such shareholder should enter into a voting, shareholders’, affiliates’ or other agreement with respect to the merger or exercise any dissenters’ or appraisal rights that may be available to such shareholder.

KBW’s opinion was reviewed and approved by KBW’s Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

In connection with the opinion, KBW reviewed, analyzed and relied upon material bearing upon the financial and operating condition of SHBI and TCFC and bearing upon the merger, including, among other things:

•

a draft of the merger agreement, dated December 13, 2022 (the most recent draft then made available to KBW);

​

•

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2021 of SHBI;

​

•

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 of SHBI;

​

•

the audited financial statements and Annual Reports on Form 10-K for the three fiscal years ended December 31, 2021 of TCFC;

​

•

the unaudited quarterly financial statements and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022 of TCFC;

​

•

certain regulatory filings of SHBI and TCFC and their respective subsidiaries, including, as applicable, the quarterly or semi-annual reports on Form FR Y-9C or FR Y-9SP and call reports filed with respect to each quarter during the three-year period ended December 31, 2021 as well as the quarters ended March 31, 2022, June 30, 2022 and September 30, 2022;

​

•

certain other interim reports and other communications of SHBI and TCFC to their respective shareholders; and

​

•

other financial information concerning the respective businesses and operations of SHBI and TCFC furnished to KBW by SHBI and TCFC or which KBW was otherwise directed to use for purposes of its analysis.

​

KBW’s consideration of financial information and other factors that it deemed appropriate under the circumstances or relevant to its analyses included, among others, the following:

•

the historical and current financial position and results of operations of SHBI and TCFC;

​

•

the assets and liabilities of SHBI and TCFC;

​

•

the nature and terms of certain other merger transactions and business combinations in the banking industry;

​

•

a comparison of certain financial and stock market information of SHBI e and TCFC with similar information for certain other companies, the securities of which were publicly traded;

​

•

publicly available consensus “street estimates” of SHBI and TCFC, as well as assumed SHBI and TCFC long-term growth rates provided to KBW by SHBI management, all of which information was discussed with KBW by SHBI management and used and relied upon by KBW at the direction of such management and with the consent of the SHBI board; and

​

 

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•

estimates regarding certain pro forma financial effects of the merger on SHBI (including, without limitation, the cost savings expected to result or be derived from the merger) that were prepared by SHBI management, provided to and discussed with KBW by such management, and used and relied upon by KBW at the direction of such management and with the consent of the SHBI board.

​

KBW also performed such other studies and analyses as it considered appropriate and took into account its assessment of general economic, market and financial conditions and its experience in other transactions, as well as its experience in securities valuation and knowledge of the banking industry generally. KBW also participated in discussions held by the managements of SHBI and TCFC regarding the past and current business operations, regulatory relations, financial condition and future prospects of their respective companies and such other matters as KBW deemed relevant to its inquiry.

In conducting its review and arriving at its opinion, KBW relied upon and assumed the accuracy and completeness of all of the financial and other information provided to or discussed with it or that was publicly available and KBW did not independently verify the accuracy or completeness of any such information or assume any responsibility or liability for such verification, accuracy or completeness. KBW relied upon SHBI management as to the reasonableness and achievability of the publicly available consensus “street estimates” of SHBI and TCFC, the assumed SHBI and TCFC long-term growth rates, and the estimates regarding certain pro forma financial effects of the merger on SHBI (including, without limitation, the cost savings expected to result or be derived from the merger), all as referred to above (and the assumptions and bases for all such information), and KBW assumed that all such information was reasonably prepared and represented, or in the case of the SHBI and TCFC “street estimates” referred to above that such estimates were consistent with, the best currently available estimates and judgments of SHBI management and that the forecasts, projections and estimates reflected in such information would be realized in the amounts and in the time periods estimated.

It is understood that the portion of the foregoing financial information of SHBI and TCFC that was provided to KBW was not prepared with the expectation of public disclosure and that all of the foregoing financial information, including the publicly available consensus “street estimates” of SHBI and TCFC, was based on numerous variables and assumptions that are inherently uncertain (including, without limitation, factors related to general economic and competitive conditions and, in particular, the widespread disruption, extraordinary uncertainty and unusual volatility arising from global tensions and political unrest, economic uncertainty, inflation, and the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions) and, accordingly, actual results could vary significantly from those set forth in such information. KBW assumed, based on discussions with the management of SHBI and with the consent of the SHBI board, that all such information provided a reasonable basis upon which KBW could form its opinion and KBW expressed no view as to any such information or the assumptions or bases therefor. Among other things, such information has assumed that the ongoing COVID-19 pandemic could have an adverse impact, which was assumed to be limited, on SHBI and TCFC. KBW relied on all such information without independent verification or analysis and did not in any respect assume any responsibility or liability for the accuracy or completeness thereof.

KBW also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either SHBI or TCFC since the date of the last financial statements of each such entity that were made available to KBW. KBW is not an expert in the independent verification of the adequacy of allowances for loan and lease losses and KBW assumed, without independent verification and with SHBI’s consent, that the aggregate allowances for loan and lease losses for each of SHBI and TCFC are adequate to cover such losses. In rendering its opinion, KBW did not make or obtain any evaluations or appraisals or physical inspection of the property, assets or liabilities (contingent or otherwise) of SHBI or TCFC, the collateral securing any of such assets or liabilities, or the collectability of any such assets, nor did KBW examine any individual loan or credit files, nor did it evaluate the solvency, financial capability or fair value of SHBI or TCFC under any state or federal laws, including those relating to bankruptcy, insolvency or other matters. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Such estimates are inherently subject to uncertainty and should not be taken as KBW’s view of the actual value of any companies or assets.

 

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KBW assumed, in all respects material to its analyses:

•

the merger and any related transactions (including, without limitation, the bank merger) would be completed substantially in accordance with the terms set forth in the merger agreement (the final terms of which KBW assumed would not differ in any respect material to its analyses from the draft reviewed by KBW and referred to above), with no adjustments to the exchange ratio and with no other consideration or payments in respect of TCFC common stock;

​

•

the representations and warranties of each party in the merger agreement and in all related documents and instruments referred to in the merger agreement were true and correct;

​

•

each party to the merger agreement and all related documents would perform all of the covenants and agreements required to be performed by such party under such documents;

​

•

there are no factors that would delay or subject to any adverse conditions, any necessary regulatory or governmental approval for the merger or any related transactions and all conditions to the completion of the merger and any related transactions would be satisfied without any waivers or modifications to the merger agreement or any of the related documents; and

​

•

in the course of obtaining the necessary regulatory, contractual, or other consents or approvals for the merger and any related transactions, no restrictions, including any divestiture requirements, termination or other payments or amendments or modifications, would be imposed that would have a material adverse effect on the future results of operations or financial condition of SHBI, TCFC or the pro forma entity or the contemplated benefits of the merger, including without limitation the cost savings expected to result or be derived from the merger.

​

KBW assumed that the merger would be consummated in a manner that complies with the applicable provisions of the Securities Act, the Exchange Act, and all other applicable federal and state statutes, rules and regulations. KBW was further advised by representatives of SHBI that SHBI relied upon advice from its advisors (other than KBW) or other appropriate sources as to all legal, financial reporting, tax, accounting and regulatory matters with respect to SHBI, TCFC, the merger and any related transaction (including the bank merger), and the merger agreement. KBW did not provide advice with respect to any such matters.

KBW’s opinion addressed only the fairness, from a financial point of view, as of the date of such opinion, of the exchange ratio in the merger to SHBI. KBW expressed no view or opinion as to any other terms or aspects of the merger or any term or aspect of any related transaction (including the bank merger and the actions relating to the TCFC ESOP to be taken in connection with the merger), including without limitation, the form or structure of the merger or any such related transaction, any consequences of the merger or any related transaction to SHBI, its shareholders, creditors or otherwise, or any terms, aspects, merits or implications of any employment, retention, consulting, voting, support, shareholder, other agreements, arrangements or understandings contemplated or entered into in connection with the merger, any such related transaction, or otherwise. KBW’s opinion was necessarily based upon conditions as they existed and could be evaluated on the date of such opinion and the information made available to KBW through such date. There is currently significant volatility in the stock and other financial markets arising from global tensions and political unrest, economic uncertainty, inflation, and the COVID-19 pandemic, including the effect of evolving governmental interventions and non-interventions. Developments subsequent to the date of KBW’s opinion may have affected, and may affect, the conclusion reached in KBW’s opinion and KBW did not and does not have an obligation to update, revise or reaffirm its opinion. KBW’s opinion did not address, and KBW expressed no view or opinion with respect to:

•

the underlying business decision of SHBI to engage in the merger or enter into the merger agreement;

​

•

the relative merits of the merger as compared to any strategic alternatives that are, have been or may be available to or contemplated by SHBI or the SHBI board;

​

•

any business, operational or other plans with respect to TCFC or the pro forma entity that may be contemplated by SHBI or the SHBI board or that may be implemented by SHBI or the SHBI board subsequent to the closing of the merger;

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•

the fairness of the amount or nature of any compensation to any of SHBI’s officers, directors or employees, or any class of such persons, relative to any compensation to the holders of SHBI common stock or relative to the exchange ratio;

​

•

the effect of the merger or any related transaction on, or the fairness of the consideration to be received by, holders of any class of securities of SHBI, TCFC or any other party to any transaction contemplated by the merger agreement;

​

•

the actual value of SHBI common stock to be issued in connection with the merger;

​

•

the prices, trading range or volume at which SHBI common stock or TCFC common stock would trade following the public announcement of the merger or the prices, trading range or volume at which SHBI common stock would trade following the consummation of the merger;

​

•

any advice or opinions provided by any other advisor to any of the parties to the merger or any other transaction contemplated by the merger agreement; or

​

•

any legal, regulatory, accounting, tax, or similar matters relating to SHBI, TCFC or any of their respective shareholders, or relating to or arising out of or as a consequence of the merger or any other related transaction (including the bank merger), including whether or not the merger would qualify as a tax-free reorganization for U.S. federal income tax purposes.

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In performing its analyses, KBW made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, which are beyond the control of KBW, SHBI and TCFC. Any estimates contained in the analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by these analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. In addition, the KBW opinion was among several factors taken into consideration by the SHBI board in making its determination to approve the merger agreement and the merger. Consequently, the analyses described below should not be viewed as determinative of the decision of the SHBI board with respect to the fairness of the exchange ratio. The type and amount of consideration payable in the merger were determined through negotiation between SHBI and TCFC and the decision of SHBI to enter into the merger agreement was solely that of the SHBI board.

The following is a summary of the material financial analyses presented by KBW to the SHBI board in connection with its opinion. The summary is not a complete description of the financial analyses underlying the opinion or the presentation made by KBW to the SHBI board, but summarizes the material analyses performed and presented in connection with such opinion. The financial analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex analytic process involving various determinations as to appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, KBW did not attribute any particular weight to any analysis or factor that it considered, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, KBW believes that its analyses and the summary of its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on the information presented below in tabular format, without considering all analyses and factors or the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the process underlying its analyses and opinion.

For purposes of the financial analyses described below, KBW utilized an indicative transaction value for the proposed merger of $44.71 per share of outstanding TCFC common stock, or approximately $254.4 million in the aggregate (inclusive of the implied value of unvested shares of TCFC restricted stock), based on the 2.3287x exchange ratio in the proposed merger and the closing price of SHBI common stock on December 13, 2022. In addition to the financial analyses described below, KBW reviewed with the SHBI board of directors for informational purposes, among other things, an implied transaction multiple for the proposed merger (based on the implied transaction value for the proposed merger of $44.71 per share of outstanding TCFC common stock) of 8.8x TCFC’s estimated 2022 earnings per share (“EPS”) using publicly available consensus “street estimates” of TCFC.

 

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SHBI and TCFC Selected Companies Analysis.   Using publicly available information, KBW compared the financial performance, financial condition and market performance of SHBI and TCFC to 19 selected major exchange-traded banks headquartered in the Mid Atlantic with total assets between $2 billion and $5 billion and positive core return on average assets.

The selected companies were as follows:

To perform this analysis, KBW used profitability and other financial information for the most recent completed fiscal quarter (“MRQ”) or latest 12 months (“LTM”) available (which, in all cases, were the periods ended September 30, 2022) or as of the end of such periods and market price information as of December 13, 2022. KBW also used 2022 and 2023 EPS estimates taken from publicly available consensus “street estimates” for both SHBI and TCFC and the selected companies to the extent publicly available (consensus “street” estimates were not publicly available for four of the selected companies). Where consolidated holding company level financial data for the selected companies was unreported, subsidiary bank level data was utilized to calculate ratios (subsidiary bank level data necessary to calculate Total Capital Ratio was also not then publicly available for three of the selected companies). Certain financial data presented in the tables below may not correspond to the data presented in SHBI’s and TCFC’s historical financial statements, or the data presented under the section “The Merger — Opinion of TCFC’s Financial Advisor,” as a result of the different periods, assumptions and methods used to compute the financial data presented.

KBW’s analysis showed the following concerning the financial performance of SHBI, TCFC and the selected companies:

(1)

Core income excluded extraordinary items, gains/losses on sale of securities, amortization of intangibles and non-recurring items as defined by S&P.

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(2)

Excluded gains/losses on sale of securities.

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KBW’s analysis also showed the following concerning the financial condition of SHBI, TCFC and, to the extent publicly available, the selected companies: