REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2014

Regulatory Capital Requirements [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 17. REGULATORY CAPITAL REQUIREMENTS

Shore Bancshares, Inc. and each of the Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Banks must meet specific capital guidelines that involve quantitative measures of the Banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain amounts and ratios (set forth in the table below) of Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (leverage ratio). As of December 31, 2014, management believes that Shore Bancshares, Inc. and CNB met all capital adequacy requirements to which they are subject. Per the Order, Talbot Bank submitted a capital plan to the FDIC and Commissioner which describes the methods and timing by which it will increase and maintain its capital ratios up to or in excess of required minimums (leverage ratio of 8%, total capital ratio of 12%). These methods include earnings from operations, capital infusions from the Company, and other capital-raising alternatives such as equity issuances.

As of December 31, 2014, the most recent notification from the Federal Deposit Insurance Corporation categorized Talbot Bank as adequately capitalized and CNB as well capitalized under the regulatory framework for prompt corrective action. To be categorized as adequately or well capitalized, the Banks must maintain minimum Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are described below. The Talbot Bank would be considered “well capitalized” based on its capital ratios at year ended December 31, 2014, however must remain in the “adequately capitalized” category until the consent order is terminated by the FDIC and the Commissioner.

The minimum ratios for capital adequacy purposes are 4.00%, 8.00% and 4.00% for the Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively. To be categorized as well capitalized, a bank must maintain minimum ratios of 6.00%, 10.00% and 5.00% for its Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively. Shore Bancshares, Inc., as a financial holding company, is subject to the well-capitalized requirement.

The following tables present the capital amounts and ratios for Shore Bancshares, Inc., Talbot Bank and CNB as of December 31, 2014 and 2013.

			Total		Net				Tier 1		Total
			Risk-		Risk-		Adjusted		Risk-Based		Risk-Based		Tier 1
December 31, 2014	Tier 1		Based		Weighted		Average		Capital		Capital		Leverage
(Dollars in thousands)	Capital		Capital		Assets		Total Assets		Ratio		Ratio		Ratio
Company	$	112,511	$	120,510	$	736,763	$	1,075,674	15.27	%	16.36	%	10.46	%
Talbot Bank		51,637		55,910		394,788		579,781	13.08		14.16		8.91
CNB		44,869		48,594		331,089		485,042	13.55		14.68		9.25

			Total		Net				Tier 1		Total
			Risk-		Risk-		Adjusted		Risk-Based		Risk-Based		Tier 1
December 31, 2013	Tier 1		Based		Weighted		Average		Capital		Capital		Leverage
(Dollars in thousands)	Capital		Capital		Assets		Total Assets		Ratio		Ratio		Ratio
Company	$	72,370	$	81,341	$	717,129	$	1,028,957	10.09	%	11.34	%	7.03	%
Talbot Bank		28,395		33,554		410,547		569,689	6.92		8.17		4.98
CNB		42,186		45,998		305,278		460,747	13.82		15.07		9.16

Federal and state laws and regulations applicable to banks and their holding companies impose certain restrictions on dividend payments by the Banks, as well as restricting extensions of credit and transfers of assets between the Banks and Shore Bancshares, Inc. Talbot Bank is currently prohibited from paying dividends to Shore Bancshares, Inc. without the prior consent of its banking regulators. CNB paid dividends of $200 thousand to Shore Bancshares, Inc. during 2014. At December 31, 2014, CNB could have paid additional dividends to Shore Bancshares, Inc. of approximately $4.5 million without the prior consent and approval of its regulatory agencies. Shore Bancshares, Inc. had no outstanding receivables from subsidiaries at December 31, 2014 or 2013.