SHORE BANCSHARES INCSHBI

SHORE BANCSHARES INC Leases Disclosure

10-KFiled Mar 10, 20252 min read
Leases
Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.
The Company’s long-term lease agreements for branches and offices are classified as operating leases. Some of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.
During the third quarter of 2023, the Company acquired long-term branch leases and equipment leases due to the acquisition of TCFC. These leases were reassessed by management as of the Acquisition Date, which included updating the incremental borrowing rates and remaining lease terms.
The following tables present information about the Company’s leases as of and for the years ended December 31, 2024 and 2023.
($ in thousands)December 31, 2024December 31, 2023
Lease liabilities$11,844 $12,857 
Right-of-use assets$11,385 $12,487 
Weighted-average remaining lease term 10.20 years10.88 years
Weighted-average discount rate3.29 %3.24 %
Remaining lease term - minimum0.01 years0.39 years
Remaining lease term - maximum16.68 years17.68 years
Year Ended December 31,
Lease cost ($ in thousands)
20242023
Operating lease cost$1,916 $1,645 
Short-term lease cost— — 
Total lease cost$1,916 $1,645 
Cash paid for amounts included in the measurement of lease liabilities$1,809 $1,553 
The following table presents a maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to total operating lease liabilities at December 31, 2024.
Lease payments due ($ in thousands)
December 31, 2024
2025$1,713 
20261,677 
20271,568 
20281,538 
20291,268 
Thereafter6,025 
Total undiscounted cash flows$13,789 
Less: Imputed interest1,945 
Lease liabilities$11,844 
Total gross rental income was $1.1 million and $1.2 million for the years ended December 31, 2024 and 2023, respectively.

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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