Form 8-K - Current report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 25, 2024

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland

000-22345

52-1974638

(State or other jurisdiction of incorporation or organization)

(Commission file number)

(IRS Employer Identification No.)

18 E. Dover St., Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

[phone]

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

o						Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o						Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o						Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o						Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common stock, par value $.01 per share

SHBI

Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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 13(a) of the Exchange Act. o

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Item 2.02. Result of Operation and Financial Condition.

On July 25, 2024, Shore Bancshares, Inc. (the “Company”) issued a press release announcing its results of operations and financial condition for the three and six months ended June 30, 2024. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits.

The exhibits that are filed or furnished with this report are listed in the Exhibit Index that immediately follows the signatures hereto, which list is incorporated herein by reference.

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EXHIBIT INDEX

Exhibit Number						Description
99.1						Press Release, dated July 25, 2024 (filed herewith)
104						Cover Page Interactive Data File (embedded within the inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

						SHORE BANCSHARES, INC.
Dated: July 25, 2024						By:			/s/ James M. Burke
									James M. Burke
									President and Chief Executive Officer

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18 E. Dover Street

Easton, Maryland 21601

Phone [phone]

PRESS RELEASE

Shore Bancshares, Inc. Reports Second Quarter and First-Half Financial Results

Easton, Maryland (July 25, 2024) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the “Company” or “Shore Bancshares”), the holding company for Shore United Bank, N.A. (the “Bank” or “SUB”) reported net income for the second quarter of 2024 of $11.2 million or $0.34 per diluted common share compared to net income of $8.2 million or $0.25 per diluted common share for the first quarter of 2024, and net income of $4.0 million or $0.20 per diluted common share for the second quarter of 2023. Net income for the first-half of 2024 was $19.4 million or $0.58 per diluted common share, compared to net income for the first-half of 2023 of $10.5 million or $0.53 per diluted common share. Unless the context clearly suggests otherwise, references to “the merger” refers to the merger of equals which took place on July 1, 2023 between the Company and The Community Financial Corporation (“TCFC”).

Second Quarter and First-Half of 2024 Highlights

■Return on Average Assets (“ROAA”) - The Company reported ROAA of 0.77% for the second quarter of 2024, compared to 0.57% for the first quarter of 2024 and 0.45% for the second quarter of 2023. Non-GAAP, ROAA(1), which excludes fraud expense, core deposit intangible amortization, and merger-related expenses, was 0.91% for the second quarter of 2024, compared to 0.94% for the first quarter of 2024 and 0.59% for the second quarter of 2023.

■Net Interest Margin Expansion - Net interest margin (“NIM”) increased to 3.11% for the second quarter of 2024 from 3.08% for the first quarter of 2024. Excluding net accretion interest income of $3.8 million and $3.6 million for the same time periods, NIM increased two basis points (“bps”) to 2.83% for the second quarter of 2024 from 2.81% for the first quarter of 2024.

■Continued Stable and Low Cost Funding - Total deposits remained stable in the second quarter of 2024 with noninterest-bearing deposits increasing $386.6 million to 30.8% of total deposits. The increase in noninterest-bearing deposits was primarily due to the migration of low-cost demand deposits to noninterest-bearing deposits and successful initiatives designed to drive noninterest-bearing deposit growth. The total average cost of deposits for the second quarter of 2024 declined four bps to 2.19% when compared to the first quarter of 2024.

■Improving Earnings Drive Capital Accretion - Second quarter net interest income and noninterest income increased $1.0 million and $1.9 million, respectively, from the first quarter of 2024. Net interest income increased due to modest loan growth, slightly higher accelerated accretion income, and loan and securities repricing. Noninterest income increased primarily due to higher mortgage-banking revenue from increased volume and sales of residential mortgages. The improved earnings for the second quarter resulted in a 14 bps increase in the Company’s Tier 1 Capital Ratio and a 14 bps increase in the Company’s Total Risk-Based Capital Ratio, which were 9.67% and 11.82%, respectively, on June 30, 2024. The Company’s leverage ratio and tangible common equity ratio(1) also increased to 8.07% and 7.23%, respectively, in the second quarter of 2024.

■Reduced Commercial Real Estate (“CRE”) Concentration - The CRE Concentration Ratio, which is calculated as non-owner occupied CRE loans as a percentage of the Bank’s Tier 1 Capital + Allowance for Credit Losses (“ACL”), decreased in the second quarter of 2024 to 368.7% from 370.0% in the first quarter of 2024 and 382.6% in the fourth quarter of 2023. Capital accretion has allowed the Bank to meet the needs of its customers and fund new CRE loans.

■Improving Operating Leverage - The second quarter efficiency ratio improved to 66.2% when compared to 76.9% in the first quarter 2024 and 77.8% in the second quarter 2023. The second quarter non-GAAP efficiency, which excludes core deposit intangible amortization and non-recurring activity, improved to 61.1% when compared to 62.4% in the first quarter 2024 and 71.8% in the second quarter 2023. Management anticipates ongoing expense management and technology investments will result in continued improvements in operating leverage over time.

“Throughout our first post-merger operating year, we have worked to strengthen our balance sheet and streamline our operations. Our second quarter financial results reflect our progress and momentum on both fronts.” stated James (“Jimmy”) M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. “Stable deposit balances and increasing asset yields drove NIM expansion and improving financial results built capital and supported loan growth. We continue to closely manage expenses and make investments that will improve

(1) Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

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operating leverage over time. Credit remains broadly stable and economic activity in our markets remains strong. We appreciate the focus and commitment of all our associates who continue to deliver outstanding service to our clients and our communities.”

Balance Sheet Review

Total assets were $5.9 billion at June 30, 2024, a decrease of $145 million or 2.4%, when compared to $6.0 billion at December 31, 2023. The aggregate decrease was primarily due to a decrease in cash and cash equivalents of $233.5 million and investment securities held to maturity of $13.8 million partially offset by an increase in investment securities available for sale of $21.1 million and loans held for investment of $64.7 million. The ratio of the ACL to total loans increased slightly from 1.23% at December 31, 2023 to 1.24% at June 30, 2024.

The Company’s tangible common equity ratio(1) at June 30, 2024 was 7.23% compared to 7.11% at December 31, 2023. The Company’s Tier 1 and Total Risk-Based Capital Ratios at June 30, 2024 were 9.67% and 11.82%, respectively. The Bank’s Tier 1 and Total Risk-Based Capital Ratios at June 30, 2024 were 10.45% and 11.69%, respectively. Non-owner occupied CRE loans as a percentage of the Bank’s Tier 1 Capital + ACL at June 30, 2024 and December 31, 2023 were $2.1 billion or 368.7% and $2.0 billion or 382.6%, respectively. Construction loans as a percentage of the Bank’s Tier 1 Capital + ACL at June 30, 2024 and December 31, 2023 were $327.9 million or 58.6% and $299.0 million or 56.7%, respectively.

The Bank's office CRE loan portfolio, which includes owner-occupied and non-owner occupied CRE loans, was $504.9 million or 10.7% of total loans of $4.7 billion at June 30, 2024. The Bank’s office CRE loan portfolio included $141.1 million or 28.0% of the total with medical tenants and $72.9 million or 14.4% of the total with government or government contractor tenants. There were 507 loans in the office CRE portfolio with an average and median loan size of $1.0 million and $0.4 million, respectively. Loan to Value ("LTV") estimates for the office CRE portfolio are summarized below and LTV collateral values are based on the most recent appraisal, which varies from the initial loan boarding to interim credit reviews:

LTV Range						Loan Count						Loan Balance						% of Total CRE
Less than or equal to 50%						257						$	169,209					34		%
50%-60%						67						131,378						26		%
60%-70%						84						99,728						20		%
70%-80%						74						87,971						17		%
Greater than 80%						25						16,583						3		%
Grand Total						507						$	504,869					100		%

The Bank had 18 office CRE loans totaling $164.1 million that were greater than $5.0 million at June 30, 2024, compared to 24 office CRE loans totaling $189.8 million at December 31, 2023. The decrease in this portfolio segment was the result of normal amortization and two large loan payoffs in the quarter. For the office CRE portfolio, at June 30, 2024, the average loan debt-service coverage ratio was 2.5x and average LTV was 51.0%. Of the office CRE portfolio balance, 74% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 87% is secured by properties with five stories or less. Of the office CRE loans, $5.9 million will mature and $4.1 million of the office CRE loans will reprice prior to December 31, 2024. Of the office CRE loans, $2.1 million were classified as special mention or substandard at June 30, 2024.

Total deposits decreased $237.2 million, or 4.4% to $5.1 billion at June 30, 2024 when compared to December 31, 2023. The decrease in total deposits was primarily due to decreases in demand deposits of $507.0 million and money market and savings of $88.6 million, partially offset by increases in noninterest-bearing deposits of $329.2 million and time deposits of $29.2 million. The decrease in deposits is primarily attributable to seasonal municipal runoff and a decrease in interest rate-sensitive cannabis-related deposits. The increase in noninterest bearing deposits was significantly impacted by a transfer of $399.4 million of demand deposits which carried an average rate of four bps during the second quarter of 2024.

Total funding, which includes customer deposits, Federal Home Loan Bank (“FHLB”) short and long-term advances, and brokered deposits remained flat at $5.2 billion at June 30, 2024 and March 31, 2024. The Bank had $81 million in total FHLB advances at June 30, 2024 compared to zero at March 31, 2024. These advances consisted of short-term direct rate credits of $31 million and an 18-month Bermuda Convertible of $50 million. The Bank's uninsured deposits at June 30, 2024 were $948.9 million or 18.43% of total deposits. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, at June 30, 2024 were $819.4 million or 15.91% of total deposits. At June 30, 2024, the Bank had approximately $1.0 billion of available liquidity including: $138.9 million in cash, $894.3 million in secured borrowing capacity at the FHLB and other correspondent banks, and $95.0 million in unsecured lines of credit.

Total stockholders’ equity increased $11.6 million, or 2.3%, when compared to December 31, 2023, primarily due to current year earnings, offset by cash dividends paid. As of June 30, 2024, the ratio of total equity to total assets was 8.92% and the ratio of total tangible equity to total tangible assets(1) was 7.23% compared to 8.50% and 6.78% at December 31, 2023, respectively.

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Review of Quarterly Financial Results

Net interest income was $42.1 million for the second quarter of 2024, compared to $41.1 million for the first quarter of 2024 and $22.5 million for the second quarter of 2023. The increase in net interest income when compared to the first quarter of 2024 was primarily due to the increase in interest and fees on loans of $1.5 million and interest and dividends on investment securities of $0.8 million, partially offset by an increase in interest expense of $1.0 million. The increase in interest expense in the second quarter of 2024 was the result of carrying short-term advances from FHLB during the quarter to offset seasonal outflows from municipal customers of $1.5 million, partially offset by lower interest expense on deposits of $0.9 million. The increase when compared to the second quarter of 2023 was primarily due to the increase in interest and fees on loans of $34.6 million, interest and dividends on investment securities of $1.5 million and interest on deposits from other banks of $0.4 million, coupled with a decrease in interest on short-term borrowings of $1.9 million. These increases were partially offset by the increase in interest on deposits of $17.7 million and interest on long-term borrowings of $1.0 million all significantly impacted by the merger in the third quarter of 2023.

The Company’s net interest margin increased to 3.11% for the second quarter of 2024 from 3.08% for the first quarter of 2024 primarily due to loans and securities repricing at a greater rate than deposits. The Company’s cost of funds was positively impacted during the second quarter due to a shift from interest-bearing to noninterest-bearing deposits. Average interest-bearing deposits decreased $395.0 million, or 9.9% which resulted in $0.9 million less interest expense. These interest-bearing deposits were almost entirely replaced with an increase in the average balance on noninterest-bearing deposits of $317.4 million, or 27.3%. The Company’s net interest margin increased to 3.11% for the second quarter of 2024 from 2.68% for the second quarter of 2023. Comparing the second quarter of 2024 to the second quarter of 2023, the Company’s interest-earning asset yields increased 102 bps to 5.39% from 4.37%, while the cost of funds repriced at a slower pace resulting in an increase of 60 bps to 2.36% from 1.76% for the same period.

The provision for credit losses was $2.1 million for the three months ended June 30, 2024. The comparable amounts were $0.4 million for the three months ended March 31, 2024, and $0.7 million for the three months ended June 30, 2023. The increase in the provision for credit losses for the second quarter of 2024 compared to the first quarter of 2024 was due to new loan growth, a small increase in the Bank’s CECL model loss factors and increases in specific reserves and charge-offs in the second quarter of 2024. Coverage ratios were 1.24% and 1.23% at June 30, 2024 and March 31, 2024, respectively. The increase in the provision for credit losses when compared to the second quarter of 2023 was primarily due to an updated CECL model in the third quarter of 2023 due to the merger. Net charge-offs for the second quarter of 2024 were $0.9 million compared to net charge-offs of $0.6 million for the first quarter of 2024 and net charge offs of $50,000 for the second quarter of 2023.

At June 30, 2024 and March 31, 2024, nonperforming assets were $18.4 million, or 0.31% of total assets and $16.4 million, or 0.28% of total assets, respectively. The balance of nonperforming assets increased primarily due to an increase in assets held for sale of $1.1 million and an increase of $1.1 million in loans 90 days past due and still accruing. When comparing June 30, 2024 to June 30, 2023, nonperforming assets increased $13.7 million, primarily due to increases in nonaccrual loans of $11.4 million, an increase in repossessed marine loans and assets held for sale of $2.9 million, and an increase of $0.7 million in loans 90 days past due and still accruing almost entirely impacted by the merger in the third quarter of 2023.

Total noninterest income for the second quarter of 2024 was $8.4 million, an increase of $1.9 million from $6.6 million for the first quarter of 2024 and an increase $3.1 million from $5.3 million for the second quarter of 2023. The increase from the first quarter of 2024 was primarily due to improved mortgage banking revenue. In addition, both Wye Financial Partners, the Bank’s wealth management division, and the Mid-Maryland Title Company, Inc. (the “title company”) have experienced improved revenue streams due to increased activity. The increase from the second quarter of 2023 was due to higher revenue among almost all revenue line items, a direct result of the merger in the third quarter of 2023.

Total noninterest expense of $33.5 million for the second quarter of 2024 decreased $3.2 million when compared to the first quarter of 2024 expense of $36.7 million and increased $11.9 million when compared to the second quarter of 2023 expense of $21.6 million. The decrease from the first quarter of 2024 was primarily due to a credit card fraud loss of $4.3 million in the first quarter of 2024, partially offset by an increase in salaries and wages of $1.5 million. The increase from the second quarter of 2023 was primarily due to the operation of a larger branch network and employee base due to the merger, which significantly impacted almost all expense line items. In addition, despite the increased size, the Company has prudently reduced its staff by approximately 72 FTE’s since the consummation of the merger. The efficiency ratio for the second quarter of 2024 when compared to the first quarter of 2024 and the second quarter of 2023 was 66.23%, 76.93% and 77.76%, respectively. Furthermore, Non-GAAP efficiency ratios(1) for the same periods were 61.05%, 62.37% and 71.75%, respectively. The net operating expense ratio,which is non-interest expense less non-interest income divided by average assets, for the second quarter 2024 was 1.73%, compared to 2.10% and 1.82% for the first quarter of 2024 and the second quarter of 2023, respectively. The Non-GAAP net operating expense ratio, which excludes core deposit intangible amortization and non-recurring activity, for the second quarter 2024 was 1.55%, compared to 1.62% and 1.64% for the first quarter of 2024 and the second quarter of 2023, respectively.

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Review of Six Month Financial Results

Net interest income for the first six months of 2024 was $83.3 million, an increase of $35.1 million, or 72.9%, when compared to the first six months of 2023. The increase in net interest income was primarily due to an increase in total interest income of $72.6 million, or 101.2%, which included an increase in interest and fees on loans of $69.5 million, or 109.3%. The increase of interest and fees on loans was primarily due to the increase in the average balance of loans of $2.0 billion, or 75.9%, and an increase in net accretion income of $6.7 million due to the merger. Increases to net interest income were partially offset by increased total interest expense of $37.4 million, or 159.0%, primarily due to increases in the cost of funds and in the average balance of interest-bearing deposits of $1.6 billion, or 76.8%. All of these increases were largely due to the merger.

The Company’s net interest margin increased to 3.09% for 2024 from 2.93% for 2023, primarily due to recent loan growth and repricing of earning assets, higher net accretion due to the merger, a positive shift in lower cost deposits and an overall stabilized funding base. The increase in the average balance and yields earned on average earning assets of $2.1 billion and 100 bps, respectively, were partially offset by increases in the average balance and rates paid on interest-bearing deposits of $1.6 billion and 136 bps, respectively. The average balance on noninterest-bearing deposits increased $522.7 million, or 65.4%. Net accretion income impacted the increased net interest margin by 27 bps and five bps for the six months ended June 30, 2024 and 2023, respectively. Until the balance sheet restructuring in the third quarter of 2024, the net interest margin experienced compression due to the Company’s liability sensitive position, deposit rate pressures and significantly higher FHLB borrowing rates.

The provision for credit losses for the six months ended June 30, 2024 and 2023 was $2.5 million and $1.9 million, respectively. The increase in the provision for credit losses for 2024 was due to higher levels of reserves required by the Company’s CECL model and higher net charge-offs. Net charge offs for the six months ended June 30, 2024 were $1.5 million compared to net recoveries of $70,000 for the six months ended June 30, 2023.

Total noninterest income for the six months ended June 30, 2024 increased $4.4 million or 41.2%, when compared to the same period in 2023. The increase in noninterest income was experienced among almost all revenue line items. These increases were attributable to the increased size and scale of the Company following the merger as well as strategic initiatives to improve business line operations and profitability.

Total noninterest expense for the six months ended June 30, 2024 increased $27.7 million, or 65.2%, when compared to the same period in 2023. Almost all noninterest expense line items increased as a result of the merger and the expanded operations of the newly combined Company. There were no merger-related expenses for the six months ended June 30, 2024, compared to $1.9 million for the six months ended June 30, 2023. The Company continues to focus on streamlining processes to unlock operational efficiencies and reduce overall noninterest expenses.

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Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares 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, N.A. Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and the Middle East; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget; the impact of recent or future changes in FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; the Company’s evaluation of the effect of the credit card fraud on the Company’s internal controls over financial reporting and its ability to remediate the existing material weakness identified in its internal control over financial reporting; the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and other factors that may affect our future results. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

For further information contact: Todd Capitani, Executive Vice President, and Chief Financial Officer, 240-427-1068

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Shore Bancshares, Inc.

Financial Highlights (Unaudited)

						For the Three Months Ended June 30,																		For the Six Months Ended June 30,
(Dollars in thousands, except per share data)						2024						2023						Change						2024						2023						Change
PROFITABILITY FOR THE PERIOD
Net interest income						$	42,140					$	22,494					87.3		%				$	83,275					$	48,158					72.9		%
Provision for credit losses						2,081						667						212.0						2,488						1,880						32.3
Noninterest income						8,440						5,294						59.4						15,007						10,628						41.2
Noninterest expense						33,499						21,608						55.0						70,197						42,501						65.2
Income before income taxes						15,000						5,513						172.1						25,597						14,405						77.7
Income tax expense						3,766						1,495						151.9						6,179						3,930						57.2
Net income						$	11,234					$	4,018					179.6						$	19,418					$	10,475					85.4
Return on average assets						0.77		%				0.45		%				32		bp				0.67		%				0.59		%				8		bp
Return on average assets excluding amortization of intangibles, merger related expenses and credit card fraud losses - Non-GAAP (1) (2)						0.91						0.59						32						0.92						0.71						21
Return on average equity						8.70						4.49						421						7.54						5.83						171
Return on average tangible equity - Non-GAAP (1), (2)						12.85						7.16						569						13.08						8.57						451
Interest rate spread						2.11						2.04						7						2.23						2.35						(12)
Net interest margin						3.11						2.68						43						3.09						2.93						16
Efficiency ratio - GAAP						66.23						77.76						(1,153)						71.42						72.30						(88)
Efficiency ratio - Non-GAAP (1)						61.05						71.76						(1,071)						61.69						67.49						(580)
Non-interest income to average assets						0.58						0.59						(1)						0.52						0.60						(8)
Non-interest expense to average assets						2.31						2.41						(10)						2.43						2.41						2
Net operating expense to average assets - GAAP						1.73						1.82						(9)						1.91						1.81						10
Net operating expense to average assets - Non-GAAP (1)						1.55						1.64						(9)						1.58						1.65						(7)
PER SHARE DATA
Basic and diluted net income per common share						$	0.34					$	0.20					69.1		%				$	0.58					$	0.53					9.9		%
Dividends paid per common share						$	0.12					$	0.12					—		%				$	0.24					$	0.24					—		%
Book value per common share at period end						15.74						18.24						(13.7)
Tangible book value per common share at period end - Non-GAAP (1)						12.54						14.83						(15.4)
Market value at period end						11.45						11.56						(1.0)
Market range:
High						11.90						14.45						(17.6)						14.38						18.15						(20.8)
Low						10.06						10.65						(5.5)						10.06						10.65						(5.5)
AVERAGE BALANCE SHEET DATA
Loans						$	4,706,510					$	2,709,944					73.7		%				$	4,680,846					$	2,661,066					75.9		%
Investment securities						706,079						645,842						9.3						680,701						649,994						4.7
Earning assets						5,459,961						3,369,183						62.1						5,423,871						3,324,682						63.1
Assets						5,839,328						3,596,311						62.4						5,807,076						3,551,573						63.5
Deposits						5,064,974						2,908,662						74.1						5,103,815						2,938,389						73.7
Short-term and Long Term FHLB advances						143,769						261,797						(45.1)						73,885						188,293						(60.8)
Subordinated Debt & TRUPS						72,680						43,185						68.3						72,549						43,147						68.1
Stockholders' equity						519,478						363,225						43.0						517,727						362,205						42.9

____________________________________

(1)See the reconciliation table that begins on page 23.

(2)This ratio excludes merger related expenses (Non-GAAP) on page 23.

6

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Shore Bancshares, Inc.

Financial Highlights (Unaudited) - Continued

						For the Three Months Ended June 30,																		For the Six Months Ended June 30,
(Dollars in thousands, except per share data)						2024						2023						Change						2024						2023						Change
CREDIT QUALITY DATA
Net charge-offs						$	886					$	50					1,672.0		%				$	1,451					$	70					1972.9		%
Nonaccrual loans						$	14,837					$	3,481					326.2		%
Loans 90 days past due and still accruing						414						1,050						(60.6)
Other real estate owned and Repossessed Property						3,126						179						1,646.4
Total nonperforming assets						18,377						4,710						290.2
Borrowers experiencing financial difficulty ("BEFDs") (still accruing)						—						—						—
Total nonperforming assets and BEFDs modifications						$	18,377					$	4,710					290.2
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets						8.92		%				9.97		%				(105)		bp
Period-end tangible equity to tangible assets - Non-GAAP (1)						7.23						8.26						(103)
Annualized net charge-offs to average loans						0.08		%				0.01		%				7		bp				0.06		%				0.01		%				5		bp
Allowance for credit losses as a percent of:
Period-end loans						1.24		%				1.05		%				19		bp
Nonaccrual loans						394.14						833.50						(43,936)
Nonperforming assets						318.21						616.01						(29,780)
Accruing BEFDs modifications						—						—						—
Nonperforming assets and accruing BEFDs						318.21						616.01						(29,780)
As a percent of total loans:
Nonaccrual loans						0.32		%				0.13		%				19		bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets						0.39		%				0.17		%				22		bp
As a percent of total assets:
Nonaccrual loans						0.25		%				0.10		%				15		bp
Nonperforming assets						0.31		%				0.13		%				18

____________________________________

(1)See the reconciliation table that begins on page 23.

(2)This ratio excludes merger related expenses (Non-GAAP) on page 23.

7

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

																								June 30, 2024			June 30, 2024
																								compared to			compared to
(In thousands, except per share data)						June 30, 2024						December 31, 2023						June 30, 2023						December 31, 2023			June 30, 2023
ASSETS
Cash and due from banks						$	50,090					$	63,172					$	35,423					(20.7)		%	41.4		%
Interest-bearing deposits with other banks						88,793						309,241						10,404						(71.3)			753.5
Cash and cash equivalents						138,883						372,413						45,827						(62.7)			203.1
Investment securities available for sale (at fair value)						131,594						110,521						78,069						19.1			68.6
Investment securities held to maturity (net of allowance for credit losses of $108 (June 30, 2024), $94 (December 31, 2023), $163 (June 30, 2023)) at amortized cost)						499,431						513,188						536,970						(2.7)			(7.0)
Equity securities, at fair value						5,699						5,703						1,245						(0.1)			357.8
Restricted securities						21,725						17,900						21,208						21.4			2.4
Loans held for sale, at fair value						27,829						8,782						6,845						216.9			306.6
Loans held for investment						4,705,737						4,641,010						2,753,223						1.4			70.9
Less: allowance for credit losses						(58,478)						(57,351)						(29,014)						(2.0)			(101.6)
Loans, net						4,647,259						4,583,659						2,724,209						1.4			70.6
Premises and equipment, net						82,176						82,386						51,036						(0.3)			61.0
Goodwill						63,266						63,266						63,266						—			—
Other intangible assets, net						42,945						48,090						4,671						(10.7)			819.4
Other real estate owned, net						179						179						179						—			—
Repossessed property, net						1,560						—						—						—			—
Assets held for sale						1,387						—						—						—
Mortgage servicing rights, at fair value						5,995						5,926						5,466						1.2			9.7
Right of use assets, net						11,762						12,487						9,077						(5.8)			29.6
Cash surrender value on life insurance						102,969						101,704						60,150						1.2			71.2
Accrued interest receivable						19,641						19,217						8,778						2.2			123.8
Deferred income taxes						36,078						40,707						10,879						(11.4)			231.6
Other assets						23,639						24,790						13,756						(4.6)			71.8
Total assets						$	5,864,017					$	6,010,918					$	3,641,631					(2.4)			61.0
LIABILITIES
Noninterest-bearing deposits						$	1,587,252					$	1,258,037					$	778,963					26.2		%	103.8		%
Interest-bearing deposits						3,561,633						4,128,083						2,158,563						(13.7)			65.0
Total deposits						5,148,885						5,386,120						2,937,526						(4.4)			75.3
Advances from FHLB - short-term						31,000						—						276,000						—			(88.8)
Advances from FHLB - long-term						50,000						—						—						—			—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")						29,316						29,158						18,492						0.5			58.5
Subordinated debt						43,504						43,139						24,735						0.8			75.9
Total borrowings						153,820						72,297						319,227						112.8			(51.8)
Lease liabilities						12,189						12,857						9,392						(5.2)			29.8
Accrued expenses and other liabilities						26,340						28,509						12,346						(7.6)			113.3
Total liabilities						$	5,341,234					$	5,499,783					$	3,278,491					(2.9)			62.9
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares						$	333					$	332					$	199					0.3			67.3
Additional paid in capital						356,994						356,007						202,008						0.3			76.7
Retained earnings						173,716						162,290						169,494						7.0			2.5
Accumulated other comprehensive loss						(8,260)						(7,494)						(8,561)						(10.2)			3.5
Total stockholders' equity						522,783						511,135						363,140						2.3			44.0
Total liabilities and stockholders' equity						$	5,864,017					$	6,010,918					$	3,641,631					(2.4)			61.0
Period-end common shares outstanding						$	33,215					$	33,162					$	19,907					0.2			66.8
Book value per common share						$	15.74					$	15.41					$	18.24					2.1			(13.7)

8

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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

						For the Three Months Ended June 30,																		For the Six Months Ended June 30,
(In thousands, except per share data)						2024						2023						% Change						2024						2023						% Change
INTEREST INCOME
Interest and fees on loans						$	67,292					$	32,729					105.6		%				$	133,045					$	63,557					109.3		%
Interest on investment securities:
Taxable						5,230						3,729						40.3						9,650						7,793						23.8
Tax-exempt						6						5						20.0						12						12						—
Interest on deposits with other banks						578						170						240.0						1,538						333						361.9
Total interest income						$	73,106					$	36,633					99.6						$	144,245					$	71,695					101.2
INTEREST EXPENSE
Interest on deposits						$	27,585					$	9,914					178.2						$	56,081					$	17,195					226.1
Interest on short-term borrowings						1,584						3,449						(54.1)						1,641						4,810						(65.9)
Interest on long-term borrowings						1,797						776						131.6						3,248						1,532						112.0
Total interest expense						$	30,966					$	14,139					119.0						$	60,970					$	23,537					159.0
NET INTEREST INCOME						$	42,140					$	22,494					87.3						$	83,275					$	48,158					72.9
Provision for credit losses						2,081						667						212.0						2,488						1,880						32.3
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES						$	40,059					$	21,827					83.5						$	80,787					$	46,278					74.6
NONINTEREST INCOME
Service charges on deposit accounts						$	1,493					$	1,264					18.1						$	3,001					$	2,477					21.2
Trust and investment fee income						896						399						124.6						1,630						831						96.1
Interchange credits						1,717						1,311						31.0						3,304						2,523						31.0
Mortgage-banking revenue						1,983						1,054						88.1						2,783						2,031						37.0
Title Company revenue						165						186						(11.3)						243						323						(24.8)
Other noninterest income						2,186						1,080						102.4						4,046						2,443						65.6
Total noninterest income						$	8,440					$	5,294					59.4						$	15,007					$	10,628					41.2

9

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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited) - Continued

						For the Three Months Ended June 30,																		For the Six Months Ended June 30,
(In thousands, except per share data)						2024						2023						% Change						2024						2023						% Change
NONINTEREST EXPENSE
Salaries and wages						$	13,307					$	8,955					48.6		%				$	25,158					$	17,639					42.6		%
Employee benefits						3,593						2,440						47.3						7,689						5,361						43.4
Occupancy expense						2,432						1,599						52.1						4,848						3,218						50.7
Furniture and equipment expense						900						477						88.7						1,804						1,011						78.4
Data processing						2,978						1,739						71.2						5,845						3,537						65.3
Directors' fees						359						185						94.1						654						435						50.3
Amortization of intangible assets						2,569						435						490.6						5,145						876						487.3
FDIC insurance premium expense						1,089						758						43.7						2,240						1,129						98.4
Other real estate owned, net						—						—						—						—						(1)						100.0
Legal and professional fees						1,354						959						41.2						2,954						1,709						72.8
Fraud losses (1)						62						47						31.9						4,564						114						3903.5
Merger related expenses						—						1,197						(100.0)						—						1,888						(100.0)
Other noninterest expenses						4,856						2,817						72.4						9,296						5,585						66.4
Total noninterest expense						$	33,499					$	21,608					55.0						70,197						42,501						65.2
Income before income taxes						$	15,000					$	5,513					172.1						25,597						14,405						77.7
Income tax expense						3,766						1,495						151.9						6,179						3,930						57.2
NET INCOME						$	11,234					$	4,018					179.6						$	19,418					$	10,475					85.4
Weighted average shares outstanding - basic and diluted						33,215						19,903						66.9						33,337						19,895						67.6
Basic and diluted net income per common share						$	0.34					$	0.20					69.1						$	0.58					$	0.53					9.9
Dividends paid per common share						$	0.12					$	0.12					—						$	0.24					$	0.24					—

____________________________________

(1)Fraud losses includes $4.3 million of credit card fraud losses for the six months ended June 30, 2024.

10

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

						For the Three Months Ended																																				For the Three Months Ended
						June 30, 2024																		June 30, 2023																		June 30, 2024																		March 31, 2024
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate						$	1,388,168					$	19,278					5.59		%				$	946,545					$	10,876					4.61		%				$	1,388,168					$	19,278					5.59		%				$	1,361,636					$	18,492					5.46		%
Commercial real estate						2,738,693						39,370						5.78						1,292,406						15,620						4.85						2,738,693						39,370						5.78						2,722,600						38,604						5.70
Commercial						216,809						3,926						7.28						137,554						2,177						6.35						216,809						3,926						7.28						219,884						4,097						7.49
Consumer						327,781						4,265						5.23						323,798						3,983						4.93						327,781						4,265						5.23						329,118						4,272						5.22
State and political						2,331						30						5.18						900						8						3.57						2,331						30						5.18						1,473						16						4.37
Credit Cards						8,378						201						9.65						—						—						—						8,378						201						9.65						7,457						167						9.01
Other						24,350						302						4.99						8,741						117						5.37						24,350						302						4.99						13,015						183						5.66
Total Loans						4,706,510						67,372						5.76						2,709,944						32,781						4.85						4,706,510						67,372						5.76						4,655,183						65,831						5.69
Investment securities
Taxable						705,421						5,230						2.97						645,178						3,729						2.31						705,421						5,230						2.97						654,663						4,419						2.70
Tax-exempt (1)						658						8						4.86						664						9						5.42						658						8						4.86						660						8						4.85
Interest-bearing deposits						47,372						578						4.91						13,397						170						5.09						47,372						578						4.91						77,276						960						5.00
Total earning assets						5,459,961						73,188						5.39						3,369,183						36,689						4.37						5,459,961						73,188						5.39						5,387,782						71,218						5.32
Cash and due from banks						45,141																		29,923																		45,141																		49,499
Other assets						391,854																		225,935																		391,854																		395,023
Allowance for credit losses						(57,628)																		(28,730)																		(57,628)																		(57,480)
Total assets						$	5,839,328																	$	3,596,311																	$	5,839,328																	$	5,774,824

11

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						For the Three Months Ended																																				For the Three Months Ended
						June 30, 2024																		June 30, 2023																		June 30, 2024																		March 31, 2024
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Interest-bearing liabilities
Demand deposits						$	711,138					$	5,550					3.14		%				$	685,674					$	3,913					2.29		%				$	711,138					$	5,550					3.14		%				$	1,110,524					$	6,362					2.30		%
Money market and savings deposits						1,690,157						10,291						2.45						907,068						2,526						1.12						1,690,157						10,291						2.45						1,669,074						10,160						2.45
Brokered deposits						7,753						94						4.88						—						—						—						7,753						94						4.88						20,465						251						4.93
Certificates of deposit $100,000 or more						758,211						7,581						4.02						312,367						2,337						3.00						758,211						7,581						4.02						762,210						7,675						4.05
Other time deposits						417,331						4,069						3.92						225,495						1,139						2.03						417,331						4,069						3.92						417,362						4,049						3.90
Interest-bearing deposits (4)						3,584,590						27,585						3.10						2,130,604						9,915						1.87						3,584,590						27,585						3.10						3,979,635						28,497						2.88
Advances from FHLB - short-term						113,549						1,584						5.61						261,797						3,449						5.28						113,549						1,584						5.61						4,000						56						5.63
Advances from FHLB - long-term						30,220						346						4.60						—						—						—						30,220						346						4.60						—						—						—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,680						1,451						8.03						43,185						776						7.21						72,680						1,451						8.03						72,418						1,451						8.06
Total interest-bearing liabilities						3,801,039						30,966						3.28						2,435,586						14,140						2.33						3,801,039						30,966						3.28						4,056,053						30,004						2.98
Noninterest-bearing deposits						1,480,384																		778,058																		1,480,384																		1,163,023
Accrued expenses and other liabilities						38,427																		19,442																		38,427																		39,772
Stockholders' equity						519,478																		363,225																		519,478																		515,976
Total liabilities and stockholders' equity						$	5,839,328																	$	3,596,311																	$	5,839,328																	$	5,774,824
Net interest income												$	42,222																	$	22,549																	$	42,222																	$	41,214
Net interest spread																		2.11		%																2.04		%																2.11		%																2.34		%
Net interest margin																		3.11		%																2.68		%																3.11		%																3.08		%
Cost of Funds																		2.36		%																1.76		%																2.36		%																2.31		%
Cost of Deposits																		2.19		%																1.37		%																2.19		%																2.23		%
Cost of Debt																		6.28		%																5.56		%																6.28		%																7.93		%

____________________________________

(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $4.5 million, $0.3 million and $4.2 million of accretion interest on loans for the three months ended June 30, 2024 and 2023, and March 31, 2024, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit discount and amortization of borrowing fair value adjustments. There were $(0.4) million, $41,000 and $(0.4) million of amortization of deposits premium, and $(0.2) million, $(47,000), and $(0.2) million of amortization of borrowing fair value adjustments for the three months ended June 30, 2024 and 2023, and March 31, 2024, respectively.

12

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

						For the Six Months Ended June 30,
						2024																		2023
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate						$	1,374,902					$	37,770					5.52		%				$	914,351					$	21,383					4.72		%
Commercial real estate						2,730,646						77,974						5.74						1,286,199						30,793						4.83
Commercial						218,346						8,024						7.39						140,161						3,997						5.75
Consumer						328,450						8,537						5.23						310,736						7,257						4.71
State and political						1,902						46						4.86						939						17						3.65
Credit Cards						7,918						368						9.35						—						—						—
Other						18,682						484						5.21						8,680						199						4.62
Total Loans						4,680,846						133,203						5.72						2,661,066						63,646						4.82
Investment securities
Taxable						680,042						9,650						2.84						649,329						7,793						2.40
Tax-exempt (1)						659						15						4.55						665						15						4.51
Interest-bearing deposits						62,324						1,538						4.96						13,622						333						4.93
Total earning assets						5,423,871						144,406						5.35						3,324,682						71,787						4.35
Cash and due from banks						47,320																		29,266
Other assets						393,439																		226,989
Allowance for credit losses						(57,554)																		(29,364)
Total assets						$	5,807,076																	$	3,551,573
Interest-bearing liabilities
Demand deposits						$	910,831					$	11,911					2.63		%				$	690,258					$	7,149					2.09		%
Money market and savings deposits						1,679,615						20,451						2.45						955,541						4,899						1.03
Brokered deposits						14,107						345						4.92						—						—						—
Certificates of deposit $100,000 or more						760,211						15,256						4.04						277,096						3,413						2.48
Other time deposits						417,346						8,118						3.91						216,500						1,734						1.62
Interest-bearing deposits (4)						3,782,110						56,081						2.98						2,139,395						17,195						1.62
Advances from FHLB - short-term						58,775						1,641						5.61						188,293						4,810						5.15
Advances from FHLB - long-term						15,110						346						4.60						—						—						—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,549						2,902						8.04						43,147						1,532						7.16
Total interest-bearing liabilities						3,928,544						60,970						3.12						2,370,835						23,537						2.00
Noninterest-bearing deposits						1,321,705																		798,994
Accrued expenses and other liabilities						39,100																		19,539
Stockholders' equity						517,727																		362,205
Total liabilities and stockholders' equity						$	5,807,076																	$	3,551,573
Net interest income												$	83,436																	$	48,250
Net interest spread																		2.23		%																2.35		%
Net interest margin																		3.09		%																2.93		%
Cost of Funds																		2.34		%																1.50		%
Cost of Deposits																		2.21		%																1.18		%
Cost of Debt																		6.71		%																5.53		%

____________________________________

(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $8.7 million and $0.7 million of accretion interest on loans for the six months ended June 30, 2024 and 2023, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $(0.8) million of amortization of deposit discounts and $0.2 million of amortization of deposit premium, and $(0.5) million and $(0.1) million of amortization of borrowing fair value adjustment for the six months ended June 30, 2024 and 2023, respectively.

13

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						2nd Quarter						6/30/2024						6/30/2024
						2024						2024						2023						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						Q1 2024						Q2 2023
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income						$	42,222					$	41,214					$	41,606					$	45,702					$	22,545					2.5		%				87.3		%
Less: Taxable-equivalent adjustment						82						79						81						80						51						3.8						60.8
Net interest income						42,140						41,135						41,525						45,622						22,494						2.4						87.3
Provision for credit losses						2,081						407						896						28,176						667						411.3						212.0
Noninterest income						8,440						6,567						7,548						14,984						5,294						28.5						59.4
Noninterest expense						33,499						36,698						33,670						47,158						21,608						(8.7)						55.0
Income/(loss) before income taxes						15,000						10,597						14,507						(14,728)						5,513						41.6						172.1
Income tax expense/ (benefit)						3,766						2,413						4,017						(4,991)						1,495						56.1						151.9
Net income/ (loss)						$	11,234					$	8,184					$	10,490					$	(9,737)					$	4,018					37.3						179.6
Return on average assets						0.77%						0.57%						0.72%						(0.67)%						0.45%						20		bp				32		bp
Return on average assets excluding amortization of intangibles, fraud losses and merger related expenses - Non-GAAP (1), (2)						0.91						0.94						0.88						0.01						0.59						(3)						32
Return on average equity						8.70						6.38						8.21						(7.25)						4.49						232						421
Return on average tangible equity - Non-GAAP (1), (2)						12.85						13.39						12.88						1.74						7.16						(54)						569
Net interest margin						3.11						3.08						3.09						3.35						2.68						3						43
Efficiency ratio - GAAP						66.23						76.93						68.61						77.81						77.76						(1,070)						(1,153)
Efficiency ratio - Non-GAAP (1)						61.05						62.37						61.99						47.19						71.75						(132)						(1,070)
PER SHARE DATA
Basic and diluted net income/(loss) per common share						$	0.34					$	0.25					$	0.32					$	(0.29)					$	0.20					35.3		%				69.1		%
Dividends paid per common share						0.12						0.12						0.12						0.12						0.12						—						—
Book value per common share at period end						15.74						15.51						15.41						15.14						18.24						1.5						(13.7)
Tangible book value per common share at period end - Non-GAAP (1)						12.54						12.24						12.06						11.70						14.83						2.5						(15.4)
Market value at period end						11.45						11.50						14.25						10.52						11.56						(0.4)						(1.0)
Market range:
High						11.90						14.38						14.51						13.37						14.45						(17.3)						(17.7)
Low						10.06						10.56						9.66						10.27						10.65						(4.7)						(5.5)

____________________________________

(1)See the reconciliation table (Non-GAAP) that begins on page 23.

(2)This ratio excludes merger related expenses (Non-GAAP) on page 23.

14

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued

						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						2nd Quarter						6/30/2024						6/30/2024
						2024						2024						2023						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						Q1 2024						Q2 2023
AVERAGE BALANCE SHEET DATA
Loans						$	4,706,510					$	4,655,183					$	4,639,467					$	4,562,748					$	2,709,944					1.10		%				73.68		%
Investment securities						706,079						655,323						619,920						778,744						645,842						7.75						9.33
Earning assets						5,459,961						5,387,782						5,339,833						5,404,572						3,369,183						1.34						62.06
Assets						5,839,328						5,774,824						5,745,440						5,769,312						3,596,311						1.12						62.37
Deposits						5,064,974						5,142,658						5,136,818						5,066,886						2,908,662						(1.51)						74.13
Short-term and Long Term FHLB advances						143,769						4,000						1,141						70,348						261,797						3494.23						(45.08)
Subordinated Debt & TRUPS						72,680						72,418						72,155						71,907						43,185						0.36						68.30
Stockholders' equity						519,478						515,976						507,040						533,114						363,225						0.68						43.02
CREDIT QUALITY DATA
Net charge offs						$	886					$	565					$	500					$	1,449					$	50					56.81		%				1,672.00		%
Nonaccrual loans						$	14,837					$	12,776					$	12,784					$	8,982					$	3,481					16.13		%				326.23		%
Loans 90 days past due and still accruing						414						1,560						738						2,149						1,065						(73.46)						(61.13)
Other real estate owned and repossessed property						3,126						2,024						179						179						179						54.45						1,646.37
Total nonperforming assets						$	18,377					$	16,360					$	13,701					$	11,310					$	4,725					12.33						288.93

15

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued

						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						2nd Quarter						6/30/2024						6/30/2024
						2024						2024						2023						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						Q1 2024						Q2 2023
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets						8.92		%				8.84		%				8.50		%				8.79		%				9.97		%				8		bp				(105)		bp
Period-end tangible equity to tangible assets - Non-GAAP (1)						7.23						7.11						6.78						6.93						8.26						12						(103)
Annualized net charge-offs to average loans						0.08		%				0.05		%				0.04		%				0.13		%				0.01		%				3		bp				7		bp
Allowance for credit losses as a percent of:
Period-end loans (3)						1.24		%				1.23		%				1.24		%				1.24		%				1.05		%				1		bp				19		bp
Period-end loans (4)						1.24						1.23						1.24						1.24						1.05						1						19
Nonaccrual loans						394.14						448.78						448.62						635.17						833.50						(5,464)						(43,936)
Nonperforming assets						318.21						350.46						418.59						504.43						614.05						(3,225)						(29,584)
As a percent of total loans:
Nonaccrual loans						0.32		%				0.27		%				0.28		%				0.19		%				0.13		%				5		bp				19		bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets						0.39		%				0.35		%				0.30		%				0.24		%				0.17		%				4		bp				22		bp
As a percent of total assets:
Nonaccrual loans						0.25		%				0.22		%				0.21		%				0.16		%				0.10		%				3		bp				15		bp
Nonperforming assets						0.31						0.28						0.23						0.20						0.13						3						18

____________________________________

(1)See the reconciliation table (Non-GAAP) that begins on page 23.

(2)This ratio excludes merger related expenses (Non-GAAP) on page 23.

(3)Includes all loans held for investment, including PPP loan balances for all periods shown.

(4)For 2023, this ratio excludes only PPP loans given the Company’s adoption of the CECL standard.

16

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

																																				June 30, 2024						June 30, 2024
																																				compared to						compared to
(In thousands, except per share data)						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023						June 30, 2023						December 31, 2023						June 30, 2023
ASSETS
Cash and due from banks						$	50,090					$	43,079					$	63,172					$	68,097					$	35,423					(20.7)		%				41.4		%
Interest-bearing deposits with other banks						88,793						71,481						309,241						40,612						10,404						(71.3)						753.5
Cash and cash equivalents						138,883						114,560						372,413						108,709						45,827						(62.7)						203.1
Investment securities available for sale (at fair value)						131,594						179,496						110,521						79,143						78,069						19.1						68.6
Investment securities held to maturity (net of allowance for credit losses of $108 (June 30, 2024), $116 (March 31, 2024), $94 (December 31,2023), $126 (September 30, 2023), and $163 (June 30, 2023)) at amortized cost)						499,431						503,822						513,188						523,051						536,970						(2.7)						(7.0)
Equity securities, at fair value						5,699						5,681						5,703						5,434						1,245						(0.1)						357.8
Restricted securities						21,725						17,863						17,900						13,361						21,208						21.4						2.4
Loans held for sale, at fair value						27,829						13,767						8,782						14,725						6,845						216.9						306.6
Loans held for investment						4,705,737						4,648,725						4,641,010						4,617,719						2,753,223						1.4						70.9
Less: allowance for credit losses						(58,478)						(57,336)						(57,351)						(57,051)						(29,014)						(2.0)						(101.6)
Loans, net						4,647,259						4,591,389						4,583,659						4,560,668						2,724,209						1.4						70.6
Premises and equipment, net						82,176						83,084						82,386						81,149						51,036						(0.3)						61.0
Goodwill						63,266						63,266						63,266						63,266						63,266						—						—
Other intangible assets, net						42,945						45,515						48,090						50,685						4,671						(10.7)						819.4
Other real estate owned, net						179						179						179						179						179						—						—
Repossessed property, net						1,560						1,845						—						—						—						—						—
Assets held for sale						1,387						—						—						—						—						—						—
Mortgage servicing rights, at fair value						5,995						5,821						5,926						5,890						5,466						1.2						9.7
Right of use assets, net						11,762						12,153						12,487						12,741						9,077						(5.8)						29.6
Cash surrender value on life insurance						102,969						102,321						101,704						100,950						60,150						1.2						71.2
Accrued interest receivable						19,641						19,541						19,217						15,683						8,778						2.2						123.8
Deferred income taxes						36,078						38,978						40,707						45,346						10,879						(11.4)						231.6
Other assets						23,639						26,423						24,790						24,392						13,756						(4.6)						71.8
Total assets						$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372					$	3,641,631					(2.4)						61.0

17

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited) - Continued

																																				June 30, 2024						June 30, 2024
																																				compared to						compared to
(In thousands, except per share data)						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023						June 30, 2023						December 31, 2023						June 30, 2023
LIABILITIES
Noninterest-bearing deposits						$	1,587,252					$	1,200,680					$	1,258,037					$	1,211,401					$	778,963					26.2		%				103.8
Interest-bearing deposits						3,561,633						3,983,599						4,128,083						3,897,343						2,158,563						(13.7)						65.0
Total deposits						5,148,885						5,184,279						5,386,120						5,108,744						2,937,526						(4.4)						75.3
Advances from FHLB - short-term						31,000						—						—						—						276,000						—						(88.8)
Advances from FHLB - long-term						50,000						—						—						—						—						—						—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")						29,316						29,237						29,158						29,079						18,492						0.5						58.5
Subordinated debt						43,504						43,322						43,139						42,956						24,735						0.8						75.9
Total borrowings						153,820						72,559						72,297						72,035						319,227						112.8						(51.8)
Lease liabilities						12,189						12,552						12,857						13,082						9,392						(5.3)						29.8
Accrued expenses and other liabilities						26,340						41,086						28,509						9,933						12,346						(5.3)						113.3
Total liabilities						5,341,234						5,310,476						5,499,783						5,203,794						3,278,491						(3.0)						62.9
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares						333						332						332						331						199						0.3						67.3
Additional paid in capital						356,994						356,464						356,007						355,575						202,008						0.3						76.7
Retained earnings						173,716						166,490						162,290						155,781						169,494						6.9						2.5
Accumulated other comprehensive loss						(8,260)						(8,058)						(7,494)						(10,109)						(8,561)						(9.5)						3.5
Total stockholders' equity						522,783						515,228						511,135						501,578						363,140						2.3						44.0
																																										—
Total liabilities and stockholders' equity						$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372					$	3,641,631					(2.5)						61.0
Period-end common shares outstanding						33,215						33,211						33,162						33,136						19,907						0.2						66.8
Book value per common share						$	15.74					$	15.51					$	15.41					$	15.14					$	18.24					2.1						(13.7)

18

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Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

																																				6/30/2024						6/30/2024
																																				compared to						compared to
(In thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						Q1 2024						Q2 2023
INTEREST INCOME
Interest and fees on loans						$	67,292					$	65,754					$	65,914					$	64,869					$	32,729					2.3		%				105.6		%
Interest on investment securities:
Taxable						5,230						4,419						3,992						5,047						3,729						18.4						40.3
Tax-exempt						6						6						6						27						5						—						20.0
Interest on federal funds sold						—						—						—						92						—						—						—
Interest on deposits with other banks						578						960						1,224						1,213						170						(39.8)						240.0
Total interest income						73,106						71,139						71,136						71,248						36,633						2.8						99.6
INTEREST EXPENSE
Interest on deposits						27,585						28,497						28,133						23,473						9,914						(3.2)						178.2
Interest on short-term borrowings						1,584						56						16						692						3,449						2728.6						(54.1)
Interest on long-term borrowings						1,797						1,451						1,462						1,461						776						23.9						131.6
Total interest expense						30,966						30,004						29,611						25,626						14,139						3.2						119.0
NET INTEREST INCOME						42,140						41,135						41,525						45,622						22,494						2.4						87.3
Provision for credit losses						2,081						407						896						28,176						667						411.3						212.0
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES						40,059						40,728						40,629						17,446						21,827						(1.6)						83.5
NONINTEREST INCOME
Service charges on deposit accounts						1,493						1,507						1,519						1,505						1,264						(0.9)						18.1
Trust and investment fee income						896						734						844						1,933						399						22.1						124.6
Loss on sales and calls of investment securities						—						—						—						(2,166)						—						—						—
Interchange credits						1,717						1,587						1,633						1,557						1,311						8.2						31.0
Mortgage-banking revenue						1,983						801						1,105						1,377						1,054						147.6						88.1
Title Company revenue						165						78						139						89						186						111.5						(11.3)
Bargain purchase gain						—						—						—						8,816						—						—						—
Other noninterest income						2,186						1,860						2,308						1,873						1,080						17.5						102.4
Total noninterest income						$	8,440					$	6,567					$	7,548					$	14,984					$	5,294					28.5						59.4

19

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Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited) - Continued

																																				6/30/2024						6/30/2024
																																				compared to						compared to
(In thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						Q1 2024						Q2 2023
NONINTEREST EXPENSE
Salaries and wages						$	13,307					$	11,852					$	12,823					$	14,183					$	8,955					12.3		%				48.6		%
Employee benefits						3,593						4,097						3,389						3,607						2,440						(12.3)						47.3
Occupancy expense						2,432						2,416						2,328						2,245						1,599						0.7						52.1
Furniture and equipment expense						900						904						790						750						477						(0.4)						88.7
Data processing						2,978						2,867						2,762						2,485						1,739						3.9						71.3
Directors' fees						359						295						426						295						185						21.7						94.1
Amortization of intangible assets						2,569						2,576						2,595						2,634						435						(0.3)						490.6
FDIC insurance premium expense						1,089						1,150						1,733						618						758						(5.3)						43.7
Other real estate owned expenses, net						—						—						—						2						—						—						—
Legal and professional fees						1,354						1,599						1,411						1,217						959						(15.3)						41.2
Fraud losses (1)						62						4,502						503						262						47						(98.6)						31.9
Merger related expenses						—						—						602						14,866						1,197						—						(100.0)
Other noninterest expenses						4,856						4,440						4,308						3,994						2,817						9.4						72.4
Total noninterest expense						33,499						36,698						33,670						47,158						21,608						(8.7)						55.0
Income/(loss) before income taxes						15,000						10,597						14,507						(14,728)						5,513						41.6						172.1
Income tax expense/(benefit)						3,766						2,413						4,017						(4,991)						1,495						56.1						151.9
NET INCOME/(LOSS)						$	11,234					$	8,184					$	10,490					$	(9,737)					$	4,018					37.3						179.6
Weighted average shares outstanding - basic and diluted						33,215						33,337						33,322						33,246						19,903						(0.4)						66.9
Basic and diluted net income/(loss) per common share						$	0.34					$	0.25					$	0.32					$	(0.29)					$	0.20					35.3						69.1
Dividends paid per common share						0.12						0.12						0.12						0.12						0.12						—						—

____________________________________

(1)Fraud losses includes $4.3 million of credit card fraud losses for the quarter ended March 31, 2024.

20

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

						Q2 2024																		Q1 2024																		Q4 2023																		Q3 2023																		Q2 2023
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate						$	1,388,168					$	19,278					5.59		%				$	1,361,636					$	18,492					5.46		%				$	1,331,150					$	18,653					5.56		%				$	1,141,707					$	14,548					5.06		%				$	946,545					$	10,876					4.61		%
Commercial real estate						2,738,693						39,370						5.78						2,722,600						38,604						5.70						2,728,094						38,730						5.63						2,831,569						40,536						5.68						1,292,406						15,620						4.85
Commercial						216,809						3,926						7.28						219,884						4,097						7.49						221,342						4,295						7.70						233,756						5,315						9.02						137,554						2,177						6.35
Consumer						327,781						4,265						5.23						329,118						4,272						5.22						333,807						3,859						4.59						332,486						4,183						4.99						323,798						3,983						4.93
State and political						2,331						30						5.18						1,473						16						4.37						1,290						13						4.00						929						10						4.27						900						8						3.57
Credit Cards						8,378						201						9.65						7,457						167						9.01						6,320						166						10.42						6,164						149						9.59						—						—						—
Other						24,350						302						4.99						13,015						183						5.66						17,464						277						6.29						16,137						201						4.94						8,741						116						5.32
Total Loans						4,706,510						67,372						5.76						4,655,183						65,831						5.69						4,639,467						65,993						5.64						4,562,748						64,942						5.65						2,709,944						32,780						4.85
Investment securities
Taxable						705,421						5,230						2.97						654,663						4,419						2.70						619,259						3,992						2.58						778,081						5,047						2.59						645,178						3,729						2.31
Tax-exempt (1)						658						8						4.86						660						8						4.85						661						8						4.84						663						34						20.51						664						6						3.61
Federal funds sold						—						—						—						—						—						—						—						—						—						7,533						92						4.85						—						—						—
Interest-bearing deposits						47,372						578						4.91						77,276						960						5.00						80,446						1,224						6.04						55,547						1,213						8.66						13,397						170						5.09
Total earning assets						5,459,961						73,188						5.39						5,387,782						71,218						5.32						5,339,833						71,217						5.29						5,404,572						71,328						5.24						3,369,183						36,685						4.37
Cash and due from banks						45,141																		49,499																		63,506																		51,714																		29,923
Other assets						391,854																		395,023																		399,409																		359,726																		225,935
Allowance for credit losses						(57,628)																		(57,480)																		(57,308)																		(46,700)																		(28,730)
Total assets						$	5,839,328																	$	5,774,824																	$	5,745,440																	$	5,769,312																	$	3,596,311

21

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						Q2 2024																		Q1 2024																		Q4 2023																		Q3 2023																		Q2 2023
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate
Interest-bearing liabilities
Demand deposits						$	711,138					$	5,550					3.14		%				$	1,110,524					$	6,362					2.30		%				$	1,117,117					$	6,673					2.37		%				$	1,056,956					$	6,659					2.50		%				$	685,674					$	3,913					2.29		%
Money market and savings deposits						1,690,157						10,291						2.45						1,669,074						10,160						2.45						1,605,930						8,330						2.06						1,572,920						6,810						1.72						907,068						2,526						1.12
Brokered deposits						7,753						94						4.88						20,465						251						4.93						92,840						1,347						5.76						98,649						1,225						4.93						—						—						—
Certificates of deposit $100,000 or more						758,211						7,581						4.02						762,210						7,675						4.05						701,051						6,898						3.90						706,642						6,272						3.52						312,367						2,337						3.00
Other time deposits						417,331						4,069						3.92						417,362						4,049						3.90						391,820						4,885						4.95						285,743						2,507						3.48						225,495						1,138						2.02
Interest-bearing deposits (4)						3,584,590						27,585						3.10						3,979,635						28,497						2.88						3,908,758						28,133						2.86						3,720,910						23,473						2.50						2,130,604						9,914						1.87
Advances from FHLB - short-term						113,549						1,584						5.61						4,000						56						5.63						1,141						16						5.56						70,348						692						3.90						261,797						3,449						5.28
Advances from FHLB - long-term						30,220						346						4.60						—						—						—						—						—						—						—						—						—						—						—						—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,680						1,451						8.03						72,418						1,451						8.06						72,155						1,462						8.04						71,907						1,461						8.06						43,185						776						7.21
Total interest-bearing liabilities						3,801,039						30,966						3.28						4,056,053						30,004						2.98						3,982,054						29,611						2.95						3,863,165						25,626						2.63						2,435,586						14,139						2.33
Noninterest-bearing deposits						1,480,384																		1,163,023																		1,228,060																		1,345,976																		778,058
Accrued expenses and other liabilities						38,427																		39,772																		28,286																		27,057																		19,442
Stockholders' equity						519,478																		515,976																		507,040																		533,114																		363,225
Total liabilities and stockholders' equity						$	5,839,328																	$	5,774,824																	$	5,745,440																	$	5,769,312																	$	3,596,311
Net interest income												$	42,222																	$	41,214																	$	41,606																	$	45,702																	$	22,546
Net interest spread																		2.11		%																2.34		%																2.34		%																2.61		%																2.04		%
Net interest margin																		3.11		%																3.08		%																3.09		%																3.35		%																2.68		%
Cost of Funds																		2.36		%																2.31		%																2.25		%																1.95		%																1.76		%
Cost of Deposits																		2.19		%																2.23		%																2.17		%																1.84		%																1.37		%
Cost of Debt																		6.28		%																7.93		%																8.00		%																6.00		%																5.56		%

____________________________________

(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $4.5 million, $4.2 million, $4.8 million, $6.1 million and $0.3 million of accretion interest on loans for the three months ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $(0.4) million, $(0.4) million, $(1.5) million, $(0.5) million and $41,000 of amortization of deposits premium, and $(0.2) million, $(0.2) million, $(0.2) million, $(0.2) million and $(47,000) of amortization of borrowing fair value adjustment for the three months ended June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023, and June 30, 2023, respectively.

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Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited)

																																				YTD						YTD
(In thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						6/30/2024						6/30/2023
The following reconciles return on average assets, average equity and return on average tangible equity (Note 1):
Net income (loss)						$	11,234					$	8,184					$	10,490					$	(9,737)					$	4,018					$	19,418					$	10,475
Net income (loss) - annualized (A)						$	45,183					$	32,916					$	41,618					$	(38,632)					$	16,295					$	39,049					$	21,124
Net income (loss)						$	11,234					$	8,184					$	10,490					$	(9,737)					$	4,018					$	19,418					$	10,475
Add: Amortization of intangible assets, net of tax						1,924						1,989						1,876						1,741						317						3,903						637
Add: Merger Expenses, net of tax						—						—						435						9,828						872						—						1,373
Add: Credit Card Fraud Losses, net of tax						—						3,339						—						—						—						3,279						—
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses						13,158						13,512						12,801						1,832						5,207						26,600						12,485
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - annualized (B)						$	52,921					$	54,345					$	50,787					$	7,268					$	21,121					$	53,492					$	25,177
Return on average assets (GAAP)						0.77		%				0.57		%				0.72		%				(0.67)		%				0.45		%				0.67		%				0.59		%
Return on average assets excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - (Non-GAAP)						0.91		%				0.94		%				0.88		%				0.01		%				0.59		%				0.92		%				0.71		%
Average assets						$	5,839,328					$	5,774,824					$	5,745,440					$	5,769,312					$	3,596,311					$	5,807,076					$	3,551,573
Average stockholders' equity (C)						$	519,478					$	515,976					$	507,040					$	533,114					$	363,225					$	517,727					$	362,205
Less: Average goodwill and core deposit intangible						(107,594)						(110,167)						(112,752)						(115,604)						(68,172)						(108,881)						(68,388)
Average tangible equity (D)						$	411,884					$	405,809					$	394,288					$	417,510					$	295,053					$	408,846					$	293,817
Return on average equity (GAAP) (A)/(C)						8.70		%				6.38		%				8.21		%				(7.25)		%				4.49		%				7.54		%				5.83		%
Return on average tangible equity (Non-GAAP) (B)/(D)						12.85		%				13.39		%				12.88		%				1.74		%				7.16		%				13.08		%				8.57		%

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Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited) - Continued

																																				YTD						YTD
(In thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023						6/30/2024						6/30/2023
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)						$	33,499					$	36,698					$	33,670					$	47,158					$	21,608					$	70,197					$	42,501
Less: Amortization of intangible assets						(2,569)						(2,576)						(2,595)						(2,634)						(435)						(5,145)						(876)
Less: Merger Expenses						—						—						(602)						(14,866)						(1,197)						—						(1,888)
Less: Credit Card Fraud Losses						—						(4,323)						—						—						—						(4,323)						—
Adjusted noninterest expense (F)						$	30,930					$	29,799					$	30,473					$	29,658					$	19,976					$	60,729					$	39,737
Net interest income (G)						$	42,140					$	41,135					$	41,525					$	45,622					$	22,494					$	83,275					$	48,158
Add: Taxable-equivalent adjustment						82						79						81						80						51						161						92
Taxable-equivalent net interest income (H)						$	42,222					$	41,214					$	41,606					$	45,702					$	22,545					$	83,436					$	48,250
Noninterest income (I)						$	8,440					$	6,567					$	7,548					$	14,984					$	5,294					$	15,007					$	10,628
Investment securities losses (gains)						—						—						—						2,166						—						—						—
Less: Bargain purchase gain						—						—						—						(8,816)						—						—						—
Adjusted noninterest income (J)						$	8,440					$	6,567					$	7,548					$	8,334					$	5,294					$	15,007					$	10,628
Efficiency ratio (GAAP) (E)/(G)+(I)						66.23		%				76.93		%				68.61		%				77.81		%				77.76		%				71.42		%				72.30		%
Efficiency ratio (Non-GAAP) (F)/(H)+(J)						61.05		%				62.37		%				61.99		%				54.89		%				71.76		%				61.69		%				67.49		%
Net operating expense to average assets (GAAP)						1.73		%				2.10		%				1.80		%				2.21		%				1.82		%				1.91		%				1.81		%
Net operating expense to average assets (Non-GAAP)						1.55		%				1.62		%				1.58		%				1.47		%				1.64		%				1.58		%				1.65		%

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Shore Bancshares, Inc.

Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited) - Continued

(In thousands, except per share data)						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (K)						$	522,783					$	515,228					$	511,135					$	501,578					$	363,140
Less: Goodwill and core deposit intangible						(106,211)						(108,781)						(111,356)						(113,951)						(67,937)
Tangible equity (L)						$	416,572					$	406,447					$	399,779					$	387,627					$	295,203
Shares outstanding (M)						33,215						33,211						33,162						33,136						19,907
Book value per common share (GAAP) (K)/(M)						$	15.74					$	15.51					$	15.41					$	15.14					$	18.24
Tangible book value per common share (Non-GAAP) (L)/(M)						$	12.54					$	12.24					$	12.06					$	11.70					$	14.83
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (N)						$	522,783					$	515,228					$	511,135					$	501,578					$	363,140
Less: Goodwill and core deposit intangible						(106,211)						(108,781)						(111,356)						(113,951)						(67,937)
Tangible equity (O)						$	416,572					$	406,447					$	399,779					$	387,627					$	295,203
Assets (P)						$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372					$	3,641,631
Less: Goodwill and core deposit intangible						(106,211)						(108,781)						(111,356)						(113,951)						(67,937)
Tangible assets (Q)						$	5,757,806					$	5,716,923					$	5,899,562					$	5,591,421					$	3,573,694
Period-end equity/assets (GAAP) (N)/(P)						8.92%						8.84%						8.50%						8.79%						9.97%
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)						7.23%						7.11%						6.78%						6.93%						8.26%

____________________________________

Note 1: Management believes that reporting tangible equity and tangible assets more closely approximates the adequacy of capital for regulatory purposes.

Note 2: Management believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling cash-based operating activities.

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Shore Bancshares, Inc.

Summary of Loan Portfolio (Unaudited)

Portfolio loans are summarized by loan type as follows:

(Dollars in thousands)						June 30, 2024						%						March 31, 2024						%						December 31, 2023						%						September 30, 2023						%						June 30, 2023						%
Portfolio Loans by Loan Type
Construction						$	327,875					6.97		%				$	299,133					6.43		%				$	299,000					6.44		%				$	328,750					7.12		%				$	220,228					8.00		%
Residential real estate						1,539,590						32.72		%				1,515,134						32.59		%				1,490,438						32.11		%				1,439,464						31.17		%				938,151						34.07		%
Commercial real estate						2,287,497						48.60		%				2,272,867						48.90		%				2,286,154						49.27		%				2,283,521						49.45		%				1,130,346						41.06		%
Commercial						218,987						4.65		%				229,594						4.94		%				229,939						4.95		%				229,474						4.97		%				138,459						5.03		%
Consumer						324,480						6.90		%				325,076						6.99		%				328,896						7.09		%				330,411						7.16		%				326,039						11.84		%
Credit Cards						7,308						0.16		%				6,921						0.15		%				6,583						0.14		%				6,099						0.13		%				—						—		%
Total loans						4,705,737						100.00		%				4,648,725						100.00		%				4,641,010						100.00		%				4,617,719						100.00		%				2,753,223						100.00		%
Less: Allowance for credit losses						(58,478)												(57,336)												(57,351)												(57,051)												(29,014)
Total loans, net						$	4,647,259											$	4,591,389											$	4,583,659											$	4,560,668											$	2,724,209

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Shore Bancshares, Inc.

Classified Assets and Nonperforming Loans (Unaudited)

Classified loans and nonperforming loans are summarized as follows:

(dollars in thousands)						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023						June 30, 2023
Classified Loans
Substandard						$	17,409					$	13,403					$	14,673					$	10,888					$	13,108
Doubtful						—						—						—						—						—
Loss						—						—						—						—						—
Total Classified Loans						$	17,409					$	13,403					$	14,673					$	10,888					$	13,108
Special Mention Loans						25,549						27,192						28,264						24,931						11,405
Total Classified and Special Mention Loans						$	42,958					$	40,595					$	42,937					$	35,819					$	24,513
Classified Loans						$	17,409					$	13,403					$	14,673					$	10,888					$	13,108
Other Real Estate Owned						3,126						2,024						179						179						179
Classified Securities						—						—						—						—						—
Total Classified Assets						$	20,535					$	15,427					$	14,852					$	11,067					$	13,287
Non-accrual Loans						$	14,837					$	12,776					$	12,784					$	8,982					$	3,481
90+ Days Delinquent Accruing						414						1,560						738						2,149						1,050
Accruing BEFDs Loans ("BEFDs")						—						—						—						—						—
Other Real Estate Owned ("OREO")						3,126						2,024						179						179						179
Total Nonperforming Loans						$	18,377					$	16,360					$	13,701					$	11,310					$	4,710

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Shore Bancshares, Inc.

Summary of Deposits (Unaudited)

						June 30, 2024												March 31, 2024												December 31, 2023												September 30, 2023												June 30, 2023
(dollars in thousands)						Balance						%						Balance						%						Balance						%						Balance						%						Balance						%
Noninterest-bearing demand						$	1,587,252					30.83		%				$	1,200,680					23.15		%				$	1,258,037					23.36		%				$	1,211,401					23.70		%				$	778,963					26.52		%
Interest-bearing:
Demand						658,512						12.79		%				1,101,954						21.26		%				1,165,546						21.64		%				1,210,051						23.69		%				694,221						23.63		%
Money market deposits						1,337,274						25.97		%				1,358,205						26.20		%				1,430,603						26.56		%				1,179,049						23.08		%				600,724						20.45		%
Savings						352,069						6.84		%				354,098						6.83		%				347,324						6.45		%				371,755						7.28		%				270,884						9.22		%
Certificates of deposit						1,213,778						23.57		%				1,169,342						22.56		%				1,184,610						21.99		%				1,136,488						22.25		%				592,734						20.18		%
Total interest-bearing						3,561,633						69.17		%				3,983,599						76.85		%				4,128,083						76.64		%				3,897,343						76.30		%				2,158,563						73.48		%
Total Deposits						$	5,148,885					100.00		%				$	5,184,279					100.00		%				$	5,386,120					100.00		%				$	5,108,744					100.00		%				$	2,937,526					100.00		%

28

Cover	Jul. 25, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Jul. 25, 2024
Entity Registrant Name	SHORE BANCSHARES, INC.
Entity Incorporation, State or Country Code	MD
Entity File Number	000-22345
Entity Tax Identification Number	52-1974638
Entity Address, Address Line One	18 E. Dover St.
Entity Address, City or Town	Easton
Entity Address, State or Province	MD
Entity Address, Postal Zip Code	21601
City Area Code	410
Local Phone Number	763-7800
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common stock, par value $.01 per share
Trading Symbol	SHBI
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0001035092

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