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): October 24, 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 October 24, 2024, Shore Bancshares, Inc. (the “Company”) issued a press release announcing its results of operations and financial condition for the three and nine months ended September 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 October 24, 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: October 24, 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 Three and Nine Months Financial Results

Easton, Maryland (October 24, 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 third quarter of 2024 of $11.2 million or $0.34 per diluted common share which was equal to the second quarter of 2024. The Company’s had a net loss of $9.7 million or $(0.29) per diluted common share for the third quarter of 2023 as a result of the merger of equals on July 1, 2023 between the Company and The Community Financial Corporation. Net income for the first nine months of 2024 was $30.6 million or $0.92 per diluted common share, compared to the first nine months of 2023 of $0.7 million or $0.03 per diluted common share.

Third Quarter and Nine-Months Ended September 30, 2024 Highlights

■Steady Return on Average Assets (“ROAA”) - The Company reported ROAA of 0.77% for the third quarter of 2024, which was equal to reported ROAA for the second quarter of 2024. Non-GAAP, ROAA(1) was 0.90% for the third quarter of 2024, compared to 0.91% for the second quarter of 2024.

■Increased Net Interest Income and Net Interest Margin - Third quarter 2024 net interest income increased $1.1 million to $43.3 million from $42.1 million in the second quarter of 2024. Net interest income increased due to modest loan growth, slightly higher accelerated accretion income, and loans and securities repricing at a faster pace than the Bank’s cost of funds. Net interest margin (“NIM”) increased six basis points (“bps”) to 3.17% for the third quarter of 2024 from 3.11% for the second quarter of 2024. Excluding net accretion interest income of $4.5 million and $3.8 million for the same time periods, NIM increased one bps to 2.84% for the third quarter of 2024 from 2.83% for the second quarter of 2024.

■Asset Quality Remains Strong - Allowance for credit losses (“ACL”) was $58.7 million at September 30, 2024 compared to $58.5 million at June 30, 2024. The third quarter of 2024 ACL as a percentage of loans remained stable at 1.24% from the second quarter of 2024. Nonperforming assets to total assets were 0.27% for the third quarter of 2024 compared to 0.29% for the second quarter of 2024 and 0.23% for the fourth quarter of 2023. Classified assets to total assets increased to 0.39% in the third quarter of 2024 compared to 0.33% for the second quarter of 2024 and 0.25% for the fourth quarter of 2023.

■Stable Operating Leverage - The third quarter of 2024 efficiency ratio was 67.49% when compared to 66.23% in the second quarter of 2024. The third quarter efficiency ratio was affected by one-time data processing expense related to the fraud incident in the first quarter of 2024. The third quarter of 2024 non-GAAP efficiency ratio(1) was 62.10% when compared to 61.05% in the second quarter of 2024.

■Strong Deposit Growth - Total deposits increased to $5.23 billion at September 30, 2024 from $5.15 billion at June 30, 2024. Average noninterest bearing deposits increased to $1.58 billion for the third quarter of 2024 representing 30.55% of average funding, excluding subordinated debt, compared to 28.42% during the second quarter of 2024. The Bank’s use of wholesale funding, which includes Federal Home Loan Bank (“FHLB”) advances and brokered deposits, has been minimal in 2024. Wholesale funding increased from $44.5 million or 0.74% of assets at December 31, 2023 to $50.0 million or 0.84% of total assets at September 30, 2024. Sustained efforts to enhance the Bank’s deposit franchise are expected to continue to attract additional deposits in future quarters.

“Increasing net interest income drove a healthy increase in net interest margin in the third quarter,” stated James (“Jimmy”) M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. “Active management of our deposit relationships, combined with the recent reduction in rates by the Federal Reserve, have helped us stabilize our cost of funding even as assets yields continue to increase. Credit remains stable and economic activity in our markets remains strong. We continue to rapidly build capital and are optimistic that decreasing rates and clarity in November will result in loan growth.”

(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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Balance Sheet Review

Total assets were $5.9 billion at September 30, 2024, a decrease of $93.2 million or 1.6%, 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 $188.8 million and investment securities held to maturity of $28.6 million partially offset by an increase in investment securities available for sale of $22.8 million and loans held for investment of $92.9 million. The ratio of the ACL to total loans remained flat at 1.24% at September 30, 2024 compared to December 31, 2023.

The Company’s tangible common equity ratio(1) at September 30, 2024 was 7.39% compared to 6.78% at December 31, 2023. The Company’s Tier 1 and Total Risk-Based Capital Ratios at September 30, 2024 were 9.89% and 12.04%, respectively. The Bank’s Tier 1 and Total Risk-Based Capital Ratios at September 30, 2024 were 10.60% and 11.84%, respectively. Non-owner occupied CRE loans as a percentage of the Bank’s Tier 1 Capital + ACL at September 30, 2024 and December 31, 2023 were $2.1 billion or 364.0% and $2.0 billion or 382.6%, respectively. Construction loans as a percentage of the Bank’s Tier 1 Capital + ACL at September 30, 2024 and December 31, 2023 were $337.1 million or 59.3% 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 $509.4 million or 10.8% of total loans of $4.7 billion at September 30, 2024. The Bank’s office CRE loan portfolio included $140.9 million or 27.7% of the total with medical tenants and $71.8 million or 14.1% of the total with government or government contractor tenants. There were 503 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 may vary from the appraised value at loan origination.

LTV Range						Loan Count						Loan Balance						% of Total CRE
Less than or equal to 50%						258						$	177,771					35		%
50%-60%						69						118,547						23		%
60%-70%						80						111,951						22		%
70%-80%						73						82,674						16		%
Greater than 80%						23						18,433						4		%
Grand Total						503						$	509,376					100		%

The Bank had 18 office CRE loans totaling $164.6 million with balances greater than $5.0 million at September 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. At September 30, 2024, the average loan debt-service coverage ratio was 2.5x and average LTV was 50.0%. Of the office CRE portfolio balance, 73% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97% is secured by properties with five stories or less. Of the office CRE loans, $2.0 million were classified as special mention or substandard at September 30, 2024.

Total deposits decreased $160.4 million, or 3.0% to $5.2 billion at September 30, 2024 when compared to December 31, 2023. The decrease in total deposits was primarily due to decreases in demand deposits of $414.0 million and money market and savings of $143.8 million, partially offset by increases in noninterest-bearing deposits of $313.4 million and time deposits of $84.0 million. The decrease in deposits is primarily attributable to seasonal municipal runoff and a decrease in interest rate-sensitive cannabis-related deposits. During the second quarter of 2024, the Company reclassified $399.4 million of demand deposits which carried an average rate of 4 bps to noninterest bearing deposits.

Total funding, which includes customer deposits, FHLB short and long-term advances, and brokered deposits was $5.28 billion at September 30, 2024 compared to $5.26 billion at June 30, 2024 and $5.43 billion at December 31, 2023. The Bank had $50.0 million in total FHLB advances at September 30, 2024 compared to aggregate advances of $81.0 million at June 30, 2024 and zero at December 31, 2023. The advance consisted of 18-month Bermuda Convertible of $50 million. The Bank had zero brokered deposits (excluding reciprocal deposits) at September 30, 2024 compared to $28.2 million at June 30, 2024 and $19.4 million at December 31, 2023. Total reciprocal deposits were $1.3 billion at September 30, 2024 compared to $1.2 billion at June 30, 2024 and $1.3 billion at December 31, 2023. 

The Bank's uninsured deposits at September 30, 2024 were $895.9 million or 17.14% of total deposits. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, at September 30, 2024 were $768.6 million or 14.71% of total deposits. At September 30, 2024, the Bank had approximately $1.1 billion of available liquidity including: $183.6 million in cash, $932.5 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 $22.1 million, or 4.3%, when compared to December 31, 2023, primarily due to current year earnings, offset by cash dividends paid. As of September 30, 2024, the ratio of total equity to total assets was 9.01% and the ratio of total tangible equity to total tangible assets(1) was 7.39% 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 $43.3 million for the third quarter of 2024, compared to $42.1 million for the second quarter of 2024 and $45.6 million for the third quarter of 2023. The increase in net interest income when compared to the second quarter of 2024 was primarily due to the increase in interest and fees on loans of $1.9 million and interest and dividends on investment securities of $268 thousand, partially offset by an increase in interest expense of $460 thousand. The increase in interest expense in the third quarter of 2024 was the result of higher interest expense on deposits of $1.3 million, partially offset by lower interest expense from carrying lower short-term advances from the FHLB during the quarter to offset seasonal outflows from municipal customers of $1.1 million. The decrease in net interest income when compared to the third quarter of 2023 was primarily due the higher interest expense on deposits of $5.4 million and long-term borrowings of $618 thousand. These were partially offset by an increase in interest and fees on loans of $4.3 million. All of these items were significantly impacted by the merger in the third quarter of 2023.

The Company’s net interest margin increased to 3.17% for the third quarter of 2024 from 3.11% for the second quarter of 2024 primarily due to loans 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 $77.8 million, or 2.2% which resulted in $1.3 million less interest expense. These interest-bearing deposits were almost entirely replaced with an increase in the average balance on noninterest-bearing deposits of $99.1 million, or 6.7%. The Company’s net interest margin decreased to 3.17% for the third quarter of 2024 from 3.35% for the third quarter of 2023. Comparing the third quarter of 2024 to the third quarter of 2023, the Company’s interest-earning asset yields increased 23 bps to 5.47% from 5.24%, while the cost of funds repriced at a slower pace resulting in an increase of 43 bps to 2.38% from 1.95% for the same period.

The provision for credit losses was $1.5 million for the three months ended September 30, 2024. The comparable amounts were $2.1 million for the three months ended June 30, 2024, and $28.2 million for the three months ended September 30, 2023. The increase in the provision for credit losses for the third quarter of 2024 compared to the second quarter of 2024 was due to new loan growth, increases in specific reserves and charge-offs in the third quarter of 2024. Coverage ratios remained flat at 1.24% at September 30, 2024 and June 30, 2024. The decrease in the provision for credit losses when compared to the third quarter of 2023 was primarily due to an enhanced CECL model in the third quarter of 2023 due to the merger. Net charge-offs were $1.4 million for the third quarter of 2024 and third quarter of 2023, compared to $886 thousand for the second quarter of 2024.

At September 30, 2024 and June 30, 2024, nonperforming assets were $15.8 million, or 0.27% of total assets and $17.0 million, or 0.29% of total assets, respectively. The balance of nonperforming assets decreased primarily due to a decrease in repossessed properties of $1.3 million. When comparing September 30, 2024 to September 30, 2023, nonperforming assets increased $4.5 million, primarily due to increases in nonaccrual loans of $5.9 million, an increase in repossessed marine loans and assets held for sale of $306 thousand, partially offset by a decrease of $1.7 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 third quarter of 2024 was $7.3 million, a decrease of $1.2 million from $8.4 million for the second quarter of 2024 and a decrease $7.7 million from $15.0 million for the third quarter of 2023. The decrease from the second quarter of 2024 was lower revenues from mortgage banking and Mid-Maryland Title Company, Inc. (the“title Company”). The Bank’s mortgage revenue declined $806 thousand due to lower interest rates which decreased the value of mortgage servicing rights $686 thousand and also drove higher prepayment rates. The title company revenues declined due to lower settlement activity than the prior quarter.

Total noninterest expense of $34.1 million for the third quarter of 2024 increased $615 thousand when compared to the second quarter of 2024 expense of $33.5 million and decreased $13.0 million when compared to the third quarter of 2023 expense of $47.2 million. The increase from the second quarter of 2024 was primarily due to one time data processing costs related to the fraud incident in the first quarter of 2024 and other fraud expenses. The decrease from the third quarter of 2023 was primarily due to one time merger related expenses that were incurred in 2023 partially offset by an increase in expenses 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 third quarter of 2024 when compared to the second quarter of 2024 and the third quarter of 2023 was 67.49%, 66.23% and 77.81%, respectively. Furthermore, non-GAAP efficiency ratios(1) for the same periods were 62.10%, 61.05% and 54.89%, respectively. The net operating expense ratio, which is non-interest expense less non-interest income divided by average assets, for the third quarter 2024 was 1.84%, compared to 1.73% and 2.21% for the second quarter of 2024 and the third quarter of 2023, respectively. The non-GAAP net operating expense ratio(1), which excludes core deposit intangible amortization and non-recurring activity, for the third quarter 2024 was 1.65%, compared to 1.55% and 1.48% for the second quarter of 2024 and the third quarter of 2023, respectively.

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Review of Nine Month Financial Results

Net interest income for the first nine months of 2024 was $126.5 million, an increase of $32.8 million, or 34.9%, when compared to the first nine months of 2023. The increase in net interest income was primarily due to an increase in total interest income of $76.0 million, or 53.2%, which included an increase in interest and fees on loans of $73.8 million, or 57.4%. The increase of interest and fees on loans was primarily due to the increase in the average balance of loans of $1.4 billion, or 42.3%, and an increase in net accretion income of $5.5 million due to the merger. Increases to net interest income were partially offset by increased total interest expense of $43.2 million, or 87.9%, primarily due to increases in the cost of funds and in the average balance of interest-bearing deposits of $1.0 billion, or 38.1%. All of the increases in average balances were largely due to the merger.

The Company’s net interest margin remained flat at 3.12% for the nine months ended September 30, 2024 and 2023. Margins were flat as more rapid increases in rates on interest-bearing liabilities were offset by lower increases in interest-earning assets yields and larger balances in noninterest-bearing deposits. The increases in the average balance and rates paid on interest-bearing deposits of $1.0 billion and 104 bps, respectively, were partially offset by increases in the average balance and yields earned on average earning assets of $1.4 billion and 64 bps, respectively. Additionally, margins were positively impacted as average balances of noninterest-bearing deposits increased $424.9 million, or 43.2% from 25.9% of average funding for the nine months ended September 30, 2023 to 27.2% of average funding for the nine months ended September 30, 2024. Net accretion income impacted net interest margin by 29 bps and 21 bps for the nine months ended September 30, 2024 and 2023, respectively.

The provision for credit losses for the nine months ended September 30, 2024 and 2023 was $4.0 million and $30.1 million, respectively. The decrease in the provision for credit losses was due to higher levels of reserves required by the Company’s CECL model related to the merger in 2023. Net charge-offs for the nine months ended September 30, 2024 were $3.0 million compared to net recoveries of $1.5 million for the nine months ended September 30, 2023.

Total noninterest income for the nine months ended September 30, 2024 decreased $3.3 million or 13.0%, when compared to the same period in 2023. The decrease was primarily due to lower trust and investment fee income of $1.1 million and one-time third quarter 2023 bargain purchase income of $8.8 million offset by $2.2 million of losses on sale of investment securities, both a direct result of the merger with TCFC in the third quarter of 2023.

Total noninterest expense for the nine months ended September 30, 2024 increased $14.6 million, or 16.3%, when compared to the same period in 2023. Almost all noninterest expense line items increased as a result of the credit card fraud losses and the expanded operations of the newly combined Company. There were no merger-related expenses and $4.7 million of credit card fraud losses for the nine months ended September 30, 2024, compared to $16.8 million expenses and no fraud losses for the nine months ended September 30, 2023, respectively. 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 ability to remediate the existing material weaknesses 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 September 30,																		For the Nine Months Ended September 30,
(Dollars in thousands, except per share data)						2024						2023						Change						2024						2023						Change
PROFITABILITY FOR THE PERIOD
Net interest income						$	43,263					$	45,622					(5.2)		%				$	126,538					$	93,782					34.9		%
Provision for credit losses						1,470						28,176						(94.8)						3,958						30,056						(86.8)
Noninterest income						7,287						14,984						(51.4)						22,294						25,613						(13.0)
Noninterest expense						34,114						47,158						(27.7)						104,311						89,661						16.3
Income before income taxes						14,966						(14,728)						201.6						40,563						(322)						12694.3
Income tax expense						3,777						(4,991)						175.7						9,956						(1,060)						1039.2
Net income						$	11,189					$	(9,737)					214.9						$	30,607					$	738					4047.7
Return on average assets						0.77		%				(0.67)		%				144		bp				0.70		%				0.02		%				68		bp
Return on average assets excluding amortization of intangibles, merger related expenses and credit card fraud losses - Non-GAAP (1) (2)						0.90						0.01						89						0.91						0.49						42
Return on average equity						8.41						(7.25)						1,566						7.84						0.24						760
Return on average tangible equity - Non-GAAP (1), (2)						12.37						1.74						1,063						12.83						6.27						656
Interest rate spread						2.06						2.61						(55)						2.18						2.46						(28)
Net interest margin						3.17						3.35						(18)						3.12						3.12						—
Efficiency ratio - GAAP						67.49						77.81						(1,032)						70.09						75.10						(501)
Efficiency ratio - Non-GAAP (1)						62.10						54.89						721						61.83						54.98						685
Non-interest income to average assets						0.50						1.03						(53)						0.51						0.80						(29)
Non-interest expense to average assets						2.34						3.24						(90)						2.40						2.79						(39)
Net operating expense to average assets - GAAP						1.84						2.24						(40)						1.89						3.00						(111)
Net operating expense to average assets - Non-GAAP (1)						1.65						1.48						17						1.61						1.74						(13)
PER SHARE DATA
Basic and diluted net income per common share						$	0.34					$	(0.29)					214.3		%				$	0.92					$	0.03					2938.3		%
Dividends paid per common share						$	0.12					$	0.12					—		%				$	0.36					$	0.36					—		%
Book value per common share at period end						16.00						15.14						5.7
Tangible book value per common share at period end - Non-GAAP (1)						12.88						11.70						10.1
Market value at period end						13.99						10.52						33.0
Market range:
High						14.99						13.37						12.1						14.99						18.15						(17.4)
Low						11.03						10.27						7.4						10.06						10.27						(2.0)
AVERAGE BALANCE SHEET DATA
Loans						$	4,734,001					$	4,562,748					3.8		%				$	4,698,694					$	3,301,926					42.3		%
Investment securities						656,375						778,744						(15.7)						672,533						693,382						(3.0)
Earning assets						5,435,311						5,404,572						0.6						5,427,713						4,025,597						34.8
Assets						5,810,492						5,769,312						0.7						5,808,153						4,298,943						35.1
Deposits						5,086,348						5,066,886						0.4						5,097,951						3,655,684						39.5
Short-term and Long Term FHLB advances						83,500						70,348						18.7						77,113						148,546						(48.1)
Subordinated Debt & TRUPS						72,946						71,907						1.4						72,682						52,839						37.6
Stockholders' equity						529,155						533,114						(0.7)						521,564						419,801						24.2

____________________________________

(1)See the reconciliation of GAAP and Non-GAAP Measures table.

(2)This ratio excludes merger related expenses. See the reconciliation of GAAP and Non-GAAP Measures table.

6

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Shore Bancshares, Inc.

Financial Highlights (Unaudited) - Continued

						For the Three Months Ended September 30,																		For the Nine Months Ended September 30,
(Dollars in thousands, except per share data)						2024						2023						Change						2024						2023						Change
CREDIT QUALITY DATA
Net charge-offs						$	1,379					$	1,449					(4.8)		%				$	2,995					$	1,519					97.2		%
Nonaccrual loans						$	14,844					$	8,982					65.3		%
Loans 90 days past due and still accruing						454						2,149						(78.9)
Other real estate owned and Repossessed Property						485						179						170.9
Total nonperforming assets						15,783						11,310						39.5
Borrowers experiencing financial difficulty ("BEFDs") (still accruing)						—						—						—
Total nonperforming assets and BEFDs modifications						$	15,783					$	11,310					39.5
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets						9.01		%				8.79		%				22		bp
Period-end tangible equity to tangible assets - Non-GAAP (1)						7.39						6.93						46
Annualized net charge-offs to average loans						0.12		%				0.13		%				(1)		bp				0.09		%				0.06		%				3		bp
Allowance for credit losses as a percent of:
Period-end loans						1.24		%				1.24		%				—		bp
Nonaccrual loans						395.24						635.17						(23,993)
Nonperforming assets						371.72						504.43						(13,271)
Accruing BEFDs modifications						—						—						—
Nonperforming assets and accruing BEFDs						371.72						504.43						(13,271)
As a percent of total loans:
Nonaccrual loans						0.31		%				0.19		%				12		bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets						0.33		%				0.24		%				9		bp
As a percent of total assets:
Nonaccrual loans						0.25		%				0.16		%				9		bp
Nonperforming assets						0.27		%				0.20		%				7

____________________________________

(1)See the reconciliation of GAAP and Non-GAAP Measures table.

7

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

																								September 30, 2024						September 30, 2024
																								compared to						compared to
(In thousands, except per share data)						September 30, 2024						December 31, 2023						September 30, 2023						December 31, 2023						September 30, 2023
ASSETS
Cash and due from banks						$	52,363					$	63,172					$	68,097					(17.1)		%				(23.1)		%
Interest-bearing deposits with other banks						131,258						309,241						40,612						(57.6)						223.2
Cash and cash equivalents						183,621						372,413						108,709						(50.7)						68.9
Investment securities available for sale (at fair value)						133,339						110,521						79,143						20.6						68.5
Investment securities held to maturity (net of allowance for credit losses of $101 (September 30, 2024), $94 (December 31, 2023), $126 (September 30, 2023)) at amortized cost)						484,583						513,188						523,051						(5.6)						(7.4)
Equity securities, at fair value						5,950						5,703						5,434						4.3						9.5
Restricted securities						20,253						17,900						13,361						13.1						51.6
Loans held for sale, at fair value						26,877						8,782						14,725						206.0						82.5
Loans held for investment						4,733,909						4,641,010						4,617,719						2.0						2.5
Less: allowance for credit losses						(58,669)						(57,351)						(57,051)						(2.3)						(2.8)
Loans, net						4,675,240						4,583,659						4,560,668						2.0						2.5
Premises and equipment, net						81,663						82,386						81,149						(0.9)						0.6
Goodwill						63,266						63,266						63,266						—						—
Other intangible assets, net						40,609						48,090						50,685						(15.6)						(19.9)
Other real estate owned, net						179						179						179						—						—
Repossessed property, net						306						—						—						—						—
Assets held for sale						1,387						—						—						—						—
Mortgage servicing rights, at fair value						5,309						5,926						5,890						(10.4)						(9.9)
Right of use assets, net						11,384						12,487						12,741						(8.8)						(10.7)
Cash surrender value on life insurance						103,729						101,704						100,950						2.0						2.8
Accrued interest receivable						19,992						19,217						15,683						4.0						27.5
Deferred income taxes						32,191						40,707						45,346						(20.9)						(29.0)
Other assets						27,826						24,790						24,392						12.2						14.1
Total assets						$	5,917,704					$	6,010,918					$	5,705,372					(1.6)						3.7
LIABILITIES
Noninterest-bearing deposits						$	1,571,393					$	1,258,037					$	1,211,401					24.9		%				29.7		%
Interest-bearing deposits						3,654,330						4,128,083						3,897,343						(11.5)						(6.2)
Total deposits						5,225,723						5,386,120						5,108,744						(3.0)						2.3
Advances from FHLB - long-term						50,000						—						—						—						—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")						29,768						29,530						29,451						0.8						1.1
Subordinated debt						43,688						43,139						42,956						1.3						1.7
Total borrowings						123,456						72,669						72,407						69.9						70.5
Lease liabilities						11,816						12,857						13,082						(8.1)						(9.7)
Accrued expenses and other liabilities						23,438						28,137						9,561						(16.7)						145.1
Total liabilities						$	5,384,433					$	5,499,783					$	5,203,794					(2.1)						3.5
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares						$	333					$	332					$	331					0.3						0.6
Additional paid in capital						357,580						356,007						355,575						0.4						0.6
Retained earnings						180,884						162,290						155,781						11.5						16.1
Accumulated other comprehensive loss						(5,526)						(7,494)						(10,109)						26.3						45.3
Total stockholders' equity						533,271						511,135						501,578						4.3						6.3
Total liabilities and stockholders' equity						$	5,917,704					$	6,010,918					$	5,705,372					(1.6)						3.7
Period-end common shares outstanding						$	33,327					$	33,162					$	33,136					0.5						0.6
Book value per common share						$	16					$	15.41					$	15.14					3.8						5.7

8

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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)

						For the Three Months Ended September 30,																		For the Nine Months Ended September 30,
(In thousands, except per share data)						2024						2023						% Change						2024						2023						% Change
INTEREST INCOME
Interest and fees on loans						$	69,157					$	64,869					6.6		%				$	202,203					$	128,424					57.4		%
Interest on investment securities:
Taxable						4,962						5,047						(1.7)						14,611						12,840						13.8
Tax-exempt						6						27						(77.8)						18						41						(56.1)
Interest on federal funds sold						—						92						(100.0)						—						92						(100.0)
Interest on deposits with other banks						564						1,213						(53.5)						2,102						1,546						36.0
Total interest income						$	74,689					$	71,248					4.8						$	218,934					$	142,943					53.2
INTEREST EXPENSE
Interest on deposits						$	28,856					$	23,473					22.9						$	84,938					$	40,668					108.9
Interest on short-term borrowings						491						692						(29.0)						2,131						5,501						(61.3)
Interest on long-term borrowings						2,079						1,461						42.3						5,327						2,992						78.0
Total interest expense						$	31,426					$	25,626					22.6						$	92,396					$	49,161					87.9
NET INTEREST INCOME						$	43,263					$	45,622					(5.2)						$	126,538					$	93,782					34.9
Provision for credit losses						1,470						28,176						(94.8)						3,958						30,056						(86.8)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES						$	41,793					$	17,446					139.6						$	122,580					$	63,726					92.4
NONINTEREST INCOME
Service charges on deposit accounts						$	1,543					$	1,505					2.5						$	4,543					$	3,981					14.1
Trust and investment fee income						880						1,933						(54.5)						2,510						2,764						(9.2)
Loss on sales and calls of investment securities						—						(2,166)						100.0						—						(2,166)						100.0
Interchange credits						1,711						1,557						9.9						5,015						4,081						22.9
Mortgage-banking revenue						1,177						1,377						(14.5)						3,961						3,408						16.2
Title Company revenue						100						89						12.4						344						412						(16.5)
Bargain purchase gain						—						8,816						(100.0)						—						8,816						(100.0)
Other noninterest income						1,876						1,873						0.2						5,921						4,317						37.2
Total noninterest income						$	7,287					$	14,984					(51.4)						$	22,294					$	25,613					(13.0)

9

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Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited) - Continued

						For the Three Months Ended September 30,																		For the Nine Months Ended September 30,
(In thousands, except per share data)						2024						2023						% Change						2024						2023						% Change
NONINTEREST EXPENSE
Salaries and wages						$	13,197					$	14,183					(7.0)		%				$	38,355					$	31,822					20.5		%
Employee benefits						3,326						3,607						(7.8)						11,015						8,968						22.8
Occupancy expense						2,384						2,245						6.2						7,232						5,463						32.4
Furniture and equipment expense						876						750						16.8						2,681						1,761						52.2
Data processing						3,081						2,485						24.0						8,925						6,022						48.2
Directors' fees						443						295						50.2						1,097						730						50.3
Amortization of intangible assets						2,336						2,634						(11.3)						7,482						3,510						113.2
FDIC insurance premium expense						1,160						618						87.7						3,400						1,747						94.6
Legal and professional fees						1,362						1,217						11.9						4,315						2,926						47.5
Fraud losses (1)						673						262						156.9						5,237						376						1292.8
Merger related expenses						—						14,866						(100.0)						—						16,754						(100.0)
Other noninterest expenses						5,276						3,996						32.0						14,572						9,582						52.1
Total noninterest expense						$	34,114					$	47,158					(27.7)						104,311						89,661						16.3
Income (loss) before income taxes						$	14,966					$	(14,728)					201.6						40,563						(322)						12694.3
Income tax expense (benefit)						3,777						(4,991)						175.7						9,956						(1,060)						1039.2
NET INCOME (LOSS)						$	11,189					$	(9,737)					214.9						$	30,607					$	738					4047.7
Weighted average shares outstanding - basic						33,318						33,129						0.6						33,247						24,354						36.5
Weighted average shares outstanding - diluted						33,339						33,129						0.6						33,255						24,354						36.5
Basic net income (loss) per common share						$	0.34					$	(0.29)					214.3						$	0.92					$	0.03					2938.3
Diluted net income (loss) per common share						$	0.34					$	(0.29)					214.3						$	0.92					$	0.03					2938.3
Dividends paid per common share						$	0.12					$	0.12					—						$	0.36					$	0.36					—

____________________________________

(1)Fraud losses for the third quarter of 2024 and nine months ended September 30, 2024 include $337 thousand and $4.7 million in losses related to the one-time online credit card account opening credit card event. The third quarter expense of $337 thousand was related to non-recurring data processing charges to close the fraudulent accounts.

10

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

						For the Three Months Ended																																																						For the Three Months Ended
						September 30, 2024																		September 30, 2023																								June 30, 2024
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate																								Average Balance						Interest						Yield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate						$	1,412,086					$	20,723					5.84		%				$	1,141,707					$	14,548					5.06		%																						$	1,388,168					$	19,278					5.59		%
Commercial real estate						2,749,395						39,858						5.77						2,831,569						40,536						5.68																								2,738,693						39,370						5.78
Commercial						210,728						3,732						7.05						233,756						5,315						9.02																								216,809						3,926						7.28
Consumer						320,960						4,306						5.34						332,486						4,183						4.99																								327,781						4,265						5.23
State and political						1,883						32						6.76						929						10						4.27																								2,331						30						5.18
Credit Cards						7,132						170						9.48						6,164						149						9.59																								8,378						201						9.65
Other						31,817						416						5.20						16,137						201						4.94																								24,350						302						4.99
Total Loans						4,734,001						69,237						5.82						4,562,748						64,942						5.65																								4,706,510						67,372						5.76
Investment securities
Taxable						655,718						4,962						3.03						778,081						5,047						2.59																								705,421						5,230						2.97
Tax-exempt (1)						657						8						4.87						663						34						20.51																								658						8						4.86
Interest-bearing deposits						44,935						564						4.99						55,547						1,213						8.66																								47,372						578						4.91
Total earning assets						5,435,311						74,771						5.47						5,404,572						71,328						5.24																								5,459,961						73,188						5.39
Cash and due from banks						46,996																		51,714																																				45,141
Other assets						386,700																		359,726																																				391,854
Allowance for credit losses						(58,515)																		(46,700)																																				(57,628)
Total assets						$	5,810,492																	$	5,769,312																																			$	5,839,328

11

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						For the Three Months Ended																																																						For the Three Months Ended
						September 30, 2024																		September 30, 2023																								June 30, 2024
(Dollars in thousands)						Average Balance						Interest						Yield/Rate						Average Balance						Interest						Yield/Rate																								Average Balance						Interest						Yield/Rate
Interest-bearing liabilities
Demand deposits						$	581,517					$	5,472					3.74		%				$	1,056,956					$	6,659					2.50		%																						$	711,138					$	5,550					3.14		%
Money market and savings deposits						1,670,210						10,420						2.48						1,572,920						6,810						1.72																								1,690,157						10,291						2.45
Brokered deposits						25,829						222						3.42						98,649						1,225						4.93																								7,753						94						4.88
Certificates of deposit $100,000 or more						797,439						8,433						4.21						706,642						6,272						3.52																								758,211						7,581						4.02
Other time deposits						431,834						4,309						3.97						285,743						2,507						3.48																								417,331						4,069						3.92
Interest-bearing deposits (4)						3,506,829						28,856						3.27						3,720,910						23,473						2.50																								3,584,590						27,585						3.10
Advances from FHLB - short-term						33,500						491						5.83						70,348						692						3.90																								113,549						1,584						5.61
Advances from FHLB - long-term						50,000						625						4.97						—						—						—																								30,220						346						4.60
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,946						1,454						7.93						71,907						1,461						8.06																								72,680						1,451						8.03
Total interest-bearing liabilities						3,663,275						31,426						3.41						3,863,165						25,626						2.63																								3,801,039						30,966						3.28
Noninterest-bearing deposits						1,579,519																		1,345,976																																				1,480,384
Accrued expenses and other liabilities						38,543																		27,057																																				38,427
Stockholders' equity						529,155																		533,114																																				519,478
Total liabilities and stockholders' equity						$	5,810,492																	$	5,769,312																																			$	5,839,328
Net interest income												$	43,345																	$	45,702																																			$	42,222
Net Interest Spread																		2.06		%																2.61		%																																		2.11		%
Net Interest Margin																		3.17		%																3.35		%																																		3.11		%
Cost of Funds																		2.38		%																1.95		%																																		2.36		%
Cost of Deposits																		2.26		%																1.84		%																																		2.19		%
Cost of Debt																		6.54		%																6.00		%																																		6.28		%

____________________________________

(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 $5.0 million, $6.1 million and $4.5 million of accretion interest on loans for the three months ended September 30, 2024 and 2023, and June 30, 2024, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit discount and amortization of borrowing fair value adjustments. There were $(287) thousand, $(484) thousand and $(421) thousand of amortization of deposits premium, and $(232) thousand, $(232) thousand, and $(243) thousand of amortization of borrowing fair value adjustments for the three months ended September 30, 2024 and 2023, and June 30, 2024, respectively.

12

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)

						For the Nine Months Ended September 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						$	1,387,387					$	58,493					5.63		%				$	990,970					$	35,929					4.85		%
Commercial real estate						2,736,941						117,832						5.75						1,806,983						71,328						5.28
Commercial						215,788						11,755						7.28						171,702						9,312						7.25
Consumer						325,935						12,843						5.26						318,066						11,440						4.81
State and political						1,896						78						5.50						936						27						3.86
Credit Cards						7,654						539						9.41						2,077						149						9.59
Other						23,093						900						5.21						11,192						400						4.78
Total Loans						4,698,694						202,440						5.76						3,301,926						128,585						5.21
Investment securities
Taxable						671,875						14,611						2.90						692,718						12,840						2.47
Tax-exempt (1)						658						23						4.66						664						52						10.44
Interest-bearing deposits						56,486						2,102						4.97						27,750						1,546						7.45
Total earning assets						5,427,713						219,176						5.39						4,025,597						143,115						4.75
Cash and due from banks						47,211																		36,831
Other assets						391,106																		271,721
Allowance for credit losses						(57,877)																		(35,206)
Total assets						$	5,808,153																	$	4,298,943
Interest-bearing liabilities
Demand deposits						$	800,258					$	17,384					2.90		%				$	813,834					$	13,808					2.27		%
Money market and savings deposits						1,676,457						30,871						2.46						1,163,595						11,709						1.35
Brokered deposits						16,642						567						4.55						33,244						1,225						4.93
Certificates of deposit $100,000 or more						774,112						23,689						4.09						421,852						9,685						3.07
Other time deposits						422,212						12,427						3.93						239,834						4,241						2.36
Interest-bearing deposits (4)						3,689,681						84,938						3.07						2,672,359						40,668						2.03
Advances from FHLB - short-term						50,288						2,131						5.66						148,546						5,501						4.95
Advances from FHLB - long-term						26,825						971						4.84						—						—						—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,682						4,356						8.01						52,839						2,992						7.57
Total interest-bearing liabilities						3,839,476						92,396						3.21						2,873,744						49,161						2.29
Noninterest-bearing deposits						1,408,270																		983,325
Accrued expenses and other liabilities						38,843																		22,073
Stockholders' equity						521,564																		419,801
Total liabilities and stockholders' equity						$	5,808,153																	$	4,298,943
Net interest income												$	126,780																	$	93,954
Net Interest Spread																		2.18		%																2.46		%
Net Interest Margin																		3.12		%																3.12		%
Cost of Funds																		2.35		%																1.70		%
Cost of Deposits																		2.23		%																1.49		%
Cost of Debt																		6.65		%																5.64		%

____________________________________

(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 $13.7 million and $7.0 million of accretion interest on loans for the nine months ended September 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 $(1.1) million of amortization of deposit discounts and $(308) thousand of amortization of deposit premium, and $(695) thousand and $(325) thousand of amortization of borrowing fair value adjustment for the nine months ended September 30, 2024 and 2023, respectively.

13

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)

						3rd Quarter						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						Q3 2024						Q3 2024
						2024						2024						2024						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2024						Q3 2023
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income						$	43,345					$	42,222					$	41,214					$	41,606					$	45,702					2.7		%				(5.2)		%
Less: Taxable-equivalent adjustment						82						82						79						81						80						—						2.5
Net interest income						43,263						42,140						41,135						41,525						45,622						2.7						(5.2)
Provision for credit losses						1,470						2,081						407						896						28,176						(29.4)						(94.8)
Noninterest income						7,287						8,440						6,567						7,548						14,984						(13.7)						(51.4)
Noninterest expense						34,114						33,499						36,698						33,670						47,158						1.8						(27.7)
Income/(loss) before income taxes						14,966						15,000						10,597						14,507						(14,728)						(0.2)						201.6
Income tax expense/ (benefit)						3,777						3,766						2,413						4,017						(4,991)						0.3						175.7
Net income/ (loss)						$	11,189					$	11,234					$	8,184					$	10,490					$	(9,737)					(0.4)						214.9
Return on average assets						0.77%						0.77%						0.57%						0.72%						(0.67)%						—		bp				144		bp
Return on average assets excluding amortization of intangibles, fraud losses and merger related expenses - Non-GAAP (1), (2)						0.90						0.91						0.94						0.88						0.01						(1)						89
Return on average equity						8.41						8.70						6.38						8.21						(7.25)						(29)						1,566
Return on average tangible equity - Non-GAAP (1), (2)						12.37						12.85						13.39						12.88						1.74						(48)						1,063
Net interest margin						3.17						3.11						3.08						3.09						3.35						6						(18)
Efficiency ratio - GAAP						67.49						66.23						76.93						68.61						77.81						126						(1,032)
Efficiency ratio - Non-GAAP (1)						62.10						61.05						62.37						61.99						54.89						105						721
PER SHARE DATA
Basic and diluted net income/(loss) per common share						$	0.34					$	0.34					$	0.25					$	0.32					$	(0.29)					(0.7)		%				215.8		%
Dividends paid per common share						0.12						0.12						0.12						0.12						0.12						—						—
Book value per common share at period end						16.00						15.74						15.51						15.41						15.14						1.7						5.7
Tangible book value per common share at period end - Non-GAAP (1)						12.88						12.54						12.24						12.06						11.70						2.7						10.1
Market value at period end						13.99						11.45						11.50						14.25						10.52						22.2						33.0
Market range:
High						14.99						11.90						14.38						14.51						13.37						26.0						12.1
Low						11.03						10.06						10.56						9.66						10.27						9.6						7.4

____________________________________

(1)See the reconciliation of GAAP and Non-GAAP Measures table.

(2)This ratio excludes merger related expenses. See the reconciliation of GAAP and Non-GAAP Measures table.

14

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued

						3rd Quarter						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						Q3 2024						Q3 2024
						2024						2024						2024						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2024						Q3 2023
AVERAGE BALANCE SHEET DATA
Loans						$	4,734,001					$	4,706,510					$	4,655,183					$	4,639,467					$	4,562,748					0.58		%				3.75		%
Investment securities						656,375						706,079						655,323						619,920						778,744						(7.04)						(15.71)
Earning assets						5,435,311						5,459,961						5,387,782						5,339,833						5,404,572						(0.45)						0.57
Assets						5,810,492						5,839,328						5,774,824						5,745,440						5,769,312						(0.49)						0.71
Deposits						5,086,348						5,064,974						5,142,658						5,136,818						5,066,886						0.42						0.38
Short-term and Long Term FHLB advances						83,500						143,769						4,000						1,141						70,348						(41.92)						18.70
Subordinated Debt & TRUPS						72,946						72,680						72,418						72,155						71,907						0.37						1.44
Stockholders' equity						529,155						519,478						515,976						507,040						533,114						1.86						(0.74)
CREDIT QUALITY DATA
Net charge offs						$	1,379					$	886					$	565					$	500					$	1,449					55.64		%				(4.83)		%
Nonaccrual loans						$	14,844					$	14,837					$	12,776					$	12,784					$	8,982					0.05		%				65.26		%
Loans 90 days past due and still accruing						454						414						1,560						738						2,149						9.66						(78.87)
Other real estate owned and repossessed property						485						1,739						2,024						179						179						(72.11)						170.95
Total nonperforming assets						$	15,783					$	16,990					$	16,360					$	13,701					$	11,310					(7.10)						39.55

15

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Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued

						3rd Quarter						2nd Quarter						1st Quarter						4th Quarter						3rd Quarter						Q3 2024						Q3 2024
						2024						2024						2024						2023						2023						compared to						compared to
(Dollars in thousands, except per share data)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2024						Q3 2023
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets						9.01		%				8.92		%				8.84		%				8.50		%				8.79		%				9		bp				22		bp
Period-end tangible equity to tangible assets - Non-GAAP (1)						7.39						7.23						7.11						6.78						6.93						16						46
Annualized net charge-offs to average loans						0.12		%				0.08		%				0.05		%				0.04		%				0.13		%				4		bp				(1)		bp
Allowance for credit losses as a percent of:
Period-end loans						1.24		%				1.24		%				1.23		%				1.24		%				1.24		%				—		bp				—		bp
Period-end loans						1.24						1.24						1.23						1.24						1.24						—						—
Nonaccrual loans						395.24						394.14						448.78						448.62						635.17						110						(23,993)
Nonperforming assets						371.72						344.19						350.46						418.59						504.43						2,753						(13,271)
As a percent of total loans:
Nonaccrual loans						0.31		%				0.32		%				0.27		%				0.28		%				0.19		%				(1)		bp				12		bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets						0.33		%				0.36		%				0.35		%				0.30		%				0.24		%				(3)		bp				9		bp
As a percent of total assets:
Nonaccrual loans						0.25		%				0.25		%				0.22		%				0.21		%				0.16		%				—		bp				9		bp
Nonperforming assets						0.27						0.29						0.28						0.23						0.20						(2)						7

____________________________________

(1)See the reconciliation of GAAP and Non-GAAP Measures table.

16

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)

																																				September 30, 2024						September 30, 2024
																																				compared to						compared to
(In thousands, except per share data)						September 30, 2024						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023						December 31, 2023						September 30, 2023
ASSETS
Cash and due from banks						$	52,363					$	50,090					$	43,079					$	63,172					$	68,097					(17.1)		%				(23.1)		%
Interest-bearing deposits with other banks						131,258						88,793						71,481						309,241						40,612						(57.6)						223.2
Cash and cash equivalents						183,621						138,883						114,560						372,413						108,709						(50.7)						68.9
Investment securities available for sale (at fair value)						133,339						131,594						179,496						110,521						79,143						20.6						68.5
Investment securities held to maturity (net of allowance for credit losses of $101 (September 30, 2024), $108 (June 30, 2024), $116 (March 31, 2024), $94 (December 31,2023), and $126 (September 30, 2023)) at amortized cost)						484,583						499,431						503,822						513,188						523,051						(5.6)						(7.4)
Equity securities, at fair value						5,950						5,699						5,681						5,703						5,434						4.3						9.5
Restricted securities						20,253						21,725						17,863						17,900						13,361						13.1						51.6
Loans held for sale, at fair value						26,877						27,829						13,767						8,782						14,725						206.0						82.5
Loans held for investment						4,733,909						4,705,737						4,648,725						4,641,010						4,617,719						2.0						2.5
Less: allowance for credit losses						(58,669)						(58,478)						(57,336)						(57,351)						(57,051)						(2.3)						(2.8)
Loans, net						4,675,240						4,647,259						4,591,389						4,583,659						4,560,668						2.1						2.5
Premises and equipment, net						81,663						82,176						83,084						82,386						81,149						(0.9)						0.6
Goodwill						63,266						63,266						63,266						63,266						63,266						—						—
Other intangible assets, net						40,609						42,945						45,515						48,090						50,685						(15.6)						(19.9)
Other real estate owned, net						179						179						179						179						179						—						—
Repossessed property, net						306						1,560						1,845						—						—						—						—
Assets held for sale						1,387						1,387						—						—						—						—						—
Mortgage servicing rights, at fair value						5,309						5,995						5,821						5,926						5,890						(10.4)						(9.9)
Right of use assets, net						11,384						11,762						12,153						12,487						12,741						(8.8)						(10.7)
Cash surrender value on life insurance						103,729						102,969						102,321						101,704						100,950						2.0						2.8
Accrued interest receivable						19,992						19,641						19,541						19,217						15,683						4.0						27.5
Deferred income taxes						32,191						36,078						38,978						40,707						45,346						(20.9)						(29.0)
Other assets						27,826						23,639						26,423						24,790						24,392						12.2						14.1
Total assets						$	5,917,704					$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372					(1.5)						3.7

17

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Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited) - Continued

																																				September 30, 2024						September 30, 2024
																																				compared to						compared to
(In thousands, except per share data)						September 30, 2024						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023						December 31, 2023						September 30, 2023
LIABILITIES
Noninterest-bearing deposits						$	1,571,393					$	1,587,252					$	1,200,680					$	1,258,037					$	1,211,401					24.9		%				29.7
Interest-bearing deposits						3,654,330						3,561,633						3,983,599						4,128,083						3,897,343						(11.5)						(6.2)
Total deposits						5,225,723						5,148,885						5,184,279						5,386,120						5,108,744						(3.0)						2.3
Advances from FHLB - short-term						—						31,000						—						—						—						—						—
Advances from FHLB - long-term						50,000						50,000						—						—						—						—						—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")						29,768						29,316						29,237						29,158						29,079						2.1						2.4
Subordinated debt						43,688						43,504						43,322						43,139						42,956						1.3						1.7
Total borrowings						123,456						153,820						72,559						72,297						72,035						70.8						71.4
Lease liabilities						11,816						12,189						12,552						12,857						13,082						(8.5)						(9.7)
Accrued expenses and other liabilities						23,438						26,340						41,086						28,509						9,933						(19.3)						136.0
Total liabilities						5,384,433						5,341,234						5,310,476						5,499,783						5,203,794						(2.2)						3.5
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares						333						333						332						332						331						0.3						0.6
Additional paid in capital						357,580						356,994						356,464						356,007						355,575						0.4						0.6
Retained earnings						180,884						173,716						166,490						162,290						155,781						10.7						16.1
Accumulated other comprehensive loss						(5,526)						(8,260)						(8,058)						(7,494)						(10,109)						23.8						45.3
Total stockholders' equity						533,271						522,783						515,228						511,135						501,578						4.2						6.3
																																										—
Total liabilities and stockholders' equity						$	5,917,704					$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372					(1.6)						3.7
Period-end common shares outstanding						33,327						33,215						33,211						33,162						33,136						0.5						0.6
Book value per common share						$	16.00					$	15.74					$	15.51					$	15.41					$	15.14					3.8						5.7

18

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Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)

																																				Q3 2024						Q3 2024
																																				compared to						compared to
(In thousands, except per share data)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2024						Q3 2023
INTEREST INCOME
Interest and fees on loans						$	69,157					$	67,292					$	65,754					$	65,914					$	64,869					2.8		%				6.6		%
Interest on investment securities:
Taxable						4,962						5,230						4,419						3,992						5,047						(5.1)						(1.7)
Tax-exempt						6						6						6						6						27						—						(77.8)
Interest on federal funds sold						—						—						—						—						92						—						(100.0)
Interest on deposits with other banks						564						578						960						1,224						1,213						(2.4)						(53.5)
Total interest income						74,689						73,106						71,139						71,136						71,248						2.2						4.8
INTEREST EXPENSE
Interest on deposits						28,856						27,585						28,497						28,133						23,473						4.6						22.9
Interest on short-term borrowings						491						1,584						56						16						692						(69.0)						(29.1)
Interest on long-term borrowings						2,079						1,797						1,451						1,462						1,461						15.7						42.3
Total interest expense						31,426						30,966						30,004						29,611						25,626						1.5						22.6
NET INTEREST INCOME						43,263						42,140						41,135						41,525						45,622						2.7						(5.2)
Provision for credit losses						1,470						2,081						407						896						28,176						(29.4)						(94.8)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES						41,793						40,059						40,728						40,629						17,446						4.3						139.6
NONINTEREST INCOME
Service charges on deposit accounts						1,543						1,493						1,507						1,519						1,505						3.4						2.5
Trust and investment fee income						880						896						734						844						1,933						(1.8)						(54.5)
Loss on sales and calls of investment securities						—						—						—						—						(2,166)						—						100.0
Interchange credits						1,711						1,717						1,587						1,633						1,557						(0.4)						9.9
Mortgage-banking revenue						1,177						1,983						801						1,105						1,377						(40.7)						(14.5)
Title Company revenue						100						165						78						139						89						(39.4)						12.4
Bargain purchase gain						—						—						—						—						8,816						—						(100.0)
Other noninterest income						1,876						2,186						1,860						2,308						1,873						(14.2)						0.2
Total noninterest income						$	7,287					$	8,440					$	6,567					$	7,548					$	14,984					(13.7)						(51.4)

19

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Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited) - Continued

																																				Q3 2024						Q3 2024
																																				compared to						compared to
(In thousands, except per share data)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2024						Q3 2023
NONINTEREST EXPENSE
Salaries and wages						$	13,197					$	13,307					$	11,852					$	12,823					$	14,183					(0.8)		%				(7.0)		%
Employee benefits						3,326						3,593						4,097						3,389						3,607						(7.4)						(7.8)
Occupancy expense						2,384						2,432						2,416						2,328						2,245						(2.0)						6.2
Furniture and equipment expense						876						900						904						790						750						(2.7)						16.8
Data processing						3,081						2,978						2,867						2,762						2,485						3.5						24.0
Directors' fees						443						359						295						426						295						23.4						50.2
Amortization of intangible assets						2,336						2,569						2,576						2,595						2,634						(9.1)						(11.3)
FDIC insurance premium expense						1,160						1,089						1,150						1,733						618						6.5						87.7
Other real estate owned expenses, net						—						—						—						—						2						—						(100.0)
Legal and professional fees						1,362						1,354						1,599						1,411						1,217						0.6						11.9
Fraud losses (1)						673						62						4,502						503						262						985.5						156.9
Merger related expenses						—						—						—						602						14,866						—						(100.0)
Other noninterest expenses						5,276						4,856						4,440						4,308						3,994						8.7						32.1
Total noninterest expense						34,114						33,499						36,698						33,670						47,158						1.8						(27.7)
Income/(loss) before income taxes						14,966						15,000						10,597						14,507						(14,728)						(0.2)						201.6
Income tax expense/(benefit)						3,777						3,766						2,413						4,017						(4,991)						0.3						175.7
NET INCOME/(LOSS)						$	11,189					$	11,234					$	8,184					$	10,490					$	(9,737)					(0.4)						214.9
Weighted average shares outstanding - basic						33,318						33,234						33,189						33,153						33,129						0.3						0.6
Weighted average shares outstanding - diluted						33,339						33,234						33,191						33,322						33,129						0.3						0.6
Basic net income/(loss) per common share						$	0.34					$	0.34					$	0.25					$	0.32					$	(0.29)					(0.7)						215.8
Diluted net income/(loss) per common share						$	0.34					$	0.34					$	0.25					$	0.32					$	(0.29)					(0.8)						215.7
Dividends paid per common share						0.12						0.12						0.12						0.12						0.12						—						—

____________________________________

(1)Fraud losses for the third quarter of 2024 and first quarter of 2024 include $337 thousand and $4.3 million in losses related to the one-time online credit card account opening credit card event. The third quarter expense of $337 thousand was related to non-recurring data processing charges to close the fraudulent accounts.

20

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Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)

						Q3 2024																		Q2 2024																		Q1 2024																		Q4 2023																		Q3 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						$	1,412,086					$	20,723					5.84		%				$	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		%
Commercial real estate						2,749,395						39,858						5.77						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
Commercial						210,728						3,732						7.05						216,809						3,926						7.28						219,884						4,097						7.49						221,342						4,295						7.70						233,756						5,315						9.02
Consumer						320,960						4,306						5.34						327,781						4,265						5.23						329,118						4,272						5.22						333,807						3,859						4.59						332,486						4,183						4.99
State and political						1,883						32						6.76						2,331						30						5.18						1,473						16						4.37						1,290						13						4.00						929						10						4.27
Credit Cards						7,132						170						9.48						8,378						201						9.65						7,457						167						9.01						6,320						166						10.42						6,164						149						9.59
Other						31,817						416						5.20						24,350						302						4.99						13,015						183						5.66						17,464						277						6.29						16,137						201						4.94
Total Loans						4,734,001						69,237						5.82						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
Investment securities
Taxable						655,718						4,962						3.03						705,421						5,230						2.97						654,663						4,419						2.70						619,259						3,992						2.58						778,081						5,047						2.59
Tax-exempt (1)						657						8						4.87						658						8						4.86						660						8						4.85						661						8						4.84						663						34						20.51
Federal funds sold						—						—						—						—						—						—						—						—						—						—						—						—						7,533						92						4.85
Interest-bearing deposits						44,935						564						4.99						47,372						578						4.91						77,276						960						5.00						80,446						1,224						6.04						55,547						1,213						8.66
Total earning assets						5,435,311						74,771						5.47						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
Cash and due from banks						46,996																		45,141																		49,499																		63,506																		51,714
Other assets						386,700																		391,854																		395,023																		399,409																		359,726
Allowance for credit losses						(58,515)																		(57,628)																		(57,480)																		(57,308)																		(46,700)
Total assets						$	5,810,492																	$	5,839,328																	$	5,774,824																	$	5,745,440																	$	5,769,312

21

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						Q3 2024																		Q2 2024																		Q1 2024																		Q4 2023																		Q3 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						$	581,517					$	5,472					3.74		%				$	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		%
Money market and savings deposits						1,670,210						10,420						2.48						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
Brokered deposits						25,829						222						3.42						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						797,439						8,433						4.21						758,211						7,581						4.02						762,210						7,675						4.05						701,051						6,898						3.90						706,642						6,272						3.52
Other time deposits						431,834						4,309						3.97						417,331						4,069						3.92						417,362						4,049						3.90						391,820						4,885						4.95						285,743						2,507						3.48
Interest-bearing deposits (4)						3,506,829						28,856						3.27						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
Advances from FHLB - short-term						33,500						491						5.83						113,549						1,584						5.61						4,000						56						5.63						1,141						16						5.56						70,348						692						3.90
Advances from FHLB - long-term						50,000						625						4.97						30,220						346						4.60						—						—						—						—						—						—						—						—						—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)						72,946						1,454						7.93						72,680						1,451						8.03						72,418						1,451						8.06						72,155						1,462						8.04						71,907						1,461						8.06
Total interest-bearing liabilities						3,663,275						31,426						3.41						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
Noninterest-bearing deposits						1,579,519																		1,480,384																		1,163,023																		1,228,060																		1,345,976
Accrued expenses and other liabilities						38,543																		38,427																		39,772																		28,286																		27,057
Stockholders' equity						529,155																		519,478																		515,976																		507,040																		533,114
Total liabilities and stockholders' equity						$	5,810,492																	$	5,839,328																	$	5,774,824																	$	5,745,440																	$	5,769,312
Net interest income												$	43,345																	$	42,222																	$	41,214																	$	41,606																	$	45,702
Net interest spread																		2.06		%																2.11		%																2.34		%																2.34		%																2.61		%
Net interest margin																		3.17		%																3.11		%																3.08		%																3.09		%																3.35		%
Cost of Funds																		2.38		%																2.36		%																2.31		%																2.25		%																1.95		%
Cost of Deposits																		2.26		%																2.19		%																2.23		%																2.17		%																1.84		%
Cost of Debt																		6.54		%																6.28		%																7.93		%																8.00		%																6.00		%

____________________________________

(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 $5.0 million, $4.5 million, $4.2 million, $4.8 million and $6.1 million of accretion interest on loans for the three months ended September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 30, 2023, respectively.

(4) Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $(287) thousand, $(421) thousand, $(367) thousand, $(1.5) million and $(484) thousand of amortization of deposits premium, and $(232) thousand, $(243) thousand, $(220) thousand, $(232) thousand and $(232) thousand of amortization of borrowing fair value adjustment for the three months ended September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 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)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						9/30/2024						9/30/2023
The following reconciles return on average assets, average equity and return on average tangible equity (Note 1):
Net income (loss)						$	11,189					$	11,234					$	8,184					$	10,490					$	(9,737)					$	30,607					$	738
Net income (loss) - annualized (A)						$	44,513					$	45,183					$	32,916					$	41,618					$	(38,632)					$	40,884					$	987
Net income (loss)						$	11,189					$	11,234					$	8,184					$	10,490					$	(9,737)					$	30,607					$	738
Add: Amortization of intangible assets, net of tax						1,746						1,924						1,989						1,876						1,741						5,646						2,597
Add: Merger Expenses, net of tax						—						—						—						435						9,828						—						12,398
Add: Credit Card Fraud Losses, net of tax						252						—						3,339						—						—						3,516						—
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses						13,187						13,158						13,512						12,801						1,832						39,769						15,733
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - annualized (B)						$	52,461					$	52,921					$	54,345					$	50,787					$	7,268					$	53,122					$	21,035
Return on average assets (GAAP)						0.77		%				0.77		%				0.57		%				0.72		%				(0.67)		%				0.70		%				0.02		%
Return on average assets excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - (Non-GAAP)						0.90		%				0.91		%				0.94		%				0.88		%				0.01		%				0.91		%				0.49		%
Average assets						$	5,810,492					$	5,839,328					$	5,774,824					$	5,745,440					$	5,769,312					$	5,808,153					$	4,298,943
Average stockholders' equity (C)						$	529,155					$	519,478					$	515,976					$	507,040					$	533,114					$	521,564					$	419,801
Less: Average goodwill and core deposit intangible						(105,136)						(107,594)						(110,167)						(112,752)						(115,604)						(107,623)						(84,300)
Average tangible equity (D)						$	424,019					$	411,884					$	405,809					$	394,288					$	417,510					$	413,941					$	335,501
Return on average equity (GAAP) (A)/(C)						8.41		%				8.70		%				6.38		%				8.21		%				(7.25)		%				7.84		%				0.24		%
Return on average tangible equity (Non-GAAP) (B)/(D)						12.37		%				12.85		%				13.39		%				12.88		%				1.74		%				12.83		%				6.27		%

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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)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023						9/30/2024						9/30/2023
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)						$	34,114					$	33,499					$	36,698					$	33,670					$	47,158					$	104,311					$	89,661
Less: Amortization of intangible assets						(2,336)						(2,569)						(2,576)						(2,595)						(2,634)						(7,482)						(3,510)
Less: Merger Expenses						—						—						—						(602)						(14,866)						—						(16,754)
Less: Credit Card Fraud Losses						(337)						—						(4,323)						—						—						(4,660)						—
Adjusted noninterest expense (F)						$	31,441					$	30,930					$	29,799					$	30,473					$	29,658					$	92,169					$	69,397
Net interest income (G)						$	43,263					$	42,140					$	41,135					$	41,525					$	45,622					$	126,538					$	93,782
Add: Taxable-equivalent adjustment						82						82						79						81						80						242						172
Taxable-equivalent net interest income (H)						$	43,345					$	42,222					$	41,214					$	41,606					$	45,702					$	126,780					$	93,954
Noninterest income (I)						$	7,287					$	8,440					$	6,567					$	7,548					$	14,984					$	22,294					$	25,613
Investment securities losses (gains)						—						—						—						—						2,166						—						(2,166)
Less: Bargain purchase gain						—						—						—						—						(8,816)						—						8,816
Adjusted noninterest income (J)						$	7,287					$	8,440					$	6,567					$	7,548					$	8,334					$	22,294					$	32,263
Efficiency ratio (GAAP) (E)/(G)+(I)						67.49		%				66.23		%				76.93		%				68.61		%				77.81		%				70.09		%				75.10		%
Efficiency ratio (Non-GAAP) (F)/(H)+(J)						62.10		%				61.05		%				62.37		%				61.99		%				54.89		%				61.83		%				54.98		%
Net operating expense to average assets (GAAP)						1.84		%				1.73		%				2.07		%				1.80		%				2.24		%				1.89		%				3.00		%
Net operating expense to average assets (Non-GAAP)						1.65		%				1.55		%				1.60		%				1.58		%				1.48		%				1.61		%				1.74		%

24

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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)						Q3 2024						Q2 2024						Q1 2024						Q4 2023						Q3 2023
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (K)						$	533,271					$	522,783					$	515,228					$	511,135					$	501,578
Less: Goodwill and core deposit intangible						(103,875)						(106,211)						(108,781)						(111,356)						(113,951)
Tangible equity (L)						$	429,396					$	416,572					$	406,447					$	399,779					$	387,627
Shares outstanding (M)						33,327						33,215						33,211						33,162						33,136
Book value per common share (GAAP) (K)/(M)						$	16.00					$	15.74					$	15.51					$	15.41					$	15.14
Tangible book value per common share (Non-GAAP) (L)/(M)						$	12.88					$	12.54					$	12.24					$	12.06					$	11.70
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (N)						$	533,271					$	522,783					$	515,228					$	511,135					$	501,578
Less: Goodwill and core deposit intangible						(103,875)						(106,211)						(108,781)						(111,356)						(113,951)
Tangible equity (O)						$	429,396					$	416,572					$	406,447					$	399,779					$	387,627
Assets (P)						$	5,917,704					$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372
Less: Goodwill and core deposit intangible						(103,875)						(106,211)						(108,781)						(111,356)						(113,951)
Tangible assets (Q)						$	5,813,829					$	5,757,806					$	5,716,923					$	5,899,562					$	5,591,421
Period-end equity/assets (GAAP) (N)/(P)						9.01%						8.92%						8.84%						8.50%						8.79%
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)						7.39%						7.23%						7.11%						6.78%						6.93%

____________________________________

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)						September 30, 2024						%						June 30, 2024						%						March 31, 2024						%						December 31, 2023						%						September 30, 2023						%
Portfolio Loans by Loan Type
Construction						$	337,113					7.12		%				$	327,875					6.97		%				$	299,133					6.43		%				$	299,000					6.44		%				$	328,750					7.12		%
Residential real estate						1,570,998						33.19		%				1,539,590						32.72		%				1,515,134						32.59		%				1,490,438						32.11		%				1,439,464						31.17		%
Commercial real estate						2,276,381						48.09		%				2,287,497						48.60		%				2,272,867						48.90		%				2,286,154						49.27		%				2,283,521						49.45		%
Commercial						225,083						4.75		%				218,987						4.65		%				229,594						4.94		%				229,939						4.95		%				229,474						4.97		%
Consumer						317,149						6.70		%				324,480						6.90		%				325,076						6.99		%				328,896						7.09		%				330,411						7.16		%
Credit Cards						7,185						0.15		%				7,308						0.16		%				6,921						0.15		%				6,583						0.14		%				6,099						0.13		%
Total loans						4,733,909						100.00		%				4,705,737						100.00		%				4,648,725						100.00		%				4,641,010						100.00		%				4,617,719						100.00		%
Less: Allowance for credit losses						(58,669)												(58,478)												(57,336)												(57,351)												(57,051)
Total loans, net						$	4,675,240											$	4,647,259											$	4,591,389											$	4,583,659											$	4,560,668

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Shore Bancshares, Inc.

Classified Assets and Nonperforming Assets (Unaudited)

Classified assets and nonperforming assets are summarized as follows:

(dollars in thousands)						September 30, 2024						June 30, 2024						March 31, 2024						December 31, 2023						September 30, 2023
Classified Loans
Substandard						$	22,798					$	17,409					$	13,403					$	14,673					$	10,888
Doubtful						—						—						—						—						—
Loss						—						—						—						—						—
Total Classified Loans						$	22,798					$	17,409					$	13,403					$	14,673					$	10,888
Special Mention Loans						14,385						25,549						27,192						28,264						24,931
Total Classified and Special Mention Loans						$	37,183					$	42,958					$	40,595					$	42,937					$	35,819
Classified Loans						$	22,798					$	17,409					$	13,403					$	14,673					$	10,888
Other Real Estate Owned						179						179						179						179						179
Repossessed Property						306						1,560						1,845						—						—
Classified Securities						—						—						—						—						—
Total Classified Assets						$	23,283					$	19,148					$	15,427					$	14,852					$	11,067
Classified Assets to Total Assets						0.39		%				0.33		%				0.26		%				0.25		%				0.19		%
Non-accrual Loans						$	14,844					$	14,837					$	12,776					$	12,784					$	8,982
90+ Days Delinquent Accruing						454						414						1,560						738						2,149
Accruing BEFDs Loans ("BEFDs")						—						—						—						—						—
Other Real Estate Owned ("OREO")						179						179						179						179						179
Repossessed Property						306						1,560						1,845						—						—
Total Nonperforming Assets						$	15,783					$	16,990					$	16,360					$	13,701					$	11,310
Nonperforming Assets to Total Assets						0.27		%				0.29		%				0.28		%				0.23		%				0.20		%
Total Assets						$	5,917,704					$	5,864,017					$	5,825,704					$	6,010,918					$	5,705,372

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Shore Bancshares, Inc.

Summary of Deposits (Unaudited)

						September 30, 2024												June 30, 2024												March 31, 2024												December 31, 2023												September 30, 2023
(dollars in thousands)						Balance						%						Balance						%						Balance						%						Balance						%						Balance						%
Noninterest-bearing demand						$	1,571,393					30.07		%				$	1,587,252					30.83		%				$	1,200,680					23.15		%				$	1,258,037					23.36		%				$	1,211,401					23.70		%
Interest-bearing:
Demand						751,533						14.38		%				658,512						12.79		%				1,101,954						21.26		%				1,165,546						21.64		%				1,210,051						23.69		%
Money market deposits						1,297,237						24.82		%				1,337,274						25.97		%				1,358,205						26.20		%				1,430,603						26.56		%				1,179,049						23.08		%
Savings						336,903						6.45		%				352,069						6.84		%				354,098						6.83		%				347,324						6.45		%				371,755						7.28		%
Certificates of deposit						1,268,657						24.28		%				1,213,778						23.57		%				1,169,342						22.56		%				1,184,610						21.99		%				1,136,488						22.25		%
Total interest-bearing						3,654,330						69.93		%				3,561,633						69.17		%				3,983,599						76.85		%				4,128,083						76.64		%				3,897,343						76.30		%
Total Deposits						$	5,225,723					100.00		%				$	5,148,885					100.00		%				$	5,184,279					100.00		%				$	5,386,120					100.00		%				$	5,108,744					100.00		%

28

Cover	Oct. 24, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Oct. 24, 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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