shbi-20240725

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

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

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

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland

000-22345

52-1974638

(State or other jurisdiction of incorporation or organization)

(Commission file number)

(IRS Employer Identification No.)

18 E. Dover St., Easton, Maryland 21601

(Address of principal executive offices) (Zip Code)

(410) 763-7800

(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

Item 2.02. Result of Operation and Financial Condition.

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

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

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits.

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

EXHIBIT INDEX


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

SIGNATURES

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


	SHORE BANCSHARES, INC.

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

Document

http://api.rkd.refinitiv.com/api/FilingsRetrieval3/.79941284.0001628280-24-032901shore_bancsharesxlogo.jpg.ashx

18 E. Dover Street

Easton, Maryland 21601

Phone 410-763-7800

PRESS RELEASE

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

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

Second Quarter and First-Half of 2024 Highlights

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

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

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

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

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

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

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

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

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

Balance Sheet Review

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

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

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


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

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

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

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

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

Review of Quarterly Financial Results

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

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

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

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

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

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

Review of Six Month Financial Results

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

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

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

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

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

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

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

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

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

Shore Bancshares, Inc.

Financial Highlights (Unaudited)


	For the Three Months Ended June 30,								For the Six Months Ended June 30,
(Dollars in thousands, except per share data)	2024			2023			Change		2024			2023			Change

PROFITABILITY FOR THE PERIOD
Net interest income	$	42,140		$	22,494		87.3	%	$	83,275		$	48,158		72.9	%
Provision for credit losses	2,081			667			212.0		2,488			1,880			32.3
Noninterest income	8,440			5,294			59.4		15,007			10,628			41.2
Noninterest expense	33,499			21,608			55.0		70,197			42,501			65.2
Income before income taxes	15,000			5,513			172.1		25,597			14,405			77.7
Income tax expense	3,766			1,495			151.9		6,179			3,930			57.2
Net income	$	11,234		$	4,018		179.6		$	19,418		$	10,475		85.4

Return on average assets	0.77		%	0.45		%	32	bp	0.67		%	0.59		%	8	bp
Return on average assets excluding amortization of intangibles, merger related expenses and credit card fraud losses - Non-GAAP (1) (2)	0.91			0.59			32		0.92			0.71			21
Return on average equity	8.70			4.49			421		7.54			5.83			171
Return on average tangible equity - Non-GAAP (1), (2)	12.85			7.16			569		13.08			8.57			451
Interest rate spread	2.11			2.04			7		2.23			2.35			(12)
Net interest margin	3.11			2.68			43		3.09			2.93			16
Efficiency ratio - GAAP	66.23			77.76			(1,153)		71.42			72.30			(88)
Efficiency ratio - Non-GAAP (1)	61.05			71.76			(1,071)		61.69			67.49			(580)
Non-interest income to average assets	0.58			0.59			(1)		0.52			0.60			(8)
Non-interest expense to average assets	2.31			2.41			(10)		2.43			2.41			2
Net operating expense to average assets - GAAP	1.73			1.82			(9)		1.91			1.81			10
Net operating expense to average assets - Non-GAAP (1)	1.55			1.64			(9)		1.58			1.65			(7)

PER SHARE DATA
Basic and diluted net income per common share	$	0.34		$	0.20		69.1	%	$	0.58		$	0.53		9.9	%

Dividends paid per common share	$	0.12		$	0.12		—	%	$	0.24		$	0.24		—	%
Book value per common share at period end	15.74			18.24			(13.7)
Tangible book value per common share at period end - Non-GAAP (1)	12.54			14.83			(15.4)
Market value at period end	11.45			11.56			(1.0)
Market range:
High	11.90			14.45			(17.6)		14.38			18.15			(20.8)
Low	10.06			10.65			(5.5)		10.06			10.65			(5.5)

AVERAGE BALANCE SHEET DATA
Loans	$	4,706,510		$	2,709,944		73.7	%	$	4,680,846		$	2,661,066		75.9	%
Investment securities	706,079			645,842			9.3		680,701			649,994			4.7
Earning assets	5,459,961			3,369,183			62.1		5,423,871			3,324,682			63.1
Assets	5,839,328			3,596,311			62.4		5,807,076			3,551,573			63.5
Deposits	5,064,974			2,908,662			74.1		5,103,815			2,938,389			73.7
Short-term and Long Term FHLB advances	143,769			261,797			(45.1)		73,885			188,293			(60.8)

Subordinated Debt & TRUPS	72,680			43,185			68.3		72,549			43,147			68.1
Stockholders' equity	519,478			363,225			43.0		517,727			362,205			42.9

____________________________________

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

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

Shore Bancshares, Inc.

Financial Highlights (Unaudited) - Continued


	For the Three Months Ended June 30,								For the Six Months Ended June 30,
(Dollars in thousands, except per share data)	2024			2023			Change		2024			2023			Change

CREDIT QUALITY DATA
Net charge-offs	$	886		$	50		1,672.0	%	$	1,451		$	70		1972.9	%

Nonaccrual loans	$	14,837		$	3,481		326.2	%
Loans 90 days past due and still accruing	414			1,050			(60.6)
Other real estate owned and Repossessed Property	3,126			179			1,646.4
Total nonperforming assets	18,377			4,710			290.2
Borrowers experiencing financial difficulty ("BEFDs") (still accruing)	—			—			—
Total nonperforming assets and BEFDs modifications	$	18,377		$	4,710		290.2

CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets	8.92		%	9.97		%	(105)	bp
Period-end tangible equity to tangible assets - Non-GAAP (1)	7.23			8.26			(103)

Annualized net charge-offs to average loans	0.08		%	0.01		%	7	bp	0.06		%	0.01		%	5	bp

Allowance for credit losses as a percent of:
Period-end loans	1.24		%	1.05		%	19	bp

Nonaccrual loans	394.14			833.50			(43,936)
Nonperforming assets	318.21			616.01			(29,780)
Accruing BEFDs modifications	—			—			—
Nonperforming assets and accruing BEFDs	318.21			616.01			(29,780)

As a percent of total loans:
Nonaccrual loans	0.32		%	0.13		%	19	bp



As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets	0.39		%	0.17		%	22	bp


As a percent of total assets:
Nonaccrual loans	0.25		%	0.10		%	15	bp
Nonperforming assets	0.31		%	0.13		%	18

____________________________________

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

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

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)


							June 30, 2024		June 30, 2024
							compared to		compared to
(In thousands, except per share data)	June 30, 2024		December 31, 2023		June 30, 2023		December 31, 2023		June 30, 2023

ASSETS
Cash and due from banks	$	50,090	$	63,172	$	35,423	(20.7)	%	41.4	%
Interest-bearing deposits with other banks	88,793		309,241		10,404		(71.3)		753.5
Cash and cash equivalents	138,883		372,413		45,827		(62.7)		203.1

Investment securities available for sale (at fair value)	131,594		110,521		78,069		19.1		68.6
Investment securities held to maturity (net of allowance for credit losses of $108 (June 30, 2024), $94 (December 31, 2023), $163 (June 30, 2023)) at amortized cost)	499,431		513,188		536,970		(2.7)		(7.0)
Equity securities, at fair value	5,699		5,703		1,245		(0.1)		357.8
Restricted securities	21,725		17,900		21,208		21.4		2.4
Loans held for sale, at fair value	27,829		8,782		6,845		216.9		306.6

Loans held for investment	4,705,737		4,641,010		2,753,223		1.4		70.9
Less: allowance for credit losses	(58,478)		(57,351)		(29,014)		(2.0)		(101.6)
Loans, net	4,647,259		4,583,659		2,724,209		1.4		70.6
Premises and equipment, net	82,176		82,386		51,036		(0.3)		61.0
Goodwill	63,266		63,266		63,266		—		—
Other intangible assets, net	42,945		48,090		4,671		(10.7)		819.4
Other real estate owned, net	179		179		179		—		—
Repossessed property, net	1,560		—		—		—		—
Assets held for sale	1,387		—		—		—
Mortgage servicing rights, at fair value	5,995		5,926		5,466		1.2		9.7
Right of use assets, net	11,762		12,487		9,077		(5.8)		29.6
Cash surrender value on life insurance	102,969		101,704		60,150		1.2		71.2
Accrued interest receivable	19,641		19,217		8,778		2.2		123.8
Deferred income taxes	36,078		40,707		10,879		(11.4)		231.6
Other assets	23,639		24,790		13,756		(4.6)		71.8
Total assets	$	5,864,017	$	6,010,918	$	3,641,631	(2.4)		61.0

LIABILITIES
Noninterest-bearing deposits	$	1,587,252	$	1,258,037	$	778,963	26.2	%	103.8	%
Interest-bearing deposits	3,561,633		4,128,083		2,158,563		(13.7)		65.0
Total deposits	5,148,885		5,386,120		2,937,526		(4.4)		75.3

Advances from FHLB - short-term	31,000		—		276,000		—		(88.8)
Advances from FHLB - long-term	50,000		—		—		—		—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")	29,316		29,158		18,492		0.5		58.5
Subordinated debt	43,504		43,139		24,735		0.8		75.9
Total borrowings	153,820		72,297		319,227		112.8		(51.8)

Lease liabilities	12,189		12,857		9,392		(5.2)		29.8
Accrued expenses and other liabilities	26,340		28,509		12,346		(7.6)		113.3
Total liabilities	$	5,341,234	$	5,499,783	$	3,278,491	(2.9)		62.9



STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares	$	333	$	332	$	199	0.3		67.3
Additional paid in capital	356,994		356,007		202,008		0.3		76.7
Retained earnings	173,716		162,290		169,494		7.0		2.5
Accumulated other comprehensive loss	(8,260)		(7,494)		(8,561)		(10.2)		3.5
Total stockholders' equity	522,783		511,135		363,140		2.3		44.0
Total liabilities and stockholders' equity	$	5,864,017	$	6,010,918	$	3,641,631	(2.4)		61.0

Period-end common shares outstanding	$	33,215	$	33,162	$	19,907	0.2		66.8
Book value per common share	$	15.74	$	15.41	$	18.24	2.1		(13.7)

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands, except per share data)	2024		2023		% Change		2024		2023		% Change

INTEREST INCOME
Interest and fees on loans	$	67,292	$	32,729	105.6	%	$	133,045	$	63,557	109.3	%
Interest on investment securities:
Taxable	5,230		3,729		40.3		9,650		7,793		23.8
Tax-exempt	6		5		20.0		12		12		—

Interest on deposits with other banks	578		170		240.0		1,538		333		361.9
Total interest income	$	73,106	$	36,633	99.6		$	144,245	$	71,695	101.2

INTEREST EXPENSE
Interest on deposits	$	27,585	$	9,914	178.2		$	56,081	$	17,195	226.1
Interest on short-term borrowings	1,584		3,449		(54.1)		1,641		4,810		(65.9)
Interest on long-term borrowings	1,797		776		131.6		3,248		1,532		112.0
Total interest expense	$	30,966	$	14,139	119.0		$	60,970	$	23,537	159.0

NET INTEREST INCOME	$	42,140	$	22,494	87.3		$	83,275	$	48,158	72.9
Provision for credit losses	2,081		667		212.0		2,488		1,880		32.3

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	$	40,059	$	21,827	83.5		$	80,787	$	46,278	74.6

NONINTEREST INCOME
Service charges on deposit accounts	$	1,493	$	1,264	18.1		$	3,001	$	2,477	21.2
Trust and investment fee income	896		399		124.6		1,630		831		96.1

Interchange credits	1,717		1,311		31.0		3,304		2,523		31.0
Mortgage-banking revenue	1,983		1,054		88.1		2,783		2,031		37.0
Title Company revenue	165		186		(11.3)		243		323		(24.8)

Other noninterest income	2,186		1,080		102.4		4,046		2,443		65.6
Total noninterest income	$	8,440	$	5,294	59.4		$	15,007	$	10,628	41.2

Shore Bancshares, Inc.

Consolidated Statements of Income (Unaudited) - Continued


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands, except per share data)	2024		2023		% Change		2024		2023		% Change

NONINTEREST EXPENSE
Salaries and wages	$	13,307	$	8,955	48.6	%	$	25,158	$	17,639	42.6	%
Employee benefits	3,593		2,440		47.3		7,689		5,361		43.4
Occupancy expense	2,432		1,599		52.1		4,848		3,218		50.7
Furniture and equipment expense	900		477		88.7		1,804		1,011		78.4
Data processing	2,978		1,739		71.2		5,845		3,537		65.3
Directors' fees	359		185		94.1		654		435		50.3
Amortization of intangible assets	2,569		435		490.6		5,145		876		487.3
FDIC insurance premium expense	1,089		758		43.7		2,240		1,129		98.4
Other real estate owned, net	—		—		—		—		(1)		100.0
Legal and professional fees	1,354		959		41.2		2,954		1,709		72.8
Fraud losses (1)	62		47		31.9		4,564		114		3903.5
Merger related expenses	—		1,197		(100.0)		—		1,888		(100.0)
Other noninterest expenses	4,856		2,817		72.4		9,296		5,585		66.4
Total noninterest expense	$	33,499	$	21,608	55.0		70,197		42,501		65.2

Income before income taxes	$	15,000	$	5,513	172.1		25,597		14,405		77.7
Income tax expense	3,766		1,495		151.9		6,179		3,930		57.2
NET INCOME	$	11,234	$	4,018	179.6		$	19,418	$	10,475	85.4

Weighted average shares outstanding - basic and diluted	33,215		19,903		66.9		33,337		19,895		67.6

Basic and diluted net income per common share	$	0.34	$	0.20	69.1		$	0.58	$	0.53	9.9

Dividends paid per common share	$	0.12	$	0.12	—		$	0.24	$	0.24	—

____________________________________

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

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)


	For the Three Months Ended												For the Three Months Ended
	June 30, 2024						June 30, 2023						June 30, 2024						March 31, 2024
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate

Earning assets
Loans (1), (2), (3)
Consumer real estate	$	1,388,168	$	19,278	5.59	%	$	946,545	$	10,876	4.61	%	$	1,388,168	$	19,278	5.59	%	$	1,361,636	$	18,492	5.46	%
Commercial real estate	2,738,693		39,370		5.78		1,292,406		15,620		4.85		2,738,693		39,370		5.78		2,722,600		38,604		5.70
Commercial	216,809		3,926		7.28		137,554		2,177		6.35		216,809		3,926		7.28		219,884		4,097		7.49
Consumer	327,781		4,265		5.23		323,798		3,983		4.93		327,781		4,265		5.23		329,118		4,272		5.22
State and political	2,331		30		5.18		900		8		3.57		2,331		30		5.18		1,473		16		4.37
Credit Cards	8,378		201		9.65		—		—		—		8,378		201		9.65		7,457		167		9.01
Other	24,350		302		4.99		8,741		117		5.37		24,350		302		4.99		13,015		183		5.66
Total Loans	4,706,510		67,372		5.76		2,709,944		32,781		4.85		4,706,510		67,372		5.76		4,655,183		65,831		5.69

Investment securities
Taxable	705,421		5,230		2.97		645,178		3,729		2.31		705,421		5,230		2.97		654,663		4,419		2.70
Tax-exempt (1)	658		8		4.86		664		9		5.42		658		8		4.86		660		8		4.85

Interest-bearing deposits	47,372		578		4.91		13,397		170		5.09		47,372		578		4.91		77,276		960		5.00
Total earning assets	5,459,961		73,188		5.39		3,369,183		36,689		4.37		5,459,961		73,188		5.39		5,387,782		71,218		5.32
Cash and due from banks	45,141						29,923						45,141						49,499
Other assets	391,854						225,935						391,854						395,023
Allowance for credit losses	(57,628)						(28,730)						(57,628)						(57,480)
Total assets	$	5,839,328					$	3,596,311					$	5,839,328					$	5,774,824


	For the Three Months Ended												For the Three Months Ended
	June 30, 2024						June 30, 2023						June 30, 2024						March 31, 2024
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate

Interest-bearing liabilities
Demand deposits	$	711,138	$	5,550	3.14	%	$	685,674	$	3,913	2.29	%	$	711,138	$	5,550	3.14	%	$	1,110,524	$	6,362	2.30	%
Money market and savings deposits	1,690,157		10,291		2.45		907,068		2,526		1.12		1,690,157		10,291		2.45		1,669,074		10,160		2.45
Brokered deposits	7,753		94		4.88		—		—		—		7,753		94		4.88		20,465		251		4.93
Certificates of deposit $100,000 or more	758,211		7,581		4.02		312,367		2,337		3.00		758,211		7,581		4.02		762,210		7,675		4.05
Other time deposits	417,331		4,069		3.92		225,495		1,139		2.03		417,331		4,069		3.92		417,362		4,049		3.90
Interest-bearing deposits (4)	3,584,590		27,585		3.10		2,130,604		9,915		1.87		3,584,590		27,585		3.10		3,979,635		28,497		2.88

Advances from FHLB - short-term	113,549		1,584		5.61		261,797		3,449		5.28		113,549		1,584		5.61		4,000		56		5.63
Advances from FHLB - long-term	30,220		346		4.60		—		—		—		30,220		346		4.60		—		—		—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)	72,680		1,451		8.03		43,185		776		7.21		72,680		1,451		8.03		72,418		1,451		8.06
Total interest-bearing liabilities	3,801,039		30,966		3.28		2,435,586		14,140		2.33		3,801,039		30,966		3.28		4,056,053		30,004		2.98
Noninterest-bearing deposits	1,480,384						778,058						1,480,384						1,163,023
Accrued expenses and other liabilities	38,427						19,442						38,427						39,772
Stockholders' equity	519,478						363,225						519,478						515,976
Total liabilities and stockholders' equity	$	5,839,328					$	3,596,311					$	5,839,328					$	5,774,824

Net interest income			$	42,222					$	22,549					$	42,222					$	41,214

Net interest spread					2.11	%					2.04	%					2.11	%					2.34	%
Net interest margin					3.11	%					2.68	%					3.11	%					3.08	%
Cost of Funds					2.36	%					1.76	%					2.36	%					2.31	%
Cost of Deposits					2.19	%					1.37	%					2.19	%					2.23	%
Cost of Debt					6.28	%					5.56	%					6.28	%					7.93	%

____________________________________

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

(2) Average loan balances include nonaccrual loans.

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

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

Shore Bancshares, Inc.

Consolidated Average Balance Sheets (Unaudited)


	For the Six Months Ended June 30,
	2024						2023
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate

Earning assets
Loans (1), (2), (3)
Consumer real estate	$	1,374,902	$	37,770	5.52	%	$	914,351	$	21,383	4.72	%
Commercial real estate	2,730,646		77,974		5.74		1,286,199		30,793		4.83
Commercial	218,346		8,024		7.39		140,161		3,997		5.75
Consumer	328,450		8,537		5.23		310,736		7,257		4.71
State and political	1,902		46		4.86		939		17		3.65
Credit Cards	7,918		368		9.35		—		—		—
Other	18,682		484		5.21		8,680		199		4.62

Total Loans	4,680,846		133,203		5.72		2,661,066		63,646		4.82

Investment securities
Taxable	680,042		9,650		2.84		649,329		7,793		2.40
Tax-exempt (1)	659		15		4.55		665		15		4.51

Interest-bearing deposits	62,324		1,538		4.96		13,622		333		4.93
Total earning assets	5,423,871		144,406		5.35		3,324,682		71,787		4.35
Cash and due from banks	47,320						29,266
Other assets	393,439						226,989
Allowance for credit losses	(57,554)						(29,364)
Total assets	$	5,807,076					$	3,551,573

Interest-bearing liabilities
Demand deposits	$	910,831	$	11,911	2.63	%	$	690,258	$	7,149	2.09	%
Money market and savings deposits	1,679,615		20,451		2.45		955,541		4,899		1.03
Brokered deposits	14,107		345		4.92		—		—		—
Certificates of deposit $100,000 or more	760,211		15,256		4.04		277,096		3,413		2.48
Other time deposits	417,346		8,118		3.91		216,500		1,734		1.62
Interest-bearing deposits (4)	3,782,110		56,081		2.98		2,139,395		17,195		1.62

Advances from FHLB - short-term	58,775		1,641		5.61		188,293		4,810		5.15
Advances from FHLB - long-term	15,110		346		4.60		—		—		—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)	72,549		2,902		8.04		43,147		1,532		7.16
Total interest-bearing liabilities	3,928,544		60,970		3.12		2,370,835		23,537		2.00
Noninterest-bearing deposits	1,321,705						798,994
Accrued expenses and other liabilities	39,100						19,539
Stockholders' equity	517,727						362,205
Total liabilities and stockholders' equity	$	5,807,076					$	3,551,573

Net interest income			$	83,436					$	48,250

Net interest spread					2.23	%					2.35	%
Net interest margin					3.09	%					2.93	%
Cost of Funds					2.34	%					1.50	%
Cost of Deposits					2.21	%					1.18	%
Cost of Debt					6.71	%					5.53	%

____________________________________

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

(2) Average loan balances include nonaccrual loans.

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

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

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited)


	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter		6/30/2024		6/30/2024
	2024		2024		2023		2023		2023		compared to		compared to
(Dollars in thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2024		Q2 2023
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income	$	42,222	$	41,214	$	41,606	$	45,702	$	22,545	2.5	%	87.3	%
Less: Taxable-equivalent adjustment	82		79		81		80		51		3.8		60.8
Net interest income	42,140		41,135		41,525		45,622		22,494		2.4		87.3
Provision for credit losses	2,081		407		896		28,176		667		411.3		212.0
Noninterest income	8,440		6,567		7,548		14,984		5,294		28.5		59.4
Noninterest expense	33,499		36,698		33,670		47,158		21,608		(8.7)		55.0
Income/(loss) before income taxes	15,000		10,597		14,507		(14,728)		5,513		41.6		172.1
Income tax expense/ (benefit)	3,766		2,413		4,017		(4,991)		1,495		56.1		151.9
Net income/ (loss)	$	11,234	$	8,184	$	10,490	$	(9,737)	$	4,018	37.3		179.6

Return on average assets	0.77%		0.57%		0.72%		(0.67)%		0.45%		20	bp	32	bp
Return on average assets excluding amortization of intangibles, fraud losses and merger related expenses - Non-GAAP (1), (2)	0.91		0.94		0.88		0.01		0.59		(3)		32
Return on average equity	8.70		6.38		8.21		(7.25)		4.49		232		421
Return on average tangible equity - Non-GAAP (1), (2)	12.85		13.39		12.88		1.74		7.16		(54)		569
Net interest margin	3.11		3.08		3.09		3.35		2.68		3		43
Efficiency ratio - GAAP	66.23		76.93		68.61		77.81		77.76		(1,070)		(1,153)
Efficiency ratio - Non-GAAP (1)	61.05		62.37		61.99		47.19		71.75		(132)		(1,070)

PER SHARE DATA
Basic and diluted net income/(loss) per common share	$	0.34	$	0.25	$	0.32	$	(0.29)	$	0.20	35.3	%	69.1	%

Dividends paid per common share	0.12		0.12		0.12		0.12		0.12		—		—
Book value per common share at period end	15.74		15.51		15.41		15.14		18.24		1.5		(13.7)
Tangible book value per common share at period end - Non-GAAP (1)	12.54		12.24		12.06		11.70		14.83		2.5		(15.4)
Market value at period end	11.45		11.50		14.25		10.52		11.56		(0.4)		(1.0)
Market range:
High	11.90		14.38		14.51		13.37		14.45		(17.3)		(17.7)
Low	10.06		10.56		9.66		10.27		10.65		(4.7)		(5.5)

____________________________________

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

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

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued


	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter		6/30/2024		6/30/2024
	2024		2024		2023		2023		2023		compared to		compared to
(Dollars in thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2024		Q2 2023

AVERAGE BALANCE SHEET DATA
Loans	$	4,706,510	$	4,655,183	$	4,639,467	$	4,562,748	$	2,709,944	1.10	%	73.68	%
Investment securities	706,079		655,323		619,920		778,744		645,842		7.75		9.33
Earning assets	5,459,961		5,387,782		5,339,833		5,404,572		3,369,183		1.34		62.06
Assets	5,839,328		5,774,824		5,745,440		5,769,312		3,596,311		1.12		62.37
Deposits	5,064,974		5,142,658		5,136,818		5,066,886		2,908,662		(1.51)		74.13
Short-term and Long Term FHLB advances	143,769		4,000		1,141		70,348		261,797		3494.23		(45.08)
Subordinated Debt & TRUPS	72,680		72,418		72,155		71,907		43,185		0.36		68.30
Stockholders' equity	519,478		515,976		507,040		533,114		363,225		0.68		43.02

CREDIT QUALITY DATA
Net charge offs	$	886	$	565	$	500	$	1,449	$	50	56.81	%	1,672.00	%

Nonaccrual loans	$	14,837	$	12,776	$	12,784	$	8,982	$	3,481	16.13	%	326.23	%
Loans 90 days past due and still accruing	414		1,560		738		2,149		1,065		(73.46)		(61.13)
Other real estate owned and repossessed property	3,126		2,024		179		179		179		54.45		1,646.37
Total nonperforming assets	$	18,377	$	16,360	$	13,701	$	11,310	$	4,725	12.33		288.93

Shore Bancshares, Inc.

Financial Highlights By Quarter (Unaudited) - Continued


	2nd Quarter		1st Quarter		4th Quarter		3rd Quarter		2nd Quarter		6/30/2024		6/30/2024
	2024		2024		2023		2023		2023		compared to		compared to
(Dollars in thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2024		Q2 2023

CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets	8.92	%	8.84	%	8.50	%	8.79	%	9.97	%	8	bp	(105)	bp
Period-end tangible equity to tangible assets - Non-GAAP (1)	7.23		7.11		6.78		6.93		8.26		12		(103)

Annualized net charge-offs to average loans	0.08	%	0.05	%	0.04	%	0.13	%	0.01	%	3	bp	7	bp

Allowance for credit losses as a percent of:
Period-end loans (3)	1.24	%	1.23	%	1.24	%	1.24	%	1.05	%	1	bp	19	bp
Period-end loans (4)	1.24		1.23		1.24		1.24		1.05		1		19
Nonaccrual loans	394.14		448.78		448.62		635.17		833.50		(5,464)		(43,936)
Nonperforming assets	318.21		350.46		418.59		504.43		614.05		(3,225)		(29,584)

As a percent of total loans:
Nonaccrual loans	0.32	%	0.27	%	0.28	%	0.19	%	0.13	%	5	bp	19	bp

As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets	0.39	%	0.35	%	0.30	%	0.24	%	0.17	%	4	bp	22	bp

As a percent of total assets:
Nonaccrual loans	0.25	%	0.22	%	0.21	%	0.16	%	0.10	%	3	bp	15	bp
Nonperforming assets	0.31		0.28		0.23		0.20		0.13		3		18

____________________________________

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

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

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

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

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited)


											June 30, 2024		June 30, 2024
											compared to		compared to
(In thousands, except per share data)	June 30, 2024		March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023		December 31, 2023		June 30, 2023

ASSETS
Cash and due from banks	$	50,090	$	43,079	$	63,172	$	68,097	$	35,423	(20.7)	%	41.4	%
Interest-bearing deposits with other banks	88,793		71,481		309,241		40,612		10,404		(71.3)		753.5

Cash and cash equivalents	138,883		114,560		372,413		108,709		45,827		(62.7)		203.1

Investment securities available for sale (at fair value)	131,594		179,496		110,521		79,143		78,069		19.1		68.6
Investment securities held to maturity (net of allowance for credit losses of $108 (June 30, 2024), $116 (March 31, 2024), $94 (December 31,2023), $126 (September 30, 2023), and $163 (June 30, 2023)) at amortized cost)	499,431		503,822		513,188		523,051		536,970		(2.7)		(7.0)
Equity securities, at fair value	5,699		5,681		5,703		5,434		1,245		(0.1)		357.8
Restricted securities	21,725		17,863		17,900		13,361		21,208		21.4		2.4

Loans held for sale, at fair value	27,829		13,767		8,782		14,725		6,845		216.9		306.6

Loans held for investment	4,705,737		4,648,725		4,641,010		4,617,719		2,753,223		1.4		70.9
Less: allowance for credit losses	(58,478)		(57,336)		(57,351)		(57,051)		(29,014)		(2.0)		(101.6)
Loans, net	4,647,259		4,591,389		4,583,659		4,560,668		2,724,209		1.4		70.6

Premises and equipment, net	82,176		83,084		82,386		81,149		51,036		(0.3)		61.0
Goodwill	63,266		63,266		63,266		63,266		63,266		—		—
Other intangible assets, net	42,945		45,515		48,090		50,685		4,671		(10.7)		819.4
Other real estate owned, net	179		179		179		179		179		—		—
Repossessed property, net	1,560		1,845		—		—		—		—		—
Assets held for sale	1,387		—		—		—		—		—		—
Mortgage servicing rights, at fair value	5,995		5,821		5,926		5,890		5,466		1.2		9.7
Right of use assets, net	11,762		12,153		12,487		12,741		9,077		(5.8)		29.6
Cash surrender value on life insurance	102,969		102,321		101,704		100,950		60,150		1.2		71.2
Accrued interest receivable	19,641		19,541		19,217		15,683		8,778		2.2		123.8
Deferred income taxes	36,078		38,978		40,707		45,346		10,879		(11.4)		231.6
Other assets	23,639		26,423		24,790		24,392		13,756		(4.6)		71.8


Total assets	$	5,864,017	$	5,825,704	$	6,010,918	$	5,705,372	$	3,641,631	(2.4)		61.0

Shore Bancshares, Inc.

Consolidated Balance Sheets (Unaudited) - Continued


											June 30, 2024		June 30, 2024
											compared to		compared to
(In thousands, except per share data)	June 30, 2024		March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023		December 31, 2023		June 30, 2023

LIABILITIES
Noninterest-bearing deposits	$	1,587,252	$	1,200,680	$	1,258,037	$	1,211,401	$	778,963	26.2	%	103.8
Interest-bearing deposits	3,561,633		3,983,599		4,128,083		3,897,343		2,158,563		(13.7)		65.0
Total deposits	5,148,885		5,184,279		5,386,120		5,108,744		2,937,526		(4.4)		75.3


Advances from FHLB - short-term	31,000		—		—		—		276,000		—		(88.8)
Advances from FHLB - long-term	50,000		—		—		—		—		—		—
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")	29,316		29,237		29,158		29,079		18,492		0.5		58.5
Subordinated debt	43,504		43,322		43,139		42,956		24,735		0.8		75.9
Total borrowings	153,820		72,559		72,297		72,035		319,227		112.8		(51.8)

Lease liabilities	12,189		12,552		12,857		13,082		9,392		(5.3)		29.8
Accrued expenses and other liabilities	26,340		41,086		28,509		9,933		12,346		(5.3)		113.3

Total liabilities	5,341,234		5,310,476		5,499,783		5,203,794		3,278,491		(3.0)		62.9



STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares	333		332		332		331		199		0.3		67.3
Additional paid in capital	356,994		356,464		356,007		355,575		202,008		0.3		76.7
Retained earnings	173,716		166,490		162,290		155,781		169,494		6.9		2.5
Accumulated other comprehensive loss	(8,260)		(8,058)		(7,494)		(10,109)		(8,561)		(9.5)		3.5
Total stockholders' equity	522,783		515,228		511,135		501,578		363,140		2.3		44.0
													—
Total liabilities and stockholders' equity	$	5,864,017	$	5,825,704	$	6,010,918	$	5,705,372	$	3,641,631	(2.5)		61.0

Period-end common shares outstanding	33,215		33,211		33,162		33,136		19,907		0.2		66.8
Book value per common share	$	15.74	$	15.51	$	15.41	$	15.14	$	18.24	2.1		(13.7)

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited)


											6/30/2024		6/30/2024
											compared to		compared to
(In thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2024		Q2 2023

INTEREST INCOME
Interest and fees on loans	$	67,292	$	65,754	$	65,914	$	64,869	$	32,729	2.3	%	105.6	%
Interest on investment securities:
Taxable	5,230		4,419		3,992		5,047		3,729		18.4		40.3
Tax-exempt	6		6		6		27		5		—		20.0
Interest on federal funds sold	—		—		—		92		—		—		—
Interest on deposits with other banks	578		960		1,224		1,213		170		(39.8)		240.0
Total interest income	73,106		71,139		71,136		71,248		36,633		2.8		99.6

INTEREST EXPENSE
Interest on deposits	27,585		28,497		28,133		23,473		9,914		(3.2)		178.2
Interest on short-term borrowings	1,584		56		16		692		3,449		2728.6		(54.1)
Interest on long-term borrowings	1,797		1,451		1,462		1,461		776		23.9		131.6
Total interest expense	30,966		30,004		29,611		25,626		14,139		3.2		119.0

NET INTEREST INCOME	42,140		41,135		41,525		45,622		22,494		2.4		87.3
Provision for credit losses	2,081		407		896		28,176		667		411.3		212.0

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	40,059		40,728		40,629		17,446		21,827		(1.6)		83.5

NONINTEREST INCOME
Service charges on deposit accounts	1,493		1,507		1,519		1,505		1,264		(0.9)		18.1
Trust and investment fee income	896		734		844		1,933		399		22.1		124.6
Loss on sales and calls of investment securities	—		—		—		(2,166)		—		—		—
Interchange credits	1,717		1,587		1,633		1,557		1,311		8.2		31.0
Mortgage-banking revenue	1,983		801		1,105		1,377		1,054		147.6		88.1
Title Company revenue	165		78		139		89		186		111.5		(11.3)
Bargain purchase gain	—		—		—		8,816		—		—		—
Other noninterest income	2,186		1,860		2,308		1,873		1,080		17.5		102.4
Total noninterest income	$	8,440	$	6,567	$	7,548	$	14,984	$	5,294	28.5		59.4

Shore Bancshares, Inc.

Consolidated Statements of Income By Quarter (Unaudited) - Continued


											6/30/2024		6/30/2024
											compared to		compared to
(In thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023		Q1 2024		Q2 2023

NONINTEREST EXPENSE
Salaries and wages	$	13,307	$	11,852	$	12,823	$	14,183	$	8,955	12.3	%	48.6	%
Employee benefits	3,593		4,097		3,389		3,607		2,440		(12.3)		47.3
Occupancy expense	2,432		2,416		2,328		2,245		1,599		0.7		52.1
Furniture and equipment expense	900		904		790		750		477		(0.4)		88.7
Data processing	2,978		2,867		2,762		2,485		1,739		3.9		71.3
Directors' fees	359		295		426		295		185		21.7		94.1
Amortization of intangible assets	2,569		2,576		2,595		2,634		435		(0.3)		490.6
FDIC insurance premium expense	1,089		1,150		1,733		618		758		(5.3)		43.7
Other real estate owned expenses, net	—		—		—		2		—		—		—
Legal and professional fees	1,354		1,599		1,411		1,217		959		(15.3)		41.2
Fraud losses (1)	62		4,502		503		262		47		(98.6)		31.9
Merger related expenses	—		—		602		14,866		1,197		—		(100.0)
Other noninterest expenses	4,856		4,440		4,308		3,994		2,817		9.4		72.4
Total noninterest expense	33,499		36,698		33,670		47,158		21,608		(8.7)		55.0

Income/(loss) before income taxes	15,000		10,597		14,507		(14,728)		5,513		41.6		172.1
Income tax expense/(benefit)	3,766		2,413		4,017		(4,991)		1,495		56.1		151.9
NET INCOME/(LOSS)	$	11,234	$	8,184	$	10,490	$	(9,737)	$	4,018	37.3		179.6

Weighted average shares outstanding - basic and diluted	33,215		33,337		33,322		33,246		19,903		(0.4)		66.9

Basic and diluted net income/(loss) per common share	$	0.34	$	0.25	$	0.32	$	(0.29)	$	0.20	35.3		69.1

Dividends paid per common share	0.12		0.12		0.12		0.12		0.12		—		—

____________________________________

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

Shore Bancshares, Inc.

Consolidated Average Balance Sheets By Quarter (Unaudited)



	Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate

Earning assets
Loans (1), (2), (3)
Consumer real estate	$	1,388,168	$	19,278	5.59	%	$	1,361,636	$	18,492	5.46	%	$	1,331,150	$	18,653	5.56	%	$	1,141,707	$	14,548	5.06	%	$	946,545	$	10,876	4.61	%
Commercial real estate	2,738,693		39,370		5.78		2,722,600		38,604		5.70		2,728,094		38,730		5.63		2,831,569		40,536		5.68		1,292,406		15,620		4.85
Commercial	216,809		3,926		7.28		219,884		4,097		7.49		221,342		4,295		7.70		233,756		5,315		9.02		137,554		2,177		6.35
Consumer	327,781		4,265		5.23		329,118		4,272		5.22		333,807		3,859		4.59		332,486		4,183		4.99		323,798		3,983		4.93
State and political	2,331		30		5.18		1,473		16		4.37		1,290		13		4.00		929		10		4.27		900		8		3.57
Credit Cards	8,378		201		9.65		7,457		167		9.01		6,320		166		10.42		6,164		149		9.59		—		—		—
Other	24,350		302		4.99		13,015		183		5.66		17,464		277		6.29		16,137		201		4.94		8,741		116		5.32
Total Loans	4,706,510		67,372		5.76		4,655,183		65,831		5.69		4,639,467		65,993		5.64		4,562,748		64,942		5.65		2,709,944		32,780		4.85

Investment securities
Taxable	705,421		5,230		2.97		654,663		4,419		2.70		619,259		3,992		2.58		778,081		5,047		2.59		645,178		3,729		2.31
Tax-exempt (1)	658		8		4.86		660		8		4.85		661		8		4.84		663		34		20.51		664		6		3.61
Federal funds sold	—		—		—		—		—		—		—		—		—		7,533		92		4.85		—		—		—
Interest-bearing deposits	47,372		578		4.91		77,276		960		5.00		80,446		1,224		6.04		55,547		1,213		8.66		13,397		170		5.09
Total earning assets	5,459,961		73,188		5.39		5,387,782		71,218		5.32		5,339,833		71,217		5.29		5,404,572		71,328		5.24		3,369,183		36,685		4.37
Cash and due from banks	45,141						49,499						63,506						51,714						29,923
Other assets	391,854						395,023						399,409						359,726						225,935
Allowance for credit losses	(57,628)						(57,480)						(57,308)						(46,700)						(28,730)
Total assets	$	5,839,328					$	5,774,824					$	5,745,440					$	5,769,312					$	3,596,311



	Q2 2024						Q1 2024						Q4 2023						Q3 2023						Q2 2023
(Dollars in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate

Interest-bearing liabilities
Demand deposits	$	711,138	$	5,550	3.14	%	$	1,110,524	$	6,362	2.30	%	$	1,117,117	$	6,673	2.37	%	$	1,056,956	$	6,659	2.50	%	$	685,674	$	3,913	2.29	%
Money market and savings deposits	1,690,157		10,291		2.45		1,669,074		10,160		2.45		1,605,930		8,330		2.06		1,572,920		6,810		1.72		907,068		2,526		1.12
Brokered deposits	7,753		94		4.88		20,465		251		4.93		92,840		1,347		5.76		98,649		1,225		4.93		—		—		—
Certificates of deposit $100,000 or more	758,211		7,581		4.02		762,210		7,675		4.05		701,051		6,898		3.90		706,642		6,272		3.52		312,367		2,337		3.00
Other time deposits	417,331		4,069		3.92		417,362		4,049		3.90		391,820		4,885		4.95		285,743		2,507		3.48		225,495		1,138		2.02
Interest-bearing deposits (4)	3,584,590		27,585		3.10		3,979,635		28,497		2.88		3,908,758		28,133		2.86		3,720,910		23,473		2.50		2,130,604		9,914		1.87

Advances from FHLB - short-term	113,549		1,584		5.61		4,000		56		5.63		1,141		16		5.56		70,348		692		3.90		261,797		3,449		5.28
Advances from FHLB - long-term	30,220		346		4.60		—		—		—		—		—		—		—		—		—		—		—		—
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)	72,680		1,451		8.03		72,418		1,451		8.06		72,155		1,462		8.04		71,907		1,461		8.06		43,185		776		7.21
Total interest-bearing liabilities	3,801,039		30,966		3.28		4,056,053		30,004		2.98		3,982,054		29,611		2.95		3,863,165		25,626		2.63		2,435,586		14,139		2.33
Noninterest-bearing deposits	1,480,384						1,163,023						1,228,060						1,345,976						778,058
Accrued expenses and other liabilities	38,427						39,772						28,286						27,057						19,442
Stockholders' equity	519,478						515,976						507,040						533,114						363,225
Total liabilities and stockholders' equity	$	5,839,328					$	5,774,824					$	5,745,440					$	5,769,312					$	3,596,311

Net interest income			$	42,222					$	41,214					$	41,606					$	45,702					$	22,546

Net interest spread					2.11	%					2.34	%					2.34	%					2.61	%					2.04	%
Net interest margin					3.11	%					3.08	%					3.09	%					3.35	%					2.68	%
Cost of Funds					2.36	%					2.31	%					2.25	%					1.95	%					1.76	%
Cost of Deposits					2.19	%					2.23	%					2.17	%					1.84	%					1.37	%
Cost of Debt					6.28	%					7.93	%					8.00	%					6.00	%					5.56	%

____________________________________

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

(2) Average loan balances include nonaccrual loans.

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

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

Shore Bancshares, Inc.

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


																YTD			YTD
(In thousands, except per share data)	Q2 2024			Q1 2024			Q4 2023			Q3 2023			Q2 2023			6/30/2024			6/30/2023

The following reconciles return on average assets, average equity and return on average tangible equity (Note 1):
Net income (loss)	$	11,234		$	8,184		$	10,490		$	(9,737)		$	4,018		$	19,418		$	10,475
Net income (loss) - annualized (A)	$	45,183		$	32,916		$	41,618		$	(38,632)		$	16,295		$	39,049		$	21,124

Net income (loss)	$	11,234		$	8,184		$	10,490		$	(9,737)		$	4,018		$	19,418		$	10,475
Add: Amortization of intangible assets, net of tax	1,924			1,989			1,876			1,741			317			3,903			637
Add: Merger Expenses, net of tax	—			—			435			9,828			872			—			1,373
Add: Credit Card Fraud Losses, net of tax	—			3,339			—			—			—			3,279			—
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses	13,158			13,512			12,801			1,832			5,207			26,600			12,485
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - annualized (B)	$	52,921		$	54,345		$	50,787		$	7,268		$	21,121		$	53,492		$	25,177

Return on average assets (GAAP)	0.77		%	0.57		%	0.72		%	(0.67)		%	0.45		%	0.67		%	0.59		%
Return on average assets excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - (Non-GAAP)	0.91		%	0.94		%	0.88		%	0.01		%	0.59		%	0.92		%	0.71		%

Average assets	$	5,839,328		$	5,774,824		$	5,745,440		$	5,769,312		$	3,596,311		$	5,807,076		$	3,551,573

Average stockholders' equity (C)	$	519,478		$	515,976		$	507,040		$	533,114		$	363,225		$	517,727		$	362,205
Less: Average goodwill and core deposit intangible	(107,594)			(110,167)			(112,752)			(115,604)			(68,172)			(108,881)			(68,388)
Average tangible equity (D)	$	411,884		$	405,809		$	394,288		$	417,510		$	295,053		$	408,846		$	293,817

Return on average equity (GAAP) (A)/(C)	8.70		%	6.38		%	8.21		%	(7.25)		%	4.49		%	7.54		%	5.83		%
Return on average tangible equity (Non-GAAP) (B)/(D)	12.85		%	13.39		%	12.88		%	1.74		%	7.16		%	13.08		%	8.57		%

Shore Bancshares, Inc.

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


																YTD			YTD
(In thousands, except per share data)	Q2 2024			Q1 2024			Q4 2023			Q3 2023			Q2 2023			6/30/2024			6/30/2023

The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)	$	33,499		$	36,698		$	33,670		$	47,158		$	21,608		$	70,197		$	42,501
Less: Amortization of intangible assets	(2,569)			(2,576)			(2,595)			(2,634)			(435)			(5,145)			(876)
Less: Merger Expenses	—			—			(602)			(14,866)			(1,197)			—			(1,888)
Less: Credit Card Fraud Losses	—			(4,323)			—			—			—			(4,323)			—
Adjusted noninterest expense (F)	$	30,930		$	29,799		$	30,473		$	29,658		$	19,976		$	60,729		$	39,737

Net interest income (G)	$	42,140		$	41,135		$	41,525		$	45,622		$	22,494		$	83,275		$	48,158
Add: Taxable-equivalent adjustment	82			79			81			80			51			161			92
Taxable-equivalent net interest income (H)	$	42,222		$	41,214		$	41,606		$	45,702		$	22,545		$	83,436		$	48,250

Noninterest income (I)	$	8,440		$	6,567		$	7,548		$	14,984		$	5,294		$	15,007		$	10,628
Investment securities losses (gains)	—			—			—			2,166			—			—			—
Less: Bargain purchase gain	—			—			—			(8,816)			—			—			—
Adjusted noninterest income (J)	$	8,440		$	6,567		$	7,548		$	8,334		$	5,294		$	15,007		$	10,628

Efficiency ratio (GAAP) (E)/(G)+(I)	66.23		%	76.93		%	68.61		%	77.81		%	77.76		%	71.42		%	72.30		%
Efficiency ratio (Non-GAAP) (F)/(H)+(J)	61.05		%	62.37		%	61.99		%	54.89		%	71.76		%	61.69		%	67.49		%

Net operating expense to average assets (GAAP)	1.73		%	2.10		%	1.80		%	2.21		%	1.82		%	1.91		%	1.81		%
Net operating expense to average assets (Non-GAAP)	1.55		%	1.62		%	1.58		%	1.47		%	1.64		%	1.58		%	1.65		%

Shore Bancshares, Inc.

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


(In thousands, except per share data)	Q2 2024		Q1 2024		Q4 2023		Q3 2023		Q2 2023

The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (K)	$	522,783	$	515,228	$	511,135	$	501,578	$	363,140
Less: Goodwill and core deposit intangible	(106,211)		(108,781)		(111,356)		(113,951)		(67,937)
Tangible equity (L)	$	416,572	$	406,447	$	399,779	$	387,627	$	295,203

Shares outstanding (M)	33,215		33,211		33,162		33,136		19,907

Book value per common share (GAAP) (K)/(M)	$	15.74	$	15.51	$	15.41	$	15.14	$	18.24
Tangible book value per common share (Non-GAAP) (L)/(M)	$	12.54	$	12.24	$	12.06	$	11.70	$	14.83

The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (N)	$	522,783	$	515,228	$	511,135	$	501,578	$	363,140
Less: Goodwill and core deposit intangible	(106,211)		(108,781)		(111,356)		(113,951)		(67,937)
Tangible equity (O)	$	416,572	$	406,447	$	399,779	$	387,627	$	295,203

Assets (P)	$	5,864,017	$	5,825,704	$	6,010,918	$	5,705,372	$	3,641,631
Less: Goodwill and core deposit intangible	(106,211)		(108,781)		(111,356)		(113,951)		(67,937)
Tangible assets (Q)	$	5,757,806	$	5,716,923	$	5,899,562	$	5,591,421	$	3,573,694

Period-end equity/assets (GAAP) (N)/(P)	8.92%		8.84%		8.50%		8.79%		9.97%
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)	7.23%		7.11%		6.78%		6.93%		8.26%

____________________________________

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

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

Shore Bancshares, Inc.

Summary of Loan Portfolio (Unaudited)

Portfolio loans are summarized by loan type as follows:


(Dollars in thousands)	June 30, 2024		%		March 31, 2024		%		December 31, 2023		%		September 30, 2023		%		June 30, 2023		%
Portfolio Loans by Loan Type
Construction	$	327,875	6.97	%	$	299,133	6.43	%	$	299,000	6.44	%	$	328,750	7.12	%	$	220,228	8.00	%
Residential real estate	1,539,590		32.72	%	1,515,134		32.59	%	1,490,438		32.11	%	1,439,464		31.17	%	938,151		34.07	%

Commercial real estate	2,287,497		48.60	%	2,272,867		48.90	%	2,286,154		49.27	%	2,283,521		49.45	%	1,130,346		41.06	%
Commercial	218,987		4.65	%	229,594		4.94	%	229,939		4.95	%	229,474		4.97	%	138,459		5.03	%
Consumer	324,480		6.90	%	325,076		6.99	%	328,896		7.09	%	330,411		7.16	%	326,039		11.84	%
Credit Cards	7,308		0.16	%	6,921		0.15	%	6,583		0.14	%	6,099		0.13	%	—		—	%
Total loans	4,705,737		100.00	%	4,648,725		100.00	%	4,641,010		100.00	%	4,617,719		100.00	%	2,753,223		100.00	%
Less: Allowance for credit losses	(58,478)				(57,336)				(57,351)				(57,051)				(29,014)
Total loans, net	$	4,647,259			$	4,591,389			$	4,583,659			$	4,560,668			$	2,724,209

Shore Bancshares, Inc.

Classified Assets and Nonperforming Loans (Unaudited)

Classified loans and nonperforming loans are summarized as follows:


(dollars in thousands)	June 30, 2024		March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023
Classified Loans
Substandard	$	17,409	$	13,403	$	14,673	$	10,888	$	13,108
Doubtful	—		—		—		—		—
Loss	—		—		—		—		—
Total Classified Loans	$	17,409	$	13,403	$	14,673	$	10,888	$	13,108
Special Mention Loans	25,549		27,192		28,264		24,931		11,405
Total Classified and Special Mention Loans	$	42,958	$	40,595	$	42,937	$	35,819	$	24,513

Classified Loans	$	17,409	$	13,403	$	14,673	$	10,888	$	13,108
Other Real Estate Owned	3,126		2,024		179		179		179
Classified Securities	—		—		—		—		—
Total Classified Assets	$	20,535	$	15,427	$	14,852	$	11,067	$	13,287

Non-accrual Loans	$	14,837	$	12,776	$	12,784	$	8,982	$	3,481
90+ Days Delinquent Accruing	414		1,560		738		2,149		1,050
Accruing BEFDs Loans ("BEFDs")	—		—		—		—		—
Other Real Estate Owned ("OREO")	3,126		2,024		179		179		179
Total Nonperforming Loans	$	18,377	$	16,360	$	13,701	$	11,310	$	4,710

Shore Bancshares, Inc.

Summary of Deposits (Unaudited)


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

Total Deposits	$	5,148,885	100.00	%	$	5,184,279	100.00	%	$	5,386,120	100.00	%	$	5,108,744	100.00	%	$	2,937,526	100.00	%