EX-99.1 2 shbi-20240331xexx991.htm EX-99.1 Document

shore_bancsharesxlogo.jpg
18 E. Dover Street
Easton, Maryland 21601
Phone 410-763-7800
PRESS RELEASE
Shore Bancshares, Inc. Reports 2024 First Quarter Financial Results
Easton, Maryland (May 2, 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 first quarter of 2024 of $8.2 million or $0.25 per diluted common share compared to a net income of $10.5 million or $0.32 per diluted common share for the fourth quarter of 2023, and net income of $6.5 million or $0.32 per diluted common share for the first quarter of 2023.
First Quarter 2024 Highlights
■Credit Card Fraud - On April 2, 2024, the Bank detected that it had been subjected to fraudulent credit card account openings during the first quarter of 2024 and commenced an investigation. Bad actors used stolen personal information to open Bank-issued credit cards through the Bank’s online credit card activation system. The personal information used had been stolen from individuals who are not customers of the Bank. No existing Bank customers were impacted by this fraudulent activity and the Bank’s core processing system was not compromised. Upon detection, the Bank immediately closed all fraudulently-opened credit card accounts and suspended all credit card activations. The Bank will not open new credit card accounts until its investigation is complete. The Bank is implementing enhanced activity monitoring on all existing cards outstanding.
As a result of the fraudulent activity, the Company recognized a $4.3 million fraud-related expense in the first quarter of 2024 and does not anticipate additional losses related to this event. The majority of the fraud loss, approximately $3.6 million, or 84%, occurred between March 25, 2024 and April 2, 2024. In coordination with the Bank’s credit card processor, management is evaluating the root causes of the fraud event and the preventative and monitoring controls that would have mitigated the fraud loss. Management will also consider in this evaluation whether the credit card product can attain the size and scale needed in the near-term for the Bank to continue as an issuer. The Bank has notified and is actively working with law enforcement to recover a portion of the fraud losses by various means.
The above information was reported on the Company’s Current Report on Form 8-K filed with SEC on April 30, 2024 describing the event. The impact of this event resulted in a $0.10 decrease to basic and diluted earnings per share.
■Return on Average Assets (“ROAA”) - The Company reported ROAA of 0.57% for the first quarter of 2024, compared to 0.72% and 0.75% for the fourth and first quarters of 2023, respectively. Excluding the fraud expense, amortization from core deposit intangibles, and merger-related expenses the Company’s Non-GAAP, ROAA was 0.94% for the first quarter of 2024, compared to 0.88% and 0.84% for the fourth and first quarters of 2023, respectively.
■Stable Net Interest Margin - Net interest margin (“NIM”) remained relatively stable at 3.08% for the first quarter of 2024 from 3.09% for the fourth quarter of 2023. Excluding net accretion interest income of $3.6 million and $3.0 million for the same time periods, NIM decreased six basis points to 2.81% for the first quarter of 2024 from 2.87% for the fourth quarter of 2023.
■Active Management of Deposit Costs - Decreases in rates on higher cost deposit relationships mitigated margin compression in the first quarter of 2024. For the month of March 2024, asset yields grew more quickly than funding costs which positively impacted the Company’s net interest margin and may position the Bank to see positive margin movement during the second quarter of 2024. As a result of decreased rates paid on some deposits and expected seasonal cash outflows in the first quarter of 2024, deposits decreased $201.8 million, or 3.7% to $5.2 billion at March 31, 2024 when compared to December 31, 2023. Liquidity remained relatively stable with the loan to deposit ratio modestly increasing from 86.2% at December 31, 2023 to 89.7% at March 31, 2024. The Bank had no brokered deposits or advances at March 31, 2024.
■Stable Credit Trends - The Company’s total nonperforming assets to total assets for the first quarter of 2024 was 0.28% compared to the fourth quarter of 2023 of 0.23%. The Company’s credit quality metrics remain at historical lows with no signs of significant deterioration or systemic issues within its loan portfolios.
■Branch Closings and Office Space Rationalization - The Company expects to close two branches by the end of the third quarter and to consolidate two office buildings into a single space by the end of the third quarter.
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“While the first quarter’s credit card fraud was disappointing, I am pleased with the response of our team after the incident was identified to contain the problem, and that no customers were impacted,” stated James (“Jimmy”) M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. “We are undertaking a comprehensive review of the incident to recover as much of the fraudulent charges as possible and are evaluating our options regarding the future of an in-house credit card program.”
Burke continued, “Active balance sheet management in the first quarter resulted in stabilizing margins and net interest income while continued focus on reducing expenses is expected to enhance future operating leverage. Credit remains stable and we believe we are well positioned to deliver improving profitability in future quarters.”
Balance Sheet Review
Total assets were $5.8 billion at March 31, 2024, a decrease of $185 million or 3.1%, 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 $257.9 million and investment securities held to maturity of $9.4 million partially offset by an increase in investment securities available for sale of $69.0 million and loans held for investment of $7.7 million. The ratio of the Allowance for Credit Losses (“ACL”) to total loans decreased slightly from 1.24% at December 31, 2023, to 1.23% at March 31, 2024.
The Company’s tangible common equity ratio at March 31, 2024 was 7.11% compared to 6.78% at December 31, 2023. The Company’s Tier 1 and Total Risk-Based Capital Ratios at March 31, 2024 were 9.53% and 11.68%, respectively. The Bank’s Tier 1 and Total Risk-Based Capital Ratios at March 31, 2024 were 10.32% and 11.56%, respectively. Non-owner occupied commercial real estate (“CRE”) loans as a percentage of the Bank’s Tier 1 Capital + ACL at March 31, 2024 and December 31, 2023 were $2.0 billion or 370.0% and $2.0 billion or 382.6%, respectively. Construction loans as a percentage of the Bank’s Tier 1 Capital + ACL at March 31, 2024 and December 31, 2023 were $299.1 million or 54.9% and $299.0 million or 56.7%, respectively.
The Bank's office CRE loan portfolio, which includes owner-occupied and nonowner-occupied CRE loans, was $516.0 million or 11.1% of total loans of $4.6 billion at March 31, 2024. The Bank’s office CRE loan portfolio included $137.7 million or 26.7% of the total with medical tenants and $73.3 million or 14.2% of the total with government or government contractor tenants. There were 513 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 are less than 70% for $395.8 million or 76.7% of the office CRE portfolio and less than 80% for $490.4 million or 95.0% of the office CRE portfolio.
The Bank had 19 office CRE loans totaling $172.0 million that were greater than $5.0 million at March 31, 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 a two large loan payoffs in the quarter. For the office CRE portfolio, at March 31, 2024, the average loan debt-service coverage ratio was 1.7x and average LTV was 57.6%. Of the office CRE portfolio balance, 73% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 92% are secured by properties with five stories or less. Of the office CRE loans, $5.8 million will mature and $5.1 million of the office CRE loans will reprice prior to December 31, 2024. Of the office CRE loans, $2.2 million are special mention or substandard.
Total deposits decreased $201.8 million, or 3.7% to $5.2 billion at March 31, 2024 when compared to December 31, 2023. The decrease in total deposits was primarily due to a decrease in time deposits of $15.3 million, demand deposits of $63.6 million, money market and savings of $65.6 million and noninterest-bearing deposits of $57.4 million. The decrease in deposits is primarily attributable to seasonal municipal runoff and disintermediation of interest-sensitive cannabis-related deposits.
Total funding, which includes customer deposits, Federal Home Loan Bank (“FHLB”) advances, and brokered deposits decreased $246.3 million from $5.4 billion at December 31, 2023 to $5.2 billion at March 31, 2024. The Bank had no FHLB advances at March 31, 2024 or December 31, 2023 and reduced brokered deposits from $44.5 million at December 31, 2023 to zero at March 31, 2024. The Bank's uninsured deposits at March 31, 2024 were $981.3 million or 18.93% of total deposits. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, at March 31, 2024 were $825.9 million or 15.93% of total deposits. At March 31, 2024, the Bank had approximately $1.2 billion of available liquidity including: $114.6 million in cash, $1.1 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $45.0 million in unsecured lines of credit.
Total stockholders’ equity increased $4.1 million, or 0.8%, when compared to December 31, 2023, primarily due to current year earnings, offset by the cash dividend paid. As of March 31, 2024, the ratio of total equity to total assets was 8.84% and the ratio of total tangible equity to total tangible assets was 7.11% compared to 8.50% and 6.78% at December 31, 2023, respectively.
Management continues to pursue opportunities to increase efficiencies and decrease expenses as a percentage of operating revenues. Following feasibility assessments, management decided to close two branches by the end of the third quarter, subject to regulatory approval. The Onley, VA branch should close on or about July 17, 2024 and the Westgate branch located in Annapolis, MD should close on or about September 30, 2024. Limited growth opportunities within the Eastern Shore of Virginia and a conscientious focus on profitability led to the decision to close the Onley branch. The Westgate branch has limited foot traffic and is located less than a mile from another SUB branch within the City of Annapolis. Customer disruption is expected to be limited. These closures are estimated to cost $0.2 million. The Company is expected to reduce four positions as part of these closings
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Additionally, the Company plans to reduce professional office space located in Easton, MD. By the end of the third quarter, a newly renovated office building is expected to be put into service eliminating the need for two currently-occupied office buildings. In the second quarter, the Company expects to begin marketing for sale the two redundant office properties. Recent appraisals on these properties exceed the Bank’s cost bases resulting in no impairment. At the present time the two properties remain in service, are not listed for immediate sale, and are classified as active assets on our balance sheet. Once these properties meet the accounting criteria they will be moved to held for sale.
Review of Quarterly Financial Results
Net interest income was $41.1 million for the first quarter of 2024, compared to $41.5 million for the fourth quarter of 2023 and $25.7 million for the first quarter of 2023. The decrease in net interest income when compared to the fourth quarter of 2023 was primarily due to the increase in interest expense of $0.4 million resulting from an increase in the average balance of interest bearing deposits of $70.9 million. The increase when compared to the first quarter of 2023 was primarily due to the increase in interest and fees on loans, interest on deposits from other banks, a decrease in interest on short-term borrowings partially offset by the increase in interest on deposits and interest on long-term borrowings all significantly impacted by the merger of equals with TCFC in the third quarter of 2023.
The Company’s net interest margin decreased slightly to 3.08% for the first quarter of 2024 from 3.09% for the fourth quarter of 2023 primarily due to an increase in the overall mix of interest-bearing deposits compared to noninterest-bearing deposits. Average interest-bearing deposits increased $70.9 million which resulted in a two basis point rate increase. In addition to the change in deposit mix, rates on money market and time deposits also increased, which were partly offset by lower rates on demand deposits. The Company’s net interest margin decreased to 3.08% for the first quarter of 2024 from 3.18% for the first quarter of 2023. Comparing the first quarter of 2024 to the first quarter of 2023, the Company’s interest-earning asset yields increased 98 basis points to 5.32% from 4.34%, while the cost of funds repriced at a faster pace resulting in an increase of 109 basis points to 2.31% from 1.22% for the same period.
The provision for credit losses was $0.4 million for the three months ended March 31, 2024. The comparable amounts were $0.9 million for the three months ended December 31, 2023, and $1.2 million for the three months ended March 31, 2023. The decrease in the provision for credit losses for the first quarter of 2024 compared to the fourth quarter of 2023 was primarily related to more optimistic short-term forecasts for unemployment and Gross Domestic Product (“GDP”). Coverage ratios were 1.23% and 1.24% for the three months ended March 31, 2024 and December 31, 2023, respectively. The decrease in the provision for credit losses when compared to the first quarter of 2023 was primarily due to improved economic factors and forecasts. Net charge-offs for the first quarter of 2024 were $0.6 million compared to net charge-offs of $0.5 million for the fourth quarter of 2023 and net charge offs of $20,000 for the first quarter of 2023.
At March 31, 2024 and December 31, 2023, nonperforming assets were $16.4 million or 0.28% of total assets and $13.7 million, or 0.23% of total assets, respectively. The balance of nonperforming assets increased primarily due to an increase in repossessed marine loans of $1.8 million and an increase of $0.8 million in loans 90 days past due and still accruing. When comparing March 31, 2024 to March 31, 2023, nonperforming assets increased $13.7 million, primarily due to increases in nonaccrual loans of $10.9 million, an increase in repossessed marine loans of $1.8 million, and an increase of $0.9 million in loans 90 days past due and still accruing almost entirely impacted by the merger with TCFC in the third quarter of 2023.
Total noninterest income for the first quarter of 2024 was $6.6 million, a decrease of $1.0 million from $7.5 million for the fourth quarter of 2023 and an increase $1.2 million from $5.3 million for the first quarter of 2023. The decrease from the fourth quarter of 2023 was primarily due to other noninterest income which included decreases in other fees on bank services and other loan fee income, decreases in mortgage banking revenue and trust and investment fee income. The increase from the first quarter of 2023 was primarily due to other noninterest income which included increases in other loan fee income, gains on life insurance contracts, an increase in credit card income, increases in trust and investment fee income and interchange credits all a result of the merger in the third quarter of 2023.
Total noninterest expense of $36.7 million for the first quarter of 2024 increased $3.0 million when compared to the fourth quarter of 2023 expense of $33.7 million and increased $15.8 million when compared to the first quarter of 2023 expense of $20.9 million. The increase from the fourth quarter of 2023 was primarily due to credit card fraud expense of $4.3 million, and an increase in employee benefits of $0.7 million partially offset by decreases in salaries and wages expense of $1.0 million, merger related expenses of $0.6 million, and FDIC insurance premium expense of $0.6 million. The increase from the first quarter of 2023 was primarily due to the operation of a larger branch network due to the merger with TCFC which significantly impacted almost all expense line items. Unrelated to the merger were the fraud expenses in the first quarter of 2024 previously mentioned above.
Subsequent Event
On May 1, 2024, the Company’s board of directors declared a quarterly common stock dividend in the amount of $0.12 per share, payable May 31, 2024 to stockholders of record on May 16, 2024.
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Shore Bancshares Information
Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. Additional information is available at www.shorebancshares.com.
Forward-Looking Statements
The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions. Although these statements reflect management’s good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and the Middle East; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget; the impact of recent or future changes in FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; the Company’s evaluation of the effect of the credit card fraud on the Company’s internal controls over financial reporting and its ability to remediate the existing material weakness identified in its internal control over financial reporting; the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and other factors that may affect our future results. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov).
The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.
For further information contact: Todd Capitani, Executive Vice President, and Chief Financial Officer, 240-427-1068
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Shore Bancshares, Inc.
Financial Highlights (Unaudited)
For the Three Months Ended March 31,
(Dollars in thousands, except per share data)
20242023 Change
PROFITABILITY FOR THE PERIOD
Net interest income$41,135$25,66460.3 %
Provision for credit losses4071,213(66.4)
Noninterest income6,5675,33423.1 
Noninterest expense36,69820,89375.6 
Income before income taxes10,5978,89219.2 
Income tax expense 2,4132,435(0.9)
Net income$8,184$6,45726.7 
Return on average assets 0.57 %0.75 %(18)bp
Return on average assets excluding amortization of intangibles, merger related expenses and credit card fraud losses - Non-GAAP (1 ) (2)0.94 0.84 10 
Return on average equity 6.38 7.25 (87)
Return on average tangible equity - Non-GAAP (1), (2)13.39 10.09 330 
Interest rate spread2.34 2.69 (35)
Net interest margin3.08 3.18 (10)
Efficiency ratio - GAAP 76.93 67.40 953 
Efficiency ratio - Non-GAAP (1)62.37 63.67 (130)
Non-interest income to avg assets0.46 0.62 (16)
Non-interest expense to avg assets2.56 2.42 14 
Net operating expense to avg assets2.10 1.80 30 
PER SHARE DATA
Basic and diluted net income per common share$0.25$0.32(21.9)%
Dividends paid per common share$0.12$0.12— %
Book value per common share at period end15.5118.17(14.6)
Tangible book value per common share at period end - Non-GAAP (1)12.2414.74(17.0)
Market value at period end11.5014.28(19.5)
Market range:
High14.3818.15(20.8)
Low10.5614.00(24.6)
AVERAGE BALANCE SHEET DATA
Loans$4,655,183$2,611,64478.2 %
Investment securities655,323654,1930.2 
Earning assets5,387,7823,279,68664.3 
Assets5,774,8243,506,33664.7 
Deposits5,142,6582,968,44873.2 
Short-term and Long Term FHLB advances4,000113,972(96.5)
Subordinated Debt & TRUPS72,41843,10868.0 
Stockholders' equity515,976361,17442.9 
____________________________________
(1)See the reconciliation table that begins on page 21.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 21.
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Shore Bancshares, Inc.
Financial Highlights (Unaudited) - Continued
For the Three Months Ended March 31,
(Dollars in thousands, except per share data)20242023 Change
CREDIT QUALITY DATA
Net charge-offs$565$202,725.0 %
Nonaccrual loans $12,776$1,894574.6 %
Loans 90 days past due and still accruing1,560611155.3 
Other real estate owned and Repossessed Property2,0241791,030.7 
Total nonperforming assets 16,3602,684509.5 
Borrowers experiencing financial difficulty ("BEFD") (still accruing)——— 
Total nonperforming assets and BEFD modifications$16,360$2,684509.5 
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets8.84 %10.18 %(134)bp
Period-end tangible equity to tangible assets - Non-GAAP (1)7.11 8.41 (130)
Annualized net charge-offs to average loans0.05 %— %5 bp
Allowance for credit losses as a percent of:
Period-end loans 1.23 %1.07 %16 bp
Nonaccrual loans 448.78 1,502.85 (105,407)
Nonperforming assets 350.46 1,060.51 (71,005)
Accruing BEFD modifications— — — 
Nonperforming assets and accruing BEFDs350.46 1,060.51 (71,005)
As a percent of total loans:
Nonaccrual loans 0.27 %0.07 %20 bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets0.35 %0.10 %25 bp
As a percent of total assets:
Nonaccrual loans 0.22 %0.05 %17 bp
Nonperforming assets 0.28 %0.08 %20 
____________________________________
(1)See the reconciliation table that begins on page 21.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 21.

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Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited)
March 31, 2024March 31, 2024
compared tocompared to
(In thousands, except per share data)March 31, 2024December 31, 2023March 31, 2023December 31, 2023March 31, 2023
ASSETS
Cash and due from banks$43,079$63,172$23,863(31.8)%80.5 %
Interest-bearing deposits with other banks71,481309,24113,846(76.9)416.3 
Cash and cash equivalents114,560372,41337,709(69.2)203.8 
Investment securities available for sale (at fair value)179,496110,52181,52562.4 120.2 
Investment securities held to maturity (net of allowance for credit losses of $116 (March 31, 2024), $94 (December 31, 2023), $0 (March 31, 2023)) at amortized cost)503,822513,188549,096(1.8)(8.2)
Equity securities, at fair value5,6815,7031,258(0.4)351.6 
Restricted securities17,86317,90015,067(0.2)18.6 
Loans held for sale, at fair value13,7678,7823,51456.8 291.8 
Loans held for investment4,648,7254,641,0102,668,6810.2 74.2 
Less: allowance for credit losses(57,336)(57,351)(28,464)— (101.4)
Loans, net4,591,3894,583,6592,640,2170.2 73.9 
Premises and equipment, net83,08482,38650,5160.8 64.5 
Goodwill63,26663,26663,266— — 
Other intangible assets, net45,51548,0905,106(5.4)791.4 
Other real estate owned, net179179179— — 
Repossessed property, net1,845——— — 
Mortgage servicing rights, at fair value5,8215,9265,310(1.8)9.6 
Right of use assets, net12,15312,4879,344(2.7)30.1 
Cash surrender value on life insurance102,321101,70459,7110.6 71.4 
Accrued interest receivable19,54119,2178,2181.7 137.8 
Deferred income taxes38,97840,70710,436(4.2)273.5 
Other assets26,42324,79013,2226.6 99.8 
Total assets$5,825,704$6,010,918$3,553,694(3.1)63.9 
LIABILITIES
Noninterest-bearing deposits$1,200,680$1,258,037$808,679(4.6)%48.5 %
Interest-bearing deposits3,983,5994,128,0832,185,883(3.5)82.2 
Total deposits5,184,2795,386,1202,994,562(3.7)73.1 
Advances from FHLB - short-term——131,500— (100.0)
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")29,23729,15818,4450.3 58.5 
Subordinated debt43,32243,13924,7050.4 75.4 
Total borrowings72,55972,297174,6500.4 (58.5)
Lease liabilities12,55212,8579,642(2.4)30.2 
Accrued expenses and other liabilities41,08628,50913,20244.1 211.2 
Total liabilities$5,310,476$5,499,783$3,192,056(3.4)66.4 
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares$332$332$199— 66.8 
Additional paid in capital356,464356,007201,7360.1 76.7 
Retained earnings166,490162,290167,8642.6 (0.8)
Accumulated other comprehensive loss(8,058)(7,494)(8,161)(7.5)1.3 
Total stockholders' equity515,228511,135361,6380.8 42.5 
Total liabilities and stockholders' equity$5,825,704$6,010,918$3,553,694(3.1)63.9 
Period-end common shares outstanding$33,211$33,162$19,8980.1 66.9 
Book value per common share$15.51$15.41$18.170.6 (14.6)
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Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31,
(In thousands, except per share data)20242023% Change
INTEREST INCOME
Interest and fees on loans $65,754$30,828113.3 %
Interest on investment securities:
Taxable4,4194,0648.7 
Tax-exempt 67(14.3)
Interest on deposits with other banks960163489.0 
Total interest income$71,139$35,062102.9 
INTEREST EXPENSE
Interest on deposits$28,497$7,281291.4 
Interest on short-term borrowings561,361(95.9)
Interest on long-term borrowings1,45175691.9 
Total interest expense$30,004$9,398219.3 
NET INTEREST INCOME$41,135$25,66460.3 
Provision for credit losses4071,213(66.4)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES$40,728$24,45166.6 
NONINTEREST INCOME
Service charges on deposit accounts$1,507$1,21324.2 
Trust and investment fee income73443269.9 
Interchange credits1,5871,21230.9 
Mortgage-banking revenue801977(18.0)
Title Company revenue78137(43.1)
Other noninterest income1,8601,36336.5 
Total noninterest income$6,567$5,33423.1 

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Shore Bancshares, Inc.
Consolidated Statements of Income (Unaudited) - Continued
For the Three Months Ended March 31,
(In thousands, except per share data)20242023% Change
NONINTEREST EXPENSE
Salaries and wages$11,852$8,68436.5 %
Employee benefits4,0972,92140.3 
Occupancy expense 2,4161,61949.2 
Furniture and equipment expense90453469.3 
Data processing2,8671,79859.5 
Directors' fees29525018.0 
Amortization of intangible assets2,576441484.1 
FDIC insurance premium expense1,150371210.0 
Other real estate owned, net—(1)100.0 
Legal and professional fees1,599750113.2 
Fraud losses (1)4,502676,619.4 
Merger related expenses—691(100.0)
Other noninterest expenses4,4402,76860.4 
Total noninterest expense$36,698$20,89375.6 
Income before income taxes$10,597$8,89219.2 
Income tax expense 2,4132,435(0.9)
NET INCOME $8,184$6,45726.7 
Weighted average shares outstanding - basic and diluted33,33719,88667.6 
Basic and diluted net income per common share$0.25$0.32(21.9)
Dividends paid per common share$0.12$0.12— 
____________________________________
(1)Fraud losses includes $4.3 million of credit card fraud losses for the quarter ended March 31, 2024.

9

Shore Bancshares, Inc.
Consolidated Average Balance Sheets (Unaudited)
For the Three Months EndedFor the Three Months Ended
March 31, 2024March 31, 2023March 31, 2024December 31, 2023
(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate $1,361,636$18,4925.46 %$881,799$10,5074.83 %$1,361,636$18,4925.46 %$1,331,150$18,6535.56 %
Commercial real estate 2,722,60038,6045.70 1,279,92315,1734.81 2,722,60038,6045.70 2,728,09438,7305.63 
Commercial 219,8844,0977.49 142,7971,8195.17 219,8844,0977.49 221,3424,2957.70 
Consumer329,1184,2725.22 297,5283,2744.46 329,1184,2725.22 333,8073,8594.59 
State and political1,473164.37 97893.73 1,473164.37 1,290134.00 
Credit Cards7,4571679.01 ——— 7,4571679.01 6,32016610.42 
Other13,0151835.66 8,619843.91 13,0151835.66 17,4642776.29 
Total Loans4,655,18365,8315.69 2,611,64430,8664.79 4,655,18365,8315.69 4,639,46765,9935.64 
Investment securities
Taxable654,6634,4192.70 653,5274,0642.49 654,6634,4192.70 619,2593,9922.58 
Tax-exempt (1)66084.85 66695.41 66084.85 66184.84 
Interest-bearing deposits77,2769605.00 13,8491634.77 77,2769605.00 80,4461,2246.04 
Total earning assets5,387,78271,2185.32 3,279,68635,1024.34 5,387,78271,2185.32 5,339,83371,2175.29 
Cash and due from banks49,49928,60249,49963,506
Other assets395,023228,054395,023399,409
Allowance for credit losses(57,480)(30,006)(57,480)(57,308)
Total assets$5,774,824$3,506,336$5,774,824$5,745,440
10

For the Three Months EndedFor the Three Months Ended
March 31, 2024March 31, 2023March 31, 2024December 31, 2023
(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate Average BalanceInterestYield/RateAverage BalanceInterestYield/Rate
Interest-bearing liabilities
Demand deposits$1,110,524$6,3622.30 %$694,894$3,2361.89 %$1,110,524$6,3622.30 %$1,117,117$6,6732.37 %
Money market and savings deposits 1,669,07410,1602.45 1,004,5532,3740.96 1,669,07410,1602.45 1,605,9308,3302.06 
Brokered deposits20,4652514.93 ——— 20,4652514.93 92,8401,3475.76 
Certificates of deposit $100,000 or more762,2107,6754.05 241,4361,0761.81 762,2107,6754.05 701,0516,8983.90 
Other time deposits417,3624,0493.90 207,4035951.16 417,3624,0493.90 391,8204,8854.95 
Interest-bearing deposits (4)3,979,63528,4972.88 2,148,2867,2811.37 3,979,63528,4972.88 3,908,75828,1332.86 
Advances from FHLB - short-term4,000565.63 113,9721,3614.84 4,000565.63 1,141165.56 
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)72,4181,4518.06 43,1087567.11 72,4181,4518.06 72,1551,4628.04 
Total interest-bearing liabilities4,056,05330,0042.98 2,305,3669,3981.65 4,056,05330,0042.98 3,982,05429,6112.95 
Noninterest-bearing deposits1,163,023820,1621,163,0231,228,060
Accrued expenses and other liabilities39,77219,63439,77228,286
Stockholders' equity515,976361,174515,976507,040
Total liabilities and stockholders' equity$5,774,824$3,506,336$5,774,824$5,745,440
Net interest income$41,214$25,704$41,214$41,606
Net interest spread2.34 %2.69 %2.34 %2.34 %
Net interest margin3.08 %3.18 %3.08 %3.09 %
Cost of Funds2.31 %1.22 %2.31 %2.25 %
Cost of Deposits2.23 %0.99 %2.23 %2.17 %
Cost of Debt7.93 %5.47 %7.93 %8.00 %
____________________________________
(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 $4.2 million, $0.5 million and $4.8 million of accretion interest on loans for the three months ended March 31, 2024 and 2023, and December 31, 2023, 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, $0.1 million and $(1.5) 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 March 31, 2024 and 2023, and December 31, 2023, respectively.
11

Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited)
1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter3/31/20243/31/2024
20242023202320232023compared tocompared to
(Dollars in thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023Q4 2023Q1 2023
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income$41,214$41,606$45,702$22,545$25,704(0.9)%60.3 %
Less: Taxable-equivalent adjustment7981805140(2.5)97.5 
Net interest income41,13541,52545,62222,49425,664(0.9)60.3 
Provision for credit losses40789628,1766671,213(54.6)(66.5)
Noninterest income6,5677,54814,9845,2945,334(13.0)23.1 
Noninterest expense36,69833,67047,15821,60820,8939.0 75.6 
Income/(loss) before income taxes10,59714,507(14,728)5,5138,892(27.0)19.2 
Income tax expense/ (benefit)2,4134,017(4,991)1,4952,435(39.9)(0.9)
Net income/ (loss) $8,184$10,490$(9,737)$4,018$6,457(22.0)26.7 
Return on average assets 0.57%0.72%(0.67)%0.45%0.75%(15)bp(18)bp
Return on average assets excluding amortization of intangibles, fraud losses and merger related expenses - Non-GAAP (1), (2)0.940.880.010.590.846 10 
Return on average equity 6.388.21(7.25)4.497.25(183)(87)
Return on average tangible equity - Non-GAAP (1), (2)13.3912.881.747.1610.0951 330 
Net interest margin3.083.093.352.683.18(1)(10)
Efficiency ratio - GAAP 76.9368.6177.8177.7667.40832 953 
Efficiency ratio - Non-GAAP (1)62.3761.9947.1971.7563.6738 (130)
PER SHARE DATA
Basic and diluted net income/(loss) per common share$0.25$0.32$(0.29)$0.20$0.32(21.9)%(21.9)%
Dividends paid per common share0.120.120.120.120.12— — 
Book value per common share at period end15.5115.4115.1418.2418.170.6 (14.6)
Tangible book value per common share at period end - Non-GAAP (1)12.2412.0611.7014.8314.741.5 (17.0)
Market value at period end11.5014.2510.5211.5614.28(19.3)(19.5)
Market range:
High14.3814.5113.3714.4518.15(0.9)(20.8)
Low10.569.6610.2710.6514.009.3 (24.6)
____________________________________
(1)See the reconciliation table (Non-GAAP) that begins on page 21.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 21.

12

Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited) - Continued
1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter3/31/20243/31/2024
20242023202320232023compared tocompared to
(Dollars in thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023Q4 2023Q1 2023
AVERAGE BALANCE SHEET DATA
Loans$4,655,183$4,639,467$4,562,748$2,709,944$2,611,6440.34 %78.25 %
Investment securities655,323619,920778,744645,842654,1935.71 0.17 
Earning assets5,387,7825,339,8335,404,5723,369,1833,279,6860.90 64.28 
Assets5,774,8245,745,4405,769,3123,596,3113,506,3360.51 64.70 
Deposits5,142,6585,136,8185,066,8862,908,6622,968,4480.11 73.24 
Short-term and Long Term FHLB advances4,0001,14170,348261,797113,972250.57 (96.49)
Subordinated Debt & TRUPS72,41872,15571,90743,18543,1080.36 67.99 
Stockholders' equity515,976507,040533,114363,225361,1741.76 42.86 
CREDIT QUALITY DATA
Net charge offs $565$500$1,449$50$2013.00 %2,725.00 %
Nonaccrual loans $12,776$12,784$8,982$3,481$1,894(0.06)%574.55 %
Loans 90 days past due and still accruing1,5607382,1491,065611111.38 155.32 
Other real estate owned and repossessed property2,0241791791791791,030.73 1,030.73 
Total nonperforming assets $16,360$13,701$11,310$4,725$2,68419.41 509.54 

13

Shore Bancshares, Inc.
Financial Highlights By Quarter (Unaudited) - Continued
1st Quarter4th Quarter3rd Quarter2nd Quarter1st Quarter3/31/20243/31/2024
20242023202320232023compared tocompared to
(Dollars in thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023Q4 2023Q1 2023
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets8.84 %8.50 %8.79 %9.97 %10.18 %34 bp(134)bp
Period-end tangible equity to tangible assets - Non-GAAP (1)7.11 6.78 6.93 8.26 8.41 33 (130)
Annualized net charge-offs to average loans0.05 %0.04 %0.13 %0.01 %— %1 bp5 bp
Allowance for credit losses as a percent of:
Period-end loans (3)1.23 %1.24 %1.24 %1.05 %1.07 %(1)bp16 bp
Period-end loans (4)1.23 1.24 1.24 1.05 1.07 (1)16 
Nonaccrual loans 448.78 448.62 635.17 833.50 1502.85 16 (105,407)
Nonperforming assets 350.46 418.59 504.43 614.05 1060.51 (6,813)(71,005)
As a percent of total loans:
Nonaccrual loans 0.27 %0.28 %0.19 %0.13 %0.07 %(1)bp20 bp
As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets 0.35 %0.30 %0.24 %0.17 %0.10 %5 bp25 bp
As a percent of total assets:
Nonaccrual loans 0.22 %0.21 %0.16 %0.10 %0.05 %1 bp17 bp
Nonperforming assets 0.28 0.23 0.20 0.13 0.08 5 20 
____________________________________
(1)See the reconciliation table (Non-GAAP) that begins on page 21.
(2)This ratio excludes merger related expenses (Non-GAAP) on page 21.
(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.
14

Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited)
March 31, 2024March 31, 2024
compared tocompared to
(In thousands, except per share data)March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2023March 31, 2023
ASSETS
Cash and due from banks$43,079 $63,172 $68,097 $35,423 $23,863 (31.8)%80.5 %
Interest-bearing deposits with other banks71,481 309,241 40,612 10,404 13,846 (76.9)416.3 
Cash and cash equivalents114,560 372,413 108,709 45,827 37,709 (69.2)203.8 
Investment securities available for sale (at fair value)179,496 110,521 79,143 78,069 81,525 62.4 120.2 
Investment securities held to maturity (net of allowance for credit losses of $116 (March 31, 2024), $94 (December 31,2023), $126 ( September 30, 2023), $163 (June 30, 2023) and $0 (March 31, 2023)) at amortized cost)503,822 513,188 523,051 536,970 549,096 (1.8)(8.2)
Equity securities, at fair value5,681 5,703 5,434 1,245 1,258 (0.4)351.6 
Restricted securities17,863 17,900 13,361 21,208 15,067 (0.2)18.6 
Loans held for sale, at fair value13,767 8,782 14,725 6,845 3,514 56.8 291.8 
Loans held for investment4,648,725 4,641,010 4,617,719 2,753,223 2,668,681 0.2 74.2 
Less: allowance for credit losses(57,336)(57,351)(57,051)(29,014)(28,464)— (101.4)
Loans, net4,591,389 4,583,659 4,560,668 2,724,209 2,640,217 0.2 73.9 
Premises and equipment, net83,084 82,386 81,149 51,036 50,516 0.8 64.5 
Goodwill63,266 63,266 63,266 63,266 63,266 — — 
Other intangible assets, net45,515 48,090 50,685 4,671 5,106 (5.4)791.4 
Other real estate owned, net179 179 179 179 179 — — 
Repossessed property, net1,845 — — — — — — 
Mortgage servicing rights, at fair value5,821 5,926 5,890 5,466 5,310 (1.8)9.6 
Right of use assets, net12,153 12,487 12,741 9,077 9,344 (2.7)30.1 
Cash surrender value on life insurance102,321 101,704 100,950 60,150 59,711 0.6 71.4 
Accrued interest receivable19,541 19,217 15,683 8,778 8,218 1.7 137.8 
Deferred income taxes38,978 40,707 45,346 10,879 10,436 (4.2)273.5 
Other assets26,423 24,790 24,392 13,756 13,222 6.6 99.8 
Total assets$5,825,704 $6,010,918 $5,705,372 $3,641,631 $3,553,694 (3.1)63.9 

15

Shore Bancshares, Inc.
Consolidated Balance Sheets (Unaudited) - Continued
March 31, 2024March 31, 2024
compared tocompared to
(In thousands, except per share data)March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2023March 31, 2023
LIABILITIES
Noninterest-bearing deposits$1,200,680 $1,258,037 $1,211,401 $778,963 $808,679 (4.6)%48.5 
Interest-bearing deposits3,983,599 4,128,083 3,897,343 2,158,563 2,185,883 (3.5)82.2 
Total deposits5,184,279 5,386,120 5,108,744 2,937,526 2,994,562 (3.7)73.1 
Advances from FHLB - short-term— — — 276,000 131,500 — (100.0)
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")29,237 29,158 29,079 18,492 18,445 0.3 58.5 
Subordinated debt43,322 43,139 42,956 24,735 24,705 0.4 75.4 
Total borrowings72,559 72,297 72,035 319,227 174,650 0.4 (58.5)
Lease liabilities12,552 12,857 13,082 9,392 9,642 (2.4)30.2 
Accrued expenses and other liabilities41,086 28,509 9,933 12,346 13,202 44.1 211.2 
Total liabilities5,310,476 5,499,783 5,203,794 3,278,491 3,192,056 (3.4)66.4 
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares332 332 331 199 199 — 66.8 
Additional paid in capital356,464 356,007 355,575 202,008 201,736 0.1 76.7 
Retained earnings166,490 162,290 155,781 169,494 167,864 2.6 (0.8)
Accumulated other comprehensive loss(8,058)(7,494)(10,109)(8,561)(8,161)(7.5)1.3 
Total stockholders' equity515,228 511,135 501,578 363,140 361,638 0.8 42.5 
— — 
Total liabilities and stockholders' equity$5,825,704 $6,010,918 $5,705,372 $3,641,631 $3,553,694 (3.1)63.9 
Period-end common shares outstanding33,21133,162 33,136 19,907 19,898 0.1 66.9 
Book value per common share$15.51 $15.41 $15.14 $18.24 $18.17 0.6 (14.6)
16

Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited)
3/31/20243/31/2024
compared tocompared to
(In thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023Q4 2023Q1 2023
INTEREST INCOME
Interest and fees on loans $65,754$65,914$64,869$32,729$30,828(0.2)%113.3 %
Interest on investment securities:
Taxable4,4193,9925,0473,7294,06410.7 8.7 
Tax-exempt662757— (14.3)
Interest on federal funds sold——92——— — 
Interest on deposits with other banks9601,2241,213170163(21.6)489.0 
Total interest income71,13971,13671,24836,63335,062— 102.9 
INTEREST EXPENSE
Interest on deposits28,49728,13323,4739,9147,2811.3 291.4 
Interest on short-term borrowings56166923,4491,361250.0 (95.9)
Interest on long-term borrowings1,4511,4621,461776756(0.8)91.9 
Total interest expense30,00429,61125,62614,1399,3981.3 219.3 
NET INTEREST INCOME41,13541,52545,62222,49425,664(0.9)60.3 
Provision for credit losses40789628,1766671,213(54.6)(66.4)
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES40,72840,62917,44621,82724,4510.2 66.6 
NONINTEREST INCOME
Service charges on deposit accounts1,5071,5191,5051,2641,213(0.8)24.2 
Trust and investment fee income7348441,933399432(13.0)69.9 
Loss on sales and calls of investment securities——(2,166)——— — 
Interchange credits1,5871,6331,5571,3111,212(2.8)30.9 
Mortgage-banking revenue8011,1051,3771,054977(27.5)(18.0)
Title Company revenue7813989186137(43.9)(43.1)
Bargain purchase gain——8,816——— — 
Other noninterest income1,8602,3081,8731,0801,363(19.4)36.5 
Total noninterest income$6,567$7,548$14,984$5,294$5,334(13.0)23.1 

17

Shore Bancshares, Inc.
Consolidated Statements of Income By Quarter (Unaudited) - Continued
3/31/20243/31/2024
compared tocompared to
(In thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023Q4 2023Q1 2023
NONINTEREST EXPENSE
Salaries and wages$11,852$12,823$14,183$8,955$8,684(7.6)%36.5 %
Employee benefits4,0973,3893,6072,4402,92120.9 40.3 
Occupancy expense 2,4162,3282,2451,5991,6193.8 49.2 
Furniture and equipment expense90479075047753414.4 69.3 
Data processing2,8672,7622,4851,7391,7983.8 59.5 
Directors' fees295426295185250(30.8)18.0 
Amortization of intangible assets2,5762,5952,634435441(0.7)484.1 
FDIC insurance premium expense1,1501,733618758371(33.6)210.0 
Other real estate owned expenses, net——2—(1)— 100.0 
Legal and professional fees1,5991,4111,21795975013.3 113.2 
Fraud losses (1)4,5025032624767795.0 6619.4 
Merger related expenses—60214,8661,197691(100.0)(100.0)
Other noninterest expenses4,4404,3083,9942,8172,7683.1 60.4 
Total noninterest expense36,69833,67047,15821,60820,8939.0 75.6 
Income/(loss) before income taxes10,59714,507(14,728)5,5138,892(27.0)19.2 
Income tax expense/(benefit) 2,4134,017(4,991)1,4952,435(39.9)(0.9)
NET INCOME/(LOSS)$8,184$10,490$(9,737)$4,018$6,457(22.0)26.7 
Weighted average shares outstanding - basic and diluted33,33733,32233,24619,90319,8860.1 67.6 
Basic and diluted net income/(loss) per common share$0.25$0.32$(0.29)$0.20$0.32(21.9)(21.9)
Dividends paid per common share0.120.120.120.120.12— — 
____________________________________
(1)Fraud losses includes $4.3 million of credit card fraud losses for the quarter ended March 31, 2024.
18

Shore Bancshares, Inc.
Consolidated Average Balance Sheets By Quarter (Unaudited)
Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023
(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/Rate
Earning assets
Loans (1), (2), (3)
Consumer real estate $1,361,636$18,4925.46 %$1,331,150$18,6535.56 %$1,141,707$14,5485.06 %$946,545$10,8764.61 %$881,799$10,5074.83 %
Commercial real estate 2,722,60038,6045.70 2,728,09438,7305.63 2,831,56940,5365.68 1,292,40615,6204.85 1,279,92315,1734.81 
Commercial 219,8844,0977.49 221,3424,2957.70 233,7565,3159.02 137,5542,1776.35 142,7971,8195.17 
Consumer329,1184,2725.22 333,8073,8594.59 332,4864,1834.99 323,7983,9834.93 297,5283,2744.46 
State and political1,473164.37 1,290134.00 929104.27 90083.57 97893.73 
Credit Cards7,4571679.01 6,32016610.42 6,1641499.59 ——— ——— 
Other13,0151835.66 17,4642776.29 16,1372014.94 8,7411165.37 8,619843.91 
Total Loans4,655,18365,8315.69 4,639,46765,9935.64 4,562,74864,9425.65 2,709,94432,7804.85 2,611,64430,8664.79 
Investment securities
Taxable654,6634,4192.70 619,2593,9922.58 778,0815,0472.59 645,1783,7292.32 653,5274,0642.49 
Tax-exempt (1)66084.85 66184.84 6633420.51 66463.62 66695.41 
Federal funds sold——— ——— 7,533924.85 ——— ——— 
Interest-bearing deposits77,2769605.00 80,4461,2246.04 55,5471,2138.66 13,3971705.09 13,8491634.77 
Total earning assets5,387,78271,2185.32 5,339,83371,2175.29 5,404,57271,3285.24 3,369,18336,6854.37 3,279,68635,1024.34 
Cash and due from banks49,49963,50651,71429,92328,602
Other assets395,023399,409359,726225,935228,054
Allowance for credit losses(57,480)(57,308)(46,700)(28,730)(30,006)
Total assets$5,774,824$5,745,440$5,769,312$3,596,311$3,506,336
19

Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023
(Dollars in thousands)Average BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/RateAverage BalanceInterestYield/Rate
Interest-bearing liabilities
Demand deposits$1,110,524$6,3622.30 %$1,117,117$6,6732.37 %$1,056,956$6,6592.50 %$685,674$3,9132.29 %$694,894$3,2361.89 %
Money market and savings deposits 1,669,07410,1602.45 1,605,9308,3302.06 1,572,9206,8101.72 907,0682,5261.12 1,004,5532,3740.96 
Brokered deposits20,4652514.93 92,8401,3475.76 98,6491,2254.93 ——— ——— 
Certificates of deposit $100,000 or more762,2107,6754.05 701,0516,8983.90 706,6426,2723.52 312,3672,3373.00 241,4361,0761.81 
Other time deposits417,3624,0493.90 391,8204,8854.95 285,7432,5073.48 225,4951,1382.03 207,4035951.16 
Interest-bearing deposits (4)3,979,63528,4972.88 3,908,75828,1332.86 3,720,91023,4732.50 2,130,6049,9141.87 2,148,2867,2811.37 
Advances from FHLB - short-term4,000565.63 1,141165.56 70,3486923.90 261,7973,4495.28 113,9721,3614.84 
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)72,4181,4518.06 72,1551,4628.04 71,9071,4618.06 43,1857767.21 43,1087567.11 
Total interest-bearing liabilities4,056,05330,0042.98 3,982,05429,6112.95 3,863,16525,6262.63 2,435,58614,1392.33 2,305,3669,3981.65 
Noninterest-bearing deposits1,163,0231,228,0601,345,976778,058820,162
Accrued expenses and other liabilities39,77228,28627,05719,44219,634
Stockholders' equity515,976507,040533,114363,225361,174
Total liabilities and stockholders' equity$5,774,824$5,745,440$5,769,312$3,596,311$3,506,336
Net interest income$41,214$41,606$45,702$22,546$25,704
Net interest spread2.34 %2.34 %2.61 %2.04 %2.69 %
Net interest margin3.08 %3.09 %3.35 %2.68 %3.18 %
Cost of Funds2.31 %2.25 %1.95 %1.76 %1.22 %
Cost of Deposits2.23 %2.17 %1.84 %1.37 %0.99 %
Cost of Debt7.93 %8.00 %6.00 %5.56 %5.47 %
____________________________________
(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 $4.2 million, $4.8 million, $6.1 million, $0.3 million and $0.5 million of accretion interest on loans for the three months ended March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 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, $(1.5) million, $(0.5) million, $41,000 and $0.1 million of amortization of deposits premium, and $(0.2) million, $(0.2) million, $(0.2) million, $(47,000) and $(47,000) of amortization of borrowing fair value adjustment for the three months ended March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively.
20

Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited)
YTDYTD
(In thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 20233/31/20243/31/2023
The following reconciles return on average assets, average equity and return on average tangible equity (Note 1):
Net income (loss) $8,184 $10,490 $(9,737)$4,018 $6,457 $8,184 $6,457 
Net income (loss) - annualized (A)$32,916 $41,618 $(38,632)$16,295 $26,187 $32,916 $26,187 
Net income (loss) $8,184 $10,490 $(9,737)$4,018 $6,457 $8,184 $6,457 
Add: Amortization of intangible assets, net of tax1,989 1,876 1,741 317 320 1,989 320 
Add: Merger Expenses, net of tax— 435 9,828 872 502 — 502 
Add: Credit Card Fraud Losses, net of tax3,339 — — — — 3,339 — 
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses13,512 12,801 1,832 5,207 7,279 13,512 7,279 
Net income, excluding net amortization of intangible assets, merger related expenses and credit card fraud losses - annualized (B)$54,345 $50,787 $7,268 $21,121 $29,520 $54,345 $29,520 
Return on average assets (GAAP)0.57 %0.72 %(0.67)%0.45 %0.75 %0.57 %0.75 %
Return on average assets excluding net amortization of intangible assets, merger related expenses and credit card fraud losses- (Non-GAAP)0.94 %0.88 %0.01 %0.59 %0.84 %0.94 %0.84 %
Average assets$5,774,824 $5,745,440 $5,769,312 $3,596,311 $3,506,336 $5,774,824 $3,506,336 
Average stockholders' equity (C)$515,976 $507,040 $533,114 $363,225 $361,174 $515,976 $361,174 
Less: Average goodwill and core deposit intangible(110,167)(112,752)(115,604)(68,172)(68,607)(110,167)(68,607)
Average tangible equity (D)$405,809 $394,288 $417,510 $295,053 $292,567 $405,809 $292,567 
Return on average equity (GAAP) (A)/(C)6.38 %8.21 %(7.25)%4.49 %7.25 %6.38 %7.25 %
Return on average tangible equity (Non-GAAP) (B)/(D)13.39 %12.88 %1.74 %7.16 %10.09 %13.39 %10.09 %
The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):
Noninterest expense (E)$36,698 $33,670 $47,158 $21,608 $20,893 $36,698 $20,893 
Less: Amortization of intangible assets(2,576)(2,595)(2,634)(435)(441)(2,576)(441)
Less: Merger Expenses— (602)(14,866)(1,197)(691)— (691)
Less: Credit Card Fraud Losses(4,323)— — — — (4,323)— 
Adjusted noninterest expense (F)$29,799 $30,473 $29,658 $19,976 $19,761 $29,799 $19,761 
Net interest income (G)$41,135 $41,525 $45,622 $22,494 $25,664 $41,135 $25,664 
Add: Taxable-equivalent adjustment79 81 80 51 40 79 40 
Taxable-equivalent net interest income (H)$41,214 $41,606 $45,702 $22,545 $25,704 $41,214 $25,704 
Noninterest income (I)$6,567 $7,548 $14,984 $5,294 $5,334 $6,567 $5,334 
Investment securities losses (gains)— — 2,166 — — — — 
Adjusted noninterest income (J)$6,567 $7,548 $17,150 $5,294 $5,334 $6,567 $5,334 
Efficiency ratio (GAAP) (E)/(G)+(I) 76.93 %68.61 %77.81 %77.76 %67.40 %76.93 %67.40 %
Efficiency ratio (Non-GAAP) (F)/(H)+(J)62.37 %61.99 %47.19 %71.76 %63.67 %62.37 %63.67 %
21

Shore Bancshares, Inc.
Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited) - Continued
(In thousands, except per share data)Q1 2024Q4 2023Q3 2023Q2 2023Q1 2023
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (K)$515,228 $511,135 $501,578 $363,140 $361,638 
Less: Goodwill and core deposit intangible(108,781)(111,356)(113,951)(67,937)(68,372)
Tangible equity (L)$406,447 $399,779 $387,627 $295,203 $293,266 
Shares outstanding (M)33,21133,16233,13619,90719,898
Book value per common share (GAAP) (K)/(M)$15.51$15.41$15.14$18.24$18.17
Tangible book value per common share (Non-GAAP) (L)/(M)$12.24$12.06$11.70$14.83$14.74
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (N)$515,228$511,135$501,578$363,140$361,638
Less: Goodwill and core deposit intangible(108,781)(111,356)(113,951)(67,937)(68,372)
Tangible equity (O)$406,447$399,779$387,627$295,203$293,266
Assets (P)$5,825,704$6,010,918$5,705,372$3,641,631$3,553,694
Less: Goodwill and core deposit intangible(108,781)(111,356)(113,951)(67,937)(68,372)
Tangible assets (Q)$5,716,923$5,899,562$5,591,421$3,573,694$3,485,322
Period-end equity/assets (GAAP) (N)/(P)8.84%8.50%8.79%9.97%10.18%
Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q)7.11%6.78%6.93%8.26%8.41%
____________________________________
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.
22

Shore Bancshares, Inc.
Summary of Loan Portfolio (Unaudited)
Portfolio loans are summarized by loan type as follows:
(Dollars in thousands)March 31, 2024%December 31, 2023%September 30, 2023%June 30, 2023%March 31, 2023%
Portfolio Loans by Loan Type
Construction$299,133 6.43 %$299,000 6.44 %$328,750 7.12 %$220,228 8.00 %$250,447 9.38 %
Residential real estate1,515,134 32.59 %1,490,438 32.11 %1,439,464 31.17 %938,151 34.07 %866,225 32.46 %
Commercial real estate2,272,867 48.90 %2,286,154 49.27 %2,283,521 49.45 %1,130,346 41.06 %1,096,937 41.11 %
Commercial229,594 4.94 %229,939 4.95 %229,474 4.97 %138,459 5.03 %140,312 5.26 %
Consumer325,076 6.99 %328,896 7.09 %330,411 7.16 %326,039 11.84 %314,760 11.79 %
Credit Cards6,921 0.15 %6,583 0.14 %6,099 0.13 %— — %— — %
Total loans4,648,725 100.00 %4,641,010 100.00 %4,617,719 100.00 %2,753,223 100.00 %2,668,681 100.00 %
Less: Allowance for credit losses(57,336)(57,351)(57,051)(29,014)(28,464)
Total loans, net$4,591,389 $4,583,659 $4,560,668 $2,724,209 $2,640,217 

23

Shore Bancshares, Inc.
Summary of Deposits (Unaudited)
March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023
(dollars in thousands)Balance%Balance%Balance%Balance%Balance%
Noninterest-bearing demand$1,200,680 23.15 %$1,258,037 23.36 %$1,211,401 23.70 %$778,963 26.52 %$808,679 27.00 %
Interest-bearing:
Demand1,101,954 21.26 %1,165,546 21.64 %1,210,051 23.69 %694,221 23.63 %726,070 24.25 %
Money market deposits1,358,205 26.20 %1,430,603 26.56 %1,179,049 23.08 %600,724 20.45 %675,751 22.57 %
Savings354,098 6.83 %347,324 6.45 %371,755 7.28 %270,884 9.22 %295,002 9.85 %
Certificates of deposit1,169,342 22.56 %1,184,610 21.99 %1,136,488 22.25 %592,734 20.18 %489,060 16.33 %
Total interest-bearing3,983,599 76.85 %4,128,083 76.64 %3,897,343 76.30 %2,158,563 73.48 %2,185,883 73.00 %
Total Deposits$5,184,279 100.00 %$5,386,120 100.00 %$5,108,744 100.00 %$2,937,526 100.00 %$2,994,562 100.00 %
24