Shore Bancshares, Inc. Reports 2024 Fourth Quarter and Annual Results

, /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank") reported net income for the fourth quarter of 2024 of $13.3 million, or $0.40 per diluted common share, compared to net income of $11.2 million, or $0.34 per diluted common share, for the third quarter of 2024, and net income of $10.5 million, or $0.31 per diluted common share, for the fourth quarter of 2023. Net income for the fiscal year of 2024 was $43.9 million, or $1.32 per diluted common share, compared to net income for the fiscal year of 2023 of $11.2 million, or $0.42 per diluted common share. Fourth Quarter and Full-Year 2024 Highlights Improving Return on Average Assets ("ROAA") - The Company reported ROAA of 0.86% for the fourth quarter of 2024, compared to 0.77% for the third quarter of 2024 and 0.72% for the fourth quarter of 2023. Non–U.S. generally accepted accounting principles ("GAAP") ROAA([1]) was 0.94% for the fourth quarter of 2024, compared to 0.90% for the third quarter of 2024 and 0.88% for the fourth quarter of 2023. Increased Net Income - Net income for the fourth quarter of 2024 increased $2.1 million to $13.3 million from $11.2 million in the third quarter of 2024. Net income increased due to higher net interest income, a lower provision for loan losses, and higher noninterest income driven by higher mortgage servicing valuations and increased income from the sale of assets held for sale. Net income for the fiscal year of 2024 increased $32.7 million to $43.9 million from $11.2 million for the fiscal year of 2023. Net Interest Income ("NII") and Net Interest Margin ("NIM") - NII for the fourth quarter of 2024 increased $748 thousand to $44.0 million from $43.3 million for the third quarter of 2024. NII increased due to a $363.1 million increase in average interest-earning assets, funded by a seasonal increase in municipal deposits. NIM decreased 14 basis points ("bps") to 3.03% during the fourth quarter of 2024 from 3.17% in the third quarter of 2024, due to less net accretion interest income. NIM, excluding net accretion interest ("core NIM"), increased to 2.85% in the fourth quarter of 2024 from 2.84% in the third quarter of 2024 as loan yields and deposit costs declined at similar rates during the quarter. Improved Funding Costs - Fourth quarter funding costs declined by 7 bps from the third quarter of 2024 supported by stable noninterest-bearing deposits and continued active management of deposit relationships, which resulted in a 15 bps decline in the cost of interest-bearing deposits. The decrease was partially offset by seasonal increase of approximately $300 million of higher cost time and municipal deposits. Asset Quality - Nonperforming assets to total assets were 0.40% for the fourth quarter of 2024, compared to 0.27% for the third quarter of 2024 and 0.23% for the fourth quarter of 2023. Classified assets to total assets were 0.45% in the fourth quarter of 2024, compared to 0.39% for the third quarter of 2024 and increased compared to 0.25% for the fourth quarter of 2023. The allowance for credit losses ("ACL") was $57.9 million at December 31, 2024 compared to $58.7 million at September 30, 2024. The ACL as a percentage of loans decreased to 1.21% for the fourth quarter of 2024, compared to 1.24% for the third quarter of 2024. Improved Operating Leverage - The efficiency ratio for the fourth quarter of 2024 was 64.21% when compared to 67.49% in the third quarter of 2024 and 68.61% for the fourth quarter of 2023. The non-GAAP efficiency ratio(1) for the fourth quarter of 2024 was 60.28%, compared to 62.10% for the third quarter of 2024 and 61.99% for the fourth quarter of 2023. "Increasing net interest income, lower credit provisions and higher noninterest income supported net income growth in the fourth quarter," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. "Funding costs decreased due to stable noninterest-bearing deposits and lower rates on interest-bearing deposits. Although we saw a $300 million increase in higher cost seasonal municipal deposits, core NIM increased one bp to 2.85% during the fourth quarter. Overall credit in our loan portfolios remains stable and economic activity in our markets is strong. We continue to focus on controlling expenses to enhance operating leverage and improve our operating efficiency." ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. Balance Sheet Review Total assets were $6.23 billion at December 31, 2024, an increase of $219.8 million, or 3.66%, when compared to $6.01 billion at December 31, 2023. The aggregate increase was primarily due to increases in loans held for investment of $131.0 million, cash and cash equivalents of $87.4 million and investment securities available for sale of $38.7 million, partially offset by a decrease in investments held to maturity of $32.1 million. The ratio of the ACL to total loans decreased to 1.21% at December 31, 2024, compared to 1.24% at December 31, 2023. The Company's tangible common equity ratio at December 31, 2024 was 7.17%, compared to 6.78% at December 31, 2023. The Company's Tier 1 and Total Risk-Based Capital Ratios at December 31, 2024 were 10.06% and 12.18%, respectively. The Bank's Tier 1 and Total Risk-Based Capital Ratios at December 31, 2024 were 10.75% and 11.97%, respectively. Non-owner occupied commercial real estate ("CRE") loans as a percentage of the Bank's Tier 1 Capital + ACL at December 31, 2024 and December 31, 2023 were $2.08 billion or 359.52%, and $2.02 billion or 382.57%, respectively. Non owner-occupied construction loans as a percentage of the Bank's Tier 1 Capital + ACL at December 31, 2024 and December 31, 2023 were $336.0 million or 57.99%, and $299.0 million or 56.68%, respectively. CRE loans at December 31, 2024 were $2.56 billion compared to $2.54 billion at December 31, 2023. The following table provides stratification of the classes of CRE loans at December 31, 2024. December 31, 2024 Owner Occupied Non-Owner Occupied ($ in thousands) Average LTV(1) Average Loan Size Loan Balance(2) Average LTV (1) Average Loan Size Loan Balance(2) Office, medical 45.20 % $ 604 $ 32,617 52.07 % $ 1,894 $ 106,040 Office, govt. or govt. contractor 51.80 642 5,133 57.09 2,934 49,872 Office, other 49.28 492 97,403 48.71 1,279 214,915 Office, total 48.54 520 135,153 49.30 1,010 370,827 Retail 50.35 601 63,696 49.38 2,391 447,038 Multi-family (5+ units) — — — 54.93 2,248 265,278 Motel/hotel — — — 43.85 4,161 212,216 Industrial/warehouse 48.43 650 100,731 49.03 1,454 200,623 Commercial-improved 42.16 967 163,405 48.58 1,338 179,254 Marine/boat slips 31.40 1,967 59,005 40.05 2,235 15,643 Restaurant 49.06 1,024 58,347 48.26 1,034 47,553 Church 34.98 886 64,661 13.56 2,421 2,421 Land/lot loans 53.74 913 913 49.95 274 94,245 Other 39.80 1,089 81,655 62.90 590 247,857 Total CRE loans, gross(3) 44.39 786 $ 727,566 51.55 1,235 $ 2,082,955 (1) Loan-to-value ("LTV") is determined based on latest available appraisal against current bank owned principal. Loans without an updated appraisal utilized the original transaction value. (2) Loan balance includes deferred fees and costs. (3) CRE loans include land and construction. The Bank's office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $506.0 million, or 10.60% of total loans of $4.77 billion, at December 31, 2024. The Bank's office CRE loan portfolio included medical tenants of $138.7 million, or 27.40% of the total office CRE loan portfolio, at December 31, 2024. The Bank's office CRE loan portfolio also included government or government contractor tenants of $55.0 million, or 10.87% of the total office CRE loan portfolio, at December 31, 2024. There were 501 loans in the office CRE portfolio with an average and median loan size of $1.0 million and $375 thousand, respectively. LTV estimates for the office CRE portfolio at December 31, 2024 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination. LTV Range ($ in thousands) Loan Count Loan Balance % of Total CRE Less than or equal to 50% 246 $ 182,284 36.00 % 50%-60% 78 114,723 22.70 60%-70% 91 119,089 23.50 70%-80% 74 80,224 15.90 Greater than 80% 12 9,660 1.90 Grand Total 501 $ 505,980 100.00 % The Bank had 18 office CRE loans totaling $164.5 million with balances greater than $5.0 million at December 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 one loan payoff totaling $10.4 million, and adjustments totaling $13.9 million to exclude non-bank-owned participation balances. At December 31, 2024, the average loan debt-service coverage ratio was 1.9x and the average LTV was 49.30%. Of the office CRE portfolio balance, 74.88% was secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.05% was secured by properties with five stories or less. Of the office CRE loans, $2.3 million were classified as special mention or substandard at December 31, 2024. The Bank did not have any charge-offs related to the office CRE portfolio during 2024. At December 31, 2024 and September 30, 2024, nonperforming assets were $24.8 million, or 0.40% of total assets and $15.8 million, or 0.27% of total assets, respectively. The balance of nonperforming assets increased $9.0 million, primarily due to a commercial real estate nonaccrual loan and an increase in repossessed marine assets of $3.0 million. When comparing December 31, 2024 to December 31, 2023, nonperforming assets increased $11.1 million, primarily due to an increase in nonaccrual loans of $8.2 million and an increase in repossessed marine loans of $3.3 million, almost entirely impacted by the merger with The Community Financial Corporation ("TCFC") in the third quarter of 2023. Total deposits increased $142.2 million, or 2.64%, to $5.53 billion at December 31, 2024 when compared to December 31, 2023. The increase in total deposits was primarily due to increases in noninterest-bearing deposits of $304.8 million and money market and savings deposits of $28.0 million. These increases were partially offset by decreases in interest-bearing checking deposits of $187.5 million and time deposits of $3.0 million. The increase in noninterest-bearing and overall deposits was due to the Bank's focus on customer acquisition and retention with superior customer service. During the second quarter of 2024, the Company reclassified $399.4 million of demand deposits, which carried an average rate of 4 bps, to noninterest-bearing deposits. Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits was $5.58 billion at December 31, 2024, compared to $5.28 billion at September 30, 2024 and $5.39 billion at December 31, 2023. The Bank had a $50.0 million FHLB advance at December 31, 2024 and at September 30, 2024, compared to zero at December 31, 2023. The advance consisted of an 18-month Bermuda Convertible note of $50.0 million. The Bank had zero brokered deposits at December 31, 2024 and at September 30, 2024, compared to $19.4 million at December 31, 2023. Total reciprocal deposits were $1.65 billion at December 31, 2024 and $1.29 billion at September 30, 2024 and at December 31, 2023.  The Bank's uninsured deposits were $905.3 million, or 16.38% of total deposits, at December 31, 2024. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, were $745.1 million, or 13.48% for same period. At December 31, 2024, the Bank had approximately $1.47 billion of available liquidity, including $459.9 million in cash and cash equivalents, $1.01 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $95.0 million in unsecured lines of credit. Total stockholders' equity increased $29.9 million, or 5.86%, when compared to December 31, 2023, primarily due to current year earnings, offset by cash dividends paid. As of December 31, 2024, the ratio of total equity to total assets was 8.68% and the ratio of total tangible equity to total tangible assets([2]) was 7.17%, compared to 8.50% and 6.78%, respectively, at December 31, 2023. ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. Review of Quarterly Financial Results Net interest income was $44.0 million for the fourth quarter of 2024, compared to $43.3 million for the third quarter of 2024 and $41.5 million for the fourth quarter of 2023. The increase in net interest income when compared to the third quarter of 2024 was primarily due to the increase in interest income of $1.7 million, partially offset by an increase in interest expense of $967 thousand. The increase in net interest income of $2.5 million, when compared to the fourth quarter of 2023, was primarily due to increase in interest and fees on loans of $1.5 million and an increase in interest on deposits at other institutions of $2.9 million, partially offset by higher interest expense on deposits and long-term borrowings of $2.8 million. The Company's net interest margin decreased to 3.03% for the fourth quarter of 2024 from 3.17% for the third quarter of 2024, primarily due to less net accretion interest income. Core NIM increased for the comparable periods from 2.84% to 2.85%. Excluding accretion interest, loan yields and funding costs decreased similarly at seven bps and nine bps, respectively, for the comparable periods. Interest expense for the fourth quarter of 2024 increased $967 thousand when compared to the third quarter of 2024. Money market and demand deposits repriced at favorable rates, and was partially offset by a large increase in seasonal higher rate municipal interest-bearing deposits. The Company's net interest margin decreased to 3.03% for the fourth quarter of 2024 from 3.09% for the fourth quarter of 2023. Comparing the fourth quarter of 2024 to the fourth quarter of 2023, the Company's interest-earning asset yields decreased 4 bps to 5.25% from 5.29%, while the cost of funds increased 6 bps to 2.31% from 2.25% for the same periods. The provision for credit losses was $780 thousand for the three months ended December 31, 2024. The comparable amounts were $1.5 million for the three months ended September 30, 2024 and $896 thousand for the three months ended December 31, 2023. The decrease in the provision for credit losses for the fourth quarter of 2024 compared to the third quarter of 2024 was due to an improved economic outlook, partially offset by loan growth in the fourth quarter of 2024. Coverage ratios decreased to 1.21% at December 31, 2024, from 1.24% at September 30, 2024 and at December 31, 2023. Net charge-offs remained flat at $1.3 million for the fourth quarter of 2024 compared to the third quarter of 2024, and were $500 thousand for the fourth quarter of 2023. Total noninterest income for the fourth quarter of 2024 was $8.9 million, an increase of $1.6 million from $7.3 million for the third quarter of 2024, and an increase of $1.3 million from $7.5 million for the fourth quarter of 2023. When comparing the fourth quarter of 2024 to the third quarter of 2024, the increase in noninterest income was primarily due to an increase in mortgage banking revenue of $849 thousand, driven by increased mortgage servicing activity and lower prepayment rates, and higher other noninterest income of $703 thousand resulting from the gain on sale of other assets held for sale. When comparing the fourth quarter of 2024 to the fourth quarter of 2023, the increase in noninterest income was primarily due to an increase in mortgage banking revenue of $921 thousand, driven by increased mortgage servicing activity and lower prepayment rates, and higher other noninterest income of $271 thousand resulting from the gain on sale of other assets held for sale. Total noninterest expense of $33.9 million for the fourth quarter of 2024 decreased $171 thousand compared to the third quarter of 2024 expense of $34.1 million, and increased $273 thousand compared to the fourth quarter of 2023 expense of $33.7 million. The decrease from the third quarter of 2024 was primarily due to the absence of the one-time data processing costs related to the fraud incident in the first quarter of 2024 and other fraud expenses incurred in the third quarter of 2024, partially offset by higher salaries and employee benefits for year end bonus accruals and an increase in occupancy related expenses. The increase from the fourth quarter of 2023 was primarily due to higher salaries and employee benefits and occupancy related expenses, partially offset by lower FDIC fees and amortization of intangible assets. The efficiency ratio for the fourth quarter of 2024 when compared to the third quarter of 2024 and the fourth quarter of 2023 was 64.21%, 67.49% and 68.61%, respectively. Non-GAAP efficiency ratios([3]) for the same periods were 60.28%, 62.10% and 61.99%, respectively. The net operating expense ratio, which is noninterest expense less noninterest income divided by average assets, for the fourth quarter of 2024 was 1.62%, compared to 1.84% and 1.80% for the third quarter of 2024 and the fourth quarter of 2023, respectively. The non-GAAP net operating expense ratio(1), which excludes core deposit intangible amortization and non-recurring activity, was 1.50% for the fourth quarter of 2024, compared to 1.65% and 1.58% for the third quarter of 2024 and the fourth quarter of 2023, respectively. ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. Review of Full-Year Financial Results The Company merged with TCFC and its wholly-owned subsidiary Community Bank of the Chesapeake on July 1, 2023 (the "merger"). The merger added $2.4 billion in assets, $454.5 million in investments, $1.8 billion in loans, $2.0 billion in deposits, $150.6 million in brokered deposits, $69.0 million in FHLB advances and $32.0 million in subordinated debt and trust preferred debentures. The larger footprint has accelerated growth in income and has expanded the cost base. Fiscal year 2024 has the full impact of the newly combined company. Net interest income for the year ended December 31, 2024 was $170.5 million, an increase of $35.2 million, or 26.05%, when compared to the year ended December 31, 2023. The increase in net interest income was primarily due to an increase in total interest income of $81.3 million, or 37.96%, which included an increase in interest and fees on loans of $75.3 million, or 38.74%. The increase in interest and fees on loans was primarily due to the increase in the average balance of loans of $1.08 billion, or 29.79%, and an increase in net accretion income of $5.1 million due to the merger. The increase in net interest income was partially offset by an increase in total interest expense of $46.0 million, or 58.42%, primarily due to increases in the cost of funds and the average balance of interest-bearing deposits of $749.2 million, or 25.09%. All of the increases in average balances were primarily due to the merger. The Company's net interest margin decreased from 3.11% for the year ended December 31, 2023 to 3.10% for the year ended December 31, 2024. Margins were flat as more rapid increases in rates on interest-bearing liabilities were offset by increases in interest-earning asset yields and larger balances in noninterest-bearing deposits. The increases in the average balances and rates paid on interest-bearing deposits of $749.2 million and 79 bps, respectively, were partially offset by increases in the average balance and yields earned on average earning assets of $1.16 billion and 44 bps, respectively. Additionally, margins were positively impacted as average balances of noninterest-bearing deposits increased $410.6 million, or 39.35%, from 24.86% of average funding for the year ended December 31, 2023 to 27.27% for the year ended December 31, 2024. Net accretion income impacted net interest margin by 27 bps and 21 bps for the years ended December 31, 2024 and 2023, respectively, which resulted in core NIMs of 2.83% and 2.90% for the same periods. The provision for credit losses for the years ended December 31, 2024 and 2023 was $4.7 million and $31.0 million, respectively. The decrease in the provision for credit losses was due to higher levels of reserves required by the Company's CECL model for the acquired portfolio related to the merger in 2023. Net charge-offs for the year ended December 31, 2024 were $4.1 million, compared to $2.0 million for the year ended December 31, 2023. Total noninterest income for the year ended December 31, 2024 decreased $2.0 million, or 6.07%, when compared to the same period in 2023. The decrease was primarily due to one-time bargain purchase gain of $8.8 million in the third quarter of 2023, partially offset by $2.2 million of losses on the sale of investment securities, which were both a direct result of the merger with TCFC in the third quarter of 2023. These were offset by increases in mortgage banking revenue, interchange fees and gain on sale of other assets Total noninterest expense for the year ended December 31, 2024 increased $14.9 million, or 12.10%, when compared to the same period in 2023. Noninterest expense line items increased as a result of the $4.7 million credit card fraud event and the expanded operations of the newly-combined larger Company. There were no merger-related expenses and $4.7 million of credit card fraud losses for the fiscal year 2024, compared to $17.4 million of merger-related expenses and no fraud losses for the fiscal year 2023, respectively. The Company continues to focus on streamlining processes to unlock operational efficiencies and reduce the growth rate of noninterest expenses to increase operating leverage. The efficiency ratio for the year ended December 31, 2024 was 68.55%, compared to 73.21% for the year ended December 31, 2023. Non-GAAP efficiency ratios for the same periods were 61.43% and 61.62%, respectively. The net operating expense ratio, which is noninterest expense less noninterest income divided by average assets, for the year ended December 31, 2024 was 1.82%, compared to 1.93% for the year ended December 31, 2023. The non-GAAP net operating expense ratio([4]), which excludes core deposit intangible amortization and non-recurring activity was 1.58% for the year ended December 31, 2024, compared to 1.57% for the year ended December 31, 2023. ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. 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; 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 war in Ukraine and the conflict in the Middle East; the effects of, and changes in, trade, monetary, and fiscal policies and laws, including 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; the impact of governmental efforts to restructure or adjust the U.S. financial regulatory system; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget; the impact of recent or future changes in FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; the Company's ability to remediate the existing material weaknesses identified in its internal control over financial reporting; the effectiveness of the Company's internal control over financial reporting and disclosure controls and procedures; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and other factors that may affect our future results. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (https://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. Shore Bancshares, Inc. Financial Highlights By Quarter and Year (Unaudited) Q4 2024 vs. Q4 2024 vs. Year Ended December 31, ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 2024 vs. 2023 PROFITABILITY FOR THE PERIOD Taxable-equivalent net interest income $ 44,093 $ 43,345 $ 42,222 $ 41,214 $ 41,606 1.73 % 5.98 % $ 170,874 $ 135,560 26.05 % Less: Taxable-equivalent adjustment 82 82 82 79 81 — 1.23 325 253 28.46 Net interest income 44,011 43,263 42,140 41,135 41,525 1.73 5.99 170,549 135,307 26.05 Provision for credit losses 780 1,470 2,081 407 896 (46.94) (12.95) 4,738 30,953 (84.69) Noninterest income 8,853 7,287 8,440 6,567 7,548 21.49 17.29 31,147 33,159 (6.07) Noninterest expense 33,943 34,114 33,499 36,698 33,670 (0.50) 0.80 138,254 123,329 12.10 Income before income taxes 18,141 14,966 15,000 10,597 14,507 21.21 25.05 58,704 14,184 313.87 Income tax expense 4,859 3,777 3,766 2,413 4,017 28.65 20.96 14,815 2,956 401.18 Net income $ 13,282 $ 11,189 $ 11,234 $ 8,184 $ 10,490 18.71 26.60 $ 43,889 $ 11,228 290.89 Return on average assets 0.86 % 0.77 % 0.77 % 0.57 % 0.72 % 9 bp 14 bp 0.74 % 0.24 % 50 bp Return on average assets excluding amortization of intangibles, fraud losses and merger-related expenses - non-GAAP (1), (2) 0.94 0.90 0.91 0.94 0.88 4 6 0.92 0.58 34 Return on average equity 9.82 8.41 8.70 6.38 8.21 141 161 8.35 2.54 581 Return on average tangible equity - non-GAAP (1), (2) 13.37 12.37 12.85 13.39 12.88 100 49 13.00 7.74 526 Interest rate spread 2.02 2.06 2.11 2.34 2.34 (4) (32) 2.14 2.42 (28) Net interest margin 3.03 3.17 3.11 3.08 3.09 (14) (6) 3.10 3.11 (1) Efficiency ratio - GAAP 64.21 67.49 66.23 76.93 68.61 (328) (440) 68.55 73.21 (466) Efficiency ratio - non-GAAP (1) 60.28 62.10 61.05 62.37 61.99 (182) (171) 61.43 61.62 (19) Noninterest income to average assets 0.57 0.50 0.58 0.46 0.52 7 5 0.53 0.71 (18) Noninterest expense to average assets 2.19 2.34 2.31 2.56 2.33 (15) (14) 2.34 2.64 (30) Net operating expense to average assets - GAAP 1.62 1.84 1.73 2.10 1.80 (22) (18) 1.82 1.93 (11) Net operating expense to average assets - non-GAAP (1) 1.50 1.65 1.55 1.62 1.58 (15) (8) 1.58 1.57 1 PER SHARE DATA Basic net income per common share $ 0.40 $ 0.34 $ 0.34 $ 0.25 $ 0.32 17.65 % 25.00 % $ 1.32 $ 0.42 214.29 % Diluted net income per common share 0.40 0.34 0.34 0.25 0.31 17.65 29.03 1.32 0.42 214.29 Dividends paid per common share 0.12 0.12 0.12 0.12 0.12 — — 0.48 0.48 — Book value per common share at period end 16.23 16.00 15.74 15.51 15.41 1.44 5.32 16.23 15.41 5.32 Tangible book value per common share at period end - non-GAAP (1) 13.19 12.88 12.54 12.24 12.06 2.41 9.37 13.19 12.06 9.37 Market value at period end 15.85 13.99 11.45 11.50 14.25 13.30 11.23 15.85 14.25 11.23 Market range: High 17.61 14.99 11.90 14.38 14.51 17.48 21.36 17.61 18.15 (2.98) Low 13.21 11.03 10.06 10.56 9.66 19.76 36.75 10.06 9.66 4.14 ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. (2) This ratio excludes merger-related expenses. See the Reconciliation of GAAP and non-GAAP Measures tables. Shore Bancshares, Inc. Financial Highlights By Quarter and Year (Unaudited) - Continued Q4 2024 vs. Q4 2024 vs. Year Ended December 31, ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 2024 vs. 2023 AVERAGE BALANCE SHEET DATA Loans $ 4,796,245 $ 4,734,001 $ 4,706,510 $ 4,655,183 $ 4,639,467 1.31 % 3.38 % $ 4,723,215 $ 3,639,058 29.79 % Investment securities 655,610 656,375 706,079 655,323 619,920 (0.12) 5.76 668,279 674,866 (0.98) Earning assets 5,798,454 5,435,311 5,459,961 5,387,782 5,339,833 6.68 8.59 5,520,904 4,356,855 26.72 Assets 6,163,497 5,810,492 5,839,328 5,774,824 5,745,440 6.08 7.28 5,896,931 4,663,539 26.45 Deposits 5,461,583 5,086,348 5,064,974 5,142,658 5,136,818 7.38 6.32 5,188,812 4,029,014 28.79 FHLB advances 50,000 83,500 143,769 4,000 1,141 (40.12) 4282.12 70,298 111,392 (36.89) Subordinated debt & TRUPS 73,578 72,946 72,680 72,418 72,155 0.87 1.97 72,907 57,708 26.34 Stockholders' equity 538,184 529,155 519,478 515,976 507,040 1.71 6.14 525,742 441,790 19.00 CREDIT QUALITY DATA Net charge-offs $ 1,333 $ 1,379 $ 886 $ 565 $ 500 (3.34) % 166.60 % 4,072 2,019 101.68 % Nonaccrual loans $ 21,008 $ 14,844 $ 14,837 $ 12,776 $ 12,784 41.53 % 64.33 % Loans 90 days past due and still accruing 294 454 414 1,560 738 (35.24) (60.16) Other real estate owned and repossessed property 3,494 485 1,739 2,024 179 620.41 1,851.96 Total nonperforming assets $ 24,796 $ 15,783 $ 16,990 $ 16,360 $ 13,701 57.11 80.98 Shore Bancshares, Inc. Financial Highlights By Quarter and Year (Unaudited) - Continued Q4 2024 vs. Q4 2024 vs. Year Ended December 31, ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 2024 vs. 2023 CAPITAL AND CREDIT QUALITY RATIOS Period-end equity to assets 8.68 % 9.01 % 8.92 % 8.84 % 8.50 % (33) bp 18 bp Period-end tangible equity to tangible assets - non-GAAP (1) 7.17 7.39 7.23 7.11 6.78 (22) 39 Annualized net charge-offs to average loans 0.11 % 0.12 % 0.08 % 0.05 % 0.04 % (1) bp 7 bp 0.09 % 0.06 % 3 bp Allowance for credit losses as a percent of: Period-end loans 1.21 % 1.24 % 1.24 % 1.23 % 1.24 % (3) bp (3) bp Nonaccrual loans 275.66 395.24 394.14 448.78 448.62 (11,958) (17,296) Nonperforming assets 233.55 371.72 344.19 350.46 418.59 (13,817) (18,504) As a percent of total loans: Nonaccrual loans 0.44 % 0.31 % 0.32 % 0.27 % 0.28 % 13 bp 16 bp As a percent of total loans, other real estate owned and repossessed property Nonperforming assets 0.52 % 0.33 % 0.36 % 0.35 % 0.30 % 19 bp 22 bp As a percent of total assets: Nonaccrual loans 0.34 % 0.25 % 0.25 % 0.22 % 0.21 % 9 bp 13 bp Nonperforming assets 0.40 0.27 0.29 0.28 0.23 13 17 ____________________________________ (1) See the Reconciliation of GAAP and non-GAAP Measures tables. Shore Bancshares, Inc. Financial Highlights By Quarter and Year (Unaudited) - Continued Q4 2024 vs. Q4 2024 vs. Year Ended December 31, ($ in thousands) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 2024 vs. 2023 The Company Amounts Common Tier 1 Capital to RWA $ 458,258 $ 446,402 $ 435,238 $ 421,670 $ 408,317 2.66 % 12.23 % Tier 1 Capital to RWA 488,105 476,170 464,554 450,907 437,847 2.51 11.48 Total Capital to RWA 591,228 579,664 567,680 552,657 539,572 1.99 9.57 Tier 1 Capital to AA (Leverage) 488,105 476,170 464,554 450,907 437,847 2.51 11.48 The Company Ratios Common Tier 1 Capital to RWA 9.44 % 9.27 % 9.06 % 8.91 % 8.69 % 17 bp 75 bp Tier 1 Capital to RWA 10.06 9.89 9.67 9.53 9.32 17 74 Total Capital to RWA 12.18 12.04 11.82 11.68 11.49 14 69 Tier 1 Capital to AA (Leverage) 8.02 8.31 8.07 7.93 7.75 (29) 27 The Bank Amounts Common Tier 1 Capital to RWA $ 521,453 $ 509,511 $ 501,003 $ 487,494 $ 470,200 2.34 % 10.90 % Tier 1 Capital to RWA 521,453 509,511 501,003 487,494 470,200 2.34 10.90 Total Capital to RWA 580,706 569,317 560,625 545,922 528,786 2.00 9.82 Tier 1 Capital to AA (Leverage) 521,453 509,511 501,003 487,494 470,200 2.34 10.90 The Bank Ratios Common Tier 1 Capital to RWA 10.75 % 10.60 % 10.45 % 10.32 % 10.02 % 15 bp 73 bp Tier 1 Capital to RWA 10.75 10.60 10.45 10.32 10.02 15 73 Total Capital to RWA 11.97 11.84 11.69 11.56 11.27 13 70 Tier 1 Capital to AA (Leverage) 8.58 8.90 8.71 8.58 8.33 (32) 25 Shore Bancshares, Inc. Consolidated Balance Sheets (Unaudited) December 31, 2024 compared to ($ in thousands, except per share data) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 December 31, 2023 ASSETS Cash and due from banks $ 44,008 $ 52,363 $ 50,090 $ 43,079 $ 63,172 (30.34) % Interest-bearing deposits with other banks 415,843 131,258 88,793 71,481 309,241 34.47 Cash and cash equivalents 459,851 183,621 138,883 114,560 372,413 23.48 Investment securities: Available for sale, at fair value 149,212 133,339 131,594 179,496 110,521 35.01 Held to maturity, net of allowance for credit losses 481,077 484,583 499,431 503,822 513,188 (6.26) Equity securities, at fair value 5,814 5,950 5,699 5,681 5,703 1.95 Restricted securities, at cost 20,253 20,253 21,725 17,863 17,900 13.15 Loans held for sale, at fair value 19,606 26,877 27,829 13,767 8,782 123.25 Loans held for investment 4,771,988 4,733,909 4,705,737 4,648,725 4,641,010 2.82 Less: allowance for credit losses (57,910) (58,669) (58,478) (57,336) (57,351) (0.97) Loans, net 4,714,078 4,675,240 4,647,259 4,591,389 4,583,659 2.85 Premises and equipment, net 81,806 81,663 82,176 83,084 82,386 (0.70) Goodwill 63,266 63,266 63,266 63,266 63,266 — Other intangible assets, net 38,311 40,609 42,945 45,515 48,090 (20.33) Mortgage servicing rights, at fair value 5,874 5,309 5,995 5,821 5,926 (0.88) Right-of-use assets 11,385 11,384 11,762 12,153 12,487 (8.83) Cash surrender value on life insurance 104,421 103,729 102,969 102,321 101,704 2.67 Accrued interest receivable 19,570 19,992 19,641 19,541 19,217 1.84 Deferred income taxes 31,857 32,191 36,078 38,978 40,707 (21.74) Other assets 24,382 29,698 26,765 28,447 24,969 (2.35) TOTAL ASSETS $ 6,230,763 $ 5,917,704 $ 5,864,017 $ 5,825,704 $ 6,010,918 3.66 Shore Bancshares, Inc. Consolidated Balance Sheets (Unaudited) - Continued December 31, 2024 compared to ($ in thousands, except per share data) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 December 31, 2023 LIABILITIES Deposits: Noninterest-bearing $ 1,562,815 $ 1,571,393 $ 1,587,252 $ 1,200,680 $ 1,258,037 24.23 % Interest-bearing checking 978,076 751,533 658,512 1,101,954 1,165,546 (16.08) Money market and savings 1,805,884 1,634,140 1,689,343 1,712,303 1,777,927 1.57 Time deposits 1,181,561 1,268,657 1,213,778 1,169,342 1,184,610 (0.26) Total deposits 5,528,336 5,225,723 5,148,885 5,184,279 5,386,120 2.64 FHLB advances - short-term — — 31,000 — — — FHLB advances 50,000 50,000 50,000 — — — Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") 29,847 29,768 29,316 29,237 29,158 2.36 Subordinated debt 43,870 43,688 43,504 43,322 43,139 1.69 Total borrowings 123,717 123,456 153,820 72,559 72,297 71.12 Lease liabilities 11,844 11,816 12,189 12,552 12,857 (7.88) Other liabilities 25,800 23,438 26,340 41,086 28,509 (9.50) TOTAL LIABILITIES 5,689,697 5,384,433 5,341,234 5,310,476 5,499,783 3.45 STOCKHOLDERS' EQUITY Common stock, par value $0.01 per share 333 333 333 332 332 0.30 Additional paid in capital 358,112 357,580 356,994 356,464 356,007 0.59 Retained earnings 190,166 180,884 173,716 166,490 162,290 17.18 Accumulated other comprehensive loss (7,545) (5,526) (8,260) (8,058) (7,494) (0.68) TOTAL STOCKHOLDERS' EQUITY 541,066 533,271 522,783 515,228 511,135 5.86 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,230,763 $ 5,917,704 $ 5,864,017 $ 5,825,704 $ 6,010,918 3.66 Period-end common shares outstanding 33,332,177 33,326,772 33,214,522 33,210,522 33,161,532 0.51 Book value per common share $ 16.23 $ 16.00 $ 15.74 $ 15.51 $ 15.41 5.32 Shore Bancshares, Inc. Consolidated Statements of Income By Quarter (Unaudited) Q4 2024 vs. Q4 2024 vs. compared to compared to Year Ended December 31, ($ in thousands, except share and per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 % Change INTEREST INCOME Interest and fees on loans $ 67,428 $ 69,157 $ 67,292 $ 65,754 $ 65,914 (2.50) % 2.30 % $ 269,631 $ 194,339 38.74 % Interest on investment securities: Taxable 4,833 4,962 5,230 4,419 3,992 (2.60) 21.07 19,444 16,832 15.52 Tax-exempt 6 6 6 6 6 — — 24 46 (47.83) Interest on federal funds sold — — — — — — — — 92 (100.00) Interest on deposits with other banks 4,137 564 578 960 1,224 633.51 237.99 6,239 2,770 125.23 Total interest income 76,404 74,689 73,106 71,139 71,136 2.30 7.41 295,338 214,079 37.96 INTEREST EXPENSE Interest on deposits 30,363 28,856 27,585 28,497 28,133 5.22 7.93 115,301 68,800 67.59 Interest on short-term borrowings — 491 1,584 56 16 (100.00) (100.00) 2,131 5,518 (61.38) Interest on long-term borrowings 2,030 2,079 1,797 1,451 1,462 (2.36) 38.85 7,357 4,454 65.18 Total interest expense 32,393 31,426 30,966 30,004 29,611 3.08 9.40 124,789 78,772 58.42 NET INTEREST INCOME 44,011 43,263 42,140 41,135 41,525 1.73 5.99 170,549 135,307 26.05 Provision for credit losses 780 1,470 2,081 407 896 (46.94) (12.90) 4,738 30,953 (84.69) NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 43,231 41,793 40,059 40,728 40,629 3.44 6.40 165,811 104,354 58.89 NONINTEREST INCOME Service charges on deposit accounts 1,606 1,543 1,493 1,507 1,519 4.08 5.73 6,149 5,501 11.78 Trust and investment fee income 857 880 896 734 844 (2.61) 1.54 3,367 3,608 (6.68) Loss on sales and calls of investment securities — — — — — — — — (2,166) 100.00 Interchange credits 1,726 1,711 1,717 1,587 1,633 0.88 5.70 6,741 5,714 17.97 Mortgage banking revenue 2,026 1,177 1,983 801 1,105 72.13 83.35 5,987 4,513 32.66 Title Company revenue 59 100 165 78 139 (41.00) (57.55) 402 551 (27.04) Bargain purchase gain — — — — — — — — 8,816 (100.00) Other noninterest income 2,579 1,876 2,186 1,860 2,308 37.47 11.74 8,501 6,622 28.38 Total noninterest income $ 8,853 $ 7,287 $ 8,440 $ 6,567 $ 7,548 21.49 17.29 $ 31,147 $ 33,159 (6.07) Shore Bancshares, Inc. Consolidated Statements of Income By Quarter (Unaudited) - Continued Q4 2024 vs. Q4 2024 vs. compared to compared to Year Ended December 31, ($ in thousands, except share and per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Q3 2024 Q4 2023 2024 2023 % Change NONINTEREST EXPENSE Salaries and employee benefits $ 17,209 $ 16,523 $ 16,900 $ 15,949 $ 16,212 4.15 % 6.15 % $ 66,579 $ 57,003 16.80 % Occupancy expense 2,474 2,384 2,432 2,416 2,328 3.78 6.27 9,706 7,791 24.58 Furniture and equipment expense 760 876 900 904 790 (13.24) (3.80) 3,441 2,551 34.89 Data processing 3,067 3,081 2,978 2,867 2,762 (0.45) 11.04 12,329 8,783 40.37 Directors' fees 460 443 359 295 426 3.84 7.98 1,557 1,156 34.69 Amortization of intangible assets 2,298 2,336 2,569 2,576 2,595 (1.63) (11.45) 9,779 6,105 60.18 FDIC insurance premium expense 1,013 1,160 1,089 1,150 1,733 (12.67) (41.55) 4,413 3,479 26.85 Legal and professional fees 1,521 1,362 1,354 1,599 1,411 11.67 7.80 5,836 4,337 34.56 Fraud losses(1) 98 673 62 4,502 503 (85.44) (80.52) 4,998 879 468.60 Merger-related expenses — — — — 602 — (100.00) — 17,356 (100.00) Other noninterest expenses 5,043 5,276 4,856 4,440 4,308 (4.42) 17.06 19,616 13,889 41.23 Total noninterest expense 33,943 34,114 33,499 36,698 33,670 (0.50) 0.81 138,254 123,329 12.10 Income before income taxes 18,141 14,966 15,000 10,597 14,507 21.21 25.05 58,704 14,184 313.87 Income tax expense 4,859 3,777 3,766 2,413 4,017 28.65 20.96 14,815 2,956 401.18 NET INCOME $ 13,282 $ 11,189 $ 11,234 $ 8,184 $ 10,490 18.71 26.62 $ 43,889 $ 11,228 290.89 Weighted average shares outstanding - basic 33,327 33,318 33,234 33,189 33,153 0.03 % 0.53 % 33,267 26,572 25.20 % Weighted average shares outstanding - diluted 33,364 33,339 33,234 33,191 33,322 0.07 % 0.12 % 33,285 26,574 25.25 % Basic net income per common share $ 0.40 $ 0.34 $ 0.34 $ 0.25 $ 0.32 17.65 % 25.00 % $ 1.32 $ 0.42 214.29 % Diluted net income per common share $ 0.40 $ 0.34 $ 0.34 $ 0.25 $ 0.31 17.65 % 29.03 % $ 1.32 $ 0.42 214.29 % Dividends paid per common share $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.12 — % — % $ 0.48 $ 0.48 — % ____________________________________ (1) Fraud losses for the third quarter of 2024 and first quarter of 2024 include $337 thousand and $4.3 million in losses related to the one-time online credit card account opening event. The third quarter of 2024 expense of $337 thousand was related to non-recurring data processing charges to close the fraudulent accounts. Shore Bancshares, Inc. Consolidated Average Balance Sheets (Unaudited) Three Months Ended December 31, 2024 December 31, 2023 September 30, 2024 ($ in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Earning assets Loans(1), (2), (3) Commercial real estate $ 2,551,903 $ 36,036 5.62 % $ 2,509,904 $ 35,561 5.62 % $ 2,522,170 $ 36,376 5.74 % Residential real estate 1,358,066 18,142 5.31 1,242,852 17,512 5.59 1,332,891 19,315 5.76 Construction 336,094 5,304 6.28 322,267 4,588 5.65 336,209 5,307 6.28 Commercial 229,676 3,792 6.57 222,632 4,308 7.68 212,611 3,763 7.04 Consumer 313,686 4,080 5.17 335,492 3,858 4.56 322,988 4,306 5.30 Credit cards 6,820 154 8.98 6,320 166 10.42 7,132 170 9.48 Total loans 4,796,245 67,508 5.60 4,639,467 65,993 5.64 4,734,001 69,237 5.82 Investment securities Taxable 654,955 4,833 2.95 619,259 3,992 2.58 655,718 4,962 3.03 Tax-exempt(1) 655 8 4.89 661 8 4.84 657 8 4.87 Interest-bearing deposits 346,599 4,137 4.75 80,446 1,224 6.04 44,935 564 4.99 Total earning assets 5,798,454 76,486 5.25 5,339,833 71,217 5.29 5,435,311 74,771 5.47 Cash and due from banks 43,444 63,506 46,996 Other assets 380,321 399,409 386,700 Allowance for credit losses (58,722) (57,308) (58,515) Total assets $ 6,163,497 $ 5,745,440 $ 5,810,492 Shore Bancshares, Inc. Consolidated Average Balance Sheets (Unaudited) - Continued Three Months Ended December 31, 2024 December 31, 2023 September 30, 2024 ($ in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Interest-bearing liabilities Interest-bearing checking deposits $ 901,764 $ 7,898 3.48 % $ 1,117,117 $ 6,673 2.37 % $ 581,517 $ 5,472 3.74 % Money market and savings deposits 1,733,934 10,331 2.37 1,605,930 8,330 2.06 1,670,210 10,420 2.48 Time deposits 1,232,480 12,134 3.92 1,092,871 11,783 4.28 1,229,273 12,742 4.12 Brokered deposits — — — 92,840 1,347 5.76 25,829 222 3.42 Interest-bearing deposits(4) 3,868,178 30,363 3.12 3,908,758 28,133 2.86 3,506,829 28,856 3.27 FHLB advances 50,000 618 4.92 1,141 16 5.56 83,500 1,116 5.32 Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4) 73,578 1,412 7.63 72,155 1,462 8.04 72,946 1,454 7.93 Total interest-bearing liabilities 3,991,756 32,393 3.23 3,982,054 29,611 2.95 3,663,275 31,426 3.41 Noninterest-bearing deposits 1,593,405 1,228,060 1,579,519 Accrued expenses and other liabilities 40,152 28,286 38,543 Stockholders' equity 538,184 507,040 529,155 Total liabilities and stockholders' equity $ 6,163,497 $ 5,745,440 $ 5,810,492 Net interest income $ 44,093 $ 41,606 $ 43,345 Net interest spread 2.02 % 2.34 % 2.06 % Net interest margin 3.03 3.09 3.17 Cost of funds 2.31 2.25 2.38 Cost of deposits 2.21 2.17 2.26 Cost of debt 6.54 8.00 6.54 ____________________________________ (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 $3.2 million, $4.8 million and $5.0 million of accretion interest on loans for the three months ended December 31, 2024 and 2023, and September 30, 2024, respectively. (4) Interest expense on deposits and borrowing includes amortization of deposit discount and amortization of borrowing fair value adjustments. There were $412 thousand, $1.5 million and $287 thousand of amortization of deposits premium, and $232 thousand, $232 thousand, and $232 thousand of amortization of borrowing fair value adjustments for the three months ended December 31, 2024 and 2023, and September 30, 2024, respectively. Shore Bancshares, Inc. Consolidated Average Balance Sheets (Unaudited) - Continued For the Year Ended December 31, 2024 2023 ($ in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Earning assets Loans (1), (2), (3) Commercial real estate $ 2,528,961 $ 144,155 5.70 % $ 1,860,517 $ 99,953 5.37 % Residential real estate 1,318,500 72,636 5.51 981,473 50,244 5.12 Construction 322,978 19,917 6.17 284,238 15,123 5.32 Commercial 220,699 15,625 7.08 185,239 13,647 7.37 Consumer 324,633 16,923 5.21 324,444 15,298 4.72 Credit cards 7,444 694 9.32 3,147 315 10.01 Total loans 4,723,215 269,950 5.72 3,639,058 194,580 5.35 Investment securities Taxable 667,622 19,444 2.91 674,203 16,832 2.50 Tax-exempt (1) 657 30 4.57 663 58 8.75 Federal funds sold — — — 1,899 92 4.84 Interest-bearing deposits 129,410 6,239 4.82 41,032 2,770 6.75 Total earning assets 5,520,904 295,663 5.36 4,356,855 214,332 4.92 Cash and due from banks 46,264 43,555 Other assets 387,852 303,906 Allowance for credit losses (58,089) (40,777) Total assets $ 5,896,931 $ 4,663,539 Shore Bancshares, Inc. Consolidated Average Balance Sheets (Unaudited) - Continued For the Year Ended December 31, 2024 2023 ($ in thousands) Average Balance Interest Yield/Rate Average Balance Interest Yield/Rate Interest-bearing liabilities Interest-bearing checking deposits $ 825,773 $ 25,523 3.09 % $ 883,976 $ 20,134 2.28 % Money market and savings deposits 1,690,905 41,202 2.44 1,275,088 20,039 1.57 Time deposits 1,212,782 48,566 4.00 770,370 25,708 3.34 Brokered deposits 5,265 10 0.19 56,101 2,919 5.20 Interest-bearing deposits (4) 3,734,725 115,301 3.09 2,985,535 68,800 2.30 FHLB advances 70,298 3,720 5.29 111,392 5,518 4.95 Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4) 72,907 5,768 7.91 57,708 4,454 7.72 Total interest-bearing liabilities 3,877,930 124,789 3.22 3,154,635 78,772 2.50 Noninterest-bearing deposits 1,454,087 1,043,479 Accrued expenses and other liabilities 39,172 23,635 Stockholders' equity 525,742 441,790 Total liabilities and stockholders' equity $ 5,896,931 $ 4,663,539 Net interest income $ 170,874 $ 135,560 Net interest spread 2.14 % 2.42 % Net interest margin 3.10 3.11 Cost of funds 2.34 1.88 Cost of deposits 2.22 1.71 Cost of debt 6.63 5.90 ____________________________________ (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 $16.9 million and $11.8 million of accretion interest on loans for the years ended December 31, 2024 and 2023, respectively. (4) Interest expense on deposits and borrowing includes amortization of deposit premiums and amortization of borrowing fair value adjustment. There were $1.5 million of amortization of deposit discounts and $1.8 million of amortization of deposit premium, and $926 thousand and $557 thousand of amortization of borrowing fair value adjustment for the years ended December 31, 2024 and 2023, respectively. Shore Bancshares, Inc. Reconciliation of GAAP and Non-GAAP Measures (Unaudited) YTD YTD ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 12/31/2024 12/31/2023 The following reconciles return on average assets, average equity and return on average tangible equity(1): Net income (loss) $ 13,282 $ 11,189 $ 11,234 $ 8,184 $ 10,490 $ 43,889 $ 11,228 Net income (loss) - annualized (A) $ 52,839 $ 44,513 $ 45,183 $ 32,916 $ 41,618 $ 43,889 $ 11,228 Net income (loss) $ 13,282 $ 11,189 $ 11,234 $ 8,184 $ 10,490 $ 43,889 $ 11,228 Add: Amortization of intangible assets, net of tax 1,683 1,746 1,924 1,989 1,876 7,342 4,254 Add: Merger expenses, net of tax — — — — 435 — 11,637 Add: Credit card fraud losses, net of tax — 252 — 3,339 — 3,591 — Less: Sale and fair value of held for sale assets, net of tax (329) — — — — (329) Net income, excluding net amortization of intangible assets, merger-related expenses, credit card fraud losses and held for sale assets 14,636 13,187 13,158 13,512 12,801 54,493 27,119 Net income, excluding net amortization of intangible assets, merger-related expenses, credit card fraud losses and held for sale assets - annualized (B) $ 58,226 $ 52,461 $ 52,921 $ 54,345 $ 50,787 $ 54,493 $ 27,119 Return on average assets (GAAP) 0.86 % 0.77 % 0.77 % 0.57 % 0.72 % 0.74 % 0.24 % Return on average assets excluding net amortization of intangible assets, merger-related expenses, credit card fraud losses and held for sale assets - (non-GAAP) 0.94 % 0.90 % 0.91 % 0.94 % 0.88 % 0.92 % 0.58 % Average assets $ 6,163,497 $ 5,810,492 $ 5,839,328 $ 5,774,824 $ 5,745,440 $ 5,896,931 $ 4,663,539 Average stockholders' equity (C) $ 538,184 $ 529,155 $ 519,478 $ 515,976 $ 507,040 $ 525,742 $ 441,790 Less: Average goodwill and core deposit intangible (102,794) (105,136) (107,594) (110,167) (112,752) (106,409) (91,471) Average tangible equity (D) $ 435,390 $ 424,019 $ 411,884 $ 405,809 $ 394,288 $ 419,333 $ 350,319 Return on average equity (GAAP) (A)/(C) 9.82 % 8.41 % 8.70 % 6.38 % 8.21 % 8.35 % 2.54 % Return on average tangible equity (non-GAAP) (A)/(D) 12.14 % 10.50 % 10.97 % 8.11 % 10.56 % 10.47 % 3.21 % Return on average tangible equity (non-GAAP) (B)/(D) 13.37 % 12.37 % 12.85 % 13.39 % 12.88 % 13.00 % 7.74 % Shore Bancshares, Inc. Reconciliation of GAAP and Non-GAAP Measures (Unaudited) - Continued YTD YTD ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 12/31/2024 12/31/2023 The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio(2): Noninterest expense (E) $ 33,943 $ 34,114 $ 33,499 $ 36,698 $ 33,670 $ 138,254 $ 123,329 Less: Amortization of intangible assets (2,298) (2,336) (2,569) (2,576) (2,595) (9,779) (6,105) Less: Merger expenses — — — — (602) — (17,356) Less: Credit card fraud losses — (337) — (4,323) — (4,660) — Adjusted noninterest expense (F) $ 31,645 $ 31,441 $ 30,930 $ 29,799 $ 30,473 $ 123,815 $ 99,868 Net interest income (G) $ 44,011 $ 43,263 $ 42,140 $ 41,135 $ 41,525 $ 170,549 $ 135,307 Add: Taxable-equivalent adjustment 82 82 82 79 81 325 253 Taxable-equivalent net interest income (H) $ 44,093 $ 43,345 $ 42,222 $ 41,214 $ 41,606 $ 170,874 $ 135,560 Noninterest income (I) $ 8,853 $ 7,287 $ 8,440 $ 6,567 $ 7,548 $ 31,147 $ 33,159 Investment securities losses (gains) — — — — — — 2,166 Less: Bargain purchase gain — — — — — — (8,816) Less: Sale and fair value of held for sale assets (450) — — — — (450) — Adjusted noninterest income (J) $ 8,403 $ 7,287 $ 8,440 $ 6,567 $ 7,548 $ 30,697 $ 26,509 Efficiency ratio (GAAP) (E)/(G)+(I) 64.21 % 67.49 % 66.23 % 76.93 % 68.61 % 68.55 % 73.21 % Efficiency ratio (Non-GAAP) (F)/(H)+(J) 60.28 % 62.10 % 61.05 % 62.37 % 61.99 % 61.43 % 61.62 % Net operating expense to average assets (GAAP) 1.62 % 1.84 % 1.73 % 2.10 % 1.80 % 1.82 % 1.93 % Net operating expense to average assets (Non-GAAP) 1.50 % 1.65 % 1.55 % 1.62 % 1.58 % 1.58 % 1.57 % Shore Bancshares, Inc. Reconciliation of GAAP and Non-GAAP Measures (Unaudited) - Continued ($ in thousands, except per share data) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 The following reconciles book value per common share and tangible book value per common share(1): Stockholders' equity (K) $ 541,066 $ 533,271 $ 522,783 $ 515,228 $ 511,135 Less: Goodwill and core deposit intangible (101,577) (103,875) (106,211) (108,781) (111,356) Tangible equity (L) $ 439,489 $ 429,396 $ 416,572 $ 406,447 $ 399,779 Shares outstanding (M) 33,332 33,327 33,272 33,211 33,162 Book value per common share (GAAP) (K)/(M) $ 16.23 $ 16.00 $ 15.71 $ 15.51 $ 15.41 Tangible book value per common share (non-GAAP) (L)/(M) $ 13.19 $ 12.88 $ 12.52 $ 12.24 $ 12.06 The following reconciles equity to assets and tangible equity to tangible assets(1): Stockholders' equity (N) $ 541,066 $ 533,271 $ 522,783 $ 515,228 $ 511,135 Less: Goodwill and core deposit intangible (101,577) (103,875) (106,211) (108,781) (111,356) Tangible equity (O) $ 439,489 $ 429,396 $ 416,572 $ 406,447 $ 399,779 Assets (P) $ 6,230,763 $ 5,917,704 $ 5,864,017 $ 5,825,704 $ 6,010,918 Less: Goodwill and core deposit intangible (101,577) (103,875) (106,211) (108,781) (111,356) Tangible assets (Q) $ 6,129,186 $ 5,813,829 $ 5,757,806 $ 5,716,923 $ 5,899,562 Period-end equity/assets (GAAP) (N)/(P) 8.68 % 9.01 % 8.92 % 8.84 % 8.50 % Period-end tangible equity/tangible assets (Non-GAAP) (O)/(Q) 7.17 % 7.39 % 7.23 % 7.11 % 6.78 % ____________________________________ (1) Management believes that reporting tangible equity and tangible assets more closely approximates the adequacy of capital for regulatory purposes. (2) Management believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling cash-based operating activities. Shore Bancshares, Inc. Reconciliation of GAAP and Non-GAAP Measures (Unaudited) - Continued Regulatory Capital and Ratios for the Company ($ in thousands) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Common equity $ 541,066 $ 533,271 $ 522,783 $ 515,228 $ 511,135 Goodwill(1) (61,362) (61,397) (61,460) (61,523) (63,266) Core deposit intangible(2) (28,991) (30,572) (32,313) (34,235) (38,069) DTAs that arise from net operating loss and tax credit carry forwards — (426) (2,032) (5,858) (8,977) AOCI (gains) losses 7,545 5,526 8,260 8,058 7,494 Common Equity Tier 1 Capital 458,258 446,402 435,238 421,670 408,317 TRUPS 29,847 29,768 29,316 29,237 29,530 Tier 1 Capital 488,105 476,170 464,554 450,907 437,847 Allowable reserve for credit losses and other Tier 2 adjustments 59,253 59,806 59,622 58,428 58,586 Subordinated notes 43,870 43,688 43,504 43,322 43,139 Total Capital $ 591,228 $ 579,664 $ 567,680 $ 552,657 $ 539,572 Risk-Weighted Assets ("RWA") $ 4,852,564 $ 4,816,165 $ 4,803,230 $ 4,729,930 $ 4,697,504 Average Assets ("AA") 6,083,760 5,729,576 5,756,260 5,684,150 5,649,116 Common Tier 1 Capital to RWA 9.44 % 9.27 % 9.06 % 8.91 % 8.69 % Tier 1 Capital to RWA 10.06 9.89 9.67 9.53 9.32 Total Capital to RWA 12.18 12.04 11.82 11.68 11.49 Tier 1 Capital to AA (Leverage)(3) 8.02 8.31 8.07 7.93 7.75 Shore Bancshares, Inc. Reconciliation of GAAP and Non-GAAP Measures (Unaudited) - Continued Regulatory Capital and Ratios for the Bank ($ in thousands) Q4 2024 Q3 2024 Q2 2024 Q1 2024 Q4 2023 Common equity $ 604,261 $ 595,954 $ 587,283 $ 579,520 $ 570,100 Goodwill(1) (61,362) (61,397) (61,460) (61,523) (63,266) Core deposit intangible(2) (28,991) (30,572) (32,313) (34,235) (38,069) DTAs that arise from net operating loss and tax credit carry forwards — — (767) (4,326) (6,059) AOCI (gains) losses 7,545 5,526 8,260 8,058 7,494 Common Equity Tier 1 Capital 521,453 509,511 501,003 487,494 470,200 TRUPS — — — — — Tier 1 Capital 521,453 509,511 501,003 487,494 470,200 Allowable reserve for credit losses and other Tier 2 adjustments 59,253 59,806 59,622 58,428 58,586 Subordinated notes — — — — — Total Capital $ 580,706 $ 569,317 $ 560,625 $ 545,922 $ 528,786 Risk-Weighted Assets ("RWA") $ 4,851,903 $ 4,808,058 $ 4,796,512 $ 4,723,872 $ 4,693,009 Average Assets ("AA") 6,077,540 5,721,995 5,750,604 5,679,282 5,644,930 Common Tier 1 Capital to RWA 10.75 % 10.60 % 10.45 % 10.32 % 10.02 % Tier 1 Capital to RWA 10.75 10.60 10.45 10.32 10.02 Total Capital to RWA 11.97 11.84 11.69 11.56 11.27 Tier 1 Capital to AA (Leverage)(3) 8.58 8.90 8.71 8.58 8.33 ___________________________________ (1) Goodwill is net of deferred tax liability. (2) Core deposit intangible is net of deferred tax liability. (3) Tier 1 Capital to AA (Leverage) has no capital conservation buffer defined. The PCA well capitalized is defined as 5.00%. Shore Bancshares, Inc. Summary of Loan Portfolio (Unaudited) Portfolio loans are summarized by loan type as follows: ($ in thousands) December 31, 2024 % September 30, 2024 % June 30, 2024 % March 31, 2024 % December 31, 2023 % Portfolio Loans by Loan Type Commercial real estate $ 2,557,806 53.60 % $ 2,535,004 53.55 % $ 2,546,114 54.10 % $ 2,531,076 54.45 % $ 2,536,861 54.67 % Residential real estate 1,329,406 27.86 1,312,375 27.72 1,280,973 27.22 1,256,925 27.04 1,239,731 26.71 Construction 335,999 7.04 337,113 7.12 327,875 6.97 299,133 6.43 299,000 6.44 Commercial 237,932 4.99 225,083 4.76 218,987 4.65 229,594 4.94 229,939 4.95 Consumer 303,746 6.36 317,149 6.70 324,480 6.90 325,076 6.99 328,896 7.09 Credit cards 7,099 0.15 7,185 0.15 7,308 0.16 6,921 0.15 6,583 0.14 Total loans 4,771,988 100.00 % 4,733,909 100.00 % 4,705,737 100.00 % 4,648,725 100.00 % 4,641,010 100.00 % Less: Allowance for credit losses (57,910) (58,669) (58,478) (57,336) (57,351) Total loans, net $ 4,714,078 $ 4,675,240 $ 4,647,259 $ 4,591,389 $ 4,583,659 Shore Bancshares, Inc. Classified Assets and Nonperforming Assets (Unaudited) Classified assets and nonperforming assets are summarized as follows: ($ in thousands) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Classified loans Substandard $ 24,675 $ 22,798 $ 17,409 $ 13,403 $ 14,673 Doubtful — — — — — Loss — — — — — Total classified loans 24,675 22,798 17,409 13,403 14,673 Special mention loans 33,519 14,385 25,549 27,192 28,264 Total classified and special mention loans $ 58,194 $ 37,183 $ 42,958 $ 40,595 $ 42,937 Classified loans $ 24,675 $ 22,798 $ 17,409 $ 13,403 $ 14,673 Other real estate owned 179 179 179 179 179 Repossessed property 3,315 306 1,560 1,845 — Total classified assets $ 28,169 $ 23,283 $ 19,148 $ 15,427 $ 14,852 Classified assets to total assets 0.45 % 0.39 % 0.33 % 0.26 % 0.25 % Non-accrual loans $ 21,008 $ 14,844 $ 14,837 $ 12,776 $ 12,784 90+ days delinquent accruing 294 454 414 1,560 738 Other real estate owned ("OREO") 179 179 179 179 179 Repossessed property 3,315 306 1,560 1,845 — Total nonperforming assets $ 24,796 $ 15,783 $ 16,990 $ 16,360 $ 13,701 Accruing borrowers experiencing financial difficulty loans ("BEFD") $ 1,362 $ — $ — $ — $ 367 Total nonperforming assets and BEFDs modifications $ 26,158 $ 15,783 $ 16,990 $ 16,360 $ 14,068 Nonperforming assets to total assets 0.40 % 0.27 % 0.29 % 0.28 % 0.23 % Total assets $ 6,230,763 $ 5,917,704 $ 5,864,017 $ 5,825,704 $ 6,010,918 SOURCE Shore Bancshares, Inc. 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Shore Bancshares, Inc. Reports 2024 Fourth Quarter and Annual Results

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