Financial Performance - The Company's net income for Q3 2025 was $14.3 million, or $0.43 per diluted common share, down from $15.5 million, or $0.46 per diluted common share in Q2 2025[176] - Net income for the nine months ended September 30, 2025, was $43.6 million, compared to $30.6 million for the same period in 2024, driven by increased net interest income[178] - The company reported net income of $14.3 million for Q3 2025, a 28.2% increase from $11.2 million in Q3 2024, resulting in diluted earnings per share of $0.43 compared to $0.34[185] - Net income for the three months ended September 30, 2025, was $14.3 million, compared to $11.2 million for the same period in 2024, reflecting an increase of 28.8%[293] Interest Income and Margin - Net interest income increased by $1.4 million to $48.7 million in Q3 2025, with a Net Interest Margin (NIM) of 3.42%, up from 3.35% in Q2 2025[178] - Total interest income increased by 3.3% to $77.2 million in Q3 2025 from $74.7 million in Q3 2024, driven by higher loan fees and interest on deposits[186] - Net interest income rose by 12.5% to $48.7 million in Q3 2025, up from $43.3 million in Q3 2024, primarily due to a decrease in interest expense on deposits and borrowings[186] - Tax-equivalent net interest income for Q3 2025 was $48.7 million, up 12.4% from $43.3 million in Q3 2024, reflecting effective interest rate management[187] - The company's net interest margin (NIM) improved to 3.42% in Q3 2025, up from 3.17% in Q3 2024[196] Asset Quality - Nonperforming assets to total assets increased to 0.45% at September 30, 2025, from 0.33% at June 30, 2025[178] - The allowance for credit losses (ACL) was $59.6 million at September 30, 2025, compared to $57.9 million at December 31, 2024[178] - Provision for credit losses increased significantly by 103.5% to $3.0 million in Q3 2025 from $1.5 million in Q3 2024[186] - The ratio of the allowance for credit losses (ACL) as a percentage of loans was 1.22% at September 30, 2025, compared to 1.21% at December 31, 2024[234] - Nonperforming assets totaled $28.08 million, or 0.45% of total assets, at September 30, 2025, up from $24.80 million, or 0.40% of total assets, at December 31, 2024[276] Efficiency and Management - The efficiency ratio for Q3 2025 was 61.00%, slightly up from 60.83% in Q2 2025, but improved from 67.49% in Q3 2024[178] - The efficiency ratio improved to 61.00% in Q3 2025 from 67.49% in Q3 2024, indicating better cost management[186] - Management anticipates ongoing improvements in operating leverage due to expense management and technology investments[178] - The efficiency ratio – non-GAAP improved to 57.30% for the three months ended September 30, 2025, compared to 62.10% for the same period in 2024[298] Capital and Liquidity - Book value per share rose to $17.27 at September 30, 2025, from $16.94 at June 30, 2025, and $16.00 at September 30, 2024[178] - The Bank was classified as "well-capitalized" under regulatory capital requirements as of September 30, 2025, with a Common Equity Tier 1 ratio of 8.86%[231] - Total stockholders' equity increased by $36.1 million, or 6.7%, to $577.2 million at September 30, 2025, primarily due to $43.6 million of net income[288] - The Company had approximately $1.37 billion of available liquidity, including $416.5 million in cash and cash equivalents and $294.4 million in unpledged securities[224] Loans and Deposits - Total loans increased by $110.981 million, or 2.3%, from $4.771 billion on December 31, 2024, to $4.883 billion on September 30, 2025[247] - The commercial real estate (CRE) loan portfolio grew to $2.643 billion, representing 54.1% of total loans, up from $2.558 billion, or 53.6%, at the end of 2024, marking a $84.795 million increase, or 3.3%[247] - Total deposits decreased by $171 thousand to $5,528.17 million at September 30, 2025, compared to $5,528.34 million at December 31, 2024[279] - Interest-bearing checking deposits fell by $126.11 million, while time deposits increased by $99.57 million during the same period[279] Market Sensitivity - Estimated changes in Net Interest Income (NII) for September 30, 2025, show a decrease of (3.8)% under a +400 basis points scenario[302] - The economic value of equity is projected to increase by 16.1% under a +400 basis points scenario for September 30, 2025[303] - Under a -200 basis points scenario, the economic value of equity is projected to decrease by (24.6)% for September 30, 2025[303] - The analysis indicates that certain assets and liabilities may react differently to changes in market interest rates[304]

Core Insights - Shore Bancshares (SHBI) is recognized as one of the top-ranked regional banks on Seeking Alpha's Quant Rating system, specifically ranked 12th [1] Company Overview - Shore Bancshares operates under the name Shore United Bank and is based in Maryland [1] Market Perspective - The financial markets are viewed as efficient, with most stocks reflecting their real current value, suggesting that opportunities for profit may arise from less-followed stocks or those that do not accurately reflect market opportunities [1]

Core Insights - Shore Bancshares reported revenue of $56.36 million for the quarter ended September 2025, reflecting an 11.5% increase year-over-year, although it was a slight miss of 0.4% compared to the Zacks Consensus Estimate of $56.58 million [1] - The earnings per share (EPS) for the quarter was $0.48, up from $0.40 in the same quarter last year, resulting in a positive surprise of 6.67% against the consensus estimate of $0.45 [1] Financial Performance Metrics - Net Interest Margin stood at 3.4%, matching the two-analyst average estimate of 3.4% [4] - Efficiency Ratio was reported at 61%, slightly better than the two-analyst average estimate of 61.1% [4] - Total Non-Interest Income was $7.7 million, below the two-analyst average estimate of $7.95 million [4] - Net Interest Income reached $48.66 million, exceeding the two-analyst average estimate of $48.22 million [4] Stock Performance - Over the past month, shares of Shore Bancshares have returned -6.2%, contrasting with the Zacks S&P 500 composite's increase of +0.2% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Insights - Shore Bancshares (SHBI) reported quarterly earnings of $0.48 per share, exceeding the Zacks Consensus Estimate of $0.45 per share, and showing an increase from $0.40 per share a year ago, resulting in an earnings surprise of +6.67% [1] - The company posted revenues of $56.36 million for the quarter ended September 2025, which was slightly below the Zacks Consensus Estimate by 0.4%, but an increase from $50.55 million year-over-year [2] - The stock has underperformed the S&P 500, gaining about 0.4% since the beginning of the year compared to the S&P 500's gain of 13.9% [3] Earnings Performance - Over the last four quarters, Shore Bancshares has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] - The current consensus EPS estimate for the upcoming quarter is $0.45 on revenues of $57.15 million, and for the current fiscal year, it is $1.78 on revenues of $223.11 million [7] Market Outlook - The company's earnings outlook and management's commentary on the earnings call will be crucial for understanding future stock movements [3][4] - The Zacks Industry Rank indicates that the Banks - Northeast sector is in the top 24% of over 250 Zacks industries, suggesting a favorable environment for performance [8] Estimate Revisions - The estimate revisions trend for Shore Bancshares was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - Shore Bancshares reported net income of $14.3 million, or $0.43 per diluted common share, for Q3 2025, a decrease from $15.5 million, or $0.46 per share in Q2 2025[3]. - Net income for Q3 2025 was $14,348,000, a decrease of 7.5% from Q2 2025 but an increase of 28.2% compared to Q3 2024[47]. - Adjusted net income (non-GAAP) was $15,889 in Q3 2025, a decrease of 7.7% from Q2 2025 but an increase of 20.5% year-over-year[37]. - Adjusted net income for the nine months ended September 30, 2025, was $48,585,000, up from $39,769,000 in the same period of 2024, reflecting a growth of 22.1%[57]. Income and Expenses - Total noninterest income for Q3 2025 was $7.7 million, a decrease of $1.6 million from Q2 2025, primarily due to a decrease in mortgage banking revenue[24]. - Total noninterest expense for Q3 2025 was $34.4 million, unchanged from Q2 2025, but increased by $265 thousand compared to Q3 2024[25]. - Total noninterest income for the nine months ended September 30, 2025, increased by $1.7 million, or 7.7%, compared to the same period in 2024[30]. - Total noninterest income for Q3 2025 was $7,701,000, a decrease of 17.4% from Q2 2025 but an increase of 5.7% year-over-year[47]. Interest Income and Margin - Net interest income increased by $1.4 million to $48.7 million in Q3 2025, with net interest margin expanding by 7 basis points to 3.42%[6]. - Net interest income for Q3 2025 was $48.7 million, up from $47.3 million in Q2 2025 and $43.3 million in Q3 2024, primarily due to an increase in interest income on loans of $1.2 million[21]. - Taxable-equivalent net interest income for Q3 2025 was $48,738, an increase of 3.0% from Q2 2025 and 12.4% from Q3 2024[37]. - The Company's net interest margin (NIM) increased to 3.42% in Q3 2025 from 3.35% in Q2 2025, driven by higher core interest income[22]. Assets and Liabilities - Total assets reached $6.28 billion at September 30, 2025, reflecting a 0.8% increase from $6.23 billion at December 31, 2024, driven by a $111.0 million increase in the loan portfolio[8]. - Total deposits rose by $214.2 million to $5.53 billion at September 30, 2025, primarily due to seasonal growth in municipal deposits[17]. - Total stockholders' equity increased by $36.1 million, or 6.7%, compared to December 31, 2024, with total equity to total assets ratio at 9.19% as of September 30, 2025[20]. - Total assets increased to $6,278,479 thousand as of September 30, 2025, representing a 0.8% increase compared to June 30, 2025, and a 6.1% increase year-over-year[43]. Credit Quality - Nonperforming assets increased to $28.1 million, or 0.45% of total assets, at September 30, 2025, up from $19.6 million, or 0.33% at June 30, 2025[16]. - The allowance for credit losses was $59.6 million at September 30, 2025, representing 1.22% of loans[6]. - Provision for credit losses was $3.0 million for Q3 2025, up from $1.5 million in both Q2 2025 and Q3 2024, due to higher reserves related to loan portfolio growth[23]. - Nonperforming assets totaled $28,083 thousand in September 2025, up from $19,633 thousand in June 2025, reflecting a 43.1% increase[66]. Efficiency and Ratios - The efficiency ratio for Q3 2025 was 61.00%, compared to 60.83% in Q2 2025, indicating a slight decline in operational efficiency[6]. - The efficiency ratio improved to 61.00% in Q3 2025 from 67.49% in Q3 2024, indicating better cost management[58]. - Return on average assets (GAAP) was 0.95% in Q3 2025, down 8 basis points from Q2 2025 but up 26 basis points from Q3 2024[37]. - The annualized adjusted return on average tangible common equity was 13.27% in Q3 2025, compared to 12.37% in Q3 2024, showing enhanced profitability for shareholders[57]. Capital and Equity - The tangible common equity ratio improved to 7.80% at September 30, 2025, compared to 7.17% at December 31, 2024[9]. - Common Equity Tier 1 Capital reached $496,709 thousand, an increase of 2.64% from Q2 2025 and 11.27% from Q3 2024[42]. - Total Capital rose to $627,055 thousand, reflecting a 1.34% increase from Q2 2025 and 8.18% from Q3 2024[42]. - Total stockholders' equity rose to $577,207 thousand, reflecting a 6.7% increase from June 30, 2025, and an 8.2% increase year-over-year[44].

Core Insights - Shore Bancshares reported a net income of $14.3 million for Q3 2025, a decrease from $15.5 million in Q2 2025 and an increase from $11.2 million in Q3 2024 [1][9] - The company demonstrated resilience despite a decline in net income due to a significant marine loan write-off and softer noninterest income, while achieving growth in net interest margin and book value per share [3][9] Financial Performance - Net interest income for Q3 2025 was $48.7 million, up from $47.3 million in Q2 2025 and $43.3 million in Q3 2024, driven by an increase in interest income on loans [19][28] - The net interest margin (NIM) increased to 3.42% in Q3 2025 from 3.35% in Q2 2025, with loan yields rising by 6 basis points and funding costs decreasing by 6 basis points [20][9] - Noninterest income decreased to $7.7 million in Q3 2025 from $9.3 million in Q2 2025, primarily due to reduced mortgage banking revenue [22][9] Asset Quality - Nonperforming assets increased to $28.1 million, or 0.45% of total assets, in Q3 2025, up from 0.33% in Q2 2025, attributed to commercial real estate and consumer loans [13][9] - The allowance for credit losses (ACL) was $59.6 million, representing 1.22% of loans, slightly up from 1.21% at the end of 2024 [9][21] Balance Sheet Highlights - Total assets reached $6.28 billion as of September 30, 2025, a 0.8% increase from $6.23 billion at the end of 2024, primarily due to a $111 million increase in the loan portfolio [4][9] - Total deposits increased by $214.2 million to $5.53 billion in Q3 2025, driven by seasonal growth in municipal deposits [14][9] Capital Ratios - The tangible common equity ratio improved to 7.80% at September 30, 2025, compared to 7.17% at the end of 2024 [5][9] - Tier 1 and Total Risk-Based Capital Ratios were 10.82% and 12.88%, respectively, as of September 30, 2025 [5][9] Efficiency Metrics - The efficiency ratio for Q3 2025 was 61.00%, slightly up from 60.83% in Q2 2025 but significantly improved from 67.49% in Q3 2024 [26][9] - Non-GAAP efficiency ratio was 57.30% for Q3 2025, compared to 56.73% in Q2 2025 and 62.10% in Q3 2024 [26][9]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for Q2 2025 and FY2024, including balance sheets, income statements, cash flows, and detailed accounting notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $6,037,874 | $6,230,763 | | Total Liabilities | $5,472,680 | $5,689,697 | | Total Stockholders' Equity | $565,194 | $541,066 | - Total assets decreased by $192.9 million (3.1%) from December 31, 2024, to June 30, 2025, primarily due to decreases in cash and cash equivalents and held-to-maturity securities, partially offset by increases in loans held for investment and available-for-sale securities[9](index=9&type=chunk)[243](index=243&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Interest Income | $76,620 | $73,106 | $152,684 | $144,245 | | Total Interest Expense | $29,368 | $30,966 | $59,403 | $60,970 | | Net Interest Income | $47,252 | $42,140 | $93,281 | $83,275 | | Provision for Credit Losses | $1,528 | $2,081 | $2,556 | $2,488 | | Total Noninterest Income | $9,318 | $8,440 | $16,320 | $15,007 | | Total Noninterest Expense | $34,410 | $33,499 | $68,157 | $70,197 | | Net Income | $15,507 | $11,234 | $29,271 | $19,418 | | Basic Net Income per Common Share | $0.46 | $0.34 | $0.88 | $0.58 | | Diluted Net Income per Common Share | $0.46 | $0.34 | $0.88 | $0.58 | - Net income for Q2 2025 increased by **$4.273 million (38.0%)** YoY, driven by higher net interest income and noninterest income, partially offset by increased noninterest expense[11](index=11&type=chunk)[184](index=184&type=chunk) - Net income for the six months ended June 30, 2025, increased by **$9.853 million (50.7%)** YoY, primarily due to higher net interest income and a decrease in noninterest expense[11](index=11&type=chunk)[203](index=203&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $15,507 | $11,234 | $29,271 | $19,418 | | Other Comprehensive Income (Loss) | $730 | $(202) | $1,942 | $(766) | | Comprehensive Income | $16,237 | $11,032 | $31,213 | $18,652 | - Other comprehensive income (loss) significantly improved, moving from a loss of **$(202) thousand** in Q2 2024 to a gain of **$730 thousand** in Q2 2025, primarily due to unrealized holding gains on available-for-sale securities[12](index=12&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Common Stock | $333 | $334 | | Additional Paid in Capital | $358,112 | $359,063 | | Retained Earnings | $190,166 | $211,400 | | Accumulated Other Comprehensive Loss | $(7,545) | $(5,603) | | Total Stockholders' Equity | $541,066 | $565,194 | - Total stockholders' equity increased by **$24.1 million (4.5%)** from December 31, 2024, to June 30, 2025, driven by net income and a decrease in accumulated other comprehensive loss, partially offset by dividends declared[298](index=298&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $11,446 | $5,418 | | Net Cash Used in Investing Activities | $(63,129) | $(74,157) | | Net Cash Used in Financing Activities | $(223,184) | $(164,791) | | Net Decrease in Cash and Cash Equivalents | $(274,867) | $(233,530) | | Cash and Cash Equivalents at End of Period | $184,984 | $138,883 | - Net cash provided by operating activities increased significantly to **$11.4 million** for the six months ended June 30, 2025, from $5.4 million in the prior year[17](index=17&type=chunk) - The net decrease in cash and cash equivalents was **$274.9 million** for the first six months of 2025, primarily due to a decrease in interest-bearing deposits, partially offset by an increase in noninterest-bearing deposits[20](index=20&type=chunk)[224](index=224&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Note 1 – Summary of Significant Accounting Policies](index=11&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) - The Company's primary revenue source is interest from commercial, residential mortgage, and other loans, along with fees from lending and banking services in Maryland, Delaware, and Virginia[25](index=25&type=chunk) - Mid-Maryland Title Company, Inc. ceased conducting real estate closings effective March 31, 2025, and will continue operations only as necessary to address work in progress[25](index=25&type=chunk) - The FASB issued ASU No. 2023-09, 'Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, which the Company does not expect to have a material impact on its financial statements[27](index=27&type=chunk) [Note 2 – Investment Securities](index=12&type=section&id=Note%202%20%E2%80%93%20Investment%20Securities) | Security Type (in thousands) | Amortized Cost (June 30, 2025) | Fair Value (June 30, 2025) | Amortized Cost (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :--------------------------- | :----------------------------- | :------------------------- | :---------------------------- | :------------------------ | | Available for Sale | $195,389 | $187,679 | $159,593 | $149,212 | | Held to Maturity | $459,445 | $414,699 | $481,280 | $424,734 | | Equity Securities | N/A | $6,010 | N/A | $5,814 | - Net unrealized losses on Available for Sale (AFS) securities totaled **$7.7 million** at June 30, 2025, an improvement from $10.4 million at December 31, 2024, primarily due to market interest rate fluctuations rather than credit concerns[41](index=41&type=chunk) - The Company concluded no credit loss exists in its AFS securities portfolio as of June 30, 2025, due to high credit quality, intent to hold to maturity, and timely payments from issuers[39](index=39&type=chunk) [Note 3 – Loans and Allowance for Credit Losses](index=16&type=section&id=Note%203%20%E2%80%93%20Loans%20and%20Allowance%20for%20Credit%20Losses) | Loan Class (in thousands) | June 30, 2025 | % of Total Loans (June 30, 2025) | December 31, 2024 | % of Total Loans (Dec 31, 2024) | | :------------------------ | :------------ | :------------------------------- | :---------------- | :------------------------------ | | Commercial real estate | $2,603,974 | 53.95% | $2,557,806 | 53.60% | | Residential real estate | $1,349,010 | 27.94% | $1,329,406 | 27.85% | | Construction | $350,053 | 7.25% | $335,999 | 7.04% | | Commercial | $224,092 | 4.64% | $237,932 | 4.99% | | Consumer | $294,239 | 6.09% | $303,746 | 6.37% | | Credit cards | $6,260 | 0.13% | $7,099 | 0.15% | | Total Loans | $4,827,628 | 100.00% | $4,771,988 | 100.00% | | Less: Allowance for Credit Losses | $(58,483) | | $(57,910) | | | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Nonaccrual Loans | $16,782 | $21,008 | | Total Collateral-Dependent Loans | $16,760 | $20,840 | | Allowance for Credit Losses (ACL) | $58,483 | $57,910 | | ACL as % of Total Loans | 1.21% | 1.21% | - Nonaccrual loans decreased to **$16.8 million** at June 30, 2025, from $21.0 million at December 31, 2024, indicating an improvement in asset quality[52](index=52&type=chunk)[53](index=53&type=chunk) - Nine loan modifications were made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025, totaling **$6.6 million** in commercial real estate loans, with no defaults on prior modifications[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 4 – Goodwill and Other Intangible Assets](index=27&type=section&id=Note%204%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Goodwill | $63,266 | $63,266 | | Core Deposit Intangible, Net | $33,761 | $38,311 | | Total Intangible Assets, Net | $97,027 | $101,577 | - Amortization expense for the core deposit intangible was **$2.3 million** for Q2 2025 (down from $2.6 million in Q2 2024) and **$4.5 million** for the six months ended June 30, 2025 (down from $5.1 million in H1 2024)[81](index=81&type=chunk) [Note 5 – Leases](index=28&type=section&id=Note%205%20%E2%80%93%20Leases) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Lease Liabilities | $11,541 | $11,844 | | Right-of-Use Assets | $11,052 | $11,385 | | Weighted-Average Remaining Lease Term | 9.33 years | 10.20 years | | Weighted-Average Discount Rate | 3.45% | 3.29% | - Operating lease cost remained stable at **$494 thousand** for Q2 2025 and **$986 thousand** for H1 2025, consistent with the prior year periods[86](index=86&type=chunk) [Note 6 - Deposits](index=29&type=section&id=Note%206%20-%20Deposits) | Deposit Type (in thousands) | June 30, 2025 | % of Total Deposits (June 30, 2025) | December 31, 2024 | % of Total Deposits (Dec 31, 2024) | | :-------------------------- | :------------ | :---------------------------------- | :---------------- | :--------------------------------- | | Noninterest-bearing | $1,575,120 | 29.64% | $1,562,815 | 28.27% | | Interest-bearing checking | $763,309 | 14.36% | $978,076 | 17.69% | | Money market and savings | $1,691,438 | 31.84% | $1,805,884 | 32.67% | | Time deposits | $1,273,285 | 23.96% | $1,181,561 | 21.37% | | Brokered deposits | $10,806 | 0.20% | — | — | | Total Deposits | $5,313,958 | 100.00% | $5,528,336 | 100.00% | - Total deposits decreased by **$214.4 million (3.9%)** to **$5.3 billion** at June 30, 2025, primarily due to decreases in interest-bearing demand deposits and money market/savings, partially offset by an increase in time deposits and the introduction of brokered deposits[88](index=88&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - Approximately **$1.11 billion** of time deposits mature within one year as of June 30, 2025[89](index=89&type=chunk) [Note 7 - Borrowings](index=30&type=section&id=Note%207%20-%20Borrowings) | Borrowing Type (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Subordinated Debentures | $44,500 | $44,500 | | Trust Preferred Securities | $32,991 | $32,991 | | Less: Net Discount and Unamortized Issuance Costs | $(3,250) | $(3,774) | | Total Long-Term Debt | $74,241 | $73,717 | | FHLB Advances | $50,000 | $50,000 | - The Company has **$50.0 million** in FHLB advances outstanding at a rate of **4.79%**, maturing on November 7, 2025[95](index=95&type=chunk) [Note 8 – Derivatives](index=31&type=section&id=Note%208%20%E2%80%93%20Derivatives) | Derivative Type (in thousands) | Notional Amount (June 30, 2025) | Fair Value (June 30, 2025) | Notional Amount (Dec 31, 2024) | Fair Value (Dec 31, 2024) | | :----------------------------- | :------------------------------ | :------------------------- | :----------------------------- | :------------------------ | | Asset – IRLCs | $21,743 | $426 | $7,527 | $113 | | Asset – TBA securities | $4,750 | $3 | $22,100 | $164 | | Liability – TBA securities | $43,300 | $311 | $7,550 | $23 | - The Company uses interest rate lock commitments (IRLCs) and mandatory forward contracts (TBA securities) to manage price risk on mortgage loans intended for secondary market sale[97](index=97&type=chunk) [Note 9 – Accumulated Other Comprehensive Loss](index=31&type=section&id=Note%209%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Beginning of Period | $(7,545) | $(7,494) | | Other Comprehensive Income (Loss), Net of Tax | $1,942 | $(766) | | End of Period | $(5,603) | $(8,260) | - Accumulated other comprehensive loss improved significantly, decreasing from **$(7.5) million** at the beginning of the six-month period to **$(5.6) million** at June 30, 2025, primarily due to positive other comprehensive income[101](index=101&type=chunk) [Note 10 – Regulatory Capital Requirements](index=32&type=section&id=Note%2010%20%E2%80%93%20Regulatory%20Capital%20Requirements) | Capital Ratio | Company (June 30, 2025) | Bank (June 30, 2025) | Regulatory Minimum | Well Capitalized Minimum | | :------------ | :---------------------- | :------------------- | :----------------- | :----------------------- | | CET1 to RWA | 9.90% | 11.18% | 7.00% | 6.50% | | Tier 1 to RWA | 10.51% | 11.18% | 8.50% | 8.00% | | Total Capital to RWA | 12.65% | 12.42% | 10.50% | 10.00% | | Tier 1 Leverage | 8.65% | 9.20% | 4.00% | 5.00% | - Both the Company and the Bank met all capital adequacy requirements and conservation buffer requirements as of June 30, 2025, with the Bank categorized as 'well-capitalized'[103](index=103&type=chunk)[104](index=104&type=chunk)[108](index=108&type=chunk) [Note 11 – Fair Value Measurements](index=35&type=section&id=Note%2011%20%E2%80%93%20Fair%20Value%20Measurements) | Asset Type (in thousands) | Fair Value (June 30, 2025) | Level 1 | Level 2 | Level 3 | | :------------------------ | :------------------------- | :------ | :------ | :------ | | AFS Securities | $187,679 | — | $187,679 | — | | Equity Securities | $6,010 | — | $6,010 | — | | Loans Held for Sale | $34,319 | — | $34,319 | — | | IRLCs | $426 | — | — | $426 | | Total Assets at Fair Value | $228,437 | — | $228,011 | $426 | - IRLCs are classified as Level 3 due to the use of unobservable inputs, specifically the estimated probability of loan closing (pull-through rate), which averaged **87%** at June 30, 2025[116](index=116&type=chunk)[117](index=117&type=chunk) - Nonrecurring fair value adjustments for collateral-dependent loans, OREO, and repossessed assets are classified as Level 3, based on appraisals and estimated selling costs[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [Note 12 – Fair Value of Financial Instruments](index=42&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) | Financial Instrument (in thousands) | Carrying Amount (June 30, 2025) | Fair Value (June 30, 2025) | Fair Value Level | | :---------------------------------- | :------------------------------ | :------------------------- | :--------------- | | Cash and Cash Equivalents | $184,984 | $184,984 | Level 1 | | AFS Securities | $187,679 | $187,679 | Level 2 | | HTM Securities | $459,246 | $414,699 | Level 2 | | Loans Held for Investment, Net | $4,769,145 | $4,662,358 | Level 3 | | Total Deposits | $5,313,958 | $5,311,451 | Level 2 | - Loans held for investment, net, had a carrying amount of **$4.77 billion** and an estimated fair value of **$4.66 billion** at June 30, 2025, with fair value measurements classified as Level 3[137](index=137&type=chunk) [Note 13 – Commitments and Contingencies](index=43&type=section&id=Note%2013%20%E2%80%93%20Commitments%20and%20Contingencies) | Commitment Type (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------- | :------------ | :---------------- | | Commitments to Extend Credit | $772,480 | $759,480 | | Letters of Credit | $30,508 | $27,961 | | Total Commitments Outstanding | $802,988 | $787,441 | - The Bank's reserve for off-balance sheet credit exposures increased to **$1.9 million** at June 30, 2025, from $1.1 million at December 31, 2024[143](index=143&type=chunk) - Management does not anticipate that future liability from current legal proceedings will have a material effect on the Company's financial condition, operating results, or liquidity[144](index=144&type=chunk) [Note 14 – Earnings per Common Share](index=46&type=section&id=Note%2014%20%E2%80%93%20Earnings%20per%20Common%20Share) | Metric (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $15,507 | $11,234 | $29,271 | $19,418 | | Basic Net Income per Common Share | $0.46 | $0.34 | $0.88 | $0.58 | | Diluted Net Income per Common Share | $0.46 | $0.34 | $0.88 | $0.58 | | Average Number of Common Shares Outstanding | 33,374,265 | 33,233,870 | 33,362,632 | 33,211,558 | [Note 15 – Revenue Recognition](index=46&type=section&id=Note%2015%20%E2%80%93%20Revenue%20Recognition) | Noninterest Income (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | In-scope of Topic 606 | $5,707 | $5,252 | $10,347 | $9,961 | | Out-of-scope of Topic 606 | $3,611 | $3,188 | $5,973 | $5,046 | | Total Noninterest Income | $9,318 | $8,440 | $16,320 | $15,007 | - Noninterest income in-scope of Topic 606 increased by **$455 thousand (8.7%)** for Q2 2025 YoY, and by **$386 thousand (3.9%)** for H1 2025 YoY[157](index=157&type=chunk) - Service charges on deposit accounts, trust and investment fee income, and interchange income are recognized over time or at a point in time depending on the nature of the service[148](index=148&type=chunk)[150](index=150&type=chunk)[155](index=155&type=chunk) [Note 16 – Segment Reporting](index=48&type=section&id=Note%2016%20%E2%80%93%20Segment%20Reporting) - The Company operates as a single reportable operating segment, as the Chief Operating Decision Maker evaluates financial performance on a Company-wide basis, aggregating similar operating performance of products and customers[158](index=158&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition, operating results, liquidity, and capital resources, with analysis of key performance indicators and balance sheet trends [FORWARD-LOOKING INFORMATION](index=49&type=section&id=FORWARD-LOOKING%20INFORMATION) - The report contains forward-looking statements based on management's current expectations, which involve inherent risks and uncertainties that could cause actual results to differ materially[160](index=160&type=chunk) - Key risk factors include the strength of the U.S. economy, interest rate environment, government policies, ability to manage IT systems and cyber risks, regulatory changes, and competitive factors[160](index=160&type=chunk)[167](index=167&type=chunk) [INTRODUCTION](index=51&type=section&id=INTRODUCTION) - Shore Bancshares, Inc. is headquartered in Maryland, operating Shore United Bank, N.A. with 40 full-service branches across Maryland, Delaware, and Virginia[165](index=165&type=chunk) - The Company offers investment, insurance, financial planning, and wealth management services through Wye Financial Partners and Wye Trust[165](index=165&type=chunk) - Mid-Maryland Title Company, Inc. ceased real estate closings on March 31, 2025, and will dissolve after addressing outstanding matters[165](index=165&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=52&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) - The Allowance for Credit Losses (ACL) on loans is identified as a critical accounting policy due to its high degree of subjectivity and reliance on significant judgments, estimates, and assumptions regarding credit risks and economic forecasts[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk) - The ACL represents management's best estimate of expected lifetime credit losses within the loan portfolio, determined using a cash flow methodology and considering historical experience, current conditions, and reasonable economic forecasts[170](index=170&type=chunk) [OVERVIEW](index=53&type=section&id=OVERVIEW) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :----- | :------ | :------ | :------ | | Net Income (in millions) | $15.5 | $13.8 | $11.2 | | Diluted EPS | $0.46 | $0.41 | $0.34 | | ROAA | 1.03% | 0.91% | 0.77% | | NIM | 3.35% | 3.24% | 3.11% | | Book Value per Share | $16.94 | $16.55 | $15.74 | | Nonperforming Assets to Total Assets | 0.33% | 0.31% | 0.29% | | Efficiency Ratio (GAAP) | 60.83% | 63.64% | 66.23% | - Net income for Q2 2025 increased by **$1.7 million** to **$15.5 million** from Q1 2025, driven by higher net interest income and mortgage banking activity[175](index=175&type=chunk) - Net Interest Margin (NIM) expanded by **11 basis points** to **3.35%** in Q2 2025 from 3.24% in Q1 2025, due to modest loan growth, higher accretion income, and lower cost of deposits[175](index=175&type=chunk) - The efficiency ratio improved to **60.83%** in Q2 2025 from 63.64% in Q1 2025, reflecting ongoing expense management and technology investments[175](index=175&type=chunk) [SUMMARY OF OPERATING RESULTS](index=55&type=section&id=SUMMARY%20OF%20OPERATING%20RESULTS) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | ROAA | 1.03% | 0.77% | 0.97% | 0.67% | | ROACE | 11.13 | 8.70 | 10.67 | 7.54 | | NIM | 3.35 | 3.11 | 3.30 | 3.09 | | Efficiency Ratio (GAAP) | 60.83 | 66.23 | 62.19 | 71.42 | - The Company achieved significant improvements in profitability ratios, with **ROAA increasing from 0.77% in Q2 2024 to 1.03% in Q2 2025**, and **ROACE rising from 8.70% to 11.13%** over the same period[179](index=179&type=chunk) [RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024](index=56&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20THREE%20MONTHS%20ENDED%20JUNE%2030%2C%202025%20AND%202024) | Metric (in thousands) | Q2 2025 | Q2 2024 | $ Change | % Change | | :-------------------- | :------ | :------ | :------- | :------- | | Net Interest Income | $47,252 | $42,140 | $5,112 | 12.1% | | Provision for Credit Losses | $1,528 | $2,081 | $(553) | (26.6)% | | Noninterest Income | $9,318 | $8,440 | $878 | 10.4% | | Noninterest Expense | $34,410 | $33,499 | $911 | 2.7% | | Net Income | $15,507 | $11,234 | $4,273 | 38.0% | - Net interest income increased by **$5.1 million (12.1%)** YoY, primarily due to higher interest and fees on loans and interest on deposits with other banks, coupled with a decrease in interest expense on short-term borrowings[185](index=185&type=chunk)[186](index=186&type=chunk)[193](index=193&type=chunk) - The Net Interest Margin (NIM) increased to **3.35%** in Q2 2025 from 3.11% in Q2 2024, as interest-earning asset yields increased and the cost of funds repriced at a faster pace[194](index=194&type=chunk) - Noninterest income rose by **$878 thousand (10.4%)** YoY, mainly driven by increased mortgage banking activity, including higher mortgage servicing activity and lower prepayment rates[196](index=196&type=chunk) - Noninterest expense increased by **$911 thousand (2.7%)** YoY, primarily due to higher salaries and benefits and software/data processing costs, partially offset by lower operating expenses[198](index=198&type=chunk) [RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024](index=61&type=section&id=RESULTS%20OF%20OPERATIONS%20FOR%20THE%20SIX%20MONTHS%20ENDED%20JUNE%2030%2C%202025%20AND%202024) | Metric (in thousands) | H1 2025 | H1 2024 | $ Change | % Change | | :-------------------- | :------ | :------ | :------- | :------- | | Net Interest Income | $93,281 | $83,275 | $10,006 | 12.0% | | Provision for Credit Losses | $2,556 | $2,488 | $68 | 2.7% | | Noninterest Income | $16,320 | $15,007 | $1,313 | 8.7% | | Noninterest Expense | $68,157 | $70,197 | $(2,040) | (2.9)% | | Net Income | $29,271 | $19,418 | $9,853 | 50.7% | - Net interest income increased by **$10.0 million (12.0%)** for the six months ended June 30, 2025, driven by an **$8.4 million** increase in total interest income and a **$1.6 million** decrease in total interest expense[204](index=204&type=chunk)[205](index=205&type=chunk) - The Net Interest Margin (NIM) increased from 3.09% in H1 2024 to **3.30%** in H1 2025, supported by increased interest-earning asset balances and yields, and lower cost interest-bearing deposits[211](index=211&type=chunk) - Noninterest expense decreased by **$2.0 million (2.9%)** for the six months ended June 30, 2025, primarily due to the absence of a **$4.3 million** credit card fraud event from the prior year, partially offset by higher salaries and software expenses[215](index=215&type=chunk) [LIQUIDITY](index=66&type=section&id=LIQUIDITY) - The Company's principal sources of liquidity are cash on hand and dividends from the Bank, while the Bank relies on net income, deposits, loan sales, borrowings, and payments on loans and securities[219](index=219&type=chunk)[221](index=221&type=chunk) | Metric (in thousands) | June 30, 2025 | | :-------------------- | :------------ | | Liquidity in Use (FHLB secured borrowings) | $83,100 | | Liquidity Available (FHLB capacity) | $740,728 | | Liquidity Available (Unsecured federal fund lines) | $95,000 | | Liquidity Available (Cash and cash equivalents) | $184,984 | | Liquidity Available (Unpledged investment securities) | $316,500 | | Total Liquidity Available | $1,337,212 | - The net decrease in cash and cash equivalents was **$274.9 million** for the first six months of 2025, mainly due to a decrease in interest-bearing deposits, partially offset by an increase in noninterest-bearing deposits[224](index=224&type=chunk) [CAPITAL RESOURCES](index=68&type=section&id=CAPITAL%20RESOURCES) | Capital Ratio | Company (June 30, 2025) | Bank (June 30, 2025) | | :------------ | :---------------------- | :------------------- | | CET1 Ratio | 9.90% | 11.18% | | Tier 1 Risk-Based Capital Ratio | 10.51% | 11.18% | | Total Risk-Based Capital Ratio | 12.65% | 12.42% | | Tier 1 Leverage Ratio | 8.65% | 9.20% | - Both the Company and the Bank were in compliance with all applicable regulatory capital requirements as of June 30, 2025, with the Bank classified as 'well-capitalized'[236](index=236&type=chunk) - The Company provides banking services to the cannabis industry, with deposit balances of **$141.5 million (2.66% of total deposits)** and loan balances of **$84.6 million (1.75% of total gross loans)** at June 30, 2025, despite federal illegality[239](index=239&type=chunk)[240](index=240&type=chunk)[242](index=242&type=chunk) [ANALYSIS OF FINANCIAL CONDITION](index=71&type=section&id=ANALYSIS%20OF%20FINANCIAL%20CONDITION) [Balance Sheet Summary](index=71&type=section&id=Balance%20Sheet%20Summary) - Total assets decreased by **$192.9 million (3.1%)** to **$6.04 billion** at June 30, 2025, compared to $6.23 billion at December 31, 2024[243](index=243&type=chunk) - The decrease was primarily driven by reductions in cash and cash equivalents and held-to-maturity securities, partially offset by increases in loans held for investment and available-for-sale securities[243](index=243&type=chunk) [Cash and Cash Equivalents](index=71&type=section&id=Cash%20and%20Cash%20Equivalents) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and Cash Equivalents | $185,000 | $459,900 | - Cash and cash equivalents decreased by **$274.9 million** from December 31, 2024, to June 30, 2025, reflecting fluctuations from operating, financing, and investment activities[244](index=244&type=chunk) [Investment Securities](index=71&type=section&id=Investment%20Securities) | Security Type (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Total Investment Securities | $673,300 | $656,400 | | AFS Securities (Fair Value) | $187,700 | $149,200 | | HTM Securities (Amortized Cost) | $459,200 | $481,100 | - At June 30, 2025, **29.0%** of the debt securities portfolio was AFS and **71.0%** was HTM, compared to 23.7% and 76.3% respectively, at December 31, 2024[245](index=245&type=chunk) - **97.9%** of the investment portfolio's carrying value at June 30, 2025, consisted of securities issued or guaranteed by U.S. government agencies or government-sponsored agencies, with no speculative grade HTM securities[249](index=249&type=chunk)[250](index=250&type=chunk) [Loans Held for Sale](index=73&type=section&id=Loans%20Held%20for%20Sale) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Fair Value of Loans Held for Sale | $34,300 | $19,600 | - The fair value of loans held for sale increased to **$34.3 million** at June 30, 2025, from $19.6 million at December 31, 2024[255](index=255&type=chunk) - The Bank repurchased one loan of **$415 thousand** during the six months ended June 30, 2025, with no repurchases in prior periods[255](index=255&type=chunk) [Loans Held for Investment](index=73&type=section&id=Loans%20Held%20for%20Investment) | Loan Class (in thousands) | June 30, 2025 | % of Total Loans | December 31, 2024 | % of Total Loans | $ Change | % Change | | :------------------------ | :------------ | :--------------- | :---------------- | :--------------- | :------- | :------- | | Commercial real estate | $2,603,974 | 54.0% | $2,557,806 | 53.6% | $46,168 | 1.8% | | Residential real estate | $1,349,010 | 27.9% | $1,329,406 | 27.9% | $19,604 | 1.5% | | Construction | $350,053 | 7.3% | $335,999 | 7.0% | $14,054 | 4.2% | | Commercial | $224,092 | 4.6% | $237,932 | 5.0% | $(13,840) | (5.8)% | | Consumer | $294,239 | 6.1% | $303,746 | 6.4% | $(9,507) | (3.1)% | | Credit cards | $6,260 | 0.1% | $7,099 | 0.2% | $(839) | (11.8)% | | Total Loans | $4,827,628 | 100.0% | $4,771,988 | 100.0% | $55,640 | 1.2% | - Total loans held for investment increased by **$55.6 million (1.2%)** to **$4.83 billion** at June 30, 2025, primarily driven by growth in commercial real estate, residential real estate, and construction loans[257](index=257&type=chunk) - Non-owner occupied CRE loans totaled **$2.14 billion (44.4% of total loans)** and construction loans totaled **$349.6 million (7.25% of total loans)** at June 30, 2025, indicating a concentration in CRE lending that requires heightened risk management[50](index=50&type=chunk)[258](index=258&type=chunk)[262](index=262&type=chunk) - The office CRE loan portfolio was **$484.3 million (10.0% of total loans)** at June 30, 2025, with **80.5%** secured by properties in rural or suburban areas and an average LTV of **48.4%**[265](index=265&type=chunk)[267](index=267&type=chunk) [Asset Quality](index=78&type=section&id=Asset%20Quality) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Classified Assets | $22,566 | $28,173 | | Total Nonperforming Assets | $19,633 | $24,796 | | Allowance for Credit Losses (ACL) | $58,483 | $57,910 | | ACL as % of Total Portfolio Loans | 1.21% | 1.21% | | Nonperforming Assets to Total Assets | 0.33% | 0.40% | - Classified assets decreased by **$5.6 million** to **$22.6 million (0.4% of total assets)** at June 30, 2025, primarily due to a decrease in substandard loans and repossessed assets[283](index=283&type=chunk) - Nonperforming assets decreased by **$5.2 million** to **$19.6 million (0.3% of total assets)** at June 30, 2025, mainly due to a reduction in nonaccrual loans and repossessed assets[284](index=284&type=chunk) - Special mention loans increased to **$65.6 million** at June 30, 2025, from $33.5 million at December 31, 2024, primarily due to loans in the multifamily commercial real estate portfolio[283](index=283&type=chunk) [Deposits](index=81&type=section&id=Deposits) | Deposit Type (in thousands) | June 30, 2025 | % of Total Deposits | December 31, 2024 | % of Total Deposits | $ Change | % Change | | :-------------------------- | :------------ | :------------------ | :---------------- | :------------------ | :------- | :------- | | Noninterest-bearing | $1,575,120 | 29.6% | $1,562,815 | 28.3% | $12,305 | 0.8% | | Interest-bearing checking | $763,309 | 14.4% | $978,076 | 17.7% | $(214,767) | (22.0)% | | Money market and savings | $1,691,438 | 31.8% | $1,805,884 | 32.7% | $(114,446) | (6.3)% | | Time deposits | $1,273,285 | 24.0% | $1,181,561 | 21.4% | $91,724 | 7.8% | | Brokered deposits | $10,806 | 0.2% | — | — | $10,806 | — | | Total Deposits | $5,313,958 | 100.0% | $5,528,336 | 100.0% | $(214,378) | (3.9)% | - Total deposits decreased by **$214.4 million (3.9%)** to **$5.3 billion** at June 30, 2025, primarily due to decreases in interest-bearing checking and money market/savings deposits, partially offset by an increase in time deposits and the introduction of brokered deposits[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) - Estimated uninsured deposits were **$886.8 million (16.7% of total deposits)** at June 30, 2025, with **$118.0 million** secured by pledged collateral[289](index=289&type=chunk) [Wholesale Funding – Short-Term Borrowings and Brokered Deposits](index=83&type=section&id=Wholesale%20Funding%20%E2%80%93%20Short-Term%20Borrowings%20and%20Brokered%20Deposits) - The Company's wholesale funding increased to **$60.8 million** at June 30, 2025, from $50.0 million at December 31, 2024, primarily due to **$10.8 million** in brokered deposits[291](index=291&type=chunk) - Reciprocal deposits decreased by **$331.3 million** to **$1.31 billion** at June 30, 2025, with **$232.9 million** classified as brokered deposits for call reporting purposes[292](index=292&type=chunk) [Long-Term Debt](index=84&type=section&id=Long-Term%20Debt) - The Company has **$25.0 million** in Fixed-to-Floating Rate Subordinated Notes due September 1, 2030, and acquired **$18.9 million** in Junior Subordinated Debt Securities due 2035 from the Severn merger[93](index=93&type=chunk)[94](index=94&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) - Additional Junior Subordinated Debt Securities (**$11.1 million**) and **4.75%** fixed-to-floating rate subordinated notes (**$19.3 million**) were acquired from The Community Financial Corporation merger in 2023[94](index=94&type=chunk)[297](index=297&type=chunk) [Stockholders' Equity](index=84&type=section&id=Stockholders'%20Equity) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :-------------------- | :------------ | :---------------- | :------- | :------- | | Total Stockholders' Equity | $565,194 | $541,066 | $24,128 | 4.5% | - Total stockholders' equity increased by **$24.1 million (4.5%)** to **$565.2 million** at June 30, 2025, primarily due to **$29.3 million** of net income and a **$1.9 million** decrease in accumulated other comprehensive loss, partially offset by **$8.0 million** in dividends declared[298](index=298&type=chunk) [USE OF NON-GAAP FINANCIAL MEASURES](index=85&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) - The Company uses non-GAAP financial measures, such as Return on Average Tangible Common Equity (ROATCE), to provide supplemental information for evaluating underlying performance trends, excluding intangible assets[299](index=299&type=chunk)[300](index=300&type=chunk)[304](index=304&type=chunk) | Metric (in thousands, except per share amounts) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :---------------------------------------------- | :------------ | :---------------- | :------------ | | Total Assets | $6,037,874 | $6,230,763 | $5,864,017 | | Less: Total Intangible Assets | $97,027 | $101,577 | $106,211 | | Tangible Assets | $5,940,847 | $6,129,186 | $5,757,806 | | Total Common Equity | $565,194 | $541,066 | $522,783 | | Less: Total Intangible Assets | $97,027 | $101,577 | $106,211 | | Tangible Common Equity | $468,167 | $439,489 | $416,572 | | Tangible Common Equity to Tangible Assets | 7.88% | 7.17% | 7.23% | | Tangible Common Book Value per Share | $14.03 | $13.19 | $12.54 | | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----- | :------ | :------ | :------ | :------ | | ROACE | 11.13% | 8.70% | 10.67% | 7.54% | | ROATCE | 14.99% | 12.85% | 14.53% | 11.47% | [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Details the Company's primary market risk, interest rate fluctuation, and mitigation strategies, including NII and EVE sensitivity analysis and policy limit adherence - The Company's primary market risk is interest rate fluctuation, managed through quarterly simulations of interest rate shocks (+/- 100, 200, 300, and 400 basis points) to assess Net Interest Income (NII) and Economic Value of Equity (EVE) at risk[307](index=307&type=chunk)[308](index=308&type=chunk) | Change in Interest Rates | NII Policy Limit | NII Change (June 30, 2025) | NII Change (Dec 31, 2024) | | :----------------------- | :--------------- | :------------------------- | :------------------------ | | +400 basis points | +/- 25% | (7.6)% | (3.8)% | | +300 basis points | +/- 20% | (5.2)% | (2.4)% | | +200 basis points | +/- 15% | (3.2)% | (1.3)% | | +100 basis points | +/- 10% | (1.4)% | (0.5)% | | -100 basis points | +/- 10% | 0.7% | (0.1)% | | -200 basis points | +/- 15% | (0.6)% | (2.1)% | | Change in Interest Rates | EVE Policy Limit | EVE Change (June 30, 2025) | EVE Change (Dec 31, 2024) | | :----------------------- | :--------------- | :------------------------- | :------------------------ | | +400 basis points | +/- 40% | 13.5% | 15.2% | | +300 basis points | +/- 30% | 12.8% | 14.2% | | +200 basis points | +/- 20% | 10.7% | 11.7% | | +100 basis points | +/- 10% | 6.7% | 7.2% | | -100 basis points | +/- 10% | (9.4)% | (10.0)% | | -200 basis points | +/- 20% | (22.6)% | (24.2)% | - As of June 30, 2025, the Company exceeded Board approved limits for percentage change in economic value of equity in the interest rate shock of -200 basis points, similar to December 31, 2024, primarily due to average lives and low market rates on non-maturing deposit instruments[308](index=308&type=chunk) [Item 4. Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures, with no material changes in internal control over financial reporting during the period - Management, including the PEO and PFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate information disclosure[314](index=314&type=chunk) - There were no changes in the Company's internal control over financial reporting during the six months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[315](index=315&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) States the Company is involved in legal proceedings, with no anticipated material adverse impact on financial condition or earnings - The Company does not anticipate that any future liability arising from current legal proceedings will have a material adverse impact on its financial condition or earnings[317](index=317&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) Indicates no material changes to risk factors previously disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes to the risk factors as previously disclosed in the Company's 2024 Annual Report on Form 10-K[318](index=318&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Confirms no repurchases or unregistered sales of common stock during the three months ended June 30, 2025 - There were no repurchases or unregistered sales of the Company's common stock during the three months ended June 30, 2025[319](index=319&type=chunk) [Item 3. Defaults Upon Senior Securities](index=71&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[320](index=320&type=chunk) [Item 4. Mine Safety Disclosures](index=71&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[321](index=321&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) Reports no officer or director adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements - No officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[322](index=322&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including merger agreements, articles, by-laws, and certifications - The exhibits include the Agreement and Plan of Merger, Amended and Restated Articles of Incorporation, Second Amended and Restated By-Laws, Description of Registrant's Securities, Certifications of Principal Executive and Accounting Officers, and Inline Interactive Data Files[323](index=323&type=chunk) SIGNATURES [SIGNATURES](index=73&type=section&id=SIGNATURES) Contains duly authorized signatures of the President & CEO and Executive VP & CFO, certifying the report filing - The report is signed by James M. Burke, President & Chief Executive Officer, and Charles S. Cullum, Executive Vice President & Chief Financial Officer, on August 7, 2025[327](index=327&type=chunk)

Core Viewpoint - The article highlights Shore Bancshares (SHBI) as a strong value stock, supported by its favorable valuation metrics and earnings outlook [4][8]. Valuation Metrics - SHBI has a Forward P/E ratio of 9.31, which is lower than the industry average of 9.95. Over the past year, SHBI's Forward P/E has fluctuated between 7.29 and 12.57, with a median of 9.70 [4]. - The company has a P/B ratio of 0.98, compared to the industry's average P/B of 1.06. SHBI's P/B has ranged from 0.71 to 1.09 in the last 12 months, with a median of 0.91 [5]. - SHBI's P/S ratio stands at 1.59, which is lower than the industry average of 1.83 [6]. - The P/CF ratio for SHBI is 9.89, significantly lower than the industry's average of 16.80. In the past year, SHBI's P/CF has varied from 7.80 to 12.48, with a median of 10.05 [7]. Investment Outlook - The combination of SHBI's strong valuation metrics suggests that it is likely undervalued, making it an attractive option for value investors [8].

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Core Insights - Shore Bancshares reported revenue of $56.57 million for the quarter ended June 2025, reflecting an 11.7% increase year-over-year [1] - The company's EPS was $0.51, up from $0.40 in the same quarter last year, exceeding the consensus estimate of $0.41 by 24.39% [1] Financial Performance - Revenue surpassed the Zacks Consensus Estimate of $53.84 million, resulting in a surprise of +5.08% [1] - Net Interest Margin was reported at 3.4%, slightly above the average estimate of 3.3% [4] - Efficiency Ratio stood at 60.8%, better than the estimated 62.9% [4] - Total Non-Interest Income reached $9.32 million, exceeding the average estimate of $7.31 million [4] - Net Interest Income was $47.25 million, compared to the average estimate of $46.53 million [4] Stock Performance - Shore Bancshares shares have returned +9.6% over the past month, outperforming the Zacks S&P 500 composite's +5.7% change [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating potential for outperformance in the near term [3]