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].

Group 1 - The core focus of Quad 7 Capital is to provide investment opportunities through their BAD BEAT Investing platform, emphasizing both long and short trades with a proven track record of success [1] - Quad 7 Capital has maintained an average position of 95% long and 5% short since May 2020, showcasing their strategic approach to market conditions [1] - The team consists of 7 analysts with diverse expertise in business, policy, economics, mathematics, game theory, and sciences, enhancing their research capabilities [1] Group 2 - BAD BEAT Investing offers various benefits, including weekly well-researched trade ideas, access to multiple chat rooms, and daily summaries of key analyst upgrades and downgrades [2] - The platform also provides educational resources for learning basic options trading and extensive trading tools to assist investors [2] - The goal of BAD BEAT Investing is to teach investors to become proficient traders while saving them time through high-quality research and clear entry and exit targets [1][2]

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]

Company Performance - Shore Bancshares reported quarterly earnings of $0.51 per share, exceeding the Zacks Consensus Estimate of $0.41 per share, and up from $0.40 per share a year ago, representing an earnings surprise of +24.39% [1] - The company posted revenues of $56.57 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 5.08%, compared to year-ago revenues of $50.66 million [2] - Over the last four quarters, Shore Bancshares has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - The stock has added about 4.9% since the beginning of the year, while the S&P 500 has gained 8.1% [3] - The current consensus EPS estimate for the coming quarter is $0.42 on revenues of $54.78 million, and for the current fiscal year, it is $1.67 on revenues of $217.05 million [7] - The estimate revisions trend for Shore Bancshares was favorable ahead of the earnings release, resulting in a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Zacks Industry Rank for Banks - Northeast is currently in the top 23% of over 250 Zacks industries, suggesting a favorable outlook for the sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

[Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Shore Bancshares achieved strong Q2 2025 performance with significant growth in net income and EPS, improved margins, efficiency, and stable asset quality - The President and CEO, James M. Burke, highlighted the company's steady performance improvement, noting the expansion of **net income** and **margins**, improved **efficiency**, and **capital build-up**; he also mentioned that while **loan growth** is constrained, **rising asset yields** are expected to support margins through 2025[5](index=5&type=chunk) Q2 2025 Key Performance Indicators | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $15.5 million | $13.8 million | $11.2 million | | Diluted EPS | $0.46 | $0.41 | $0.34 | | ROAA | 1.03% | 0.91% | 0.77% | | Net Interest Margin (NIM) | 3.35% | 3.24% | 3.11% | | Book Value per Share | $16.94 | $16.55 | $15.74 | | Efficiency Ratio | 60.83% | 63.64% | 66.23% | - Asset quality remained stable, with nonperforming assets to total assets at **0.33%** for Q2 2025, a slight increase from **0.31%** in Q1 2025 and **0.29%** in Q2 2024; the allowance for credit losses (ACL) as a percentage of loans was flat at **1.21%** compared to year-end 2024[6](index=6&type=chunk) [Financial Condition Review (Balance Sheet)](index=2&type=section&id=Financial%20Condition%20Review%20%28Balance%20Sheet%29) Total assets decreased to $6.04 billion due to deposit run-offs, while capital ratios remained strong with improved tangible common equity [Assets and Capital](index=2&type=section&id=Assets%20and%20Capital) Total assets decreased to $6.04 billion due to deposit reductions, while capital ratios remained robust with a 7.88% tangible common equity ratio - Total assets decreased by **$192.9 million**, or **3.1%**, from December 31, 2024, primarily due to a **$285.4 million** decrease in interest-bearing deposits at other banks, driven by seasonal municipal deposit run-offs[7](index=7&type=chunk) Key Capital Ratios (June 30, 2025) | Ratio | Value | | :--- | :--- | | Tangible Common Equity Ratio | 7.88% | | Tier 1 Risk-Based Capital Ratio | 10.51% | | Total Risk-Based Capital Ratio | 12.65% | [Loan Portfolio Analysis](index=2&type=section&id=Loan%20Portfolio%20Analysis) The $2.60 billion CRE portfolio includes $484.3 million in office CRE, diversified with a low 48.41% average LTV - The office CRE loan portfolio was **$484.3 million**, or **10.0%** of total loans, at June 30, 2025; this portfolio had an average loan debt-service coverage ratio of **1.8x** and an average LTV of **48.41%**[12](index=12&type=chunk) Office CRE Portfolio LTV Stratification (June 30, 2025) | LTV Range | Loan Count | Loan Balance ($ thousands) | % of Office CRE | | :--- | :--- | :--- | :--- | | <= 50% | 245 | 168,874 | 34.9% | | 50%-60% | 74 | 111,092 | 22.9% | | 60%-70% | 94 | 130,718 | 27.0% | | 70%-80% | 65 | 62,601 | 12.9% | | > 80% | 14 | 11,013 | 2.3% | | **Total** | **492** | **484,298** | **100.0%** | - The Bank reported **no charge-offs** related to its office CRE portfolio during 2025; of the office CRE loans, only **$2.5 million** were classified as special mention or substandard at June 30, 2025[15](index=15&type=chunk) [Asset Quality](index=4&type=section&id=Asset%20Quality) Asset quality remained stable with NPAs at $19.6 million (0.33% of total assets), a slight increase driven by CRE and consumer loans - Nonperforming assets were **$19.6 million** (**0.33%** of total assets) at June 30, 2025, compared to **$18.9 million** (**0.31%** of total assets) at March 31, 2025; the increase of **$729 thousand** was mainly due to commercial real estate and consumer loans[16](index=16&type=chunk) [Deposits, Funding, and Liquidity](index=4&type=section&id=Deposits%2C%20Funding%2C%20and%20Liquidity) Total deposits decreased to $5.31 billion due to seasonal outflows, while liquidity remained strong at $1.16 billion - Total deposits decreased by **$214.4 million** from December 31, 2024, primarily driven by seasonal municipal run-offs[17](index=17&type=chunk) - The Bank's uninsured deposits were **$886.8 million**, or **16.7%** of total deposits; excluding deposits secured with pledged collateral, this figure was **$768.7 million**, or **14.5%** of total deposits[19](index=19&type=chunk) - At June 30, 2025, the Bank had approximately **$1.16 billion** of available liquidity, comprising cash, secured borrowing capacity, and unsecured lines of credit[19](index=19&type=chunk) [Stockholders' Equity](index=4&type=section&id=Stockholders%27%20Equity) Stockholders' equity increased by 4.5% to $565.2 million, driven by earnings and reduced comprehensive losses, improving the equity to assets ratio to 9.36% - Total stockholders' equity increased by **$24.1 million**, or **4.5%**, compared to December 31, 2024, primarily due to current year earnings and a decrease in accumulated other comprehensive losses[20](index=20&type=chunk) Equity Ratios | Ratio | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Equity to Total Assets | 9.36% | 8.68% | | Tangible Equity to Tangible Assets | 7.88% | 7.17% | [Review of Financial Results](index=5&type=section&id=Review%20of%20Financial%20Results) Financial results showed strong sequential and year-over-year growth, with increased net interest income, noninterest income, and improved efficiency [Quarterly Results (Q2 2025)](index=5&type=section&id=Quarterly%20Results%20%28Q2%202025%29) Q2 2025 saw net interest income rise to $47.3 million, NIM expand to 3.35%, and noninterest income increase by $2.3 million, improving efficiency to 60.83% - Net interest income increased to **$47.3 million** in Q2 2025 from **$46.0 million** in Q1 2025; the Net Interest Margin (NIM) expanded by **11 bps** to **3.35%** during the same period[21](index=21&type=chunk)[22](index=22&type=chunk) - The provision for credit losses was **$1.5 million** for Q2 2025, up from **$1.0 million** in Q1 2025, due to loan portfolio growth[23](index=23&type=chunk) - Total noninterest income for Q2 2025 was **$9.3 million**, a **$2.3 million** increase from Q1 2025, mainly due to a **$780 thousand** increase in mortgage banking revenue and a one-time credit card incentive[24](index=24&type=chunk) - Total noninterest expense rose by **$663 thousand** from Q1 2025 to **$34.4 million**, primarily due to higher salaries and employee benefits[25](index=25&type=chunk) [Six-Month Results (H1 2025)](index=6&type=section&id=Six-Month%20Results%20%28H1%202025%29) H1 2025 net interest income grew 12.0% to $93.3 million, NIM improved to 3.30%, and noninterest expense decreased 2.9%, boosting efficiency to 62.19% - Net interest income for the first six months of 2025 was **$93.3 million**, a **12.0%** increase from the same period in 2024[27](index=27&type=chunk) - The Net Interest Margin (NIM) increased to **3.30%** for H1 2025 from **3.09%** for H1 2024, driven by higher earning-asset balances and lower funding costs[28](index=28&type=chunk) - Total noninterest expense for H1 2025 decreased by **$2.0 million** (**2.9%**) compared to H1 2024, primarily due to the absence of a **$4.3 million** credit card fraud event that occurred in 2024[31](index=31&type=chunk) - The efficiency ratio for the first six months of 2025 improved significantly to **62.19%**, compared to **71.42%** for the same period in 2024[32](index=32&type=chunk) [Financial Tables](index=8&type=section&id=Financial%20Tables) This section presents detailed unaudited financial tables, including highlights, balance sheets, income statements, and reconciliations of GAAP to non-GAAP measures - The report includes **comprehensive unaudited financial tables** covering profitability, per-share data, balance sheet details, income statements, credit quality, capital ratios, and reconciliations of non-GAAP measures[37](index=37&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) [Financial Highlights](index=8&type=section&id=Financial%20Highlights) Key financial metrics are presented quarterly and semi-annually, covering profitability, per-share data, interest spreads, and credit quality [Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets) Details assets, liabilities, and stockholders' equity for the last five quarters, providing a snapshot of financial position [Consolidated Statements of Income](index=14&type=section&id=Consolidated%20Statements%20of%20Income) Outlines revenues and expenses for the last five quarters and H1 2025/2024, detailing the derivation of net income [Consolidated Average Balance Sheets](index=16&type=section&id=Consolidated%20Average%20Balance%20Sheets) Provides average asset/liability balances, interest income/expense, and yields/rates for net interest margin analysis [Reconciliation of GAAP and Non-GAAP Measures](index=20&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Measures) Reconciles GAAP financial measures to non-GAAP measures like tangible book value and non-GAAP efficiency ratio for transparency [Loan Portfolio Summary](index=25&type=section&id=Loan%20Portfolio%20Summary) Breaks down the loan portfolio by type for the last five quarter-ends, including commercial and residential real estate [Classified and Nonperforming Assets](index=26&type=section&id=Classified%20and%20Nonperforming%20Assets) Details classified and nonperforming assets over five quarters, providing insight into credit risk and asset quality [Company Information and Forward-Looking Statements](index=7&type=section&id=Company%20Information%20and%20Forward-Looking%20Statements) Overview of Shore Bancshares and a safe harbor statement regarding forward-looking statements and inherent risks - Shore Bancshares is a **financial holding company** headquartered in **Easton, Maryland**, and is the parent company of **Shore United Bank, N.A.**[33](index=33&type=chunk) - The report contains **forward-looking statements** based on management's current expectations, which involve **inherent risks and uncertainties**; these statements are **not guarantees of future performance** and actual results could differ materially[34](index=34&type=chunk)

Core Viewpoint - Shore Bancshares, Inc. reported a net income of $15.5 million for Q2 2025, reflecting a growth from $13.8 million in Q1 2025 and $11.2 million in Q2 2024, driven by higher net interest income and noninterest income from increased mortgage banking activity [1][12][37]. Financial Performance - Net income for Q2 2025 was $15.5 million, or $0.46 per diluted common share, compared to $13.8 million, or $0.41 per diluted common share in Q1 2025, and $11.2 million, or $0.34 per diluted common share in Q2 2024 [1][12][37]. - The Company’s net interest income increased to $47.3 million in Q2 2025 from $46.0 million in Q1 2025 and $42.1 million in Q2 2024 [20][37]. - Noninterest income for Q2 2025 was $9.3 million, up from $7.0 million in Q1 2025 and $8.4 million in Q2 2024 [23][37]. - The efficiency ratio improved to 60.83% in Q2 2025 from 63.64% in Q1 2025 and 66.23% in Q2 2024 [25][37]. Balance Sheet Overview - Total assets decreased to $6.04 billion at June 30, 2025, down from $6.23 billion at December 31, 2024, primarily due to a decrease in interest-bearing deposits [4][18]. - The tangible common equity ratio increased to 7.88% at June 30, 2025, compared to 7.17% at December 31, 2024 [5][18]. - Total deposits decreased by $214.4 million, or 3.9%, to $5.31 billion at June 30, 2025, mainly due to a decline in interest-bearing checking deposits [15][18]. Asset Quality and Capital Ratios - Nonperforming assets to total assets were 0.33% for Q2 2025, slightly up from 0.31% in Q1 2025 [14][18]. - The allowance for credit losses was $58.5 million at June 30, 2025, remaining flat as a percentage of loans at 1.21% [12][18]. - The Company’s Tier 1 and Total Risk-Based Capital Ratios were 10.51% and 12.65%, respectively, at June 30, 2025 [5][18]. Loan Portfolio Insights - The Company’s loan portfolio increased by $55.6 million, with total loans reaching $2.60 billion in commercial real estate (CRE) loans at June 30, 2025 [4][6]. - The average loan debt-service coverage ratio for the office CRE portfolio was 1.8x, with an average loan-to-value (LTV) ratio of 48.41% [9][10]. Shareholder Value - Book value per share increased to $16.94 at June 30, 2025, from $16.55 at March 31, 2025, and $15.74 at June 30, 2024 [12][37]. - The Company maintained a dividend of $0.12 per common share [37].

Core Viewpoint - Shore Bancshares (SHBI) is anticipated to report a year-over-year increase in earnings driven by higher revenues, with a consensus outlook suggesting a positive earnings picture that could influence its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to show quarterly earnings of $0.41 per share, reflecting a year-over-year increase of +2.5%, while revenues are projected to reach $53.84 million, up 6.3% from the previous year [3]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' assessments [4]. Earnings Surprise Potential - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Shore Bancshares is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +2.44%, suggesting a bullish outlook on the company's earnings prospects [12]. - The stock currently holds a Zacks Rank of 1, indicating a strong likelihood of beating the consensus EPS estimate [12]. Historical Performance - In the last reported quarter, Shore Bancshares exceeded the expected earnings of $0.35 per share by delivering $0.45, resulting in a surprise of +28.57% [13]. - Over the past four quarters, the company has consistently beaten consensus EPS estimates [14]. Conclusion - Shore Bancshares is positioned as a compelling candidate for an earnings beat, although investors are advised to consider additional factors beyond earnings results when making investment decisions [17].

Core Viewpoint - Shore Bancshares Inc (SHBI) is showing potential for a bullish breakout due to a recent "golden cross" in its moving averages, indicating a key level of support and positive technical signals [1]. Technical Analysis - SHBI's 50-day simple moving average has crossed above its 200-day simple moving average, forming a "golden cross," which is a significant bullish indicator [1]. - The golden cross pattern typically involves three stages: a downtrend followed by a crossover of the shorter moving average over the longer one, and finally, an upward price movement [2]. Performance Metrics - Over the past four weeks, SHBI shares have increased by 10% [3]. - The company currently holds a 1 (Strong Buy) rating on the Zacks Rank, suggesting strong potential for further gains [3]. Earnings Outlook - There has been one upward revision in earnings estimates for SHBI in the last 60 days, with no downward revisions, indicating a positive earnings outlook for the current quarter [3]. - The Zacks Consensus Estimate for SHBI has also increased, reinforcing the bullish sentiment around the stock [4].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Shore Bancshares (SHBI) - Shore Bancshares currently holds a Momentum Style Score of B, indicating a positive momentum outlook [2] - The company has a Zacks Rank of 1 (Strong Buy), suggesting strong potential for outperformance in the market [3] Performance Metrics - SHBI shares have increased by 6.63% over the past week, outperforming the Zacks Banks - Northeast industry, which rose by 4.31% [5] - Over the past month, SHBI's price change is 12.53%, compared to the industry's 7.77% [5] - In the last quarter, SHBI shares have risen by 30.83%, and over the past year, they have gained 44.22%, while the S&P 500 has only increased by 10.24% and 14.41%, respectively [6] Trading Volume - The average 20-day trading volume for SHBI is 191,516 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the past two months, one earnings estimate for SHBI has increased, while none have decreased, raising the consensus estimate from $1.62 to $1.67 [9] - For the next fiscal year, one estimate has also moved upwards with no downward revisions [9] Conclusion - Considering the positive momentum indicators and earnings outlook, SHBI is positioned as a 1 (Strong Buy) stock with a Momentum Score of B, making it a potential candidate for near-term investment [11]