Shore Bancshares, Inc. Reports 2026 First Quarter Results (Form 8-K)

Shore Bancshares, Inc. Reports 2026 First Quarter Results

Easton, Maryland (April 23, 2026) - Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank"), reported record net income for the first quarter of 2026 of $17.1 million, or $0.51 per diluted common share, compared to net income of $15.9 million, or $0.48 per diluted common share, for the fourth quarter of 2025, and net income of $13.8 million, or $0.41 per diluted common share, for the first quarter of 2025.

First Quarter 2026 Highlights

•Net Income - Net income for the first quarter of 2026 increased $1.2 million to a record $17.1 million from $15.9 million in the fourth quarter of 2025. Net income increased primarily due to an increase in net interest income of $2.4 million and a decrease in the provision for credit losses of $2.7 million, partially offset by lower noninterest income of $1.7 million and an increase in noninterest expense of $1.6 million. The lower noninterest income was due to a one-time receipt of insurance proceeds in the fourth quarter of 2025.

•Return on Average Assets ("ROAA") - The Company reported ROAA of 1.12% for the first quarter of 2026, compared to 1.02% for the fourth quarter of 2025 and 0.91% for the first quarter of 2025. Adjusted ROAA - non-U.S. generally accepted accounting principles ("GAAP")(1) was 1.22% for the first quarter of 2026, compared to 1.11% for the fourth quarter of 2025 and 1.02% for the first quarter of 2025.

•Net Interest Margin ("NIM") - Net interest income for the first quarter of 2026 increased $2.4 million to $52.6 million compared to the fourth quarter of 2025. NIM increased 21 basis points ("bps") to 3.64% during the first quarter of 2026 compared to the fourth quarter of 2025. NIM excluding accretion(1) increased for the comparable periods from 3.24% to 3.35%. Excluding accretion interest, loan yields decreased 1 bp and funding costs decreased 13 bps for the comparable periods. Net interest income increased due to accelerated accretion due to loan payoffs coupled with a lower cost of deposits and lower long-term borrowing expenses. These favorable changes were partially offset by lower yields on interest-bearing deposits with other institutions.

•Book Value per Share - Book value per share increased to $18.02 at March 31, 2026 from $17.65 at December 31, 2025 and $16.55 at March 31, 2025.

•Asset Quality - Nonperforming assets were 1.10% of total assets at March 31, 2026, an increase from 0.69% at December 31, 2025 and 0.31% at March 31, 2025. Classified assets were 1.38% of total assets at March 31, 2026, an increase when compared to 0.96% at December 31, 2025 and 0.36% at March 31, 2025. The allowance for credit losses ("ACL") was $58.5 million at March 31, 2026, compared to $58.8 million at December 31, 2025 and $58.0 million at March 31, 2025. The ACL as a percentage of loans increased to 1.21% at March 31, 2026 compared to 1.20% at December 31, 2025 and remained flat compared to March 31, 2025.

•Operating Leverage - The efficiency ratio for the first quarter of 2026 was 61.97%, compared to 60.06% in the fourth quarter of 2025 and 63.64% for the first quarter of 2025. The adjusted efficiency ratio - non-GAAP(1), which excludes amortization of intangibles, was 58.57% for the first quarter of 2026, compared to 56.59% for the fourth quarter of 2025 and 59.25% for the first quarter of 2025. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

"Shore Bancshares delivered another strong quarter to begin 2026, with higher net income, expanding net interest margin and continued growth in book value per share," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares. "Lower funding costs, accelerated loan repricing and disciplined balance sheet management drove record net interest income and record profitability during the quarter. We also continued to make progress improving our core operating performance while maintaining prudent expense control.

(1) See the Reconciliation of GAAP and Non-GAAP Measures tables.

1

"Although nonperforming and classified assets increased during the quarter, overall asset quality remains sound and is supported by strong collateral values, conservative underwriting and solid reserve levels. We remain focused on managing risk, strengthening operating leverage and building long-term value for our shareholders as we move through 2026."

Balance Sheet Review

Total assets were $6.21 billion at March 31, 2026, a decrease of $52.8 million, or 0.8%, when compared to $6.26 billion at December 31, 2025. The decrease was primarily due to a decrease in our loan portfolio of $52.3 million and a decrease in cash and cash equivalents of $14.7 million, which were partially offset by an increase in our investment securities portfolio of $22.5 million. The decrease in cash and cash equivalents was primarily driven by seasonal run-off of the municipal deposits. Total assets increased $29.5 million, or 0.5%, from $6.18 billion when compared to March 31, 2025.

Non-owner occupied commercial real estate ("CRE") loans were $2.14 billion and $2.15 billion, and as a percentage of the Bank's Tier 1 Capital + ACL were 333% and 343% at March 31, 2026 and December 31, 2025, respectively.

CRE loans (excluding land and construction) were $2.60 billion at March 31, 2026 compared to $2.64 billion at December 31, 2025. The office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $480.9 million, or 9.9% of total loans at March 31, 2026. The following table provides the stratification of the classes of CRE loans (excluding land and construction) at March 31, 2026.

						March 31, 2026
						Owner Occupied																		Non-Owner Occupied
($ in thousands)						Average LTV(1)						Average Loan Size						Loan Balance(2)						Average LTV(1)						Average Loan Size						Loan Balance(2)
Office, medical						45.25		%				$	597					$	28,074					47.74		%				$	1,746					$	85,570
Office, govt. or govt. contractor						49.80						875						6,999						53.80						3,057						62,308
Office, other						46.58						467						84,074						48.66						1,328						213,825
Office, total						46.43						507						119,147						48.91						1,574						361,703
Retail						49.55						610						65,223						48.07						2,554						482,785
Multifamily (5+ units)						-						-						-						54.46						2,353						261,226
Hotel/motel						-						-						-						44.46						4,056						190,614
Industrial/warehouse						45.74						654						92,883						46.49						1,412						184,927
Commercial-improved						41.57						1,182						217,492						50.02						1,291						160,134
Marine/boat slips						32.52						804						17,696						36.45						1,472						7,359
Restaurant						47.86						976						54,657						48.40						1,008						41,310
Church						33.03						861						56,797						13.18						2,354						2,354
Land/lot loans						44.54						551						1,103						-						-						-
Other						40.21						1,440						119,558						32.94						543						162,847
Total CRE loans, gross						43.14						830						$	744,556					44.39						1,584						$	1,855,259

(1)Loan-to-value ("LTV") is determined based on latest available appraisal against current bank owned principal. Loans without an updated appraisal utilized the original transaction value.

(2)Loan balance includes deferred fees and costs.

The office CRE loan portfolio included loans to medical tenants of $113.6 million, or 23.6% of the total office CRE loan portfolio, at March 31, 2026. The office CRE loan portfolio also included loans to government or government contractor tenants of $69.3 million, or 14.4% of the total office CRE loan portfolio for the same period. At March 31, 2026, the average loan debt service coverage ratio on the office CRE loan portfolio was 1.7x and the average LTV was 47.66%.

The 467 loans in the office CRE portfolio at March 31, 2026 had an average loan size of $1.0 million and a median loan size of $378 thousand. LTV estimates for the office CRE portfolio at March 31, 2026 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

2

LTV Range ($ in thousands)						Loan Count						Loan Balance						% of Office CRE
Less than or equal to 50%						234						$	167,305					34.8		%
Greater than 50% and less than or equal to 60%						75						122,649						25.5
Greater than 60% and less than or equal to 70%						92						142,127						29.6
Greater than 70% and less than or equal to 80%						52						37,694						7.8
Greater than 80%						14						11,075						2.3
Total						467						$	480,850					100.0		%

There were 17 office CRE loans with balances greater than $5.0 million, totaling $164.8 million at March 31, 2026 and totaling $166.1 million at December 31, 2025. The decrease in this portfolio segment was the result of normal amortization. 81.1% of the office CRE loan balance was secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.5% was secured by properties with five stories or less. $28.7 million of these loan balances were classified as special mention or substandard at March 31, 2026. There were no charge-offs within the office CRE portfolio during the three months ended March 31, 2026.

Nonperforming assets were $68.4 million and $43.2 million, or 1.10% and 0.69% of total assets, as of March 31, 2026 and December 31, 2025, respectively. Nonperforming assets primarily consist of two large relationships with an aggregate loan balance of $45.6 million. These nonperforming loans primarily consists of multifamily and office commercial real estate based in North Carolina and Virginia. As of March 31, 2026, these loans are well-secured by collateral and required minimal individual reserves. When comparing March 31, 2026 to March 31, 2025, nonperforming assets increased $49.5 million, primarily due to an increase in nonaccrual loans of $49.6 million and an increase in repossessed marine and auto loans of $806 thousand, partially offset by a decrease in loans 90 days past due and accruing of $894 thousand. Substandard loans, which include nonaccrual loans and accruing loans 90 days or more past due were $82.3 million at March 31, 2026 compared to $57.4 million at December 31, 2025 and $19.4 million at March 31, 2025.

Special mention loans increased to $97.8 million at March 31, 2026 compared to $73.4 million at December 31, 2025 and $33.5 million at March 31, 2025. As of March 31, 2026, there were six special mention loans with individual balances greater than $5.0 million, totaling $79.1 million. These loans consist primarily of multifamily commercial real estate and other commercial real estate exposures that are well-collateralized, and the Company continues to closely monitor their cash flows. Management does not currently expect material losses on these credits and is actively engaged in credit oversight and timely execution of workout strategies.

Total deposits decreased $72.2 million from December 31, 2025 to $5.46 billion at March 31, 2026 and increased $1.3 million when compared to March 31, 2025. The year-to-date decrease in total deposits was primarily due to a decrease in interest-bearing deposits of $39.7 million, a decrease in noninterest-bearing deposits of $20.5 million and a decrease in money market and savings accounts of $19.3 million. These decreases were partially offset by an increase in time deposits of $7.3 million. Core deposits, which exclude municipal deposits, increased by $25.3 million, or 0.6%, during the same period.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits, was $5.46 billion at March 31, 2026, compared to $5.53 billion at December 31, 2025. The Company had no FHLB advances at March 31, 2026 and December 31, 2025. Brokered deposits were $11.0 million and $10.9 million at March 31, 2026 and December 31, 2025, respectively. Total reciprocal deposits were $1.42 billion and $1.52 billion at March 31, 2026 and December 31, 2025, respectively.

Uninsured deposits were $933.0 million, or 17.1% of total deposits, at March 31, 2026. Uninsured deposits, excluding deposits secured with pledged collateral, were $786.0 million, or 14.4% of total deposits, at March 31, 2026. At March 31, 2026, the available liquidity was $1.82 billion, including $340.8 million in cash and cash equivalents, $328.0 million in unpledged securities, $777.6 million in secured borrowing capacity at the FHLB and $376.3 million in unsecured lines of credit with other correspondent banks.

Total stockholders' equity increased $12.8 million, or 2.2%, when compared to December 31, 2025, primarily due to current year earnings, partially offset by cash dividends paid and an increase in accumulated other comprehensive losses. As of March 31, 2026 and 2025, the ratio of total equity to total assets was 9.71% and 8.94%, respectively. As of March 31, 2026, the ratio of total tangible equity to total tangible assets(1) was 8.37%, compared to 8.06% and 7.46% as of December 31, 2025 and March 31, 2025, respectively. The Company's Tier 1 and Total Risk-Based Capital Ratios at March 31, 2026 were 11.60% and 14.08%, respectively.

(1) See the Reconciliation of GAAP and Non-GAAP Measures tables.

3

Review of Quarterly Financial Results

Net interest income was $52.6 million for the first quarter of 2026, compared to $50.2 million for the fourth quarter of 2025 and $45.9 million for the first quarter of 2025. The increase in net interest income when compared to the fourth quarter of 2025 was primarily due to a decrease in interest expense on deposits of $3.0 million, a decrease in interest expense on long-term borrowings of $608 thousand and a decrease of $246 thousand in interest expense on short-term borrowings. The decrease in interest expense on long-term borrowings is due to a new debt issuance of $60 million during the fourth quarter 2025, which replaced $45 million of subordinated debt that was redeemed at the end of the fourth quarter 2025. These favorable changes were partially offset by a decrease in interest income on loans of $1.3 million and a decrease in interest income on deposits at other banks of $352 thousand. The increase in net interest income was $6.7 million when compared to the first quarter of 2025, and was primarily due to a decrease in interest expense on deposits of $3.8 million, an increase in interest and fees on loans of $3.3 million and a decrease in interest expense on short-term borrowings of $598 thousand. These favorable changes were partially offset by a decrease in interest on deposits with other banks of $951 thousand and an increase in interest expense on long-term borrowings of $207 thousand. The decrease in interest expense on deposits is reflective of the rate reductions during 2025.

The Company's NIM increased to 3.64% for the first quarter of 2026 from 3.43% for the fourth quarter of 2025, primarily due to lower interest expense on deposits. NIM excluding accretion increased for the comparable periods from 3.24% to 3.35%. Excluding accretion interest income, loan yields decreased 1 bp and funding costs decreased 13 bps for the comparable periods. Interest expense for the first quarter of 2026 decreased $3.9 million compared to the fourth quarter of 2025, primarily due to lower rates during the quarter and the absence of the write-offs of merger-related interest rate marks on certain deposit products in the fourth quarter of 2025. The Company's NIM increased to 3.64% for the first quarter of 2026 from 3.21% for the first quarter of 2025. The Company's average interest-earning asset yield increased to 5.44% for the first quarter of 2026 from 5.32% for the first quarter of 2025, while the average cost of funds decreased 30 bps to 1.90% from 2.20% for the same periods.

The provision for credit losses was $85 thousand for the three months ended March 31, 2026. The comparable amounts were $2.8 million for the three months ended December 31, 2025 and $1.0 million for the three months ended March 31, 2025. The decrease in the provision for credit losses for the first quarter of 2026 compared to the fourth quarter of 2025 was due to lower reserves resulting from lower loan balances and recoveries of certain charged-off loans, partially offset by the absence by the large charge-off driven by a commercial real estate loan in the fourth quarter of 2025. Coverage ratios increased to 1.21% at March 31, 2026 from 1.20% at December 31, 2025, and remained flat compared to March 31, 2025. Net charge-offs decreased to $847 thousand for the first quarter of 2026 compared to $3.6 million for the fourth quarter of 2025 and $554 thousand for the first quarter of 2025. The decrease was driven by the absence of the large commercial real estate write-down in the fourth quarter of 2025 and recoveries of previous write-downs of $409 thousand during the quarter.

Total noninterest income for the first quarter of 2026 was $7.2 million, a decrease of $1.7 million from $8.9 million for the fourth quarter of 2025, and an increase of $110 thousand from $7.1 million for the first quarter of 2025. When comparing the first quarter of 2026 to the fourth quarter of 2025, the decrease in noninterest income was primarily due to the absence of a one-time receipt of insurance proceeds in the fourth quarter of 2025.

Total noninterest expense of $37.1 million for the first quarter of 2026 increased $1.6 million compared to $35.5 million for the fourth quarter of 2025, and increased $3.3 million compared to $33.7 million for the first quarter of 2025. The increase from the fourth quarter of 2025 was primarily due to salaries and employee benefit expenses increasing $1.1 million and professional service fees increasing $368 thousand. The increase in salaries and employee benefits are primarily related to higher health care costs and one-time employee incentive related expense. The increase from the first quarter of 2025 was primarily due to an increase in salaries and employee benefits expense of $3.2 million and an increase in software and data processing costs of $449 thousand, partially offset by a decrease in amortization of other intangible assets of $298 thousand.

The efficiency ratio for the first quarter of 2026 when compared to the fourth quarter of 2025 and the first quarter of 2025 was 61.97%, 60.06% and 63.64%, respectively. Adjusted efficiency ratios - non-GAAP(1) for the same periods were 58.57%, 56.59% and 59.25%, respectively.

(1) See the Reconciliation of GAAP and Non-GAAP Measures tables.

4

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

This news release contains statements relating to future events or our future results that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. We also may make forward-looking statements in other documents filed with or furnished to the Securities and Exchange Commission, and our senior management may make forward-looking statements orally to investors, analysts, representatives of the media, and others. Forward-looking statements may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "intend," "potential," "target," "plan," "goal," or words of similar meaning, or future or conditional verbs such as "could," "would," or "may." Forward-looking statements include statements of our goals, intentions, or expectations; statements regarding our business plans, prospects, growth, or operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.