What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2026-03-02 compared with 2025-03-10 · 555 added, 532 removed, 1259 unchanged (46% of the section changed)

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Management’s Report on Internal Control over Financial Reporting

Report s of Independent Registered Public Accounting Fi rm (PCAOB ID 173 )

Report of Independent Registered Public Accounting Fi rm (PCAOB ID 613 )

Reports of Independent Registered Public Accounting Firm (PCAOB ID 173 )

Report of Independent Registered Public Accounting Firm (PCAOB ID 613)

Consolidated Balance Sheets

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Crowe has also issued a report on the effectiveness of internal control over financial reporting.

This report has also been made a part of this Annual Report.

Burke /s/ Todd L.

Burke Todd L.

This report has also been made a part of this Annual Report on Form 10-K.

Burke /s/ Charles S.

Burke Charles S.

President and Chief Executive Officer Executive Vice President and Chief Financial Officer

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We have audited the accompanying consolidated balance sheet of Shore Bancshares, Inc.

(the “Company”) as of December 31, 2024, and the related consolidated statement of income, comprehensive income, changes in stockholders’ equity, and cash flows for the period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements").

(the “Company”) as of December 31, 2025 and 2024, and the related consolidated statement of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework:

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Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Shore Bancshares, Inc.

and its subsidiaries (the Company) as of December 31, 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for the year then ended, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, of Shore Bancshares, Inc.

and its subsidiaries (the Company) for the year ended December 31, 2023, and the related notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Investment securities:

Available for sale, at fair value (amortized cost of $ 159,593 and $ 120,832 at December 31, 2024 and 2023, respectively)

Available for sale, at fair value (amortized cost of $ 226,677 and $ 159,593 at December 31, 2025 and December 31, 2024, respectively)

220,358 149,212

Held to maturity, net of allowance for credit losses of $ 203 and $ 94 (fair value of $ 424,734 and $ 457,830 ) at December 31, 2024 and 2023, respectively

Held to maturity, net of allowance for credit losses of $ 99 and $ 203 (fair value of $ 378,116 and $ 424,734 at December 31, 2025 and December 31, 2024, respectively)

414,827 481,077

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Loans held for sale, at fair value 32,540 19,606

Loans held for investment (fair value of $ 9,466 and $ 9,944 at December 31, 2024 and 2023, respectively)

4,771,988 4,641,010

Loans held for investment 4,900,302 4,771,988

allowance for credit losses ( 58,836 ) ( 57,910 )

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Other intangible assets, net 29,722 38,311

Mortgage servicing rights, at fair value 5,874 5,926

Right-of-use assets 10,523 11,385

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Time deposits 1,267,487 1,181,561

Brokered deposits 10,911 —

Total deposits 5,533,864 5,528,336

FHLB advances — 50,000

Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”) 29,847 29,530

Subordinated debt 43,870 43,139

Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”), net 30,168 29,847

Subordinated debt, net 58,893 43,870

Total borrowings 89,061 123,717

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shares authorized 50,000,000 ;

shares issued and outstanding 33,332,177 and 33,161,532 at December 31, 2024 and 2023, respectively

shares issued and outstanding 33,413,503 and 33,332,177 at December 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 360,554 358,112

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Trust and investment fee income 3,705 3,367 3,608

Loss on sales and calls of investment securities — ( 2,166 )

Gain on sale of loans held for sale 5,021 2,978

Mortgage banking revenue 6,078 5,987 4,513

Interchange credits 7,085 6,741 5,714

Title Company revenue 402 551

Bank-owned life insurance income 3,910 2,657 1,997

Bargain purchase gain — — 8,816

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Furniture and equipment expense 3,334 3,441 2,551

Data processing 12,329 8,783

Directors’ fees 1,557 1,156

Software and data processing 19,862 17,508 12,465

Amortization of other intangible assets 8,589 9,779 6,105

FDIC insurance premium expense 4,413 3,479

Legal and professional fees 5,064 5,836 4,337

FDIC insurance premium expense 3,753 4,413 3,479

Marketing and advertising 1,320 1,319 1,089

Fraud losses 460 4,998 879

Merger-related expenses — — 17,356

Other noninterest expenses 19,616 13,889

Other noninterest expense 14,370 14,675 10,274

Total noninterest expense 138,035 138,254 123,329

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

($ in thousands) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

($ in thousands) Common

Stock Additional

Capital Retained

Earnings Accumulated

Comprehensive

Income (Loss) Total

Stockholders’

Balances, December 31, 2022 $ 199 $ 201,494 $ 171,613 $ ( 9,021 ) $ 364,285

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Balances, December 31, 2024 333 358,112 190,166 ( 7,545 ) 541,066

Net income — — 59,506 — 59,506

Other comprehensive income — — — 2,952 2,952

Common shares issued for employee stock purchase plan — 82 — — 82

Stock-based compensation 1 2,360 — — 2,361

Cash dividends at $ 0.48 per common share

— — ( 16,094 ) — ( 16,094 )

Balances, December 31, 2025 $ 334 $ 360,554 $ 233,578 $ ( 4,593 ) $ 589,873

See accompanying notes to consolidated financial statements.

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Gain on mortgage loans held for sale ( 5,671 ) ( 5,021 ) ( 2,978 )

Gain on other mortgage loan activity ( 220 ) ( 499 )

Loss (gain) on other mortgage loan activity 6 ( 220 ) ( 499 )

Proceeds from sale of mortgage loans held for sale 183,446 170,205 121,734

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Deferred income tax expense 922 8,869 2,721

Losses on sales and calls of securities — 2,166

Gain on sales of repossessed assets ( 3 ) —

Loss on sales and calls of securities — — 2,166

Loss (gain) on sales and valuation adjustments of repossessed assets 857 ( 3 ) —

Loss on valuation adjustments on mortgage servicing rights 858 361 251

Loss on disposal of fixed assets 358 10 —

Gain on disposal of premises held for sale ( 737 ) —

Loss (gain) on disposal of premises held for sale 61 ( 737 ) —

Valuation adjustments on premises transferred to held for sale — 289 272

Gain on sales and valuation adjustments on other real estate owned — ( 3 )

Fair value adjustments on loans held for investment, at fair value 257 ( 33 )

Loss (gain) on sales and valuation adjustments on other real estate owned 66 — ( 3 )

Fair value adjustment on equity securities ( 189 ) 55 ( 54 )

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Net cash provided by operating activities 62,391 46,887 22,713

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

Year Ended December 31,

($ in thousands) 2024 2023

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturities and principal payments of investment securities available for sale 70,892 17,754

Proceeds from maturities and principal payments of available for sale securities 27,070 70,892 17,754

Proceeds from the sale of acquired available for sale securities — — 434,215

Proceeds from maturities and principal payments of investment securities held to maturity 48,960 44,801

Proceeds from maturities and principal payments of held to maturity securities 68,141 48,960 44,801

Proceeds from life insurance death benefits 2,814 150 —

Purchase of investment securities available for sale ( 108,554 ) ( 33,226 )

Purchases of investment securities held to maturity ( 17,512 ) —

Purchases of available for sale securities ( 93,702 ) ( 108,554 ) ( 33,226 )

Purchases of held to maturity securities ( 2,325 ) ( 17,512 ) —

Proceeds from sale of loans held for investment — — 8,611

Purchases of equity securities ( 183 ) ( 166 ) ( 79 )

Purchases of restricted securities ( 36,157 ) ( 35,350 )

Purchase of restricted securities ( 3,484 ) ( 36,157 ) ( 35,350 )

Net change in loans ( 122,583 ) ( 123,277 ) ( 317,283 )

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Net cash (used in) provided by investing activities $ ( 118,322 ) $ ( 134,541 ) $ 172,313

See accompanying notes to consolidated financial statements.

SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS – Continued

Year Ended December 31,

($ in thousands) 2025 2024 2023

CASH FLOWS FROM FINANCING ACTIVITIES:

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Long-term borrowings — 50,000 —

Proceeds from issuance of subordinated debt, net of issuance costs 58,860 — —

Redemption of subordinated debt ( 44,500 ) — —

Common stock dividends paid ( 16,094 ) ( 16,013 ) ( 12,733 )

Issuance of common stock 82 376 385

Net cash provided by financing activities 175,092 121,888

Net increase in cash and cash equivalents 87,438 316,914

Net cash (used in) provided by financing activities ( 48,354 ) 175,092 121,888

Net (decrease) increase in cash and cash equivalents ( 104,285 ) 87,438 316,914

Cash and cash equivalents at beginning of period 459,851 372,413 55,499

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Transfers from loans to repossessed assets 3,408 5,119 —

Transfer from loans held for sale to loans held for investment 649 — —

Unrealized gains (losses) on available for sale securities 4,062 ( 70 ) 2,101

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See accompanying notes to consolidated financial statements.

Shore Bancshares, Inc.

Notes to Consolidated Financial Statements

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Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of Shore Bancshares, Inc.

The accompanying consolidated financial statements include the accounts of Shore Bancshares, Inc.

and its subsidiaries (collectively referred to in these Notes as the “Company”), with all significant intercompany transactions eliminated.

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The Company engages in the banking business through Shore United Bank, N.A.

(the “Bank”), a Maryland commercial bank with trust powers.

The Company’s primary source of revenue is derived from interest earned on commercial, residential mortgage and other loans, and fees charged in connection with lending and other banking services located in Maryland, Delaware and Virginia.

The Company engages in financial service offerings through Wye Financial Partners and offers corporate trustee services through Wye Trust, a division of Shore United Bank, N.A.

The Bank also conducts secondary market lending activities through a division of the Bank.

(the “Bank”), a national banking association with trust powers with locations in Maryland, Delaware and Virginia.

The Company’s primary source of revenue is derived from interest earned on commercial, residential mortgage and other loans, and fees charged in connection with lending and other banking services.

The Company engages in financial service offerings through Wye Financial Partners and offers corporate trustee services through Wye Trust, a division of the Bank.

The Bank also conducts secondary market lending activities.

Mid-Maryland Title Company, Inc.

(the “Title Company”), engages in title work related to real estate transactions.

(the “Title Company”), engaged in title work related to real estate transactions.

The Title Company ceased conducting real estate closings effective March 31, 2025.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues earned and expenses incurred during the reporting period.

Actual results could differ from those estimates.

Estimates that could change significantly relate to the determination of the allowance for credit losses on loans, loans acquired in business combinations, valuation of deferred tax assets and the subsequent evaluation of goodwill for impairment.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the related disclosures.

These estimates are based on information available as of the date of the consolidated financial statements.

While management makes its best judgments, actual amounts or results could differ from these estimates.

Investments – Debt Securities

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If either criterion is met, the security’s amortized cost basis is written down to fair value through income during the current period.

For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other driving factors.

If the Company's assessment indicates that a credit loss exists, the present value of cash flows

expected to be collected from the security is compared to the amortized cost basis of the security.

For available for

sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other driving factors.

If the Company's assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, an ACL is recorded for the credit loss (which represents the difference between the expected cash flows and amortized cost basis), limited by the amount that the fair value is less than the amortized cost basis.

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or (3) the Company does not expect to recover the entire amortized cost basis of the security.

In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in shareholders' equity as comprehensive income, net of deferred taxes.

In all other situations, only the portion of the impairment loss representing the credit loss must be recognized in earnings, with the remaining portion being recognized in stockholders’ equity as comprehensive income, net of deferred taxes.

Changes in the ACL are recorded as a provision for (or reversal of) credit losses.

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Any impairment not recorded through an allowance for credit loss is recognized in other comprehensive income as a noncredit-related impairment.

As part of its estimation process, the Company have made a policy election to exclude accrued interest from the amortized cost basis of available for sale debt securities and report accrued interest separately in other assets in the consolidated balance sheet.

Available for sale debt securities are placed on nonaccrual status when we no longer expect to receive all contractual amounts due, which is generally at 90 days past due.

As part of its estimation process, the Company has elected to exclude accrued interest from the amortized cost basis of available for sale debt securities and report accrued interest separately in other assets in the consolidated balance sheet.

Available for sale debt securities are placed on nonaccrual status when the Company no longer expects to receive all contractual amounts due, which is generally at 90 days past due.

Accrued interest receivable is reversed against interest income when a security is placed on nonaccrual status.

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If it determines that a security indicates evidence of deteriorated credit quality, the security is individually-evaluated and a discounted cash flow analysis is performed and compared to the amortized cost basis.

As of December 31, 2024, the Company had $ 424.7 million classified as held to maturity at estimated fair value with an amortized cost basis of $ 481.3 million with the remainder of the securities portfolio held as available for sale.

As of December 31, 2025, the Company had $ 378.1 million of securities classified as held to maturity at estimated fair value with an amortized cost basis of $ 414.9 million, with the remainder of the securities portfolio classified as available for sale.

Loans Held for Investment

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Commercial Real Estate – Commercial real estate loans consist of both loans secured by owner occupied properties and non-owner occupied properties where an established banking relationship exists and involves investment properties for multi-family (5+), warehouse, retail, and office space with a history of occupancy and cash flow.

These loans are subject to adverse changes in the local economy and commercial real estate markets.

These loans are subject to adverse changes in the local economy and

commercial real estate markets.

Credit risk associated with owner occupied properties arises from the borrower’s financial stability and the ability of the borrower and the business to repay the loan.

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Credit risk arises from the successful operation of the business which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy.

The Company discontinued the issuance of new marine loans and only services the existing portfolio at December 31, 2025.

Consumer – Consumer loans include installment loans and personal lines of credit.

Credit risk is similar to residential real estate loans above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

The credit risk of consumer loans is similar to that of residential real estate loans described above, as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

Credit Cards – Unsecured credit card loans were offered to our commercial and consumer customers.

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Subsequent changes in the fair value of these loans are recorded in interest income.

During the year ended December 31, 2024 and 2023 the Company had no transfers from LHFS to LHFI.

The Company had a $ 649 thousand transfer from LHFS to LHFI during the year ended December 31, 2025 and no transfers from LHFS to LHFI during the years ended December 31, 2024 and 2023.

Allowance for Credit Losses – Loans Held for Investment

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When a loan is collateral-dependent and the repayment is expected to be provided substantially through the operation or sale of the collateral, the ACL is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral.

Cash flow projections and estimated expected losses on loans which share common risk characteristics are based in part on forecasts economic independent variables, namely, the national unemployment rate, 10-year Treasury rate and changes in GDP that are reasonable and supportable over a 12-month period and incorporated into the estimate of expected credit losses using a statistical regression analysis.

Cash flow projections and estimated expected losses on loans that share common risk characteristics are based in part on forecasts of independent economic variables, namely, the national unemployment rate, 10-year Treasury rate and changes in GDP that are reasonable and supportable over a 12-month period and incorporated into the estimate of expected credit losses using a statistical regression analysis.

For periods beyond those for which reasonable and supportable forecasts are available, projections are based on a 12-month straight-line reversion of the corresponding economic independent variable from the last forecast to a historical average level.

Management’s estimate of the ACL on loans that are collectively evaluated also includes a qualitative assessment of available information relevant to assessing collectability that is not captured in the quantitative loss estimation process.

Factors considered by management include concentrations of loans to specific industry segments, the volume and severity of delinquencies and adversely classified loan balances and the value of underlying collateral, and a number of other economic indicators intended to account for the imprecision inherent in forecasting economic conditions.This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available.

Reserve for Unfunded Commitments

The Company records a reserve, reported in other liabilities, for expected credit losses on commitments to extend credit that are not unconditionally cancellable by the Company.

The Company records a reserve within other liabilities for expected credit losses on commitments to extend credit that are not unconditionally cancellable by the Company.

The reserve for unfunded commitments is measured based on the principles utilized in estimating the ACL on loans and an estimate of the amount of unfunded commitments expected to be advanced.

Changes in the reserve for unfunded commitments are recorded through the provision for credit losses.

The Company recorded a provision for credit losses associated with its unfunded commitments of $ 104 thousand and $ 436 thousand during the years ended December 31, 2024 and 2023, respectively.

The Company recorded a provision for credit losses associated with its unfunded commitments of $ 906 thousand, $ 104 thousand and $ 436 thousand during the years ended December 31, 2025, 2024 and 2023, respectively.

Loans Held For Sale

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Mortgage Servicing Rights

When mortgage loans are sold with servicing retained, the MSRs are initially recorded at fair value with the income statement effect recorded in gains or losses of loan held for sale.

Fair value is based on a valuation model that calculates the present value of estimated future net servicing income.

The Company measures servicing rights at fair value at each reporting date and records the changes in fair value of servicing assets in earnings in the period in which the changes occur.

Servicing fee income is recorded in the mortgage banking revenue line item.

When mortgage loans are sold with servicing retained, the MSRs are initially recorded at fair value and subsequently amortized in proportion to, and over the period of, estimated net servicing revenue.

Servicing rights are assessed for impairment quarterly, based on fair value, with impairment recorded through income.

The primary risk of material changes to the value of the servicing rights resides in the potential volatility in the economic assumptions used, particularly the prepayment speeds.

Servicing fee income is recorded in the mortgage banking revenue in the consolidated statements of income.

Premises and Equipment

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Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets.

Useful lives range from three to ten for furniture, fixtures and equipment;

Useful lives range from three to ten years for furniture, fixtures and equipment;

three to five years for computer hardware and data handling equipment;

and ten to 40 years for buildings and building improvements.

Land improvements are amortized over a period of 15 years and leasehold improvements are amortized over the term of the respective lease or useful life, whichever is shorter.

Maintenance and repairs are charged to expense as incurred, while improvements which extend the useful life of an asset are capitalized and depreciated over the estimated remaining life of the asset.

Land improvements are amortized over a period of 15 years and leasehold improvements are amortized over the remaining term of the respective lease or useful life, whichever is shorter.

Maintenance and repairs are charged to expense as incurred, while improvements that extend the useful life of an asset are capitalized and depreciated over the estimated remaining life of the asset.

Long-lived assets are evaluated periodically for impairment when events or changes in circumstances indicate the carrying amount may not be recoverable.

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Segment Reporting

Operating segments are components of a business about which separate financial information is available and evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance.

The Bank is the Company’s only reportable operating segment upon which management makes decisions regarding how to allocate resources and assess performance.

While the Company’s chief operating decision maker has some limited financial information about its various financial products and services including the Title Company, that information is not complete since it does not include a full allocation of revenue, costs, and capital from key corporate functions;

therefore, the Company evaluates financial performance on a company-wide basis.

Management continues to evaluate the Company's business units for separate reporting as facts and circumstances change.

Business Combination

The Company accounts for business combinations utilizing the acquisition method of accounting, which necessitates that purchased assets and assumed liabilities be recorded at their respective fair values.

In numerous instances, the fair values of acquired assets and assumed liabilities are ascertained by estimating the anticipated cash flows from those assets and liabilities and discounting them at appropriate market rates.

The Company’s reportable segment is determined by the Chief Executive Officer, who is designated the chief operating decision maker (“CODM”), based upon information provided about the Company’s product and services offered.

The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are then aggregated if operating performance of product and customers are similar.

The CODM evaluates the financial performance of the Company’s business components such as revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in determination of allocated resources.

While the CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the financial services operations are considered by management to be aggregated in one reportable operating segment.

Refer to the “Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K.

Business Combinations

The Company accounts for business combinations utilizing the acquisition method of accounting, which requires purchased assets and assumed liabilities be recorded at their respective fair values.

In numerous instances, the fair values of acquired assets and assumed

liabilities are ascertained by estimating the anticipated future cash flows from those assets and liabilities and discounting them at appropriate market rates.

The Company determines the fair values of loans, core deposit intangibles and deposits with the assistance of a third-party vendor.

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PCD loans are those for which there is more than insignificant evidence of credit deterioration since origination.

Fair values are determined primarily through a discounted cash flow approach which considers the acquired loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, timing of principal and

interest payments, current market rates, and remaining balances.

Fair values are determined primarily through a discounted cash flow approach that considers the acquired loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, timing of principal and interest payments, current market rates, and remaining balances.

Estimates of fair value also include estimates of default, loss severity and estimated prepayments.

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Determining fair value is subjective, requiring the use of estimates, assumptions and management judgment.

Goodwill is tested at least annually for impairment, usually during the fourth quarter, or on an interim basis if circumstances dictate.

Goodwill is tested at least annually for impairment, usually during the fourth quarter, or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of goodwill below its carrying value.

Intangible assets that have finite lives are amortized over their estimated useful lives and also are subject to impairment testing.

If the fair value of a reporting unit is less than book value, an expense may be required to write down the related goodwill to record an impairment loss.

If the fair value of a reporting unit is less than its book value, an impairment charge may be required to write down the carrying value of the related goodwill to fair value.

As of December 31, 2025, the Company had one operating segment, the banking segment.

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Cash and cash equivalents include cash, deposits with other financial institutions with original maturities fewer than 90 days and federal funds sold.

Interest-bearing deposits in other financial institutions mature within one year and are carried at cost.

Interest-bearing deposits in other financial institutions mature within 90 days or less.

Derivative Financial Instruments and Hedging

We account for derivatives in accordance with Financial Accounting Standards Board (“FASB”) literature on accounting for derivative instruments and hedging activities.

When we enter into a derivative contract, we designate the derivative as held for trading, an economic hedge, or a qualifying hedge as detailed in the literature.

The Company accounts for derivatives in accordance with Financial Accounting Standards Board (“FASB”) literature on accounting for derivative instruments and hedging activities.

When we enter into a derivative contract, we designate the derivative as held for trading, an

economic hedge, or a qualifying hedge as detailed in the literature.

The designation may change based upon management’s reassessment or changing circumstances.

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We designate at inception whether a derivative contract is considered hedging or non-hedging.

All of our derivatives are nonexchange traded contracts, and as such, their fair value is based on dealer quotes, pricing models, discounted cash flow methodologies, or similar techniques for which the determination of fair value may require significant management judgement or estimation.

For qualifying hedges, we formally document at inception all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various accounting hedges.

We primarily utilize derivatives to manage interest rate sensitivity.

At December 31, 2024 and 2023, the Company did not have any designated hedges.

As of December 31, 2025 and 2024, the Company did not have any designated hedges.

The Company measures certain financial assets and liabilities at fair value and also makes disclosures about certain financial instruments that are not measured at fair value in the consolidated balance sheets.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants, on the measurement date.

Fair value estimates involve uncertainties and matters of significant judgement regarding interest rates, credit risk, and other factors, particularly in the absence of broad markets for specific terms.

Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, and other factors, particularly in the absence of broad markets for specific terms.

Changes in assumptions or in market conditions could significantly affect these estimates.

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The Company and its subsidiary file a consolidated federal income tax return.

The Company accounts for income taxes using the liability method in accordance with required accounting guidance.

The Company accounts for income taxes using the liability method in accordance with appropriate accounting guidance.

Under this method, deferred tax assets and liabilities are determined by applying the applicable federal and state income tax rates to cumulative temporary differences.

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A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.

Realization of deferred tax assets is dependent on the generation of a sufficient level of future taxable income, recoverable taxes paid in prior years and tax planning strategies.

The Company evaluates all positive and negative evidence before determining if a valuation allowance is deemed necessary regarding the realization of deferred tax assets.

Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income, recoverable taxes paid in prior years and tax planning strategies.

The Company evaluates all positive and negative evidence before determining whether a valuation allowance is deemed necessary regarding the realization of deferred tax assets.

The Company recognizes accrued interest and penalties as a component of tax expense.

The provision for income taxes includes the impact of reserve provisions and changes in the reserves that are considered appropriate, as well as the related net interest and penalties.

In addition, the Company is subject to the continuous examination of its income tax returns by the IRS and other tax authorities which may assert assessments against the Company.

In addition, the Company is subject to the continuous examination of its income tax returns by the IRS and other tax authorities that may assert assessments against the Company.

The Company regularly assesses the likelihood of adverse outcomes resulting from these examinations and assessments to determine the adequacy of its provision for income taxes.

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Basic earnings per share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding and does not include the effect of any potentially dilutive common stock equivalents.

Included in this calculation due to dividend participation rights are restricted stock awards which have been granted.

Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for the effect of any potentially dilutive common stock equivalents.

Included in this calculation due to dividend participation rights are restricted stock awards that have been granted.

Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted-average number of shares outstanding, adjusted for the effect of any potentially dilutive common stock equivalents.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered.

Transfers of financial assets are accounted for as sales at the time when control over the assets has been surrendered.

Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company, (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Share-Based Compensation

The Company may grant share-based compensation to employees and non-employee directors in the form of restricted stock, restricted stock units (“RSUs”) and stock options.

The fair value of restricted stock is determined based on the closing price of the Bank’s holding company common stock on the date of grant.

The Company recognizes compensation expense related to restricted stock on a straight-line basis over the vesting period for service-based awards.

The fair value of RSUs is initially valued based on the closing price of the Bank’s

holding company common stock on the date of grant and is amortized in the statement of income over the vesting period.

The RSUs are subsequently remeasured in each reporting period until settlement based on the quantity of awards for which it is probable that the performance conditions will be achieved.

Stock-Based Compensation

The Company may grant share-based awards to employees and non-employee directors in the form of restricted stock and restricted stock units (“RSUs”).

The fair value of restricted stock and RSUs is determined based on the closing price of the Company’s common stock on the date of grant.

The Company recognizes compensation expense related to equity compensation on a straight-line basis over the vesting period for service-based awards.

When equity awards are subject to performance conditions, the awards are subsequently remeasured in each reporting period until settlement based on the quantity of awards for which it is probable that the performance conditions will be achieved.

The fair value of stock options is estimated at the date of grant using the Black-Scholes option pricing model and related assumptions.

The Company uses historical data to predict option exercise and employee termination behavior.

Expected volatilities are based on the historical volatility of the Bank’s holding company common stock.

Expected volatilities are based on the historical volatility of the Company’s common stock.

The expected term of options granted is derived from actual historical exercise activity and represents the period of time that options granted are expected to be outstanding.

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Treasury yield curve in effect at the time of grant based on the expected life of the option.

The dividend yield is equal to the dividend yield of the Bank’s holding company common stock at the time of grant.

Expense related to shared-based compensation is recorded in the statements of income as a component of salaries and employee benefits for employees and as a component of other noninterest expense for non-employee directors, with a corresponding increase to capital surplus in shareholders’ equity.

The dividend yield is equal to the dividend yield of the Company’s common stock at the time of grant.

Advertising Costs

Advertising costs are generally expensed as incurred.

The Company incurred advertising costs of approximately $ 1.3 million and $ 1.1 million for the years ended December 31, 2024 and 2023, respectively.

The Company incurred advertising costs of approximately $ 1.3 million, $ 1.3 million and $ 1.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Comprehensive Income

2 unchanged sentences

There were no reclassifications from accumulated other comprehensive income during the years ended December 31, 2025, 2024 and 2023.

Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.” The amendments in this ASU are intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

This ASU requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”).

Additionally, this ASU requires that at least one of the reported segment profit and loss measures should be the measure that is most consistent with the measurement principles used in an entity’s consolidated financial statements.

Lastly, this ASU requires public business entities with a single reportable segment to provide all disclosures required by these amendments in this ASU and all existing segment disclosures in Topic 280.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company adopted this standard as of December 31, 2024 and the Company did not have a material impact on its consolidated financial statements.

Segment Reporting for more details.

Recent Accounting Pronouncements

ASU Update 2023-09 – In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis.

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pre-tax income by the entity’s applicable statutory rate, on an annual basis.

Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received).

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This ASU is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied on a prospective basis;

however, retrospective application is permitted.

The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.

Note 2 – Business Combination

On July 1, 2023 (the “Acquisition Date”), the Company completed the acquisition of TCFC (“the merger”), a Maryland charted commercial bank, in accordance with the definitive agreement that was entered into on December 14, 2022, by and among the Company and TCFC.

The primary reasons for the merger included:

expansion of the branch network and commanding market share positions in attractive Maryland markets and a growing presence in Virginia and Delaware;

attractive low-cost funding base;

strong cultural alignment and a deep commitment to shareholders, customers, employees, and communities served by Shore United Bank and TCFC, meaningful value creation to shareholders;

and increased trading liquidity for both companies and increased dividends for TCFC shareholders.

In connection with the completion of the merger, former TCFC shareholders received 2.3287 shares of the Company’s common stock.

The value of the total transaction consideration was approximately $ 153.6 million.

The consideration included the issuance of 13,201,693 shares of the Company’s common stock, which had a value of $ 11.56 per share, which was the closing price of the Company’s common stock on June 30, 2023, the last trading day prior to the consummation of the acquisition.

Also included in the total consideration were cash in lieu of any fractional shares, converted share-based payment awards, and debt of TCFC that was effectively settled upon closing.

The acquisition of TCFC was accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date.

The amount of bargain purchase gain as of the Acquisition Date was approximately $ 8.8 million.

The bargain purchase gain is not included as taxable income for tax purposes.

The exchange ratio was determined at the time of announcement of the merger between the Company and TCFC in December of 2022 when the stock price of the Company was much higher than at the legal merger date.

The decline in the Company’s stock price was the primary driver in recording a bargain purchase gain on this transaction.

The decline in stock price for the Company was comparable to other financial institutions similar to the Company leading up to the merger due to bank failures in the first quarter of 2023 and increases to overnight borrowing rates by the Fed which resulted in continued pressure on net interest margins.

As a result of the integration of operations of TCFC, it is not practicable to determine revenue or net income included in the Company’s consolidated operating results relating to TCFC since the Acquisition Date, as TCFC’s results cannot be separately identified.

Comparative pro-forma financial statements for the prior year period were not presented, as adjustments to those statements would not be indicative of what would have occurred had the acquisition taken place on January 1, 2022.

In particular, adjustments that would have been necessary to be made to record the loans at fair value, the provision of credit losses or the core deposit intangible would not be practical to estimate.

($ in thousands, except per share data)

Purchase Price Consideration:

Fair value of common shares issued ( 13,201,693 shares) based on Shore Bancshares, Inc.

share price of $ 11.56

Effective settlement of pre-existing debt (1)

Cash consideration (cash in lieu for fractional shares) 5

Fair value of converted restricted stock units (2)

Total purchase price $ 153,592

Identifiable assets:

Cash and cash equivalents $ 25,377

Total securities 454,468

Loans, net 1,765,255

Premises and equipment, net 29,277

Core deposit intangible asset 48,648

Other assets 89,808

Total identifiable assets $ 2,412,833

Identifiable liabilities:

Deposits $ 2,131,141

Total debt 97,545

Other liabilities 21,739

Total identifiable liabilities $ 2,250,425

Fair value of net assets acquired $ 162,408

Bargain purchase gain $ ( 8,816 )

____________________________________

(1) SHBI held $ 500,000 in subordinated debt of TCFC.

The debt was effectively settled.

(2) Represents the number of TCFC restricted stock units outstanding and the equity exchange ratio, further multiplied by the price per share of SHBI common stock of $ 11.56 and the estimated ratio of the completed service period relative to the total service period of the underlying awards.

The acquired assets and assumed liabilities of TCFC were measured at fair value as of the Acquisition Date.

Management made significant estimates and exercised significant judgement in accounting for the acquisition of TCFC.

The following is a brief description of the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed.

The Company utilized a valuation specialist to assist with the determination of fair values for certain acquired assets and assumed liabilities.

The Company recorded all loans acquired at the estimated fair value on the Acquisition Date with no carryover of the related allowance for loan losses.

The Company determined the net discounted value of cash flows on gross loans totaling $ 1.9 billion, including 3,858 of purchased performing loans and 323 PCD loans.

The valuation took into consideration the loans’ underlying characteristics, including account types, remaining terms, annual interest rates, interest types, past delinquencies, timing of principal and interest payments, current market rates and remaining balances.

Valuations also considered default rates, loss severity estimates, and estimates related to expected prepayments over the contractual lives of the loans.

The effect of the valuation process was a total net discount $ 120.9 million at the Acquisition Date.

The core deposit intangible was valued using an income approach focused on cost savings, which recognizes the cost savings represented by the expense of maintaining the core deposit base versus the cost of an alternative funding source.

The valuation incorporates assumptions related to account retention, discount rates, deposit interest rates, deposit maintenance costs and alternative funding rates.

The fair value of premises acquired was based on recent third-party appraised values of the properties, with fair value adjustments made to both the buildings and any associated parcels of land.

Acquired equipment was based on the remaining net book value of TCFC, which approximated fair value.

The fair value of noninterest-bearing demand deposits, interest checking, money market and savings deposit accounts from TCFC were assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.

Certificates of deposit were valued at the present value of the certificates’ expected contractual payments discounted at market rates for certificates with similar terms.

The estimated fair value of the acquired portfolio of debt securities was based on quoted market prices and dealer quotes.

Substantially all the acquired portfolio was sold following the acquisition.

The estimated fair value of short-term borrowings was determined to approximate their stated value.

Subordinated debt and trust preferred debt were valued using a discounted cash flow approach incorporating a discount rate that considered market terms, maturities, and credit ratings.

The Company adopted this ASU prospectively on January 1, 2025.

Refer to Note 14 – Income Taxes for additional details related to the impact that adoption of this ASU had on the Company’s consolidated financial statements and related disclosures.

Note 2 – Investment Securities

The following tables provide information on the amortized cost and estimated fair values of investment securities at December 31, 2024 and 2023.

The following tables provide information on the amortized cost and estimated fair values of investment securities as of December 31, 2025 and 2024.

($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

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Other debt securities (2)

4,269 446 — 4,715

Total $ 226,677 $ 779 $ 7,098 $ 220,358

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Other debt securities (2)

6,170 469 13 6,626

Total $ 159,593 $ 557 $ 10,938 $ 149,212

No AFS securities were sold from the Company’s legacy securities portfolios during the years ended December 31, 2024 and 2023.

The Company sold virtually all of the AFS securities portfolio acquired from TCFC immediately after the legal merger with the proceeds of $ 434.2 million, and recognized gross losses of $ 2.2 million from the sale of securities in 2023.

____________________________________

(1) No available for sale (“AFS”) securities were sold during the years ended December 31, 2025 and 2024.

(2) Other debt securities includes corporate and municipal bond obligations of state and political entities.

($ in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Allowance for Credit Losses

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Mortgage-backed securities 303,129 255 32,167 271,217 —

Obligations of states and political entities 1,465 19 34 1,450 —

Other debt securities (1)

6,961 33 420 6,574 99

Total $ 414,926 $ 290 $ 37,100 $ 378,116 $ 99

2 unchanged sentences

Mortgage-backed securities 336,755 — 47,234 289,521 —

Obligations of states and political entities 1,470 57 19 1,508 —

Other debt securities (1)

11,965 19 776 11,208 203

Total $ 481,280 $ 19 $ 56,565 $ 424,734 $ 203

Equity securities with aggregate fair values of $ 5.8 million and $ 5.7 million at December 31, 2024 and 2023, respectively, are presented separately on the consolidated balance sheets.

The fair value adjustments recorded through earnings totaled $ 55 thousand and $ 54 thousand for the years ended December 31, 2024 and 2023, respectively.

On January 1, 2023, the Company adopted ASC 326, which made changes to accounting for AFS debt securities whereby credit losses should be presented as an allowance, rather than as a write-down, when management does not intend to sell and does not believe that it is more likely than not they will be required to sell prior to maturity.

In addition, ASC 326 requires an ACL to be recorded on HTM debt securities measured at amortized cost.

The following table summarizes the activity in the ACL on HTM securities.

____________________________________

(1) Other debt securities includes corporate and municipal bond obligations of state and political entities.

Equity securities with aggregate fair values of $ 6.2 million and $ 5.8 million as of December 31, 2025 and 2024, respectively, are presented separately on the consolidated balance sheets.

The fair value adjustments recorded through earnings totaled gains of $ 372 thousand, $ 111 thousand and $ 133 thousand for the years ended December 31, 2025, 2024 and 2023, respectively.

The following table summarizes the activity in the allowance for credit losses (“ACL”) on held to maturity (“HTM”) securities for the periods presented.

Year Ended December 31,

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Balance, beginning of period $ 203 $ 94 $ —

Provision for credit losses, other debt securities 109 94

Provision for (reversal of) credit losses, other debt securities ( 104 ) 109 94

Balance, end of period $ 99 $ 203 $ 94

A provision for credit losses of $ 109 thousand and $ 94 thousand was recorded on HTM corporate and municipal bonds for the years ended December 31, 2024 and 2023, respectively.

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2024 and 2023.

A reversal of the provision for credit losses of $ 104 thousand, a provision for credit losses of $ 109 thousand and a provision for credit losses of $ 94 thousand was recorded on HTM corporate and municipal bonds for the years ended December 31, 2025, 2024 and 2023, respectively.

Less than 12 Months More than 12 Months Total

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government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of December 31, 2024.

All of the securities with unrealized losses in the portfolio have modest duration risk, low credit risk and minimal losses when compared to total amortized cost.

The unrealized losses on debt securities that exist are the result of market changes in interest rates since original purchase and are not related to credit concerns.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of December 31, 2025 and 2024.

Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary.

There were 111 available for sale securities and 187 held to maturity securities in an unrealized loss position at December 31, 2024.

There were 115 available for sale securities and a 185 held to maturity securities in an unrealized loss position at December 31, 2023.

Net unrealized losses of the AFS securities totaled $ 10.4 million as of December 31, 2023.

There were 122 AFS and 169 HTM securities in an unrealized loss position at December 31, 2025.

There were 111 AFS and 187 HTM securities in an unrealized loss position at December 31, 2024.

Net unrealized losses of the AFS securities totaled $ 6.3 million and $ 10.4 million as of December 31, 2025 and 2024, respectively.

The following table provides information on the amortized cost and estimated fair values of investment securities by contractual maturity date at December 31, 2025.

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Due after ten years 252 237 10,149 8,574

29,154 26,828 144,525 135,213

Total non-mortgage-backed securities $ 26,572 $ 25,331 $ 111,797 $ 106,899

Mortgage-backed securities 200,105 195,027 303,129 271,217

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The maturity dates for debt securities are determined using contractual maturity dates.

Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations without prepayment penalties.

The Company has securities that have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase.

At December 31, 2024, the aggregate carrying value of pledged AFS and HTM pledged securities was $ 67.9 million and $ 197.5 million, respectively.

At December 31, 2025, the aggregate carrying value of AFS and HTM pledged securities was $ 69.4 million and $ 218.6 million, respectively.

The comparable amounts for December 31, 2024 were $ 67.9 million and $ 197.5 million, respectively.

The following table sets forth the amortized cost and estimated fair values of securities which have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase at December 31, 2024 and 2023.

The following table sets forth the amortized cost and estimated fair values of securities that have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase at December 31, 2025 and 2024.

December 31, 2025 December 31, 2024

($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value

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Pledged held to maturity securities 218,556 197,146 197,474 173,248

There were no obligations to any issuer exceeding 10% of stockholders’ equity at December 31, 2024 or 2023.

There were no obligations of any issuer exceeding 10% of stockholders’ equity at December 31, 2025 or 2024.

Note 3 – Loans and Allowance for Credit Losses

On January 1, 2023, the Company adopted ASC 326.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables.

For further discussion on the most significant accounting policies that the Company follows see Note 1 – “Summary of Significant Accounting Policies.”

The Company classifies loans as commercial real estate, residential real estate, construction, commercial, consumer and credit cards, and the customers are primarily in Anne Arundel County, Baltimore County, Charles County, Calvert County, St.

Mary’s County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County and Worcester County in Maryland, Kent and Sussex County, Delaware and in Accomack County, Stafford County, Spotsylvania County, and Fredericksburg city in Virginia.

The Company classifies loans as commercial real estate, residential real estate, construction, commercial, consumer and credit cards, with customers primarily located in Maryland, Delaware and Virginia.

The Company makes loans to certain officers, directors and their affiliated interests.

See Note 19 – “Related Party Transactions” for more information.

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables.

For further discussion on the most significant accounting policies that the Company follows, see Note 1 – “Summary of Significant Accounting Policies.”

The following table provides information about the principal classes of the loan portfolio at December 31, 2025 and 2024.

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Total loans, net $ 4,841,466 $ 4,714,078

Loans are stated at their principal amount outstanding, net of any purchase premiums/discounts, deferred fees and costs.

Loans are stated at their principal amount outstanding, net of any purchase premiums or discounts, deferred fees, and costs.

Included in loans were deferred costs, net of fees, of $ 3.1 million and $ 3.2 million at December 31, 2025 and 2024, respectively.

At December 31, 2024 and 2023, loans included $ 1.69 billion and $ 1.94 billion, respectively, of aggregate loans that were acquired as part of the acquisitions of Severn Bancorp, Inc.

(“Severn”) and TCFC.

These balances were presented net of the related aggregate discounts, which totaled $ 92.0 million and $ 113.1 million at December 31, 2024 and 2023, respectively.

At December 31, 2024, the Bank was servicing $ 366.5 million in loans for the Federal National Mortgage Association and $ 116.6 million in loans for the Federal Home Loan Mortgage Corporation.

The following tables provide information on amortized cost basis on nonaccrual loans by loan class as of December 31, 2024 and 2023.

At December 31, 2025 and 2024, loans included $ 1.49 billion and $ 1.69 billion, respectively, of aggregate loans that were acquired as part of the

acquisitions of Severn Bancorp, Inc.

(“Severn”) and The Community Financial Corporation (“TCFC”).

These balances are presented net of the related aggregate discounts, which totaled $ 78.2 million and $ 92.0 million at December 31, 2025 and 2024, respectively.

The following tables provide information on the amortized cost basis on nonaccrual loans by loan class as of December 31, 2025 and 2024.

($ in thousands) Nonaccrual With No Allowance For Credit Loss Nonaccrual With An Allowance For Credit Loss Total Nonaccrual Loans

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Consumer 761 712 1,473

Credit cards — 168 168

Total $ 16,512 $ 4,496 $ 21,008

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Consumer 1,431 42 1,473

Credit cards 146 22 168

Total $ 13,254 $ 7,754 $ 21,008

The overall quality of the Bank’s loan portfolio is primarily assessed using the Bank’s risk-grading scale.

The overall quality of the Company’s loan portfolio is primarily assessed using the Company’s risk-grading scale.

This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans.

Credit quality indicators are adjusted based on management’s judgment during the quarterly review process.

Consumer credit cards are monitored based on a borrower payment history.

Credit card loans are classified as performing and are typically charged off no later than 180 days past due when, or in the opinion of management, the collection of principal or interest is considered doubtful.

As of December 31, 2024, there were 7 credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and nonperforming.

Consumer credit cards are monitored based on a borrower’s payment history.

Credit card loans are classified as performing and are typically charged off no later than 180 days past due or when, in the opinion of management, the collection of principal or interest is considered doubtful.

As of December 31, 2025, there were two credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and nonperforming.

Loans subject to risk rating are graded on a scale of one to ten.

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These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.

They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected.

They are characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected.

Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard.

The loans may have a delinquent history or combination of weak collateral, weak guarantor or operating losses.

When a loan is assigned to this category the Bank may estimate a specific reserve in the loan loss allowance analysis and/or place the loan on nonaccrual.

When a loan is assigned to this category, the Company may estimate a specific reserve in the credit loss allowance analysis and/or place the loan on nonaccrual.

These assets listed may include assets with histories of repossessions or some that are nonperforming bankruptcies.

These relationships will be reviewed at least quarterly.

Rating 9 – Doubtful - Doubtful assets have many of the same characteristics of substandard with the exception that the Bank has determined that loss is not only possible but is probable.

Rating 9 – Doubtful – Doubtful assets have many of the same characteristics of substandard with the exception that the Company has determined that loss is not only possible but is probable.

The amount of loss is not discernible due to factors such as merger, acquisition, or liquidation;

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The following table provides information on loan risk ratings as of December 31, 2025 and gross write-offs during the year ended December 31, 2025.

Term Loans by Origination Year Revolving Loans Revolving Converted to Term Loans Total

Term Loans by Origination Year Revolving

loans Revolving

term loans Total

($ in thousands) Prior 2021 2022 2023 2024 2025

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Pass $ 27,094 $ 7,238 $ 7,047 $ 28,868 $ 108,885 $ 151,738 $ 13,070 $ 632 $ 344,572

Special mention — — — — — — — — —

Special mentions — — — — — — — — —

Substandard 88 — — — — 243 — — 331

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Total gross charge-offs $ ( 636 ) $ ( 2,739 ) $ ( 1,595 ) $ ( 975 ) $ ( 324 ) $ — $ ( 444 ) $ ( 31 ) $ ( 6,744 )

The following tables present the amortized cost in credit card loans based on performing status and gross charge-off as of December 31, 2024 and gross write-offs during the year ended December 31, 2024.

The following table presents the amortized cost in credit card loans based on performing status and gross charge-off as of December 31, 2025 and gross write-offs during the year ended December 31, 2025.

Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.

1 unchanged sentence

($ in thousands) Prior 2021 2022 2023 2024 2025

December 31, 2025

Performing $ — $ — $ — $ — $ — $ — $ 4,473 $ — $ 4,473

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Total recorded investment $ 1,362,664 $ 663,013 $ 987,622 $ 543,191 $ 457,635 $ 616,747 $ 238,924 $ 30,506 $ 4,900,302

The following tables provide information on loan risk rating as of December 31, 2023 and gross write-offs during the year ended December 31, 2023.

The following table provides information on loan risk ratings as of December 31, 2024 and gross write-offs during the year ended December 31, 2024.

Term Loans by Origination Year Revolving

16 unchanged sentences

Pass $ 31,884 $ 8,191 $ 8,628 $ 56,685 $ 70,232 $ 131,383 $ 26,785 $ 1,851 $ 335,639

Special mentions — — — — — — — — —

Substandard 360 — — — — — — — 360

14 unchanged sentences

Substandard 13,975 — 4,389 2,407 1,948 — 1,291 501 24,511

Total loans by

risk category $ 1,059,173 $ 277,491 $ 461,213 $ 837,657 $ 1,107,579 $ 670,765 $ 194,798 $ 25,751 $ 4,634,427

Total loans by risk

category $ 1,195,244 $ 405,932 $ 764,538 $ 1,052,957 $ 634,525 $ 461,566 $ 232,193 $ 17,934 $ 4,764,889

charge-offs $ ( 1,342 ) $ ( 23 ) $ ( 401 ) $ ( 1,820 ) $ ( 246 ) $ — $ ( 17 ) $ — $ ( 3,849 )

The following tables present the amortized cost in credit card loans based on performing status and gross charge-offs as of December 31, 2023, and gross write-offs during the year ended December 31, 2023.

The following table presents the amortized cost in credit card loans based on performing status and gross charge-off as of December 31, 2024 and gross write-offs during the year ended December 31, 2024.

Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.

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by performing status $ — $ — $ — $ — $ — $ — $ 7,099 $ — $ 7,099

charge-offs $ — $ — $ — $ — $ — $ — $ ( 111 ) $ — $ ( 111 )

Total gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 584 ) $ — $ ( 584 )

Total recorded

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The following tables provide information on the aging of the Company’s loan portfolio as of December 31, 2025 and 2024.

($ in thousands) 30‑59 Days

Past Due 60‑89 Days

Past Due 90 Days Past

Due and Still

Accruing 30-89 Days

Not Accruing 90 Days Past

Accruing Total Past

($ in thousands) 30‑59 Days Past Due 60‑89 Days Past Due 90 Days Past Due and Still Accruing 30-89 Days Past Due and Not Accruing 90 Days Past Due and Not Accruing Total Past Due Current Accrual Loans Current Nonaccrual Loans Total

December 31, 2025

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Percent of total loans 0.08 % 0.02 % 0.01 % 0.03 % 0.12 % 0.26 % 99.08 % 0.66 % 100.00 %

____________________________________

(1) Includes loans measured at fair value of $ 9.5 million at December 31, 2024.

Loan were transferred from loans held for sale.

($ in thousands) 30‑59 Days

Past Due 60‑89 Days

Past Due 90 Days Past

Due and Still

Accruing 30-89 Days

Not Accruing 90 Days Past

Accruing Total Past

($ in thousands) 30‑59 days Past Due 60‑89 Days Past Due 90 Days Past Due and Still Accruing 30-89 Days Past Due and Not Accruing 90 Days Past Due and Not Accruing Total Past Due Current Accrual Loans Current Nonaccrual Loans Total

December 31, 2024

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Percent of total loans 0.17 % 0.01 % 0.01 % 0.09 % 0.19 % 0.47 % 99.37 % 0.16 % 100.00 %

____________________________________

(1) Includes loans measured at fair value of $ 9.9 million at December 31, 2023.

Loan were transferred from loans held for sale.

The following tables provide a summary of the activity in the ACL allocated by loan class for the years ended December 31, 2025 and 2024.

Allocation of a portion of the allowance to one loan class does not include its availability to absorb losses in other loan classes.

($ in thousands) Beginning Balance Charge-offs Recoveries Provision Ending Balance

Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses from other loan classes.

($ in thousands) Beginning

Balance Charge-offs Recoveries Provisions Ending

Year Ended December 31, 2025

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Commercial 3,138 ( 812 ) 112 567 3,005

7,601 ( 3,646 ) 317 2,617 6,889

Consumer 6,889 ( 3,133 ) 242 1,769 5,767

Credit cards 407 ( 535 ) 3 324 199

Total $ 57,910 $ ( 7,279 ) $ 632 $ 7,573 $ 58,836

(1) Gross charge-offs of consumer loans for the year ended December 31, 2024 included $ 699 thousand of demand deposit overdrafts.

($ in thousands) Beginning

Balance Impact of

Adoption Merger

Adjustments (2)

offs Recoveries Provision Ending

($ in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending

Year Ended December 31, 2024

3 unchanged sentences

Commercial 2,671 ( 190 ) 15 642 3,138

4,497 452 14 ( 574 ) 284 2,928 7,601

Consumer 7,601 ( 3,646 ) 317 2,617 6,889

Credit cards 220 ( 584 ) 9 762 407

Total $ 57,351 $ ( 4,433 ) $ 361 $ 4,631 $ 57,910

(1) Gross charge-offs of consumer loans for the year ended December 31, 2023 included $ 239 thousand of demand deposit overdrafts.

(2) Merger adjustments consist of gross-up for acquired PCD loans in the TCFC merger.

The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment.

The following tables present the amortized cost basis of collateral-dependent loans by loan portfolio segment.

December 31, 2025

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Loan Modifications to Borrowers Experiencing Financial Difficulty

Modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions, and other combination of actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

During the year ended December 31, 2024, one loan modification in the form of a monthly payment reduction was made to a borrower experiencing financial difficulty.

During the year ended December 31, 2023, three loan modifications, each of which were in the form of a one-year term extension, were made to borrowers experiencing financial difficulty.

During the years ended December 31, 2024 and 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.

As of December 31, 2024, loan modification balances with borrowers experiencing financial diff iculty that were modified during the preceding 12 months were classified as current nonaccrual, of which $ 97 thousand were for commercial real estate loans and $ 203 thousand were for commercial loans, and current accrual which had a balance of $ 1.4 million in commercial real estate;

compared to December 31, 2023, which had current nonaccrual balances of $ 125 thousand and $ 89 thousand for commercial real estate and commercial loans, respectively, and current accrual balances of $ 153 thousand in commercial loans.

Loan modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions and other combinations of actions intended to minimize economic loss and avoid foreclosure or repossession of collateral.

The following table presents details of portfolio loans that were modified during the year ended December 31, 2025, by loan category.

($ in thousands) Quantity of Loans Modified Principal Forgiveness Payment Delay Term Extension Interest Rate Reduction Payment Delay and Term Extension Term Extension and Interest Rate Reduction Total % of Total Portfolio Segment

December 31, 2025

Commercial real estate 6 $ — $ — $ — $ — $ — $ 5,166 $ 5,166 0.20 %

Residential real estate 3 — — — — — 145 145 0.01

Commercial 2 — — — — — 170 170 0.08

Total 11 $ — $ — $ — $ — $ — $ 5,481 $ 5,481 0.11

As of December 31, 2025, of the loans with borrowers experiencing financial difficulty that were modified during the preceding 12 months, $ 5.3 million and $ 170 thousand were classified as current accrual and current nonaccrual, respectively.

The following table presents details of portfolio loans that were modified during the year ended December 31, 2024, by loan category.

December 31, 2024

Commercial real estate 1 $ — $ — $ 1,362 $ — $ — $ — $ 1,362 0.05 %

Total 1 $ — $ — $ 1,362 $ — $ — $ — $ 1,362 0.03

As of December 31, 2024, of the loans with borrowers experiencing financial difficulty that were modified during the preceding 12 months, $ 1.4 million was classified as current accrual.

The following table presents details of portfolio loans that were modified during the year ended December 31, 2023, by loan category.

December 31, 2023

Commercial real estate 2 $ — $ — $ 253 $ — $ — $ — $ 253 0.01 %

Commercial 1 — — 351 — — — 351 0.15

Total 3 $ — $ — $ 604 $ — $ — $ — $ 604 0.01

During the years ended December 31, 2025 and 2024, there were no defaults on loan modifications made to borrowers experiencing financial difficulty in the preceding 12 months.

Foreclosure Proceedings

There were $ 124 thousand and $ 175 thousand of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of December 31, 2024 and 2023, respectively.

The Company had $ 124 thousand and $ 124 thousand of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of December 31, 2025 and 2024, respectively.

The Company had $ 95 thousand and $ 554 thousand of commercial real estate loans collateralized by commercial real estate that were in the process of foreclosure as of December 31, 2025 and 2024.

Other Real Estate Owned (“OREO”) and Repossessed Assets

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Subsequently, foreclosed assets are carried at the lower of carrying value or fair value.

The Company had OREO and repossessed asset balances of $ 179 thousand and $ 3.3 million as of December 31, 2024 and $ 179 thousand and zero as of December 31, 2023, respectively.

The Company had OREO and repossessed asset balances of $ 113 thousand and $ 2.9 million as of December 31, 2025 and $ 179 thousand and $ 3.3 million as of December 31, 2024, respectively.

Mortgage Servicing Rights (“MSRs”)

Mortgage loans are sold with servicing retained and the MSRs are initially recorded at fair value with the income statement effect recorded in mortgage banking revenue.

The Company recognized net servicing income of $ 898 thousand and $ 866 thousand for the years ended December 31, 2024 and 2023, respectively.

Mortgage loans are sold with servicing retained and the MSRs are initially recorded at fair value with the income statement effect recorded in mortgage banking revenue in the consolidated statements of income.

Subsequently, the MSRs are amortized to the income statement in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing rights are evaluated for impairment based upon fair value of the rights as compared to carrying amount.

No impairments of MSRs were recognized for the years ended December 31, 2025, 2024 or 2023.

The Company recognized net servicing income of $ 378 thousand, $ 898 thousand and $ 866 thousand for the years ended December 31, 2025, 2024 and 2023, respectively.

At December 31, 2025, the Company was servicing $ 343.8 million in loans for the Federal National Mortgage Association and $ 105.6 million in loans for Federal Home Loan Mortgage Corporation.

The following table presents activity in MSRs for the year ended December 31, 2025.

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Beginning balance $ 5,874

Servicing rights resulting from sales of loans 309

Valuation adjustment ( 361 )

Net additions 126

Amortization expense ( 528 )

Other ( 330 )

Ending balance $ 5,142

The fair value of MSRs were determined using discount rates ranging from 9.0 % to 11.0 % at December 31, 2024 and 2023.

Depending on the stratification of the specific mortgage servicing right, prepayment speeds ranged from 6.0 % to 52.2 % and 6.0 % to 25.1 % for the years ended December 31, 2024 and 2023, respectively.

The associated weighted-average default rates were 1.2 % and 1.3 % for the years ended December 31, 2024 and 2023, respectively.

The fair value of MSRs were determined using discount rates ranging from 9.0 % to 10.0 % at December 31, 2025 and 9.0 % to 11.0 % at December 31, 2024.

The valuation on MSRs was not material at December 31, 2025 and 2024.

Depending on the stratification of the specific mortgage servicing right, prepayment speeds ranged from 6.11 % to 9.56 % for the year ended December 31, 2025.

The associated weighted-average default rate was 0.20 % for the year ended December 31, 2025.

Note 4 – Goodwill and Other Intangible Assets

The following table provides information on the significant components of goodwill and other acquired intangible assets at December 31, 2024 and 2023.

The following tables provide information on the significant components of goodwill and other acquired intangible assets as of December 31, 2025 and 2024.

December 31, 2025

($ in thousands) Goodwill Core deposit

($ in thousands) Goodwill Core Deposit Intangible

Gross carrying amount $ 63,266 $ 59,151

Additions — —

Accumulated impairment charges ( 1,543 ) —

Accumulated amortization — ( 29,429 )

1 unchanged sentence

December 31, 2024

($ in thousands) Goodwill Core deposit

($ in thousands) Goodwill Core Deposit Intangible

Gross carrying amount $ 63,266 $ 59,151

Additions — 48,648

Accumulated impairment charges ( 1,543 ) —

Accumulated amortization — ( 20,840 )

Net carrying amount $ 63,266 $ 38,311

The aggregate amortization expense for the core deposit intangible was $ 9.8 million and $ 6.1 million for the years ended December 31, 2024 and 2023, respectively.

At December 31, 2024, the estimated future remaining amortization for core deposit intangible assets within the years ending December 31 is as follows:

The aggregate amortization expense for the core deposit intangible was $ 8.6 million, $ 9.8 million and $ 6.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, the estimated future remaining amortization for core deposit intangibles within the years ending December 31 is as follows:

($ in thousands) Amortization Expense

2 unchanged sentences

Note 5 – Leases

Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows.

Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease.

The Company’s long-term lease agreements for branches and offices are classified as operating leases.

Some of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.

Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised.

The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

During the third quarter of 2023, the Company acquired long-term branch leases and equipment leases due to the acquisition of TCFC.

These leases were reassessed by management as of the Acquisition Date, which included updating the incremental borrowing rates and remaining lease terms.

The following tables present information about the Company’s leases as of and for the years ended December 31, 2024 and 2023.

The following tables present information about the Company’s leases as of and for the periods presented.

($ in thousands) December 31, 2025 December 31, 2024

Lease liabilities $ 11,844 $ 12,857

Right-of-use assets $ 10,523 $ 11,385

Lease liabilities $ 11,027 $ 11,844

Weighted-average remaining lease term 8.91 years 10.20 years

Weighted-average discount rate 3.42 % 3.29 %

Remaining lease term - minimum 0.01 years 0.39 years

Remaining lease term - maximum 16.68 years 17.68 years

Remaining lease term – min 0.36 years 0.01 years

Remaining lease term – max 15.68 years 16.68 years

Year Ended December 31,

Lease cost ($ in thousands)

2025 2024 2023

Operating lease cost $ 2,009 $ 1,916 $ 1,645

Short-term lease cost — —

Total lease cost $ 2,009 $ 1,916 $ 1,645

7 unchanged sentences

Lease liabilities $ 11,027

Total gross rental income was $ 1.1 million and $ 1.2 million for the years ended December 31, 2024 and 2023, respectively.

Total gross rental income was $ 1.1 million, $ 1.1 million and $ 1.2 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Note 6 – Premises and Equipment

The following table provides information on premises and equipment at December 31, 2024 and 2023.

The following table provides information on premises and equipment as of December 31, 2025 and 2024.

($ in thousands) December 31, 2025 December 31, 2024

2 unchanged sentences

Furniture and equipment 13,604 11,783

101,770 101,367

Premises and equipment, gross 103,355 101,770

Accumulated depreciation ( 23,187 ) ( 19,964 )

Total $ 81,806 $ 82,386

Depreciation expense totaled $ 4.4 million and $ 3.3 million for the years ended December 31, 2024 and 2023, respectively.

Premises and equipment, net $ 80,168 $ 81,806

Depreciation expense totaled $ 4.4 million, $ 4.4 million and $ 3.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Note 7 – Deposits

2 unchanged sentences

Balance % of Total Deposits Balance % of Total Deposits

Noninterest-bearing $ 1,562,815 28.27 % $ 1,258,037 23.36 %

Interest-bearing:

Noninterest-bearing deposits $ 1,587,953 28.69 % $ 1,562,815 28.27 %

Interest-bearing deposits:

Interest-bearing checking 852,585 15.41 978,076 17.69

1 unchanged sentence

Time deposits 1,267,487 22.90 1,181,561 21.37

Brokered deposits 10,911 0.20 — —

Total interest-bearing 3,945,911 71.31 3,965,521 71.73

8 unchanged sentences

Total $ 1,267,487

The approximate amount of certificates of deposits that meet or exceed the FDIC insurance limit of $250,000 or more was $ 374.1 million and $ 354.6 million at December 31, 2024 and 2023, respectively.

The approximate amount of certificates of deposit that exceeded the FDIC insurance limit of $250,000 or more was $ 403.5 million and $ 374.1 million at December 31, 2025 and 2024, respectively.

Note 8 – Borrowings

6 unchanged sentences

FHLB advances – fixed 42,466 4.85 32,650 4.87

FHLB advances – variable $ — — % $ — — %

FHLB advances – fixed (1)

— — 50,000 4.79

____________________________________

(1) Fixed-rate advance with an option of terminating at predetermined dates, without incurring a prepayment fee.

2 unchanged sentences

government agency securities, which are segregated in the Company’s custodial accounts from other investment securities.

The Bank had $ 95.0 million and $ 45.0 million in federal funds lines of credit and a reverse repurchase agreement available on a short-term basis from correspondent banks at December 31, 2024 and 2023, respectively.

In addition, the Bank had secured credit availability of approximately $ 737.5 million from the FHLB at December 31, 2024.

The Bank has pledged as collateral, under a blanket lien, all qualifying residential loans under borrowing agreements with the FHLB.

The Bank had letters of credit with FHLB of $ 6.1 million and $ 86.1 million as of December 31, 2024 and 2023, respectively.

The Company had $ 95.0 million of federal funds lines of credit and a reverse repurchase agreement available on a short-term basis from correspondent banks at December 31, 2025 and 2024.

In addition, the Company had secured credit availability of approximately $ 754.4 million from the FHLB at December 31, 2025.

The Company has pledged as collateral, under a blanket lien, all qualifying residential loans under borrowing agreements with the FHLB.

The Company had letters of credit with FHLB of $ 33.7 million and $ 6.1 million as of December 31, 2025 and 2024, respectively.

These letters of credit are used to secure public deposits held with various municipal customers.

The following table summarizes certain information of the Company’s long-term debt at December 31, 2024 and 2023.

The following table summarizes certain information of the Company’s long-term debt as of December 31, 2025 and 2024.

($ in thousands) December 31, 2025 December 31, 2024 Issue Date Stated Maturity Date Earliest Call Date Interest Rate

September 2030 Subordinated Debentures 25,000 25,000 2020 2030 2025 5.375 % through September 2025, 3-month SOFR + 5.265 % thereafter

October 2030 Subordinated Debentures 19,500 19,500 2020 2030 2025 4.75 % through October 2025, 3-month SOFR + 4.58 % thereafter

Subordinated Debentures due September 2030 $ — $ 25,000 2020 2030 2025 5.375 % through September 2025, 3-month SOFR* + 5.265 % thereafter

Subordinated Debentures due October 2030 — 19,500 2020 2030 2025 4.75 % through October 2025, 3-month SOFR + 4.58 % thereafter

Subordinated Debentures due November 2035 60,000 — 2025 2035 2030 6.25 % through November 2030, 3-month SOFR + 2.88 % thereafter

Total subordinated debentures 60,000 44,500

5 unchanged sentences

Total long-term debt $ 89,061 $ 73,717

At December 31, 2024, subordinated notes consisted of $ 25.0 million of long-term debt issued by the Company in August 2020, and $ 19.5 million of long-term debt assumed as a result of the merger with TCFC.

As of December 31, 2024, the recorded balance of subordinated debt issued by the Company and the assumed subordinated debt from TCFC, net of unamortized issuance costs and fair value discounts, were $ 24.9 million and $ 19.0 million, respectively.

The Company also assumed trust preferred securities in the aggregate of $ 33.0 million as a result of the merger with TCFC in 2023 and the acquisition of Severn in 2021.

Trust preferred securities consisted of $ 20.6 million issued to Severn Capital Trust I, $ 7.2 million issued by Tri-County Capital Trust I and $ 5.2 million issued by Tri-County Capital Trust II.

The recorded balance of the debt acquired from Severn at December 31, 2024 was $ 18.8 million, net of the unamortized fair value adjustment of $ 1.8 million.

At December 31, 2024, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.6 million and $ 4.4 million, respectively, which are presented as net of the unamortized fair value adjustments of $ 568 thousand and $ 731 thousand, respectively.

As both the Capital Trust I and Capital Trust II variable-rate capital securities were originally London Interbank Offered Rate (“LIBOR”) linked instruments that matured after June 30, 2023, the interest rate transitioned from a LIBOR-based rate to an alternative reference rate.

Both instruments were subject to the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) and neither instrument contains fallback provision or a clearly practicable fallback provision in the event that LIBOR was no longer published or quoted.

The interest rate on both the Capital Trust I and Capital Trust II transitioned pursuant to the LIBOR Act to a rate based on the Secured Overnight Financing Rate (“SOFR”) on July 1, 2023.

____________________________________

* Secured Overnight Financing Rate (“SOFR”).

At December 31, 2025, subordinated debentures consisted of $ 60.0 million of long-term debt issued by the Company in November 2025.

As of December 31, 2025, the recorded balance of subordinated debt issued by the Company, net of unamortized issuance costs and fair value discounts, was $ 58.9 million.

The Company has the option to redeem the subordinate notes in part or whole as of November 15, 2030.

As of December 31, 2025, 100 % of the subordinated debt was considered Tier 2 capital under current regulatory guidelines.

The Company assumed trust preferred securities in the aggregate of $ 33.0 million as a result of the merger with TCFC in 2023 and the acquisition of Severn in 2021.

Trust preferred securities consisted of $ 20.6 million issued by Severn Capital Trust I, $ 7.2 million issued by Tri-County Capital Trust I and $ 5.2 million issued by Tri-County Capital Trust II.

The recorded balance of the junior subordinated debt securities of Severn Capital Trust I at December 31, 2025 was $ 19.0 million, net of the unamortized fair value adjustment of $ 1.7 million.

At December 31, 2025, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.7 million and $ 4.5 million, respectively, which are presented net of the unamortized fair value adjustments of $ 504 thousand and $ 661 thousand, respectively.

As of December 31, 2025, the entire amount of trust preferred securities debt is considered Tier 2 capital under current regulatory guidelines.

The Company may periodically borrow from a correspondent federal funds line of credit arrangement, under a secured reverse repurchase agreement, or from the Federal Home Loan Bank (“FHLB”) to meet short-term liquidity needs.

The Company had no outstanding borrowings from the FHLB at December 31, 2025, and had $ 50.0 million outstanding at December 31, 2024.

The Company did not have any correspondent federal fund lines at December 31, 2025 and 2024.

Note 9 – Benefit Plans

2 unchanged sentences

The Company may also make discretionary contributions based on profits.

The Company’s contributions to this plan included in noninterest expense totaled $ 1.9 million and $ 1.7 million for the years ended December 31, 2024 and 2023, respectively.

The Company’s contributions to this plan included in noninterest expense totaled $ 2.1 million, $ 1.9 million and $ 1.7 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Employee Stock Purchase Plan – The Company maintains an employee stock purchase under the Shore Bancshares, Inc.

2025 Employee Stock Purchase Plan (the “ESPP”).

The ESPP provides (i) for four offering periods each year and (ii) that the purchase price for shares of the Company’s common stock purchased under the ESPP will be 15 % of the lesser of the fair market value of the Company’s common stock on the purchase date or the fair market value of the Company’s common stock on the first day of the offering period.

Notwithstanding the foregoing, the compensation committee of the Company’s board of directors may exercise its discretion, subject to certain conditions, to make changes to certain aspects of the ESPP.

Participating eligible employees select a rate of payroll deduction of their salary or wage compensation received from the Company as in effect at the start of the offering period, with the aggregate purchase limited to a maximum fair market value of $ 25,000 per employee per year.

Participation in the ESPP began on July 1, 2025 with the number of shares authorized for issuance fixed at 250,000 .

The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code.

During the year ended December 31, 2025, an aggregate of 10,793 shares of the Company’s common stock were issued in accordance with the ESPP.

Net proceeds from the issuance of these shares were $ 142 thousand for the year ended December 31, 2025.

As of December 31, 2025, 239,207 shares remained available for purchase under the ESPP.

Employee Stock Ownership Plan – Prior to the closing of the acquisition of TCFC during 2023, TCFC paid into its Employee Stock Ownership Plan (“ESOP”) and adopted resolutions to (i) terminate the ESOP and (ii) provide for full vesting of all account balances in the ESOP.

A determination letter has been filed with the IRS to terminate the ESOP and the ESOP will be terminated if and when the IRS issues a favorable determination letter.

In 2025, the Company received a favorable determination letter from the Internal Revenue Service approving the termination of the ESOP.

During 2025, all remaining ESOP assets were distributed to participants in accordance with applicable plan and regulatory requirements.

Note 10 – Stock-Based Compensation

At the 2016 annual meeting, stockholders approved the Shore Bancshares, Inc.

2016 Stock and Incentive Plan (“2016 Equity Plan”), replacing the Shore Bancshares, Inc.

2006 Stock and Incentive Plan, which expired on that date.

The Company may issue shares of common stock or grant other equity-based awards pursuant to the 2016 Equity Plan.

Stock-based awards granted to date generally are time-based, vest in equal installments on each anniversary of the grant date and range over a one - to three-year period of time, and, in the case of stock options, expire ten years from the grant date.

As part of the 2016 Equity Plan, a performance equity incentive award program, known as the “Long-term incentive plan” allows participating officers of the Company to earn incentive awards of performance share/restricted stock units if certain pre-determined targets are achieved at the end of a three-year performance cycle.

Stock-based compensation expense based on the grant date fair value is recognized ratably over the requisite service period for all awards and reflects forfeitures as they occur.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 190,166 shares remained available for grant at December 31, 2024.

The Company assumed 3,977 shares of restricted stock and 90,783 of restricted stock units at a fair value of $ 11.56 per share as a result of the merger with TCFC.

The vesting period for the outstanding restricted stock grants is between three and five years .

The vesting period for restricted stock units and performance stock units is between one to three years .

At the Company’s 2025 annual meeting, stockholders approved the Shore Bancshares, Inc.

2025 Equity Incentive Plan (the “2025 Equity Plan”), which replaced the Shore Bancshares, Inc.

2016 Stock and Incentive Plan (“2016 Equity Plan”).

Although the 2016 Equity Plan was scheduled to expire in 2026, the Company adopted the 2025 Equity Plan in 2025 due to an insufficient number of shares remaining under the 2016 Equity Plan to permit the company to continue granting equity awards through its expected term.

No further awards will be granted under the 2016 Equity Plan, although awards previously granted under the 2016 Equity Plan remain outstanding and continue to be governed by the original terms of the 2016 Equity Plan.

Under the 2025 Equity Plan, the Company may issue incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and performance stock units.

Restricted stock units granted to employees vest in equal installments over a three-year period.

Restricted stock units granted to directors vest on the first anniversary of the grant date.

Performance stock units vest upon achievement of pre‑established performance targets over a three‑year performance period.

Stock‑based compensation expense is measured based on the grant‑date fair value of the awards and is recognized ratably over the requisite service period, with forfeitures recognized as they occur.

In connection with the adoption of the 2025 Equity Plan, an additional 1,000,000 shares of common stock were reserved for issuance.

Together with the 73,967 shares of common stock that remained available for grant under the 2016 Equity Plan, the 2025 Equity Plan provides for an aggregate share reserve of 1,073,967 shares of common stock.

As of December 31, 2025, a total of 992,641 shares remained available for future grants under the 2025 Equity Plan.

The recipients of restricted stock units do not have any stockholder rights, including voting, dividend, or liquidation rights, with respect to the shares underlying awarded restricted stock units, until the recipient becomes the record holder of those shares.

The following table presents stock-based compensation expense related to the 2016 Equity Plan, included in the consolidated statements of income, for each of the periods indicated.

($ in thousands) December 31, 2024 December 31, 2023

The Company assumed 3,977 shares of restricted stock and 90,783 restricted stock units at a fair value of $ 11.56 per share as a result of the merger with TCFC .

The vesting period for the outstanding restricted stock grants is between three to five years .

The vesting period for restricted stock units is between one to three years .

The following table presents stock-based compensation expense included in the consolidated statements of income for each of the periods indicated.

Year Ended December 31,

($ in thousands) 2025 2024 2023

Stock-based compensation expense $ 1,890 $ 1,730 $ 1,174

The following table presents the total stock-based compensation expense related to unvested awards that has not yet been recognized at December 31, 2024 and 2023, and the weighted-average period over which the expense will be recognized.

The following table presents the total stock-based compensation expense related to unvested awards that has not yet been recognized as of December 31, 2025 and the weighted-average period over which the expense will be recognized.

At December 31, 2025

2 unchanged sentences

Weighted-average period unrecognized expense is expected to be recognized 0.2 years 1.5 years 1.9 years

At December 31, 2023

($ in thousands) Restricted Stock Restricted Stock Units

Unrecognized stock-based compensation expense $ 175 $ 1,684

Weighted-average period unrecognized expense is expected to be recognized 0.5 years 1.3 years

The following table summarizes the Company’s restricted stock, restricted stock unit and performance stock unit activity for the year ended December 31, 2025.

6 unchanged sentences

Outstanding at December 31, 2025 3,175 16.01 176,406 14.45 94,046 13.55

There were no stock options outstanding as of or granted during the years ended December 31, 2024 or 2023.

The fair value of restricted stock awards that vested during the years ended December 31, 2024 and 2023 was $ 588 thousand and $ 615 thousand, respectively.

The fair value of restricted stock unit awards that vested during the years ended December 31, 2024 and 2023 was $ 914 thousand and $ 178 thousand, respectively.

The fair value of restricted stock awards that vested during the years ended December 31, 2025, 2024 and 2023 was $ 749 thousand, $ 588 thousand, and $ 615 thousand, respectively.

The fair value of restricted stock units that vested during the years ended December 31, 2025, 2024 and 2023 was $ 1.4 million, $ 914 thousand and $ 178 thousand, respectively.

No performance stock unit awards vested during the years ended December 31, 2025, 2024 and 2023.

Note 11 – Derivatives

The Company maintains and accounts for derivatives, in the form of IRLCs and mandatory forward contracts, in accordance with the FASB guidance on accounting for derivative instruments and hedging activities.

The Company maintains and accounts for derivatives, in the form of interest rate lock commitments (“IRLCs”) and mandatory forward contracts, in accordance with the FASB guidance on accounting for derivative instruments and hedging activities.

The Company recognizes gains and losses through mortgage banking revenue in the consolidated statements of income.

IRLCs on mortgage loans that we intend to sell in the secondary market are considered derivatives.

We are exposed to price risk from the time a mortgage loan is locked in until the time the loan is sold.

The period of time between issuance of a loan commitment, closing and sale of the loan generally ranges from 14 days to 120 days.

For these IRLCs and our closed inventory in loans held for sale, we attempt to protect the Bank from changes in interest rates through the use of to be announced (“TBA”) securities, which are forward contracts, as well as, to a significantly lesser degree, loan level commitments in the form of best efforts and mandatory forward contracts.

IRLCs on mortgage loans that the Company intends to sell in the secondary market are considered derivatives.

The Company is exposed to price risk from the time a mortgage loan is locked in until the time the loan is sold.

The period of time between issuance of a loan commitment, closing and sale of the loan generally ranges from 14 days to 120 days, however, this period may be longer for construction to permanent loans that are originated with the intent of selling in the secondary market upon permanent financing.

For these IRLCs and closed inventory in loans held for sale, the Company attempts to protect itself from changes in interest rates through the use of to be announced (“TBA”) securities, which are forward contracts, as well as, to a significantly lesser degree, loan level commitments in the form of best efforts and mandatory forward contracts.

These assets and liabilities are included in the consolidated balance sheets in other assets and accrued expenses and other liabilities, respectively.

The following table provides information pertaining to the carrying amounts of the Company’s derivative financial instruments at December 31, 2024 and 2023.

The following table provides information pertaining to the carrying amounts of the Company’s derivative financial instruments as of December 31, 2025 and 2024.

December 31, 2025 December 31, 2024

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Asset – IRLCs

$ 6,172 $ 91 $ 7,527 $ 113

Asset – TBA securities

9,750 11 22,100 164

Liability – IRLCs

Liability – TBA securities

20,150 59 7,550 23

Note 12 – Deferred Compensation

The Company has multiple deferred compensation agreements with current and former employees.

The Executive Deferred Compensation Plan is reserved for members of management and highly compensated employees of the Company and the Bank.

During 2019, the Executive Deferred Compensation Plan was expanded to include additional officers who had not previously participated.

The Executive Deferred Compensation Plan permits a participant to elect, each year, to defer receipt of up to 100 % of their salary and bonus to be earned in the following year.

The Executive Deferred Compensation Plan also permits the participant to defer the receipt of performance-based compensation not later than six months before the end of the period for which it is to be earned.

The deferred amounts are credited to an account maintained on behalf of the participant and are invested at the discretion of each participant in certain deemed investment options selected by the Compensation Committee of the Board of the Company.

The Deferred Compensation Plan is reserved for members of management and highly compensated employees of the Company and the Bank.

The Deferred Compensation Plan permits a participant to elect, each year, to defer receipt of up to 50 % of their salary and up to 100 % of their bonus to be earned in the following year.

The deferred amounts are credited to an account maintained on behalf of the participant and are invested at the discretion of each participant in certain deemed investment options.

The actual investments purchased are owned by the Company and held in a Rabbi Trust.

The accounts of the Rabbi Trust are consolidated and the investments are included in other assets on the consolidated balance sheets.

The Company and the Bank may also make matching, mandatory and discretionary contributions for certain participants.

The Company may also make discretionary contributions for certain participants.

A participant is fully vested at all times in the amounts that they elect to defer.

Any contributions made by the Company are subject to vesting over a five-year period.

The following table provides information on Shore Bancshares, Inc.’s contributions and participant deferrals to the Executive Deferred Compensation Plan and the related deferred compensation liability at December 31, 2024 and 2023.

($ in thousands) December 31, 2024 December 31, 2023

Elective deferrals $ 276 $ 273

Any contributions made by the Company are subject to vesting over a three-year period.

The following table provides information on employer contributions and participant deferrals to the Deferred Compensation Plan and the related deferred compensation liability for the periods presented.

Year Ended December 31,

($ in thousands) 2025 2024 2023

Employer contributions $ 218 $ 140 $ 52

Participant elective deferrals 287 276 273

Deferred compensation liability 1,812 1,506 1,576

During 2019, the Company introduced a new supplemental executive retirement plan (“SERP”) for executive officers of the Company and the Bank.

The Company maintains supplemental executive retirement plans (“SERPs”) for certain current and former executive officers of the Company, CBTC and Severn.

The related liability is unfunded;

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The unfunded SERP liability and cash surrender value were included on the consolidated balance sheets in other liabilities and other assets, respectively.

($ in thousands) December 31, 2024 December 31, 2023

($ in thousands) December 31, 2025 December 31, 2024 December 31, 2023

Cash surrender value $ 102,150 $ 100,517 $ 98,140

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SERP expense 1,166 1,050 1,405

Lastly, in 2016, the Bank assumed agreements held by the former Centreville National Bank (“CNB”) under which its former directors had elected to defer part of their fees and compensation while serving on the former board of CNB.

In 2016, the Company assumed agreements held by the former Centreville National Bank (“CNB”) under which its former directors had elected to defer part of their fees and compensation while serving on the former board of CNB.

The amounts deferred were invested in

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Note 13 – Accumulated Other Comprehensive Loss

The Company records unrealized holding gains (losses), net of tax, on investment securities AFS as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The following table provides information on the changes in the component of accumulated other comprehensive income (loss) on the consolidated balance sheets for the years ended December 31, 2024 and 2023.

Net Unrealized Gains (Losses)

Year Ended December 31,

($ in thousands) 2024 2023

The Company records unrealized holding gains (losses), net of tax, on AFS securities as accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The following table provides information on the changes in the component of accumulated other comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023.

($ in thousands) December 31, 2025 December 31, 2024 December 31, 2023

Beginning of period $ ( 7,545 ) $ ( 7,494 ) $ ( 9,021 )

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Note 14 – Income Taxes

The Company files income tax returns in the U.S.

federal jurisdiction and the State of Maryland.

In its most recently filed tax year, the Company filed income tax returns in the United States federal jurisdiction and the State of Maryland.

With few exceptions, the Company is no longer subject to U.S.

federal and state income tax examinations by tax authorities for years prior to 2022.

The following table provides information on components of income tax expense for the years ended December 31, 2024 and 2023.

($ in thousands) December 31, 2024 December 31, 2023

Current tax expense:

The following table provides information on the components of income tax expense from continuing operations for the years ended December 31, 2025, 2024 and 2023.

Year Ended December 31,

($ in thousands) 2025 2024 2023

Current income tax expense:

Federal $ 13,870 $ 4,264 $ 172

State 4,357 1,681 63

Total current income tax expense 18,227 5,945 235

Deferred income tax expense:

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State 386 2,300 1,029

Total deferred income tax expense 922 8,870 2,721

Total income tax expense $ 19,149 $ 14,815 $ 2,956

The following table provides a reconciliation of tax computed at the statutory federal tax rate to the actual tax expense for the years ended December 31, 2024 and 2023.

December 31, 2024 December 31, 2023

The Company did not have pre-tax income from continuing foreign operations or foreign tax expense during the years ended December 31, 2025, 2024 and 2023.

The following table provides a reconciliation of tax computed at the statutory federal tax rate and the recorded tax expense (in dollars and percentages) for the year ended December 31, 2025, under the provisions of ASU No.

Year Ended December 31, 2025

($ in thousands) Amount Percent

Tax at federal statutory rate $ 16,518 21.0 %

State and local income taxes, net of federal tax benefits (1)

Low-income housing (2)

Nontaxable or nondeductible items

Appreciation in cash surrender value of life insurance ( 821 ) ( 1.1 )

Other ( 273 ) ( 0.3 )

Actual income tax $ 19,149 24.4 %

_________________________________

(1) State taxes in Maryland comprised the majority of the tax effect in this category.

(2) Includes proportional amortization of low income tax credit and other tax benefits.

The following table provides a reconciliation of tax computed at the statutory federal tax rate and the recorded tax expense (in percentages) for the years ended December 31, 2024 and 2023, prior to the adoption of ASU No.

Year Ended December 31,

Tax at federal statutory rate 21.0 % 21.0 %

Tax effect of:

Tax-exempt income ( 1.4 ) ( 3.6 )

State income taxes, net of federal benefit 5.4 6.1

State and local income taxes, net of federal tax benefits 5.4 6.1

Bargain purchase gain — ( 13.1 )

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Other 0.1 3.9

Actual income tax expense rate 25.2 % 20.8 %

The following table provides information on significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023.

($ in thousands) December 31, 2024 December 31, 2023

Actual income tax 25.2 % 20.8 %

During the year ended December 31, 2025, the Company made payments to tax authorities for income taxes as set forth in the table below.

($ in thousands) 2025

Federal $ 13,050

State and local:

Maryland 2,020

Total taxes paid $ 15,070

The following table provides information on significant components of the Company’s deferred tax assets and liabilities attributable to continuing operations as of December 31, 2025 and 2024.

($ in thousands) 2025 2024

Deferred tax assets:

Allowance for credit losses $ 15,035 $ 14,888

Write-downs of OREO — 33

Valuation adjustments on OREO and repossessed assets 217 —

Nonaccrual loan interest 691 578

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Deferred compensation 4,084 4,078

Federal net operating loss — 6,528

State net operating loss 2,066 2,448

State net operating losses 2,834 2,066

Deferred loan fees 2,204 2,078

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Net deferred tax assets $ 29,825 $ 31,857

Management of the Company has determined a full valuation allowance is required for the holding company’s state deferred tax assets, largely associated with its state net operating losses.

As the holding company files in the state of Maryland on separate entity basis and has not had and does not expect to have taxable income in that jurisdiction for the foreseeable future, the Company believes, at the current and prior period end, it was more likely than not that the holding company’s state deferred tax assets will not be realized.

Management of the Company has determined that a full valuation allowance is required for Shore Bancshares’ and the Title Company’s state deferred tax assets, largely associated with their state net operating losses.

As both entities file income tax returns in the state of Maryland on separate entity basis and do not expect to have taxable income in that jurisdiction, it is more likely than not that their state deferred tax assets will not be realized.

This valuation allowance increased from $ 1.9 million to $ 2.8 million during the year ended December 31, 2025.

Based on the Company’s analysis, no other valuation allowances have been recorded as the Company expects to realize its remaining federal and state deferred tax assets.

Based on the Company’s analysis, no other valuation allowances have been recorded as the Company believes it will have sufficient future taxable income to realize its remaining federal and state deferred tax assets.

The Company has analyzed the tax positions taken or expected to be taken in its income tax returns for the periods ending December 31, 2025 and 2024, and has recorded no liabilities related to uncertain tax positions in accordance with the applicable guidance in ASC 740, Income Taxes .

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business tax provisions.

The legislation has multiple effective dates, with certain provisions effective in 2025 and others being phased in through 2027.

Through December 31, 2025, the OBBBA had not materially impacted the Company’s income taxes;

however, the Company continues to evaluate the effect the OBBBA will have on the Company's consolidated financial condition and results of operations.

Note 15 – Regulatory Capital Requirements

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Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of Common Equity Tier 1, Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (leverage ratio).

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s

assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.

The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of common equity Tier 1 (“CET1”), Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (leverage ratio).

As of December 31, 2025 and 2024, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2024, the most recent notification from our primary regulator categorized Shore United Bank, N.A.

as “well-capitalized” under the regulatory framework for prompt corrective action.

As of December 31, 2025, the most recent notification from the Bank’s primary regulator categorized the Bank, as “well-capitalized” under the regulatory framework for prompt corrective action.

There are no conditions or events since that notification that management believes would change the Bank’s classification.

To be categorized as “well-capitalized”, the Bank must maintain minimum common equity Tier 1, Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are outlined in the table below.

The following tables present the actual and required capital amounts and ratios for the Company and the Bank at December 31, 2024 and 2023.

December 31, Regulatory Minimum Ratio + Capital Conservation Buffer To Be Well-Capitalized Under Prompt Corrective Action Regulation (1)

To be categorized as “well-capitalized,” the Bank must maintain minimum CET1, Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are outlined in the table below.

The following table presents the capital amounts and ratios for the Company and the Bank as of December 31, 2025 and 2024.

December 31, 2025

Amount Regulatory Minimum Ratio + Capital Conservation Buffer To Be Well-Capitalized Under Prompt Corrective Action Regulation (1)

($ in thousands)

The Company Amounts

Common Tier 1 Capital to RWA $ 458,258 $ 408,317

Tier 1 Capital to RWA 488,105 437,847

Total Capital to RWA 591,228 539,572

Company Amounts

Common Equity Tier 1 Capital $ 510,729 $ 339,680 N/A

Tier 1 Capital 540,897 412,469 N/A

Total Capital 660,451 509,520 N/A

Risk-Weighted Assets 4,852,573 245,172 N/A

Company Ratios

Common Equity Tier 1 Capital to Risk-Weighted Assets (“RWA”) 10.52 % 7.00 % N/A

Tier 1 Capital to RWA 11.15 8.50 N/A

Total Capital to RWA 13.61 10.50 N/A

Tier 1 Capital to AA (Leverage) (2)

488,105 437,847

The Company Ratios

Common Tier 1 Capital to RWA 9.44 % 8.69 % 7.00 %

8.82 4.00 N/A

Common Equity Tier 1 Capital $ 569,183 $ 339,125 $ 314,902

Tier 1 Capital 569,183 411,794 387,571

Total Capital 629,746 508,687 484,464

Risk-Weighted Assets 4,844,639 244,911 306,139

Common Equity Tier 1 Capital to RWA 11.75 % 7.00 % 6.50 %

Tier 1 Capital to RWA 11.75 8.50 8.00

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9.30 4.00 5.00

The Bank Amounts

Common Tier 1 Capital to RWA $ 521,453 $ 470,200

Tier 1 Capital to RWA 521,453 470,200

Total Capital to RWA 580,706 528,786

Tier 1 Capital to AA (Leverage) (2)

____________________________________

The Bank Ratios

Common Tier 1 Capital to RWA 10.75 % 10.02 % 7.00 % 6.50 %

(1) Applies to the Bank only.

(2) Tier 1 Capital to Average Assets (Leverage) has no capital conservation buffer defined.

The PCA well-capitalized threshold is defined as 5.00 %.

December 31, 2024

Amount Regulatory Minimum Ratio + Capital Conservation Buffer To Be Well-Capitalized Under Prompt Corrective Action Regulation (1)

($ in thousands)

Company Amounts

Common Equity Tier 1 Capital $ 458,258 $ 339,679 N/A

Tier 1 Capital 488,105 412,468 N/A

Total Capital 591,228 509,519 N/A

Risk-Weighted Assets 4,852,564 243,350 N/A

Company Ratios

Common Equity Tier 1 Capital to RWA 9.44 % 7.00 % N/A

Tier 1 Capital to RWA 10.06 8.50 N/A

Total Capital to RWA 12.18 10.50 N/A

Tier 1 Capital to AA (Leverage) (2)

8.02 4.00 N/A

Common Equity Tier 1 Capital $ 521,453 $ 339,633 $ 315,374

Tier 1 Capital 521,453 412,412 388,152

Total Capital 580,706 509,450 485,190

Risk-Weighted Assets 4,851,903 243,102 303,877

Common Equity Tier 1 Capital to RWA 10.75 % 7.00 % 6.50 %

Tier 1 Capital to RWA 10.75 8.50 8.00

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_________________________________

(1) Applies to Bank only.

(2) Tier 1 Capital to AA (Leverage) has no capital conservation buffer defined.

(1) Applies to the Bank only.

(2) Tier 1 Capital to Average Assets (Leverage) has no capital conservation buffer defined.

The PCA well-capitalized threshold is defined as 5.00 %.

As of December 31, 2025, both the Company and the Bank satisfied the capital conservation buffer requirements applicable to them.

The lowest ratio at the Company is the Tier 1 Capital to RWA, which was 5.15 % above the minimum buffer ratio, and the lowest ratio at the Bank was the Total Capital to RWA, which was 5.00 % above the minimum buffer ratio.

The Company is a separate legal entity from the Bank and must provide for its own liquidity.

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The Company’s primary source of income is dividends received from the Bank.

The amount of dividends that the Bank may declare and pay to

Parent Company in any calendar year, without the receipt of prior approval from the Federal Reserve Bank, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years.

At December 31, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the OCC, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years.

As of December 31, 2025, the Bank could pay dividends to the Company to the extent of its current period earnings plus the earnings of the preceding two years, so long as it maintained required capital ratios.

Note 16 – Fair Value Measurements

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This accounting guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

Securities available for sale and equity securities with readily determinable fair values are recorded at fair value on a recurring basis, along with other mortgage related items identified in the recurring fair value table below.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities on a recurring basis and to determine fair value disclosures.

Available for sale securities and equity securities with readily determinable fair values are recorded at fair value on a recurring basis, along with other mortgage-related items identified in the recurring fair value table below.

Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral-dependent loans, repossessed assets and OREO (foreclosed assets).

These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

These non-recurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under fair value accounting guidance, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine their fair values.

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Assets Measured at Fair Value on a Recurring Basis

Investment Securities Available for Sale

Fair value measurement for investment securities available for sale is based on quoted prices from an independent pricing service.

Available for Sale Securities

Fair value measurement of AFS securities is based on quoted prices from an independent pricing service.

The fair value measurements consider observable data that may include present value of future cash flows, prepayment assumptions, credit loss assumptions and other factors.

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Fair value measurement for equity securities is based on quoted market prices retrieved by the Company via online resources.

Although these securities have readily available fair market values, the Company deems that they be classified as level 2 investments in the fair value hierarchy due to not being considered traded in a highly active market.

Although these securities have readily available fair market values, the Company determined that they should be classified as level 2 investments in the fair value hierarchy due to not being considered traded in a highly active market.

Loans Held for Sale

Loans held for sale are carried at fair value, which is determined based on Mark to Trade for allocated/committed loans or Mark to Market analysis for unallocated/uncommitted loans based on third-party pricing models (Level 2).

Mortgage Servicing Rights

The fair value of MSRs is determined using a valuation model administered by a third party that calculates the present value of estimated future net servicing income (Level 3).

The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income, and other ancillary income such as late fees.

Management reviews all significant assumptions on a quarterly basis.

Mortgage loan prepayment speed, a key assumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal.

The discount rate used to determine the present value of estimated future net servicing income, another key assumption in the model, is an estimate of the required rate of return investors in the market would require for an asset with similar risk.

Both assumptions can, and generally will, change as market conditions and interest rates change.

The significant unobservable inputs used in the fair value measurement of the reporting entity’s residential MSRs are prepayment speeds, probability of default, rate of return, and cost of servicing.

Significant increases/decreases in any of those inputs in isolation would have resulted in a significantly lower/higher fair value measurement.

Generally, a change in the assumption used for prepayment speeds would have been accompanied by a directionally similar change in the markets (i.e., the 10-Year Treasury) and in the probability of default.

We utilize a third-party specialist model to estimate the fair value of our IRLCs, which are valued based upon mortgage securities (TBA) prices less estimated costs to process and settle the loan.

The Company utilizes a third-party specialist model to estimate the fair value of IRLCs, which are valued based upon mortgage securities (TBA) prices less estimated costs to process and settle the loan.

Fair value is adjusted for the estimated probability of the loan closing with the borrower (Level 3).

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December 31, 2025

$ 5,874 Market Approach Weighted-average prepayment speed (PSA) (2)

IRLCs – net asset $ 90 Market Approach Range of pull through rate 81 % - 100 %

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December 31, 2024

$ 5,926 Market Approach Weighted-average prepayment speed (PSA) (2)

IRLCs – net asset $ 113 Market Approach Range of pull through rate 78 % - 100 %

Average pull through rate 89 %

________________________________

(1) The weighted-average was calculated with reference to the principal balance of the underlying mortgages.

(2) PSA = Public Securities Association Standard Prepayment Model.

The following table presents activity in the IRLCs for the year ended December 31, 2024.

($ in thousands) Year Ended

December 31, 2024

The following table presents activity in the IRLCs – net asset for the years ended December 31, 2025, 2024 and 2023.

Year Ended December 31,

($ in thousands) 2025 2024 2023

Beginning balance $ 113 $ 110 $ 28

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Forward Contracts

To avoid interest rate risk, we hedge the open locked/closed position with TBA forward trades.

On a regular basis, we allocate disbursed loans to mandatory commitments with government-sponsored enterprises and private investors delivering the loans within 120 days of origination to maximize interest earnings.

For a small percentage of our business, we enter into best efforts forward sales commitments with investors at the time we make an IRLC to a borrower.

To avoid interest rate risk, the Company hedges the open locked/closed position with TBA forward trades.

On a regular basis, the Company allocates disbursed loans to mandatory commitments with government-sponsored enterprises and private investors delivering the loans within 120 days of origination to maximize interest earnings.

For a small percentage of business, the Company enters into best efforts forward sales commitments with investors at the time it makes an IRLC to a borrower.

Once a loan has been closed and funded, the best efforts commitments convert to mandatory forward sales commitments.

The mandatory commitments are derivatives, and we measure and report them at fair value.

Fair value is based on the gain or loss that would occur if we were to pair-off the transaction with the investor at the measurement date.

The mandatory commitments are derivatives, and the Company measures and reports them at fair value.

Fair value is based on the gain or loss that would occur if the Company were to pair-off the transaction with the investor at the measurement date.

This is a Level 2 input.

We have elected to measure and report best efforts commitments at fair value using a valuation methodology similar to that used for mandatory commitments.

The Company has elected to measure and report best efforts commitments at fair value using a valuation methodology similar to that used for mandatory commitments.

Market assumptions utilized in the fair value measurement of the reporting entity’s residential mortgage derivatives, inclusive of IRLCs, Closed Loan Inventory, TBA derivative trades, and Mandatory Forwards may be subject to investor overlays that may result in a significantly lower fair value measurement.

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($ in thousands) Fair Value Quoted Prices

(Level 1) Significant Other Observable Inputs (Level 2) Significant Other Observable Inputs (Level 3)

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

December 31, 2025

Securities available for sale:

Available for sale securities:

government agency securities $ 20,616 $ — $ 20,616 $ —

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Other debt securities 4,715 — 4,715 —

149,212 — 149,212 —

Total available for sale securities 220,358 — 220,358 —

Equity securities 6,186 — 6,186 —

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Loans held for sale 32,540 — 32,540 —

Loans held for investment, at fair value 9,466 — 9,466 —

MSRs 5,874 — — 5,874

IRLCs 91 — — 91

Total assets at fair value $ 259,186 $ — $ 259,095 $ 91

IRLCs $ 1 $ — $ — $ 1

TBA forward trades 59 — 59 —

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($ in thousands) Fair Value Quoted Prices

(Level 1) Significant Other Observable Inputs (Level 2) Significant Other Observable Inputs (Level 3)

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

December 31, 2024

Securities available for sale:

Available for sale securities:

government agency securities $ 20,202 $ — $ 20,202 $ —

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Other debt securities 6,626 — 6,626 —

110,521 — 110,521 —

Total available for sale securities 149,212 — 149,212 —

Equity securities 5,814 — 5,814 —

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Loans held for sale 19,606 — 19,606 —

Loans held for investment, at fair value 9,944 — 9,944 —

MSRs 5,926 — — 5,926

IRLCs 113 — — 113

Total assets at fair value $ 174,909 $ — $ 174,796 $ 113

TBA securities $ 176 $ — $ 176 $ —

TBA forward trades $ 23 $ — $ 23 $ —

Total liabilities at fair value $ 23 $ — $ 23 $ —

Assets Measured at Fair Value on a Nonrecurring Basis

Assets Measured at Fair Value on a Non-recurring Basis

Individually Evaluated Collateral-Dependent Loans

Loans for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, where applicable.

Management utilizes various methods to estimate fair value of the collateral including appraisals, discounted cashflow and automated valuation methods.

Accordingly, collateral-dependent loans are classified within Level 3 of the fair value hierarchy.

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Repossessed Assets

The Company records repossessed assets at fair value on a nonrecurring basis.

All repossessed assets are recorded at lower of the estimated fair value of the properties, less expected selling costs, or the carrying amount of the defaulted loans.

From time to time, nonrecurring fair value adjustments are recorded to reflect partial write-downs based on current appraised value of an asset.

From time to time, non-recurring fair value adjustments are recorded to reflect partial write-downs based on current appraised value of an asset.

The Company considers any valuation inputs related to repossessed assets to be Level 3 inputs.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis as of December 31, 2024 and 2023 that are valued at the lower of cost or market.

Fair value adjustments for these assets are recorded in other noninterest expense in the consolidated statements of income.

Other Assets Held for Sale

Other assets held for sale are carried at the lower of the carrying amount or fair value.

The fair value is determined based on the appraisal value, listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to sell.

Due to the use of significant unobservable inputs, these assets are classified as Level 3 under the fair value hierarchy.

Fair value adjustments for these assets are recorded in other noninterest expense in the consolidated statements of income.

The following tables set forth the Company’s assets subject to fair value adjustments (impairment) on a non-recurring basis as of December 31, 2025 and 2024 that are valued at lower of cost or market.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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December 31, 2025

Nonrecurring measurements:

Non-recurring measurements:

Individually-evaluated collateral dependent loans:

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Appraisal adjustment (2)

Assets held for sale 900 Appraisal of collateral (1)

Appraisal adjustment (2)

Quantitative Information about Level 3 Fair Value Measurements

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Nonrecurring measurements:

Individually evaluated collateral dependent loan

Individually-evaluated collateral dependent loans:

Commercial real estate $ 2,220 Appraisal of collateral (1)

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Appraisal adjustment (2)

Repossessed assets 3,315 Appraisal of collateral (1)

Appraisal adjustment (2)

Assets held for sale 900 Appraisal of collateral (1)

Appraisal adjustment (2)

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(1) Unobservable inputs were weighted by the relative fair value of the instruments.

No range is presented only when one instrument was available.

(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

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A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash.

Certain items are specifically excluded from the financial instrument fair value disclosure requirements, including the Company’s common stock, OREO, premises and equipment and other assets and liabilities.

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments for the years ended December 31, 2024 and 2023.

Certain items are specifically excluded from the financial instrument fair value disclosure requirements, including the Company’s common stock, OREO, repossessed assets, premises and equipment and other assets and liabilities.

The following tables present the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2025 and 2024.

Fair values for December 31, 2025 and 2024 were estimated using an exit price notion.

December 31, 2025 Carrying Amount Fair Value Fair Value Measurements

($ in thousands)

Level 1 Level 2 Level 3

($ in thousands) Level 1 Level 2 Level 3

Cash and cash equivalents $ 355,566 $ 355,566 $ 355,566 $ — $ —

Available for sale investment securities 149,212 149,212 — 149,212 —

Held to maturity investment securities 481,077 424,734 — 424,734 —

Available for sale securities 220,358 220,358 — 220,358 —

Held to maturity securities 414,827 378,116 — 378,116 —

Equity securities 6,186 6,186 — 6,186 —

Restricted securities 20,253 20,253 — 20,253 —

Restricted securities 17,989 N/A — N/A —

Loans held for sale 32,540 32,540 — 32,540 —

TBA securities 11 11 — 11 —

Loans held for investment, at fair value 9,466 9,466 — 9,466 —

Loans held for investment, at amortized cost, net 4,841,466 4,767,143 — — 4,767,143

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Time deposits 1,267,487 1,265,740 — 1,265,740 —

Brokered deposits 10,911 10,923 — 10,923 —

FHLB advances — — — — —

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Accrued interest payable 2,977 2,977 — 2,977 —

IRLCs 1 1 — — 1

December 31, 2024 Carrying Amount Fair Value Fair Value Measurements

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Cash and cash equivalents $ 459,851 $ 459,851 $ 459,851 $ — $ —

Available for sale investment securities 110,521 110,521 — 110,521 —

Held to maturity investment securities 513,188 457,830 — 457,830 —

Available for sale securities 149,212 149,212 — 149,212 —

Held to maturity securities 481,077 424,734 — 424,734 —

Equity securities 5,814 5,814 — 5,814 —

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TBA securities 164 164 — 164 —

Cash surrender value on life insurance 101,704 101,704 — 101,704 —

Loans held for investment 9,944 9,944 — 9,944 —

Loans, net 4,573,715 4,477,468 — — 4,477,468

Loans held for investment, at amortized cost, net 4,714,078 4,561,449 — — 4,561,449

Mortgage servicing rights 5,874 5,874 — 5,874 —

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Time deposits 1,181,561 1,179,716 — 1,179,716 —

Brokered deposits — — — — —

FHLB advances 50,000 50,201 — 50,201 —

TRUPS 29,847 27,952 — 27,952 —

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Note 18 – Commitments and Contingencies

In the normal course of business, to meet the financial needs of its customers, the Bank is a party to financial instruments with off-balance sheet risk.

In the normal course of business, to meet the financial needs of its customers, the Company is a party to financial instruments with off-balance sheet risk.

These financial instruments include commitments to extend credit and standby letters of credit.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract.

Letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party.

Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party.

Letters of credit and other commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Because many of the letters of credit and commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

Commitments to make loans are generally made for a periods of 90 days or less.

As of December 31, 2024, the Company’s outstanding fixed rate loan commitments have interest rates ranging from 6.50 % - 9.75 %.

The following table provides information on commitments outstanding for the years ended December 31, 2024 and 2023.

Commitments to make loans are generally made for a period of 90 days or less.

The following table provides information on commitments outstanding as of December 31, 2025 and 2024.

($ in thousands) December 31, 2025 December 31, 2024

Commitments to extend credit

Fixed $ 209,737 $ 261,794

Variable 503,713 497,686

Total commitments to extend credit $ 713,450 $ 759,480

Letters of credit

Total $ 732,729 $ 641,785

The Bank had a reserve for off-balance sheet credit exposures of $ 1.1 million as of December 31, 2024 and 2023.

The reserve was estimated based on the historic losses experienced by the Company.

Fixed $ 6,495 $ 8,980

Variable 17,830 18,981

Total letters of credit $ 24,325 $ 27,961

Total commitments outstanding $ 737,775 $ 787,441

The Company had a reserve for off-balance sheet credit exposures of $ 2.0 million and $ 1.1 million as of December 31, 2025 and 2024, respectively.

The reserve was estimated based on current expected credit losses to be experienced by the Company.

Losses are charged against the allowance when management believes the required funding of these exposures is uncollectible.

While this evaluation is completed on a regular basis, it is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

In the normal course of business, Shore Bancshares, Inc.

and its subsidiaries may become involved in litigation arising from banking, financial, and other activities.

In the normal course of business, the Company may become involved in litigation arising from banking, financial and other activities.

Management, after consultation with legal counsel, does not anticipate that the future liability, if any, arising out of current proceedings will have a material effect on the Company’s financial condition, operating results or liquidity.

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As of December 31, 2025 and 2024, such loans outstanding, both direct and indirect (including guarantees), to directors, their associates and policy-making officers, totaled approximately $ 45.1 million and $ 54.3 million, respectively.

During the years ended December 31, 2024 and 2023, loan additions were approximately $ 8.2 million and $ 35.9 million , of which $ 27.4 million were due to the 2023 acquisition of TCFC, and loan repayments and no longer reportable loans were approximately $ 7.3 million and $ 1.3 million, respectively.

As of December 31, 2024 and 2023, deposits, both direct and indirect, from executive officers and directors, their associates and policy-making officers, totaled approximately $ 35.8 million and $ 35.6 million, respectively.

During the years ended December 31, 2025 and 2024, loan additions were approximately $ 4.4 million and $ 8.2 million , respectively, and loan repayments and no longer reportable loans were approximately $ 18.5 million and $ 7.3 million, respectively.

The Company held both direct and indirect deposit accounts on behalf of its executive officers, directors, their associates, and policy‑making officers.

None of the related‑party deposit accounts were overdrawn, and the Bank did not maintain any compensating balance arrangements for these related parties during the years ended December 31, 2025 and 2024.

The Company leases a portion of one of its facilities to a law firm in which the Chairman of the Board of the Company and the Bank is a partner.

In January 2022, the lease entered the final five-year renewal option under the leasing agreement.

The total rent payments received were $ 318 thousand and $ 311 thousand for the years ended December 31, 2024 and 2023, respectively.

The total rent payments received were $ 324 thousand, $ 318 thousand and $ 311 thousand for the years ended December 31, 2025, 2024 and 2023.

The law firm also reimburses the Company for its share of common area maintenance and utilities.

In addition, the law firm represents the Company and the Bank in certain legal matters.

The Company leases its Fredericksburg, Virginia lending center from an entity in which director Michael B.

Adams is a 25 % owner and managing member.

The current lease term expires on November 30, 2028.

Shore United Bank paid this entity $ 108 thousand, $ 105 thousand and $ 51 thousand during the years ended December 31, 2025, 2024 and 2023, respectively.

Adams is also the 100 % owner and president of an entity to which the Company pays monthly fees in connection with common area maintenance for the Virginia lending center.

The Company paid this entity $ 12 thousand, $ 12 thousand and $ 6 thousand during the years ended December 31, 2025, 2024 and 2023, respectively.

Consulting Agreement

On October 31, 2021, Shore United Bank entered into a Consulting Agreement with Alan J.

Hyatt in connection with the company’s acquisition of Severn Bancorp, Inc., of which Mr.

Hyatt was the Chairman, President and Chief Executive Officer.

Under the terms of the Consulting Agreement, which terminates on October 31, 2026, Mr.

Hyatt provides consulting services consisting of assisting us in business introductions, business development calls and business referrals;

attending community functions sponsored by us;

and assisting in any other matters or duties management may request.

In consideration of the consulting services, Mr.

Hyatt receives an annual fee of $ 150 thousand payable in equal monthly installments.

Note 20 – Earnings per Common Share

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The following table provides information relating to the calculation of earnings per common share for the years ended December 31, 2025, 2024 and 2023.

(In thousands, except per share data) December 31, 2024 December 31, 2023

Year Ended December 31,

($ in thousands, except per share data) 2025 2024 2023

Net income $ 59,506 $ 43,889 $ 11,228

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Dilutive effect of common stock equivalents 14,338 17,828 1,893

Average number of shares used to calculate diluted earnings per common share 33,285 26,574

Average number of common shares used to calculate diluted EPS 33,407,155 33,285,156 26,574,110

Anti-dilutive shares — — —

Earnings per common share

Basic $ 1.32 $ 0.42

Diluted $ 1.32 $ 0.42

As of December 31, 2024 and 2023, there were no unvested common stock equivalents excluded from the calculation of diluted earnings per common share as their effect would be anti-dilutive.

Basic net income per common share $ 1.78 $ 1.32 $ 0.42

Diluted net income per common share $ 1.78 $ 1.32 $ 0.42

There were zero anti-dilutive unvested restricted stock and performance stock unit awards excluded from the calculation of diluted earnings per common share for the years ended December 31, 2025, 2024 and 2023, respectively.

Note 21 – Revenue Recognition

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.

Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees and merchant income.

Noninterest revenue streams in-scope of Topic 606 are discussed below.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities.

Service Charges on Deposit Accounts

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Trust and Investment Fee Income

Trust and investment fee income are primarily comprised of fees earned from the management and administration of trusts and other customer assets.

Trust and investment fee income is primarily comprised of fees earned from the management and administration of trusts and other customer assets.

The Company’s performance obligation is generally satisfied over time, and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate.

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Payment is received shortly after services are rendered.

Title Company Revenue

Title Company revenue consists of revenue earned on performing title work for real estate transactions.

The revenue is earned when the title work is performed.

Payment for such performance obligations generally occurs at the time of the settlement of a real estate transaction.

As such settlement is generally within 90 days of the performance of the title work, we recognize the revenue at the time of the settlement.

All contract issuance costs are expensed as incurred.

The Company had no contract assets or liabilities at December 31, 2024.

Other Noninterest Income

Other noninterest income consists of:

fees, exchange, other service charges, safety deposit box rental fees, and other miscellaneous revenue streams.

Other noninterest income consists of fees, exchange, other service charges, safety deposit box rental fees, and other miscellaneous revenue streams.

Fees and other service charges are primarily comprised of debit and credit card income, automated teller machine (“ATM”) fees, merchant services income, and other service charges.

Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard and Visa.

ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM.

Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees.

ATM fees are primarily generated when a Company cardholder uses a third-party ATM or a non-Company cardholder uses a Company ATM.

Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account

management fees.

Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services.

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Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment.

The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended December 31, 2025, 2024 and 2023.

($ in thousands) December 31, 2024 December 31, 2023

Year Ended December 31,

($ in thousands) 2025 2024 2023

Noninterest income

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Interchange income 7,085 6,741 5,714

Title Company revenue 402 551

Other noninterest income 3,768 4,653 3,512

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As of December 31, 2025 and 2024, the Company did not have any significant contract balances.

Note 23 – Segment Reporting

While the CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis.

Accordingly, all of the financial services operations are considered by management to be aggregated in one reportable operating segment.

Refer to the “Consolidated Financial Statements” included in Part II, Item 8.

of this Annual Report on Form 10-K.

Note 22 – Parent Company Financial Information

The following tables provide condensed financial information for Shore Bancshares, Inc.

(Parent Company only) at and for the years ended December 31, 2024 and 2023.

(Parent Company only).

SHORE BANCSHARES, INC.

(PARENT COMPANY ONLY)

CONDENSED BALANCE SHEETS

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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 682,138 $ 619,832

SHORE BANCSHARES, INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF INCOME

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Salaries and employee benefits 408 598 358

Occupancy and equipment expense — 1

Legal and professional fees, including merger expenses 1,929 1,636 5,164

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NET INCOME $ 59,506 $ 43,889 $ 11,228

SHORE BANCSHARES, INC.

(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF CASH FLOWS

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Net increase in other assets ( 2,104 ) ( 957 ) ( 1,267 )

Net increase (decrease) in other liabilities 2,284 ( 682 )

Net (decrease) increase in other liabilities ( 1,374 ) 2,284 ( 682 )

Net cash provided by operating activities 17,858 13,747 12,709

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Purchase of company owned life insurance ( 309 ) ( 198 ) ( 249 )

Return of subsidiary investment 500 — —

Cash acquired in the acquisition of TCFC, net of cash paid — — 88

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of subordinated debt, net of issuance costs 58,860 — —

Redemption of subordinated debt ( 44,500 ) — —

Common stock dividends paid ( 16,094 ) ( 16,013 ) ( 12,733 )

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Net cash used in financing activities ( 1,652 ) ( 15,637 ) ( 12,348 )

Net (decrease) increase in cash and cash equivalents ( 2,088 ) 200

Net increase (decrease) in cash and cash equivalents 16,397 ( 2,088 ) 200

Cash and cash equivalents at beginning of year 5,257 7,345 7,145

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data