SHORE BANCSHARES INC 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management’s Report on Internal Control over Financial Reporting 55 Reports of Independent Registered Public Accounting Firm (PCAOB ID 173 ) 56 Report of Independent Registered Public Accounting Firm (PCAOB ID 613) 58 Consolidated Balance Sheets 59 Consolidated Statements of Income 60 Consolidated Statements of Comprehensive Income 61 Consolidated Statements of Changes in Stockholders’ Equity 62 Consolidated Statements of Cash Flows 63 Notes to Consolidated Financial Statements 65 54 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of Shore Bancshares, Inc. (the “Company”) is responsible for the preparation, integrity and fair presentation of the financial statements included in this Annual Report. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgments and estimates concerning the effects of events and transactions that are accounted for or disclosed. Management is also responsible for establishing and maintaining effective internal control over financial reporting. The Company’s internal control over financial reporting includes those policies and procedures that pertain to the Company’s ability to record, process, summarize and report reliable financial data. The internal control system contains monitoring mechanisms, and appropriate actions taken to correct identified deficiencies. Management believes that internal controls over financial reporting, which are subject to scrutiny by management and the Company’s internal auditors, support the integrity and reliability of the financial statements. Management recognizes that there are inherent limitations in the effectiveness of any internal control system, including the possibility of human error and the circumvention or overriding of internal controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. In addition, because of changes in conditions and circumstances, the effectiveness of internal control over financial reporting may vary over time. The Audit Committee of the board of directors (the “Committee”), is comprised entirely of outside directors who are independent of management. The Committee is responsible for the appointment and compensation of the independent auditors and makes decisions regarding the appointment or removal of members of the internal audit function. The Committee meets periodically with management, the independent auditors, and the internal auditors to ensure that they are carrying out their responsibilities. The Committee is also responsible for performing an oversight role by reviewing and monitoring the financial, accounting, and auditing procedures of the Company in addition to reviewing the Company’s financial reports. The independent auditors and the internal auditors have full and unlimited access to the Committee, with or without the presence of management, to discuss the adequacy of internal control over financial reporting, and any other matters which they believe should be brought to the attention of the Committee. Management assessed the Company’s system of internal control over financial reporting as of December 31, 2025. This assessment was conducted based on the Committee of Sponsoring Organizations of the Treadway Commission “Internal Control – Integrated Framework (2013).” Based on this assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2025. There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15 under the Securities Act of 1934) during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The 2025 financial statements have been audited by the independent registered public accounting firm of Crowe LLP (“Crowe”). Personnel from Crowe were given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Directors and committees thereof. Management believes that all representations made to all the independent auditors were valid and appropriate. The resulting report from Crowe accompanies the financial statements. 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 on Form 10-K. /s/ James M. Burke /s/ Charles S. Cullum James M. Burke Charles S. Cullum President and Chief Executive Officer Executive Vice President and Chief Financial Officer (Principal Executive Officer) (Principal Financial Officer) March 2, 2026 March 2, 2026 55 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 173 ) Stockholders and the Board of Directors Shore Bancshares, Inc. Easton, Maryland Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheet of Shore Bancshares, Inc. (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, 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: (2013) issued by COSO. 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 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. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 56 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses – Economic Imprecision Qualitative Factor As described in Note 1 to the financial statements, the Company accounts for credit losses under ASC 326, Financial Instruments – Credit Losses . ASC 326 requires the measurement of expected lifetime credit losses for financial assets measured at amortized cost at the reporting date. As of December 31, 2025, the balance of the allowance for credit losses (“ACL”) on loans was $58.8 million. The Company’s methodology for estimating the amount reported in the ACL includes an allowance assessed on a collective basis for pools of loans that share similar risk characteristics, which are evaluated collectively using a cash flow approach which includes loan-level cash flow projections and pool-level assumptions and incorporates a reasonable and supportable forecast. 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. Qualitative 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 the probability of the near-term recession and its impacts on estimated losses that is captured through an economic imprecision factor. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. We identified auditing the economic imprecision qualitative factor of the ACL as a critical audit matter because the methodology to determine the estimate of credit losses uses subjective judgments by management and is subject to material variability. Performing audit procedures to evaluate the economic imprecision qualitative factor involved a high degree of auditor judgment, subjectivity and required significant effort, including the need to involve more experienced audit personnel. The primary procedures we performed to address this critical audit matter included: • Testing the effectiveness of controls over the evaluation of the qualitative factor assessments, particularly the economic imprecision factor, used in the ACL on collectively evaluated loans, including controls addressing: ◦ Methodology and accounting policies related to the qualitative factors ◦ Data inputs, calculations, and judgments used to determine the qualitative factors ◦ Management’s output review of the ACL inclusive of qualitative factors • Substantively testing management’s process, including evaluating their judgments and assumptions, for developing the economic imprecision qualitative factor of the ACL which is applied to loans which are collectively evaluated, which included: ◦ Evaluation of the reasonableness of the Company’s accounting policies, judgments, and elections related to the economic imprecision qualitative factor ◦ Testing the accuracy of key inputs and calculations used to determine the economic imprecision qualitative factor ◦ Evaluation of the reasonableness of management’s judgments and assumptions related to the economic imprecision qualitative factor to determine if it is calculated in conformity with management’s policies and was consistently applied period over period. /s/ Crowe LLP We have served as the Company’s auditor since 2024. Livingston, New Jersey March 2, 2026 57 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 613) To the Stockholders and the Board of Directors of Shore Bancshares, Inc. Opinion on the Financial Statements 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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Yount, Hyde & Barbour, P.C. We served as the Company’s auditor from 2017 to 2024. Winchester, Virginia March 15, 2024 58 SHORE BANCSHARES, INC. CONSOLIDATED BALANCE SHEETS ($ in thousands, except per share data) December 31, 2025 December 31, 2024 ASSETS Cash and due from banks $ 50,164 $ 44,008 Interest-bearing deposits with other banks 305,402 415,843 Cash and cash equivalents 355,566 459,851 Investment securities: 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 $ 99 and $ 203 (fair value of $ 378,116 and $ 424,734 at December 31, 2025 and December 31, 2024, respectively) 414,827 481,077 Equity securities, at fair value 6,186 5,814 Restricted securities, at cost 17,989 20,253 Loans held for sale, at fair value 32,540 19,606 Loans held for investment 4,900,302 4,771,988 Less: allowance for credit losses ( 58,836 ) ( 57,910 ) Loans, net 4,841,466 4,714,078 Premises and equipment, net 80,168 81,806 Goodwill 63,266 63,266 Other intangible assets, net 29,722 38,311 Right-of-use assets 10,523 11,385 Cash surrender value on life insurance 105,839 104,421 Accrued interest receivable 18,551 19,570 Deferred income taxes 29,825 31,857 Other assets 31,992 30,256 TOTAL ASSETS $ 6,258,818 $ 6,230,763 LIABILITIES Deposits: Noninterest-bearing $ 1,587,953 $ 1,562,815 Interest-bearing checking 852,585 978,076 Money market and savings 1,814,928 1,805,884 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”), net 30,168 29,847 Subordinated debt, net 58,893 43,870 Total borrowings 89,061 123,717 Lease liabilities 11,027 11,844 Other liabilities 34,993 25,800 TOTAL LIABILITIES 5,668,945 5,689,697 COMMITMENTS AND CONTINGENCIES (Note 18) STOCKHOLDERS’ EQUITY Common stock, $ 0.01 par value per share; shares authorized 50,000,000 ; shares issued and outstanding 33,413,503 and 33,332,177 at December 31, 2025 and December 31, 2024, respectively 334 333 Additional paid-in capital 360,554 358,112 Retained earnings 233,578 190,166 Accumulated other comprehensive loss ( 4,593 ) ( 7,545 ) TOTAL STOCKHOLDERS’ EQUITY 589,873 541,066 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 6,258,818 $ 6,230,763 See accompanying notes to consolidated financial statements. 59 SHORE BANCSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, ($ in thousands, except per share data) 2025 2024 2023 INTEREST INCOME Interest and fees on loans $ 280,604 $ 269,631 $ 194,339 Interest and dividends on taxable investment securities 20,378 19,444 16,832 Interest and dividends on tax-exempt investment securities 24 24 46 Interest on federal funds sold — — 92 Interest on deposits with other banks 9,022 6,239 2,770 Total interest income 310,028 295,338 214,079 INTEREST EXPENSE Interest on deposits 109,203 115,301 68,800 Interest on short-term borrowings 2,089 2,131 5,518 Interest on long-term borrowings 6,359 7,357 4,454 Total interest expense 117,651 124,789 78,772 NET INTEREST INCOME 192,377 170,549 135,307 Provision for credit losses 8,375 4,738 30,953 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 184,002 165,811 104,354 NONINTEREST INCOME Service charges on deposit accounts 6,295 6,149 5,501 Trust and investment fee income 3,705 3,367 3,608 Mortgage banking revenue 6,078 5,987 4,513 Interchange credits 7,085 6,741 5,714 Bank-owned life insurance income 3,910 2,657 1,997 Bargain purchase gain — — 8,816 Other noninterest income 5,615 6,246 3,010 Total noninterest income 32,688 31,147 33,159 NONINTEREST EXPENSE Salaries and employee benefits 71,406 66,579 57,003 Occupancy expense 9,877 9,706 7,791 Furniture and equipment expense 3,334 3,441 2,551 Software and data processing 19,862 17,508 12,465 Amortization of other intangible assets 8,589 9,779 6,105 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 expense 14,370 14,675 10,274 Total noninterest expense 138,035 138,254 123,329 Income before income taxes 78,655 58,704 14,184 Income tax expense 19,149 14,815 2,956 NET INCOME $ 59,506 $ 43,889 $ 11,228 Basic net income per common share $ 1.78 $ 1.32 $ 0.42 Diluted net income per common share $ 1.78 $ 1.32 $ 0.42 Dividends paid per common share $ 0.48 $ 0.48 $ 0.48 See accompanying notes to consolidated financial statements. 60 SHORE BANCSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Year Ended December 31, ($ in thousands) 2025 2024 2023 Net income $ 59,506 $ 43,889 $ 11,228 Other comprehensive income (loss): Investment securities: Unrealized holding gains (losses) on available for sale securities 4,062 ( 70 ) 2,101 Tax effect ( 1,110 ) 19 ( 574 ) Total other comprehensive income (loss) 2,952 ( 51 ) 1,527 Comprehensive income $ 62,458 $ 43,838 $ 12,755 See accompanying notes to consolidated financial statements. 61 SHORE BANCSHARES, INC. 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 Balances, December 31, 2022 $ 199 $ 201,494 $ 171,613 $ ( 9,021 ) $ 364,285 Net income — — 11,228 — 11,228 Cumulative effect adjustment due to the adoption of ASC 326, net of tax — — ( 7,818 ) — ( 7,818 ) Other comprehensive income — — — 1,527 1,527 TCFC acquisition 132 152,955 — — 153,087 Common shares issued for employee stock purchase plan 1 384 — — 385 Stock-based compensation — 1,174 — — 1,174 Cash dividends at $ 0.48 per common share — — ( 12,733 ) — ( 12,733 ) Balances, December 31, 2023 332 356,007 162,290 ( 7,494 ) 511,135 Net income — — 43,889 — 43,889 Other comprehensive loss — — — ( 51 ) ( 51 ) Common shares issued for employee stock purchase plan 1 375 — — 376 Stock-based compensation — 1,730 — — 1,730 Cash dividends at $ 0.48 per common share — — ( 16,013 ) — ( 16,013 ) 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. 62 Table of Contents SHORE BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, ($ in thousands) 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 59,506 $ 43,889 $ 11,228 Adjustments to reconcile net income to net cash provided by operating activities: Net accretion of acquisition accounting estimates ( 12,043 ) ( 14,734 ) ( 8,772 ) Provision for credit losses 8,375 4,738 30,953 Depreciation and amortization 15,331 16,040 10,939 Net amortization of securities 86 ( 546 ) 838 Amortization of debt issuance costs 120 122 122 Bargain purchase gain — — ( 8,816 ) Gain on mortgage loans held for sale ( 5,671 ) ( 5,021 ) ( 2,978 ) 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 Originations of loans held for sale ( 191,278 ) ( 176,415 ) ( 123,376 ) Stock-based compensation expense 1,890 1,730 1,174 Deferred income tax expense 922 8,869 2,721 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 — Loss (gain) on disposal of premises held for sale 61 ( 737 ) — Valuation adjustments on premises transferred to held for sale — 289 272 Loss (gain) on sales and valuation adjustments on other real estate owned 66 — ( 3 ) Fair value adjustment on equity securities ( 189 ) 55 ( 54 ) Bank-owned life insurance income ( 3,910 ) ( 2,657 ) ( 1,997 ) Net changes in: Accrued interest receivable 1,019 ( 353 ) ( 724 ) Other assets ( 4,115 ) 5,027 ( 10,908 ) Accrued interest payable ( 421 ) ( 1,313 ) 2,095 Other liabilities 7,117 ( 2,449 ) ( 3,653 ) Net cash provided by operating activities 62,391 46,887 22,713 CASH FLOWS FROM INVESTING ACTIVITIES: 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 held to maturity securities 68,141 48,960 44,801 Proceeds from life insurance death benefits 2,814 150 — 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 ) Purchase of restricted securities ( 3,484 ) ( 36,157 ) ( 35,350 ) Net change in loans ( 122,583 ) ( 123,277 ) ( 317,283 ) Purchases of premises and equipment ( 3,168 ) ( 5,224 ) ( 5,954 ) Proceeds from sales of other real estate owned — — 21 Proceeds from sales of repossessed assets 2,829 1,807 — Redemption of restricted securities 5,748 33,804 32,959 Purchases of bank owned life insurance ( 322 ) ( 210 ) ( 249 ) Proceeds from disposal of premises held for sale 843 946 721 Cash acquired in the acquisition of TCFC, net of cash paid — — 25,372 Net cash (used in) provided by investing activities $ ( 118,322 ) $ ( 134,541 ) $ 172,313 See accompanying notes to consolidated financial statements. 63 Table of Contents SHORE BANCSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS – Continued Year Ended December 31, ($ in thousands) 2025 2024 2023 CASH FLOWS FROM FINANCING ACTIVITIES: Net changes in: Noninterest-bearing deposits $ 25,138 $ 304,778 $ ( 192,658 ) Interest-bearing deposits ( 21,840 ) ( 164,049 ) 435,894 Short-term borrowings ( 50,000 ) — ( 109,000 ) 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 (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 Cash and cash equivalents at end of period $ 355,566 $ 459,851 $ 372,413 Supplemental cash flows information: Interest paid $ 114,858 $ 123,567 $ 74,038 Income taxes paid 15,070 — 7,293 Recognition of lease liabilities arising from right-of-use assets 1,210 566 179 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 Transfer of premises to held for sale, included in other assets — 1,387 750 See accompanying notes to consolidated financial statements. 64 Table of Contents Shore Bancshares, Inc. Notes to Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation 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. The accounting and reporting policies of the Company conform with generally accepted accounting principles in the United States of America (“GAAP”). For purposes of comparability, certain reclassifications have been made to amounts previously reported to conform with the current period presentation. Reclassifications had no effect on prior year net income or stockholders’ equity. Nature of Operations The Company engages in the banking business through Shore United Bank, N.A. (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”), 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 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. 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 Investments in debt securities are classified as either held to maturity (“HTM”), available for sale (“AFS”), or trading, based on management’s intent. Currently, the Company has classified its debt securities within the AFS and HTM classifications. Debt securities purchased with the positive intent and ability to hold to maturity are classified as HTM and are recorded at amortized cost, net of any allowance for credit losses (“ACL”). Debt securities not classified as HTM are classified as AFS and are carried at estimated fair value with the corresponding unrealized gains and losses recognized in other comprehensive income (loss). Gains or losses are recognized in net income on the trade date using the amortized cost of the specific security sold. Purchase premiums are recognized in interest income using the effective interest rate method over the period from purchase to maturity or, for callable securities, the earliest call date, and purchase discounts are recognized in the same manner from purchase to maturity. The Company has elected to exclude accrued interest receivable from the amortized cost basis and fair value of its HTM and AFS debt securities and has included such accrued interest of $ 2.1 million and $ 2.5 million at December 31, 2025 and 2024, respectively, within accrued interest receivable on the consolidated balance sheets. 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, 2025, the aggregate carrying value of pledged AFS and HTM pledged securities was $ 69.4 million and $ 218.6 million, respectively. The comparable amounts as of December 31, 2024 were $ 67.9 million and $ 197.5 million, respectively. Investments – Equity Securities Equity securities with readily determinable fair values are carried at fair value, with changes in fair value reported in net income. Any equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. Restricted equity securities are carried at cost and are periodically evaluated for impairment based on the ultimate recovery of par value. The entirety of any impairment on equity securities is recognized in earnings. Allowance for Credit Losses – Securities The Company evaluates its available for sale and held to maturity debt securities portfolios for expected credit losses as of the valuation date under ASC 326. For available for sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or if it is more likely than not that it would be required to sell, the security before recovery of its amortized cost basis. 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 65 Table of Contents 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. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. The entire amount of an impairment loss is recognized in earnings only when: (1) the Company intends to sell the security; or (2) it is more likely than not that the Company will have to sell the security before recovery of the Company's amortized cost basis; 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 stockholders’ equity as comprehensive income, net of deferred taxes. Changes in the ACL are recorded as a provision for (or reversal of) credit losses. Losses are charged against the ACL when the Company believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. 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 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. Accordingly, the Company does not recognize an allowance for credit loss against accrued interest receivable. This approach is consistent with the Company’s nonaccrual policy implemented for its loan portfolio. The Company separately evaluates its held to maturity investment securities for any credit losses. 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, 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 The Company’s recorded investment in loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay off generally is reported at the unpaid principal balances adjusted for charges-offs, unearned discounts, any deferred fees or costs on originated loans, and the ACL. The Company has elected to exclude accrued interest receivable from the amortized cost basis of its loans held for investment and has included such accrued interest of $ 16.3 million and $ 16.7 million at December 31, 2025 and 2024, respectively, within accrued interest receivable on the consolidated balance sheets. Interest on loans is recorded to interest income based on the contractual rates and the amount of outstanding principal of the loans. Loan fees and origination costs are deferred and the net amount is amortized as an adjustment of the related loan’s yield using the level-yield method. Loans acquired in a business combination are recorded at estimated fair value on the date of acquisition. In the case of loans that have experienced more than insignificant deterioration in credit quality since origination as of the acquisition date, the loan’s amortized cost basis is increased above estimated fair value by the amount of expected credit losses as of the acquisition date, and a corresponding ACL is also recorded. A loan’s past due status is based on the contractual due date of the most delinquent payment due. Loans are generally placed on nonaccrual status when the collection of principal or interest is 90 days or more past due, or earlier if collection is uncertain. Any accrued interest receivable on loans placed on nonaccrual status is reversed by an adjustment to interest income. Loans greater than 90 days past due may remain on accrual status if management determines it is well secured and in the process of collection. Interest payments received on nonaccrual loans are applied as a reduction of the loan principal balance unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. A loan may be returned to accrual status if the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms of the loan and there is reasonable assurance the borrower will continue to make payments as agreed. In the ordinary course of business, the Company has entered into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated balance sheets when they are funded. In the normal course of banking business, risks related to specific loan segments are as follows: 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 66 Table of Contents 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. Non-owner occupied properties carry the risk of a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow. Residential Real Estate – Residential real estate loans are typically made to consumers and are secured by residential real estate. Credit risk arises from the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral. Construction – Construction loans are offered primarily to builders and individuals to finance the construction of single-family dwellings. In addition, the Bank periodically finances the construction of commercial projects. Credit risk factors include the borrower’s ability to successfully complete the construction on time and within budget, changing market conditions which could affect the value and marketability of projects, changes in the borrower’s ability or willingness to repay the loan and potentially rising interest rates which can impact both the borrower’s ability to repay and the collateral value. Commercial – Commercial loans are secured or unsecured loans for business purposes. Loans are typically secured by accounts receivable, inventory, equipment and/or other assets of the business. 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. 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. Credit risk factors include the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. In 2024, the Company discontinued the issuance of new credit cards (except to select existing customers) and only services the existing portfolio at December 31, 2025. Transfers of Loans Held for Sale (“LHFS”) to Loans Held for Investment (“LHFI”) The Company may, from time to time, transfer LHFS to LHFI. Transfers of LHFS to LHFI are accounted for in accordance with the underlying accounting applied to the loan prior to its transfer. For loans where the fair value option had been elected, the Company continues to account for the loan at fair value in the LHFI portfolio. Subsequent changes in the fair value of these loans are recorded in interest income. 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 An ACL is estimated on loans held for investment, excluding loans carried at fair value. The ACL on loans is established through charges to earnings in the form of a provision for credit losses. Loan losses are charged against the ACL for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance represents management’s current estimate of expected credit losses over the contractual term of loans held for investment, and is recorded at an amount that, in management’s judgment, reduces the recorded investment in loans to the net amount expected to be collected. No ACL is recorded on accrued interest receivable and amounts written-off are reversed by an adjustment to interest income. Management’s judgment in determining the level of the allowance is based on evaluations of historical loan losses, current conditions and reasonable and supportable forecasts relevant to the collectability of loans. The methodology for estimating the amount reported in the ACL is the sum of two main components, an allowance assessed on a collective basis for pools of loans that share similar risk characteristics and an allowance assessed on individual loans that do not share similar risk characteristics with other loans. Loans that share common risk characteristics are evaluated collectively using a cash flow approach. The cash flow approach used by the Company utilizes loan-level cash flow projections and pool-level assumptions. For loans that do not share risk characteristics with other loans, the ACL is measured based on the net realizable value, that is, the difference between the expected future cash flows and the amortized cost basis of the loan. 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 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. 67 Table of Contents 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. Reserve for Unfunded Commitments 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 $ 906 thousand, $ 104 thousand and $ 436 thousand during the years ended December 31, 2025, 2024 and 2023, respectively. Loans Held For Sale The Company has elected to carry its mortgage loans originated for sale at fair value. Fair value is determined based on outstanding investor commitments or, in the absence of such commitments, on current investor yield requirements or third-party pricing models. Fair value adjustments are recorded at each balance sheet date with the changes in fair value recognized in mortgage banking revenue in the consolidated statements of income. Gains and losses on loan sales are determined based on the differential between a loan’s carrying value and sales price and are recognized through mortgage-banking revenue in the consolidated statements of income. LHFS are sold either with the mortgage servicing rights (“MSRs”) released or retained by the Bank. Mortgage Servicing Rights 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 Land is carried at cost and premises and equipment are stated at cost less accumulated depreciation and amortization. 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 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 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. Impairment exists when the expected undiscounted future cash flows of a long-lived asset are less than its carrying value. In that event, the Company recognizes a loss for the difference between the carrying amount and the estimated fair value of the asset. Segment Reporting 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 68 Table of Contents 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. The most significant assessment of fair value in our accounting for business combinations relates to the valuation of an acquired loan portfolio. At acquisition, loans are classified as either (i) purchase credit-deteriorated (“PCD”) loans or (ii) non-PCD loans, and are recorded at fair value on the date of acquisition. 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 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. At acquisition, an allowance for PCD loans is determined based upon the Company’s methodology for estimating the ACL on loans. This allowance is credited to the ACL on loans with a corresponding adjustment to the amortized cost basis of the loan on the date of the acquisition. The difference between the new amortized cost basis and the unpaid principal balance is either a noncredit discount or premium that is amortized or accreted to interest income over the remaining life of the loan. Disposals of PCD loans, which may include sale of loans to third parties, receipt of payments in full or in part from the borrower or foreclosure of the collateral, result in removal of the loan from the loan portfolio at its carrying amount. For non-PCD loans, an ACL is established in a manner that is consistent with the Company’s originated loans. The ACL is determined using the Company’s methodology and the related ACL for non-PCD loans is recorded through a charge to the provision for credit losses in the period in which the loans are purchased or acquired. The entirety of any purchase discount or premium on non-PCD loans is amortized or accreted to interest income over the remaining life of the loan. Goodwill and Other Intangible Assets Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. Goodwill and other intangible assets are initially required to be recorded at fair value. 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 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 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. Other intangible assets consist of core deposit intangible assets arising from whole bank and branch acquisitions and are amortized using an accelerated method over their estimated useful lives, which range from seven to ten years . During the years ended December 31, 2025 and 2024, goodwill and other intangible assets were subjected to assessments for impairment. No impairment charges were recognized in either year. Our assessment of goodwill concluded it was not more likely than not that the fair value of the Company’s reporting unit was less than its carrying amount. Borrowings Short-term and long-term borrowings are comprised primarily of Federal Home Loan Bank (“FHLB”) borrowings. The Company’s short-term borrowings may also include advances on other lines of credit with correspondent banks or repurchase agreements with customers. The repurchase agreements are securities sold to the Company’s customers, at the customers’ request, under a continuing “roll-over” contract that matures in one business day. The underlying securities sold are U.S. government agency securities, which are segregated from the Company’s other investment securities by its safekeeping agents. Subordinated Debt Subordinated debt is carried at its outstanding principal balance, net of any unamortized issuance costs and acquisition related fair value adjustments. For additional information on the Company’s subordinated debt, refer to Note 8 – “Borrowings.” Cash and Cash Equivalents 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 90 days or less. Derivative Financial Instruments and Hedging 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 69 Table of Contents economic hedge, or a qualifying hedge as detailed in the literature. The designation may change based upon management’s reassessment or changing circumstances. Derivatives utilized by the Company include interest rate lock commitments (“IRLCs”) and forward settlement contracts. IRLCs occur when we originate mortgage loans with interest rates determined prior to funding. Forward settlement contracts are agreements to buy or sell a quantity of a financial instrument, index, currency, or commodity at a predetermined future date, rate, or price. 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 judgment 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. As of December 31, 2025 and 2024, the Company did not have any designated hedges. Fair Value 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 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. See Note 16 – “Fair Value Measurements” for a further discussion of fair value. Income Taxes 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 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. These temporary differences represent differences between financial statement carrying amounts and the corresponding tax bases of certain assets and liabilities. Deferred taxes result from such temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. 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 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 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. The Company remains subject to examination for tax years ending on or after December 31, 2022. Basic and Diluted Earnings Per Common Share 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 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 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. 70 Table of Contents 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 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. The risk-free rate is derived from the U.S. 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 Company’s 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 additional paid-in capital. Advertising Costs Advertising costs are generally expensed as incurred. 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 Comprehensive income consists of net income and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized holding gains and losses on available for sale securities, net of any gains recognized from the sale of available for sale securities. There were no reclassifications from accumulated other comprehensive income during the years ended December 31, 2025, 2024 and 2023. Recent Accounting Pronouncements 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). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. 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. 71 Table of Contents Note 2 – Investment Securities 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 Available for sale securities (1) : December 31, 2025 U.S. Treasury and government agency securities $ 22,303 $ 2 $ 1,689 $ 20,616 Mortgage-backed securities 200,105 331 5,409 195,027 Other debt securities (2) 4,269 446 — 4,715 Total $ 226,677 $ 779 $ 7,098 $ 220,358 December 31, 2024 U.S. Treasury and government agency securities $ 22,984 $ 4 $ 2,786 $ 20,202 Mortgage-backed securities 130,439 84 8,139 122,384 Other debt securities (2) 6,170 469 13 6,626 Total $ 159,593 $ 557 $ 10,938 $ 149,212 ____________________________________ (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 Held to maturity securities: December 31, 2025 U.S. Treasury and government agency securities $ 104,836 $ 2 $ 4,513 $ 100,325 $ — Mortgage-backed securities 303,129 255 32,167 271,217 — Other debt securities (1) 6,961 33 420 6,574 99 Total $ 414,926 $ 290 $ 37,100 $ 378,116 $ 99 December 31, 2024 U.S. Treasury and government agency securities $ 132,560 $ — $ 8,555 $ 124,005 $ — Mortgage-backed securities 336,755 — 47,234 289,521 — Other debt securities (1) 11,965 19 776 11,208 203 Total $ 481,280 $ 19 $ 56,565 $ 424,734 $ 203 ____________________________________ (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, ($ in thousands) 2025 2024 2023 Balance, beginning of period $ 203 $ 94 $ — Provision for (reversal of) credit losses, other debt securities ( 104 ) 109 94 Balance, end of period $ 99 $ 203 $ 94 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. 72 Table of Contents 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 as of December 31, 2025 and 2024. Less than 12 Months More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2025 Available for sale securities: U.S. Treasury and government agency securities $ — $ — $ 18,027 $ 1,689 $ 18,027 $ 1,689 Mortgage-backed securities 102,954 531 47,656 4,878 150,610 5,409 Other debt securities — — — — — — Total $ 102,954 $ 531 $ 65,683 $ 6,567 $ 168,637 $ 7,098 Less than 12 Months More than 12 Months Total ($ in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2024 Available for sale securities: U.S. Treasury and government agency securities $ 207 $ — $ 17,422 $ 2,786 $ 17,629 $ 2,786 Mortgage-backed securities 56,913 710 48,782 7,429 105,695 8,139 Other debt securities — — 1,988 13 1,988 13 Total $ 57,120 $ 710 $ 68,192 $ 10,228 $ 125,312 $ 10,938 There were 122 AFS debt securities with a fair value below the amortized cost basis, with unrealized losses totaling $ 7.1 million as of December 31, 2025. The Company concluded that a credit loss does not exist in its AFS securities portfolio as of December 31, 2025, and no impairment loss has been recognized based on the fact that (1) changes in fair value were primarily caused by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more likely than not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-backed securities are issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. 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, 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 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. 73 Table of Contents The following table provides information on the amortized cost and estimated fair values of investment securities by contractual maturity date at December 31, 2025. Available for Sale Held to Maturity ($ in thousands) Amortized Cost Fair Value Amortized Cost Fair Value Due in one year or less $ 2,461 $ 2,463 $ 32,564 $ 32,391 Due after one year through five years 21,330 19,808 63,596 60,829 Due after five years through ten years 2,529 2,823 5,488 5,105 Due after ten years 252 237 10,149 8,574 Total non-mortgage-backed securities $ 26,572 $ 25,331 $ 111,797 $ 106,899 Mortgage-backed securities 200,105 195,027 303,129 271,217 Total $ 226,677 $ 220,358 $ 414,926 $ 378,116 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, 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 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 Pledged available for sale securities $ 75,123 $ 69,369 $ 76,280 $ 67,926 Pledged held to maturity securities 218,556 197,146 197,474 173,248 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 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. ($ in thousands) December 31, 2025 % of Total Loans December 31, 2024 % of Total Loans Commercial real estate $ 2,643,996 53.95 % $ 2,557,806 53.60 % Residential real estate 1,414,964 28.88 1,329,406 27.85 Construction 344,903 7.04 335,999 7.04 Commercial 226,006 4.61 237,932 4.99 Consumer 265,912 5.43 303,746 6.37 Credit cards 4,521 0.09 7,099 0.15 Total loans 4,900,302 100.00 % 4,771,988 100.00 % Less: allowance for credit losses ( 58,836 ) ( 57,910 ) Total loans, net $ 4,841,466 $ 4,714,078 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, 2025 and 2024, loans included $ 1.49 billion and $ 1.69 billion, respectively, of aggregate loans that were acquired as part of the 74 Table of Contents 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 December 31, 2025 Nonaccrual loans: Commercial real estate $ 6,135 $ 19,498 $ 25,633 Residential real estate 9,594 544 10,138 Construction 88 — 88 Commercial 2,297 784 3,081 Consumer 898 74 972 Credit cards — 48 48 Total $ 19,012 $ 20,948 $ 39,960 Interest income $ 285 $ 363 $ 648 ($ in thousands) Nonaccrual With No Allowance For Credit Loss Nonaccrual With An Allowance For Credit Loss Total Nonaccrual Loans December 31, 2024 Nonaccrual loans: Commercial real estate $ 8,192 $ 2,194 $ 10,386 Residential real estate 6,741 873 7,614 Construction 360 — 360 Commercial 458 549 1,007 Consumer 761 712 1,473 Credit cards — 168 168 Total $ 16,512 $ 4,496 $ 21,008 Interest income $ 274 $ 65 $ 339 ($ in thousands) Nonaccrual Delinquent Loans Nonaccrual Current Loans Total Nonaccrual Loans December 31, 2025 Nonaccrual loans: Commercial real estate $ 2,809 $ 22,824 $ 25,633 Residential real estate 3,808 6,330 10,138 Construction 88 — 88 Commercial 196 2,885 3,081 Consumer 491 481 972 Credit cards 32 16 48 Total $ 7,424 $ 32,536 $ 39,960 75 Table of Contents ($ in thousands) Nonaccrual Delinquent Loans Nonaccrual Current Loans Total Nonaccrual Loans December 31, 2024 Nonaccrual loans: Commercial real estate $ 7,268 $ 3,118 $ 10,386 Residential real estate 3,979 3,635 7,614 Construction 360 — 360 Commercial 70 937 1,007 Consumer 1,431 42 1,473 Credit cards 146 22 168 Total $ 13,254 $ 7,754 $ 21,008 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’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. Ratings 1 thru 6 – Pass – Ratings 1 thru 6 have asset risks ranging from excellent-low to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks. Rating 7 – Special Mention – These credits have potential weaknesses due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. Special mention loan relationships are reviewed at least quarterly. Rating 8 – Substandard – Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. Substandard loans are the first adversely classified loans on the Bank’s watchlist. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. 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 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 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; a capital injection; a pledge of additional collateral; the sale of assets; or alternative refinancing plans. Credits receiving a doubtful classification are required to be on nonaccrual. These relationships will be reviewed at least quarterly. Rating 10 – Loss – Loss assets are uncollectible or of little value. 76 Table of Contents 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 ($ in thousands) Prior 2021 2022 2023 2024 2025 December 31, 2025 Commercial real estate Pass $ 939,986 $ 364,719 $ 556,924 $ 242,170 $ 139,929 $ 265,405 $ 14,703 $ 27,136 $ 2,550,972 Special mention 15,105 2,884 34,014 344 — — — — 52,347 Substandard 20,056 16,806 2,840 — 283 — 692 — 40,677 Total $ 975,147 $ 384,409 $ 593,778 $ 242,514 $ 140,212 $ 265,405 $ 15,395 $ 27,136 $ 2,643,996 Gross charge-offs $ ( 109 ) $ ( 2,640 ) $ — $ — $ — $ — $ — $ — $ ( 2,749 ) Residential real estate Pass $ 317,764 $ 182,198 $ 275,869 $ 215,397 $ 147,517 $ 114,300 $ 131,075 $ 695 $ 1,384,815 Special mention 3,719 14,777 — 504 — — 65 — 19,065 Substandard 6,990 2,012 267 330 — 112 1,373 — 11,084 Total $ 328,473 $ 198,987 $ 276,136 $ 216,231 $ 147,517 $ 114,412 $ 132,513 $ 695 $ 1,414,964 Gross charge-offs $ ( 5 ) $ — $ — $ — $ — $ — $ ( 45 ) $ — $ ( 50 ) Construction Pass $ 27,094 $ 7,238 $ 7,047 $ 28,868 $ 108,885 $ 151,738 $ 13,070 $ 632 $ 344,572 Special mentions — — — — — — — — — Substandard 88 — — — — 243 — — 331 Total $ 27,182 $ 7,238 $ 7,047 $ 28,868 $ 108,885 $ 151,981 $ 13,070 $ 632 $ 344,903 Gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial Pass $ 23,379 $ 25,518 $ 19,739 $ 14,925 $ 29,307 $ 35,202 $ 70,493 $ 1,870 $ 220,433 Special mention 104 27 107 105 76 54 845 — 1,318 Substandard 424 1,055 758 527 — — 1,318 173 4,255 Total $ 23,907 $ 26,600 $ 20,604 $ 15,557 $ 29,383 $ 35,256 $ 72,656 $ 2,043 $ 226,006 Gross charge-offs $ ( 71 ) $ — $ — $ ( 329 ) $ — $ — $ ( 381 ) $ ( 31 ) $ ( 812 ) Consumer Pass $ 7,954 $ 45,750 $ 88,990 $ 39,576 $ 31,597 $ 49,634 $ 769 $ — $ 264,270 Special mention — — 671 — — — — — 671 Substandard 1 29 396 445 41 59 — — 971 Total $ 7,955 $ 45,779 $ 90,057 $ 40,021 $ 31,638 $ 49,693 $ 769 $ — $ 265,912 Gross charge-offs $ ( 451 ) $ ( 99 ) $ ( 1,595 ) $ ( 646 ) $ ( 324 ) $ — $ ( 18 ) $ — $ ( 3,133 ) Total Pass $ 1,316,177 $ 625,423 $ 948,569 $ 540,936 $ 457,235 $ 616,279 $ 230,110 $ 30,333 $ 4,765,062 Special mention 18,928 17,688 34,792 953 76 54 910 — 73,401 Substandard 27,559 19,902 4,261 1,302 324 414 3,383 173 57,318 Total loans by risk category $ 1,362,664 $ 663,013 $ 987,622 $ 543,191 $ 457,635 $ 616,747 $ 234,403 $ 30,506 $ 4,895,781 Total gross charge-offs $ ( 636 ) $ ( 2,739 ) $ ( 1,595 ) $ ( 975 ) $ ( 324 ) $ — $ ( 444 ) $ ( 31 ) $ ( 6,744 ) 77 Table of Contents 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. Term Loans by Origination Year Revolving Loans Revolving Converted to Term Loans Total ($ in thousands) Prior 2021 2022 2023 2024 2025 December 31, 2025 Credit cards Performing $ — $ — $ — $ — $ — $ — $ 4,473 $ — $ 4,473 Nonperforming — — — — — — 48 — 48 Total $ — $ — $ — $ — $ — $ — $ 4,521 $ — $ 4,521 Gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 535 ) $ — $ ( 535 ) Total loans evaluated by performing status $ — $ — $ — $ — $ — $ — $ 4,521 $ — $ 4,521 Total gross charge-offs $ ( 636 ) $ ( 2,739 ) $ ( 1,595 ) $ ( 975 ) $ ( 324 ) $ — $ ( 979 ) $ ( 31 ) $ ( 7,279 ) Total recorded investment $ 1,362,664 $ 663,013 $ 987,622 $ 543,191 $ 457,635 $ 616,747 $ 238,924 $ 30,506 $ 4,900,302 78 Table of Contents 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 Loans Revolving Converted to Term Loans Total ($ in thousands) Prior 2020 2021 2022 2023 2024 December 31, 2024 Commercial real estate Pass $ 822,391 $ 297,098 $ 435,084 $ 534,936 $ 250,482 $ 136,891 $ 24,966 $ 14,084 $ 2,515,932 Special mention 7,514 — 2,964 19,746 — — 417 — 30,641 Substandard 7,684 — 2,991 — — — 558 — 11,233 Total $ 837,589 $ 297,098 $ 441,039 $ 554,682 $ 250,482 $ 136,891 $ 25,941 $ 14,084 $ 2,557,806 Gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Residential real estate Pass $ 291,306 $ 78,568 $ 211,938 $ 295,402 $ 220,753 $ 101,005 $ 119,367 $ 613 $ 1,318,952 Special mention 1,529 518 — — — — — — 2,047 Substandard 5,414 — 1,342 290 885 — 476 — 8,407 Total $ 298,249 $ 79,086 $ 213,280 $ 295,692 $ 221,638 $ 101,005 $ 119,843 $ 613 $ 1,329,406 Gross charge-offs $ ( 1 ) $ — $ — $ — $ — $ — $ — $ — $ ( 1 ) Construction Pass $ 31,884 $ 8,191 $ 8,628 $ 56,685 $ 70,232 $ 131,383 $ 26,785 $ 1,851 $ 335,639 Special mentions — — — — — — — — — Substandard 360 — — — — — — — 360 Total $ 32,244 $ 8,191 $ 8,628 $ 56,685 $ 70,232 $ 131,383 $ 26,785 $ 1,851 $ 335,999 Gross charge-offs $ — $ — $ ( 12 ) $ — $ — $ — $ — $ — $ ( 12 ) Commercial Pass $ 25,214 $ 11,088 $ 40,817 $ 29,142 $ 29,458 $ 39,489 $ 57,982 $ 874 $ 234,064 Special mention 116 — — — — — 703 11 830 Substandard 515 — 8 1,257 500 — 257 501 3,038 Total $ 25,845 $ 11,088 $ 40,825 $ 30,399 $ 29,958 $ 39,489 $ 58,942 $ 1,386 $ 237,932 Gross charge-offs $ ( 54 ) $ ( 11 ) $ — $ ( 56 ) $ ( 69 ) $ — $ — $ — $ ( 190 ) Consumer Pass $ 1,315 $ 10,469 $ 60,718 $ 114,639 $ 61,652 $ 52,798 $ 682 $ — $ 302,273 Special mention — — — — — — — — — Substandard 2 — 48 860 563 — — — 1,473 Total $ 1,317 $ 10,469 $ 60,766 $ 115,499 $ 62,215 $ 52,798 $ 682 $ — $ 303,746 Gross charge-offs $ ( 1,287 ) $ ( 12 ) $ ( 389 ) $ ( 1,764 ) $ ( 177 ) $ — $ ( 17 ) $ — $ ( 3,646 ) Total Pass $ 1,172,110 $ 405,414 $ 757,185 $ 1,030,804 $ 632,577 $ 461,566 $ 229,782 $ 17,422 $ 4,706,860 Special mention 9,159 518 2,964 19,746 — — 1,120 11 33,518 Substandard 13,975 — 4,389 2,407 1,948 — 1,291 501 24,511 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 Total gross charge-offs $ ( 1,342 ) $ ( 23 ) $ ( 401 ) $ ( 1,820 ) $ ( 246 ) $ — $ ( 17 ) $ — $ ( 3,849 ) 79 Table of Contents 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. Term Loans by Origination Year Revolving Loans Revolving Converted to Term Loans Total ($ in thousands) Prior 2020 2021 2022 2023 2024 December 31, 2024 Credit cards Performing $ — $ — $ — $ — $ — $ — $ 6,931 $ — $ 6,931 Nonperforming — — — — — — 168 — 168 Total $ — $ — $ — $ — $ — $ — $ 7,099 $ — $ 7,099 Gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 584 ) $ — $ ( 584 ) Total loans evaluated by performing status $ — $ — $ — $ — $ — $ — $ 7,099 $ — $ 7,099 Total gross charge-offs $ — $ — $ — $ — $ — $ — $ ( 584 ) $ — $ ( 584 ) Total recorded investment $ 1,195,244 $ 405,932 $ 764,538 $ 1,052,957 $ 634,525 $ 461,566 $ 239,292 $ 17,934 $ 4,771,988 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 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 Commercial real estate $ 1,684 $ — $ — $ 68 $ 2,741 $ 4,493 $ 2,616,679 $ 22,824 $ 2,643,996 Residential real estate 1,663 397 71 1,225 2,583 5,939 1,402,695 6,330 1,414,964 Construction — 43 79 — 88 210 344,693 — 344,903 Commercial — 4 — 46 150 200 222,921 2,885 226,006 Consumer 390 690 — 43 448 1,571 263,860 481 265,912 Credit cards 14 19 105 32 — 170 4,335 16 4,521 Total $ 3,751 $ 1,153 $ 255 $ 1,414 $ 6,010 $ 12,583 $ 4,855,183 $ 32,536 $ 4,900,302 Percent of total loans 0.08 % 0.02 % 0.01 % 0.03 % 0.12 % 0.26 % 99.08 % 0.66 % 100.00 % ($ 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 Commercial real estate $ 75 $ — $ — $ 2,328 $ 4,940 $ 7,343 $ 2,547,345 $ 3,118 $ 2,557,806 Residential real estate 3,828 246 127 655 3,324 8,180 1,317,591 3,635 1,329,406 Construction 30 — — — 360 390 335,609 — 335,999 Commercial 152 2 — — 70 224 236,771 937 237,932 Consumer 4,068 55 — 1,180 251 5,554 298,150 42 303,746 Credit cards 161 190 167 — 146 664 6,413 22 7,099 Total $ 8,314 $ 493 $ 294 $ 4,163 $ 9,091 $ 22,355 $ 4,741,879 $ 7,754 $ 4,771,988 Percent of total loans 0.17 % 0.01 % 0.01 % 0.09 % 0.19 % 0.47 % 99.37 % 0.16 % 100.00 % 80 Table of Contents 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 preclude its availability to absorb losses from other loan classes. ($ in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance Year Ended December 31, 2025 Commercial real estate $ 22,846 $ ( 2,749 ) $ 78 $ 1,212 $ 21,387 Residential real estate 21,776 ( 50 ) 196 588 22,510 Construction 2,854 — 1 3,113 5,968 Commercial 3,138 ( 812 ) 112 567 3,005 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 ($ in thousands) Beginning Balance Charge-offs Recoveries Provisions Ending Balance Year Ended December 31, 2024 Commercial real estate $ 23,015 $ — $ — $ ( 169 ) $ 22,846 Residential real estate 19,909 ( 1 ) 7 1,861 21,776 Construction 3,935 ( 12 ) 13 ( 1,082 ) 2,854 Commercial 2,671 ( 190 ) 15 642 3,138 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 The following tables present the amortized cost basis of collateral-dependent loans by loan portfolio segment. December 31, 2025 ($ in thousands) Real Estate Collateral Other Collateral Total Commercial real estate $ 40,676 $ — $ 40,676 Residential real estate 11,084 — 11,084 Construction 332 — 332 Commercial — 4,164 4,164 Consumer — 971 971 Total $ 52,092 $ 5,135 $ 57,227 December 31, 2024 ($ in thousands) Real Estate Collateral Other Collateral Total Commercial real estate $ 12,835 $ — $ 12,835 Residential real estate 9,023 — 9,023 Construction 360 — 360 Commercial — 3,039 3,039 Consumer — 1,483 1,483 Total $ 22,218 $ 4,522 $ 26,740 Loan Modifications to Borrowers Experiencing Financial Difficulty 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. 81 Table of Contents ($ 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. ($ 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, 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. ($ 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, 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 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. 82 Table of Contents Other Real Estate Owned (“OREO”) and Repossessed Assets OREO and repossessed assets are adjusted for fair value upon transfer from loans to foreclosed assets, establishing a new cost basis. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. 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 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. ($ in thousands) Year Ended December 31, 2025 Beginning balance $ 5,874 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 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. 83 Table of Contents Note 4 – Goodwill and Other Intangible Assets 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 Intangible Gross carrying amount $ 63,266 $ 59,151 Accumulated amortization — ( 29,429 ) Net carrying amount $ 63,266 $ 29,722 December 31, 2024 ($ in thousands) Goodwill Core Deposit Intangible Gross carrying amount $ 63,266 $ 59,151 Accumulated amortization — ( 20,840 ) Net carrying amount $ 63,266 $ 38,311 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 2026 $ 7,398 2027 6,208 2028 5,060 2029 3,980 2030 3,096 Thereafter 3,980 Total amortizing intangible assets $ 29,722 84 Table of Contents 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. 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. 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 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 – 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 Total lease cost $ 2,009 $ 1,916 $ 1,645 Cash paid for amounts included in the measurement of lease liabilities $ 1,954 $ 1,809 $ 1,553 The following table presents a maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to total operating lease liabilities at December 31, 2025. Lease payments due ($ in thousands) December 31, 2025 2026 $ 2,020 2027 1,869 2028 1,779 2029 1,355 2030 997 Thereafter 4,578 Total undiscounted cash flows 12,598 Less: imputed interest 1,571 Lease liabilities $ 11,027 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. 85 Table of Contents Note 6 – Premises and Equipment The following table provides information on premises and equipment as of December 31, 2025 and 2024. ($ in thousands) December 31, 2025 December 31, 2024 Land $ 18,266 $ 18,266 Buildings and land improvements 71,485 71,721 Furniture and equipment 13,604 11,783 Premises and equipment, gross 103,355 101,770 Accumulated depreciation ( 23,187 ) ( 19,964 ) 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. 86 Table of Contents Note 7 – Deposits Deposits consist of the following categories as of the dates indicated: ($ in thousands) December 31, 2025 December 31, 2024 Balance % of Total Deposits Balance % of Total Deposits 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 Money market and savings 1,814,928 32.80 1,805,884 32.67 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 Total deposits $ 5,533,864 100.00 % $ 5,528,336 100.00 % The Company holds deposits of certain officers, directors and their associates. See Note 19 – “Related Party Transactions” for more information. The following table provides information on the approximate maturities of total time deposits at December 31, 2025. ($ in thousands) December 31, 2025 Within one year $ 1,163,823 Year 2 79,259 Year 3 11,964 Year 4 5,115 Year 5 7,326 Thereafter — Total $ 1,267,487 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. 87 Table of Contents Note 8 – Borrowings The Company may periodically borrow from a correspondent federal funds line of credit arrangement, under a secured reverse repurchase agreement, or from the FHLB, to meet short-term liquidity needs. The following table summarizes certain information of the Company’s borrowings as of and for the years ended December 31, 2025 and 2024. December 31, 2025 December 31, 2024 ($ in thousands) Amount Rate Amount Rate Average for the year FHLB advances – variable $ 602 4.64 % $ 37,648 5.66 % FHLB advances – fixed 42,466 4.85 32,650 4.87 At year end 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. Securities sold under agreements to repurchase are securities sold to customers, at the customers’ request, under a “roll-over” contract that matures in one business day. The underlying securities sold are U.S. government agency securities, which are segregated in the Company’s custodial accounts from other investment securities. 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 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 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 Severn Capital Trust I 20,619 20,619 2004 2035 3-month SOFR + 2.26 % Tri-County Capital Trust I 7,217 7,217 2004 2034 90-day SOFR + 2.86 % Tri-County Capital Trust II 5,155 5,155 2005 2035 90-day SOFR + 1.96 % Total trust preferred securities 32,991 32,991 Less: net discount and unamortized issuance costs ( 3,930 ) ( 3,774 ) Total long-term debt $ 89,061 $ 73,717 ____________________________________ * Secured Overnight Financing Rate (“SOFR”). 88 Table of Contents 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 401(k) and Profit Sharing Plan – The Company has a 401(k) and profit sharing plan covering substantially all full-time employees. The Company currently matches 100 % of the first 3 % of each employee’s contributions and 50 % of the next 2 % of each employee’s contributions, each plan year. The Company may also make discretionary contributions based on profits. 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. 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. 89 Table of Contents Note 10 – Stock-Based Compensation 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 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 as of December 31, 2025 and the weighted-average period over which the expense will be recognized. At December 31, 2025 ($ in thousands) Restricted Stock Restricted Stock Units Performance Stock Units Unrecognized stock-based compensation expense $ 1 $ 1,770 $ 784 Weighted-average period unrecognized expense is expected to be recognized 0.2 years 1.5 years 1.9 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. Restricted Stock Restricted Stock Units Performance Stock Units Number of Shares Weighted-Average Grant Date Fair Value per Share Number of Shares Weighted-Average Grant Date Fair Value per Share Number of Shares Weighted-Average Grant Date Fair Value per Share Outstanding at December 31, 2024 51,610 $ 11.42 135,104 $ 11.46 43,651 $ 11.32 Granted 4,480 15.62 133,866 15.57 59,179 15.15 Vested ( 51,610 ) 11.39 ( 86,320 ) 11.57 — — Forfeited ( 1,305 ) 15.62 ( 6,244 ) 13.59 ( 8,784 ) 13.30 Outstanding at December 31, 2025 3,175 16.01 176,406 14.45 94,046 13.55 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. 90 Table of Contents Note 11 – Derivatives 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 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 as of December 31, 2025 and 2024. December 31, 2025 December 31, 2024 ($ in thousands) Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value Asset – IRLCs $ 6,172 $ 91 $ 7,527 $ 113 Asset – TBA securities 9,750 11 22,100 164 Liability – IRLCs 193 1 — — 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 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 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 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 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; however, bank-owned life insurance was purchased to offset the benefit costs. The following table provides information on the expense recognized during the years ended December 31, 2025, 2024 and 2023, as well as the balance of the unfunded SERP liability and the cash surrender value of policies purchased to offset the SERP benefit costs as of December 31, 2025, 2024 and 2023. 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, 2025 December 31, 2024 December 31, 2023 Cash surrender value $ 102,150 $ 100,517 $ 98,140 Deferred compensation liability – SERP 13,576 13,349 12,869 SERP expense 1,166 1,050 1,405 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 91 Table of Contents insurance policies on the lives of the respective individuals. Amounts available under the policies are to be paid to the individuals as retirement benefits over future years. The following table includes information on the deferred compensation liability and cash surrender value as of December 31, 2025 and 2024. ($ in thousands) December 31, 2025 December 31, 2024 Deferred compensation liability $ 200 $ 331 Cash surrender value 1,547 2,257 Note 13 – Accumulated Other Comprehensive Loss 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. Year Ended ($ in thousands) December 31, 2025 December 31, 2024 December 31, 2023 Beginning of period $ ( 7,545 ) $ ( 7,494 ) $ ( 9,021 ) Other comprehensive income (loss), net of tax 2,952 ( 51 ) 1,527 End of period $ ( 4,593 ) $ ( 7,545 ) $ ( 7,494 ) Note 14 – Income Taxes 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 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: Federal 536 6,570 1,692 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 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. 92 Table of Contents 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. 2023-09. 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) 3,746 4.7 Tax credits Low-income housing (2) ( 21 ) — 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. 2023-09. Year Ended December 31, 2024 2023 Tax at federal statutory rate 21.0 % 21.0 % Tax effect of: Tax-exempt income ( 1.4 ) ( 3.6 ) State and local income taxes, net of federal tax benefits 5.4 6.1 Bargain purchase gain — ( 13.1 ) Nondeductible compensation costs 0.1 3.9 Nondeductible merger-related expenses — 2.6 Other 0.1 3.9 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 93 Table of Contents 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. December 31, ($ in thousands) 2025 2024 Deferred tax assets: Allowance for credit losses $ 15,035 $ 14,888 Valuation adjustments on OREO and repossessed assets 217 — Nonaccrual loan interest 691 578 Lease liabilities 2,813 3,035 Deferred compensation 4,084 4,078 State net operating losses 2,834 2,066 Deferred loan fees 2,204 2,078 Acquisition fair value adjustments 20,628 24,988 Unrealized losses on available for sale securities 1,734 2,844 Other 1,432 1,233 Total deferred tax assets $ 51,672 $ 55,788 Deferred tax liabilities: Depreciation $ 4,042 $ 4,115 Right-of-use assets 2,685 2,918 Mortgage servicing rights 1,312 1,505 Acquisition fair value adjustments 826 1,651 Intangibles 9,299 11,223 Other 886 575 Total deferred tax liabilities 19,050 21,987 Less: valuation allowance ( 2,797 ) ( 1,944 ) Net deferred tax assets $ 29,825 $ 31,857 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 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 Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. 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 Bank’s 94 Table of Contents 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, 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 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) 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) 8.82 4.00 N/A Bank Amounts 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 Bank Ratios Common Equity Tier 1 Capital to RWA 11.75 % 7.00 % 6.50 % Tier 1 Capital to RWA 11.75 8.50 8.00 Total Capital to RWA 13.00 10.50 10.00 Tier 1 Capital to AA (Leverage) (2) 9.30 4.00 5.00 ____________________________________ (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 %. 95 Table of Contents 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 Bank Amounts 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 Bank Ratios Common Equity Tier 1 Capital to RWA 10.75 % 7.00 % 6.50 % Tier 1 Capital to RWA 10.75 8.50 8.00 Total Capital to RWA 11.97 10.50 10.00 Tier 1 Capital to AA (Leverage) (2) 8.58 4.00 5.00 _________________________________ (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. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common stockholders and interest and principal on outstanding debt. 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 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. 96 Table of Contents Note 16 – Fair Value Measurements Accounting guidance under GAAP defines fair value 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. 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 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 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. These hierarchy levels are: • Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. • Level 2 inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. • Level 3 inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. Assets Measured at Fair Value on a Recurring Basis 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. The Company classifies its investments in U.S. Treasury securities, if any, as Level 1 in the fair value hierarchy, and it classifies its investments in U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government-sponsored entities as Level 2. Equity Securities 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 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). IRLCs 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). ($ in thousands) Fair Value Valuation Technique Unobservable Input Range December 31, 2025 IRLCs – net asset $ 90 Market Approach Range of pull through rate 81 % - 100 % Average pull through rate 98 % 97 Table of Contents ($ in thousands) Fair Value Valuation Technique Unobservable Input Range December 31, 2024 IRLCs – net asset $ 113 Market Approach Range of pull through rate 78 % - 100 % Average pull through rate 89 % 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 Valuation adjustment ( 23 ) 3 82 Ending balance $ 90 $ 113 $ 110 Forward Contracts 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 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. 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. Generally such overlays are announced with advanced notice in order to include the risk adjuster, however there are times when announcements are mandated resulting in a lower fair value measurement. Additionally market assumptions such as spec pool payups may result in a significantly higher fair value measurement at time of loan allocation to specific trades. 98 Table of Contents The following tables present the recorded amount of assets measured at fair value on a recurring basis as of December 31, 2025 and 2024. No assets were transferred from one hierarchy level to another during the years ended December 31, 2025 or 2024. ($ in thousands) Fair Value Quoted Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2025 Assets: Available for sale securities: U.S. government agency securities $ 20,616 $ — $ 20,616 $ — Mortgage-backed securities 195,027 — 195,027 — Other debt securities 4,715 — 4,715 — Total available for sale securities 220,358 — 220,358 — Equity securities 6,186 — 6,186 — TBA forward trades 11 — 11 — Loans held for sale 32,540 — 32,540 — IRLCs 91 — — 91 Total assets at fair value $ 259,186 $ — $ 259,095 $ 91 Liabilities: IRLCs $ 1 $ — $ — $ 1 TBA forward trades 59 — 59 — Total liabilities at fair value $ 60 $ — $ 59 $ 1 ($ in thousands) Fair Value Quoted Prices (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2024 Assets: Available for sale securities: U.S. government agency securities $ 20,202 $ — $ 20,202 $ — Mortgage-backed securities 122,384 — 122,384 — Other debt securities 6,626 — 6,626 — Total available for sale securities 149,212 — 149,212 — Equity securities 5,814 — 5,814 — TBA forward trades 164 — 164 — Loans held for sale 19,606 — 19,606 — IRLCs 113 — — 113 Total assets at fair value $ 174,909 $ — $ 174,796 $ 113 Liabilities: TBA forward trades $ 23 $ — $ 23 $ — Total liabilities at fair value $ 23 $ — $ 23 $ — 99 Table of Contents 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. OREO (Foreclosed Assets) Foreclosed assets are adjusted for fair value upon transfer of loans to foreclosed assets establishing a new cost basis. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. The estimated fair value for foreclosed assets included in Level 3 are determined by independent market-based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to the initial recognition, the Company records the foreclosed asset as a non-recurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods. Repossessed Assets 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, 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. 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. Quantitative Information about Level 3 Fair Value Measurements ($ in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted-Average December 31, 2025 Non-recurring measurements: Individually-evaluated collateral dependent loans: Commercial real estate $ 19,696 Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 60 % - 71 % 10 % 68 % 10 % Residential real estate 520 Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 0 % 10 % 1 % 10 % Commercial — Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 0 % 10 % 0 % 10 % Consumer — Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 0 % 10 % 0 % 10 % Other real estate owned 113 Appraisal of collateral (1) Appraisal adjustment (2) N/A 0 % Repossessed assets 2,879 Appraisal of collateral (1) Appraisal adjustment (2) N/A 60 % 100 Table of Contents Quantitative Information about Level 3 Fair Value Measurements ($ in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted-Average December 31, 2024 Nonrecurring measurements: Individually-evaluated collateral dependent loans: Commercial real estate $ 2,220 Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 62 % 10 % 38 % 10 % Residential real estate 817 Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 55 % - 100 % 10 % 17 % 10 % Commercial — Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 14 % - 100 % 10 % 0 % 10 % Consumer 624 Appraisal of collateral (1) Appraisal adjustment (2) Liquidation expense (2) 80 % - 86 % 10 % 15 % 10 % Other real estate owned 179 Appraisal of collateral (1) Appraisal adjustment (2) N/A 0 % Repossessed assets 3,315 Appraisal of collateral (1) Appraisal adjustment (2) N/A 39 % Assets held for sale 900 Appraisal of collateral (1) Appraisal adjustment (2) N/A 0 % _________________________________ (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. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal. 101 Table of Contents Note 17 – Fair Value of Financial Instruments Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. 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, 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 Assets Cash and cash equivalents $ 355,566 $ 355,566 $ 355,566 $ — $ — 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 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 amortized cost, net 4,841,466 4,767,143 — — 4,767,143 Mortgage servicing rights 5,142 5,861 — 5,861 — Accrued interest receivable 18,551 18,551 — 18,551 — IRLCs 91 91 — — 91 Liabilities Deposits: Noninterest-bearing $ 1,587,953 $ 1,587,953 $ — $ 1,587,953 $ — Interest-bearing checking 852,585 852,585 — 852,585 — Money market and savings 1,814,928 1,814,928 — 1,814,928 — Time deposits 1,267,487 1,265,740 — 1,265,740 — Brokered deposits 10,911 10,923 — 10,923 — FHLB advances — — — — — TRUPS 30,168 29,586 — 29,586 — Subordinated debt 58,893 58,064 — 58,064 — TBA Securities 59 59 — 59 — Accrued interest payable 2,977 2,977 — 2,977 — IRLCs 1 1 — — 1 102 Table of Contents December 31, 2024 Carrying Amount Fair Value Fair Value Measurements ($ in thousands) Level 1 Level 2 Level 3 Assets Cash and cash equivalents $ 459,851 $ 459,851 $ 459,851 $ — $ — 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 — Restricted securities 20,253 20,253 — 20,253 — Loans held for sale 19,606 19,606 — 19,606 — TBA securities 164 164 — 164 — 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 — Accrued interest receivable 19,570 19,570 — 19,570 — IRLCs 113 113 — — 113 Liabilities Deposits: Noninterest-bearing $ 1,562,815 $ 1,562,815 $ — $ 1,562,815 $ — Interest bearing checking 978,076 978,076 — 978,076 — Money market and savings 1,805,884 1,805,884 — 1,805,884 — 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 — Subordinated debt 43,870 43,669 — 43,669 — TBA securities 23 23 — 23 — Accrued interest payable 3,398 3,398 — 3,398 — Note 18 – Commitments and Contingencies 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 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 period of 90 days or less. 103 Table of Contents 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 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, 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. Note 19 – Related Party Transactions In the normal course of banking business, loans are made to officers, directors and their affiliated interests. These loans are made on substantially the same terms and conditions as those prevailing at the time for comparable transactions with persons who are not related to the Company and are not considered to involve more than the normal risk of collectability. 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, 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 $ 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. Mr. 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. 104 Table of Contents Note 20 – Earnings per Common Share Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents (stock-based awards). The following table provides information relating to the calculation of earnings per common share for the years ended December 31, 2025, 2024 and 2023. Year Ended December 31, ($ in thousands, except per share data) 2025 2024 2023 Net income $ 59,506 $ 43,889 $ 11,228 Average number of common shares outstanding 33,392,817 33,267,328 26,572,217 Dilutive effect of common stock equivalents 14,338 17,828 1,893 Average number of common shares used to calculate diluted EPS 33,407,155 33,285,156 26,574,110 Anti-dilutive shares — — — 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 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 Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account-related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or at the end of the month through a direct charge to customers’ accounts. Trust and Investment Fee Income 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. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered. Other Noninterest Income 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 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 105 Table of Contents management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. 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. Year Ended December 31, ($ in thousands) 2025 2024 2023 Noninterest income In-scope of Topic 606: Service charges on deposit accounts $ 6,295 $ 6,149 $ 5,501 Trust and investment fee income 3,705 3,367 3,608 Interchange income 7,085 6,741 5,714 Other noninterest income 3,768 4,653 3,512 Noninterest income (in-scope of Topic 606) 20,853 20,910 18,335 Noninterest income (out-of-scope of Topic 606) 11,835 10,237 14,824 Total noninterest income $ 32,688 $ 31,147 $ 33,159 Contract Balances A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of December 31, 2025 and 2024, the Company did not have any significant contract balances. 106 Table of Contents Note 22 – Parent Company Financial Information The following tables provide condensed financial information for Shore Bancshares, Inc. (Parent Company only). SHORE BANCSHARES, INC. (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS ($ in thousands) December 31, 2025 December 31, 2024 ASSETS Cash $ 21,654 $ 5,257 Investment in subsidiaries 648,599 605,286 Other assets 11,885 9,289 TOTAL ASSETS $ 682,138 $ 619,832 LIABILITIES Accrued interest payable $ 839 $ 1,027 Deferred tax liability 140 251 Other liabilities 2,225 3,771 Long-term debt 89,061 73,717 TOTAL LIABILITIES 92,265 78,766 STOCKHOLDERS’ EQUITY Common stock 334 333 Additional paid-in capital 360,554 358,112 Retained earnings 233,578 190,166 Accumulated other comprehensive loss ( 4,593 ) ( 7,545 ) TOTAL STOCKHOLDERS’ EQUITY 589,873 541,066 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 682,138 $ 619,832 107 Table of Contents SHORE BANCSHARES, INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF INCOME Year Ended December 31, ($ in thousands) 2025 2024 2023 INCOME Dividends from subsidiaries $ 26,000 $ 17,000 $ 22,000 Company owned life insurance income 184 206 141 Bargain purchase gain — — 8,816 TOTAL INCOME 26,184 17,206 30,957 EXPENSES Interest expense 6,359 5,768 4,454 Salaries and employee benefits 408 598 358 Legal and professional fees, including merger expenses 1,929 1,636 5,164 Other operating expenses 890 1,032 776 TOTAL EXPENSES 9,586 9,034 10,752 Income before income tax benefit and equity (deficit) in undistributed net income of subsidiaries 16,598 8,172 20,205 Income tax benefit ( 2,047 ) ( 1,678 ) ( 1,557 ) Income before equity (deficit) in undistributed net income of subsidiaries 18,645 9,850 21,762 Equity (deficit) in undistributed net income of subsidiaries 40,861 34,039 ( 10,534 ) NET INCOME $ 59,506 $ 43,889 $ 11,228 108 Table of Contents SHORE BANCSHARES, INC. (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS Year Ended December 31, ($ in thousands) 2025 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 59,506 $ 43,889 $ 11,228 Adjustments to reconcile net income to cash provided by operating activities: Equity in undistributed net income of subsidiaries ( 40,861 ) ( 34,039 ) 10,534 Bargain purchase gain — — ( 8,816 ) Amortization of debt issuance costs 119 122 122 Stock-based compensation expense 1,890 1,730 1,174 Company owned life insurance income ( 183 ) ( 208 ) ( 141 ) Acquisition accounting adjustments 865 926 557 Net increase in other assets ( 2,104 ) ( 957 ) ( 1,267 ) Net (decrease) increase in other liabilities ( 1,374 ) 2,284 ( 682 ) Net cash provided by operating activities 17,858 13,747 12,709 CASH FLOWS FROM INVESTING ACTIVITIES: 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 Net cash used in investing activities 191 ( 198 ) ( 161 ) 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 ) Issuance of common stock 82 376 385 Net cash used in financing activities ( 1,652 ) ( 15,637 ) ( 12,348 ) 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 Cash and cash equivalents at end of year $ 21,654 $ 5,257 $ 7,345 109 Table of Contents Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.