What changed in this filing

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Item 1. Financial Statements

2024-08-09 compared with 2024-05-09 · 256 added, 183 removed, 1020 unchanged (30% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data) March 31, 2024 December 31, 2023

(In thousands, except share and per share data) June 30, 2024 December 31, 2023

ASSETS (Unaudited)

19 unchanged sentences

Repossessed properties 1,560 —

Assets held for sale 1,387 —

Mortgage servicing rights, at fair value 5,995 5,926

8 unchanged sentences

Total deposits 5,148,885 5,386,120

Advances from FHLB - short-term 31,000 —

Advances from FHLB - long-term 50,000 —

Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS"), net 29,316 29,158

16 unchanged sentences

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

For Three Months Ended March 31,

For Three Months Ended June 30, For Six Months Ended June 30,

(In thousands, except per share data) 2024 2023 2024 2023

33 unchanged sentences

Fraud losses (1)

62 47 4,564 114

Merger-related expenses — 1,197 — 1,888

7 unchanged sentences

____________________________________

(1) Fraud losses includes $ 4.3 million of credit card fraud losses for the quarter ended March 31, 2024 .

(1) Fraud losses includes $ 4.3 million of credit card fraud losses for the six months ended June 30, 2024 .

See accompanying notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

For Three Months Ended March 31,

For Three Months Ended June 30, For Six Months Ended June 30,

(In thousands) 2024 2023 2024 2023

9 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)

For the Three Months Ended March 31, 2024 and 2023

For the Three and Six Months Ended June 30, 2024 and 2023

(In thousands) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss

7 unchanged sentences

Balances, March 31, 2024 $ 332 $ 356,464 $ 166,490 $ ( 8,058 ) $ 515,228

Net income — — 11,234 — 11,234

Other comprehensive loss — — — ( 202 ) ( 202 )

Common shares issued for employee stock purchase plan 1 120 — — 121

Stock-based compensation — 410 — — 410

Cash dividends declared — — ( 4,008 ) — ( 4,008 )

Balances, June 30, 2024 $ 333 $ 356,994 $ 173,716 $ ( 8,260 ) $ 522,783

SHORE BANCSHARES, INC.

9 unchanged sentences

Balances, March 31, 2023 $ 199 $ 201,736 $ 167,864 $ ( 8,161 ) $ 361,638

Net Income — — 4,018 — 4,018

Other comprehensive loss — — — ( 400 ) ( 400 )

Common shares issued for employee stock purchase plan — 102 — — 102

Stock-based compensation — 170 — — 170

Cash dividends declared — — ( 2,388 ) — ( 2,388 )

Balances, June 30, 2023 $ 199 $ 202,008 $ 169,494 $ ( 8,561 ) $ 363,140

See accompanying notes to Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For Three Months Ended March 31,

For Six Months Ended June 30,

(In thousands) 2024 2023

12 unchanged sentences

Deferred income tax expense (benefit) 4,916 ( 743 )

Loss on sales of repossessed assets 45 —

Loss on valuation adjustments on mortgage servicing rights 129 40

13 unchanged sentences

Proceeds from maturities and principal payments of investment securities held to maturity 19,291 21,795

Proceeds from life insurance death benefits 150 —

Purchases of investment securities available for sale ( 81,904 ) —

Purchases of investment securities held to maturity ( 5,800 ) —

Purchases of equity securities ( 80 ) ( 15 )

3 unchanged sentences

Proceeds from sales of other real estate owned — 21

Proceeds from sales of repossessed assets 240 —

Redemption of restricted securities 18,361 13,940

Purchases of bank owned life insurance ( 71 ) ( 174 )

Proceeds from disposal of premises held for sale — 721

Net cash (used in) investing activities $ ( 74,157 ) $ ( 179,653 )

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued

For Three Months Ended March 31,

For Six Months Ended June 30,

(In thousands) 2024 2023

4 unchanged sentences

Short-term borrowings 31,000 236,000

Long-term borrowings 50,000 —

Common stock dividends paid ( 7,992 ) ( 4,776 )

10 unchanged sentences

Unrealized (losses) gains on securities available for sale $ ( 1,054 ) $ 634

Unsettled securities transaction $ 14,083 $ —

Transfer of premises to held for sale (included in other assets) $ 1,387 $ 750

2 unchanged sentences

Notes to Consolidated Financial Statements

For the Three Months Ended March 31, 2024 and 2023

For the Three and Six Months Ended June 30, 2024 and 2023

Note 1 – Basis of Presentation

3 unchanged sentences

The accompanying interim financial statements are unaudited;

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at March 31, 2024, the consolidated results of income and comprehensive income for the three months ended March 31, 2024 and 2023, changes in stockholders’ equity for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023, have been included.

however, in the opinion of management all adjustments necessary to present fairly the consolidated financial position at June 30, 2024, the consolidated results of income and comprehensive income for the three and six months ended June 30, 2024 and 2023, changes in stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023, have been included.

All such adjustments were of a normal recurring nature.

The amounts as of December 31, 2023 were derived from the 2023 audited financial statements.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for any other interim period or for the full year.

This Quarterly Report on Form 10-Q should be read in conjunction with the Annual Report of Shore Bancshares, Inc.

24 unchanged sentences

The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements.

ASU Update 2023-06 – In October 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative.” This ASU incorporates certain U.S.

Securities and Exchange Commission (SEC) disclosure requirements into the FASB Accounting Standards Codification.

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations.

For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules.

For all other entities, the amendments will be effective two years later.

However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the

amendments will be removed from the Codification and not become effective for any entity.

The Company does not expect the adoption of ASU 2023-06 to have a material impact on its consolidated financial statements.

ASU Update 2023-05 – In August 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement.” This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) as defined in the FASB Accounting Standards Codification Master Glossary.

While joint ventures are defined in the Master Glossary, there has been no specific guidance in the Codification that applies to the formation accounting by a joint venture in its separate financial statements.

The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation.

As a result, a newly formed joint venture, upon formation, would initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance).

This ASU is effective on a prospective basis for all joint ventures with a formation date on or after January 1, 2025.

Early adoption of ASU No.

2023-05 is permitted in any interim or annual period in which financial statements have not yet been issued (or made available for issuance).

A joint venture that elects to early adopt may apply ASU No.

2023-05 either prospectively or retrospectively.

The Company does not expect the adoption of ASU 2023-05 to have a material impact on its consolidated financial statements.

ASU Update 2023-03 – In July 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718).” This ASU amends the FASB Accounting Standards Codification for SEC paragraphs pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

ASU 2023-03 is effective upon addition to the FASB Codification.

The Company does not expect the adoption of ASU 2023-03 to have a material impact on its consolidated financial statements.

Note 2 – Business Combinations

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

All securities information presented as of March 31, 2024 and as of December 31, 2023 are in accordance with ASC 326.

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

(Dollars in thousands) Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

All securities information presented as of June 30, 2024 and as of December 31, 2023 are in accordance with ASC 326, except ACL on HTM securities were presented as of three and six months ended June 30, 2024 and June 30, 2023.

The following table summarizes the activity in the ACL on HTM securities as of three and six months ended June 30, 2024 and June 30, 2023.

(Dollars in thousands) Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Balance, beginning of period $ 116 $ — $ 94 $ —

1 unchanged sentence

Balance, end of period $ 108 $ 163 $ 108 $ 163

A provision for credit losses of $ 22,000 and $ 0.2 million was recorded for the three months ended March 31, 2024 and March 31, 2023, respectively.

A provision for credit losses of $ 8,000 and $ 0.2 million, $ 14,000 and $ 0.2 million was recorded for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

The following tables provide information on the amortized cost and estimated fair values of debt securities.

1 unchanged sentence

Available-for-sale securities:

March 31, 2024

June 30, 2024

Treasury and government agencies $ 23,213 $ 4 $ 3,057 $ 20,160

7 unchanged sentences

Total $ 120,832 $ 69 $ 10,380 $ 110,521

No AFS securities were sold during the three months ended March 31, 2024 and 2023.

No AFS securities were sold during the three and six months ended June 30, 2024 and 2023.

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

Held-to-maturity securities:

March 31, 2024

June 30, 2024

Treasury and government agencies $ 143,165 $ 2 $ 10,805 $ 132,362 $ —

9 unchanged sentences

Total $ 513,282 $ 57 $ 55,509 $ 457,830 $ 94

Equity securities with an aggregate fair value of $ 5.7 million at March 31, 2024 and $ 5.7 million at December 31, 2023 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled gain of $ 61,000 for the three months ended March 31, 2024 and loss of $ 17,000 for the three months ended March 31, 2023, respectively.

Equity securities with an aggregate fair value of $ 5.7 million at June 30, 2024 and $ 5.7 million at December 31, 2023 are presented separately on the balance sheet.

The fair value adjustment recorded through earnings totaled loss of $ 0.2 million for the six months ended June 30, 2024 and loss of $ 3,000 for the six months ended June 30, 2023, respectively.

Credit Quality Information

3 unchanged sentences

Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities.

There were no speculative grade HTM securities at March 31, 2024 or December 31, 2023.

There were no speculative grade HTM securities at June 30, 2024 or December 31, 2023.

HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S.

government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of March 31, 2024.

March 31, 2024

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of June 30, 2024.

June 30, 2024

Investment Grade

14 unchanged sentences

Total held-to-maturity securities $ 498,631 $ 1,470 $ 4,000 $ 4,000 $ 500 $ 4,681 $ 513,282

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

Less than 12 Months More than 12 Months Total

(Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses

March 31, 2024

June 30, 2024

Available-for-sale securities:

11 unchanged sentences

Total $ 24,479 $ 150 $ 72,504 $ 10,230 $ 96,983 $ 10,380

There were 115 AFS debt securities with a fair value below the amortized cost basis, totaling $ 11.4 million of aggregate fair value as of March 31, 2024.

The Company concluded that a credit loss does not exist in its AFS securities portfolio as of March 31, 2024, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily 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.

There were 110 AFS debt securities with a fair value below the amortized cost basis, totaling $ 11.4 million of aggregate fair value as of June 30, 2024.

The Company concluded that a credit loss does not exist in its AFS securities portfolio as of June 30, 2024, and no impairment loss has been recognized based on the fact that (1) changes in fair value were caused primarily 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-back securities are issued by either U.S.

3 unchanged sentences

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 March 31, 2024.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of June 30, 2024.

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

At March 31, 2024, the carrying value of pledged AFS securities was $ 53.1 million and $ 195.8 million of pledged HTM securities.

At June 30, 2024, the carrying value of pledged AFS securities was $ 53.8 million and $ 199.7 million of pledged HTM securities.

The comparable amounts for December 31, 2023 were $ 54.5 million and $ 185.9 million, respectively.

There were no obligations of states or political subdivisions with carrying values, as to any issuer, exceeding 10% of stockholders’ equity at March 31, 2024 or December 31, 2023.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at March 31, 2024.

There were no obligations of states or political subdivisions with carrying values, as to any issuer, exceeding 10% of stockholders’ equity at June 30, 2024 or December 31, 2023.

The following table provides information on the amortized cost and estimated fair values of investment securities by maturity date at June 30, 2024.

Available for sale Held to maturity

11 unchanged sentences

The Company makes residential mortgage, commercial, and consumer loans to customers primarily in Anne Arundel County, Baltimore County, Charles County, Calvert County, St Mary’s County, Howard County, Kent County, Queen Anne’s County, Caroline County, Talbot County, Dorchester County and Worcester County in Maryland, Kent and Sussex County, Delaware and in Accomack County, Stafford County, Spotsylvania County and Fredericksburg City in Virginia.

The following table provides information about the principal classes of the loan portfolio at March 31, 2024 and December 31, 2023.

(Dollars in thousands) March 31, 2024 % of Total Loans December 31, 2023 % of Total Loans

The following table provides information about the principal classes of the loan portfolio at June 30, 2024 and December 31, 2023.

(Dollars in thousands) June 30, 2024 % of Total Loans December 31, 2023 % of Total Loans

Construction $ 327,875 6.97 % $ 299,000 6.40 %

8 unchanged sentences

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

Included in loans were deferred costs, net of fees, of $ 2.4 million and $ 2.2 million at March 31, 2024 and December 31, 2023.

At March 31, 2024 and December 31, 2023 included in total loans were $ 1.6 billion and $ 1.6 billion in loans acquired as part of the acquisition of TCFC, effective July 1, 2023.

These balances were presented net of the related discount which totaled $ 104.2 million and $ 108.4 million at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024 and December 31, 2023, included in total loans were $ 289.0 million and $ 297.9 million in loans, acquired as part of the acquisition of Severn Bancorp, Inc.

Included in loans were deferred costs, net of fees, of $ 3.2 million and $ 2.2 million at June 30, 2024 and December 31, 2023.

At June 30, 2024 and December 31, 2023 included in total loans were $ 1,558.9 million and $ 1,643.4 million in loans acquired as part of the acquisition of TCFC, effective July 1, 2023.

These balances were presented net of the related discount which totaled $ 96.6 million and $ 108.4 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024 and December 31, 2023, included in total loans were $ 273.5 million and $ 297.9 million in loans, acquired as part of the acquisition of Severn Bancorp, Inc.

(“Severn”), effective October 31, 2021.

These balances were presented net of the related discount which totaled $ 4.4 million and $ 4.7 million at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024, the Bank was servicing $ 371.1 million in loans for the Federal National Mortgage Association and $ 117.8 million in loans for Freddie Mac.

The following table provides information on nonaccrual loans by loan class as of March 31, 2024 and December 31, 2023.

(Dollars in thousands) Non-accrual with no allowance for credit loss Non-accrual with an allowance for credit loss Total Non-accruals

March 31, 2024

These balances were presented net of the related discount which totaled $ 4.0 million and $ 4.7 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 2024, the Bank was servicing $ 368.0 million in loans for the Federal National Mortgage Association and $ 120.1 million in loans for Freddie Mac.

The following table provides information on nonaccrual loans by loan class as of June 30, 2024 and December 31, 2023.

(Dollars in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

June 30, 2024

Nonaccrual loans:

4 unchanged sentences

Consumer 254 134 388

Credit Cards — 173 173

Total $ 10,986 $ 3,851 $ 14,837

Interest income $ 183 $ 60 $ 243

(Dollars in thousands) Non-accrual with no allowance for credit loss Non-accrual with an allowance for credit loss Total Non-accruals

(Dollars in thousands) Non-Accrual with no allowance for credit loss Non-Accrual with an allowance for credit loss Total Non-Accrual Loans

December 31, 2023

5 unchanged sentences

Consumer 216 689 905

Credit Cards — — —

Total $ 11,247 $ 1,537 $ 12,784

Interest income $ 399 $ 53 $ 452

(Dollars in thousands) Non-accrual Delinquent Loans Non-accrual Current Loans Total Non-accruals

March 31, 2024

(Dollars in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

June 30, 2024

Nonaccrual loans:

1 unchanged sentence

Residential real estate 4,467 2,313 6,780

Residential rentals — — —

Commercial real estate 572 5,259 5,831

1 unchanged sentence

Consumer 336 52 388

Credit Cards — 173 173

Total $ 5,776 $ 9,061 $ 14,837

(Dollars in thousands) Non-accrual Delinquent Loans Non-accrual Current Loans Total Non-accruals

(Dollars in thousands) Non-Accrual Delinquent Loans Non-Accrual Current Loans Total Non-Accrual Loans

December 31, 2023

2 unchanged sentences

Residential real estate 4,137 2,208 6,345

Residential rentals — — —

Commercial real estate 1,215 3,149 4,364

1 unchanged sentence

Consumer 903 2 905

Credit Cards — — —

Total $ 6,504 $ 6,280 $ 12,784

4 unchanged sentences

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

As of June 30, 2024, there were 7 credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and non-performing.

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

7 unchanged sentences

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

They are characterized by the possibility that the Bank

will sustain some loss if the deficiencies are not corrected.

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

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

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

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

When a loan is assigned to this category the Bank 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 non-performing bankruptcies.

9 unchanged sentences

Rating 10 – Loss – Loss assets are uncollectible or of little value.

The following tables provides information on loan risk ratings as of March 31, 2024 and gross write-offs during the three months ended March 31, 2024.

The following tables provides information on loan risk ratings as of June 30, 2024 and gross write-offs during the six months ended June 30, 2024.

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

(Dollars in thousands) Prior 2020 2021 2022 2023 2024

March 31, 2024

June 30, 2024

Pass $ 36,766 $ 11,583 $ 24,701 $ 81,331 $ 113,451 $ 45,465 $ 13,754 $ 617 $ 327,668

31 unchanged sentences

(Dollars in thousands) Prior 2020 2021 2022 2023 2024

March 31, 2024

June 30, 2024

Performing $ — $ — $ — $ — $ — $ — $ 7,135 $ — $ 7,135

Non-Performing — — — — — — 173 — 173

Total $ — $ — $ — $ — $ — $ — $ 7,308 $ — $ 7,308

49 unchanged sentences

Investment $ 1,059,173 $ 277,491 $ 461,213 $ 837,657 $ 1,107,579 $ 670,765 $ 201,381 $ 25,751 $ 4,641,010

The following tables provide information on the aging of the loan portfolio as of March 31, 2024 and December 31, 2023.

(Dollars in thousands) 30‑59 days past due

60‑89 days past due

30-89 days past due and not accruing 90 days past due and still accruing 90 days past

accruing Total

past due Current Accrual Loans (1)

March 31, 2024

The following tables provide information on the aging of the loan portfolio as of June 30, 2024 and December 31, 2023.

(Dollars 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 Non-Accrual Loans Total

June 30, 2024

Construction $ 282 $ — $ — $ — $ 207 $ 489 $ 327,386 $ — $ 327,875

6 unchanged sentences

Percent of total loans 0.14 % 0.04 % 0.01 % 0.02 % 0.10 % 0.31 % 99.50 % 0.19 % 100.0 %

(1) Includes loans measured at fair value of $ 9.7 million at March 31, 2024.

(Dollars in thousands) 30‑59 days past due 60‑89 days past due 30-89 days past due and not accruing 90 days past due and still accruing 90 days past due and not accruing Total past due Current Accrual Loans (1) Current Non accrual Loans Total

(1) Includes loans measured at fair value of $ 9.5 million at June 30, 2024.

December 31, 2023

8 unchanged sentences

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

The following tables provide a summary of the activity in the ACL allocated by loan class for the three months ended March 31, 2024 and March 31, 2023.

The following tables provide a summary of the activity in the ACL allocated by loan class for the three and six months ended June 30, 2024 and June 30, 2023.

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

(Dollars in thousands) Beginning Balance Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For three months ended March 31, 2024

For three months ended June 30, 2024

Construction $ 3,558 $ — $ 4 $ 4 $ ( 91 ) $ 3,471

5 unchanged sentences

Total $ 57,336 $ ( 962 ) $ 76 $ ( 886 ) $ 2,028 $ 58,478

(1) Gross charge-offs of consumer loans for the three months ended March 31, 2024 included $ 0.2 million of demand deposit overdrafts.

(1) Gross charge-offs of consumer loans for the three months ended June 30, 2024 included $ 0.4 million of demand deposit overdrafts.

(Dollars in thousands) Beginning Balance Impact of ASC326 Adoption Charge-offs Recoveries Net (charge-offs) recoveries Provisions Ending Balance

For Three Months Ended March 31, 2023

For Three Months Ended June 30, 2023

Construction $ 2,689 $ — $ — $ 4 $ 4 $ ( 307 ) $ 2,386

4 unchanged sentences

Total $ 28,464 $ — $ ( 177 ) $ 127 $ ( 50 ) $ 600 $ 29,014

(Dollars in thousands) Beginning

Balance Charge-

offs Recoveries Net (charge-offs)

recoveries Provisions Ending

For Six Months Ended June 30, 2024

Construction $ 3,935 $ ( 12 ) $ 6 $ ( 6 ) $ ( 458 ) $ 3,471

Residential real estate 21,949 ( 1 ) 4 3 108 22,060

Commercial real estate 20,975 — — — 449 21,424

Commercial 2,671 ( 23 ) 3 ( 20 ) 215 2,866

Consumer 7,601 ( 1,386 ) 144 ( 1,242 ) 1,786 8,145

Credit Card 220 ( 194 ) 8 ( 186 ) 478 512

Total $ 57,351 $ ( 1,616 ) $ 165 $ ( 1,451 ) $ 2,578 $ 58,478

(Dollars in thousands) Beginning

Balance Impact of

Adoption Merger

Adjustments Charge-

offs Recoveries Net

(charge-offs)

recoveries Provisions Ending

For Six Months Ended June 30, 2023

Construction $ 2,973 $ 1,222 $ — $ — 7 $ 7 $ ( 1,816 ) $ 2,386

Residential real estate 2,622 4,974 — — 34 34 1,521 9,151

Residential rentals — — — — — — — —

Commercial real estate 4,899 3,742 — — — — 1,626 10,267

Commercial 1,652 401 — — 8 8 ( 105 ) 1,956

Consumer 4,497 452 — ( 284 ) 165 ( 119 ) 424 5,254

Credit Card — — — — — — — —

Total $ 16,643 $ 10,791 $ — $ ( 284 ) $ 214 $ ( 70 ) $ 1,650 $ 29,014

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

March 31, 2024

June 30, 2024

(Dollars in thousands) Real Estate Collateral Other Collateral Total

13 unchanged sentences

Total $ 14,843 $ 2,010 $ 16,853

The Company did not identify any significant changes in the extent to which collateral secures its collateral dependent loans, whether in the form of general deterioration or from other factors during the period ended March 31, 2024.

Loan Modifications to Borrowers Experiencing Financial Difficulty

4 unchanged sentences

Commercial Term extension greater than three months .

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during three months ended March 31, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended March 31, 2023.

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during three months ended June 30, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended December 31, 2023.

(dollars in thousands) Term Extension Interest Rate Reduction Payment Delay and Term Extension Term Extension and Interest Rate Reduction Payment Delay Total % of Total Portfolio Segment

March 31, 2024

June 30, 2024

Construction $ — $ — $ — $ — $ — $ — — %

6 unchanged sentences

Total $ 330 $ — $ — $ — $ — $ 330 0.01 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended March 31, 2023.

(dollars in thousands) Term Extension Interest Rate Reduction Payment Delay and Term Extension Term Extension and Interest Rate Reduction Payment Delay Total % of Total Portfolio Segment

December 31, 2023

Construction $ — $ — $ — $ — $ — $ — — %

Residential real estate — — — — — — — %

Residential rentals — — — — — — — %

Commercial real estate 125 — — — — 125 0.01 %

Commercial 242 — — — — 242 0.11 %

Consumer — — — — — — — %

Credit Cards — — — — — — — %

Total $ 367 $ — $ — $ — $ — $ 367 0.01 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2024, and there were no modifications to loans for borrowers experiencing financial difficulty during the three months ended December 31, 2023.

(dollars in thousands) Weighted-Average Months of Term Extension

March 31, 2024

June 30, 2024

Commercial real estate 12 months

Commercial 12 months

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

The following table present the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of March 31, 2024, and there were no loan modifications made to borrowers experiencing financial difficulty at March 31, 2023.

(dollars in thousands) Weighted-Average Months of Term Extension

December 31, 2023

Commercial real estate 1.0 year

Commercial 1.0 year

During the three months ended June 30, 2024 and December 31, 2023, there were no defaults on loan modifications made to borrowers experiencing financial difficulty.

The following table present the aging analysis of loan modifications made to borrowers experiencing financial difficulty as of June 30, 2024, and there were no loan modifications made to borrowers experiencing financial difficulty at December 31, 2023.

(Dollars in thousands) 30‑59 days past due 60‑89 days past due 90 days past due and still accruing 90 days past due and not accruing Total past due Current Accrual Current Non-Accrual Total Recorded Investment

March 31, 2024

June 30, 2024

Construction $ — $ — $ — $ — $ — $ — $ — $ —

5 unchanged sentences

Total $ — $ — $ — $ — $ — $ — $ 330 $ 330

December 31, 2023

Construction $ — $ — $ — $ — $ — $ — $ — $ —

Residential real estate — — — — — — — —

Residential rentals — — — — — — — —

Commercial real estate — — — — — — 125 125

Commercial — — — — — 153 89 242

Consumer — — — — — — — —

Credit Cards — — — — — — — —

Total $ — $ — $ — $ — $ — $ 153 $ 214 $ 367

Foreclosure Proceedings

There were $ 0.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of March 31, 2024 and $ 0.2 million as of December 31, 2023, respectively.

There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at March 31, 2024 and December 31, 2023.

There were $ 0.2 million of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of June 30, 2024 and $ 0.2 million as of December 31, 2023, respectively.

There were no residential real estate properties included in the balance of other real estate owned (“OREO”) at June 30, 2024 and December 31, 2023.

Note 5 – Goodwill and Other Intangibles

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

March 31, 2024

The following table provides information on the significant components of goodwill and other acquired intangible assets at June 30, 2024 and December 31, 2023.

June 30, 2024

(Dollars in thousands) Gross Carrying Amount Additions Accumulated Impairment Charges Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life (in years)

9 unchanged sentences

Total other intangible assets $ 10,503 $ 48,648 $ — $ ( 11,061 ) $ 48,090

The aggregate amortization expense was $ 2.6 million for the three months ended March 31, 2024 and $ 0.4 million for the three months ended March 31, 2023.

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

The aggregate amortization expense was $ 5.1 million for the six months ended June 30, 2024 and $ 0.9 million for the six months ended June 30, 2023.

At June 30, 2024, estimated future remaining amortization for amortizing core deposit intangibles within the years ending December 31, is as follows:

(Dollars in thousands) Amortization Expense

9 unchanged sentences

The following tables present information about the Company’s leases.

(Dollars in thousands) March 31, 2024 December 31, 2023

(Dollars in thousands) June 30, 2024 December 31, 2023

Lease liabilities $ 12,189 $ 12,857

4 unchanged sentences

Remaining lease term - max 17.18 years 17.68 years

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Lease cost (in thousands) 2024 2023 2024 2023

3 unchanged sentences

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total of operating lease liabilities is as follows:

Lease payments due (in thousands) As of March 31, 2024

Nine months ending December 31, 2024 $ 1,347

Lease payments due (in thousands) As of June 30, 2024

Six months ending December 31, 2024 $ 899

Thereafter 7,281

2 unchanged sentences

Lease liabilities $ 12,189

Total gross rental income was $ 0.3 million and $ 0.4 million for the three months ended March 31, 2024 and 2023, respectively.

The following table presents our minimum future annual rental income on such leases as of March 31, 2024.

(In thousands) As of March 31, 2024

Nine months ending December 31, 2024 $ 635

Total gross rental income was $ 0.3 million and $ 0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Total gross rental income was $ 0.5 million and $ 0.7 million for the six months ended June 30, 2024 and 2023, respectively.

The following table presents our minimum future annual rental income on such leases as of June 30, 2024.

(In thousands) As of June 30, 2024

Six months ending December 31, 2024 $ 446

Thereafter 2,477

2 unchanged sentences

Deposits consist of the following categories as of the dates indicated:

(dollars in thousands) March 31, 2024 December 31, 2023

(dollars in thousands) June 30, 2024 December 31, 2023

Balance % Balance %

7 unchanged sentences

Total Deposits $ 5,148,885 100.00 % $ 5,386,120 100.00 %

At March 31, 2024, the scheduled contractual maturities of certificates of deposit are as follows:

(dollars in thousands) March 31, 2024

At June 30, 2024, the scheduled contractual maturities of certificates of deposit are as follows:

(dollars in thousands) June 30, 2024

Within one year $ 1,012,597

1 unchanged sentence

Year 3 16,729

Year 4 11,048

The aggregate amount of certificates of deposit that met or exceeded the FDIC insurance limit of $250,000 at March 31, 2024 and December 31, 2023 was $ 371.0 million and $ 354.6 million, respectively.

The aggregate amount of certificates of deposit that met or exceeded the FDIC insurance limit of $250,000 at June 30, 2024 and December 31, 2023 was $ 372.7 million and $ 354.6 million, respectively.

Note 8 - Borrowings

Long-term debt consisted of the following:

(dollars in thousands) March 31, 2024 December 31, 2023 Issue Date Stated Maturity Date Earliest Call Date Interest Rate

(dollars in thousands) June 30, 2024 December 31, 2023 Issue Date Stated Maturity Date Earliest Call Date Interest Rate

FHLB Advances $ 50,000 — 2024 2025 4.786 %

Total long-term advances 50,000 —

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

7 unchanged sentences

Total long-term debt $ 122,820 $ 72,297

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

At June 30, 2024, subordinated notes consisted of $ 25.0 million of long-term debt issued by the Company in August 2020, and $ 19.5 million of long-term debt assumed as a result of the merger with TCFC.

The recorded balance of subordinated debt issued in 2020 and the assumed subordinated debt from TCFC, net of unamortized issuance costs and fair value discounts, respectively, were $ 24.9 million and $ 18.6 million, respectively.

The Company also assumed trust preferred securities in the aggregate of $ 32.6 million as a result of the merger with TCFC in the third quarter of 2023 and the acquisition of Severn in the fourth quarter of 2022.

The Company also assumed TRUPS in the aggregate of $ 32.6 million as a result of the merger with TCFC in the third quarter of 2023 and the acquisition of Severn in the fourth quarter of 2022.

Trust preferred securities consisted of $ 20.6 million issued to Severn Capital Trust I, $ 7.0 million issued by Tri-County Capital Trust I and $ 5.0 million issued by Tri-County Capital Trust II.

The recorded balance of the debt acquired from Severn at March 31, 2024 was $ 18.6 million, net of the unamortized fair value adjustment of $ 2.0 million.

At March 31, 2024, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.4 million and $ 4.2 million, which are presented as net of the unamortized fair value adjustment of $ 0.6 million and $ 0.8 million, respectively.

The recorded balance of the debt acquired from Severn at June 30, 2024 was $ 18.7 million, net of the unamortized fair value adjustment of $ 1.9 million.

At June 30, 2024, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.4 million and $ 4.2 million, which are presented as net of the unamortized fair value adjustment of $ 0.6 million and $ 0.8 million, respectively.

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.

There were no outstanding borrowings from the Federal Home Loan Bank (“FHLB”) at March 31, 2024 and December 31, 2023.

There were $ 50.0 million outstanding long-term borrowings from the FHLB at June 30, 2024 and zero at December 31, 2023.

The Company also had short-term borrowings from FHLB of $ 31.0 million at June 30, 2024 and zero at December 31, 2023, respectively.

Further information on these obligations is provided in the Company’s 2023 Annual Report.

7 unchanged sentences

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

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 401,868 shares remained available for grant at March 31, 2024.

The 2016 Equity Plan originally reserved 750,000 shares of common stock for grant, and 190,166 shares remained available for grant at June 30, 2024.

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

1 unchanged sentence

Restricted stock units and performance stock units vesting period is between one to three years .

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

The following table summarizes restricted stock award and restricted stock unit activity for the Company under the 2016 Equity Plan for the three months ended March 31, 2024.

The recipients of the restricted stock units and

performance 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.

At June 30, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

The following table summarizes restricted stock award and restricted stock unit activity for the Company under the 2016 Equity Plan for the six months ended June 30, 2024.

Restricted Stock Restricted Stock Units Performance Stock Units

5 unchanged sentences

Nonvested at end of period 69,067 $ 11.74 179,932 $ 11.49 43,651 $ 11.32

The fair value of restricted stock awards that vested during the first three months of 2024 and 2023 was $ 0.3 million and $ 0.5 million, respectively.

The fair value of restricted stock units vested during the first three months of 2024 and 2023 was $ 0.4 million and zero .

The fair value of restricted stock awards that vested during the first six months of 2024 and 2023 was $ 0.3 million and $ 0.5 million, respectively.

The fair value of restricted stock units vested during the first six months of 2024 and 2023 was $ 0.4 million and zero .

Note 10 – Derivatives

6 unchanged sentences

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 our derivative financial instruments at March 31, 2024 and December 31, 2023.

March 31, 2024 December 31, 2023

The following table provides information pertaining to the carrying amounts of our derivative financial instruments at June 30, 2024 and December 31, 2023.

June 30, 2024 December 31, 2023

(Dollars in thousands) Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value

1 unchanged sentence

Asset - TBA securities 19,500 85 1,000 2

Liability - IRLCs 198 1 — —

Liability - TBA securities 4,000 7 18,000 176

Note 11 – Accumulated Other Comprehensive Income (Loss)

Note 11 – Accumulated Other Comprehensive Loss

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

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

Three Months Ended March 31, 2024 Three Months Ended March 31, 2023

(Dollars in thousands) Net Unrealized (Losses) Net Unrealized Gains And (Losses)

The following table provides information on the changes in the component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023.

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

(Dollars in thousands) Net Unrealized Losses Net Unrealized Losses Net Unrealized Losses Net Unrealized Gains And (Losses)

Beginning of period $ ( 8,058 ) $ ( 8,161 ) $ ( 7,494 ) $ ( 9,021 )

7 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of June 30, 2024 and December 31, 2023, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2023, the most recent notification from our primary regulator categorized the Bank, as well capitalized under the regulatory framework for prompt corrective action.

At March 31, 2024, there were no conditions or events since that notification that management believes would change the Bank’s classification.

At June 30, 2024, there were no conditions or events since that notification that management believes would change the Bank’s classification.

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

The minimum ratios for capital adequacy purposes are 7.00 %, 8.50 %, 10.50 % and 4.00 % for the common equity Tier 1, Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively which include a capital conservation buffer of 2.50% respectively.

To be categorized as well capitalized, a bank must maintain minimum ratios of 6.50 %, 8.00 %, 10.00 % and 5.00 % for its common equity Tier 1, Tier 1 risk-based capital, total risk-based capital and leverage ratios, respectively.

Regulatory Capital and Ratios Regulatory Minimum Ratio + CCB ( 1)

The Company The Bank

(dollars in thousands) March 31, 2024 December 31, 2023 March 31, 2024 December 31, 2023

The table presents the actual and required capital ratios for the Company and Bank as of June 30, 2024 and December 31, 2023.

(dollars in thousands) Actual Regulatory Min.

Ratio + CCB (1)

Required To Be Considered Well Capitalized

June 30, 2024 Amount Ratio Amount Ratio Amount Ratio

Common Tier 1 Capital to RWA

The Company $ 435,238 9.06 % $ 336,226 7.00 % $ 312,210 6.50 %

The Bank 501,003 10.45 % 335,756 7.00 % 311,773 6.50 %

Tier 1 Capital to RWA

The Company 464,554 9.67 % 408,275 8.50 % 384,258 8.00 %

The Bank 501,003 10.45 % 407,704 8.50 % 383,721 8.00 %

Total Capital to RWA

The Company 567,680 11.82 % 504,339 10.50 % 480,323 10.00 %

The Bank 560,625 11.69 % 503,634 10.50 % 479,651 10.00 %

Tier 1 Capital to AA (Leverage) (2)

The Company 464,554 8.07 % 230,250 4.00 % 287,813 5.00 %

The Bank 501,003 8.71 % 230,024 4.00 % 287,530 5.00 %

December 31, 2023

Common Tier 1 Capital to RWA

The Company $ 408,317 8.69 % $ 328,825 7.00 % $ 305,338 6.50 %

The Bank 470,200 10.02 % 328,511 7.00 % 305,046 6.50 %

Tier 1 Capital to RWA

The Company 437,475 9.31 % 399,288 8.50 % 375,800 8.00 %

The Bank 470,200 10.02 % 398,906 8.50 % 375,441 8.00 %

Total Capital to RWA

The Company 539,200 11.48 % 493,238 10.50 % 469,750 10.00 %

The Bank 528,786 11.27 % 492,766 10.50 % 469,301 10.00 %

Tier 1 Capital to AA (Leverage) (2)

The Company 437,475 7.74 % 225,965 4.00 % 282,456 5.00 %

The Bank 470,200 8.33 % 225,797 4.00 % 282,247 5.00 %

The following tables present the capital amounts as of June 30, 2024 and December 31, 2023.

Regulatory Capital and Ratios The Company The Bank

(dollars in thousands) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

Common equity $ 522,783 $ 511,135 $ 587,283 $ 570,100

8 unchanged sentences

Allowable reserve for credit losses and other Tier 2 adjustments 59,622 58,586 59,622 58,586

Subordinated notes 43,322 43,139 — —

Tier 2 Capital $ 552,657 $ 539,200 $ 545,922 $ 528,786

Subordinated debentures 43,504 43,139 — —

Total Capital $ 567,680 $ 539,200 $ 560,625 $ 528,786

Risk-Weighted Assets ("RWA") $ 4,803,230 $ 4,697,504 $ 4,796,512 $ 4,693,009

Average Assets ("AA") $ 5,756,260 $ 5,649,116 $ 5,750,604 $ 5,644,930

Common Tier 1 Capital to RWA 7.00 % 8.91 % 8.69 % 10.32 % 10.02 %

Tier 1 Capital to RWA 8.50 % 9.53 % 9.31 % 10.32 % 10.02 %

Tier 2 Capital to RWA 10.50 % 11.68 % 11.48 % 11.56 % 11.27 %

Tier 1 Capital to AA (Leverage) (2)

n/a 7.93 % 7.74 % 8.58 % 8.33 %

____________________________________

4 unchanged sentences

(3) Core deposit intangible is net of deferred tax liability.

(4) Goodwill is net of deferred tax liability as of March 31, 2024.

(4) Goodwill is net of deferred tax liability .

Bank and holding company regulations impose certain restrictions on dividend payments by the Bank, as well as restricting extensions of credit and transfers of assets between the Bank and the Company.

At March 31, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

At June 30, 2024, the Bank could pay dividends to the Company to the extent of its earnings so long as it maintained required capital ratios.

Note 13 – Fair Value Measurements

37 unchanged sentences

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range

March 31, 2024

June 30, 2024

$ 5,995 Market Approach Weighted average prepayment speed (PSA) (2)

9 unchanged sentences

(2) PSA = Public Securities Association Standard Prepayment Model

The following table presents activity in MSRs for the three months ended March 31, 2024.

(Dollars in thousands) Three Months Ended March 31, 2024

The following table presents activity in MSRs for the three and six months ended June 30, 2024.

(Dollars in thousands) Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Beginning balance $ 5,821 $ 5,926

2 unchanged sentences

Ending balance $ 5,995 $ 5,995

The following table presents activity in the IRLCs - net asset for the three months ended March 31, 2024.

(Dollars in thousands) Three Months Ended March 31, 2024

The following table presents activity in the IRLCs - net asset for the three and six months ended June 30, 2024.

(Dollars in thousands) Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Beginning balance $ 232 $ 110

13 unchanged sentences

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.

The following tables present the recorded amount of assets measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023.

No assets were transferred from one hierarchy level to another during the first three months of 2024 or 2023.

The following tables present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2024 and December 31, 2023.

No assets were transferred from one hierarchy level to another during the first six months of 2024 or 2023.

(Dollars in thousands) Fair Value Quoted Prices

1 unchanged sentence

(Level 2) Significant Unobservable Inputs

March 31, 2024

June 30, 2024

Securities available for sale:

10 unchanged sentences

Total assets at fair value $ 180,925 $ — $ 174,722 $ 6,203

IRLCs $ 1 $ — $ — $ 1

TBA securities 7 — 7 —

33 unchanged sentences

The Company considers any valuation inputs related to repossessed properties to be Level 3 inputs.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at March 31, 2024 and December 31, 2023.

The following tables set forth the Company’s financial and nonfinancial assets subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2024 and December 31, 2023.

Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

1 unchanged sentence

(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range Weighted Average (1)

March 31, 2024

June 30, 2024

Nonrecurring measurements:

4 unchanged sentences

Appraisal adjustment (2)

( 0 %) - ( 20 %)

Repossessed properties $ 1,560 Appraisal of collateral (1)

18 unchanged sentences

The carrying amounts and estimated fair values of the Company’s financial instruments are presented in the following table.

Fair values for March 31, 2024 and December 31, 2023 were estimated using an exit price notion.

March 31, 2024 Carrying Amount Fair Value Fair Value Measurements

Fair values for June 30, 2024 and December 31, 2023 were estimated using an exit price notion.

June 30, 2024 Carrying Amount Fair Value Fair Value Measurements

Description of Asset (dollars in thousands)

18 unchanged sentences

Certificates of Deposit 1,213,778 1,212,174 — 1,212,174 —

Advances from FHLB 81,000 80,786 — 80,786 —

Subordinated debt, net 43,504 43,587 — 43,587 —

9 unchanged sentences

Equity securities 5,703 5,703 — 5,703 —

Restricted securities 17,900 17,900 — 17,900 —

Loans held for sale 8,782 8,782 — 8,782 —

20 unchanged sentences

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.

The following table provides information on commitments outstanding at March 31, 2024 and December 31, 2023.

(Dollars in thousands) March 31, 2024 December 31, 2023

The following table provides information on commitments outstanding at June 30, 2024 and December 31, 2023.

(Dollars in thousands) June 30, 2024 December 31, 2023

Commitments to extend credit $ 676,715 $ 613,266

2 unchanged sentences

The Company provides banking services to customers who do business in the cannabis industry.

Prior to the second quarter of 2022, the Company restricted these businesses to include only those in the medical-use cannabis industry in the state of Maryland.

During the second quarter of 2022, the Company expanded its cannabis banking program to include both medical and adult-use licensees in other states, with an initial offering to the Company’s existing Maryland customers with multi-state operations.

While the Company is providing banking services to customers that are engaged in the growing, processing, and sales of cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate Federal laws.

1 unchanged sentence

While we are not aware of any instance of a federally-insured financial institution being subject to such aiding and abetting liability, the strict enforcement of Federal laws regarding cannabis would likely result in the Company’s inability to continue to provide banking services to these customers and the Company could have legal action taken against it by the Federal government, including imprisonment and fines.

There is an uncertainty of the potential impact to the

Company’s Consolidated Financial Statements if the Federal government takes actions against the Company.

As of March 31, 2024, the Company had not accrued an amount for the potential impact of any such actions.

There is an uncertainty of the potential impact to the Company’s Consolidated Financial Statements if the Federal government takes actions against the Company.

As of June 30, 2024, the Company had not accrued an amount for the potential impact of any such actions.

Following is a summary of the level of business activities with our cannabis industry customers:

• Deposit and loan balances at March 31, 2024 were approximately $ 227.6 million, or 4.4 % of total deposits, and $ 73.7 million, or 1.6 % of total gross loans, respectively.

• Interest and noninterest income for the three months ended March 31, 2024, were approximately $ 1.0 million and $ 0.3 million, respectively.

• Deposit and loan balances at June 30, 2024 were approximately $ 202.3 million, or 3.9 % of total deposits, and $ 73.6 million, or 1.6 % of total gross loans, respectively.

• Interest and noninterest income for the six months ended June 30, 2024, were approximately $ 2.0 million and $ 0.6 million, respectively.

In the normal course of business, the Company may become involved in litigation arising from banking, financial, and other activities.

4 unchanged sentences

The following table provides information relating to the calculation of earnings per common share.

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands, except per share data) 2024 2023 2024 2023

7 unchanged sentences

Diluted $ 0.34 $ 0.20 $ 0.58 $ 0.53

As of March 31, 2024 there were 1,000 and as of March 31, 2023 there were zero unvested common stock equivalents excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive.

As of three and six months ended June 30, 2024 there were 9,000 and 5,000 , respectively, of unvested restricted stock and performance stock unit awards which were excluded from the calculation as their effect would be anti-dilutive.

There were no antidilutive awards that were excluded from the calculation for the three and six months ended June 30, 2023.

Note 17 – Revenue Recognition

21 unchanged sentences

All contract issuance costs are expensed as incurred.

We had no contract assets or liabilities at March 31, 2024.

We had no contract assets or liabilities at June 30, 2024.

Other Noninterest Income

10 unchanged sentences

The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2024 and 2023.

Three Months Ended March 31,

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2024 and 2023.

Three Months Ended June 30, Six Months Ended June 30,

(Dollars in thousands) 2024 2023 2024 2023

9 unchanged sentences

Total Noninterest Income $ 8,440 $ 5,294 $ 15,007 $ 10,628

Note 18 – Subsequent Events

On April 12, 2024 the Board of Directors determined that it is in the best interest of the Company to close two branches.

Management is directed to close the Onley branch located in Onley, VA on or about July 17, 2024 and to close the Westgate branch located in Annapolis, MD on or about September 30, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements