Shore Bancshares, Inc. Reports 2025 Second Quarter Results

EASTON, Md., July 24, 2025 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank") reported net income for the second quarter of 2025 of $15.5 million, or $0.46 per diluted common share, compared to net income of $13.8 million, or $0.41 per diluted common share for the first quarter of 2025, and net income of $11.2 million, or $0.34 per diluted common share, for the second quarter of 2024.

Second Quarter 2025 Highlights

• Net Income Growth – Net income for the second quarter of 2025 increased $1.7 million to $15.5 million from $13.8 million in the first quarter of 2025. Net income increased primarily due to higher net interest income and noninterest income driven by higher mortgage banking activity, partially offset by higher noninterest expense. Net income for the first half of 2025 was $29.3 million, compared to $19.4 million for the first half of 2024.
• Improved Return on Average Assets ("ROAA") – The Company reported ROAA of 1.03% for the second quarter of 2025, compared to 0.91% for the first quarter of 2025 and 0.77% for the second quarter of 2024. Non-U.S. generally accepted accounting principles ("GAAP") ROAA(1) was 1.15% for the second quarter of 2025, compared to 1.02% for the first quarter of 2025 and 0.91% for the second quarter of 2024.
• Net Interest Margin ("NIM") Expansion – Net interest income for the second quarter of 2025 increased $1.2 million to $47.3 million from $46.0 million for the first quarter of 2025. NIM increased 11 basis points ("bps") to 3.35% during the second quarter of 2025 from 3.24% in the first quarter of 2025. NIM excluding accretion(1) increased for the comparable periods from 3.02% to 3.10%. Excluding accretion interest, loan yields increased 2 bps and funding costs decreased 4 bps for the comparable periods. Net interest income increased due to modest loan growth, slightly higher accelerated accretion income, and loan and securities repricing, coupled with lower cost of deposits during the period.
• Book Value per Share Growth - Book value per share increased to $16.94 at June 30, 2025 from $16.55 at March 31, 2025 and $15.74 at June 30, 2024.
• Stable Asset Quality – Nonperforming assets to total assets were 0.33% for the second quarter of 2025, an increase from 0.31% for the first quarter of 2025 and 0.29% for the second quarter of 2024. Classified assets to total assets were 0.37% in the second quarter of 2025, an increase when compared to 0.36% for the first quarter of 2025 and 0.33% for the second quarter of 2024. The allowance for credit losses ("ACL") was $58.5 million at June 30, 2025, compared to $57.9 million at December 31, 2024 and $58.5 million at June 30, 2024. The ACL as a percentage of loans remained flat at 1.21% at June 30, 2025 compared to December 31, 2024, and decreased compared to 1.24% at June 30, 2024.
• Improved Operating Leverage – The efficiency ratio for the second quarter of 2025 was 60.83% compared to 63.64% in the first quarter of 2025 and 66.23% for the second quarter of 2024. The non-GAAP efficiency ratio(1), which excludes amortization, was 56.73% for the second quarter of 2025, compared to 59.25% for the first quarter of 2025 and 61.05% for the second quarter of 2024. Management anticipates ongoing expense management and technology investments will result in continued improvements in operating leverage over time.

"We continued to see steady improvement in our performance in the second quarter," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares. "Net income and margins continue to expand as our efficiency improves and capital builds.  Loan growth remains constrained but asset yield increases are expected to support margins for the remainder of 2025. Continued investments in our infrastructure and personnel position us well for growth."

Balance Sheet Review

Total assets were $6.04 billion at June 30, 2025, a decrease of $192.9 million, or 3.1%, when compared to $6.23 billion at December 31, 2024. The aggregate decrease was primarily due to the decrease of interest-bearing deposits at other banks of $285.4 million, partially offset by an increase in our loan portfolio of $55.6 million and an increase in our investment securities portfolio of $16.8 million. The decrease in interest-bearing deposits was primarily driven by seasonal municipal run-offs of deposits. Total assets increased $173.9 million, or 3.0%, from $5.86 billion when compared to June 30, 2024.

The Company's tangible common equity ratio at June 30, 2025 was 7.88% compared to 7.17% at December 31, 2024. The Company's Tier 1 and Total Risk-Based Capital Ratios at June 30, 2025 were 10.51% and 12.65%, respectively. Non-owner occupied commercial real estate ("CRE") loans were $2.14 billion and $2.08 billion, and as a percentage of the Bank's Tier 1 Capital + ACL were 354.15% and 359.52% at June 30, 2025 and December 31, 2024, respectively.

CRE loans (excluding land and construction) at June 30, 2025 were $2.60 billion compared to $2.56 billion at December 31, 2024. The following table provides the stratification of the classes of CRE loans at June 30, 2025.

The Bank's office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $484.3 million, or 10.0% of total loans at June 30, 2025. The Bank's office CRE loan portfolio included medical tenants of $135.5 million, or 28.0% of the total office CRE loan portfolio, at June 30, 2025. The Bank's office CRE loan portfolio also included government or government contractor tenants of $54.4 million, or 11.2% of the total office CRE loan portfolio for the same period. At June 30, 2025, the average loan debt-service coverage ratio was 1.8x and the average LTV was 48.41%.

There were 492 loans in the office CRE portfolio, which had an average loan size of $1.0 million and a median loan size of $369 thousand. LTV estimates for the office CRE portfolio at June 30, 2025 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

The Bank had 17 office CRE loans with balances greater than $5.0 million, totaling $150.9 million at June 30, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024. The decrease in this portfolio segment was the result of normal amortization and the change in purpose of collateral of an $11.0 million loan from office to school. Of the office CRE portfolio balance, 80.5% was secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.0% was secured by properties with five stories or less. Of the office CRE loans, $2.5 million were classified as special mention or substandard at June 30, 2025. The Bank did not have any charge-offs related to the office CRE portfolio during 2025.

At June 30, 2025 and March 31, 2025, nonperforming assets were $19.6 million, or 0.33% of total assets, and $18.9 million, or 0.31% of total assets, respectively. The balance of nonperforming assets increased $729 thousand, primarily due to commercial real estate and consumer loans. When comparing June 30, 2025 to June 30, 2024, nonperforming assets increased $2.6 million, primarily due to an increase in nonaccrual loans of $1.9 million and an increase in repossessed marine loans of $897 thousand.

Total deposits decreased $214.4 million, or 3.9%, to $5.31 billion at June 30, 2025 when compared to December 31, 2024. The decrease in total deposits was primarily due to a decrease in interest-bearing checking deposits of $214.8 million and a decrease in money market and savings of $114.4 million, partially offset by an increase in time deposits of $91.7 million. The decrease in interest-bearing deposits was primarily driven by seasonal municipal run-offs of deposits. The rate on interest-bearing deposits remained flat at 2.94% at June 30, 2025 compared to March 31, 2025.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits was $5.36 billion at June 30, 2025, compared to $5.51 billion at March 31, 2025. The Bank had a $50.0 million FHLB advance at June 30, 2025 and March 31, 2025. The advance consisted of an 18-month Bermuda Convertible note of $50.0 million. The Bank had $10.8 million of brokered deposits at June 30, 2025 and zero at March 31, 2025. Total reciprocal deposits were $1.31 billion at June 30, 2025 and $1.46 billion at March 31, 2025. 

The Bank's uninsured deposits were $886.8 million, or 16.7% of total deposits, at June 30, 2025. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, were $768.7 million, or 14.5% of total deposits, at June 30, 2025. At June 30, 2025, the Bank had approximately $1.16 billion of available liquidity, including $185.0 million in cash and cash equivalents, $974.1 million in secured borrowing capacity at the FHLB and other correspondent banks and $95.0 million in unsecured lines of credit.

Total stockholders' equity increased $24.1 million, or 4.5%, when compared to December 31, 2024, primarily due to current year earnings and a decrease in accumulated other comprehensive losses, partially offset by cash dividends paid. As of June 30, 2025, the ratio of total equity to total assets was 9.36% and the ratio of total tangible equity to total tangible assets(1) was 7.88% compared to 8.68% and 7.17%, respectively, at December 31, 2024.

Review of Quarterly Financial Results

Net interest income was $47.3 million for the second quarter of 2025, compared to $46.0 million for the first quarter of 2025 and $42.1 million for the second quarter of 2024. The increase in net interest income when compared to the first quarter of 2025 was primarily due to an increase in interest income on loans of $2.0 million, an increase in interest income on investment securities of $330 thousand and a decrease in interest expense on deposits of $701 thousand, partially offset by a decrease in interest income on deposits at other banks of $1.8 million. The increase in net interest income was $5.1 million when compared to the second quarter of 2024, and was primarily due to an increase in interest and fees on loans of $2.4 million, an increase in interest on deposits at other banks of $1.0 million and a decrease in interest expense on short-term borrowings of 1.6 million.

The Company's NIM increased to 3.35% for the second quarter of 2025 from 3.24% for the first quarter of 2025, primarily due to higher core interest income. NIM excluding accretion increased for the comparable periods from 3.02% to 3.10%. Excluding accretion interest, loan yields increased 2 bps and funding costs decreased 4 bps, for the comparable periods. Interest expense for the second quarter of 2025 decreased $666 thousand when compared to the first quarter of 2025. All products repriced at favorable rates, and were partially offset by the seasonal run off of municipal deposits. The Company's NIM increased to 3.35% for the second quarter of 2025 from 3.11% for the second quarter of 2024. The Company's average interest-earning asset yield increased to 5.44% for the second quarter of 2025 from 5.39% for the second quarter of 2024, while the average cost of funds decreased 19 bps to 2.17% from 2.36% for the same periods.

The provision for credit losses was $1.5 million for the three months ended June 30, 2025. The comparable amounts were $1.0 million for the three months ended March 31, 2025 and $2.1 million for the three months ended June 30, 2024. The increase in the provision for credit losses for the second quarter of 2025 compared to the first quarter of 2025 was due to higher reserves related to growth in the loan portfolio, partially offset by higher charge-offs. Coverage ratios remained flat at 1.21% at June 30, 2025 from March 31, 2025, and decreased from 1.24% at June 30, 2024. Net charge-offs increased to $649 thousand for the second quarter of 2025 compared to $554 thousand for the first quarter of 2025, and decreased compared to $886 thousand for the second quarter of 2024.

Total noninterest income for the second quarter of 2025 was $9.3 million, an increase of $2.3 million from $7.0 million for the first quarter of 2025, and an increase of $878 thousand from $8.4 million for the second quarter of 2024. When comparing the second quarter of 2025 to the first quarter of 2025, the increase in noninterest income was primarily due to an increase in mortgage banking revenue of $780 thousand, an increase in gain on loans held for sale of $359 thousand and an one-time credit card incentive. Comparing the second quarter of 2025 to the second quarter of 2024, the increase in noninterest income was primarily due to an increase in mortgage banking and related activity driven by increased mortgage servicing activity and lower prepayment rates.

Total noninterest expense of $34.4 million for the second quarter of 2025 increased $663 thousand compared to the first quarter of 2025 expense of $33.7 million, and increased $911 thousand compared to the second quarter of 2024 expense of $33.5 million. The increase from the first quarter of 2025 was primarily due to higher salaries and employee benefit expenses of $1.3 million, partially offset by lower professional service fees of $388 thousand. The increase from the second quarter of 2024 was primarily due to higher salaries and benefits expense of $842 thousand and higher software and data processing costs of  $600 thousand, partially offset by lower amortization of other intangible assets of $297 thousand.

The efficiency ratio for the second quarter of 2025 when compared to the first quarter of 2025 and the second quarter of 2024 was 60.83%, 63.64% and 66.23%, respectively. Non-GAAP efficiency ratios(1) for the same periods were 56.73%, 59.25% and 61.05%, respectively. The net operating expense ratio, which is noninterest expense less noninterest income divided by average assets, for the second quarter of 2025 was 1.67%, compared to 1.77% and 1.73% for the first quarter of 2025 and the second quarter of 2024, respectively. The non-GAAP net operating expense ratio(1), which excludes core deposit intangible amortization and non-recurring activity, was 1.52% for the second quarter of 2025, compared to 1.62% and 1.55% for the first quarter of 2025 and the second quarter of 2024, respectively.

Review of  Six Month Financial Results

Net interest income for the six months ended June 30, 2025 was $93.3 million, an increase of $10.0 million, or 12.0%, when compared to the six months ended June 30, 2024. The increase in net interest income was primarily due to an increase in total interest income of $8.4 million, or 5.9%, which included an increase in interest and fees on loans of $4.3 million, or 3.2%, and an increase in interest on deposits with other banks of $3.5 million, or 224.9%. The increase in interest and fees on loans was primarily due to the increase in the average balance of loans of $128.6 million, or 2.7% and a decrease in total interest expense, primarily due to a decrease in interest paid on short-term borrowings of $1.6 million and a decrease in interest on deposits of $641 thousand. These decreases were partially offset by an increase in interest expenses on long-term borrowings of $715 thousand due to the 18-month Bermuda Convertible note.

The Company's NIM increased from 3.09% for the six months ended June 30, 2024 to 3.30% for the six months ended June 30, 2025. Margins were higher due to a $288.2 million increase in interest-earning asset balances and a 5 basis point increase in interest-earning asset yields. These positive movements were coupled with lower cost interest-bearing deposits. The increase in the average balances of interest-bearing deposits of $20.0 million was offset by a 4 basis point decrease in the associated rates paid, as well as a $23.9 million decrease in the average balance of FHLB advances and a 56 basis point decrease in the associated rates paid. Net accretion income impacted net interest margin by 24 basis points and 27 basis points for the six months ended June 30, 2025 and 2024, respectively, which resulted in NIMs excluding accretion of 3.06% and 2.82% for the same periods.

The provision for credit losses for the six months ended June 30, 2025 and 2024 was $2.6 million and $2.5 million, respectively. The increase in the provision for credit losses during 2025 was due to higher reserves related to growth in the loan portfolio, partially offset by an improved economic outlook. Net charge-offs for the six months ended June 30, 2025 were $1.2 million compared to $1.5 million for the six months ended June 30, 2024.

Total noninterest income for the six months ended June 30, 2025 increased $1.3 million, or 8.8%, when compared to the same period in 2024. The increase was primarily due to a $453 thousand gain on sales of loans held for sale, $383 thousand of mortgage banking revenue and $249 thousand of other noninterest income.

Total noninterest expense for the six months ended June 30, 2025 decreased $2.0 million, or 2.9%, when compared to the same period in 2024. Noninterest expense line items decreased primarily due to the absence of the $4.3 million credit card fraud event during the six months ended June 30, 2024, which was partially offset by higher salaries and employee benefit expenses of $1.3 million and an increase of $1.3 million of software and data processing expense in the six months ended June 30, 2025.

The efficiency ratio for the six months ended June 30, 2025 was 62.19% compared to 71.42% for the six months ended June 30, 2024. Non-GAAP efficiency ratios for the same periods were 57.95% and 61.69%, respectively. The net operating expense ratio, which is noninterest expense less noninterest income divided by average assets, for the six months ended June 30, 2025 was 1.72% compared to 1.91% for the six months ended June 30, 2024. The non-GAAP net operating expense ratio(1), which excludes core deposit intangible amortization and non-recurring activity, was 1.57% for the six months ended June 30, 2025, compared to 1.58% for the six months ended June 30, 2024.

Shore Bancshares Information

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

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: the strength of the United States ("U.S.") economy and general economic conditions, (including the interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation/deflation and supply chain issues), whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products, our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the collateral for our loans; the ability to effectively manage the information technology systems, including third-party vendors, cyber or data privacy incidents or other failures, disruptions or security breaches, and risk related to the development and use of artificial intelligence; the ability to develop and use technologies to provide products and services that will satisfy customer demands; results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our reserve for loan losses or to write-down assets; changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, which could lead to restrictions on activities of banks generally, or our subsidiary bank in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; changes in market rates and prices may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet; our liquidity requirements could be adversely affected by changes in our assets and liabilities; our ability to prudently manage our growth and execute our strategy; impairment of our goodwill and intangible assets; competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals; the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; the growth and profitability of noninterest or fee income being less than expected; the effect of legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; the effect of any change in federal government enforcement of federal laws affecting the cannabis industry; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the U.S. Securities and Exchange Commission (the "SEC"), the Public Company Accounting Oversight Board and other regulatory agencies; changes in U.S. trade policies, including the implementation of tariffs and other protectionist trade policies; the impact of governmental efforts to restructure or adjust the U.S. financial regulatory system; the impact of recent or future changes in Federal Deposit Insurance Corporation (the "FDIC") insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; the effect of fiscal and governmental policies of the U.S. federal government; climate change and other catastrophic events or disasters; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts of terrorism, and/or military conflicts, which could impact business and economic conditions in the United States and abroad; and other factors that may affect our future results. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2024 Annual Report on Form 10-K filed with the SEC and available at the SEC's Internet site (https://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.