Shore Bancshares, Inc. Reports 2026 Second Quarter Results

EASTON, Md., July 23, 2026 /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 2026 of $18.9 million, or $0.56 per diluted common share, compared to net income of $17.1 million, or $0.51 per diluted common share, for the first quarter of 2026, and net income of $15.5 million, or $0.46 per diluted common share, for the second quarter of 2025.

Second Quarter 2026 Highlights

• Net Income – Net income for the second quarter of 2026 increased $1.8 million to $18.9 million, from $17.1 million in the first quarter of 2026. Net income increased primarily due to a decrease in interest expense of $1.3 million, an increase in other noninterest income of $1.2 million and a decrease in salaries and employee benefits of $1.2 million. These increases were partially offset by a decrease in interest on deposits with other banks of $858 thousand and a higher provision for credit losses of $811 thousand. Net income for the six months ended June 30, 2026 was $36.0 million, compared to $29.3 million for the six months ended June 30, 2025.

• Return on Average Assets ("ROAA") – The Company reported ROAA of 1.24% for the second quarter of 2026, compared to 1.12% for the first quarter of 2026 and 1.03% for the second quarter of 2025. Adjusted ROAA – non-U.S. generally accepted accounting principles ("GAAP")⁽¹⁾ was 1.34% for the second quarter of 2026, compared to 1.22% for the first quarter of 2026 and 1.15% for the second quarter of 2025.

• Net Interest Margin ("NIM") – Net interest income for the second quarter of 2026 increased $364 thousand to $52.9 million compared to the first quarter of 2026. NIM increased 6 basis points ("bps") to 3.70% during the second quarter of 2026 compared to the first quarter of 2026. NIM excluding accretion⁽¹⁾ increased for the comparable periods from 3.35% to 3.45%. Excluding accretion interest, loan yields decreased 1 bp and funding costs decreased 8 bps for the comparable periods. Net interest income increased due to elevated accretion income and interest recoveries from loan payoffs coupled with a lower cost of deposits.

• Capital Management – Book value per share increased to $18.44 at June 30, 2026 from $18.02 at March 31, 2026 and $16.94 at June 30, 2025. During the quarter ended June 30, 2026, the Company announced a $30 million share repurchase program and repurchased 40,093 shares of its outstanding common stock, or approximately $891 thousand. During the second quarter of 2026, the Company declared a dividend of $0.14 per share, which represents a $0.02, or 16.7% increase from the dividend paid in the prior quarter.

• Asset Quality – Nonperforming assets were 1.09% of total assets at June 30, 2026, a decrease from 1.10% at March 31, 2026 and an increase from 0.33% at June 30, 2025. Classified assets were 1.41% of total assets at June 30, 2026, an increase when compared to 1.38% at March 31, 2026 and 0.37% at June 30, 2025. The allowance for credit losses ("ACL") was $58.7 million at June 30, 2026, compared to $58.5 million at March 31, 2026 and at June 30, 2025. The ACL as a percentage of loans decreased to 1.20% at June 30, 2026 compared to 1.21% at March 31, 2026 and at June 30, 2025.

• Operating Leverage – The efficiency ratio for the second quarter of 2026 was 57.76%, compared to 61.97% in the first quarter of 2026 and 60.83% for the second quarter of 2025. The adjusted efficiency ratio – non-GAAP⁽¹⁾, which excludes amortization of intangibles, was 54.49% for the second quarter of 2026, compared to 58.57% for the first quarter of 2026 and 56.73% for the second quarter of 2025. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

"Our second quarter results reflect the continued strength of our franchise and the progress we are making across the organization," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. "Another quarter of expanding net interest margin, record net interest income and record profitability demonstrates the benefits of disciplined balance sheet management, lower funding costs and our ongoing focus on operational execution.  Our improved earnings and capital generation allowed us to increase our quarterly dividend and launch a share repurchase program, underscoring the confidence our Board has in the long-term value of our franchise and our commitment to disciplined capital allocation.

We continue to closely monitor several commercial real estate relationships, overall asset quality remains supported by conservative underwriting, strong collateral values and solid reserve levels. We remain focused on executing our strategy, enhancing shareholder returns and positioning Shore Bancshares for sustainable long-term growth."

Balance Sheet Review

Total assets were $6.15 billion at June 30, 2026, a decrease of $54.6 million from March 31 ,2026. The decrease was primarily due to a decrease in interest bearing deposits of $92.4 million partially offset by an increase in loans of $29.7 million. Total assets decreased $107.4 million, or 1.7%, when compared to $6.26 billion at December 31, 2025. The decrease was primarily due to a decrease in cash and cash equivalents of $97.9 million and a decrease in our loan portfolio of $22.6 million, which were partially offset by an increase in our investment securities portfolio of $18.4 million. The decrease in cash and cash equivalents was primarily driven by seasonal run-off of municipal deposits.

CRE loans (excluding land and construction) were $2.60 billion at June 30, 2026 compared to $2.64 billion at December 31, 2025. The office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $475.9 million, or 9.8% of total loans at June 30, 2026. The following table provides the stratification of the classes of CRE loans (excluding land and construction) at June 30, 2026.

The office CRE loan portfolio included loans to medical tenants of $107.9 million, or 22.7% of the total office CRE loan portfolio, at June 30, 2026. The office CRE loan portfolio also included loans secured by buildings with government or government contractor tenants of $68.9 million, or 14.5% of the total office CRE loan portfolio at the same date. At June 30, 2026, the average loan debt service coverage ratio on the office CRE loan portfolio was 1.7x and the average LTV was 48.10%.

The 463 loans in the office CRE portfolio at June 30, 2026 had an average loan size of $1.0 million and a median loan size of $389 thousand. LTV estimates for the office CRE portfolio at June 30, 2026 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

There were 16 office CRE loans with balances greater than $5.0 million, totaling $147.8 million at June 30, 2026 and totaling $166.1 million at December 31, 2025. The decrease in this portfolio segment was the result of normal amortization and the payoff of one loan. 80.8% of the office CRE loan balance 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. $17.6 million of these loan balances were classified as special mention or substandard at June 30, 2026. There were no charge-offs within the office CRE portfolio during the three and six months ended June 30, 2026 and 2025.

Nonperforming assets were $67.2 million and $68.4 million, or 1.09% and 1.10% of total assets, as of June 30, 2026 and March 31, 2026, respectively. Nonperforming assets primarily consist of three large loans with an aggregate loan balance of $44.4 million. These nonperforming loans primarily consist of multifamily and office commercial real estate loans with collateral in North Carolina and Virginia. As of June 30, 2026, these loans are well-secured by collateral and required minimal individual reserves. When comparing June 30, 2026 to June 30, 2025, nonperforming assets increased $47.6 million, primarily due to an increase in nonaccrual loans of $48.0 million, partially offset by a decrease in repossessed marine and auto loans of $274 thousand and a decrease in loans 90 days past due and accruing of $195 thousand. Substandard loans, which include nonaccrual loans and accruing loans 90 days or more past due, were $84.3 million at June 30, 2026 compared to $82.3 million at March 31, 2026 and $19.9 million at June 30, 2025.

Special mention loans decreased to $73.0 million at June 30, 2026 compared to $97.8 million at March 31, 2026 and increased compared to $65.6 million at June 30, 2025. As of June 30, 2026, there were four special mention loans with individual balances greater than $5.0 million, totaling $53.0 million. These loans consist primarily of multifamily commercial real estate and other commercial real estate exposures that are well-collateralized. Management does not currently expect material losses on these credits and is actively engaged in credit oversight and timely execution of workout strategies.

Total deposits decreased $61.9 million from March 31, 2026 to $5.40 billion at June 30, 2026 and decreased $134.1 million when compared to December 31, 2025. The year-to-date decrease in total deposits was primarily due to a decrease in money market and savings accounts of $104.4 million, a decrease in time deposits of $19.5 million and a decrease in interest-bearing checking of $19.0 million. These decreases were partially offset by an increase in noninterest-bearing deposits of $18.9 million. Core deposits, which exclude municipal cannabis deposits, increased by $71.7 million, or 1.7%, during the same period.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits, was $5.40 billion at June 30, 2026, compared to $5.46 billion at March 31, 2026. The Company had no FHLB advances at June 30, 2026 and March 31, 2026. Brokered deposits were $796 thousand and $11.0 million at June 30, 2026 and March 31, 2026, respectively. Total reciprocal deposits were $1.33 billion and $1.42 billion at June 30, 2026 and March 31, 2026, respectively.

Uninsured deposits were $975.6 million, or 18.1% of total deposits, at June 30, 2026. Uninsured deposits, excluding deposits secured with pledged collateral, were $838.9 million, or 15.5% of total deposits, at June 30, 2026. At June 30, 2026, available liquidity was $1.90 billion, including $911.9 million in secured borrowing capacity at the FHLB, $25.1 million in secured borrowing capacity through the FRB Discount Window, $396.1 million in unsecured lines of credit with other correspondent banks, $314.4 million in unpledged securities and $257.7 million in cash and cash equivalents.

Total stockholders' equity at June 30, 2026 increased $26.2 million, or 4.4%, when compared to December 31, 2025, primarily due to current year earnings, partially offset by cash dividends paid and an increase in accumulated other comprehensive losses. As of June 30, 2026 and 2025, the ratio of total equity to total assets was 10.02% and 9.36%, respectively. As of June 30, 2026, the ratio of total tangible equity to total tangible assets⁽¹⁾ was 8.69%, compared to 8.06% and 7.88% as of December 31, 2025 and June 30, 2025, respectively. The Company's Tier 1 and Total Risk-Based Capital Ratios at June 30, 2026 were 11.71% and 14.17%, respectively.

Review of Quarterly Financial Results

Net interest income was $52.9 million for the second quarter of 2026, compared to $52.6 million for the first quarter of 2026 and $47.2 million for the second quarter of 2025. The slight increase in net interest income when compared to the first quarter of 2026 was primarily due to a decrease in interest expense on deposits of $1.3 million, partially offset by a decrease in interest income on deposits at other banks of $858 thousand and a decrease in interest income on loans of $358 thousand. The increase in net interest income was $5.8 million when compared to the second quarter of 2025, and was primarily due to a decrease in interest expense on deposits of $4.4 million, an increase in interest on loans of $849 thousand and a decrease in interest expense on short-term borrowings of $589 thousand. These favorable changes were partially offset by an increase in interest expense on long-term borrowings of $177 thousand. The decrease in interest expense on deposits is reflective of the rate reductions during 2026.

The Company's NIM increased to 3.70% for the second quarter of 2026 from 3.64% for the first quarter of 2026, primarily due to lower interest expense on deposits, partially offset by lower accelerated accretion related to loan payoffs. NIM excluding accretion increased for the comparable periods from 3.35% to 3.45%. Excluding accretion interest income, loan yields decreased 1 bp and funding costs decreased 8 bps for the comparable periods. Interest expense for the second quarter of 2026 decreased $1.3 million compared to the first quarter of 2026, primarily due to lower rates during the quarter. The Company's NIM increased to 3.70% for the second quarter of 2026 from 3.34% for the second quarter of 2025. The Company's average interest-earning asset yield remained flat at 5.42% for the second quarter of 2026 compared to the second quarter of 2025, while the average cost of funds decreased 36 bps to 1.81% from 2.17% for the same periods.

The provision for credit losses was $896 thousand for the three months ended June 30, 2026. The comparable amounts were $85 thousand for the three months ended March 31, 2026 and $1.5 million for the three months ended June 30, 2025. The increase in the provision for credit losses for the second quarter of 2026 compared to the first quarter of 2026 was due to a higher unfunded commitments, partially offset by favorable credit outlook and lower net charge offs. Coverage ratios decreased to 1.20% at June 30, 2026 from 1.21% at March 31, 2026, and decreased compared to June 30, 2025. Net charge-offs decreased to $123 thousand for the second quarter of 2026 compared to $847 thousand for the first quarter of 2026 and $649 thousand for the second quarter of 2025. The decrease was driven by the consumer loan related write-offs during the first quarter of 2026.

Total noninterest income for the second quarter of 2026 was $8.8 million, an increase of $1.6 million from the first quarter of 2026. The increase in other noninterest income was primarily related to other fees for bank services. Total noninterest income decreased $576 thousand during the second quarter of 2026 when compared to the second quarter of 2025 due to lower mortgage related activity.

Total noninterest expense of $35.7 million for the second quarter of 2026 decreased $1.4 million compared to $37.1 million for the first quarter of 2026, and increased $1.3 million compared to $34.4 million for the second quarter of 2025. The decrease from the first quarter of 2026 was primarily due to a decrease in salaries and employee benefit expenses of $1.2 million and a decrease in professional service fees of $250 thousand. The decrease in salaries and employee benefits was primarily related to lower employee related taxes. The increase from the second quarter of 2025 was primarily due to an increase in salaries and employee benefits expense of $720 thousand and an increase in software and data processing costs of $516 thousand, partially offset by a decrease in amortization of other intangible assets of $297 thousand.

The efficiency ratio for the second quarter of 2026 when compared to the first quarter of 2026 and the second quarter of 2025 was 57.76%, 61.97% and 60.83%, respectively. Adjusted efficiency ratios – non-GAAP⁽¹⁾ for the same periods were 54.49%, 58.57% and 56.73%, respectively.

Review of Six Month Financial Results

Net interest income for the six months ended June 30, 2026 was $105.5 million, an increase of $12.4 million, or 13.3%, when compared to the six months ended June 30, 2025. The increase in net interest income was primarily due to an increase in total interest income of $3.4 million, or 2.2%, which included an increase in interest on loans of $4.1 million, or 3.0%, a decrease in interest on deposits with other banks of $939 thousand, or 18.8%, and an increase in interest income on taxable investments of $169 thousand. The increase in interest on loans was primarily due to the increase in the average balance of loans of $70.6 million, or 1.5%. The decrease in total interest expense was primarily due to a decrease in interest on deposits of $8.2 million and lower short-term borrowings of  $1.2 million. These were partially offset by the increase in interest expense on long-term borrowings of $384 thousand as a result of lower FHLB borrowings and subordinated debt-related expenses that were classified as short term borrowings in 2025.

The Company's NIM increased from 3.28% for the six months ended June 30, 2025 to 3.67% for the six months ended June 30, 2026. Margins were higher due to a $64.8 million increase in interest-earning asset balances and a 6 bp increase in interest-earning asset yields. These positive movements were coupled with a lower cost of interest-bearing deposits. The increase in the average balances of interest-bearing deposits of $4.6 million was offset by a 44 basis point decrease in the associated rates paid, as well as a $49.2 million decrease in the average balance of FHLB advances and a 99 basis point decrease in the associated rates paid. Net accretion income impacted net interest margin by 27 basis points and 24 basis points for the six months ended June 30, 2026 and 2025, respectively, which resulted in NIM excluding accretion of 3.40% and 3.04% for the same periods.

The provision for credit losses for the six months ended June 30, 2026 and 2025 was $1.0 million and $2.6 million, respectively. The decrease in the provision for credit losses during 2026 was due to improved economic conditions and lower net charge-offs, partially offset by higher reserves related to growth in the loan portfolio. Net charge-offs for the six months ended June 30, 2026 were $970 thousand, compared to $1.2 million for the six months ended June 30, 2025.

Total noninterest income for the six months ended June 30, 2026 decreased $466 thousand, or 2.8%, when compared to the same period in 2025. The decrease was primarily due to an $833 thousand decrease in other noninterest income and a $615 thousand decrease in mortgage banking revenue, partially offset by a $475 thousand increase in trust and investment fee income and a $293 thousand increase in interchange credits.

Total noninterest expense for the six months ended June 30, 2026 increased $4.6 million, or 6.7%, when compared to the same period in 2025. Noninterest expense line items increased primarily due to higher salaries and employee benefit expenses of $3.9 million and a $1.0 million increase in software and data processing expense. These increases were partially offset by lower amortization of intangible assets of $595 thousand during the six months ended June 30, 2026.

The efficiency ratio for the six months ended June 30, 2026 was 59.83% compared to 62.19% for the six months ended June 30, 2025. Adjusted efficiency ratios – non-GAAP⁽¹⁾ for the same periods were 56.50% and 57.95%, respectively.

Shore Bancshares Information

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

Forward-Looking Statements

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

Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. We caution that the forward-looking statements are based largely on our expectations and information available at the time the statements are made and are subject to known and unknown risks and uncertainties that are subject to change based on factors, which in many instances are beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements. You should bear this in mind when reading this news release and not place undue reliance on these forward-looking statements.

The factors that could cause actual results to differ materially from those expressed in such forward-looking statements include, but are not limited to, the risks identified in our Annual Report on Form 10-K for the year ended December 31, 2025, and in any subsequent filings with the Securities and Exchange Commission and the following: local, regional and global business, economic and political conditions and geopolitical events; changes in laws, rules and regulatory requirements, including capital and liquidity requirements; changes in consumer and business confidence, investor sentiment, and consumer spending and savings behavior; changes in the level of inflation; changes in monetary and fiscal policies; changes in trade policies, including the imposition of tariffs and retaliatory responses; changes in the demand for loans, deposits, and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; changes in FDIC assessments; changes in the interest rate environment; changes in income tax laws and regulations; our ability to manage effectively our capital and liquidity; the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations; changes in credit ratings assigned to us; competitive pressures among financial services companies; technology changes instituted by us, our counterparties, or competitors; the ability to attract, develop, and retain qualified employees; change in federal government enforcement of federal laws affecting the cannabis industry; our ability to maintain the security of our financial, accounting, technology, data processing and other operational systems and facilities; our ability to effectively defend ourselves against cyber-attacks and other attempts by unauthorized parties to access our information or information of our customers or to disrupt our systems; our ability to withstand disruptions that may be caused by any failure of our operational systems or those of third parties; our ability to control expenses; the impact of changes in accounting policies, including the introduction of new accounting standards; the impact of judicial or regulatory proceedings; and the impact of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, epidemics or pandemics, an outbreak or escalation of hostilities or other geopolitical instabilities, the effects of climate change or extraordinary events beyond our control.

Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.