PR Newswire | Jul 29, 2021 04:16PM EDT

07/29 15:15 CDT

Shore Bancshares Reports Second Quarter and First-Half Financial Results EASTON, Md., July 29, 2021

EASTON, Md., July 29, 2021 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company") reported net income of $4.031 million or $0.34 per diluted common share for the second quarter of 2021, compared to net income of $3.998 million or $0.34 per diluted common share for the first quarter of 2021, and net income of $5.335 million or $0.43 per diluted common share for the second quarter of 2020. Net income for the first half of 2021 was $8.028 million or $0.68 per diluted common share, compared to net income for the first half of 2020 of $8.453 million or $0.68 per diluted common share. On March 3, 2021, the Company and Severn Bancorp, Inc. ("Severn") announced that they had entered into a merger agreement pursuant to which Severn will be merged with and into the Company. For both the second quarter and the first six months of 2021, the Company recorded $377 thousand in merger-related expenses and will continue to recognize additional merger-related expenses in future quarters as they are incurred.

When comparing net income for the second quarter of 2021 to the first quarter of 2021, net income increased $33 thousand, primarily due to increases in net interest income of $303 thousand and noninterest income of $346 thousand, which was almost entirely offset by an increase in provision for credit losses of $225 thousand and noninterest expense of $377 thousand. When comparing net income for the second quarter of 2021 to the second quarter of 2020, net income decreased $1.3 million, primarily due to the return to a more normalized operating noninterest expense run-rate given that a large production of PPP loan originations occurred in the second quarter of 2020 allowing for the deferral of costs, specifically salaries and wages tied to generating these loans. Despite lower deferred loan origination costs in the second quarter of 2021 when compared to the second quarter of 2020, the Company experienced an increase in net interest income of $1.1 million and a reduced provision for credit losses of $350 thousand. In addition, merger-related expenses previously mentioned of $377 thousand, reduced profitability in the second quarter of 2021 when compared to the linked and previous quarters.

"We are pleased to announce our second quarter earnings and a strong demand for our banking services." said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer. "All of our markets have rebounded nicely from the pandemic. We have especially seen very robust activity in our vacation travel markets. This has been a very welcoming turnaround and has led to some significant loan and deposit growth. We processed a total of 2,454 loans for a cumulative balance of $196.0 million through both rounds of the PPP program. We have been working diligently with our PPP borrowers this quarter on forgiveness and have reduced our outstanding balance of PPP loans to $86.8 million at June 30, 2021. Despite the decrease in PPP loans, we have been able to grow our loan portfolio through traditional lending channels and our pipeline remains very strong. We have a very positive outlook on the remainder of 2021 and remain focused on core earnings and enhanced returns for our shareholders."

Ongoing response to COVID-19

Employees Many of our non-branch personnel have returned to our offices and continue to practice social distancing as the Company has implemented enhanced cleaning and disinfecting procedures across all locations. Due to vaccinations and very low positivity rates for COVID within our markets, we have been able to resume in-person meetings at limited capacity. We continue to have some meetings through telephonic or video conferencing. We have resumed most of our business-related travel, public events, and meetings with outside parties. We have encouraged our employees to sign-up and receive the COVID vaccine in accordance with state and local guidelines.

Banking Locations All our branch locations remain open, with normal hours of operation. The drive-thru locations have expanded their capabilities to accommodate an array of transactions for our customers. We notified our customers of our changes in operations as well as promoted the use of online and mobile banking.

Customers We thank our customers for their commitment and understanding as we continue to find ways to serve them as safely and securely as possible.

Loan Deferrals As of June 30, 2021, the Company's outstanding COVID related loan deferral balance amounted to $9.5 million, or less than 1% of the total loan portfolio. This balance consisted of two hotel loans on principal only deferral as they continue to make interest only payments. The outstanding COVID loan deferral balance at March 31, 2021 was $16.1 million, or 1.10% of the total loan portfolio and $34.9 million, or 2.40% of the total loan portfolio at December 31, 2020.

Small Business Administration's Paycheck Protection Program ("PPP") We remain a SBA preferred lender and actively participated in the first and second PPP programs. The first round of PPP lending resulted in 1,495 loans for $129.0 million, of which 1,037 loans have been forgiven or paid down in the amount of $102.3 million as of June 30, 2021. The second round of PPP lending which began in 2021, resulted in 959 loans for $67.3 million, of which 223 loans have been forgiven or paid down in the amount of $7.2 million. As of June 30, 2021, the Company had 1,195 PPP loans totaling $86.8 million that were outstanding, inclusive of loans issued during both the first and second rounds of PPP.

Share Repurchases At the present time, all share repurchases have been suspended due to the current status of our merger with Severn. Once the merger is consummated, the Company intends to resume its current share buyback program in which $546 thousand remains available. The Board of Directors and management will re-evaluate the need for an additional stock repurchase program once the current plan is exhausted or expires.

Dividends We currently expect to maintain our quarterly cash dividends based on our strong capital position.

Balance Sheet ReviewTotal assets were $2.120 billion at June 30, 2021, a $186.9 million, or 9.7%, increase when compared to $1.933 billion at the end of 2020. This growth was due to increases in both investment securities held to maturity and interest-bearing deposits with other banks of $133.2 million and $48.7 million, respectively. These increases were funded by an increase in deposits of $179.9 million and proceeds from the maturity and principal payments on investment securities available for sale of $25.6 million.

Total deposits increased $179.9 million, or 10.6%, when compared to December 31, 2020. The increase in total deposits consisted of increases in the following categories: savings and money market accounts of $150.6 million, noninterest-bearing deposits of $28.9 million and other time deposits of $2.7 million, partially offset by a decrease in interest checking accounts of $2.3 million. The significant movement within deposit accounts continues to be impacted by direct government stimulus payments to our customers and new account openings.

Total stockholders' equity increased $3.7 million, or 1.9%, when compared to the end of 2020. At June 30, 2021, the ratio of total equity to total assets was 9.37% and the ratio of total tangible equity to total tangible assets was 8.55%.

Total assets at June 30, 2021 increased $400.7 million, or 23.3%, when compared to total assets at June 30, 2020, primarily the result of increases in total investment securities of $214.7 million, cash and cash equivalents of $117.2 million and loan growth of $65.2 million. In addition, other assets increased $12.9 million, primarily the result of purchasing life insurance contracts in the first quarter of 2021.

Total deposits at June 30, 2021 increased $375.9 million, or 25.0%, when compared to June 30, 2020. The increase in total deposits included growth within savings and money market accounts of $183.0 million, interest-bearing checking accounts of $99.0 million and noninterest-bearing deposits of $95.0 million. These increases were partially offset by a decrease in other time deposits of $1.1 million.

Total stockholders' equity decreased $1.5 million, or 0.7%, when compared to June 30, 2020, primarily attributed to stock buybacks of $9.1 million which occurred in the third and fourth quarters of 2020.

Review of Quarterly Financial ResultsNet interest income was $14.1 million for the second quarter of 2021, compared to $13.8 million for the first quarter of 2021 and $13.0 million for the second quarter of 2020. The increase in net interest income when compared to the first quarter of 2021 was primarily due to an increase in interest on taxable investment securities, coupled with a decrease in interest expense on interest-bearing deposits. The increase in interest on taxable investment securities was due to the purchase of held to maturity securities during the second quarter of 2021, which resulted in an increase in the average balance in taxable investment securities of $58.3 million. Due to an excess liquidity position at the Bank, management purchased these taxable investment securities, which had an average yield of 1.53% during the second quarter of 2021, which is 10bps lower than the average yield on these similar taxable investment securities during the first quarter of 2021, as it was deemed a better alternative than remaining in low-yielding interest-bearing deposits with other banks of only 10bps. The decrease in interest expense on interest-bearing deposits was due to a 6bps decline on rates paid on these deposits, specifically time deposits that matured and renewed during the second quarter of 2021 at lower rates than when they originated. The slight increase in interest and fees on loans was primarily due to increased loan originations, specifically within the consumer lending category in the last month of the second quarter of 2021. The increase in net interest income when comparing the second quarter of 2021 to the second quarter of 2020, was the result of higher interest and fees on loans and income from investment securities, coupled with a decrease in interest expense. The increase in interest income on loans was driven by an increase of $70.4 million in the average volume of loans, which included PPP lending. The average balance of investment securities increased $178.2 million, providing $456 thousand of additional income, despite a decrease in the average yield of 84bps. The decrease in interest expenses from the second quarter of 2020 was impacted by the decrease in the rates paid on interest-bearing deposits of 29bps, which reduced expense by $502 thousand, partially offset by the addition of subordinated debt in the third quarter of 2020 of $25.0 million, which resulted in $370 thousand of additional expense for the second quarter of 2021. The Company's net interest margin decreased to 2.91% for the second quarter of 2021 from 3.00% for the first quarter of 2021 and 3.41% for the second quarter of 2020. The decline in net interest margin in the second quarter of 2021 when compared to the first quarter of 2021 and the second quarter of 2020 was primarily due to excess liquidity, which has been partially invested in investment securities at lower yields and the remainder yet to be invested. Absent excess liquidity of $100 million, we estimate our margin for the second quarter of 2021 would have been 3.07%.

The provision for credit losses was $650 thousand for the three months ended June 30, 2021. The comparable amounts were $425 thousand and $1.0 million for the three months ended March 31, 2021 and June 30, 2020, respectively. The ratio of the allowance for credit losses to period-end loans was 1.02% at June 30, 2021, compared to 0.98% at March 31, 2021 and 0.79% at June 30, 2020. Excluding PPP loans, these ratios were 1.09% at June 30, 2021, 1.07% at March 31, 2021 and 0.86% at June 30, 2020. The primary drivers of the increased percentage of the allowance to total loans, excluding PPP loans, as compared to March 31, 2021 and June 30, 2020, were significant loan originations in the second quarter of 2021, specifically within the commercial real estate portfolio, which require a higher level of allowance than other traditional loan categories, as well as, pandemic related qualitative factors which have remained elevated due to uncertainty and associated risks with the COVID-19 virus/variants and lagging vaccination rates. The Company reported net recoveries of $125 thousand in the second quarter of 2021, compared to no net charge offs or recoveries for the first quarter of 2021 and net charge-offs of $288 thousand for the second quarter of 2020.

At June 30, 2021 and March 31, 2021, nonperforming assets were $4.9 million and $6.3 million, respectively. The balance of nonperforming assets decreased primarily due to decreases in nonaccrual loans of $933 thousand, or 19.1%, and loans 90 days past due and still accruing of $436 thousand, or 36.7%. Accruing troubled debt restructurings ("TDRs") decreased $118 thousand, or 1.8%, over the same time period. Other real estate owned properties decreased to $203 thousand at June 30, 2021 from $205 thousand at March 31, 2021. When comparing June 30, 2021 to June 30, 2020, nonperforming assets decreased $7.4 million, or 60.1%, primarily due to a decrease in nonaccrual loans of $7.7 million, or 66.1%. Accruing TDRs decreased $974 thousand, or 13.3%, and other real estate owned increased $165 thousand, or 434.2%, over the same time period. The ratio of nonperforming assets and accruing TDRs to total assets was 0.53%, 0.63% and 1.14% at June 30, 2021, March 31, 2021 and June 30, 2020, respectively. In addition, the ratio of accruing TDRs to total loans at June 30, 2021 was 0.43%, compared to 0.44% at March 31, 2021 and 0.52% at June 30, 2020.

Total noninterest income for the second quarter of 2021 increased $346 thousand, or 13.5%, when compared to the first quarter of 2021 and increased $134 thousand, or 4.8%, when compared to the second quarter of 2020. The increase compared the first quarter of 2021 was primarily due to higher deposit related fees and other bank service charges. The increase in noninterest income compared to the second quarter of 2020 was due to higher deposit related fees, service charges on deposit accounts and trust and investment fee income, partially offset by the absence of a gain on sale of an investment security in the second quarter of 2021 compared to a gain of $347 thousand in the same period in 2020.

Total noninterest expense for the second quarter of 2021 increased $377 thousand, or 3.6%, when compared to the first quarter of 2021 and increased $3.2 million, or 41.9%, when compared to the second quarter of 2020. The increase in noninterest expense when compared to the first quarter of 2021 was primarily due to merger-related expenses, salaries and wages, furniture and fixtures and legal and professional fees, partially offset by lower employee benefit costs. The increase in salaries and wages was mainly attributable to the deferral of costs associated with originating the second round of PPP loans in the first quarter of 2021. The decrease in employee benefits was the result of lower payroll taxes and medical insurance claims in the second quarter of 2021. The increase in noninterest expenses when compared to the second quarter of 2020 was primarily driven by salary and wages being deferred in the second quarter of 2020 as a result of originating first round PPP loans. Absent the deferral of salary and wages, increases in furniture and fixtures, data processing and merger-related expenses resulted in the overall increase in noninterest expenses when comparing these periods.

Review of Six-Month Financial ResultsNet interest income for the first six months of 2021 was $27.9 million, an increase of $2.4 million, or 9.2% when compared to the first six months of 2020. The increase was due to higher interest income of $1.6 million, specifically loans of $1.0 million and taxable investment securities of $668 thousand, and lower interest expense of $759 thousand. The lower interest expense was a result of lower costs of deposits of $1.4 million, partially offset by an increase in long-term borrowings from a subordinated debt issuance in the third quarter of 2020 of $616 thousand. The decrease of yields on earning assets of 68bps were partially offset by the decrease in rates paid on interest-bearing deposits of 37bps. The decrease of yields on earnings assets consisted of the following: lower yields on loans of 23bps due to the origination of PPP loans at 1.0%, well below the market rate for loans originated in the normal course of business, lower yields on taxable investment securities of 71bps, due to the decline in 10yr. treasury notes and its impact on the bond market and lower yields on interest-bearing deposits of 54bps, due to the Federal Reserve Board's target federal funds rate to near 0%. These declines in the yields of earning assets resulted in a net interest margin of 2.96% for the first six months of 2021 compared to 3.45% for the first six months of 2020.

The provision for credit losses for the six months ended June 30, 2021 and 2020 was $1.1 million and $1.4 million, respectively, while net recoveries were $125 thousand and net charge offs were $767 thousand, respectively. The decrease in provision for credit losses was the result of lower charge-offs in 2021 and increases in qualitative factors related to the pandemic in 2020. The ratio of allowance to total loans increased from 0.79% at June 30, 2020, to 1.02% at June 30, 2021. Excluding PPP loans, the ratio of the allowance for credit losses to period-end loans was 1.09% at June 30, 2021, higher than the 0.86% at June 30, 2020. The primary drivers for the increase in the percentage of allowance for credit losses to total loans were significant commercial real estate loan growth in the second quarter of 2021, as well as continued elevated pandemic related qualitative factors. Management will continue to evaluate the adequacy of the allowance for credit losses as more economic data becomes available and as changes within the Company's portfolio are known.

Total noninterest income for the six months ended June 30, 2021 increased $339 thousand, or 6.6%, when compared to the same period in 2020. The increase in noninterest income primarily consisted of higher deposit related fees, service charges on other bank services and trust and investment fee income, partially off-set by the absence of a gain on sale of securities in the second quarter of 2021 compared to a gain of $347 thousand in the same period in 2020. The increase in deposit related fees and other bank service charges are mostly due to the local government-imposed shutdowns in 2020 and a return to a more normalized local economy and consumer demand for products and services in 2021.

Total noninterest expense for the six months ended June 30, 2021 increased $3.4 million, or 18.7%, when compared to the same period in 2020. The increase was mainly the result of lower PPP loan originations, which resulted in lower deferred loan origination costs in 2021, higher data processing costs and FDIC insurance premiums due to significant increases in new and existing customer accounts, specifically deposits and higher occupancy costs due a new branch lease in Ocean City, Maryland which will open in 2022. In addition, as previously mentioned, during the first six months of 2021 the Company recorded merger-related expenses of $377 thousand due to the pending acquisition of Severn.

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank.

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. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Board's target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and FDIC premiums may increase if the agency experience additional resolution costs.

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.

Shore Bancshares, Inc. Financial Highlights (Unaudited) (Dollars in thousands, except per share data)



For the Three Months Ended For the Six Months Ended

June 30, June 30,

2021 2020 Change 2021 2020 Change

PROFITABILITY FOR THE PERIOD

Net interest income $14,103 $13,031 8.2 % $27,902 $25,549 9.2 %

Provision for credit losses 650 1,000 (35.0) 1,075 1,350 (20.4)

Noninterest income 2,903 2,769 4.8 5,460 5,121 6.6

Noninterest expense 10,876 7,663 41.9 21,375 18,012 18.7

Income before income taxes 5,480 7,137 (23.2) 10,912 11,308 (3.5)

Income tax expense 1,449 1,802 (19.6) 2,884 2,855 1.0

Net income $4,031 $5,335 (24.4) $8,028 $8,453 (5.0)





Return on average assets 0.78 % 1.31 %(53) bp 0.80 % 1.07 %(27) bp

Return on average assets excluding merger 0.86 1.31 (45) 0.84 1.07 (23) expenses (2)

Return on average equity 8.19 10.79 (260) 8.21 8.65 (44)

Return on average tangible equity (1), (2) 9.89 12.20 (231) 9.62 9.84 (22)

Net interest margin 2.91 3.41 (50) 2.96 3.45 (49)

Efficiency ratio - GAAP 63.95 48.50 1,545 64.07 58.73 534

Efficiency ratio - Non-GAAP (1), (2) 60.90 48.58 1,232 62.06 58.33 373



PER SHARE DATA

Basic and diluted net income per common share$0.34 $0.43 (20.9) % $0.68 $0.68 - %



Dividends paid per common share $0.12 $0.12 - $0.24 $0.24 -

Book value per common share at period end 16.91 15.98 5.8

Tangible book value per common share at 15.29 14.42 6.0 period end (1)

Market value at period end 16.75 11.09 51.0

Market range:

High 18.01 12.40 45.2 18.10 17.56 3.1

Low 16.10 8.00 101.3 12.99 7.63 70.2



AVERAGE BALANCE SHEET DATA

Loans $1,444,684 $1,374,324 5.1 % $1,447,767 $1,318,883 9.8 %

Investment securities 286,121 107,908 165.2 257,130 118,659 116.7

Earning assets 1,949,509 1,539,945 26.6 1,908,945 1,495,227 27.7

Assets 2,061,214 1,638,387 25.8 2,018,818 1,592,689 26.8

Deposits 1,822,148 1,427,063 27.7 1,782,627 1,377,112 29.4

Stockholders' equity 197,532 198,842 (0.7) 196,666 196,587 0.0



CREDIT QUALITY DATA

Net (recoveries) charge-offs $(125) $288 (143.4)% $(125) $767 (116.3)%



Nonaccrual loans $3,947 $11,649 (66.1)

Loans 90 days past due and still accruing 752 604 24.5

Other real estate owned 203 38 434.2

Total nonperforming assets 4,902 12,291 (60.1)

Accruing troubled debt restructurings (TDRs) 6,338 7,312 (13.3)

Total nonperforming assets and accruing TDRs $11,240 $19,603 (42.7)





CAPITAL AND CREDIT QUALITY RATIOS

Period-end equity to assets 9.37 % 11.64 %(227) bp

Period-end tangible equity to tangible assets 8.55 10.63 (208) (1)



Annualized net (recoveries) charge-offs to (0.03) 0.08 (11) (0.03) % 0.12 %(15) bpaverage loans



Allowance for credit losses as a percent of:

Period-end loans (3) 1.02 0.79 23

Nonaccrual loans 382.27 95.20 287

Nonperforming assets 307.79 90.23 218

Accruing TDRs 238.06 151.67 86

Nonperforming assets and accruing TDRs 134.23 56.57 78



As a percent of total loans:

Nonaccrual loans 0.27 0.83 (56)

Accruing TDRs 0.43 0.52 (9)

Nonaccrual loans and accruing TDRs 0.70 1.35 (65)



As a percent of total loans+other real estate owned:

Nonperforming assets 0.33 0.87 (54)

Nonperforming assets and accruing TDRs 0.76 1.39 (63)



As a percent of total assets:

Nonaccrual loans 0.19 0.68 (49)

Nonperforming assets 0.23 0.71 (48)

Accruing TDRs 0.30 0.43 (13)

Nonperforming assets and accruing TDRs 0.53 1.14 (61)

(1) See the reconciliation table that begins on page 15 of 16.

(2) This ratio excludes merger related expenses.

As of June 30, 2021 and June 30, 2020, these ratios included PPP loans of(3) $86.8 million and $123.0 million, respectively. Excluding these loans, the ratios were 1.09% and 0.86% for June 30, 2021 and June 30, 2020, respectively.

Shore Bancshares, Inc. Consolidated Balance Sheets (Unaudited) (In thousands, except per share data)



June 30, 2021 June 30, 2021

June 30, December 31, June 30, compared to compared to

2021 2020 2020 December 31, 2020 June 30, 2020

ASSETS

Cash and due from banks $18,275 $16,666 $24,585 9.7 %(25.7) %

Interest-bearing deposits with other banks 218,913 170,251 101,699 28.6 115.3

Cash and cash equivalents 237,188 186,917 126,284 26.9 87.8



Investment securities available for sale (at fair value) 113,957 139,568 86,020 (18.4) 32.5

Investment securities held to maturity 198,884 65,706 11,710 202.7 1,598.4

Equity securities, at fair value 1,384 1,395 1,388 (0.8) (0.3)

Restricted securities 3,189 3,626 3,626 (12.1) (12.1)



Loans 1,472,429 1,454,256 1,407,2491.2 4.6

Less: allowance for credit losses (15,088) (13,888) (11,090) 8.6 (36.1)

Loans, net 1,457,341 1,440,368 1,396,1591.2 4.4



Premises and equipment, net 25,313 24,924 24,668 1.6 2.6

Goodwill 17,518 17,518 17,518 - -

Other intangible assets, net 1,473 1,719 1,970 (14.3) (25.2)

Other real estate owned, net 203 - 38 - 434.2

Right of use assets, net 5,616 4,795 4,879 17.1 15.1

Other assets 58,194 46,779 45,264 24.4 28.6

Total assets $2,120,260$1,933,315 $1,719,5249.7 23.3



LIABILITIES

Noninterest-bearing deposits $538,009 $509,091 $442,996 5.7 21.4

Interest-bearing deposits 1,342,573 1,191,614 1,061,73212.7 26.5

Total deposits 1,880,582 1,700,705 1,504,72810.6 25.0



Securities sold under retail repurchase agreements 2,907 1,050 1,064 176.9 173.2

Subordinated debt 24,490 24,429 - 0.2 -

Total borrowings 27,397 25,479 1,064



Lease liabilities 5,757 4,874 4,941 18.1 16.5

Accrued expenses and other liabilities 7,842 7,238 8,657 8.3 (9.4)

Total liabilities 1,921,578 1,738,296 1,519,39010.5 26.5



COMMITMENTS AND CONTINGENCIES



STOCKHOLDERS' EQUITY

Common stock, par value $0.01; authorized 35,000,000 118 118 125 - (5.6) shares

Additional paid in capital 51,544 52,167 61,129 (1.2) (15.7)

Retained earnings 146,414 141,205 136,876 3.7 7.0

Accumulated other comprehensive income 606 1,529 2,004 (60.4) (69.8)

Total stockholders' equity 198,682 195,019 200,134 1.9 (0.7)

Total liabilities and stockholders' equity $2,120,260$1,933,315 $1,719,5249.7 23.3



Period-end common shares outstanding 11,752 11,783 12,526 (0.3) (6.2)

Book value per common share $16.91 $16.55 $15.98 2.2 5.8

Shore Bancshares, Inc. Consolidated Statements of Income (Unaudited) (In thousands, except per share data)





For the Three Months Ended For the Six Months Ended

June 30, June 30,

2021 2020 % Change 2021 2020 % Change

INTEREST INCOME

Interest and fees on loans $14,381$13,9453.1 %$28,747$27,7403.6 %

Interest on investment securities:

Taxable 1,095 638 71.6 2,025 1,357 49.2

Interest on deposits with other banks 55 11 400.0 102 183 (44.3)

Total interest income 15,531 14,5946.4 30,874 29,2805.4



INTEREST EXPENSE

Interest on deposits 1,056 1,556 (32.1) 2,240 3,615 (38.0)

Interest on short-term borrowings 2 1 100.0 3 3 -

Interest on long-term borrowings 370 6 6,066.7 729 113 -

Total interest expense 1,428 1,563 (8.6) 2,972 3,731 (20.3)



NET INTEREST INCOME 14,103 13,0318.2 27,902 25,5499.2

Provision for credit losses 650 1,000 (35.0) 1,075 1,350 (20.4)



NET INTEREST INCOME AFTER PROVISION

FOR CREDIT LOSSES 13,453 12,03111.8 26,827 24,19910.9



NONINTEREST INCOME

Service charges on deposit accounts 683 544 25.6 1,357 1,410 (3.8)

Trust and investment fee income 475 363 30.9 882 738 19.5

Gains on sales and calls of investment securities - 347 (100.0) - 347 -

Other noninterest income 1,745 1,515 15.2 3,221 2,626 22.7

Total noninterest income 2,903 2,769 4.8 5,460 5,121 6.6



NONINTEREST EXPENSE

Salaries and wages 4,262 2,130 100.1 8,404 6,426 30.8

Employee benefits 1,493 1,535 (2.7) 3,337 3,257 2.5

Occupancy expense 770 702 9.7 1,584 1,400 13.1

Furniture and equipment expense 412 247 66.8 719 564 27.5

Data processing 1,217 1,037 17.4 2,344 2,081 12.6

Directors' fees 154 113 36.3 303 254 19.3

Amortization of intangible assets 120 138 (13.0) 246 282 (12.8)

FDIC insurance premium expense 223 124 79.8 408 215 89.8

Other real estate owned expenses, net 1 - - 2 18 (88.9)

Legal and professional fees 648 553 17.2 1,164 1,187 (1.9)

Merger related expenses 377 - - 377 - -

Other noninterest expenses 1,199 1,084 10.6 2,487 2,328 6.8

Total noninterest expense 10,876 7,663 41.9 21,375 18,01218.7



Income before income taxes 5,480 7,137 (23.2) 10,912 11,308(3.5)

Income tax expense 1,449 1,802 (19.6) 2,884 2,855 1.0



NET INCOME $4,031 $5,335 (24.4) $8,028 $8,453 (5.0)



Weighted average shares outstanding - basic 11,752 12,524(6.2) 11,749 12,519(6.2)

Weighted average shares outstanding - diluted 11,754 12,525(6.2) 11,750 12,521(6.2)



Basic and diluted net income per common share $0.34 $0.43 (20.9) $0.68 $0.68 -



Dividends paid per common share 0.12 0.12 - 0.24 0.24 -

Shore Bancshares, Inc. Consolidated Average Balance Sheets (Unaudited) (Dollars in thousands)



For the Three Months Ended For the Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Average Yield/ Average Yield/ Average Yield/ Average Yield/

balance rate balance rate balance rate balance rate

Earning assets

Loans (1), (2), (3) $1,444,6844.00 %$1,374,3244.09 %$1,447,7674.01 %$1,318,8834.24 %

Investment securities

Taxable 286,121 1.53 107,908 2.37 257,130 1.59 118,659 2.30

Interest-bearing deposits 218,704 0.10 57,713 0.07 204,048 0.10 57,685 0.64

Total earning assets 1,949,5093.20 % 1,539,9453.82 % 1,908,9453.27 % 1,495,2273.95 %

Cash and due from banks 16,908 18,167 18,070 18,020

Other assets 109,457 90,981 106,251 90,068

Allowance for credit losses (14,660) (10,706) (14,448) (10,626)

Total assets $2,061,214 $1,638,387 $2,018,818 $1,592,689





Interest-bearing liabilities

Demand deposits $405,473 0.13 %$298,568 0.20 %$421,816 0.14 %$291,372 0.37 %

Money market and savings deposits 605,202 0.17 426,963 0.23 565,341 0.17 418,608 0.34

Certificates of deposit $100,000 or more 135,376 1.04 130,582 1.81 133,073 1.14 129,995 1.83

Other time deposits 143,821 0.90 150,675 1.54 144,367 1.00 150,659 1.58

Interest-bearing deposits 1,289,8720.33 1,006,7880.62 1,264,5970.36 990,634 0.73

Securities sold under retail repurchase

agreements and federal funds purchased 3,123 0.26 2,030 0.20 2,683 0.23 1,632 0.37

Advances from FHLB - long-term - - 824 2.93 - - 7,912 2.87

Subordinated debt 24,474 6.06 - - 24,459 6.01 - -

Total interest-bearing liabilities 1,317,4690.43 % 1,009,6420.62 % 1,291,7390.46 % 1,000,1780.75 %

Noninterest-bearing deposits 532,276 420,275 518,030 386,478

Accrued expenses and other liabilities 13,937 9,628 12,383 9,446

Stockholders' equity 197,532 198,842 196,666 196,587

Total liabilities and stockholders' equity$2,061,214 $1,638,387 $2,018,818 $1,592,689



Net interest spread 2.77 % 3.20 % 2.81 % 3.20 %

Net interest margin 2.91 % 3.41 % 2.96 % 3.45 %

All amounts are reported on a tax-equivalent basis computed using the(1) statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

Interest income on loans includes accreted loan fees, net of costs and(3) accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc. Financial Highlights By Quarter (Unaudited) (Dollars in thousands, except per share data)



2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter Q2 2021 Q2 2021

2021 2021 2020 2020 2020 compared to compared to

Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2021 Q2 2020

PROFITABILITY FOR THE PERIOD

Taxable-equivalent net interest income $14,141 $13,836 $13,799 $13,317 $13,068 2.2 % 8.2 %

Less: Taxable-equivalent adjustment 38 36 34 34 37 5.6 2.7

Net interest income 14,103 13,800 13,765 13,283 13,031 2.2 8.2

Provision for credit losses 650 425 1,050 1,500 1,000 52.9 (35.0)

Noninterest income 2,903 2,557 3,047 2,581 2,769 13.5 4.8

Noninterest expense 10,876 10,499 10,556 9,831 7,663 3.6 41.9

Income before income taxes 5,480 5,433 5,206 4,533 7,137 0.9 (23.2)

Income tax expense 1,449 1,435 1,320 1,142 1,802 1.0 (19.6)

Net income $4,031 $3,998 $3,886 $3,391 $5,335 0.8 (24.4)



Return on average assets 0.78 % 0.82 % 0.82 % 0.76 % 1.31 %(4) bp(53) bp

Return on average assets excluding merger 0.86 0.82 0.82 0.76 1.31 4 (45) expenses (2)

Return on average equity 8.19 8.28 7.82 6.71 10.79 (9) (260)

Return on average tangible equity (1) 9.89 9.40 8.88 7.63 12.20 49 (231)

Net interest margin 2.91 3.00 3.08 3.17 3.41 (9) (50)

Efficiency ratio - GAAP 63.95 64.19 62.79 61.97 48.50 (24) 1,545

Efficiency ratio - Non-GAAP (1), (2) 60.90 63.28 61.91 61.05 48.58 (238) 1,232



PER SHARE DATA

Basic and diluted net income per common $0.34 $0.34 $0.32 $0.27 $0.43 - % (20.9) % share



Dividends paid per common share 0.12 0.12 0.12 0.12 0.12 - -

Book value per common share at period end 16.91 16.69 16.55 16.28 15.98 1.3 5.8

Tangible book value per common share at 15.29 15.06 14.92 14.69 14.42 1.5 6.0 period end (1)

Market value at period end 16.75 17.02 14.60 10.98 11.09 (1.6) 51.0

Market range:

High 18.01 18.10 15.12 11.77 12.40 (0.5) 45.2

Low 16.10 12.99 10.25 9.14 8.00 23.9 101.3



AVERAGE BALANCE SHEET DATA

Loans $1,444,684 $1,450,883 $1,430,013 $1,406,683 $1,374,324 (0.4) % 5.1 %

Investment securities 286,121 227,816 179,801 136,017 107,908 25.6 165.2

Earning assets 1,949,509 1,867,930 1,780,854 1,670,194 1,539,945 4.4 26.6

Assets 2,061,214 1,975,951 1,880,449 1,771,944 1,638,387 4.3 25.8

Deposits 1,822,148 1,742,666 1,646,980 1,548,072 1,427,063 4.6 27.7

Stockholders' equity 197,532 195,791 197,591 201,079 198,842 0.9 (0.7)



CREDIT QUALITY DATA

Net (recoveries) charge-offs $(125) $- $(61) $(187) $288 - % (143.4) %



Nonaccrual loans $3,947 $4,880 $5,455 $6,966 $11,649 (19.1) (66.1)

Loans 90 days past due and still accruing 752 1,188 804 1,373 604 (36.7) 24.5

Other real estate owned 203 205 - 38 38 (1.0) 434.2

Total nonperforming assets $4,902 $6,273 $6,259 $8,377 $12,291 (21.9) (60.1)



Accruing troubled debt restructurings $6,338 $6,456 $6,997 $7,267 $7,312 (1.8) (13.3) (TDRs)



Total nonperforming assets and accruing $11,240 $12,729 $13,256 $15,644 $19,603 (11.7) (42.7) TDRs



CAPITAL AND CREDIT QUALITY RATIOS

Period-end equity to assets 9.37 % 9.61 % 10.09 % 10.88 % 11.64 %(24) bp(227) bp

Period-end tangible equity to tangible 8.55 8.76 9.18 9.92 10.63 (21) (208) assets (1)



Annualized net (recoveries) charge-offs (0.03) - (0.02) (0.05) 0.08 (3) (11) to average loans



Allowance for credit losses as a percent of:

Period-end loans (3) 1.02 0.98 0.95 0.90 0.79 4 23

Nonaccrual loans 382.27 293.30 254.59 183.42 95.20 8,897 287

Nonperforming assets 307.79 228.17 221.89 152.52 90.23 7,962 218

Accruing TDRs 238.06 221.70 198.49 175.82 151.67 1,636 86

Nonperforming assets and accruing TDRs 134.23 112.44 104.77 81.67 56.57 2,179 78



As a percent of total loans:

Nonaccrual loans 0.27 0.33 0.38 0.49 0.83 (6) (56)

Accruing TDRs 0.43 0.44 0.48 0.51 0.52 (1) (9)

Nonaccrual loans and accruing TDRs 0.70 0.78 0.86 1.00 1.35 (8) (65)



As a percent of total loans+other real estate owned:

Nonperforming assets 0.33 0.43 0.43 0.59 0.87 (10) (54)

Nonperforming assets and accruing TDRs 0.76 0.87 0.91 1.10 1.39 (11) (63)



As a percent of total assets:

Nonaccrual loans 0.19 0.24 0.28 0.38 0.68 (5) (49)

Nonperforming assets 0.23 0.31 0.32 0.46 0.71 (8) (48)

Accruing TDRs 0.30 0.32 0.36 0.40 0.43 (2) (13)

Nonperforming assets and accruing TDRs 0.53 0.63 0.68 0.86 1.14 (10) (61)

(1) See the reconciliation table that begins on page 15 of 16.

(2) This ratio excludes merger related expenses.

Includes PPP loan balances for all periods shown. As of June 30, 2021, December 31, 2020, and June 30, 2020, these ratios included PPP loans of(3) $86.8 million, $122.8 million and $123.0 million, respectively. Excluding these loans, the ratios were 1.09%, 1.04%, and 0.86% for June 30, 2021, December 31, 2020, and June 30, 2020, respectively.

Shore Bancshares, Inc. Consolidated Statements of Income By Quarter (Unaudited) (In thousands, except per share data)



Q2 2021 Q2 2021

compared to compared to

Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2021 Q2 2020

INTEREST INCOME

Interest and fees on loans $14,381$14,366$14,541$14,139$13,9450.1 %3.1 %

Interest on investment securities:

Taxable 1,095 931 910 730 638 17.6 71.6

Interest on deposits with other banks 55 47 44 33 11 17.0 400.0

Total interest income 15,531 15,344 15,495 14,902 14,5941.2 6.4



INTEREST EXPENSE

Interest on deposits 1,056 1,184 1,355 1,470 1,556 (10.8) (32.1)

Interest on short-term borrowings 2 1 1 1 1 100.0 100.0

Interest on long-term borrowings 370 359 374 148 6 3.1 6,066.7

Total interest expense 1,428 1,544 1,730 1,619 1,563 (7.5) (8.6)



NET INTEREST INCOME 14,103 13,800 13,765 13,283 13,0312.2 8.2

Provision for credit losses 650 425 1,050 1,500 1,000 52.9 (35.0)



NET INTEREST INCOME AFTER PROVISION

FOR CREDIT LOSSES 13,453 13,375 12,715 11,783 12,0310.6 11.8



NONINTEREST INCOME

Service charges on deposit accounts 683 674 782 647 544 1.3 25.6

Trust and investment fee income 475 407 439 381 363 16.7 30.9

Gains on sales and calls of investment securities - - - - 347 - (100.0)

Other noninterest income 1,745 1,476 1,826 1,553 1,515 18.2 15.2

Total noninterest income 2,903 2,557 3,047 2,581 2,769 13.5 4.8



NONINTEREST EXPENSE

Salaries and wages 4,262 4,142 4,366 4,143 2,130 2.9 100.1

Employee benefits 1,493 1,844 1,715 1,489 1,535 (19.0) (2.7)

Occupancy expense 770 814 745 774 702 (5.4) 9.7

Furniture and equipment expense 412 307 366 294 247 34.2 66.8

Data processing 1,217 1,127 1,093 1,114 1,037 8.0 17.4

Directors' fees 154 149 118 132 113 3.4 36.3

Amortization of intangible assets 120 126 126 125 138 (4.8) (13.0)

FDIC insurance premium expense 223 185 138 132 124 20.5 79.8

Other real estate owned expenses, net 1 1 38 - - - -

Legal and professional fees 648 516 662 447 553 25.6 17.2

Merger related expenses 377 - - - - - -

Other noninterest expenses 1,199 1,288 1,189 1,181 1,084 (6.9) 10.6

Total noninterest expense 10,876 10,499 10,556 9,831 7,663 3.6 41.9



Income before income taxes 5,480 5,433 5,206 4,533 7,137 0.9 (23.2)

Income tax expense 1,449 1,435 1,320 1,142 1,802 1.0 (19.6)



NET INCOME $4,031 $3,998 $3,886 $3,391 $5,335 0.8 (24.4)



Weighted average shares outstanding - basic 11,752 11,745 12,004 12,483 12,5240.1 (6.2)

Weighted average shares outstanding - diluted 11,754 11,747 12,005 12,483 12,5250.1 (6.2)



Basic and diluted net income per common share $0.34 $0.34 $0.32 $0.27 $0.43 - (20.9)



Dividends paid per common share 0.12 0.12 0.12 0.12 0.12 - -

Shore Bancshares, Inc. Consolidated Average Balance Sheets By Quarter (Unaudited) (Dollars in thousands)



Average balance

Q2 2021 Q2 2021

compared to compared to

Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 Q1 2021 Q2 2020

Average Yield/ Average Yield/ Average Yield/ Average Yield/ Average Yield/

balance rate balance rate balance rate balance rate balance rate

Earning assets

Loans (1), (2), (3) $1,444,6844.00 %$1,450,8834.03 %$1,430,0134.05 %$1,406,6834.01 %$1,374,3244.09 %(0.4) %5.1 %

Investment securities

Taxable 286,121 1.53 227,816 1.63 179,801 2.02 136,017 2.14 107,908 2.37 25.6 165.2

Interest-bearing deposits 218,704 0.10 189,231 0.10 171,040 0.10 127,494 0.10 57,713 0.07 15.6 279.0

Total earning assets 1,949,5093.20 % 1,867,9303.34 % 1,780,8543.47 % 1,670,1943.56 % 1,539,9453.82 %4.4 26.6

Cash and due from banks 16,908 19,245 17,268 18,860 18,167 (12.1) (6.9)

Other assets 109,457 103,010 95,684 94,755 90,981 6.3 20.3

Allowance for credit losses (14,660) (14,234) (13,357) (11,865) (10,706) 3.0 36.9

Total assets $2,061,214 $1,975,951 $1,880,449 $1,771,944 $1,638,387 4.3 25.8



Interest-bearing liabilities

Demand deposits $405,473 0.13 %$438,340 0.14 %$420,582 0.18 %$370,922 0.19 %$298,568 0.20 %(7.5) 35.8

Money market and savings deposits 605,202 0.17 510,881 0.18 459,237 0.20 442,322 0.21 426,963 0.23 18.5 41.7

Certificates of deposit $100,000 or more 135,376 1.04 130,745 1.26 128,642 1.45 127,983 1.68 130,582 1.81 3.5 3.7

Other time deposits 143,821 0.90 144,919 1.10 145,795 1.27 148,223 1.42 150,675 1.54 (0.8) (4.5)

Interest-bearing deposits 1,289,8720.33 1,224,8850.39 1,154,2560.47 1,089,4500.54 1,006,7880.62 5.3 28.1

Securities sold under retail repurchase agreements

and federal funds purchased 3,123 0.26 2,238 0.18 1,101 0.36 1,575 0.25 2,030 0.20 39.5 53.8

Advances from FHLB - long-term - - - - - - - - 824 2.93 - (100.0)

Subordinated debt 24,474 6.06 24,443 5.96 24,420 6.09 9,859 5.97 - - 100.0 100.0

Total interest-bearing liabilities 1,317,4690.43 % 1,251,5660.50 % 1,179,7770.58 % 1,100,8840.59 % 1,009,6420.62 %5.3 30.5

Noninterest-bearing deposits 532,276 517,781 492,724 458,622 420,275 2.8 26.6

Accrued expenses and other liabilities 13,937 10,813 10,357 11,359 9,628 28.9 44.8

Stockholders' equity 197,532 195,791 197,591 201,079 198,842 0.9 (0.7)

Total liabilities and stockholders' equity $2,061,214 $1,975,951 $1,880,449 $1,771,944 $1,638,387 4.3 25.8



Net interest spread 2.77 % 2.84 % 2.89 % 2.97 % 3.20 %

Net interest margin 2.91 % 3.00 % 3.08 % 3.17 % 3.41 %

All amounts are reported on a tax-equivalent basis computed using the(1) statutory federal income tax rate of 21.0%, exclusive of nondeductible interest expense.

(2) Average loan balances include nonaccrual loans.

Interest income on loans includes accreted loan fees, net of costs and(3) accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc. Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (Unaudited) (In thousands, except per share data)



YTD YTD

Q2 2021 Q1 2021 Q4 2020 Q3 2020 Q2 2020 6/30/2021 6/30/2020



The following reconciles return on average equity and return on average tangible equity (Note 1):



Net Income $4,031 $3,998 $3,886 $3,391 $5,335 $8,028 $8,453

Net Income - annualized (A) $16,168 $16,214 $15,460 $13,490 $21,457 $16,144 $16,999



Net income, excluding net amortization of intangible assets

and merger related expenses $4,402 $4,092 $3,980 $3,484 $5,438 $8,493 $8,663

Net income, excluding net amortization of intangible assets$17,656 $16,595 $15,833 $13,860 $21,872 $17,079 $17,421 - annualized (B)



Average stockholders' equity (C) $197,532 $195,791 $197,591 $201,079 $198,842 $196,666 $196,587

Less: Average goodwill and other intangible assets (19,053) (19,178) (19,304) (19,430) (19,560) (19,115) (19,631)

Average tangible equity (D) $178,479 $176,613 $178,287 $181,649 $179,282 $177,551 $176,956



Return on average equity (GAAP) (A)/(C) 8.19 % 8.28 % 7.82 % 6.71 % 10.79 % 8.21 % 8.65 %

Return on average tangible equity (Non-GAAP) (B)/(D) 9.89 % 9.40 % 8.88 % 7.63 % 12.20 % 9.62 % 9.84 %



The following reconciles GAAP efficiency ratio and non-GAAP efficiency ratio (Note 2):



Noninterest expense (E) $10,876 $10,499 $10,556 $9,831 $7,663 $21,375 $18,012

Less: Amortization of intangible assets (120) (126) (126) (125) (138) (246) (282)

Merger Expenses (377) - - - - (377) -

Adjusted noninterest expense (F) $10,379 $10,373 $10,430 $9,706 $7,525 $20,752 $17,730



Net interest income (G) 14,103 13,800 13,765 13,283 13,031 27,902 25,549

Add: Taxable-equivalent adjustment 38 36 34 34 37 74 73

Taxable-equivalent net interest income (H) $14,141 $13,836 $13,799 $13,317 $13,068 $27,976 $25,622



Noninterest income (I) $2,903 $2,557 $3,047 $2,581 $2,769 $5,460 5,121

Less: Investment securities (gains) - - - - (347) - (347)

Adjusted noninterest income (J) $2,903 $2,557 $3,047 $2,581 $2,422 $5,460 $4,774



Efficiency ratio (GAAP) (E)/(G)+(I) 63.95 % 64.19 % 62.79 % 61.97 % 48.50 % 64.07 % 58.73 %

Efficiency ratio (Non-GAAP) (F)/(H)+(J) 60.90 % 63.28 % 61.91 % 61.05 % 48.58 % 62.06 % 58.33 %



The following reconciles book value per common share and tangible book value per common share (Note 1):



Stockholders' equity (L) $198,682 $196,104 $195,019 $198,881 $200,134

Less: Goodwill and other intangible assets (18,991) (19,111) (19,237) (19,362) (19,488)

Tangible equity (M) $179,691 $176,993 $175,782 $179,519 $180,646



Shares outstanding (N) 11,752 11,752 11,783 12,218 12,526



Book value per common share (GAAP) (L)/(N) $16.91 $16.69 $16.55 $16.28 $15.98

Tangible book value per common share (Non-GAAP) (M)/(N) $15.29 $15.06 $14.92 $14.69 $14.42





The following reconciles equity to assets and tangible equity to tangible assets (Note 1):



Stockholders' equity (O) $198,682 $196,104 $195,019 $198,881 $200,134

Less: Goodwill and other intangible assets (18,991) (19,111) (19,237) (19,362) (19,488)

Tangible equity (P) $179,691 $176,993 $175,782 $179,519 $180,646



Assets (Q) $2,120,260 $2,039,631 $1,933,315 $1,828,172 $1,719,524

Less: Goodwill and other intangible assets (18,991) (19,111) (19,237) (19,362) (19,488)

Tangible assets (R) $2,101,269 $2,020,520 $1,914,078 $1,808,810 $1,700,036



Period-end equity/assets (GAAP) (O)/(Q) 9.37 % 9.61 % 10.09 % 10.88 % 11.64 %

Period-end tangible equity/tangible assets (Non-GAAP) (P)/ 8.55 % 8.76 % 9.18 % 9.92 % 10.63 % (R)

Management believes that reporting tangible equity and tangible assetsNote 1: more closely approximates the adequacy of capital for regulatory purposes.

Management believes that reporting the non-GAAP efficiency ratio moreNote 2: closely measures its effectiveness of controlling cash-based operating activities.

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SOURCE Shore Bancshares, Inc.