SHBI 10-Q Quarterly Report June 30, 2025

SHORE BANCSHARES INC

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shbi-20250630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2025


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 000-22345

SHORE BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Maryland

52-1974638

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

18 E. Dover Street , Easton , Maryland

21601

(Address of Principal Executive Offices)

(Zip Code)

( 410 ) 763-7800

Registrant’s Telephone Number, Including Area Code

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, $0.01 par value per share

SHBI

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☑

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ☑

The number of shares outstanding of the registrant’s common stock as of August 4, 2025 was 33,417,377 .

Table of Contents

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Consolidated Balance Sheets at June 30, 2025 (unaudited) and December 31, 2024

Consolidated Statements of Income for the three and six months ended June 30, 2025 and 2024 (unaudited)

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2025 and 2024 (unaudited)

Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024 (unaudited)

Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (unaudited)

Notes to Consolidated Financial Statements (unaudited)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Item 5.

Other Information

Item 6.

Exhibits

SIGNATURES

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

SHORE BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS


($ in thousands, except per share data)	June 30, 2025		December 31, 2024
ASSETS	(Unaudited)
Cash and due from banks	$	54,512	$	44,008
Interest-bearing deposits with other banks	130,472		415,843
Cash and cash equivalents	184,984		459,851
Investment securities:
Available for sale, at fair value (amortized cost of $ 195,389 and $ 159,593 at June 30, 2025 and December 31, 2024, respectively)	187,679		149,212
Held to maturity, net of allowance for credit losses of $ 199 and $ 203 (fair value of $ 414,699 and $ 424,734 at June 30, 2025 and December 31, 2024, respectively)	459,246		481,077
Equity securities, at fair value	6,010		5,814
Restricted securities, at cost	20,412		20,253
Loans held for sale, at fair value	34,319		19,606
Loans held for investment	4,827,628		4,771,988
Less: allowance for credit losses	( 58,483 )		( 57,910 )
Loans, net	4,769,145		4,714,078

Premises and equipment, net	81,426		81,806
Goodwill	63,266		63,266
Other intangible assets, net	33,761		38,311
Mortgage servicing rights	5,396		5,874
Right-of-use assets	11,052		11,385
Cash surrender value on life insurance	105,860		104,421
Accrued interest receivable	19,821		19,570
Deferred income taxes	30,972		31,857
Other assets	24,525		24,382
TOTAL ASSETS	$	6,037,874	$	6,230,763

LIABILITIES
Deposits:
Noninterest-bearing	$	1,575,120	$	1,562,815
Interest-bearing checking	763,309		978,076
Money market and savings	1,691,438		1,805,884
Time deposits	1,273,285		1,181,561
Brokered deposits	10,806		—
Total deposits	5,313,958		5,528,336
FHLB advances	50,000		50,000
Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”), net	30,005		29,847
Subordinated debt, net	44,236		43,870
Total borrowings	124,241		123,717
Lease liabilities	11,541		11,844
Other liabilities	22,940		25,800
TOTAL LIABILITIES	5,472,680		5,689,697
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS’ EQUITY
Common stock, $ 0.01 par value per share; shares authorized 50,000,000 ; shares issued and outstanding 33,374,265 and 33,332,177 at June 30, 2025 and December 31, 2024, respectively	334		333
Additional paid in capital	359,063		358,112
Retained earnings	211,400		190,166
Accumulated other comprehensive loss	( 5,603 )		( 7,545 )
TOTAL STOCKHOLDERS’ EQUITY	565,194		541,066
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,037,874	$	6,230,763

See accompanying notes to unaudited consolidated financial statements.

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands, except per share data)	2025		2024		2025		2024
INTEREST INCOME
Interest and fees on loans	$	69,695	$	67,292	$	137,343	$	133,045
Interest and dividends on taxable investment securities	5,331		5,230		10,332		9,650
Interest and dividends on tax-exempt investment securities	6		6		12		12

Interest on deposits with other banks	1,588		578		4,997		1,538
Total interest income	76,620		73,106		152,684		144,245

INTEREST EXPENSE
Interest on deposits	27,369		27,585		55,440		56,081
Interest on short-term borrowings	605		1,584		1,203		1,641
Interest on long-term borrowings	1,394		1,797		2,760		3,248
Total interest expense	29,368		30,966		59,403		60,970

NET INTEREST INCOME	47,252		42,140		93,281		83,275
Provision for credit losses	1,528		2,081		2,556		2,488
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	45,724		40,059		90,725		80,787

NONINTEREST INCOME
Service charges on deposit accounts	1,519		1,493		3,033		3,001
Trust and investment fee income	942		896		1,765		1,630
Gain on sale of loans held for sale	1,325		1,131		2,291		1,838
Mortgage-banking revenue	1,054		852		1,328		945
Interchange credits	1,788		1,717		3,365		3,304

Other noninterest income	2,690		2,351		4,538		4,289
Total noninterest income	9,318		8,440		16,320		15,007

NONINTEREST EXPENSE
Salaries and employee benefits	17,742		16,900		34,182		32,847
Occupancy expense	2,472		2,432		5,010		4,848
Furniture and equipment expense	796		900		1,650		1,804
Software and data processing	4,819		4,219		9,510		8,240
Directors’ fees	219		359		567		654
Amortization of other intangible assets	2,272		2,569		4,550		5,145
FDIC insurance premium expense	1,023		1,089		2,114		2,240
Legal and professional fees	1,225		1,354		2,838		2,954
Fraud losses	83		62		188		4,564

Other noninterest expense	3,759		3,615		7,548		6,901
Total noninterest expense	34,410		33,499		68,157		70,197
Income before income taxes	20,632		15,000		38,888		25,597
Income tax expense	5,125		3,766		9,617		6,179
NET INCOME	$	15,507	$	11,234	$	29,271	$	19,418

Basic net income per common share	$	0.46	$	0.34	$	0.88	$	0.58
Diluted net income per common share	$	0.46	$	0.34	$	0.88	$	0.58
Dividends paid per common share	$	0.12	$	0.12	$	0.24	$	0.24

See accompanying notes to unaudited consolidated financial statements.

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2025		2024		2025		2024
Net income	$	15,507	$	11,234	$	29,271	$	19,418

Other comprehensive income (loss):
Investment securities:
Unrealized holding gains (losses) on available for sale securities	1,004		( 278 )		2,671		( 1,054 )
Tax effect	( 274 )		76		( 729 )		288
Total other comprehensive income (loss)	730		( 202 )		1,942		( 766 )
Comprehensive income	$	16,237	$	11,032	$	31,213	$	18,652

See accompanying notes to unaudited consolidated financial statements.

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited)


($ in thousands)	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
Balances, December 31, 2024	$	333	$	358,112	$	190,166	$	( 7,545 )	$	541,066
Net income	—		—		13,764		—		13,764
Other comprehensive income	—		—		—		1,212		1,212

Stock-based compensation	—		460		—		—		460
Cash dividends declared	—		—		( 4,032 )		—		( 4,032 )
Balances, March 31, 2025	333		358,572		199,898		( 6,333 )		552,470
Net income	—		—		15,507		—		15,507
Other comprehensive loss	—		—		—		730		730

Stock-based compensation	1		491		—		—		492
Cash dividends declared	—		—		( 4,005 )		—		( 4,005 )
Balances, June 30, 2025	$	334	$	359,063	$	211,400	$	( 5,603 )	$	565,194

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) - Continued


($ in thousands)	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
Balances, December 31, 2023	$	332	$	356,007	$	162,290	$	( 7,494 )	$	511,135
Net income	—		—		8,184		—		8,184
Other comprehensive loss	—		—		—		( 564 )		( 564 )
Common shares issued for employee stock purchase plan	—		103		—		—		103
Stock-based compensation	—		354		—		—		354
Cash dividends declared	—		—		( 3,984 )		—		( 3,984 )
Balances, March 31, 2024	332		356,464		166,490		( 8,058 )		515,228
Net income	—		—		11,234		—		11,234
Other comprehensive loss	—		—		—		( 202 )		( 202 )
Common shares issued for employee stock purchase plan	1		120		—		—		121
Stock-based compensation	—		410		—		—		410
Cash dividends declared	—		—		( 4,008 )		—		( 4,008 )
Balances, June 30, 2024	$	333	$	356,994	$	173,716	$	( 8,260 )	$	522,783

See accompanying notes to unaudited consolidated financial statements.

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Six Months Ended June 30,
($ in thousands)	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	29,271	$	19,418
Adjustments to reconcile net income to net cash provided by operating activities:
Net accretion of acquisition accounting estimates	( 6,737 )		( 7,618 )
Provision for credit losses	2,556		2,488
Depreciation and amortization	8,126		8,217
Net amortization of securities	64		( 643 )
Amortization of debt issuance costs	61		60
Gain on mortgage loans held for sale	( 2,291 )		( 1,838 )
Gain on other mortgage loan activity	( 938 )		( 608 )
Proceeds from sale of mortgage loans held for sale	82,070		64,563
Originations of loans held for sale	( 94,125 )		( 81,712 )
Stock-based compensation expense	970		764
Deferred income tax (benefit) expense	156		4,916

Loss on sales of repossessed assets	123		45
Loss on valuation adjustments on mortgage servicing rights	330		129
Loss on disposal of fixed assets	48		—
Loss on disposal of premises held for sale	61		—
Valuation adjustments on premises transferred to held for sale	—		2

Fair value adjustment on equity securities	( 106 )		84
Bank owned life insurance income	( 1,287 )		( 1,344 )
Net changes in:
Accrued interest receivable	( 253 )		( 424 )
Other assets	( 1,490 )		1,559
Accrued interest payable	88		( 630 )
Other liabilities	( 5,251 )		( 2,010 )
Net cash provided by operating activities	11,446		5,418

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and principal payments of available for sale securities	12,573		60,673

Proceeds from maturities and principal payments of held to maturity securities	23,899		19,291
Proceeds from life insurance death benefits	—		150
Purchases of available for sale securities	( 48,171 )		( 81,904 )
Purchases of held to maturity securities	( 2,326 )		( 5,800 )

Purchases of equity securities	( 90 )		( 80 )
Purchase of restricted securities	( 158 )		( 22,186 )
Net change in loans	( 49,173 )		( 59,472 )
Purchases of premises and equipment	( 1,905 )		( 3,359 )

Proceeds from sales of repossessed assets	1,531		240
Redemption of restricted securities	—		18,361
Purchases of bank owned life insurance	( 152 )		( 71 )
Proceeds from disposal of premises held for sale	843		—


Net cash used in investing activities	$	( 63,129 )	$	( 74,157 )

See accompanying notes to unaudited consolidated financial statements.

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SHORE BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued


	Six Months Ended June 30,
($ in thousands)	2025		2024

CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in:
Noninterest-bearing deposits	$	12,314	$	329,215
Interest-bearing deposits	( 227,461 )		( 567,238 )
Short-term borrowings	—		31,000
Long-term borrowings	—		50,000
Common stock dividends paid	( 8,037 )		( 7,992 )
Issuance of common stock	—		224
Net cash used in financing activities	( 223,184 )		( 164,791 )
Net decrease in cash and cash equivalents	( 274,867 )		( 233,530 )
Cash and cash equivalents at beginning of period	459,851		372,413
Cash and cash equivalents at end of period	$	184,984	$	138,883

Supplemental cash flows information:
Interest paid	$	58,022	$	60,289
Income taxes paid	7,985		—
Recognition of lease liabilities arising from right-of-use assets	912		76
Transfers from loans to repossessed assets	947		1,845
Transfer from loans held for sale to loans held for investment	649		—
Unrealized gains (losses) on available for sale securities	2,671		( 1,054 )

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

See accompanying notes to unaudited consolidated financial statements.

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Shore Bancshares, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited interim consolidated financial statements include the accounts of Shore Bancshares, Inc. and its subsidiaries (collectively referred to in these Notes as the “Company”), with all significant intercompany transactions eliminated. The accounting and reporting policies of the Company conform with generally accepted accounting principles in the United States of America (“GAAP”). For purposes of comparability, certain reclassifications have been made to amounts previously reported to conform with the current period presentation. Reclassifications had no effect on prior year net income or stockholders’ equity.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”).

Nature of Operations

The Company engages in the banking business through Shore United Bank, N.A. (the “Bank”), a Maryland commercial bank with trust powers. The Company’s primary source of revenue is derived from interest earned on commercial, residential mortgage and other loans, and fees charged in connection with lending and other banking services located in Maryland, Delaware and Virginia. The Company engages in financial service offerings through Wye Financial Partners and offers corporate trustee services through Wye Trust, a division of the Bank. The Bank also conducts secondary market lending activities through a division of the Bank. Mid-Maryland Title Company, Inc. (the “Title Company”), engaged in title work related to real estate transactions. The Title Company ceased conducting real estate closings effective March 31, 2025. Operations will continue for as long as necessary to ensure that work in progress is adequately addressed.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the related disclosures. These estimates are based on information available as of the date of the consolidated financial statements. Actual amounts or results could differ from these estimates. In the opinion of management, all normal, recurring adjustments have been included for a fair presentation of this interim financial information.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU No. 2023-09 to have a material impact on its consolidated financial statements.

Table of Contents

Note 2 – Investment Securities

The following tables provide information on the amortized cost and estimated fair values of investment securities at June 30, 2025 and December 31, 2024.


($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available for sale securities (1) :
June 30, 2025
U.S. Treasury and government agency securities	$	22,593	$	3	$	2,074	$	20,522
Mortgage-backed securities	168,579		105		6,211		162,473
Other debt securities (2)	4,217		467		—		4,684
Total	$	195,389	$	575	$	8,285	$	187,679

December 31, 2024
U.S. Treasury and government agency securities	$	22,984	$	4	$	2,786	$	20,202
Mortgage-backed securities	130,439		84		8,139		122,384
Other debt securities (2)	6,170		469		13		6,626
Total	$	159,593	$	557	$	10,938	$	149,212

____________________________________

(1) No available for sale (“AFS”) securities were sold during the three and six months ended June 30, 2025 and 2024.

(2) Other debt securities includes corporate and municipal bond obligations of state and political entities.


($ in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses
Held to maturity securities:
June 30, 2025
U.S. Treasury and government agency securities	$	129,269	$	3	$	6,253	$	123,019	$	—
Mortgage-backed securities	321,213		5		37,884		283,334		—

Other debt securities (1)	8,963		15		632		8,346		199
Total	$	459,445	$	23	$	44,769	$	414,699	$	199

December 31, 2024
U.S. Treasury and government agency securities	$	132,560	$	—	$	8,555	$	124,005	$	—
Mortgage-backed securities	336,755		—		47,234		289,521		—

Other debt securities (1)	11,965		19		776		11,208		203
Total	$	481,280	$	19	$	56,565	$	424,734	$	203

____________________________________

(1) Other debt securities includes corporate and municipal bond obligations of state and political entities.

Equity securities with aggregate fair values of $ 6.0 million and $ 5.8 million at June 30, 2025 and December 31, 2024, respectively, are presented separately on the consolidated balance sheets. The fair value adjustments recorded through earnings totaled a gain of $ 65 thousand and $ 18 thousand for the three months ended June 30, 2025 and 2024, respectively. The fair value adjustments recorded through earnings totaled a gain of $ 196 thousand and a loss of $ 171 thousand for the six months ended June 30, 2025 and 2024, respectively.

The following table summarizes the activity in the allowance for credit losses (“ACL”) on held to maturity (“HTM”) securities for the periods presented.


	Three Months Ended				Six Months Ended
($ in thousands)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Balance, beginning of period	$	178	$	116	$	203	$	94
Provision for (reversal of) credit losses, other debt securities	21		( 8 )		( 4 )		14
Balance, end of period	$	199	$	108	$	199	$	108

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A provision for credit losses of $ 21 thousand and a reversal of the provision for credit losses of $ 8 thousand was recorded on HTM corporate and municipal bonds for the three months ended June 30, 2025 and 2024, respectively. A reversal of the provision for credit losses of $ 4 thousand and a provision for credit losses of $ 14 thousand was recorded on HTM corporate and municipal bonds for the six months ended June 30, 2025 and 2024, respectively.

The following tables provide information about gross unrealized losses and fair value by length of time that the individual securities have been in a continuous unrealized loss position at June 30, 2025 and December 31, 2024.


	Less than 12 Months				More than 12 Months				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
June 30, 2025
Available for sale securities:
U.S. Treasury and government agency securities	$	73	$	1	$	17,787	$	2,073	$	17,860	$	2,074
Mortgage-backed securities	76,441		432		53,416		5,779		129,857		6,211
Other debt securities	—		—		—		—		—		—
Total	$	76,514	$	433	$	71,203	$	7,852	$	147,717	$	8,285


	Less than 12 Months				More than 12 Months				Total
($ in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
December 31, 2024
Available for sale securities:
U.S. Treasury and government agency securities	$	207	$	—	$	17,422	$	2,786	$	17,629	$	2,786
Mortgage-backed securities	56,913		710		48,782		7,429		105,695		8,139
Other debt securities	—		—		1,988		13		1,988		13
Total	$	57,120	$	710	$	68,192	$	10,228	$	125,312	$	10,938

There were 118 AFS debt securities with a fair value below the amortized cost basis, with unrealized losses totaling $ 8.3 million as of June 30, 2025. The Company concluded that a credit loss does not exist in its AFS securities portfolio as of June 30, 2025, and no impairment loss has been recognized based on the fact that (1) changes in fair value were primarily caused by fluctuations in interest rates, (2) securities with unrealized losses had generally high credit quality, (3) the Company intends to hold these investments in debt securities to maturity and it is more-likely-than-not the Company will not be required to sell these investments before a recovery of its investment, and (4) issuers have continued to make timely payments of principal and interest. Additionally, the Company’s mortgage-backed securities are issued by either U.S. government agencies or U.S. government-sponsored enterprises. Collectively, these entities provide a guarantee, which is either explicitly or implicitly supported by the full faith and credit of the U.S. government, that investors in such mortgage-backed securities will receive timely principal and interest payments.

All HTM and AFS securities were current with no securities past due or on nonaccrual as of June 30, 2025 and December 31, 2024.

All of the securities with unrealized losses in the portfolio have modest duration risk, low credit risk and minimal losses when compared to total amortized cost. The unrealized losses on debt securities that exist are the result of market changes in interest rates since original purchase and are not related to credit concerns. Because the Company does not intend to sell these securities and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost bases, which may be at maturity for debt securities, the Company considers the unrealized losses to be temporary. There were 118 AFS and 181 HTM securities in an unrealized loss position at June 30, 2025. There were 111 AFS and 187 HTM securities in an unrealized loss position at December 31, 2024. Net unrealized losses of the AFS securities totaled $ 7.7 million and $ 10.4 million as of June 30, 2025 and December 31, 2024, respectively.

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The following table provides information on the amortized cost and estimated fair values of investment securities by contractual maturity date at June 30, 2025.


	Available for Sale				Held to Maturity
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	2,455	$	2,456	$	28,567	$	28,209
Due after one year through five years	16,545		15,330		90,617		86,608
Due after five years through ten years	7,541		7,168		8,523		7,908
Due after ten years	269		252		10,525		8,640
	$	26,810	$	25,206	$	138,232	$	131,365
Mortgage-backed securities	168,579		162,473		321,213		283,334
Total	$	195,389	$	187,679	$	459,445	$	414,699

The maturity dates for debt securities are determined using contractual maturity dates. Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations without prepayment penalties.

The Company has securities that have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase. At June 30, 2025, the aggregate carrying value of pledged AFS and HTM pledged securities was $ 69.9 million and $ 213.0 million, respectively. The comparable amounts for December 31, 2024 were $ 67.9 million and $ 197.5 million, respectively.

The following table sets forth the amortized cost and estimated fair values of securities that have been pledged as collateral for obligations to federal, state and local government agencies, and other purposes as required or permitted by law, or sold under agreements to repurchase at June 30, 2025 and December 31, 2024.


	June 30, 2025				December 31, 2024
($ in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged available for sale securities	$	76,701	$	69,878	$	76,280	$	67,926
Pledged held to maturity securities	212,963		191,357		197,474		173,248

There were no obligations to any issuer exceeding 10% of stockholders’ equity at June 30, 2025 or December 31, 2024.

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Note 3 – Loans and Allowance for Credit Losses

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. For further discussion on the most significant accounting policies that the Company follows, see Note 1 – “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8. of the 2024 Annual Report.

The following table provides information about the principal classes of the loan portfolio at June 30, 2025 and December 31, 2024.


($ in thousands)	June 30, 2025		% of Total Loans		December 31, 2024		% of Total Loans
Commercial real estate	$	2,603,974	53.95	%	$	2,557,806	53.60	%
Residential real estate	1,349,010		27.94		1,329,406		27.85
Construction	350,053		7.25		335,999		7.04
Commercial	224,092		4.64		237,932		4.99
Consumer	294,239		6.09		303,746		6.37
Credit cards	6,260		0.13		7,099		0.15
Total loans	4,827,628		100.00	%	4,771,988		100.00	%
Less: allowance for credit losses	( 58,483 )				( 57,910 )
Total loans, net	$	4,769,145			$	4,714,078

Loans are stated at their principal amount outstanding, net of any purchase premiums/discounts and deferred fees and costs. Included in loans were deferred costs, net of fees, of $ 3.0 million and $ 3.2 million at June 30, 2025 and December 31, 2024, respectively. At June 30, 2025 and December 31, 2024, loans included $ 1.63 billion and $ 1.69 billion, respectively, of aggregate loans that were acquired as part of the acquisitions of Severn Bancorp, Inc. (“Severn”) and The Community Financial Corporation (“TCFC”). These balances were presented net of the related aggregate discounts, which totaled $ 86.1 million and $ 92.0 million at June 30, 2025 and December 31, 2024, respectively.

At June 30, 2025, the Bank was servicing $ 232.9 million in loans for the Federal National Mortgage Association and $ 1,337.6 million in loans for Federal Home Loan Mortgage Corporation.

The following tables provide information on amortized cost basis on nonaccrual loans by loan class as of June 30, 2025 and December 31, 2024.


($ in thousands)	Nonaccrual With No Allowance For Credit Loss		Nonaccrual With An Allowance For Credit Loss		Total Nonaccrual Loans
June 30, 2025
Nonaccrual loans:
Commercial real estate	$	3,239	$	2,544	$	5,783
Residential real estate	7,768		—		7,768
Construction	330		—		330
Commercial	1,300		990		2,290
Consumer	589		—		589
Credit cards	—		22		22
Total	$	13,226	$	3,556	$	16,782

Interest income	$	219	$	67	$	286

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($ in thousands)	Nonaccrual With No Allowance For Credit Loss		Nonaccrual With An Allowance For Credit Loss		Total Nonaccrual Loans
December 31, 2024
Nonaccrual loans:
Commercial real estate	$	8,192	$	2,194	$	10,386
Residential real estate	6,741		873		7,614
Construction	360		—		360
Commercial	458		549		1,007
Consumer	761		712		1,473
Credit cards	—		168		168
Total	$	16,512	$	4,496	$	21,008

Interest income	$	274	$	65	$	339


($ in thousands)	Nonaccrual Delinquent Loans		Nonaccrual Current Loans		Total Nonaccrual Loans
June 30, 2025
Nonaccrual loans:
Commercial real estate	$	2,710	$	3,073	$	5,783
Residential real estate	4,502		3,266		7,768
Construction	330		—		330
Commercial	506		1,784		2,290
Consumer	126		463		589
Credit cards	22		—		22
Total	$	8,196	$	8,586	$	16,782


($ in thousands)	Nonaccrual Delinquent Loans		Nonaccrual Current Loans		Total Nonaccrual Loans
December 31, 2024
Nonaccrual loans:
Commercial real estate	$	7,268	$	3,118	$	10,386
Residential real estate	3,979		3,635		7,614
Construction	360		—		360
Commercial	70		937		1,007
Consumer	1,431		42		1,473
Credit cards	146		22		168
Total	$	13,254	$	7,754	$	21,008

The overall quality of the Bank’s loan portfolio is primarily assessed using the Bank’s risk-grading scale. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators are adjusted based on management’s judgment during the quarterly review process.

Consumer credit cards are monitored based on a borrower payment history. Credit card loans are classified as performing and are typically charged off no later than 180 days past due when, or in the opinion of management, the collection of principal or interest is considered doubtful. As of June 30, 2025, there w ere seven cred it cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and nonperforming.

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

Ratings 1 thru 6 – Pass – Ratings 1 thru 6 have asset risks ranging from excellent-low to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks.

Rating 7 – Special Mention – These credits have potential weaknesses due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. Special mention loan relationships are reviewed at least quarterly.

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Rating 8 – Substandard – Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. Substandard loans are the first adversely classified loans on the Bank’s watchlist. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor or operating losses. When a loan is assigned to this category the Bank may estimate a specific reserve in the credit loss allowance analysis and/or place the loan on nonaccrual. These assets listed may include assets with histories of repossessions or some that are nonperforming bankruptcies. These relationships will be reviewed at least quarterly.

Rating 9 – Doubtful – Doubtful assets have many of the same characteristics of substandard with the exception that the Bank has determined that loss is not only possible but is probable. The amount of loss is not discernible due to factors such as merger, acquisition, or liquidation; a capital injection; a pledge of additional collateral; the sale of assets; or alternative refinancing plans. Credits receiving a doubtful classification are required to be on nonaccrual. These relationships will be reviewed at least quarterly.

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

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The following table provides information on loan risk ratings as of June 30, 2025 and gross write-offs during the six months ended June 30, 2025.


	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2021		2022		2023		2024		2025
June 30, 2025
Commercial real estate
Pass	$	1,018,604	$	408,550	$	540,962	$	261,806	$	135,760	$	127,485	$	15,334	$	27,592	$	2,536,093
Special mention	21,491		5,436		34,174		—		—		—		290		—		61,391
Substandard	3,080		2,853		—		—		—		—		557		—		6,490
Total	$	1,043,175	$	416,839	$	575,136	$	261,806	$	135,760	$	127,485	$	16,181	$	27,592	$	2,603,974
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential real estate
Pass	$	344,691	$	205,315	$	284,972	$	220,729	$	107,203	$	51,744	$	123,497	$	517	$	1,338,668
Special mention	1,992		—		—		—		—		—		—		—		1,992
Substandard	5,343		1,557		278		401		—		—		771		—		8,350
Total	$	352,026	$	206,872	$	285,250	$	221,130	$	107,203	$	51,744	$	124,268	$	517	$	1,349,010
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass	$	35,231	$	7,540	$	37,073	$	42,961	$	144,210	$	64,963	$	16,364	$	1,164	$	349,506
Special mentions	—		217		—		—		—		—		—		—		217
Substandard	330		—		—		—		—		—		—		—		330
Total	$	35,561	$	7,757	$	37,073	$	42,961	$	144,210	$	64,963	$	16,364	$	1,164	$	350,053
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial
Pass	$	30,528	$	33,001	$	23,894	$	27,660	$	34,852	$	14,117	$	53,509	$	1,363	$	218,924
Special mention	155		—		35		—		—		—		794		34		1,018
Substandard	523		5		1,313		919		—		—		1,390		—		4,150
Total	$	31,206	$	33,006	$	25,242	$	28,579	$	34,852	$	14,117	$	55,693	$	1,397	$	224,092
Gross charge-offs	$	( 2 )	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	( 2 )

Consumer
Pass	$	10,075	$	53,680	$	103,852	$	50,606	$	40,749	$	33,076	$	667	$	—	$	292,705
Special mention	—		—		946		—		—		—		—		—		946
Substandard	—		30		78		448		32		—		—		—		588
Total	$	10,075	$	53,710	$	104,876	$	51,054	$	40,781	$	33,076	$	667	$	—	$	294,239
Gross charge-offs	$	( 235 )	$	( 99 )	$	( 332 )	$	( 96 )	$	( 302 )	$	—	$	( 16 )	$	—	$	( 1,080 )

Total
Pass	$	1,439,129	$	708,086	$	990,753	$	603,762	$	462,774	$	291,385	$	209,371	$	30,636	$	4,735,896
Special mention	23,638		5,653		35,155		—		—		—		1,084		34		65,564
Substandard	9,276		4,445		1,669		1,768		32		—		2,718		—		19,908
Total loans by risk category	$	1,472,043	$	718,184	$	1,027,577	$	605,530	$	462,806	$	291,385	$	213,173	$	30,670	$	4,821,368

Total gross charge-offs	$	( 237 )	$	( 99 )	$	( 332 )	$	( 96 )	$	( 302 )	$	—	$	( 16 )	$	—	$	( 1,082 )

The following table presents the amortized cost in credit card loans based on performing status and gross charge-off as of June 30, 2025 and gross write-offs during the six months ended June 30, 2025. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.

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	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2021		2022		2023		2024		2025
June 30, 2025
Credit cards
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	6,238	$	—	$	6,238
Nonperforming	—		—		—		—		—		—		22		—		22
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	6,260	$	—	$	6,260
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	( 431 )	$	—	$	( 431 )

Total loans evaluated by performing status	$	—	$	—	$	—	$	—	$	—	$	—	$	6,260	$	—	$	6,260

Total gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	( 431 )	$	—	$	( 431 )

Total recorded investment	$	1,472,043	$	718,184	$	1,027,577	$	605,530	$	462,806	$	291,385	$	219,433	$	30,670	$	4,827,628

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The following table provides information on loan risk ratings as of December 31, 2024 and gross write-offs during the year ended December 31, 2024.


	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2020		2021		2022		2023		2024
December 31, 2024
Commercial real estate
Pass	$	822,391	$	297,098	$	435,084	$	534,936	$	250,482	$	136,891	$	24,966	$	14,084	$	2,515,932
Special mention	7,514		—		2,964		19,746		—		—		417		—		$	30,641
Substandard	7,684		—		2,991		—		—		—		558		—		11,233
Total	$	837,589	$	297,098	$	441,039	$	554,682	$	250,482	$	136,891	$	25,941	$	14,084	$	2,557,806
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential real estate
Pass	$	291,306	$	78,568	$	211,938	$	295,402	$	220,753	$	101,005	$	119,367	$	613	$	1,318,952
Special mention	1,529		518		—		—		—		—		—		—		2,047
Substandard	5,414		—		1,342		290		885		—		476		—		8,407
Total	$	298,249	$	79,086	$	213,280	$	295,692	$	221,638	$	101,005	$	119,843	$	613	$	1,329,406
Gross charge-offs	$	( 1 )	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	( 1 )

Construction
Pass	$	31,884	$	8,191	$	8,628	$	56,685	$	70,232	$	131,383	$	26,785	$	1,851	$	335,639
Special mentions	—		—		—		—		—		—		—		—		—
Substandard	360		—		—		—		—		—		—		—		360
Total	$	32,244	$	8,191	$	8,628	$	56,685	$	70,232	$	131,383	$	26,785	$	1,851	$	335,999
Gross charge-offs	$	—	$	—	$	( 12 )	$	—	$	—	$	—	$	—	$	—	$	( 12 )

Commercial
Pass	$	25,214	$	11,088	$	40,817	$	29,142	$	29,458	$	39,489	$	57,982	$	874	$	234,064
Special mention	116		—		—		—		—		—		703		11		830
Substandard	515		—		8		1,257		500		—		257		501		3,038
Total	$	25,845	$	11,088	$	40,825	$	30,399	$	29,958	$	39,489	$	58,942	$	1,386	$	237,932
Gross charge-offs	$	( 54 )	$	( 11 )	$	—	$	( 56 )	$	( 69 )	$	—	$	—	$	—	$	( 190 )

Consumer
Pass	$	1,315	$	10,469	$	60,718	$	114,639	$	61,652	$	52,798	$	682	$	—	$	302,273
Special mention	—		—		—		—		—		—		—		—		—
Substandard	2		—		48		860		563		—		—		—		1,473
Total	$	1,317	$	10,469	$	60,766	$	115,499	$	62,215	$	52,798	$	682	$	—	$	303,746
Gross charge-offs	$	( 1,287 )	$	( 12 )	$	( 389 )	$	( 1,764 )	$	( 177 )	$	—	$	( 17 )	$	—	$	( 3,646 )

Total
Pass	$	1,172,110	$	405,414	$	757,185	$	1,030,804	$	632,577	$	461,566	$	229,782	$	17,422	$	4,706,860
Special mention	9,159		$	518	$	2,964	$	19,746	$	—	$	—	$	1,120	$	11	33,518
Substandard	13,975		—		4,389		2,407		1,948		—		1,291		501		24,511
Total loans by risk category	$	1,195,244	$	405,932	$	764,538	$	1,052,957	$	634,525	$	461,566	$	232,193	$	17,934	$	4,764,889

Total gross charge-offs	$	( 1,342 )	$	( 23 )	$	( 401 )	$	( 1,820 )	$	( 246 )	$	—	$	( 17 )	$	—	$	( 3,849 )

The following table presents the amortized cost in credit card loans based on performing status and gross charge-off as of December 31, 2024 and gross write-offs during the year ended December 31, 2024. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.

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	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2020		2021		2022		2023		2024
December 31, 2024
Credit cards
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	6,931	$	—	$	6,931
Nonperforming	—		—		—		—		—		—		168		—		168
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	7,099	$	—	$	7,099
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	( 584 )	$	—	$	( 584 )

Total loans evaluated by performing status	$	—	$	—	$	—	$	—	$	—	$	—	$	7,099	$	—	$	7,099

Total gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	( 584 )	$	—	$	( 584 )

Total recorded investment	$	1,195,244	$	405,932	$	764,538	$	1,052,957	$	634,525	$	461,566	$	239,292	$	17,934	$	4,771,988

The following tables provide information on the aging of the Company’s loan portfolio as of June 30, 2025 and December 31, 2024.


($ in thousands)	30‑59 Days Past Due			60‑89 Days Past Due			90 Days Past Due and Still Accruing			30-89 Days Past Due and Not Accruing			90 Days Past Due and Not Accruing			Total Past Due			Current Accrual Loans			Current Nonaccrual Loans			Total
June 30, 2025
Commercial real estate	$	1,279		$	126		$	—		$	2,234		$	476		$	4,115		$	2,596,786		$	3,073		$	2,603,974
Residential real estate	2,746			858			56			1,821			2,681			8,162			1,337,582			3,266			1,349,010
Construction	44			—			—			—			330			374			349,679			—			350,053
Commercial	45			3			—			—			506			554			221,754			1,784			224,092
Consumer	3,136			1,046			9			28			98			4,317			289,459			463			294,239
Credit cards	40			20			150			—			22			232			6,028			—			6,260
Total	$	7,290		$	2,053		$	215		$	4,083		$	4,113		$	17,754		$	4,801,288		$	8,586		$	4,827,628
Percent of total loans	0.2		%	0.0		%	0.0		%	0.1		%	0.1		%	0.4		%	99.4		%	0.2		%	100.0		%


($ in thousands)	30‑59 days Past Due			60‑89 Days Past Due			90 Days Past Due and Still Accruing			30-89 Days Past Due and Not Accruing			90 Days Past Due and Not Accruing			Total Past Due			Current Accrual Loans			Current Nonaccrual Loans			Total
December 31, 2024
Commercial real estate	$	75		$	—		$	—		$	2,328		$	4,940		$	7,343		$	2,547,345		$	3,118		$	2,557,806
Residential real estate	3,828			246			127			655			3,324			8,180			1,317,591			3,635			1,329,406
Construction	30			—			—			—			360			390			335,609			—			335,999
Commercial	152			2			—			—			70			224			236,771			937			237,932
Consumer	4,068			55			—			1,180			251			5,554			298,150			42			303,746
Credit cards	161			190			167			—			146			664			6,413			22			7,099
Total	$	8,314		$	493		$	294		$	4,163		$	9,091		$	22,355		$	4,741,879		$	7,754		$	4,771,988
Percent of total loans	0.2		%	0.0		%	0.0		%	0.1		%	0.2		%	0.5		%	99.4		%	0.2		%	100.0		%

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The following tables provide a summary of the activity in the ACL allocated by loan class for the three and six months ended June 30, 2025 and 2024. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses from other loan classes.


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Three Months Ended June 30, 2025
Commercial real estate	$	21,988	$	—	$	—	$	( 1,809 )	$	20,179
Residential real estate	22,394		—		2		807		23,203
Construction	3,842		—		—		1,963		5,805
Commercial	2,854		—		81		( 65 )		2,870
Consumer	6,574		( 598 )		55		157		6,188
Credit cards	390		( 189 )		—		37		238
Total	$	58,042	$	( 787 )	$	138	$	1,090	$	58,483


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Three Months Ended June 30, 2024
Commercial real estate	$	23,013	$	—	$	—	$	( 29 )	$	22,984
Residential real estate	19,005		—		2		1,493		20,500
Construction	3,558		—		4		( 91 )		3,471
Commercial	2,879		( 23 )		2		8		2,866
Consumer	8,682		( 861 )		68		256		8,145
Credit cards	199		( 78 )		—		391		512
Total	$	57,336	$	( 962 )	$	76	$	2,028	$	58,478


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Six Months Ended June 30, 2025
Commercial real estate	$	22,846	$	—	$	78	$	( 2,745 )	$	20,179
Residential real estate	21,776		—		3		1,424		23,203
Construction	2,854		—		1		2,950		5,805
Commercial	3,138		( 2 )		87		( 353 )		2,870
Consumer	6,889		( 1,080 )		141		238		6,188
Credit cards	407		( 431 )		—		262		238
Total	$	57,910	$	( 1,513 )	$	310	$	1,776	$	58,483


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Six Months Ended June 30, 2024
Commercial real estate	$	23,015	$	—	$	—	$	( 31 )	$	22,984
Residential real estate	19,909		( 1 )		4		588		20,500
Construction	3,935		( 12 )		6		( 458 )		3,471
Commercial	2,671		( 23 )		3		215		2,866
Consumer	7,601		( 1,386 )		144		1,786		8,145
Credit cards	220		( 194 )		8		478		512
Total	$	57,351	$	( 1,616 )	$	165	$	2,578	$	58,478

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

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	June 30, 2025
($ in thousands)	Real Estate Collateral		Other Collateral		Total
Commercial real estate	$	5,783	$	—	$	5,783
Residential real estate	7,768		—		7,768
Construction	330		—		330
Commercial	—		2,290		2,290
Consumer	—		589		589
Total	$	13,881	$	2,879	$	16,760


	December 31, 2024
($ in thousands)	Real Estate Collateral		Other Collateral		Total
Commercial real estate	$	10,386	$	—	$	10,386
Residential real estate	7,614		—		7,614
Construction	360		—		360
Commercial	—		1,007		1,007
Consumer	—		1,473		1,473
Total	$	18,360	$	2,480	$	20,840

Loan Modifications to Borrowers Experiencing Financial Difficulty

Modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions, and other combinations of actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

During the three and six months ended June 30, 2025, nine loan modifications were made to borrowers experiencing financial difficulty. During the three and six months ended June 30, 2024, zero loan modifications were made to borrowers experiencing financial difficulty. During the three and six months ended June 30, 2025 and 2024, there were no defaults on loan modifications made to borrowers experiencing financial difficulty in the preceding 12 months.

As of June 30, 2025, nine loan modification balances with borrowers experiencing financial difficulty that were modified during the preceding 12 months were classified as current accrual and were for $ 6.6 million of commercial real estate loans.

Foreclosure Proceedings

There were $ 135 thousand of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of June 30, 2025 and $ 124 thousand in December 31, 2024. There were $ 93 thousand of commercial real estate loans collateralized by commercial real estate that were in the process of foreclosure as of June 30, 2025 and $ 554 thousand in December 31, 2024.

Other Real Estate Owned (“OREO”) and Repossessed Assets

OREO and repossessed assets are adjusted for fair value upon transfer from loans to foreclosed assets, establishing a new cost basis. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. The Company had OREO and repossessed asset balances of $ 179 thousand and $ 2.5 million as of June 30, 2025 and $ 179 thousand and $ 3.3 million as of December 31, 2024, respectively.

Mortgage Servicing Rights (“MSRs”)

Mortgage loans are sold with servicing retained and the MSRs are initially recorded at fair value with the income statement effect recorded in the income statement. Subsequently the MSRs are amortized to the income statement in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon fair value of the rights as compared to carrying amount. No impairment was recognized for the six months ended June 30, 2025. The Company recognized net servicing income of $ 168 thousand and $ 418 thousand for the three months ended June 30, 2025 and 2024, respectively. The Company recognized net servicing income of $ 103 thousand and $ 506 thousand for the six months ended June 30, 2025 and 2024, respectively.

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The following table presents activity in MSRs for the three and six months ended June 30, 2025.


($ in thousands)	Three Months Ended June 30, 2025		Six Months Ended June 30, 2025
Beginning balance	$	5,535	$	5,874
Net additions	15		58
Amortization expense	( 154 )		( 206 )
Other	—		( 330 )
Ending balance	$	5,396	$	5,396

The fair value of MSRs were determined using discount rates ranging from 9.5 % to 10.0 % at June 30, 2025 and December 31, 2024, respectively. The valuation on MSRs was not material at June 30, 2025 and December 31, 2024. Depending on the stratification of the specific mortgage servicing right, prepayment speeds ranged from 5.84 % to 8.48 % for the three months ended June 30, 2025 and 5.69 % to 8.22 % for the six months ended June 30, 2025. The associated weighted-average default rates were 0.14 % for the three and six months ended June 30, 2025, respectively.

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Note 4 – Goodwill and Other Intangible Assets

The following table provides information on the significant components of goodwill and other acquired intangible assets at June 30, 2025 and December 31, 2024.


	June 30, 2025
($ in thousands)	Goodwill		Core Deposit Intangible
Gross carrying amount	$	64,809	$	59,151

Accumulated impairment charges	( 1,543 )		—
Accumulated amortization	—		( 25,390 )
Net carrying amount	$	63,266	$	33,761


	December 31, 2024
($ in thousands)	Goodwill		Core Deposit Intangible
Gross carrying amount	$	64,809	$	59,151

Accumulated impairment charges	( 1,543 )		—
Accumulated amortization	—		( 20,840 )
Net carrying amount	$	63,266	$	38,311

The aggregate amortization expense for the core deposit intangible was $ 2.3 million and $ 2.6 million for the three months ended June 30, 2025 and 2024, respectively and $ 4.5 million and $ 5.1 million for the six months ended June 30, 2025 and 2024, respectively.

At June 30, 2025, estimated future remaining amortization for amortizing core deposit intangibles within the years ending December 31, is as follows:


($ in thousands)	Amortization Expense
2025	$	4,039
2026	7,398
2027	6,208
2028	5,060
2029	3,980
Thereafter	7,076
Total amortizing intangible assets	$	33,761

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Note 5 – Leases

Lease liabilities represent the Company’s obligation to make lease payments and are presented at each reporting date as the net present value of the remaining contractual cash flows. Cash flows are discounted at the Company’s incremental borrowing rate in effect at the commencement date of the lease. Right-of-use assets represent the Company’s right to use the underlying asset for the lease term and are calculated as the sum of the lease liability and if applicable, prepaid rent, initial direct costs and any incentives received from the lessor.

The Company’s long-term lease agreements for branches and offices are classified as operating leases. Certain of these leases offer the option to extend the lease term and the Company has included such extensions in its calculation of the lease liabilities to the extent the options are reasonably certain of being exercised. The lease agreements do not provide for residual value guarantees and have no restrictions or covenants that would impact dividends or require incurring additional financial obligations.

The following tables present information about the Company’s leases as of and for the periods presented.


($ in thousands)	June 30, 2025			December 31, 2024
Lease liabilities	$	11,541		$	11,844
Right-of-use assets	$	11,052		$	11,385
Weighted-average remaining lease term	9.33 years			10.20 years
Weighted-average discount rate	3.45		%	3.29		%
Remaining lease term - min	0.17 years			0.01 years
Remaining lease term - max	16.18 years			16.68 years


	Three Months Ended June 30,				Six Months Ended June 30,
Lease cost ($ in thousands)	2025		2024		2025		2024
Operating lease cost	$	494	$	494	$	986	$	986

Total lease cost	$	494	$	494	$	986	$	986

Cash paid for amounts included in the measurement of lease liabilities	$	479	$	466	$	946	$	928

The following table presents a maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to total operating lease liabilities at June 30, 2025.


Lease payments due ($ in thousands)	June 30, 2025
2025	$	957
2026	1,889
2027	1,781
2028	1,742
2029	1,351
Thereafter	5,573
Total undiscounted cash flows	13,293
Less: imputed interest	1,752
Lease liabilities	$	11,541

Total gross rental income was $ 280 thousand and $ 256 thousand for the three months ended June 30, 2025 and 2024, respectively. Total gross rental income was $ 615 thousand and $ 533 thousand for the six months ended June 30, 2025 and 2024, respectively.

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Note 6 - Deposits

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


($ in thousands)	June 30, 2025				December 31, 2024
	Balance		% of Total Deposits		Balance		% of Total Deposits
Noninterest-bearing	$	1,575,120	29.64	%	$	1,562,815	28.27	%
Interest-bearing:
Interest-bearing checking	763,309		14.36		978,076		17.69
Money market and savings	1,691,438		31.84		1,805,884		32.67
Time deposits	1,273,285		23.96		1,181,561		21.37
Brokered deposits	10,806		0.20		—		—
Total interest-bearing	3,738,838		70.36		3,965,521		71.73
Total deposits	$	5,313,958	100.00	%	$	5,528,336	100.00	%

The following table provides information on the approximate maturities of total time deposits at June 30, 2025.


($ in thousands)	June 30, 2025
Within one year	$	1,111,488
Year 2	137,257
Year 3	12,839
Year 4	5,442
Year 5	6,251
Thereafter	8
Total	$	1,273,285

The approximate amount of certificates of deposit that met or exceeded the FDIC insurance limit of $250,000 or more was $ 410.6 million and $ 374.1 million at June 30, 2025 and December 31, 2024, respectively.

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Note 7 - Borrowings

The following table summarizes certain information of the Company’s long-term debt at June 30, 2025 and December 31, 2024.


($ in thousands)	June 30, 2025		December 31, 2024		Issue Date	Stated Maturity Date	Earliest Call Date	Interest Rate



September 2030 Subordinated Debentures	$	25,000	$	25,000	2020	2030	2025	5.375 % through September 2025, 3-month SOFR* + 5.265 % thereafter
October 2030 Subordinated Debentures	19,500		19,500		2020	2030	2025	4.75 % through October 2025, 3-month SOFR + 4.58 % thereafter
Total subordinated debentures	44,500		44,500

Severn Capital Trust I	20,619		20,619		2004	2035		3-month SOFR + 2.00 %
Tri-County Capital Trust I	7,217		7,217		2004	2034		90-day SOFR + 2.60 %
Tri-County Capital Trust II	5,155		5,155		2005	2035		90-day SOFR + 1.70 %
Total trust preferred securities	32,991		32,991
Less: net discount and unamortized issuance costs	( 3,250 )		( 3,774 )
Total long-term debt	$	74,241	$	73,717

____________________________________

* Secured Overnight Financing Rate (“SOFR”).

At June 30, 2025, subordinated notes consisted of $ 25.0 million of long-term debt issued by the Company in August 2020, and $ 19.5 million of long-term debt assumed as a result of the merger with TCFC. As of June 30, 2025, the recorded balance of subordinated debt issued by the Company and the assumed subordinated debt from TCFC, net of unamortized issuance costs and fair value discounts, were $ 25.0 million and $ 19.3 million, respectively.

The Company also assumed trust preferred securities in the aggregate of $ 33.0 million as a result of the merger with TCFC in 2023 and the acquisition of Severn in 2021. Trust preferred securities consisted of $ 20.6 million issued to Severn Capital Trust I, $ 7.2 million issued by Tri-County Capital Trust I and $ 5.2 million issued by Tri-County Capital Trust II. The recorded balance of the debt acquired from Severn at June 30, 2025 was $ 18.9 million, net of the unamortized fair value adjustment of $ 1.8 million. At June 30, 2025, the junior subordinated debt securities of Tri-County Capital Trust I and Tri-County Capital Trust II had a recorded balance of $ 6.7 million and $ 4.5 million, respectively, which are presented as net of the unamortized fair value adjustments of $ 538 thousand and $ 696 thousand, respectively.

The Company may periodically borrow from a correspondent federal funds line of credit arrangement, under a secured reverse repurchase agreement, or from the Federal Home Loan Bank (“FHLB”) to meet short-term liquidity needs. There were $ 50.0 million of outstanding borrowings from the FHLB at June 30, 2025 and December 31, 2024. The $ 50.0 million FHLB advance originated on May 7, 2024 was for an initial term of 18 -months at a rate of 4.79 %. The Company did not have any short-term borrowings from the FHLB at June 30, 2025 and December 31, 2024. Further information on these obligations is provided in the 2024 A nnual Report.

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Note 8 – Derivatives

The Company maintains and accounts for derivatives, in the form of interest rate lock commitments (“IRLCs”) and mandatory forward contracts, in accordance with the FASB guidance on accounting for derivative instruments and hedging activities. The Company recognizes gains and losses through mortgage-banking revenue in the consolidated statements of income.

IRLCs on mortgage loans that we intend to sell in the secondary market are considered derivatives. We are exposed to price risk from the time a mortgage loan is locked in until the time the loan is sold. The period of time between issuance of a loan commitment, closing and sale of the loan generally ranges from 14 days to 120 days, however, this period may be longer for construction to permanent loans that are originated with the intent of selling in the secondary market upon permanent financing. For these IRLCs and our closed inventory in loans held for sale, we attempt to protect the Bank from changes in interest rates through the use of to be announced (“TBA”) securities, which are forward contracts, as well as, to a significantly lesser degree, loan level commitments in the form of best efforts and mandatory forward contracts. These assets and liabilities are included in the consolidated balance sheets in other assets and accrued expenses and other liabilities, respectively.

The following table provides information pertaining to the carrying amounts of the Company’s derivative financial instruments at June 30, 2025 and December 31, 2024.


	June 30, 2025				December 31, 2024
($ in thousands)	Notional Amount		Estimated Fair Value		Notional Amount		Estimated Fair Value
Asset – IRLCs	$	21,743	$	426	$	7,527	$	113
Asset – TBA securities	4,750		3		22,100		164

Liability – TBA securities	43,300		311		7,550		23

Note 9 – Accumulated Other Comprehensive Loss

The Company records unrealized holding gains (losses), net of tax, on AFS securities as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. The following table provides information on the changes in the component of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2025 and 2024.


	Accumulated Other Comprehensive Loss
($ in thousands)	Three Months Ended June 30, 2025		Three Months Ended June 30, 2024		Six Months Ended June 30, 2025		Six Months Ended June 30, 2024
Beginning of period	$	( 6,333 )	$	( 8,058 )	$	( 7,545 )	$	( 7,494 )
Other comprehensive income (loss), net of tax	730		( 202 )		1,942		( 766 )
End of period	$	( 5,603 )	$	( 8,260 )	$	( 5,603 )	$	( 8,260 )

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Note 10 – Regulatory Capital Requirements

Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Banks’ assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Banks’ capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain amounts and ratios (set forth in the table below) of common equity Tier 1 (“CET1”), Tier 1 and total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (leverage ratio). As of June 30, 2025 and December 31, 2024, management believes that the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2024, the most recent notification from our primary regulator categorized the Bank, as “well-capitalized” under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes would change the Bank’s classification. To be categorized as “well-capitalized,” the Bank must maintain minimum CET1, Tier 1 risk-based and total risk-based capital ratios, and Tier 1 leverage ratios, which are outlined in the table below.

The following table presents the capital amounts and ratios for the Company and the Bank as of June 30, 2025 and December 31, 2024.


	June 30, 2025									December 31, 2024
	Amount			Regulatory Minimum Ratio + Capital Conservation Buffer			To Be Well-Capitalized Under Prompt Corrective Action Regulation (1)			Amount
($ in thousands)
The Company Amounts
Common Equity Tier 1 Capital	$	483,947		$	342,348		N/A			$	458,258
Tier 1 Capital	513,952			415,708			N/A			488,105
Total Capital	618,793			513,521			N/A			591,228
Risk-Weighted Assets	4,890,679			237,725			N/A			4,852,564

The Company Ratios
Common Equity Tier 1 Capital to Risk-Weighted Assets (“RWA”)	9.90		%	7.00		%	N/A			9.44		%
Tier 1 Capital to RWA	10.51			8.50			N/A			10.06
Total Capital to RWA	12.65			10.50			N/A			12.18
Tier 1 Capital to AA (Leverage) (2)	8.65			4.00			N/A			8.02

The Bank Amounts
Common Equity Tier 1 Capital	$	546,630		$	342,199		$	317,756		$	521,453
Tier 1 Capital	546,630			415,527			391,085			521,453
Total Capital	607,235			513,299			488,856			580,706
Risk-Weighted Assets	4,888,558			237,616			297,021			4,851,903

The Bank Ratios
Common Equity Tier 1 Capital to RWA	11.18		%	7.00		%	6.50		%	10.75		%
Tier 1 Capital to RWA	11.18			8.50			8.00			10.75
Total Capital to RWA	12.42			10.50			10.00			11.97
Tier 1 Capital to AA (Leverage) (2)	9.20			4.00			5.00			8.58

____________________________________

(1) Applies to the Bank only.

(2) Tier 1 Capital to AA (Leverage) has no capital conservation buffer defined. The PCA well-capitalized threshold is defined as 5.00 %.

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As of June 30, 2025, both the Company and the Bank satisfy the capital conservation buffer requirements applicable to them. The lowest ratio at the Company is the Tier 1 Capital to RWA, which was 4.51 % above the minimum buffer ratio and, at the Bank, the lowest ratio was the Total Capital to RWA, which was 4.42 % above the minimum buffer ratio.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common stockholders and interest and principal on outstanding debt. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the Federal Reserve Bank, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years. At June 30, 2025, the Bank could pay dividends to the Company to the extent of its earnings, so long as it maintained required capital ratios.

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Note 11 – Fair Value Measurements

Accounting guidance under GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This accounting guidance also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities on a recurring basis and to determine fair value disclosures. Available for sale securities and equity securities with readily determinable fair values are recorded at fair value on a recurring basis, along with other mortgage-related items identified in the recurring fair value table below. Additionally, from time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as collateral dependent loans, repossessed assets and OREO (foreclosed assets). These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or write-downs of individual assets.

Under fair value accounting guidance, assets and liabilities are grouped at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine their fair values. These hierarchy levels are:

• Level 1 inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

• Level 2 inputs – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs – Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Assets Measured at Fair Value on a Recurring Basis

Available for Sale Securities

Fair value measurement of AFS securities is based on quoted prices from an independent pricing service. The fair value measurements consider observable data that may include present value of future cash flows, prepayment assumptions, credit loss assumptions and other factors. The Company classifies its investments in U.S. Treasury securities, if any, as Level 1 in the fair value hierarchy, and it classifies its investments in U.S. government agency securities and mortgage-backed securities issued or guaranteed by U.S. government-sponsored entities as Level 2.

Equity Securities

Fair value measurement for equity securities is based on quoted market prices retrieved by the Company via online resources. Although these securities have readily available fair market values, the Company determined that they should be classified as level 2 investments in the fair value hierarchy due to not being considered traded in a highly active market.

Loans Held for Sale

Loans held for sale are carried at fair value, which is determined based on Mark to Trade for allocated/committed loans or Mark to Market analysis for unallocated/uncommitted loans based on third-party pricing models (Level 2).

IRLCs

We utilize a third-party specialist model to estimate the fair value of our IRLCs, which are valued based upon mortgage securities (TBA) prices less estimated costs to process and settle the loan. Fair value is adjusted for the estimated probability of the loan closing with the borrower (Level 3).

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

June 30, 2025

IRLCs - net asset

426

Market Approach

Range of pull through rate

77 % - 100 %

Average pull through rate

87 %

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($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

December 31, 2024

IRLCs - net asset

113

Market Approach

Range of pull through rate

78 % - 100 %

Average pull through rate

98 %

The following table presents activity in the IRLCs - net asset for the three and six months ended June 30, 2025.


($ in thousands)	Three Months Ended June 30, 2025		Six Months Ended June 30, 2025
Beginning balance	$	392	$	113
Valuation adjustment	34		313
Ending balance	$	426	$	426

Forward Contracts

To avoid interest rate risk, we hedge the open locked/closed position with TBA forward trades. On a regular basis, we allocate disbursed loans to mandatory commitments with government-sponsored enterprises and private investors delivering the loans within 120 days of origination to maximize interest earnings. For a small percentage of our business, we enter into best efforts forward sales commitments with investors at the time we make an IRLC to a borrower. Once a loan has been closed and funded, the best efforts commitments convert to mandatory forward sales commitments. The mandatory commitments are derivatives, and we measure and report them at fair value. Fair value is based on the gain or loss that would occur if we were to pair-off the transaction with the investor at the measurement date. This is a Level 2 input. We have elected to measure and report best efforts commitments at fair value using a valuation methodology similar to that used for mandatory commitments.

Market assumptions utilized in the fair value measurement of the reporting entity’s residential mortgage derivatives, inclusive of IRLCs, Closed Loan Inventory, TBA derivative trades, and Mandatory Forwards may be subject to investor overlays that may result in a significantly lower fair value measurement. Generally such overlays are announced with advanced notice in order to include the risk adjuster, however there are times when announcements are mandated resulting in a lower fair value measurement. Additionally market assumptions such as spec pool payups may result in a significantly higher fair value measurement at time of loan allocation to specific trades.

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The following tables present the recorded amount of assets measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024. No assets were transferred from one hierarchy level to another during the six months ended June 30, 2025 or 2024.


($ in thousands)	Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2025
Assets:
Available for sale securities:
U.S. government agency securities	$	20,522	$	—	$	20,522	$	—
Mortgage-backed securities	162,473		—		162,473		—
Other debt securities	4,684		—		4,684		—
Total available for sale securities	187,679		—		187,679		—

Equity securities	6,010		—		6,010		—

TBA forward trades	3		—		3		—
Loans held for sale	34,319		—		34,319		—

IRLCs	426		—		—		426
Total assets at fair value	$	228,437	$	—	$	228,011	$	426

Liabilities:

TBA forward trades	$	311	$	—	$	311	$	—
Total liabilities at fair value	$	311	$	—	$	311	$	—


($ in thousands)	Fair Value		Quoted Prices (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
December 31, 2024
Assets:
Available for sale securities:
U.S. government agency securities	$	20,202	$	—	$	20,202	$	—
Mortgage-backed securities	122,384		—		122,384		—
Other debt securities	6,626		—		6,626		—
Total available for sale securities	149,212		—		149,212		—

Equity securities	5,814		—		5,814		—

TBA forward trades	164		—		164		—
Loans held for sale	19,606		—		19,606		—


IRLCs	113		—		—		113
Total assets at fair value	$	174,909	$	—	$	174,796	$	113

Liabilities:

TBA forward trades	$	23	$	—	$	23	$	—
Total liabilities at fair value	$	23	$	—	$	23	$	—

Assets Measured at Fair Value on a Nonrecurring Basis

Individually Evaluated Collateral-Dependent Loans

Loans for which repayment is substantially expected to be provided through the operation or sale of collateral are considered collateral dependent, and are valued based on the estimated fair value of the collateral, less estimated costs to sell at the reporting date, where applicable. Accordingly, collateral dependent loans are classified within Level 3 of the fair value hierarchy.

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OREO (Foreclosed Assets)

Foreclosed assets are adjusted for fair value upon transfer of loans to foreclosed assets establishing a new cost basis. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. The estimated fair value for foreclosed assets included in Level 3 are determined by independent market based appraisals and other available market information, less costs to sell, that may be reduced further based on market expectations or an executed sales agreement. If the fair value of the collateral deteriorates subsequent to the initial recognition, the Company records the foreclosed asset as a non-recurring Level 3 adjustment. Valuation techniques are consistent with those techniques applied in prior periods.

Repossessed Assets

All repossessed assets are recorded at lower of the estimated fair value of the properties, less expected selling costs, or the carrying amount of the defaulted loans. From time to time, nonrecurring fair value adjustments are recorded to reflect partial write-downs based on current appraised value of an asset. The Company considers any valuation inputs related to repossessed assets to be Level 3 inputs. Fair value adjustments for these assets are recorded in other noninterest expense in the consolidated statements of income.

Other Assets Held for Sale

Other assets held for sale are carried at the lower of the carrying amount or fair value. The fair value is determined based on the appraisal value, listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to sell. Due to the use of significant unobservable inputs, these assets are classified as Level 3 under the fair value hierarchy. Fair value adjustments for these assets are recorded in other noninterest expense in the consolidated statements of income.

The following tables set forth the Company’s assets subject to fair value adjustments (impairment) on a nonrecurring basis at June 30, 2025 and December 31, 2024 that are valued at lower of cost or market. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Quantitative Information about Level 3 Fair Value Measurements

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted-Average

June 30, 2025

Nonrecurring measurements:

Individually evaluated collateral dependent loan

Commercial real estate

2,980

Appraisal of collateral (1)

Appraisal adjustment (2)

Liquidation expense (2)

61 %

10 %

54 %

10 %

Commercial

413

Appraisal of collateral (1)

Appraisal adjustment (2)

Liquidation expense (2)

100 %

10 %

12 %

10 %

Other real estate owned

179

Appraisal of collateral (1)

Appraisal adjustment (2)

N/A

0 %

Repossessed assets

2,457

Appraisal of collateral (1)

Appraisal adjustment (2)

N/A

65 %

Quantitative Information about Level 3 Fair Value Measurements

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted-Average

December 31, 2024

Nonrecurring measurements:

Individually evaluated collateral dependent loan

Commercial real estate

2,220

Appraisal of collateral (1)

Appraisal adjustment (2)

Liquidation expense (2)

62 %

10 %

38 %

10 %

Residential real estate

817

Appraisal of collateral (1)

Appraisal adjustment (2)

Liquidation expense (2)

55 % - 100 %

10 %

17 %

10 %

Consumer

624

Appraisal of collateral (1)

Appraisal adjustment (2)

Liquidation expense (2)

80 % - 86 %

10 %

15 %

10 %

Other real estate owned

179

Appraisal of collateral (1)

Appraisal adjustment (2)

N/A

0 %

Repossessed assets

3,315

Appraisal of collateral (1)

Appraisal adjustment (2)

N/A

39 %

Assets held for sale

900

Appraisal of collateral (1)

Appraisal adjustment (2)

N/A

0 %

_________________________________

(1) Unobservable inputs were weighted by the relative fair value of the instruments. No range is presented only when one instrument was available.

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(2) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

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Note 12 – Fair Value of Financial Instruments

Financial instruments require disclosure of fair value information, whether or not recognized in the consolidated balance sheets, when it is practical to estimate the fair value. A financial instrument is defined as cash, evidence of an ownership interest in an entity or a contractual obligation which requires the exchange of cash. Certain items are specifically excluded from the financial instrument fair value disclosure requirements, including the Company’s common stock, OREO, premises and equipment and other assets and liabilities.

The following tables present the carrying amounts and estimated fair values of the Company’s financial instruments as of June 30, 2025 and December 31, 2024. Fair values for June 30, 2025 and December 31, 2024 were estimated using an exit price notion.


June 30, 2025	Carrying Amount		Fair Value		Fair Value Measurements
($ in thousands)					Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	184,984	$	184,984	$	184,984	$	—	$	—
Available for sale securities	187,679		187,679		—		187,679		—
Held to maturity securities	459,246		414,699		—		414,699		—
Equity securities	6,010		6,010		—		6,010		—
Restricted securities	20,412		20,412		—		20,412		—
Loans held for sale	34,319		34,319		—		34,319		—
TBA securities	3		3		—		3		—

Loans held for investment, at amortized cost, net	4,769,145		4,662,358		—		—		4,662,358
Mortgage servicing rights	5,396		5,396		—		5,396		—
Accrued interest receivable	19,821		19,821		—		19,821		—
IRLCs	426		426		—		—		426

Liabilities
Deposits:
Noninterest-bearing	$	1,575,120	$	1,575,120	$	—	$	1,575,120	$	—
Interest-bearing checking	763,309		763,309		—		763,309		—
Money market and savings	1,691,438		1,691,438		—		1,691,438		—
Time deposits	1,273,285		1,271,570		—		1,271,570		—
Brokered deposits	10,806		10,014		—		10,014		—
FHLB advances	50,000		50,065		—		50,065		—
TRUPS	30,005		27,542		—		27,542		—
Subordinated debt	44,236		44,202		—		44,202		—
TBA Securities	311		311		—		311		—
Accrued interest payable	3,486		3,486		—		3,486		—

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December 31, 2024	Carrying Amount		Fair Value		Fair Value Measurements
($ in thousands)					Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	459,851	$	459,851	$	459,851	$	—	$	—
Available for sale securities	149,212		149,212		—		149,212		—
Held to maturity securities	481,077		424,734		—		424,734		—
Equity securities	5,814		5,814		—		5,814		—
Restricted securities	20,253		20,253		—		20,253		—
Loans held for sale	19,606		19,606		—		19,606		—
TBA securities	164		164		—		164		—

Loans held for investment, at amortized cost, net	4,714,078		4,561,449		—		—		4,561,449
Mortgage servicing rights	5,874		5,874		—		5,874		—
Accrued interest receivable	19,570		19,570		—		19,570		—
IRLCs	113		113		—		—		113

Liabilities
Deposits:
Noninterest-bearing	$	1,562,815	$	1,562,815	$	—	$	1,562,815	$	—
Interest bearing checking	978,076		978,076		—		978,076		—
Money market and savings	1,805,884		1,805,884		—		1,805,884		—
Time deposits	1,181,561		1,179,716		—		1,179,716		—

FHLB advances	50,000		50,201		—		50,201		—
TRUPS	29,847		27,952		—		27,952		—
Subordinated debt	43,870		43,669		—		43,669		—
TBA securities	23		23		—		23		—
Accrued interest payable	3,398		3,398		—		3,398		—

Note 13 – Commitments and Contingencies

In the normal course of business, to meet the financial needs of its customers, the Bank is a party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit and standby letters of credit. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Letters of credit and other commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Because many of the letters of credit and commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Commitments to make loans are generally made for a period of 90 days or less. As of June 30, 2025 , the Company’s outstanding fixed rate loan commitments have interest rates ra nging from 6.50 % to 9.75 %.

The following table provides information on commitments outstanding at June 30, 2025 and December 31, 2024.


($ in thousands)	June 30, 2025		December 31, 2024
Commitments to extend credit
Fixed	$	232,688	$	261,794
Variable	539,792		497,686
Total commitments to extend credit	$	772,480	$	759,480

Letters of credit
Fixed	$	8,217	$	8,980
Variable	22,291		18,981
Total letters of credit	$	30,508	$	27,961

Total commitments outstanding	$	802,988	$	787,441

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The Bank had a reserve for off-balance sheet credit exposures of $ 1.9 million and $ 1.1 million as of June 30, 2025 and December 31, 2024, respectively. The reserve was estimated based on the historic losses experienced by the Company. Losses are charged against the allowance when management believes the required funding of these exposures is uncollectible. While this evaluation is completed on a regular basis, it is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

In the normal course of business, the Company may become involved in litigation arising from banking, financial and other activities. Management, after consultation with legal counsel, does not anticipate that the future liability, if any, arising out of current proceedings will have a material effect on the Company’s financial condition, operating results, or liquidity.

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Note 14 – Earnings per Common Share

Basic earnings per common share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents (stock-based awards). The following table provides information relating to the calculation of earnings per common share for the three months ended June 30, 2025 and 2024.


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands, except per share data)	2025		2024		2025		2024
Net income	$	15,507	$	11,234	$	29,271	$	19,418

Average number of common shares outstanding	33,374,265		33,233,870		33,362,632		33,211,558
Dilutive effect of common stock equivalents	13,748		—		14,533		—
Average number of common shares used to calculate diluted EPS	33,388,013		33,233,870		33,377,165		33,211,558

Anti-dilutive shares	3,323		—		3,363		—

Basic net income per common share	$	0.46	$	0.34	$	0.88	$	0.58
Diluted net income per common share	$	0.46	$	0.34	$	0.88	$	0.58

There were three thousand and zero anti-dilutive unvested restricted stock and performance stock unit awards excluded from the calculation of diluted earnings per share for the three months ended June 30, 2025 and 2024, respectively. There were three thousand and zero anti-dilutive unvested restricted stock and performance stock unit awards excluded from the calculation of diluted earnings per share for the six months ended June 30, 2025 and 2024, respectively.

Note 15 – Revenue Recognition

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees and merchant income. Noninterest revenue streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts

Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided.

Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or at the end of the month through a direct charge to customers’ accounts.

Trust and Investment Fee Income

Trust and investment fee income primarily comprise fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time, and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received a few days after month end through a direct charge to customers’ accounts. The Company does not earn performance-based incentives.

Optional services such as real estate sales and tax return preparation services are also available to existing trust and asset management customers. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

Title Company Revenue

Title Company revenue consists of revenue earned on performing title work for real estate transactions. The revenue is earned when the title work is performed. Payment for such performance obligations generally occurs at the time of the settlement of a real estate transaction. As such settlement is generally within 90 days of the performance of the title work, the Company recognizes the revenue at the time of the settlement.

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All contract issuance costs are expensed as incurred. The Company had no contract assets or liabilities at June 30, 2025.

Other Noninterest Income

Other noninterest income consists of fees, exchange, other service charges, safety deposit box rental fees, and other miscellaneous revenue streams. Fees and other service charges primarily comprise debit and credit card income, automated teller machine (“ATM”) fees, merchant services income, and other service charges. Debit and credit card income primarily comprises interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard and Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that rentals and renewals of safe deposit boxes will be recognized on a monthly basis consistent with the duration of the performance obligation.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2025 and 2024.


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2025		2024		2025		2024
Noninterest income
In-scope of Topic 606:
Service charges on deposit accounts	$	1,519	$	1,493	$	3,033	$	3,001
Trust and investment fee income	942		896		1,765		1,630
Interchange income	1,788		1,717		3,365		3,304
Other noninterest income	1,458		1,146		2,184		2,026
Noninterest income (in-scope of Topic 606)	5,707		5,252		10,347		9,961
Noninterest income (out-of-scope of Topic 606)	3,611		3,188		5,973		5,046
Total noninterest income	$	9,318	$	8,440	$	16,320	$	15,007

Note 16 – Segment Reporting

The Company’s reportable segment is determined by the Chief Executive Officer, who is designated the chief operating decision maker (“CODM”), based upon information provided about the Company’s product and services offered. The segment is also distinguished by the level of information provided to the CODM, who uses such information to review performance of various components of the business, which are then aggregated if operating performance of product and customers are similar. The CODM evaluates the financial performance of the Company’s business components such as revenue streams, significant expenses, and budget to actual results in assessing the Company’s segment and in determination of allocated resources. While the CODM monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the financial services operations are considered by management to be aggregated in one reportable operating segment. Refer to the “Consolidated Financial Statements” included in Part I, Item 1. of this Quarterly Report on Form 10-Q.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context clearly suggests otherwise, references to “the Company,” “we,” “our” and “us” in the remainder of this Quarterly Report on Form 10-Q are to Shore Bancshares, Inc. and its consolidated subsidiaries.

FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains 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;

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• 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 Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) filed with SEC and available at the SEC’s website (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.

INTRODUCTION

The following management’s discussion and analysis of financial condition and results of operations is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and related notes presented elsewhere in this report, as well as the audited consolidated financial statements and related notes included in the 2024 Annual Report.

Shore Bancshares, Inc. is headquartered on the Eastern Shore of Maryland. It is the parent company of Shore United Bank, N.A. (the “Bank”). The Bank currently operates 40 full-service branches in Maryland, Delaware and Virginia. The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through our broker/dealer, LPL Financial. The Company, through Wye Trust, a division of the Bank, offers wealth management, corporate trustee services and trust administration to customers within our market areas and nationwide. The Company offered title services through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. (the “Title Company”), which engaged in residential and commercial real estate settlement activities and offered title insurance policies, title search and lien satisfaction services. The Title Company ceased conducting real estate closings effective March 31, 2025. Operations will continue for as long as necessary to ensure that work in progress is adequately addressed. Upon successful completion of outstanding matters, the Title Company will complete any regulatory filings necessary to discontinue the business and dissolve the corporation.

The shares of common stock of Shore Bancshares, Inc. are listed on the NASDAQ Global Select Market under the symbol “SHBI.”

Shore Bancshares, Inc. maintains an Internet site at www.shorebancshares.com on which it makes available free of charge its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to the foregoing as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC.

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CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and follow general practices within the industries in which it operates. Application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions, and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.

The most significant accounting policies that we follow are presented in Note 1 – “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8. of the 2024 Annual Report. These policies, along with the disclosures presented in the notes to consolidated financial statements and in this management’s discussion and analysis of financial condition and results of operations, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined. Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions, and estimates underlying those amounts, management has determined that the accounting policy for the allowance for credit losses (“ACL”) on loans is a critical accounting policy. This policy is considered critical because it relates to an accounting area that require the most subjective or complex judgments, and, as such, could be most subject to revision as new information becomes available.

Allowance for Credit Losses on Loans

The ACL represents management’s best estimate of expected lifetime credit losses within the Company’s loan portfolio as of the balance sheet date. The ACL is established through a provision for credit losses and is increased by recoveries of loans previously charged off. Loan losses are charged against the allowance when management’s assessments confirm that the Company will not collect the full amortized cost basis of a loan. The calculation of expected credit losses is determined using a cash flow methodology, and includes considerations of historical experience, current conditions, and reasonable and supportable economic forecasts that may affect collection of the recorded balances. The Company assesses an ACL to groups of loans which share similar risk characteristics or on an individual basis, as deemed appropriate. Changes in the ACL on loans and the related provision for credit losses can materially affect financial results. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for loans in the portfolio.

The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires the Company to make significant judgments concerning credit risks and trends using quantitative and qualitative information, as well as reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and significant changes. Changes in conditions, including unforeseen events, changes in asset-specific risk characteristics, and other economic factors, both within and outside the Company’s control, may indicate the need for an increase or decrease in the ACL on loans. While management makes every effort to utilize the best information available in making its assessment of the ACL estimate, the estimation process is inherently challenging as potential changes in any one factor or input may occur at different rates and/or impact pools of loans in different ways. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

The Company’s management reviews the adequacy of the ACL on loans on at least a quarterly basis. Refer to Note 1 – “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8. of the 2024 Annual Report for additional details concerning the determination of the ACL on loans.

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OVERVIEW

The Company’s net income for the second quarter of 2025 was $15.5 million, or $0.46 per diluted common share, compared to $13.8 million, or $0.41 per diluted common share, for the first quarter of 2025. The Company had 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 (“NII”) 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%. Exc luding 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.

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(1) See the Reconciliation of GAAP and non-GAAP Measures tables.

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SUMMARY OF OPERATING RESULTS

A comparison of the results of operations for the three and six months ended June 30, 2025 and 2024 is presented below.



	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2025		2024		2025		2024
OPERATING DATA
Total interest income	$	76,620	$	73,106	$	152,684	$	144,245
Total interest expense	29,368		30,966		59,403		60,970
Net interest income	47,252		42,140		93,281		83,275
Provision for credit losses	1,528		2,081		2,556		2,488
NII after provision for credit losses	45,724		40,059		90,725		80,787
Total noninterest income	9,318		8,440		16,320		15,007
Total noninterest expense	34,410		33,499		68,157		70,197
Income before income taxes	20,632		15,000		38,888		25,597
Income tax expense	5,125		3,766		9,617		6,179
Net income	$	15,507	$	11,234	$	29,271	$	19,418



	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
KEY OPERATING RATIOS
ROAA	1.03		%	0.77		%	0.97		%	0.67		%
Return on average common equity (“ROACE”)	11.13			8.70			10.67			7.54
Return on average tangible common equity (“ROATCE”) non-GAAP (1)	13.50			10.97			13.01			9.55
Average total equity to average total assets	9.28			8.90			9.11			8.92
Interest rate spread	2.39			2.11			2.35			2.23
Net interest margin	3.35			3.11			3.30			3.09
Efficiency ratio – GAAP (2)	60.83			66.23			62.19			71.42
Noninterest income to average assets	0.62			0.58			0.54			0.52
Noninterest expense to average assets	2.29			2.31			2.26			2.43
Net operating expense to average assets – GAAP (3)	1.67			1.73			1.72			1.91

COMMON SHARE DATA
Basic net income per common share	$	0.46		$	0.34		$	0.88		$	0.58
Diluted net income per common share	$	0.46		$	0.34		$	0.88		$	0.58
Cash dividends paid per common share	$	0.12		$	0.12		$	0.24		$	0.24
Common dividend payout ratio	26.09		%	35.29		%	27.27		%	41.38		%

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(1) ROATCE is computed by dividing net earnings applicable to common stockholders by average tangible common stockholders’ equity. ROATCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. Refer to Use of Non-GAAP Financial Measures for additional details.

(2) Efficiency ratio is noninterest expense divided by the sum of net interest income and noninterest income.

(3) Net operating expense is the sum of noninterest expense offset by noninterest income.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2025 AND 2024

Summary of Financial Results

The Company reported net income for the three months ended June 30, 2025 of $15.5 million, or $0.46 diluted earnings per common share, compared to $11.2 million, or diluted earnings per common share of $0.34, for the three months ended June 30, 2024. The Company’s ROAA, non-GAAP ROAA, ROACE and ROATCE were 1.03%, 1.15%, 11.13% and 13.50%, respectively, for the three months ended June 30, 2025, compared to 0.77%, 0.91%, 8.70% and 10.97%, respectively, for the three months ended June 30, 2024.

The following table presents selected consolidated statement of operations data for each of the periods indicated.


	Three Months Ended June 30,
($ in thousands)	2025		2024		$ Change		% Change
Interest and dividend income	$	76,620	$	73,106	$	3,514	4.8	%
Interest expense	29,368		30,966		(1,598)		(5.2)
Net interest income	47,252		42,140		5,112		12.1
Provision for credit losses	1,528		2,081		(553)		(26.6)
Noninterest income	9,318		8,440		878		10.4
Noninterest expense	34,410		33,499		911		2.7
Income before income taxes	20,632		15,000		5,632		37.5
Income tax expense	5,125		3,766		1,359		36.1
Net income	$	15,507	$	11,234	$	4,273	38.0

Net Interest Income

Tax-equivalent NII is NII adjusted for the tax-favored status of income from certain loans and investments. As shown in the table below, tax-equivalent NII was $47.3 million for the second quarter of 2025 and $42.2 million for the second quarter of 2024. The increase was primarily due to increases in interest and fees on loans of $2.4 million and interest on deposits at other banks of $1.0 million, as well as a decrease in interest expense on short-term borrowings of $1.0 million.


	Three Months Ended June 30,
($ in thousands)	2025		2024		$ Change		% Change
Interest and dividend income
Loans, including fees	$	69,695	$	67,292	$	2,403	3.6	%
Interest and dividends on investment securities	5,337		5,236		101		1.9
Interest on deposits with banks	1,588		578		1,010		174.7
Total interest and dividend income	$	76,620	$	73,106	$	3,514	4.8

Interest expense
Deposits	$	27,369	$	27,585	$	(216)	(0.8)	%
Short-term borrowings	605		1,584		(979)		(61.8)
Long-term debt	1,394		1,797		(403)		(22.4)
Total interest expense	$	29,368	$	30,966	$	(1,598)	(5.2)

Taxable-equivalent adjustment	$	81	$	82	$	(1)	(1.2)	%

Tax-equivalent net interest income	$	47,333	$	42,222	$	5,111	12.1	%

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Average Balances and Yields

The following table presents the distribution of the average consolidated balance sheets, interest income, interest expense and annualized yields earned and rates paid for the three months ended June 30, 2025 and 2024.


	Three Months Ended June 30,
	2025						2024
($ in thousands)	Average Balance		Interest		Yield/Rate		Average Balance		Interest		Yield/Rate
Earning assets
Loans (1), (2), (3)
Commercial real estate	$	2,572,931	$	37,276	5.81	%	$	2,522,708	$	36,110	5.76	%
Residential real estate	1,378,940		18,986		5.52		1,306,260		17,938		5.52
Construction	352,803		5,697		6.48		319,205		4,902		6.18
Commercial	224,218		3,658		6.54		219,140		3,956		7.26
Consumer	298,544		4,036		5.42		330,819		4,265		5.19
Credit card	6,122		121		7.93		8,378		201		9.65
Total loans	4,833,558		69,774		5.79		4,706,510		67,372		5.76

Investment securities
Taxable	683,028		5,331		3.12		705,421		5,230		2.97
Tax-exempt (1)	652		8		4.91		658		8		4.86

Interest-bearing deposits	143,171		1,588		4.45		47,372		578		4.91
Total earning assets	5,660,409		$	76,701	5.44		5,459,961		$	73,188	5.39
Cash and due from banks	46,620						45,141
Other assets	372,725						391,854
Allowance for credit losses	(58,369)						(57,628)
Total assets	$	6,021,385					$	5,839,328

Interest-bearing liabilities
Interest-bearing checking	$	720,967	$	5,697	3.17	%	$	711,138	$	5,550	3.14	%
Money market and savings deposits	1,747,854		9,580		2.20		1,690,157		10,291		2.45
Time deposits	1,258,802		12,000		3.82		1,175,542		11,650		3.99
Brokered deposits	9,720		92		3.80		7,753		94		4.88
Interest-bearing deposits (4)	3,737,343		27,369		2.94		3,584,590		27,585		3.10

FHLB advances	50,000		605		4.85		143,769		1,930		5.40
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”) (4)	74,102		1,394		7.55		72,680		1,451		8.03
Total interest-bearing liabilities	3,861,445		29,368		3.05		3,801,039		30,966		3.28
Noninterest-bearing deposits	1,560,224						1,480,384
Accrued expenses and other liabilities	40,764						38,427
Stockholders’ equity	558,952						519,478
Total liabilities and stockholders’ equity	$	6,021,385					$	5,839,328

Net interest income			$	47,333					$	42,222

Net interest spread					2.39	%					2.11	%
Net interest margin					3.35						3.11
Net interest margin excluding accretion (3)					3.10						2.83	%
Cost of funds					2.17						2.36
Cost of deposits					2.07						2.19
Cost of debt					6.46						6.28

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

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $4.2 million and $4.5 million of accretion interest on loans for the three months ended June 30, 2025 and 2024, respectively.

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(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments. There were $435 thousand and $421 thousand of amortization of deposit discounts, and $232 thousand and $243 thousand of amortization of borrowing fair value adjustments for the three months ended June 30, 2025 and 2024, respectively.

Rate and Volume Analysis

The following table presents changes in interest income and interest expense for the periods indicated. For each category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (1) changes in volume (changes in volume multiplied by old rate); and (2) changes in rate (changes in rate multiplied by old volume). Changes in rate-volume (changes in rate multiplied by the change in volume) have been allocated to changes due to volume.


Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024
($ in thousands)	Volume		Due to Rate		Total
Interest income from earning assets:
Loans
Commercial real estate	$	852	$	314	$	1,166
Residential real estate	1,048		—		1,048
Construction	556		239		795
Commercial	95		(393)		(298)
Consumer	(419)		190		(229)
Credit cards	(44)		(36)		(80)
Taxable investment securities	(251)		352		101


Interest-bearing deposits	746		264		1,010
Total interest income	$	2,583	$	930	$	3,513

Interest-bearing liabilities:
Interest-bearing checking deposits	$	94	$	53	$	147
Money market and savings deposits	342		(1,053)		(711)
Time deposits	848		(498)		350
Brokered deposits	19		(21)		(2)

Advances from FHLB	(1,128)		(197)		(1,325)
Subordinated debt	30		(87)		(57)
Total interest-bearing liabilities	205		(1,803)		(1,598)
Net change in net interest income	$	2,378	$	2,733	$	5,111

Fluctuations in NII can result from the combination of changes in the average balances of asset and liability categories and changes in interest rates. Interest rates earned and paid are affected by general economic conditions, particularly changes in market interest rates, and by competitive factors, government policies and actions of regulatory authorities.

NII was $47.3 million for the second quarter of 2025, compared to $42.1 million for the second quarter of 2024. The increase was primarily due to increases in interest and fees on loans of $2.4 million and interest on deposits at other banks of $1.0 million, as well as a decrease in interest expense on short-term borrowings of $1.0 million.

The Company’s NIM increased to 3.35% for the second quarter of 2025 from 3.11% for the second quarter of 2024. Comparing the second quarter of 2025 to the second quarter of 2024, the Company’s interest-earning asset yields increased to 5.44% from 5.39%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 19 bps basis points, from 2.36% to 2.17% for the same period.

Provision for Credit Losses (“PCL”) and ACL

Refer to the discussion of the Bank’s PCL and ACL in the asset quality discussion in the analysis of financial condition in this management’s discussion and analysis of financial condition and results of operations.

Noninterest Income

Total noninterest income for the second quarter of 2025 was $9.3 million, an increase of $878 thousand from $8.4 million for the second quarter of 2024. The increase was primarily due to an increase in mortgage banking activity, driven by increased mortgage servicing activity and lower prepayment rates.

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Noninterest Expense

Total noninterest expense of $34.4 million for the second quarter of 2025 increased $911 thousand when compared to the second quarter of 2024 total noninterest expense of $33.5 million. The increase in total noninterest expense from the second quarter of 2024 was primarily due to higher salaries and benefits expense and software and data processing costs, partially offset by lower operating expenses in the second quarter of 2025.

Income Taxes

The Company reported income tax expense of $5.1 million and $3.8 million for the three months ended June 30, 2025 and 2024, respectively. The effective tax rate for the second quarter of 2025 and 2024 was 24.8% and 25.1%, respectively.

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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2025 AND 2024

Summary of Financial Results

The Company reported net income for the six months ended June 30, 2025 of $29.3 million, or $0.88 diluted earnings per common share, compared to $19.4 million, or diluted earnings per share of $0.58, for the six months ended June 30, 2024. The Company’s ROAA, non-GAAP ROAA, ROACE and ROATCE were 0.97%, 1.09%, 10.67% and 13.01%, respectively, for the six months ended June 30, 2025, compared to 0.67%, 0.92%, 7.54% and 9.55%, respectively, for the six months ended June 30, 2024.

The following table presents selected consolidated statement of operations data for each of the periods indicated.


	Six Months Ended June 30,
($ in thousands)	2025		2024		$ Change		% Change
Interest and dividend income	$	152,684	$	144,245	$	8,439	5.9	%
Interest expense	59,403		60,970		(1,567)		(2.6)
Net interest income	93,281		83,275		10,006		12.0
Provision for credit losses	2,556		2,488		68		2.7
Noninterest income	16,320		15,007		1,313		8.7
Noninterest expense	68,157		70,197		(2,040)		(2.9)
Income before income taxes	38,888		25,597		13,291		51.9
Income tax expense	9,617		6,179		3,438		55.6
Net income	$	29,271	$	19,418	$	9,853	50.7

Net Interest Income

As shown in the table below, tax-equivalent net interest income increased $10.0 million to $93.4 million for the six months ended June 30, 2025, compared to $83.4 million for 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%. The decrease in total interest expense was primarily due to a decrease in interest on deposits of $641 thousand, a decrease in interest expense on long-term borrowings of $488 thousand and a decrease in interest expense on short-term borrowings of $438 thousand. The decreases in borrowings were related to lower FHLB advances in 2025.


	Six Months Ended June 30,
($ in thousands)	2025		2024		$ Change		% Change
Interest and dividend income
Loans, including fees	$	137,343	$	133,045	$	4,298	3.2	%
Interest and dividends on investment securities	10,344		9,662		682		7.1
Interest on deposits with banks	4,997		1,538		3,459		224.9
Total interest and dividend income	$	152,684	$	144,245	$	8,439	5.9

Interest expense
Deposits	$	55,440	$	56,081	$	(641)	(1.1)	%
Short-term borrowings	1,203		1,641		(438)		(26.7)
Long-term debt	2,760		3,248		(488)		(15.0)
Total Interest Expense	$	59,403	$	60,970	$	(1,567)	(2.6)

Taxable-equivalent adjustment	$	161	$	161	$	—	—	%

Tax-equivalent net interest income	$	93,442	$	83,436	$	10,006	12.0	%

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Average Balances and Yields


	Six Months Ended June 30,
	2025						2024
($ in thousands)	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Earning assets
Loans (1), (2), (3)
Commercial real estate	$	2,557,316	$	73,167	5.77	%	$	2,520,796	$	71,743	5.72	%
Residential real estate	1,363,076		37,448		5.54		1,291,225		35,179		5.48
Construction	352,564		11,222		6.42		309,661		9,306		6.04
Commercial	228,535		7,363		6.50		220,248		8,070		7.37
Consumer	301,515		8,094		5.41		330,998		8,537		5.19
Credit card	6,403		207		6.52		7,918		368		9.35
Total loans	4,809,409		137,501		5.77		4,680,846		133,203		5.72

Investment securities
Taxable	673,567		10,332		3.07		680,042		9,650		2.84
Tax-exempt (1)	653		15		4.59		659		15		4.55

Interest-bearing deposits	228,488		4,997		4.41		62,324		1,538		4.96
Total earning assets	5,712,117		$	152,845	5.40		5,423,871		$	144,406	5.35
Cash and due from banks	46,912						47,320
Other assets	374,641						393,439
Allowance for credit losses	(58,331)						(57,554)
Total assets	$	6,075,339					$	5,807,076

Interest-bearing liabilities
Interest-bearing checking	$	789,949	$	12,722	3.25	%	$	910,831	$	11,911	2.63	%
Money market and savings deposits	1,773,637		19,595		2.23		1,679,615		20,451		2.45
Time deposits	1,233,666		23,031		3.76		1,177,557		23,374		3.99
Brokered deposits	4,888		92		3.80		14,107		345		4.92
Interest-bearing deposits (4)	3,802,140		55,440		2.94		3,782,110		56,081		2.98

FHLB advances	50,000		1,203		4.85		73,885		1,987		5.41
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”) (4)	73,971		2,760		7.52		72,549		2,902		8.04
Total interest-bearing liabilities	3,926,111		59,403		3.05		3,928,544		60,970		3.12
Noninterest-bearing deposits	1,555,405						1,321,705
Accrued expenses and other liabilities	40,594						39,100
Stockholders’ equity	553,229						517,727
Total liabilities and stockholders’ equity	$	6,075,339					$	5,807,076

Net interest income			$	93,442					$	83,436

Net interest spread					2.35	%					2.23	%
Net interest margin					3.30						3.09
Net interest margin excluding accretion (3)					3.06						2.82
Cost of funds					2.19						2.34
Cost of deposits					2.09						2.21
Cost of debt					6.45						6.71

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

(2) Average loan balances include nonaccrual loans.

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $8.0 million and $8.7 million of accretion interest on loans for the six months ended June 30, 2025 and 2024, respectively.

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(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments. There were $769 thousand and $788 thousand of amortization of deposit discounts, and $463 thousand and $463 thousand of amortization of borrowing fair value adjustments for the six months ended June 30, 2025 and 2024, respectively.

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Rate and Volume Analysis

The following table presents changes in volume and rate related to interest income and interest expense for the periods indicated.


Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024
($ in thousands)	Volume		Due to Rate		Total
Interest income from earning assets:
Loans
Commercial real estate	$	799	$	625	$	1,424
Residential real estate	1,885		384		2,269
Construction	1,332		584		1,916
Commercial	243		(950)		(707)
Consumer	(804)		361		(443)
Credit cards	(50)		(111)		(161)
Taxable investment securities	(479)		1,161		682


Interest-bearing deposits	2,683		776		3,459
Total interest income	$	5,609	$	2,830	$	8,439

Interest-bearing liabilities:
Interest-bearing checking deposits	$	(1,989)	$	2,800	$	811
Money market and savings deposits	976		(1,832)		(856)
Time deposits	1,000		(1,343)		(343)
Brokered deposits	(175)		(78)		(253)

Advances from FHLB	(579)		(205)		(784)
Subordinated debt	45		(187)		(142)
Total interest-bearing liabilities	(722)		(845)		(1,567)
Net change in net interest income	$	6,331	$	3,675	$	10,006

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.

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Provision for Credit Losses and ACL

Noninterest Income

Total noninterest income for the six months ended June 30, 2025 was $16.3 million, an increase of $1.3 million, or 8.8%, when compared to the same period in 2024. The increase was primarily due to higher gains on sales of loans held for sale of $453 thousand, mortgage banking revenue of $383 thousand and other noninterest income of $249 thousand.

Noninterest Expense

Total noninterest expense was $68.2 million for the six months ended June 30, 2025, a decrease of $2.0 million, or 2.9%, when compared to the same period in 2024. Noninterest expense 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 in software and data processing expense in the six months ended June 30, 2025.

Income Taxes

The Company reported income tax expense of $9.6 million and $6.2 million for the six months ended June 30, 2025 and 2024, respectively. The effective tax rate was 24.73% for the six months ended June 30, 2025 and 24.14% for the six months ended June 30, 2024. The 2024 effective tax rate was impacted by nondeductible merger costs incurred.

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LIQUIDITY

Liquidity is our ability to meet cash demands as they arise. Cash needs may come from loan demand, deposit withdrawals or acquisition opportunities. Potential obligations, resulting from the issuance of standby letters of credit and commitments to fund future borrowings to our loan customers, are other factors affecting our liquidity needs. Many of these obligations and commitments are expected to expire without being drawn upon; therefore, the total commitment amounts do not necessarily represent future cash requirements affecting our liquidity position.

The Company’s principal sources of liquidity are cash on hand and dividends received from the Bank. The Bank’s most liquid assets are cash, cash equivalents and federal funds sold. The levels of such assets are dependent upon the Bank’s operating, financing and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows. Customer deposits are considered the primary source of funds supporting the Bank’s lending and investment activities.

Based on management’s going concern evaluation, we believe that there are no conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s or the Bank’s ability to continue as a going concern, within one year of the date of the issuance of the financial statements.

The Bank’s principal sources of funds for investment and operations are net income, deposits, sales of loans, borrowings, principal and interest payments on loans, principal and interest received on investment securities and proceeds from the maturity and sale of investment securities. The Bank’s principal funding commitments are for the origination or purchase of loans, the purchase of securities and the payment of maturing deposits.

The Bank’s most liquid assets are cash, cash equivalents and federal funds sold. The levels of such assets are dependent on the Bank’s operating, financing and investment activities at any given time. The variations in levels of cash and cash equivalents are influenced by deposit flows and anticipated future deposit flows.

Liquidity is provided by access to funding sources, which include core deposits and brokered deposits. Other sources of funds include our ability to borrow, such as purchasing federal funds from correspondent banks, sales of securities under agreements to repurchase and advances from the FHLB. The Bank uses wholesale funding (brokered deposits and other sources of funds) to supplement funding when loan growth exceeds core deposit growth and for asset-liability management purposes.

We derive liquidity through increased customer deposits, non-reinvestment of the cash flow from the investment portfolio, loan repayments, borrowings and income from earning assets. As seen in the consolidated statements of cash flows, the net decrease in cash and cash equivalents was $274.9 million for the first six months of 2025, compared to a net decrease of $233.5 million for the first six months of 2024. The decrease in cash and cash equivalents in the first six months of 2025 was mainly due to the decrease of $227.5 million in interest-bearing deposits, partially offset by an increase of $12.3 million in noninterest-bearing deposits.

To the extent that deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term fund markets. At June 30, 2025, the Bank had approximately $1.16 billion of available liquidity, including $185.0 million in cash and cash equivalents, $316.5 million in unpledged securities and $740.7 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by FHLB advances and a letter of credit of $50.0 million and $33.1 million, respectively. The Bank has arrangements with other correspondent banks whereby it has $95.0 million available in federal funds lines of credit and a reverse repurchase agreement available to meet any short-term needs which may not otherwise be funded by the Bank’s portfolio of readily marketable investments that can be converted to cash. Through the FHLB, the Bank had available lendable collateral of approximately $740.7 million and $743.6 million at June 30, 2025 and December 31, 2024, respectively. The Bank has pledged, under a blanket lien, all qualifying residential and commercial real estate loans under borrowing agreements with the FHLB of Atlanta. The following table presents the Company’s liquidity in use and liquidity available as of June 30, 2025.


	June 30, 2025
($ in thousands)	Liquidity in Use		Liquidity Available
FHLB secured borrowings (1)	$	83,100	$	740,728
Unsecured federal fund purchase lines	—		95,000

Unpledged assets
Cash and cash equivalents	N/A		$	184,984
Investment securities	N/A		316,500
Total	$	83,100	$	1,337,212

____________________________________

(1) The Bank has pledged a portion of the commercial real estate and residential loan portfolio to the FHLB to secure the line of credit.

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For information about risks relating to liquidity, see “Risk Factors – Risks Relating to Our Business” included in Part I, Item 1A. in the 2024 Annual Report.

CAPITAL RESOURCES

The Bank and the Company are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank and the Company to maintain minimum ratios of common equity Tier 1 (“CET1”), Tier 1, and total capital as a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 12.50%. The Bank and Company are also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio. The Bank was deemed “well-capitalized” under applicable regulatory capital requirements at June 30, 2025.

The Company evaluates capital resources by the ability to maintain adequate regulatory capital ratios. The Company and the Bank annually update its strategic plan, which includes a three-year capital plan. In developing its plan, the Company considers the impact to capital of asset growth, loan concentrations, income accretion, dividends, holding company liquidity, investment in markets and people and stress testing.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios of CET1, Tier 1, and total capital as a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 12.50%. The Bank is also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio.

In July 2013, federal bank regulatory agencies issued a final rule that revised their risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with certain standards that were developed by Basel III and certain provisions of the Dodd-Frank Act. The final rule currently applies to all depository institutions and bank holding companies and savings and loan holding companies with total consolidated assets of more than $3 billion.

As of June 30, 2025, the Bank and the Company were in compliance with all applicable regulatory capital requirements to which they were subject, and the Bank was classified as “well-capitalized” for purposes of the prompt corrective action regulations. The following tables present the applicable capital ratios for the Company and the Bank as of June 30, 2025 and December 31, 2024.


June 30, 2025	Tier 1 Leverage Ratio		Common Equity Tier 1 Ratio		Tier 1 Risk-Based Capital Ratio		Total Risk-Based Capital Ratio
The Company	8.65	%	9.90	%	10.51	%	12.65	%
The Bank	9.20		11.18		11.18		12.42


December 31, 2024	Tier 1 Leverage Ratio		Common Equity Tier 1 Ratio		Tier 1 Risk-Based Capital Ratio		Total Risk-Based Capital Ratio
The Company	8.02	%	9.44	%	10.06	%	12.18	%
The Bank	8.58		10.75		10.75		11.97

On August 1, 2025, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on August 25, 2025, to holders of record of shares of common stock as of August 11, 2025.

See Note 10 – “Regulatory Capital Requirements” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1. of this Quarterly Report on Form 10-Q for further information about the regulatory capital positions of the Bank and the Company.

The Company provides banking services to customers who do business in the cannabis industry. Prior to the second quarter of 2022, the Company restricted these businesses to include only those in the medical-use cannabis industry in the State of Maryland. During the

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second quarter of 2022, the Company expanded its cannabis banking program to include both medical and adult-use licensees in other states, with an initial offering of the Company’s existing Maryland customers with multi-state operations. While the Company is providing banking services to customers that are engaged in growing, processing, and sales of both medical and adult-use cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate federal law. The Company may be deemed to be aiding and abetting illegal activities through the services that it provides to these customers. While we are not aware of any instance of a federally-insured financial institution being subject to such aiding and abetting liability, the strict enforcement of federal laws regarding cannabis would likely result in the Company’s inability to continue to provide banking services to these customers and the Company could have legal action taken against it by the federal government, including imprisonment and fines. There is an uncertainty of the potential impact to the Company’s consolidated financial statements if the federal government takes actions against the Company. As of June 30, 2025, the Company has not accrued an amount for the potential impact of any such actions.

The following is a summary of the level of business activities with our cannabis customers:

• At June 30, 2025, deposit balances were $141.5 million, or 2.66% of total deposits, and loan balances were $84.6 million, or 1.75% of total gross loans. At December 31, 2024, deposit balances were $151.4 million, or 2.74% of total deposits, and loan balances were $82.6 million, or 1.73% of total gross loans.

• Interest and noninterest income for the six months ended June 30, 2025, were approximately $2.2 million and $467 thousand, respectively. Interest and noninterest income for the six months ended June 30, 2024, were approximately $2.0 million and $558 thousand, respectively.

For information about risks related with our banking services provided to the cannabis industry, see “Risk Factors – Risks Relating to Our Business” included in Part I, Item 1A. in the 2024 Annual Report.

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ANALYSIS OF FINANCIAL CONDITION

Balance Sheet Summary

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 decrease was primarily due to decreases in cash and cash equivalents of $274.9 million and held to maturity (“HTM”) securities of $21.8 million, partially offset by increases in loans held for investment of $55.6 million and available for sale (“AFS”) securities of $38.5 million. The ratio of the ACL as a percentage of loans was 1.21% and 1.21% at June 30, 2025 and December 31, 2024, respectively.

Cash and Cash Equivalents

Cash and cash equivalents totaled $185.0 million at June 30, 2025, compared to $459.9 million at December 31, 2024. Total cash and cash equivalents fluctuate due to transactions in process and other liquidity demands. Management believes liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and wholesale funding sources, and the portions of the investment and loan portfolios that mature within one year.

Investment Securities

The investment portfolio includes debt and equity securities. Debt securities are classified as either AFS or HTM. AFS investment securities are stated at estimated fair value based on market prices. They represent securities which may be sold as part of the asset/liability management strategy or in response to changing interest rates. Net unrealized holding gains and losses on these securities are reported net of related income taxes as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Investment securities in the HTM category are stated at cost adjusted for amortization of premiums and accretion of discounts and the ACL. We have the intent and ability to hold such securities until maturity. At June 30, 2025, 29.0% of the portfolio of debt securities was classified as AFS and 71.0% was classified as HTM, compared to 23.7% and 76.3% respectively, at December 31, 2024. See Note 2 – “Investment Securities” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional details on the composition of our investment portfolio.

Investment securities, including restricted stock and equity securities, totaled $673.3 million at June 30, 2025, a $17.0 million, or 2.6% increase, compared to $656.4 million at December 31, 2024.

At June 30, 2025, AFS securities, carried at fair value, totaled $187.7 million, compared to $149.2 million at December 31, 2024. At June 30, 2025, AFS securities consisted of 86.6% mortgage-backed, 10.9% U.S. government agencies and 2.5% corporate bonds, compared to 82.0%, 13.5% and 4.4%, respectively, at December 31, 2024. At June 30, 2025, the accumulated other comprehensive loss was $5.6 million, compared to $7.5 million at December 31, 2024.

At June 30, 2025, HTM securities, carried at amortized cost, totaled $459.2 million, compared to $481.1 million at December 31, 2024. At June 30, 2025, HTM securities consisted of 69.9% mortgage-backed, 28.1% U.S. government agencies and 2.0% other debt securities, compared to 70.0%, 27.5% and 2.5%, respectively, at December 31, 2024.

At June 30, 2025 and December 31, 2024, 97.9% and 97.1%, respectively, of the Bank’s carrying value of its investment portfolio consisted of securities issued or guaranteed by U.S. government agencies or government-sponsored agencies.

The Company monitors the credit quality of HTM securities through credit ratings provided by Standard & Poor’s Rating Services and Moody’s Investor Services. Credit ratings express opinions about the credit quality of a security, and are updated at each quarter end. Investment grade securities are rated BBB- or higher by S&P and Baa3 or higher by Moody’s and are generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade, which are labeled as speculative grade by the rating agencies, are considered to have distinctively higher credit risk than investment grade securities. There were no speculative grade HTM securities at June 30, 2025 or December 31, 2024. HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S. government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

The following table shows the amortized cost of HTM securities based on their lowest publicly available credit rating as of June 30, 2025.


	June 30, 2025
	Investment Grade
($ in thousands)	Aaa		Aa1		A3		Baa1		Baa2		NR		Total
U.S. Treasury and government agency securities	$	5,848	$	123,421	$	—	$	—	$	—	$	—	$	129,269
Mortgage-backed securities	321,213		—		—		—		—		—		321,213

Other debt securities	—		1,463		4,000		1,000		500		2,000		8,963
Total held to maturity securities	$	327,061	$	124,884	$	4,000	$	1,000	$	500	$	2,000	$	459,445

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


	December 31, 2024
	Investment Grade
($ in thousands)	Aaa		Aa1		A3		Baa1		Baa2		NR		Total
U.S. Treasury and government agency securities	$	132,560	$	—	$	—	$	—	$	—	$	—	$	132,560
Mortgage-backed securities	336,755		—		—		—		—		—		336,755

Other debt securities	—		1,465		4,000		4,000		500		2,000		11,965
Total held to maturity securities	$	469,315	$	1,465	$	4,000	$	4,000	$	500	$	2,000	$	481,280

Loans Held for Sale

We originate residential mortgage loans for sale on the secondary market, which are recorded at fair value. At June 30, 2025 and December 31, 2024 , the fair value of loans held for sale amounted to $34.3 million and $19.6 million, respectively. The Bank makes certain representations to purchasers in the sale of mortgage loans related to loan ownership, loan compliance and legality, and accurate documentation. If a loan is found to be out of compliance with any of the representations subsequent to the date of purchase, the Bank may be required to repurchase the loan or indemnify the purchaser. No loans were repurchased during the three months ended June 30, 2025 or 2024, or during the six months ended June 30, 2024. During the six months ended June 30, 2025, the Bank repurchased one loan of $415 thousand.

Loans Held for Investment

The following table summarizes the Company’s loan portfolio at June 30, 2025 and December 31, 2024.


($ in thousands)	June 30, 2025		% of Total Loans		December 31, 2024		% of Total Loans		$ Change		% Change
Commercial real estate	$	2,603,974	54.0	%	$	2,557,806	53.6	%	$	46,168	1.8	%
Residential real estate	1,349,010		27.9		1,329,406		27.9		19,604		1.5
Construction	350,053		7.3		335,999		7.0		14,054		4.2
Commercial	224,092		4.6		237,932		5.0		(13,840)		(5.8)
Consumer	294,239		6.1		303,746		6.4		(9,507)		(3.1)
Credit cards	6,260		0.1		7,099		0.2		(839)		(11.8)
Total loans	4,827,628		100.0	%	4,771,988		100.0	%	55,640		1.2
Less: allowance for credit losses	(58,483)				(57,910)				(573)		1.0
Total loans, net	$	4,769,145			$	4,714,078			$	55,067	1.2

CRE Loan Portfolio

Our loan portfolio has a CRE loan concentration, which is generally defined as a combination of certain construction and CRE loans. The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in CRE lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential CRE concentration risk, institutions which have (1) total reported loans for construction, land development, and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total non-owner occupied CRE loans representing 300% or more of the institution’s total risk-based capital and the institution’s non-owner occupied CRE loan portfolio (including construction) has increased 50% or more during the prior 36 months are identified as having potential CRE concentration risk. Institutions which are deemed to have concentrations in CRE lending are expected to employ heightened levels of risk management with respect to their CRE portfolios, and may be required to hold higher levels of capital. The Bank has a concentration in CRE loans, and experienced significant growth in its CRE portfolio with its acquisition of The Community Financial Corporation and its wholly-owned subsidiary, Community Bank of the Chesapeake. Non-owner occupied CRE loans totaled $2.14 billion and $2.08 billion at June 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 354.15% and 359.52%, respectively. Construction loans totaled $349.6 million and $336.0 million at June 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital + ACL were 57.77% and 57.99%, respectively.

The CRE portfolio has increased in the past two years. Management has extensive experience in CRE lending, and has implemented and continues to maintain heightened risk management procedures, as well as strong underwriting criteria with respect to its CRE portfolio. Monitoring practices are part of the Bank’s credit and risk departments’ annual test plans and are adjusted as needed on a quarterly basis if external or internal conditions merit changes. The Bank’s CRE monitoring plans include stress testing analysis to evaluate changes in

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collateral values and changes in cash flow debt service coverage ratios as a result of increasing interest rates or declines in customer net operating revenues. We may be required to maintain higher levels of capital as a result of our CRE concentrations, which could require us to obtain additional capital or be required to sell/participate portions of loans, which may adversely affect shareholder returns.

Non-Owner Occupied CRE Loans


	June 30, 2025
($ in thousands)	Amount		Average Loan Size		% of Non-Owner Occupied CRE Loans		% of Total Portfolio Loans, Gross
Loan type:
Retail	$	466,209	$	2,454	21.8	%	9.7	%
Office	356,104		1,490		16.6		7.4
Multifamily (5+ units)	276,222		2,302		12.9		5.7
Industrial/warehouse	212,915		1,532		9.9		4.4
1-4 family dwelling	196,272		529		9.2		4.1
Motel/hotel	194,811		3,976		9.1		4.0
Other (1)	440,449		721		20.5		9.1
Total non-owner occupied CRE loans (2)	$	2,142,982	1,247		100.0	%	44.4	%
Total portfolio loans, gross (3)	$	4,827,628

____________________________________

(1) Other non-owner occupied CRE loans include commercial - improved loans of $160.5 million, lot/land loans of $93.7 million, self-storage loans of $72.5 million and other loans of $113.7 million.

(2) The balances for our non-owner occupied CRE portfolio as of June 30, 2025, as presented in this table, coincide with our internal evaluation of risk for the purpose of monitoring loan concentrations in accordance with internal and regulatory guidelines.

(3) Excludes loans held for sale of $34.3 million.

Owner Occupied CRE Loans


	June 30, 2025
($ in thousands)	Amount		Average Loan Size		% of Owner Occupied CRE Loans		% of Total Portfolio Loans, Gross
Loan type:
Commercial – improved	$	199,122	$	1,164	27.3	%	4.1	%
Office	128,194		507		17.6		2.7
Industrial/warehouse	95,292		662		13.1		2.0
Retail	65,214		609		8.9		1.3
Restaurant	60,476		1,008		8.3		1.2
Other (1)	181,152		1,029		24.8		3.8
Total owner occupied CRE loans	$	729,450	801		100.0	%	15.1	%
Total portfolio loans, gross (2)	$	4,827,628

____________________________________

(1) Other owner occupied CRE loans include church loans of $57.1 million, marina/boat loans of $39.4 million, auto service center loans of $30.1 million and other loans of $54.5 million.

(2) Excludes loans held for sale of $34.3 million.

Office CRE Loan Portfolio

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 of $4.83 billion at June 30, 2025. The Bank’s office CRE loan portfolio included $135.5 million, or 28.0% of total office CRE loans, with medical tenants, and $54.4 million, or 11.2% of total office CRE loans, with government or government contractor tenants. There were 492 loans in the office CRE loan portfolio with an average and median loan size of $1.0 million and $369 thousand, respectively. Loan to Value (“LTV”) estimates are less than 50% for $168.9 million, or 34.9% of the office CRE loan portfolio, and greater than 80% for $11.0 million, or 2.3% of the office CRE loan portfolio. LTV collateral values are based on the most recent appraisal, which varies from the initial loan boarding to interim credit reviews. LTV estimates for the office CRE loan portfolio are summarized in the table below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

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LTV Range ($ in thousands)	Loan Count	Loan Balance		% of Office CRE
Less than or equal to 50%	245	$	168,874	34.9	%
50%-60%	74	111,092		22.9
60%-70%	94	130,718		27.0
70%-80%	65	62,601		12.9
Greater than 80%	14	11,013		2.3
Total	492	$	484,298	100.0	%

The Bank had 17 office CRE loans totaling $150.9 million that were greater than $5.0 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 . For the office CRE portfolio, at June 30, 2025, the average loan debt-service coverage ratio was 1.8x and the average LTV was 48.4%. Of the office CRE portfolio balance, 80.5% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.0% are secured by properties with five stories or less. Of the office CRE loans, $10.0 million will mature and $10.2 million will reprice prior to December 31, 2025. Of the office CRE loans, $2.5 million are special mention or substandard.

Maturity of Loan Portfolio

The following table below sets forth the maturities and interest rate sensitivity of the loan portfolio at June 30, 2025. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as maturing within one year.


($ in thousands)	Maturing Within One Year		Maturing After One But Within Five Years		Maturing After Five But Within 15 Years		Maturing After 15 Years		Total
Commercial real estate	$	114,995	$	778,169	$	882,479	$	828,331	$	2,603,974
Residential real estate	17,678		147,440		127,103		1,056,789		1,349,010
Construction	182,389		131,126		30,826		5,712		350,053
Commercial	33,425		100,099		67,231		23,337		224,092
Consumer	1,249		62,903		120,371		109,716		294,239
Credit cards	1,504		3,063		1,693		—		6,260
Total	$	351,240	$	1,222,800	$	1,229,703	$	2,023,885	$	4,827,628

Rate Terms:
Fixed-interest rate loans	$	251,386	$	1,022,386	$	791,931	$	357,904	$	2,423,607
Adjustable-interest rate loans	99,854		200,414		437,772		1,665,981		2,404,021
Total	$	351,240	$	1,222,800	$	1,229,703	$	2,023,885	$	4,827,628

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Asset Quality

The following table summarizes asset quality information and ratios at June 30, 2025 and December 31, 2024.


($ in thousands)	June 30, 2025		December 31, 2024
ASSET QUALITY
Total portfolio loans	$	4,827,628	$	4,771,988

Special mention loans	65,564		33,519

Classified loans	19,930		24,679
Other real estate owned	179		179
Repossessed assets	2,457		3,315
Total classified assets (1)	22,566		28,173
Total classified loans and special mention loans	85,494		58,198

Allowance for credit losses on loans	(58,483)		(57,910)

Past due loans – 31 to 89 days	9,343		8,807
Past due loans >= 90 days	215		294
Total past due (delinquency) loans	9,558		9,101

Nonaccrual loans	16,782		21,008
Past due loans >= 90 days	215		294
Other real estate owned (“OREO”)	179		179
Repossessed assets	2,457		3,315
Total nonperforming assets	19,633		24,796
Accruing borrowers experiencing financial difficulty (“BEFD”) modifications (2)	6,709		1,362
Nonaccrual loans, OREO, repossessed assets and BEFD modifications	$	26,342	$	26,158


($ in thousands)	June 30, 2025		December 31, 2024
ASSET QUALITY RATIOS
Classified assets to total assets (1)	0.37	%	0.45	%
Classified assets to risk-based capital (1)	3.65		4.77
Allowance for credit losses on loans to total portfolio loans	1.21		1.21
Allowance for credit losses on loans to nonaccrual loans	348.49		275.66

Past due loans – 31 to 89 days to total portfolio loans	0.19	%	0.18	%
Past due loans >=90 days and nonaccrual to total loans	0.35		0.45
Total past due (delinquency) and nonaccrual to total portfolio loans	0.55		0.63

Nonaccrual loans to total portfolio loans	0.35	%	0.44	%




Nonperforming assets to total assets	0.33		0.40

____________________________________

(1) Classified assets are substandard loans, OREO and other repossessed assets. Classified assets do not include special mention loans.

(2) BEFD modification loans include both nonaccrual and accruing performing loans. All BEFD modification loans are included in the calculation of asset quality financial ratios. Nonaccrual BEFD modification loans are included in the nonaccrual balance and accruing BEFD modification loans are included in the accruing BEFD modification balance.

Allowance for Credit Losses on Loans

The ACL was $58.5 million at June 30, 2025, $57.9 million at December 31, 2024 and $58.5 million at June 30, 2024. There were net charge-offs of $649 thousand for the three months ended June 30, 2025, compared to net charge-offs of $886 thousand for the three months

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ended June 30, 2024. There were net charge-offs of $1.2 million for the six months ended June 30, 2025, compared to net charge-offs of $1.5 million for the six months ended June 30, 2024. The ratio of annualized net charge-offs to average loans was 0.05% and 0.08% for the three months ended June 30, 2025 and 2024, respectively. The ratio of annualized net charge-offs to average loans was 0.05% and 0.06% for the six months ended June 30, 2025 and 2024, respectively.

Management remains focused on its efforts to dispose of problem loans and to prudently charge-off nonperforming loans to enable the Company to maintain overall credit quality. The ACL as a percentage of period-end loans was 1.21% at June 30, 2025 and December 31, 2024.

The following table allocates the ACL by portfolio loan category as of the dates indicated. The allocation of the ACL to each category is not necessarily indicative of future losses and does not restrict the use of the ACL to absorb losses in any category.


	June 30, 2025					December 31, 2024
($ in thousands)	ACL		Average Balance	% (1)		ACL		Average Balance	% (1)
Commercial real estate	$	20,179	$2,572,931	0.78	%	$	22,846	$2,551,903	0.90	%
Residential real estate	23,203		1,378,940	1.68		21,776		1,358,066	1.60
Construction	5,805		352,803	1.65		2,854		336,094	0.85
Commercial	2,870		224,218	1.28		3,138		229,676	1.37
Consumer	6,188		298,544	2.07		6,889		313,686	2.20
Credit cards	238		6,122	3.89		407		6,820	5.97
Total	$	58,483	$4,833,558	1.21		$	57,910	$4,796,245	1.21

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(1) Percent of loans in each category to total portfolio loans.

The following table presents the net charge-offs or recoveries by average loan portfolio category for the three and six months ended June 30, 2025 and 2024.


	Three Months Ended
	June 30, 2025						June 30, 2024
($ in thousands)	Net (Charge-offs) Recoveries		Average Balance (1)		Net (Charge-off) Recovery %		Net (Charge-offs) Recoveries		Average Balance (1)		Net (Charge-off) Recovery %
Commercial real estate	$	—	$	2,572,931	—	%	$	—	$	2,522,708	—	%
Residential real estate	2		1,378,940		0.00		2		1,306,260		0.00
Construction	—		352,803		—		4		319,205		(0.01)
Commercial	81		224,218		(0.14)		(21)		219,140		0.04
Consumer	(543)		298,544		0.73		(793)		330,819		0.96
Credit cards	(189)		6,122		12.38		(78)		8,378		3.74
Total	(649)		4,833,558		0.05		(886)		4,706,510		0.08
Allowance for credit losses	—		(58,369)		—		—		(57,628)		—
Total net charge-off and average loans	$	(649)	$	4,775,189	0.05		$	(886)	$	4,648,882	0.08

____________________________________

(1) Excludes loans held for sale.

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	Six Months Ended
	June 30, 2025						June 30, 2024
($ in thousands)	Net (Charge-offs) Recoveries		Average Balance (1)		%		Net (Charge-offs) Recoveries		Average Balance (1)		%
Commercial real estate	$	78	$	2,557,316	(0.01)	%	$	—	$	2,520,796	—	%
Residential real estate	3		1,363,076		—		3		1,291,225		—
Construction	1		352,564		—		(6)		309,661		—
Commercial	85		228,535		(0.08)		(20)		220,248		0.02
Consumer	(939)		301,515		0.63		(1,242)		330,998		0.76
Credit cards	(431)		6,403		13.57		(186)		7,918		—
	(1,203)		4,809,409		0.05		(1,451)		4,680,846		0.06
Allowance for credit losses	—		(58,331)		—		—		(57,554)		—
Total net charge-off and average loans	$	(1,203)	$	4,751,078	0.05		$	(1,451)	$	4,623,292	0.06

Classified Assets and Special Mention Assets

Classified assets decreased $5.6 million to $22.6 million, or 0.4% of total assets, at June 30, 2025, from $28.2 million, or 0.5% of total assets, at December 31, 2024. Classified assets are substandard loans, repossessed assets and OREO. The decrease was primarily due to a decrease in substandard loans of $4.7 million and a decrease of $858 thousand in repossessed assets. Special mention loans increased to $65.6 million at June 30, 2025 from $33.5 million at December 31, 2024. Management considers classified assets to be an important measure of asset quality. Increases in special mention loan categories were due to loans related to our multifamily commercial real estate portfolio. Management believes these assets are well collateralized and will continue to monitor the cash flow. The Company’s risk rating process for classified loans is an important input into the Company’s allowance methodology and ACL qualitative framework.

Nonperforming Assets

Nonperforming assets were $19.6 million, or 0.3% of total assets, at June 30, 2025, compared to $24.8 million, or 0.4% of total assets, at December 31, 2024. The balance of nonperforming assets decreased primarily due to a decrease of nonaccrual loans of $4.2 million and a decrease of $858 thousand of repossessed assets.

Off-Balance Sheet Credit Exposure Reserve

The Company’s reserve for off-balance sheet credit exposure was $1.9 million and $1.1 million at June 30, 2025 and December 31, 2024, respectively. The Company is monitoring line of credit usage and has not seen substantive increases in usage or expected usage. The Company will continue to monitor activity for potential increases in the off-balance sheet reserve in future quarters as customers use available liquidity.

Deposits

The following is a breakdown of the Company’s deposit portfolio at June 30, 2025 and December 31, 2024:


($ in thousands)	June 30, 2025				December 31, 2024
	Balance		%		Balance		%		$ Change		% Change
Noninterest-bearing	$	1,575,120	29.6	%	$	1,562,815	28.3	%	$	12,305	0.8	%
Interest-bearing:
Interest-bearing checking	763,309		14.4		978,076		17.7		(214,767)		(22.0)
Money market and savings	1,691,438		31.8		1,805,884		32.7		(114,446)		(6.3)
Time deposits	1,273,285		24.0		1,181,561		21.4		91,724		7.8
Brokered deposits	10,806		0.2		—		—		10,806		—
Total interest-bearing	3,738,838		70.4		3,965,521		71.7		(226,683)		(5.7)

Total deposits	$	5,313,958	100.0	%	$	5,528,336	100.0	%	$	(214,378)	(3.9)

Total deposits decreased $214.4 million, or 3.9%, to $5.3 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 demand deposits of $214.8 million and money market and savings

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deposits of $114.4 million, partially offset by an increase in time deposits of $91.7 million. The decrease in deposits is primarily attributable to seasonal municipal runoff.

Total estimated uninsured deposits were $886.8 million, or 16.7% of total deposits, at June 30, 2025 and $905.3 million, or 16.4% of total deposits, at December 31, 2024. At June 30, 2025, there were $118.0 million included in uninsured deposits that the Bank secured using the market value of pledged collateral. The Bank’s uninsured deposits, excluding the market value of pledged collateral, at June 30, 2025 were $768.7 million, or 14.5% of total deposits.

The Bank is required to monitor large deposit relationships and concentration risks in accordance with regulatory guidance. This includes monitoring deposit concentrations and maintaining fund management policies and strategies that take into account potentially volatile concentrations and significant deposits that mature simultaneously. Regulatory guidance defines a large depositor as a customer or entity that owns or controls 2% or more of the Bank’s total deposits. At June 30, 2025, the Bank had three local municipal customer deposit relationships that exceeded 2% of total deposits, totaling $403.3 million, which represented 7.6% of total deposits of $5.32 billion. At December 31, 2024, there were three customer deposit relationships that exceeded 2% of total deposits, totaling $547.4 million, which represented 9.9% of total deposits of $5.54 billion.

Wholesale Funding – Short-Term Borrowings and Brokered Deposits

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $60.8 million and $50.0 million at June 30, 2025 and December 31, 2024, respectively. The $50.0 million FHLB advance was for an initial term of 18-months at a rate of 4.79%. This advance has the option to be called by FHLB at any time and matures on November 7, 2025. At June 30, 2025, the Company had $10.8 million of brokered deposits and no securities sold under agreements to repurchase or overnight borrowings from correspondent banks. At December 31, 2024, the Company had no brokered deposits or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

For FDIC call reporting purposes, reciprocal deposits are classified as brokered deposits when they exceed 20% of a bank’s liabilities or $5.0 billion . Reciprocal deposits decreased $331.3 million to $1.31 billion at June 30, 2025, compared to $1.65 billion at December 31, 2024. Reciprocal deposits as a percentage of the Bank’s liabilities at June 30, 2025 and December 31, 2024 were 24.3% and 29.3%, respectively. For call reporting purposes, $232.9 million of reciprocal deposits were considered brokered at June 30, 2025, compared to $520.5 million at December 31, 2024.

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Long-Term Debt

The Company occasionally borrows from the FHLB to meet longer term liquidity needs, specifically to fund loan growth when liquidity from deposit growth is not sufficient. Currently, the Company has no long term borrowing with FHLB as of June 30, 2025.

On August 25, 2020, the Company entered into Subordinated Note Purchase Agreements pursuant to which the Company issued and sold $25.0 million in aggregate principal amount with an initial interest rate of 5.375% of Fixed-to-Floating Rate Subordinated Notes due September 1, 2030.

As a result of the merger with Severn Bancorp, Inc., effective October 31, 2021, the Company acquired Junior Subordinated Debt Securities due in 2035 which had an outstanding principal balance of $20.6 million. The debt balances of $18.9 million at June 30, 2025 and $18.8 million at December 31, 2024 were presented net of fair value adjustments of $1.8 million and $1.8 million, respectively.

Additionally, as a result of the merger with The Community Financial Corporation in 2023 , the Company acquired Junior Subordinated Debt Securities, which had an outstanding principal balance of $12.4 million. The debt b alance of $11.1 million at June 30, 2025 was presented net of a fair value adjustment of $1.2 million. In addition, the Company acquired 4.75% fixed-to-floating rate subordinated notes with a carrying value of $19.5 million at June 30, 2025. The notes’ aggregate balance of $19.3 million at June 30, 2025 was presented net of fair value adjustment of $244 thousand.

Stockholders’ Equity


($ in thousands, except per share amounts)	June 30, 2025		December 31, 2024		$ Change		% Change
Common stock, $0.01 par value per share	$	334	$	333	$	1	0.3	%
Additional paid in capital	359,063		358,112		951		0.3
Retained earnings	211,400		190,166		21,234		11.2
Accumulated other comprehensive loss	(5,603)		(7,545)		1,942		(25.7)
Total stockholders’ equity	$	565,194	$	541,066	$	24,128	4.5

Total stockholders’ equity increased $24.1 million, or 4.5%, to $565.2 million at June 30, 2025 when compared to December 31, 2024, primarily due to $29.3 million of net income and a decrease in accumulated other comprehensive loss of $1.9 million, partially offset by dividends declared of $8.0 million.

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USE OF NON-GAAP FINANCIAL MEASURES

Statements included in the management’s discussion and analysis of financial condition and results of operations include non-GAAP financial measures and should be read along with the accompanying tables, which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures and believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP. See non-GAAP reconciliation schedules that immediately follow.

Reconciliation of Non-GAAP Measures

This Quarterly Report on Form 10-Q, including the accompanying financial statement tables, contains financial information determined by methods other than in accordance with GAAP. This financial information includes certain performance measures, which exclude intangible assets. These non-GAAP measures are included because the Company believes they may provide useful supplemental information for evaluating the underlying performance trends of the Company.


($ in thousands, except per share amounts)	June 30, 2025			December 31, 2024			June 30, 2024
Total assets	$	6,037,874		$	6,230,763		$	5,864,017
Less: intangible assets
Goodwill	63,266			63,266			63,266
Core deposit intangibles	33,761			38,311			42,945
Total intangible assets	97,027			101,577			106,211
Tangible assets	$	5,940,847		$	6,129,186		$	5,757,806

Total common equity	$	565,194		$	541,066		$	522,783
Less: intangible assets	97,027			101,577			106,211
Tangible common equity	$	468,167		$	439,489		$	416,572

Common shares outstanding at end of period	33,374,265			33,332,177			33,214,522

Common equity to assets	9.36		%	8.68		%	8.92		%
Tangible common equity to tangible assets	7.88			7.17			7.23

Common book value per share	$	16.94		$	16.23		$	15.74
Tangible common book value per share	14.03			13.19			12.54

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Return on Average Common Equity

ROACE is a financial ratio that measures the profitability of a company in relation to the average stockholders’ equity. This financial metric is expressed in the form of a percentage which is equal to net income after tax divided by the average stockholders’ equity for a specific period of time.


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2025			2024			2025			2024

Net income (as reported)	$	15,507		$	11,234		$	29,271		$	19,418

ROACE	11.13		%	8.70		%	10.67		%	7.54		%

Average Equity	$	558,952		$	519,478		$	553,229		$	517,727

Return on Average Tangible Common Equity

ROATCE is computed by dividing net earnings applicable to common stockholders by average tangible common shareholders’ equity. Management believes that ROATCE is meaningful because it measures the performance of a business consistently, whether acquired or internally-developed. ROATCE is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies.


	Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	2025			2024			2025			2024

Net income (as reported)	$	15,507		$	11,234		$	29,271		$	19,418

Core deposit intangible amortization (net of tax) (1)	1,708			1,924			3,425			3,903
Net earnings applicable to common stockholders	$	17,215		$	13,158		$	32,696		$	23,321

ROATCE	14.99		%	12.85		%	14.53		%	11.47		%

Average equity	$	558,952		$	519,478		$	553,229		$	517,727
Less: Average goodwill and core deposit intangible	(98,241)			(107,594)			(99,372)			(108,881)
Average tangible common equity	$	460,711		$	411,884		$	453,857		$	408,846

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(1) The Company utilized an effective tax rate of 24.8% and 25.1% for the three months ended June 30, 2025 and 2024, respectively, and 24.7% and 24.1% for the six months ended June 30, 2025 and 2024, respectively.

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk is interest rate fluctuation, and management has procedures in place to evaluate and mitigate this risk. This risk and these procedures are discussed in Part II, Item 7A. of the 2024 Annual Report under the caption “Quantitative and Qualitative Disclosures About Market Risk.” Management recognizes that recent changes in interest rates have had an impact on the Company’s market risk. The procedures used to evaluate and mitigate these risks remain unchanged, and we continue to monitor our actual and simulated sensitivity positions since December 31, 2024.

The Company prepares a current base case and several alternative simulations at least quarterly. Current interest rates are shocked by +/- 100, 200, 300 and 400 basis points. In addition, the Company simulates additional rate curve scenarios. The Company may elect not to use particular scenarios that it determines are impractical in a current rate environment.

The Company’s internal limits for parallel shock scenarios are as follows:

Shock in Basis Points

Net Interest Income

Economic Value of Equity

+ - 400

+/- 25%

+/- 40%

+ - 300

+/- 20%

+/- 30%

+ - 200

+/- 15%

+/- 20%

+ - 100

+/- 10%

It is management’s goal to manage the Bank’s portfolios so that NII at risk over 12 and 24-month periods and the economic value of equity at risk do not exceed policy guidelines at the various interest rate shock levels . As of June 30, 2025 and December 31, 2024, the Com pany exceeded Board approved limits for percentage change in economic value of equity in the interest rate shock of -200 . In both periods, the Company exceeded board approved levels due to average lives and the low level of market rates on non-maturing deposit instruments.

Measures of NII at risk produced by simulation analysis are indicators of an institution’s short-term performance in alternative rate environments. The below schedule estimates the changes in NII over a 12-month period for parallel rate shocks for up 400, 300, 200, 100 and down 100 and 200 scenarios:


Estimated Changes in Net Interest Income

Change in Interest Rates:	+ 400 basis points		+ 300 basis points		+ 200 basis points		+ 100 basis points		- 100 basis points		- 200 basis points
Policy limit	+/- 25%		+/- 20%		+/- 15%		+/- 10%		+/- 10%		+/- 15%

June 30, 2025	(7.6)	%	(5.2)	%	(3.2)	%	(1.4)	%	0.7	%	(0.6)	%
December 31, 2024	(3.8)	%	(2.4)	%	(1.3)	%	(0.5)	%	(0.1)	%	(2.1)	%

Measures of equity value at risk indicate the ongoing economic value of the Company by considering the effects of changes in interest rates on all of the Company’s cash flows, and by discounting the cash flows to estimate the present value of assets and liabilities. The below schedule estimates the changes in the economic value of equity at parallel shocks for up 400, 300, 200, 100 and down 100 and 200 scenarios:


Estimated Changes in Economic Value of Equity

Change in Interest Rates:	+ 400 basis points		+ 300 basis points		+ 200 basis points		+ 100 basis points		- 100 basis points		- 200 basis points
Policy limit	+/- 40%		+/- 30%		+/- 20%		+/- 10%		+/- 10%		+/- 20%

June 30, 2025	13.5	%	12.8	%	10.7	%	6.7	%	(9.4)	%	(22.6)	%
December 31, 2024	15.2	%	14.2	%	11.7	%	7.2	%	(10.0)	%	(24.2)	%

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing tables. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features which restrict changes in interest rates on a short-term basis and over the life of the

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asset. Further, if interest rates change, expected rates of prepayments on loans and early withdrawals from certificates of deposit could deviate significantly from those assumed in calculating the tables.

Item 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the SEC, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in those rules and forms, and that such information is accumulated and communicated to management, including the Company’s principal executive officer (“PEO”) and its principal financial officer (“PFO”), as appropriate, to allow for timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of the design and operation of these disclosure controls and procedures as of June 30, 2025 was carried out under the supervision and with the participation of management, including the PEO and the PFO. Based on that evaluation, the Company’s management, including the PEO and the PFO, concluded that our disclosure controls and procedures as of June 30, 2025 were effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to our management, including the PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as such term is defined by Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the six months ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time the Company may become involved in legal proceedings. At the present time, there are no proceedings which the Company believes will have a material adverse impact on the financial condition or earnings of the Company.

Item 1A. RISK FACTORS

There have been no material changes to the risk factors as previously disclosed under Part I, Item 1A. in our 2024 Annual Report.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no repurchases or unregistered sales of the Company’s common stock, $0.01 par value per share, during the three months ended June 30, 2025.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the three months ended June 30, 2025, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).

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Item 6. EXHIBITS


Exhibit Number						Description

2.1						Agreement and Plan of Merger, dated as of December 14, 2022, between Shore Bancshares, Inc. and The Community Financial Corporation (incorporated by reference to Exhibit 2.1 of the Company’s Form 8-K filed on December 14, 2022)
3.1(i)						Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on December 14, 2000).
3.1(ii)						Articles of the Amendment of Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on July 3, 2023).
3.1(iii)						Articles Supplementary relating to the Fixed Rate Cumulative Perpetual Preferred Stock Series A (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed on January 13, 2009).
3.1(iv)						Articles Supplementary relating to the reclassification of the Fixed Rate Cumulative Perpetual Preferred Stock Series A, as common stock (incorporated by reference to Exhibit 3.1(i) of the Company’s Form 8-K filed on June 17, 2009).
3.2						Second Amended and Restated By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Company’s Form 10-Q filed August 9, 2024).
4.1						Description of Registrant’s Securities (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K filed March 15, 2024).
4.2						Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Form S-3 filed on June 25, 2010).
31.1						Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith).
31.2						Certifications of the Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith).
32						Certification pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith).
101						Inline Interactive Data File.
101.INS						Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH						Inline XBRL Taxonomy Extension Schema (filed herewith).
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase (filed herewith).
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase (filed herewith).
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase (filed herewith).
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SHORE BANCSHARES, INC.

Date: August 7, 2025	By:	/s/ James M. Burke
		James M. Burke
		President & Chief Executive Officer

Date: August 7, 2025	By:	/s/ Charles S. Cullum
		Charles S. Cullum
		Executive Vice President & Chief Financial Officer

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Note 1 Summary Of Significant Accounting Policies Note 2 Investment Securities Note 3 Loans and Allowance For Credit Losses Note 4 Goodwill and Other Intangible Assets Note 5 Leases Note 6 - Deposits Note 7 - Borrowings Note 8 Derivatives Note 9 Accumulated Other Comprehensive Loss Note 10 Regulatory Capital Requirements Note 11 Fair Value Measurements Note 12 Fair Value Of Financial Instruments Note 13 Commitments and Contingencies Note 14 Earnings Per Common Share Note 15 Revenue Recognition Note 16 Segment Reporting Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

2.1 Agreement and Plan of Merger, dated as of December 14, 2022, between Shore Bancshares, Inc. and The Community Financial Corporation (incorporated by reference to Exhibit 2.1 of the Companys Form 8-K filed on December 14, 2022) 3.1(ii) Articles of the Amendment of Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Companys Form 8-K filed on July 3, 2023). 3.1(iii) Articles Supplementary relating to the Fixed Rate Cumulative Perpetual Preferred Stock Series A (incorporated by reference to Exhibit 4.1 of the Companys Form 8-K filed on January 13, 2009). 3.1(iv) Articles Supplementary relating to the reclassification of the Fixed Rate Cumulative Perpetual Preferred Stock Series A, as common stock (incorporated by reference to Exhibit 3.1(i) of the Companys Form 8-K filed on June 17, 2009). 3.2 Second Amended and Restated By-Laws, as amended (incorporated by reference to Exhibit 3.2 to the Companys Form 10-Q filed August 9, 2024). 4.1 Description of Registrants Securities (incorporated by reference to Exhibit 4.1 to the Companys Form 10-K filed March 15, 2024). 4.2 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Companys Form S-3 filed on June 25, 2010). 31.1 Certifications of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). 31.2 Certifications of the Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act (filed herewith). 32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act (furnished herewith).

SHBI 10-Q Quarter ended June 30, 2025

Exhibits