Shore Bancshares, Inc. Reports 2025 Fourth Quarter and Annual Results

EASTON, Md., Jan. 28, 2026 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ – SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank") reported net income for the fourth quarter of 2025 of $15.9 million, or $0.48 per diluted common share, compared to net income of $14.3 million, or $0.43 per diluted common share, for the third quarter of 2025, and net income of $13.3 million, or $0.40 per diluted common share, for the fourth quarter of 2024.

Fourth Quarter and Full-Year 2025 Highlights

• Net Income – Net income for the fourth quarter of 2025 increased $1.5 million to $15.9 million from $14.3 million in the third quarter of 2025. Net income increased primarily due to higher net interest income of $1.8 million and higher noninterest income of $966 thousand driven by one-time insurance proceeds, partially offset by higher noninterest expense of $1.1 million. Net income for the year ended December 31, 2025 was $59.5 million, compared to $43.9 million for the year ended December 31, 2024. The annual increase was primarily driven by an increase in net interest income due to loans repricing favorably, coupled with lower cost of deposits during the period. The favorable changes were offset by a higher provision for loan losses, driven by increased charge-offs in 2025.
• Return on Average Assets ("ROAA") – The Company reported ROAA of 1.02% for the fourth quarter of 2025, compared to 0.95% for the third quarter of 2025 and 0.86% for the fourth quarter of 2024. Non-U.S. generally accepted accounting principles ("GAAP") adjusted ROAA^([1]) was 1.11% for the fourth quarter of 2025, compared to 1.05% for the third quarter of 2025 and 0.94% for the fourth quarter of 2024.
• Net Interest Margin ("NIM") – Net interest income for the fourth quarter of 2025 increased $1.8 million to $50.4 million compared to the third quarter of 2025. NIM increased 1 basis point ("bps") to 3.43% during the fourth quarter of 2025 compared to the third quarter of 2025. NIM excluding accretion⁽¹⁾ increased for the comparable periods from 3.22% to 3.24%. Excluding accretion interest, loan yields increased 2 bps and funding costs decreased 4 bps for the comparable periods. Net interest income increased due to modest loan growth and higher yields on investments, coupled with a lower cost of deposits. These favorable changes were partially offset by lower yields on interest-bearing deposits with other institutions.
• Book Value per Share – Book value per share increased to $17.65 at December 31, 2025 from $17.27 at September 30, 2025 and $16.23 at December 31, 2024.
• Asset Quality – Nonperforming assets were 0.69% of total assets at December 31, 2025, an increase from 0.45% at September 30, 2025 and 0.40% at December 31, 2024. Classified assets were 0.96% of total assets at December 31, 2025, an increase when compared to 0.83% at September 30, 2025 and 0.45% at December 31, 2024. The allowance for credit losses ("ACL") was $58.8 million at December 31, 2025, compared to $59.6 million at September 30, 2025 and $57.9 million at December 31, 2024. The ACL as a percentage of loans decreased to 1.20% at December 31, 2025, compared to 1.22% at September 30, 2025 and 1.21% at December 31, 2024.
• Operating Leverage – The efficiency ratio for the fourth quarter of 2025 was 60.06% compared to 61.00% in the third quarter of 2025 and 64.21% for the fourth quarter of 2024. The non-GAAP efficiency ratio⁽¹⁾, which excludes amortization of intangibles was 56.59% for the fourth quarter of 2025, compared to 57.30% for the third quarter of 2025 and 60.28% for the fourth quarter of 2024. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

"Our fourth-quarter and full year results underscore the strength and momentum of the bank," stated James ("Jimmy") Burke, President and Chief Executive Officer. "We delivered meaningful quarterly and annual improvements in net income, net interest income, ROAA, and NIM, while controlling expenses and driving operating leverage. Nonperforming and classified assets have increased but overall asset quality remains solid and is supported by strong collateral and reserves.

As we enter 2026, we remain confident in our ability to strengthen core profitability and deliver sustainable long‑term value for our shareholders."

Balance Sheet Review

Total assets were $6.26 billion at December 31, 2025, an increase of $28.1 million, or 0.5%, when compared to $6.23 billion at December 31, 2024. The increase was primarily due to an increase in our loan portfolio of $128.3 million and an increase in our investment securities portfolio of $5.3 million, which were partially offset by a decrease in cash and cash equivalents of $104.3 million.   The decrease in cash and cash equivalents was primarily driven by loan growth. Total assets decreased $19.7 million, or 0.3%, from $6.28 billion when compared to September 30, 2025.

Non-owner occupied commercial real estate ("CRE") loans were $2.15 billion and $2.08 billion, and as a percentage of the Bank's Tier 1 Capital + ACL were 343% and 360% at December 31, 2025 and 2024, respectively.

CRE loans (excluding land and construction) at December 31, 2025 were $2.64 billion compared to $2.56 billion at December 31, 2024. The following table provides the stratification of the classes of CRE loans (excluding land and construction) at December 31, 2025.

The office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $485.9 million, or 9.9% of total loans at December 31, 2025. The office CRE loan portfolio included loans to medical tenants of $129.1 million, or 26.6% of the total office CRE loan portfolio, at December 31, 2025. The office CRE loan portfolio also included loans to government or government contractor tenants of $51.5 million, or 10.6% of the total office CRE loan portfolio for the same period. At December 31, 2025, the average loan debt-service coverage ratio on the office CRE loan portfolio was 1.7x and the average LTV was 47.55%.

The 481 loans in the office CRE portfolio at December 31, 2025 had an average loan size of $1.0 million and a median loan size of $365 thousand. LTV estimates for the office CRE portfolio at December 31, 2025 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

There were 17 office CRE loans with balances greater than $5.0 million, totaling $166.1 million at December 31, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024. The increase this portfolio segment was the result of normal amortization, the payoff of a $5.6 million loan, the change in purpose of collateral of an $11.8 million loan from office to school, and a loan opened for $25 million. Of the office CRE portfolio balance, 80.5% was secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.1% was secured by properties with five stories or less. Of the office CRE loans, $30.7 million were classified as special mention or substandard at December 31, 2025. In the fourth quarter of 2025 there was a charge-off of $2.6 million related to the office CRE portfolio. There were no other office CRE portfolio charge-offs during 2025.

Nonperforming assets were $43.2 million and $28.1 million, or 0.69% and 0.45% of total assets, as of December 31, 2025 and September 30, 2025, respectively. The balance of nonperforming assets increased $15.1 million in the fourth quarter, primarily due to commercial real estate and consumer loans. When comparing December 31, 2025 to December 31, 2024, nonperforming assets increased $18.4 million, primarily due to an increase in nonaccrual loans of $19.0 million and an decrease in repossessed marine and auto loans of $502 thousand. Substandard loans, which include nonaccrual loans, accruing loans and accruing loans 90 days or more past due were $57.4 million at December 31, 2025 compared to $48.5 million at September 30, 2025 and $24.7 million at December 31, 2024. The increase was primarily due to several commercial non-owner occupied real estate loans that were downgraded during the current period. All of these loans are well secured by collateral and required minimal individual reserves as of December 31, 2025.

Total deposits increased $5.7 million from September 30, 2025 to $5.53 billion at December 31, 2025 and increased $5.5 million when compared to December 31, 2024. The increase in total deposits year-to-date was primarily due to an increase in time deposits of $85.9 million, an increase in noninterest-bearing accounts of $25.1 million, an increase in brokered deposits of $10.9 million and an increase in money market and savings accounts of $9.0 million. These increases were partially offset by a decrease in interest-bearing checking deposits of $125.5 million. Core deposits, which exclude municipal deposits, increased by $154.8 million, or 3.8%, during the same period, which was partially offset by volatility driven by a large client relationship.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits was $5.53 billion at December 31, 2025, compared to $5.58 billion at September 30, 2025. FHLB advances were $50.0 million at September 30, 2025, which was repaid in the fourth quarter of 2025. Brokered deposits were $10.9 million at December 31, 2025 and September 30, 2025. Total reciprocal deposits were $1.52 billion and $1.48 billion at December 31, 2025 and September 30, 2025, respectively.

Uninsured deposits were $937.2 million, or 16.9% of total deposits, at December 31, 2025. Uninsured deposits, excluding deposits secured with pledged collateral, were $786.5 million, or 14.2% of total deposits, at December 31, 2025. At December 31, 2025, the available liquidity was $1.42 billion, including $355.6 million in cash and cash equivalents, $1.07 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $95.0 million in unsecured lines of credit.

Total stockholders' equity increased $48.8 million, or 9.0%, when compared to December 31, 2024, primarily due to current year earnings and a decrease in accumulated other comprehensive losses, partially offset by cash dividends paid. As of December 31, 2025 and 2024, the ratio of total equity to total assets was 9.42% and 8.68%, respectively, and the ratio of total tangible equity to total tangible assets^([2]) was 8.06% and 7.17%, respectively. The Company's tangible common equity ratio at December 31, 2025 was 8.06% compared to 7.17% at December 31, 2024. The Company's Tier 1 and Total Risk-Based Capital Ratios at December 31, 2025 were 11.15% and 13.61%, respectively.

Review of Quarterly Financial Results

Net interest income was $50.4 million for the fourth quarter of 2025, compared to $48.7 million for the third quarter of 2025 and $44.0 million for the fourth quarter of 2024. The increase in net interest income when compared to the third quarter of 2025 was primarily due to an increase in interest income on deposits at other banks of $1.6 million, an increase in interest income on loans of $1.4 million and a decrease in interest expense on short-term borrowings of $394 thousand. These favorable changes were partially offset by an increase in interest expense on deposits of $815 thousand and an increase in interest expense of long-term borrowings of $763 thousand. The increase in interest expense on long-term borrowings is due to a new debt issuance of $60.0 million during the quarter, which replaced $45 million of subordinated debt that was redeemed at the end of the quarter. The increase in net interest income was $6.4 million when compared to the fourth quarter of 2024, and was primarily due to an increase in interest and fees on loans of $4.9 million and a decrease in interest expense on deposits of $3.1 million. These favorable changes were partially offset by a decrease in interest on deposits with other banks of $1.3 million, an increase in interest expense on short-term borrowings of $246 thousand, and an increase in interest expense on long-term borrowings of $151 thousand.

The Company's NIM increased to 3.43% for the fourth quarter of 2025 from 3.42% for the third quarter of 2025, primarily due to higher core interest income. NIM excluding accretion increased for the comparable periods from 3.22% to 3.24%. Excluding accretion interest income, loan yields increased 2 bps and funding costs decreased 4 bps for the comparable periods. Interest expense for the fourth quarter of 2025 increased $1.2 million compared to the third quarter of 2025, primarily due to write-offs of merger-related interest rate marks on certain deposit products. The Company's NIM increased to 3.43% for the fourth quarter of 2025 from 3.03% for the fourth quarter of 2024. The Company's average interest-earning asset yield increased to 5.45% for the fourth quarter of 2025 from 5.25% for the fourth quarter of 2024, while the average cost of funds decreased 20 bps to 2.11% from 2.31% for the same periods.

The provision for credit losses was $2.8 million for the three months ended December 31, 2025. The comparable amounts were $3.0 million for the three months ended September 30, 2025 and $780 thousand for the three months ended December 31, 2024. The decrease in the provision for credit losses for the fourth quarter of 2025 compared to the third quarter of 2025 was due to lower reserves resulting from favorable economic conditions, partially offset by charge-offs driven by a large commercial real estate loan write-down. Coverage ratios decreased to 1.20% at December 31, 2025 from 1.22% at September 30, 2025, and decreased from 1.21% at December 31, 2024. Net charge-offs increased to $3.6 million for the fourth quarter of 2025 compared to $1.8 million for the third quarter of 2025 and $1.3 million for the fourth quarter of 2024. The increase was driven by a large commercial real estate write-down in the fourth quarter 2025.

Total noninterest income for the fourth quarter of 2025 was $8.7 million, an increase of $1.0 million from $7.7 million for the third quarter of 2025, and a decrease of $186 thousand from $8.9 million for the fourth quarter of 2024. When comparing the fourth quarter of 2025 to the third quarter of 2025, the increase in noninterest income was primarily due to a one-time receipt of insurance proceeds. Comparing the fourth quarter of 2025 to the fourth quarter of 2024, the decrease in noninterest income was primarily due a decrease in mortgage banking revenue, partially offset by an increase in trust and investment fee income, an increase in interchange credits and the absence of the one-time gain on sale of real property in 2024.

Total noninterest expense of $35.5 million for the fourth quarter of 2025 increased $1.1 million compared to $34.4 million for the third quarter of 2025, and increased $1.6 million compared to $33.9 million for the fourth quarter of 2024. The increase from the third quarter of 2025 was primarily due to higher professional service fees of $248 thousand and other noninterest expense of $689 thousand related to writedown of repossessed assets. The increase from the fourth quarter of 2024 was primarily due to higher salaries and benefits expense of $1.4 million and higher software and data processing costs of $685 thousand, partially offset by lower amortization of other intangible assets of $298 thousand and lower legal and professional services of $284 thousand.

The efficiency ratio for the fourth quarter of 2025 when compared to the third quarter of 2025 and the fourth quarter of 2024 was 60.06%, 61.00% and 64.21%, respectively. Non-GAAP efficiency ratios^([3]) for the same periods were 56.59%, 57.30% and 60.28%, respectively.

Review of Full-Year Financial Results

Net interest income for the year ended December 31, 2025 was $192.4 million, an increase of $21.8 million, or 12.8%, when compared to the year ended December 31, 2024. The increase in net interest income was primarily due to an increase in total interest income of $14.7 million, or 5.0%, which included an increase in interest and fees on loans of $11.0 million, or 4.1%, an increase in interest on deposits with other banks of $2.8 million, or 44.6%, and an increase in interest income on taxable investments of $934 thousand. The increase in interest and fees on loans was primarily due to the increase in the average balance of loans of $130.3 million, or 2.8%. The decrease in total interest expense was primarily due to a decrease in interest on deposits of $6.1 million and the decrease in interest expense on borrowings of $1.0 million was as a result of lower average FHLB advances and associated rates during the year.

The Company's NIM increased from 3.10% for the year ended December 31, 2024 to 3.36% for the year ended December 31, 2025. Margins were higher due to a $211.0 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 $49.9 million was offset by a 20 basis point decrease in the associated rates paid, as well as a $27.2 million decrease in the average balance of FHLB advances and a 44 basis point decrease in the associated rates paid. Net accretion income impacted net interest margin by 21 basis points and 27 basis points for the year ended December 31, 2025 and 2024, respectively, which resulted in NIM excluding accretion of 3.15% and 2.83% for the same periods.

The provision for credit losses for the year ended December 31, 2025 and 2024 was $8.4 million and $4.7 million, respectively. The increase in the provision for credit losses during 2025 was due to higher reserves related to growth in the loan portfolio and higher charge-offs, partially offset by an improved economic outlook. Net charge-offs for the year ended December 31, 2025 were $6.6 million compared to $4.1 million for the year ended December 31, 2024.

Total noninterest income for the year ended December 31, 2025 increased $1.5 million, or 4.9%, when compared to the same period in 2024. The increase was primarily due to a $344 thousand increase in interchange credits, a $338 thousand increase in trust and investment fee income, and a $622 thousand increase in other noninterest income.

Total noninterest expense for the year ended December 31, 2025 decreased $219 thousand, or 0.2%, when compared to the same period in 2024. Noninterest expense line items decreased primarily due to the absence of the $4.7 million credit card fraud event that occurred in 2024 and lower amortization of intangible assets of $1.2 million, which was partially offset by higher salaries and employee benefit expenses of $4.8 million and a $2.4 million increase in software and data processing expense in year ended December 31, 2025.

The efficiency ratio for the year ended December 31, 2025 was 61.33% compared to 68.55% for the year ended December 31, 2024. Non-GAAP efficiency ratios for the same periods were 57.43% and 61.43%, respectively. The net operating expense ratio, which is noninterest expense less noninterest income divided by average assets, was 1.73% for the year ended December 31, 2025, compared to 1.82% for the year ended December 31, 2024. The non-GAAP net operating expense ratio^([4]), which excludes core deposit intangible amortization and non-recurring activity, was 1.59% for the year ended December 31, 2025, compared to 1.58% for the year ended December 31, 2024.

Dividend Schedule

Beginning this quarter, the Company's Board of Directors will consider regular dividend declarations in February, May, August and November, with dividends, when declared, payable in March, June, September and December, which is one month later than in the past.

Shore Bancshares Information

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

Forward-Looking Statements

This news release may contain statements relating to future events or our future results that are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "expect," "anticipate," "plan," "estimate," "intend," "potential," "target," "plan," "goal," or words of similar meaning, or future or conditional verbs such as "could," "would," or "may." Forward-looking statements include statements of our goals, intentions, or expectations; statements regarding our business plans, prospects, growth, or operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.

Forward-looking statements are not a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. The factors that could cause actual results to differ materially from those expressed in such forward-looking statements include, but are not limited to, the following: local, regional and global business, economic and political conditions and geopolitical events; changes in laws, rules and regulatory requirements, including capital and liquidity requirements; changes in consumer and business confidence, investor sentiment, and consumer spending and savings behavior; changes in the level of inflation; changes in monetary and fiscal policies; changes in trade policies, including the imposition of tariffs and retaliatory responses; changes in the demand for loans, deposits, and other financial services that we provide; the possibility that future credit losses may be higher than currently expected; changes in FDIC assessments; changes in the interest rate environment; changes in income tax laws and regulations; our ability to manage effectively our capital and liquidity; the ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations; changes in credit ratings assigned to us; competitive pressures among financial services companies; technology changes instituted by us, our counterparties, or competitors; the ability to attract, develop, and retain qualified employees; change in federal government enforcement of federal laws affecting the cannabis industry; our ability to maintain the security of our financial, accounting, technology, data processing and other operational systems and facilities; our ability to effectively defend ourselves against cyber-attacks and other attempts by unauthorized parties to access our information or information of our customers or to disrupt our systems; our ability to withstand disruptions that may be caused by any failure of our operational systems or those of third parties; our ability to control expenses; the impact of changes in accounting policies, including the introduction of new accounting standards; the impact of judicial or regulatory proceedings; and the impact of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, epidemics or pandemics, an outbreak or escalation of hostilities or other geopolitical instabilities, the effects of climate change or extraordinary events beyond our control. The Company provides greater detail regarding some of these factors in its Annual Report on Form 10-K for the year ended December 31, 2024, including in the Risk Factors section of that report, and in its other SEC reports. Forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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