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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________

FORM 10-K

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

For the Year Ended December 31, 2025

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

Commission File No. 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)

Registrant’s Telephone Number, Including Area Code: (410) 763-7800

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days þ Yes o No

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 files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter based on the closing price of $15.72 per share: $480.1 million.

The number of shares outstanding of the registrant’s common stock as of the latest practicable date: 33,418,125 as of February 26, 2026.

Documents Incorporated by Reference

Certain information required by Part III of this annual report is incorporated therein by reference to the definitive proxy statement for the 2026 Annual Meeting of Stockholders.

TABLE OF CONTENTS

Page

Fo rward-looking S tatements

Unresolved Staff Comments

Mine Safety Disclosures

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6.

[Reserved]

Item 7.

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

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

110

Item 9A.

Controls and Procedures

Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

110

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

110

Item 11.

Executive Compensation

110

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

110

Item 13.

Certain Relationships and Related Transactions, and Director Independence

111

Item 14.

Principal Accountant Fees and Services

111

PART IV

Item 15.

Exhibits and Financial Statement Schedules

Cautionary Note Regarding Forward-looking Statements

This Annual Report on Form 10-K contains statements relating to future events or our future results that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We also may make forward-looking statements in other documents filed with or furnished to the Securities and Exchange Commission, and our senior management may make forward-looking statements orally to investors, analysts, representatives of the media, and others. Forward-looking statements may be identified by the use of words such as “believe,” “expect,” “anticipate,” “plan,” “estimate,” “intend,” “potential,” “target,” “plan,” “goal,” or words of similar meaning, or future or conditional verbs such as “could,” “would,” or “may.” Forward-looking statements include statements of our goals, intentions, or expectations; statements regarding our business plans, prospects, growth, or operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits.

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

The factors that could cause actual results to differ materially from those expressed in such forward-looking statements include, but are not limited to, the risks identified in Item 1A of this report and the following:

•Local, regional and global business, economic and political conditions and geopolitical events;

•Changes in laws, rules and regulatory requirements, including capital and liquidity requirements;

•Changes in consumer and business confidence, investor sentiment, and consumer spending and savings behavior;

•Changes in the level of inflation;

•Changes in monetary and fiscal policies;

•Changes in trade policies, including the imposition of tariffs and retaliatory responses;

•Changes in the demand for loans, deposits, and other financial services that we provide;

•The possibility that future credit losses may be higher than currently expected;

•Changes in FDIC assessments;

•Changes in the interest rate environment;

•Changes in income tax laws and regulations;

•Our ability to manage effectively our capital and liquidity;

•The ability to realize benefits and cost savings from, and limit any unexpected liabilities associated with, any business combinations;

•Changes in credit ratings assigned to us;

•Competitive pressures among financial services companies;

•Technology changes instituted by us, our counterparties, or competitors;

•The ability to attract, develop, and retain qualified employees;

•Change in federal government enforcement of federal laws affecting the cannabis industry;

•Our ability to maintain the security of our financial, accounting, technology, data processing and other operational systems and facilities;

•Our ability to effectively defend ourselves against cyber-attacks and other attempts by unauthorized parties to access our information or information of our customers or to disrupt our systems;

•Our ability to withstand disruptions that may be caused by any failure of our operational systems or those of third parties;

•Our ability to control expenses;

•The impact of changes in accounting policies, including the introduction of new accounting standards;

•The impact of judicial or regulatory proceedings; and

•The impact of natural or man-made disasters or calamities, including health emergencies, the spread of infectious diseases, epidemics or pandemics, an outbreak or escalation of hostilities or other geopolitical instabilities, the effects of climate change or extraordinary events beyond our control.

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

PART I

Item 1. BUSINESS

OVERVIEW

General

Shore Bancshares, Inc. was incorporated under the laws of Maryland on March 15, 1996 and is the bank holding company for Shore United Bank, N.A,. Throughout this report, references to the “Company,” “we,” “our,” and “us,” and similar terms refer to the consolidated entity consisting of Shore Bancshares, Inc. and its subsidiaries. “Shore Bancshares” refers solely to the parent holding company, and the “Bank” refers solely to Shore Bancshares’ subsidiary bank, Shore United Bank, N.A.

Shore Bancshares is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended (the “BHC Act”). The Company is the largest independent financial holding company headquartered on the Eastern Shore of Maryland. The Company conducts business primarily through the Bank. The Bank provides consumer and commercial banking products and services and secondary mortgage lending, trust, wealth management and financial planning services. 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. The Company and the Bank are Affirmative Action/Equal Opportunity Employers.

Banking Products and Services

The Bank, which traces its origin to 1876, is a national banking association chartered under the laws of the United States. The Bank currently operates 40 full-service branches and 10 loan production and administration offices, and provides a full range of commercial and consumer banking products and services to individuals, businesses, and other organizations in Maryland, Delaware and Virginia. The Bank’s deposits are insured up to applicable legal limits by the FDIC.

Services provided to businesses include commercial checking, savings, certificates of deposit and overnight investment sweep accounts. The Bank offers all forms of commercial lending, including secured and unsecured loans, working capital loans, lines of credit, term loans, accounts receivable financing, real estate acquisition and development loans, construction loans and letters of credit. Treasury management services are also available, such as merchant card processing services, remote deposit capture, ACH origination, digital banking and telephone banking services.

Services provided to individuals include checking accounts, various savings programs, mortgage loans, home improvement loans, installment and other personal loans, credit cards, personal lines of credit, automobile and other consumer financing, trust administration, wealth management, safe deposit boxes, debit cards, 24-hour telephone banking, internet banking, mobile banking and 24-hour ATM services. Additionally, the Bank has Saturday hours and extended hours on certain evenings during the week for added customer convenience.

Business Strategy

The Company’s business strategy is to establish a leading community banking franchise that delivers exceptional financial services to the communities we serve. This strategy has been implemented over the past several years through a combination of organic and strategic growth, both within and contiguous to our existing footprint.

On July 1, 2023, the Company completed the acquisition of The Community Financial Corporation (“TCFC”) and its wholly-owned subsidiary Community Bank of the Chesapeake (“CBTC”). The transaction expanded the Bank’s footprint into the Southern Maryland Counties of Charles, St. Mary’s and Calvert and the greater Fredericksburg area in Virginia, which includes Fredericksburg City as well as Stafford and Spotsylvania Counties. At the time of the acquisition, TCFC had $2.4 billion in assets, $454.5 million in investments, $1.8 billion in loans, $2.1 billion in deposits, $150.6 million in brokered deposits, $69.0 million in Federal Home Loan Bank (the “FHLB”) advances and $32.0 million in subordinated debt and trust preferred debentures. The excess of the fair value of net TCFC assets acquired over the merger consideration resulted in an $8.8 million bargain purchase gain.

Lending Activities

The Bank originates loans including commercial real estate, residential real estate, construction, commercial and consumer.

•Commercial Real Estate (“CRE”) and Other Non-Residential Real Estate Loans. The Bank’s CRE loans are primarily secured by commercial buildings, multi-family buildings, agricultural purpose consumer properties, service industry buildings such as restaurants and hotels, retail buildings and general purpose business space. The Bank attempts to mitigate the risks associated with these loans through financial analyses, conservative underwriting procedures, including loan-to-value ratio standards, obtaining additional collateral and management’s knowledge of the local economy in which the Bank lends.

•Residential Real Estate Loans. The Bank originates residential mortgage loans that are to be held in our loan portfolio as well as loans that are intended for sale in the secondary market. Loans sold in the secondary market are primarily sold to investors with which the Bank maintains a correspondent relationship. These loans are made in conformity with standard government-sponsored enterprise underwriting criteria required by the investors to assure maximum eligibility for resale in the secondary market and are approved either by the Bank’s underwriter or the correspondent’s underwriter. Additionally, loans that are sold into the secondary market are typically residential long-term loans (15 or more years), generally with fixed rates of interest. Loans retained for the Bank’s portfolio typically include loans that periodically reprice or mature prior to the end of an amortized term. Generally, loans are sold with mortgage servicing rights retained, which includes loans sold to the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). As of December 31, 2025, the Bank was servicing $343.8 million in loans for Fannie Mae and $105.6 million in loans for Freddie Mac.

•Construction Loans. The Bank provides commercial and residential real estate construction loans to builders and individuals. Residential construction loans are usually granted based upon “as completed” appraisals and are secured by the property under construction. Additional collateral may be taken if loan-to-value ratios exceed 80%. Site inspections are performed to determine pre-specified stages of completion before loan proceeds are disbursed. These loans typically have maturities of six to twelve months and may have fixed or variable rate features. Permanent financing options for individuals include fixed and variable rate loans with three- and five-year balloon features and one-, three- and five-year adjustable rate mortgage loans. The Bank attempts to mitigate risks associated with these loans through conservative underwriting procedures such as loan-to-value ratios of 80% or less at origination, obtaining additional collateral when prudent, and closely monitoring construction projects to control disbursement of funds on loans.

•Commercial Loans. The Bank originates secured and unsecured loans for business purposes. Commercial loans are typically secured by real estate, accounts receivable, inventory, equipment and/or other assets of the business. Repayment is often dependent upon the successful operation of the business and may be affected by adverse conditions in the local economy or real estate market. The financial condition and cash flow of commercial borrowers is therefore carefully analyzed during the loan approval process, and continues to be monitored by obtaining business financial statements, personal financial statements and income tax returns. The frequency of this ongoing analysis depends upon the size and complexity of the credit and collateral that secures the loan. It is also the Bank’s general policy to obtain personal guarantees from the principals of the commercial loan borrowers.

•Consumer Loans. A variety of consumer loans are offered to customers, including home equity loans, marine loans and other secured and unsecured lines of credit and term loans. Certain consumer loans are originated by a third-party on behalf of the Company. Careful analysis of an applicant’s creditworthiness is performed before granting credit, and ongoing monitoring of loans outstanding is performed in an effort to minimize risk of loss by identifying problem loans early. The Company discontinued the issuance of new marine loans in June 2023 and only services the existing portfolio as of December 31, 2025.

•Credit Card Loans. The Bank offered unsecured credit card loans to commercial and consumer customers. Credit risk factors include the borrower’s continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. The Company discontinued the issuance of new credit cards in April 2024 (except to select existing credit card customers) and only services the existing portfolio as of December 31, 2025.

Deposit Activities

The Bank offers a wide array of deposit products including checking, savings and money market accounts, and regular and IRA certificates of deposit. The Bank also offers its certificate of deposit account registry service (“CDARS”) program and the insured cash sweep (“ICS”) program allowing customers the ability to insure deposits over $250,000 among other banks that participate in the CDARS and ICS networks while providing competitive rates and easy access to funds. In addition, we offer our commercial customers packages that include cash management services, various checking opportunities and other cash sweep products.

Title Services

The Company offered title services through its wholly-owned subsidiary, 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.

Financial Services

The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through a third-party broker/dealer, LPL Financial, to residents of the states of AL, AZ, CA, CO, CT, DE, DC, FL, GA, IN, KY, ME, MD, MA, MI, NJ, NY, NC, OH, PA, RI, SC, SD, TX, VA, WA and WV.

Trust Services

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.

Cannabis Related Business

The Bank provides banking services to customers that are licensed by various states to do business in the cannabis industry as growers, processors and dispensaries. The Bank maintains stringent written policies and procedures related to the on-boarding of such businesses and to the monitoring and maintenance of such business accounts.

In accordance with federal regulatory guidance and industry best practices, the Bank performs a multilayered due diligence review of a cannabis business before the business is on-boarded, including site visits and confirmation that the business is properly licensed by the state in which it is conducting business. Throughout the relationship, the Bank continues to monitor the business, including site visits, to ensure that the cannabis business continues to meet stringent requirements, including maintenance of required licenses. The Bank performs periodic financial reviews of the business and monitors the business in accordance with the Bank Secrecy Act of 1970 (“BSA”) and state requirements.

Seasonality

The Company recognizes that certain customers have seasonality within their operations, which indirectly impacts the Bank’s liquidity. The Bank has significant banking relationships with state, county and local municipalities within Maryland, Virginia and Delaware that receive their funding from federal and state agencies, as well as, tax generating revenue, which is seasonal in nature.

Employees and Human Capital Resources

Our Mission and Culture

The Bank is built around the character of our people and our communities. We are dedicated to our clients, our employees, our communities and our shareholders. The Bank’s corporate culture is defined by core values which include integrity, accountability, teamwork, and resilience. We value our employees by investing in competitive compensation and benefit packages and fostering a team environment centered on professional service and open communication. Attracting, retaining and developing qualified, engaged employees who embody these values are crucial to our success. We believe that relations with our employees are good.

Employee Demographics

As of December 31, 2025, the Bank employed 608 individuals, of whom 595 were employed on a full-time basis (602 full-time equivalent employees). The Bank’s employees were not represented by a collective bargaining agreement.

The Company has no employees and reimburses the Bank for estimated expenses, including an allocation of salaries and employee benefits.

Belonging and Inclusion

We are committed to building an inclusive work environment that is supported by our culture and values. We believe diversity of thought and experiences inspires our team to achieve more creative and innovative solutions for our customers. With a commitment to support an inclusive workplace, we focus on understanding, accepting, and valuing the differences between people.

Compensation and Benefits

The Bank’s compensation and benefits package is designed to attract and retain a talented workforce. In addition to salaries, employee benefits include a 401(k) plan with an employer matching contribution, an employee stock purchase plan, medical insurance benefits, paid short-term and long-term disability and life insurance, flexible spending accounts, and tuition assistance.

Employee Health, Safety and Wellness

We are committed to supporting the safety, health and wellness of our employees. We provide paid time off (including parental and adoption leave), an employee assistance program and wellness benefits, which include mental health support, coaching and other resources for employees and their immediate family members.

We have adopted a flexible approach to remote work, which designates roles as remote, on-site or hybrid (a combination of on-site and remote work) based on specific job responsibilities and requirements.

Professional Development

The Bank invests in the growth of its employees by providing access to professional development and continuing education courses and seminars that are relevant to the banking industry and their job function within the Company. We offer our employees the opportunity to participate in various professional and leadership development programs. On-demand training opportunities include a variety of industry, technical, professional, business development, leadership and regulatory topics.

COMPETITION

We operate in a highly competitive environment. Our competitors include community banks, commercial banks, credit unions, thrifts, mortgage banking companies, investment advisory firms, brokerage firms, mutual fund companies, private equity firms, fintechs, and e-commerce and other internet-based companies. We compete on a local and regional basis for banking and investment products and services.

The primary factors when competing in the financial services market include personalized services, the quality and range of products and services, interest rates on loans and deposits, lending services, price, customer convenience, and our ability to attract and retain experienced employees.

To compete in our market areas, we utilize multiple media channels including print, online, social media, television, radio, direct mail, e-mail and digital signage. Our employees also play a significant role in maintaining existing relationships with customers while establishing new relationships to grow all areas of our businesses.

SUPERVISION AND REGULATION

The following is a summary of certain statutes and regulations that significantly affect us. Other statutes and regulations may affect us but are not discussed in the following paragraphs.

Bank Holding Company Regulation

As a bank holding company, Shore Bancshares is subject to supervision and regulation by the Board of Governors of the Federal Reserve System (the “FRB”). Shore Bancshares is required to furnish to the FRB annual and quarterly reports of its operations and additional information and reports. Shore Bancshares is also subject to regular examination by the FRB.

A bank holding company can elect, subject to certain qualifications, to become a “financial holding company.” A financial holding company may engage in a full range of financial activities, including insurance and securities underwriting and agency activities, merchant banking, and insurance company portfolio investment activities, with expedited notice procedures. Shore Bancshares has elected to be a financial holding company.

Under the BHC Act, a bank holding company must obtain the prior approval of the FRB before (1) acquiring direct or indirect ownership or control of any class of voting securities of any bank or bank holding company if, after the acquisition, the bank holding company would directly or indirectly own or control more than 5% of the class; (2) acquiring all or substantially all of the assets of another bank or bank holding company; or (3) merging or consolidating with another bank holding company.

Prior to acquiring control of Shore Bancshares or the Bank, any company must obtain approval of the FRB. For purposes of the BHC Act, “control” is defined as ownership of 25% or more of any class of voting securities of Shore Bancshares or the Bank, the ability to control the election of a majority of the directors, or the exercise of a controlling influence over management or policies of Shore Bancshares or the Bank.

The Change in Bank Control Act and the related regulations of the FRB require any person or persons acting in concert (except for companies required to make application under the BHC Act) to file a written notice with the FRB before the person or persons acquire control of Shore Bancshares or the Bank. The Change in Bank Control Act defines “control” as the direct or indirect power to vote 25% or more of any class of voting securities or to direct the management or policies of a bank holding company or an insured bank.

The BHC Act also limits the investments and activities of bank holding companies. In general, a bank holding company is prohibited from acquiring direct or indirect ownership or control of more than 5% of the voting shares of a company that is not a bank or a bank holding company or from engaging directly or indirectly in activities other than those of banking, managing or controlling banks, providing services for its subsidiaries, non-bank activities that are closely related to banking, and other financially related activities.

In general, a bank holding company that qualifies as a financial holding company may engage in an expanded list of non-bank activities. Non-bank and financially related activities of financial holding companies may be subject to regulation and oversight by regulators other than the FRB.

The FRB has the power to order a holding company or its subsidiaries to terminate any activity, or to terminate its ownership or control of any subsidiary, when it has reasonable cause to believe that the continuation of such activity or such ownership or control constitutes a serious risk to the financial safety, soundness, or stability of any bank subsidiary of that holding company.

The FRB has adopted guidelines regarding the capital adequacy of bank holding companies that require bank holding companies to maintain specified minimum ratios of capital to total average assets and capital to risk-weighted assets. See “Regulatory Capital Requirements.”

The FRB has the power to prohibit dividends by bank holding companies if their actions constitute unsafe or unsound practices. The FRB has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the FRB’s view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with its capital needs, asset quality, and overall financial condition.

A holding company must serve as a source of strength for its subsidiary banks and the FRB may require a holding company to contribute additional capital to an undercapitalized subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal banking regulator to maintain the capital of a subsidiary bank would be assumed by the bankruptcy trustee and may be entitled to priority over other creditors.

Bank Regulation

The Bank is a national banking association subject to supervision by the Office of the Comptroller of the Currency (the “OCC”). Deposits of the Bank are insured by the FDIC to the maximum legal limit. Deposits, reserves, investments, loans, consumer law compliance, issuance of securities, payment of dividends, establishment of branches, mergers and acquisitions, corporate activities, changes in control, electronic funds transfers, responsiveness to community needs, management practices, compensation policies, and other aspects of

operations are subject to regulation by the appropriate federal supervisory authorities. In addition, the Bank is subject to numerous federal, state and local laws and regulations that set forth specific restrictions and procedural requirements with respect to extensions of credit (including to insiders), credit practices, disclosure of credit terms and discrimination in credit transactions.

The OCC regularly examines the operations and condition of the Bank, including, but not limited to, its capital adequacy, liquidity, asset quality, regulatory compliance, and management practices. These examinations are for the protection of the Bank’s depositors and the Deposit Insurance Fund. In addition, the Bank is required to furnish quarterly and annual reports to the OCC. The OCC’s enforcement authority includes the power to remove officers and directors and the authority to issue cease-and-desist orders to prevent a bank from engaging in unsafe or unsound practices or violating laws or regulations governing its business.

The OCC has adopted regulations regarding capital adequacy that require national banks to maintain specified minimum ratios of capital to total average assets and capital to risk-weighted assets. See “Regulatory Capital Requirements.” OCC regulations limit the amount of dividends that the Bank may pay to Shore Bancshares.

The Bank is subject to restrictions imposed by federal law on extensions of credit to, and certain other transactions with, Shore Bancshares and other affiliates, and on investments in their stock or other securities. These restrictions prevent Shore Bancshares and the Bank’s other affiliates from borrowing from the Bank unless the loans are secured by specified collateral and require those transactions to have terms comparable to terms of arms-length transactions with third parties. In addition, secured loans and other transactions and investments by the Bank are generally limited in amount as to Shore Bancshares and as to any other affiliate to 10% of the Bank’s capital and surplus and as to Shore Bancshares and all other affiliates together to an aggregate of 20% of the Bank’s capital and surplus. Certain exemptions to these limitations apply to extensions of credit and other transactions between the Bank and its subsidiaries. These regulations and restrictions may limit Shore Bancshares’s ability to obtain funds from the Bank for its cash needs, including funds for acquisitions and for payment of dividends, interest, and operating expenses.

Under OCC regulations, banks must adopt and maintain written policies that establish appropriate limits and standards for extensions of credit secured by liens or interests in real estate or made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards; prudent underwriting standards, including loan-to-value limits, that are clear and measurable; loan administration procedures; and documentation, approval, and reporting requirements. A bank’s real estate lending policy must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies (the “Interagency Guidelines”) adopted by the federal bank regulators. The Interagency Guidelines, among other things, call for internal loan-to-value limits for real estate loans that are not in excess of the limits specified in the guidelines. The Interagency Guidelines state, however, that it may be appropriate in individual cases to originate or purchase loans with loan-to-value ratios in excess of the supervisory loan-to-value limits.

The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. The FDIC uses a risk-based pricing system to determine assessment rates, which currently range from 2.5 to 42 basis points. No institution may pay a dividend if in default of the federal deposit insurance assessment. Deposit insurance assessments are based on total average assets, excluding Paycheck Protection Program loans, less average tangible common equity. The FDIC has authority to increase insurance assessments. Management cannot predict what insurance assessment rates will be in the future.

Insured depository institutions with assets of $10 billion or more are subject to limits on interchange fees. Interchange fees, or “swipe” fees, are fees that merchants pay to credit card companies and debit card-issuing banks such as the Bank for processing electronic payment transactions on their behalf. The maximum permissible interchange fee that a non-exempt issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction, subject to an upward adjustment of 1 cent if an issuer certifies that it has implemented policies and procedures reasonably designed to achieve the fraud-prevention standards set forth by the FRB. As the Bank’s assets are less than $10 billion, it is not subject to a cap on interchange fees.

Consumer Financial Protection Laws and Enforcement

We must comply with various federal and state consumer protection laws and regulations with respect to the consumer financial products and services that we provide. The Consumer Financial Protection Bureau (“CFPB”) is responsible for promoting fairness and transparency for mortgages, credit cards, deposit accounts and other consumer financial products and services and for interpreting and enforcing the federal consumer financial laws that govern the provision of such products and services. The CFPB is also authorized to prevent any institution under its authority from engaging in an unfair, deceptive, or abusive act or practice in connection with consumer financial products and services. The CFPB has exclusive examination and primary enforcement authority with respect to compliance with federal consumer financial protection laws and regulations by institutions under its supervision and is authorized, individually or jointly with the federal banking agencies, to conduct investigations to determine whether any person is, or has, engaged in conduct that violates such laws or regulations. As an insured depository institution with total assets less than $10 billion, the Bank is not subject to the CFPB’s supervisory and enforcement authorities.

The Bank is subject to federal and state fair lending laws such as the Equal Credit Opportunity Act and the Fair Housing Act, which prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. In addition, the Bank is subject to other federal and state laws designed to protect consumers and prohibit unfair, deceptive or abusive business practices, including the Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of

2003, the Gramm-Leach Bliley Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans, and providing other services.

Regulatory Capital Requirements

Shore Bancshares and the Bank are subject to capital and leverage requirements. Specifically, Shore Bancshares and the Bank are subject to the following minimum capital requirements: (1) a leverage ratio of 4%; (2) a Common Equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; (3) a Tier 1 risk-based capital ratio of 6%; and (4) a total risk-based capital ratio of 8%.

CET1 capital consists solely of common stock plus related surplus and retained earnings, adjusted for goodwill, intangible assets and the related deferred taxes. Additional Tier 1 capital may include other perpetual instruments historically included in Tier 1 capital, such as non-cumulative perpetual preferred stock, if applicable. Tier 2 capital consists of unsecured instruments that are subordinated to deposits and general creditors and have a minimum original maturity of at least five years, among other requirements, plus instruments that the rule has disqualified from Tier 1 capital treatment. Instruments that are included in Tier 2 capital, but have a maturity of less than five years, must be ratably discounted over their remaining life until they reach maturity.

In addition, in order to avoid restrictions on capital distributions or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” of 2.5% on top of its minimum risk-based capital requirements. This buffer must consist solely of CET1 capital and the buffer applies to all three measurements: CET1 capital, Tier 1 capital and total capital.

Prompt Corrective Regulatory Action

Federal law establishes a system of prompt corrective action to resolve the problems of undercapitalized institutions. The law requires that certain supervisory actions be taken against undercapitalized institutions, the severity of which depends on the degree of undercapitalization. The OCC has adopted regulations to implement the prompt corrective action legislation as to national banks. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

Subject to a narrow exception, a receiver or conservator is required to be appointed for an institution that is “critically undercapitalized” within specified time frames. The regulations also provide that a capital restoration plan must be filed with the OCC within 45 days of the date an institution is deemed to have received notice that it is “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized.” Compliance with the plan must be guaranteed by any parent holding company up to the lesser of 5% of the institution's total assets when it was deemed to be undercapitalized or the amount necessary to achieve compliance with applicable capital requirements. In addition, numerous mandatory supervisory actions become immediately applicable to an undercapitalized institution including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions and expansion. The OCC could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacement of senior executive officers and directors. Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionary measures.

As of December 31, 2025, the most recent notification from the Bank’s primary regulator categorized the Bank as a “well-capitalized” institution under the prompt corrective action rules of the Federal Deposit Insurance Act.

Supervision and Regulation of Mortgage Banking Operations

Our mortgage banking business is subject to the rules and regulations of the U.S. Department of Housing and Urban Development (“HUD”), the Federal Housing Administration (“FHA”), the Veterans’ Administration (“VA”) and Fannie Mae with respect to originating, processing, selling and servicing mortgage loans. Those rules and regulations, among other things, prohibit discrimination and establish underwriting guidelines, which include provisions for inspections and appraisals, require credit reports on prospective borrowers, and fix maximum loan amounts. Lenders are required annually to submit audited financial statements to Fannie Mae, FHA and VA. Each of these regulatory entities has its own financial requirements. We are also subject to examination by Fannie Mae, FHA and VA to assure compliance with the applicable regulations, policies and procedures. Mortgage origination activities are subject to, among others, the Equal Credit Opportunity Act, the Federal Truth-in-Lending Act, the Fair Housing Act, the Fair Credit Reporting Act, the National Flood Insurance Act and the Real Estate Settlement Procedures Act and related regulations that prohibit discrimination and require the disclosure

of certain basic information to mortgagors concerning credit terms and settlement costs. Our mortgage banking operations are also affected by various state and local laws and regulations and the requirements of various private mortgage investors.

Community Reinvestment

Under the Community Reinvestment Act (“CRA”), a financial institution has a continuing and affirmative obligation to help meet the credit needs of the entire community, including low- and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions or limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. However, institutions are rated on their performance in meeting the needs of their communities. Performance is tested in three areas: (1) lending, to evaluate the institution’s record of making loans in its assessment areas; (2) investment, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low- or moderate-income individuals and businesses; and (3) service, to evaluate the institution’s delivery of services through its branches, ATMs and other offices. The CRA requires each federal banking agency, in connection with its examination of a financial institution, to assess and assign one of four ratings to the institution’s record of meeting the credit needs of the community and to take such record into account in its evaluation of certain applications by the institution, including applications for charters, branches and other deposit facilities, relocations, mergers, consolidations, acquisitions of assets or assumptions of liabilities, and savings and loan holding company acquisitions. The CRA also requires that all institutions make public disclosure of their CRA ratings. The Bank was assigned a “satisfactory” rating as a result of its most recent CRA examination.

In 2023, the federal bank regulators jointly issued a final rule to strengthen and modernize the CRA regulations to better achieve the purpose of the CRA. The final rule updates the CRA regulations to evaluate lending outside traditional assessment areas generated by the growth of non-branch delivery systems. The final rule adopts a new metrics-based approach to evaluating bank retail lending and community development financing, using benchmarks based on peer and demographic data. Most of the rule’s requirements will be applicable beginning January 1, 2026. The remaining requirements, including the data reporting requirements, will be applicable on January 1, 2027. On July 16, 2025, the federal bank regulators jointly issued a proposal to rescind the 2023 rule and replace it with the 1995 CRA regulations, with certain technical amendments.

Bank Secrecy Act

Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction. Financial institutions are generally required to report cash transactions involving more than $10,000 to the United States Treasury. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects, or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA, or has no lawful purpose. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, commonly referred to as the “USA Patriot Act” or the “Patriot Act”, contains prohibitions against specified financial transactions and account relationships, as well as enhanced due diligence standards intended to prevent the use of the United States financial system for money laundering and terrorist financing activities. The Patriot Act requires banks and other depository institutions, brokers, dealers and certain other businesses involved in the transfer of money to establish anti-money laundering programs, including employee training and independent audit requirements meeting minimum standards specified by the Patriot Act, to follow standards for customer identification and maintenance of customer identification records, and to compare customer lists against lists of suspected terrorists, terrorist organizations and money launderers. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering in determining whether to approve a proposed bank acquisition. In July 2024, the federal banking agencies proposed amendments to update the requirements for supervised institutions to establish, implement and maintain effective, risk-based and reasonably designed AML and countering the financing of terrorism (“CFT”) programs. The proposed amendments would require supervised institutions to identify, evaluate and document the regulated institution's money laundering, terrorist financing and other illicit finance activity risks, as well as consider, as appropriate, the U.S. Department of the Treasury's Financial Crimes Enforcement Network's (“FinCEN”) published national AML/CFT priorities.

Cybersecurity

Federal regulations require a banking organization to notify its primary federal regulator as soon as possible, and no later than 36 hours, after the banking organization determines that a “computer-security incident” rising to the level of a “notification incident” has occurred. Notification is required for incidents that have materially affected or are reasonably likely to materially affect the viability of a banking organization’s operations, its ability to deliver banking products and services, or the stability of the financial sector. Service providers are required under the rule to notify affected banking organization customers as soon as possible when the provider determines that it has experienced a computer-security incident that has materially affected or is reasonably likely to materially affect the banking organization’s customers for four or more hours.

Guidance for Third-Party Relationships

The federal bank regulators have jointly issued guidance on risk management of third-party relationships, including third-party lending relationships. The interagency guidance seeks to, among other things, promote consistency in third-party risk management and provide

sound risk management guidance for third-party relationships commensurate with a bank's risk profile and complexity as well as the criticality of the activity.

Brokered Deposits

The FDIC limits the ability to accept brokered deposits to those insured depository institutions that are well capitalized. Institutions that are less than well capitalized cannot accept, renew or roll over any brokered deposit unless they have applied for and been granted a waiver by the FDIC. Institutions that are less than well capitalized that are permitted to accept, renew or rollover brokered deposits via FDIC waiver generally may not pay an interest rate in excess of the national rate plus 75 basis points on such brokered deposits. The FDIC has defined the “national rate” for all interest-bearing deposits held by less-than-well-capitalized institutions as “a simple average of rates paid by all insured depository institutions and branches for which data are available” and has stated that its presumption is that this national rate is the prevailing rate in any market.

Brokered deposits are deposits placed into a bank by a third-party deposit broker. Generally, a person is a “deposit broker” if it is “engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions or the business of placing deposits with insured depository institutions for the purpose of selling interests in those deposits to third parties.” FDIC regulations define what it means to be in the business of placing deposits and facilitating the placement of deposits for purpose of the deposit broker definition.

Other Laws and Regulations

Some of the aspects of our lending and deposit business that are subject to regulation by the OCC and the FDIC include reserve requirements and disclosure requirements in connection with personal and mortgage loans and deposit accounts. In addition, we are subject to numerous federal and state laws and regulations that include specific restrictions and procedural requirements with respect to the establishment of branches, investments, interest rates on loans, credit practices, the disclosure of credit terms, and discrimination in credit transactions.

We are also subject to the Gramm-Leach-Bliley Act (the “GLBA”) and its implementing regulations and guidance. Among other things, the GLBA (i) imposes certain limitations on the ability to share consumers’ nonpublic personal information with non-affiliated third-parties and (ii) requires certain disclosures to consumers about information collection, sharing, and security practices and their right to “opt out” of the institution’s disclosure of their personal financial information to non-affiliated third-parties (with certain exceptions).

Enforcement Actions

Federal and state statutes and regulations provide financial institution regulatory agencies with great flexibility to undertake an enforcement action against an institution that fails to comply with regulatory requirements. Possible enforcement actions range from the imposition of a capital plan and capital directive to civil money penalties, cease-and-desist orders, receivership, conservatorship, or the termination of the deposit insurance.

AVAILABLE INFORMATION

The Company maintains an Internet site at www.shorebancshares.com on which it makes available, free of charge, its Annual Reports 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. In addition, stockholders may access these reports and documents on the SEC’s website at www.sec.gov. The information on, or accessible through, our website or any other website cited in this Annual Report on Form 10-K is not part of, or incorporated by reference into, this Annual Report on Form 10-K and should not be relied upon in determining whether to make an investment decision.

Information About Our Executive Officers (as of December 31, 2025)

Executive Officer

Recent Work Experience

Age

James M. Burke

President and Chief Executive Officer

President and Chief Executive Officer since July 1, 2023. Prior to that time, he served as President and Chief Executive Officer of The Community Financial Corporation.

Charles S. Cullum

Executive Vice President and Chief Financial Officer

Chief Financial Officer since April 21, 2025. Prior to that time, he served as Chief Financial Officer of Sandy Spring Bancorp, Inc. from May 2024 to April 2025, Treasurer from July 2022 to May 2024 and Corporate Strategist and Director of Financial Analysis prior to July 2022.

Virginia M. Anderson

Executive Vice President and Chief Internal Audit Officer

Chief Internal Audit Officer since January 1, 2025. From January 1, 2024, to December 31, 2024, she served as Director of Internal Audit. From July 1, 2023, to December 31, 2023, she served as Director of Special Projects. Prior to that time, she served as Vice President of Special Projects of Community Bank of the Chesapeake.

B. Scot Ebron

Executive Vice President and Chief Banking Officer

Chief Banking Officer since July 1, 2023. Prior to that time, he served as Chief Banking Officer of The Community Financial Corporation.

Christy Lombardi

Executive Vice President and Chief Human Resources Officer

Chief Human Resources Officer since July 1, 2023. Prior to that time, she served as Chief Operating Officer of The Community Financial Corporation.

Aaron M. Kaslow

Executive Vice President and Chief Legal Officer

Chief Legal Officer since October 20, 2025. Prior to that time, he served as General Counsel and Chief Administrative Officer of Sandy Spring Bancorp, Inc.

Lacey A. Pierce

Executive Vice President and Chief Strategy & Project Officer

Chief Strategy & Project Officer since January 1, 2025. Previously Chief Administrative Officer since July 1, 2023. Prior to that time, she served as Chief Administrative Officer of The Community Financial Corporation.

Charles E. Ruch, Jr.

Executive Vice President and Chief Credit Officer

Chief Credit Officer since 2016.

Noah Stayton

Executive Vice President and Chief Information Officer

Chief Information Officer since August 4, 2025. Previously head of the North America Risk Practice at Visa Consulting and Analytics.

Donna J. Stevens

Executive Vice President and Chief Operating Officer

Chief Operating Officer since 2015.

Talal Tay

Executive Vice President and Chief Risk Officer

Chief Risk Officer since July 1, 2023. Prior to that time, he served as Chief Risk Officer of The Community Financial Corporation.

Item 1A. RISK FACTORS

Investing in our common stock involves risks, including the possibility that the value of the investment could fall substantially and that dividends or other distributions could be reduced or eliminated. Investors should carefully consider the following risk factors before making an investment decision regarding our stock. The following risk factors may cause our future earnings to be lower or our financial condition to be less favorable than expected, which could adversely affect the value of, and return on, an investment in the Company. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may cause earnings to be lower or may adversely impact our financial condition. Investors should also consider the other information in this Annual Report on Form 10-K, as well as in the documents incorporated by reference into this Form 10-K, as the same may be updated from time to time by our future filings with the SEC under the Exchange Act.

Risks Related to the Economy, Financial Markets, Interest Rates and Liquidity

The geographic concentration of our operations makes us susceptible to downturns in local economic conditions.

Our banking operations are concentrated in eastern and southern Maryland, Delaware and northern Virginia. Our success depends in part upon economic conditions in these markets. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or that depend on such businesses for a significant portion of their revenues. In addition, federal government employees make up a significant proportion of the population of the Washington, D.C. metropolitan area. Reductions in the federal workforce through layoffs and buyouts, furloughs of government employees or government contractors, as well as cancelling government contracts and other impacts from declining government spending, lapses in appropriations, or changes in fiscal appropriations could have adverse impacts on other businesses in our market and the general economy of the greater Washington, D.C. metropolitan area. Adverse changes in economic conditions in our markets could limit growth in loans and deposits, impair our ability to collect amounts due on loans, increase problem loans and charge-offs and otherwise negatively affect our performance and financial condition. Declines in real estate values could cause some of our residential and commercial real estate loans to be inadequately collateralized, which would expose us to a greater risk of loss if the recovery on amounts due on defaulted loans is resolved by selling the real estate collateral under duress or to expedite payment.

Changes in interest rates may adversely affect our earnings and financial condition.

Our net income depends to a great extent upon the level of net interest income, which is the difference between the interest income earned on loans, investments, and other interest-earning assets, and the interest paid on interest-bearing liabilities, such as deposits and borrowings. Net interest income is affected by changes in market interest rates because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. When interest-bearing liabilities mature or re-price more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or re-price more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income.

Changes in market interest rates are affected by many factors beyond our control, including inflation, unemployment, money supply, fiscal policies of the U.S. government, domestic and international events, and events in U.S. and other financial markets. We attempt to manage our risk from changes in market interest rates by adjusting the rates, maturity, re-pricing, and balances of the different types of interest-earning assets and interest-bearing liabilities, but interest rate risk management techniques are not exact. As a result, a rapid increase or decrease in interest rates could have an adverse effect on our results of operations. Changes in the market interest rates for types of products and services in various markets also may vary significantly from location to location and over time based upon competition and local or regional economic factors.

For further discussion regarding the impact of interest rate movements on net interest income, see Item 7A of this report. The results of any interest rate sensitivity simulation model depend upon a number of assumptions regarding customer behavior, movement of interest rates and cash flows, any of which may prove to be inaccurate.

Inflation can have an adverse impact on our business and on our customers.

Inflation generally increases the cost of goods and services we use in our business operations, as well as labor costs. We may find that we need to give higher than normal raises to employees and start new employees at a higher wage. Furthermore, our clients are also affected by elevated inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. Historically, the Federal Reserve has increased the federal funds target rate in an effort to combat elevated inflation. Market interest rates generally increase in response to the Federal Reserve's actions. Higher market interest rates increase borrowing costs and depress loan demand. As market interest rates rise, the value of our investment securities generally decreases, although this effect can be less pronounced for floating rate instruments. Higher interest rates increase the attractiveness of alternative investment and savings products, like U.S. Treasury securities and money market funds, which can make it difficult to attract and retain deposits. Sustained higher interest could weaken economic activity. A deterioration in economic conditions in the United States and our markets could result in a further increase in loan delinquencies and nonperforming assets, decreases in loan collateral values, and a decrease in demand for our products and services, all of which, in turn, would adversely affect our business, financial condition, and results of operations.

Insufficient liquidity could impair our ability to fund operations and jeopardize our financial condition, growth and prospects.

We require sufficient liquidity to fund loan commitments, satisfy depositor withdrawal requests, make payments on our debt obligations as they become due, and meet other cash commitments. Liquidity risk is the potential that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding at a reasonable cost, in a timely manner, and without adverse conditions or consequences. Our sources of liquidity consist primarily of cash, assets readily convertible to cash (such as investment securities), increases in deposits, advances, as needed, from the FHLB, borrowings, as needed, from the Federal Reserve Bank of Richmond, and other borrowings. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy generally. Core deposits and FHLB advances are our primary source of funding. A significant decrease in core deposits, an inability to renew FHLB advances, an inability to obtain alternative funding to core deposits or FHLB advances, or a substantial, unexpected, or prolonged change in the level or cost of liquidity could have a negative effect on our business, financial condition and results of operations.

Our business may be adversely affected by unfavorable economic, market, and political conditions.

Our results of operations could be adversely affected in the event of an economic recession because we could experience higher loan charge-offs and higher operating costs. Adverse economic conditions, both in the U.S. and globally, including persistent inflation, rising interest rates, supply chain issues, labor shortages or changes in United States trade policies, including the imposition of tariffs and retaliatory tariffs, could adversely affect our results of operations. Changes in interest rates, inflation, or the financial markets could affect demand for our products. Real estate market conditions directly affect performance of our loans secured by real estate. Debt markets affect the availability of credit, which impacts the rates and terms at which we offer loans. Stock market downturns often signal broader economic deterioration and/or a downward trend in business earnings, which may adversely affect businesses’ ability to raise capital and/or service their debts. Political and electoral changes, developments, conflicts, and conditions have in the past introduced, and may in the future introduce, additional uncertainty that may also affect our results of operations.

Unfavorable economic, market and political conditions could have direct or indirect material adverse impacts on us, our customers, and our counterparties and could result in one or more of the following:

•a decrease in the demand for our loans and other products and services offered by us;

•a decrease in our deposit balances due to overall reductions in the accounts of customers;

•a decrease in the value of collateral securing our loans;

•an increase in the level of nonperforming and classified loans;

•an increase in provisions for credit losses and loan charge-offs;

•a decrease in net interest income;

•a decrease in our ability to access the capital markets; and

•an increase in our operating expenses associated with attending to the effects of certain circumstances listed above.

Our investment securities portfolio is subject to credit risk, market risk, and liquidity risk.

Our investment securities portfolio has risk factors beyond our control that may significantly influence its fair value. These risk factors include, but are not limited to, rating agency downgrades of the securities, defaults of the issuers of the securities, lack of market pricing of the securities, and instability in the credit markets. Lack of market activity with respect to some securities has, in certain circumstances, required us to base our fair market valuation on unobservable inputs. Any changes in these risk factors, in current accounting principles or interpretations of these principles could impact our assessment of fair value. Adjustments to the allowance for credit losses on held-to-maturity investment securities would negatively affect our earnings and regulatory capital ratios.

Credit Risks

Our allowance for credit losses may not be adequate to cover our actual credit losses; additions to the allowance for credit losses could adversely affect our financial condition and results of operations.

We maintain an allowance for credit losses in an amount that is believed to be appropriate to provide for expected losses inherent in the portfolio. We monitor credit quality and seek to identify loans that may become nonperforming; however, at any time there could be loans in the portfolio that may result in losses, but that have not been identified as nonperforming or potential problem credits. We may be unable to identify all deteriorating credits prior to them becoming nonperforming assets, or to limit losses on those loans that are identified. As a result, future additions to the allowance may be necessary. Additionally, future additions to the allowance may be required based on changes in forecasted economic conditions, changes in the loans comprising the portfolio and changes in the financial condition of borrowers, or as a result of assumptions used by management in determining the allowance. Additionally, banking regulators, as an integral part of their supervisory function, periodically review the adequacy of our allowance for credit losses. These regulatory agencies may require an increase in the provision for expected credit losses or to recognize further loan charge-offs based upon their judgments, which may be different from ours. Any increase in the allowance for credit losses could have a negative effect on our financial condition and results of operations.

We may not be able to adequately measure and limit our credit risk, which could lead to unexpected losses.

The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid timely, or at all, or that the value of any collateral supporting the loan will be insufficient to cover our outstanding exposure. These risks may be affected by the strength of the borrower’s business sector and local, regional and national market and economic conditions. Many of our loans are made to small- to medium-sized businesses that may be less able to withstand competitive, economic and financial pressures than larger borrowers. Our risk management practices, such as monitoring the concentration of loans within specific industries and credit approval practices, may not adequately reduce credit risk, and credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. A failure to effectively measure and limit the credit risk associated with our loan portfolio could lead to unexpected losses and have a material adverse effect on our business, financial condition and results of operations.

Our commercial real estate lending activities expose us to increased lending risks and related loan losses.

At December 31, 2025, our commercial real estate loan portfolio totaled $2.64 billion, or 53.95% of our total loan portfolio. Commercial real estate loans generally expose a lender to greater risk of non-payment and loss than one-to-four family residential mortgage loans because repayment of the loans often depends on the successful operation of the properties and the income stream of the borrowers. These loans involve larger loan balances to single borrowers or groups of related borrowers compared to one-to-four family residential mortgage loans. Some segments have shown some signs of weakness as rising expenses and debt costs and lower valuations have impacted credit quality metrics. Vacancy rates have risen in the office sector, which is experiencing significant structural shifts that could take several years to fully materialize as remote work practices normalize. To the extent that borrowers have more than one commercial real estate loan outstanding, an adverse development with respect to one loan or one credit relationship could expose us to a significantly greater risk of loss compared to an adverse development with respect to a one-to-four family residential real estate loan. Moreover, if loans that are collateralized by commercial real estate become troubled and the value of the real estate has deteriorated significantly, then we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan. A decline in the value of the collateral for a loan may require us to increase our allowance for credit losses, which would adversely affect our financial condition and results of operations.

Imposition of limits by the bank regulators on commercial real estate lending activities could curtail our growth and adversely affect our earnings.

A bank’s commercial real estate lending exposure could receive increased supervisory scrutiny when total commercial investor real estate loans, including loans secured by apartment buildings, nonowner-occupied investor real estate, and construction and land loans, represent 300% or more of an institution’s total risk-based capital, and the outstanding balance of the commercial real estate loan portfolio has increased by 50% or more during the preceding 36 months. At December 31, 2025, our total commercial investor real estate loans, including loans secured by apartment buildings, nonowner-occupied commercial real estate, and construction and land loans represented 342.55% of the Bank’s total risk-based capital. Management has established a commercial real estate lending framework to monitor specific exposures and limits by types within the commercial real estate loan portfolio and takes appropriate actions, as necessary. If the OCC, the Bank’s primary federal regulator, were to impose restrictions on the amount of commercial real estate loans we can hold in our portfolio, it could curtail or growth and adversely affect our earnings. If we are required to maintain higher levels of capital as a result of our commercial real estate loan concentrations, we may need to obtain additional capital, which may adversely affect shareholder returns.

Our concentration of residential mortgage loans exposes us to increased lending risks.

At December 31, 2025, 33.60% of our total loan portfolio was secured by one-to-four family real estate, a significant majority of which is located in Maryland, Delaware and northern Virginia. One-to-four family residential mortgage lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

An increase in nonperforming assets would adversely impact earnings.

Nonperforming assets adversely affect net income in various ways. Interest income is not accrued on nonaccrual loans, other real estate owned or repossessed assets. We must record a reserve for expected credit losses, which is established through a current period charge in the form of a provision for expected credit losses, and from time to time we must write down the value of properties in our other real estate owned and repossessed assets portfolios to reflect changing market values. Additionally, there are legal fees associated with the resolution of problem assets as well as carrying costs such as taxes, insurance and maintenance related to other real estate owned and repossessed assets. Further, the resolution of nonperforming assets requires the active involvement of management, which can distract them from more profitable activities. Finally, if the estimate for the recorded allowance for credit losses proves to be incorrect and the allowance is inadequate, the allowance will have to be increased and, as a result, our earnings would be adversely affected.

Appraisals may not accurately describe the value of our collateral.

When making a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and does not guarantee that the appraised value could be realized upon sale of the property. Real estate values can change significantly in relatively short periods of time, especially in periods of changing interest rates and economic uncertainty. If the amount realizable upon the sale of the collateral is less than the appraised value, we may not be able to recover the full contractual amount of principal and interest that we anticipated at the time we originated the loan. In addition, we rely on appraisals and other valuation techniques to establish the value of foreclosed real estate and to determine certain loan impairments. If any of these valuations are incorrect, our consolidated financial statements may reflect the incorrect value of our other real estate owned and our allowance for credit losses may not accurately reflect loan impairments.

Strategic and Other Risks

Our future success will depend on our ability to compete effectively in the highly competitive financial services industry.

We face substantial competition in all phases of our operations from a variety of different competitors. We compete with commercial banks, credit unions, savings and loan associations, mortgage banking firms, consumer finance companies, securities brokerage firms, money market funds and other mutual funds, as well as other local and community, super-regional, national and international financial institutions that operate offices in our primary market areas and elsewhere. Credit unions have federal tax exemptions, which may allow them to offer lower rates on loans and higher rates on deposits than taxpaying financial institutions such as commercial banks. In addition, non-depository institution competitors are generally not subject to the extensive regulation applicable to institutions that offer federally insured deposits. Because technology and other changes have lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, we also compete with financial technology companies seeking to disrupt conventional banking markets. Our future growth and success will depend on our ability to compete effectively in this highly competitive financial services environment. Failure to attract new clients or retain existing ones could have an adverse effect on our financial condition and results of operations.

The loss of key personnel could disrupt our business.

Our continued growth and future success will depend in large part on the skills of our management team, as well as on our ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees. The loss of service of one or more of our executive officers or key personnel could reduce our ability to successfully implement our long-term business strategy. Leadership changes will occur from time to time and we cannot predict whether or when significant resignations will occur or whether we will be able to recruit additional qualified personnel. We believe our management team possesses valuable knowledge about the banking industry and our markets and that their knowledge and relationships would be very difficult to replicate. Our success also depends on the experience of our branch managers and lending officers and on their relationships with the customers and communities they serve. The loss of these key personnel could negatively affect our banking operations. Competition for qualified employees is intense, and the process of locating key personnel with the combination of skills, attributes and business relationships required to execute our business plan may be lengthy. The loss of key personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations.

Acquisitions could disrupt our business.

The success of future acquisitions we may consummate may depend, in part, on the ability to realize the estimated cost savings and combine the acquired businesses with our existing operations in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth opportunities to occur. If we are unable to successfully achieve these objectives, the anticipated benefits of future acquisitions may not be realized fully or at all or may take longer to realize than expected.

It is possible that the potential cost savings of future acquisitions could turn out to be more difficult to achieve than anticipated and the integration process associated with an acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect our ability to maintain relationships with customers and employees or to achieve the anticipated benefits of the acquisitions. Integration efforts could also divert management attention and resources. These integration matters could have an adverse effect on us during this transition period and for an undetermined period after completion of a transaction.

Operational Risks

Our funding sources may prove insufficient to replace deposits and support our future growth.

We rely on customer deposits, advances from the FHLB, and lines of credit at other financial institutions to fund our operations. Although we have historically been able to replace maturing deposits and advances if desired, no assurance can be given that we would be able to replace such funds in the future if our financial condition or the financial condition of the FHLB or market conditions were to change. Our financial flexibility will be severely constrained and/or our cost of funds will increase if we are unable to maintain our access to funding or if financing necessary to accommodate future growth is not available at favorable interest rates. Finally, if we are required to place greater

reliance on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our results of operations would be adversely affected.

Income from mortgage-banking operations is volatile and we may incur losses with respect to our mortgage-banking operations that could negatively affect our earnings.

One component of our strategy is to sell on the secondary market the longer term, conforming fixed-rate residential mortgage loans that we originate, earning noninterest income in the form of gains on the sale of the loans. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans we can originate for sale. Weak or deteriorating economic conditions also tend to reduce loan demand. When mortgage loans are sold, it is customary to make representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. Whole loan sale agreements require the repurchase or substitution of mortgage loans in the event we breach any of these representations or warranties. In addition, there may be a requirement to repurchase mortgage loans as a result of borrower fraud or in the event of early payment default of the borrower on a mortgage loan. Repurchase and indemnity demands, if significant, could adversely affect our financial condition and results of operations.

Any delays in our ability to foreclose on delinquent mortgage loans may increase our costs and expose us to greater losses.

The origination of mortgage loans occurs with the expectation that, if the borrower defaults, the ultimate loss would be mitigated by the value of the collateral that secures the mortgage loan. The ability to mitigate the losses on defaulted loans depends upon the ability to promptly foreclose upon the collateral after an appropriate cure period. The length of the foreclosure process depends on state law and other factors, such as the volume of foreclosures and actions taken by the borrower to stop the foreclosure. Any delay in the foreclosure process will adversely affect us by increasing the expenses related to carrying such assets, such as taxes, insurance, and other carrying costs, and expose us to losses as a result of potential additional declines in the value of such collateral.

The strict enforcement of federal laws regarding cannabis could result in our inability to continue to provide banking services to marijuana-related businesses and expose us to legal action by the federal government.

We have deposit and loan customers that are licensed in several states within the United States to do business in the cannabis industry as growers, processors, and dispensaries. While cannabis is legal in these states of operation, it remains classified as a Schedule I controlled substance under the federal Controlled Substances Act. As such, the cultivation, use, distribution, and possession of cannabis is a violation of federal law that is punishable by imprisonment and fines. Notwithstanding state law that permits the sale of cannabis, the federal government has the authority to regulate and criminalize cannabis, including medical marijuana.

Prior to 2018, the U.S. Department of Justice characterized the enforcement of the Controlled Substances Act against persons and entities complying with state regulatory systems permitting the use, manufacture and sale of medical marijuana as an inefficient use of their prosecutorial resources and discretion. Although the DOJ rescinded this position, as of the date of this report we are not aware of any insured depository institution that has been prosecuted by the DOJ based on providing otherwise lawful banking products and services to the cannabis industry.

Since 2014, the U.S. Congress has annually included a rider to an omnibus spending bill that prohibits the DOJ and the U.S. Drug Enforcement Administration from using funds from relevant appropriations acts to prevent states from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana. Further, the U.S. Court of Appeals for the Ninth Circuit has held that this spending restriction prohibits the DOJ from spending funds from relevant appropriations acts to prosecute individuals who engage in conduct permitted by state medical marijuana laws and who fully comply with such laws. The Ninth Circuit ruling is not binding on federal courts outside of the Ninth Circuit, including those in Maryland, Delaware and Virginia. Additionally, as the possession and use of cannabis remains illegal under the Controlled Substances Act, we may be deemed to be aiding and abetting illegal activities through the services that we provide to these customers and could have legal action taken against us by the federal government, including imprisonment and fines. Elimination of restrictions on the DOJ from spending money on certain enforcement activities and any change in the federal government’s enforcement position with respect to state cannabis laws could cause us to cease providing banking services to the medical and adult-use cannabis industry, which could have a material adverse effect on our business, financial condition, and results of operations.

The Financial Crimes Enforcement Network has provided guidance for financial institutions on how to serve marijuana-related businesses while complying with the Bank Secrecy Act and federal law. Any change in this guidance, any new regulations or legislation, any change in existing regulations, and any change in regulatory policy or interpretation of laws or regulations could increase our cost of regulatory compliance, which could have a material adverse effect on our business, financial condition, and results of operations.

On December 18, 2025, President Trump issued an executive order directing the Attorney General to take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the Controlled Substances Act, which would allow marijuana to be recognized for acceptable medical use. Rescheduling marijuana would not legalize marijuana for recreational use or override state cannabis laws. As long as marijuana remains a controlled substance, whether in Schedule I or Schedule III, the manufacture, distribution, and possession of state-legal marijuana generally remain federal crimes.

Our risk management framework may not be effective in mitigating risks and/or losses to us.

Our risk management framework is comprised of various processes, systems and strategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate, operational and compliance. Our framework also includes financial or other modeling methodologies that involve management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate any risk of loss to us. If our risk management framework is not effective, we could suffer unexpected losses and our business, financial condition, or results of operations could be materially and adversely affected. We also may be subject to potentially adverse regulatory consequences.

Risks Related to our Financial Statements

We may incur impairment charges on our investment securities, which could adversely impact our results of operations, liquidity, financial condition, or growth prospects.

Under current accounting standards, declines in the fair value of our available for sale or held to maturity securities that are judged to be other-than-temporary would require us to write down the securities to fair value through charges to earnings. These charges could reduce our net income and equity, negatively affect our liquidity, and require us to raise additional capital or curtail growth initiatives. Future triggering events could include prolonged or severe credit deterioration, adverse changes in market conditions (e.g., interest-rate spikes or widening credit spreads), issuer-specific credit events, or unexpected downgrades by rating agencies.

Impairment goodwill, other intangible assets, or deferred tax assets could require charges to earnings, which would adversely impact on our results of operations.

Under current accounting standards, goodwill is subject to impairment tests on at least an annual basis or more frequently if an event occurs or circumstances change that reduce the fair value of a reporting unit below its carrying amount. Intangible assets other than goodwill are also subject to impairment tests at least annually. A decline in the price of our common stock or occurrence of a triggering event following any of our quarterly earnings releases and prior to the filing of the periodic report for that period could, under certain circumstances, cause us to perform goodwill and other intangible assets impairment tests and result in an impairment charge being recorded for that period which was not reflected in such earnings release. If we conclude that all or a portion of our goodwill or other intangible assets may be impaired, a non-cash charge for the amount of such impairment would be recorded to earnings. At December 31, 2025, we had recorded goodwill of $63.3 million and other intangible assets, net of $29.7 million, representing approximately 10.7% and 5.0% of stockholders’ equity, respectively.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Assessing the need for, or the sufficiency of, a valuation allowance requires management to evaluate all available evidence, both negative and positive, including the recent trend of quarterly earnings. Positive evidence necessary to overcome the negative evidence includes whether future taxable income in sufficient amounts and character within the carryback and carryforward periods is available under the tax law, including the use of tax planning strategies. When negative evidence (e.g., cumulative losses in recent years, history of operating loss or tax credit carry forwards expiring unused) exists, more positive evidence than negative evidence will be necessary. At December 31, 2025, our gross deferred tax assets were approximately $51.7 million. There was a valuation allowance of deferred taxes of $2.8 million recorded at December 31, 2025, as management believes it is more likely than not that net operating losses for Shore Bancshares only will not be realized for state income tax purposes. Shore Bancshares files a separate return with the State of Maryland and does not expect that it will generate sufficient taxable income to utilize its deferred tax assets. No valuation allowance is currently recorded for state deferred income taxes of the Bank or at the federal level where we file a consolidated tax return.

Changes in accounting standards or interpretation of new or existing standards may affect how we report our financial condition and results of operations.

From time to time the Financial Accounting Standards Board (“FASB”) and the SEC change accounting regulations and reporting standards that govern the preparation of our financial statements. In addition, the FASB, SEC, bank regulators and our independent auditors may revise their previous interpretations regarding existing accounting regulations and the application of these accounting standards. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, there could be a requirement to apply a new or revised accounting standard retroactively, resulting in the restatement of prior period financial statements.

The Current Expected Credit Loss (“CECL”) accounting standard could require us to increase our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations.

Accounting Standard Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, requires advanced modeling techniques, heavy reliance on assumptions, and dependence on historical data that may not accurately forecast losses. CECL can result in volatility in the level of the allowance for credit losses, depending on various factors and assumptions applied in the model, such as forecasted economic conditions and loan payment behaviors. Any increase in the allowance for

credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, can have an adverse effect on our financial condition and results of operations.

Our accounting estimates and risk management processes rely on analytical and forecasting models.

The processes that we use to estimate our allowance for credit losses and to measure the fair value of financial instruments, as well as the processes used to estimate the effects of changing interest rates and other market measures on our financial condition and results of operations, depend upon the use of analytical and forecasting models. These models reflect assumptions that may not be accurate, particularly in times of market stress or other unforeseen circumstances. Even if these assumptions are adequate, the models may prove to be inadequate or inaccurate because of other flaws in their design or their implementation. If the models that we use for interest rate risk and asset-liability management are inadequate, we could incur increased or unexpected losses upon changes in market interest rates or other market measures. Inaccurate deposit assumptions could render model results unreliable and may mask our true interest rate risk and liquidity risk profiles. Inaccurate model projections and stresses may result in higher-than-forecast funding costs and potentially unexpected liquidity shortfalls. If the models that we use for determining our allowance for expected credit losses are inadequate, the allowance for credit losses may not be sufficient to support future charge-offs. If the models that we use to measure the fair value of financial instruments are inadequate, the fair value of such financial instruments may fluctuate unexpectedly or may not accurately reflect what we could realize upon sale or settlement of such financial instruments. Any such failure in our analytical or forecasting models could have a material adverse effect on our financial condition and results of operations.

We have previously identified material weaknesses in our internal controls.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act and for evaluating and reporting on that system of internal control. In the past, material weaknesses have been identified in our internal control over financial reporting. In the future, we may identify additional material weaknesses or otherwise fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material errors in our financial statements or cause us to fail to meet our period reporting obligations. If we fail to establish and maintain effective control over financial reporting, it may adversely affect our ability to accurately and timely report our financial results in the future, may adversely affect investor confidence, our reputation and our ability to raise additional capital, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.

We depend on the accuracy and completeness of information about customers and counterparties and our financial condition could be adversely affected if we rely on inaccurate information.

In deciding whether to extend credit or to enter into other transactions with customers and counterparties, we may rely on information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial information, which we do not independently verify. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to customers, we may assume that a customer’s audited financial statements conform with generally accepted accounting principles and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our financial condition and results of operations could be negatively impacted to the extent we rely on inaccurate information.

Operational risks, including system failures, human error, and third-party dependencies could adversely affect our business.

We are exposed to many types of operational risks, including reputation, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, clerical or record-keeping errors, and errors resulting from faulty or disabled computer or telecommunications systems.

Certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process transactions may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as are we) and to the risk that our (or our vendors’) business continuity and data security systems prove to be inadequate.

Risks Related to Cybersecurity and Technology

Our information systems may experience an interruption or breach in security.

We rely heavily on communications and information systems to conduct our business. We, our customers, and other financial institutions with which we interact, are subject to ongoing, continuous attempts to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations. Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan, human resources, and other systems, misappropriation of funds, and theft of proprietary or customer data. The occurrence of any failure, interruption or security breach of our information systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny, or expose us to

civil litigation and possible financial liability, any of which could have a material adverse effect on our business, financial condition and results of operations.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, including artificial intelligence, and the use of the internet and telecommunications technologies to conduct financial transactions.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our facilities and systems, and those of our third-party service providers and vendors, may be vulnerable to cyber-attacks, security breaches, ransomware, unauthorized activity and access, malicious code, acts of vandalism, computer viruses, theft of data, misplaced or lost data, fraud, misconduct or misuse, social engineering attacks and denial of service attacks, phishing attacks, programming or human errors, physical break-ins, or other disruptions (including natural disasters), any of which could result in critical data becoming inaccessible or the loss or disclosure of confidential or personal client or employee information or our own proprietary information. Any such loss or disclosure of confidential information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business, financial condition, and results of operations.

Failure to comply with privacy and information security laws could expose us to liability.

We are subject to laws regarding the privacy, information security and protection of personal information. Any violation of these laws or another incident involving personal, confidential or proprietary information of individuals could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations. Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and protection of personal information of individuals (including customers, employees, suppliers and other third parties). For example, our business is subject to the Gramm-Leach-Bliley Act which, among other things: (i) imposes certain limitations on our ability to share nonpublic personal information about our customers with non-affiliated third parties; (ii) requires that we provide certain disclosures to customers about our information collection, sharing and security practices and afford customers the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as plans for responding to data security breaches. Various state and federal laws and regulations impose data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Ensuring that our collection, use, transfer and storage of personal information complies with all applicable laws and regulations can increase costs.

Furthermore, we may not be able to ensure that all of our clients, suppliers, counterparties and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under personal information laws and regulations. Concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers or potential customers for our products and services and thereby reduce our revenues. Accordingly, any failure or perceived failure to comply with applicable privacy or data protection laws and regulations may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our business, financial condition, and results of operations.

Our reliance on third party vendors could expose us to additional cyber risk and liability.

The operation of our business involves outsourcing certain business functions and reliance on third-party providers, which may result in transmission and maintenance of personal, confidential and proprietary information to and by such vendors. Although we require third-party providers to maintain certain levels of information security, such providers may experience breaches, non-performance of or outages by their own vendors, unauthorized access, unplanned outages, misuse, computer viruses or other malicious attacks that could ultimately compromise sensitive information possessed by us.

We outsource certain aspects of our data processing to certain third-party providers, which may expose us to additional risk.

We outsource certain key aspects of our data processing to certain third-party providers. While we have selected these third-party providers carefully, we cannot control their actions. If our third-party providers encounter difficulties, including those which result from their failure to provide services for any reason or their poor performance of services, or if we have difficulty in communicating with them, our ability to adequately process and account for customer transactions could be affected, and our business operations could be adversely impacted. Replacing these third-party providers could also entail significant delay and expense.

Our third-party providers may be vulnerable to unauthorized access, natural disasters, computer viruses, insider threats, phishing schemes and other security breaches. Threats to information security also exist in the processing of customer information through various other third-party providers and their personnel. We may be required to expend significant additional resources to protect against the threat of such security breaches and computer viruses, or to alleviate problems caused by such security breaches or viruses. To the extent that the activities of our third-party providers or the activities of our customers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, regulatory scrutiny, litigation and other possible liabilities, which could adversely affect our business, financial condition, and results of operations.

We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures, interruptions or breaches of security could have an adverse effect on our financial condition and results of operations.

Our business is highly dependent on the successful and uninterrupted functioning of our information technology and telecommunications systems and third-party servicers. We outsource many of our major systems, such as data-processing and deposit-processing systems. The failure of these systems, or the termination of a third-party software license or service agreement on which any of these systems is based, could interrupt our operations. Our third-party service providers may themselves rely on third-party vendors, including cloud service providers, with which we have no direct relationship. The failure of the systems used by our third-party servicers could also interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such services exceeds capacity, or such third-party systems fail or experience interruptions. If sustained or repeated, a system failure or service denial could result in a deterioration of our ability to provide customer service, compromise our ability to operate effectively, damage our reputation, result in a loss of customer business and/or subject us to additional regulatory scrutiny and possible financial liability, any of which could have a material adverse effect on our financial condition and results of operations.

In addition, we provide our customers the ability to bank remotely, including online over the Internet and through mobile banking applications. The secure transmission of confidential information is a critical element of remote banking. Our network could be vulnerable to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches. We may be required to spend significant capital and other resources to protect against the threat of security breaches and computer viruses, or to alleviate problems caused by security breaches or viruses. Further, we outsource some of the data processing functions used for remote banking, and accordingly we are dependent on the expertise and performance of our third-party providers. To the extent that our activities, the activities of our customers, or the activities of our third-party service providers involve the storage and transmission of confidential information, security breaches and viruses could expose us to claims, litigation and other possible liabilities. Any inability to prevent security breaches or computer viruses could also cause existing customers to lose confidence in our systems and could adversely affect our reputation, results of operations and ability to attract and maintain customers. In addition, a security breach could also subject us to additional regulatory scrutiny, expose us to civil litigation and possible financial liability and cause reputational damage.

We are at risk of increased losses from fraud.

Fraudulent activity that may be committed against us or our customers may result in financial losses or increased costs to us. Criminals are committing fraud at an increasing rate and are using more sophisticated techniques. Such fraudulent activity has taken many forms, ranging from wire fraud, debit card fraud, check fraud, mechanical devices attached to ATMs, social engineering and phishing attacks to obtain personal information, business email compromise, or impersonation of clients through the use of falsified or stolen credentials. While we have policies and procedures, as well as fraud detection tools, designed to prevent fraud losses, such policies, procedures and tools may be insufficient to accurately detect and prevent fraud. A significant increase in fraudulent activities could lead us to take additional steps to reduce fraud risk, which could increase our costs. Fraud losses may materially and adversely affect our business, financial condition, and results of operations.

Failure to keep up with technological change in the financial services industry could have a material adverse effect on our competitive position or profitability.

The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-

driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse effect on our business, financial condition and results of operations.

Risks Relating to the Regulation of our Industry

We operate in a highly regulated environment, which could restrain our growth and profitability.

The banking industry is heavily regulated. Banking regulations are primarily intended to protect the federal deposit insurance fund and depositors, not shareholders. The Bank is subject to regulation and supervision by the OCC. Shore Bancshares is subject to regulation and supervision by the Federal Reserve. Federal laws and regulations govern numerous matters affecting us, including changes in the ownership or control of banks and bank holding companies, maintenance of adequate capital and sound financial condition, permissible types, amounts and terms of loans and investments, permissible non-banking activities, and restrictions on dividend payments. These and other restrictions limit the way we conduct business and obtain financing. The laws, rules, regulations, and supervisory guidance and policies applicable to us are subject to regular modification and change. Such changes may, among other things, increase the cost of doing business, limit the types of financial services and products we offer, or affect the competitive balance between banks and other financial institutions. Any new regulations or legislation, change in existing regulations or oversight, whether a change in regulatory policy or a change in a regulator's interpretation of a law or regulation, could have a material impact on our operations, increase our costs of regulatory compliance and adversely affect our profitability. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, our compliance policies and procedures may not be effective. Failure to comply (or to ensure that our agents and third-party service providers comply) with laws, regulations, or policies could result in enforcement actions or sanctions by regulatory agencies, civil money penalties, and/or reputational damage, which could have a material adverse effect on our business, financial condition, or results of operations. The burdens imposed by federal and state regulations put banks at a competitive disadvantage compared to less regulated competitors such as finance companies, mortgage banking companies, and leasing companies.

Federal regulators periodically examine our business, and we may be required to remediate adverse examination findings.

As part of the bank regulatory process, the Federal Reserve and the OCC periodically conduct comprehensive examinations of our business, including compliance with laws and regulations. If, as a result of an examination, the Federal Reserve or the OCC were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, asset sensitivity, risk management or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. The Federal Reserve and the OCC may enjoin “unsafe or unsound” practices or violations of law, require affirmative actions to correct any conditions resulting from any violation or practice, issue an administrative order that can be judicially enforced, direct an increase in our capital levels, restrict our growth, assess civil monetary penalties against us or our officers or directors, and remove officers and directors. The FDIC also has authority to review the Bank’s financial condition, and, if the FDIC were to conclude that the Bank or its directors were engaged in unsafe or unsound practices, that the Bank was in an unsafe or unsound condition to continue operations, or that the Bank or the directors violated applicable law, the FDIC could move to terminate the Bank’s deposit insurance. Any regulatory action against us could have a material adverse effect on our business, financial condition, and results of operations.

Our FDIC deposit insurance assessments may increase.

Customer deposits are insured by the FDIC up to legal limits. The FDIC assesses fees on insured depository institutions to fund the Deposit Insurance Fund, which protects depositors in the event of bank failures. Our regular assessments are determined by our risk profile. An increase in our risk profile could result in an increase in our deposit insurance assessments. Increases in assessment rates or special assessments may occur in the future, especially if there are significant bank failures. Increases in assessment rates, special assessments, or required prepayments could have a material adverse effect on our business, financial condition and results of operations.

We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

The CRA requires the OCC to assess our performance in meeting the credit needs of the communities we serve, including low- and moderate-income neighborhoods. If the OCC determines that we need to improve our performance or are in substantial non-compliance with CRA requirements, various adverse regulatory consequences may ensue. In addition, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. In addition, we are subject to other federal and state laws designed to protect consumers. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with clients when taking deposits, making loans, collecting and servicing loans and providing other services.

A successful regulatory challenge to an institution’s performance under the CRA, fair lending laws or regulations, or consumer lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also be

able to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.

Additionally, state attorneys general can enforce consumer protection laws, including through use of Dodd-Frank Act provisions that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties and other relief available to the CFPB. In conducting an investigation, the state attorneys general may issue a civil investigative demand requiring a target company to prepare and submit, among other items, documents, written reports, answers to interrogatories, and deposition testimony. If we become subject to such an investigation, the required response could result in substantial costs and a diversion of the attention and resources of our management, and any penalties imposed in connection with such investigations could have a material adverse effect on our business, financial condition and results of operations.

We face a risk of noncompliance and enforcement action with the BSA and other anti-money laundering statues and regulations.

The federal Bank Secrecy Act, the PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and engages in coordinated enforcement efforts with the individual federal banking regulators, as well as the Department of Justice, Drug Enforcement Administration and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Asset Control. The OCC also focuses on compliance with the Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient, we could be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition, and results of operations.

Risks Relating to Our Securities

Our common stock is not insured by any governmental entity.

Our common stock is not a deposit account or other obligation of any bank and is not insured by the FDIC or any other governmental entity. Investment in our common stock is subject to risk, including possible loss.

Our ability to pay dividends is limited by law and contract.

The ability to pay dividends to shareholders largely depends on Shore Bancshares’ receipt of dividends from the Bank. The amount of dividends that the Bank may pay to Shore Bancshares is limited by federal laws and regulations. The ability of the Bank to pay dividends is also subject to its profitability, financial condition and cash flow requirements. There is no assurance that the Bank will be able to pay dividends to Shore Bancshares in the future. In addition, as a financial holding company, Shore Bancshares’ ability to declare and pay dividends is dependent on federal regulatory considerations, including limits on dividends should we not maintain the required capital conservation buffer and guidelines of the Federal Reserve regarding capital adequacy and dividends. It is the policy of the Federal Reserve that bank holding companies should generally pay dividends on common stock only out of earnings, and only if prospective earnings retention is consistent with the organization’s expected future needs, asset quality and financial condition. We may limit the payment of dividends, even when the legal ability to pay them exists, in order to retain earnings for other uses.

Our subordinated debt instruments contain restrictions on our ability to declare and pay dividends on or repurchase our common stock.

Under the terms of our subordinated debentures, if (i) there has occurred and is continuing an event of default; (ii) we are in default with respect to payment of any obligations under the related guarantee; or (iii) we have given notice of our election to defer payments of interest on the subordinated debentures by extending the interest distribution period as provided in the indentures governing the subordinated debentures and such period, or any extension thereof, has commenced and is continuing, then we may not, among other things, declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of our capital stock, including our common stock. Under the terms of our subordinated notes, upon the occurrence and during the continuation of an event of default, we may not declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of Shore Bancshares’ capital stock. As of December 31, 2025, we were current on all interest due on our outstanding subordinated debt instruments.

Future sales of our common stock or other securities may dilute the value and adversely affect the market price of our common stock.

In many situations, the board of directors has the authority, without any vote of our shareholders, to issue shares of authorized but unissued stock, including shares authorized and unissued under our equity incentive plans. In the future, additional securities may be issued, through

public or private offerings, in order to raise additional capital. Any such issuance would dilute the percentage of ownership interest of existing shareholders and may dilute the per share book value of our common stock.

Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.

Our corporate organizational documents and provisions of federal and state law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor or an attempted replacement of our board of directors or management.

In addition, certain provisions of Maryland law may delay, discourage or prevent an attempted acquisition or change in control. Furthermore, banking laws impose notice, approval, and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or its holding company. These laws include the BHC Act and the Change in Bank Control Act. These laws could delay or prevent an acquisition.

We may issue debt and equity securities that are senior to the common stock as to distributions and in liquidation, which could negatively affect the value of the common stock.

In the future, we may increase our capital resources by entering into debt or debt-like financing or issuing debt or equity securities, which could include issuances of senior notes, subordinated notes, preferred stock or common stock. In the event of our liquidation, our lenders and holders of our debt or preferred securities would receive a distribution of our available assets before distributions to the holders of our common stock. Our decision to incur debt and issue securities in future offerings will depend on market conditions and other factors beyond our control. We cannot predict or estimate the amount, timing or nature of its future offerings and debt financings. Future offerings could reduce the value of shares of our common stock and dilute a stockholder’s interest in us.

The market price for our stock may be volatile.

The market price for our common stock has fluctuated, ranging between $11.47 and $19.22 per share during the 12 months ended December 31, 2025. The overall market and the price of our common stock may experience volatility. There may be a significant impact on the market price for the common stock due to, among other things:

•past and future dividend practice;

•financial condition, performance, creditworthiness and prospects;

•quarterly variations in results of operations or the quality of our assets;

•results of operations that vary from the expectations of management, securities analysts and investors;

•changes in expectations as to the future financial performance;

•announcements of innovations, new products, strategic developments, significant contracts, acquisitions and other material events by us or our competitors;

•the operating and securities price performance of other companies that investors believe are comparable to us;

•future sales of our equity or equity-related securities;

•the credit, mortgage and housing markets, the markets for securities relating to mortgages or housing, and developments with respect to financial institutions generally; and

•changes in global financial markets and economies and general market conditions, such as interest or foreign exchange rates, stock, commodity or real estate valuations or volatility or other geopolitical, regulatory or judicial events.

General Risk Factors

Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.

Severe weather, earthquakes, other natural disasters, pandemics, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations. Climate change has the potential to increase the frequency and severity of these severe weather events in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such events could have a material adverse effect on our business, financial condition, and results of operations.

Climate change could have a material adverse impact on us and our clients.

We are exposed to risks of physical impacts of climate change and risks arising from the process of transitioning to a less carbon-dependent economy. Climate change-related physical risks include increased severity and frequency of adverse weather events, such as extreme storms and flooding, and longer-term shifts in climate patterns, such as rising temperatures and sea levels and changes in

precipitation amount and distribution. Such physical risks may have adverse impacts on us, both directly on our business operations and as a result of impacts on our borrowers and counterparties, such as declines in the value of loans, investments, real estate and other assets, disruptions in business operations and economic activity, including supply chains, and market volatility.

Transition risks include changes in regulations, market preferences and technologies toward a less carbon-dependent economy. The possible adverse impacts of transition risks include asset devaluations, increased operational and compliance costs, and an inability to meet regulatory or market expectations. For example, we may become subject to new or heightened regulatory requirements and stakeholder expectations regarding climate change, including those relating operational resiliency, disclosure and financial reporting.

The risks associated with climate change are rapidly changing and evolving, making them difficult to assess due to limited data and other uncertainties. We could experience increased expenses resulting from strategic planning, litigation, and technology and market changes, and reputational harm as a result of negative public sentiment, regulatory scrutiny, and reduced investor and stakeholder confidence due to our response to climate change, which, in turn, could have a material negative impact on our business, financial condition, and results of operations.

Negative public opinion regarding us or failure to maintain our reputation in the communities we serve could adversely affect our business and prevent us from growing our business.

Our reputation within the communities we serve is critical to our success. We believe we have set ourselves apart from our competitors by building strong personal and professional relationships with our customers and being an active member of the communities we serve. As such, we strive to enhance our reputation by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve and delivering superior service to our customers. If our reputation is negatively affected by the actions of our employees or otherwise, we could be less successful in attracting new talent and customers or may lose existing customers, and our business, financial condition and earnings could be adversely affected. Further, negative public opinion can expose us to litigation and regulatory action and delay and impede our efforts to implement our growth strategy, which could further adversely affect our business, financial condition, and results of operations.

Changes in tax laws and regulations and differences in interpretation of tax laws and regulations may negatively impact our financial performance.

From time to time, local, state or federal tax authorities change tax laws and regulations, which may result in a decrease or increase to our net deferred tax asset. Local, state or federal tax authorities may interpret laws and regulations differently than we do and challenge tax positions that we have taken on our tax returns. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest, penalties or litigation costs that could have a material adverse effect on our financial condition and results of operations.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 1C. CYBERSECURITY

Cybersecurity Risk Management and Strategy

The Company recognizes that the security of our banking operations is essential to protecting our customers, maintaining our reputation, and preserving the value of the Company. The Board of Directors, through the Board Risk Oversight Committee, provides direction and oversight of our enterprise-wide risk management framework, and cybersecurity represents a component of our overall approach to enterprise-wide risk management. The Enterprise Risk Management Program establishes policies and procedures for assessing the effectiveness and efficiency of information security controls related to both design and operations. We use a variety of tools, including the Federal Financial Institutions Examination Council Cybersecurity Assessment Tools, to help us identify our cybersecurity risks and determine our cybersecurity preparedness. This assessment tool incorporates regulatory guidance. In general, we seek to address cybersecurity risks through a comprehensive, cross-functional approach focused on the confidentiality, security and availability of the information that we collect and store by identifying, preventing, and mitigating cybersecurity threats and effectively responding to cybersecurity incidents that may occur.

As one of the elements of our overall enterprise-wide risk management approach, the Enterprise Risk Management Program is focused on the following key areas:

•Security Operation and Governance: As discussed in more detail under the section titled “Cybersecurity Governance,” the Board Risk Oversight Committee oversees our information security and cybersecurity risk management.

•Collaborative Approach: We have implemented a cross-functional approach to identifying, assessing, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management.

•Security Competencies: We have security competencies and tools designed to evaluate security risks and to protect the confidentiality, integrity and availability of our information systems and data. These assets represent a blend of various management (e.g., policies), operational (e.g., standards and processes), and technical controls (e.g., tools and configurations).

•Cyber Defense and Incident Response Plan: We utilize sophisticated security monitoring and detection tools for continuous monitoring of our information systems at all times. We utilize third-party tools and solutions to actively deliver threat analysis, vulnerability management, intrusion detection, intrusion hunting and red team exercises. We also receive the latest cybersecurity alerts and threat intelligence from government agencies and information sharing and analysis centers. Our Incident Response Plan reduces the risks related to security incidents by providing guidance on our response to incidents by focusing on the coordination of personnel, policies and procedures to ensure incidents are detected, analyzed and managed.

•Third-Party Risk Management: Management of third parties, including vendors and service providers, is conducted through a risk-based approach, with the level of due diligence driven by risk factors established by the Third-Party Risk Management Program. The process provides awareness and collaboration across all internal teams including Information Technology and Risk Management. A review process is conducted on new or significantly changed key third parties to ensure certain cybersecurity baseline requirements are met and cybersecurity incidents are appropriately disclosed. This process advocates for appropriate standards and controls, based on risk factors, to secure the third parties’ information systems, and to ensure the third parties have recovery plans in place.

•Security Awareness and Education: We provide annual, mandatory training for employees regarding security awareness to better equip them with the understanding of how to properly use and protect the computing resources entrusted to them, and to communicate our information security policies, standards, processes and practices. Additionally, we conduct monthly email security awareness testing, with follow-up training assigned when deemed necessary.

We leverage continuous monitoring and regular risks assessments to identify current and potential cybersecurity risks. Technical vulnerabilities are identified using automated vulnerability scanning tools, penetration testing, and system management tools, whereas non-technical vulnerabilities are identified via process or procedural reviews. We conduct a variety of assessments throughout the year, both internally and through third parties. Vulnerability assessment and penetration tests are performed on a regular basis to provide us with an unbiased view of our environment and controls. Vulnerabilities identified during these assessments are inventoried in a centralized tracking system and reported to management on a regular basis. A multi-step approach is applied to identify, report and remediate these vulnerabilities, and we adjust our information security policies, standards, processes and practices as necessary based on the information provided by these assessments. Summarized results of key assessments are reported to the Board Risk Oversight Committee.

We engage third parties on a regular basis to assess, test and assist with the implementation of our cybersecurity program to detect and manage cybersecurity risks, including but not limited to third parties who assist with monitoring our information security systems and auditors who assist with conducting penetration tests.

Cybersecurity Governance

The Board of Directors, through the Board Risk Oversight Committee, provides direction and oversight of the enterprise-wide risk management framework of the Company, including the management of risks arising from cybersecurity threats. The Board Risk Oversight Committee reviews and approves the Information Security Policy, which includes our cybersecurity risk management program. The Board of Directors receives regular presentations and updates on cybersecurity risks, including the threat environment, evolving standards, projects and initiatives, risk and vulnerability assessments, independent audit reviews, and technological trends. The Board of Directors also receives information regarding any cybersecurity incident that meets established reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed. On an annual basis, the full Board of Directors discusses our approach to cybersecurity risk management.

The Information Security Officer, under the guidance of our Chief Risk Officer and Director of Operational Risk, works collaboratively across the Company to implement a program designed to protect our information systems and data from cybersecurity risks. The Information Security Officer is responsible for assessing and managing cybersecurity risks, responding to any cybersecurity incidents in accordance with our Incident Response Plan and Business Continuity Plan, and reporting incidents to appropriate individuals in accordance with the Incident Response Plan. To facilitate the success of our cybersecurity risk management program, multidisciplinary teams throughout the Company are deployed to address cybersecurity threats and to respond to cybersecurity incidents. The Information Technology and the Operational Risk Management teams monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents and report such threats and incidents to the Information Security Officer and Chief Information Officer and ultimately the Board Risk Oversight Committee, when appropriate. The Information Security Officer holds the Certified Information Security Manager Certification and is supported by additional team members with extensive backgrounds in cybersecurity and related fields.

Item 2. PROPERTIES

We own or lease buildings across Maryland, Delaware and Virginia that are used in the normal course of our business. The corporate headquarters for the Company and Bank is located at 18 East Dover Street in Easton, Maryland, and is owned by the Company. As of December 31, 2025, 27 of the 40 full-service branches the Bank operates were owned by the Company. For information about our leased premises and properties, see Note 5 – “Leases” and Note 6 – “Premises and Equipment” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K.

Item 3. LEGAL PROCEEDINGS

In the normal course of business, the Company may become involved in litigation arising from its business activities. Management, after consultation with legal counsel, does not anticipate that the ultimate liability, if any, arising from pending legal proceedings will have a material adverse effect on our financial condition or results of operations.

Item 4. MINE SAFETY DISCLOSURES

This item is not applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION, HOLDERS AND CASH DIVIDENDS

The shares of the Company’s common stock are listed on the NASDAQ Global Select Market under the symbol “SHBI.” As of February 26, 2026, the Company had approximately 1,729 registered holders of record.

The transfer agent for the Company’s common stock is:

Broadridge Corporate Issuer Solutions, Inc.

51 Mercedes Way

Edgewood, NY 11717

Investor Relations: +1 (800) 353-0103

E-mail for investor inquiries: shareholder@broadridge.com

www.broadridge.com

Stock Performance Graph

The following graph and table show the cumulative total return on the common stock of the Company over the last five years, compared with the cumulative total return of a broad stock market index (the NASDAQ Composite Index), and a narrower index of the KBW NASDAQ Regional Banking Index. Cumulative total return on the stock or the index equals the total increase in value since December 31, 2020 assuming reinvestment of all dividends paid into the stock or the index.

The graph and table were prepared assuming that $100 was invested on December 31, 2020, in the common stock and the securities included in the indexes.


Source: S&P Global Market Intelligence	Period Ending
Index	12/31/2020		12/31/2021		12/31/2022		12/31/2023		12/31/2024		12/31/2025
Shore Bancshares, Inc.	$	100.00	$	146.88	$	125.79	$	106.83	$	123.49	$	142.05
NASDAQ Composite Index	100.00		122.18		82.43		119.22		154.48		187.14
KBW NASDAQ Regional Banking Index	100.00		136.64		127.17		126.67		143.39		152.71

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2025, with respect to options outstanding and shares available for future awards under the Company’s active equity incentive plans.


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	—	—	992,641
Equity compensation plans not approved by security holders	—	—	—
Total	—	—	992,641

UNREGISTERED SALES OF EQUITY SECURITIES AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s prior stock repurchase program expired on March 31, 2023. There were no purchases made by or on behalf of us or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the fourth quarter of 2025.

Item 6. [RESERVED]

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion compares the Company’s financial condition at December 31, 2025 to its financial condition at December 31, 2024 and the results of operations for the years ended December 31, 2025 and 2024. This discussion should be read in conjunction with the consolidated financial statements and the notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K.

The discussion comparing the Company’s financial condition at December 31, 2024 to its financial condition at December 31, 2023 and the results of operations for the years ended December 31, 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

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 Company’s most significant accounting policies are presented in Note 1 – “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K. 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 requires 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 seeks 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 this Annual Report on Form 10-K for additional details concerning the determination of the ACL on loans.

RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS

The notes to consolidated financial statements discuss the expected impact of accounting policies recently issued or proposed but not yet required to be adopted. To the extent the adoption of new accounting standards materially affects our financial condition, results of operations or liquidity, the impacts are discussed in the applicable section(s) of this discussion and notes to consolidated financial statements.

RESULTS OF OPERATIONS

Summary of Financial Results

The Company reported net income for the year ended December 31, 2025 of $59.5 million, or $1.78 diluted earnings per common share, compared to $43.9 million, or $1.32 diluted earnings per common share, for the year ended December 31, 2024. The Company’s return on average assets, return on average common equity and return on average tangible common equity were 0.98%, 10.52% and 14.09%, respectively, for the year ended December 31, 2025, compared to 0.74%, 8.35% and 12.21%, respectively, for the year ended December 31, 2024. For additional details, see “Reconciliation of Non-GAAP Measures.” The increase in net income in 2025 compared to 2024 was primarily due to higher net interest income (“NII”) driven by loan growth in 2025 coupled with loans and deposits repricing favorably. These were partially offset by a higher provision for credit losses of $3.6 million.

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


	Year Ended December 31,
($ in thousands)		2025		2024		2023
Total interest income		$	310,028	$	295,338	$	214,079
Total interest expense		117,651		124,789		78,772
Net interest income		192,377		170,549		135,307
Provision for credit losses		8,375		4,738		30,953
NII after provision for credit losses		184,002		165,811		104,354
Total noninterest income		32,688		31,147		33,159
Total noninterest expense		138,035		138,254		123,329
Income before income taxes		78,655		58,704		14,184
Income tax expense		19,149		14,815		2,956
Net income		$	59,506	$	43,889	$	11,228

A comparison of key operating ratios and common share data for the years ended December 31, 2025, 2024 and 2023 is presented below.


	Year Ended December 31,
		2025			2024			2023
KEY OPERATING RATIOS
ROAA – GAAP		0.98		%	0.74		%	0.24		%
Adjusted ROAA – non-GAAP(1)		1.08			0.92			0.58
Return on average common equity (“ROACE”) – GAAP		10.52			8.35			2.54
Return on average tangible common equity (“ROATCE”) – non-GAAP(2)		14.09			12.21			4.42
Average total equity to average total assets		9.28			8.92			9.47
Net interest spread		2.40			2.14			2.42
Net interest margin		3.36			3.10			3.11
Efficiency ratio – GAAP(3)		61.33			68.55			73.21
Efficiency ratio – non-GAAP(4)		57.43			61.43			61.62
Noninterest income to average assets		0.54			0.53			0.71
Noninterest expense to average assets		2.26			2.34			2.64

COMMON SHARE DATA
Basic net income per common share		$	1.78		$	1.32		$	0.42
Diluted net income per common share		$	1.78		$	1.32		$	0.42
Cash dividends paid per common share		$	0.48		$	0.48		$	0.48
Common dividend payout ratio		26.97		%	36.36		%	114.29		%

____________________________________

(1)ROAA – non-GAAP is computed by dividing (i) net income (excluding net of tax adjustments for the amortization of other intangible assets, credit card fraud losses and the sale and fair value of held for sale assets) by (ii) average assets.

(2)ROATCE is computed by dividing net earnings applicable to common stockholders by average tangible common 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.

(3)Efficiency ratio – GAAP is computed by dividing (i) noninterest expense by (ii) the sum of NII and noninterest income.

(4)Efficiency ratio – non-GAAP is computed by dividing (i) noninterest expense less amortization of other intangible assets and credit card fraud losses by (ii) the sum of taxable-equivalent NII and noninterest income less the sale and the fair value of held for sale assets.

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 increased $21.8 million to $192.7 million for the year ended December 31, 2025, compared to $170.9 million for the year ended December 31, 2024. The increase in NII 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%, and an increase in interest on deposits with other banks of $2.8 million, or 44.6%. 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%, coupled with loans repricing favorably during the year. The decrease in total interest expense was primarily due to a decrease in interest on deposits of $6.1 million and a decrease in interest expense on long-term borrowings of $1.0 million. The decrease in expense on borrowings was related to lower FHLB advances in 2025.

The following table presents taxable-equivalent net interest income for each of the periods indicated.


	Year Ended December 31,
($ in thousands)	2025		2024		2023		2025 vs. 2024		2024 vs. 2023
Interest and dividend income
Loans, including fees	$	280,604	$	269,631	$	194,339	4.1	%	38.7	%
Interest and dividends on investment securities	20,402		19,468		16,970		4.8		14.7
Interest on deposits with banks	9,022		6,239		2,770		44.6		125.2
Total interest and dividend income	$	310,028	$	295,338	$	214,079	5.0		38.0

Interest expense
Deposits	$	109,203	$	115,301	$	68,800	(5.3)	%	67.6	%
Short-term borrowings	2,089		2,131		5,518		(2.0)		(61.4)
Long-term borrowings	6,359		7,357		4,454		(13.6)		65.2
Total interest expense	$	117,651	$	124,789	$	78,772	(5.7)		58.4

Taxable-equivalent adjustment	$	335	$	325	$	253	3.1	%	28.5	%

Taxable-equivalent net interest income	$	192,712	$	170,874	$	135,560	12.8	%	26.1	%

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 years ended December 31, 2025, 2024 and 2023.


	Year Ended December 31,
	2025						2024						2023
($ in thousands)	Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate		Average Balance		Interest		Yield/ Rate
Earning assets
Loans(1), (2), (3)
Commercial real estate	$	2,588,913	$	150,171	5.80	%	$	2,528,961	$	144,155	5.70	%	$	1,860,517	$	99,953	5.37	%
Residential real estate	1,394,073		76,708		5.50		1,318,500		72,636		5.51		981,473		50,244		5.12
Construction	349,097		22,809		6.53		322,978		19,917		6.17		284,238		15,123		5.32
Commercial	223,949		15,081		6.73		220,699		15,625		7.08		185,239		13,647		7.37
Consumer	291,789		15,697		5.38		324,633		16,923		5.21		324,444		15,298		4.72
Credit cards	5,648		467		8.27		7,444		694		9.32		3,147		315		10.00
Total loans	4,853,469		280,933		5.79		4,723,215		269,950		5.72		3,639,058		194,580		5.35

Investment securities
Taxable	665,940		20,378		3.06		667,622		19,444		2.91		674,203		16,832		2.50
Tax-exempt(1)	651		30		4.61		657		30		4.57		663		58		8.75
Federal funds sold	—		—		—		—		—		—		1,899		92		4.84
Interest-bearing deposits	211,859		9,022		4.26		129,410		6,239		4.82		41,032		2,770		6.75
Total earning assets	5,731,919		$	310,363	5.41		5,520,904		$	295,663	5.36		4,356,855		$	214,332	4.92
Cash and due from banks	48,725						46,264						43,555
Other assets	372,846						387,852						303,906
Allowance for credit losses	(58,831)						(58,089)						(40,777)
Total assets	$	6,094,659					$	5,896,931					$	4,663,539

Interest-bearing liabilities
Interest-bearing checking	$	759,395	$	23,265	3.06	%	$	825,773	$	25,523	3.09	%	$	883,976	$	20,134	2.28	%
Money market and savings deposits	1,761,503		38,245		2.17		1,690,905		41,202		2.44		1,275,088		20,039		1.57
Time deposits	1,255,797		47,391		3.77		1,205,411		48,566		4.03		770,370		25,708		3.34
Brokered deposits	7,927		302		3.81		12,636		10		0.08		56,101		2,919		5.20
Interest-bearing deposits(4)	3,784,622		109,203		2.89		3,734,725		115,301		3.09		2,985,535		68,800		2.30

FHLB advances	43,068		2,089		4.85		70,298		3,720		5.29		111,392		5,518		4.95
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures (“TRUPS”)(4)	81,828		6,359		7.77		72,907		5,768		7.91		57,708		4,454		7.72
Total interest-bearing liabilities	3,909,518		117,651		3.01		3,877,930		124,789		3.22		3,154,635		78,772		2.50
Noninterest-bearing deposits	1,577,271						1,454,087						1,043,479
Accrued expenses and other liabilities	42,291						39,172						23,635
Stockholders’ equity	565,579						525,742						441,790
Total liabilities and stockholders’ equity	$	6,094,659					$	5,896,931					$	4,663,539



Net interest spread					2.40	%					2.14	%					2.42	%
Net interest margin					3.36						3.10						3.11
Net interest margin excluding accretion(3)					3.15						2.83						2.90
Cost of funds					2.14						2.34						1.88
Cost of deposits					2.04						2.22						1.71
Cost of debt					6.76						6.63						5.90

____________________________________

(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 $15.4 million, $16.9 million and $11.8 million of accretion interest on loans for the years ended December 31, 2025, 2024 and 2023, respectively.

(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments. There were $2.2 million, $1.5 million and $1.8 million of amortization of deposit discounts and $865 thousand, $926 thousand and $557 thousand of amortization of borrowing fair value adjustments for the years ended December 31, 2025, 2024 and 2023, 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.


Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
($ in thousands)	Due to Volume		Due to Rate		Total
Interest income from earning assets:
Loans
Commercial real estate	$	3,487	$	2,529	$	6,016
Residential real estate	4,204		(132)		4,072
Construction	1,729		1,163		2,892
Commercial	228		(772)		(544)
Consumer	(1,778)		552		(1,226)
Credit cards	(149)		(78)		(227)
Taxable investment securities	(67)		1,001		934


Interest-bearing deposits	3,508		(725)		2,783
Total interest income	$	11,162	$	3,538	$	14,700

Interest-bearing liabilities:
Interest-bearing checking deposits	$	(2,010)	$	(248)	$	(2,258)
Money market and savings deposits	1,608		(4,565)		(2,957)
Time deposits	1,959		(3,134)		(1,175)
Brokered deposits	(179)		471		292

Advances from FHLB	(1,322)		(309)		(1,631)
Subordinated debt	693		(102)		591
Total interest-bearing liabilities	749		(7,887)		(7,138)
Net change in net interest income	$	10,413	$	11,425	$	21,838

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.

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 years ended December 31, 2025 and 2024, respectively, which resulted in NIMs excluding accretion of 3.15% and 2.83% for the same periods.

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 year ended December 31, 2025 was $32.7 million, an increase of $1.5 million, or 4.9%, when compared to the same period in 2024. The increase was primarily due to a $631 thousand decrease in other noninterest income driven by one-time insurance proceeds, a $344 thousand increase in interchange credits and a $338 thousand increase in trust and investment fee income.

Noninterest Expense

Total noninterest expense was $138.0 million for the year ended December 31, 2025, a decrease of $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 during the year ended December 31, 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 an increase of $2.4 million of software and data processing expense in the year ended December 31, 2025. Noninterest expense as a percentage of average assets decreased to 2.26% for the year ended December 31, 2025 from 2.34% for the year ended December 31, 2024.

Income Taxes

The Company reported income tax expense of $19.1 million and $14.8 million for the years ended December 31, 2025 and 2024, respectively. The effective tax rates were 24.35% and 25.24% for the years ended December 31, 2025 and 2024, respectively. Deferred tax assets were $29.8 million and $31.9 million as of December 31, 2025 and 2024, respectively.

ANALYSIS OF FINANCIAL CONDITION

Balance Sheet Summary

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. The ratio of the ACL as a percentage of loans was 1.20% and 1.21% at December 31, 2025 and 2024, respectively.

Cash and Cash Equivalents

Cash and cash equivalents totaled $355.6 million at December 31, 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 (“AOCI”) (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 December 31, 2025, 34.7% of the portfolio of debt securities was classified as AFS and 65.3% 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 II, Item 8 of this Annual Report on Form 10-K for additional details on the composition of the investment portfolio.

Investment securities, including restricted stock and equity securities, totaled $659.4 million at December 31, 2025, an increase of $3.0 million, or 0.5%, compared to $656.4 million at December 31, 2024. At December 31, 2025, AFS securities, carried at fair value, totaled $220.4 million, compared to $149.2 million at December 31, 2024. At December 31, 2025, AFS securities consisted of 88.5% mortgage-backed, 9.4% U.S. government agencies and 2.1% corporate bonds, compared to 82.0%, 13.5% and 4.4%, respectively, at December 31, 2024. At December 31, 2025, the gross unrealized losses on AFS securities were all related to changes in interest rates and were $7.1 million, or less than 1% of total assets and 2% of total stockholders’ equity. At December 31, 2025, the AOCI (loss) was $4.6 million, compared to $7.5 million at December 31, 2024.

At December 31, 2025, HTM securities, carried at amortized cost, totaled $414.8 million, compared to $481.1 million at December 31, 2024. At December 31, 2025, HTM securities consisted of 73.1% mortgage-backed, 25.3% U.S. government agency securities and 1.7% other debt securities, compared to 70.0%, 27.6% and 2.5%, respectively, at December 31, 2024.

At December 31, 2025 and 2024, 98.2% 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 following tables set forth the weighted-average yields by maturity category of the bond investment portfolio as of December 31, 2025.


	Under 1 Year				1 - 5 Years				5 - 10 Years				Over 10 Years				Total Investment Securities
($ in thousands)	Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Fair Value
December 31, 2025
Available for sale
U.S. Treasury and government agency securities	$	2,461	3.68	%	$	19,498	1.23	%	$	92	7.28	%	$	252	3.15	%	$	22,303	$	20,616
Mortgage-backed securities	33		1.75		28,805		4.60		10,431		2.61		160,836		3.95		200,105		195,027
Other debt securities	—		—		1,832		9.33		2,437		7.72		—		—		4,269		4,715
Total available for sale	$	2,494	3.66	%	$	50,135	3.46	%	$	12,960	3.61	%	$	161,088	3.95	%	$	226,677	$	220,358


	Under 1 Year				1 - 5 Years				5 - 10 Years				Over 10 Years				Total Investment Securities
($ in thousands)	Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Average Yield		Amortized Cost		Fair Value
December 31, 2025
Held to maturity
U.S. Treasury and government agencies	$	32,564	2.40	%	$	62,283	1.51	%	$	340	2.16	%	$	9,649	2.51	%	$	104,836	$	100,325
Mortgage-backed securities	—		—		15,413		3.72		24,199		2.46		263,517		2.35		303,129		271,217
Other debt securities	—		—		1,313		7.24		5,148		4.47		500		4.86		6,961		6,574
Total held to maturity	$	32,564	2.40	%	$	79,009	2.03	%	$	29,687	2.81	%	$	273,666	2.36	%	$	414,926	$	378,116

Credit Quality Information

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 December 31, 2025 or 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 tables present the amortized cost of HTM securities based on their lowest publicly available credit rating as of December 31, 2025 and 2024.


	December 31, 2025
	Investment Grade
($ in thousands)	Aaa		Aa1		A3		Baa1		Baa2		NR		Total
U.S. Treasury and government agency securities	$	5,399	$	99,437	$	—	$	—	$	—	$	—	$	104,836
Mortgage-backed securities	303,129		—		—		—		—		—		303,129
Other debt securities	—		1,461		2,000		1,000		500		2,000		6,961
Total held to maturity securities	$	308,528	$	100,898	$	2,000	$	1,000	$	500	$	2,000	$	414,926


	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

The Company originates residential mortgage loans for sale on the secondary market, which are recorded at fair value. At December 31, 2025 and 2024, the fair value of loans held for sale amounted to $32.5 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. During the year ended December 31, 2025, the Bank repurchased two loans with an aggregate value of $938 thousand. No loans were repurchased during the year ended December 31, 2024.

Loans Held for Investment

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


($ in thousands)	December 31, 2025		% of Total Loans		December 31, 2024		% of Total Loans		$ Change		% Change
Commercial real estate	$	2,643,996	53.95	%	$	2,557,806	53.60	%	$	86,190	3.40	%
Residential real estate	1,414,964		28.88		1,329,406		27.85		85,558		6.40
Construction	344,903		7.04		335,999		7.04		8,904		2.70
Commercial	226,006		4.61		237,932		4.99		(11,926)		(5.00)
Consumer	265,912		5.43		303,746		6.37		(37,834)		(12.50)
Credit cards	4,521		0.09		7,099		0.15		(2,578)		(36.30)
Total loans	4,900,302		100.00	%	4,771,988		100.00	%	128,314		2.70
Less: allowance for credit losses	(58,836)				(57,910)				(926)		1.60
Total loans, net	$	4,841,466			$	4,714,078			$	127,388	2.70

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 TCFC and its wholly-owned subsidiary, CBTC. Non-owner occupied CRE loans including construction totaled $2.15 billion and $2.08 billion at December 31, 2025 and 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 342.55% and 359.52%, respectively.

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 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, either of which may adversely affect shareholder returns.

Non-Owner Occupied CRE Loans


	December 31, 2025
($ in thousands)	Amount		Average Loan Size		% of Non-Owner Occupied CRE Loans		% of Total Portfolio Loans, Gross
Loan type:
Retail	$	490,093	$	2,539	22.8	%	10.0	%
Office	362,118		1,548		16.8		7.4
Multifamily (5+ units)	289,727		2,476		13.5		5.9
Industrial/warehouse	195,938		1,473		9.1		4.0
1-4 family dwelling	201,468		550		9.4		4.1
Motel/hotel	196,211		4,088		9.1		4.0
Other(1)	415,736		696		19.3		8.5
Total non-owner occupied CRE loans(2)	2,151,291		1,274		100.0	%	43.9	%
Total portfolio loans, gross(3)	$	4,900,302

____________________________________

(1)Other non-owner occupied CRE loans include commercial – improved loans of $164.4 million, lot/land loans of $82.4 million, self storage loans of $71.9 million and other loans $97.0 million.

(2)The balances for the non-owner occupied CRE portfolio as of December 31, 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 $32.5 million.

Owner Occupied CRE Loans


	December 31, 2025
($ in thousands)	Amount		Average Loan Size		% of Owner Occupied CRE Loans		% of Total Portfolio Loans, Gross
Loan type:
Commercial – improved	$	217,092	$	1,186	28.0	%	4.4	%
Office	123,822		501		16.0		2.5
Industrial/warehouse	94,538		657		12.2		1.9
Retail	64,988		596		8.4		1.3
Restaurant	55,149		985		7.1		1.1
Other(1)	218,928		1,216		28.3		4.6
Total owner occupied CRE loans	774,517		843		100.0	%	15.8	%
Total portfolio loans, gross(2)	$	4,900,302

____________________________________

(1)Other owner occupied CRE loans include church loans of $59.7 million, marina/boat slip loans of $38.8 million, fire/EMS building loans of $38.3 million and other loans $82.0 million.

(2)Excludes loans held for sale of $32.5 million.

Office CRE Loan Portfolio

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $485.9 million, or 9.9% of total loans of $4.90 billion at December 31, 2025. The Bank’s office CRE loan portfolio included $129.1 million, or 26.6% of total office CRE loans, with medical tenants, and $51.5 million, or 10.6%, of total office CRE loans, with government or government contractor tenants. There were 481 loans in the office CRE loan portfolio with an average and median loan size of $1.0 million and $365 thousand, respectively. Loan-to-value (“LTV”) estimates are less than 50% for $170.5 million, or 35.0%, of the office CRE loan portfolio, and greater than 80% for $9.1 million, or 1.9%, 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.


LTV Range ($ in thousands)	Loan Count	Loan Balance		% of Office CRE
Less than or equal to 50%	244	$	170,536	35.0	%
Greater than 50% and less than or equal to 60%	73	114,510		23.6
Greater than 60% and less than or equal to 70%	92	149,203		30.7
Greater than 70% and less than or equal to 80%	58	42,608		8.8
Greater than 80%	14	9,083		1.9
Total	481	$	485,940	100.0	%

The Bank had 17 office CRE loans totaling $166.1 million that were greater than $5.0 million at December 31, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024. The increase in the loan balance of this portfolio segment was the result of addition of a new loan partially offset by normal amortization, the payoff of a $5.6 million loan and the change in purpose of collateral of an $11.8 million loan from office to school. For the office CRE portfolio, at December 31, 2025, the average loan debt-service coverage ratio was 1.7x and the average LTV was 47.6%. Of the office CRE portfolio balance, 80.5% are secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.1% are secured by properties with five stories or less. Of the office CRE loans, $45.0 million will mature and $26.7 million will reprice prior to December 31, 2026. Of the office CRE loans, $30.7 million are special mention or substandard. 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.

Maturity of Loan Portfolio

The following table sets forth the maturities and interest rate sensitivity of the loan portfolio at December 31, 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	$	262,754	$	815,971	$	753,021	$	812,250	$	2,643,996
Residential real estate	40,451		135,548		123,808		1,115,157		1,414,964
Construction	210,541		104,883		27,019		2,460		344,903
Commercial	72,112		74,778		64,327		14,789		226,006
Consumer	1,680		85,929		87,686		90,617		265,912
Credit cards	1,945		2,249		327		—		4,521
Total	$	589,483	$	1,219,358	$	1,056,188	$	2,035,273	$	4,900,302

Rate Terms:
Fixed-interest rate loans	$	420,188	$	1,028,990	$	597,394	$	297,736	$	2,344,308
Adjustable-interest rate loans	169,295		190,368		458,794		1,737,537		2,555,994
Total	$	589,483	$	1,219,358	$	1,056,188	$	2,035,273	$	4,900,302

Loans Related to Cannabis Business

Loan balances related to our cannabis business were $86.2 million and $82.6 million, or 1.76% and 1.73% of total gross loans, as of December 31, 2025 and 2024, respectively.

Asset Quality

ACL and Provision for Credit Losses

The following table presents the Company’s general and specific allowances as a percentage of total portfolio loans at December 31, 2025 and 2024.


($ in thousands)	December 31, 2025			December 31, 2024
Specific allowance	$	1,056		$	1,350
General allowance	57,780			56,560
Total allowance for credit losses	$	58,836		$	57,910

Specific allowance to total gross loans	0.02		%	0.02		%
General allowance total gross loans	1.18			1.19
Allowance to total gross loans	1.20		%	1.21		%

Total gross loans	$	4,900,302		$	4,771,988

The ACL as a percentage of loans decreased to 1.20% at December 31, 2025, compared to 1.21% at December 31, 2024. At December 31, 2025, the Company’s ACL increased $926 thousand, or 1.60%, to $58.8 million from $57.9 million at December 31, 2024. The increase in the general allowance was primarily due to loan growth, partially offset by favorable economic conditions in 2025.

The Company recorded a provision for credit losses on loans of $8.4 million for the year ended December 31, 2025 compared to $4.7 million for the year ended December 31, 2024 primarily due to loan growth and net charge-offs, which amounted to $6.6 million, or 0.14% of average loans, for the year ended December 31, 2025 compared to net charge-offs of $4.1 million, or 0.09% of average loans, for the year ended December 31, 2024. The increase in charge-offs in 2025 was primarily due to the marine and CRE portfolio.

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 following table allocates the ACL by loan portfolio 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.


	Year Ended
	December 31, 2025						December 31, 2024
($ in thousands)	ACL Balance		Average Loan Balance(1)		%(2)		ACL Balance		Average Loan Balance(1)		%(2)
Commercial real estate	$	21,387	$	2,588,913	0.83	%	$	22,846	$	2,528,961	0.90	%
Residential real estate	22,510		1,367,452		1.65		21,776		1,297,096		1.68
Construction	5,968		349,097		1.71		2,854		322,978		0.88
Commercial	3,005		223,949		1.34		3,138		220,699		1.42
Consumer	5,767		291,789		1.98		6,889		324,633		2.12
Credit cards	199		5,648		3.52		407		7,444		5.47
Total	$	58,836	$	4,826,848	1.22		$	57,910	$	4,701,811	1.23

____________________________________

(1)Excludes loans held for sale.

(2)ACL balance as a percent of average loan balance of each category.

The following table presents the net charge-offs or recoveries by average loan portfolio category for the year ended December 31, 2025 and 2024.


	Year Ended
	December 31, 2025						December 31, 2024						December 31, 2023
($ in thousands)	Net (Charge-offs) Recoveries		Average Loan Balance(1)		Net (Charge-off) Recovery %		Net (Charge-offs) Recoveries		Average Loan Balance(1)		Net (Charge-off) Recovery %		Net (Charge-offs) Recoveries		Average Loan Balance(1)		Net (Charge-off) Recovery %
Commercial real estate	$	(2,671)	$	2,588,913	(0.10)	%	$	—	$	2,528,961	—	%	$	(1,326)	$	1,860,517	(0.07)	%
Residential real estate	146		1,367,452		0.01		6		1,297,096		0.00		(75)		971,937		(0.01)
Construction	1		349,097		0.00		1		322,978		0.00		15		284,238		0.01
Commercial	(700)		223,949		(0.31)		(175)		220,699		(0.08)		(232)		185,239		(0.13)
Consumer(2)	(2,891)		291,789		(0.99)		(3,329)		324,633		(1.03)		(290)		324,444		(0.09)
Credit cards	(532)		5,648		(9.42)		(575)		7,444		(7.72)		(111)		3,147		(3.53)
Total	$	(6,647)	$	4,826,848	(0.14)		$	(4,072)	$	4,701,811	(0.09)		$	(2,019)	$	3,629,522	(0.06)

____________________________________

(1)Excludes loans held for sale.

(2)Includes the marine portfolio.

Classified Assets

The following tables present the Company’s classified assets by loan portfolio category at December 31, 2025 and 2024.


	December 31, 2025
($ in thousands)	Classified Loans		Other Real Estate Owned		Repossessed Assets		Total Classified Assets
Commercial real estate	$	40,677	$	—	$	—	$	40,677
Residential real estate	11,084		—		—		11,084
Construction	331		113		—		444
Commercial	4,255		—		—		4,255
Consumer	971		—		2,879		3,850
Credit cards	48		—		—		48
Total	$	57,366	$	113	$	2,879	$	60,358


	December 31, 2024
($ in thousands)	Classified Loans		Other Real Estate Owned		Repossessed Assets		Total Classified Assets
Commercial real estate	$	11,233	$	—	$	—	$	11,233
Residential real estate	8,407		—		—		8,407
Construction	360		179		—		539
Commercial	3,038		—		—		3,038
Consumer	1,473		—		3,315		4,788
Credit cards	168		—		—		168
Total	$	24,679	$	179	$	3,315	$	28,173

The following table presents the Company’s total classified assets as a percentage of total assets and risk-based capital at December 31, 2025 and 2024.


	December 31, 2025		December 31, 2024















Total classified assets as a percentage of total assets	0.96	%	0.45	%
Total classified assets as a percentage of risk-based capital	9.14		4.77

Classified assets increased $32.2 million to $60.4 million, or 0.96% of total assets, at December 31, 2025, from $28.2 million, or 0.45% of total assets, at December 31, 2024. Classified assets are substandard loans, repossessed assets and OREO. The increase was primarily due to several commercial non-owner occupied real estate loans, which were downgraded during the current year. All of these loans are well secured by collateral and required minimal individual reserves as of December 31, 2025.

Special Mention Loans

The following table presents the Company’s special mention loans by loan portfolio category at December 31, 2025 and 2024.


($ in thousands)	December 31, 2025		December 31, 2024
Commercial real estate	$	52,347	$	30,641
Residential real estate	19,065		2,047

Commercial	1,318		830
Consumer	671		—

Total special mention loans	$	73,401	$	33,518

Special mention loans increased to $73.4 million at December 31, 2025, from $33.5 million at December 31, 2024. Increases in special mention loan categories were due to loans in the multifamily commercial real estate and residential loan portfolios. Management believes these assets are well collateralized and will continue to monitor their cash flows. 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

At December 31, 2025, nonperforming assets were $43.2 million, an increase of $18.4 million, or 74.25%, when compared to December 31, 2024. The increase in nonperforming assets was primarily due to the increase in commercial real estate and consumer nonaccrual loans, offset by a decrease in repossessed assets related to the marine portfolio. At December 31, 2025, the ratio of nonaccrual loans to total assets was 0.64%, an increase from 0.34% at December 31, 2024. The ratio of nonperforming assets to total assets at December 31, 2025 was 0.69% compared to 0.40% at December 31, 2024.

The following table summarizes our nonperforming assets for the years ended December 31, 2025 and 2024.


($ in thousands)	December 31, 2025			December 31, 2024
Nonperforming assets
Nonaccrual loans	$	39,960		$	21,008
Total loans 90 days or more past due and still accruing	255			294
OREO	113			179
Repossessed assets	2,879			3,315
Total nonperforming assets	$	43,207		$	24,796

As a percent of total loans:
Nonaccrual loans	0.82		%	0.44		%

As a percent of total loans and OREO:
Nonperforming assets	0.88		%	0.52		%

As a percent of total assets:
Nonaccrual loans	0.64		%	0.34		%
Nonperforming assets	0.69			0.40

Off-Balance Sheet Credit Exposure Reserve

The Company’s reserve for off-balance sheet credit exposure was $2.0 million and $1.1 million at December 31, 2025 and 2024, respectively. The Company monitors line of credit usage and did not see substantive increases in usage or expected usage during the year ended December 31, 2025. 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 December 31, 2025 and 2024:


($ in thousands)	December 31, 2025				December 31, 2024
	Balance		% of Total Deposits		Balance		% of Total Deposits		$ Change		% Change
Noninterest-bearing deposits	$	1,587,953	28.69	%	$	1,562,815	28.27	%	$	25,138	1.6	%
Interest-bearing deposits:
Interest-bearing checking	852,585		15.41		978,076		17.69		(125,491)		(12.8)
Money market and savings	1,814,928		32.80		1,805,884		32.67		9,044		0.5
Time deposits	1,267,487		22.90		1,181,561		21.37		85,926		7.3
Brokered deposits	10,911		0.20		—		—		10,911		*
Total interest-bearing	3,945,911		71.31		3,965,521		71.73		(19,610)		(0.5)

Total deposits	$	5,533,864	100.00	%	$	5,528,336	100.00	%	$	5,528	0.1

____________________________________

*Not meaningful for comparative purposes

Total deposits increased $5.5 million, to $5.53 billion at December 31, 2025 when compared to December 31, 2024. The slight increase in total deposits 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 estimated uninsured deposits were $937.2 million, or 16.9% of total deposits, at December 31, 2025 and $905.3 million, or 16.4% of total deposits, at December 31, 2024. At December 31, 2025, there were $150.8 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 December 31, 2025 were $786.5 million, or 14.2% of total deposits.

For FDIC call reporting purposes, reciprocal deposits are classified as brokered deposits when they exceed 20% of a bank’s liabilities or $5 billion. Reciprocal deposits decreased $128.4 million to $1.52 billion at December 31, 2025, compared to $1.65 billion at December 31, 2024. Reciprocal deposits as a percentage of the Bank’s liabilities at December 31, 2025 and 2024 were 27.08% and 29.25%, respectively. For call reporting purposes, $396.9 million of reciprocal deposits were considered brokered at December 31, 2025, compared to $520.5 million at December 31, 2024.

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 December 31, 2025, the Bank had three local municipal customer deposit relationships that exceeded 2% of total deposits, totaling $539.0 million, which represented 9.70% of total deposits of $5.56 billion. At December 31, 2024, there were three customer deposit relationships that exceeded 2% of total deposits, totaling $547.4 million, which represented 9.89% of total deposits of $5.54 billion. Deposit balances related to the cannabis business were $159.4 million and $151.4 million, or 2.88% and 2.74% of total deposits, as of December 31, 2025 and 2024, respectively.

The Bank uses deposits primarily to fund loans and to purchase investment securities. Average total deposits increased from $5.19 billion at December 31, 2024 to $5.36 billion at December 31, 2025, an increase of $173.1 million, or 3.34%.

The following table sets forth the average balances of deposits and percentage of each major category to total average deposits for the years ended December 31, 2025 and 2024.


	December 31, 2025				December 31, 2024
($ in thousands)	Average Balance		%		Average Balance		%
Noninterest-bearing deposits	$	1,577,271	29.42	%	$	1,454,087	28.02	%
Interest-bearing deposits
Interest-bearing checking	759,395		14.16		825,773		15.91
Money market and savings	1,761,503		32.85		1,690,905		32.60
Time deposits	1,255,797		23.42		1,205,411		23.23
Brokered deposits	7,927		0.15		12,636		0.24
Total interest-bearing	3,784,622		70.58		3,734,725		71.98

Total deposits	$	5,361,893	100.00	%	$	5,188,812	100.00	%

Average interest-bearing deposits for the year ended December 31, 2025 increased $49.9 million, or 1.3%, compared to the year ended December 31, 2024. Average noninterest-bearing deposits increased $123.2 million, or 8.5%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. Deposits provided funding for approximately 93.54% and 93.98% of average earning assets for the years ended December 31, 2025 and 2024, respectively.

The following table sets forth the aggregate amount and maturity ranges of certificates of deposit with balances of $250,000 or more as of December 31, 2025, as well as the portion that is uninsured.


	December 31, 2025
($ in thousands)	Total		Uninsured
Three months or less	$	67,271	$	34,521
Over three through 6 months	136,892		62,642
Over 6 through 12 months	176,053		70,553
Over 12 months	23,290		8,790
Total	$	403,506	$	176,506

Note 7 – “Deposits” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K includes the scheduled contractual maturities of total certificates of deposit of $1.27 billion at December 31, 2025.

Securities Sold Under Retail Repurchase Agreements

Securities sold under agreements to repurchase are issued in conjunction with cash management services for commercial depositors. There were no securities sold under retail purchase agreements at December 31, 2025 and 2024.

Wholesale Funding – Short-Term Borrowings

The Company borrows from the FHLB on a short-term basis to meet liquidity needs. There were no short-term borrowings outstanding as of December 31, 2025 and 2024.

The Company’s wholesale funding, which includes FHLB advances and brokered deposits, was $10.9 million and $50.0 million at December 31, 2025 and 2024, respectively. At December 31, 2025, the Company had $10.9 million of brokered deposits and no FHLB advances or securities sold under agreements to repurchase or overnight borrowings from correspondent banks. At December 31, 2024, the Company had $50.0 million in FHLB advances and no brokered deposits or securities sold under agreements to repurchase or overnight borrowings from correspondent banks.

Contractual Obligations

The Company has various contractual obligations that affect its cash flows and liquidity. Our operating leases are primarily related to branch premises and equipment. Purchase obligations arise from agreements to purchase goods and services that are enforceable and legally binding. Other contracts included in purchase obligations primarily consist of service agreements for various systems and applications supporting bank operations. For information regarding material contractual obligations, please see Note 5 – “Leases” and Note 21 – “Revenue Recognition” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K.

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. The Company had no short or long-term borrowings with the FHLB as of December 31, 2025.

In November 2025, the Company issued $60 million in subordinated debt maturing in 2035, carrying a fixed interest rate of 6.25% through November 2030. The proceeds were used to fully redeem two existing subordinated debt issuances totaling $44.5 million.

As a result of the merger with Severn Bancorp, Inc., effective October 31, 2021, the Company assumed liability for Junior Subordinated Debt Securities due in 2035, which had an outstanding principal balance of $20.6 million. The debt balances of $19.0 million at December 31, 2025 and $18.8 million at December 31, 2024 were presented net of fair value adjustments of $1.7 million and $1.8 million, respectively.

Additionally, as a result of the merger with The Community Financial Corporation in 2023, the Company assumed liability for Junior Subordinated Debt Securities with an outstanding principal balance of $12.4 million. The debt balances of $11.2 million and $11.1 million were presented net of fair value adjustments of $1.2 million and $1.3 million at December 31, 2025 and 2024, respectively.

For additional information regarding long-term debt, refer to Note 8 – “Borrowings” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K.

Stockholders’ Equity

Total stockholders’ equity increased $48.8 million, or 9.0%, to $589.9 million at December 31, 2025 when compared to December 31, 2024, primarily due to $59.5 million of net income and a decrease in accumulated other comprehensive loss of $3.0 million, partially offset by dividends declared of $16.1 million.


($ in thousands, except per share amounts)	December 31, 2025		December 31, 2024		$ Change		% Change
Common stock, $0.01 par value per share	$	334	$	333	$	1	0.3	%
Additional paid-in capital	360,554		358,112		2,442		0.7
Retained earnings	233,578		190,166		43,412		22.8
Accumulated other comprehensive loss	(4,593)		(7,545)		2,952		(39.1)
Total stockholders’ equity	$	589,873	$	541,066	$	48,807	9.0

We record unrealized holding gains (losses), net of tax, on available for sale investment securities as AOCI (loss), a separate component of stockholders’ equity. At December 31, 2025 and 2024, the portion of the investment portfolio designated as “available for sale” had an unrealized holding loss, net of tax, of $4.6 million and $7.5 million, respectively.

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.

Shore Bancshares’ 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, management believes that there are no conditions or events, considered in the aggregate, that raise substantial doubt about the Company’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.

The Company derives liquidity through increased customer deposits, cash flow from the investment portfolio, loan repayments, borrowings and income from earning assets. The net decrease in cash and cash equivalents was $104.3 million for the year ended December 31, 2025, compared to a net increase of $87.4 million for the year ended December 31, 2024. The decrease in cash and cash equivalents in the year ended December 31, 2025 was mainly due to the decrease of $21.8 million in interest-bearing deposits, paid off FHLB Advances of $50.0 million, and redemption of subordinated debt of $44.5 million, partially offset by an increase of $25.1 million in noninterest-bearing deposits and issuance of new subordinated debt of $58.9 million, net of subordinated debt issuance costs.

To the extent that deposits are not adequate to fund customer loan demand, liquidity needs can be met in the short-term funds markets. At December 31, 2025, the Bank had approximately $1.42 billion of available liquidity, including $355.6 million in cash and cash equivalents, $314.5 million in unpledged securities and $788.1 million in secured borrowing capacity at the FHLB of Atlanta, partially offset by a letter of credit of $33.7 million. 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 that 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 $788.1 million and $743.6 million at December 31, 2025 and 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 December 31, 2025.


	December 31, 2025
($ in thousands)	Liquidity in Use		Liquidity Available
FHLB secured borrowings(1)	$	33,667	$	788,080
Unsecured federal fund purchase lines	—		95,000

Unpledged assets
Cash and cash equivalents	N/A		$	355,566
Investment securities	N/A		314,461
Total	$	33,667	$	1,553,107

____________________________________

(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.

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 December 31, 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.

As of December 31, 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 December 31, 2025 and 2024.


December 31, 2025	Tier 1 Leverage Ratio		Common Equity Tier 1 Ratio		Tier 1 Risk-Based Capital Ratio		Total Risk-Based Capital Ratio
The Company	8.82	%	10.52	%	11.15	%	13.61	%
The Bank	9.30		11.75		11.75		13.00


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 February 18, 2026, the Company announced that its Board of Directors declared a cash dividend of $0.12 per share, payable on March 18, 2026, to holders of record of shares of common stock as of March 4, 2026.

The Company has no business other than holding the stock of the Bank and does not currently have any material funding requirements, except for the payment of dividends on common stock, and the payment of interest on subordinated debentures and subordinated notes, and noninterest expense.

See Note 15 – “Regulatory Capital Requirements” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Annual Report on Form 10-K for further information about the regulatory capital positions of the Bank and the Company. For information about risks relating to liquidity, see “Risk Factors” included in Part I, Item 1A of this Annual Report on Form 10-K.

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 Annual Report on Form 10-K, 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)	December 31, 2025			December 31, 2024
Total assets	$	6,258,818		$	6,230,763
Less: intangible assets
Goodwill	63,266			63,266
Core deposit intangibles	29,722			38,311
Total intangible assets	92,988			101,577
Tangible assets	$	6,165,830		$	6,129,186

Total common equity	$	589,873		$	541,066
Less: intangible assets	92,988			101,577
Tangible common equity	$	496,885		$	439,489

Common shares outstanding at end of period	33,413,503			33,332,177

Common equity to assets	9.42		%	8.68		%
Tangible common equity to tangible assets	8.06			7.17

Common book value per share	$	17.65		$	16.23
Tangible common book value per share	14.87			13.19

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 divided by the average stockholders’ equity for a specific period of time.


	Year Ended December 31,
($ in thousands)		2025			2024			2023
Net income		$	59,506		$	43,889		$	11,228


ROACE		10.52		%	8.35		%	2.54		%

Average stockholders’ equity		$	565,579		$	525,742		$	441,790

Return on Average Tangible Common Equity

ROATCE is computed by dividing net earnings applicable to common stockholders by average tangible common 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.

SHORE BANCSHARES INC 10-K