EASTON, Md., May 2, 2024 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ - SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank" or "SUB") reported net income for the first quarter of 2024 of $8.2 million or $0.25 per diluted common share compared to a net income of $10.5 million or $0.32 per diluted common share for the fourth quarter of 2023, and net income of $6.5 million or $0.32 per diluted common share for the first quarter of 2023.

First Quarter 2024 Highlights

Credit Card Fraud - On April 2, 2024, the Bank detected that it had been subjected to fraudulent credit card account openings during the first quarter of 2024 and commenced an investigation. Bad actors used stolen personal information to open Bank-issued credit cards through the Bank's online credit card activation system. The personal information used had been stolen from individuals who are not customers of the Bank. No existing Bank customers were impacted by this fraudulent activity and the Bank's core processing system was not compromised. Upon detection, the Bank immediately closed all fraudulently-opened credit card accounts and suspended all credit card activations. The Bank will not open new credit card accounts until its investigation is complete. The Bank is implementing enhanced activity monitoring on all existing cards outstanding.

As a result of the fraudulent activity, the Company recognized a $4.3 million fraud-related expense in the first quarter of 2024 and does not anticipate additional losses related to this event. The majority of the fraud loss, approximately $3.6 million, or 84%, occurred between March 25, 2024 and April 2, 2024. In coordination with the Bank's credit card processor, management is evaluating the root causes of the fraud event and the preventative and monitoring controls that would have mitigated the fraud loss. Management will also consider in this evaluation whether the credit card product can attain the size and scale needed in the near-term for the Bank to continue as an issuer. The Bank has notified and is actively working with law enforcement to recover a portion of the fraud losses by various means.

The above information was reported on the Company's Current Report on Form 8-K filed with SEC on April 30, 2024 describing the event. The impact of this event resulted in a $0.10 decrease to basic and diluted earnings per share.
Return on Average Assets ("ROAA") - The Company reported ROAA of 0.57% for the first quarter of 2024, compared to 0.72% and 0.75% for the fourth and first quarters of 2023, respectively. Excluding the fraud expense, amortization from core deposit intangibles, and merger-related expenses the Company's Non-GAAP, ROAA was 0.94% for the first quarter of 2024, compared to 0.88% and 0.84% for the fourth and first quarters of 2023, respectively.
Stable Net Interest Margin - Net interest margin ("NIM") remained relatively stable at 3.08% for the first quarter of 2024 from 3.09% for the fourth quarter of 2023. Excluding net accretion interest income of $3.6 million and $3.0 million for the same time periods, NIM decreased six basis points to 2.81% for the first quarter of 2024 from 2.87% for the fourth quarter of 2023.
Active Management of Deposit Costs - Decreases in rates on higher cost deposit relationships mitigated margin compression in the first quarter of 2024. For the month of March 2024, asset yields grew more quickly than funding costs which positively impacted the Company's net interest margin and may position the Bank to see positive margin movement during the second quarter of 2024. As a result of decreased rates paid on some deposits and expected seasonal cash outflows in the first quarter of 2024, deposits decreased $201.8 million, or 3.7% to $5.2 billion at March 31, 2024 when compared to December 31, 2023. Liquidity remained relatively stable with the loan to deposit ratio modestly increasing from 86.2% at December 31, 2023 to 89.7% at March 31, 2024. The Bank had no brokered deposits or advances at March 31, 2024.
Stable Credit Trends - The Company's total nonperforming assets to total assets for the first quarter of 2024 was 0.28% compared to the fourth quarter of 2023 of 0.23%. The Company's credit quality metrics remain at historical lows with no signs of significant deterioration or systemic issues within its loan portfolios.
Branch Closings and Office Space Rationalization - The Company expects to close two branches by the end of the third quarter and to consolidate two office buildings into a single space by the end of the third quarter.

"While the first quarter's credit card fraud was disappointing, I am pleased with the response of our team after the incident was identified to contain the problem, and that no customers were impacted," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. "We are undertaking a comprehensive review of the incident to recover as much of the fraudulent charges as possible and are evaluating our options regarding the future of an in-house credit card program."

Burke continued, "Active balance sheet management in the first quarter resulted in stabilizing margins and net interest income while continued focus on reducing expenses is expected to enhance future operating leverage. Credit remains stable and we believe we are well positioned to deliver improving profitability in future quarters."

Balance Sheet Review

Total assets were $5.8 billion at March 31, 2024, a decrease of $185 million or 3.1%, when compared to $6.0 billion at December 31, 2023. The aggregate decrease was primarily due to a decrease in cash and cash equivalents of $257.9 million and investment securities held to maturity of $9.4 million partially offset by an increase in investment securities available for sale of $69.0 million and loans held for investment of $7.7 million. The ratio of the Allowance for Credit Losses ("ACL") to total loans decreased slightly from 1.24% at December 31, 2023, to 1.23% at March 31, 2024.

The Company's tangible common equity ratio at March 31, 2024 was 7.11% compared to 6.78% at December 31, 2023. The Company's Tier 1 and Total Risk-Based Capital Ratios at March 31, 2024 were 9.53% and 11.68%, respectively. The Bank's Tier 1 and Total Risk-Based Capital Ratios at March 31, 2024 were 10.32% and 11.56%, respectively. Non-owner occupied commercial real estate ("CRE") loans as a percentage of the Bank's Tier 1 Capital + ACL at March 31, 2024 and December 31, 2023 were $2.0 billion or 370.0% and $2.0 billion or 382.6%, respectively. Construction loans as a percentage of the Bank's Tier 1 Capital + ACL at March 31, 2024 and December 31, 2023 were $299.1 million or 54.9% and $299.0 million or 56.7%, respectively.

The Bank's office CRE loan portfolio, which includes owner-occupied and nonowner-occupied CRE loans, was $516.0 million or 11.1% of total loans of $4.6 billion at March 31, 2024. The Bank's office CRE loan portfolio included $137.7 million or 26.7% of the total with medical tenants and $73.3 million or 14.2% of the total with government or government contractor tenants. There were 513 loans in the office CRE portfolio with an average and median loan size of $1.0 million and $0.4 million, respectively. Loan to Value ("LTV") estimates are less than 70% for $395.8 million or 76.7% of the office CRE portfolio and less than 80% for $490.4 million or 95.0% of the office CRE portfolio.

The Bank had 19 office CRE loans totaling $172.0 million that were greater than $5.0 million at March 31, 2024, compared to 24 office CRE loans totaling $189.8 million at December 31, 2023. The decrease in this portfolio segment was the result of normal amortization and a two large loan payoffs in the quarter. For the office CRE portfolio, at March 31, 2024, the average loan debt-service coverage ratio was 1.7x and average LTV was 57.6%. Of the office CRE portfolio balance, 73% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 92% are secured by properties with five stories or less. Of the office CRE loans, $5.8 million will mature and $5.1 million of the office CRE loans will reprice prior to December 31, 2024. Of the office CRE loans, $2.2 million are special mention or substandard.

Total deposits decreased $201.8 million, or 3.7% to $5.2 billion at March 31, 2024 when compared to December 31, 2023. The decrease in total deposits was primarily due to a decrease in time deposits of $15.3 million, demand deposits of $63.6 million, money market and savings of $65.6 million and noninterest-bearing deposits of $57.4 million. The decrease in deposits is primarily attributable to seasonal municipal runoff and disintermediation of interest-sensitive cannabis-related deposits.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances, and brokered deposits decreased $246.3 million from $5.4 billion at December 31, 2023 to $5.2 billion at March 31, 2024. The Bank had no FHLB advances at March 31, 2024 or December 31, 2023 and reduced brokered deposits from $44.5 million at December 31, 2023 to zero at March 31, 2024. The Bank's uninsured deposits at March 31, 2024 were $981.3 million or 18.93% of total deposits. The Bank's uninsured deposits, excluding deposits secured with pledged collateral, at March 31, 2024 were $825.9 million or 15.93% of total deposits. At March 31, 2024, the Bank had approximately $1.2 billion of available liquidity including: $114.6 million in cash, $1.1 billion in secured borrowing capacity at the FHLB and other correspondent banks, and $45.0 million in unsecured lines of credit.

Total stockholders' equity increased $4.1 million, or 0.8%, when compared to December 31, 2023, primarily due to current year earnings, offset by the cash dividend paid. As of March 31, 2024, the ratio of total equity to total assets was 8.84% and the ratio of total tangible equity to total tangible assets was 7.11% compared to 8.50% and 6.78% at December 31, 2023, respectively.

Management continues to pursue opportunities to increase efficiencies and decrease expenses as a percentage of operating revenues. Following feasibility assessments, management decided to close two branches by the end of the third quarter, subject to regulatory approval. The Onley, VA branch should close on or about July 17, 2024 and the Westgate branch located in Annapolis, MD should close on or about September 30, 2024. Limited growth opportunities within the Eastern Shore of Virginia and a conscientious focus on profitability led to the decision to close the Onley branch. The Westgate branch has limited foot traffic and is located less than a mile from another SUB branch within the City of Annapolis. Customer disruption is expected to be limited. These closures are estimated to cost $0.2 million. The Company is expected to reduce four positions as part of these closings

Additionally, the Company plans to reduce professional office space located in Easton, MD. By the end of the third quarter, a newly renovated office building is expected to be put into service eliminating the need for two currently-occupied office buildings. In the second quarter, the Company expects to begin marketing for sale the two redundant office properties. Recent appraisals on these properties exceed the Bank's cost bases resulting in no impairment. At the present time the two properties remain in service, are not listed for immediate sale, and are classified as active assets on our balance sheet. Once these properties meet the accounting criteria they will be moved to held for sale.

Review of Quarterly Financial Results

Net interest income was $41.1 million for the first quarter of 2024, compared to $41.5 million for the fourth quarter of 2023 and $25.7 million for the first quarter of 2023. The decrease in net interest income when compared to the fourth quarter of 2023 was primarily due to the increase in interest expense of $0.4 million resulting from an increase in the average balance of interest bearing deposits of $70.9 million. The increase when compared to the first quarter of 2023 was primarily due to the increase in interest and fees on loans, interest on deposits from other banks, a decrease in interest on short-term borrowings partially offset by the increase in interest on deposits and interest on long-term borrowings all significantly impacted by the merger of equals with TCFC in the third quarter of 2023.

The Company's net interest margin decreased slightly to 3.08% for the first quarter of 2024 from 3.09% for the fourth quarter of 2023 primarily due to an increase in the overall mix of interest-bearing deposits compared to noninterest-bearing deposits. Average interest-bearing deposits increased $70.9 million which resulted in a two basis point rate increase. In addition to the change in deposit mix, rates on money market and time deposits also increased, which were partly offset by lower rates on demand deposits. The Company's net interest margin decreased to 3.08% for the first quarter of 2024 from 3.18% for the first quarter of 2023. Comparing the first quarter of 2024 to the first quarter of 2023, the Company's interest-earning asset yields increased 98 basis points to 5.32% from 4.34%, while the cost of funds repriced at a faster pace resulting in an increase of 109 basis points to 2.31% from 1.22% for the same period.

The provision for credit losses was $0.4 million for the three months ended March 31, 2024. The comparable amounts were $0.9 million for the three months ended December 31, 2023, and $1.2 million for the three months ended March 31, 2023. The decrease in the provision for credit losses for the first quarter of 2024 compared to the fourth quarter of 2023 was primarily related to more optimistic short-term forecasts for unemployment and Gross Domestic Product ("GDP"). Coverage ratios were 1.23% and 1.24% for the three months ended March 31, 2024 and December 31, 2023, respectively. The decrease in the provision for credit losses when compared to the first quarter of 2023 was primarily due to improved economic factors and forecasts. Net charge-offs for the first quarter of 2024 were $0.6 million compared to net charge-offs of $0.5 million for the fourth quarter of 2023 and net charge offs of $20,000 for the first quarter of 2023.

At March 31, 2024 and December 31, 2023, nonperforming assets were $16.4 million or 0.28% of total assets and $13.7 million, or 0.23% of total assets, respectively. The balance of nonperforming assets increased primarily due to an increase in repossessed marine loans of $1.8 million and an increase of $0.8 million in loans 90 days past due and still accruing. When comparing March 31, 2024 to March 31, 2023, nonperforming assets increased $13.7 million, primarily due to increases in nonaccrual loans of $10.9 million, an increase in repossessed marine loans of $1.8 million, and an increase of $0.9 million in loans 90 days past due and still accruing almost entirely impacted by the merger with TCFC in the third quarter of 2023.

Total noninterest income for the first quarter of 2024 was $6.6 million, a decrease of $1.0 million from $7.5 million for the fourth quarter of 2023 and an increase $1.2 million from $5.3 million for the first quarter of 2023. The decrease from the fourth quarter of 2023 was primarily due to other noninterest income which included decreases in other fees on bank services and other loan fee income, decreases in mortgage banking revenue and trust and investment fee income. The increase from the first quarter of 2023 was primarily due to other noninterest income which included increases in other loan fee income, gains on life insurance contracts, an increase in credit card income, increases in trust and investment fee income and interchange credits all a result of the merger in the third quarter of 2023.

Total noninterest expense of $36.7 million for the first quarter of 2024 increased $3.0 million when compared to the fourth quarter of 2023 expense of $33.7 million and increased $15.8 million when compared to the first quarter of 2023 expense of $20.9 million. The increase from the fourth quarter of 2023 was primarily due to credit card fraud expense of $4.3 million, and an increase in employee benefits of $0.7 million partially offset by decreases in salaries and wages expense of $1.0 million, merger related expenses of $0.6 million, and FDIC insurance premium expense of $0.6 million. The increase from the first quarter of 2023 was primarily due to the operation of a larger branch network due to the merger with TCFC which significantly impacted almost all expense line items. Unrelated to the merger were the fraud expenses in the first quarter of 2024 previously mentioned above.

Subsequent Event

On May 1, 2024, the Company's board of directors declared a quarterly common stock dividend in the amount of $0.12 per share, payable May 31, 2024 to stockholders of record on May 16, 2024.

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the parent company of Shore United Bank, N.A. Shore Bancshares engages in title work related to real estate transactions through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. and in trust and wealth management services through Wye Financial Partners, a division of Shore United Bank, N.A. Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: the effect of acquisitions we have made or may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations; recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to these developments; changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and the Middle East; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; potential changes in federal policy and at regulatory agencies as a result of the upcoming 2024 presidential election; a deterioration of the credit rating for U.S. long-term sovereign debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, and uncertainties surrounding debt ceiling and the federal budget; the impact of recent or future changes in FDIC insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; the Company's evaluation of the effect of the credit card fraud on the Company's internal controls over financial reporting and its ability to remediate the existing material weakness identified in its internal control over financial reporting; the effectiveness of the Company's internal control over financial reporting and disclosure controls and procedures; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and other factors that may affect our future results. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company's 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") and available at the SEC's Internet site (http://www.sec.gov).

The Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

Shore Bancshares, Inc. Financial Highlights (Unaudited)

	For the Three Months Ended March 31,
(Dollars in thousands, except per share data)	2024	2023	Change

PROFITABILITY FOR THE PERIOD
Net interest income	$ 41,135	$ 25,664	60.3 %
Provision for credit losses	407	1,213	(66.4)
Noninterest income	6,567	5,334	23.1
Noninterest expense	36,698	20,893	75.6
Income before income taxes	10,597	8,892	19.2
Income tax expense	2,413	2,435	(0.9)
Net income	$ 8,184	$ 6,457	26.7

Return on average assets	0.57 %	0.75 %	(18) bp
Return on average assets excluding amortization of intangibles, merger related expenses and credit card fraud losses - Non-GAAP (1 ) (2)	0.94	0.84	10
Return on average equity	6.38	7.25	(87)
Return on average tangible equity - Non-GAAP (1), (2)	13.39	10.09	330
Interest rate spread	2.34	2.69	(35)
Net interest margin	3.08	3.18	(10)
Efficiency ratio - GAAP	76.93	67.40	953
Efficiency ratio - Non-GAAP (1)	62.37	63.67	(130)
Non-interest income to avg assets	0.46	0.62	(16)
Non-interest expense to avg assets	2.56	2.42	14
Net operating expense to avg assets	2.10	1.80	30

PER SHARE DATA
Basic and diluted net income per common share	$ 0.25	$ 0.32	(21.9) %

Dividends paid per common share	$ 0.12	$ 0.12	— %
Book value per common share at period end	15.51	18.17	(14.6)
Tangible book value per common share at period end - Non-GAAP (1)	12.24	14.74	(17.0)
Market value at period end	11.50	14.28	(19.5)
Market range:
High	14.38	18.15	(20.8)
Low	10.56	14.00	(24.6)

AVERAGE BALANCE SHEET DATA
Loans	$ 4,655,183	$ 2,611,644	78.2 %
Investment securities	655,323	654,193	0.2
Earning assets	5,387,782	3,279,686	64.3
Assets	5,774,824	3,506,336	64.7
Deposits	5,142,658	2,968,448	73.2
Short-term and Long Term FHLB advances	4,000	113,972	(96.5)
Subordinated Debt & TRUPS	72,418	43,108	68.0
Stockholders' equity	515,976	361,174	42.9

____________________________________
(1)	See the reconciliation table that begins on page 21.
(2)	This ratio excludes merger related expenses (Non-GAAP) on page 21.

Shore Bancshares, Inc. Financial Highlights (Unaudited) - Continued

	For the Three Months Ended March 31,
(Dollars in thousands, except per share data)	2024	2023	Change

CREDIT QUALITY DATA
Net charge-offs	$ 565	$ 20	2,725.0 %

Nonaccrual loans	$ 12,776	$ 1,894	574.6 %
Loans 90 days past due and still accruing	1,560	611	155.3
Other real estate owned and Repossessed Property	2,024	179	1,030.7
Total nonperforming assets	16,360	2,684	509.5
Borrowers experiencing financial difficulty ("BEFD") (still accruing)	—	—	—
Total nonperforming assets and BEFD modifications	$ 16,360	$ 2,684	509.5

CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets	8.84 %	10.18 %	(134) bp
Period-end tangible equity to tangible assets - Non-GAAP (1)	7.11	8.41	(130)

Annualized net charge-offs to average loans	0.05 %	— %	5 bp

Allowance for credit losses as a percent of:
Period-end loans	1.23 %	1.07 %	16 bp
Nonaccrual loans	448.78	1,502.85	(105,407)
Nonperforming assets	350.46	1,060.51	(71,005)
Accruing BEFD modifications	—	—	—
Nonperforming assets and accruing BEFDs	350.46	1,060.51	(71,005)

As a percent of total loans:
Nonaccrual loans	0.27 %	0.07 %	20 bp

As a percent of total loans, other real estate owned, and repossessed property
Nonperforming assets	0.35 %	0.10 %	25 bp

As a percent of total assets:
Nonaccrual loans	0.22 %	0.05 %	17 bp
Nonperforming assets	0.28 %	0.08 %	20

____________________________________
(1)	See the reconciliation table that begins on page 21.
(2)	This ratio excludes merger related expenses (Non-GAAP) on page 21.

Shore Bancshares, Inc. Consolidated Balance Sheets (Unaudited)

				March 31, 2024	March 31, 2024
				compared to	compared to
(In thousands, except per share data)	March 31, 2024	December 31, 2023	March 31, 2023	December 31, 2023	March 31, 2023

ASSETS
Cash and due from banks	$ 43,079	$ 63,172	$ 23,863	(31.8) %	80.5 %
Interest-bearing deposits with other banks	71,481	309,241	13,846	(76.9)	416.3
Cash and cash equivalents	114,560	372,413	37,709	(69.2)	203.8

Investment securities available for sale (at fair value)	179,496	110,521	81,525	62.4	120.2
Investment securities held to maturity (net of allowance for credit losses of $116 (March 31, 2024), $94 (December 31, 2023), $0 (March 31, 2023)) at amortized cost)	503,822	513,188	549,096	(1.8)	(8.2)
Equity securities, at fair value	5,681	5,703	1,258	(0.4)	351.6
Restricted securities	17,863	17,900	15,067	(0.2)	18.6
Loans held for sale, at fair value	13,767	8,782	3,514	56.8	291.8

Loans held for investment	4,648,725	4,641,010	2,668,681	0.2	74.2
Less: allowance for credit losses	(57,336)	(57,351)	(28,464)	—	(101.4)
Loans, net	4,591,389	4,583,659	2,640,217	0.2	73.9
Premises and equipment, net	83,084	82,386	50,516	0.8	64.5
Goodwill	63,266	63,266	63,266	—	—
Other intangible assets, net	45,515	48,090	5,106	(5.4)	791.4
Other real estate owned, net	179	179	179	—	—
Repossessed property, net	1,845	—	—	—	—
Mortgage servicing rights, at fair value	5,821	5,926	5,310	(1.8)	9.6
Right of use assets, net	12,153	12,487	9,344	(2.7)	30.1
Cash surrender value on life insurance	102,321	101,704	59,711	0.6	71.4
Accrued interest receivable	19,541	19,217	8,218	1.7	137.8
Deferred income taxes	38,978	40,707	10,436	(4.2)	273.5
Other assets	26,423	24,790	13,222	6.6	99.8
Total assets	$ 5,825,704	$ 6,010,918	$ 3,553,694	(3.1)	63.9

LIABILITIES
Noninterest-bearing deposits	$ 1,200,680	$ 1,258,037	$ 808,679	(4.6) %	48.5 %
Interest-bearing deposits	3,983,599	4,128,083	2,185,883	(3.5)	82.2
Total deposits	5,184,279	5,386,120	2,994,562	(3.7)	73.1

Advances from FHLB - short-term	—	—	131,500	—	(100.0)
Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS")	29,237	29,158	18,445	0.3	58.5
Subordinated debt	43,322	43,139	24,705	0.4	75.4
Total borrowings	72,559	72,297	174,650	0.4	(58.5)

Lease liabilities	12,552	12,857	9,642	(2.4)	30.2
Accrued expenses and other liabilities	41,086	28,509	13,202	44.1	211.2
Total liabilities	$ 5,310,476	$ 5,499,783	$ 3,192,056	(3.4)	66.4

STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 50,000,000 shares	$ 332	$ 332	$ 199	—	66.8
Additional paid in capital	356,464	356,007	201,736	0.1	76.7
Retained earnings	166,490	162,290	167,864	2.6	(0.8)
Accumulated other comprehensive loss	(8,058)	(7,494)	(8,161)	(7.5)	1.3
Total stockholders' equity	515,228	511,135	361,638	0.8	42.5
Total liabilities and stockholders' equity	$ 5,825,704	$ 6,010,918	$ 3,553,694	(3.1)	63.9

Period-end common shares outstanding	$ 33,211	$ 33,162	$ 19,898	0.1	66.9
Book value per common share	$ 15.51	$ 15.41	$ 18.17	0.6	(14.6)

Shore Bancshares, Inc. Consolidated Statements of Income (Unaudited)

	For the Three Months Ended March 31,
(In thousands, except per share data)	2024	2023	% Change

INTEREST INCOME
Interest and fees on loans	$ 65,754	$ 30,828	113.3 %
Interest on investment securities:
Taxable	4,419	4,064	8.7
Tax-exempt	6	7	(14.3)
Interest on deposits with other banks	960	163	489.0
Total interest income	$ 71,139	$ 35,062	102.9

INTEREST EXPENSE
Interest on deposits	$ 28,497	$ 7,281	291.4
Interest on short-term borrowings	56	1,361	(95.9)
Interest on long-term borrowings	1,451	756	91.9
Total interest expense	$ 30,004	$ 9,398	219.3

NET INTEREST INCOME	$ 41,135	$ 25,664	60.3
Provision for credit losses	407	1,213	(66.4)

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES	$ 40,728	$ 24,451	66.6

NONINTEREST INCOME
Service charges on deposit accounts	$ 1,507	$ 1,213	24.2
Trust and investment fee income	734	432	69.9
Interchange credits	1,587	1,212	30.9
Mortgage-banking revenue	801	977	(18.0)
Title Company revenue	78	137	(43.1)
Other noninterest income	1,860	1,363	36.5
Total noninterest income	$ 6,567	$ 5,334	23.1

Shore Bancshares, Inc. Consolidated Statements of Income (Unaudited) - Continued

	For the Three Months Ended March 31,
(In thousands, except per share data)	2024	2023	% Change

NONINTEREST EXPENSE
Salaries and wages	$ 11,852	$ 8,684	36.5 %
Employee benefits	4,097	2,921	40.3
Occupancy expense	2,416	1,619	49.2
Furniture and equipment expense	904	534	69.3
Data processing	2,867	1,798	59.5
Directors' fees	295	250	18.0
Amortization of intangible assets	2,576	441	484.1
FDIC insurance premium expense	1,150	371	210.0
Other real estate owned, net	—	(1)	100.0
Legal and professional fees	1,599	750	113.2
Fraud losses (1)	4,502	67	6,619.4
Merger related expenses	—	691	(100.0)
Other noninterest expenses	4,440	2,768	60.4
Total noninterest expense	$ 36,698	$ 20,893	75.6

Income before income taxes	$ 10,597	$ 8,892	19.2
Income tax expense	2,413	2,435	(0.9)
NET INCOME	$ 8,184	$ 6,457	26.7

Weighted average shares outstanding - basic and diluted	33,337	19,886	67.6

Basic and diluted net income per common share	$ 0.25	$ 0.32	(21.9)

Dividends paid per common share	$ 0.12	$ 0.12	—

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(1)	Fraud losses includes $4.3 million of credit card fraud losses for the quarter ended March 31, 2024.

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

	For the Three Months Ended						For the Three Months Ended
	March 31, 2024			March 31, 2023			March 31, 2024			December 31, 2023
(Dollars in thousands)	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate	Average Balance	Interest	Yield/ Rate

Earning assets
Loans (1), (2), (3)
Consumer real estate	$ 1,361,636	$ 18,492	5.46 %	$ 881,799	$ 10,507	4.83 %	$ 1,361,636	$ 18,492	5.46 %	$ 1,331,150	$ 18,653	5.56 %
Commercial real estate	2,722,600	38,604	5.70	1,279,923	15,173	4.81	2,722,600	38,604	5.70	2,728,094	38,730	5.63
Commercial	219,884	4,097	7.49	142,797	1,819	5.17	219,884	4,097	7.49	221,342	4,295	7.70
Consumer	329,118	4,272	5.22	297,528	3,274	4.46	329,118	4,272	5.22	333,807	3,859	4.59
State and political	1,473	16	4.37	978	9	3.73	1,473	16	4.37	1,290	13	4.00
Credit Cards	7,457	167	9.01	—	—	—	7,457	167	9.01	6,320	166	10.42
Other	13,015	183	5.66	8,619	84	3.91	13,015	183	5.66	17,464	277	6.29
Total Loans	4,655,183	65,831	5.69	2,611,644	30,866	4.79	4,655,183	65,831	5.69	4,639,467	65,993	5.64

Investment securities
Taxable	654,663	4,419	2.70	653,527	4,064	2.49	654,663	4,419	2.70	619,259	3,992	2.58
Tax-exempt (1)	660	8	4.85	666	9	5.41	660	8	4.85	661	8	4.84
Interest-bearing deposits	77,276	960	5.00	13,849	163	4.77	77,276	960	5.00	80,446	1,224	6.04
Total earning assets	5,387,782	71,218	5.32	3,279,686	35,102	4.34	5,387,782	71,218	5.32	5,339,833	71,217	5.29
Cash and due from banks	49,499			28,602			49,499			63,506
Other assets	395,023			228,054			395,023			399,409
Allowance for credit losses	(57,480)			(30,006)			(57,480)			(57,308)
Total assets	$ 5,774,824			$ 3,506,336			$ 5,774,824			$ 5,745,440


Interest-bearing liabilities
Demand deposits	$ 1,110,524	$ 6,362	2.30 %	$ 694,894	$ 3,236	1.89 %	$ 1,110,524	$ 6,362	2.30 %	$ 1,117,117	$ 6,673	2.37 %
Money market and savings deposits	1,669,074	10,160	2.45	1,004,553	2,374	0.96	1,669,074	10,160	2.45	1,605,930	8,330	2.06
Brokered deposits	20,465	251	4.93	—	—	—	20,465	251	4.93	92,840	1,347	5.76
Certificates of deposit $100,000 or more	762,210	7,675	4.05	241,436	1,076	1.81	762,210	7,675	4.05	701,051	6,898	3.90
Other time deposits	417,362	4,049	3.90	207,403	595	1.16	417,362	4,049	3.90	391,820	4,885	4.95
Interest-bearing deposits (4)	3,979,635	28,497	2.88	2,148,286	7,281	1.37	3,979,635	28,497	2.88	3,908,758	28,133	2.86
Advances from FHLB - short-term	4,000	56	5.63	113,972	1,361	4.84	4,000	56	5.63	1,141	16	5.56
Subordinated debt and Guaranteed preferred beneficial interest in junior subordinated debentures ("TRUPS") (4)	72,418	1,451	8.06	43,108	756	7.11	72,418	1,451	8.06	72,155	1,462	8.04
Total interest-bearing liabilities	4,056,053	30,004	2.98	2,305,366	9,398	1.65	4,056,053	30,004	2.98	3,982,054	29,611	2.95
Noninterest-bearing deposits	1,163,023			820,162			1,163,023			1,228,060
Accrued expenses and other liabilities	39,772			19,634		<

Shore Bancshares, Inc. Reports 2024 First Quarter Financial Results