Shore Bancshares, Inc. Reports 2026 Third Quarter Results

EASTON, Md., Oct. 22, 2026 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) (the "Company" or "Shore Bancshares"), the holding company for Shore United Bank, N.A. (the "Bank"), reported net income for the third quarter of 2026 of $16.8 million, or $0.50 per diluted common share, compared to net income of $18.9 million, or $0.56 per diluted common share, for the second quarter of 2026, and net income of $14.3 million, or $0.43 per diluted common share, for the third quarter of 2025.

Third Quarter 2026 Highlights

• Pre-tax Pre-provision Income ("PTPP"), a non-U.S. generally accepted accounting principles ("GAAP")⁽¹⁾ financial measure – PTPP for the third quarter of 2026 increased $1.5 million to $27.5 million, from $26.1 million in the second quarter of 2026. PTPP increased primarily due to an increase in interest income of $2.6 million and a decrease in noninterest expense of $405 thousand. The increase in net interest income was partially offset by a decrease in noninterest income of $1.2 million and an increase in interest expense of $390 thousand. PTPP for the nine months ended September 30, 2026 was $76.4 million compared to $63.4 million for the nine months ended September 30, 2025.

• Return on Average Assets ("ROAA") – The Company reported ROAA of 1.08% for the third quarter of 2026, compared to 1.24% for the second quarter of 2026 and 0.95% for the third quarter of 2025. Adjusted ROAA – non-GAAP⁽¹⁾ was 1.16% for the third quarter of 2026, compared to 1.34% for the second quarter of 2026 and 1.05% for the third quarter of 2025.

• Net Interest Margin ("NIM") – Net interest income for the third quarter of 2026 increased $2.2 million to $55.1 million compared to the second quarter of 2026. NIM increased 8 basis points ("bps") to 3.78% for the third quarter of 2026 compared to the second quarter of 2026. NIM excluding accretion⁽¹⁾ increased for the comparable periods from 3.45% to 3.50%. Excluding accretion interest, loan yields increased 4 bp and funding costs decreased 2 bps for the comparable periods. Net interest income increased due to elevated accretion income from loan payoffs, partially offset by a slightly higher interest expense driven by municipal deposits.

• Capital Management – Book value per share increased to $18.59 at September 30, 2026 from $18.44 at June 30, 2026 and $17.27 at September 30, 2025. During the quarter ended September 30, 2026, the Company declared a dividend of $0.14 per share and repurchased 148,006 shares of its outstanding common stock for approximately $3.4 million.

• Asset Quality – Nonperforming assets were 1.27% of total assets at September 30, 2026, an increase from 1.09% at June 30, 2026 and an increase from 0.45% at September 30, 2025. Classified assets were 1.61% of total assets at September 30, 2026, an increase when compared to 1.41% at June 30, 2026 and 0.83% at September 30, 2025. The allowance for credit losses ("ACL") was $59.6 million at both September 30, 2026 and September 30, 2025, and $58.7 million at June 30, 2026. The ACL as a percentage of loans increased to 1.21% at September 30, 2026 compared to 1.20% at June 30, 2026 and decreased compared to 1.22% at September 30, 2025.

• Operating Leverage – The efficiency ratio for the third quarter of 2026 was 56.15%, compared to 57.76% in the second quarter of 2026 and 61.00% for the third quarter of 2025. The adjusted efficiency ratio – non-GAAP⁽¹⁾, which excludes amortization of intangibles, was 53.30% for the third quarter of 2026, compared to 54.49% for the second quarter of 2026 and 57.30% for the third quarter of 2025. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

"Our third quarter reflected very strong core earnings, driven by continued expansion in net interest margin, growth in net interest income and lower noninterest expense, which further improved operating leverage," stated James ("Jimmy") M. Burke, President and Chief Executive Officer of Shore Bancshares, Inc. "Pre-tax, pre-provision income increased 5.6% from the prior quarter, reflecting our disciplined approach to balance sheet management, the strength of our deposit franchise and our focus on operational execution.

Net income for the quarter was impacted by a higher provision for credit losses, primarily related to a partial charge-off on a multifamily relationship that we downgraded last year. As we pursued an exit from these credits, updated valuations reflected property-specific issues that reduced collateral values. Our approach is to address potential credit problems as early as possible, and our core performance gives us the flexibility to do so. Capital levels remained strong, book value per share increased and we continued to return capital to shareholders through our quarterly dividend and share repurchases. Going forward, we remain focused on prudent growth, continually managing expenses and creating long-term value for our shareholders."

Balance Sheet Review

Total assets were $6.45 billion at September 30, 2026, an increase of $302.9 million from June 30, 2026. The increase was primarily due to an increase in cash and cash equivalents of $197.4 million, an increase in available for sale securities of $93.5 million and an increase in loans of $24.9 million. Total assets increased $195.5 million, or 3.1%, when compared to $6.26 billion at December 31, 2025. The increase was primarily due to an increase in cash and cash equivalents of $99.5 million and an increase in our investment securities portfolio of $101.7 million. The increases in cash and cash equivalents during the quarter and year were primarily driven by the seasonality of municipal deposits.

CRE loans (excluding land and construction) were $2.58 billion at September 30, 2026 compared to $2.64 billion at December 31, 2025. The office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $447.0 million, or 9.1% of total loans at September 30, 2026. The following table provides the stratification of the classes of CRE loans (excluding land and construction) at September 30, 2026.

The office CRE loan portfolio included loans to medical tenants of $96.2 million, or 21.5% of the total office CRE loan portfolio, at September 30, 2026. The office CRE loan portfolio also included loans secured by buildings with government or government contractor tenants of $66.9 million, or 15.0% of the total office CRE loan portfolio at the same date. At September 30, 2026, the average loan debt service coverage ratio on the office CRE loan portfolio was 1.7x and the average LTV was 49.15%.

The 449 loans in the office CRE portfolio at September 30, 2026 had an average loan size of $1.0 million and a median loan size of $399 thousand. LTV estimates for the office CRE portfolio at September 30, 2026 are summarized below and LTV collateral values are based on the most recent appraisal, which may vary from the appraised value at loan origination.

There were 14 office CRE loans with balances greater than $5.0 million, totaling $136.1 million at September 30, 2026 and $166.1 million at December 31, 2025. The decrease in this portfolio segment was the result of normal amortization and payoff of one loan. At September 30, 2026, 80.3% of the office CRE loan balance was secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.1% was secured by properties with five stories or less. Office CRE loan balances that were classified as special mention or substandard were $8.2 million at September 30, 2026. There were no charge-offs within the office CRE portfolio during the three and nine months ended September 30, 2026 and 2025. During the third quarter of 2026, the Company foreclosed on an office commercial real estate property located in Virginia with a carrying value of $10.8 million. The property had previously been reported as a nonperforming asset in prior periods and was transferred to other real estate owned ("OREO") during the quarter.

Nonperforming assets were $81.8 million and $67.2 million, or 1.27% and 1.09% of total assets, as of September 30, 2026 and June 30, 2026, respectively. Nonperforming assets included three large loans with an aggregate loan balance of $48.2 million. These nonaccrual loans primarily consist of multifamily real estate loans with collateral in Virginia and North Carolina. As of September 30, 2026, these loans had been partially charged-off by $3.9 million, reflecting updated, lower appraisals and carried specific reserves of $3.1 million. The decline in appraised values was driven by property-specific factors, including unanticipated capital investment requirements and financial stress among a tenant base disproportionately affected by inflation. Management believes these conditions are unique to the underlying properties and are not indicative of broader portfolio trends. When comparing September 30, 2026 to September 30, 2025, nonperforming assets increased $53.7 million, primarily due to an increase in nonaccrual loans of $43.8 million, and an increase in other real estate and repossessed marine and auto assets of $9.9 million. Substandard loans, which include nonaccrual loans and accruing loans 90 days or more past due, were $90.3 million at September 30, 2026 compared to $84.3 million at June 30, 2026 and $48.5 million at September 30, 2025.

Special mention loans decreased to $54.6 million at September 30, 2026 compared to $73.0 million at June 30, 2026 and compared to $71.0 million at September 30, 2025. As of September 30, 2026, there were three special mention loans with individual balances greater than $5.0 million, totaling $33.3 million. During the third quarter of 2026, the Company transferred a loan to nonperforming assets that was previously considered a special mention loan of $19.2 million. The remaining loans consist primarily of multifamily commercial real estate and other commercial real estate exposures.

The Bank's loan portfolio remains well positioned to benefit from higher interest rates through ongoing loan repricing. However, while interest rates remain elevated and the potential for additional rate increases persists, such conditions may place pressure on debt service capacity and liquidity for certain borrowers. Management continues to proactively engage with borrowers and, when appropriate may utilize prudent loan modifications to support repayment performance. In addition, the Bank routinely performs portfolio stress testing to evaluate the potential impact of varying interest rate and economic scenarios on borrower performance and overall credit quality. The Bank closely monitors portfolio performance and believes its disciplined underwriting standards, relationship-based lending approach, active credit oversight, and ongoing stress-testing practices provide a strong foundation for managing credit risk throughout changing interest rate environments.

Total deposits increased $296.6 million from June 30, 2026 to $5.70 billion at September 30, 2026 and increased $162.5 million when compared to December 31, 2025. The year-to-date increase in total deposits was primarily due to an increase in interest-bearing checking of $216.9 million and an increase in noninterest-bearing deposits of $29.3 million. These increases were partially offset by a decrease in money market and savings accounts of $56.9 million and a decrease in time deposits of $16.8 million. Core deposits, which exclude municipal and cannabis deposits, increased by $81.9 million, or 1.9%, during the same period.

Total funding, which includes customer deposits, Federal Home Loan Bank ("FHLB") advances and brokered deposits, was $5.70 billion at September 30, 2026, compared to $5.40 billion at June 30, 2026. The Company had no FHLB advances at September 30, 2026 and June 30, 2026. Brokered deposits were $803 thousand and $796 thousand at September 30, 2026 and June 30, 2026, respectively. Total reciprocal deposits were $1.59 billion and $1.33 billion at September 30, 2026 and June 30, 2026, respectively.

Uninsured deposits were $1.04 billion, or 18.3% of total deposits, at September 30, 2026. Uninsured deposits, excluding deposits secured with pledged collateral, were $877.1 million, or 15.4% of total deposits, at September 30, 2026. At September 30, 2026, available liquidity was $2.23 billion, including $912.7 million in secured borrowing capacity at the FHLB, $38.0 million in secured borrowing capacity through the FRB Discount Window, $444.7 million in unsecured lines of credit with other correspondent banks, $379.9 million in unpledged securities and $455.1 million in cash and cash equivalents.

Total stockholders' equity at September 30, 2026 increased $29.4 million, or 5.0%, when compared to December 31, 2025, primarily due to current year earnings, partially offset by cash dividends paid, share repurchase activity and an increase in accumulated other comprehensive losses. As of September 30, 2026 and 2025, the ratio of total equity to total assets was 9.60% and 9.19%, respectively. As of September 30, 2026, the ratio of total tangible equity to total tangible assets^([2]) was 8.36%, compared to 8.06% and 7.80% as of December 31, 2025 and September 30, 2025, respectively. The Company's Tier 1 and Total Risk-Based Capital Ratios at September 30, 2026 were 12.06% and 14.53%, respectively.

Review of Quarterly Financial Results

Net interest income was $55.1 million for the third quarter of 2026, compared to $52.9 million for the second quarter of 2026 and $48.4 million for the third quarter of 2025. The increase in net interest income when compared to the second quarter of 2026 was primarily due to an increase in interest on loans of $2.2 million, an increase in interest on deposits with other banks of $251 thousand, partially offset by an increase in interest expense on deposits of $393 thousand. The increase in net interest income was $6.7 million when compared to the third quarter of 2025, and was primarily due to a decrease in interest expense on deposits of $3.1 million, an increase in interest on loans of $2.0 million and a decrease in interest expense on short-term borrowings of $640 thousand. These favorable changes were partially offset by an increase in interest expense on long-term borrowings of $166 thousand.

The Company's NIM increased to 3.78% for the third quarter of 2026 from 3.70% for the second quarter of 2026, primarily due to higher interest income on loans and investment securities coupled with higher accelerated accretion related to loan payoffs. NIM excluding accretion increased for the comparable periods from 3.45% to 3.50%. Excluding accretion interest income, loan yields increased 4 bp and funding costs decreased 2 bps for the comparable periods. The Company's NIM increased to 3.78% for the third quarter of 2026 from 3.41% for the third quarter of 2025. The Company's average interest-earning asset yield increased to 5.47% for the third quarter of 2026 compared to 5.41% for the third quarter of 2025, while the average cost of funds decreased 29 bps to 1.80% from 2.09% for the same periods.

The provision for credit losses was $5.3 million for the three months ended September 30, 2026. The comparable amounts were $896 thousand for the three months ended June 30, 2026 and $3.0 million for the three months ended September 30, 2025. The increase in the provision for credit losses for the third quarter of 2026 compared to the second quarter of 2026 was due to higher multifamily loan-related charge-offs and specific reserves partially offset by favorable credit outlook. The allowance for credit losses increased to 1.21% of total loans at September 30, 2026 from 1.20% at June 30, 2026, and decreased compared to September 30, 2025. Net charge-offs increased to $4.8 million for the third quarter of 2026 compared to $123 thousand for the second quarter of 2026 and $1.8 million for the third quarter of 2025. The increase was driven by a partial multifamily loan write-off in the third quarter 2026.

Total noninterest income for the third quarter of 2026 was $7.7 million, a decrease of $1.2 million from the second quarter of 2026. The decrease in noninterest income was primarily related to lower banking revenue and fees for other bank services. Total noninterest income decreased $263 thousand during the third quarter of 2026 when compared to the third quarter of 2025 due to lower mortgage-related activity.

Total noninterest expense of $35.3 million for the third quarter of 2026 decreased $405 thousand compared to $35.7 million for the second quarter of 2026, and increased $884 thousand compared to $34.4 million for the third quarter of 2025. The decrease from the second quarter of 2026 was primarily due to a decrease in legal and professional fees of $474 thousand and a decrease in amortization of intangible assets of $234 thousand, partially offset by an increase in software and processing costs of $466 thousand. The increase from the third quarter of 2025 was primarily due to an increase in software and data processing costs of $646 thousand and an increase in other noninterest expense of $500 thousand. These were partially offset by a decrease in amortization of other intangible assets of $298 thousand. 

The efficiency ratio for the third quarter of 2026 when compared to the second quarter of 2026 and the third quarter of 2025 was 56.15%, 57.76% and 61.00%, respectively. Adjusted efficiency ratios – non-GAAP^([3]) for the same periods were 53.30%, 54.49% and 57.30%, respectively.

Review of Nine Month Financial Results

Net interest income for the nine months ended September 30, 2026 was $160.6 million, an increase of $19.1 million, or 13.5%, when compared to the nine months ended September 30, 2025. The increase in net interest income was primarily due to an increase in total interest income of $6.5 million, or 2.8%, which included an increase in interest on loans of $6.1 million, or 2.9%, and an increase in interest income on taxable investments of $668 thousand. These were partially offset by a decrease in interest on deposits with other banks of $303 thousand, or 4.9%. The increase in interest on loans was primarily due to the increase in yields of 9 bps. The decrease in total interest expense was primarily due to a decrease in interest on deposits of $11.4 million and lower interest on short-term borrowings of $1.8 million. These were partially offset by the increase in interest expense on long-term borrowings of $550 thousand. The decrease in short-term borrowings is due to lower FHLB borrowings and subordinated debt-related expenses that were classified as short-term borrowings in 2025.

The Company's NIM increased from 3.32% for the nine months ended September 30, 2025 to 3.71% for the nine months ended September 30, 2026. Margins were higher due to a $99.1 million increase in interest-earning asset balances and a 6 bp increase in interest-earning asset yields. These positive movements were coupled with a lower cost of interest-bearing deposits. The increase in the average balances of interest-bearing deposits of $31.7 million was offset by a 43 basis point decrease in the associated rates paid, as well as a $50.3 million decrease in the average balance of FHLB advances and a 103 basis point decrease in the associated rates paid. Net accretion income impacted net interest margin by 28 basis points and 22 basis points for the nine months ended September 30, 2026 and 2025, respectively, which resulted in NIM excluding accretion of 3.43% and 3.10% for the same periods.

The provision for credit losses for the nine months ended September 30, 2026 and 2025 was $6.2 million and $5.5 million, respectively. The increase in the provision for credit losses during 2026 was due to higher net charge-offs. Net charge-offs for the nine months ended September 30, 2026 were $5.8 million, compared to $3.0 million for the nine months ended September 30, 2025. The increase was driven by a partial multifamily loan write-off in the third quarter 2026.

Total noninterest income for the nine months ended September 30, 2026 decreased $729 thousand, or 3.0%, when compared to the same period in 2025. The decrease was primarily due to a $1.4 million decrease in other noninterest income and a $737 thousand decrease in mortgage banking revenue, partially offset by a $692 thousand increase in trust and investment fee income and a $398 thousand increase in interchange credits. The decrease in other noninterest income is primarily due to valuation adjustments on equity securities and supplemental employee retirement plans.

Total noninterest expense for the nine months ended September 30, 2026 increased $5.5 million, or 5.3%, when compared to the same period in 2025. Noninterest expense line items increased primarily due to higher salaries and employee benefit expenses of $3.8 million and a $1.6 million increase in software and data processing expense. These increases were partially offset by lower amortization of intangible assets of $893 thousand during the nine months ended September 30, 2026.

The efficiency ratio for the nine months ended September 30, 2026 was 58.58% compared to 61.78% for the nine months ended September 30, 2025. Adjusted efficiency ratios – non-GAAP^([4]) for the same periods were 55.41% and 57.73%, respectively.

Shore Bancshares Information

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

Forward-Looking Statements

This news release 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," "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 news release 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 our Annual Report on Form 10-K for the year ended December 31, 2025, and in any subsequent filings with the Securities and Exchange Commission 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.