SHORE BANCSHARES INC

Previous wording

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) filed with SEC and available at the SEC’s website (www.sec.gov).

Current wording

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”) filed with SEC and available at the SEC’s website (www.sec.gov). The information on, or accessible through, our website or any other website cited in this Quarterly Report on Form 10-Q is not part of, or incorporated by reference into, this Quarterly Report on Form 10-Q and should not be relied upon in determining whether to make an investment decision.

Previous wording

Shore Bancshares, Inc. is headquartered on the Eastern Shore of Maryland. It is the parent company of Shore United Bank, N.A. (the “Bank”). The Bank currently operates 40 full-service branches in Maryland, Delaware and Virginia. The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through our broker/dealer, LPL Financial. The Company, through Wye Trust, a division of the Bank, offers wealth management, corporate trustee services and trust administration to customers within our market areas and nationwide. The Company offered title services through its wholly-owned subsidiary, Mid-Maryland Title Company, Inc. (the “Title Company”), which engaged in residential and commercial real estate settlement activities and offered title insurance policies, title search and lien satisfaction services. The Title Company ceased conducting real estate closings effective March 31, 2025.

Current wording

Shore Bancshares, Inc. is headquartered on the Eastern Shore of Maryland. It is the parent company of Shore United Bank, N.A. (the “Bank”). The Bank currently operates 40 full-service branches in Maryland, Delaware and Virginia. The Company, through Wye Financial Partners, a division of the Bank, offers full-service investment, insurance and financial planning services through our broker/dealer, LPL Financial. The Company, through Wye Trust, a division of the Bank, offers wealth management, corporate trustee services and trust administration to customers within our market areas and nationwide.

Previous wording

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

Current wording

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.

Previous wording

The Company’s net income for the third quarter of 2025 was $14.3 million, or $0.43 per diluted common share, compared to $15.5 million, or $0.46 per diluted common share, for the second quarter of 2025. The Company had net income of $11.2 million, or $0.34 per diluted common share, for the third quarter of 2024.

Current wording

The Company’s net income for the first quarter of 2026 was $17.1 million, or $0.51 per diluted common share, compared to $15.9 million, or $0.48 per diluted common share, for the fourth quarter of 2025. The Company had net income of $13.8 million, or $0.41 per diluted common share, for the first quarter of 2025.

Previous wording

•Net Income – Net income for the third quarter of 2025 decreased $1.2 million to $14.3 million from $15.5 million in the second quarter of 2025. Net income decreased primarily due to lower noninterest income of $1.6 million driven by reduced mortgage banking activity and a higher provision for loan losses of $1.5 million due to a large marine loan write-off, partially offset by an increase in net interest income of $1.4 million. Net income for the nine months ended September 30, 2025 was $43.6 million, compared to $30.6 million for the nine months ended September 30, 2024. The increase was primarily driven by an increase in net interest income due to loans repricing favorably coupled with a lower cost of deposits during the period.

Current wording

•Net Income – Net income for the first quarter of 2026 increased $1.2 million to a record $17.1 million from $15.9 million in the fourth quarter of 2025. Net income increased primarily due to an increase in net interest income of $2.4 million and a decrease in the provision for credit losses of $2.7 million, partially offset by lower noninterest income of $1.7 million and an increase in noninterest expense of $1.6 million. The lower noninterest income was due to a one-time receipt of insurance proceeds in the fourth quarter of 2025.

Previous wording

•Return on Average Assets (“ROAA”) – The Company reported ROAA of 0.95% for the third quarter of 2025, compared to 1.03% for the second quarter of 2025 and 0.77% for the third quarter of 2024. Non-U.S. generally accepted accounting principles (“GAAP”) ROAA(1)was 1.05% for the third quarter of 2025, compared to 1.15% for the second quarter of 2025 and 0.90% for the third quarter of 2024.

Current wording

•Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.12% for the first quarter of 2026, compared to 1.02% for the fourth quarter of 2025 and 0.91% for the first quarter of 2025. Adjusted ROAA – non-U.S. generally accepted accounting principles (“GAAP”)(1), which excludes amortization of other intangible assets (net of tax), was 1.22% for the first quarter of 2026, compared to 1.11% for the fourth quarter of 2025 and 1.02% for the first quarter of 2025.

Previous wording

•Net Interest Margin (“NIM”)– Net interest income for the third quarter of 2025 increased $1.4 million to $48.7 million from $47.3 million for the second quarter of 2025. NIM increased 7 basis points (“bps”) to 3.42% during the third quarter of 2025 from 3.35% in the second quarter of 2025. NIM excluding accretion(1) increased for the comparable periods from 3.10% to 3.22%. Excluding accretion interest, loan yields increased 6 bps and funding costs decreased 6 bps for the comparable periods. Net interest income increased due to modest loan growth coupled with a lower cost of deposits. These favorable changes were partially offset by a lower yield on investments and lower average deposits with other institutions.

Current wording

•Net Interest Margin (“NIM”)– Net interest income for the first quarter of 2026 increased $2.4 million to $52.6 million compared to the fourth quarter of 2025. NIM increased 21 basis points (“bps”) to 3.64% during the first quarter of 2026 compared to the fourth quarter of 2025. NIM excluding accretion(1) increased for the comparable periods from 3.24% to 3.35%. Excluding accretion interest, loan yields decreased 1 bp and funding costs decreased 13 bps for the comparable periods. Net interest income increased due to accelerated accretion due to loan payoffs coupled with a lower cost of deposits and lower long-term borrowing expenses. These favorable changes were partially offset by lower yields on interest-bearing deposits with other institutions.

Previous wording

•Book Value per Share –Book value per share increased to $17.27 at September 30, 2025 from $16.94 at June 30, 2025 and $16.00 at September 30, 2024.

Current wording

•Book Value per Share –Book value per share increased to $18.02 at March 31, 2026 from $17.65 at December 31, 2025 and $16.55 at March 31, 2025.

Previous wording

•Asset Quality– Nonperforming assets to total assets were 0.45% at September 30, 2025, an increase from 0.33% at June 30, 2025 and 0.27% at September 30, 2024. Classified assets to total assets were 0.83% at September 30, 2025, an increase when compared to 0.37% at June 30, 2025 and 0.39% at September 30, 2024. The allowance for credit losses (“ACL”) was $59.6 million at September 30, 2025, compared to $57.9 million at December 31, 2024 and $58.7 million at September 30, 2024. The ACL as a percentage of loans increased to 1.22% at September 30, 2025 compared to 1.21% at December 31, 2024, and decreased compared to 1.24% at September 30, 2024.

Current wording

•Asset Quality– Nonperforming assets were 1.10% of total assets at March 31, 2026, an increase from 0.69% at December 31, 2025 and 0.31% at March 31, 2025. Classified assets were 1.38% of total assets at March 31, 2026, an increase when compared to 0.96% at December 31, 2025 and 0.36% at March 31, 2025. The allowance for credit losses (“ACL”) was $58.5 million at March 31, 2026, compared to $58.8 million at December 31, 2025 and $58.0 million at March 31, 2025. The ACL as a percentage of loans increased to 1.21% at March 31, 2026 compared to 1.20% at December 31, 2025 and remained flat compared to March 31, 2025.

Previous wording

•Operating Leverage– The efficiency ratio for the third quarter of 2025 was 61.00% compared to 60.83% in the second quarter of 2025 and 67.49% for the third quarter of 2024. The non-GAAP efficiency ratio(1), which excludes amortization, was 57.30% for the third quarter of 2025, compared to 56.73% for the second quarter of 2025 and 62.10% for the third quarter of 2024. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

Current wording

•Operating Leverage– The efficiency ratio for the first quarter of 2026 was 61.97%, compared to 60.06% in the fourth quarter of 2025 and 63.64% for the first quarter of 2025. The adjusted efficiency ratio – non-GAAP(1), which excludes amortization of intangibles, was 58.57% for the first quarter of 2026, compared to 56.59% for the fourth quarter of 2025 and 59.25% for the first quarter of 2025. Management anticipates ongoing expense management of professional services and technology investments will result in continued improvements in operating leverage over time.

Previous wording

The Company reported net income for the three months ended September 30, 2025 of $14.3 million, or $0.43 diluted earnings per common share, compared to $11.2 million, or diluted earnings per common share of $0.34, for the three months ended September 30, 2024.

Current wording

The Company reported net income for the three months ended March 31, 2026 of $17.1 million, or $0.51 per diluted common share, compared to $13.8 million, or $0.41 per diluted common share, for the three months ended March 31, 2025.

Previous wording

Tax-equivalent NII is NII adjusted for the tax-favored status of income from certain loans and investments. As shown in the table below, tax-equivalent NII was $48.7 million for the third quarter of 2025 and $43.3 million for the third quarter of 2024. The increase was primarily due to increases in interest and fees on loans of$1.8 million and interest on deposits at other banks of$651 thousand, coupled with a decrease in interest expense on deposits of $2.4 million and borrowings of $512 thousand.

Current wording

Taxable-equivalent NII is NII adjusted for the tax-favored status of income from certain loans and investments. As shown in the table below, taxable-equivalent NII was $52.6 million for the first quarter of 2026 and $46.0 million for the first quarter of 2025. The increase was primarily due to a decrease in interest expense on deposits of $3.8 million, an increase in interest and fees on loans of $3.3 million and a decrease in interest expense on borrowings of $391 thousand, partially offset by a decrease in interest on deposits with other banks of $951 thousand.

Previous wording

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

Current wording

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

Previous wording

(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.

Current wording

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

Previous wording

(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 $3.3 million and $5.0 million of accretion interest on loans for the three months ended September 30, 2025 and 2024, respectively.

Current wording

(3) Interest income on loans includes accreted loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations. There were $4.3 million and $3.7 million of accretion interest on loans for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments. There were $280 thousand and $287 thousand of amortization of deposit discounts and $232 thousand and $232 thousand of amortization of borrowing fair value adjustments for the three months ended September 30, 2025 and 2024, respectively.

Current wording

(4) Interest expense on deposits and borrowings includes amortization of deposit discounts and amortization of borrowing fair value adjustments. There were zero and $334 thousand of amortization of deposit discounts and $79 thousand and $232 thousand of amortization of borrowing fair value adjustments for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

The Company’s NIM increased to 3.42% for thethree months ended September 30, 2025, from 3.17% for thethree months ended September 30, 2024. Comparing thethree months ended September 30, 2025 to thethree months ended September 30, 2024, the Company’s interest-earning asset yields decreased to 5.42% from 5.47%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 29 bps basis points, from 2.38% to 2.09%for the same period.

Current wording

The Company’s NIMincreased to 3.64% for thethree months ended March 31, 2026, from 3.21% for thethree months ended March 31, 2025. Comparing thethree months ended March 31, 2026 to thethree months ended March 31, 2025, the Company’s interest-earning asset yields increased to 5.44% from 5.32%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 30 bps, to 1.90%from 2.20%, for the same periods.

Previous wording

Total noninterest income for the three months ended September 30, 2025 was $7.7 million, an increase of $414 thousand from $7.3 million for the three months ended September 30, 2024. The increase was primarily due to a $101 thousand increase in mortgage banking revenue, driven by increased mortgage servicing activity, and a $147 thousand increase in interchange credits.

Current wording

Total noninterest income for the three months ended March 31, 2026 was $7.2 million, an increase of $110 thousand from $7.1 million for the three months ended March 31, 2025. The increase was primarily due to an increase in trust and investment fee income of $314 thousand, an increase in mortgage banking revenue of $210 thousand driven by increased mortgage servicing activity, and a $121 thousand increase in interchange credits. These favorable changes were partially offset by a decrease in other noninterest income of $617 thousand due to the absence of one-time bank-owned life insurance income recorded in the first quarter of 2025.

Previous wording

Total noninterest expense of $34.4 million for the three months ended September 30, 2025 increased $265 thousand when compared to the three months ended September 30, 2024 total noninterest expense of $34.1 million. The increase was primarily due to higher salaries and benefits expense of $2.1 million and higher software and data processing costs of $736 thousand, partially offset by the absence of the credit fraud loss-related expenses incurred in the third quarter 2024, lower legal and professional services of $373 thousand and lower amortization of other intangible assets of $297 thousand.

Current wording

$3.2 million and higher software and data processing costs of $449 thousand, partially offset by the decrease in the amortization of other intangible assets of $298 thousand.

Previous wording

The Company reported income tax expense of $4.6 million and $3.8 million for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate was 24.4% and 25.2% for the three months ended September 30, 2025 and 2024, respectively.

Current wording

The Company reported income tax expense of $5.6 million and $4.5 million for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate was 24.58% and 24.61% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Total assets were $6.28 billion at September 30, 2025, an increase of $47.7 million, or 0.8%, when compared to $6.23 billion at December 31, 2024. The aggregate increase was primarily due to an increase in the loan portfolio of $111.0 million, partially offset by a decrease in interest-bearing deposits at other banks of $61.6 million and a decrease in the investment securities portfolio of $14.8 million. The decrease in interest-bearing deposits with other institutions was primarily driven by loan growth. Total assets increased $360.8 million, or 6.1%, from $5.92 billion when compared to September 30, 2024. The ratio of the ACL as a percentage of loans was 1.22% and 1.21% at September 30, 2025 and December 31, 2024, respectively.

Current wording

Total assets were $6.21 billion at March 31, 2026, a decrease of $52.8 million, or 0.8%, when compared to $6.26 billion at December 31, 2025. The decrease was primarily due to a decrease in our loan portfolio of $52.3 million and a decrease in cash and cash equivalents of $14.7 million, which were partially offset by an increase in our investment securities portfolio of $22.5 million. The ratio of the ACL as a percentage of loans was 1.21% and 1.20% at March 31, 2026 and December 31, 2025, respectively.

Previous wording

Cash and cash equivalents totaled $416.5 million at September 30, 2025, compared to $459.9 million at December 31, 2024. Total cash and cash equivalents fluctuate due to transactions in process and other liquidity demands. Management believes liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional and wholesale funding sources, and the portions of the investment and loan portfolios that mature within one year.

Current wording

Cash and cash equivalents totaled $340.8 million at March 31, 2026 compared to $355.6 million at December 31, 2025. 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. The decrease in cash and cash equivalents was primarily driven by seasonal run-off of the municipal deposits.

Previous wording

The investment portfolio includes debt and equity securities. Debt securities are classified as either AFS or HTM. AFS investment securities are stated at estimated fair value based on market prices. They represent securities which may be sold as part of the asset/liability management strategy or in response to changing interest rates. Net unrealized holding gains and losses on these securities are reported net of related income taxes as accumulated other comprehensive income (loss), a separate component of stockholders’ equity. Investment securities in the HTM category are stated at cost adjusted for amortization of premiums and accretion of discounts and the ACL. We have the intent and ability to hold such securities until maturity. At September 30, 2025, 29.5% of the portfolio of debt securities was classified as AFS and 70.5% was classified as HTM, compared to 23.7% and 76.3%, respectively, at December 31, 2024. See Note 2 – “Investment Securities” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1. of this Quarterly Report on Form 10-Q for additional details on the composition of the investment portfolio.

Current wording

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 March 31, 2026, 40.15% of the portfolio of debt securities was classified as AFS and 59.85% was classified as HTM, compared to 34.69% and 65.31%, respectively, at December 31, 2025. See Note 2 – “Investment Securities” in the “Notes to Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the composition of the investment portfolio.

Previous wording

At September 30, 2025, HTM securities, carried at amortized cost, totaled $433.4 million, compared to $481.1 million at December 31, 2024. At September 30, 2025, HTM securities consisted of 71.9% mortgage-backed, 26.5% U.S. government agencies and 1.6% other debt securities, compared to 70.0%, 27.5% and 2.5%, respectively, at December 31, 2024.

Current wording

At March 31, 2026, HTM securities, carried at amortized cost, totaled $393.6 million, compared to $414.8 million at December 31, 2025. At March 31, 2026, HTM securities consisted of 74.74% mortgage-backed securities, 23.49% U.S. government agency securities and 1.77% other debt securities, compared to 73.06%, 25.26% and 1.68%, respectively, at December 31, 2025.

Previous wording

At September 30, 2025 and December 31, 2024, 98.1% 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.

Current wording

At March 31, 2026 and December 31, 2025, 96.98% and 98.18%, 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.

Previous wording

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 September 30, 2025 or December 31, 2024. HTM securities that are not rated are agency mortgage-backed securities sponsored by U.S. government agencies, as well as direct obligations of the agencies, with the remainder being sub-debt of other banks.

Current wording

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 March 31, 2026 or December 31, 2025. 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 subordinated debt securities of other banks.

Previous wording

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

Current wording

The following tables present the amortized cost of HTM securities based on their lowest publicly available credit rating as of March 31, 2026 and December 31, 2025.

Previous wording

The Company originates residential mortgage loans for sale on the secondary market, which are recorded at fair value. At September 30, 2025 and December 31, 2024, the fair value of loans held for sale amounted to $21.5 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 three and nine months ended September 30, 2025, the Bank repurchased one loan valued at $523 thousand and two loans with an aggregate value of $938 thousand, respectively. No loans were repurchased during the three or nine months ended September 2024.

Current wording

The Company originates residential mortgage loans for sale on the secondary market, which are recorded at fair value. At March 31, 2026 and December 31, 2025, the fair value of loans held for sale amounted to $24.0 million and $32.5 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 three months ended March 31, 2026, the Bank repurchased no loans. During the three months ended March 31, 2025, the Bank repurchased one loan with an aggregate value of $415 thousand.

Previous wording

The Company’s loan portfolio has a CRE loan concentration, which is generally defined as a combination of certain construction and CRE loans. The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in CRE lending. Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential CRE concentration risk, institutions which have (1) total reported loans for construction, land development, and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total non-owner occupied CRE loans representing 300% or more of the institution’s total risk-based capital and the institution’s non-owner occupied CRE loan portfolio (including construction) has increased 50% or more during the prior 36 months are identified as having potential CRE concentration risk. Institutions which are deemed to have concentrations in CRE lending are expected to employ heightened levels of risk management with respect to their CRE portfolios and may be required to hold higher levels of capital. The Bank has a concentration in CRE loans, and experienced significant growth in its CRE portfolio with its acquisition of The Community Financial Corporation and its wholly-owned subsidiary, Community Bank of the Chesapeake. Non-owner occupied CRE loans totaled $2.16 billion and $2.08 billion at September 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 348.42% and 359.52%, respectively. Construction loans totaled $350.9 million and $336.0 million at September 30, 2025 and December 31, 2024, respectively, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 56.71% and 57.99%, respectively.

Current wording

The Company’s 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. Non-owner occupied CRE loans, including construction loans, totaled $2.14 billion and $2.15 billion at March 31, 2026 and December 31, 2025, respectively, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 332.94% and 342.55%, respectively.

Previous wording

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

Current wording

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 the Bank’s 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.

Previous wording

(1)Other non-owner occupied CRE loans include commercial - improved loans of $160.7 million, lot/land loans of $86.9 million, self-storage loans of $72.2 million and other loans of $94.0 million.

Current wording

(1)Other non-owner occupied CRE loans include commercial – improved loans of $160.1 million, self storage loans of $67.0 million, farm real estate loans of $46.4 million, lot/land loans of $3.3 million and other loans $89.3 million.

Previous wording

(3)Excludes loans held for sale of $21.5 million.

Current wording

(3)Excludes loans held for sale of$24.0 million.

Previous wording

(1)Other owner occupied CRE loans include church loans of $60.4 million, marina/boat loans of $39.3 million, fire/EMS building loans of $38.7 million and other loans of $76.8 million.

Current wording

(1)Other owner occupied CRE loans include church loans of $56.8 million, marina/boat slip loans of $17.7 million, fire/EMS building loans of $38.0 million and other loans $82.7 million.

Previous wording

(2)Excludes loans held for sale of $21.5 million.

Current wording

(2)Excludes loans held for sale of $24.0 million.

Previous wording

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $473.7 million, or 9.7% of total loans of $4.88 billion at September 30, 2025. The Bank’s office CRE loan portfolio included $129.7 million, or 27.4% of total office CRE loans, with medical tenants, and $54.0 million, or 11.4% of total office CRE loans, with government or government contractor tenants. There were 491 loans in the office CRE loan portfolio with an average and median loan size of $965 thousand and $366 thousand, respectively. Loan to Value (“LTV”) estimates are less than 50% for $156.7 million, or 33.1% of the office CRE loan portfolio, and greater than 80% for $10.2 million, or 2.2% 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.

Current wording

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $480.9 million, or 9.9% of total loans of $4.85 billion at March 31, 2026. The Bank’s office CRE loan portfolio included $113.6 million, or 23.6% of total office CRE loans, with medical tenants, and $69.3 million, or 14.4%, of total office CRE loans, with government or government contractor tenants. At March 31, 2026, there were 467 loans in the office CRE loan portfolio with an average and median loan size of $1.0 million and $378 thousand, respectively. Loan-to-value (“LTV”) estimates are less than or equal to 50% for $167.3 million, or 34.8%, of the office CRE loan portfolio, and greater than 80% for $11.1 million, or 2.3%, of the office CRE loan portfolio at March 31, 2026. 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 March 31, 2026 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.

Previous wording

The Bank had 16 office CRE loans totaling $144.7 million that were greater than $5.0 million at September 30, 2025, compared to 18 office CRE loans totaling $164.5 million at December 31, 2024. The decrease in this portfolio segment was the result of normal amortization, the payoff of a $5.6 million loan, andthe change in purpose of collateral of an $11.8 million loan from office to school. For the office CRE portfolio, at September 30, 2025, the average loan debt-service coverage ratio was 1.8x and the average LTV was 48.4%. Of the office CRE portfolio balance, 80.1% is secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 96.9% are secured by properties with five stories or less. Of the office CRE loans, $5.5 million will mature and $5.4 million will reprice prior to December 31, 2025. Of the office CRE loans, $13.7 million are special mention or substandard.

Current wording

There were 17 office CRE loans with balances greater than $5.0 million, totaling $164.8 million at March 31, 2026, compared to 17 loans totaling $166.1 million at December 31, 2025. The decrease in this portfolio segment was the result of normal amortization. Of the office CRE portfolio balance, 81.1% of the loans were secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.5% were secured by properties with five stories or less at March 31, 2026. Of the office CRE loans, $28.7 million were classified as special mention or substandard at March 31, 2026. There were no charge-offs within the office CRE portfolio during the three months ended March 31, 2026.

Previous wording

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

Current wording

The following table sets forth the maturities and interest rate sensitivity of the loan portfolio at March 31, 2026. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as maturing within one year.

Previous wording

The ACL was $59.6 million at September 30, 2025, $57.9 million at December 31, 2024 and $58.7 million at September 30, 2024. There were net charge-offs of $1.8 million for the three months ended September 30, 2025, compared to net charge-offs of $1.3 million for the three months ended September 30, 2024. There were net charge-offs of $3.0 million for the nine months ended September 30, 2025, compared to net charge-offs of $2.7 million for the nine months ended September 30, 2024. The ratio of annualized net charge-offs to average loans was 0.15% and 0.11% for the three months ended September 30, 2025 and 2024, respectively. The ratio of annualized net charge-offs to average loans was 0.08% and 0.08% for the nine months ended September 30, 2025 and 2024, respectively.

Current wording

The Company recorded a provision for credit losses on loans of $85 thousand for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025, primarily due to loan growth and net charge-offs, which amounted to $847 thousand, or 0.02% of average loans, for the three months ended March 31, 2026, compared to net charge-offs of $554 thousand, or 0.01% of average loans, for the three months ended March 31, 2025. The increase in charge-offs in 2026 was primarily due to the marine and CRE portfolio. The ratio of annualized net charge-offs to average loans was 0.07% and 0.05% for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

Management remains focused on its efforts to dispose of problem loans and to prudently charge-off nonperforming loans to enable the Company to maintain overall credit quality. The ACL as a percentage of period-end loans was 1.22% at September 30, 2025 and December 31, 2024.

Current wording

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.

Previous wording

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

Current wording

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.