SHORE BANCSHARES INC

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.

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 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 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.

Current wording

The Company’s net income for the second quarter of 2026 was $18.9 million, or $0.56 per diluted common share, compared to $17.1 million, or $0.51 per diluted common share, for the first quarter of 2026. The Company had net income of $15.5 million, or $0.46 per diluted common share, for the second quarter of 2025.

Previous 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.

Current wording

•Net Income – Net income for the second quarter of 2026 increased $1.8 million to $18.9 million, from $17.1 million in the first quarter of 2026. Net income increased primarily due to a decrease in interest expense of $1.3 million, an increase in other noninterest income of $1.2 million and a decrease in salaries and employee benefits of $1.2 million, which were partially offset by a decrease in interest on deposits with other banks of $858 thousand and a higher provision for credit losses of $811 thousand. Net income for the six months ended June 30, 2026 was $36.0 million, compared to $29.3 million for the six months ended June 30, 2025.

Previous 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.

Current wording

•Return on Average Assets (“ROAA”) – The Company reported ROAA of 1.24% for the second quarter of 2026, compared to 1.12% for the first quarter of 2026 and 1.03% for the second quarter of 2025. Adjusted ROAA – non-U.S. generally accepted accounting principles (“GAAP”)(1)was 1.34% for the second quarter of 2026, compared to 1.22% for the first quarter of 2026 and 1.15% for the second quarter of 2025.

Previous 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.

Current wording

•Net Interest Margin (“NIM”)– Net interest income (“NII”) for the second quarter of 2026 increased $364 thousand to $52.9 million compared to the first quarter of 2026. NIM increased 6 basis points (“bps”) to 3.70% during the second quarter of 2026 compared to the first quarter of 2026. NIM excluding accretion(1) increased for the comparable periods from 3.35% to 3.45%. Excluding accretion interest, loan yields decreased 1 bp and funding costs decreased 8 bps for the comparable periods. Net interest income increased due to additional interest income from loan payoffs coupled with a lower cost of deposits. Loan payoffs resulted in accelerated accretion and interest income recovery on nonaccrual loans.

Previous 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.

Current wording

•Capital Management –Book value per share increased to $18.44 at June 30, 2026 from $18.02 at March 31, 2026 and $16.94 at June 30, 2025. During the quarter ended June 30, 2026, the Company announced a $30 million share repurchase program and repurchased 40,093 shares of its outstanding common stock for approximately $891 thousand. During the second quarter of 2026, the Company declared a dividend of $0.14 per share, which represents a $0.02, or 16.7%, increase from the dividend paid in the prior quarter.

Previous 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.

Current wording

•Asset Quality–Nonperforming assets were 1.09% of total assets at June 30, 2026, a decrease from 1.10% at March 31, 2026 and anincrease from 0.33% at June 30, 2025. Classified assets were 1.41% of total assets at June 30, 2026, an increase when compared to 1.38% at March 31, 2026 and 0.37% at June 30, 2025. The allowance for credit losses was $58.7 million at June 30, 2026, compared to $58.5 million at March 31, 2026 and at June 30, 2025. The ACL as a percentage of loans decreased to 1.20% at June 30, 2026 compared to 1.21% at March 31, 2026 and at June 30, 2025.

Previous 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.

Current wording

•Operating Leverage– The efficiency ratio for the second quarter of 2026 was 57.76%, compared to 61.97% for the first quarter of 2026 and 60.83% for the second quarter of 2025. The adjusted efficiency ratio – non-GAAP(1), which excludes amortization of intangibles, was 54.49% for the second quarter of 2026, compared to 58.57% for the first quarter of 2026 and 56.73% for the second 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

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

Current wording

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

Previous 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.

Current wording

The Company reported net income for the three months ended June 30, 2026 of $18.9 million, or $0.56 per diluted common share, compared to $15.5 million, or $0.46 per diluted common share, for the three months ended June 30, 2025.

Previous 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.

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 increased $5.8 million to $53.0 million for the second quarter of 2026, compared to $47.2 million for the second quarter of 2025. The increase in net interest income was primarily due to a decrease in interest expense on deposits of $4.4 million, an increase in interest on loans of $849 thousand and a decrease in interest expense on short-term borrowings of $589 thousand. These favorable changes were partially offset by an increase in interest expense on long-term borrowings of $177 thousand. The decrease in interest expense on deposits is reflective of rate reductions during 2026.

Previous wording

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

Current wording

The following table presents taxable-equivalent NII for each of the periods indicated.

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 $4.3 million and $3.7 million of accretion interest on loans for the three months ended March 31, 2026 and 2025, 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 $3.8 million and $4.2 million of accretion interest on loans for the three months ended June 30, 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 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.

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 $435 thousand of amortization of deposit discounts and $79 thousand and $232 thousand of amortization of borrowing fair value adjustments for the three months ended June 30, 2026 and 2025, respectively. All deposit discounts have been fully amortized as of December 31, 2025.

Previous 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.

Current wording

The Company’s NIMincreased to 3.70% for thethree months ended June 30, 2026, from 3.34% for thethree months ended June 30, 2025. Comparing thethree months ended June 30, 2026 to thethree months ended June 30, 2025, the Company’s interest-earning asset yields were flat at 5.42%, while the cost of funds repriced at a faster pace, which resulted in a decrease of 36 bps, to 1.81%from 2.17%, for the same periods.

Previous wording

ACL and Provision for Credit Losses

Current wording

ACL and Provision for Credit Losses (“PCL”)

Previous 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.

Current wording

Total noninterest income for the three months ended June 30, 2026 was $8.8 million, a decrease of $576 thousand, or 6.1%, from $9.4 million for the three months ended June 30, 2025. The decrease was primarily due to a decrease in mortgage banking revenue of $825 thousand and other noninterest income, partially offset by increases in service charges on deposit accounts, trust and investment fee income and interchange credits.

Previous wording

Noninterest expense of $37.1 million for the three months ended March 31, 2026 increased $3.3 million when compared to the $33.7 million for the three months ended March 31, 2025. The increase was primarily due to higher salaries and employee benefits expense of

Current wording

Total noninterest expense was $35.7 million for the three months ended June 30, 2026, an increase of $1.3 million, or 3.7%, when compared to $34.4 million for the three months ended June 30, 2025. The increase was primarily due to higher salaries and employee benefits expense of $720 thousand and higher software and data processing costs of $516 thousand, partially offset by the decrease in the amortization of other intangible assets of $297 thousand.

Previous 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.

Current wording

The Company reported income tax expense of $6.3 million and $5.1 million for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate was 25.09% and 24.84% for the three months ended June 30, 2026 and 2025, respectively.

Previous 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.

Current wording

Total assets were $6.15 billion at June 30, 2026, a decrease of $107.4 million, or 1.7%, when compared to $6.26 billion at December 31, 2025. The decrease was primarily due to a decrease in our loan portfolio of $22.6 million and a decrease in cash and cash equivalents of $97.9 million, which were partially offset by an increase in our investment securities portfolio of $18.4 million. The ratio of the ACL as a percentage of loans was 1.20% and 1.20% at June 30, 2026 and December 31, 2025, respectively.

Previous 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.

Current wording

Cash and cash equivalents totaled $257.7 million at June 30, 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 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 (“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.

Current wording

The investment portfolio includes debt and equity securities. Debt securities are classified as either available for sale (“AFS”) or held to maturity (“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 June 30, 2026, 43.97% of the portfolio of debt securities was classified as AFS and 56.03% 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

Investment securities, including restricted stock and equity securities, totaled $681.8 million at March 31, 2026, an increase of $22.5 million, or 3.4%, compared to $659.4 million at December 31, 2025. At March 31, 2026, AFS securities, carried at fair value, totaled $264.0 million compared to $220.4 million at December 31, 2025. At March 31, 2026, AFS securities consisted of 87.37% mortgage-backed securities, 7.71% U.S. government agency securities and 4.92% corporate bonds, compared to 88.50%, 9.36% and 2.14%, respectively, at December 31, 2025. At March 31, 2026, the gross unrealized losses on AFS securities were all related to changes in interest rates and were $7.9 million, or less than 1% of total assets and 2% of total stockholders’ equity. At March 31, 2026, the AOCI loss was $5.3 million, compared to $4.6 million at December 31, 2025.

Current wording

Investment securities, including restricted stock and equity securities, totaled $677.8 million at June 30, 2026, an increase of $18.4 million, or 2.80%, compared to $659.4 million at December 31, 2025. At June 30, 2026, AFS securities, carried at fair value, totaled $287.4 million, compared to $220.4 million at December 31, 2025. At June 30, 2026, AFS securities consisted of 85.95% mortgage-backed securities, 7.05% U.S. government agency securities and 7.00% corporate bonds, compared to 88.50%, 9.36% and 2.14%, respectively, at December 31, 2025. At June 30, 2026, the gross unrealized losses on AFS securities were all related to changes in interest rates and were $9.1 million, or less than 1% of total assets and 2% of total stockholders’ equity. At June 30, 2026, the AOCI loss was $6.1 million, compared to $4.6 million at December 31, 2025.

Previous 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.

Current wording

At June 30, 2026, HTM securities, carried at amortized cost net of allowance, totaled $366.2 million, compared to $414.8 million at December 31, 2025. At June 30, 2026, HTM securities consisted of 77.69% mortgage-backed securities, 20.41% U.S. government agency securities and 1.90% other debt securities, compared to 73.06%, 25.26% and 1.68%, respectively, at December 31, 2025.

Previous 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.

Current wording

At June 30, 2026 and December 31, 2025, 83.22% and 86.82%, 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 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.

Current wording

The Company originates residential mortgage loans for sale on the secondary market, which are recorded at fair value. At June 30, 2026 and December 31, 2025, the fair value of loans held for sale amounted to $30.8 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 June 30, 2026 and 2025 and six months ended June 30, 2026, the Bank repurchased no loans. During the six months ended June 30, 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. 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.

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, excluding land and construction loans, totaled $1.87 billion at June 30, 2026 and $1.84 billion at December 31, 2025, and as a percentage of the Bank’s Tier 1 Capital plus ACL were 326.63% and 342.55%, respectively.

Previous 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.

Current wording

(1)Other non-owner occupied CRE loans include commercial – improved loans of $161.3 million, self storage loans of $66.7 million, farm real estate loans of $45.8 million, restaurant loans of $41.8 million and other loans of $42.5 million.

Previous wording

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

Current wording

(3)Excludes loans held for sale of$30.8 million.

Previous 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.

Current wording

(1)Other owner occupied CRE loans include church loans of $51.7 million, fire/EMS building loans of $37.6 million, auto service center of $34.0 million and other loans of $52.5 million.

Previous wording

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

Current wording

(2)Excludes loans held for sale of $30.8 million.

Previous 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.

Current wording

The Bank’s office CRE loan portfolio, which includes owner occupied and non-owner occupied CRE loans, was $475.9 million, or 9.8% of total loans of $4.88 billion at June 30, 2026. The Bank’s office CRE loan portfolio included $107.9 million, or 22.7% of total office CRE loans, with medical tenants, and $68.9 million, or 14.5% of total office CRE loans, with government or government contractor tenants. At June 30, 2026, there were 463 loans in the office CRE loan portfolio, with an average and median loan size of $1.0 million and $389 thousand, respectively. Loan-to-value (“LTV”) estimates are less than or equal to 50% for $166.2 million, or 34.9% of the office CRE loan portfolio, and greater than 80% for $13.1 million, or 2.8% of the office CRE loan portfolio at June 30, 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 as of June 30, 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

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.

Current wording

There were 16 office CRE loans with balances greater than $5.0 million, totaling $147.8 million at June 30, 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, 80.8% of the loans were secured by properties in rural or suburban areas with limited exposure to metropolitan cities and 97.0% were secured by properties with five stories or less at June 30, 2026. Of the office CRE loans, $33.7 million will mature and $10.0 million will reprice prior to December 31, 2026. Of the office CRE loans, $17.6 million were classified as special mention or substandard at June 30, 2026. There were no charge-offs within the office CRE portfolio during the three and six months ended June 30, 2026.

Previous wording

Loan balances related to our cannabis business were $91.9 million and $86.2 million, or 1.90% and 1.76% of total gross loans, as of March 31, 2026 and December 31, 2025, respectively.

Current wording

Loan balances related to the cannabis business were $91.3 million and $86.2 million, or 1.87% and 1.76% of total gross loans, as of June 30, 2026 and December 31, 2025, respectively.

Previous wording

The ACL as a percentage of loans increased to 1.21% at March 31, 2026, compared to 1.20% at December 31, 2025. At March 31, 2026, the Company’s ACL decreased $355 thousand, to $58.5 million from $58.8 million at December 31, 2025. The decrease in the general allowance was primarily due to loan payoffs, partially offset by unfavorable economic conditions in 2026.

Current wording

The ACL as a percentage of loans remained flat at 1.20% at June 30, 2026, compared to December 31, 2025. At June 30, 2026, the Company’s ACL decreased $99 thousand to $58.7 million, from $58.8 million at December 31, 2025.

Previous 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.

Current wording

The Company recorded a PCL on loans in the consolidated statement of income of $896 thousand for the three months ended June 30, 2026, compared to $1.5 million for the three months ended June 30, 2025, primarily due to lower net charge-offs partially offset by loan growth. Net charges-offs were $123 thousand for the three months ended June 30, 2026, compared to $649 thousand, or 0.01% of average loans, for the three months ended June 30, 2025. The decrease in charge-offs in 2026 was primarily due to reduced losses in the marine and CRE portfolios. The ratio of annualized net charge-offs to average loans was 0.01% and 0.05% for the three months ended June 30, 2026 and 2025, respectively.

Previous 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.

Current wording

The following tables allocate 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.

Previous wording

The following table presents the net charge-offs or recoveries by average loan portfolio category for the three months ended March 31, 2026 and 2025.

Current wording

The following tables present the net charge-offs or recoveries by average loan portfolio category as of the dates indicated.

Previous wording

Classified assets increased $25.4 million to $85.8 million, or 1.38% of total assets, at March 31, 2026, from $60.4 million, or 0.96% of total assets, at December 31, 2025.

Current wording

Classified assets increased $26.3 million to $86.6 million, or 1.41% of total assets, at June 30, 2026, from $60.4 million, or 0.96% of total assets, at December 31, 2025.

Previous wording

Special mention loans increased to $97.8 million at March 31, 2026 compared to $73.4 million at December 31, 2025 and $33.5 million at March 31, 2025. As of March 31, 2026, there weresix special mention loans with individual balances greater than $5.0 million, totaling $79.1 million. These loans consist primarily of multifamily commercial real estate and other commercial real estate exposures that are well-collateralized. Management does not currently expect material losses on these credits and is actively engaged in credit oversight and timely execution of workout strategies.

Current wording

Special mention loans decreased to $73.0 million at June 30, 2026, compared to $73.4 million at December 31, 2025. As of June 30, 2026, there were four special mention loans with individual balances greater than $5.0 million, totaling $53.0 million. These loans consist primarily of multifamily commercial real estate and other commercial real estate exposures that are well-collateralized. Management does not currently expect material losses on these credits and is actively engaged in credit oversight and timely execution of workout strategies.