Shore Bancshares (SHBI) 8-K Shore Bancshares Reports Second Quarter and First-Half Results

Exhibit 99.1

Shore Bancshares Reports Second Quarter and First-Half Results

EASTON, Md., July 25, 2019 /PRNewswire/ -- Shore Bancshares, Inc. (NASDAQ: SHBI) (the "Company") reported net income of $4.224 million or $0.33 per diluted common share for the second quarter of 2019, compared to net income of $3.754 million or $0.29 per diluted common share for the first quarter of 2019, and net income of $4.391 million or $0.34 per diluted common share for the second quarter of 2018. Net income from continuing operations for the second quarter of 2019 was $4.228 million or $0.33 per diluted common share, compared to net income from continuing operations of $3.828 million or $0.30 per diluted common share for the first quarter of 2019, and net income from continuing operations of $4.192 million or $0.33 per diluted common share for the second quarter of 2018. The Company reported net income of $7.978 million or $0.62 per diluted common share for the first half of 2019, compared to net income of $8.449 million or $0.66 per diluted common share for the first half of 2018. Net income from continuing operations for the first half of 2019 was $8.056 million or $0.63 per diluted common share, compared to net income from continuing operations of $7.654 million or $0.60 per diluted common share for the first half of 2018.

When comparing net income from continuing operations for the second quarter of 2019 to the first quarter of 2019, the increase was primarily the result of higher noninterest income and lower noninterest expenses, partially offset by an increase in interest expense on deposits and an increase in the provision for credit losses. When comparing net income from continuing operations for the second quarter of 2019 to the second quarter of 2018, the slightly better results were attributed to interest and fees on loans, an increase in noninterest income and a lower provision for credit losses, almost entirely offset by an increase in interest expense on deposits and higher noninterest expenses.

"The second quarter produced positive results as we experienced strong growth in both loans and deposits," said Lloyd L. "Scott" Beatty, Jr., President and Chief Executive Officer. "During the second quarter loans and deposits grew $28.6 million and $11.7 million, respectively. Loan growth had gotten off to a slow start in 2019, but we experienced a significant amount of growth late in the second quarter and we continue to see steady demand for the last half of 2019. Our focus on deposit growth has produced very positive results."

Balance Sheet Review
Total assets were $1.489 billion at June 30, 2019, a $5.5 million, or less than 1.0%, increase when compared to $1.483 billion at the end of 2018. The increase in total assets included loan growth of $44.9 million which was almost entirely funded by decreases in interest-bearing deposits with other banks of $30.2 million and investment securities (including restricted securities) of $10.5 million.

Total deposits increased $36.7 million, or 3.0%, when compared to December 31, 2018. The increase in total deposits primarily consisted of increases in time deposits greater than $100 thousand of $20.0 million, noninterest-bearing deposits of $16.5 million, other time deposits of $8.9 million and savings and money market accounts of $1.1 million, partially offset by decreases in interest-bearing checking deposits of $7.7 million and brokered deposits of $2.1 million.

Total stockholders' equity increased $8.1 million, or 4.4%, when compared to the end of 2018. At June 30, 2019, the ratio of total equity to total assets was 12.85% and the ratio of total tangible equity to total tangible assets was 11.66%.

Total assets at June 30, 2019 increased $36.8 million, or 2.5%, when compared to total assets at June 30, 2018. Total assets year over year increased primarily as a result of loan growth of $83.4 million which was partially funded by a decrease in investment securities (including restricted securities) of $32.2 million. In addition, the sale of Avon Dixon resulted in a decrease in assets of $11.3 million.

Total deposits at June 30, 2019 increased $73.9 million, or 6.3%, when compared to June 30, 2018. The increase in total deposits included growth within interest-bearing checking deposits of $29.0 million, time deposits of $100 thousand or more of $21.0 million, noninterest-bearing deposits of $20.3 million, money market and savings deposits of $7.1 million and other time deposits of $3.8 million. These increases resulted in a reduced dependence on brokered deposits which experienced a decrease of $7.4 million or 27.0% at June 30, 2019. Total stockholders' equity increased $23.2 million, or 13.8%, when compared to June 30, 2018.

Review of Quarterly Financial Results
Net interest income was $12.3 million for the second quarter of 2019, compared to $12.4 million for the first quarter of 2019 and $12.6 million for the second quarter of 2018. The primary reasons for the decrease in net interest income when compared to the first quarter of 2019 and second quarter 2018 were higher interest expense on deposits and lower interest income on taxable securities. Interest income increased when compared to the first quarter of 2019 due to an increase in the average balance on loans of $19.3 million. Similarly, interest income increased when compared to the second quarter of 2018 due to an increase in the average balance on loans of $79.9 million. The Company's net interest margin decreased to 3.54% from 3.61% in the first quarter of 2019 and decreased from 3.79% in the second quarter of 2018. The decline in net interest margin from the first quarter of 2019 and the second quarter 2018 was the direct result of higher rates paid on interest-bearing deposits and the timing of significant loan growth late in the second quarter of 2019 which had little impact on the average balance on loans and, correspondingly, interest income, partially offset by a decline in the average balance on short-term borrowings.

The provision for credit losses was $200 thousand for the three months ended June 30, 2019. The comparable amounts were $100 thousand and $418 thousand for the three months ended March 31, 2019 and June 30, 2018, respectively. The increase in the amount of provision for credit losses from the first quarter of 2019 was due the absence of recoveries experienced in the first quarter of 2019 which totaled $185 thousand. The decrease in the amount of provision for credit losses from the second quarter of 2018 was due to lower loan growth in the second quarter of 2019. Net charge-offs were $313 thousand for the second quarter of 2019, $25 thousand for the first quarter of 2019 and $84 thousand for the second quarter of 2018. The ratio of annualized net charge-offs to average loans was 0.10% for the second quarter of 2019, 0.01% for the first quarter of 2019 and 0.03% for the second quarter of 2018. The ratio of the allowance for credit losses to period-end loans was 0.83% at June 30, 2019, lower than the 0.86% at March 31, 2019 and 0.87% at June 30, 2018.

At June 30, 2019, nonperforming assets were $15.6 million, a decrease of $831 thousand, or 5.1%, when compared to March 31, 2019, primarily due to a decrease in nonaccrual loans of $768 thousand, or 5.0%. Accruing troubled debt restructurings ("TDRs") decreased $60 thousand, or 0.8% over the same time period. When comparing June 30, 2019 to June 30, 2018, nonperforming assets increased $7.2 million, or 86.8%, and accruing TDRs decreased $1.9 million, or 19.3%. The increase in nonperforming assets was due to a large nonaccrual loan with an outstanding loan balance of $7.5 million added late in the fourth quarter of 2018, in which the Company does not anticipate any further losses. The ratio of nonperforming assets and accruing TDRs to total assets was 1.56%, 1.63% and 1.24% at June 30, 2019, March 31, 2019 and June 30, 2018, respectively. In addition, the ratio of accruing TDRs to total loans at June 30, 2019 was 0.63%, compared to 0.65% at March 31, 2019 and 0.83% at June 30, 2018.

Total noninterest income from continuing operations for the second quarter of 2019 increased $421 thousand when compared to the first quarter of 2019 and increased $313 thousand when compared to the second quarter of 2018. The increase from the first quarter of 2019 and the second quarter of 2018 was the result of an increase in service charges on deposit accounts and additional fees on bank service charges included in other noninterest income.

Total noninterest expense from continuing operations for the second quarter of 2019 decreased $358 thousand when compared to the first quarter of 2019 and increased $132 thousand when compared to the second quarter of 2018. The decrease in noninterest expense compared to the first quarter of 2019 was primarily due to lower employee benefits and payroll taxes, other real estate owned expenses and legal and professional fees. The increase in noninterest expenses from the second quarter of 2018 was primarily due to increases in data processing fees, other real estate owned expenses and legal and professional fees, partially offset by lower salaries and wages expense.

Review of Six-Month Financial Results
Net interest income for the first six months of 2019 was $24.7 million, a decrease of $275 thousand, or 1.1% when compared to the first six months of 2018. The decrease was the direct result of an increase in interest expense on deposits, which was partially offset by an increase in interest and fees on loans. The average balance on loans increased $87.8 million and the yield on loans increased 11bps when comparing the periods. This increase in volume and yields on loans was offset by an increase in the average balance of interest-bearing deposits of $43.8 million, with an associated increase in rates paid on these deposits of 67bps. This resulted in a net interest margin of 3.57% for the first six months of 2019 compared to 3.80% for the first six months of 2018.

The provision for credit losses for the six months ended June 30, 2019 and 2018 was $300 thousand and $907 thousand, respectively, while net charge-offs were $338 thousand and $567 thousand, respectively. The decrease in provision for credit losses was the result of improved overall credit quality exclusive of the one large relationship mentioned above and lower net charge-offs for the first six months of 2019 compared to the first six months of 2018. In addition, loan growth in the first six months of 2019 has lagged the first six months of 2018. The ratio of annualized net charge-offs to average loans was 0.06% for the first half of 2019 and 0.10% for the first half of 2018.

Total noninterest income from continuing operations for the six months ended June 30, 2019 increased $361 thousand, or 8.1%, when compared to the same period in 2018. The increase in noninterest income primarily consisted of increases in service charges on deposit accounts and other fees on bank services.

Total noninterest expense from continuing operations for the six months ended June 30, 2019 increased $23 thousand, or 0.1%, when compared to the same period in 2018. Despite the insignificant increase in total noninterest expenses, salaries and wages decreased $769 thousand, which was offset by increases in employee benefits of $101 thousand, data processing of $272 thousand, legal and professional fees $225 thousand and other real estate owned expenses of $334 thousand.

Shore Bancshares Information

Shore Bancshares is a financial holding company headquartered in Easton, Maryland and is the largest independent bank holding company located on Maryland's Eastern Shore. It is the parent company of Shore United Bank. Shore Bancshares engages in trust and wealth management services through Wye Financial & Trust, a division of Shore United Bank. Additional information is available at www.shorebancshares.com.

Forward-Looking Statements

The statements contained herein that are not historical facts are forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995) based on management's current expectations and beliefs concerning future developments and their potential effects on the Company. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. There can be no assurance that future developments affecting the Company will be the same as those anticipated by management. These statements are evidenced by terms such as "anticipate," "estimate," "should," "expect," "believe," "intend," and similar expressions. Although these statements reflect management's good faith beliefs and projections, they are not guarantees of future performance and they may not prove true. These projections involve risk and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. For a discussion of these risks and uncertainties, see the section of the periodic reports filed by Shore Bancshares, Inc. with the Securities and Exchange Commission entitled "Risk Factors".

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

Shore Bancshares, Inc. Financial Highlights (Dollars in thousands, except per share data)
	For the Three Months Ended								For the Six Months Ended
	June 30,								June 30,
	2019			2018			Change		2019			2018			Change
PROFITABILITY FOR THE PERIOD
Net interest income	$	12,293		$	12,633		(2.7)	%	$	24,687		$	24,962		(1.1)	%
Provision for credit losses		200			418		(52.2)			300			907		(66.9)
Noninterest income		2,609			2,296		13.6			4,797			4,436		8.1
Noninterest expense		8,985			8,853		1.5			18,328			18,305		0.1
Income from continuing operations before income taxes		5,717			5,658		1.0			10,856			10,186		6.6
Income tax expense		1,489			1,466		1.6			2,800			2,532		10.6
Income from continuing operations	$	4,228		$	4,192		0.9		$	8,056		$	7,654		5.3
(Loss) Income from discontinued operations before income taxes		(4)			269		(101.5)			(103)			1,048		(109.8)
Income tax expense (benefit)		—			70		(100.0)			(25)			253		(109.9)
(Loss) Income from discontinued operations		(4)			199		(102.0)			(78)			795		(109.8)
Net income	$	4,224		$	4,391		(3.8)		$	7,978		$	8,449		(5.6)
From Continuing Operations:
Return on average assets		1.16	%		1.18	%	(2)	bp		1.11	%		1.09	%	2	bp
Return on average equity		8.97			10.10		(113)			8.69			9.31		(62)
Return on average tangible equity (1)		10.31			13.02		(271)			10.02			11.94		(192)
Net interest margin		3.54			3.79		(25)			3.57			3.80		(23)
Efficiency ratio - GAAP		60.29			59.30		99			62.16			62.22		(6)
Efficiency ratio - Non-GAAP (1)		59.09			57.67		142			60.93			61.04		(11)
PER SHARE DATA
Basic net income per common share
Income from continuing operations	$	0.33		$	0.33		—	%	$	0.63		$	0.60		5.0	%
(Loss) Income from discontinued operations		—			0.01		(100.0)			(0.01)			0.06		(116.7)
Net income	$	0.33		$	0.34		(2.9)		$	0.62		$	0.66		(6.1)
Diluted net income per common share
Income from continuing operations	$	0.33		$	0.33		—		$	0.63		$	0.60		5.0
(Loss) Income from discontinued operations		—			0.01		(100.0)			(0.01)			0.06		(116.7)
Net income	$	0.33		$	0.34		(2.9)		$	0.62		$	0.66		(6.1)
Dividends paid per common share		0.10			0.08		25.0			0.20			0.15		33.3
Book value per common share at period end		14.97			13.19		13.5
Tangible book value per common share at period end (1)		13.40			10.68		25.5
Market value at period end		16.34			19.02		(14.1)
Market range:
High		16.48			20.09		(18.0)			16.48			20.09		(18.0)
Low		14.84			17.92		(17.2)			14.00			16.28		(14.0)
AVERAGE BALANCE SHEET DATA
Loans	$	1,221,215		$	1,141,296		7.0	%	$	1,211,618		$	1,123,852		7.8	%
Investment securities		159,878			186,453		(14.3)			162,429			191,839		(15.3)
Earning assets		1,399,418			1,341,050		4.4			1,397,086			1,327,227		5.3
Assets		1,468,093			1,425,947		3.0			1,464,214			1,411,058		3.8
Deposits		1,233,951			1,161,790		6.2			1,224,876			1,165,184		5.1
Stockholders' equity		189,101			166,480		13.6			187,048			165,778		12.8
CREDIT QUALITY DATA
Net charge-offs	$	313		$	84		272.6	%	$	338		$	567		(40.4)	%
Nonaccrual loans	$	14,592		$	6,757		116.0
Loans 90 days past due and still accruing		439			—		—
Other real estate owned		524			1,569		(66.6)
Total nonperforming assets		15,555			8,326		86.8
Accruing troubled debt restructurings (TDRs)		7,768			9,620		(19.3)
Total nonperforming assets and accruing TDRs	$	23,323		$	17,946		30.0
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets		12.85	%		11.58	%	127	bp
Period-end tangible equity to tangible assets (1)		11.66			9.59		207
Annualized net charge-offs to average loans		0.10			0.03		7			0.06	%		0.10	%	(4)	bp
Allowance for credit losses as a percent of:
Period-end loans		0.83			0.87		(4)
Nonaccrual loans		70.62			149.79		(7,917)
Nonperforming assets		66.25			121.56		(5,531)
Accruing TDRs		132.66			105.21		2,745
Nonperforming assets and accruing TDRs		44.18			56.40		(1,222)
As a percent of total loans:
Nonaccrual loans		1.18			0.58		60
Accruing TDRs		0.63			0.83		(20)
Nonaccrual loans and accruing TDRs		1.80			1.42		38
As a percent of total loans+other real estate owned:
Nonperforming assets		1.25			0.72		53
Nonperforming assets and accruing TDRs		1.88			1.55		33
As a percent of total assets:
Nonaccrual loans		0.98			0.47		51
Nonperforming assets		1.04			0.57		47
Accruing TDRs		0.52			0.66		(14)
Nonperforming assets and accruing TDRs		1.56			1.24		32
________________________
(1)  See the reconciliation table on page 16 of 16.

Shore Bancshares, Inc. Consolidated Balance Sheets (In thousands, except per share data)
							June 30, 2019
	June 30,		December 31,		June 30,		compared to
	2019		2018		2018		December 31, 2018
ASSETS
Cash and due from banks	$	18,541	$	16,294	$	19,420	13.8	%
Interest-bearing deposits with other banks		20,739		50,931		24,059	(59.3)
Cash and cash equivalents		39,280		67,225		43,479	(41.6)
Investment securities available for sale (at fair value)		145,410		154,432		175,566	(5.8)
Investment securities held to maturity		5,905		6,043		6,168	(2.3)
Equity securities, at fair value		1,325		1,269		652	4.4
Restricted securities		5,095		6,476		7,578	(21.3)
Loans		1,240,295		1,195,355		1,156,884	3.8
Less: allowance for credit losses		(10,305)		(10,343)		(10,121)	(0.4)
Loans, net		1,229,990		1,185,012		1,146,763	3.8
Premises and equipment, net		22,710		22,711		22,906	(0.0)
Goodwill		17,518		17,518		17,518	—
Other intangible assets, net		2,540		2,857		4,369	(11.1)
Other real estate owned, net		524		1,222		1,569	(57.1)
Right of use assets, net		3,663		—		—	—
Other assets		14,602		17,678		13,876	(17.4)
Assets of discontinued operations		—		633		11,270	(100.0)
Total assets	$	1,488,562	$	1,483,076	$	1,451,714	0.4
LIABILITIES
Noninterest-bearing deposits	$	346,916	$	330,466	$	326,634	5.0
Interest-bearing deposits		902,084		881,875		848,465	2.3
Total deposits		1,249,000		1,212,341		1,175,099	3.0
Short-term borrowings		25,508		60,812		102,741	(58.1)
Long-term borrowings		15,000		15,000		—	—
Lease liabilities		3,663		—		—	—
Accrued expenses and other liabilities		4,084		8,415		5,117	(51.5)
Liabilities of discontinued operations		—		3,323		642	(100.0)
Total liabilities		1,297,255		1,299,891		1,283,599	(0.2)
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; authorized 35,000,000 shares		128		127		127	0.8
Additional paid in capital		65,376		65,434		65,562	(0.1)
Retained earnings		125,996		120,574		106,193	4.5
Accumulated other comprehensive (loss)		(193)		(2,950)		(3,767)	93.5
Total stockholders' equity		191,307		183,185		168,115	4.4
Total liabilities and stockholders' equity	$	1,488,562	$	1,483,076	$	1,451,714	0.4
Period-end common shares outstanding		12,780		12,749		12,747	0.2
Book value per common share	$	14.97	$	14.37	$	13.19	4.2

Shore Bancshares, Inc. Consolidated Statements of Income (In thousands, except per share data)
	For the Three Months Ended							For the Six Months Ended
	June 30,						June 30,
	2019		2018		% Change		2019		2018		% Change
INTEREST INCOME
Interest and fees on loans	$	13,749	$	12,631	8.9	%	$	27,248	$	24,675	10.4	%
Interest on investment securities:
Taxable		887		982	(9.7)			1,885		2,003	(5.9)
Interest on deposits with other banks		113		61	85.2			276		99	178.8
Total interest income		14,749		13,674	7.9			29,409		26,777	9.8
INTEREST EXPENSE
Interest on deposits		2,204		580	280.0			4,151		1,128	268.0
Interest on short-term borrowings		145		461	(68.5)			358		687	(47.9)
Interest on long-term borrowings		107		—	—			213		—	—
Total interest expense		2,456		1,041	135.9			4,722		1,815	160.2
NET INTEREST INCOME		12,293		12,633	(2.7)			24,687		24,962	(1.1)
Provision for credit losses		200		418	(52.2)			300		907	(66.9)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		12,093		12,215	(1.0)			24,387		24,055	1.4
NONINTEREST INCOME
Service charges on deposit accounts		1,028		947	8.6			1,962		1,852	5.9
Trust and investment fee income		385		414	(7.0)			757		814	(7.0)
Other noninterest income		1,196		935	27.9			2,078		1,770	17.4
Total noninterest income		2,609		2,296	13.6			4,797		4,436	8.1
NONINTEREST EXPENSE
Salaries and wages		3,792		4,101	(7.5)			7,558		8,327	(9.2)
Employee benefits		1,068		1,045	2.2			2,322		2,221	4.5
Occupancy expense		668		650	2.8			1,359		1,327	2.4
Furniture and equipment expense		295		247	19.4			558		502	11.2
Data processing		919		689	33.4			1,829		1,557	17.5
Directors' fees		116		152	(23.7)			202		266	(24.1)
Amortization of intangible assets		155		228	(32.0)			317		327	(3.1)
FDIC insurance premium expense		181		214	(15.4)			386		419	(7.9)
Other real estate owned expenses, net		60		5	1,100.0			293		(41)	814.6
Legal and professional fees		559		487	14.8			1,160		935	24.1
Other noninterest expenses		1,172		1,035	13.2			2,344		2,465	(4.9)
Total noninterest expense		8,985		8,853	1.5			18,328		18,305	0.1
Income from continuing operations before income taxes		5,717		5,658	1.0			10,856		10,186	6.6
Income tax expense		1,489		1,466	1.6			2,800		2,532	10.6
Income from continuing operations		4,228		4,192	0.9			8,056		7,654	5.3
(Loss) income from discontinued operations before income taxes		(4)		269	(101.5)			(103)		1,048	(109.8)
Income tax (benefit) expense		—		70	(100.0)			(25)		253	(109.9)
(Loss) Income from discontinued operations		(4)		199	(102.0)			(78)		795	(109.8)
NET INCOME	$	4,224	$	4,391	(3.8)		$	7,978	$	8,449	(5.6)
Weighted average shares outstanding - basic		12,779		12,744	0.3			12,774		12,730	0.3
Weighted average shares outstanding - diluted		12,784		12,757	0.2			12,779		12,743	0.3
Basic net income per common share
Income from continuing operations	$	0.33	$	0.33	—		$	0.63	$	0.60	5.0
(Loss) Income from discontinued operations		—		0.01	(100.0)			(0.01)		0.06	(116.7)
Net income	$	0.33	$	0.34	(2.9)		$	0.62	$	0.66	(6.1)
Diluted net income per common share
Income from continuing operations	$	0.33	$	0.33	-		$	0.63	$	0.60	5.0
(Loss) Income from discontinued operations		—		0.01	(100.0)			(0.01)		0.06	(116.7)
Net income	$	0.33	$	0.34	(2.9)		$	0.62	$	0.66	(6.1)
Dividends paid per common share		0.10		0.08	25.0			0.20		0.15	33.3

Shore Bancshares, Inc. Consolidated Average Balance Sheets (Dollars in thousands)
	For the Three Months Ended								For the Six Months Ended
	June 30,								June 30,
	2019				2018				2019				2018
	Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/
	balance		rate		balance		rate		balance		rate		balance		rate
Earning assets
Loans (1), (2), (3)	$	1,221,215	4.53	%	$	1,141,296	4.45	%	$	1,211,618	4.55	%	$	1,123,852	4.44	%
Investment securities
Taxable		159,878	2.22			186,453	2.11			162,429	2.34			191,839	2.09
Interest-bearing deposits		18,325	2.47			13,301	1.82			23,039	2.42			11,536	1.72
Total earning assets		1,399,418	4.24	%		1,341,050	4.10	%		1,397,086	4.26	%		1,327,227	4.08	%
Cash and due from banks		17,225				16,905				17,211				16,646
Other assets		61,906				78,185				60,340				77,266
Allowance for credit losses		(10,456)				(10,193)				(10,423)				(10,081)
Total assets	$	1,468,093			$	1,425,947			$	1,464,214			$	1,411,058
Interest-bearing liabilities
Demand deposits	$	234,775	0.65	%	$	204,068	0.21	%	$	237,271	0.63	%	$	210,403	0.22	%
Money market and savings deposits		385,272	0.84			381,047	0.13			384,508	0.84			380,969	0.13
Brokered deposits		20,866	2.52			10,684	1.96			21,470	2.44			5,372	1.96
Certificates of deposit $100,000 or more		107,549	1.54			96,873	0.54			103,067	1.40			99,387	0.52
Other time deposits		145,900	1.31			146,946	0.45			143,226	1.16			149,619	0.46
Interest-bearing deposits		894,362	0.99			839,618	0.27			889,542	0.94			845,750	0.27
Short-term borrowings		21,557	2.70			91,980	2.01			27,239	2.65			74,381	1.86
Long-term borrowings		15,000	2.86			—	—			15,000	2.86			—	—
Total interest-bearing liabilities		930,919	1.06	%		931,598	0.44	%		931,781	1.02	%		920,131	0.40	%
Noninterest-bearing deposits		339,589				322,172				335,334				319,434
Accrued expenses and other liabilities		8,484				5,697				10,051				5,715
Stockholders' equity		189,101				166,480				187,048				165,778
Total liabilities and stockholders' equity	$	1,468,093			$	1,425,947			$	1,464,214			$	1,411,058
Net interest spread			3.18	%			3.66	%			3.24	%			3.68	%
Net interest margin			3.54	%			3.79	%			3.57	%			3.80	%
____________________________
(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of the alternative minimum tax rate       and nondeductible interest expense.
(2) Average loan balances include nonaccrual loans.
(3) Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc. Financial Highlights By Quarter (Dollars in thousands, except per share data)
	2nd Quarter			1st Quarter			4th Quarter			3rd Quarter			2nd Quarter			Q2 2019		Q2 2019
	2019			2019			2018			2018			2018			compared to		compared to
	Q2 2019			Q1 2019			Q4 2018			Q3 2018			Q2 2018			Q1 2019		Q2 2018
PROFITABILITY FOR THE PERIOD
Taxable-equivalent net interest income	$	12,334		$	12,428		$	12,756		$	12,975		$	12,661		(0.8)	%	(2.6)	%
Less: Taxable-equivalent adjustment		41			34			30			28			28		20.6		46.4
Net interest income		12,293			12,394			12,726			12,947			12,633		(0.8)		(2.7)
Provision for credit losses		200			100			460			307			418		100.0		(52.2)
Noninterest income		2,609			2,188			2,112			2,465			2,296		19.2		13.6
Noninterest expense		8,985			9,343			9,216			9,310			8,853		(3.8)		1.5
Income from continuing operations before income taxes		5,717			5,139			5,162			5,795			5,658		11.2		1.0
Income tax expense		1,489			1,311			1,309			1,539			1,466		13.6		1.6
Income from continuing operations		4,228			3,828			3,853			4,256			4,192		10.4		0.9
(Loss) Income from discontinued operations before income taxes		(4)			(99)			104			269			269		96.0		(101.5)
Gain on sale of insurance agency		—			—			12,736			—			—		—		—
Income tax expense (benefit)		—			(25)			4,599			71			70		100.0		(100.0)
(Loss) Income from discontinued operations		(4)			(74)			8,241			198			199		94.6		(102.0)
Net income	$	4,224		$	3,754		$	12,094		$	4,454		$	4,391		12.5		(3.8)
From Continuing Operations:
Return on average assets		1.16	%		1.06	%		1.04	%		1.16	%		1.18	%	10	bp	(2)	bp
Return on average equity		8.97			8.39			8.83			9.92			10.10		58		(113)
Return on average tangible equity (1)		10.31			9.72			11.34			12.77			13.02		59		(271)
Net interest margin		3.54			3.61			3.58			3.76			3.79		(7)		(25)
Efficiency ratio - GAAP		60.29			64.07			62.11			60.41			59.30		(378)		99
Efficiency ratio - Non-GAAP (1)		59.09			62.81			60.18			58.55			57.67		(372)		142
PER SHARE DATA
Basic net income per common share
Income from continuing operations	$	0.33		$	0.30		$	0.30		$	0.33		$	0.33		10.0	%	—	%
(Loss) Income from discontinued operations		—			(0.01)			0.65			0.02			0.01		100.0		(100.0)
Net income	$	0.33		$	0.29		$	0.95		$	0.35		$	0.34		13.8		(2.9)
Diluted net income per common share
Income from continuing operations	$	0.33		$	0.30		$	0.30		$	0.33		$	0.33		10.0		—
(Loss) Income from discontinued operations		—			(0.01)			0.65			0.02			0.01		100.0		(100.0)
Net income	$	0.33		$	0.29		$	0.95		$	0.35		$	0.34		13.8		(2.9)
Dividends paid per common share		0.10			0.10			0.09			0.08			0.08		—		25.0
Book value per common share at period end		14.97			14.64			14.37			13.45			13.19		2.3		13.5
Tangible book value per common share at period end (1)		13.40			13.06			12.77			10.96			10.68		2.6		25.5
Market value at period end		16.34			14.91			14.54			17.82			19.02		9.6		(14.1)
Market range:
High		16.48			16.11			18.32			19.84			20.09		2.3		(18.0)
Low		14.84			14.00			12.95			16.63			17.92		6.0		(17.2)
AVERAGE BALANCE SHEET DATA
Loans	$	1,221,215		$	1,201,913		$	1,189,504		$	1,174,513		$	1,141,296		1.6	%	7.0	%
Investment securities		159,878			165,009			177,700			178,572			186,453		(3.1)		(14.3)
Earning assets		1,399,418			1,394,728			1,385,368			1,370,573			1,341,050		0.3		4.4
Assets		1,468,093			1,460,291			1,463,839			1,457,074			1,425,947		0.5		3.0
Deposits		1,233,951			1,215,702			1,197,445			1,192,845			1,161,790		1.5		6.2
Stockholders' equity		189,101			184,972			173,214			170,299			166,480		2.2		13.6
CREDIT QUALITY DATA
Net charge-offs	$	313		$	25		$	445		$	100		$	84		1,152.0	%	272.6	%
Nonaccrual loans	$	14,592		$	15,360		$	16,655		$	7,362		$	6,757		(5.0)		116.0
Loans 90 days past due and still accruing		439			47			139			3			—		834.0		—
Other real estate owned		524			979			1,222			1,518			1,569		(46.5)		(66.6)
Total nonperforming assets	$	15,555		$	16,386		$	18,016		$	8,883		$	8,326		(5.1)		86.8
Accruing troubled debt restructurings (TDRs)	$	7,768		$	7,828		$	8,663		$	8,933		$	9,620		(0.8)		(19.3)
Total nonperforming assets and accruing TDRs	$	23,323		$	24,214		$	26,679		$	17,816		$	17,946		(3.7)		30.0
CAPITAL AND CREDIT QUALITY RATIOS
Period-end equity to assets		12.85	%		12.59	%		12.35	%		11.63	%		11.58	%	26	bp	127	bp
Period-end tangible equity to tangible assets (1)		11.66			11.39			11.13			9.69			9.59		27		207
Annualized net charge-offs to average loans		0.10			0.01			0.15			0.03			0.03		9		7
Allowance for credit losses as a percent of:
Period-end loans		0.83			0.86			0.87			0.87			0.87		(3)		(4)
Nonaccrual loans		70.62			67.83			62.10			140.29			149.79		279		(7,917)
Nonperforming assets		66.25			63.58			57.41			116.27			121.56		267		(5,531)
Accruing TDRs		132.66			133.09			119.39			115.62			105.21		(43)		2,745
Nonperforming assets and accruing TDRs		44.18			43.02			38.77			57.97			56.40		116		(1,222)
As a percent of total loans:
Nonaccrual loans		1.18			1.27			1.39			0.62			0.58		(9)		60
Accruing TDRs		0.63			0.65			0.72			0.76			0.83		(2)		(20)
Nonaccrual loans and accruing TDRs		1.80			1.91			2.12			1.38			1.42		(11)		38
As a percent of total loans+other real estate owned:
Nonperforming assets		1.25			1.35			1.51			0.75			0.72		(10)		53
Nonperforming assets and accruing TDRs		1.88			2.00			2.23			1.51			1.55		(12)		33
As a percent of total assets:
Nonaccrual loans		0.98			1.03			1.12			0.50			0.47		(5)		51
Nonperforming assets		1.04			1.10			1.21			0.60			0.57		(6)		47
Accruing TDRs		0.52			0.53			0.58			0.61			0.66		(1)		(14)
Nonperforming assets and accruing TDRs		1.56			1.63			1.80			1.21			1.24		(7)		32
______________________
(1)  See the reconciliation table on page 16 of 16.

Shore Bancshares, Inc. Consolidated Statements of Income By Quarter (In thousands, except per share data)
											Q2 2019		Q2 2019
											compared to		compared to
	Q2 2019		Q1 2019		Q4 2018		Q3 2018		Q2 2018		Q1 2019		Q2 2018
INTEREST INCOME
Interest and fees on loans	$	13,749	$	13,499	$	13,452	$	13,205	$	12,631	1.9	%	8.9	%
Interest on investment securities:
Taxable		887		998		1,339		947		982	(11.1)		(9.7)
Interest on deposits with other banks		113		163		103		84		61	(30.7)		85.2
Total interest income		14,749		14,660		14,894		14,236		13,674	0.6		7.9
INTEREST EXPENSE
Interest on deposits		2,204		1,947		1,577		826		580	13.2		280.0
Interest on short-term borrowings		145		213		486		463		461	(31.9)		(68.5)
Interest on long-term borrowings		107		106		105		—		—	0.9		—
Total interest expense		2,456		2,266		2,168		1,289		1,041	8.4		135.9
NET INTEREST INCOME		12,293		12,394		12,726		12,947		12,633	(0.8)		(2.7)
Provision for credit losses		200		100		460		307		418	100.0		(52.2)
NET INTEREST INCOME AFTER PROVISION
FOR CREDIT LOSSES		12,093		12,294		12,266		12,640		12,215	(1.6)		(1.0)
NONINTEREST INCOME
Service charges on deposit accounts		1,028		934		1,045		982		947	10.1		8.6
Trust and investment fee income		385		372		360		383		414	3.5		(7.0)
Other noninterest income		1,196		882		707		1,100		935	35.6		27.9
Total noninterest income		2,609		2,188		2,112		2,465		2,296	19.2		13.6
NONINTEREST EXPENSE
Salaries and wages		3,792		3,766		3,999		4,209		4,101	0.7		(7.5)
Employee benefits		1,068		1,254		797		983		1,045	(14.8)		2.2
Occupancy expense		668		691		649		646		650	(3.3)		2.8
Furniture and equipment expense		295		263		236		212		247	12.2		19.4
Data processing		919		910		844		930		689	1.0		33.4
Directors' fees		116		86		145		145		152	34.9		(23.7)
Amortization of intangible assets		155		162		269		270		228	(4.3)		(32.0)
FDIC insurance premium expense		181		205		159		193		214	(11.7)		(15.4)
Other real estate owned expenses, net		60		233		228		166		5	(74.2)		1,100.0
Legal and professional fees		559		601		603		443		487	(7.0)		14.8
Other noninterest expenses		1,172		1,172		1,287		1,113		1,035	—		13.2
Total noninterest expense		8,985		9,343		9,216		9,310		8,853	(3.8)		1.5
Income from continuing operations before income taxes		5,717		5,139		5,162		5,795		5,658	11.2		1.0
Income tax expense		1,489		1,311		1,309		1,539		1,466	13.6		1.6
Income from continuing operations		4,228		3,828		3,853		4,256		4,192	10.4		0.9
(Loss) Income from discontinued operations before income taxes		(4)		(99)		104		269		269	96.0		(101.5)
Gain on sale of insurance agency		—		—		12,736		—		—	—		—
(Loss) Income tax expense (benefit)		—		(25)		4,599		71		70	100.0		(100.0)
Income from discontinued operations		(4)		(74)		8,241		198		199	94.6		(102.0)
NET INCOME	$	4,224	$	3,754	$	12,094	$	4,454	$	4,391	12.5		(3.8)
Weighted average shares outstanding - basic		12,779		12,769		12,749		12,748		12,744	0.1		0.3
Weighted average shares outstanding - diluted		12,784		12,773		12,766		12,761		12,757	0.1		0.2
Basic net income per common share
Income from continuing operations	$	0.33	$	0.30	$	0.30	$	0.33	$	0.33	10.0		—
(Loss) Income from discontinued operations		—		(0.01)		0.65		0.02		0.01	100.0		(100.0)
Net income	$	0.33	$	0.29	$	0.95	$	0.35	$	0.34	13.8		(2.9)
Diluted net income per common share
Income from continuing operations	$	0.33	$	0.30	$	0.30	$	0.33	$	0.33	10.0		—
(Loss) Income from discontinued operations		—		(0.01)		0.65		0.02		0.01	100.0		(100.0)
Net income	$	0.33	$	0.29	$	0.95	$	0.35	$	0.34	13.8		(2.9)
Dividends paid per common share		0.10		0.10		0.09		0.08		0.08	—		25.0

Shore Bancshares, Inc. Consolidated Average Balance Sheets By Quarter (Dollars in thousands)
																					Average balance
																					Q2 2019		Q2 2019
																					compared to		compared to
	Q2 2019				Q1 2019				Q4 2018				Q3 2018				Q2 2018				Q1 2019		Q2 2018
	Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/		Average		Yield/
	balance		rate		balance		rate		balance		rate		balance		rate		balance		rate
Earning assets
Loans (1), (2), (3)		1,221,215	4.53	%	$	1,201,913	4.57	%	$	1,189,504	4.50	%	$	1,174,513	4.47	%	$	1,141,296	4.45	%	1.6	%	7.0	%
Investment securities
Taxable		159,878	2.22			165,009	2.45			177,700	2.46			178,572	2.12			186,453	2.11		(3.1)		(14.3)
Interest-bearing deposits		18,325	2.47			27,806	2.38			18,164	2.25			17,488	1.91			13,301	1.82		(34.1)		37.8
Total earning assets		1,399,418	4.24	%		1,394,728	4.27	%		1,385,368	4.20	%		1,370,573	4.13	%		1,341,050	4.10	%	0.3		4.4
Cash and due from banks		17,225				17,196				18,204				17,790				16,905			0.2		1.9
Other assets		61,906				58,756				70,858				79,065				78,185			5.4		(20.8)
Allowance for credit losses		(10,456)				(10,389)				(10,591)				(10,354)				(10,193)			0.6		2.6
Total assets	$	1,468,093			$	1,460,291			$	1,463,839			$	1,457,074			$	1,425,947			0.5		3.0
Interest-bearing liabilities
Demand deposits	$	234,775	0.65	%	$	239,794	0.61	%	$	218,519	0.53	%	$	221,905	0.32	%	$	204,068	0.21	%	(2.1)		15.0
Money market and savings deposits		385,272	0.84			383,738	0.85			378,163	0.68			373,357	0.14			381,047	0.13		0.4		1.1
Brokered deposits		20,866	2.52			22,080	2.37			22,816	2.17			25,507	2.01			10,684	1.96		(5.5)		95.3
Certificates of deposit $100,000 or more		107,549	1.54			98,535	1.24			97,023	0.94			97,563	0.69			96,873	0.54		9.1		11.0
Other time deposits		145,900	1.31			140,523	1.02			141,702	0.80			145,130	0.57			146,946	0.45		3.8		(0.7)
Interest-bearing deposits		894,362	0.99			884,670	0.89			858,223	0.73			863,462	0.36			839,618	0.27		1.1		6.5
Short-term borrowings		21,557	2.70			32,984	2.62			72,462	2.66			87,925	2.09			91,980	2.01		(34.6)		(76.6)
Long-term borrowings		15,000	2.86			15,000	2.87			14,348	2.89			—	—			—	—		—		—
Total interest-bearing liabilities		930,919	1.06	%		932,654	0.99	%		945,033	0.91	%		951,387	0.52	%		931,598	0.44	%	(0.2)		(0.1)
Noninterest-bearing deposits		339,589				331,032				339,222				329,383				322,172			2.6		5.4
Accrued expenses and other liabilities		8,484				11,633				6,370				6,005				5,697			(27.1)		48.9
Stockholders' equity		189,101				184,972				173,214				170,299				166,480			2.2		13.6
Total liabilities and stockholders' equity	$	1,468,093			$	1,460,291			$	1,463,839			$	1,457,074			$	1,425,947			0.5		3.0
Net interest spread			3.18	%			3.28	%			3.29	%			3.61	%			3.66	%
Net interest margin			3.54	%			3.61	%			3.58	%			3.76	%			3.79	%
____________________________________
(1) All amounts are reported on a tax-equivalent basis computed using the statutory federal income tax rate of 21.0%, exclusive of the alternative minimum tax rate and nondeductible interest expense.
(2) Average loan balances include nonaccrual loans.
(3) Interest income on loans includes amortized loan fees, net of costs and accretion of discounts on acquired loans, which are included in the yield calculations.

Shore Bancshares, Inc. Reconciliation of Generally Accepted Accounting Principles (GAAP) and Non-GAAP Measures (In thousands, except per share data)
																YTD			YTD
	Q2 2019			Q1 2019			Q4 2018			Q3 2018			Q2 2018			6/30/2019			6/30/2018
The following reconciles return on average equity and return on average tangible equity from continuing operations (Note 1):
Net income from continuing operations	$	4,228		$	3,828		$	3,853		$	4,256		$	4,192		$	8,056		$	7,654
Net income from continuing operations - annualized (A)	$	16,958		$	15,525		$	15,286		$	16,885		$	16,814		$	16,246		$	15,435
Net income, excluding net amortization of intangible assets	$	4,344		$	3,949		$	4,054		$	4,457		$	4,362		$	8,293		$	7,898
Net income, excluding net amortization of intangible assets - annualized (B)	$	17,424		$	16,015		$	16,084		$	17,683		$	17,496		$	16,723		$	15,927
Average stockholders' equity (C)	$	189,101		$	184,972		$	173,214		$	170,299		$	166,480		$	187,048		$	165,778
Less:  Average goodwill and other intangible assets		(20,138)			(20,281)			(31,410)			(31,810)			(32,088)			(20,209)			(32,403)
Average tangible equity (D)	$	168,963		$	164,691		$	141,804		$	138,489		$	134,392		$	166,839		$	133,375
Return on average equity (GAAP)  (A)/(C)		8.97	%		8.39	%		8.83	%		9.91	%		10.10	%		8.69	%		9.31	%
Return on average tangible equity (Non-GAAP)  (B)/(D)		10.31	%		9.72	%		11.34	%		12.77	%		13.02	%		10.02	%		11.94	%
The following reconciles GAAP efficiency ratio and non- GAAP efficiency ratio from continuing operations (Note 2):
Noninterest expense (E)	$	8,985		$	9,343		$	9,216		$	9,310		$	8,853		$	18,328		$	18,305
Less:  Amortization of intangible assets		(155)			(162)			(269)			(270)			(228)			(317)			(327)
Adjusted noninterest expense (F)	$	8,830		$	9,181		$	8,947		$	9,040		$	8,625		$	18,011		$	17,978
Net interest income (G)		12,293			12,394			12,726			12,947			12,633			24,687			24,962
Add:  Taxable-equivalent adjustment		41			34			30			28			28			75			56
Taxable-equivalent net interest income (H)	$	12,334		$	12,428		$	12,756		$	12,975		$	12,661		$	24,762		$	25,018
Noninterest income (I)	$	2,609		$	2,188		$	2,112		$	2,465		$	2,296		$	4,797			4,436
Adjusted noninterest income (J)	$	2,609		$	2,188		$	2,112		$	2,465		$	2,296		$	4,797		$	4,436
Efficiency ratio (GAAP)  (E)/(G)+(I)		60.29	%		64.07	%		62.11	%		60.41	%		59.30	%		62.16	%		62.22	%
Efficiency ratio (Non-GAAP)  (F)/(H)+(J)		59.09	%		62.81	%		60.18	%		58.55	%		57.67	%		60.93	%		61.04	%
The following reconciles book value per common share and tangible book value per common share (Note 1):
Stockholders' equity (L)	$	191,307		$	187,082		$	183,185		$	171,419		$	168,115
Less:  Goodwill and other intangible assets		(20,058)			(20,214)			(20,383)			(31,706)			(31,987)
Tangible equity (M)	$	171,249		$	166,868		$	162,802		$	139,713		$	136,128
Shares outstanding (N)		12,780			12,780			12,749			12,748			12,747
Book value per common share (GAAP)  (L)/(N)	$	14.97		$	14.64		$	14.37		$	13.45		$	13.19
Tangible book value per common share (Non-GAAP) (M)/(N)	$	13.40		$	13.06		$	12.77		$	10.96		$	10.68
The following reconciles equity to assets and tangible equity to tangible assets (Note 1):
Stockholders' equity (O)	$	191,307		$	187,082		$	183,185		$	171,419		$	168,115
Less:  Goodwill and other intangible assets		(20,058)			(20,214)			(20,383)			(31,706)			(31,987)
Tangible equity (P)	$	171,249		$	166,868		$	162,802		$	139,713		$	136,128
Assets (Q)	$	1,488,562		$	1,485,799		$	1,483,076		$	1,473,543		$	1,451,714
Less:  Goodwill and other intangible assets		(20,058)			(20,214)			(20,383)			(31,706)			(31,987)
Tangible assets (R)	$	1,468,504		$	1,465,585		$	1,462,693		$	1,441,837		$	1,419,727
Period-end equity/assets (GAAP)  (O)/(Q)		12.85	%		12.59	%		12.35	%		11.63	%		11.58	%
Period-end tangible equity/tangible assets (Non-GAAP)  (P)/(R)		11.66	%		11.39	%		11.13	%		9.69	%		9.59	%
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Note 1: Management believes that reporting tangible equity and tangible assets more closely approximates the adequacy of capital for regulatory purposes.
Note 2: Management believes that reporting the non-GAAP efficiency ratio more closely measures its effectiveness of controlling cash-based operating activities.

CONTACT: Edward Allen, Executive Vice President and Chief Financial Officer, 410-763-7800