SHORE BANCSHARES INCSHBI

SHORE BANCSHARES INC Income Taxes Disclosure

10-KFiled Mar 2, 20264 min read
Income Taxes
In its most recently filed tax year, the Company filed income tax returns in the United States federal jurisdiction and the State of Maryland. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2022.
The following table provides information on the components of income tax expense from continuing operations for the years ended December 31, 2025, 2024 and 2023.
Year Ended December 31,
($ in thousands)202520242023
Current income tax expense:
Federal$13,870 $4,264 $172 
State4,357 1,681 63 
Total current income tax expense18,227 5,945 235 
Deferred income tax expense:
Federal536 6,570 1,692 
State386 2,300 1,029 
Total deferred income tax expense922 8,870 2,721 
Total income tax expense $19,149 $14,815 $2,956 
The Company did not have pre-tax income from continuing foreign operations or foreign tax expense during the years ended December 31, 2025, 2024 and 2023.
The following table provides a reconciliation of tax computed at the statutory federal tax rate and the recorded tax expense (in dollars and percentages) for the year ended December 31, 2025, under the provisions of ASU No. 2023-09.
Year Ended December 31, 2025
($ in thousands)AmountPercent
Tax at federal statutory rate$16,518 21.0 %
State and local income taxes, net of federal tax benefits(1)
3,746 4.7 
Tax credits
Low-income housing(2)
(21)— 
Nontaxable or nondeductible items
Appreciation in cash surrender value of life insurance(821)(1.1)
Other(273)(0.3)
Actual income tax$19,149 24.4 %
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(1)State taxes in Maryland comprised the majority of the tax effect in this category.
(2)Includes proportional amortization of low income tax credit and other tax benefits.

The following table provides a reconciliation of tax computed at the statutory federal tax rate and the recorded tax expense (in percentages) for the years ended December 31, 2024 and 2023, prior to the adoption of ASU No. 2023-09.
Year Ended December 31,
20242023
Tax at federal statutory rate21.0 %21.0 %
Tax effect of:
Tax-exempt income(1.4)(3.6)
State and local income taxes, net of federal tax benefits5.4 6.1 
Bargain purchase gain— (13.1)
Nondeductible compensation costs0.1 3.9 
Nondeductible merger-related expenses— 2.6 
Other0.1 3.9 
Actual income tax25.2 %20.8 %
During the year ended December 31, 2025, the Company made payments to tax authorities for income taxes as set forth in the table below.
($ in thousands)2025
Federal$13,050 
State and local:
Maryland2,020 
Total taxes paid$15,070 
The following table provides information on significant components of the Company’s deferred tax assets and liabilities attributable to continuing operations as of December 31, 2025 and 2024.
December 31,
($ in thousands)20252024
Deferred tax assets:  
Allowance for credit losses$15,035 $14,888 
Valuation adjustments on OREO and repossessed assets217 — 
Nonaccrual loan interest 691 578 
Lease liabilities2,813 3,035 
Deferred compensation4,084 4,078 
State net operating losses2,834 2,066 
Deferred loan fees2,204 2,078 
Acquisition fair value adjustments20,628 24,988 
Unrealized losses on available for sale securities1,734 2,844 
Other1,432 1,233 
Total deferred tax assets$51,672 $55,788 
Deferred tax liabilities:
Depreciation$4,042 $4,115 
Right-of-use assets2,685 2,918 
Mortgage servicing rights1,312 1,505 
Acquisition fair value adjustments826 1,651 
Intangibles9,299 11,223 
Other886 575 
Total deferred tax liabilities19,050 21,987 
Less: valuation allowance(2,797)(1,944)
Net deferred tax assets$29,825 $31,857 
Management of the Company has determined that a full valuation allowance is required for Shore Bancshares’ and the Title Company’s state deferred tax assets, largely associated with their state net operating losses. As both entities file income tax returns in the state of Maryland on separate entity basis and do not expect to have taxable income in that jurisdiction, it is more likely than not that their state deferred tax assets will not be realized. This valuation allowance increased from $1.9 million to $2.8 million during the year ended December 31, 2025. Based on the Company’s analysis, no other valuation allowances have been recorded as the Company believes it will have sufficient future taxable income to realize its remaining federal and state deferred tax assets.
The Company has analyzed the tax positions taken or expected to be taken in its income tax returns for the periods ending December 31, 2025 and 2024, and has recorded no liabilities related to uncertain tax positions in accordance with the applicable guidance in ASC 740, Income Taxes.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business tax provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others being phased in through 2027. Through December 31, 2025, the OBBBA had not materially impacted the Company’s income taxes; however, the Company continues to evaluate the effect the OBBBA will have on the Company's consolidated financial condition and results of operations.
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Historical Timeline

Fiscal YearFiled
2025Mar 2, 2026Showing above
2024Mar 10, 2025
2023Mar 15, 2024
2022Mar 30, 2023
2021Mar 31, 2022
2020Mar 26, 2021
2019Mar 13, 2020
2018Mar 15, 2019
2017Mar 16, 2018
2016Mar 16, 2017
2015Mar 11, 2016

About Income Taxes Disclosures

The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.

Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.

Other Available Disclosures

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