January 22, 2024false000141953600014195362024-01-222024-01-22



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 22, 2024

CAPITAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
 
Maryland
001-38671
52-2083046
(State or other jurisdiction of incorporation or organization)
(Commission file number)
(IRS Employer Identification No.)
2275 Research Boulevard, Suite 600, Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
(301) 468-8848
Registrant’s telephone number, including area code

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareCBNKNASDAQ Stock Market



Item 2.02 Results of Operations and Financial Disclosure
On January 22, 2024, Capital Bancorp, Inc. (the “Company”) issued a press release announcing the Company’s unaudited financial results for the three months and year ended December 31, 2023. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and hereby incorporated by reference.

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including Exhibit 99.1 to this Current Report on Form 8-K, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.

Item 8.01. Other Events
On January 19, 2024, the Company's Board of Directors declared a $0.08 per share dividend, payable on February 21, 2024 to stockholders of record on February 5, 2024.

Item 9.01. Financial Statements and Exhibits
(d) Exhibits
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document)



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CAPITAL BANCORP, INC.                             
 
 
By: /s/ Jay Walker
Name: Jay Walker
Title: Chief Financial Officer
January 22, 2024




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capitalbancorplogoa21a.jpg
Capital Bancorp, Inc. Reports Fourth Quarter 2023 Net Income of $9.0 million, or $0.65 per share
•Diluted EPS of $0.65, ROAA of 1.63%, and ROAE of 14.44% for 4Q 2023
•Tangible Book Value Per Share(1) of $18.31 for 4Q 2023 up 15.6% from 4Q 2022
•Loan Growth of $40.7 million, or 8.7% annualized for 4Q 2023
•Cash dividend of $0.08 per share declared
Rockville, Maryland, January 22, 2024 (GLOBE NEWSWIRE) – Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.0 million, or $0.65 per diluted share, for the fourth quarter 2023, compared to net income of $9.8 million, or $0.70 per diluted share, for the third quarter 2023 and $9.0 million, or $0.62 per diluted share, for the fourth quarter 2022.

The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on February 21, 2024 to shareholders of record on February 5, 2024.

“Over the past two years, our strategy, which emphasizes both growth and profitability, has led to a 29% increase in book value," said Ed Barry, Chief Executive Officer of the Company and the Bank. “Despite persistent market volatility, we continue to identify opportunities to generate attractive loans and core deposits and expand our talented team. We are investing in our people and technology to build on our momentum, diversify our business, and achieve profitable expansion.”

“While acknowledging that net income year-over-year did not advance, there are many performance indicators that are cause for optimism about the Bank’s future” said Steven J. Schwartz, Chairman of the Company. "Substantial stability of core net interest margin and core deposits year-over-year positions the Bank for continued outperformance of peers, as does our ongoing commitment to maintain a strong credit culture and eschew the assumption of undue interest rate risk. Moreover, our investment in best-in-class C-suite executives should give us competitive advantages as we seek to meaningfully grow both sides of our balance sheet. Also encouraging is the promise that our ongoing investments in technology applications will enable improvements to our already strong customer-facing and back office functions.”

(1) Reconciliations of the non–U.S. generally accepted accounting principles ("GAAP") measures are set forth in the Appendix at the end of this press release.
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Fourth Quarter 2023 Highlights
Capital Bancorp, Inc.
Earnings Summary - Net income of $9.0 million, or $0.65 per diluted share, decreased $0.8 million compared to $9.8 million, or $0.70 per diluted share, for the third quarter 2023.
•Net interest income of $34.9 million decreased $1.9 million compared to $36.8 million for the third quarter 2023. Interest income of $47.0 million decreased $0.8 million compared to $47.7 million for the third quarter 2023 as interest income from credit card loans decreased $1.1 million. Interest expense of $12.1 million increased $1.2 million compared to $10.9 million for the third quarter 2023 reflecting the rising cost of interest-bearing deposits.
•The provision for credit losses was $2.8 million, an increase of $0.5 million from the third quarter 2023. The provision for credit losses includes net charge-offs of $2.5 million in the fourth quarter 2023 including $1.9 million from credit card related loans and $0.6 million from commercial loans. Commercial loan net charge-offs include a charge-off of $0.7 million in the fourth quarter 2023 of which $0.4 million was specifically reserved in the third quarter 2023 on a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2023. This loan was classified as nonperforming in the first quarter of 2023. As of January 22, 2024, sales of three of the properties totaling $7.1 million are currently pending. The third quarter 2023 provision for credit losses included net charge-offs of $1.8 million primarily related to credit card loans.
•Noninterest income of $5.9 million decreased $0.4 million compared to $6.3 million for the third quarter 2023. Credit card fees decreased $0.4 million primarily due to lower interchange and other fee income.
•Noninterest expense of $26.9 million decreased $1.1 million compared to $28.0 million for the third quarter 2023. Within this category, significant variances included the following:
◦Salaries and employee benefits of $11.6 million decreased $0.8 million primarily due to adjustments to annual incentive based compensation.
◦Professional fees of $1.6 million decreased $0.4 million related to decreases in third party consulting fees.
◦Data processing expense of $6.1 million decreased $0.3 million primarily from processor rebates.
◦Loan processing expense of $0.2 million decreased $0.2 million.
◦Other operating expenses of $4.0 million increased $0.6 million related to operational losses.
•Income tax expense of $2.2 million, or 19.5% of pre-tax income for the fourth quarter 2023 decreased $0.8 million from $3.0 million, or 23.4% of pre-tax income for the third quarter 2023, reflecting a decrease in pre-tax income of $1.6 million. The lower effective tax rate for the fourth quarter 2023 when compared to the third quarter 2023 is primarily driven by the tax benefit recognized on the exercise of non-qualified stock options during the fourth quarter. The stock option exercises also contributed to the reduction in the total year effective tax rate.
Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.63% and 14.44%, respectively, for the three months ended December 31, 2023, compared to 1.75% and 16.00%, respectively, for the three months ended September 30, 2023.
•The efficiency ratio was 65.91% for the three months ended December 31, 2023, compared to 65.02% for the three months ended September 30, 2023.
2


Balance Sheet – Total assets of $2.2 billion at December 31, 2023 decreased $47.8 million, or 2.1%, from September 30, 2023.
•Cash and cash equivalents of $54.0 million at December 31, 2023 decreased $92.2 million, or 63.1% from September 30, 2023, as total deposits decreased $72.0 million and total portfolio loans increased $40.4 million partially offset by an increase in other borrowed funds of $15.0 million.
•Net portfolio loans of $1.9 billion increased $40.7 million, representing 8.7% annualized growth.
•Total deposits of $1.9 billion at December 31, 2023 decreased $72.0 million, or 3.7%, from September 30, 2023, while total average deposits decreased $33.4 million quarter over quarter. The reduction in deposits is traditionally seasonal in nature, with title companies typically experiencing slower mortgage activity in the fourth quarter and some other commercial operating businesses typically drawing down demand deposits in the fourth quarter. Average portfolio loans-to-deposit ratio of 98.8% for the three months ended December 31, 2023 increased from 96.3% for the three months ended September 30, 2023.
•The investment securities portfolio continues to be classified as available for sale and had a fair market value of $208.3 million, or 9.4% of total assets, at December 31, 2023 up slightly from $206.1 million at September 30, 2023. The amortized cost of the investment securities portfolio was $225.7 million, with an effective duration of 3.22 years. U.S. Treasury securities represented 71.5% of the overall investment portfolio at December 31, 2023. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio decreased $4.7 million during the quarter to $13.1 million as of December 31, 2023, which represents 5.1% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.
Net Interest Margin - Net interest margin decreased to 6.40% for the three months ended December 31, 2023, compared to 6.71% for the three months ended September 30, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), a non-GAAP measure, decreased to 3.92%, compared to 4.05% for the three months ended September 30, 2023.
•The average yield on interest earning assets decreased 8 basis points compared to the third quarter 2023. The decrease in average yield was due to a 13 basis point decline in the yield for portfolio loans to 9.59% as interest income from credit card loans of $14.7 million in the fourth quarter 2023 declined $1.1 million from $15.8 million in the third quarter 2023. The yield on portfolio loans, as adjusted (excluding credit card loans), a non-GAAP measure, of 6.89% for the fourth quarter 2023 increased 13 basis points from 6.76% for the third quarter 2023. New portfolio loans (excluding credit card loans) originated in the fourth quarter 2023 totaled $91.1 million with a weighted average yield of 8.46% as compared to $98.9 million with a weighted average yield of 8.37% in the third quarter 2023.
•The average rate on interest-bearing liabilities increased 31 basis points compared to the third quarter 2023. Increases in average rates include money market accounts increasing 31 basis points to 4.16% and time deposits increasing 21 basis points to 4.72%, while average balances increased $24.7 million and $6.3 million, respectively, compared to the third quarter 2023. Further, the average rate on interest-bearing demand accounts increased 3 basis points to 0.18%, while the average balance decreased $20.0 million compared to the third quarter 2023.
3


Deposits - Total deposits at December 31, 2023 decreased by $72.0 million, or 3.7%, compared to September 30, 2023.
•Noninterest-bearing deposits of $617.4 million decreased $63.4 million, or 9.3%, compared to September 30, 2023. Interest-bearing deposits of $1.3 billion decreased $8.6 million, or 0.7%, compared to September 30, 2023 with a reduction in interest-bearing demand accounts of $29.7 million, money market accounts of $5.6 million and savings of $0.5 million while other time deposits increased $13.6 million. Brokered time deposits totaled $142.4 million at December 31, 2023, an increase of $13.7 million from September 30, 2023.
Cost of Interest-Bearing Liabilities - The elevated interest rate environment has driven up the average cost of interest-bearing liabilities to 3.68% for the quarter ended December 31, 2023, compared to 3.37% for the third quarter 2023.
•Average noninterest-bearing deposits of $622.9 million decreased $44.0 million, or 6.6%, compared to September 30, 2023, and represented 33.0% of total average deposits at December 31, 2023.
•Average borrowed funds of $41.8 million increased $6.9 million, or 19.7%, compared to September 30, 2023.
Robust Capital Positions - As of December 31, 2023, the Company reported a common equity tier 1 capital ratio of 15.43%, compared to 15.27% at September 30, 2023, and an allowance for credit losses to total loans ratio of 1.50%, compared to an allowance for credit losses to total loans ratio of 1.52% at September 30, 2023. Shares repurchased and retired during the three months ended December 31, 2023, as part of the Company's stock repurchase program, totaled 89,427 shares at an average price of $20.52, for a total cost of $1.8 million including commissions. Tangible book value per common share grew 4.5% to $18.31 at December 31, 2023 when compared to September 30, 2023. The Company did not have goodwill or other intangible assets during any of the periods presented and therefore, tangible book value per share is equal to book value per share.
Liquidity - Total sources of available borrowings at December 31, 2023 totaled $576.9 million, including available collateralized lines of credit of $463.7 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $37.2 million.
4


Commercial Bank
Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $39.6 million, to $1.8 billion, gross, at December 31, 2023 compared to September 30, 2023.
Net Interest Income - Interest income of $31.0 million increased $0.5 million compared to $30.4 million for the third quarter 2023, driven primarily by loan growth. Interest expense of $11.9 million increased $1.1 million, driven by an increase in the average cost of interest-bearing liabilities in the fourth quarter 2023.
Credit Metrics - Nonperforming assets ("NPAs") increased 5 basis points to 0.72% of total assets at December 31, 2023 compared to 0.67% at September 30, 2023 as a result of an increase in nonaccrual loans at December 31, 2023 to $16.0 million compared to $15.2 million at September 30, 2023. Included in nonperforming assets is a single $7.6 million, multi-unit residential real estate loan as previously mentioned. At December 31, 2023 commercial real estate loans with office space exposure totaled $56.3 million, or 3.0% of total portfolio loans, with a weighted average loan-to-value ("LTV") of 49.5%. Included in the total are owner-occupied commercial real estate loans with office exposure totaling $42.8 million with a weighted average LTV of 48.2% and non owner-occupied commercial real estate loans with office exposure totaling $13.5 million with a weighted average LTV of 54.2%.
OpenSky®
Revenues - Total revenue of $19.0 million decreased $1.5 million from the third quarter 2023. Interest income of $15.0 million decreased $1.1 million from the third quarter 2023. Average OpenSky® loan balances, net of reserves and deferred fees of $114.6 million for the fourth quarter 2023, decreased $2.3 million, or 1.9%, compared to $116.8 million for the third quarter 2023. Noninterest income of $4.0 million decreased $0.4 million due to a decline in credit card fees as compared to the third quarter 2023.
Noninterest Expense - Total noninterest expense of $10.4 million decreased $0.3 million from the third quarter 2023. Noninterest expense declined in the fourth quarter 2023 due primarily to a reduction in data processing expense of $0.4 million primarily from processor rebates. During the fourth quarter 2023, the number of OpenSky® credit card accounts declined by 3,891 to 525,314.
Loan Balances - OpenSky® loan balances, net of reserves, of $123.3 million at December 31, 2023 increased by $0.8 million, or 0.7%, compared to $122.5 million at September 30, 2023. Corresponding deposit balances of $173.9 million at December 31, 2023 decreased $7.3 million, or 4.0%, compared to $181.2 million at September 30, 2023. Gross unsecured loan balances of $30.8 million at December 31, 2023 increased $3.4 million, or 12.4%, compared to $27.4 million at September 30, 2023.
OpenSky® Credit - Card delinquencies remained stable in the fourth quarter 2023 when compared to the third quarter 2023. The provision for credit losses increased $0.3 million compared to the third quarter 2023 as card balances, net of reserves, increased $0.8 million during the fourth quarter 2023 as compared to a decrease of $0.4 million during the third quarter 2023.
5


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended4Q23 vs 3Q234Q23 vs 4Q22
(in thousands except per share data)December 31, 2023September 30, 2023December 31, 2022$ Change% Change$ Change% Change
Earnings Summary
Interest income$46,969 $47,741 $41,348 $(772)(1.6)%$5,621 13.6 %
Interest expense12,080 10,931 6,149 1,149 10.5 %5,931 96.5 %
Net interest income34,889 36,810 35,199 (1,921)(5.2)%(310)(0.9)%
Provision for credit losses2,808 2,280 2,384 528 23.2 %424 17.8 %
(Release of) provision for credit losses on unfunded commitments(106)24 — (130)(541.7)%(106)— %
Noninterest income5,936 6,326 5,561 (390)(6.2)%375 6.7 %
Noninterest expense26,907 28,046 26,734 (1,139)(4.1)%173 0.6 %
Income before income taxes11,216 12,786 11,642 (1,570)(12.3)%(426)(3.7)%
Income tax expense2,186 2,998 2,651 (812)(27.1)%(465)(17.5)%
Net income$9,030 $9,788 $8,991 $(758)(7.7)%$39 0.4 %
Pre-tax pre-provision net revenue ("PPNR") (1)
$13,918 $15,090 $14,026 $(1,172)(7.8)%$(108)(0.8)%
Common Share Data
Earnings per share - Basic$0.65 $0.70 $0.64 $(0.05)(7.1)%$0.01 1.6 %
Earnings per share - Diluted$0.65 $0.70 $0.62 $(0.05)(7.1)%$0.03 4.8 %
Weighted average common shares - Basic13,897 13,933 14,071 
Weighted average common shares - Diluted13,989 14,024 14,408 
Return Ratios
Return on average assets (annualized)1.63 %1.75 %1.67 %
Return on average assets, excluding impact of SBA-PPP loans (annualized) (1)
1.63 %1.75 %1.67 %
Return on average equity (annualized)14.44 %16.00 %16.18 %
______________
(1) Refer to Appendix for reconciliation of non-GAAP measures.
6


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
Year Ended
December 31,
(in thousands except per share data)20232022$ Change% Change
Earnings Summary
Interest income$183,206 $150,646 $32,560 21.6 %
Interest expense41,680 10,039 31,641 315.2 %
Net interest income141,526 140,607 919 0.7 %
Provision for credit losses9,610 6,631 2,979 44.9 %
(Release of) provision for credit losses on unfunded commitments(101)— (101)— %
Noninterest income24,975 29,372 (4,397)(15.0)%
Noninterest expense110,767 109,114 1,653 1.5 %
Income before income taxes46,225 54,234 (8,009)(14.8)%
Income tax expense10,354 12,430 (2,076)(16.7)%
Net income$35,871 $41,804 $(5,933)(14.2)%
Pre-tax pre-provision net revenue ("PPNR") (1)
$55,734 $60,865 $(5,131)(8.4)%
Common Share Data
Earnings per share - Basic$2.56 $2.98 $(0.42)(14.1)%
Earnings per share - Diluted$2.55 $2.91 $(0.36)(12.4)%
Weighted average common shares - Basic14,003 14,025 
Weighted average common shares - Diluted14,081 14,362 
Return Ratios
Return on average assets (annualized)1.64 %2.01 %
Return on average assets, excluding impact of SBA-PPP loans (annualized) (1)
1.64 %1.87 %
Return on average equity (annualized)14.91 %19.68 %
______________
(1) Refer to Appendix for reconciliation of non-GAAP measures.


7


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
Quarter EndedQuarter Ended
December 31,September 30,June 30,March 31,
(in thousands except per share data)20232022% Change202320232022
Balance Sheet Highlights
Assets$2,224,667 $2,123,655 4.8 %$2,272,484 $2,227,866 $2,245,286 
Investment securities available for sale208,329 252,481 (17.5)%206,055 208,464 255,762 
Mortgage loans held for sale7,481 7,416 0.9 %4,843 10,146 9,620 
SBA-PPP loans, net of fees645 2,163 (70.2)%750 1,090 2,037 
Portfolio loans receivable (2)
1,902,643 1,728,592 10.1 %1,861,929 1,837,041 1,786,109 
Allowance for credit losses28,610 26,385 8.4 %28,279 27,495 26,216 
Deposits1,895,996 1,758,072 7.8 %1,967,988 1,934,361 1,944,374 
FHLB borrowings 22,000 107,000 (79.4)%22,000 22,000 32,000 
Other borrowed funds27,062 12,062 124.4 %12,062 12,062 12,062 
Total stockholders' equity254,860 224,015 13.8 %242,878 237,435 234,517 
Tangible common equity (1)
254,860 224,015 13.8 %242,878 237,435 234,517 
Common shares outstanding13,923 14,139 (1.5)%13,893 13,981 14,083 
Book value per share$18.31 $15.84 15.6 %$17.48 $16.98 $16.65 
Tangible book value per share (1)
$18.31 $15.84 15.6 %$17.48 $16.98 $16.65 
Dividends per share
$0.08 $0.06 33.3 %$0.08 $0.06 $0.06 
______________
(1) Refer to Appendix for reconciliation of non-GAAP measures.
(2) Loans are reflected net of deferred fees and costs.
8


Operating Results - Comparison of Three Months Ended December 31, 2023 and 2022
For the three months ended December 31, 2023, net interest income of $34.9 million decreased slightly from $35.2 million in the same period in 2022. The net interest margin decreased 24 basis points to 6.40% for the three months ended December 31, 2023 from the same period in 2022 as interest income on credit card decreased $1.1 million. Net interest margin, excluding credit card and SBA-PPP loans, increased to 3.92% for the three months ended December 31, 2023, compared to 3.91% for the same period in 2022 as yields on interest-bearing deposits and portfolio loans generally kept pace with the rising costs of deposits, including money market accounts and time deposits.
For the three months ended December 31, 2023, average interest earning assets increased $60.8 million, or 2.9%, to $2.2 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 81 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $147.7 million, or 12.8%, and the average cost of interest-bearing liabilities increased to 3.68%, a 157 basis point increase from 2.11%.
For the three months ended December 31, 2023, the provision for credit losses was $2.8 million, an increase of $0.4 million from the same period in 2022. Net charge-offs for the three months ended December 31, 2023 were $2.5 million, or 0.53% on an annualized basis of average portfolio loans, compared to $2.1 million, or 0.49% on an annualized basis of average loans for the same period in 2022. The change in provision was partially due to a charge-off of $0.7 million in the fourth quarter 2023 of which $0.4 million was specifically reserved in the third quarter 2023 on a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2023. This loan was classified as nonperforming in the first quarter of 2023. As of January 22, 2024, sales of three of the properties totaling $7.1 million are currently pending. Of the $2.5 million in net charge-offs during the quarter, $1.4 million related to secured and partially secured cards in the credit card portfolio and $0.4 million related to unsecured cards.
For the three months ended December 31, 2023, noninterest income of $5.9 million increased $0.4 million, or 6.7%, from the same period in 2022. Mortgage banking revenue of $1.2 million increased $0.6 million due to an increase in home loan sales. Credit card fees of $4.0 million decreased $0.3 million as the number of open customer accounts declined year over year, which resulted in lower interchange and other fee income.
Credit card loan balances, net of reserves, decreased by $5.1 million to $123.3 million as of December 31, 2023, from $128.4 million at December 31, 2022. The related deposit account balances decreased 7.2% to $173.9 million at December 31, 2023 when compared to $187.4 million at December 31, 2022, reflective of the reduction in the number of open customer accounts year over year.
The efficiency ratio for the three months ended December 31, 2023 was 65.91% compared to 65.59% for the three months ended December 31, 2022.
For the three months ended December 31, 2023, noninterest expense of $26.9 million increased slightly from $26.7 million for the same period in 2022. The change includes increases in advertising expense of $0.7 million and other operating expense of $0.6 million, partially offset by decreases in data processing expense of $0.6 million and professional fees of $0.5 million.

9


Operating Results - Comparison of Year Ended December 31, 2023 and 2022
For the year ended December 31, 2023, net interest income of $141.5 million increased $0.9 million from the same period in 2022, primarily due to increased average balances of $235.9 million in portfolio loans combined with a 71 basis point increase in yield for portfolio loans, offset by significant increases in the cost of funding. The net interest margin decreased 32 basis points to 6.60% for the year ended December 31, 2023 from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.96% for the year ended December 31, 2023, compared to 3.93% for the same period in 2022.
For the year ended December 31, 2023, average interest earning assets increased $112.0 million, or 5.5%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 113 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $209.1 million, or 19.7%, while the average cost of interest-bearing liabilities increased 234 basis points to 3.29% from 0.95%.
For the year ended December 31, 2023, the provision for credit losses was $9.6 million, an increase of $3.0 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the year ended December 31, 2023 were $8.5 million, or 0.47% annualized of average portfolio loans, compared to $5.4 million, or 0.34% annualized of average portfolio loans, for the same period in 2022. The $8.5 million in net charge-offs during the year ended December 31, 2023 was comprised primarily of credit card portfolio net charge-offs, with $5.5 million related to secured and partially secured cards while $1.4 million was related to unsecured cards.
For the year ended December 31, 2023, noninterest income of $25.0 million decreased $4.4 million, or 15.0%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $4.7 million as the number of open customer accounts declined to 525,314 at December 31, 2023 from 533,855 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year.
The efficiency ratio for the year ended December 31, 2023 was 66.53% compared to 64.19% for the year ended December 31, 2022.
For the year ended December 31, 2023, noninterest expense of $110.8 million increased $1.7 million, or 1.5%, from the same period in 2022. The increase was primarily driven by a $5.9 million, or 13.7%, increase in salaries and employee benefits and a $0.8 million, or 16.6%, increase in occupancy and equipment, partially offset by a $3.7 million, or 12.7%, decrease in data processing expense and a $1.7 million, or 15.8%, decrease in professional fees due to a reduction in third party consulting fees. The decrease in data processing expense was the result of a contract renegotiation entered into in the first quarter 2022 in the OpenSky® Division as well as fewer average open cards during the period.
10


Financial Condition
Total assets at December 31, 2023 were $2.2 billion, a decrease of $47.8 million, or 2.1%, from the balance at September 30, 2023 and an increase of $101.0 million, or 4.8%, from the balance at December 31, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.9 billion at December 31, 2023, an increase of $40.7 million, up 2.2% or 8.7% annualized, compared to September 30, 2023, and an increase of $174.1 million, or 10.1%, compared to $1.7 billion at December 31, 2022.
The Company recorded a provision for credit losses of $9.6 million during the year ended December 31, 2023, which increased the allowance for credit losses to $28.6 million, or 1.50% of total loans at December 31, 2023, representing an increase of $0.3 million over the balance at September 30, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of December 31, 2023, were $16.0 million, or 0.72% of total assets, up from $15.2 million, or 0.67% of total assets at September 30, 2023, and up from $9.8 million, or 0.46% of total assets at December 31, 2022. Included in nonperforming assets at December 31, 2023 is a single $7.6 million, multi-unit residential real estate loan, with respect to which $0.7 million was charged off in the fourth quarter 2023.
Deposits were $1.9 billion at December 31, 2023, a decrease of $72.0 million, or 3.7%, from the balance at September 30, 2023 and an increase of $137.9 million, or 7.8%, from the balance at December 31, 2022. Average deposits of $1.9 billion for the three months ended December 31, 2023 decreased $33.4 million, or 1.7%, as compared to the three months ended September 30, 2023. Rising interest rates have resulted in some customers moving balances from noninterest-bearing deposit accounts to interest-bearing deposit accounts. As a result of the migration, average noninterest-bearing deposit balances decreased $112.5 million to $622.9 million as of December 31, 2023, as compared to December 31, 2022. Noninterest-bearing deposits represented 32.6% of total deposits at December 31, 2023 compared to 38.4% at December 31, 2022. Uninsured deposits were approximately $789.4 million as of December 31, 2023, representing 41.6% of the Company's deposit portfolio, compared to $857.7 million, or 43.6%, at September 30, 2023, and $784.6 million, or 44.6%, at December 31, 2022.
Stockholders’ equity increased to $254.9 million as of December 31, 2023, compared to $242.9 million at September 30, 2023 and $224.0 million at December 31, 2022. Shares repurchased and retired for the year ended December 31, 2023 as part of the Company's stock repurchase program totaled 475,346 shares at an average price of $18.12, for a total cost of $8.8 million including commissions. As of December 31, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.


11


Consolidated Statements of Income (Unaudited)
Three Months Ended
Year Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022December 31, 2023December 31, 2022
Interest income
Loans, including fees$45,109 $45,385 $42,991 $41,275 $38,763 $174,760 $144,408 
Investment securities available for sale1,083 1,089 1,266 1,377 1,402 4,815 3,912 
Federal funds sold and other777 1,267 823 764 1,183 3,631 2,326 
Total interest income46,969 47,741 45,080 43,416 41,348 183,206 150,646 
Interest expense
Deposits11,759 10,703 9,409 7,754 4,377 39,625 7,611 
Borrowed funds321 228 331 1,175 1,772 2,055 2,428 
Total interest expense12,080 10,931 9,740 8,929 6,149 41,680 10,039 
Net interest income34,889 36,810 35,340 34,487 35,199 141,526 140,607 
Provision for credit losses2,808 2,280 2,862 1,660 2,384 9,610 6,631 
(Release of) provision for credit losses on unfunded commitments(106)24 — (19)— (101)— 
Net interest income after provision for credit losses32,187 34,506 32,478 32,846 32,815 132,017 133,976 
Noninterest income
Service charges on deposits240 250 245 229 222 964 767 
Credit card fees3,970 4,387 4,706 4,210 4,314 17,273 21,972 
Mortgage banking revenue1,166 1,243 1,332 1,155 554 4,896 4,866 
Other income560 446 404 432 471 1,842 1,767 
Total noninterest income5,936 6,326 6,687 6,026 5,561 24,975 29,372 
Noninterest expenses
Salaries and employee benefits11,638 12,419 12,143 12,554 11,769 48,754 42,898 
Occupancy and equipment1,573 1,351 1,536 1,213 1,388 5,673 4,865 
Professional fees1,930 2,358 2,608 2,374 2,426 9,270 11,012 
Data processing6,128 6,469 6,559 6,530 6,697 25,686 29,418 
Advertising1,433 1,565 2,646 517 726 6,161 6,220 
Loan processing198 426 660 349 350 1,633 1,702 
Foreclosed real estate expenses, net— 1 — 6 — 7 (183)
Other operating4,007 3,457 3,440 2,679 3,378 13,583 13,182 
Total noninterest expenses26,907 28,046 29,592 26,222 26,734 110,767 109,114 
Income before income taxes11,216 12,786 9,573 12,650 11,642 46,225 54,234 
Income tax expense2,186 2,998 2,255 2,915 2,651 10,354 12,430 
Net income$9,030 $9,788 $7,318 $9,735 $8,991 $35,871 $41,804 

12


Consolidated Balance Sheets
(unaudited)(unaudited)(unaudited)(unaudited)(audited)
(in thousands except share data)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Assets
Cash and due from banks$14,513 $13,767 $18,619 $14,477 $19,963 
Interest-bearing deposits at other financial institutions39,044 130,428 100,343 125,448 39,764 
Federal funds sold407 1,957 376 462 20,688 
Total cash and cash equivalents53,964 146,152 119,338 140,387 80,415 
Investment securities available for sale208,329 206,055 208,464 255,762 252,481 
Restricted investments4,353 4,340 3,803 4,215 7,362 
Loans held for sale7,481 4,843 10,146 9,620 7,416 
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs645 750 1,090 2,037 2,163 
Portfolio loans receivable, net of deferred fees and costs1,902,643 1,861,929 1,837,041 1,786,109 1,728,592 
   Less allowance for credit losses(28,610)(28,279)(27,495)(26,216)(26,385)
Total portfolio loans held for investment, net1,874,033 1,833,650 1,809,546 1,759,893 1,702,207 
Premises and equipment, net5,069 5,297 5,494 5,367 3,386 
Accrued interest receivable11,494 11,231 10,155 9,985 9,489 
Deferred tax asset12,252 13,644 13,616 12,898 13,777 
Bank owned life insurance37,711 37,315 37,041 36,781 36,524 
Other assets9,336 9,207 9,173 8,341 8,435 
Total assets$2,224,667 $2,272,484 $2,227,866 $2,245,286 $2,123,655 
Liabilities
Deposits
Noninterest-bearing$617,373 $680,803 $693,129 $705,801 $674,313 
Interest-bearing1,278,623 1,287,185 1,241,232 1,238,573 1,083,759 
Total deposits1,895,996 1,967,988 1,934,361 1,944,374 1,758,072 
Federal Home Loan Bank advances22,000 22,000 22,000 32,000 107,000 
Other borrowed funds27,062 12,062 12,062 12,062 12,062 
Accrued interest payable5,583 5,204 3,029 1,977 1,031 
Other liabilities19,166 22,352 18,979 20,356 21,475 
Total liabilities1,969,807 2,029,606 1,990,431 2,010,769 1,899,640 
Stockholders' equity
Common stock139 139 140 141 141 
Additional paid-in capital54,473 54,549 55,856 57,277 58,190 
Retained earnings213,345 206,033 197,490 191,058 182,435 
Accumulated other comprehensive loss(13,097)(17,843)(16,051)(13,959)(16,751)
Total stockholders' equity254,860 242,878 237,435 234,517 224,015 
Total liabilities and stockholders' equity$2,224,667 $2,272,484 $2,227,866 $2,245,286 $2,123,655 
13


The following tables show the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
Three Months Ended
December 31, 2023		Three Months Ended
September 30, 2023		Three Months Ended
December 31, 2022
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
(in thousands)
Assets
Interest earning assets:
Interest-bearing deposits$65,336 $680 4.13 %$87,112 $1,183 5.39 %$111,404 $1,006 3.58 %
Federal funds sold1,574 21 5.29 1,134 15 5.25 4,054 35 3.41 
Investment securities available for sale223,132 1,083 1.93 229,731 1,089 1.88 292,117 1,402 1.90 
Restricted investments4,518 76 6.67 4,058 69 6.75 10,111 142 5.57 
Loans held for sale 4,601 83 7.16 6,670 111 6.60 6,062 88 5.74 
SBA-PPP loans receivable699 4 2.27 906 11 4.82 2,435 28 4.59 
Portfolio loans receivable(2)(3)
1,862,599 45,022 9.59 1,846,866 45,263 9.72 1,675,434 38,647 9.15 
Total interest earning assets2,162,459 46,969 8.62 2,176,477 47,741 8.70 2,101,617 41,348 7.81 
Noninterest earning assets40,020 44,640 34,539 
Total assets
$2,202,479 $2,221,117 $2,136,156 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts$195,539 90 0.18 $215,527 71 0.13 $218,518 61 0.11 
Savings5,184 2 0.15 5,582 3 0.21 8,261 1 0.05 
Money market accounts680,697 7,139 4.16 655,990 6,373 3.85 552,185 3,016 2.17 
Time deposits380,731 4,528 4.72 374,429 4,256 4.51 177,346 1,299 2.91 
Borrowed funds41,823 321 3.05 34,932 228 2.59 199,982 1,772 3.52 
Total interest-bearing liabilities1,303,974 12,080 3.68 1,286,460 10,931 3.37 1,156,292 6,149 2.11 
Noninterest-bearing liabilities:
Noninterest-bearing liabilities27,529 25,047 23,941 
Noninterest-bearing deposits622,941 666,939 735,416 
Stockholders’ equity
248,035 242,671 220,507 
Total liabilities and stockholders’ equity$2,202,479 $2,221,117 $2,136,156 
Net interest spread4.94 %5.33 %5.70 %
Net interest income$34,889 $36,810 $35,199 
Net interest margin(4)
6.40 %6.71 %6.64 %
_______________
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, collectively, portfolio loans yield excluding credit card loans was 6.89%, 6.76% and 5.86%, respectively.
(4)For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, collectively, SBA-PPP loans and credit card loans accounted for 248, 266 and 273 basis points of the reported net interest margin, respectively.

14


Year Ended December 31,
20232022
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
(in thousands)
Assets
Interest earning assets:
Interest-bearing deposits$70,407 $3,211 4.56 %$156,751 $2,007 1.28 %
Federal funds sold1,597 74 4.63 2,959 44 1.49 
Investment securities available for sale245,466 4,815 1.96 248,869 3,912 1.57 
Restricted investments5,016 346 6.90 5,475 275 5.02 
Loans held for sale 5,755 382 6.64 9,696 435 4.49 
SBA-PPP loans receivable1,373 30 2.18 29,831 3,477 11.66 
Portfolio loans receivable(2)(3)
1,815,595 174,348 9.60 1,579,661 140,496 8.89 
Total interest earning assets2,145,209 183,206 8.54 2,033,242 150,646 7.41 
Noninterest earning assets43,090 44,559 
Total assets
$2,188,299 $2,077,801 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts$201,194 298 0.15 $253,923 174 0.07 
Savings5,768 8 0.14 8,917 5 0.06 
Money market accounts642,013 23,510 3.66 553,388 4,529 0.82 
Time deposits360,464 15,809 4.39 165,854 2,903 1.75 
Borrowed funds59,302 2,055 3.47 77,556 2,428 3.13 
Total interest-bearing liabilities1,268,741 41,680 3.29 1,059,638 10,039 0.95 
Noninterest-bearing liabilities:
Noninterest-bearing liabilities24,026 23,797 
Noninterest-bearing deposits655,013 781,971 
Stockholders’ equity
240,519 212,395 
Total liabilities and stockholders’ equity$2,188,299 $2,077,801 
Net interest spread5.25 %6.46 %
Net interest income$141,526 $140,607 
Net interest margin(4)
6.60 %6.92 %
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the years ended December 31, 2023 and 2022, collectively, portfolio loans yield excluding credit card loans was 6.66% and 5.31%, respectively.
(4)For the years ended December 31, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 264 and 299 basis points of the reported net interest margin, respectively.



15


The Company’s reportable segments represent business units with discrete financial information whose results are regularly reviewed by management. The four segments include Commercial Banking, Capital Bank Home Loans (the Company’s mortgage loan division), OpenSky® (the Company’s credit card division) and the Corporate Office. The following schedule presents financial information for each reportable segment for the year ended December 31, 2023 and December 31, 2022.

Segments
For the three months ended December 31, 2023
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$30,957 $83 $15,035 $964 $(70)$46,969 
Interest expense11,884 31 — 235 (70)12,080 
Net interest income19,073 52 15,035 729 — 34,889 
Provision (release of provision) for credit losses691 — 2,125 (8)— 2,808 
Release of credit losses on unfunded commitments(106)— — — — (106)
Net interest income after provision18,488 52 12,910 737 — 32,187 
Noninterest income773 1,166 3,996 1 — 5,936 
Noninterest expense(1)
15,135 1,437 10,378 (43)— 26,907 
Net income (loss) before taxes$4,126 $(219)$6,528 $781 $— $11,216 
Total assets$2,050,436 $8,589 $117,477 $276,831 $(228,666)$2,224,667 
For the three months ended September 30, 2023
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$30,409 $111 $16,143 $1,162 $(84)$47,741 
Interest expense10,736 32 — 247 (84)10,931 
Net interest income19,673 79 16,143 915 — 36,810 
Provision for credit losses
275 — 1,875 130 — 2,280 
Provision for credit losses on unfunded commitments24 — — — — 24 
Net interest income after provision19,374 79 14,268 785 — 34,506 
Noninterest income665 1,255 4,405 1 — 6,326 
Noninterest expense(1)
15,784 1,502 10,637 123 — 28,046 
Net income (loss) before taxes$4,255 $(168)$8,036 $663 $— $12,786 
Total assets$2,102,749 $5,280 $116,318 $264,950 $(216,813)$2,272,484 
For the three months ended December 31, 2022
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$24,389 $88 $16,035 $891 $(55)$41,348 
Interest expense5,990 33 — 181 (55)6,149 
Net interest income18,399 55 16,035 710 — 35,199 
Provision for loan losses— — 2,384 — — 2,384 
Net interest income after provision18,399 55 13,651 710 — 32,815 
Noninterest income550 696 4,314 1 — 5,561 
Noninterest expense(1)
13,811 2,085 10,724 114 — 26,734 
Net income (loss) before taxes$5,138 $(1,334)$7,241 $597 $— $11,642 
Total assets$1,939,601 $7,936 $122,418 $245,399 $(191,699)$2,123,655 
________________________
(1)     Noninterest expense includes $5.7 million, $6.1 million and $6.1 million in data processing expense in OpenSky’s® segment for the three months ended December 31, 2023 September 30, 2023, and December 31, 2022, respectively.
(2)    The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.


16


Segments
For the year ended December 31, 2023
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$116,408 $382 $62,476 $4,238 $(298)$183,206 
Interest expense40,896 135 — 947 (298)41,680 
Net interest income75,512 247 62,476 3,291 — 141,526 
Provision for credit losses1,540 — 7,948 122 — 9,610 
Release of credit losses on unfunded commitments(101)— — — — (101)
Net interest income after provision74,073 247 54,528 3,169 — 132,017 
Noninterest income2,737 4,909 17,325 4 — 24,975 
Noninterest expense(1)
61,836 6,001 42,524 406 — 110,767 
Net income (loss) before taxes$14,974 $(845)$29,329 $2,767 $— $46,225 
Total assets$2,050,436 $8,589 $117,477 $276,831 $(228,666)$2,224,667 
For the year ended December 31, 2022
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$82,182 $435 $64,859 $3,349 $(179)$150,646 
Interest expense9,245 218 — 755 (179)10,039 
Net interest income72,937 217 64,859 2,594 — 140,607 
Provision (release of provision) for loan losses
(980)— 7,611 — — 6,631 
Net interest income after provision73,917 217 57,248 2,594 — 133,976 
Noninterest income2,122 5,276 21,972 2 — 29,372 
Noninterest expense(1)
52,552 8,450 47,647 465 — 109,114 
Net income (loss) before taxes$23,487 $(2,957)$31,573 $2,131 $— $54,234 
Total assets$1,939,601 $7,936 $122,418 $245,399 $(191,699)$2,123,655 
(1)     Noninterest expense includes $23.7 million and $27.0 million in data processing expense in OpenSky’s® segment for the years ended December 31, 2023 and 2022, respectively.
(2)    The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.








17

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended
(in thousands except per share data)December 31, 2023September 30, 2023June 30,
2023		March 31,
2023		December 31,
2022
Earnings:
Net income$9,030 $9,788 $7,318 $9,735 $8,991 
Earnings per common share, diluted0.65 0.70 0.52 0.68 0.62 
Net interest margin6.40 %6.71 %6.63 %6.65 %6.64 %
Net interest margin, excluding credit cards & SBA-PPP loans (1)
3.92 %4.05 %4.06 %3.81 %3.91 %
Return on average assets(2)
1.63 %1.75 %1.34 %1.84 %1.67 %
Return on average assets, excluding impact of SBA-PPP loans (1)(2)
1.63 %1.75 %1.34 %1.84 %1.67 %
Return on average equity(2)
14.44 %16.00 %12.30 %16.98 %16.18 %
Efficiency ratio65.91 %65.02 %70.41 %64.73 %65.59 %
Balance Sheet:
Total portfolio loans receivable, net deferred fees$1,902,643 $1,861,929 $1,837,041 $1,786,109 $1,728,592 
Total deposits1,895,996 1,967,988 1,934,361 1,944,374 1,758,072 
Total assets2,224,667 2,272,484 2,227,866 2,245,286 2,123,655 
Total stockholders' equity254,860 242,878 237,435 234,517 224,015 
Total average portfolio loans receivable, net deferred fees1,862,599 1,846,866 1,800,800 1,750,539 1,675,434 
Total average deposits1,885,092 1,918,467 1,881,380 1,771,024 1,691,726 
Portfolio loans-to-deposit ratio (period-end balances)100.35 %94.61 %94.97 %91.86 %98.32 %
Portfolio loans-to-deposit ratio (average balances)98.81 %96.27 %95.72 %98.84 %99.04 %
Asset Quality Ratios:
Nonperforming assets to total assets0.72 %0.67 %0.71 %0.73 %0.46 %
Nonperforming assets to total assets, excluding the SBA-PPP loans (1)
0.72 %0.67 %0.71 %0.73 %0.46 %
Nonperforming loans to total loans0.84 %0.82 %0.85 %0.91 %0.56 %
Nonperforming loans to portfolio loans (1)
0.84 %0.82 %0.86 %0.91 %0.56 %
Net charge-offs to average portfolio loans (1)(2)
0.53 %0.38 %0.35 %0.61 %0.49 %
Allowance for credit losses to total loans1.50 %1.52 %1.50 %1.47 %1.52 %
Allowance for credit losses to portfolio loans (1)
1.50 %1.52 %1.50 %1.47 %1.53 %
Allowance for credit losses to non-performing loans178.34 %185.61 %175.03 %160.91 %270.46 %
Bank Capital Ratios:
Total risk based capital ratio14.81 %14.51 %14.08 %14.09 %14.21 %
Tier 1 risk based capital ratio13.56 %13.25 %12.82 %12.84 %12.95 %
Leverage ratio10.51 %10.04 %9.77 %9.78 %9.47 %
Common equity Tier 1 capital ratio13.56 %13.25 %12.82 %12.84 %12.95 %
Tangible common equity9.91 %9.08 %8.93 %8.79 %8.85 %
Holding Company Capital Ratios:
Total risk based capital ratio17.38 %17.11 %16.81 %16.75 %16.33 %
Tier 1 risk based capital ratio15.55 %15.27 %14.96 %14.90 %15.13 %
Leverage ratio12.14 %11.62 %11.50 %11.47 %11.24 %
Common equity Tier 1 capital ratio15.43 %15.27 %14.96 %14.90 %15.00 %
Tangible common equity11.71 %10.69 %10.66 %10.44 %10.55 %
18

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended
(in thousands except per share data)December 31, 2023September 30, 2023June 30,
2023		March 31,
2023		December 31,
2022
Composition of Loans:
SBA-PPP loans, net$645 $750 $1,090 $2,037 $2,163 
Commercial real estate, non owner-occupied$351,116 $350,637 $348,892 $348,047 $351,423 
Commercial real estate, owner-occupied$307,911 $305,802 $311,972 $299,966 $300,809 
Residential real estate573,104 558,147 555,133 545,899 484,735 
Construction real estate290,108 280,905 258,400 251,494 238,099 
Commercial and industrial238,548 236,782 233,598 221,258 220,221 
Lender finance11,085 — — — — 
Business equity lines of credit14,117 14,155 13,277 12,205 12,319 
Credit card, net of reserve(3)
123,331 122,533 122,925 112,860 128,434 
Other consumer loans950 948 1,187 1,578 1,179 
Portfolio loans receivable$1,910,270 $1,869,909 $1,845,384 $1,793,307 $1,737,219 
Deferred origination fees, net(7,627)(7,980)(8,343)(7,198)(8,627)
Portfolio loans receivable, net$1,902,643 $1,861,929 $1,837,041 $1,786,109 $1,728,592 
Composition of Deposits:
Noninterest-bearing$617,373 $680,803 $693,129 $705,801 $674,313 
Interest-bearing demand199,308 229,035 243,095 219,685 207,836 
Savings5,211 5,686 5,816 5,835 7,530 
Money markets663,129 668,774 631,148 632,087 574,978 
Brokered time deposits142,356 128,665 128,665 181,820 131,819 
Other time deposits268,619 255,025 232,508 199,146 161,596 
Total deposits$1,895,996 $1,967,988 $1,934,361 $1,944,374 $1,758,072 
Capital Bank Home Loan Metrics:
Origination of loans held for sale$45,152 $50,023 $61,480 $44,448 $43,956 
Mortgage loans sold34,140 39,364 49,231 40,483 43,415 
Gain on sale of loans1,015 1,011 1,262 1,223 912 
Purchase volume as a % of originations89.99 %92.29 %93.12 %90.72 %88.94 %
Gain on sale as a % of loans sold(4)
2.97 %2.57 %2.56 %3.02 %2.10 %
Mortgage commissions$465 $528 $621 $378 $451 
OpenSky® Portfolio Metrics:
Open customer accounts525,314 529,205 540,058 527,231 533,855 
Secured credit card loans, gross$95,300 $98,138 $100,218 $89,078 $104,157 
Unsecured credit card loans, gross30,817 27,430 25,254 25,782 26,795 
Noninterest secured credit card deposits173,857 181,185 186,566 184,809 187,412 
_______________
(1)Refer to Appendix for reconciliation of non-GAAP measures.
(2)Annualized.
(3)Credit card loans are presented net of reserve for interest and fees.
(4)Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.
19

Appendix

Reconciliation of Non-GAAP Measures




The Company has presented the following non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures because it believes that these measures provide useful and comparative information to assess trends in the Company’s results of operations and financial condition. Presentation of these non-GAAP financial measures is consistent with how the Company evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company’s industry. Investors should recognize that the Company’s presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and the Company strongly encourages a review of its condensed consolidated financial statements in their entirety.
20

Appendix

Reconciliation of Non-GAAP Measures




Return on Average Assets, as AdjustedQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Net Income$9,030 $9,788 $7,318 $9,735 $8,991 
Less: SBA-PPP Loan Income
4 11 7 8 28 
Net Income, as Adjusted$9,026 $9,777 $7,311 $9,727 $8,963 
Average Total Assets2,202,479 2,221,117 2,184,351 2,144,249 2,136,156 
Less: Average SBA-PPP Loans699 906 1,808 2,099 2,435 
Average Total Assets, as Adjusted$2,201,780 $2,220,211 $2,182,543 $2,142,150 $2,133,721 
Return on Average Assets, as Adjusted1.63%1.75%1.34%1.84%1.67%
Return on Average Assets, as AdjustedYear Ended
(in thousands)December 31, 2023December 31, 2022
Net Income$35,871 $41,804 
Less: SBA-PPP Loan Income
30 3,477 
Net Income, as Adjusted$35,841 $38,327 
Average Total Assets2,188,299 2,077,801 
Less: Average SBA-PPP Loans1,373 29,831 
Average Total Assets, as Adjusted$2,186,926 $2,047,970 
Return on Average Assets, as Adjusted1.64%1.87%
Net Interest Margin, as AdjustedQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Net Interest Income$34,889 $36,810 $35,340 $34,487 $35,199 
Less: Credit Card Loan Income
14,677 15,792 14,818 15,809 15,717 
Less: SBA-PPP Loan Income
4 11 7 8 28 
Net Interest Income, as Adjusted$20,208 $21,007 $20,515 $18,670 $19,454 
Average Interest Earning Assets2,162,459 2,176,477 2,136,936 2,103,984 2,101,617 
Less: Average Credit Card Loans
114,551 116,814 110,574 115,850 124,120 
Less: Average SBA-PPP Loans
699 906 1,808 2,099 2,435 
Total Average Interest Earning Assets, as Adjusted$2,047,209 $2,058,757 $2,024,554 $1,986,035 $1,975,062 
Net Interest Margin, as Adjusted3.92%4.05%4.06%3.81%3.91%
Net Interest Margin, as AdjustedYear Ended
(in thousands)December 31, 2023December 31, 2022
Net Interest Income$141,526 $140,607 
Less: Credit Card Loan Income
61,096 63,348 
Less: SBA-PPP Loan Income
30 3,477 
Net Interest Income, as Adjusted$80,400 $73,782 
Average Interest Earning Assets2,145,209 2,033,242 
Less: Average Credit Card Loans
114,450 126,473 
Less: Average SBA-PPP Loans
1,373 29,831 
Total Average Interest Earning Assets, as Adjusted$2,029,386 $1,876,938 
Net Interest Margin, as Adjusted3.96%3.93%








21

Appendix

Reconciliation of Non-GAAP Measures





Portfolio Loans Receivable Yield, as AdjustedQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Portfolio Loans Receivable Interest Income$45,022 $45,263 $42,872 $41,191 $38,647 
Less: Credit Card Loan Income14,677 15,792 14,818 15,809 15,717 
Portfolio Loans Receivable Interest Income, as Adjusted$30,345 $29,471 $28,054 $25,382 $22,930 
Average Portfolio Loans Receivable1,862,599 1,846,866 1,800,800 1,750,539 1,675,434 
Less: Average Credit Card Loans114,551 116,814 110,574 115,850 124,120 
Total Average Portfolio Loans Receivable, as Adjusted$1,748,048 $1,730,052 $1,690,226 $1,634,689 $1,551,314 
Portfolio Loans Receivable Yield, as Adjusted6.89%6.76%6.66%6.30%5.86%
Portfolio Loans Receivable Yield, as AdjustedYear Ended
(in thousands)December 31, 2023December 31, 2022
Portfolio Loans Receivable Interest Income$174,348 $140,496 
Less: Credit Card Loan Income61,096 63,348 
Portfolio Loans Receivable Interest Income, as Adjusted$113,252 $77,148 
Average Portfolio Loans Receivable1,815,595 1,579,661 
Less: Average Credit Card Loans114,450 126,473 
Total Average Portfolio Loans Receivable, as Adjusted$1,701,145 $1,453,188 
Portfolio Loans Receivable Yield, as Adjusted6.66%5.31%

Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Net Income
$9,030 $9,788 $7,318 $9,735 $8,991 
Add: Income Tax Expense2,186 2,998 2,255 2,915 2,651 
Add: Provision for Credit Losses2,808 2,280 2,862 1,660 2,384 
Add: (Release of) Provision for Credit Losses on Unfunded Commitments(106)24 — (19)— 
Pre-tax, Pre-Provision Net Revenue ("PPNR")$13,918 $15,090 $12,435 $14,291 $14,026 

Pre-tax, Pre-Provision Net Revenue ("PPNR")Year Ended
(in thousands)December 31, 2023December 31, 2022
Net Income
$35,871 $41,804 
Add: Income Tax Expense10,354 12,430 
Add: Provision for Credit Losses9,610 6,631 
Add: Release of Credit Losses on Unfunded Commitments(101)— 
Pre-tax, Pre-Provision Net Revenue ("PPNR")$55,734 $60,865 

Allowance for Credit Losses to Total Portfolio LoansQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Allowance for Credit Losses$28,610 $28,279 $27,495 $26,216 $26,385 
Total Loans1,903,288 1,862,679 1,838,131 1,788,146 1,730,755 
Less: SBA-PPP Loans
645 750 1,090 2,037 2,163 
Total Portfolio Loans$1,902,643 $1,861,929 $1,837,041 $1,786,109 $1,728,592 
Allowance for Credit Losses to Total Portfolio Loans1.50%1.52%1.50%1.47%1.53%
22

Appendix

Reconciliation of Non-GAAP Measures




Nonperforming Assets to Total Assets, net SBA-PPP LoansQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Total Nonperforming Assets$16,042 $15,236 $15,709 $16,293 $9,756 
Total Assets2,224,667 2,272,484 2,227,866 2,245,286 2,123,655 
Less: SBA-PPP Loans
645 750 1,090 2,037 2,163 
Total Assets, net SBA-PPP Loans$2,224,022 $2,271,734 $2,226,776 $2,243,249 $2,121,492 
Nonperforming Assets to Total Assets, net SBA-PPP Loans0.72%0.67%0.71%0.73%0.46%

Nonperforming Loans to Total Portfolio LoansQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Total Nonperforming Loans$16,042 $15,236 $15,709 $16,293 $9,756 
Total Loans1,903,288 1,862,679 1,838,131 1,788,146 1,730,755 
Less: SBA-PPP Loans
645 750 1,090 2,037 2,163 
Total Portfolio Loans$1,902,643 $1,861,929 $1,837,041 $1,786,109 $1,728,592 
Nonperforming Loans to Total Portfolio Loans0.84%0.82%0.86%0.91%0.56%

Net Charge-offs to Average Portfolio LoansQuarter Ended
(in thousands)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Total Net Charge-offs$2,477 $1,780 $1,583 $2,633 $2,090 
Total Average Loans1,863,298 1,847,772 1,802,608 1,752,638 1,677,869 
Less: Average SBA-PPP Loans
699 906 1,808 2,099 2,435 
Total Average Portfolio Loans$1,862,599 $1,846,866 $1,800,800 $1,750,539 $1,675,434 
Net Charge-offs to Average Portfolio Loans0.53%0.38%0.35%0.61%0.49%

Net Charge-offs to Average Portfolio LoansYear Ended
(in thousands)December 31, 2023December 31, 2022
Total Net Charge-offs$8,473 $5,427 
Total Average Loans1,816,968 1,609,492 
Less: Average SBA-PPP Loans
1,373 29,831 
Total Average Portfolio Loans$1,815,595 $1,579,661 
Net Charge-offs to Average Portfolio Loans0.47%0.34%

Tangible Book Value per ShareQuarter Ended
(in thousands, except per share amounts)December 31, 2023September 30, 2023June 30, 2023March 31, 2023December 31, 2022
Total Stockholders' Equity$254,860 $242,878 $237,435 $234,517 $224,015 
Less: Preferred Equity
— — — — — 
Less: Intangible Assets
— — — — — 
Tangible Common Equity$254,860 $242,878 $237,435 $234,517 $224,015 
Period End Shares Outstanding13,922,532 13,893,083 13,981,414 14,082,657 14,138,829 
Tangible Book Value per Share$18.31 $17.48 $16.98 $16.65 $15.84 

23

ABOUT CAPITAL BANCORP, INC.
Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Company’s wholly-owned subsidiary, Capital Bank, N.A., is the fourth largest bank headquartered in Maryland at December 31, 2023. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in four locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.2 billion at December 31, 2023 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "optimistic," “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.  Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and in the Middle East; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; any failure to adequately manage the transition from USD LIBOR as a reference rate; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; and other factors that may affect our future results.

These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

FINANCIAL CONTACT: Jay Walker (301) 468-8848 x1223
MEDIA CONTACT: Ed Barry (240) 283-1912
WEB SITE: www.CapitalBankMD.com

24
v3.23.4
Cover Page
Jan. 22, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Jan. 22, 2024
Entity Registrant Name CAPITAL BANCORP, INC
Entity Incorporation, State or Country Code MD
Entity File Number 001-38671
Entity Tax Identification Number 52-2083046
Entity Address, Address Line One 2275 Research Boulevard
Entity Address, Address Line Two Suite 600
Entity Address, City or Town Rockville
Entity Address, State or Province MD
Entity Address, Postal Zip Code 20850
City Area Code 301
Local Phone Number 468-8848
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Title of 12(b) Security Common Stock, par value $0.01 per share
Trading Symbol CBNK
Security Exchange Name NASDAQ
Amendment Flag false
Entity Central Index Key 0001419536
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