• Capital Bancorp, Inc. Continued Deposit and Loan Growth Leads to Strong Net Interest Margin, Declares Quarterly Dividend of $0.08

    ソース: Nasdaq GlobeNewswire / 27 7 2023 18:00:18   America/New_York

    ROCKVILLE, Md., July 27, 2023 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $7.3 million, or $0.52 per diluted share, for the second quarter 2023, compared to net income of $9.7 million, or $0.68 per diluted share, for the first quarter 2023 and $11.5 million, or $0.80 per diluted share, for the second quarter 2022. Total average deposits increased $110.4 million, or 25.0% annualized, the average loan portfolio grew $50.3 million and the net interest margin of 6.63% for the second quarter 2023 remained stable when compared to 6.65% for the first quarter 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans) of 4.06% for the second quarter 2023 grew on the back of steady loan and deposit growth, excluding brokered time deposits, when compared to adjusted net interest margin of 3.81% for the first quarter 2023.

    The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on August 23, 2023 to shareholders of record on August 7, 2023. The dividend declared of $0.08 is $0.02, or 33.3% higher than the prior quarter dividend.

    "We saw a significant number of positive signs in our performance this quarter and are making investments in our future,” said Ed Barry, Chief Executive Officer of the Company and the Bank. “Core deposit growth remains a priority and we continue to see traction on building our franchise and in particular our noninterest-bearing deposits. Net interest margin was stable with adjusted net interest margin increasing as we continued to price loans based on the marginal cost of deposits to generate attractive spreads. OpenSky® open customer accounts increased, with growth in corresponding loan and deposit balances, as initiatives began to deliver. Credit remained stable and we maintain a well positioned balance sheet with a strong capital base in the current environment."

    “Despite some of the year-over-year declines, the Board is pleased with Capital Bank’s performance during the quarter.” said Steven J. Schwartz, Chairman of the Company. “Our continued solid increases in tangible book value, average non-interest-bearing deposits, loans, and cardholders are a direct result of the Bank’s smart growth strategy. We are also pleased with the results of our continuing focus on maintaining outstanding capital and liquidity metrics, as reflected in our quarter-end numbers. Declines in EPS and ROE resulted primarily from a decision to invest more heavily in our credit card franchise, loan and deposit growth personnel and branding, as well as the industry-wide migration of our deposit book to more expensive products. We are gratified nonetheless that our net interest margin remains largely unaffected, and we believe the Bank continues to be well positioned for any macroeconomic challenges that may lie ahead.”

    Second Quarter 2023 Highlights

    Capital Bancorp, Inc.

    Earnings Summary - Net income of $7.3 million, or $0.52 per diluted share, decreased $2.4 million compared to $9.7 million, or $0.68 per diluted share, for the first quarter 2023.

    • Net interest income of $35.3 million increased $0.9 million compared to $34.5 million for the first quarter 2023. Interest income of $45.1 million increased $1.7 million compared to $43.4 million for the first quarter 2023 driven by loan growth, as average portfolio loans increased $50.3 million compared to the first quarter 2023 in tandem with slightly higher rates in the second quarter 2023. Interest expense of $9.7 million increased $0.8 million compared to $8.9 million for the first quarter 2023 driven by an increase in the cost of funds. Interest expense from interest-bearing deposits increased $1.7 million, as average interest-bearing deposits increased $88.0 million while interest expense from borrowed funds decreased $0.8 million, as average borrowed funds decreased $75.2 million from the first quarter 2023.
    • The provision for credit losses was $2.9 million, an increase of $1.2 million from the first quarter 2023 driven by moderate changes to the economic forecast and loan growth.
    • Noninterest income of $6.7 million increased $0.7 million compared to $6.0 million for the first quarter of 2023. Credit card fees increased $0.5 million as the number of open customer accounts increased quarter over quarter, which resulted in higher interchange and other income.
    • Noninterest expense of $29.6 million increased $3.4 million compared to $26.2 million for the first quarter 2023. Within this category, significant variances included the following:
      • Advertising expense of $2.6 million increased $2.1 million due to marketing efforts related to OpenSky® customer acquisition.
      • Other operating expenses of $3.4 million increased $0.8 million including $0.2 million related to outside service provider expense, $0.2 million related to FDIC assessment expense, with the remainder among other categories.
      • Occupancy and equipment expense of $1.5 million increased $0.3 million related to software licensing expenses.
      • Loan processing expense of $0.7 million increased $0.3 million in line with the growth in the loan portfolio.
      • Professional fees of $2.6 million increased $0.2 million, attributable primarily to increases in third party consulting and legal fees.
      • Salaries and employee benefits of $12.1 million decreased $0.4 million reflecting a seasonal increase in payroll taxes and benefit expense in the first quarter 2023.

    Balance Sheet Total assets of $2.2 billion at June 30, 2023 decreased $17.4 million, or 0.8%, from March 31, 2023.

    • Cash and cash equivalents decreased $21.0 million.
    • Net portfolio loans of $1.8 billion increased $50.9 million, representing 11.4% annualized growth.
    • Total deposits of $1.9 billion at June 30, 2023 decreased $10.0 million, or 0.5%, from March 31, 2023, while total average deposits increased $110.4 million, or 25.0% annualized, quarter over quarter. Federal Home Loan Bank advances decreased $10.0 million, or 31.3%, from March 31, 2023.
    • The investment securities portfolio continues to be classified as available for sale and had a fair market value of $208.5 million, or 9.4% of total assets, at June 30, 2023. The amortized cost of the investment securities portfolio was $229.9 million, with an effective duration of 3.48 years. U.S. Treasury securities represent 74.6% of the overall investment portfolio. Investment securities available for sale decreased $47.3 million, primarily due to $44.0 million of maturing U.S. Treasuries in the second quarter 2023. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio increased $2.1 million during the quarter to $16.1 million as of June 30, 2023, which represents 6.8% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.

    Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.34% and 12.30%, respectively, for the three months ended June 30, 2023, compared to 1.84% and 16.98%, respectively, for the three months ended March 31, 2023.

    • The efficiency ratio was 70.4% for the three months ended June 30, 2023, compared to 64.7% for the three months ended March 31, 2023. The change was primarily attributable to an increase in noninterest expense.

    Stable Net Interest Margin - Net interest margin was 6.63% for the three months ended June 30, 2023, compared to 6.65% for the three months ended March 31, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), of 4.06%, increased 25 basis points compared to 3.81% for the three months ended March 31, 2023.

    • The average yield on interest earning assets increased 9 basis points compared to the first quarter 2023. The average yield on investment securities available for sale decreased 4 basis points to 1.99%, and the average yield on portfolio loans increased 1 basis point.
    • The average rate on interest-bearing liabilities increased 20 basis points compared to the first quarter 2023. Increases in average rates include money market accounts increasing 39 basis points to 3.47% and time deposits increasing 37 basis points to 4.30%, while average balances increased $20.7 million and $47.0 million, respectively, compared to the first quarter 2023. The average rate on borrowed funds decreased 95 basis points to 3.07%, while average balances decreased $75.2 million compared to the first quarter 2023.

    Deposits and Cost of Funds - Total deposits at June 30, 2023 decreased by $10.0 million, or 0.5%, compared to March 31, 2023.

    • Total brokered time deposits of $128.7 million decreased $53.2 million, or 29.2%, compared to March 31, 2023. Excluding the decline in brokered time deposits during the quarter, total deposits increased $43.1 million, or 9.8% annualized.
    • Average noninterest-bearing deposits increased 3.4% compared to March 31, 2023, and represented 36.0% of total average deposits at June 30, 2023.
    • The elevated interest rate environment has driven up the cost of interest-bearing liabilities to 3.13% for the quarter ended June 30, 2023, compared to 2.93% for the first quarter 2023.

    Robust Capital Positions - As of June 30, 2023, the Company reported a common equity tier 1 capital ratio of 14.96%, compared to 14.90% at March 31, 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 1.47% as March 31, 2023. Shares repurchased and retired during the three months ended June 30, 2023, as part of the Company's stock repurchase program totaled 138,407 shares at an average price of $16.72, for a total cost of $2.3 million including commissions. Tangible book value per common share grew 2.0% to $16.98 at June 30, 2023 when compared to March 31, 2023.

    Liquidity - Total sources of available borrowings at June 30, 2023 totaled $665.8 million, including available collateralized lines of credit of $531.4 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $58.5 million.

    Commercial Bank

    Continued Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $41.2 million, or 10.1% annualized, to $1.7 billion, gross, at June 30, 2023 compared to March 31, 2023. The increase in portfolio loans included $13.9 million from commercial real estate, $12.3 million from commercial and industrial, $9.3 million from residential real estate and $6.9 million from construction real estate.

    Credit Metrics - Nonperforming assets ("NPAs") decreased 2 basis points to 0.71% of total assets at June 30, 2023 compared to 0.73% at March 31, 2023 as a result of a decrease in nonaccrual loans at June 30, 2023 to $15.7 million compared to $16.3 million at March 31, 2023. Included in nonperforming assets is a single $8.2 million, well-collateralized multi-unit residential real estate loan that was downgraded in the first quarter of 2023. At June 30, 2023 commercial real estate loans with office space exposure totaled $55.8 million, or 3.0% of total portfolio loans.

    OpenSky®

    Revenues - Total revenue of $19.9 million decreased $0.5 million from the first quarter 2023. Interest income of $15.2 million decreased $1.0 million from the first quarter 2023 as income from late charges decreased $0.7 million. Noninterest income of $4.7 million increased $0.5 million due to credit card fees as compared to the first quarter 2023.

    Noninterest Expense - Total noninterest expense of $12.1 million increased $2.6 million from the first quarter 2023 due to marketing expense of $2.3 million related to the Company’s strategy for OpenSky® customer acquisition. During the second quarter 2023, the number of OpenSky® credit card accounts increased by 12,827 to 540,058.

    Loan Balances - OpenSky® loan balances, net of reserves, of $122.9 million increased by $10.1 million, or 8.9% compared to the first quarter 2023. Corresponding deposit balances of $186.6 million increased $1.8 million, or 1.0%, compared to the first quarter 2023. Gross unsecured loan balances stood at $25.3 million at June 30, 2023 and $25.8 million at March 31, 2023.

    OpenSky® Credit - Card delinquencies and utilization remained stable in the second quarter 2023 when compared to the first quarter 2023. The provision for credit losses increased $0.3 million compared to the first quarter 2023, driven primarily by higher loan balances.

    2023 Highlights

    Capital Bancorp

    Earnings Summary - Net income of $17.1 million, or $1.20 per diluted share for the six months ended June 30, 2023 decreased $4.7 million compared to $21.7 million, or $1.52 per diluted share for the six months ended June 30, 2022.

    • Improved interest income was offset by increased deposit costs that were a result of the rising interest rate environment and a shift within the portfolio from noninterest-bearing to interest-bearing deposits and increased time deposits and FHLB balances. Further, SBA-PPP income totaled $3.2 million for the six months ended June 30, 2022 with no comparable amount in 2023. A decline in card fees of $3.2 million resulted in lower total noninterest income of $12.7 million for the six months ended June 30, 2023, as compared to $16.7 million for the same period in 2022.

    Balance Sheet Growth - Total assets of $2.2 billion at June 30, 2023 increased $73.0 million, or 3.4%, from June 30, 2022. Net portfolio loans increased $229.4 million, or 14.3% partially offset by a $131.5 million reduction in cash and cash equivalents. Total deposits of $1.9 billion at June 30, 2023 increased $45.4 million, or 2.4%, from June 30, 2022.

    Performance and Efficiency Ratios - Annualized ROAA and ROAE were 1.59% and 14.60%, respectively, for the six months ended June 30, 2023 compared to 2.12% and 21.25%, respectively, for the six months ended June 30, 2022.

    • The efficiency ratio was 67.60% for the six months ended June 30, 2023, compared to 63.52% for the six months ended June 30, 2022.

    Net Interest Margin - Net interest margin was 6.64%, or 3.94% excluding credit card and SBA-PPP loans, for the six months ended June 30, 2023, compared to 6.93%, or 3.84% excluding credit card and SBA-PPP loans, for the six months ended June 30, 2022. The lower margin is a result of a 260 basis point increase in the cost of interest-bearing liabilities despite a 127 basis point increase in yield for portfolio loans as the average balances of portfolio loans increased $256.0 million.

    Robust Capital Positions - As of June 30, 2023, the Company reported a common equity tier 1 capital ratio of 14.96%, compared to 15.55% at June 30, 2022, and an allowance for loan losses to total loans ratio of 1.50%, compared to 1.64% in 2022. Tangible book value per common share grew 14.7% to $16.98 at June 30, 2023 as compared to $14.80 at June 30, 2022.

    Commercial Bank

    Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $226.2 million, or 15.7% to $1.7 billion, gross, at June 30, 2023 compared to June 30, 2022. The increase in portfolio loans included $123.0 million from residential real estate, $65.3 million from commercial real estate and $40.3 million from commercial and industrial.

    OpenSky®

    Revenues - Total revenue of $40.2 million for the six months ended June 30, 2023, decreased $3.6 million as compared to the six months ended June 30, 2022. Interest income of $31.3 million in 2023 decreased $0.4 million compared to 2022 while noninterest income of $8.9 million decreased $3.2 million due primarily to a decrease in credit card fees resulting from a lower number of open customer accounts and balances.

    Noninterest Expense - Total noninterest expense of $21.5 million for the six months ended June 30, 2023, decreased $3.3 million as compared to the six months ended June 30, 2022 including decreases in data processing expense of $2.4 million and outside service provider expense of $1.0 million.


    COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited      
                  
     Quarter Ended 2Q23 vs 1Q23 2Q23 vs 2Q22
    (in thousands except per share data)June 30,
    2023
     March 31,
    2023
     June 30,
    2022
     $ Change %
    Change
     $ Change %
    Change
    Earnings Summary             
    Interest income$45,080  $43,416  $36,556  $1,664  3.8% $8,524  23.3%
    Interest expense 9,740   8,929   1,156   811  9.1%  8,584  742.6%
    Net interest income 35,340   34,487   35,400   853  2.5%  (60) (0.2)%
    Provision for credit losses 2,862   1,660   2,035   1,202  72.4%  827  40.6%
    Noninterest income 6,687   6,026   8,362   661  11.0%  (1,675) (20.0)%
    Noninterest expense 29,592   26,203   27,130   3,389  12.9%  2,462  9.1%
    Income before income taxes 9,573   12,650   14,597   (3,077) (24.3)%  (5,024) (34.4)%
    Income tax expense 2,255   2,915   3,089   (660) (22.6)%  (834) (27.0)%
    Net income$7,318  $9,735  $11,508  $(2,417) (24.8)% $(4,190) (36.4)%
                  
    Pre-tax pre-provision net revenue ("PPNR") (1)$12,435  $14,310  $16,632  $(1,875) (13.1)% $(4,197) (25.2)%
    Weighted average common shares - Basic 14,025   14,159   14,007   (134) (0.9)%  18  0.1%
    Weighted average common shares - Diluted 14,059   14,272   14,313   (213) (1.5)%  (254) (1.8)%
    Earnings per share - Basic$0.52  $0.69  $0.82  $(0.17) (24.6)% $(0.30) (36.6)%
    Earnings per share - Diluted$0.52  $0.68  $0.80  $(0.16) (23.5)% $(0.28) (35.0)%
    Return on average assets (annualized) 1.34%  1.84%  2.23% (0.50)% (27.2)% (0.89)% (39.9)%
    Return on average assets, excluding impact of SBA-PPP loans (annualized) (1) 1.34%  1.84%  2.04% (0.50)% (27.2)% (0.70)% (34.3)%
    Return on average equity (annualized) 12.30%  16.98%  22.16% (4.68)% (27.6)% (9.86)% (44.5)%


      Six Months Ended      
      June 30,      
    (in thousands except per share data)  2023   2022  $ Change %
    Change
     
    Earnings Summary          
    Interest income $88,496  $70,957  $17,539  24.7% 
    Interest expense  18,669   2,226   16,443  738.7%  
    Net interest income  69,827   68,731   1,096  1.6%  
    Provision for credit losses  4,522   2,987   1,535  51.4%  
    Noninterest income  12,713   16,650   (3,937) (23.6)%  
    Noninterest expense  55,795   54,232   1,563  2.9%  
    Income before income taxes  22,223   28,162   (5,939)  (21.1)%  
    Income tax expense  5,170   6,443   (1,273)  (19.8)%  
    Net income $17,053  $21,719  $(4,666)  (21.5)%  
               
    Pre-tax pre-provision net revenue ("PPNR") (1) $26,745  $31,149  $(4,404)  (14.1)%  
    Weighted average common shares - Basic  14,092   13,998   94  0.7%  
    Weighted average common shares - Diluted  14,210   14,323   (113)  (0.8)%  
    Earnings per share - Basic $1.21  $1.55  $(0.34)  (21.9)%  
    Earnings per share - Diluted $1.20  $1.52  $(0.32)  (21.1)%  
    Return on average assets (annualized)  1.59%  2.12% (0.53)% (25.0)%  
    Return on average assets, excluding impact of SBA-PPP loans (annualized) (1)  1.59%  1.86% (0.27)% (14.5)%  
    Return on average equity (annualized)  14.60%  21.25% (6.65)% (31.3)%  


     Quarter Ended   Quarter Ended
     June 30,  March 31, December 31, September 30,
    (in thousands except per share data) 2023  2022 % Change  2023  2022  2022
    Balance Sheet Highlights           
    Assets$2,227,866 $2,154,846 3.4% $2,245,286 $2,123,655 $2,009,358
    Investment securities available for sale 208,464  226,509 (8.0)%  255,762  252,481  269,620
    Mortgage loans held for sale 10,146  11,708 (13.3)%  9,620  7,416  6,875
    SBA-PPP loans, net of fees 1,090  15,864 (93.1)%  2,037  2,163  2,662
    Portfolio loans receivable (2) 1,837,041  1,607,677 14.3%  1,786,109  1,728,592  1,648,001
    Allowance for credit losses 27,495  26,419 4.1%  26,216  26,385  26,091
    Deposits 1,934,361  1,888,920 2.4%  1,944,374  1,758,072  1,737,591
    FHLB borrowings 22,000  22,000 %  32,000  107,000  22,000
    Other borrowed funds 12,062  12,062 %  12,062  12,062  12,062
    Total stockholders' equity 237,435  207,316 14.5%  234,517  224,015  214,005
    Tangible common equity (1) 237,435  207,316 14.5%  234,517  224,015  214,005
                
    Common shares outstanding 13,981  14,010 (0.2)%  14,083  14,139  14,039
    Tangible book value per share (1)$16.98 $14.80 14.7% $16.65 $15.84 $15.24

    ______________
    (1) Refer to Appendix for reconciliation of non-GAAP measures.
    (2) Loans are reflected net of deferred fees and costs.


    Operating Results - Comparison of Three Months Ended June 30, 2023 and 2022

    For the three months ended June 30, 2023, net interest income of $35.3 million decreased slightly from $35.4 million in the same period in 2022, primarily due to significant increases in the cost of funding partially offset by increased average balances of $268.1 million in portfolio loans combined with a 64 basis point increase in yield for portfolio loans. The net interest margin decreased 43 basis points to 6.63% for the three months ended June 30, 2023, from the same period in 2022 as the increase in the costs of deposits, including money market accounts and time deposits, outpaced the increase in portfolio loan yields, including credit cards. Further SBA-PPP income totaled $1.1 million for the three months ended June 30, 2022 with no comparable amount in 2023. Net interest margin, excluding credit card and SBA-PPP loans, increased to 4.06% for the three months ended June 30, 2023, compared to 3.86% for the same period in 2022.

    For the three months ended June 30, 2023, average interest earning assets increased $125.0 million, or 6.2%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 117 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $218.5 million, or 21.2%, and the average cost of interest-bearing liabilities increased to 3.13%, a 268 basis point increase from 0.45%.

    For the three months ended June 30, 2023, the provision for credit losses was $2.9 million, an increase of $0.8 million from the same period in 2022. Contributors to the increase in the provision were loan portfolio growth and change in credit card mix from fully secured to partially or fully unsecured. Net charge-offs for the three months ended June 30, 2023, were $1.6 million, or 0.35% on an annualized basis of average portfolio loans, compared to $0.9 million, or 0.23% on an annualized basis of average loans for the same period in 2022. Of the $1.6 million in net charge-offs during the quarter, $1.5 million related to secured and partially secured cards in the credit card portfolio and $0.1 million related to unsecured cards.

    For the three months ended June 30, 2023, noninterest income of $6.7 million decreased $1.7 million, or 20.0%, from the same period in 2022. Credit card fees declined by $1.5 million as the number of open customer accounts declined year over year, which resulted in lower interchange and other fee income compared to the prior year quarter.

    Credit card loan balances, net of reserves, decreased by $19.2 million to $122.9 million as of June 30, 2023, from $142.2 million at June 30, 2022. The related deposit account balances decreased 12.9% to $186.6 million at June 30, 2023 when compared to $214.1 million at June 30, 2022 reflecting the reduction in the number of open customer accounts year over year.

    The efficiency ratio for the three months ended June 30, 2023, was 70.41% compared to 62.00% for the three months ended June 30, 2022. The change was due primarily to a decline in noninterest income from credit card fees and an increase in noninterest expense from salaries and employee benefits.

    For the three months ended June 30, 2023, noninterest expense of $29.6 million increased $2.5 million, or 9.1%, from the same period in 2022. The increase was primarily driven by increased salaries and employee benefits of $2.1 million.

    Operating Results - Comparison of Six Months Ended June 30, 2023 and 2022

    For the six months ended June 30, 2023, net interest income of $69.8 million increased $1.1 million, or 1.6%, from the same period in 2022, primarily due to increased average balances of $256.0 million in portfolio loans combined with the 82 basis point increase in yield for portfolio loans offset by significant increases in the cost of funding. The net interest margin decreased 29 basis points to 6.64% for the six months ended June 30, 2023, from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.94% for the six months ended June 30, 2023, compared to 3.84% for the same period in 2022.

    For the six months ended June 30, 2023, average interest earning assets increased $119.3 million, or 6.0%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 127 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $203.8 million, or 19.6%, while the cost of interest-bearing liabilities increased 260 basis points to 3.03% from 0.43%.

    For the six months ended June 30, 2023, the provision for credit losses was $4.5 million, an increase of $1.5 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the six months ended June 30, 2023, were $4.2 million, or 0.48% annualized of average portfolio loans, compared to $1.7 million, or 0.23% annualized of average portfolio loans, for the same period in 2022. The $4.2 million in net charge-offs during the six months ended June 30, 2023, was comprised primarily of credit card portfolio net charge-offs with $2.6 million related to secured and partially secured cards while $0.7 million was related to unsecured cards.

    For the six months ended June 30, 2023, noninterest income of $12.7 million decreased $3.9 million, or 23.6%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $3.2 million as the number of open customer accounts declined to 540,058 at June 30, 2023 from 616,435 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year. The elevated interest rate environment continues to put pressure on the mortgage market, resulting in declines in home loan sales and home loan refinances, which has resulted in a $0.8 million decrease in mortgage banking revenue compared to the prior year.

    The efficiency ratio for the six months ended June 30, 2023, was 67.60% compared to 63.52% for the six months ended June 30, 2022.

    For the six months ended June 30, 2023, noninterest expense of $55.8 million increased $1.6 million, or 2.9%, from the same period in 2022. The increase was primarily driven by a $4.3 million, or 21.2%, increase in salaries and benefits, partially offset by a $2.5 million, or 15.8%, decrease in data processing expense. The decrease of $2.5 million 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.

    Financial Condition

    Total assets at June 30, 2023 were $2.2 billion, a decrease of $17.4 million, or 0.8%, from the balance at March 31, 2023 and an increase of $73.0 million, or 3.4%, from the balance at June 30, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.8 billion at June 30, 2023, an increase of $50.9 million, up 2.9% or 11.4% annualized, compared to March 31, 2023, and an increase of $229.4 million, or 14.3%, compared to $1.6 billion at June 30, 2022.

    The Company recorded a provision for credit losses of $4.5 million during the six months ended June 30, 2023, which increased the allowance for credit losses to $27.5 million, or 1.5% of total loans at June 30, 2023, representing an increase of $1.3 million or 4.9%, from the balance at March 31, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of June 30, 2023, were $15.7 million, or 0.71% of total assets, down from $16.3 million, or 0.73% of total assets at March 31, 2023 and up from $7.3 million, or 0.34% of total assets at June 30, 2022.

    Deposits were $1.9 billion at June 30, 2023, a slight decrease of $10.0 million, or 0.5%, from the balance at March 31, 2023 and an increase of $45.4 million, or 2.4%, from the balance at June 30, 2022. Average deposits of $1.9 billion for the three months ended June 30, 2023, increased $110.4 million, or 6.2%, as compared to the three months ended March 31, 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 $131.2 million to $676.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. These deposits represented 35.8% of total deposits at June 30, 2023 compared to 44.6% at June 30, 2022. Uninsured deposits were approximately $860.4 million as of June 30, 2023, representing 44.5% of the Company's deposit portfolio, compared to $888.9 million, or 45.7%, at March 31, 2023, and $915.0 million, or 48.4%, at June 30, 2022.

    Stockholders’ equity increased to $237.4 million as of June 30, 2023, compared to $234.5 million at March 31, 2023 and $207.3 million at June 30, 2022. Shares repurchased and retired through June 30, 2023 as part of the Company's stock repurchase program totaled 285,344 shares at an average price of $17.65, for a total cost of $5.0 million including commissions. As of June 30, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.


    Consolidated Statements of Income (Unaudited)    
      Three Months EndedSix Months Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
     June 30,
    2023
     June 30,
    2022
    Interest income              
    Loans, including fees $42,991 $41,275 $38,763 $36,451 $35,304 $84,266 $69,193
    Investment securities available for sale  1,266  1,377  1,402  1,362  779  2,643  1,149
    Federal funds sold and other  823  764  1,183  527  473  1,587  615
    Total interest income  45,080  43,416  41,348  38,340  36,556  88,496  70,957
                   
    Interest expense              
    Deposits  9,409  7,754  4,377  1,386  964  17,163  1,847
    Borrowed funds  331  1,175  1,772  277  192  1,506  379
    Total interest expense  9,740  8,929  6,149  1,663  1,156  18,669  2,226
                   
    Net interest income  35,340  34,487  35,199  36,677  35,400  69,827  68,731
    Provision for credit losses  2,862  1,660  2,384  1,260  2,035  4,522  2,987
    Net interest income after provision for credit losses  32,478  32,827  32,815  35,417  33,365  65,305  65,744
                   
    Noninterest income              
    Service charges on deposits  245  229  222  199  183  474  346
    Credit card fees  4,706  4,210  4,314  5,524  6,210  8,916  12,134
    Mortgage banking revenue  1,332  1,155  554  969  1,528  2,487  3,318
    Other income  404  432  471  416  441  836  852
    Total noninterest income  6,687  6,026  5,561  7,108  8,362  12,713  16,650
                   
    Noninterest expenses              
    Salaries and employee benefits  12,143  12,554  11,769  10,747  10,071  24,697  20,381
    Occupancy and equipment  1,536  1,213  1,388  1,138  1,313  2,749  2,339
    Professional fees  2,608  2,374  2,426  3,848  2,417  4,982  4,738
    Data processing  6,559  6,530  6,697  7,178  7,266  13,089  15,542
    Advertising  2,646  517  726  1,632  2,223  3,163  3,862
    Loan processing  660  349  350  625  335  1,009  727
    Foreclosed real estate expenses, net    6        6  
    Other operating  3,440  2,660  3,378  2,926  3,505  6,100  6,643
    Total noninterest expenses  29,592  26,203  26,734  28,094  27,130  55,795  54,232
    Income before income taxes  9,573  12,650  11,642  14,431  14,597  22,223  28,162
    Income tax expense  2,255  2,915  2,651  3,336  3,089  5,170  6,443
    Net income $7,318 $9,735 $8,991 $11,095 $11,508 $17,053 $21,719


    Consolidated Balance Sheets          
      (unaudited) (unaudited) (audited) (unaudited) (unaudited)
    (in thousands except share data) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
    Assets          
    Cash and due from banks $18,619  $14,477  $19,963  $14,774  $14,776 
    Interest-bearing deposits at other financial institutions  100,343   125,448   39,764   20,867   234,823 
    Federal funds sold  376   462   20,688   1,421   1,285 
    Total cash and cash equivalents  119,338   140,387   80,415   37,062   250,884 
    Investment securities available for sale  208,464   255,762   252,481   269,620   226,509 
    Marketable equity securities           232   245 
    Restricted investments  3,803   4,215   7,362   3,627   3,615 
    Loans held for sale  10,146   9,620   7,416   6,875   11,708 
    U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs  1,090   2,037   2,163   2,662   15,864 
    Portfolio loans receivable, net of deferred fees and costs  1,837,041   1,786,109   1,728,592   1,648,001   1,607,677 
    Less allowance for credit losses  (27,495)  (26,216)  (26,385)  (26,091)  (26,419)
    Total portfolio loans held for investment, net  1,809,546   1,759,893   1,702,207   1,621,910   1,581,258 
    Premises and equipment, net  5,494   5,367   3,386   3,212   3,315 
    Accrued interest receivable  10,155   9,985   9,489   7,890   7,276 
    Deferred tax asset  13,616   12,898   13,777   14,047   12,929 
    Bank owned life insurance  37,041   36,781   36,524   36,267   36,011 
    Other assets  9,173   8,341   8,435   5,954   5,232 
    Total assets $2,227,866  $2,245,286  $2,123,655  $2,009,358  $2,154,846 
               
    Liabilities          
    Deposits          
    Noninterest-bearing $693,129  $705,801  $674,313  $806,033  $842,363 
    Interest-bearing  1,241,232   1,238,573   1,083,759   931,558   1,046,557 
    Total deposits  1,934,361   1,944,374   1,758,072   1,737,591   1,888,920 
    Federal Home Loan Bank advances  22,000   32,000   107,000   22,000   22,000 
    Other borrowed funds  12,062   12,062   12,062   12,062   12,062 
    Accrued interest payable  3,029   1,977   1,031   481   300 
    Other liabilities  18,979   20,356   21,475   23,219   24,248 
    Total liabilities  1,990,431   2,010,769   1,899,640   1,795,353   1,947,530 
               
    Stockholders' equity          
    Common stock  140   141   141   140   140 
    Additional paid-in capital  55,856   57,277   58,190   56,532   55,762 
    Retained earnings  197,490   191,058   182,435   174,916   164,750 
    Accumulated other comprehensive loss  (16,051)  (13,959)  (16,751)  (17,583)  (13,336)
    Total stockholders' equity  237,435   234,517   224,015   214,005   207,316 
    Total liabilities and stockholders' equity $2,227,866  $2,245,286  $2,123,655  $2,009,358  $2,154,846 


    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
    June 30, 2023
     Three Months Ended
    March 31, 2023
     Three Months Ended
    June 30, 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 $66,401 $733 4.43% $62,566 $615 3.99% $218,251 $429 0.79%
    Federal funds sold  1,638  20 4.90   2,054  18 3.62   1,655  2 0.48 
    Investment securities available for sale  255,057  1,266 1.99   274,685  1,377 2.03   215,172  779 1.45 
    Restricted investments  4,185  71 6.80   7,346  130 7.17   3,854  42 4.37 
    Loans held for sale  7,047  111 6.32   4,695  77 6.65   11,447  134 4.70 
    SBA-PPP loans receivable  1,808  7 1.55   2,099  8 1.50   28,870  1,120 15.56 
    Portfolio loans receivable(2)  1,800,800  42,872 9.55   1,750,539  41,191 9.54   1,532,671  34,050 8.91 
    Total interest earning assets  2,136,936  45,080 8.46   2,103,984  43,416 8.37   2,011,920  36,556 7.29 
    Noninterest earning assets  47,415      40,265      56,298    
    Total assets $2,184,351     $2,144,249     $2,068,218    
                       
    Liabilities and Stockholders’ Equity                  
    Interest-bearing liabilities:                  
    Interest-bearing demand accounts $207,264  67 0.13  $186,184  70 0.15  $259,192  38 0.06 
    Savings  5,822  2 0.14   6,502  1 0.05   9,913  1 0.04 
    Money market accounts  625,515  5,411 3.47   604,864  4,587 3.08   566,303  396 0.28 
    Time deposits  366,421  3,929 4.30   319,449  3,096 3.93   160,279  529 1.32 
    Borrowed funds  43,183  331 3.07   118,379  1,175 4.02   34,062  192 2.27 
    Total interest-bearing liabilities  1,248,205  9,740 3.13   1,235,378  8,929 2.93   1,029,749  1,156 0.45 
    Noninterest-bearing liabilities:                  
    Noninterest-bearing liabilities  21,104      22,355      22,647    
    Noninterest-bearing deposits  676,358      654,025      807,558    
    Stockholders’ equity  238,684      232,491      208,264    
    Total liabilities and stockholders’ equity $2,184,351     $2,144,249     $2,068,218    
                       
    Net interest spread     5.33%     5.44%     6.84%
    Net interest income   $35,340     $34,487     $35,400  
    Net interest margin(3)     6.63%     6.65%     7.06%

    _______________
    (1)   Annualized.
    (2)   Includes nonaccrual loans.
    (3)   For the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, collectively, SBA-PPP loans and credit card loans accounted for 257, 283 and 320 basis points of the reported net interest margin, respectively.


      Six Months Ended June 30,
       2023   2022 
      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 $64,494 $1,348 4.21% $208,043 $530 0.51%
    Federal funds sold  1,845  38 4.15   3,148  2 0.13 
    Investment securities available for sale  264,817  2,643 2.01   197,965  1,149 1.17 
    Restricted investments  5,757  201 7.04   3,810  83 4.39 
    Loans held for sale  5,878  188 6.45   12,467  245 3.96 
    SBA-PPP loans receivable  1,953  15 1.55   55,917  3,186 11.49 
    Portfolio loans receivable(2)  1,775,809  84,063 9.55   1,519,857  65,762 8.73 
    Total interest earning assets  2,120,553  88,496 8.42   2,001,207  70,957 7.15 
    Noninterest earning assets  43,858      61,533    
    Total assets $2,164,411     $2,062,740    
                 
    Liabilities and Stockholders’ Equity            
    Interest-bearing liabilities:            
    Interest-bearing demand accounts $196,782  137 0.14  $276,490  74 0.05 
    Savings  6,160  3 0.10   9,098  3 0.07 
    Money market accounts  615,247  9,998 3.28   552,858  697 0.25 
    Time deposits  343,065  7,025 4.13   165,485  1,073 1.31 
    Borrowed funds  80,573  1,506 3.77   34,062  379 2.24 
    Total interest-bearing liabilities  1,241,827  18,669 3.03   1,037,993  2,226 0.43 
    Noninterest-bearing liabilities:            
    Noninterest-bearing liabilities  21,726      23,397    
    Noninterest-bearing deposits  665,253      795,221    
    Stockholders’ equity  235,605      206,129    
    Total liabilities and stockholders’ equity $2,164,411     $2,062,740    
                 
    Net interest spread     5.39%     6.72%
    Net interest income   $69,827     $68,731  
    Net interest margin(3)     6.64%     6.93%

    _______________
    (1)   Annualized.
    (2)   Includes nonaccrual loans.
    (3)   For the six months ended June 30, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 270 and 309 basis points of the reported net interest margin, respectively.


    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 three and six months ended June 30, 2023 and June 30, 2022.

    Segments            
    For the three months ended June 30, 2023          
    (in thousands) Commercial
    Bank
     CBHL OpenSky® Corporate(2) Eliminations Consolidated
    Interest income $28,742  $111  $15,168 $1,134 $(75) $45,080
    Interest expense  9,537   42     236  (75)  9,740
    Net interest income  19,205   69   15,168  898     35,340
    Provision for credit losses  735      2,127       2,862
    Net interest income after provision  18,470   69   13,041  898     32,478
    Noninterest income  810   1,161   4,714  2     6,687
    Noninterest expense(1)  15,918   1,481   12,059  134     29,592
    Net income (loss) before taxes $3,362  $(251) $5,696 $766 $  $9,573
                 
    Total assets $2,047,400  $10,605  $116,123 $260,309 $(206,571) $2,227,866
                 
    For the three months ended March 31, 2023          
    (in thousands) Commercial
    Bank
     CBHL OpenSky® Corporate(2) Eliminations Consolidated
    Interest income $26,300  $77  $16,130 $978 $(69) $43,416
    Interest expense  8,739   30     229  (69)  8,929
    Net interest income  17,561   47   16,130  749     34,487
    Provision (release of provision) for credit losses  (161)     1,821       1,660
    Net interest income after provision  17,722   47   14,309  749     32,827
    Noninterest income  489   1,327   4,210       6,026
    Noninterest expense(1)  14,980   1,581   9,450  192     26,203
    Net income (loss) before taxes $3,231  $(207) $9,069 $557 $  $12,650
                 
    Total assets $2,074,634  $10,193  $106,761 $257,048 $(203,350) $2,245,286
                 
    For the three months ended June 30, 2022          
    (in thousands) Commercial
    Bank
     CBHL OpenSky® Corporate(2) Eliminations Consolidated
    Interest income $18,912  $134  $16,780 $758 $(28) $36,556
    Interest expense  952   64     168  (28)  1,156
    Net interest income  17,960   70   16,780  590     35,400
    Provision for loan losses        2,035       2,035
    Net interest income after provision  17,960   70   14,745  590     33,365
    Noninterest income  526   1,626   6,210       8,362
    Noninterest expense(1)  12,859   2,217   11,940  114     27,130
    Net income (loss) before taxes $5,627  $(521) $9,015 $476 $  $14,597
                 
    Total assets $1,958,893  $12,257  $137,180 $226,950 $(180,434) $2,154,846

    _______________
    (1)   Noninterest expense includes $5.9 million, $5.9 million and $6.7 million in data processing expense in OpenSky’s® segment for the three months ended June 30, 2023 March 31, 2023, and June 30, 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.


    Segments            
    For the six months ended June 30, 2023          
    (in thousands) Commercial
    Bank
     CBHL OpenSky® Corporate(2) Eliminations Consolidated
    Interest income $55,042  $188  $31,298 $2,112 $(144) $88,496
    Interest expense  18,276   72     465  (144)  18,669
    Net interest income  36,766   116   31,298  1,647     69,827
    Provision for credit losses  574      3,948       4,522
    Net interest income after provision  36,192   116   27,350  1,647     65,305
    Noninterest income  1,299   2,488   8,924  2     12,713
    Noninterest expense(1)  30,898   3,062   21,509  326     55,795
    Net income (loss) before taxes $6,593  $(458) $14,765 $1,323 $  $22,223
                 
    Total assets $2,047,400  $10,605  $116,123 $260,309 $(206,571) $2,227,866
                 
    For the six months ended June 30, 2022          
    (in thousands) Commercial
    Bank
     CBHL OpenSky® Corporate(2) Eliminations Consolidated
    Interest income $37,412  $245  $31,720 $1,645 $(65) $70,957
    Interest expense  1,805   145     341  (65)  2,226
    Net interest income  35,607   100   31,720  1,304     68,731
    Provision for loan losses        2,987       2,987
    Net interest income after provision  35,607   100   28,733  1,304     65,744
    Noninterest income  1,083   3,433   12,134       16,650
    Noninterest expense(1)  24,922   4,316   24,822  172     54,232
    Net income (loss) before taxes $11,768  $(783) $16,045 $1,132 $  $28,162
                 
    Total assets $1,958,893  $12,257  $137,180 $226,950 $(180,434) $2,154,846

    _______________
    (1)   Noninterest expense includes $11.9 million and $14.3 million in data processing expense in OpenSky’s® segment for the six months ended June 30, 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.


    HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
      Quarter Ended
    (in thousands except per share data) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
    Earnings:          
    Net income $7,318  $9,735  $8,991  $11,095  $11,508 
    Earnings per common share, diluted  0.52   0.68   0.62   0.77   0.80 
    Net interest margin  6.63%  6.65%  6.64%  7.24%  7.06%
    Net interest margin, excluding credit cards & SBA-PPP loans (1)  4.06%  3.81%  3.91%  4.16%  3.86%
    Return on average assets(2)  1.34%  1.84%  1.67%  2.15%  2.23%
    Return on average assets, excluding impact of SBA-PPP loans (1)(2)  1.34%  1.84%  1.67%  2.10%  2.04%
    Return on average equity(2)  12.30%  16.98%  16.18%  20.32%  22.16%
    Efficiency ratio  70.41%  64.68%  65.59%  64.16%  62.00%
               
    Balance Sheet:          
    Total portfolio loans receivable, net deferred fees $1,837,041  $1,786,109  $1,728,592  $1,648,001  $1,607,677 
    Total deposits  1,934,361   1,944,374   1,758,072   1,737,591   1,888,920 
    Total assets  2,227,866   2,245,286   2,123,655   2,009,358   2,154,846 
    Total stockholders' equity  237,435   234,517   224,015   214,005   207,316 
               
    Asset Quality Ratios:          
    Nonperforming assets to total assets  0.71%  0.73%  0.46%  0.43%  0.34%
    Nonperforming assets to total assets, excluding the SBA-PPP loans (1)  0.71%  0.73%  0.46%  0.43%  0.34%
    Nonperforming loans to total loans  0.85%  0.91%  0.56%  0.52%  0.45%
    Nonperforming loans to portfolio loans (1)  0.86%  0.91%  0.56%  0.52%  0.46%
    Net charge-offs to average portfolio loans (1)(2)  0.35%  0.61%  0.49%  0.39%  0.23%
    Allowance for credit losses to total loans  1.50%  1.47%  1.52%  1.58%  1.64%
    Allowance for credit losses to portfolio loans (1)  1.50%  1.47%  1.53%  1.58%  1.64%
    Allowance for credit losses to non-performing loans  175.03%  160.91%  270.46%  303.76%  360.06%
               
    Bank Capital Ratios:          
    Total risk based capital ratio  14.08%  14.09%  14.21%  14.65%  14.34%
    Tier 1 risk based capital ratio  12.82%  12.84%  12.95%  13.39%  13.09%
    Leverage ratio  9.77%  9.78%  9.47%  9.60%  9.11%
    Common equity Tier 1 capital ratio  12.82%  12.84%  12.95%  13.39%  13.09%
    Tangible common equity  8.93%  8.79%  8.85%  9.00%  8.17%
    Holding Company Capital Ratios:          
    Total risk based capital ratio  16.81%  16.75%  16.33%  17.41%  17.66%
    Tier 1 risk based capital ratio  14.96%  14.90%  15.13%  15.49%  15.70%
    Leverage ratio  11.50%  11.47%  11.24%  11.31%  10.93%
    Common equity Tier 1 capital ratio  14.96%  14.90%  15.00%  15.36%  15.55%
    Tangible common equity  10.66%  10.44%  10.55%  10.65%  9.62%
    Composition of Loans:          
    SBA-PPP loans, net $1,090  $2,037  $2,163  $2,662  $15,864 
    Commercial real estate  674,141   660,218   664,551   626,030   608,646 
    Residential real estate $555,133  $545,899  $484,735  $466,849  $430,244 
    Construction real estate  258,400   251,494   238,099   235,045   241,249 
    Commercial and industrial  233,598   221,258   220,221   192,207   193,262 
    Credit card, net of reserve(3)  122,925   112,860   128,434   136,658   142,166 
    Other consumer loans  1,187   1,578   1,179   1,055   856 
    Portfolio loans receivable $1,845,384  $1,793,307  $1,737,219  $1,657,844  $1,616,423 
    Deferred origination fees, net  (8,343)  (7,198)  (8,627)  (9,843)  (8,746)
    Portfolio loans receivable, net $1,837,041  $1,786,109  $1,728,592  $1,648,001  $1,607,677 
               
    Composition of Deposits:          
    Noninterest-bearing $693,129  $705,801  $674,313  $806,033  $842,363 
    Interest-bearing demand  243,095   219,685   207,836   252,135   305,377 
    Savings  5,816   5,835   7,530   8,861   10,078 
    Money markets  631,148   632,087   574,978   518,184   570,298 
    Brokered time deposits  128,665   181,820   131,819       
    Other time deposits  232,508   199,146   161,596   152,378   160,804 
    Total deposits $1,934,361  $1,944,374  $1,758,072  $1,737,591  $1,888,920 
               
    Capital Bank Home Loan Metrics:    
    Origination of loans held for sale $61,480  $44,448  $43,956  $60,516  $84,417 
    Mortgage loans sold  49,231   40,483   43,415   65,349   89,745 
    Gain on sale of loans  1,262   1,223   912   1,340   1,918 
    Purchase volume as a % of originations  93.12%  90.72%  88.94%  81.85%  85.23%
    Gain on sale as a % of loans sold(4)  2.56%  3.02%  2.10%  2.05%  2.14%
    Mortgage commissions $621  $378  $451  $587  $772 
               
    OpenSky® Portfolio Metrics:    
    Open customer accounts  540,058   527,231   533,855   576,844   616,435 
    Secured credit card loans, gross $100,218  $89,078  $104,157  $111,842  $118,938 
    Unsecured credit card loans, gross  25,254   25,782   26,795   27,335   25,641 
    Noninterest secured credit card deposits  186,566   184,809   187,412   201,277   214,110 

    _______________
    (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.


    Appendix

     Reconciliation of Non-GAAP Measures


    Return on Average Assets, as Adjusted Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Net Income $7,318  $9,735  $8,991  $11,095  $11,508 
    Less: SBA-PPP loan income  7   8   28   263   1,120 
    Net Income, as Adjusted $7,311  $9,727  $8,963  $10,832  $10,388 
    Average Total Assets  2,184,351   2,144,249   2,136,156   2,049,078   2,068,218 
    Less: Average SBA-PPP Loans  1,808   2,099   2,435   5,906   28,870 
    Average Total Assets, as Adjusted $2,182,543  $2,142,150  $2,133,721  $2,043,172  $2,039,348 
    Return on Average Assets, as Adjusted  1.34%   1.84%   1.67%   2.10%   2.04% 


    Return on Average Assets, as Adjusted Six Months Ended
     
    (in thousands) June 30,
    2023
     June 30,
    2022

     
            
    Net Income $17,053  $21,719  
    Less: SBA-PPP loan income  15   3,186  
    Net Income, as Adjusted $17,038  $18,533  
    Average Total Assets  2,164,411   2,062,740  
    Less: Average SBA-PPP Loans  1,953   55,917  
    Average Total Assets, as Adjusted $2,162,458  $2,006,823  
    Return on Average Assets, as Adjusted  1.59%   1.81%  


    Net Interest Margin, as Adjusted Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Net Interest Income $35,340  $34,487  $35,199  $36,677  $35,400 
    Less Credit card loan income  14,818   15,809   15,717   16,768   16,376 
    Less SBA-PPP loan income  7   8   28   263   1,120 
    Net Interest Income, as Adjusted $20,515  $18,670  $19,454  $19,646  $17,904 
    Average Interest Earning Assets  2,136,936   2,103,984   2,101,617   2,010,070   2,011,920 
    Less Average credit card loans  110,574   115,850   124,120   132,246   124,548 
    Less Average SBA-PPP loans  1,808   2,099   2,435   5,906   28,870 
    Total Average Interest Earning Assets, as Adjusted $2,024,554  $1,986,035  $1,975,062  $1,871,918  $1,858,502 
    Net Interest Margin, as Adjusted  4.06%   3.81%   3.91%   4.16%   3.86% 


    Net Interest Margin, as Adjusted Six Months Ended
     
    (in thousands) June 30,
    2023
     June 30,
    2022

     
            
    Net Interest Income $69,827  $68,731  
    Less Credit card loan income  30,627   30,863  
    Less SBA-PPP loan income  15   3,186  
    Net Interest Income, as Adjusted $39,185  $34,682  
    Average Interest Earning Assets  2,120,553   2,001,207  
    Less Average credit card loans  113,197   124,735  
    Less Average SBA-PPP loans  1,953   55,917  
    Total Average Interest Earning Assets, as Adjusted $2,005,403  $1,820,555  
    Net Interest Margin, as Adjusted  3.94%   3.84%  


    Pre-tax, Pre-Provision Net Revenue ("PPNR") Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Net income $7,318  $9,735  $8,991  $11,095  $11,508 
    Add: Income Tax Expense  2,255   2,915   2,651   3,336   3,089 
    Add: Provision for Credit Losses  2,862   1,660   2,384   1,260   2,035 
    Pre-tax, Pre-Provision Net Revenue ("PPNR") $12,435  $14,310  $14,026  $15,691  $16,632 


    Pre-tax, Pre-Provision Net Revenue ("PPNR") Six Months Ended
     
    (in thousands) June 30,
    2023
     June 30,
    2022

     
            
    Net income $17,053  $21,719  
    Add: Income Tax Expense  5,170   6,443  
    Add: Provision for Credit Losses  4,522   2,987  
    Pre-tax, Pre-Provision Net Revenue ("PPNR") $26,745  $31,149  


    Allowance for Credit Losses to Total Portfolio Loans Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Allowance for Credit Losses $27,495  $26,216  $26,385  $26,091  $26,419 
    Total Loans  1,838,131   1,788,146   1,730,755   1,650,663   1,623,541 
    Less: SBA-PPP loans  1,090   2,037   2,163   2,662   15,864 
    Total Portfolio Loans $1,837,041  $1,786,109  $1,728,592  $1,648,001  $1,607,677 
    Allowance for Credit Losses to Total Portfolio Loans  1.50%   1.47%   1.53%   1.58%   1.64% 
               
    Nonperforming Assets to Total Assets, net SBA-PPP Loans Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Total Nonperforming Assets $15,709  $16,293  $9,756  $8,589  $7,338 
    Total Assets  2,227,866   2,245,286   2,123,655   2,009,358   2,154,846 
    Less: SBA-PPP loans  1,090   2,037   2,163   2,662   15,864 
    Total Assets, net SBA-PPP Loans $2,226,776  $2,243,249  $2,121,492  $2,006,696  $2,138,982 
    Nonperforming Assets to Total Assets, net SBA-PPP Loans  0.71%   0.73%   0.46%   0.43%   0.34% 
               
    Nonperforming Loans to Total Portfolio Loans Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Total Nonperforming Loans $15,709  $16,293  $9,756  $8,589  $7,338 
    Total Loans  1,838,131   1,788,146   1,730,755   1,650,663   1,623,541 
    Less: SBA-PPP loans  1,090   2,037   2,163   2,662   15,864 
    Total Portfolio Loans $1,837,041  $1,786,109  $1,728,592  $1,648,001  $1,607,677 
    Nonperforming Loans to Total Portfolio Loans  0.86%   0.91%   0.56%   0.52%   0.46% 
               
    Net Charge-offs to Average Portfolio Loans Quarters Ended
    (in thousands) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Total Net Charge-offs $1,583  $2,633  $2,090  $1,588  $868 
    Total Average Loans  1,802,608   1,752,638   1,677,869   1,607,452   1,561,541 
    Less: Average SBA-PPP loans  1,808   2,099   2,435   5,906   28,870 
    Total Average Portfolio Loans $1,800,800  $1,750,539  $1,675,434  $1,601,546  $1,532,671 
    Net Charge-offs to Average Portfolio Loans  0.35%   0.61%   0.49%   0.39%   0.23% 
               
    Tangible Book Value per Share Quarters Ended
    (in thousands, except per share amounts) June 30,
    2023
     March 31,
    2023
     December 31,
    2022
     September 30,
    2022
     June 30,
    2022
               
    Total Stockholders' Equity $237,435  $234,517  $224,015  $214,005  $207,316 
    Less: Preferred equity               
    Less: Intangible assets               
    Tangible Common Equity $237,435  $234,517  $224,015  $214,005  $207,316 
    Period End Shares Outstanding  13,981,414   14,082,657   14,138,829   14,038,599   14,010,158 
    Tangible Book Value per Share $16.98  $16.65  $15.84  $15.24  $14.80 


    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 June 30, 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 June 30, 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 war in Ukraine; the magnitude and duration of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; 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; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; 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; 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


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