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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, Md., Jan. 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.

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.

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.

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.

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.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited      
              
 Quarter Ended 4Q23 vs 3Q23 4Q23 vs 4Q22
(in thousands except per share data)December 31,
2023
 September 30,
2023
 December 31,
2022
 $
Change
 %
Change
 $
Change
 %
Change
Earnings Summary             
Interest income$46,969  $47,741  $41,348  $(772) (1.6)% $5,621  13.6%
Interest expense 12,080   10,931   6,149   1,149  10.5%  5,931  96.5%
Net interest income 34,889   36,810   35,199   (1,921) (5.2)%  (310) (0.9)%
Provision for credit losses 2,808   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 income 5,936   6,326   5,561   (390) (6.2)%  375  6.7%
Noninterest expense 26,907   28,046   26,734   (1,139) (4.1)%  173  0.6%
Income before income taxes 11,216   12,786   11,642   (1,570) (12.3)%  (426) (3.7)%
Income tax expense 2,186   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 - Basic 13,897   13,933   14,071         
Weighted average common shares - Diluted 13,989   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.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued) 
         
  Year Ended    
  December 31,    
(in thousands except per share data)  2023   2022  $ Change % Change
Earnings Summary        
Interest income $183,206  $150,646  $32,560  21.6%
Interest expense  41,680   10,039   31,641  315.2%
Net interest income  141,526   140,607   919  0.7%
Provision for credit losses  9,610   6,631   2,979  44.9%
(Release of) provision for credit losses on unfunded commitments  (101)     (101) %
Noninterest income  24,975   29,372   (4,397) (15.0)%
Noninterest expense  110,767   109,114   1,653  1.5%
Income before income taxes  46,225   54,234   (8,009) (14.8)%
Income tax expense  10,354   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 - Basic  14,003   14,025     
Weighted average common shares - Diluted  14,081   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.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)    
            
 Quarter Ended   Quarter Ended
 December
31,
  September
30,
 June
30,
 March
31,
(in thousands except per share data) 2023  2022 % Change  2023  2023  2022
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 sale 208,329  252,481 (17.5)%  206,055  208,464  255,762
Mortgage loans held for sale 7,481  7,416 0.9%  4,843  10,146  9,620
SBA-PPP loans, net of fees 645  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 losses 28,610  26,385 8.4%  28,279  27,495  26,216
Deposits 1,895,996  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 funds 27,062  12,062 124.4%  12,062  12,062  12,062
Total stockholders' equity 254,860  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 outstanding 13,923  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.

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.

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.

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.

Consolidated Statements of Income (Unaudited)    
 Three Months EndedYear Ended
(in thousands)December
31,
2023
 September
30,
2023
 June
30,
2023
 March
31,
2023
 December
31,
2022
 December
31,
2023
 December
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 sale 1,083   1,089  1,266  1,377   1,402  4,815   3,912 
Federal funds sold and other 777   1,267  823  764   1,183  3,631   2,326 
Total interest income 46,969   47,741  45,080  43,416   41,348  183,206   150,646 
              
Interest expense             
Deposits 11,759   10,703  9,409  7,754   4,377  39,625   7,611 
Borrowed funds 321   228  331  1,175   1,772  2,055   2,428 
Total interest expense 12,080   10,931  9,740  8,929   6,149  41,680   10,039 
              
Net interest income 34,889   36,810  35,340  34,487   35,199  141,526   140,607 
Provision for credit losses 2,808   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 losses 32,187   34,506  32,478  32,846   32,815  132,017   133,976 
              
Noninterest income             
Service charges on deposits 240   250  245  229   222  964   767 
Credit card fees 3,970   4,387  4,706  4,210   4,314  17,273   21,972 
Mortgage banking revenue 1,166   1,243  1,332  1,155   554  4,896   4,866 
Other income 560   446  404  432   471  1,842   1,767 
Total noninterest income 5,936   6,326  6,687  6,026   5,561  24,975   29,372 
              
Noninterest expenses             
Salaries and employee benefits 11,638   12,419  12,143  12,554   11,769  48,754   42,898 
Occupancy and equipment 1,573   1,351  1,536  1,213   1,388  5,673   4,865 
Professional fees 1,930   2,358  2,608  2,374   2,426  9,270   11,012 
Data processing 6,128   6,469  6,559  6,530   6,697  25,686   29,418 
Advertising 1,433   1,565  2,646  517   726  6,161   6,220 
Loan processing 198   426  660  349   350  1,633   1,702 
Foreclosed real estate expenses, net    1    6     7   (183)
Other operating 4,007   3,457  3,440  2,679   3,378  13,583   13,182 
Total noninterest expenses 26,907   28,046  29,592  26,222   26,734  110,767   109,114 
Income before income taxes 11,216   12,786  9,573  12,650   11,642  46,225   54,234 
Income tax expense 2,186   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 


Consolidated Balance Sheets         
 (unaudited) (unaudited) (unaudited) (unaudited) (audited)
(in thousands except share data)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
Assets         
Cash and due from banks$14,513  $13,767  $18,619  $14,477  $19,963 
Interest-bearing deposits at other financial institutions 39,044   130,428   100,343   125,448   39,764 
Federal funds sold 407   1,957   376   462   20,688 
Total cash and cash equivalents 53,964   146,152   119,338   140,387   80,415 
Investment securities available for sale 208,329   206,055   208,464   255,762   252,481 
Restricted investments 4,353   4,340   3,803   4,215   7,362 
Loans held for sale 7,481   4,843   10,146   9,620   7,416 
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs 645   750   1,090   2,037   2,163 
Portfolio loans receivable, net of deferred fees and costs 1,902,643   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, net 1,874,033   1,833,650   1,809,546   1,759,893   1,702,207 
Premises and equipment, net 5,069   5,297   5,494   5,367   3,386 
Accrued interest receivable 11,494   11,231   10,155   9,985   9,489 
Deferred tax asset 12,252   13,644   13,616   12,898   13,777 
Bank owned life insurance 37,711   37,315   37,041   36,781   36,524 
Other assets 9,336   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-bearing 1,278,623   1,287,185   1,241,232   1,238,573   1,083,759 
Total deposits 1,895,996   1,967,988   1,934,361   1,944,374   1,758,072 
Federal Home Loan Bank advances 22,000   22,000   22,000   32,000   107,000 
Other borrowed funds 27,062   12,062   12,062   12,062   12,062 
Accrued interest payable 5,583   5,204   3,029   1,977   1,031 
Other liabilities 19,166   22,352   18,979   20,356   21,475 
Total liabilities 1,969,807   2,029,606   1,990,431   2,010,769   1,899,640 
          
Stockholders' equity         
Common stock 139   139   140   141   141 
Additional paid-in capital 54,473   54,549   55,856   57,277   58,190 
Retained earnings 213,345   206,033   197,490   191,058   182,435 
Accumulated other comprehensive loss (13,097)  (17,843)  (16,051)  (13,959)  (16,751)
Total stockholders' equity 254,860   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 


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 sold 1,574  21 5.29   1,134  15 5.25   4,054  35 3.41 
Investment securities available for sale 223,132  1,083 1.93   229,731  1,089 1.88   292,117  1,402 1.90 
Restricted investments 4,518  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 receivable 699  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 assets 2,162,459  46,969 8.62   2,176,477  47,741 8.70   2,101,617  41,348 7.81 
Noninterest earning assets 40,020      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 
Savings 5,184  2 0.15   5,582  3 0.21   8,261  1 0.05 
Money market accounts 680,697  7,139 4.16   655,990  6,373 3.85   552,185  3,016 2.17 
Time deposits 380,731  4,528 4.72   374,429  4,256 4.51   177,346  1,299 2.91 
Borrowed funds 41,823  321 3.05   34,932  228 2.59   199,982  1,772 3.52 
Total interest-bearing liabilities 1,303,974  12,080 3.68   1,286,460  10,931 3.37   1,156,292  6,149 2.11 
Noninterest-bearing liabilities:                 
Noninterest-bearing liabilities 27,529      25,047      23,941    
Noninterest-bearing deposits 622,941      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 spread    4.94%     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.

 Year Ended December 31,
  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$70,407 $3,211 4.56% $156,751 $2,007 1.28%
Federal funds sold 1,597  74 4.63   2,959  44 1.49 
Investment securities available for sale 245,466  4,815 1.96   248,869  3,912 1.57 
Restricted investments 5,016  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 receivable 1,373  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 assets 2,145,209  183,206 8.54   2,033,242  150,646 7.41 
Noninterest earning assets 43,090      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 
Savings 5,768  8 0.14   8,917  5 0.06 
Money market accounts 642,013  23,510 3.66   553,388  4,529 0.82 
Time deposits 360,464  15,809 4.39   165,854  2,903 1.75 
Borrowed funds 59,302  2,055 3.47   77,556  2,428 3.13 
Total interest-bearing liabilities 1,268,741  41,680 3.29   1,059,638  10,039 0.95 
Noninterest-bearing liabilities:           
Noninterest-bearing liabilities 24,026      23,797    
Noninterest-bearing deposits 655,013      781,971    
Stockholders’ equity 240,519      212,395    
Total liabilities and stockholders’ equity$2,188,299     $2,077,801    
            
Net interest spread    5.25%     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.


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 Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $30,957  $83  $15,035 $964  $(70) $46,969 
Interest expense  11,884   31     235   (70)  12,080 
Net interest income  19,073   52   15,035  729      34,889 
Provision (release of provision) for credit losses  691      2,125  (8)     2,808 
Release of credit losses on unfunded commitments  (106)             (106)
Net interest income after provision  18,488   52   12,910  737      32,187 
Noninterest income  773   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 Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $30,409  $111  $16,143 $1,162  $(84) $47,741 
Interest expense  10,736   32     247   (84)  10,931 
Net interest income  19,673   79   16,143  915      36,810 
Provision for credit losses  275      1,875  130      2,280 
Provision for credit losses on unfunded commitments  24              24 
Net interest income after provision  19,374   79   14,268  785      34,506 
Noninterest income  665   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 Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $24,389  $88  $16,035 $891  $(55) $41,348 
Interest expense  5,990   33     181   (55)  6,149 
Net interest income  18,399   55   16,035  710      35,199 
Provision for loan losses        2,384        2,384 
Net interest income after provision  18,399   55   13,651  710      32,815 
Noninterest income  550   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.

Segments            
For the year ended December 31, 2023          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $116,408  $382  $62,476 $4,238 $(298) $183,206 
Interest expense  40,896   135     947  (298)  41,680 
Net interest income  75,512   247   62,476  3,291     141,526 
Provision for credit losses  1,540      7,948  122     9,610 
Release of credit losses on unfunded commitments  (101)            (101)
Net interest income after provision  74,073   247   54,528  3,169     132,017 
Noninterest income  2,737   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 Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $82,182  $435  $64,859 $3,349 $(179) $150,646 
Interest expense  9,245   218     755  (179)  10,039 
Net interest income  72,937   217   64,859  2,594     140,607 
Provision (release of provision) for loan losses  (980)     7,611       6,631 
Net interest income after provision  73,917   217   57,248  2,594     133,976 
Noninterest income  2,122   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.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
  Quarter Ended
(in thousands except per share data) December 31,
2023
 September 30,
2023
 June 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, diluted  0.65   0.70   0.52   0.68   0.62 
Net interest margin  6.40%  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 ratio  65.91%  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 deposits  1,895,996   1,967,988   1,934,361   1,944,374   1,758,072 
Total assets  2,224,667   2,272,484   2,227,866   2,245,286   2,123,655 
Total stockholders' equity  254,860   242,878   237,435   234,517   224,015 
Total average portfolio loans receivable, net deferred fees  1,862,599   1,846,866   1,800,800   1,750,539   1,675,434 
Total average deposits  1,885,092   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 assets  0.72%  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 loans  0.84%  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 loans  1.50%  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 loans  178.34%  185.61%  175.03%  160.91%  270.46%
           
Bank Capital Ratios:          
Total risk based capital ratio  14.81%  14.51%  14.08%  14.09%  14.21%
Tier 1 risk based capital ratio  13.56%  13.25%  12.82%  12.84%  12.95%
Leverage ratio  10.51%  10.04%  9.77%  9.78%  9.47%
Common equity Tier 1 capital ratio  13.56%  13.25%  12.82%  12.84%  12.95%
Tangible common equity  9.91%  9.08%  8.93%  8.79%  8.85%
Holding Company Capital Ratios:          
Total risk based capital ratio  17.38%  17.11%  16.81%  16.75%  16.33%
Tier 1 risk based capital ratio  15.55%  15.27%  14.96%  14.90%  15.13%
Leverage ratio  12.14%  11.62%  11.50%  11.47%  11.24%
Common equity Tier 1 capital ratio  15.43%  15.27%  14.96%  14.90%  15.00%
Tangible common equity  11.71%  10.69%  10.66%  10.44%  10.55%
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 estate  573,104   558,147   555,133   545,899   484,735 
Construction real estate  290,108   280,905   258,400   251,494   238,099 
Commercial and industrial  238,548   236,782   233,598   221,258   220,221 
Lender finance  11,085             
Business equity lines of credit  14,117   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 loans  950   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 demand  199,308   229,035   243,095   219,685   207,836 
Savings  5,211   5,686   5,816   5,835   7,530 
Money markets  663,129   668,774   631,148   632,087   574,978 
Brokered time deposits  142,356   128,665   128,665   181,820   131,819 
Other time deposits  268,619   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 sold  34,140   39,364   49,231   40,483   43,415 
Gain on sale of loans  1,015   1,011   1,262   1,223   912 
Purchase volume as a % of originations  89.99%  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 accounts  525,314   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, gross  30,817   27,430   25,254   25,782   26,795 
Noninterest secured credit card deposits  173,857   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.

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.

Return on Average Assets, as AdjustedQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 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 Assets 2,202,479   2,221,117   2,184,351   2,144,249   2,136,156 
Less: Average SBA-PPP Loans 699   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 Adjusted 1.63%  1.75%  1.34%  1.84%  1.67%


Return on Average Assets, as AdjustedYear Ended
 
(in thousands)December 31,
2023
 December 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 Assets 2,188,299   2,077,801  
Less: Average SBA-PPP Loans 1,373   29,831  
Average Total Assets, as Adjusted$2,186,926  $2,047,970  
Return on Average Assets, as Adjusted 1.64%  1.87% 


Net Interest Margin, as AdjustedQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 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 Assets 2,162,459   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 Adjusted 3.92%  4.05%  4.06%  3.81%  3.91%


Net Interest Margin, as AdjustedYear Ended
 
(in thousands)December 31,
2023
 December 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 Assets 2,145,209   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 Adjusted 3.96%  3.93% 


Portfolio Loans Receivable Yield, as AdjustedQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Portfolio Loans Receivable Interest Income$45,022  $45,263  $42,872  $41,191  $38,647 
Less: Credit Card Loan Income 14,677   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 Receivable 1,862,599   1,846,866   1,800,800   1,750,539   1,675,434 
Less: Average Credit Card Loans 114,551   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 Adjusted 6.89%  6.76%  6.66%  6.30%  5.86%


Portfolio Loans Receivable Yield, as AdjustedYear Ended
 
(in thousands)December 31,
2023
 December 31,
2022

 
    
Portfolio Loans Receivable Interest Income$174,348  $140,496  
Less: Credit Card Loan Income 61,096   63,348  
Portfolio Loans Receivable Interest Income, as Adjusted$113,252  $77,148  
Average Portfolio Loans Receivable 1,815,595   1,579,661  
Less: Average Credit Card Loans 114,450   126,473  
Total Average Portfolio Loans Receivable, as Adjusted$1,701,145  $1,453,188  
Portfolio Loans Receivable Yield, as Adjusted 6.66%  5.31% 


Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Net Income$9,030  $9,788 $7,318 $9,735  $8,991
Add: Income Tax Expense 2,186   2,998  2,255  2,915   2,651
Add: Provision for Credit Losses 2,808   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,
2023
 December 31,
2022

 
    
Net Income$35,871  $41,804 
Add: Income Tax Expense 10,354   12,430 
Add: Provision for Credit Losses 9,610   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,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Allowance for Credit Losses$28,610  $28,279  $27,495  $26,216  $26,385 
Total Loans 1,903,288   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 Loans 1.50%  1.52%  1.50%  1.47%  1.53%


Nonperforming Assets to Total Assets, net SBA-PPP LoansQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Total Nonperforming Assets$16,042  $15,236  $15,709  $16,293  $9,756 
Total Assets 2,224,667   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 Loans 0.72%  0.67%  0.71%  0.73%  0.46%


Nonperforming Loans to Total Portfolio LoansQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Total Nonperforming Loans$16,042  $15,236  $15,709  $16,293  $9,756 
Total Loans 1,903,288   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 Loans 0.84%  0.82%  0.86%  0.91%  0.56%


Net Charge-offs to Average Portfolio LoansQuarter Ended
(in thousands)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 31,
2022
          
Total Net Charge-offs$2,477  $1,780  $1,583  $2,633  $2,090 
Total Average Loans 1,863,298   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 Loans 0.53%  0.38%  0.35%  0.61%  0.49%


Net Charge-offs to Average Portfolio LoansYear Ended
 
(in thousands)December 31,
2023
 December 31,
2022

 
    
Total Net Charge-offs$8,473  $5,427  
Total Average Loans 1,816,968   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 Loans 0.47%  0.34% 


Tangible Book Value per ShareQuarter Ended
(in thousands, except per share amounts)December 31,
2023
 September 30,
2023
 June 30,
2023
 March 31,
2023
 December 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 Outstanding 13,922,532  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


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

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