• Capital Bancorp, Inc. Announces Broad Based Growth and Expanding Margin Leading to a 25% Net Income Increase from the Prior Quarter

    Source: Nasdaq GlobeNewswire / 22 Jul 2024 15:03:02   America/Chicago

    Second Quarter 2024 Results

    • Net Income of $8.2 million, or $0.59 per share
      • Net Income, as adjusted to exclude the impact of merger-related expenses (non-GAAP)(1), of $8.3 million, or $0.59 per share
    • Net Interest Income increased $2.1 million, or 5.9%, from 1Q 2024
    • Net Interest Margin ("NIM") increased to 6.46% as compared to 6.24% (1Q 2024)
      • Core NIM, as adjusted to exclude the impact of credit card loans (non-GAAP)(1) increased to 4.00% as compared to 3.85% (1Q 2024)
    • Loan Growth of $57.1 million, or 11.7% annualized for 2Q 2024
    • Deposit Growth of $94.7 million, or 19.0% annualized for 2Q 2024; Noninterest bearing deposits increased $18.8 million, or 11.3% annualized from 1Q 2024
    • Cash dividend of $0.10 per share declared, or 25% higher than the prior quarter

    ROCKVILLE, Md., July 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 $8.2 million, or $0.59 per diluted share, for the second quarter 2024, compared to net income of $6.6 million, or $0.47 per diluted share, for the first quarter 2024, and $7.3 million, or $0.52 per diluted share, for the second quarter 2023. Net income, as adjusted to exclude the impact of merger-related expenses (non-GAAP)(1), was $8.3 million, or $0.59 per diluted share, for the second quarter 2024, compared to $7.1 million, or $0.51 per diluted share, for the first quarter 2024.

    The Company also declared a cash dividend on its common stock of $0.10 per share. The dividend is payable on August 21, 2024 to shareholders of record on August 5, 2024. The dividend declared of $0.10 is $0.02, or 25.0% higher than the prior quarter dividend reflecting the strength of earnings and capital position. The Company has increased its dividend each year since it first started paying dividends in 2021.

    “All of our businesses continued to make progress in the second quarter with sustained loan and deposit growth, increased credit card accounts and revenue growth, mortgage banking income growth, and continued credit stability,” said Ed Barry, Chief Executive Officer of the Company and the Bank. “These positive trends drove stable deposit costs, record net interest income, and increased net interest margin. We were also pleased to receive approval for our pending acquisition of Integrated Financial Holdings, Inc. from the Federal Reserve and we continue to work towards obtaining all approvals and closing requirements. IFHI's expertise in niche C&I lending will further diversify our lending and fee generating capabilities while enhancing shareholder value.”

    "The Board is very pleased with the second quarter results and, in particular, with the improvement in our NIM and the growth of our loan and deposit balances. If the economy cooperates, we anticipate these improvements will result in continued steady growth in our EPS and TBV,” said Steven J Schwartz, Chairman of the Company. “We reaffirm our steadfast commitment to smartly grow enterprise value of the Company, while continually expanding and improving the services and products we offer to our customers.”

    (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.

    Pending Acquisition of Integrated Financial Holdings, Inc.

    Regarding the previously announced pending merger with Integrated Financial Holdings, Inc. ("IFHI"), the Company incurred pre-tax merger-related expenses of $0.1 million for the second quarter 2024 compared to $0.7 million for the first quarter 2024, consistent with modeled expectations.

    On July 9, 2024, the Company received regulatory approval from the Federal Reserve Bank of Richmond, acting on delegated authority from the Board of Governors of the Federal Reserve System, for the proposed merger of IFHI with and into the Company. Completion of the merger remains subject to the approval of the Office of the Comptroller of the Currency, the approval of the Company's and IFHI’s shareholders and the satisfaction of customary closing conditions. The special meeting of the Company will be held on August 15, 2024 at 3:00 p.m., Eastern Time.

    The following table provides a reconciliation of the Company's net income under GAAP to non-GAAP results excluding merger-related expenses.

     Second Quarter 2024 First Quarter 2024
    (in thousands except per share data)Income Before Income Taxes Income Tax Expense Net Income Diluted Earnings per Share Income Before Income Taxes Income Tax Expense Net Income Diluted Earnings per Share
    GAAP Earnings$10,933 $2,728 $8,205 $0.59 $8,624 $2,062 $6,562 $0.47
    Add: Merger-Related Expenses 83  21  62    712  174  538  
    Non-GAAP Earnings$11,016 $2,749 $8,267 $0.59 $9,336 $2,236 $7,100 $0.51
                            


     Six Months Ended June 30, 2024
    (in thousands except per share data)Income Before Income Taxes Income Tax Expense Net Income Diluted Earnings per Share
    GAAP Earnings$19,557 $4,790 $14,767 $1.06
    Add: Merger-Related Expenses 795  195  600  
    Non-GAAP Earnings$20,352 $4,985 $15,367 $1.10
                

    Note: The tax benefit associated with merger-related expenses has been adjusted to reflect the estimated nondeductible portion of the expenses.

    Second Quarter 2024 Highlights

    Capital Bancorp, Inc.

    Earnings Summary - Net income of $8.2 million, or $0.59 per diluted share, increased $1.6 million compared to $6.6 million, or $0.47 per diluted share, for the first quarter 2024. Net income, as adjusted to exclude the impact of merger-related expenses (non-GAAP)(1), was $8.3 million, or $0.59 per diluted share, for the second quarter 2024 compared to $7.1 million, or $0.51 per diluted share, for the first quarter 2024.

    • Net interest income of $37.1 million increased $2.1 million compared to $35.0 million for the first quarter 2024. Interest income of $50.6 million increased $2.2 million compared to $48.4 million for the first quarter 2024, primarily due to interest income from $65.3 million in average portfolio loan growth. Interest expense of $13.6 million increased $0.2 million compared to $13.4 million for the first quarter 2024 as interest expense from time deposits increased $0.3 million as growth in average balances increased $15.9 million.
    • The provision for credit losses was $3.4 million, an increase of $0.7 million from the first quarter 2024 primarily driven by unsecured credit card loan growth in the quarter. Net charge-offs totaled $1.9 million in the second quarter including $1.5 million from credit card related loans and $0.4 million from residential loans. Net charge-offs totaled $2.0 million in the first quarter 2024 including $1.7 million from credit card related loans and $0.3 million from commercial loans. At June 30, 2024, the allowance for credit losses to total loans ratio was 1.53%.
    • Noninterest income of $6.9 million increased $0.9 million compared to $6.0 million for the first quarter 2024. Mortgage banking revenue increased $0.5 million primarily due to increased mortgage loans sold while credit card fees increased $0.4 million primarily related to interchange income.
    • Noninterest expense of $29.5 million remained stable as compared to $29.5 million for the first quarter 2024. Within this category, variances included the following:
      • Salaries and employee benefits of $13.3 million increased $0.4 million due to an increase in base salaries expense of $0.2 million, incentive based compensation expense of $0.1 million and a decrease in deferred salary expense (an increase in expense) of $0.1 million as we continue to invest in talent.
      • Occupancy and equipment expense of $1.9 million increased $0.3 million related to software licensing expense to support business growth.
      • Merger-related expenses totaled $0.1 million in the second quarter 2024 as compared to $0.7 million in the first quarter 2024, consistent with modeled expectations. Primarily all merger-related expenses have been related to professional fees including legal fees, third party consulting fees and other outside service provider expenses.
    • Income tax expense of $2.7 million, or 25.0% of pre-tax income for the second quarter 2024, increased $0.7 million from $2.1 million, or 23.9% of pre-tax income for the first quarter 2024, reflective of an increase in the weighted average state income tax rate.

    Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.40% and 12.53%, respectively, for the three months ended June 30, 2024, compared to 1.15% and 10.19%, respectively, for the three months ended March 31, 2024.

    • Annualized ROAA and annualized ROAE, as adjusted to exclude the impact of merger-related expenses (non-GAAP)(1), were 1.41% and 12.62%, respectively, for the three months ended June 30, 2024, compared to 1.24% and 11.03%, respectively, for the three months ended March 31, 2024.
    • The efficiency ratio was 67.11% for the three months ended June 30, 2024, compared to 71.95% for the three months ended March 31, 2024. The efficiency ratio, as adjusted to exclude the impact of merger-related expenses (non-GAAP)(1), was 66.92% for the three months ended June 30, 2024 compared to 70.22% for the three months ended March 31, 2024.

    Balance Sheet – Total assets of $2.4 billion at June 30, 2024 increased $114.3 million, or 4.9%, from March 31, 2024.

    • Cash and cash equivalents of $136.5 million at June 30, 2024 increased $51.3 million from March 31, 2024, as total deposits increased $94.7 million, and Federal Home Loan Bank advances increased $10.0 million, partially offset by an increase in total portfolio loans of $57.1 million.
    • Total portfolio loans of $2.0 billion at June 30, 2024 increased $57.1 million, or 2.9% growth from March 31, 2024. Total average loans increased $65.3 million quarter over quarter.
    • Total deposits of $2.1 billion at June 30, 2024 increased $94.7 million, or 4.7% growth, from March 31, 2024, while total average deposits increased $53.2 million quarter over quarter. The increase in deposits, when comparing June 30, 2024 to March 31, 2024, includes $18.8 million of noninterest-bearing deposits primarily related to growth in title company deposit balances. Average portfolio loans-to-deposit ratio of 99.10% for the three months ended June 30, 2024 increased from 98.46% for the three months ended March 31, 2024.
    • The investment securities portfolio continues to be classified as available for sale and had a fair market value of $207.9 million, or 8.5% of total assets, at June 30, 2024 up from $202.3 million at March 31, 2024. The amortized cost of the investment securities portfolio was $227.1 million, with an effective duration of 2.92 years. U.S. Treasury securities represented 64.3% of the overall investment portfolio at June 30, 2024. The accumulated other comprehensive loss on the investment securities portfolio decreased $0.5 million during the quarter to $13.1 million as of June 30, 2024, which represents 4.9% of total stockholders' equity. The Company does not have a held to maturity investment securities portfolio.

    Net Interest Margin - Net interest margin increased to 6.46% for the three months ended June 30, 2024, compared to 6.24% for the three months ended March 31, 2024. Core Net Interest Margin, as adjusted to exclude the impact of credit card loans (non-GAAP)(1) increased to 4.00% and included 4 basis points from interest income recognized from nonaccrual loans as compared to 3.85% for the three months ended March 31, 2024.

    • The average yield on interest earning assets of 8.82% increased 19 basis points compared to the first quarter 2024. The yield on portfolio loans, as adjusted to exclude the impact of credit card loans (non-GAAP)(1), of 7.04% for the second quarter 2024, increased 8 basis points primarily from portfolio turnover. New portfolio loans (excluding credit card loans) originated in the second quarter 2024 totaled $112.3 million with a weighted average yield of 8.25% as compared to $122.7 million with a weighted average yield of 8.24% in the first quarter 2024.
    • The average rate on total deposits of 2.64% for the second quarter 2024 decreased 3 basis points from the first quarter 2024, primarily driven by title company balance growth in low and no interest bearing deposits.

    Deposits - Total deposits at June 30, 2024 increased by $94.7 million, or 4.7% unannualized growth, compared to March 31, 2024, primarily driven by growth in low interest-bearing demand and noninterest-bearing deposits from title companies of $86.4 million.

    • Noninterest-bearing deposits of $684.6 million increased $18.8 million, or 2.8%, compared to March 31, 2024. Interest-bearing deposits of $1.4 billion increased $76.0 million, or 5.7%, compared to March 31, 2024 including an increase in interest-bearing demand accounts of $72.1 million. Brokered time deposits totaled $155.1 million at June 30, 2024, a decrease of $5.5 million from March 31, 2024.

    Cost of Interest-Bearing Liabilities - Growth in interest-bearing demand accounts resulted in the average cost of interest-bearing liabilities decreasing to 3.86% for the quarter ended June 30, 2024, compared to 3.90% for the first quarter 2024.

    • Average interest-bearing demand accounts of $216.2 million increased $33.0 million, or 18.0%, compared to March 31, 2024.
    • Average time deposits of $465.8 million increased $15.9 million, or 3.5%, compared to March 31, 2024.
    • Average noninterest-bearing deposits of $653.0 million increased $15.9 million, or 2.5%, compared to March 31, 2024, and represented 32.5% of total average deposits at June 30, 2024.

    Capital Positions - As of June 30, 2024, the Company reported a robust common equity tier 1 capital ratio of 15.08%, compared to 14.92% at March 31, 2024. At June 30, 2024, the Company maintains regulatory capital ratios that exceed all capital adequacy requirements.

    Credit Metrics and Asset Quality - The allowance for credit losses to total loans ratio was 1.53% at June 30, 2024 as compared to an allowance for credit losses to total loans ratio of 1.49% at March 31, 2024. Nonperforming assets decreased 4 basis points to 0.58% of total assets at June 30, 2024 compared to 0.62% at March 31, 2024 as a result of a decrease in nonaccrual loans at June 30, 2024 to $14.1 million compared to $14.4 million at March 31, 2024. At June 30, 2024 special mention loans totaled $23.3 million, or 1.2% of total portfolio loans, as compared to $27.5 million, or 1.4% of total portfolio loans, at March 31, 2024. At June 30, 2024, substandard loans totaled $22.1 million, or 1.2% of total portfolio loans, as compared to $14.1 million, or .7% of total portfolio loans, at March 31, 2024.

    Consistent Tangible Book Value Growth - Tangible book value per common share(1) grew 3.1% to $19.26 at June 30, 2024 when compared to March 31, 2024. The Company did not have goodwill or other intangible assets during any of the periods presented and therefore, tangible book value per share(1) is equal to book value per share.

    Liquidity - Total sources of available borrowings at June 30, 2024 totaled $764.2 million, including available collateralized lines of credit of $570.2 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $118.0 million.

    Commercial Bank

    Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $47.4 million, to $1.9 billion, gross, at June 30, 2024 compared to March 31, 2024. The increase in portfolio loans, as disclosed in the Composition of Loans table within the Historical Financial Highlights includes residential real estate loans of $24.2 million, lender finance loans of $19.8 million and commercial real estate loans of $8.4 million, partially offset by a decrease in business equity lines of credit of $11.8 million. Lender finance loans are loans to companies used to purchase finance receivables or to extend financing to the underlying obligors and are secured primarily by the finance receivables held by our borrowers.

    Net Interest Income - Interest income of $33.9 million increased $1.4 million compared to $32.5 million for the first quarter 2024, driven by loan growth and higher loan yields. Interest expense of $13.3 million increased $0.2 million, driven by an increase in average balances in the second quarter 2024.

    Credit Metrics - Nonperforming assets decreased 4 basis points to 0.58% of total assets at June 30, 2024 compared to 0.62% at March 31, 2024 as a result of a decrease in nonaccrual loans at June 30, 2024 to $14.1 million compared to $14.4 million at March 31, 2024.

    The following tables present non-owner-occupied and owner-occupied commercial real estate loans and multi-family loans and the weighted average loan-to-value ("LTV").

    Non-owner-occupied commercial real estate loans, including multi-family

     As of June 30, 2024
    (in thousands)Amount Average Loan Size Weighted Average LTV(1) % of Non-Owner-Occupied Commercial Real Estate Loans % of Total Portfolio Loans, Gross
    Loan type:         
    Multi-family$156,744 $1,823 56.1% Not Applicable  7.7%
              
    Retail$113,697 $1,458 54.2% 28.7% 5.6%
    Mixed use 94,143  1,177 51.3% 23.7% 4.6%
    Industrial 61,992  1,127 54.6% 15.6% 3.1%
    Hotel 75,427  4,190 50.8% 19.0% 3.7%
    Office 13,699  527 63.1% 3.4% 0.7%
    Other 38,122  1,733 48.2% 9.6% 1.9%
    Total non-owner-occupied commercial real estate loans$397,080 $1,423 52.7% 100.0% 19.6%
    Total portfolio loans, gross$2,028,367        
               

    Owner-occupied commercial real estate loans

     As of June 30, 2024
    (in thousands)Amount Average Loan Size Weighted Average LTV(1) % of Owner-Occupied Commercial Real Estate Loans % of Total Portfolio Loans, Gross
    Loan type:         
    Industrial$78,596 $1,191 53.3% 24.6% 3.9%
    Office 42,876  621 57.1% 13.4% 2.1%
    Retail 40,596  766 59.1% 12.7% 2.0%
    Mixed use 17,657  929 65.6% 5.5% 0.9%
    Other(2) 139,644  2,971 61.2% 43.8% 6.9%
    Total owner-occupied commercial real estate loans$319,369 $1,257 58.7% 100.0% 15.7%
    Total portfolio loans, gross$2,028,367        
               

    (1) The weighted average LTV of the loan categories previously mentioned are calculated by reference to the most recent appraisal of the property securing each loan.

    (2) Other owner-occupied commercial real estate loans include special purpose loans of $58.3 million, skilled nursing loans of $53.8 million, and other loans of $27.5 million.

    Classified and Criticized Loans - At June 30, 2024, special mention loans totaled $23.3 million, or 1.2% of total portfolio loans, as compared to $27.5 million, or 1.4% of total portfolio loans, at March 31, 2024. At June 30, 2024, substandard loans totaled $22.1 million, or 1.2% of total portfolio loans, as compared to $14.1 million, or 0.7% of total portfolio loans, at March 31, 2024.

    OpenSky™

    Revenues - Total revenue of $20.2 million increased $1.3 million from the first quarter 2024. Interest income of $15.8 million increased $0.9 million from the first quarter 2024. Average OpenSky™ loan balances, net of reserves and deferred fees of $111.3 million for the second quarter 2024, increased $0.8 million, or 0.7%, compared to $110.5 million for the first quarter 2024. Noninterest income of $4.4 million increased $0.5 million from the first quarter 2024 primarily related to interchange income.

    Noninterest Expense - Total noninterest expense of $13.8 million increased $0.2 million from the first quarter 2024 primarily related to data processing expense.

    Loan and Deposit Balances - OpenSky™ loan balances, net of reserves, of $122.2 million at June 30, 2024 increased by $10.3 million, or 9.2%, compared to $111.9 million at March 31, 2024. Corresponding deposit balances of $173.5 million at June 30, 2024 increased $1.7 million, or 1.0%, compared to $171.8 million at March 31, 2024. Gross unsecured loan balances of $33.6 million at June 30, 2024 increased $5.1 million, or 17.7%, compared to $28.5 million at March 31, 2024. During the second quarter 2024, the number of OpenSky™ credit card accounts increased by 10,784 to 537,734 from March 31, 2024.

    OpenSky™ Credit - Card delinquencies remained stable in the second quarter 2024 when compared to the first quarter 2024. The provision for credit losses increased $0.7 million compared to the first quarter 2024 as card balances, net of reserves, increased $10.3 million during the second quarter 2024 as compared to a decrease of $11.4 million during the first quarter 2024.

    COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
                  
     Quarter Ended 2Q24 vs 1Q24 2Q24 vs 2Q23
    (in thousands except per share data)June 30, 2024 March 31, 2024 June 30, 2023 $ Change % Change $ Change % Change
    Earnings Summary             
    Interest income$50,615  $48,369  $45,080  $2,246  4.6% $5,535  12.3%
    Interest expense 13,558   13,361   9,740   197  1.5%  3,818  39.2%
    Net interest income 37,057   35,008   35,340   2,049  5.9%  1,717  4.9%
    Provision for credit losses 3,417   2,727   2,862   690  25.3%  555  19.4%
    Provision for credit losses on unfunded commitments 104   142   —   (38) (26.8)%  104  —%
    Noninterest income 6,890   5,972   6,687   918  15.4%  203  3.0%
    Noninterest expense 29,493   29,487   29,592   6  —%  (99) (0.3)%
    Income before income taxes 10,933   8,624   9,573   2,309  26.8%  1,360  14.2%
    Income tax expense 2,728   2,062   2,255   666  32.3%  473  21.0%
    Net income$8,205  $6,562  $7,318  $1,643  25.0% $887  12.1%
                  
    Pre-tax pre-provision net revenue ("PPNR") (1)$14,454  $11,493  $12,435  $2,961  25.8% $2,019  16.2%
    PPNR, as adjusted(1)$14,537  $12,205  $12,435  $2,332  19.1% $2,102  16.9%
                  
    Common Share Data             
    Earnings per share - Basic$0.59  $0.47  $0.52  $0.12  25.5% $0.07  13.5%
    Earnings per share - Diluted$0.59  $0.47  $0.52  $0.12  25.5% $0.07  13.5%
    Earnings per share - Diluted, as adjusted(1)$0.59  $0.51  $0.52  $0.08  15.7% $0.07  13.5%
    Weighted average common shares - Basic 13,895   13,919   14,025         
    Weighted average common shares - Diluted 13,895   13,919   14,059         
                  
    Return Ratios             
    Return on average assets (annualized) 1.40%  1.15%  1.34%        
    Return on average assets, as adjusted (annualized)(1) 1.41%  1.24%  1.34%        
    Return on average equity (annualized) 12.53%  10.19%  12.30%        
    Return on average equity, as adjusted (annualized)(1) 12.62%  11.03%  12.30%        

    ______________
    (1) Refer to Appendix for reconciliation of non-GAAP measures.

    COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued) 
            
     Six Months Ended    
     June 30,    
    (in thousands except per share data) 2024   2023  $ Change % Change
    Earnings Summary       
    Interest income$98,984  $88,496  $10,488  11.9%
    Interest expense 26,919   18,669   8,250  44.2%
    Net interest income 72,065   69,827   2,238  3.2%
    Provision for credit losses 6,144   4,522   1,622  35.9%
    Provision for (release of) credit losses on unfunded commitments 246   (19)  265  (1,394.7)%
    Noninterest income 12,862   12,713   149  1.2%
    Noninterest expense 58,980   55,814   3,166  5.7%
    Income before income taxes 19,557   22,223   (2,666) (12.0)%
    Income tax expense 4,790   5,170   (380) (7.4)%
    Net income$14,767  $17,053  $(2,286) (13.4)%
            
    Pre-tax pre-provision net revenue ("PPNR") (1)$25,947  $26,726  $(779) (2.9)%
    PPNR, as adjusted(1)$26,742  $26,726  $16  0.1%
            
    Common Share Data       
    Earnings per share - Basic$1.06  $1.21  $(0.15) (12.4)%
    Earnings per share - Diluted$1.06  $1.20  $(0.14) (11.7)%
    Earnings per share - Diluted, as adjusted(1)$1.10  $1.20     
    Weighted average common shares - Basic 13,907   14,092     
    Weighted average common shares - Diluted 13,907   14,210     
            
    Return Ratios       
    Return on average assets (annualized) 1.28%  1.59%    
    Return on average assets, as adjusted (annualized)(1) 1.33%  1.59%    
    Return on average equity (annualized) 11.37%  14.60%    
    Return on average equity, as adjusted (annualized)(1) 11.83%  14.60%    

    ______________
    (1) Refer to Appendix for reconciliation of non-GAAP measures.

    COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)    
                
     Quarter Ended     Quarter Ended
     June 30,     March 31, December 31, September 30,
    (in thousands except per share data) 2024   2023  % Change  2024   2023   2023 
    Balance Sheet Highlights           
    Assets$2,438,583  $2,227,866   9.5% $2,324,238  $2,226,176  $2,272,484 
    Investment securities available for sale 207,917   208,464   (0.3)%  202,254   208,329   206,055 
    Mortgage loans held for sale 19,219   10,146   89.4%  10,303   7,481   4,843 
    Portfolio loans receivable (2) 2,021,588   1,838,131   10.0%  1,964,525   1,903,288   1,862,679 
    Allowance for credit losses 30,832   27,495   12.1%  29,350   28,610   28,279 
    Deposits 2,100,428   1,934,361   8.6%  2,005,695   1,895,996   1,967,988 
    FHLB borrowings 32,000   22,000   45.5%  22,000   22,000   22,000 
    Other borrowed funds 12,062   12,062   —%  12,062   27,062   12,062 
    Total stockholders' equity 267,854   237,435   12.8%  259,465   254,860   242,878 
    Tangible common equity (1) 267,854   237,435   12.8%  259,465   254,860   242,878 
                  
    Common shares outstanding 13,910   13,981   (0.5)%  13,890   13,923   13,893 
    Book value per share$19.26  $16.98   13.4% $18.68  $18.31  $17.48 
    Tangible book value per share (1)$19.26  $16.98   13.4% $18.68  $18.31  $17.48 
    Dividends per share$0.08  $0.06   33.3% $0.08  $0.08  $0.08 

    ______________
    (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, 2024 and 2023

    For the three months ended June 30, 2024, net interest income of $37.1 million increased $1.7 million from $35.3 million in the same period in 2023. The net interest margin decreased 17 basis points to 6.46% for the three months ended June 30, 2024 from the same period in 2023 as the increase in cost of deposits, including money market accounts and time deposits, outpaced the increase in portfolio loan yields, including credit card loans. Net interest margin, excluding credit card loans(1), decreased to 4.00% for the three months ended June 30, 2024, compared to 4.06% for the same period in 2023.

    For the three months ended June 30, 2024, average interest earning assets increased $170.1 million, or 8.0%, to $2.3 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 36 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $164.4 million, or 13.2%, and the average cost of interest-bearing liabilities increased to 3.86%, a 73 basis point increase from 3.13%.

    For the three months ended June 30, 2024, the provision for credit losses was $3.4 million, an increase of $0.6 million from the same period in 2023, primarily driven by unsecured credit card loan growth. Net charge-offs for the three months ended June 30, 2024 were $1.9 million, or 0.39% on an annualized basis of average portfolio loans, compared to $1.6 million, or 0.35% on an annualized basis of average loans for the same period in 2023. Of the $1.9 million in net charge-offs during the second quarter 2024, $0.9 million related to secured and partially secured cards in the credit card portfolio and $0.6 million related to unsecured cards. Of the $1.6 million in net charge-offs during the second quarter 2023, $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, 2024, noninterest income of $6.9 million increased $0.2 million, or 3.0%, from the same period in 2023. Mortgage banking revenue of $2.0 million increased $0.7 million due to an increase in salable originations. Credit card fees of $4.3 million decreased $0.4 million primarily related to lower interchange and other fee income.

    Credit card loan balances, net of reserves, decreased by $0.7 million to $122.2 million as of June 30, 2024, from $122.9 million at June 30, 2023. The related deposit account balances decreased 7.0% to $173.5 million at June 30, 2024 when compared to $186.6 million at June 30, 2023, reflective of the reduction in the number of open secured card customer accounts year over year.

    The efficiency ratio for the three months ended June 30, 2024 was 67.11% compared to 70.41% for the three months ended June 30, 2023.

    For the three months ended June 30, 2024, noninterest expense of $29.5 million decreased $0.1 million, or 0.3%, from $29.6 million for the same period in 2023. The change includes decreases in professional fees of $0.8 million, advertising expense of $0.6 million, operational losses of $0.4 million and loan processing expense of $0.2 million. Offsetting increases include salaries and employee benefits expense of $1.1 million, occupancy and equipment expense of $0.3 million, data processing expense of $0.2 million, other operating expense of $0.2 million and merger-related expenses of $0.1 million.

    Operating Results - Comparison of Six Months Ended June 30, 2024 and 2023

    For the six months ended June 30, 2024, net interest income of $72.1 million increased $2.2 million from the same period in 2023, primarily due to increased average balances of $182.2 million in portfolio loans combined with an 11 basis point increase in the yield on portfolio loans, offset by increases in the cost of funding. The net interest margin decreased 29 basis points to 6.35% for the six months ended June 30, 2024 from the same period in 2023. Net interest margin, excluding credit card loans(1), was 3.93% for the six months ended June 30, 2024, compared to 3.94% for the same period in 2023.

    For the six months ended June 30, 2024, average interest earning assets increased $160.3 million, or 7.6%, to $2.3 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 31 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $154.2 million, or 12.4%, while the average cost of interest-bearing liabilities increased 85 basis points to 3.88% from 3.03%.

    For the six months ended June 30, 2024, the provision for credit losses was $6.1 million, an increase of $1.6 million from the prior year, attributable primarily to portfolio loan growth and specific reserves of $1.1 million for collateral dependent loans at June 30, 2024 as compared to $0.3 million at June 30, 2024. Net charge-offs for the six months ended June 30, 2024 were $3.9 million, or 0.40% annualized of average portfolio loans, compared to $4.2 million, or 0.48% annualized of average portfolio loans, for the same period in 2023. The $3.9 million in net charge-offs during the six months ended June 30, 2024 was comprised primarily of credit card portfolio net charge-offs, with $2.1 million related to secured and partially secured cards while $1.1 million was related to unsecured cards.

    For the six months ended June 30, 2024, noninterest income of $12.9 million increased $0.2 million, or 1.2%, from the same period in 2023. Mortgage banking revenue of $3.4 million increased $1.0 million due to an increase in home loan sales while credit card fees of $8.2 million declined $0.7 million as the number of open customer accounts declined to 537,734 at June 30, 2024 from 540,058 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year.

    The efficiency ratio for the six months ended June 30, 2024 was 69.45% compared to 67.62% for the six months ended June 30, 2023.

    For the six months ended June 30, 2024, noninterest expense of $59.0 million increased $3.2 million, or 5.7%, from the same period in 2023. The change includes increases in salaries and employee benefits of $1.5 million, or 6.0%, advertising expense of $0.9 million, merger-related expenses of $0.8 million, occupancy and equipment expense of $0.7 million and other operating expenses of $0.7 million partially offset by a decrease in professional fees of $1.3 million.

    Financial Condition

    Total assets at June 30, 2024 were $2.4 billion, an increase of $114.3 million, or 4.9%, from the balance at March 31, 2024 and an increase of $210.7 million, or 9.5%, from the balance at June 30, 2023.

    Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.0 billion at June 30, 2024, an increase of $57.1 million, up 2.9% or 11.6% annualized, compared to March 31, 2024, and an increase of $183.5 million, or 10.0%, compared to $1.8 billion at June 30, 2023.

    The Company recorded a provision for credit losses of $6.1 million during the six months ended June 30, 2024, which increased the allowance for credit losses to $30.8 million, or 1.53% of total loans at June 30, 2024, representing an increase of $1.5 million over the balance at March 31, 2024.

    Nonperforming assets, which were comprised solely of nonperforming loans as of June 30, 2024, were $14.1 million, or 0.58% of total assets, down from $14.4 million, or 0.62% of total assets at March 31, 2024, and down from $15.7 million, or 0.71% of total assets at June 30, 2023.

    Deposits were $2.1 billion at June 30, 2024, an increase of $94.7 million, or 4.7%, from the balance at March 31, 2024 and an increase of $166.1 million, or 8.6%, from the balance at June 30, 2023. Average deposits of $2.0 billion for the three months ended June 30, 2024 increased $53.2 million, or 2.7%, as compared to the three months ended March 31, 2024.

    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 $23.3 million to $653.0 million as of June 30, 2024, as compared to June 30, 2023.

    Noninterest-bearing deposits represented 32.6% of total deposits at June 30, 2024 compared to 35.8% at June 30, 2023. Uninsured deposits were approximately $923.7 million as of June 30, 2024, representing 44.0% of the Company's deposit portfolio, compared to $855.7 million, or 42.7%, at March 31, 2024, and $860.4 million, or 44.5%, at June 30, 2023.

    Stockholders’ equity increased to $267.9 million as of June 30, 2024, compared to $259.5 million at March 31, 2024 and $237.4 million at June 30, 2023. As of June 30, 2024, 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,
    2024    		 March 31,
    2024    		 December 31,
    2023    		 September 30,
    2023    		 June 30,
    2023    		 June 30,
    2024    		 June 30,
    2023
    Interest income             
    Loans, including fees$48,275  $45,991  $45,109  $45,385  $42,991  $94,266  $84,266 
    Investment securities available for sale 1,308   1,251   1,083   1,089   1,266   2,559   2,643 
    Federal funds sold and other 1,032   1,127   777   1,267   823   2,159   1,587 
    Total interest income 50,615   48,369   46,969   47,741   45,080   98,984   88,496 
                  
    Interest expense             
    Deposits 13,050   12,833   11,759   10,703   9,409   25,883   17,163 
    Borrowed funds 508   528   321   228   331   1,036   1,506 
    Total interest expense 13,558   13,361   12,080   10,931   9,740   26,919   18,669 
                  
    Net interest income 37,057   35,008   34,889   36,810   35,340   72,065   69,827 
    Provision for credit losses 3,417   2,727   2,808   2,280   2,862   6,144   4,522 
    Provision for (release of) credit losses on unfunded commitments 104   142   (106)  24   —   246   (19)
    Net interest income after provision for credit losses 33,536   32,139   32,187   34,506   32,478   65,675   65,324 
                  
    Noninterest income             
    Service charges on deposits 200   207   240   250   245   407   474 
    Credit card fees 4,330   3,881   3,970   4,387   4,706   8,211   8,916 
    Mortgage banking revenue 1,990   1,453   1,166   1,243   1,332   3,443   2,487 
    Other income 370   431   560   446   404   801   836 
    Total noninterest income 6,890   5,972   5,936   6,326   6,687   12,862   12,713 
                  
    Noninterest expenses             
    Salaries and employee benefits 13,272   12,907   11,638   12,419   12,143   26,179   24,697 
    Occupancy and equipment 1,864   1,613   1,573   1,351   1,536   3,477   2,749 
    Professional fees 1,769   1,947   1,930   2,358   2,608   3,716   4,982 
    Data processing 6,788   6,761   6,128   6,469   6,559   13,549   13,089 
    Advertising 2,072   2,032   1,433   1,565   2,646   4,104   3,163 
    Loan processing 476   371   198   426   660   847   1,009 
    Foreclosed real estate expenses, net —   1   —   1   —   1   6 
    Merger-related expenses 83   712   —   —   —   795   — 
    Operational losses 782   931   1,490   953   1,206   1,713   2,170 
    Other operating 2,387   2,212   2,517   2,504   2,234   4,599   3,949 
    Total noninterest expenses 29,493   29,487   26,907   28,046   29,592   58,980   55,814 
    Income before income taxes 10,933   8,624   11,216   12,786   9,573   19,557   22,223 
    Income tax expense 2,728   2,062   2,186   2,998   2,255   4,790   5,170 
    Net income$8,205  $6,562  $9,030  $9,788  $7,318  $14,767  $17,053 
                                


    Consolidated Balance Sheets         
     (unaudited) (unaudited) (audited) (unaudited) (unaudited)
    (in thousands except share data)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
    Assets         
    Cash and due from banks$19,294  $12,361  $14,513  $13,767  $18,619 
    Interest-bearing deposits at other financial institutions 117,160   72,787   39,044   130,428   100,343 
    Federal funds sold 57   56   407   1,957   376 
    Total cash and cash equivalents 136,511   85,204   53,964   146,152   119,338 
    Investment securities available for sale 207,917   202,254   208,329   206,055   208,464 
    Restricted investments 4,930   4,441   4,353   4,340   3,803 
    Loans held for sale 19,219   10,303   7,481   4,843   10,146 
    Portfolio loans receivable, net of deferred fees and costs 2,021,588   1,964,525   1,903,288   1,862,679   1,838,131 
    Less allowance for credit losses (30,832)  (29,350)  (28,610)  (28,279)  (27,495)
    Total portfolio loans held for investment, net 1,990,756   1,935,175   1,874,678   1,834,400   1,810,636 
    Premises and equipment, net 5,551   4,500   5,069   5,297   5,494 
    Accrued interest receivable 12,162   12,258   11,494   11,231   10,155 
    Deferred tax asset 12,150   12,311   12,252   13,644   13,616 
    Bank owned life insurance 38,414   38,062   37,711   37,315   37,041 
    Accounts receivable 1,336   11,637   1,055   696   450 
    Other assets 9,637   8,093   9,790   8,511   8,723 
    Total assets$2,438,583  $2,324,238  $2,226,176  $2,272,484  $2,227,866 
              
    Liabilities         
    Deposits         
    Noninterest-bearing$684,574  $665,812  $617,373  $680,803  $693,129 
    Interest-bearing 1,415,854   1,339,883   1,278,623   1,287,185   1,241,232 
    Total deposits 2,100,428   2,005,695   1,895,996   1,967,988   1,934,361 
    Federal Home Loan Bank advances 32,000   22,000   22,000   22,000   22,000 
    Other borrowed funds 12,062   12,062   27,062   12,062   12,062 
    Accrued interest payable 6,573   6,009   5,583   5,204   3,029 
    Other liabilities 19,666   19,007   20,675   22,352   18,979 
    Total liabilities 2,170,729   2,064,773   1,971,316   2,029,606   1,990,431 
              
    Stockholders' equity         
    Common stock 139   139   139   139   140 
    Additional paid-in capital 55,005   54,229   54,473   54,549   55,856 
    Retained earnings 225,824   218,731   213,345   206,033   197,490 
    Accumulated other comprehensive loss (13,114)  (13,634)  (13,097)  (17,843)  (16,051)
    Total stockholders' equity 267,854   259,465   254,860   242,878   237,435 
    Total liabilities and stockholders' equity$2,438,583  $2,324,238  $2,226,176  $2,272,484  $2,227,866 
                        

    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, 2024    		 Three Months Ended
    March 31, 2024    		 Three Months Ended
    June 30, 2023
     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$77,069 $937 4.89% $84,531 $1,049 4.99% $66,401 $733 4.43%
    Federal funds sold 56  1 7.18   56  1 7.18   1,638  20 4.90 
    Investment securities available for sale 223,973  1,308 2.35   233,231  1,251 2.16   255,057  1,266 1.99 
    Restricted investments 5,435  94 6.96   4,601  77 6.73   4,185  71 6.80 
    Loans held for sale 7,907  132 6.71   4,872  83 6.85   7,047  111 6.32 
    Portfolio loans receivable(2)(3) 1,992,630  48,143 9.72   1,927,372  45,908 9.58   1,802,608  42,879 9.54 
    Total interest earning assets 2,307,070  50,615 8.82   2,254,663  48,369 8.63   2,136,936  45,080 8.46 
    Noninterest earning assets 46,798      44,571      47,415    
    Total assets$2,353,868     $2,299,234     $2,184,351    
                      
    Liabilities and Stockholders’ Equity                 
    Interest-bearing liabilities:                 
    Interest-bearing demand accounts$216,247  148 0.28  $183,217  110 0.24  $207,264  67 0.13 
    Savings 4,409  1 0.09   4,841  1 0.08   5,822  2 0.14 
    Money market accounts 671,240  7,032 4.21   682,414  7,136 4.21   625,515  5,411 3.47 
    Time deposits 465,822  5,869 5.07   449,963  5,586 4.99   366,421  3,929 4.30 
    Borrowed funds 54,863  508 3.72   58,963  528 3.60   43,183  331 3.07 
    Total interest-bearing liabilities 1,412,581  13,558 3.86   1,379,398  13,361 3.90   1,248,205  9,740 3.13 
    Noninterest-bearing liabilities:                 
    Noninterest-bearing liabilities 24,844      23,820      21,104    
    Noninterest-bearing deposits 653,018      637,124      676,358    
    Stockholders’ equity 263,425      258,892      238,684    
    Total liabilities and stockholders’ equity$2,353,868     $2,299,234     $2,184,351    
                      
    Net interest spread    4.96%     4.73%     5.33%
    Net interest income  $37,057     $35,008     $35,340  
    Net interest margin(4)    6.46%     6.24%     6.63%

    _______________
    (1) Annualized.
    (2) Includes nonaccrual loans.
    (3) For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, collectively, portfolio loans yield excluding credit card loans was 7.04%, 6.96% and 6.65%, respectively.
    (4) For the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, collectively, credit card loans accounted for 246, 239 and 257 basis points of the reported net interest margin, respectively.

     Six Months Ended June 30,
     2024 2023
     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$80,800  $1,986   4.94% $64,494  $1,348   4.21%
    Federal funds sold 56   2   7.18   1,845   38   4.15 
    Investment securities available for sale 228,602   2,559   2.25   264,817   2,643   2.01 
    Restricted investments 5,018   171   6.85   5,757   201   7.04 
    Loans held for sale 6,390   215   6.77   5,878   188   6.45 
    Portfolio loans receivable(2)(3) 1,960,001   94,051   9.65   1,777,762   84,078   9.54 
    Total interest earning assets 2,280,867   98,984   8.73   2,120,553   88,496   8.42 
    Noninterest earning assets 45,684       43,858     
    Total assets$2,326,551      $2,164,411     
                
    Liabilities and Stockholders’ Equity           
    Interest-bearing liabilities:           
    Interest-bearing demand accounts$199,732   258   0.26  $196,782   137   0.14 
    Savings 4,625   2   0.09   6,160   3   0.10 
    Money market accounts 676,827   14,168   4.21   615,247   9,998   3.28 
    Time deposits 457,892   11,455   5.03   343,065   7,025   4.13 
    Borrowed funds 56,913   1,036   3.66   80,573   1,506   3.77 
    Total interest-bearing liabilities 1,395,989   26,919   3.88   1,241,827   18,669   3.03 
    Noninterest-bearing liabilities:           
    Noninterest-bearing liabilities 24,332       21,726     
    Noninterest-bearing deposits 645,071       665,253     
    Stockholders’ equity 261,159       235,605     
    Total liabilities and stockholders’ equity$2,326,551      $2,164,411     
                
    Net interest spread     4.85%      5.39%
    Net interest income  $72,065      $69,827   
    Net interest margin(4)     6.35%      6.64%

    (1) Annualized.
    (2) Includes nonaccrual loans.
    (3) For the six months ended June 30, 2024 and 2023, collectively, portfolio loans yield excluding credit card loans was 7.00% and 6.48%, respectively.
    (4) For the six months ended June 30, 2024 and 2023, collectively, credit card loans accounted for 242 and 270 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.

    Effective January 1, 2024, the Company allocated certain expenses previously recorded directly to the Commercial Bank segment to the other segments. These expenses are for shared services also consumed by OpenSky™, CBHL, and Corporate. The Company performs an allocation process based on several metrics the Company believes more accurately ascribe shared service overhead to each segment. The Company believes this reflects the cost of support for each segment that should be considered in assessing segment performance. Historical information has been recast to reflect financial information consistently with the 2024 presentation.

    The following schedule presents financial information for the periods indicated. Total assets are presented as of June 30, 2024, March 31, 2024, and June 30, 2023.

    Segments            
    For the three months ended June 30, 2024          
    (in thousands) Commercial Bank CBHL OpenSky™ Corporate(2) Eliminations Consolidated
    Interest income $33,935  $132  $15,785  $824  $(61) $50,615 
    Interest expense  13,312   83   —   224   (61)  13,558 
    Net interest income  20,623   49   15,785   600   —   37,057 
    Provision for credit losses  1,118   —   2,299   —   —   3,417 
    Provision for credit losses on unfunded commitments  104   —   —   —   —   104 
    Net interest income after provision  19,401   49   13,486   600   —   33,536 
    Noninterest income  677   1,845   4,368   —   —   6,890 
    Noninterest expense(1)  12,209   2,500   13,775   1,009   —   29,493 
    Net income (loss) before taxes $7,869  $(606) $4,079  $(409) $—  $10,933 
                 
    Total assets $2,254,198  $19,622  $115,593  $288,872  $(239,702) $2,438,583 
                 
    For the three months ended March 31, 2024          
    (in thousands) Commercial Bank CBHL OpenSky™ Corporate(2) Eliminations Consolidated
    Interest income $32,529  $83  $14,921  $899  $(63) $48,369 
    Interest expense  13,154   41   —   229   (63)  13,361 
    Net interest income  19,375   42   14,921   670   —   35,008 
    Provision for credit losses  1,109   —   1,559   59   —   2,727 
    Provision for credit losses on unfunded commitments  142   —   —   —   —   142 
    Net interest income after provision  18,124   42   13,362   611   —   32,139 
    Noninterest income  704   1,352   3,915   1   —   5,972 
    Noninterest expense(1)  12,259   2,105   13,599   1,524   —   29,487 
    Net income (loss) before taxes $6,569  $(711) $3,678  $(912) $—  $8,624 
                 
    Total assets $2,160,051  $10,785  $105,318  $281,766  $(233,682) $2,324,238 
                 
    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)  11,675   2,322   15,118   477   —   29,592 
    Net income (loss) before taxes $7,605  $(1,092) $2,637  $423  $—  $9,573 
                 
    Total assets $2,047,400  $10,605  $116,123  $260,309  $(206,571) $2,227,866 

    ________________________
    (1) Noninterest expense includes $6.3 million, $6.1 million, and $5.9 million in data processing expense in OpenSky’s™ segment for the three months ended June 30, 2024, March 31, 2024, and June 30, 2023, 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, 2024          
    (in thousands) Commercial Bank CBHL OpenSky™ Corporate(2) Eliminations Consolidated
    Interest income $66,464  $215  $30,706  $1,723  $(124) $98,984 
    Interest expense  26,466   124   —   453   (124)  26,919 
    Net interest income  39,998   91   30,706   1,270   —   72,065 
    Provision for credit losses  2,227   —   3,858   59   —   6,144 
    Provision for credit losses on unfunded commitments  246   —   —   —   —   246 
    Net interest income after provision  37,525   91   26,848   1,211   —   65,675 
    Noninterest income  1,381   3,197   8,283   1   —   12,862 
    Noninterest expense(1)  24,468   4,605   27,374   2,533   —   58,980 
    Net income (loss) before taxes $14,438  $(1,317) $7,757  $(1,321) $—  $19,557 
                 
    Total assets $2,254,198  $19,622  $115,593  $288,872  $(239,702) $2,438,583 
                 
    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 
    Release of credit losses on unfunded commitments  (19)  —   —   —   —   (19)
    Net interest income after provision  36,211   116   27,350   1,647   —   65,324 
    Noninterest income  1,299   2,488   8,924   2   —   12,713 
    Noninterest expense(1)  23,443   4,658   26,856   857   —   55,814 
    Net income (loss) before taxes $14,067  $(2,054) $9,418  $792  $—  $22,223 
                 
    Total assets $2,047,400  $10,605  $116,123  $260,309  $(206,571) $2,227,866 

    (1) Noninterest expense includes $12.5 million and $11.9 million in data processing expense in OpenSky’s™ segment for the six months ended June 30, 2024 and 2023, 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,
    2024    		 March 31,
    2024    		 December 31,
    2023    		 September 30,
    2023    		 June 30,
    2023
    Earnings:          
    Net income $8,205  $6,562  $9,030  $9,788  $7,318 
    Earnings per common share, diluted  0.59   0.47   0.65   0.70   0.52 
    Net interest margin  6.46%  6.24%  6.40%  6.71%  6.63%
    Net interest margin, excluding credit card loans (1)  4.00%  3.85%  3.92%  4.05%  4.06%
    Return on average assets(2)  1.40%  1.15%  1.63%  1.75%  1.34%
    Return on average equity(2)  12.53%  10.19%  14.44%  16.00%  12.30%
    Efficiency ratio  67.11%  71.95%  65.91%  65.02%  70.41%
               
    Balance Sheet:          
    Total portfolio loans receivable, net deferred fees $2,021,588  $1,964,525  $1,902,643  $1,861,929  $1,837,041 
    Total deposits  2,100,428   2,005,695   1,895,996   1,967,988   1,934,361 
    Total assets  2,438,583   2,324,238   2,226,176   2,272,484   2,227,866 
    Total stockholders' equity  267,854   259,465   254,860   242,878   237,435 
    Total average portfolio loans receivable, net deferred fees  1,992,630   1,927,372   1,863,298   1,847,772   1,802,608 
    Total average deposits  2,010,736   1,957,559   1,885,092   1,918,467   1,881,380 
    Portfolio loans-to-deposit ratio (period-end balances)  96.25%  97.95%  100.35%  94.61%  94.97%
    Portfolio loans-to-deposit ratio (average balances)  99.10%  98.46%  98.84%  96.32%  95.81%
               
    Asset Quality Ratios:          
    Nonperforming assets to total assets  0.58%  0.62%  0.72%  0.67%  0.71%
    Nonperforming loans to total loans  0.70%  0.73%  0.84%  0.82%  0.85%
    Net charge-offs to average portfolio loans (2)  0.39%  0.41%  0.53%  0.38%  0.35%
    Allowance for credit losses to total loans  1.53%  1.49%  1.50%  1.52%  1.50%
    Allowance for credit losses to non-performing loans  219.40%  204.37%  178.34%  185.61%  175.03%
               
    Bank Capital Ratios:          
    Total risk based capital ratio  14.51%  14.36%  14.81%  14.51%  14.08%
    Tier 1 risk based capital ratio  13.25%  13.10%  13.56%  13.25%  12.82%
    Leverage ratio  10.36%  10.29%  10.51%  10.04%  9.77%
    Common equity Tier 1 capital ratio  13.25%  13.10%  13.56%  13.25%  12.82%
    Tangible common equity  9.53%  9.66%  9.91%  9.08%  8.93%
    Holding Company Capital Ratios:          
    Total risk based capital ratio  16.98%  16.83%  17.38%  17.11%  16.81%
    Tier 1 risk based capital ratio  15.19%  15.03%  15.55%  15.27%  14.96%
    Leverage ratio  11.93%  11.87%  12.14%  11.62%  11.50%
    Common equity Tier 1 capital ratio  15.08%  14.92%  15.43%  15.27%  14.96%
    Tangible common equity  10.98%  11.16%  11.45%  10.69%  10.66%

    _______________
    (1) Refer to Appendix for reconciliation of non-GAAP measures.
    (2) Annualized.

    HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited (Continued)
      Quarter Ended
    (in thousands except per share data) June 30,
    2024    		 March 31,
    2024    		 December 31,
    2023    		 September 30,
    2023    		 June 30,
    2023
    Composition of Loans:          
    Commercial real estate, non owner-occupied $397,080  $377,224  $351,116  $350,637  $348,892 
    Commercial real estate, owner-occupied  319,370   330,840   307,911   305,802   311,972 
    Residential real estate  601,312   577,112   573,104   558,147   555,133 
    Construction real estate  294,489   290,016   290,108   280,905   258,400 
    Commercial and industrial  255,686   254,577   239,208   237,549   234,714 
    Lender finance  33,294   13,484   11,085   —   — 
    Business equity lines of credit  2,989   14,768   14,117   14,155   13,277 
    Credit card, net of reserve(3)  122,217   111,898   123,331   122,533   122,925 
    Other consumer loans  1,930   738   950   948   1,187 
    Portfolio loans receivable $2,028,367  $1,970,657  $1,910,930  $1,870,676  $1,846,500 
    Deferred origination fees, net  (6,779)  (6,132)  (7,642)  (7,997)  (8,369)
    Portfolio loans receivable, net $2,021,588  $1,964,525  $1,903,288  $1,862,679  $1,838,131 
               
    Composition of Deposits:          
    Noninterest-bearing $684,574  $665,812  $617,373  $680,803  $693,129 
    Interest-bearing demand  266,070   193,963   199,308   229,035   243,095 
    Savings  4,270   4,525   5,211   5,686   5,816 
    Money markets  672,455   678,435   663,129   668,774   631,148 
    Brokered time deposits  155,148   160,641   142,356   128,665   128,665 
    Other time deposits  317,911   302,319   268,619   255,025   232,508 
    Total deposits $2,100,428  $2,005,695  $1,895,996  $1,967,988  $1,934,361 
               
    Capital Bank Home Loan Metrics:          
    Origination of loans held for sale $82,363  $52,080  $45,152  $50,023  $61,480 
    Mortgage loans sold  66,417   40,377   34,140   39,364   49,231 
    Gain on sale of loans  1,732   1,238   1,015   1,011   1,262 
    Purchase volume as a % of originations  96.48%  97.83%  89.99%  92.29%  93.12%
    Gain on sale as a % of loans sold(4)  2.61%  3.07%  2.97%  2.57%  2.56%
    Mortgage commissions $582  $490  $465  $528  $621 
               
    OpenSky™ Portfolio Metrics:          
    Open customer accounts  537,734   526,950   525,314   529,205   540,058 
    Secured credit card loans, gross $90,961  $85,663  $95,300  $98,138  $100,218 
    Unsecured credit card loans, gross  33,560   28,508   30,817   27,430   25,254 
    Noninterest secured credit card deposits  173,499   171,771   173,857   181,185   186,566 

    _______________
    (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.

    Earnings Metrics, as AdjustedQuarter Ended
    (in thousands except per share data)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Net Income$8,205  $6,562  $9,030  $9,788  $7,318 
    Add: Merger-Related Expenses, net of tax 62   538   —   —   — 
    Net Income, as Adjusted$8,267  $7,100  $9,030  $9,788  $7,318 
              
    Weighted Average Common Shares - Diluted 13,895   13,919   13,989   14,024   14,059 
    Earnings per Share - Diluted$0.59  $0.47  $0.65  $0.70  $0.52 
    Earnings per Share - Diluted, as Adjusted$0.59  $0.51  $0.65  $0.70  $0.52 
              
    Average Assets$2,353,868  $2,299,234  $2,202,479  $2,221,117  $2,184,351 
    Return on Average Assets(1) 1.40%  1.15%  1.63%  1.75%  1.34%
    Return on Average Assets, as Adjusted(1) 1.41%  1.24%  1.63%  1.75%  1.34%
              
    Average Equity$263,425  $258,892  $248,035  $242,671  $238,684 
    Return on Average Equity(1) 12.53%  10.19%  14.44%  16.00%  12.30%
    Return on Average Equity, as Adjusted(1) 12.62%  11.03%  14.44%  16.00%  12.30%
              
    Net Interest Income$37,057  $35,008  $34,889  $36,810  $35,340 
    Noninterest Income 6,890   5,972   5,936   6,326   6,687 
    Total Revenue$43,947  $40,980  $40,825  $43,136  $42,027 
    Noninterest Expense$29,493  $29,487  $26,907  $28,046  $29,592 
    Efficiency Ratio(2) 67.11%  71.95%  65.91%  65.02%  70.41%
              
    Noninterest Expense$29,493  $29,487  $26,907  $28,046  $29,592 
    Less: Merger-Related Expenses 83   712   —   —   — 
    Noninterest Expense, as Adjusted$29,410  $28,775  $26,907  $28,046  $29,592 
    Efficiency Ratio, as Adjusted(2) 66.92%  70.22%  65.91%  65.02%  70.41%

    _______________
    (1) Annualized.
    (2) The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).

    Earnings Metrics, as AdjustedSix Months Ended
    (in thousands except per share data)June 30, 2024 June 30, 2023
        
    Net Income$14,767  $17,053 
    Add: Merger-Related Expenses, Net of Tax 600   — 
    Net Income, as Adjusted$15,367  $17,053 
        
    Weighted average common shares - Diluted 13,907   14,210 
    Earnings per share - Diluted$1.06  $1.20 
    Earnings per share - Diluted, as Adjusted$1.10  $1.20 
        
    Average Assets$2,326,551  $2,164,411 
    Return on Average Assets(1) 1.28%  1.59%
    Return on Average Assets, as Adjusted(1) 1.33%  1.59%
        
    Average Equity$261,159  $235,605 
    Return on Average Equity(1) 11.37%  14.60%
    Return on Average Equity, as Adjusted(1) 11.83%  14.60%
        
    Net Interest Income$72,065  $69,827 
    Noninterest Income 12,862   12,713 
    Total Revenue$84,927  $82,540 
    Noninterest Expense$58,980  $55,814 
    Efficiency Ratio(2) 69.45%  67.62%
        
    Noninterest Expense$58,980  $55,814 
    Less: Merger-Related Expenses 795   — 
    Noninterest Expense, as Adjusted$58,185  $55,814 
    Efficiency Ratio, as Adjusted(2) 68.51%  67.62%

    _______________
    (1) Annualized.
    (2) The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).

    Net Interest Margin, as AdjustedQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Net Interest Income$37,057  $35,008  $34,889  $36,810  $35,340 
    Less: Credit Card Loan Income 15,205   14,457   14,677   15,792   14,818 
    Net Interest Income, as Adjusted$21,852  $20,551  $20,212  $21,018  $20,522 
    Average Interest Earning Assets 2,307,070   2,254,663   2,162,459   2,176,477   2,136,936 
    Less: Average Credit Card Loans 111,288   110,483   114,551   116,814   110,574 
    Total Average Interest Earning Assets, as Adjusted$2,195,782  $2,144,180  $2,047,908  $2,059,663  $2,026,362 
    Net Interest Margin, as Adjusted 4.00%  3.85%  3.92%  4.05%  4.06%


        
    Net Interest Margin, as AdjustedSix Months Ended
    (in thousands)June 30, 2024 June 30, 2023
        
    Net Interest Income$72,065  $69,827 
    Less: Credit Card Loan Income 29,662   30,627 
    Net Interest Income, as Adjusted$42,403  $39,200 
    Average Interest Earning Assets 2,280,867   2,120,553 
    Less: Average Credit Card Loans 110,885   113,197 
    Total Average Interest Earning Assets, as Adjusted$2,169,982  $2,007,356 
    Net Interest Margin, as Adjusted 3.93%  3.94%
            


    Portfolio Loans Receivable Yield, as AdjustedQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Portfolio Loans Receivable Interest Income$48,143  $45,908  $45,026  $45,274  $42,879 
    Less: Credit Card Loan Income 15,205   14,457   14,677   15,792   14,818 
    Portfolio Loans Receivable Interest Income, as Adjusted$32,938  $31,451  $30,349  $29,482  $28,061 
    Average Portfolio Loans Receivable 1,992,630   1,927,372   1,863,298   1,847,772   1,802,608 
    Less: Average Credit Card Loans 111,288   110,483   114,551   116,814   110,574 
    Total Average Portfolio Loans Receivable, as Adjusted$1,881,342  $1,816,889  $1,748,747  $1,730,958  $1,692,034 
    Portfolio Loans Receivable Yield, as Adjusted 7.04%  6.96%  6.89%  6.76%  6.65%
                        


    Portfolio Loans Receivable Yield, as AdjustedSix Months Ended
    (in thousands)June 30, 2024 June 30, 2023
        
    Portfolio Loans Receivable Interest Income$94,051  $84,078 
    Less: Credit Card Loan Income 29,662   30,627 
    Portfolio Loans Receivable Interest Income, as Adjusted$64,389  $53,451 
    Average Portfolio Loans Receivable 1,960,001   1,777,762 
    Less: Average Credit Card Loans 110,885   113,197 
    Total Average Portfolio Loans Receivable, as Adjusted$1,849,116  $1,664,565 
    Portfolio Loans Receivable Yield, as Adjusted 7.00%  6.48%
            


    Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Net Income$8,205  $6,562  $9,030  $9,788  $7,318 
    Add: Income Tax Expense 2,728   2,062   2,186   2,998   2,255 
    Add: Provision for Credit Losses 3,417   2,727   2,808   2,280   2,862 
    Add: Provision for (Release of) Credit Losses on Unfunded Commitments 104   142   (106)  24   — 
    Pre-tax, Pre-Provision Net Revenue ("PPNR")$14,454  $11,493  $13,918  $15,090  $12,435 
                        


    Pre-tax, Pre-Provision Net Revenue ("PPNR")Six Months Ended
    (in thousands)June 30, 2024 June 30, 2023
        
    Net Income$14,767  $17,053 
    Add: Income Tax Expense 4,790   5,170 
    Add: Provision for Credit Losses 6,144   4,522 
    Add: Provision for (Release of) Credit Losses on Unfunded Commitments 246   (19)
    Pre-tax, Pre-Provision Net Revenue ("PPNR")$25,947  $26,726 
            


    PPNR, as AdjustedQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Net Income$8,205  $6,562  $9,030  $9,788  $7,318 
    Add: Income Tax Expense 2,728   2,062   2,186   2,998   2,255 
    Add: Provision for Credit Losses 3,417   2,727   2,808   2,280   2,862 
    Add: Provision for (Release of) Credit Losses on Unfunded Commitments 104   142   (106)  24   — 
    Add: Merger-Related Expenses 83   712   —   —   — 
    PPNR, as Adjusted$14,537  $12,205  $13,918  $15,090  $12,435 
                        


    PPNR, as AdjustedSix Months Ended
    (in thousands)June 30, 2024 June 30, 2023
        
    Net Income$14,767  $17,053 
    Add: Income Tax Expense 4,790   5,170 
    Add: Provision for Credit Losses 6,144   4,522 
    Add: Provision for (Release of) Credit Losses on Unfunded Commitments 246   (19)
    Add: Merger-Related Expenses 795   — 
    PPNR, as Adjusted$26,742  $26,726 
            


    Allowance for Credit Losses to Total Portfolio LoansQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Allowance for Credit Losses$30,832  $29,350  $28,610  $28,279  $27,495 
    Total Portfolio Loans 2,021,588   1,964,525   1,903,288   1,862,679   1,838,131 
    Allowance for Credit Losses to Total Portfolio Loans 1.53%  1.49%  1.50%  1.52%  1.50%
                        


    Nonperforming Assets to Total AssetsQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Total Nonperforming Assets$14,053  $14,361  $16,042  $15,236  $15,709 
    Total Assets 2,438,583   2,324,238   2,226,176   2,272,484   2,227,866 
    Nonperforming Assets to Total Assets 0.58%  0.62%  0.72%  0.67%  0.71%
                        


    Nonperforming Loans to Total Portfolio LoansQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Total Nonperforming Loans$14,053  $14,361  $16,042  $15,236  $15,709 
    Total Portfolio Loans 2,021,588   1,964,525   1,903,288   1,862,679   1,838,131 
    Nonperforming Loans to Total Portfolio Loans 0.70%  0.73%  0.84%  0.82%  0.85%
                        


    Net Charge-Offs to Average Portfolio LoansQuarter Ended
    (in thousands)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Total Net Charge-Offs$1,935  $1,987  $2,477  $1,780  $1,583 
    Total Average Portfolio Loans 1,992,630   1,927,372   1,863,298   1,847,772   1,802,608 
    Net Charge-Offs to Average Portfolio Loans, Annualized 0.39%  0.41%  0.53%  0.38%  0.35%
                        


    Net Charge-offs to Average Portfolio LoansSix Months Ended
    (in thousands)June 30, 2024 June 30, 2023
        
    Total Net Charge-Offs$3,922  $4,216 
    Total Average Portfolio Loans 1,960,001   1,777,762 
    Net Charge-Offs to Average Portfolio Loans 0.40%  0.48%
            


    Tangible Book Value per ShareQuarter Ended
    (in thousands, except per share amounts)June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023
              
    Total Stockholders' Equity$267,854  $259,465  $254,860  $242,878  $237,435 
    Less: Preferred Equity —   —   —   —   — 
    Less: Intangible Assets —   —   —   —   — 
    Tangible Common Equity$267,854  $259,465  $254,860  $242,878  $237,435 
    Period End Shares Outstanding 13,910,467   13,889,563   13,922,532   13,893,083   13,981,414 
    Tangible Book Value per Share$19.26  $18.68  $18.31  $17.48  $16.98 
                        

    ABOUT CAPITAL BANCORP, INC.

    Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. 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 $2.4 billion at June 30, 2024 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; 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; the ability to complete, or any delays in completing, the pending merger between the Company and IFHI; any failure to realize the anticipated benefits of the pending merger transaction when expected or at all; certain restrictions during the pendency of the transaction that may impact the Company's ability to pursue certain business opportunities or strategic transactions; the possibility that the pending merger transaction may be more expensive to complete than anticipated, including as a result of conditions imposed by regulators, unexpected conditions, factors or events, diversion of management's attention from ongoing business operations and opportunities; 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: Dominic Canuso (301) 468-8848 x1403

    MEDIA CONTACT: Ed Barry (240) 283-1912

    WEB SITE: www.CapitalBankMD.com


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