ROCKVILLE, Md., Oct. 25, 2018 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $3.1 million, or $0.26 per diluted share, for the third quarter of 2018. In comparison, net income was $2.9 million, or $0.26 per diluted share, for the third quarter of 2017. For the nine months ended September 30, 2018, net income grew 15.0% year over year to $9.3 million, or $0.77 per diluted share. In comparison, net income for the nine months ended September 30, 2017 was $7.7 million, or $0.67 per diluted share.  Return on average assets was 1.19% and return on average equity was 13.69% for the third quarter of 2018.  For the comparable period in 2017, the return on average assets was 1.17% and the return on average equity was 14.68%.

2018 Third Quarter Highlights

  • During the third quarter of 2018, the Company completed a successful initial public offering of common stock raising approximately $17.5 million of primary capital to support growth.
  • On August 15, 2018, the Company distributed a four-for-one stock split to stockholders of record as of the close of business on August 1, 2018.
  • Net income increased 7.2% to $3.1 million for third quarter of 2018 compared to $2.9 million for the third quarter of 2017.
  • Book value per share increased 14.6% to $8.09 at September 30, 2018 from $7.06 at September 30, 2017, driven by earnings growth of the Company and the impact of the initial public offering of common stock.
  • Total loans increased 9.8% to $955.4 million at September 30, 2018, compared to $869.9 million at September 30, 2017.
  • Total deposits increased 3.9% to $911.1 million at September 30, 2018, compared to $876.5 million at September 30, 2017.
  • For the nine months ended September 30, 2018, average noninterest bearing deposits increased 27.7% to $215.1 million, compared to $168.4 million for the nine months ended September 30, 2017.
  • Net interest margin improved to 5.56% for the three months ended September 30, 2018, compared to 5.20% for the three months ended September 30, 2017.
  • Asset quality remained high, as non-performing assets as a percentage of total assets totaled 0.42% at September 30, 2018. Net chargeoffs to average loans annualized for the quarter were 0.11%.
  • OpenSky®, the Bank's secured, digitally driven nationwide credit card platform, launched a mobile servicing application for credit card customers, consistent with the strategy to create lower cost to serve channels. OpenSky® also launched a redesigned customer application process and user experience design.
  • Church Street Mortgage, the Bank's residential mortgage banking arm, remained profitable for the quarter even as volumes fell from the previous quarter. The volume decrease was offset by increases in the gain on sale margin due to an increased mix of purchase customers.

“I am incredibly proud of the talent and unique culture of our team as we generated earnings of $3.1 million in the third quarter of 2018,” stated Ed Barry, the Company’s Chief Executive Officer. “We continue to see strong momentum in terms of growth of relationship deposits and loans and in execution on our mortgage and card divisions’ business plans.  Our focus on improving the quality of our deposit portfolio continues to bear fruit.  The growth of noninterest deposits coupled with the nominal growth of total deposits advances our strategy to reposition the portfolio away from non-relationship and high rate deposits, like promotional CDs and money market accounts, CDARs, listing service CDs and brokered CDs.”

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited    
 Quarter Ended 3rd Quarter Nine Months Ended YTD
 September 30, 2018 - 2017 September 30, 2018 - 2017
(in thousands except per share data)2018 2017 % Change 2018 2017 % Change
Earnings Summary           
Interest income$17,458  $15,004  16.4% $50,889  $41,986  21.2%
Interest expense2,967  2,044  45.2% 7,891  5,635  40.0%
Net interest income14,491  12,960  11.8% 42,998  36,351  18.3%
Provision for loan losses495  700  (29.3)% 1,640  1,870  (12.3)%
Noninterest income4,240  4,958  (14.5)% 12,657  12,180  3.9%
Noninterest expense13,899  12,237  13.6% 41,028  33,979  20.7%
Income before income taxes4,337  4,980  (12.9)% 12,988  12,682  2.4%
Income tax expense1,190  2,045  (41.8)% 3,706  5,031  (26.3)%
Net income (loss)$3,146  $2,936  7.2% $9,282  $7,651  21.3%
Weighted average common shares - Basic(1)11,720  11,311  3.6% 11,632  11,218  3.7%
Weighted average common shares - Diluted(1)12,103  11,531  5.0% 12,033  11,406  5.5%
Earnings - Basic(1)$0.27  $0.26  3.8% $0.80  $0.68  17.6%
Earnings - Diluted(1)$0.26  $0.26  % $0.77  $0.67  14.9%
Return on average assets1.19% 1.17% 1.7% 1.20% 1.08% 11.1%
Return on average equity13.69% 14.68% (6.7)% 14.61% 13.66% 7.0%

      (1) Gives effect to a four-for-one common stock split completed effective August 15, 2018.

 Quarter Ended 3rd Quarter Quarter Ended
 September 30, 2018 - 2017 June 30, March 31, December 31,
(in thousands except per share data)2018 2017 % Change 2018 2018 2017
Balance Sheet Highlights           
Assets$1,072,904  $1,002,684  7.0% $1,067,786  $1,017,613  $1,026,009 
Investment securities48,067  56,252  (14.6)% 49,799  51,706  54,029 
Mortgage loans held for sale21,373  31,642  (32.5)% 21,370  17,353  26,344 
Loans955,411  869,898  9.8% 920,783  900,033  887,420 
Allowance for loan losses10,892  9,693  12.4% 10,447  10,157  10,033 
Deposits911,116  876,500  3.9% 938,364  897,153  904,899 
Borrowings and repurchase agreements28,239  19,415  45.4% 14,445  10,271  13,260 
Subordinated debentures15,386  15,353  0.2% 15,378  15,369  15,361 
Total stockholders' equity106,657  80,085  33.2% 86,994  83,366  80,119 
Tangible common equity106,657  80,085  33.2% 86,994  83,366  80,119 
Common shares outstanding13,191  11,349  16.2% 11,661  11,595  11,537 
Tangible book value per share$8.09  $7.06  14.6% $7.46  $7.19  $6.94 

Operating Results

Net interest margin increased 7.0% to 5.56% for the three months ended September 30, 2018 from 5.20% for the three months ended September 30, 2017. For the three months ended September 30, 2018, our average interest-earning assets had increased by $44.7 million, compared to the three months ended September 30, 2017, while the average yield on our interest-earning assets increased by 68 basis points. In comparison, our average interest-bearing liabilities decreased $13.1 million from the third quarter of 2017 to the third quarter of 2018, with the respective average rate increasing by 52 basis points.  As a result, net interest income increased $1.5 million, or 11.8%, to $14.5 million for the three months ended September 30, 2018 compared to the same period in 2017.

For the nine months ended September 30, 2018, net interest margin was 5.63%, an increase of 46 basis points over the same period in 2017.  This increase included an average interest-earning assets increase of $81.5 million and an average interest-bearing liabilities increase of $27.8 million compared to the same nine month period in 2017. In addition, the average yields on interest-earning assets and interest-bearing liabilities increased 69 and 38 basis points, respectively.  Net interest income increased $6.6 million, or 18.3% for the nine months ended September 30, 2018 compared to the same period in 2017.

During the three months ended September 30, 2018, we recorded a provision for loan losses of $495 thousand on net chargeoffs for the third quarter of 2018 of $50 thousand, or 0.01% of average loans, annualized. During the three months ended September 30, 2017, our provision for loan losses was $700 thousand, as net chargeoffs for the third quarter of 2017 were $472 thousand, or 0.21% of average loans, annualized. For the nine months ended September 30, 2018 and 2017, our provision for loan losses were $1.6 million and $1.9 million, respectively. Our allowance for loan losses was $10.9 million, or 1.14% of loans, at September 30, 2018, which provided approximately 258% coverage of nonperforming assets at such date, compared to $9.7 million, or 1.11% of loans, and approximately 160% coverage of nonperforming assets at September 30, 2017.

Noninterest income was $4.2 million and $5.0 million for the three months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018 and 2017, noninterest income was $12.7 million and $12.2 million, respectively. The decrease in noninterest income during the three months ended September 30, 2018 related primarily to reduced mortgage banking revenue. The increase in noninterest income during the nine month period ended September 30, 2018 was driven by increases in credit card fees partially offset by lower mortgage banking revenue.

Noninterest expense was $13.9 million and $12.2 million for the three months ended September 30, 2018 and 2017, respectively, and $41.0 million and $34.0 million for the nine months ended September 30, 2018 and 2017, respectively. The increase in noninterest expense during the three and nine-month periods ended September 30, 2018 was driven primarily by increases in data processing costs, salaries and benefits, occupancy, and professional fees. During the fourth quarter of 2017, we converted our credit card processing system to a new vendor to further scale the business.  Due to projected growth of our credit card, mortgage and commercial banking businesses, data processing costs will continue to be a significant expense.

Income tax expense was $3.7 million for the nine months ended September 30, 2018, as compared to $5.0 million for the same period in 2017, a decrease of 26.3% as a result of the Tax Cuts and Jobs Act of 2017 which reduced the corporate tax rate to 21%.

Financial Condition

Total assets at September 30, 2018 were $1.1 billion, up 7.0% as compared to $1.0 billion at September 30, 2017. Gross loans were $955.4 million, excluding mortgage loans held for sale, as of September 30, 2018, compared to $869.9 million at September 30, 2017, an increase of 9.8%.  Deposits were $911.1 million at September 30, 2018, an increase of 3.9%, as compared to $876.5 million at September 30, 2017.

Nonperforming assets were $4.5 million, or 0.42% of total assets, as of September 30, 2018. Comparatively, nonperforming assets were $6.2 million, or 0.62% of total assets, at September 30, 2017. Of the $4.5 million in total nonperforming assets as of September 30, 2018, nonperforming loans represented $4.2 million, of which troubled debt restructurings amount to $289 thousand.  Also included in nonperforming assets at such date was other real estate owned which represents $246 thousand.

Stockholders’ equity totaled $106.7 million as of September 30, 2018, compared to $80.1 million at December 31, 2017. The increase was due to increased earnings and the initial public offering of approximately $17.5 million.  As of September 30, 2018, the Bank's capital ratios continue to exceed the regulatory requirements for a “well-capitalized” institution.

Consolidated Statements of Income (Unaudited)      
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
Interest income       
Loans, including fees$16,955,183  $14,551,154  $49,455,005  $40,782,284 
Investment securities available for sale271,323  289,945  785,528  783,591 
Federal funds sold and other231,799  162,503  648,830  420,526 
Total interest income17,458,305  15,003,602  50,889,363  41,986,401 
Interest expense       
Deposits2,616,627  1,707,774  6,875,895  4,632,486 
Borrowed funds350,660  335,959  1,015,106  1,002,833 
Total interest expense2,967,287  2,043,733  7,891,001  5,635,319 
Net interest income14,491,018  12,959,869  42,998,362  36,351,082 
Provision for loan losses495,000  700,000  1,640,000  1,870,188 
Net interest income after provision for loan losses13,996,018  12,259,869  41,358,362  34,480,894 
Noninterest income       
Service charges on deposits122,490  96,882  364,673  335,246 
Credit card fees1,591,981  1,682,587  4,609,321  4,028,321 
Mortgage banking revenue2,451,006  3,106,273  7,379,076  7,577,893 
Loss on sale of investment securities available for sale    (2,083)  
Other fees and charges74,558  71,769  306,124  238,609 
Total noninterest income4,240,035  4,957,511  12,657,111  12,180,069 
Noninterest expenses       
Salaries and employee benefits6,571,456  6,438,537  19,083,260  18,267,908 
Occupancy and equipment1,069,240  953,007  3,240,792  2,776,774 
Professional fees520,056  566,677  1,364,883  1,390,832 
Data processing3,976,255  1,537,761  11,820,996  5,492,114 
Advertising358,387  532,202  1,112,908  1,451,925 
Loan processing201,824  405,036  810,780  1,123,123 
Other real estate expenses, net6,916  63,841  37,859  82,360 
Other operating1,195,349  1,739,927  3,556,072  3,393,796 
Total noninterest expenses13,899,483  12,236,988  41,027,550  33,978,832 
Income before income taxes4,336,570  4,980,392  12,987,923  12,682,131 
Income tax expense1,190,159  2,044,822  3,706,218  5,030,640 
Net income$3,146,411  $2,935,570  $9,281,705  $7,651,491 


Consolidated Balance Sheets   
 September 30, 2018 (unaudited) December 31, 2017
Assets   
Cash and due from banks$10,982,277  $8,189,371 
Interest bearing deposits at other financial institutions28,494,169  40,355,658 
Federal funds sold1,248,538  3,765,982 
Total cash and cash equivalents40,724,984  52,311,011 
Investment securities available for sale48,067,052  54,028,712 
Restricted investments3,125,650  2,369,250 
Loans held for sale21,372,702  26,344,241 
Loans receivable, net of allowance for loan losses944,519,534  877,387,104 
Premises and equipment, net2,842,330  2,601,293 
Accrued interest receivable4,160,682  3,866,749 
Deferred income taxes3,709,926  3,381,482 
Foreclosed real estate245,986  92,714 
Prepaid income taxes529,200  1,532,468 
Other assets3,606,292  2,093,723 
Total assets$1,072,904,338  $1,026,008,747 
    
Liabilities   
Deposits   
Noninterest bearing$234,093,595  $196,635,473 
Interest bearing677,022,108  708,263,509 
Total deposits911,115,703  904,898,982 
Securities sold under agreements to repurchase11,239,372  11,260,363 
Federal Home Loan Bank advances17,000,000  2,000,000 
Other borrowed funds15,385,505  17,361,231 
Accrued interest payable1,671,884  1,083,532 
Other liabilities9,834,789  9,285,564 
Total liabilities966,247,253  945,889,672 
    
Stockholders' equity   
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding at September 30, 2018 and December 31, 2017   
Common stock, $.01 par value; 49,000,000 shares authorized; 13,191,024 and 11,537,196 issued and outstanding at September 30, 2018 and December 31, 2017, respectively(1)131,910  115,372 
Additional paid-in capital(1)44,912,257  27,050,741 
Retained earnings62,481,360  53,199,657 
Accumulated other comprehensive loss(868,442) (246,695)
Total stockholders' equity106,657,085  80,119,075 
Total liabilities and stockholders' equity$1,072,904,338  $1,026,008,747 

(1) Shares of common stock authorized, issued and outstanding and additional paid-in capital totals have been adjusted to reflect the four-for-one stock split completed effective August 15, 2018.

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 September 30,
 2018 2017
 Average
Outstanding 
Balance
 Interest Income/
Expense
 Average 
Yield/ 
Rate(1)
 Average
Outstanding 
Balance
 Interest Income/
Expense
 Average 
Yield/ 
Rate(1)
 (Dollars in thousands)
Assets           
Interest earning assets:           
Interest bearing deposits$42,734  $188  1.75% $42,079  $124  1.17%
Federal funds sold1,354  6  1.80% 1,095  3  1.05%
Restricted stock2,604  38  5.74% 2,537  36  5.60%
Investment securities49,159  271  2.19% 57,280  290  2.01%
Loans(2)(3)(4)938,430  16,955  7.17% 886,639  14,551  6.51%
Total interest earning assets1,034,281  17,458  6.70% 989,630  15,004  6.01%
Noninterest earning assets11,924      7,760     
Total assets$1,046,205      $997,390     
Liabilities and Stockholders’ Equity           
Interest bearing liabilities:           
Interest bearing deposits$687,618  2,617  1.51% $698,892  1,708  0.97%
Borrowed funds32,248  350  4.31% 34,067  336  3.91%
Total interest bearing liabilities719,866  2,967  1.64% 732,959  2,044  1.11%
Noninterest bearing liabilities:           
Noninterest bearing liabilities10,250      9,358     
Noninterest bearing deposits224,877      175,725     
Stockholders’ equity91,212      79,348     
Total liabilities and stockholders’ equity$1,046,205      $997,390     
            
Net interest spread(5)    5.06%     4.90%
Net interest income  $14,491      $12,960   
Net interest margin(6)    5.56%     5.20%
Net interest margin excluding credit card portfolio    4.26%     4.30%

_______________
(1) Annualized.
(2) Includes loans held for sale.
(3) Includes nonaccrual loans.
(4) Interest income includes amortization of deferred loan fees, net of deferred loan costs.
(5) Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities.
(6) Net interest margin is a ratio calculated as annualized net interest income divided by average interest earning assets for the same period.

 Nine Months Ended September 30,
 2018 2017
 Average
Outstanding 
Balance
 Interest Income/
Expense
 Average 
Yield/ 
Rate(1)
 Average
Outstanding 
Balance
 Interest Income/
Expense
 Average 
Yield/ 
Rate(1)
 (Dollars in thousands)
Assets           
Interest earning assets:           
Interest bearing deposits$44,525  $525  1.58% $44,671  $314  0.94%
Federal funds sold1,546  18  1.59% 1,203  8  0.87%
Restricted stock2,554  105  5.48% 2,475  98  5.32%
Investment securities50,987  786  2.06% 51,451  784  2.04%
Loans(2)(3)(4)922,326  49,455  7.17% 840,603  40,782  6.49%
Total interest earning assets1,021,938  50,889  6.66% 940,403  41,986  5.97%
Noninterest earning assets10,419      6,574     
Total assets$1,032,357      $946,977     
Liabilities and Stockholders’ Equity           
Interest bearing liabilities:           
Interest bearing deposits$691,307  6,876  1.33% $662,511  4,632  0.93%
Borrowed funds31,233  1,015  4.35% 32,250  1,003  4.16%
Total interest bearing liabilities722,540  7,891  1.46% 694,761  5,635  1.08%
Noninterest bearing liabilities:           
Noninterest bearing liabilities9,765      8,922     
Noninterest bearing deposits215,133      168,422     
Stockholders’ equity84,919      74,872     
Total liabilities and stockholders’ equity$1,032,357      $946,977     
            
Net interest spread(5)    5.20%     4.89%
Net interest income  $42,998      $36,351   
Net interest margin(6)    5.63%     5.17%
Net interest margin excluding credit card portfolio    4.27%     4.31%

_______________
(1) Annualized.
(2) Includes loans held for sale.
(3) Includes nonaccrual loans.
(4) Interest income includes amortization of deferred loan fees, net of deferred loan costs.
(5) Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities.
(6) Net interest margin is a ratio calculated as annualized net interest income divided by average interest earning assets for the same period.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited    
  Quarter Ended
(Dollars in thousands except per share data) September 30,
 2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 September 30,
2017
Earnings:          
Net income (loss) $3,146  $3,145  $2,990  $(543) $2,936 
Earnings per common share, diluted(1) 0.26  0.26  0.25  (0.05) 0.26 
Net interest margin 5.56% 5.49% 5.79% 5.54% 5.20%
Net interest margin excluding credit card portfolio 4.26% 4.25% 4.25% 4.35% 4.30%
Return on average assets 1.19% 1.22% 1.19% (0.21)% 1.17%
Return on average equity 13.69% 14.77% 14.86% (2.63)% 14.68%
Efficiency ratio 74.21% 73.64% 73.66% 78.85% 68.30%
Balance Sheet:          
Loans $955,411  $920,783  $900,033  $887,420  $869,898 
Deposits 911,116  938,364  897,153  904,899  876,500 
Total assets 1,072,904  1,067,786  1,017,613  1,026,009  1,002,684 
Asset Quality Ratios:          
Nonperforming assets to total assets 0.42% 0.35% 0.39% 0.54% 0.62%
Nonperforming loans to total loans 0.44% 0.35% 0.41% 0.61% 0.69%
Net chargeoffs to average loans (YTD annualized) 0.11% 0.16% 0.17% 0.15% 0.12%
Allowance for loan losses to total loans 1.14% 1.13% 1.13% 1.13% 1.11%
Allowance for loan losses to non-performing loans 257.83% 320.78% 273.66% 185.57% 160.24%
Bank Capital Ratios:          
Total risk based capital ratio 12.36% 12.34% 12.30% 12.03% 12.25%
Tier 1 risk based capital ratio 11.11% 11.09% 11.05% 10.78% 11.00%
Leverage ratio 9.03% 8.91% 8.83% 8.55% 8.83%
Common equity Tier 1 ratio 11.11% 11.09% 11.05% 10.78% 11.00%
Tangible common equity 8.72% 8.58% 8.78% 8.46% 8.78%
Composition of Loans:        
Residential real estate $388,141  $366,465  $354,818  $342,684  $332,347 
Commercial real estate 276,726  271,800  269,357  259,853  246,959 
Construction real estate 144,012  149,192  150,820  144,932  152,734 
Commercial and industrial 113,473  101,752  96,927  108,982  109,887 
Credit card 33,821  32,522  28,757  31,507  28,552 
Other 1,270  1,244  1,149  1,053  1,099 
Mortgage Metrics (CSM only):          
Origination of loans held for sale $81,665  $95,570  $87,279  $109,892  $119,429 
Proceeds from loans held for sale, net of gains 80,603  89,936  93,955  111,851  117,965 
Purchase volume as a % of originations 92.7% 85.1% 55.4% 48.1% 57.6%
Gain on sale of loans 2,227  2,239  2,092  2,569  2,673 
Gain on sale as a % of loans sold 2.7% 2.4% 2.2% 2.3% 2.2%
Credit Card Portfolio Metrics:          
Total active customer accounts 170,160  166,661  158,362  149,226  144,222 
Total loans $33,821  $32,522  $28,757  $31,506  $28,552 
Total deposits at the Bank $59,978  $58,951  $56,333  $53,625  $52,613 

(1) Gives effect to a four-for-one common stock split completed effective August 15, 2018.

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 eighth largest bank headquartered in Maryland. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets.  Capital Bancorp has assets of approximately $1.1 billion at September 30, 2018 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,” “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. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. 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: Alan Jackson (240) 283-0402

MEDIA CONTACT: Ed Barry (240) 283-1912

WEB SITE: www.CapitalBankMD.com