Capital Bancorp, Inc. Reports Third Quarter 2023 Net Income of $9.8 million, or $0.70 per share


  • Net Income Expands 33.8% with Improved Net Interest Margin from 2Q 2023
  • Diluted EPS of $0.70, ROAA of 1.75%, and ROAE of 16.00% for 3Q 2023
  • Loan and Deposit Growth Generates Positive Operating Leverage
  • Tangible Book Value Per Share(1) of $17.48 for 3Q 2023 up 15% from 3Q 2022
  • Cash dividend of $0.08 per share declared

ROCKVILLE, Md., Oct. 23, 2023 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.8 million, or $0.70 per diluted share, for the third quarter 2023, compared to net income of $7.3 million, or $0.52 per diluted share, for the second quarter 2023 and $11.1 million, or $0.77 per diluted share, for the third quarter 2022. For the quarter, total average deposits increased $37.1 million and the average loan portfolio grew $42.9 million. In addition, the net interest margin of 6.71% for the third quarter 2023 improved when compared to 6.63% for the second quarter 2023. Adjusted net interest margin(1) (excluding credit card and SBA-PPP loans) of 4.05% for the third quarter 2023 remained stable when compared to adjusted net interest margin(1) of 4.06% for the second quarter 2023.

The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on November 22, 2023 to shareholders of record on November 6, 2023.

"Our business model is proving to be stable and resilient against a challenging backdrop," said Ed Barry, Chief Executive Officer of the Company and the Bank. "Our focus on core deposit relationships and differentiated lending has enabled profitable growth. We continue to make investments in technology, people, and asset generation that should further strengthen our franchise. Credit remains stable and we maintained high capital levels allowing us to be opportunistic moving forward."

“The Board is pleased with our improved quarter over quarter performance,” said Steven J. Schwartz, Chairman of the Company. "Our continued, stable net interest margin, coupled with growth in loans and deposits, enabled our ROAA and ROE to bounce back nicely and positions the Bank for continued best-in-class performance. In addition, we are gratified by our year-over-year growth in tangible book value per share, particularly considering the challenges facing banks today due to a rapidly changing interest rate environment, and falling values of certain real estate asset classes.”

(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.

Third Quarter 2023 Highlights

Capital Bancorp, Inc.

Earnings Summary - Net income of $9.8 million, or $0.70 per diluted share, increased $2.5 million compared to $7.3 million, or $0.52 per diluted share, for the second quarter 2023.

  • Net interest income of $36.8 million increased $1.5 million compared to $35.3 million for the second quarter 2023. Interest income of $47.7 million increased $2.7 million compared to $45.1 million for the second quarter 2023. Interest expense of $10.9 million increased $1.2 million compared to $9.7 million for the second quarter 2023.
  • The provision for credit losses was $2.3 million, a decrease of $0.6 million from the second quarter 2023. The change in provision was partially due to lower loan growth of $24.9 million from June 30, 2023 to September 30, 2023 as compared to loan growth of $50.9 million from March 31, 2023 to June 30, 2023.
  • Noninterest income of $6.3 million decreased $0.4 million compared to $6.7 million for the second quarter 2023. Credit card fees decreased $0.3 million partially due to interchange fees from lower customer purchases as the number of open customer accounts decreased quarter over quarter.
  • Noninterest expense of $28.0 million decreased $1.5 million compared to $29.6 million for the second quarter 2023 including total advertising expense of $1.6 million decreasing $1.1 million off of seasonally higher second quarter levels.

Performance and Efficiency Ratios Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.75% and 16.00%, respectively, for the three months ended September 30, 2023, compared to 1.34% and 12.30%, respectively, for the three months ended June 30, 2023.

  • The efficiency ratio was 65.0% for the three months ended September 30, 2023, compared to 70.4% for the three months ended June 30, 2023. The change was primarily attributable to a $1.5 million increase in net interest income and a $1.5 million reduction in noninterest expense quarter over quarter.

Balance Sheet – Total assets of $2.3 billion at September 30, 2023 increased $44.6 million, or 2.0%, from June 30, 2023.

  • Cash and cash equivalents increased $26.8 million.
  • Net portfolio loans of $1.9 billion increased $24.9 million, representing 5.4% annualized growth.
  • Total deposits of $2.0 billion at September 30, 2023 increased $33.6 million, or 1.7%, from June 30, 2023, while total average deposits increased $37.1 million, or 7.8% annualized, quarter over quarter.
  • The investment securities portfolio continues to be classified as available for sale and had a fair market value of $206.1 million, or 9.1% of total assets, at September 30, 2023 down slightly from $208.5 million at June 30, 2023. The amortized cost of the investment securities portfolio was $229.4 million, with an effective duration of 3.21 years. U.S. Treasury securities represent 74.8% of the overall investment portfolio. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio increased $1.8 million during the quarter to $17.8 million as of September 30, 2023, which represents 7.3% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.

Net Interest Margin - Net interest margin improved to 6.71% for the three months ended September 30, 2023, compared to 6.63% for the three months ended June 30, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), of 4.05%, remained stable compared to 4.06% for the three months ended June 30, 2023.

  • The average yield on interest earning assets increased 24 basis points compared to the second quarter 2023. The increase in average yield is due to portfolio loans increasing 17 basis points to 9.72%, and interest-bearing deposits held at other institutions increased 96 basis points to 5.39%. Average portfolio loans increased $46.1 million and average interest-bearing deposits held at other institutions increased $20.7 million, compared to the second quarter 2023.
  • The average rate on interest-bearing liabilities increased 24 basis points compared to the second quarter 2023. Increases in average rates include money market accounts increasing 38 basis points to 3.85% and time deposits increasing 21 basis points to 4.51%, while average balances increased $30.5 million and $8.0 million, respectively, compared to the second quarter 2023. The average rate on borrowed funds decreased 48 basis points to 2.59%, as a result of a reduction in average short-term FHLB advances of $8.3 million to $0.9 million in the third quarter 2023 from $9.1 million in the second quarter 2023.

Deposits and Cost of Funds - Total deposits at September 30, 2023 increased by $33.6 million, or 1.7%, compared to June 30, 2023.

  • Interest-bearing deposits of $1.3 billion increased $46.0 million, or 3.7%, compared to June 30, 2023 with growth in money market accounts of $37.6 million, other time deposits of $22.5 million and a reduction in interest-bearing demand accounts of $14.1 million. Noninterest-bearing deposits of $680.8 million decreased $12.3 million, or 1.8%, compared to June 30, 2023. Brokered time deposits totaled $128.7 million at September 30, 2023, unchanged from June 30, 2023.
  • The elevated interest rate environment has driven up the average cost of interest-bearing liabilities to 3.37% for the quarter ended September 30, 2023, compared to 3.13% for the second quarter 2023.
  • Average noninterest-bearing deposits of $666.9 million decreased $9.4 million, or 1.4%, compared to June 30, 2023, and represented 34.8% of total average deposits at September 30, 2023.
  • Average borrowed funds of $34.9 million decreased $8.3 million, or 19.1%, compared to June 30, 2023.

Robust Capital Positions - As of September 30, 2023, the Company reported a common equity tier 1 capital ratio of 15.71%, compared to 14.96% at June 30, 2023, and an allowance for credit losses to total loans ratio of 1.52%, compared to an allowance for credit losses to total loans ratio of 1.50% as June 30, 2023. Management expects the Company to remain well-capitalized for the foreseeable future. Shares repurchased and retired during the three months ended September 30, 2023, as part of the Company's stock repurchase program, totaled 100,575 shares at an average price of $19.47, for a total cost of $2.0 million including commissions. Tangible book value per common share grew 2.9% to $17.48 at September 30, 2023 when compared to June 30, 2023. The company did not have goodwill or other intangible assets during any of the periods presented and therefore, tangible book value per share is equal to book value per share.

Liquidity - Total sources of available borrowings at September 30, 2023 totaled $646.6 million, including available collateralized lines of credit of $514.5 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $56.1 million.

Commercial Bank

Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $29.9 million, to $1.7 billion, gross, at September 30, 2023 compared to June 30, 2023.

Net Interest Income - Interest income of $30.4 million increased $1.7 million compared to $28.7 million for the second quarter 2023 driven primarily by loan growth. Interest expense of $10.7 million increased $1.2 million driven by an increase in average interest-bearing deposits with slightly higher rates in the third quarter 2023.

Credit Metrics - Nonperforming assets ("NPAs") decreased 4 basis points to 0.67% of total assets at September 30, 2023 compared to 0.71% at June 30, 2023 as a result of a decrease in nonaccrual loans at September 30, 2023 to $15.2 million compared to $15.7 million at June 30, 2023. Included in nonperforming assets is a single $8.2 million, multi-unit residential real estate loan that was downgraded in the first quarter of 2023. At September 30, 2023 commercial real estate loans with office space exposure totaled $55.4 million, or 3.0% of total portfolio loans, with a weighted average loan-to-value ("LTV") of 48.2%. Owner-occupied commercial real estate loans with office exposure totaled $42.5 million with a weighted average LTV of 47.8% and non owner-occupied commercial real estate loans with office exposure totaled $12.8 million with a weighted average LTV of 49.8%.

OpenSky®

Revenues - Total revenue of $20.5 million increased $0.7 million from the second quarter 2023. Interest income of $16.1 million increased $1.0 million from the second quarter 2023. Average OpenSky® loan balances, net of reserves and deferred fees of $116.8 million for the third quarter 2023, increased $6.2 million, or 5.6%, compared to $110.6 million for the second quarter 2023. Noninterest income of $4.4 million decreased $0.3 million due to a decline in credit card fees as compared to the second quarter 2023.

Noninterest Expense - Total noninterest expense of $10.6 million decreased $1.4 million from the second quarter 2023. Noninterest expense declined in the third quarter off of higher seasonal second quarter levels driven primarily by higher advertising expense. Advertising expense can vary throughout the year based on market opportunities for new account acquisition. During the third quarter 2023, the number of OpenSky® credit card accounts declined by 10,853 to 529,205.

Loan Balances - OpenSky® loan balances, net of reserves, of $122.5 million at September 30, 2023 decreased by $0.4 million, or 0.3%, compared to $122.9 million at June 30, 2023. Corresponding deposit balances of $181.2 million at September 30, 2023 decreased $5.4 million, or 2.9%, compared to $186.6 million at June 30, 2023. Gross unsecured loan balances of $27.4 million at September 30, 2023 increased $2.2 million compared to $25.3 million at June 30, 2023.

OpenSky® Credit - Card delinquencies and utilization remained stable in the third quarter 2023 when compared to the second quarter 2023. The provision for credit losses decreased $0.3 million compared to the second quarter 2023 as card balances, net of reserve decreased $0.4 million during the third quarter 2023 as compared to an increase of $10.1 million during the second quarter 2022.

 
COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
              
 Quarter Ended 3Q23 vs 2Q23 3Q23 vs 3Q22
(in thousands except per share data)September 30, 2023 June 30, 2023 September 30, 2022 $ Change % Change $ Change % Change
Earnings Summary             
Interest income$47,741  $45,080  $38,340  $2,661  5.9% $9,401  24.5%
Interest expense 10,931   9,740   1,663   1,191  12.2%  9,268  557.3%
Net interest income 36,810   35,340   36,677   1,470  4.2%  133  0.4%
Provision for credit losses 2,280   2,862   1,260   (582) (20.3)%  1,020  81.0%
Provision for credit losses on unfunded commitments 24         24  %  24  %
Noninterest income 6,326   6,687   7,108   (361) (5.4)%  (782) (11.0)%
Noninterest expense 28,046   29,592   28,094   (1,546) (5.2)%  (48) (0.2)%
Income before income taxes 12,786   9,573   14,431   3,213  33.6%  (1,645) (11.4)%
Income tax expense 2,998   2,255   3,336   743  32.9%  (338) (10.1)%
Net income$9,788  $7,318  $11,095  $2,470  33.8% $(1,307) (11.8)%
              
Pre-tax pre-provision net revenue ("PPNR")(1)$15,090  $12,435  $15,691  $2,655  21.4% $(601) (3.8)%
Weighted average common shares - Basic 13,933   14,025   14,030   (92) (0.7)%  (97) (0.7)%
Weighted average common shares - Diluted 14,024   14,059   14,375   (35) (0.2)%  (351) (2.4)%
Earnings per share - Basic$0.70  $0.52  $0.79  $0.18  34.6% $(0.09) (11.4)%
Earnings per share - Diluted$0.70  $0.52  $0.77  $0.18  34.6% $(0.07) (9.1)%
Return on average assets (annualized) 1.75%  1.34%  2.15%  0.41% 30.6% (0.40)% (18.6)%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1) 1.75%  1.34%  2.10%  0.41% 30.6% (0.35)% (16.7)%
Return on average equity (annualized) 16.00%  12.30%  20.32%  3.70% 30.1% (4.32)% (21.3)%

______________

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

 
COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
         
  Nine Months Ended    
  September 30,    
(in thousands except per share data) 2023 2022 $ Change % Change
Earnings Summary        
Interest income $136,237  $109,298  $26,939  24.6%
Interest expense  29,600   3,890   25,710  660.9%
Net interest income  106,637   105,408   1,229  1.2%
Provision for credit losses  6,802   4,247   2,555  60.2%
Provision for credit losses on unfunded commitments  5      5  %
Noninterest income  19,039   23,811   (4,772) (20.0)%
Noninterest expense  83,860   82,379   1,481  1.8%
Income before income taxes  35,009   42,593   (7,584) (17.8)%
Income tax expense  8,168   9,779   (1,611) (16.5)%
Net income $26,841  $32,814  $(5,973) (18.2)%
         
Pre-tax pre-provision net revenue ("PPNR")(1) $41,816  $46,840  $(5,024) (10.7)%
Weighted average common shares - Basic  14,038   14,009   29  0.2%
Weighted average common shares - Diluted  14,112   14,329   (217) (1.5)%
Earnings per share - Basic $1.91  $2.34  $(0.43) (18.4)%
Earnings per share - Diluted $1.90  $2.29  $(0.39) (17.0)%
Return on average assets (annualized)  1.64%  2.13% (0.49)% (23.0)%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1)  1.64%  1.94% (0.30)% (15.5)%
Return on average equity (annualized)  15.08%  20.93% (5.85)% (28.0)%
             


       
 Quarter Ended    Quarter Ended
 September 30,    June 30, March 31, December 31,
(in thousands except per share data)2023
 2022
 % Change 2023
 2023
 2022
Balance Sheet Highlights           
Assets$2,272,484  $2,009,358  13.1% $2,227,866  $2,245,286  $2,123,655 
Investment securities available for sale 206,055   269,620  (23.6)%  208,464   255,762   252,481 
Mortgage loans held for sale 4,843   6,875  (29.6)%  10,146   9,620   7,416 
SBA-PPP loans, net of fees 750   2,662  (71.8)%  1,090   2,037   2,163 
Portfolio loans receivable(2) 1,861,929   1,648,001  13.0%  1,837,041   1,786,109   1,728,592 
Allowance for credit losses 28,279   26,091  8.4%  27,495   26,216   26,385 
Deposits 1,967,988   1,737,591  13.3%  1,934,361   1,944,374   1,758,072 
FHLB borrowings 22,000   22,000  %  22,000   32,000   107,000 
Other borrowed funds 12,062   12,062  %  12,062   12,062   12,062 
Total stockholders' equity 242,878   214,005  13.5%  237,435   234,517   224,015 
Tangible common equity(1) 242,878   214,005  13.5%  237,435   234,517   224,015 
            
Common shares outstanding 13,896   14,039  (1.0)%  13,981   14,083   14,139 
Book value per share$17.48  $15.24  14.7% $16.98  $16.65  $15.84 
Tangible book value per share(1)$17.48  $15.24  14.7% $16.98  $16.65  $15.84 
Dividends per share$0.08  $0.06  33.3% $0.06  $0.06  $0.06 

______________

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

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

For the three months ended September 30, 2023, net interest income of $36.8 million increased slightly from $36.7 million in the same period in 2022, primarily due to increased average balances of $245.3 million in portfolio loans combined with a 78 basis point increase in yield for portfolio loans partially offset by significant increases in the cost of funding. The net interest margin decreased 53 basis points to 6.71% for the three months ended September 30, 2023, from the same period in 2022 as interest income on credit cards decreased $1.0 million and interest income on SBA-PPP totaled $0.3 million for the three months ended September 30, 2022 with no comparable amount in 2023. Net interest margin, excluding credit card and SBA-PPP loans, decreased to 4.05% for the three months ended September 30, 2023, compared to 4.16% for the same period in 2022 as the costs of deposits, including money market accounts and time deposits, outpaced the increases in yields on interest-bearing deposits and portfolio loans.

For the three months ended September 30, 2023, average interest earning assets increased $166.4 million, or 8.3%, to $2.2 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 113 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $280.9 million, or 27.9%, and the average cost of interest-bearing liabilities increased to 3.37%, a 271 basis point increase from 0.66%.

For the three months ended September 30, 2023, the provision for credit losses was $2.3 million, an increase of $1.0 million from the same period in 2022. Net charge-offs for the three months ended September 30, 2023 were $1.8 million, or 0.38% on an annualized basis of average portfolio loans, compared to $1.6 million, or 0.39% on an annualized basis of average loans for the same period in 2022. Of the $1.8 million in net charge-offs during the quarter, $1.4 million related to secured and partially secured cards in the credit card portfolio and $0.3 million related to unsecured cards.

For the three months ended September 30, 2023, noninterest income of $6.3 million decreased $0.8 million, or 11.0%, from the same period in 2022. Credit card fees declined by $1.1 million as the number of open customer accounts declined year over year, which resulted in lower interchange and other fee income.

Credit card loan balances, net of reserves, decreased by $14.1 million to $122.5 million as of September 30, 2023, from $136.7 million at September 30, 2022. The related deposit account balances decreased 10.0% to $181.2 million at September 30, 2023 when compared to $201.3 million at September 30, 2022 reflecting the reduction in the number of open customer accounts year over year.

The efficiency ratio for the three months ended September 30, 2023 was 65.02% compared to 64.16% for the three months ended September 30, 2022.

For the three months ended September 30, 2023, noninterest expense of $28.0 million decreased slightly from $28.1 million for the same period in 2022. The change includes decreases in professional fees of $1.5 million and data processing expense of $0.8 million partially offset by increases in salaries and employee benefits of $1.7 million and other operating expense of $0.5 million.

Operating Results - Comparison of Nine Months Ended September 30, 2023 and 2022

For the nine months ended September 30, 2023, net interest income of $106.6 million increased $1.2 million from the same period in 2022, primarily due to increased average balances of $252.4 million in portfolio loans combined with the 81 basis point increase in yield for portfolio loans offset by significant increases in the cost of funding. The net interest margin decreased 35 basis points to 6.66% for the nine months ended September 30, 2023 from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.98% for the nine months ended September 30, 2023, compared to 3.94% for the same period in 2022.

For the nine months ended September 30, 2023, average interest earning assets increased $129.2 million, or 6.4%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 124 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $229.8 million, or 22.4%, while the average cost of interest-bearing liabilities increased 264 basis points to 3.15% from 0.51%.

For the nine months ended September 30, 2023, the provision for credit losses was $6.8 million, an increase of $2.6 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the nine months ended September 30, 2023 were $6.0 million, or 0.45% annualized of average portfolio loans, compared to $1.7 million, or 0.23% annualized of average portfolio loans, for the same period in 2022. The $6.0 million in net charge-offs during the nine months ended September 30, 2023 was comprised primarily of credit card portfolio net charge-offs with $4.1 million related to secured and partially secured cards while $1.0 million was related to unsecured cards.

For the nine months ended September 30, 2023, noninterest income of $19.0 million decreased $4.8 million, or 20.0%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $4.4 million as the number of open customer accounts declined to 529,205 at September 30, 2023 from 576,844 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year. The elevated interest rate environment continues to put pressure on the mortgage market, resulting in declines in home loan sales and home loan refinances, which has resulted in a $0.6 million decrease in mortgage banking revenue compared to the prior year.

The efficiency ratio for the nine months ended September 30, 2023 was 66.73% compared to 63.75% for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, noninterest expense of $83.9 million increased $1.5 million, or 1.8%, from the same period in 2022. The increase was primarily driven by a $6.0 million, or 19.2%, increase in salaries and employee benefits, partially offset by a $3.2 million, or 13.9%, decrease in data processing expense and a $1.2 million decrease in professional fees due to a reduction in third party consulting fees. The decrease in data processing expense was the result of a contract renegotiation entered into in the first quarter 2022 in the OpenSky® Division as well as fewer average open cards during the period.

Financial Condition

Total assets at September 30, 2023 were $2.3 billion, an increase of $44.6 million, or 2.0%, from the balance at June 30, 2023 and an increase of $263.1 million, or 13.1%, from the balance at September 30, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.9 billion at September 30, 2023, an increase of $24.9 million, up 1.4% or 5.4% annualized, compared to June 30, 2023, and an increase of $213.9 million, or 13.0%, compared to $1.6 billion at September 30, 2022.

The Company recorded a provision for credit losses of $6.8 million during the nine months ended September 30, 2023, which increased the allowance for credit losses to $28.3 million, or 1.52% of total loans at September 30, 2023, representing an increase of $0.8 million or 2.9%, from the balance at June 30, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of September 30, 2023, were $15.2 million, or 0.67% of total assets, down from $15.7 million, or 0.71% of total assets at June 30, 2023 and up from $8.6 million, or 0.43% of total assets at September 30, 2022. Included in nonperforming assets is a single $8.2 million, multi-unit residential real estate loan that was downgraded in the first quarter of 2023.

Deposits were $2.0 billion at September 30, 2023, an increase of $33.6 million, or 1.7%, from the balance at June 30, 2023 and an increase of $230.4 million, or 13.3%, from the balance at September 30, 2022. Average deposits of $1.9 billion for the three months ended September 30, 2023, increased $37.1 million, or 2.0%, as compared to the three months ended June 30, 2023. Rising interest rates have resulted in some customers moving balances from noninterest-bearing deposit accounts to interest-bearing deposit accounts. As a result of the migration, average noninterest-bearing deposit balances decreased $135.5 million to $666.9 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. These deposits represented 34.6% of total deposits at September 30, 2023 compared to 46.4% at September 30, 2022. Uninsured deposits were approximately $857.7 million as of September 30, 2023, representing 43.6% of the Company's deposit portfolio, compared to $860.4 million, or 44.5%, at June 30, 2023, and $960.2 million, or 55.3%, at September 30, 2022.

Stockholders’ equity increased to $242.9 million as of September 30, 2023, compared to $237.4 million at June 30, 2023 and $214.0 million at September 30, 2022. Shares repurchased and retired through September 30, 2023 as part of the Company's stock repurchase program totaled 385,919 shares at an average price of $18.12, for a total cost of $7.0 million including commissions. As of September 30, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.

 
Consolidated Statements of Income (Unaudited)
 Three Months Ended
 Nine Months Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 September 30, 2023 September 30, 2022
Interest income             
Loans, including fees$45,385  $42,991  $41,275  $38,763  $36,451  $129,651  $105,645 
Investment securities available for sale 1,089   1,266   1,377   1,402   1,362   3,732   2,510 
Federal funds sold and other 1,267   823   764   1,183   527   2,854   1,143 
Total interest income 47,741   45,080   43,416   41,348   38,340   136,237   109,298 
              
Interest expense             
Deposits 10,703   9,409   7,754   4,377   1,386   27,866   3,234 
Borrowed funds 228   331   1,175   1,772   277   1,734   656 
Total interest expense 10,931   9,740   8,929   6,149   1,663   29,600   3,890 
              
Net interest income 36,810   35,340   34,487   35,199   36,677   106,637   105,408 
Provision for credit losses 2,280   2,862   1,660   2,384   1,260   6,802   4,247 
Provision for (release of) credit losses on unfunded commitments 24      (19)        5    
Net interest income after provision for credit losses 34,506   32,478   32,846   32,815   35,417   99,830   101,161 
              
Noninterest income             
Service charges on deposits 250   245   229   222   199   724   545 
Credit card fees 4,387   4,706   4,210   4,314   5,524   13,303   17,658 
Mortgage banking revenue 1,243   1,332   1,155   554   969   3,730   4,312 
Other income 446   404   432   471   416   1,282   1,296 
Total noninterest income 6,326   6,687   6,026   5,561   7,108   19,039   23,811 
              
Noninterest expenses             
Salaries and employee benefits 12,419   12,143   12,554   11,769   10,747   37,116   31,129 
Occupancy and equipment 1,351   1,536   1,213   1,388   1,138   4,100   3,476 
Professional fees 2,358   2,608   2,374   2,426   3,848   7,340   8,586 
Data processing 6,469   6,559   6,530   6,697   7,178   19,558   22,721 
Advertising 1,565   2,646   517   726   1,632   4,728   5,494 
Loan processing 426   660   349   350   625   1,435   1,352 
Foreclosed real estate expenses, net 1      6         7    
Other operating 3,457   3,440   2,679   3,378   2,926   9,576   9,621 
Total noninterest expenses 28,046   29,592   26,222   26,734   28,094   83,860   82,379 
Income before income taxes 12,786   9,573   12,650   11,642   14,431   35,009   42,593 
Income tax expense 2,998   2,255   2,915   2,651   3,336   8,168   9,779 
Net income$9,788  $7,318  $9,735  $8,991  $11,095  $26,841  $32,814 
                            


 
Consolidated Balance Sheets
 (unaudited) (unaudited) (unaudited) (audited) (unaudited)
(in thousands except share data)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
Assets         
Cash and due from banks$13,767  $18,619  $14,477  $19,963  $14,774 
Interest-bearing deposits at other financial institutions 130,428   100,343   125,448   39,764   20,867 
Federal funds sold 1,957   376   462   20,688   1,421 
Total cash and cash equivalents 146,152   119,338   140,387   80,415   37,062 
Investment securities available for sale 206,055   208,464   255,762   252,481   269,620 
Marketable equity securities             232 
Restricted investments 4,340   3,803   4,215   7,362   3,627 
Loans held for sale 4,843   10,146   9,620   7,416   6,875 
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs 750   1,090   2,037   2,163   2,662 
Portfolio loans receivable, net of deferred fees and costs 1,861,929   1,837,041   1,786,109   1,728,592   1,648,001 
Less allowance for credit losses (28,279)  (27,495)  (26,216)  (26,385)  (26,091)
Total portfolio loans held for investment, net 1,833,650   1,809,546   1,759,893   1,702,207   1,621,910 
Premises and equipment, net 5,297   5,494   5,367   3,386   3,212 
Accrued interest receivable 11,231   10,155   9,985   9,489   7,890 
Deferred tax asset 13,644   13,616   12,898   13,777   14,047 
Bank owned life insurance 37,315   37,041   36,781   36,524   36,267 
Other assets 9,207   9,173   8,341   8,435   5,954 
Total assets$2,272,484  $2,227,866  $2,245,286  $2,123,655  $2,009,358 
          
Liabilities         
Deposits         
Noninterest-bearing$680,803  $693,129  $705,801  $674,313  $806,033 
Interest-bearing 1,287,185   1,241,232   1,238,573   1,083,759   931,558 
Total deposits 1,967,988   1,934,361   1,944,374   1,758,072   1,737,591 
Federal Home Loan Bank advances 22,000   22,000   32,000   107,000   22,000 
Other borrowed funds 12,062   12,062   12,062   12,062   12,062 
Accrued interest payable 5,204   3,029   1,977   1,031   481 
Other liabilities 22,352   18,979   20,356   21,475   23,219 
Total liabilities 2,029,606   1,990,431   2,010,769   1,899,640   1,795,353 
          
Stockholders' equity         
Common stock 139   140   141   141   140 
Additional paid-in capital 54,549   55,856   57,277   58,190   56,532 
Retained earnings 206,033   197,490   191,058   182,435   174,916 
Accumulated other comprehensive loss (17,843)  (16,051)  (13,959)  (16,751)  (17,583)
Total stockholders' equity 242,878   237,435   234,517   224,015   214,005 
Total liabilities and stockholders' equity$2,272,484  $2,227,866  $2,245,286  $2,123,655  $2,009,358 
                    

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, 2023
 Three Months Ended
June 30, 2023
 Three Months Ended
September 30, 2022
 Average
Outstanding
Balance
 Interest Income/
Expense
 Average
Yield/
Rate(1)
 Average
Outstanding
Balance
 Interest Income/
Expense
 Average
Yield/
Rate(1)
 Average
Outstanding
Balance
 Interest Income/
Expense
 Average
Yield/
Rate(1)
 (in thousands)
Assets                 
Interest earning assets:                 
Interest-bearing deposits$87,112  $1,183  5.39% $66,401  $733  4.43% $101,187  $471  1.85%
Federal funds sold 1,134   15  5.25   1,638   20  4.90   1,492   7  1.87 
Investment securities available for sale 229,731   1,089  1.88   255,057   1,266  1.99   287,944   1,362  1.88 
Restricted investments 4,058   69  6.75   4,185   71  6.80   4,116   49  4.72 
Loans held for sale 6,670   111  6.60   7,047   111  6.32   7,879   102  5.15 
SBA-PPP loans receivable 906   11  4.82   1,808   7  1.55   5,906   263  17.66 
Portfolio loans receivable(2) 1,846,866   45,263  9.72   1,800,800   42,872  9.55   1,601,546   36,086  8.94 
Total interest earning assets 2,176,477   47,741  8.70   2,136,936   45,080  8.46   2,010,070   38,340  7.57 
Noninterest earning assets 44,640       47,415       39,008     
Total assets$2,221,117      $2,184,351      $2,049,078     
                  
Liabilities and Stockholders’ Equity                 
Interest-bearing liabilities:                 
Interest-bearing demand accounts$215,527   71  0.13  $207,264   67  0.13  $244,929   39  0.06 
Savings 5,582   3  0.21   5,822   2  0.14   9,216   1  0.04 
Money market accounts 655,990   6,373  3.85   625,515   5,411  3.47   555,634   815  0.58 
Time deposits 374,429   4,256  4.51   366,421   3,929  4.30   155,091   531  1.36 
Borrowed funds 34,932   228  2.59   43,183   331  3.07   40,700   277  2.70 
Total interest-bearing liabilities 1,286,460   10,931  3.37   1,248,205   9,740  3.13   1,005,570   1,663  0.66 
Noninterest-bearing liabilities:                 
Noninterest-bearing liabilities 25,047       21,104       24,440     
Noninterest-bearing deposits 666,939       676,358       802,458     
Stockholders’ equity 242,671       238,684       216,610     
Total liabilities and stockholders’ equity$2,221,117      $2,184,351      $2,049,078     
                  
Net interest spread    5.33%     5.33%     6.91%
Net interest income  $36,810      $35,340      $36,677   
Net interest margin(3)    6.71%     6.63%     7.24%

_______________

(1)   Annualized.
(2)   Includes nonaccrual loans.
(3)   For the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, collectively, SBA-PPP loans and credit card loans accounted for 266, 257 and 308 basis points of the reported net interest margin, respectively.

  
 Nine Months Ended September 30,
 2023
 2022
 Average
Outstanding
Balance
 Interest Income/
Expense
 Average
Yield/
Rate(1)
 Average
Outstanding
Balance
 Interest Income/
Expense
 Average
Yield/
Rate(1)
 (in thousands)
Assets           
Interest earning assets:           
Interest-bearing deposits$72,116  $2,531  4.69% $172,033  $1,001  0.78%
Federal funds sold 1,605   53  4.42   2,590   9  0.48 
Investment securities available for sale 252,993   3,732  1.97   234,294   2,510  1.43 
Restricted investments 5,184   270  6.96   3,913   133  4.54 
Loans held for sale 6,145   299  6.51   10,921   347  4.25 
SBA-PPP loans receivable 1,600   26  2.17   39,063   3,449  11.80 
Portfolio loans receivable(2) 1,799,755   129,326  9.61   1,547,386   101,849  8.80 
Total interest earning assets 2,139,398   136,237  8.51   2,010,200   109,298  7.27 
Noninterest earning assets 44,123       47,936     
Total assets$2,183,521      $2,058,136     
            
Liabilities and Stockholders’ Equity           
Interest-bearing liabilities:           
Interest-bearing demand accounts$203,099   208  0.14  $265,854   114  0.06 
Savings 5,965   6  0.13   9,138   4  0.06 
Money market accounts 628,977   16,371  3.48   553,794   1,512  0.37 
Time deposits 353,635   11,281  4.27   161,982   1,604  1.32 
Borrowed funds 65,192   1,734  3.56   36,299   656  2.41 
Total interest-bearing liabilities 1,256,868   29,600  3.15   1,027,067   3,890  0.51 
Noninterest-bearing liabilities:           
Noninterest-bearing liabilities 22,846       23,748     
Noninterest-bearing deposits 665,821       797,660     
Stockholders’ equity 237,986       209,661     
Total liabilities and stockholders’ equity$2,183,521      $2,058,136     
            
Net interest spread    5.36%     6.76%
Net interest income  $106,637      $105,408   
Net interest margin(3)    6.66%     7.01%

(1)   Annualized.
(2)   Includes nonaccrual loans.
(3)   For the nine months ended September 30, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 268 and 307 basis points of the reported net interest margin, respectively.

The Company’s reportable segments represent business units with discrete financial information whose results are regularly reviewed by management. The four segments include Commercial Banking, Capital Bank Home Loans (the Company’s mortgage loan division), OpenSky® (the Company’s credit card division) and the Corporate Office. The following schedule presents financial information for each reportable segment for the three and nine months ended September 30, 2023 and September 30, 2022.

 
Segments
For the three months ended September 30, 2023          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $30,409  $111  $16,143  $1,162  $(84) $47,741 
Interest expense  10,736   32      247   (84)  10,931 
Net interest income  19,673   79   16,143   915      36,810 
Provision for credit losses  275      1,875   130      2,280 
Release of credit losses on unfunded commitments  24               24 
Net interest income after provision  19,374   79   14,268   785      34,506 
Noninterest income  665   1,255   4,405   1      6,326 
Noninterest expense(1)  15,784   1,502   10,637   123      28,046 
Net income (loss) before taxes $4,255  $(168) $8,036  $663  $  $12,786 
             
Total assets $2,102,749  $5,280  $116,318  $264,950  $(216,813) $2,272,484 
             
For the three months ended June 30, 2023          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $28,742  $111  $15,168  $1,134  $(75) $45,080 
Interest expense  9,537   42      236   (75)  9,740 
Net interest income  19,205   69   15,168   898      35,340 
Provision for credit losses  735      2,127         2,862 
Net interest income after provision  18,470   69   13,041   898      32,478 
Noninterest income  810   1,161   4,714   2      6,687 
Noninterest expense(1)  15,918   1,481   12,059   134      29,592 
Net income (loss) before taxes $3,362  $(251) $5,696  $766  $  $9,573 
             
Total assets $2,047,400  $10,605  $116,123  $260,309  $(206,571) $2,227,866 
             
For the three months ended September 30, 2022          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $20,382  $102  $17,103  $812  $(59) $38,340 
Interest expense  1,449   40      233   (59)  1,663 
Net interest income  18,933   62   17,103   579      36,677 
Provision (release of provision) for loan losses  (980)     2,240         1,260 
Net interest income after provision  19,913   62   14,863   579      35,417 
Noninterest income  468   1,115   5,524   1      7,108 
Noninterest expense(1)  13,798   2,017   12,101   178      28,094 
Net income (loss) before taxes $6,583  $(840) $8,286  $402  $  $14,431 
             
Total assets $1,823,049  $7,664  $128,842  $234,731  $(184,928) $2,009,358 

________________________

(1)   Noninterest expense includes $6.1 million, $5.9 million and $6.6 million in data processing expense in OpenSky’s® segment for the three months ended September 30, 2023 June 30, 2023, and September 30, 2022, respectively.
(2)   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.

 
Segments
For the nine months ended September 30, 2023          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $85,451  $299  $47,441  $3,274  $(228) $136,237 
Interest expense  29,012   104      712   (228)  29,600 
Net interest income  56,439   195   47,441   2,562      106,637 
Provision for credit losses  849      5,823   130      6,802 
Release of credit losses on unfunded commitments  5               5 
Net interest income after provision  55,585   195   41,618   2,432      99,830 
Noninterest income  1,964   3,743   13,329   3      19,039 
Noninterest expense(1)  46,701   4,564   32,146   449      83,860 
Net income (loss) before taxes $10,848  $(626) $22,801  $1,986  $  $35,009 
             
Total assets $2,102,749  $5,280  $116,318  $264,950  $(216,813) $2,272,484 
             
For the nine months ended September 30, 2022          
(in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations Consolidated
Interest income $57,794  $347  $48,823  $2,457  $(123) $109,298 
Interest expense  3,255   185      573   (123)  3,890 
Net interest income  54,539   162   48,823   1,884      105,408 
Provision (release of provision) for loan losses  (980)     5,227         4,247 
Net interest income after provision  55,519   162   43,596   1,884      101,161 
Noninterest income  1,571   4,580   17,658   2      23,811 
Noninterest expense(1)  38,741   6,364   36,923   351      82,379 
Net income (loss) before taxes $18,349  $(1,622) $24,331  $1,535  $  $42,593 
             
Total assets $1,823,049  $7,664  $128,842  $234,731  $(184,928) $2,009,358 

(1)   Noninterest expense includes $17.9 million and $20.9 million in data processing expense in OpenSky’s® segment for the nine months ended September 30, 2023 and 2022, respectively.
(2)   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.

 
HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
  Quarter Ended
(in thousands except per share data) September 30, 2023 June 30, 2023 March 31,
2023
 December 31,
2022
 September 30,
2022
Earnings:          
Net income $9,788  $7,318  $9,735  $8,991  $11,095 
Earnings per common share, diluted  0.70   0.52   0.68   0.62   0.77 
Net interest margin  6.71%  6.63%  6.65%  6.64%  7.24%
Net interest margin, excluding credit cards & SBA-PPP loans(1)  4.05%  4.06%  3.81%  3.91%  4.16%
Return on average assets(2)  1.75%  1.34%  1.84%  1.67%  2.15%
Return on average assets, excluding impact of SBA-PPP loans(1)(2)  1.75%  1.34%  1.84%  1.67%  2.10%
Return on average equity(2)  16.00%  12.30%  16.98%  16.18%  20.32%
Efficiency ratio  65.02%  70.41%  64.73%  65.59%  64.16%
           
Balance Sheet:          
Total portfolio loans receivable, net deferred fees $1,861,929  $1,837,041  $1,786,109  $1,728,592  $1,648,001 
Total deposits  1,967,988   1,934,361   1,944,374   1,758,072   1,737,591 
Total assets  2,272,484   2,227,866   2,245,286   2,123,655   2,009,358 
Total stockholders' equity  242,878   237,435   234,517   224,015   214,005 
           
Asset Quality Ratios:          
Nonperforming assets to total assets  0.67%  0.71%  0.73%  0.46%  0.43%
Nonperforming assets to total assets, excluding the SBA-PPP loans(1)  0.67%  0.71%  0.73%  0.46%  0.43%
Nonperforming loans to total loans  0.82%  0.85%  0.91%  0.56%  0.52%
Nonperforming loans to portfolio loans(1)  0.82%  0.86%  0.91%  0.56%  0.52%
Net charge-offs to average portfolio loans(1)(2)  0.38%  0.35%  0.61%  0.49%  0.39%
Allowance for credit losses to total loans  1.52%  1.50%  1.47%  1.52%  1.58%
Allowance for credit losses to portfolio loans(1)  1.52%  1.50%  1.47%  1.53%  1.58%
Allowance for credit losses to non-performing loans  185.61%  175.03%  160.91%  270.46%  303.76%
           
Bank Capital Ratios:          
Total risk based capital ratio  14.51%  14.08%  14.09%  14.21%  14.65%
Tier 1 risk based capital ratio  13.25%  12.82%  12.84%  12.95%  13.39%
Leverage ratio  10.04%  9.77%  9.78%  9.47%  9.60%
Common equity Tier 1 capital ratio  13.25%  12.82%  12.84%  12.95%  13.39%
Tangible common equity  9.08%  8.93%  8.79%  8.85%  9.00%
Holding Company Capital Ratios:          
Total risk based capital ratio  17.61%  16.81%  16.75%  16.33%  17.41%
Tier 1 risk based capital ratio  15.71%  14.96%  14.90%  15.13%  15.49%
Leverage ratio  11.62%  11.50%  11.47%  11.24%  11.31%
Common equity Tier 1 capital ratio  15.71%  14.96%  14.90%  15.00%  15.36%
Tangible common equity  10.69%  10.66%  10.44%  10.55%  10.65%
Composition of Loans:          
SBA-PPP loans, net $750  $1,090  $2,037  $2,163  $2,662 
Commercial real estate $670,594  $674,141  $660,218  $664,551  $626,030 
Residential real estate  558,147   555,133   545,899   484,735   466,849 
Construction real estate  280,905   258,400   251,494   238,099   235,045 
Commercial and industrial  236,782   233,598   221,258   220,221   192,207 
Credit card, net of reserve(3)  122,533   122,925   112,860   128,434   136,658 
Other consumer loans  948   1,187   1,578   1,179   1,055 
Portfolio loans receivable $1,869,909  $1,845,384  $1,793,307  $1,737,219  $1,657,844 
Deferred origination fees, net  (7,980)  (8,343)  (7,198)  (8,627)  (9,843)
Portfolio loans receivable, net $1,861,929  $1,837,041  $1,786,109  $1,728,592  $1,648,001 
           
Composition of Deposits:          
Noninterest-bearing $680,803  $693,129  $705,801  $674,313  $806,033 
Interest-bearing demand  229,035   243,095   219,685   207,836   252,135 
Savings  5,686   5,816   5,835   7,530   8,861 
Money markets  668,774   631,148   632,087   574,978   518,184 
Brokered time deposits  128,665   128,665   181,820   131,819    
Other time deposits  255,025   232,508   199,146   161,596   152,378 
Total deposits $1,967,988  $1,934,361  $1,944,374  $1,758,072  $1,737,591 
           
Capital Bank Home Loan Metrics:    
Origination of loans held for sale $50,023  $61,480  $44,448  $43,956  $60,516 
Mortgage loans sold  39,364   49,231   40,483   43,415   65,349 
Gain on sale of loans  1,011   1,262   1,223   912   1,340 
Purchase volume as a % of originations  92.29%  93.12%  90.72%  88.94%  81.85%
Gain on sale as a % of loans sold(4)  2.57%  2.56%  3.02%  2.10%  2.05%
Mortgage commissions $528  $621  $378  $451  $587 
           
OpenSky®Portfolio Metrics:    
Open customer accounts  529,205   540,058   527,231   533,855   576,844 
Secured credit card loans, gross $98,138  $100,218  $89,078  $104,157  $111,842 
Unsecured credit card loans, gross  27,430   25,254   25,782   26,795   27,335 
Noninterest secured credit card deposits  181,185   186,566   184,809   187,412   201,277 

_______________

(1)   Refer to Appendix for reconciliation of non-GAAP measures.
(2)   Annualized.
(3)   Credit card loans are presented net of reserve for interest and fees.
(4)   Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.

Appendix

Reconciliation of Non-GAAP Measures

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

  
Return on Average Assets, as AdjustedQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Net Income$9,788  $7,318  $9,735  $8,991  $11,095 
Less: SBA-PPP loan income 11   7   8   28   263 
Net Income, as Adjusted$9,777  $7,311  $9,727  $8,963  $10,832 
Average Total Assets 2,221,117   2,184,351   2,144,249   2,136,156   2,049,078 
Less: Average SBA-PPP Loans 906   1,808   2,099   2,435   5,906 
Average Total Assets, as Adjusted$2,220,211  $2,182,543  $2,142,150  $2,133,721  $2,043,172 
Return on Average Assets, as Adjusted 1.75%  1.34%  1.84%  1.67%  2.10%
                    


Return on Average Assets, as AdjustedNine Months Ended
(in thousands)September 30, 2023 September 30, 2022
    
Net Income$26,841  $32,814 
Less: SBA-PPP loan income 26   3,449 
Net Income, as Adjusted$26,815  $29,365 
Average Total Assets 2,183,521   2,058,136 
Less: Average SBA-PPP Loans 1,600   39,063 
Average Total Assets, as Adjusted$2,181,921  $2,019,073 
Return on Average Assets, as Adjusted 1.64%  1.94%
        


Net Interest Margin, as AdjustedQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Net Interest Income$36,810  $35,340  $34,487  $35,199  $36,677 
Less Credit card loan income 15,792   14,818   15,809   15,717   16,768 
Less SBA-PPP loan income 11   7   8   28   263 
Net Interest Income, as Adjusted$21,007  $20,515  $18,670  $19,454  $19,646 
Average Interest Earning Assets 2,176,477   2,136,936   2,103,984   2,101,617   2,010,070 
Less Average credit card loans 116,814   110,574   115,850   124,120   132,246 
Less Average SBA-PPP loans 906   1,808   2,099   2,435   5,906 
Total Average Interest Earning Assets, as Adjusted$2,058,757  $2,024,554  $1,986,035  $1,975,062  $1,871,918 
Net Interest Margin, as Adjusted 4.05%  4.06%  3.81%  3.91%  4.16%
                    


Net Interest Margin, as AdjustedNine Months Ended
(in thousands)September 30, 2023 September 30, 2022
    
Net Interest Income$106,637  $105,408 
Less Credit card loan income 46,419   47,631 
Less SBA-PPP loan income 26   3,449 
Net Interest Income, as Adjusted$60,192  $54,328 
Average Interest Earning Assets 2,139,398   2,010,200 
Less Average credit card loans 114,416   127,266 
Less Average SBA-PPP loans 1,600   39,063 
Total Average Interest Earning Assets, as Adjusted$2,023,382  $1,843,871 
Net Interest Margin, as Adjusted 3.98%  3.94%
        


Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Net income$9,788  $7,318  $9,735  $8,991  $11,095 
Add: Income Tax Expense 2,998   2,255   2,915   2,651   3,336 
Add: Provision for Credit Losses 2,280   2,862   1,660   2,384   1,260 
Add: Provision (release of provision) for Credit Losses on Unfunded Commitments 24      (19)      
Pre-tax, Pre-Provision Net Revenue ("PPNR")$15,090  $12,435  $14,291  $14,026  $15,691 
                    


Pre-tax, Pre-Provision Net Revenue ("PPNR")Nine Months Ended
(in thousands)September 30, 2023 September 30, 2022
    
Net income$26,841  $32,814 
Add: Income Tax Expense 8,168   9,779 
Add: Provision for Credit Losses 6,802   4,247 
Add: Provision for Credit Losses on Unfunded Commitments 5    
Pre-tax, Pre-Provision Net Revenue ("PPNR")$41,816  $46,840 
        


Allowance for Credit Losses to Total Portfolio LoansQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Allowance for Credit Losses$28,279  $27,495  $26,216  $26,385  $26,091 
Total Loans 1,862,679   1,838,131   1,788,146   1,730,755   1,650,663 
Less: SBA-PPP loans 750   1,090   2,037   2,163   2,662 
Total Portfolio Loans$1,861,929  $1,837,041  $1,786,109  $1,728,592  $1,648,001 
Allowance for Credit Losses to Total Portfolio Loans 1.52%  1.50%  1.47%  1.53%  1.58%
                    


Nonperforming Assets to Total Assets, net SBA-PPP LoansQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Total Nonperforming Assets$15,236  $15,709  $16,293  $9,756  $8,589 
Total Assets 2,272,484   2,227,866   2,245,286   2,123,655   2,009,358 
Less: SBA-PPP loans 750   1,090   2,037   2,163   2,662 
Total Assets, net SBA-PPP Loans$2,271,734  $2,226,776  $2,243,249  $2,121,492  $2,006,696 
Nonperforming Assets to Total Assets, net SBA-PPP Loans 0.67%  0.71%  0.73%  0.46%  0.43%
                    


Nonperforming Loans to Total Portfolio LoansQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Total Nonperforming Loans$15,236  $15,709  $16,293  $9,756  $8,589 
Total Loans 1,862,679   1,838,131   1,788,146   1,730,755   1,650,663 
Less: SBA-PPP loans 750   1,090   2,037   2,163   2,662 
Total Portfolio Loans$1,861,929  $1,837,041  $1,786,109  $1,728,592  $1,648,001 
Nonperforming Loans to Total Portfolio Loans 0.82%  0.86%  0.91%  0.56%  0.52%
                    


Net Charge-offs to Average Portfolio LoansQuarters Ended
(in thousands)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Total Net Charge-offs$1,780  $1,583  $2,633  $2,090  $1,588 
Total Average Loans 1,847,772   1,802,608   1,752,638   1,677,869   1,607,452 
Less: Average SBA-PPP loans 906   1,808   2,099   2,435   5,906 
Total Average Portfolio Loans$1,846,866  $1,800,800  $1,750,539  $1,675,434  $1,601,546 
Net Charge-offs to Average Portfolio Loans 0.38%  0.35%  0.61%  0.49%  0.39%
                    


Net Charge-offs to Average Portfolio LoansNine Months Ended
(in thousands)September 30, 2023 September 30, 2022
    
Total Net Charge-offs$5,996  $1,749 
Total Average Loans 1,801,355   1,586,449 
Less: Average SBA-PPP loans 1,600   39,063 
Total Average Portfolio Loans$1,799,755  $1,547,386 
Net Charge-offs to Average Portfolio Loans 0.45%  0.23%
        


Tangible Book Value per ShareQuarters Ended
(in thousands, except per share amounts)September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022
          
Total Stockholders' Equity$242,878  $237,435  $234,517  $224,015  $214,005 
Less: Preferred equity              
Less: Intangible assets              
Tangible Common Equity$242,878  $237,435  $234,517  $224,015  $214,005 
Period End Shares Outstanding 13,896,062   13,981,414   14,082,657   14,138,829   14,038,599 
Tangible Book Value per Share$17.48  $16.98  $16.65  $15.84  $15.24 
                    

ABOUT CAPITAL BANCORP, INC.

Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Company’s wholly-owned subsidiary, Capital Bank, N.A., is the fourth largest bank headquartered in Maryland at September 30, 2023. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in four locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.3 billion at September 30, 2023 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.

FORWARD-LOOKING STATEMENTS

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "optimistic," “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.  Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.

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

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

FINANCIAL CONTACT: Jay Walker (301) 468-8848 x1223

MEDIA CONTACT: Ed Barry (240) 283-1912

WEB SITE: www.CapitalBankMD.com