Press Release

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

July 27, 2023 at 6:00 PM EDT
Diluted EPS of $0.52, ROAA of 1.34%, and ROAE of 12.30% for 2Q 2023

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

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

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

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

Second Quarter 2023 Highlights

Capital Bancorp, Inc.

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

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

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

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

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

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

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

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

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

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

Robust Capital Positions - As of June 30, 2023, the Company reported a common equity tier 1 capital ratio of 14.96%, compared to 14.90% at March 31, 2023, and an allowance for credit losses to total loans ratio of 1.50%, compared to an allowance for credit losses to total loans ratio of 1.47% as March 31, 2023. Shares repurchased and retired during the three months ended June 30, 2023, as part of the Company's stock repurchase program totaled 138,407 shares at an average price of $16.72, for a total cost of $2.3 million including commissions. Tangible book value per common share grew 2.0% to $16.98 at June 30, 2023 when compared to March 31, 2023.

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

Commercial Bank

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

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

OpenSky®

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

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

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

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

2023 Highlights

Capital Bancorp

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

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

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

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

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

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

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

Commercial Bank

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

OpenSky®

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

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


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


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


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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

For the six months ended June 30, 2023, noninterest expense of $55.8 million increased $1.6 million, or 2.9%, from the same period in 2022. The increase was primarily driven by a $4.3 million, or 21.2%, increase in salaries and benefits, partially offset by a $2.5 million, or 15.8%, decrease in data processing expense. The decrease of $2.5 million in data processing expense was the result of a contract renegotiation entered into in the first quarter 2022 in the OpenSky® Division as well as fewer average open cards during the period.

Financial Condition

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

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

Deposits were $1.9 billion at June 30, 2023, a slight decrease of $10.0 million, or 0.5%, from the balance at March 31, 2023 and an increase of $45.4 million, or 2.4%, from the balance at June 30, 2022. Average deposits of $1.9 billion for the three months ended June 30, 2023, increased $110.4 million, or 6.2%, as compared to the three months ended March 31, 2023. Rising interest rates have resulted in some customers moving balances from noninterest-bearing deposit accounts to interest-bearing deposit accounts. As a result of the migration, average noninterest-bearing deposit balances decreased $131.2 million to $676.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. These deposits represented 35.8% of total deposits at June 30, 2023 compared to 44.6% at June 30, 2022. Uninsured deposits were approximately $860.4 million as of June 30, 2023, representing 44.5% of the Company's deposit portfolio, compared to $888.9 million, or 45.7%, at March 31, 2023, and $915.0 million, or 48.4%, at June 30, 2022.

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


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


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


The following tables show the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.

    Three Months Ended
June 30, 2023
  Three Months Ended
March 31, 2023
  Three Months Ended
June 30, 2022
    Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate(1)
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate(1)
  Average
Outstanding
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate(1)
    (in thousands)
Assets                                    
Interest earning assets:                                    
Interest-bearing deposits   $ 66,401   $ 733   4.43 %   $ 62,566   $ 615   3.99 %   $ 218,251   $ 429   0.79 %
Federal funds sold     1,638     20   4.90       2,054     18   3.62       1,655     2   0.48  
Investment securities available for sale     255,057     1,266   1.99       274,685     1,377   2.03       215,172     779   1.45  
Restricted investments     4,185     71   6.80       7,346     130   7.17       3,854     42   4.37  
Loans held for sale     7,047     111   6.32       4,695     77   6.65       11,447     134   4.70  
SBA-PPP loans receivable     1,808     7   1.55       2,099     8   1.50       28,870     1,120   15.56  
Portfolio loans receivable(2)     1,800,800     42,872   9.55       1,750,539     41,191   9.54       1,532,671     34,050   8.91  
Total interest earning assets     2,136,936     45,080   8.46       2,103,984     43,416   8.37       2,011,920     36,556   7.29  
Noninterest earning assets     47,415             40,265             56,298        
Total assets   $ 2,184,351           $ 2,144,249           $ 2,068,218        
                                     
Liabilities and Stockholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing demand accounts   $ 207,264     67   0.13     $ 186,184     70   0.15     $ 259,192     38   0.06  
Savings     5,822     2   0.14       6,502     1   0.05       9,913     1   0.04  
Money market accounts     625,515     5,411   3.47       604,864     4,587   3.08       566,303     396   0.28  
Time deposits     366,421     3,929   4.30       319,449     3,096   3.93       160,279     529   1.32  
Borrowed funds     43,183     331   3.07       118,379     1,175   4.02       34,062     192   2.27  
Total interest-bearing liabilities     1,248,205     9,740   3.13       1,235,378     8,929   2.93       1,029,749     1,156   0.45  
Noninterest-bearing liabilities:                                    
Noninterest-bearing liabilities     21,104             22,355             22,647        
Noninterest-bearing deposits     676,358             654,025             807,558        
Stockholders’ equity     238,684             232,491             208,264        
Total liabilities and stockholders’ equity   $ 2,184,351           $ 2,144,249           $ 2,068,218        
                                     
Net interest spread           5.33 %           5.44 %           6.84 %
Net interest income       $ 35,340           $ 34,487           $ 35,400    
Net interest margin(3)           6.63 %           6.65 %           7.06 %

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


    Six Months Ended June 30,
      2023       2022  
    Average
Outstanding
Balance
  Interest
Income/

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

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


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

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

_______________
(1)   Noninterest expense includes $5.9 million, $5.9 million and $6.7 million in data processing expense in OpenSky’s® segment for the three months ended June 30, 2023 March 31, 2023, and June 30, 2022, respectively.
(2)   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.


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

_______________
(1)   Noninterest expense includes $11.9 million and $14.3 million in data processing expense in OpenSky’s® segment for the six months ended June 30, 2023 and 2022, respectively.
(2)   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.


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

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


Appendix

 Reconciliation of Non-GAAP Measures


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


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

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


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


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

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


Pre-tax, Pre-Provision Net Revenue ("PPNR")   Quarters Ended
(in thousands)   June 30,
2023
  March 31,
2023
  December 31,
2022