SEC Filing | Capital Bancorp, Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 1, 2024

CAPITAL BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland	001-38671	52-2083046
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(IRS Employer Identification No.)

2275 Research Boulevard, Suite 600, Rockville, Maryland 20850

(Address of principal executive offices) (Zip Code)

(301) 468-8848

Registrant’s telephone number, including area code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	CBNK	NASDAQ Stock Market

Explanatory Note

On October 1, 2024, Capital Bancorp, Inc. (the “Company”) completed its previously announced merger (the “Merger”) with Integrated Financial Holdings, Inc. (“IFHI”), pursuant to which IFHI merged with and into the Company, with the Company as the surviving entity. This Current Report Amendment No. 1 on Form 8-K/A amends the Current Report on Form 8-K filed on October 1, 2024 to present certain financial statements and certain pro forma financial information in connection with the Merger that are required by Items 9.01(a) and 9.01(b), respectively, of Form 8-K.

Item 9.01.

Financial Statements and Exhibits

(a)	Financial Statements of Businesses Acquired

IFHI’s audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and unaudited consolidated financial statements as of and for the nine months ended September 30, 2024 are incorporated by reference to Exhibit 99.1 and Exhibit 99.2 of this Form 8-K/A.

(b)	Pro Forma Financial Information

The following unaudited pro forma combined condensed consolidated financial information giving effect to the Merger is filed as the applicable exhibits attached hereto:

•

Unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2024, giving effect to the Merger as if it occurred on September 30, 2024, included in Exhibit 99.4 hereto;

•

Unaudited pro forma combined condensed consolidated statement of income for the nine months ended September 30, 2024, giving effect to the Merger as if it occurred on January 1, 2023, included in Exhibit 99.4 hereto; and

•

Unaudited pro forma combined condensed consolidated statement of income for the year ended December 31, 2023, giving effect to the Merger as if it occurred on January 1, 2023, included in Exhibit 99.3 hereto.

(c)	Shell company transactions.

Not applicable.

(d)

Exhibits

23.1	Consent of Elliott Davis, PLLC
99.1	Audited consolidated financial statements of IFHI as of and for the years ended December 31, 2023 and 2022 (incorporated by reference to the Form S-4/A filed by the Company with the SEC on June 21, 2024 (pages F-27 to F-69))
99.2	Unaudited consolidated financial statements of IFHI as of and for the nine months ended September 30, 2024
99.3	Unaudited pro forma combined condensed income statement for the year ended December 31, 2023 (incorporated by reference to the Form S-4/A filed by the Company with the SEC on June 21, 2024 (pages 34 to 44))
99.4	Unaudited pro forma combined condensed consolidated balance sheet as of September 30, 2024, unaudited pro forma combined condensed consolidated income statement for the nine months ended September 30, 2024
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CAPITAL BANCORP, INC.

Date: December 17, 2024	By:	/s/ Dominic Canuso
	Name:	Dominic Canuso
	Title:	Chief Financial Officer

Exhibit 23.1

Consent of Independent Auditor

We consent to the incorporation by reference in this Form 8-K/A of Integrated Financial Holdings, Inc. of our report dated March 27, 2024, relating to the consolidated financial statements of Integrated Financial Holdings, Inc. and Subsidiaries, appearing in this Current Report on Form 8-K/A.

/s/ Elliott Davis, PLLC

Raleigh, North Carolina

December 17, 2024

EXHIBIT 99.2

INTEGRATED FINANCIAL HOLDINGS, INC.

RALEIGH, NORTH CAROLINA

SEPTEMBER 30, 2024

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2024

		Page Number
Financial Statements
	Consolidated Balance Sheet	3
	Consolidated Statement of Income	4-5
	Consolidated Statement of Comprehensive Income	6
	Consolidated Statement of Changes in Shareholders’ Equity	7
	Consolidated Statement of Cash Flows	8-9
Notes to the Unaudited Consolidated Financial Statements		10-20

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

(in thousands, except per share data)	September 30, 2024
Assets
Cash and due from banks	$	6,379
Interest-bearing deposits with other institutions		71,443
Total cash and cash equivalents		77,822
Securities available-for-sale, at fair value		1,019
Loans held for sale		41,723
Loans held for investment		382,755
Allowance for credit losses (“ACL”)		(7,660	)
Loans held for investment, net		375,095
Premises and equipment, net		3,638
Loan servicing assets		4,515
Bank owned life insurance		4,779
Accrued interest receivable		4,299
Goodwill		13,161
Intangible assets		4,520
Other assets		11,607
Total assets	$	542,178
Liabilities and shareholders’ equity
Liabilities
Deposits:
Noninterest-bearing	$	85,609
Interest-bearing		364,274
Total deposits		449,883
Accrued interest payable		1,277
Other liabilities		8,388
Total liabilities		459,548
Shareholders’ equity
Common stock, voting $1 par value, 9,000,000 shares authorized, 2,338,764 shares issued and outstanding at September 30, 2024		2,339
Common stock, non-voting, $1 par value, 1,000,000 shares authorized, 21,740 shares issued and outstanding at September 30, 2024		22
Additional paid-in capital		28,370
Retained earnings		52,044
Accumulated other comprehensive loss		(145	)
Total shareholders’ equity		82,630
Total liabilities and shareholders’ equity	$	542,178

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

(in thousands, except share and per share data)	Nine Months Ended September 30, 2024
Interest income
Interest and fees on loans	$	27,356
Investment securities & deposits		1,698
Total interest income		29,054
Interest expense
Interest on deposits		11,083
Interest on borrowed funds		474
Total interest expense		11,557
Net interest income		17,497
Provision for credit losses		1,850
Net interest income after provision for credit losses		15,647
Noninterest income
Government loan servicing and packaging revenue		10,952
Government lending revenue		4,693
Loan servicing rights		549
Bank-owned life insurance income		91
Change in fair value of marketable equity securities		(8,631	)
Other noninterest income		(1,879	)
Total noninterest income		5,775
Noninterest expense
Compensation		16,184
Occupancy and equipment		862
Loan related expenses		1,788
Data processing expense		765
Advertising expense		350
Insurance expense		668
Professional fees		1,317
Software		1,523
Communications		191
Directors fees		576
Intangible amortization expense		498
Merger related expenses		5,133
Other noninterest expense		1,272
Total noninterest expense		31,127
Loss before income taxes		(9,705	)
Income tax benefit		1,719
Net loss	$	(7,986	)

Basic loss per common share	$	(3.37	)
Diluted loss per common share	$	(3.32	)
Weighted average common shares outstanding		2,369,645
Diluted average common shares outstanding		2,402,438

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)	Nine Months Ended September 30, 2024
Net loss	$	(7,986	)
Other comprehensive loss:
Unrealized gain during the period on available-for-sale securities		2,500
Income tax expense relating to the items above		(525	)
Other comprehensive income		1,975
Comprehensive loss	$	(6,011	)

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)

								Accumulated
	Common Stock					Additional		Other						Total
	$1.00 par					Paid-in		Comprehensive			Retained			Shareholders’
(in thousands)	Voting			Non-voting		Capital		Loss			Earnings			Equity
Balance at December 31, 2023	$	2,273		$	22	$	25,811	$	(2,120	)	$	74,346		$	100,332
Net income		-			-		-		-			(7,986	)		(7,986	)
Other comprehensive income		-			-		-		1,975			-			1,975
Distribution of shareholder dividend		-			-		-		-			(14,316	)		(14,316	)
Stock based compensation		-			-		330		-			-			330
Exercise of stock options		30			-		213		-			-			243
Restricted stock issuance		37			-		2,016		-			-			2,053
Share cancellations		(1	)		-		-		-			-			(1	)
Balance at September 30, 2024	$	2,339		$	22	$	28,370	$	(145	)	$	52,044		$	82,630

INTEGRATED FINANCIAL HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Nine Months Ended
(in thousands)	September 30, 2024
Cash flows from operating activities
Net income		(7,986	)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation expense		134
Provision for loan losses		1,850
Amortization of premium on securities, net of accretion		19
Amortization of intangible assets		498
Accretion of discounts on loans		(1,518	)
Originations of loans held for sale		(72,254	)
Proceeds from sales of loans held for sale		75,647
Net gains on sale of loans held for sale		(4,693	)
Net gain on sale of foreclosed assets		(19	)
Stock-based compensation expense		2,346
Earnings on bank-owned life insurance		(91	)
Revaluation of loan servicing rights		(549	)
Net loss on the sale of investments		9,460
Changes in assets and liabilities:
Increase in other assets		1,173
Decrease in other liabilities		(1,887	)
Net cash provided by operating activities	$	2,131

Cash flows from investing activities
Proceeds from maturities and principal paydowns of securities available-for-sale	$	521
Proceeds from the sale of investments		33,746
Increase in loans, net		(22,633	)
Increase in FHLB stock, net		80
Proceeds from sale of foreclosed assets		120
Purchases of premises and equipment, net		(16	)
Net cash provided by investing activities	$	11,819

Cash flows from financing activities
Increase in deposits, net	$	14,204
Stock option exercises and restricted stock vested		279
Distribution of dividend to shareholders		(14,316	)
Net cash provided by financing activities	$	167

Net change in cash and cash equivalents	$	14,116
Cash and cash equivalents, beginning		63,706
Cash and cash equivalents, ending	$	77,822

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest	$	11,626
Cash paid during the period for taxes	$	949
Supplemental Disclosure of Non-Cash Transactions
Change in unrealized loss on securities AFS	$	2,500

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Nature of Business and Basis of Presentation

Summary of Significant Accounting Policies

A summary of significant accounting principles is included in the Integrated Financial Holdings, Inc. (the “Company”) consolidated financial statements (unaudited), which are included elsewhere herein.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, West Town Bank & Trust (the “Bank”) and Windsor Advantage, LLC (“Windsor”) after elimination of all significant intercompany balances and transactions.

Management Opinion

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) and are unaudited. They do not contain all of the disclosures required for annual audited financial statements. In the opinion of management, all adjustments necessary to present a fair statement of the results for the interim period have been made. Such adjustments are of a normal and recurring nature. The results of operations for any interim period are not necessarily indicative of the results to be expected for an entire year. These interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes thereto contained in the Company’s consolidated financial statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those relating to the allowance for credit losses, determination of fair value of acquired assets and assumed liabilities, servicing assets, and valuation of goodwill and intangible assets.

Risks and Uncertainties

In the normal course of its business, the Company encounters two significant types of risks: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or reprice at different times, or on different bases, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan and investment securities portfolios that results from a borrower’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of collateral underlying loans receivable and the valuation of real estate held by the Company.

The Company is subject to the regulations of various governmental agencies. These regulations can and do change significantly from period to period. The Company also undergoes periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions from the regulators’ judgments based on information available to them at the time of their examination.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of loans receivable, investment securities, federal funds sold and amounts due from banks.

The Company makes loans to individuals and small businesses for various personal and commercial purposes throughout the United States. The Company’s loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers. Additionally, management is not aware of any concentrations of loans to classes of borrowers or industries that would be similarly affected by economic conditions. However, the Company does have a large portfolio of loans in the solar electric generation power industry but not so much as to be deemed a concern by management.

In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk from concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g., principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. Management has determined that there is no concentration of credit risk associated with its lending policies or practices. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e., balloon payment loans). These loans are underwritten and monitored to manage the associated risks. Therefore, management believes that these particular practices do not subject the Company to unusual credit risk.

The Company’s investment portfolio consists principally of obligations of the United States, its agencies or its corporations and general obligation municipal securities. In the opinion of management, there is no concentration of credit risk in its investment portfolio. The Company places its deposits and correspondent accounts with and sells its federal funds to high quality institutions.

Management believes credit risk associated with correspondent accounts is not significant.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 2. Earnings per Share

Basic earnings per common share is computed using the weighted average number of common shares and participating securities outstanding during the reporting period. Diluted earnings per common share is the amount of earnings available to each share of common stock during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options and warrants. Potentially dilutive common shares are excluded from the computation of dilutive earnings per share in the periods in which the effect would be anti-dilutive.

The Company’s basic and diluted earnings per share calculations are presented in the following table:

	Nine Months Ended
(in thousands, except share and per share data)	September 30, 2024
Net loss	$	(7,986	)
Weighted average common shares - basic		2,369,645
Add: effect of dilutive stock options and restricted stock awards		32,793
Weighted average common shares - dilutive		2,402,438
Basic earnings per common share	$	(3.37	)
Diluted earnings per common share	$	(3.32	)

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Investment Securities

The amortized cost, unrealized gains, unrealized losses, and fair values of available-for-sale investment securities at September 30, 2024 are as follows:

	September 30, 2024
			Gross		Gross
	Amortized		Unrealized		Unrealized
(in thousands)	Cost		Gains		Losses			Fair Value
Government sponsored enterprises collateralized
mortgage obligations	$	1,202	$	-	$	(183	)	$	1,019
Total investment securities available-for-sale	$	1,202	$	-	$	(183	)	$	1,019

The following table summarized securities with unrealized losses at September 30, 2024, aggregated by major security type and length of time in a continuous unrealized loss position:

	September 30, 2024
	Less than twelve months				Twelve months or more					Total
			Unrealized				Unrealized					Unrealized
(in thousands)	Fair Value		Losses		Fair Value		Losses			Fair Value		Losses
Government sponsored enterprises
collateralized mortgage obligations	$	-	$	-	$	1,019	$	(183	)	$	1,019	$	(183	)
Total	$	-	$	-	$	1,019	$	(183	)	$	1,019	$	(183	)

The fair values of investment securities available-for-sale at September 30, 2024 by contractual maturity are shown below. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations.

			After One		After Five
	Within		Within		Within		After
(in thousands)	1 Year		Five Years		Ten Years		Ten Years		Total
Government sponsored enterprises
collateralized mortgage obligations	$	-	$	-	$	-	$	1,019	$	1,019
Total	$	-	$	-	$	-	$	1,019	$	1,019

Management considers the nature of the investment, the underlying causes of the decline in the market value and the severity in determining impairment. Consideration is given to (1) the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 3. Investment Securities, Continued

Securities classified as available-for-sale are recorded at fair market value. At September 30, 2024, there were two securities classified as available-for-sale in an unrealized loss position for twelve months or more. No impairment loss has been realized in the Company’s consolidated income statement.

As of September 30, 2024, investments with amortized costs and fair values of $1.2 million and $1.0 million, respectively, were pledged as collateral for public deposits.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Loans Held for Investment

Loans held for investment at September 30, 2024 were as follows:

(in thousands)	September 30, 2024
Commercial	$	253,394
Real Estate:
Commercial real estate		77,971
Residential real estate		50,035
Consumer		29
Subtotal		381,429
Net deferred loan costs		1,326
Allowance for credit losses		(7,660	)
Loans held for investment, net	$	375,095

Included above, the Company has SBA loans totaling $41.9 million and USDA loans totaling $266.5 million at September 30, 2024.

The following tables present the activity in the allowance for credit losses by class of loans for the nine months ended September 30, 2024.

				Commercial			Residential
(in thousands)	Commercial			Real Estate			Real Estate		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance
as of December 31, 2023	$	5,138		$	1,044		$	669	$	1	$	84	$	6,936
Provision for credit losses		1,570			(428	)		582				126		1,850
Charge-offs		(784	)		(451	)								(1,235	)
Recoveries		50			60									110
Ending Balance
as of September 30, 2024	$	5,974		$	225		$	1,251	$	1	$	209	$	7,660

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Loans Held for Investment, continued

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

•

Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

•

Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

•

Home equity lines of credit are generally secured by second mortgages on residential real estate property.

•

Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

The following table details the amortized cost of collateral dependent loans as of September 30, 2024:

(in thousands)	September 30, 2024
Commercial	$	4,124
Real Estate:
Commercial real estate		12,235
Residential real estate		4,688
Total loans	$	21,047

Nonaccrual loans and collateral dependent loans are defined differently. Some loans may be included in both categories, and some may only be included in one category.

The following table presents the recorded investment in non-accrual and loans past due over 90 days still on accrual by class of loans as of September 30, 2024:

	September 30, 2024
	Nonaccrual Loans		Nonaccrual Loans		Total
(in thousands)	with No Allowance		with an Allowance		Nonaccrual Loans
Commercial	$	2,067	$	178	$	2,245
Real Estate:
Commercial real estate		8,877		1,948		10,826
Residential real estate		2,294		2,444		4,738
Total loans	$	13,238	$	4,570	$	17,808

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Loans Held for Investment, continued

Non-accrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated and individually classified collateral dependent loans. Loans from which principal or interest is in default for 90 days or more are classified as a non-accrual unless they are well secured and in process of collection. Loans past due over 90 days still accruing were matured loans that were well secured and in process of collection. Borrowers have continued to make payments on these loans while administrative and legal due processes are proceeding which will enable the Bank to extend or modify maturity dates.

The following tables display all non-accrual loans and loans 90 or more days past due and still on accrual for the periods ended September 30, 2024.

(in thousands)	Amount		Number
September 30, 2024
Loans past due over 90 days and still on accrual	$	-		-
Non-accrual loans past due
Less than 30 days		-		-
30-59 days		-		-
60-89 days		-		-
90+ days		4,570		18
Non-accrual loans past due	$	4,570		18

The following tables present the aging of the recorded investment in past due loans by class of loans as of September 30, 2024:

					Greater than
	30 - 59 Days		60 - 89 Days		90 Days		Total
	Past		Past		Past		Past				Total
(in thousands)	Due		Due		Due		Due		Current		Loans
September 30, 2024
Commercial	$	250	$	335	$	257	$	843	$	252,551	$	253,394
Commercial real estate				465		10,829		11,294		66,677		77,971
Residential real estate		2,344		663		1,772		4,779		45,256		50,035
Consumer		-		-		-		-		29		29
Total	$	2,594	$	1,463	$	12,858	$	16,916	$	364,513	$	381,429

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Loans Held for Investment, continued

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

During the nine months ended September 30, 2024, there were seven loans totaling $1,460,000 for commercial borrowers experiencing financial difficulty. All modifications provided for three months of full payment deferral.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The risk category of homogeneous loans is evaluated at origination and when a loan becomes delinquent. The Company uses the following definitions for risk ratings:

Pass loans are loans that are performing and are deemed adequately protected by the net worth of the borrower or the underlying collateral value. These loans are considered the least risky in terms of determining the allowance for loan losses.

Special Mention loans are loans with underwriting guideline tolerances and/or exceptions and with no mitigating factors. These are loans that are currently performing satisfactorily but with potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Bank’s position at some future date.

Substandard loans typically have an identified weakness or weaknesses and are inadequately protected by the net worth of the borrower or collateral value.

Doubtful loans have the same characteristics of a substandard loan with an additional weakness that makes collection or liquidation of the asset highly questionable, and there is a high probability of loss based on currently existing facts, conditions or values.

Loss loans are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value but rather that it is not practical or desirable to defer writing off the worthless loan even though partial recovery may be collected in the future. Probable loss portions of doubtful assets should be charged against the Allowance for Credit Losses. Loans may reside in this classification for administrative purposes for a period not to exceed the earlier of thirty days or calendar quarter-end. There were no loans rated as loss as of September 30, 2024.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 4. Loans Held for Investment, continued

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination or renewal as of September 30, 2024:

	September 30, 2024
	Term Loans by Year of Origination
(in thousands)	2024		2023		2022		2021		2020		Prior		Revolving		Total
Commercial
Pass	$	45,410	$	64,072	$	45,289	$	20,013	$	8,041	$	50,113	$	15,368	$	248,306
Special mention		69		163		-		20		181		251		-		684
Substandard		1,413		1,084		876		145		178		708		-		4,404
		46,892		65,319		46,165		20,178		8,400		51,072		15,368		253,394
Commercial real estate
Pass		14,484		13,197		12,790		7,870		4,311		14,699		260		67,611
Substandard		227		-		-		-		7,629		2,504		-		10,360
		14,711		13,197		12,790		7,870		11,940		17,203		260		77,971
Residential real estate
Pass		11,589		11,966		1,816		7,197		4,394		7,602		733		45,297
Special mention		-		-		-		-		-		191		-		191
Substandard		355		-		-		3,257		424		511		-		4,547
		11,944		11,966		1,816		10,454		4,818		8,304		733		50,035
Consumer
Pass		19		-		-		-		8		2		-		29
		19		-		-		-		8		2		-		29
Total	$	73,566	$	90,482	$	60,771	$	38,502	$	25,166	$	76,581	$	16,361	$	381,429

The following table presents the Company’s gross charge-offs by year of origination or renewal as of September 30, 2024:

	September 30, 2024
	Term Loans by Year of Origination
(in thousands)	2024		2023		2022		2021		2020		Prior		Revolving		Total
Commercial	$	-	$	22	$	175	$	-	$	583	$	4	$	-	$	784
Commercial real estate	$	-	$	-	$	24	$	-	$	-	$	427	$	-	$	451
	$	-	$	22	$	199	$	-	$	583	$	431	$	-	$	1,235

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 5. Deposits

Time deposits that meet or exceed the FDIC insurance limit of $250,000 as of September 30, 2024 were $57.3 million.

At September 30, 2024, scheduled maturities of time deposits were as follows:

(in thousands)
2024	$	50,585
2025		132,913
2026		62,623
2027		44,977
2028		28,546
2029		286
Total	$	319,930

At September 30, 2024, brokered deposits totaled $158.2 million.

INTEGRATED FINANCIAL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 6. Business Combinations

On March 28, 2024, the Company and Capital Bancorp, Inc (“CBNK” or “Capital”) jointly announced signing of a definitive merger agreement under which Capital has agreed to acquire the Company.

Effective October 1, 2024, the merger was completed. Under the terms of the Agreement and Plan of Merger, Integrated Financial Holdings, Inc. merged with and into Capital, with Capital remaining as the surviving entity.

EXHIBIT 99.4

CAPITAL BANCORP, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed consolidated financial information and explanatory notes show the impact on the historical financial positions and results of operations of Capital Bancorp, Inc. (“Capital”) and Integrated Financial Holdings, Inc. (“IFHI”) and have been prepared to illustrate the effects of the merger of IFHI with and into Capital, with Capital continuing as the surviving corporation (the “Merger”), under the acquisition method of accounting with Capital treated as the acquirer. (Please see the “Explanatory Note” included in the beginning of this Current Report Amendment No. 1 on Form 8-K/A (the “Amendment”).)

The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting, giving effect to the merger. The unaudited pro forma combined condensed consolidated balance sheet combines the historical information of Capital and IFHI as of September 30, 2024 and assumes the merger was completed on that date. The unaudited pro forma combined condensed consolidated income statement combines the historical financial information of Capital and IFHI and gives effect to the merger as if it had been completed as of January 1, 2023 and carried forward through the interim period presented. The unaudited pro forma combined condensed consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial condition had the merger been completed on the date described above, nor is it necessarily indicative of the results of operations in future periods or the future financial condition and results of operations of the combined entities. The financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma combined condensed consolidated financial information. Certain reclassifications have been made to IFHI historical financial information to conform to Capital’s presentation of financial information.

The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with Capital’s historical consolidated financial information and related notes, which are contained in Capital’s 10-Q for the three-month and nine-month periods ended September 30, 2024, IFHI’s audited financial statements as of and for the years ended December 31, 2023 and 2022 which were included in Capital’s Form S-4/A filed on June 21, 2024, and IFHI’s unaudited financial statements as of and for the nine-month period ended September 30, 2024 which appear elsewhere in the Amendment.

Unaudited Pro Forma Condensed Consolidated Balance Sheets

As of September 30, 2024

(in thousands except share data)	CBNK Historical			IFHI Historical			Pro Forma Merger Adjustments			Notes	Pro Forma Combined
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	23,462		$	6,379		$	(12,652	)	(j)	$	17,189
Interest bearing deposits at other financial institutions		133,180			71,443							204,623
Federal funds sold		58			-							58
Total cash and cash equivalents		156,700			77,822			(12,652	)			221,870
Investment securities available for sale		208,700			1,019							209,719
Restricted investments		5,895			-							5,895
Marketable equity securities		-			-							-
Loans held for sale		19,554			41,723							61,277
Portfolio loans receivable, net of deferred fees and costs		2,107,522			382,755			(17,086	)			2,472,470
Less allowance for credit losses		(31,925	)		(7,660	)		(3,261	)			(42,847	)
Total portfolio loans held for investment, net		2,075,597			375,095			(21,068	)	(a)		2,429,624
Premises and equipment, net		5,959			3,638			3,826		(b)		13,423
Accrued interest receivable		12,468			4,299							16,767
Deferred tax asset		10,748			784			8,452		(c)		19,984
Bank owned life insurance		38,779			4,779							43,558
Goodwill		-			13,161			4,218		(d)		17,378
Intangible assets		-			4,520			11,559		(e)		16,079
Loan servicing assets		-			4,515							4,515
Accounts receivable		597			1,158							1,755
Other assets		25,791			9,664			(681	)	(f)		34,774
TOTAL ASSETS	$	2,560,788		$	542,178		$	1,656			$	3,096,619

LIABILITIES
Deposits
Noninterest-bearing	$	718,120		$	85,609						$	803,729
Interest-bearing		1,468,104			364,274			9,070		(g)		1,841,447
Total deposits		2,186,224			449,883			9,070				2,645,176
Federal Home Loan Bank advances		52,000			-							52,000
Other borrowed funds		12,062			-							12,062
Accrued interest payable		8,503			1,277							9,780
Other liabilities		21,888			8,388			7,150		(h)		37,426

TOTAL LIABILITIES		2,280,677			459,548			16,220				2,756,445
TOTAL STOCKHOLDERS’ EQUITY		280,111			82,630			(22,567	)	(i)		340,175
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,560,788		$	542,178		$	(6,347	)		$	3,096,619

Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Nine Months Ended September 30, 2024

(in thousands except share data)	CBNK Historical		IFHI Historical				Pro Forma Merger Adjustments			Notes	Pro Forma Combined
INTEREST INCOME
Loans, including fees	$	144,313	$	27,357			$	(234	)	(a)	$	171,435
Investment securities available-for-sale		3,902		1,698								5,600
Federal funds sold and other		3,379		-								3,379
Investment securities & deposits		-		-								-
Total interest income		151,594		29,054				(234	)			180,414
INTEREST EXPENSE
Deposits		39,785		11,083				3,344		(b)		54,212
Borrowed funds		1,390		474								1,864
Total interest expense		41,175		11,557				3,344				56,076
NET INTEREST INCOME		110,419		17,497				(3,578	)			124,338
Provision for credit losses		9,892		1,850				(2,797	)	(c)		8,945
Provision for credit losses on unfunded commitments		263		-								263
Net interest income after provision for credit losses		100,264		15,647				(781	)			115,130
NONINTEREST INCOME
Service charges on deposits		642		-								642
Credit card fees		12,266		-								12,266
Mortgage banking revenue		5,325		-								5,325
Government loan servicing and processing revenue				10,952								10,952
Government lending revenue				4,693								4,693
Loan servicing rights				549								549
Bank-owned life insurance				91								91
Other income		1,264		(10,510	)	(g)						(9,246	)
Total noninterest income		19,497		5,775				-				25,272
NONINTEREST EXPENSE
Salaries and employee benefits		39,524		16,184								55,708
Occupancy and equipment		5,268		862								6,130
Professional fees		5,696		1,317								7,013
Data processing		20,479		765								21,244
Advertising		5,327		350								5,677
Loan processing		1,462		1,788								3,250
Intangible amortization expense				498				(785	)	(d)		(287	)
Foreclosed real estate expenses, net		2		-								2
Merger-related expenses		1,315		5,133								6,448
Operational losses		2,721		-								2,721
Other operating		6,911		4,229								11,140
Total noninterest expenses		88,705		31,127				(785	)			119,047
Income (loss) before income taxes		31,056		(9,705	)			4				21,355
Income tax expense		7,617		1,719				1		(e)		9,337
Net income (loss)	$	23,439	$	(7,986	)		$	3			$	15,456
Weighted average common shares outstanding:
Basic		13,909,090		2,369,645				262,202		(f)		16,540,937
Diluted		13,909,090		2,402,438				353,828		(f)		16,665,356
Earnings per share:												-
Basic earning (loss) per share	$	1.69	$	(3.37	)			-			$	1.07
Diluted earnings (loss) per share	$	1.69	$	(3.32	)			-			$	1.08

Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Twelve Months Ended December 31, 2023

(in thousands except share data)	CBNK Historical			IFHI Historical			Pro Forma Merger Adjustments			Notes	Pro Forma Combined
INTEREST INCOME
Loans, including fees	$	174,760		$	31,008		$	(157	)	(a)	$	205,611
Investment securities available-for-sale		4,815										4,815
Federal funds sold and other		3,631										3,631
Investment securities & deposits					2,095
Total interest income		183,206			33,103			(157	)			216,152
INTEREST EXPENSE
Deposits		39,625			10,127			4,192		(b)		53,944
Borrowed funds		2,055			261							2,316
Total interest expense		41,680			10,388			4,192				56,260
NET INTEREST INCOME		141,526			22,715			(4,349	)			159,892
Provision for credit losses		9,610			1,245			(2,797	)	(c)		8,058
Provision for (release of) credit losses on unfunded commitments		(101	)		(64	)						(165	)
Net interest income after provision for credit losses		132,017			21,534			(1,552	)			151,999
NONINTEREST INCOME												-
Service charges on deposits		964			-							964
Credit card fees		17,273			-							17,273
Mortgage banking revenue		4,896			-							4,896
Government loan servicing and processing revenue		-			11,058							11,058
Government lending revenue		-			7,746							7,746
Loan servicing rights		-			251							251
Bank-owned life insurance		-			742							742
Change in fair value of marketable equity securities		-			1,615							1,615
Other income		1,842			3,354							5,196
Total noninterest income		24,975			24,766			-				49,741
NONINTEREST EXPENSE
Salaries and employee benefits		48,754			19,946							68,700
Occupancy and equipment		5,673			1,331							8,880
Professional fees		9,270			2,001							11,271
Data processing		25,686			997							26,683
Advertising		6,161			629							6,790
Loan processing		1,633			1,930							3,563
Merger-related expenses		-			177							177
Intangible amortization expense		-			664			(1,046	)	(d)		(382	)
Foreclosed real estate expenses (income), net		7			-							7
Operational losses		4,613			-							4,613
Outside service providers		1,932			-							1,932
Other operating		7,038			3,651							8,813
Total noninterest expenses		110,767			31,326			(1,046	)			141,047
Income before income taxes		46,225			14,974			(505	)			60,694
Income tax expense		10,354			3,797			(124	)	(e)		14,027
Net income before noncontrolling interest		35,871			11,177			(383	)			46,665
Net income attributable to noncontrolling interest		-			(47	)						(47	)
Net income		35,871			11,130			(383	)			46,618
Weighted average common shares outstanding:
Basic		14,002,556			2,224,846			407,001		(f)		16,634,403
Diluted		14,080,547			2,265,987			490,279		(f)		16,758,822
Earnings per share:
Basic earnings per share	$	2.56		$	5.00			-			$	2.80
Diluted earnings per share	$	2.55		$	5.00			-			$	2.78

NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Pro Forma Adjustments to the Unaudited Consolidated Balance Sheet

(a)

The pro forma adjustment to the estimate fair value of IFHI’s portfolio loans reflects preliminary estimated fair value adjustment for non-purchased credit deteriorated loans (“PCD”) and preliminary estimated credit mark on PCD loans. The market rate adjustment represents the impact of movement in interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment represents changes in credit quality of the underlying borrowers from loan inception to the acquisition date;

(b)

The pro forma adjustment to premises and equipment reflects preliminary estimated fair value adjustments;

(c)

The pro forma adjustment to deferred tax asset reflects preliminary estimated fair value adjustments;

(d)

The pro forma adjustment to goodwill reflects the elimination of historical IFHI goodwill of $13.2 million and record preliminary estimated goodwill associated with the merger of $9.1 million;

(e)

The pro forma adjustment to intangible assets reflects Capital’s estimate of the fair value of identifiable intangible assets determined based on financial, economic, market and other conditions as of the merger date;

(f)

The pro forma adjustment to other assets reflects preliminary estimated adjustments to prepaid expenses & right of use assets;

(g)

The pro forma adjustment to interest-bearing deposits reflects differences in interest rates, based on a comparison of rates on IFHI’s time deposits to recent market rates as of the merger date for terms corresponding with the maturity dates of IFHI’s interest-bearing deposits;

(h)

The pro forma adjustment to other liabilities reflects preliminary estimated adjustments to establish mortgage and SBA repurchase reserves, as well as update estimated deferred tax liability and lease liabilities;

(i)

The pro forma adjustment to stockholders’ equity is reduced by the elimination of IFHI’s stockholders’ equity; and

(j)

The pro forma adjustment to cash reflects the cash consideration paid to acquire IFH

Note 2. Pro Forma Adjustments to the Unaudited Consolidated Income Statements

(a)

The pro forma adjustment to interest income on loans reflects preliminary estimated fair value adjustments including a market rate adjustment and credit mark adjustments on acquired loans receivable. The loan fair value adjustment is amortized using the sum-of-the-years-digits method over four years;

(b)

The pro forma adjustment to interest expense on deposits reflects differences in interest rates, based on comparison of rates of IFHI’s time deposits to recent market rates for maturity dates corresponding to the maturity dates of IFHI’s time deposits. The fair value adjustment is amortized into interest expense over the estimated remaining life of the applicable time deposits;

(c)

The pro forma adjustment to the provision for credit losses on loans reflects the preliminary estimated day 2 current expected credit losses (“CECL”) adjustment on the loan portfolio;

(d)

The pro forma adjustment to intangible amortization expense reflects preliminary estimated amortization of acquired identifiable intangible assets. Identifiable intangible assets are amortized on a straight-line basis over their respective periods;

(e)

The pro forma adjustment to income tax expense reflects an assumed tax rate of 24.5%;

(f)

The pro forma adjustments to common shares outstanding represents additional shares issued by Capital, net of IFHI shares exchanged, in the merger; and

(g)

IFH other income loss mainly driven by one-time loss associated with Special Dividend distribution.