As filed with the Securities and Exchange Commission on September 17, 2018.
Registration No. 333-227172
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pre-effective
Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAPITAL BANCORP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland | 6021 | 52-2083046 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) | ||
One Church Street
Rockville, Maryland 20850
(240) 283-0416
(Address, Including Zip Code, of Registrant’s Principal Executive Offices)
Edward F. Barry
Chief Executive Officer
Capital Bancorp, Inc.
One Church Street
Rockville, Maryland 20850
(240) 283-0416
(Name, Address and Telephone Number, Including Area Code, of Agent For Service)
Copies to:
Kevin M. Houlihan, Esq. William H. Levay, Esq. Holland & Knight LLP 800 17th Street, Suite 1100 Washington, D.C. 20006 (202) 955-3000 | Frank M. Conner III, Esq. Michael P. Reed, Esq. Christopher J. DeCresce, Esq. Covington & Burling LLP One City Center 850 Tenth Street, NW Washington, D.C. 20001 (202) 662-6000 | |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | x |
Emerging growth company | x | ||
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 7(a)(2)(B) of the Securities Act. x
CALCULATION OF REGISTRATION FEE | ||||
Title of each Class of Security to be Registered | Amount to be Registered(1) | Proposed Maximum Offering Price Per Share(2) | Proposed Maximum Aggregate Offering Price(2) | Amount of Registration Fee(3) |
Common Stock, $0.01 par value per share | 2,563,046 | $14.50 | $37,164,167.00 | $4,627.00 |
(1) | Includes 334,310 shares of common stock that the underwriters have the option to purchase from the registrant in this offering. |
(2) | Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended. |
(3) | Previously paid. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file an amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling shareholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 2018
PRELIMINARY PROSPECTUS
2,228,736 Shares
Common Stock
This prospectus relates to the initial public offering of Capital Bancorp, Inc. We are offering 1,500,000 shares of our common stock and the selling shareholders identified in this prospectus are offering an additional 728,736 shares of our common stock. We will not receive any proceeds from sales of shares of our common stock by the selling shareholders.
Prior to this offering, there has been no established public market for our common stock. We currently estimate that the initial public offering price of our common stock will be between $12.50 and $14.50 per share. We have applied to list our common stock on the Nasdaq Global Market under the symbol “CBNK.”
We are an “emerging growth company” as defined under the federal securities laws, and may take advantage of reduced public company reporting and relief from certain other requirements otherwise generally applicable to public companies. See “Implications of Being an Emerging Growth Company.”
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 22.
Per Share | Total | ||
Initial public offering price | $ | $ | |
Underwriting discount(1) | $ | $ | |
Proceeds to us (before expenses) | $ | $ | |
Proceeds to the selling shareholders (before expenses) | $ | $ | |
_______________
(1) | The underwriters will also be reimbursed for certain expenses incurred in this offering. See “Underwriting” for additional information. |
We have granted the underwriters an option to purchase up to an additional 334,310 shares of our common stock at the initial public offering price, less the underwriting discount, for a period of 30 days after the date of this prospectus.
Neither the Securities and Exchange Commission nor any other regulatory authority has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The shares of our common stock that you purchase in this offering are not deposits, savings accounts or other obligations of our bank or non-bank subsidiaries and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
The underwriters expect to deliver our common stock to purchasers on or about , 2018, subject to customary closing conditions.
Keefe, Bruyette & Woods | Stephens Inc. |
A Stifel Company | |
Sandler O’Neill + Partners, L.P. | Hovde Group, LLC |
The date of this prospectus is , 2018
TABLE OF CONTENTS
F-1 | |
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About This Prospectus
In this prospectus, unless we state otherwise or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “Capital” refer to Capital Bancorp, Inc. and its wholly owned subsidiaries, Capital Bank, N.A., which we sometimes refer to as “Capital Bank,” “the Bank” or “our Bank,” and Church Street Capital, LLC. “Church Street Capital” or “CSC” refer to our wholly owned subsidiary, Church Street Capital, LLC.
This prospectus describes the specific details regarding this offering and the terms and conditions of our common stock being offered hereby and the risks of investing in our common stock. For additional information, please see the section entitled “Where You Can Find More Information.”
Unless otherwise stated, all information in this prospectus gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
The information contained in this prospectus, or any free writing prospectus prepared by or on behalf of us or to which we have referred you, is accurate only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our assets, business, cash flows, condition (financial or otherwise), liquidity, prospects or results of operations may have changed since that date.
You should not interpret the contents of this prospectus, or any free writing prospectus prepared by or on behalf of us or to which we have referred you, to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.
We, the selling shareholders and the underwriters have not authorized anyone to provide any information to you other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We, the selling shareholders and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about, and to observe, any restrictions as to the offering and the distribution of this prospectus applicable to those jurisdictions. We, the selling shareholders and the underwriters are not making an offer of these securities in any jurisdiction where such offer is not permitted.
“Capital Bank” and its logos and other trademarks referred to and included in this prospectus belong to us. Solely for convenience, we refer to our trademarks in this prospectus without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks. Other service marks, trademarks and trade names referred to in this prospectus, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.
Market and Industry Data
This prospectus includes government, industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys, government agencies and other information available to us, which information may be specific to particular markets or geographic locations. Statements as to our market position are based on market data currently available to us. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable. Although we believe these sources are reliable, we have not independently verified the information. Some data is also based on our good faith estimates, which are derived from management’s knowledge of the industry and independent sources. We believe our internal research is reliable, even though such research has not been verified by any independent sources. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change
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based on various factors, including those discussed under the heading “Risk Factors” in this prospectus. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements in this prospectus.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in total annual gross revenue during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:
• | we are permitted to present only two years of audited financial statements, in addition to any required interim financial statements, and only two years of related discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
• | we are exempt from the requirement to obtain an attestation from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; |
• | we are permitted to provide less extensive disclosure about our executive compensation arrangements; and |
• | we are not required to hold non-binding shareholder advisory votes on executive compensation or golden parachute arrangements. |
We may take advantage of some or all of these provisions for up to five years or such earlier time as we cease to qualify as an emerging growth company, which will occur if we have more than $1.07 billion in total annual gross revenue, if we issue more than $1.0 billion of non-convertible debt in a three-year period, or if the market value of our common stock held by non-affiliates exceeds $700.0 million as of any June 30, in which case we would no longer be an emerging growth company as of the following December 31. We have taken advantage of certain reduced reporting obligations in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
In addition to reduced disclosure and the other relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. However, we have elected not to take advantage of this extended transition period, which means that the financial statements included in this prospectus, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable.
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” together with our consolidated financial statements and the related notes, before making an investment decision. Unless otherwise stated, all information in this prospectus gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
Who We Are
We are Capital Bancorp, Inc., a bank holding company and a Maryland corporation, and we operate primarily through our wholly owned subsidiary, Capital Bank, N.A., a commercial-focused community bank based in the Washington, D.C. and Baltimore metropolitan areas. We serve businesses, not-for-profit associations and entrepreneurs throughout the region by partnering with them to design tailored financial solutions supported by customized technology and “client first” advice. Capital Bank is headquartered in Rockville, Maryland and operates a branch-lite model through five commercial bank branches, five mortgage offices, two loan production offices, a limited service branch and three corporate and operations facilities located in key markets throughout our operating area. As of June 30, 2018, we had total assets of $1.1 billion, total loans held for investment of $920.8 million, total deposits of $938.4 million, and total stockholders’ equity of $87.0 million.
Capital Bank has three divisions: Commercial Banking; Church Street Mortgage, our residential mortgage banking arm, which is sometimes referred to herein as CSM; and OpenSky, a secured, digitally-driven nationwide credit card platform. Our Commercial Banking division accounted for approximately 94%, or $1.0 billion, of Capital Bank’s total assets at June 30, 2018. The Commercial Banking division’s nine commercial loan officers, three commercial real estate loan officers and ten deposit-focused business development officers provide high quality service, customized solutions and tailored advice to commercial clients in Capital Bank’s operating markets.
The Church Street Mortgage division originates conventional and government-guaranteed residential mortgage loans on a nationwide basis for sale into the secondary market and in certain, limited circumstances for the Bank’s loan portfolio. For the six months ended June 30, 2018, the Church Street Mortgage division originated $183.3 million in residential loans for sale into the secondary market. For the year ended December 31, 2017, the Church Street Mortgage division originated more than $435.8 million in residential loans for sale into the secondary market.
The OpenSky division provides secured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores. OpenSky’s secured cards operate on a fully digital and mobile enabled platform with all marketing and application procedures conducted through its website and mobile applications. A deposit equal to the full credit limit of the card is made into a noninterest-bearing demand account with the Bank when the account is opened and the deposit is required to be maintained throughout the life of the card. Using our proprietary scoring model, which considers credit score and repayment history (typically a minimum of six months of on-time repayments, but ultimately determined on a case-by-case basis) the Bank has recently begun to offer certain customers an unsecured line in excess of their secured line of credit. As of June 30, 2018, OpenSky credit card balances were $32.5 million, of which $30.7 million were fully secured. Total noninterest bearing collateral deposit account balances were $59.0 million as of the same date.
Our Growth and Performance
Over the past five years, we have executed a strategy leading to rapid organic growth and consistent profitability. The following tables highlight our growth in assets, loans, deposits, credit card accounts and certain profitability metrics for the five years ended December 31, 2017, 2016, 2015, 2014 and 2013, for the six months ended June 30, 2018 and, with respect to diluted earnings per share, for the six months ended June 30, 2017.
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Loans Held for Investment ($ in millions) | Deposits ($ in millions) | |||
CAGR: 19.8 | % | CAGR: 22.6 | % | |
Return on Average Assets(1)(5)(6) | Return on Average Equity(1)(5)(6) | |
Net Interest Margin(2)(3)(5)(6) | Number of Credit Card Accounts | ||
 | CAGR: 48.2 | % | |
2 | ||
Tangible Book Value Per Share(4)(7) | Diluted Earnings Per Share(1)(5)(7) | ||
CAGR: 11.7 | % | ||
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(1) | Financial information as of and for the year ended December 31, 2013 excludes the effect of bargain purchase gains. |
(2) | Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, TCFC, JMSB, HBMD and FVCB. Peer data per S&P Global Market Intelligence. |
(3) | Net interest margin is a ratio calculated as net interest income divided by average interest earning assets for the same period. |
(4) | This financial measure is not recognized under generally accepted accounting principles, or GAAP, and is therefore considered to be a non-GAAP measure. See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this financial measure to its most comparable GAAP financial measure. |
(5) | Presentation of this financial measure as of or for the year ended December 31, 2017 excludes the effects of certain non-recurring expenses incurred with the conversion of our credit card processing systems and the revaluation of our deferred tax assets due to the effects of the recently enacted Pub. L. 115-97, commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act. See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this financial measure to its most comparable GAAP financial measure. |
(6) | June 30, 2018 performance data has been annualized. |
(7) | Gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented. |
Our Competitive Strengths
Behind our success is a core set of operating principles that have guided our decision making and enabled Capital Bank to achieve a combination of high growth and strong profitability, including:
Sales-Focused, Entrepreneurial Culture: We have deliberately designed our management structure to be horizontal, thereby giving our associates the ability to have a voice in the business, make decisions and influence strategy. Our reward and recognition programs encourage assertiveness and our associates embrace the transparency and accountability of our disciplined approach to performance evaluations. Individual sales goals and objectives are regularly re-evaluated and adjusted, and progress toward these goals is regularly assessed to ensure our overall corporate objectives are being met. This deliberate approach to talent management encourages and rewards entrepreneurship and has allowed us to attract highly qualified staff . An example of our entrepreneurial spirit is our establishment of Church Street Capital, a small mezzanine lender wholly owned by Capital Bancorp, Inc., after one of our commercial loan officers identified an opportunity to fill a void in the local market. Church Street Capital has originated more than $25 million of commercial loans since its inception in 2014, of which we have retained approximately $0.8 million for our own portfolio. Further illustrating the success of our approach, in 2017, Ernst & Young recognized our CEO, Edward Barry, as the Entrepreneur of the Year in the Mid-Atlantic region, Financial Services category.
Well-Positioned in Dynamic and Fast-Growing Markets: The Washington, D.C. and Baltimore metropolitan areas comprise one of the most attractive regions in the United States. With the federal government’s location in Washington, D.C., the broader region benefits from consistent population growth and remains well positioned to capitalize on any increase in government spending and infrastructure. According to the U.S. Census Bureau, the Washington, D.C. and Baltimore, Maryland metropolitan statistical areas, or MSAs, include the four wealthiest counties in the United States,
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as well as five of the 10 wealthiest counties (as measured by median household income). Overall, the Washington, D.C. MSA ranks first out of the largest 20 MSAs (ranked by population) in income levels with a current median household income of approximately $99,400, which is approximately 63% higher than the national average.
Historically, the Bank’s operations have primarily focused on the Washington, D.C. MSA, where we currently operate four of our five commercial bank locations, a mortgage office, a limited service branch and a loan production office. We initially expanded into the Baltimore, Maryland MSA with two mortgage offices and recently opened a full service banking location in Columbia, Maryland. Our management views the Baltimore, Maryland MSA as a target market for potential future expansion. In addition to the Bank’s new full service banking office located in Columbia, Howard County, Maryland, which is one of the five wealthiest counties in the United States, as noted above, we recently opened a full service banking location in Reston, Fairfax County, Virginia, which is also one of the five wealthiest counties in the United States, as noted above. Although we have less than 1% deposit market share in Howard and Fairfax counties, we believe that we have the ability to continue our historical growth by serving the middle market businesses and their owners in the Washington, D.C. and Baltimore, Maryland MSAs who prefer high quality service and local decision making that is unavailable at larger, out-of-market banking institutions. We believe we can continue to tap into the growth and wealth of our primary markets to continue strengthening the performance of our franchise.
Strong Board and Management Team with an Ownership Mentality : Our management team brings over 189 years of experience in banking, both locally in the Washington, D.C. and Baltimore metropolitan areas and nationally. Our management team is particularly strong in the areas of data analysis and marketing and technology deployment, consistent with our sales-focused culture, as well as credit analysis and structuring, consistent with our commitment to risk management. We have assembled a team of experts in their respective fields, which has contributed to our growth and consistent profitability while effectively managing risk by combining the local knowledge and customer intimacy of a community bank with the strategic and operational expertise of a larger financial institution. In addition, our management team and our board of directors think and act like owners and place the creation of shareholder value at the center of everything they do. As of June 30, 2018, our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities beneficially owned approximately 55% of our outstanding shares of common stock. Many of these individuals and families have been shareholders of Capital since its initial recapitalization led by our Chairman Stephen Ashman in 2002.
Differentiation Through the Application of Technology: We embrace technology and believe it offers us significant opportunities to challenge the status quo and improve our responsiveness to customers’ evolving needs. Our value proposition is primarily driven by our consultative approach to deploying technologies that deliver value for customers and we employ a dedicated in-house team of specialists to tailor practical solutions for our customers. We regularly deploy solution specialists on sales calls with our business development officers, particularly those focused on deposit gathering, to demonstrate our ability to customize technology solutions for clients in an effort to facilitate their operations. For example, we designed and implemented a solution that allowed a freight company to remotely scan check payments along with corresponding invoices, thereby enabling greater efficiency through time savings and streamlined workflows, a reduction in disparate systems, and control over our customers’ working capital. In another recent case, we enabled a not-for-profit customer to leverage data being collected from remote deposit capture to create a database of donors that could be electronically parsed between entities and individuals, which allows the customer to mine its database and provides the customer with a better understanding of its primary donors. We constantly seek similar opportunities to add unique value to our customers and deepen our existing relationships.
We have also developed proprietary technology, such as our Apollo customer acquisition system for OpenSky secured credit cards, which improves our customers’ experience with our OpenSky credit cards and increases customer profitability. Our Apollo customer acquisition system is our application processing engine that combines licensed technology with proprietary coding to workflows. The primary decision engine software, which we license, manages the workflow of each application and contacts relevant third-party data services for identity verification and to satisfy other approval criteria. We have customized the licensed software to create a user interface for our customer service group that enables them to check the status of any given application, answer questions for applicants, and manage the application process as contemplated by our policies. Finally, we have built an operational database to process applicant data and analyze performance of our sales pipeline. The implementation of the Apollo system has resulted in 269%
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new customer growth since its launch in February 2015, with more than 70% of new customers applying and being approved for a credit card through a mobile device.
Expertise in Structuring Complex Credit: Our loan officers become their customers’ trusted advisors and structure customized credit solutions to assist these customers in achieving their business initiatives. Our lending team, led by the Bank’s President, Scot Browning, collaborates with customers to transform complex credit transactions into creative solutions that address customers’ business and personal needs while remaining highly profitable for the Bank. This approach often enables us to overcome price-led competition as demonstrated by our net interest margin of 4.27% (excluding secured credit card) for the six months ended June 30, 2018. Our limited commercial net charge-offs since the beginning of 2013 and non-performing assets of 0.35% of total assets as of June 30, 2018 exemplify the knowledge and analysis we bring to the underwriting process.
Emphasis on Regulatory Compliance and Risk Management: Compliance and risk management are a priority at Capital Bank. Our mortgage business was designed with compliance and risk controls as a centerpiece that has endured as we have continued to scale the business. Our Commercial Banking division has also adopted a proactive approach to risk and frequently reviews our commercial loan portfolios for potentially weakening credits in order to manage them aggressively out of the Bank while they are still “bankable.” When problems arise, issues are diagnosed, expediently addressed and reported to senior management and the board of directors of the Bank or the Company, as applicable, followed by an open dialogue focused on improving our process. We also conduct semi-annual stress tests of our commercial loan portfolio to assess potential losses based on both reductions in cash flow and real estate collateral values. Further, we proactively back-test our construction loan portfolio for realized sales values as compared to estimated values at underwriting down to the sub-market level to test for emerging trends in real estate valuations. Compliance and risk functions are critical tools for our managers, helping them assess and design new initiatives and creative solutions for our clients.
Differentiated Business Model: Operating our branch-lite commercial banking business model in conjunction with our national, scalable consumer lending platforms, we have achieved compound annual growth rates in both assets and loans since December 31, 2013 of 19.0% and 19.8%, respectively, as well as increasing our core deposits 131% between December 31, 2013 and June 30, 2018. Our OpenSky credit card division further supplements our core funding growth, having experienced growth in its noninterest bearing deposit balances from $14.1 million to $59.0 million over the same period, equivalent to a compound annual growth rate of 37.5%. Our Columbia, Maryland branch, which opened in June 2017, and our Reston, Virginia branch, which opened in June 2018, were the only branches we added to our network during this time period. We have achieved substantial growth while delivering consistent strong profitability. Our capabilities in sales management, marketing, data and analytics create additional opportunities for greater synergies and cross-sales across our divisions. Further, our balance sheet is well positioned to manage rising interest rates given the duration of our assets and heavy emphasis on floating interest rates in our loan portfolio. As of June 30, 2018, approximately 63% of our loan portfolio consisted of floating rate credits. As a result, an increase of 100 basis points in interest rates is estimated to increase our net interest income by 6.0% based on our most recent interest rate risk, or IRR, analysis.
Our Management and Board
Our senior management team is comprised of experienced banking professionals with a diverse mix of backgrounds, having served in executive management roles both locally and nationally with institutions ranging in size from traditional community banks to the largest global banking institutions. Our team combines sales, credit, marketing and analytics and risk management functions bringing the capabilities of a much larger institution to bear in the execution of our strategies. Additionally, our senior executives have frequently been able to recruit high quality members of their teams from prior institutions to add further depth and skill to our management team. Certain biographical information of our senior executives is as follows:
Edward F. Barry. Mr. Barry has served as our Chief Executive Officer since 2012. Since that time, Capital Bank has rapidly expanded throughout the Washington, D.C. and Baltimore metropolitan areas. Under Mr. Barry’s leadership, Capital Bank has consistently been recognized as one of the top performing banks in the U.S. In 2017, he was named an Ernst & Young Entrepreneur of the Year for the Mid-Atlantic region. Prior to joining the Bank, Mr. Barry was Senior
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Vice President, Product Marketing and Analytics at Capital One Bank where he led the product, analytics and marketing teams for the Small Business and Business Banking divisions. Prior to that he was with Bank of America as a Senior Vice President, serving in a variety of marketing and strategy roles across the consumer and commercial banks. He also worked at Ernst & Young/Cap Gemini, where he was a consultant in the Strategy and Transformation practice, responsible for creating and implementing initiatives to drive clients’ e-business sales and marketing strategies.
Scot R. Browning. Mr. Browning has served as President of the Bank since its recapitalization by the current ownership group in 2002 and has over 30 years of banking experience, with a concentration in commercial lending. He currently oversees the commercial lending department, which has grown from $13.7 million to over $741.3 million in funded loans, during his tenure. In addition, he manages loan administration and business development. From 1997 to 2002, prior to joining the Bank, he was Senior Vice President, Corporate Lending at United Bank in Bethesda, Maryland and at Century National Bank prior to its acquisition by United Bank.
Alan W. Jackson. Mr. Jackson, a certified public accountant, joined the Company and the Bank as our Chief Financial Officer in late 2017. Mr. Jackson’s over 30 years of prior experience includes consulting to community banks, serving as chief financial officer to several community banks (including two publicly traded banks), and leading the product teams developing community banking software. Prior to joining the Bank, Mr. Jackson was Senior Managing Director in the Consulting Division at FinPro, Inc., from January 2017 to December 2017, where he was responsible for advising bank clients on strategic initiatives to increase profitability and reduce their risk profiles. Prior to that he led product teams with software development efforts at both S&P Global Market Intelligence (formerly SNL Financial LC), from June 2015 to July 2016, and Banker’s Dashboard, LLC from July 2011 to June 2015. For over 20 years of his career, Mr. Jackson served as chief financial officer of three community banks, two of which began as de novo institutions. Throughout his banking career, he has been involved in all facets of community bank management, from inception to growth and including mergers and acquisitions.
Kathy M. Curtis. Ms. Curtis, who joined the Bank in 2002, serves as our Chief Risk/Compliance Officer, Bank Secrecy Act Officer, Chief Information Security Officer and Community Reinvestment Act Officer and has over 30 years of banking experience, including 15 years of experience with the Company. Ms. Curtis is charged with ensuring the Bank’s regulatory compliance, and ensuring that our Bank Secrecy Act and Information Security programs meet all requirements of the Office of the Comptroller of the Currency, or OCC, Federal Financial Institutions Examination Council, or FFIEC, Financial Crimes Enforcement Network, or FinCEN, and other regulatory authorities. Prior to joining the Bank, Ms. Curtis was employed by Century National Bank from 1985 until its acquisition by United Bank in 2001. During her 16 years at Century National Bank, Ms. Curtis held a variety of positions across the loan department before becoming its Compliance Officer and Bank Secrecy Act Officer.
Nick Bryan. Mr. Bryan, who joined the Bank in 2013, serves as our Chief Marketing Officer and as General Manager of the OpenSky credit card division. Mr. Bryan also manages the Bank’s data analytics platforms and works to integrate our data analytics and marketing functions to enhance our operational efficiency. Prior to joining the Company in 2013, Mr. Bryan spent more than eight years in various roles with Capital One, from corporate finance to product marketing and operations. Mr. Bryan also held various roles at Donaldson, Lufkin & Jenrette, including working on the launch of the first internet-based capital markets and alternative investments groups.
Eric M. Suss. Mr. Suss has served as our Chief Human Resources Officer since 2012 and is responsible for attracting top level executives to the Company in a highly competitive market. Mr. Suss has nearly 20 years of experience in human resources ranging from consulting for Arthur Andersen to nearly a decade of international human resources experience for the world’s leading provider of intellectual property outsourced solutions, CPA Global, where he served in multiple human resources positions.
Kathy Yamada. Ms. Yamada, who joined the Bank in 2010, serves as our Chief Credit Officer and has over 25 years of banking experience. She is responsible for the Bank’s credit administration function including credit policy, loan approval process, loan quality, portfolio risk management and special assets. Since joining the Bank in 2010, Ms. Yamada has successfully managed the reduction in the Bank’s criticized, classified and overall non-performing asset levels. Ms. Yamada’s prior banking experience includes a 20 year career with Equitable Bank, headquartered in Wheaton,
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Maryland, as Senior Vice President, responsible for managing the bank’s loan origination and credit administration functions and managing the residential mortgage loan origination division.
Karl Dicker. Mr. Dicker joined the Bank in 2018 as Chief Operating Officer. He currently oversees the deposit operations, branch distribution, information technology and product organizations of the Bank. Prior to joining the Bank, Mr. Dicker was Senior Vice President at Capital One Bank where he led Treasury Management Strategy, Marketing & Analytics and served as Head of Enterprise Payments. Mr. Dicker spent more than 16 years at Capital One in various other positions across consumer, business and commercial business lines in functional roles ranging from corporate strategy to operations to sales enablement to business transformation and analysis.
Our Board is comprised of talented individuals and very experienced bankers, some of whom collaborated previously to successfully operate Capital Bank, NA (established June 18, 1974), which was ultimately sold in 1998 to FCNB Bank. These individuals identified an opportunity to collaborate again at the Company in 2002. Our directors are widely known as leading businessmen and -women and entrepreneurs in the Washington, D.C. and Baltimore metropolitan areas and includes three individuals with prior experience as a director of a publicly traded company. Our directors’ diverse experience spans commercial real estate development, sophisticated accounting and tax matters, operating companies, professional services and not-for-profit associations.
Our Business Strategy
Regulations, technology and competition have fundamentally impacted the economics of the banking sector. We believe that by using technology-enabled strategies and advice-based solutions, we can deliver strong and attractive shareholder returns in excess of our cost of capital. We frequently re-evaluate our underlying assumptions, strategies and tactics and believe we can nimbly change our approaches when market conditions dictate. We have adopted the following strategies that we believe will continue to drive growth while maintaining consistent profitability and enhancing shareholder value:
Deliver premium advice-based solutions that drive organic loan and core deposit growth with corresponding superior net interest margin
• | Serve as financial partners to our customers, helping them to grow their businesses through advice-based financial solutions; |
• | Endeavor to provide comprehensive loan and deposit solutions to our customers that are tailored to their needs; |
• | Expand expertise in the non-profit, basic industries, fiduciary and community lending groups while building a greater presence in the government contracting sector; |
• | Capitalize on market dislocation from recent in-market acquisitions to continue to attract top sales talent, like our Fiduciary Banking Team and the leader of our Business Banking group, and acquire new commercial banking relationships from local competitors; and |
• | Selectively add banking centers where sales teams have already proved an ability to capture market share and leverage customer relationships. |
Leverage technology to improve the customer experience and loyalty and deliver operational efficiencies
• | Use solution structuring and customized technology implementation as differentiators to add value to clients with complex needs and deepen our relationships within our existing customer base; |
• | Deploy technologies that better support our lending associates and simplify our processes; |
• | Maximize the potential of web-based and mobile banking applications to drive core funding while maintaining our branch-lite business model; and |
7 | ||
• | Enhance cross-selling capabilities among our OpenSky, Church Street Mortgage and Commercial Banking division customers. |
Increase scale in our consumer fee based platforms through delivery of high value products and services
• | Utilize our customer acquisition system, Apollo, and leverage our investment in a new core processing system, together with our expertise in data, analytics and marketing, to deliver new products and services and grow our secured credit card business; |
• | Retain OpenSky customers that “graduate” from our secured credit product through the limited use of partially unsecured credit products; and |
• | Expand our purchase-oriented mortgage loan sales both in-market and in adjacent markets through the hiring of high quality mortgage originators and continuing to improve on our direct to consumer marketing channels. |
Pursue acquisitions opportunistically
• | Seek strategic acquisitions in Washington, D.C., Baltimore, Maryland, and surrounding metropolitan areas; |
• | Evaluate specialty finance company opportunities where we can add value through increasing interest and fee income and leveraging our management’s expertise and existing strategic assets; and |
• | Use our management’s and Board’s expertise to structure transactions that minimize integration and execution risk for the Bank. |
Summary Demographic and Other Market Data
According to the U.S. Census Bureau, the Washington, D.C. and Baltimore, Maryland MSAs include the four wealthiest counties in the United States, as well as five of the 10 wealthiest counties. Overall, the Washington, D.C. MSA ranks first out of the largest 20 MSAs (ranked by population) in income levels with a current median household income of approximately $99,400, which is approximately 63% higher than the national average. Additionally, the Washington, D.C. MSA is currently the sixth largest MSA in the United States with a total population of more than 6.2 million people (and when combined with the Baltimore, Maryland MSA, the Washington, D.C. and Baltimore metropolitan areas are home to a population of more than 9.0 million). We expect our strategies to benefit from continued growth in population and high income of our market area’s residents.
State | Total Population 2018 (Actual) | Population Change 2010-2018 | Projected Population Change 2018-2023 | Median Household Income 2018 | HH Income Change 2011-2018 | Unemployment Rate (May 2018) | ||||||||||||
Washington D.C. MSA | 6,224,774 | 10.44 | % | 5.19 | % | $ | 99,400 | 23.35 | % | 3.2 | % | |||||||
Baltimore, Maryland MSA | 2,813,526 | 3.8 | 2.51 | 77,704 | 22.98 | 4.0 | ||||||||||||
State of Maryland | 6,061,065 | 4.98 | 3.02 | 81,294 | 21.21 | 3.9 | ||||||||||||
District of Columbia | 698,375 | 16.06 | 7.98 | 82,192 | 50.75 | 5.2 | ||||||||||||
Counties of Operation (1) | 2,341,222 | 10.06 | 5.02 | 100,613 | 26.74 | 3.5 | ||||||||||||
United States | 326,533,070 | 5.76 | 3.5 | 61,045 | 22.76 | 3.6 | ||||||||||||
_______________
Source: S&P Global Market Intelligence, U.S. Bureau of Labor Statistics
(1) | Data consists of deposit-weighted average using county-level deposits. |
The Washington, D.C. MSA has a large and diversified economy, with an annual gross domestic product of nearly $510 billion, according to the Bureau of Economic Analysis. When combined with the Baltimore, Maryland MSA, the Washington, D.C. and Baltimore metropolitan areas in which we operate have a combined gross domestic product of more than $696 billion, and this combined GDP has grown approximately 19% between 2010 and 2016. The Washington, D.C. MSA is a desirable market for a broad range of companies in a variety of industries, including 15 companies from
8 | ||
the 2017 Fortune 500 list, and four of the United States’ largest 100 private companies, according to the 2017 Forbes list of largest private companies by revenue. The following table provides an in-depth view of the distribution of employment within the Washington, D.C. MSA.
Washington, D.C. MSA Employment By Sector
_______________
Source: U.S Bureau of Labor Statistics; Data as of February 2018
Note: Data not seasonally adjusted
As the home of the federal government, the broader Washington, D.C. region benefits from consistent population growth and remains well positioned to capitalize on any increase in government spending and infrastructure. Further, as banks in our market have experienced continued consolidation over the last few years, our opportunities to attract talented employees and capitalize on customer dislocation have increased. With the shrinking number of locally headquartered community banks (seven of the top 10 banks in Washington, D.C. MSA by market share are not headquartered in the region), we believe that we have the ability to continue our historical growth by serving the area’s middle market businesses and their owners who prefer a high quality level of service and local decision making that is unavailable at larger, out of market banking institutions.
With its strong demographic characteristics, scale and robust economic activity we believe that the Washington, D.C. and Baltimore metropolitan areas represent a strong geographic market for us to realize our continued growth strategies within our Commercial Banking division.
9 | ||
Recent Developments
On August 15, 2018, we effected a four-for-one stock split of our common stock, whereby each share of our common stock was automatically divided into four shares of common stock. As a result of the stock split, each shareholder held the same percentage of common stock outstanding after the stock split as that shareholder held immediately prior to the stock split. There was no change to the par value of our common stock as a result of the stock split. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
Corporate Information
Our principal executive offices are located at One Church Street, Rockville, Maryland 20850, and our telephone number at that address is (240) 283-0416. Our website address is www.capitalbankmd.com. The information on, or accessible through, our website or any other website cited in this prospectus is not part of, or incorporated by reference into, this prospectus.
Summary Risk Factors
Our business is subject to a number of substantial risks and uncertainties of which you should be aware before making a decision to invest in our common stock. These risks are discussed more fully in the section entitled “Risk Factors” beginning on page 22. Some of these risks include the following:
• | credit risks, including risks related to the significance of commercial real estate loans in our portfolio, our ability to manage our credit risk effectively and the potential deterioration of the business and economic conditions in our primary market areas; |
• | liquidity and funding risks, including the risk that we will not be able to meet our obligations due to risks related to our funding sources; |
• | operational, strategic and reputational risks, including the risk that we may not be able to implement our growth strategy and risks related to cybersecurity, the possible loss of key members of our senior leadership team and maintaining our reputation; |
• | legal, accounting and compliance risks, including risks related to the extensive state and federal regulation under which we operate and changes in such regulations; |
• | market and interest rate risks, including risks related to interest rate fluctuations and the monetary policies and regulations of the Board of Governors of the Federal Reserve System, or the Federal Reserve; and |
• | offering and investment risks, including illiquidity and volatility in the trading of our common stock, limitations on our ability to pay dividends and the dilution that investors in this offering will experience. |
10 | ||
The Offering
Common stock offered by us | 1,500,000 shares. |
Common stock offered by the selling shareholders | 728,736 shares. |
Underwriters’ option to purchase additional shares | We have granted the underwriters an option to purchase up to an additional 334,310 shares from us for a period of 30 days after the date of this prospectus. |
Shares of common stock to be outstanding after this offering | 13,161,372 shares of common stock, assuming the underwriters do not exercise their option to purchase additional shares (13,495,682 shares if the underwriters exercise in full their option to purchase additional shares). |
Use of proceeds | Assuming an initial public offering price of $13.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from the sale of our common stock in this offering will be $17.7 million (or $21.9 million if the underwriters exercise in full their option to purchase additional shares from us), after deducting the underwriting discount and estimated offering expenses payable by us. We intend to use the net proceeds to us from this offering to fund the organic growth of our commercial and consumer business lines and for general corporate purposes, which could include future acquisitions and other growth initiatives. We will not receive any proceeds from the sale of shares of our common stock by the selling shareholders. See “Use of Proceeds.” |
Dividend policy | Holders of our common stock are only entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for dividends. We have not paid any cash dividends on our capital stock since inception, and we do not intend to pay dividends for the foreseeable future. Our ability to pay dividends to our shareholders in the future will depend on regulatory restrictions, our liquidity and capital requirements, our earnings and financial condition, the general economic climate, contractual restrictions, our ability to service any equity or debt obligations senior to our common stock and other factors deemed relevant by our board of directors. For additional information, see “Dividend Policy.” |
Directed share program | At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares of our common stock offered in this offering for sale to certain of our directors, executive officers, employees and other related persons. We will offer these reserved shares to the extent permitted under applicable laws and regulations in the United States through a directed share program. Reserved shares purchased by our directors and executive officers will be subject to the lock-up provisions described in “Underwriting—Lock-Up Agreements.” We do not know if these persons will choose to purchase all or any portion of the reserved shares but the number of shares of our common stock available for sale to the general public will be reduced to the extent these persons purchase the reserved shares. Any reserved shares of our common stock that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of our common stock offered by this prospectus. See “Underwriting—Directed Share Program.” |
11 | ||
Securities owned by directors and named executive officers | As of June 30, 2018, our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities beneficially owned approximately 55% of our outstanding shares of common stock. Following the completion of this offering, we anticipate that our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities will beneficially own approximately 47% shares of our common stock (or 46% if the underwriters exercise in full their option to purchase additional shares from us). See “Principal and Selling Shareholders.” |
Nasdaq Global Market listing | We have applied to list our common stock on the Nasdaq Global Market under the trading symbol “CBNK.” |
Risk factors | Investing in our common stock involves risks. See “Risk Factors,” beginning on page 22, for a discussion of certain factors that you should carefully consider before making a decision to invest in shares of our common stock. |
Except as otherwise indicated, references in this prospectus to the number of shares of our common stock outstanding after this offering are based upon 11,661,372 shares of common stock issued and outstanding as of June 30, 2018. Unless expressly indicated or the context otherwise requires, all information in this prospectus:
• | gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018, and the effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented; |
• | assumes no exercise by the underwriters of their option to purchase up to an additional 334,310 shares of our common stock from us; |
• | assumes that the shares of common stock sold in this offering are sold at $13.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus; |
• | does not attribute to any director, executive officer or principal shareholder any purchases of shares of our common stock in this offering, including through the directed share program described in “—Underwriting-Directed Share Program;” |
• | excludes 1,276,012 shares of our common stock issuable upon exercise of stock options outstanding at June 30, 2018 at a weighted average exercise price of $8.05 per share; and |
• | excludes 934,100 shares of our common stock available for issuance under the Capital Bancorp, Inc. 2017 Stock and Incentive Compensation Plan, or the 2017 Plan. |
12 | ||
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
You should read the following selected historical consolidated financial and other data in conjunction with our consolidated financial statements and related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Capitalization” included elsewhere in this prospectus. The following tables set forth selected historical consolidated financial and other data (i) as of and for the six months ended June 30, 2018 and 2017 and (ii) as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013. Selected financial data as of and for the years ended December 31, 2017, 2016, and 2015 have been derived from our audited financial statements included elsewhere in this prospectus. We have derived the selected financial data as of and for the years ended December 31, 2014 and 2013 from our audited financial statements not included in this prospectus. Selected financial data as of and for the six months ended June 30, 2018 and for the six months ended June 30, 2017 have been derived from our unaudited financial statements included elsewhere in this prospectus and have not been audited but, in the opinion of our management, contain all adjustments (consisting of only normal or recurring adjustments) necessary to present fairly in all material respects our financial position and results of operations for such periods in accordance with GAAP. We have derived selected balance sheet data as of June 30, 2017 from our unaudited balance sheet not included in this prospectus but, in the opinion of our management, it contains all adjustments (consisting of only normal or recurring adjustments) necessary to present fairly in all material respects our financial position and results of operations for such period in accordance with GAAP. The information presented in the table below has been adjusted to give effect to a four-for-one stock split of our common stock completed effective August 15, 2018. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented below. Our historical results are not necessarily indicative of any future period. The performance ratios, asset quality and capital ratios, mortgage metrics and credit card portfolio metrics are unaudited and derived from our audited financial statements and other financial information as of and for the periods presented. Average balances have been calculated using daily averages. The selected historical consolidated financial and other data presented below contains certain financial measures that are not presented in accordance with accounting principles generally accepted in the United States and have not been audited. See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”
13 | ||
Six months Ended June 30, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars are in thousands, except per share information) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||||||||||
Total interest income | $ | 33,442 | $ | 26,983 | $ | 56,666 | $ | 49,243 | $ | 38,254 | $ | 32,852 | $ | 28,047 | ||||||||||||||
Total interest expense | 4,935 | 3,592 | 7,755 | 6,484 | 4,578 | 3,135 | 2,720 | |||||||||||||||||||||
Net interest income | 28,507 | 23,391 | 48,911 | 42,759 | 33,676 | 29,717 | 25,327 | |||||||||||||||||||||
Provision for loan losses | 1,145 | 1,170 | 2,655 | 4,291 | 1,609 | 1,230 | 1,210 | |||||||||||||||||||||
Total noninterest income | 8,417 | 7,223 | 15,149 | 20,473 | 14,929 | 11,442 | 10,171 | |||||||||||||||||||||
Total noninterest expense | 27,128 | 21,742 | 47,306 | 43,380 | 34,817 | 28,821 | 24,836 | |||||||||||||||||||||
Income before income taxes | 8,651 | 7,702 | 14,099 | 15,561 | 12,179 | 11,108 | 9,452 | |||||||||||||||||||||
Income tax expense | 2,516 | 2,986 | 6,990 | 6,120 | 4,687 | 4,315 | 3,671 | |||||||||||||||||||||
Bargain purchase gain, net of income taxes | — | — | — | — | — | — | 1,076 | |||||||||||||||||||||
Net income | 6,135 | 4,716 | 7,109 | 9,441 | 7,492 | 6,793 | 6,857 | |||||||||||||||||||||
Net income, as adjusted(1)(3) | 6,135 | 4,716 | 11,293 | 9,441 | 7,492 | 6,793 | 5,781 | |||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and due from banks | $ | 9,767 | $ | 5,878 | $ | 8,189 | $ | 4,827 | $ | 4,129 | $ | 3,849 | $ | 3,340 | ||||||||||||||
Investment securities available for sale | 49,799 | 57,734 | 54,029 | 47,985 | 39,175 | 39,393 | 33,071 | |||||||||||||||||||||
Loans held for sale | 21,370 | 32,355 | 26,344 | 49,167 | 38,878 | 42,659 | 18,465 | |||||||||||||||||||||
Loans, net of unearned income | 920,783 | 837,131 | 887,420 | 763,430 | 639,350 | 506,339 | 408,264 | |||||||||||||||||||||
Core deposit intangible | — | — | — | — | 17 | 39 | 72 | |||||||||||||||||||||
Total assets | 1,067,786 | 982,741 | 1,026,009 | 905,600 | 743,429 | 618,749 | 488,713 | |||||||||||||||||||||
Total deposits | 938,364 | 865,792 | 904,899 | 790,924 | 629,817 | 501,974 | 374,435 | |||||||||||||||||||||
FHLB advances and repurchase agreements | 14,445 | 13,833 | 13,260 | 15,659 | 23,440 | 47,988 | 59,455 | |||||||||||||||||||||
Senior promissory note due July 31, 2019 | — | 2,000 | 2,000 | 2,000 | 5,000 | 5,000 | — | |||||||||||||||||||||
Subordinated debentures | 15,378 | 15,344 | 15,361 | 15,327 | 18,629 | 7,062 | 7,062 | |||||||||||||||||||||
Total liabilities | 980,792 | 906,126 | 945,890 | 834,853 | 683,772 | 568,533 | 446,291 | |||||||||||||||||||||
Total stockholders’ equity | 86,994 | 76,615 | 80,119 | 70,748 | 59,657 | 50,216 | 42,421 | |||||||||||||||||||||
Tangible common equity(2) | 86,994 | 76,615 | 80,119 | 70,748 | 59,640 | 50,177 | 42,349 | |||||||||||||||||||||
14 | ||
Six months Ended June 30, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars are in thousands, except per share information) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
Selected Performance Ratios: | ||||||||||||||||||||||||||||
Return on average assets (ROAA)(3)(4) | 1.20 | % | 1.03 | % | 0.74 | % | 1.13 | % | 1.10 | % | 1.25 | % | 1.23 | % | ||||||||||||||
Return on average assets, as adjusted(1)(3)(4) | 1.20 | 1.03 | 1.17 | 1.13 | 1.10 | 1.25 | 1.23 | |||||||||||||||||||||
Return on average equity (ROAE)(3)(4) | 14.92 | 13.00 | 9.29 | 14.39 | 13.90 | 14.84 | 15.64 | |||||||||||||||||||||
Return on average equity, as adjusted(1)(3)(4) | 14.92 | 13.00 | 14.75 | 14.39 | 13.90 | 14.84 | 15.64 | |||||||||||||||||||||
Return on average tangible common equity (ROATCE)(2)(3)(4) | 14.92 | 13.00 | 9.29 | 14.41 | 13.94 | 14.90 | 15.76 | |||||||||||||||||||||
Return on average tangible common equity, as adjusted(1)(2)(3)(4) | 14.92 | 13.00 | 14.75 | 14.41 | 13.94 | 14.90 | 15.76 | |||||||||||||||||||||
Net interest margin (4)(5) | 5.66 | 5.15 | 5.12 | 5.18 | 5.02 | 5.59 | 5.41 | |||||||||||||||||||||
Net interest margin, as adjusted(1)(2)(4)(5) | 5.66 | 5.15 | 5.37 | 5.18 | 5.02 | 5.59 | 5.41 | |||||||||||||||||||||
Net interest margin, excluding credit card portfolio (4)(5) | 4.27 | 4.31 | 4.31 | 4.53 | 4.60 | 5.47 | 5.30 | |||||||||||||||||||||
Noninterest income / average assets (4) | 1.65 | 1.58 | 1.57 | 2.46 | 2.20 | 2.11 | 2.16 | |||||||||||||||||||||
Noninterest expense / average assets (4) | 5.33 | 4.75 | 4.90 | 5.21 | 5.12 | 5.32 | 5.27 | |||||||||||||||||||||
Net operating expense / average assets (4) | 3.67 | 3.17 | 3.33 | 2.75 | 2.93 | 3.21 | 3.11 | |||||||||||||||||||||
Efficiency ratio (4)(6) | 73.47 | 71.02 | 73.85 | 68.60 | 71.63 | 70.02 | 69.96 | |||||||||||||||||||||
Efficiency ratio, as adjusted (1)(4)(6) | 73.47 | 71.02 | 67.79 | 68.60 | 71.63 | 70.02 | 69.96 | |||||||||||||||||||||
Loan yield (4)(7) | 7.16 | 6.47 | 6.44 | 6.45 | 6.18 | 6.74 | 6.84 | |||||||||||||||||||||
Loan yield, excluding credit card portfolio (4)(7) | 5.67 | 5.56 | 5.57 | 5.76 | 5.78 | 6.62 | 6.73 | |||||||||||||||||||||
Per Share Data:(8) | ||||||||||||||||||||||||||||
Common stock shares issued and outstanding | 11,661,372 | 11,272,080 | 11,537,196 | 11,144,696 | 10,225,780 | 9,562,820 | 9,342,860 | |||||||||||||||||||||
Basic weighted average shares outstanding | 11,587,188 | 11,169,680 | 11,261,132 | 10,963,132 | 9,620,080 | 9,427,396 | 8,807,432 | |||||||||||||||||||||
Diluted weighted average shares outstanding | 11,986,310 | 11,318,023 | 11,428,000 | 11,289,044 | 10,488,036 | 10,279,548 | 9,366,596 | |||||||||||||||||||||
Basic earnings per share before bargain purchase gain(3) | $ | 0.53 | $ | 0.42 | $ | 0.63 | $ | 0.86 | $ | 0.78 | $ | 0.72 | $ | 0.66 | ||||||||||||||
Basic earnings per share | 0.53 | 0.42 | 0.63 | 0.86 | 0.78 | 0.72 | 0.78 | |||||||||||||||||||||
Diluted earnings per share before bargain purchase gain(3)(9) | 0.51 | 0.42 | 0.62 | 0.84 | 0.74 | 0.69 | 0.65 | |||||||||||||||||||||
Diluted earnings per share(9) | 0.51 | 0.42 | 0.62 | 0.84 | 0.74 | 0.69 | 0.76 | |||||||||||||||||||||
Diluted earnings per share, as adjusted(1)(2)(9) | 0.51 | 0.42 | 0.99 | 0.84 | 0.74 | 0.69 | 0.65 | |||||||||||||||||||||
Book value per share | 7.46 | 6.80 | 6.94 | 6.35 | 5.83 | 5.25 | 4.54 | |||||||||||||||||||||
Tangible book value per share(2) | 7.46 | 6.80 | 6.94 | 6.35 | 5.83 | 5.25 | 4.53 | |||||||||||||||||||||
15 | ||
Six months Ended June 30, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars are in thousands, except per share information) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
Non-Performing Assets: | ||||||||||||||||||||||||||||
Non-performing loans | $ | 3,257 | $ | 4,682 | $ | 5,407 | $ | 4,518 | $ | 5,775 | $ | 6,359 | $ | 7,451 | ||||||||||||||
Troubled debt restructurings | 297 | 1,341 | 3,811 | 941 | 2,422 | 2,768 | 2,793 | |||||||||||||||||||||
Foreclosed real estate | 493 | 387 | 93 | 90 | 203 | 454 | 282 | |||||||||||||||||||||
Non-performing assets | 3,751 | 5,070 | 5,500 | 4,608 | 5,978 | 6,813 | 7,733 | |||||||||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||||||||||
Non-performing assets / assets | 0.35 | % | 0.52 | % | 0.54 | % | 0.51 | % | 0.80 | % | 1.10 | % | 1.58 | % | ||||||||||||||
Non-performing loans / loans (10) | 0.35 | 0.56 | 0.61 | 0.59 | 0.90 | 1.26 | 1.83 | |||||||||||||||||||||
Non-performing assets / loans (10) + foreclosed real estate | 0.41 | 0.60 | 0.62 | 0.60 | 0.94 | 1.35 | 1.89 | |||||||||||||||||||||
Net charge-offs (recoveries) to average loans (10) | 0.08 | (0.04 | ) | 0.15 | 0.33 | 0.10 | 0.09 | 0.07 | ||||||||||||||||||||
Allowance for loan losses to total loans | 1.13 | 1.13 | 1.13 | 1.13 | 1.03 | 1.09 | 1.16 | |||||||||||||||||||||
Allowance for loan losses to non-performing loans | 320.78 | 202.18 | 185.57 | 190.32 | 113.83 | 86.97 | 63.54 | |||||||||||||||||||||
Bank Capital Ratios: | ||||||||||||||||||||||||||||
Tier 1 leverage ratio | 8.91 | % | 9.07 | % | 8.55 | % | 8.86 | % | 9.51 | % | 9.44 | % | 8.80 | % | ||||||||||||||
Common equity tier 1 capital | 11.09 | 11.03 | 10.78 | 11.12 | 11.35 | n/a | n/a | |||||||||||||||||||||
Tier 1 risk-based capital | 11.09 | 11.03 | 10.78 | 11.12 | 11.35 | 11.96 | 11.50 | |||||||||||||||||||||
Total risk-based capital ratio | 12.34 | 12.28 | 12.03 | 12.37 | 12.51 | 13.21 | 13.84 | |||||||||||||||||||||
Common equity to total assets | 8.15 | 7.80 | 8.46 | 8.94 | 9.38 | 8.98 | 8.72 | |||||||||||||||||||||
Composition of Loans Held for Investment: | ||||||||||||||||||||||||||||
Residential real estate | $ | 366,465 | $ | 323,413 | $ | 342,684 | $ | 286,332 | $ | 225,185 | $ | 157,370 | $ | 121,093 | ||||||||||||||
Commercial real estate | 271,800 | 243,989 | 259,853 | 234,869 | 190,776 | 162,697 | 128,945 | |||||||||||||||||||||
Construction real estate | 149,192 | 145,890 | 144,932 | 134,540 | 129,304 | 111,618 | 100,839 | |||||||||||||||||||||
Commercial | 101,752 | 97,859 | 108,982 | 87,563 | 79,003 | 63,750 | 48,615 | |||||||||||||||||||||
Credit card | 32,522 | 26,511 | 31,507 | 20,446 | 13,812 | 9,562 | 7,404 | |||||||||||||||||||||
Other consumer | 1,244 | 1,064 | 1,053 | 1,157 | 2,233 | 1,624 | 1,697 | |||||||||||||||||||||
Mortgage Metrics (CSM only): | ||||||||||||||||||||||||||||
Origination of loans held for sale | $ | 183,317 | $ | 189,596 | $ | 435,822 | $ | 853,674 | $ | 754,965 | $ | 493,273 | $ | 752,529 | ||||||||||||||
Proceeds from loans held for sale, net of gain | 188,227 | 206,901 | 459,787 | 844,464 | 759,350 | 470,534 | 793,457 | |||||||||||||||||||||
Purchase volume as a % of originations | 70.62 | % | 52.25 | % | 52.50 | % | 18.79 | % | 22.51 | % | 29.83 | % | 21.43 | % | ||||||||||||||
Gain on sale of loans | $ | 4,331 | $ | 3,992 | $ | 9,234 | $ | 15,373 | $ | 11,541 | $ | 7,827 | $ | 7,282 | ||||||||||||||
Gain on sale as a % of loans sold | 2.30 | % | 1.93 | % | 2.01 | % | 1.82 | % | 1.52 | % | 1.66 | % | 0.92 | % | ||||||||||||||
Credit Card Portfolio Metrics: | ||||||||||||||||||||||||||||
Total active customer accounts | 166,661 | 137,422 | 149,226 | 96,404 | 63,398 | 38,922 | 28,347 | |||||||||||||||||||||
Total loans | $ | 32,522 | $ | 25,730 | $ | 31,507 | $ | 20,446 | $ | 13,812 | $ | 9,562 | $ | 7,404 | ||||||||||||||
Total deposits at the Bank | 58,951 | 50,612 | 53,625 | 39,062 | 27,849 | 18,415 | 14,071 | |||||||||||||||||||||
16 | ||
_______________
(1) | Presentation of this financial measure as of or for the year ended December 31, 2017 excludes the effects of certain non-recurring expenses incurred with the conversion of our credit card processing systems and the revaluation of our deferred tax assets due to the effects of the Tax Act. See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this financial measure to its most comparable GAAP financial measure. |
(2) | This financial measure is not recognized under GAAP and is therefore considered to be a non-GAAP measure. See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this financial measure to its most comparable GAAP financial measure. |
(3) | Financial information for the year ended December 31, 2013 excludes the effect of the bargain purchase gain (net of taxes). |
(4) | June 30, 2018 and 2017 data has been annualized. |
(5) | Net interest margin is a ratio calculated as net interest income divided by average interest earning assets for the same period. |
(6) | Efficiency ratio is calculated by dividing noninterest expense by net interest income plus noninterest income. |
(7) | Includes non-accrual loans and loans 90 days and more past due. |
(8) | Gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018. The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented. |
(9) | Calculations of diluted earnings per share before bargain purchase gain, diluted earnings per share and diluted earnings per share, as adjusted, include interest on convertible debt. |
(10) | Loans exclude loans held for sale at each of the dates presented. |
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional financial measures discussed in this prospectus as being “non-GAAP financial measures.” We classify a financial measure as a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios that are calculated using exclusively financial measures presented in accordance with GAAP.
This prospectus includes certain non-GAAP financial measures for the year ended December 31, 2017 in order to present our results of operations for that period on a basis consistent with our historical operations. During the fourth quarter of 2017, we undertook a conversion of our credit card portfolio system to further scale our OpenSky credit card division. The one-time expense related to this data processing system conversion was approximately $2.3 million in the fourth quarter of 2017. As a result of the conversion, we refunded or did not charge our OpenSky customers for 60 days of interest and applicable fees on their accounts, which resulted in a loss of revenue of approximately $2.4 million. This forbearance of certain interest and fees on customers’ accounts was conducted in accordance with the safe harbor provisions of the Truth in Lending Act as implemented by Regulation Z.
The provisions of Regulation Z address, among other areas, open-end credit, such as credit cards or home equity lines, and closed-end credit, such as car loans or mortgages, as well as certain administrative matters such as a change to the payment address. In connection with the conversion of our credit card portfolio system, the address for the payment of principal, interest and fees related to our credit card portfolio was changed and, accordingly, we did not assess certain interest and fees on customers’ accounts for a period of 60 days during the fourth quarter of 2017 in accordance with the safe harbor provisions of Regulation Z.
17 | ||
We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP. However, non-GAAP financial measures have a number of limitations, are not necessarily comparable to GAAP measures and should not be considered in isolation or viewed as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate non-GAAP financial measures may differ from that of other companies reporting non-GAAP measures with similar names. You should understand how such other companies calculate their financial measures that may be similar or have names that are similar to the non-GAAP financial measures discussed herein when comparing such non-GAAP financial measures. Our management uses the non-GAAP financial measures set forth below in its analysis of our performance.
• | “Net interest margin, as adjusted” is a non-GAAP measure herein defined as net interest income, plus non-recurring foregone interest and fees, divided by average interest earning assets. |
• | “Net income, as adjusted” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revaluation and less the tax impact of conversion-related items. |
• | “Efficiency ratio, as adjusted” is a non-GAAP measure herein defined as total noninterest expense, less non-recurring data processing expenses, divided by the sum of net interest income, noninterest income and non-recurring foregone interest and fees. |
• | “Diluted earnings per share, as adjusted” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revaluation, less the tax impact of conversion-related items, divided by the diluted weighted average shares outstanding. |
• | “Return on average assets, as adjusted” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revaluation, less the tax impact of conversion-related items, divided by average total assets. |
• | “Return on average equity, as adjusted” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revaluation, less the tax impact of conversion-related items, divided by average total equity. |
• | “Tangible common equity” is a non-GAAP measure defined as total stockholders’ equity, less intangible assets. |
• | “Return on average tangible common equity” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus the amortization of intangible assets (net of taxes), divided by average total equity net of average intangible assets. |
• | “Return on average tangible common equity, as adjusted” is a non-GAAP measure herein defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revaluation, less the tax impact of conversion-related items, plus the amortization of intangible assets (net of taxes), divided by average total equity, net of average intangible assets. |
• | “Tangible book value per share” is a non-GAAP measure defined as total stockholders’ equity, less intangible assets, divided by shares of common stock outstanding. |
18 | ||
The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:
Six months Ended June 30, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars are in thousands, except per share information) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
Net Interest Margin, as adjusted:(4) | ||||||||||||||||||||||||||||
Net interest income | $ | 28,507 | $ | 23,391 | $ | 48,911 | $ | 42,759 | $ | 33,676 | $ | 29,717 | $ | 25,327 | ||||||||||||||
Add: Non-recurring foregone interest and fees | — | — | 2,370 | — | — | — | — | |||||||||||||||||||||
Adjusted net interest income | 28,507 | 23,391 | 51,281 | 42,759 | 33,676 | 29,717 | 25,327 | |||||||||||||||||||||
Divide by average interest earning assets | 1,016,446 | 915,780 | 955,479 | 825,676 | 671,275 | 531,505 | 467,772 | |||||||||||||||||||||
Net interest margin, as adjusted | 5.66 | % | 5.15 | % | 5.37 | % | 5.18 | % | 5.02 | % | 5.59 | % | 5.41 | % | ||||||||||||||
Net Income, as adjusted: | ||||||||||||||||||||||||||||
Net income | $ | 6,135 | $ | 4,716 | $ | 7,109 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 6,857 | ||||||||||||||
Less: Bargain purchase gain, net of taxes | — | — | — | — | — | — | (1,076 | ) | ||||||||||||||||||||
Add: Non-recurring foregone interest and fees | — | — | 2,370 | — | — | — | — | |||||||||||||||||||||
Add: Non-recurring data processing expenses | — | — | 2,275 | — | — | — | — | |||||||||||||||||||||
Add: Non-recurring deferred tax revaluation | — | — | 1,386 | — | — | — | — | |||||||||||||||||||||
Less: Tax impact of conversion related items(1) | — | — | (1,847 | ) | — | — | — | — | ||||||||||||||||||||
Net income, as adjusted | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 5,781 | ||||||||||||||
Efficiency Ratio, as adjusted: | ||||||||||||||||||||||||||||
Total noninterest expense | $ | 27,128 | $ | 21,742 | $ | 47,306 | $ | 43,380 | $ | 34,817 | $ | 28,821 | $ | 24,836 | ||||||||||||||
Less: Non-recurring data processing expenses | — | — | 2,275 | — | — | — | — | |||||||||||||||||||||
Adjusted noninterest expense | 27,128 | 21,742 | 45,031 | 43,380 | 34,817 | 28,821 | 24,836 | |||||||||||||||||||||
Net interest income | 28,507 | 23,391 | 48,911 | 42,759 | 33,676 | 29,717 | 25,327 | |||||||||||||||||||||
Add: Noninterest income | 8,417 | 7,223 | 15,149 | 20,473 | 14,929 | 11,442 | 10,171 | |||||||||||||||||||||
Add: Non-recurring foregone interest and fees | — | — | 2,370 | — | — | — | — | |||||||||||||||||||||
Divide by adjusted revenue | 36,924 | 30,614 | 66,430 | 63,232 | 48,605 | 41,159 | 35,498 | |||||||||||||||||||||
Efficiency ratio, as adjusted | 73.47 | % | 71.02 | % | 67.79 | % | 68.60 | % | 71.63 | % | 70.02 | % | 69.96 | % | ||||||||||||||
Diluted Earnings per Share, as adjusted: | ||||||||||||||||||||||||||||
Net income, as adjusted(2) | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 5,781 | ||||||||||||||
Add: Convertible debt interest expense | — | — | — | — | 281 | 281 | 281 | |||||||||||||||||||||
Net income for diluted earnings per share, as adjusted | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,773 | $ | 7,074 | $ | 6,062 | ||||||||||||||
Diluted weighted average shares outstanding(3) | 11,986,310 | 11,318,023 | 11,428,000 | 11,289,044 | 10,488,036 | 10,279,548 | 9,366,596 | |||||||||||||||||||||
19 | ||
Six months Ended June 30, | Years Ended December 31, | |||||||||||||||||||||||||||
(Dollars are in thousands, except per share information) | 2018 | 2017 | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||||||||
Diluted earnings per share, as adjusted(3) | $ | 0.51 | $ | 0.42 | $ | 0.99 | $ | 0.84 | $ | 0.74 | $ | 0.69 | $ | 0.65 | ||||||||||||||
Return on Average Assets, as adjusted: | ||||||||||||||||||||||||||||
Net income, as adjusted(2) | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 5,781 | ||||||||||||||
Divide by average total assets | 1,026,770 | 922,575 | 964,946 | 832,619 | 679,595 | 541,934 | 471,400 | |||||||||||||||||||||
Return on average assets, as adjusted(4) | 1.20 | % | 1.03 | % | 1.17 | % | 1.13 | % | 1.10 | % | 1.25 | % | 1.23 | % | ||||||||||||||
Return on Average Equity, as adjusted: | ||||||||||||||||||||||||||||
Net income, as adjusted(2) | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 5,781 | ||||||||||||||
Divide by average total equity | 82,944 | 73,181 | 76,543 | 65,590 | 53,883 | 45,775 | 36,965 | |||||||||||||||||||||
Return on average equity, as adjusted(4) | 14.92 | % | 13.00 | % | 14.75 | % | 14.39 | % | 13.90 | % | 14.84 | % | 15.64 | % | ||||||||||||||
Tangible Common Equity: | ||||||||||||||||||||||||||||
Total stockholders’ equity | $ | 86,994 | $ | 76,615 | $ | 80,119 | $ | 70,748 | $ | 59,657 | $ | 50,216 | $ | 42,421 | ||||||||||||||
Less: intangible assets | — | — | — | — | 17 | 39 | 72 | |||||||||||||||||||||
Tangible common equity | $ | 86,994 | $ | 76,615 | $ | 80,119 | $ | 70,748 | $ | 59,640 | $ | 50,177 | $ | 42,349 | ||||||||||||||
Return on Average Tangible Common Equity: | ||||||||||||||||||||||||||||
Net income | $ | 6,135 | $ | 4,716 | $ | 7,109 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 6,857 | ||||||||||||||
Less: Bargain purchase gain, net of taxes | — | — | — | — | — | — | (1,076 | ) | ||||||||||||||||||||
Add: Intangible asset amortization, net of taxes | — | — | — | 10 | 14 | 20 | 33 | |||||||||||||||||||||
Net income excluding intangible amortization, as adjusted | 6,135 | 4,716 | 7,109 | 9,451 | 7,506 | 6,813 | 5,814 | |||||||||||||||||||||
Average total equity | 82,944 | 73,181 | 76,543 | 65,590 | 53,883 | 45,775 | 36,965 | |||||||||||||||||||||
Less: average intangible assets | — | — | — | 8 | 26 | 53 | 84 | |||||||||||||||||||||
Divide by average tangible common equity | 82,944 | 73,181 | 76,543 | 65,582 | 53,857 | 45,722 | 36,881 | |||||||||||||||||||||
Return on average tangible common equity(4) | 14.92 | % | 13.00 | % | 9.29 | % | 14.41 | % | 13.94 | % | 14.90 | % | 15.76 | % | ||||||||||||||
Return on Average Tangible Common Equity, as adjusted: | ||||||||||||||||||||||||||||
Net income, as adjusted(2) | $ | 6,135 | $ | 4,716 | $ | 11,293 | $ | 9,441 | $ | 7,492 | $ | 6,793 | $ | 5,781 | ||||||||||||||