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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 8, 2019

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 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 13(a) of the Exchange Act. x






ITEM 2.02. Results of Operations and Financial Condition
On February 8, 2019, Capital Bancorp, Inc. (the “Company”) issued a press release setting forth the Company’s fourth quarter and year-ended December, 31 2018 financial results (unaudited). A copy of the Company’s press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.

The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that Section, nor shall it be deemed incorporated by reference in any registration statement or other filings of the Company under the Securities Act of 1933, as amended, except as shall be set forth by specific reference in such filing.


ITEM 9.01. Financial Statements and Exhibits
(d) Exhibits

Exhibit No.
Description
99.1
Press Release, dated February 8, 2019, with respect to the Registrant's unaudited financial results for the fourth quarter and year-ended December 31, 2018.






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.                             
 
 
 
 
 
By: /s/ Alan W. Jackson
 
Name: Alan W. Jackson
 
Title: Chief Financial Officer
February 8, 2019






EXHIBIT INDEX

Exhibit Number
     
Description
99.1
 




Exhibit
Capital Bancorp Reports Results for 2018
Rockville, Maryland, February 8, 2019 – Capital Bancorp, Inc. (the “Company”) (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the “Bank”), today reported net income of $3.5 million, or $0.25 per diluted share, for the fourth quarter of 2018. In comparison, for the fourth quarter of 2017, we reported a net loss of $0.6 million, or $(0.06) per diluted share, as we incurred one-time expenses and lost revenue related to our credit card system conversion of $4.6 million. For the twelve months ended December 31, 2018, net income grew 79.6% year over year to $12.8 million, or $1.02 per diluted share. In comparison, net income for the twelve months ended December 31, 2017 was $7.1 million, or $0.62 per diluted share after giving effect to the one time items in the fourth quarter of 2017. Return on average assets was 1.27% and return on average equity was 12.26% for the fourth quarter of 2018. For the comparable period in 2017, the return on average assets was (0.25)% and the return on average equity was (3.11)%.
2018 Highlights
•
During the fourth quarter of 2018, the underwriters of the Company’s initial public offering that closed on September 28, 2018,  purchased an additional 334,310 shares of the Company’s common stock for approximately $3.9 million in connection with the exercise in full of their option to purchase additional shares. The Company issued and sold an aggregate of 1,834,310 shares of its common stock in the offering, raising approximately $21.4 million of primary capital to support growth.
•
Net income increased to $3.5 million for fourth quarter of 2018 compared to a net loss of $644 thousand for the fourth quarter of 2017.
•
Book value per share increased 20.7% to $8.38 at December 31, 2018 from $6.94 at December 31, 2017, driven by earnings growth of the Company and the impact of the initial public offering of common stock.
•
In the fourth quarter, total loans increased $44.9 million or 4.7% to $1.0 billion at December 31, 2018, compared to $955.4 million at September 30, 2018. Total loans increased $112.8 million or 12.7% from $887.4 million at December 31, 2017.
•
In the fourth quarter, total deposits increased 4.8% to $955.2 million at December 31, 2018, compared to $911.1 million at September 30, 2018, and increased by $50.3 million from $904.9 million at December 31, 2017.
•
For the twelve months ended December 31, 2018, average noninterest bearing deposits increased 22.8% to $215.8 million, compared to $175.7 million for the twelve months ended December 31, 2017.
•
Net interest margin, for the three months ended December 31, 2018, increased 52 basis points to 5.46% compared to 4.94% for the three months ended December 31, 2017, primarily due to non-recurring foregone interest and fees on our credit card portfolio in the fourth quarter of 2017. Net interest margin decreased 10 basis points compared to the quarter ended September 30, 2018.
•
Asset quality remained steady during 2018, as non-performing assets as a percentage of total assets totaled 0.44% at December 31, 2018 compared to 0.54% at December 31, 2017. For the quarter, net chargeoffs to average loans were 0.09%, down 2 bps from September 30, 2018.

1

•
OpenSky®, the Bank's secured, digitally driven nationwide credit card platform, realized benefits of cost initiatives and scale to meaningfully lower its operating costs on a per open accounts basis.
•
Church Street Mortgage, the Bank's residential mortgage banking arm, remained profitable for the quarter even as volumes fell from previous levels. During the quarter, the fintech digital mortgage platform was successfully launched.

“We continued to execute our strategy in the fourth quarter, posting net income of $3.5 million,” stated Ed Barry, the Company’s Chief Executive Officer.  “Our disciplined approach to client selection contributed to the expansion of core net interest margin excluding credit card. Loan and deposits growth accelerated during the quarter, and we were also able to capitalize on market disruption and hire some great talent on the sales front.”

COMPARATIVE FINANCIAL HIGHLIGHTS (unaudited)
 
 
 
 
 
Quarter Ended
 
4th Quarter
 
Twelve Months Ended
 
 
 
December 31,
 
2018 - 2017
 
December 31,
 
2018 - 2017
(in thousands except per share data)
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Earnings Summary
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
18,238

 
$
14,681

 
24.2
 %
 
$
69,127

 
$
56,666

 
22.0
 %
Interest expense
3,348

 
2,120

 
57.9
 %
 
11,239

 
7,755

 
44.9
 %
Net interest income
14,890

 
12,561

 
18.5
 %
 
57,888

 
48,911

 
18.4
 %
Provision for loan losses
500

 
785

 
(36.3
)%
 
2,140

 
2,655

 
(19.4
)%
Noninterest income
3,466

 
2,968

 
16.8
 %
 
16,124

 
15,149

 
6.4
 %
Noninterest expense
13,094

 
13,327

 
(1.7
)%
 
54,123

 
47,306

 
14.4
 %
Income before income taxes
4,762

 
1,417

 
236.1
 %
 
17,749

 
14,099

 
25.9
 %
Income tax expense
1,276

 
2,061

 
(38.1
)%
 
4,982

 
6,990

 
(28.7
)%
Net income (loss)
$
3,486

 
$
(644
)
 
(641.3
)%
 
$
12,767

 
$
7,109

 
79.6
 %
Weighted average common shares - Basic(1)
13,554

 
11,270

 
20.3
 %
 
12,116

 
11,261

 
7.6
 %
Weighted average common shares - Diluted(1)
13,866

 
11,626

 
19.3
 %
 
12,462

 
11,428

 
9.0
 %
Earnings per common share - Basic(1)
$
0.26

 
$
(0.06
)
 
(533.3
)%
 
$
1.05

 
$
0.63

 
66.7
 %
Earnings per common share - Diluted(1)
$
0.25

 
$
(0.06
)
 
(516.7
)%
 
$
1.02

 
$
0.62

 
64.5
 %
Return on average assets
1.27
%
 
(0.25
)%
 
(608.0
)%
 
1.22
%
 
1.17
%
 
4.3
 %
Return on average equity
12.26
%
 
(3.11
)%
 
(494.2
)%
 
13.94
%
 
14.75
%
 
(5.5
)%
(1) Gives effect to a four-for-one common stock split completed effective August 15, 2018.
    



2

 
Quarter Ended
 
4th Quarter
 
Quarter Ended
 
December 31,
 
2018 - 2017
 
September 30,
 
June 30,
 
March 31,
(in thousands except per share data)
2018
 
2017
 
% Change
 
2018
 
2018
 
2018
Balance Sheet Highlights
 
 
 
 
 
 
 
 
 
 
 
Assets
$
1,105,058

 
$
1,026,009

 
7.7
 %
 
$
1,072,905

 
$
1,067,786

 
$
1,017,613

Investment securities
46,932

 
54,029

 
(13.1
)%
 
48,067

 
49,799

 
51,706

Mortgage loans held for sale
18,526

 
26,344

 
(29.7
)%
 
21,373

 
21,370

 
17,353

Loans
1,000,268

 
887,420

 
12.7
 %
 
955,412

 
920,783

 
900,033

Allowance for loan losses
11,308

 
10,033

 
12.7
 %
 
10,892

 
10,447

 
10,157

Deposits
955,240

 
904,899

 
5.6
 %
 
911,116

 
938,364

 
897,153

Borrowings and repurchase agreements
7,332

 
13,260

 
(44.7
)%
 
28,239

 
14,445

 
12,071

Senior promissory note
—

 
2,000

 
(100.0
)%
 
—

 
—

 
—

Subordinated debentures
15,393

 
15,361

 
0.2
 %
 
15,386

 
15,378

 
15,369

Total stockholders' equity
114,564

 
80,119

 
43.0
 %
 
106,657

 
86,994

 
83,453

Tangible common equity
114,564

 
80,119

 
43.0
 %
 
106,657

 
86,994

 
83,453

Common shares outstanding
13,672

 
11,537

 
18.5
 %
 
13,191

 
11,661

 
11,595

Tangible book value per share
$
8.38

 
$
6.94

 
20.7
 %
 
$
8.09

 
$
7.46

 
$
7.19


3

Operating Results
Net interest margin increased 52 basis points to 5.46% for the three months ended December 31, 2018 as compared to 4.94% for the three months ended December 31, 2017, largely due to non-recurring foregone interest and fees on our credit card portfolio during our system conversion in the fourth quarter of 2017. For the three months ended December 31, 2018, our average interest-earning assets increased by $73.8 million, compared to the three months ended December 31, 2017, while the average yield on our interest-earning assets increased by 91 basis points. In addition, our average interest-bearing liabilities increased by $2.5 million from the fourth quarter of 2017 to the fourth quarter of 2018, with the respective average rate increasing by 66 basis points. As a result, net interest income increased $2.3 million, or 18.5%, to $14.9 million for the three months ended December 31, 2018 compared to the same period in 2017.
For the twelve months ended December 31, 2018, net interest margin was 5.59%, an increase of 47 basis points over the same period in 2017. This increase included an average interest-earning assets increase of $80.3 million and an average interest-bearing liabilities increase of $23.9 million compared to the same twelve month period in 2017. In addition, the average yields on interest-earning assets and interest-bearing liabilities increased 74 basis points and 44 basis points , respectively. Net interest income increased $9.0 million , or 18.4% for the twelve months ended December 31, 2018 compared to the same period in 2017.
During the three months ended December 31, 2018, we recorded a provision for loan losses of $500 thousand on net chargeoffs for the fourth quarter of 2018 of $83 thousand, or 0.01% of average loans, annualized. During the three months ended December 31, 2017, our provision for loan losses was $785 thousand, as net chargeoffs for the fourth quarter of 2017 were $444 thousand, or 0.05% of average loans, annualized. For the twelve months ended December 31, 2018 and 2017, our provision for loan losses was $2.1 million and $2.7 million, respectively. Our allowance for loan losses was $11.3 million, or 1.13% of loans, at December 31, 2018, which provided approximately 242% coverage of nonperforming assets at such date, compared to $10.0 million, or 1.13% of loans, and approximately 186% coverage of nonperforming assets at December 31, 2017.
Noninterest income was $3.5 million and $3.0 million for the three months ended December 31, 2018 and 2017, respectively. For the twelve months ended December 31, 2018 and 2017, noninterest income was $16.1 million and $15.1 million, respectively. The increase in noninterest income during the twelve months ended December 31, 2018 was driven by increases in credit card fees partially offset by lower mortgage banking revenue. Noninterest income decreased $774 thousand during the three months ended December 31, 2018 related primarily to decreases in credit card fees and mortgage banking revenue.
Noninterest expense was $13.1 million and $13.3 million for the three months ended December 31, 2018 and 2017, respectively, and $54.1 million and $47.3 million for the twelve months ended December 31, 2018 and 2017, respectively. The increase in noninterest expense during the twelve-month period ended December 31, 2018 was driven primarily by increases in data processing costs, salaries and benefits, occupancy, and other expenses. During the fourth quarter of 2017, we converted our credit card processing system to a new vendor to further scale the business. Due to projected growth of our credit card, mortgage and commercial banking businesses, data processing costs will continue to be a significant expense.
Income tax expense was $5.0 million for the twelve months ended December 31, 2018, as compared to $7.0 million for the same period in 2017, a decrease of 28.7% as a result of the Tax Cuts and Jobs Act of 2017 which reduced the corporate tax rate to 21% beginning in 2018.




4

Financial Condition
Total assets at December 31, 2018 were $1.1 billion, up 7.7% as compared to $1.0 billion at December 31, 2017. Gross loans were $1.0 billion, excluding mortgage loans held for sale, as of December 31, 2018, compared to $887.4 million at December 31, 2017, an increase of 12.7%. Deposits were $955.2 million at December 31, 2018, an increase of 5.6%, as compared to $904.9 million at December 31, 2017.
Nonperforming assets were $4.8 million, or 0.44% of total assets, as of December 31, 2018. Comparatively, nonperforming assets were $5.5 million, or 0.54% of total assets, at December 31, 2017. Of the $4.8 million in total nonperforming assets as of December 31, 2018, nonperforming loans represented $4.7 million, of which troubled debt restructurings amounted to $284 thousand. Also included in nonperforming assets at such date was other real estate owned which represented $142 thousand.
Stockholders’ equity totaled $114.6 million as of December 31, 2018, compared to $80.1 million at December 31, 2017. The increase was due to increased earnings and the initial public offering, including the exercise in full by the underwriters of their option to purchase additional shares, of approximately $21.4 million. As of December 31, 2018, the Bank's capital ratios continue to exceed the regulatory requirements for a “well-capitalized” institution.

5

Consolidated Statements of Income (unaudited)
 
 
 
 
 
 
 
Three Months Ended December 31,
 
Twelve Months Ended December 31,
(in thousands except per share data)
2018
 
2017
 
2018
 
2017
Interest income
 
 
 
 
 
 
 
Loans, including fees
$
17,774

 
$
14,214

 
$
67,229

 
$
54,996

Investment securities available for sale
255

 
284

 
1,041

 
1,067

Federal funds sold and other
209

 
183

 
857

 
602

Total interest income
18,238

 
14,681

 
69,127

 
56,665

Interest expense

 

 
 
 
 
Deposits
2,916

 
1,802

 
9,792

 
6,434

Borrowed funds
432

 
318

 
1,447

 
1,321

Total interest expense
3,348

 
2,120

 
11,239

 
7,755

Net interest income
14,890

 
12,561

 
57,888

 
48,910

Provision for loan losses
500

 
785

 
2,140

 
2,655

Net interest income after provision for loan losses
14,390

 
11,776

 
55,748

 
46,255

Noninterest income
 
 
 
 
 
 
 
Service charges on deposits
119

 
125

 
484

 
460

Credit card fees
1,439

 
(15
)
 
6,048

 
4,014

Mortgage banking revenue
2,097

 
2,799

 
9,477

 
10,377

Loss on sale of investment securities available for sale
—

 
—

 
(2
)
 
—

Loss on sale of foreclosed real estate
(21
)
 
(52
)
 
(21
)
 
(52
)
Loss on disposal of premises and equipment
(276
)
 
(77
)
 
(276
)
 
(77
)
Other fees and charges
108

 
187

 
414

 
427

Total noninterest income
3,466

 
2,967

 
16,124

 
15,149

Noninterest expenses
 
 
 
 
 
 
 
Salaries and employee benefits
6,081

 
5,551

 
25,164

 
23,819

Occupancy and equipment
1,078

 
1,052

 
4,319

 
3,829

Professional fees
759

 
484

 
2,124

 
1,875

Data processing
3,618

 
5,127

 
15,439

 
10,621

Advertising
347

 
470

 
1,460

 
1,922

Loan processing
266

 
285

 
1,077

 
1,409

Other real estate expenses, net
(10
)
 
(82
)
 
28

 
19

Other operating
955

 
439

 
4,512

 
3,814

Total noninterest expenses
13,094

 
13,326

 
54,123

 
47,308

Income before income taxes
4,762

 
1,417

 
17,749

 
14,096

Income tax expense
1,276

 
2,061

 
4,982

 
6,990

Net income
$
3,486

 
$
(644
)
 
$
12,767

 
$
7,106


6

Consolidated Balance Sheets (unaudited)
 
 
 
(in thousands except per share data)
December 31, 2018
 
December 31, 2017
Assets
 
 
 
Cash and due from banks
$
10,431

 
$
8,189

Interest bearing deposits at other financial institutions
22,007

 
40,356

Federal funds sold
2,285

 
3,766

Total cash and cash equivalents
34,723

 
52,311

Investment securities available for sale
46,932

 
54,029

Restricted investments
2,503

 
2,369

Loans held for sale
18,526

 
26,344

Loans receivable, net of allowance for loan losses
988,960

 
877,387

Premises and equipment, net
2,975

 
2,601

Accrued interest receivable
4,462

 
3,867

Deferred income taxes
3,654

 
3,382

Foreclosed real estate
142

 
93

Prepaid income taxes
90

 
1,532

Other assets
2,091

 
2,094

Total assets
$
1,105,058

 
$
1,026,009

 
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest bearing
$
242,259

 
$
196,635

Interest bearing
712,981

 
708,264

Total deposits
955,240

 
904,899

Securities sold under agreements to repurchase
3,332

 
11,260

Federal Home Loan Bank advances
2,000

 
2,000

Other borrowed funds
17,393

 
17,361

Accrued interest payable
1,565

 
1,084

Other liabilities
10,964

 
9,286

Total liabilities
990,494

 
945,890

 
 
 
 
Stockholders' equity
 
 
 
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding at December 31, 2018 and 2017
—

 
—

Common stock, $.01 par value; 49,000,000 shares authorized; 13,672,479 and 11,537,196 issued and outstanding at December 31, 2018 and 2017, respectively(1)
137

 
115

Additional paid-in capital(1)
49,321

 
27,051

Retained earnings
65,701

 
53,200

Accumulated other comprehensive loss
(595
)
 
(247
)
Total stockholders' equity
114,564

 
80,119

Total liabilities and stockholders' equity
$
1,105,058

 
$
1,026,009

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

7


The following tables show the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
 
Three Months Ended December 31,
 
2018
 
2017
 
Average
Outstanding
Balance
 
Interest Income/
Expense
 
Average
Yield/
Rate(1)
 
Average
Outstanding
Balance
 
Interest Income/
Expense
 
Average
Yield/
Rate(1)
 
(Dollars in thousands)
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits
$
35,797

 
$
161

 
1.78
%
 
$
48,263

 
$
168

 
1.38
%
Federal funds sold
1,509

 
9

 
2.39
%
 
2,184

 
6

 
1.10
%
Restricted stock
3,229

 
39

 
4.75
%
 
2,411

 
9

 
1.50
%
Investment securities
47,365

 
255

 
2.14
%
 
55,290

 
284

 
2.04
%
Loans(2)(3)(4)
994,110

 
17,774

 
7.09
%
 
900,095

 
14,214

 
6.27
%
Total interest earning assets
1,082,010

 
18,238

 
6.69
%
 
1,008,243

 
14,681

 
5.78
%
Noninterest earning assets
8,557

 
 
 
 
 
9,844

 
 
 
 
Total assets
$
1,090,567

 
 
 
 
 
$
1,018,087

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits
$
683,389

 
2,916

 
1.69
%
 
$
698,866

 
1,802

 
1.02
%
Borrowed funds
49,998

 
432

 
3.43
%
 
32,023

 
318

 
3.94
%
Total interest bearing liabilities
733,387

 
3,348

 
1.81
%
 
730,889

 
2,120

 
1.15
%
Noninterest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Noninterest bearing liabilities
10,022

 
 
 
 
 
9,560

 
 
 
 
Noninterest bearing deposits
234,357

 
 
 
 
 
195,607

 
 
 
 
Stockholders’ equity
112,801

 
 
 
 
 
82,031

 
 
 
 
Total liabilities and stockholders’ equity
$
1,090,567

 
 
 
 
 
$
1,018,087

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest spread(5)
 
 
 
 
4.88
%
 
 
 
 
 
4.63
%
Net interest income
 
 
$
14,890

 
 
 
 
 
$
12,561

 
 
Net interest margin(6)
 
 
 
 
5.46
%
 
 
 
 
 
4.94
%
Net interest margin excluding credit card portfolio
 
 
 
 
4.28
%
 
 
 
 
 
4.27
%
_______________
(1) 
Annualized.
(2) 
Includes loans held for sale.
(3) 
Includes nonaccrual loans.
(4) 
Interest income includes amortization of deferred loan fees, net of deferred loan costs.
(5) 
Net interest spread is the difference between interest rates earned on interest earning assets and interest rates paid on interest bearing liabilities.
(6) 
Net interest margin is a ratio calculated as annualized net interest income divided by average interest earning assets for the same period.

8

 
Twelve Months Ended December 31,
 
2018
 
2017
 
Average
Outstanding
Balance
 
Interest Income/
Expense
 
Average
Yield/
Rate
 
Average
Outstanding
Balance
 
Interest Income/
Expense
 
Average
Yield/
Rate
 
(Dollars in thousands)
Assets
 
 
 
 
 
 
 
 
 
 
 
Interest earning assets:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits
$
41,858

 
$
687

 
1.64
%
 
$
45,385

 
$
481

 
1.06
%
Federal funds sold
1,537

 
27

 
1.79
%
 
1,451

 
14

 
0.96
%
Restricted stock
2,724

 
143

 
5.26
%
 
2,521

 
108

 
4.27
%
Investment securities
50,074

 
1,041

 
2.08
%
 
52,419

 
1,067

 
2.04
%
Loans(1)(2)(3)
939,538

 
67,229

 
7.16
%
 
853,703

 
54,996

 
6.44
%
Total interest earning assets
1,035,731

 
69,127

 
6.67
%
 
955,479

 
56,666

 
5.93
%
Noninterest earning assets
10,001

 
 
 
 
 
9,467

 
 
 
 
Total assets
$
1,045,732

 
 
 
 
 
$
964,946

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing deposits
$
689,311

 
9,792

 
1.42
%
 
$
671,639

 
6,434

 
0.96
%
Borrowed funds
39,170

 
1,447

 
3.70
%
 
32,893

 
1,321

 
4.02
%
Total interest bearing liabilities
728,481

 
11,239

 
1.54
%
 
704,532

 
7,755

 
1.10
%
Noninterest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Noninterest bearing liabilities
9,828

 


 


 
8,164

 


 


Noninterest bearing deposits
215,833

 


 


 
175,707

 


 


Stockholders’ equity
91,590

 


 


 
76,543

 


 


Total liabilities and stockholders’ equity
$
1,045,732

 


 


 
$
964,946

 


 


 
 
 
 
 
 
 
 
 
 
 
 
Net interest spread(4)
 
 


 
5.13
%
 
 
 


 
4.83
%
Net interest income
 
 
$
57,888

 
 
 
 
 
$
48,911

 
 
Net interest margin(5)
 
 
 
 
5.59
%
 
 
 
 
 
5.12
%
Net interest margin excluding credit card portfolio
 
 
 
 
4.28
%
 
 
 
 
 
4.31
%
_______________

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


9

HISTORICAL FINANCIAL HIGHLIGHTS (unaudited)
 
 
 
 
 
 
Quarter Ended
(in thousands except per share data)
 
December 31,
2018
 
September 30,
2018
 
June 30,
2018
 
March 31,
2018
 
December 31,
2017
Earnings:
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,486

 
$
3,146

 
$
3,145

 
$
2,990

 
$
(644
)
Earnings per common share, diluted(1)
 
$
0.25

 
$
0.26

 
$
0.26

 
$
0.25

 
$
(0.06
)
Net interest margin
 
5.46
%
 
5.56
%
 
5.49
%
 
5.79
%
 
4.94
 %
Net interest margin excluding credit card portfolio
 
4.28
%
 
4.26
%
 
4.25
%
 
4.25
%
 
4.27
 %
Return on average assets
 
1.27
%
 
1.19
%
 
1.22
%
 
1.19
%
 
(0.25
)%
Return on average equity
 
12.26
%
 
13.69
%
 
14.77
%
 
14.86
%
 
(3.11
)%
Efficiency ratio
 
71.34
%
 
74.21
%
 
73.64
%
 
73.66
%
 
85.82
 %
Balance Sheet:
 
 
 
 
 
 
 
 
 
 
Loans
 
$
1,000,268

 
$
955,412

 
$
920,783

 
$
900,033

 
$
887,420

Deposits
 
955,240

 
911,116

 
938,364

 
897,153

 
904,899

Total assets
 
1,105,058

 
1,072,905

 
1,067,786

 
1,017,613

 
1,026,009

Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
 
0.44
%
 
0.42
%
 
0.35
%
 
0.39
%
 
0.54
 %
Nonperforming loans to total loans
 
0.47
%
 
0.44
%
 
0.35
%
 
0.41
%
 
0.61
 %
Net chargeoffs to average loans (YTD annualized)
 
0.09
%
 
0.11
%
 
0.16
%
 
0.17
%
 
0.15
 %
Allowance for loan losses to total loans
 
1.13
%
 
1.14
%
 
1.13
%
 
1.13
%
 
1.13
 %
Allowance for loan losses to non-performing loans
 
241.68
%
 
257.83
%
 
320.78
%
 
273.66
%
 
185.57
 %
Bank Capital Ratios:
 
 
 
 
 
 
 
 
 
 
Total risk based capital ratio
 
12.25
%
 
12.36
%
 
12.34
%
 
12.30
%
 
12.03
 %
Tier 1 risk based capital ratio
 
11.00
%
 
11.11
%
 
11.09
%
 
11.05
%
 
10.78
 %
Leverage ratio
 
9.06
%
 
9.03
%
 
8.91
%
 
8.83
%
 
8.55
 %
Common equity Tier 1 ratio
 
11.00
%
 
11.11
%
 
11.09
%
 
11.05
%
 
10.78
 %
Tangible common equity
 
8.89
%
 
8.72
%
 
8.58
%
 
8.78
%
 
8.46
 %
Composition of Loans:
 
 
 
 
 
 
 
 
Residential real estate
 
$
407,844

 
$
388,141

 
$
366,465

 
$
354,818

 
$
342,684

Commercial real estate
 
278,691

 
276,726

 
271,800

 
269,357

 
259,853

Construction real estate
 
157,586

 
144,012

 
149,192

 
150,820

 
144,932

Commercial and industrial
 
122,263

 
113,473

 
101,752

 
96,927

 
108,982

Credit card
 
34,673

 
33,821

 
32,522

 
28,757

 
31,507

Other
 
1,202

 
1,270

 
1,244

 
1,149

 
1,053

Mortgage Metrics (CSM only):
 
 
 
 
 
 
 
 
 
 
Origination of loans held for sale
 
$
70,826

 
$
81,665

 
$
95,570

 
$
87,279

 
$
109,892

Proceeds from loans held for sale, net of gains
 
73,883

 
80,603

 
89,936

 
93,955

 
111,851

Purchase volume as a % of originations
 
86.7
%
 
92.7
%
 
85.1
%
 
55.4
%
 
48.1
 %
Gain on sale of loans
 
$
1,920

 
$
2,227

 
$
2,239

 
$
2,092

 
$
2,569

Gain on sale as a % of loans sold
 
2.3
%
 
2.7
%
 
2.4
%
 
2.2
%
 
2.3
 %
Credit Card Portfolio Metrics:
 
 
 
 
 
 
 
 
 
 
Total active customer accounts
 
169,981

 
170,160

 
166,661

 
158,362

 
149,226

Total loans
 
$
34,673

 
$
33,821

 
$
32,522

 
$
28,757

 
$
31,506

Total deposits at the Bank
 
$
59,954

 
$
59,978

 
$
58,951

 
$
56,333

 
$
53,625

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


10

ABOUT CAPITAL BANCORP, INC.
Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Company’s wholly-owned subsidiary, Capital Bank, N.A., is the eighth largest bank headquartered in Maryland. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp has assets of approximately $1.1 billion at December 31, 2018 and its common stock is traded on the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements (as defined by the Private Securities Litigation Reform Act of 1995). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.  Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

FINANCIAL CONTACT: Alan Jackson (240) 283-0402
MEDIA CONTACT: Ed Barry (240) 283-1912
WEB SITE: www.CapitalBankMD.com


11