Document




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): October 22, 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
Securities registered pursuant to Section 12(b) of the Act:

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




ITEM 2.02. Results of Operations and Financial Condition

On October 22, 2019, Capital Bancorp, Inc. (the “Company”) issued a press release setting forth the Company’s third quarter 2019 unaudited financial results. 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 October 22, 2019, with respect to the Registrant's unaudited financial results for the third quarter ended September 30, 2019.




2



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
October 22, 2019


3



EXHIBIT INDEX

Exhibit Number
     
Description
99.1
 




4
Exhibit
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13157481&doc=3


Capital Bancorp Reports Record Third Quarter 2019 Earnings
Increases in Net Interest Income and Noninterest Income contributed to a 42% year-over-year increase in Net Income
Rockville, Maryland, October 22, 2019 (GLOBE NEWSWIRE) – Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $4.5 million, or $0.32 per diluted share, for the third quarter of 2019. By comparison, net income was $3.1 million, or $0.26 per diluted share, for the third quarter of 2018. Return on average assets was 1.42% and return on average equity was 14.04% for the third quarter of 2019.
"The third quarter saw continued robust growth in commercial loans and deposits. Despite fierce competition and a declining rate environment, our margin remained stable, which is a testament to our solutions-driven approach, sales discipline and quality hirings. The mortgage and credit card businesses continue to experience higher than anticipated growth and profits to complement and enhance the commercial franchise," said Ed Barry, CEO of Capital Bancorp.
2019 Third Quarter Highlights
Record Net Income - Net income for the third quarter of 2019 increased 11% to $4.5 million compared to $4.0 million for the second quarter of 2019. Diluted earnings per share for the three months ended September 30, 2019 was $0.32, compared to $0.29 per share for the three months ended June 30, 2019. Return on average assets was 1.42%, an increase of 3 basis points compared to the second quarter of 2019. Return on average equity for the third quarter of 2019 was 14.04%, compared to 13.23% for the previous quarter.
Robust Loan Growth - For the quarter ended September 30, 2019, total loans increased $84.0 million, or 8%, to $1.14 billion compared to $1.06 billion at June 30, 2019. Loans increased year over year with growth of $184.9 million, or 19%, from $955.4 million at September 30, 2018. Average loan balances have increased 15% year over year, with the largest growth from residential real estate and commercial loans.
Strong Core Deposit Growth and Improving Deposit Profile - The Company continues to execute on its strategic initiative to improve the deposit portfolio mix away from wholesale time deposits. Accordingly, at September 30, 2019, noninterest bearing deposits increased by $13.9 million, or 20% annualized, compared to June 30, 2019. The growth was partially driven by a 5% increase in OpenSky® deposits of $4.0 million for the three months ended September 30, 2019. Noninterest bearing deposits increased 25% to $293.4 million at September 30, 2019, compared to $234.1 million at September 30, 2018. The cost of interest bearing deposits declined 1 basis point to 1.83% compared to the second quarter of 2019, and the cost of borrowed funds decreased 39 basis points to 3.19% due to in part to two market rate decreases in the third quarter.
Stable Net Interest Margin - The net interest margin improved 4 basis points to 5.83% for the third quarter of 2019 compared to the prior quarter, and increased 27 basis points from 5.56% in the same quarter of the previous year. The quarter over quarter increase this year was primarily

1


due to an increase in loan yield. Excluding credit card loans, the net interest margin remained flat for the three months ended September 30, 2019 at 4.37% compared to the prior quarter, and increased from 4.26% in the same quarter of 2018.
Credit Card Issuances Continue at a Record Pace - OpenSky® credit card issuances continue at higher levels with new originations for the quarter totaling 31,400, compared to 36,700 in the prior quarter due to seasonal factors. New originations increased 11,700, or 59%, from 19,700 in the third quarter of 2018. Our enhanced customer application and improved mobile servicing functionality contributed to an increase in customer accounts of approximately 52,000, or 30%, from September 30, 2018, and exceeded 220,000 at September 30, 2019.
Profitable Mortgage Business - The Bank's residential mortgage banking division increased the number of loans originated by 40% compared to the previous quarter, and continued to contribute to the Company's results of operations for the quarter with higher gains on sales. The decline in gain-on-sale margin during the third quarter is attributable to the large increase in price sensitive refinance activity driven by the lower rate environment.
Sound Asset Quality - Non-performing assets as a percentage of total assets decreased to 0.51% at September 30, 2019, compared to 0.57% at June 30, 2019, and increased 9 basis points from 0.42% at September 30, 2018. The quarterly decrease is due to a reduction of non-performing loans of approximately $302 thousand. The increase from the previous year is attributable to a single borrower relationship totaling $2.1 million that is well secured, on which no impairment is expected. As such, there have been no losses related to this increase in non-performing assets. Net charge-offs for the nine months ended September 30, 2019 were $369 thousand, a decrease from $781 thousand for the same period last year.




2


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
3rd Quarter
 
Nine Months Ended
 
YTD
 
September 30,
 
2019 vs. 2018
 
September 30,
 
2019 vs. 2018
(in thousands except per share data)
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
Earnings Summary
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
22,354

 
$
17,447

 
28.1
%
 
$
60,961

 
$
50,890

 
19.8
 %
Interest expense
4,170

 
2,955

 
41.1
%
 
11,502

 
7,891

 
45.8
 %
Net interest income
18,184

 
14,492

 
25.5
%
 
49,459

 
42,999

 
15.0
 %
Provision for loan losses
1,071

 
495

 
116.4
%
 
1,869

 
1,640

 
14.0
 %
Noninterest income
7,221

 
4,240

 
70.3
%
 
17,240

 
12,657

 
36.2
 %
Noninterest expense
18,228

 
13,900

 
31.1
%
 
48,768

 
41,028

 
18.9
 %
Income before income taxes
6,106

 
4,337

 
40.8
%
 
16,062

 
12,988

 
23.7
 %
Income tax expense
1,625

 
1,190

 
36.6
%
 
4,239

 
3,706

 
14.4
 %
Net income
$
4,481

 
$
3,147

 
42.4
%
 
$
11,823

 
$
9,282

 
27.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares - Basic
13,728

 
11,720

 
17.1
%
 
13,714

 
11,632

 
17.9
 %
Weighted average common shares - Diluted
13,986

 
12,103

 
15.6
%
 
13,922

 
12,033

 
15.7
 %
Earnings - Basic(1)
$
0.33

 
$
0.27

 
22.2
%
 
$
0.86

 
$
0.80

 
7.5
 %
Earnings - Diluted(1)
$
0.32

 
$
0.26

 
23.1
%
 
$
0.85

 
$
0.77

 
10.4
 %
Return on average assets
1.42
%
 
1.19
%
 
19.3
%
 
1.35
%
 
1.20
%
 
12.5
 %
Return on average equity
14.04
%
 
13.69
%
 
2.6
%
 
12.93
%
 
14.61
%
 
(11.5
)%



 
Quarter Ended
 
3rd Quarter
 
Quarter Ended
 
September 30,
 
2019 vs. 2018
 
June 30,
 
March 31,
 
December 31,
(in thousands except per share data)
2019
 
2018
 
% Change
 
2019
 
2019
 
2018
Balance Sheet Highlights
 
 
 
 

 
 
 
 
 
 
Assets
$
1,311,407

 
$
1,072,905

 
22.2
 %
 
$
1,234,157

 
$
1,123,752

 
$
1,105,058

Investment securities available for sale
37,073

 
48,067

 
(22.9
)%
 
39,157

 
46,080

 
46,932

Mortgage loans held for sale
68,982

 
21,373

 
222.8
 %
 
47,744

 
21,630

 
18,526

Loans receivable (1)
1,140,310

 
955,412

 
19.4
 %
 
1,056,290

 
1,007,928

 
1,000,268

Allowance for loan losses
12,808

 
10,892

 
17.6
 %
 
11,913

 
11,347

 
11,308

Deposits
1,112,444

 
911,116

 
22.1
 %
 
1,037,004

 
967,722

 
955,240

Borrowings and repurchase agreements
35,556

 
28,239

 
25.9
 %
 
38,889

 
3,010

 
7,332

Subordinated debentures
15,416

 
15,386

 
0.2
 %
 
15,409

 
15,401

 
15,393

Total stockholders' equity
127,829

 
106,657

 
19.9
 %
 
123,118

 
118,550

 
114,564

Tangible common equity
127,829

 
106,657

 
19.9
 %
 
123,118

 
118,550

 
114,564

 
 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
13,783

 
13,191

 
4.5
 %
 
13,719

 
13,713

 
13,672

Tangible book value per share
$
9.27

 
$
8.09

 
14.6
 %
 
$
8.97

 
$
8.65

 
$
8.38

_______________
(1) Loans are reflected net of deferred fees and costs.

3


Operating Results - three months ended September 30, 2019 compared to three months ended September 30, 2018
Net interest income increased $3.7 million, or 25%, to $18.2 million for the three months ended September 30, 2019 compared to the same period in 2018. Net interest margin increased 27 basis points to 5.83% for the three months ended September 30, 2019 from 5.56% for the three months ended September 30, 2018. For the three months ended September 30, 2019, our average interest-earning assets increased by $202.3 million, or 20%, compared to the three months ended September 30, 2018, and the average yield on our interest-earning assets increased by 48 basis points. In comparison, our average interest-bearing liabilities increased $117.0 million, or 16%, from the third quarter of 2018 to the third quarter of 2019, with the respective average rate increasing by 35 basis points.
Strong loan growth during the three months ended September 30, 2019 led to a provision for loan losses of $1.1 million, compared to $495 thousand during the three months ended September 30, 2018. Net charge-offs for the third quarter of 2019 were $188 thousand, or 0.07% of average loans, annualized. Net charge-offs for the third quarter of 2018 were $50 thousand, or 0.04% of average loans, annualized.
Noninterest income increased by $3.0 million, or 70% from $4.2 million for the three months ended September 30, 2018 to $7.2 million for the three months ended September 30, 2019, due to increased credit card fees and mortgage banking revenues.
Noninterest expense was $18.2 million and $13.9 million for the three months ended September 30, 2019 and 2018, respectively. The increase in noninterest expense was driven primarily by increases in salaries and benefits, which include commissions paid on mortgage originations, and to a lesser degree by increases in data processing expenses, advertising, and other operating expenses. Other operating expenses were also impacted by a $216 thousand credit to our FDIC assessment expense in the third quarter of 2019 as a result of the FDIC Deposit Insurance Fund exceeding 1.38% of insured deposits at June 30, 2019.

Operating Results - nine months ended September 30, 2019 compared to nine months ended September 30, 2018
Net interest income increased $6.5 million, or 15%, to $49.5 million for the nine months ended September 30, 2019 compared to the same period in 2018. Net interest margin increased 7 basis points to 5.70% for the nine months ended September 30, 2019 from 5.63% for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, our average interest-earning assets increased by $138.1 million, compared to the nine months ended September 30, 2018, and the average yield on our interest-earning assets increased by 37 basis points. In comparison, our average interest-bearing liabilities increased $63.0 million from the third quarter of 2018 to the third quarter of 2019, with the respective average rate increasing by 50 basis points.
During the nine months ended September 30, 2019, we recorded a provision for loan losses of $1.9 million, compared to $1.6 million during the nine months ended September 30, 2018. Net charge-offs for the nine months ended September 30, 2019 were $369 thousand, or 0.05% of average loans, annualized. Net charge-offs for the same period in 2018 were $781 thousand, or 0.11% of average loans, annualized.
Noninterest income increased by $4.6 million, or 36% from $12.7 million for the nine months ended September 30, 2018 to $17.2 million for the nine months ended September 30, 2019, due largely to increased mortgage banking revenue.
Noninterest expense was $48.8 million and $41.0 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in noninterest expense was driven primarily by increases in salaries and benefits, which include commissions paid on mortgage originations, professional fees and other expenses.

4



Financial Condition
Total assets at September 30, 2019 were $1.3 billion, up 22% as compared to $1.1 billion at September 30, 2018. Gross loans, excluding mortgage loans held for sale, were $1.1 billion as of September 30, 2019, compared to $955.4 million at September 30, 2018, an increase of 19%. Deposits were $1.1 billion at September 30, 2019, an increase of 22%, as compared to $911.1 million at September 30, 2018.
Our allowance for loan losses was $12.8 million, or 1.12% of loans, at September 30, 2019, which provided approximately 196% coverage of nonperforming loans at such date, compared to $10.9 million, or 1.14% of loans, and approximately 258% coverage of nonperforming loans at September 30, 2018. Nonperforming assets were $6.7 million, or 0.51% of total assets, as of September 30, 2019. Comparatively, nonperforming assets were $4.5 million, or 0.42% of total assets, at September 30, 2018. Of the $6.7 million in total nonperforming assets as of September 30, 2019, nonperforming loans represented $6.5 million and other real estate owned totaled $149 thousand. Included in nonperforming loans at September 30, 2019 are troubled debt restructurings of $465 thousand, and one borrower relationship totaling $2.1 million that is well secured, on which no impairment is expected.
Stockholders’ equity totaled $127.8 million as of September 30, 2019, compared to $106.7 million at September 30, 2018. The increase was due to increased earnings and the net underwriter overallotment purchase of $3.4 million in October 2018 following the Company's initial public offering on September 28, 2018. Shares repurchased and retired for the third quarter of 2019 as part of the Company's stock repurchase program totaled 21,130 shares at a weighted average price of $12.44, for a total cost of $263 thousand including commissions. As of September 30, 2019, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.

5



Consolidated Statements of Income (Unaudited)
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Interest income
 
 
 
 
 
 
 
Loans, including fees
$
21,900

 
$
16,955

 
$
59,548

 
$
49,455

Investment securities available for sale
215

 
272

 
707

 
786

Federal funds sold and other
239

 
220

 
706

 
649

Total interest income
22,354

 
17,447

 
60,961

 
50,890

Interest expense

 

 
 
 
 
Deposits
3,449

 
2,616

 
9,887

 
6,876

Borrowed funds
721

 
339

 
1,615

 
1,015

Total interest expense
4,170

 
2,955

 
11,502

 
7,891

Net interest income
18,184

 
14,492

 
49,459

 
42,999

Provision for loan losses
1,071

 
495

 
1,869

 
1,640

Net interest income after provision for loan losses
17,113

 
13,997

 
47,590

 
41,359

Noninterest income
 
 
 
 
 
 
 
Service charges on deposits
146

 
123

 
382

 
365

Credit card fees
2,059

 
1,592

 
5,521

 
4,609

Mortgage banking revenue
4,900

 
2,451

 
10,991

 
7,379

Gain (loss) on sale of investment securities available for sale

 

 
26

 
(2
)
Other fees and charges
116

 
74

 
320

 
306

Total noninterest income
7,221

 
4,240

 
17,240

 
12,657

Noninterest expenses
 
 
 
 
 
 
 
Salaries and employee benefits
9,238

 
6,571

 
24,136

 
19,083

Occupancy and equipment
1,111

 
1,070

 
3,307

 
3,241

Professional fees
724

 
520

 
1,952

 
1,365

Data processing
4,193

 
3,636

 
11,222

 
10,858

Advertising
584

 
358

 
1,557

 
1,113

Loan processing
634

 
202

 
1,279

 
811

Other real estate expenses, net
7

 
7

 
57

 
38

Other operating
1,737

 
1,536

 
5,258

 
4,519

Total noninterest expenses
18,228

 
13,900

 
48,768

 
41,028

Income before income taxes
6,106

 
4,337

 
16,062

 
12,988

Income tax expense
1,625

 
1,190

 
4,239

 
3,706

Net income
$
4,481

 
$
3,147

 
$
11,823

 
$
9,282



6


Consolidated Balance Sheets
 
 
 
(in thousands except share data)
(unaudited) September 30,
2019
 
December 31, 2018
Assets
 
 
 
Cash and due from banks
$
11,093

 
$
10,431

Interest bearing deposits at other financial institutions
40,521

 
22,007

Federal funds sold
3,464

 
2,285

Total cash and cash equivalents
55,078

 
34,723

Investment securities available for sale
37,073

 
46,932

Restricted investments
4,007

 
2,503

Loans held for sale
68,982

 
18,526

Loans receivable, net of allowance for loan losses of $12,808 and $11,308 at September 30, 2019 and December 31, 2018, respectively
1,127,502

 
988,960

Premises and equipment, net
6,667

 
2,975

Accrued interest receivable
4,636

 
4,462

Deferred income taxes
3,556

 
3,654

Foreclosed real estate
149

 
142

Prepaid income taxes
353

 
90

Other assets
3,403

 
2,091

Total assets
$
1,311,406

 
$
1,105,058

 
 
 
 
Liabilities
 
 
 
Deposits
 
 
 
Noninterest bearing
$
293,378

 
$
242,259

Interest bearing
819,066

 
712,981

Total deposits
1,112,444

 
955,240

Securities sold under agreements to repurchase

 
3,332

Federal funds purchased

 
2,000

Federal Home Loan Bank advances
35,556

 
2,000

Other borrowed funds
15,416

 
15,393

Accrued interest payable
2,113

 
1,565

Other liabilities
18,048

 
10,964

Total liabilities
1,183,577

 
990,494

 
 
 
 
Stockholders' equity
 
 
 
Preferred stock, $.01 par value; 1,000,000 shares authorized; no shares issued or outstanding at September 30, 2019 and December 31, 2018

 

Common stock, $.01 par value; 49,000,000 shares authorized; 13,782,538 and 13,672,479 issued and outstanding at September 30, 2019 and December 31, 2018, respectively
138

 
137

Additional paid-in capital
50,585

 
49,321

Retained earnings
77,095

 
65,701

Accumulated other comprehensive income (loss)
11

 
(595
)
Total stockholders' equity
127,829

 
114,564

Total liabilities and stockholders' equity
$
1,311,406

 
$
1,105,058



7



The following table shows the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
 
Three Months Ended September 30,
 
2019
 
2018
 
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
$
35,723

 
$
164

 
1.83
%
 
$
42,734

 
$
176

 
1.63
%
Federal funds sold
1,325

 
7

 
2.12
%
 
1,354

 
6

 
1.76
%
Investment securities available for sale
38,389

 
215

 
2.22
%
 
49,159

 
272

 
2.20
%
Restricted stock
5,629

 
68

 
4.77
%
 
2,604

 
38

 
5.79
%
 Loans held for sale
56,301

 
896

 
6.31
%
 
18,671

 
412

 
8.75
%
Loans(2) (3)
1,099,191

 
21,004

 
7.58
%
 
919,759

 
16,543

 
7.14
%
Total interest earning assets
1,236,558

 
22,354

 
7.17
%
 
1,034,281

 
17,447

 
6.69
%
Noninterest earning assets
15,908

 
 
 
 
 
11,924

 
 
 
 
Total assets
$
1,252,466

 
 
 
 
 
$
1,046,205

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing demand accounts
$
116,820

 
191

 
0.65
%
 
$
74,854

 
55

 
0.29
%
Savings
3,913

 
3

 
0.35
%
 
4,062

 
4

 
0.39
%
Money market accounts
339,751

 
1,484

 
1.73
%
 
270,697

 
972

 
1.42
%
Time deposits
286,605

 
1,771

 
2.45
%
 
338,005

 
1,585

 
1.86
%
Borrowed funds
89,746

 
721

 
3.19
%
 
32,248

 
339

 
4.17
%
Total interest bearing liabilities
836,835

 
4,170

 
1.98
%
 
719,866

 
2,955

 
1.63
%
Noninterest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Noninterest bearing liabilities
17,163

 
 
 
 
 
10,250

 
 
 
 
Noninterest bearing deposits
271,851

 
 
 
 
 
224,877

 
 
 
 
Stockholders’ equity
126,617

 
 
 
 
 
91,212

 
 
 
 
Total liabilities and stockholders’ equity
$
1,252,466

 
 
 
 
 
$
1,046,205

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest spread(4)
 
 
 
 
5.19
%
 
 
 
 
 
5.06
%
Net interest income
 
 
$
18,184

 
 
 
 
 
$
14,492

 
 
Net interest margin(5)
 
 
 
 
5.83
%
 
 
 
 
 
5.56
%
Net interest margin excluding credit cards
 
 
 
 
4.37
%
 
 
 
 
 
4.26
%
_______________
(1) 
Annualized.
(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.



8


 
Nine Months Ended September 30, 2019
 
2019
 
2018
 
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
$
35,164

 
$
518

 
1.97
%
 
$
44,525

 
$
526

 
1.58
%
Federal funds sold
1,685

 
28

 
2.23
%
 
1,546

 
18

 
1.56
%
Investment securities available for sale
42,281

 
707

 
2.24
%
 
50,987

 
786

 
2.06
%
Restricted stock
4,276

 
160

 
4.99
%
 
2,554

 
105

 
5.50
%
    Loans held for sale
35,229

 
1,928

 
7.32
%
 
18,047

 
1,182

 
8.76
%
Loans(2) (3)
1,041,364

 
57,620

 
7.40
%
 
904,279

 
48,273

 
7.14
%
Total interest earning assets
1,159,999

 
60,961

 
7.03
%
 
1,021,938

 
50,890

 
6.66
%
Noninterest earning assets
15,115

 
 
 
 
 
10,419

 
 
 
 
Total assets
$
1,175,114

 
 
 
 
 
$
1,032,357

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
Interest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Interest bearing demand accounts
$
97,325

 
387

 
0.53
%
 
$
73,129

 
154

 
0.28
%
Savings
3,613

 
9

 
0.35
%
 
3,690

 
8

 
0.29
%
Money market accounts
330,086

 
4,203

 
1.70
%
 
286,349

 
2,678

 
1.25
%
Time deposits
294,693

 
5,288

 
2.40
%
 
328,139

 
4,036

 
1.64
%
Borrowed funds
59,816

 
1,615

 
3.61
%
 
31,233

 
1,015

 
4.34
%
Total interest bearing liabilities
785,533

 
11,502

 
1.96
%
 
722,540

 
7,891

 
1.46
%
Noninterest bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Noninterest bearing liabilities
14,971

 
 
 
 
 
9,765

 
 
 
 
Noninterest bearing deposits
252,353

 
 
 
 
 
215,133

 
 
 
 
Stockholders’ equity
122,257

 
 
 
 
 
84,919

 
 
 
 
Total liabilities and stockholders’ equity
$
1,175,114

 
 
 
 
 
$
1,032,357

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest spread(4)
 
 
 
 
5.07
%
 
 
 
 
 
5.20
%
Net interest income
 
 
$
49,459

 
 
 
 
 
$
42,999

 
 
Net interest margin(5)
 
 
 
 
5.70
%
 
 
 
 
 
5.63
%
Net interest margin excluding credit cards
 
 
 
 
4.35
%
 
 
 
 
 
4.27
%
_______________
(1) 
Annualized.
(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
(Dollars in thousands except per share data)
 
September 30,
2019
 
June 30,
2019
 
March 31,
2019
 
December 31,
2018
 
September 30,
2018
Earnings:
 
 
 
 
 
 
 
 
 
 
Net income
 
$
4,481

 
$
4,023

 
$
3,319

 
$
3,486

 
$
3,147

Earnings per common share, diluted(1) (2)
 
0.32

 
0.29

 
0.24

 
0.25

 
0.26

Net interest margin
 
5.83
%
 
5.79
%
 
5.46
%
 
5.46
%
 
5.56
%
Net interest margin, excluding credit cards
 
4.37
%
 
4.37
%
 
4.30
%
 
4.28
%
 
4.26
%
Return on average assets(1)
 
1.42
%
 
1.39
%
 
1.22
%
 
1.27
%
 
1.19
%
Return on average equity(1)
 
14.04
%
 
13.23
%
 
11.39
%
 
12.26
%
 
13.69
%
Efficiency ratio
 
71.75
%
 
72.18
%
 
76.08
%
 
71.34
%
 
74.20
%
Balance Sheet:
 
 
 
 
 
 
 
 
 
 
Loans(3)
 
$
1,140,310

 
$
1,056,290

 
$
1,007,928

 
$
1,000,268

 
$
955,412

Deposits
 
1,112,444

 
1,037,004

 
967,722

 
955,240

 
911,116

Total assets
 
1,311,407

 
1,234,157

 
1,123,752

 
1,105,058

 
1,072,905

Asset Quality Ratios:
 
 
 
 
 
 
 
 
 
 
Nonperforming assets to total assets
 
0.51
%
 
0.57
%
 
0.63
%
 
0.44
%
 
0.42
%
Nonperforming loans to total loans
 
0.57
%
 
0.65
%
 
0.69
%
 
0.47
%
 
0.44
%
Net charge-offs to average loans (YTD annualized)
 
0.05
%
 
0.04
%
 
0.03
%
 
0.09
%
 
0.11
%
Allowance for loan losses to total loans
 
1.12
%
 
1.13
%
 
1.13
%
 
1.13
%
 
1.14
%
Allowance for loan losses to non-performing loans
 
195.76
%
 
174.05
%
 
162.52
%
 
241.72
%
 
257.83
%
Bank Capital Ratios:
 
 
 
 
 
 
 
 
 
 
Total risk based capital ratio
 
11.44
%
 
11.91
%
 
12.23
%
 
12.25
%
 
12.36
%
Tier 1 risk based capital ratio
 
10.19
%
 
10.65
%
 
10.98
%
 
11.00
%
 
11.11
%
Leverage ratio
 
8.60
%
 
8.91
%
 
9.05
%
 
9.06
%
 
9.01
%
Common equity Tier 1 ratio
 
10.19
%
 
10.65
%
 
10.98
%
 
11.00
%
 
11.11
%
Tangible common equity
 
8.21
%
 
8.40
%
 
8.93
%
 
8.89
%
 
8.72
%
Composition of Loans:
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
$
443,961

 
$
426,887

 
$
421,346

 
$
407,844

 
$
388,141

Commercial real estate
 
339,448

 
297,891

 
277,905

 
278,691

 
276,726

Construction real estate
 
182,224

 
169,225

 
157,338

 
157,586

 
144,012

Commercial and industrial
 
132,935

 
124,436

 
120,191

 
122,264

 
113,473

Credit card
 
44,058

 
40,141

 
32,359

 
34,673

 
33,821

Other
 
1,148

 
1,015

 
1,195

 
1,202

 
1,270

Composition of Deposits:
 
 
 
 
 
 
 
 
 
 
Non interest bearing
 
$
293,378

 
$
279,484

 
$
262,235

 
$
242,259

 
$
234,094

Interest bearing demand
 
186,422

 
129,199

 
85,969

 
85,747

 
66,170

Savings
 
3,994

 
3,572

 
3,595

 
2,866

 
4,597

Money Markets
 
313,131

 
347,701

 
320,114

 
288,897

 
275,832

Time Deposits
 
315,520

 
277,048

 
295,809

 
335,471

 
330,423

Capital Bank Home Loan Metrics:
 
 
 
 
 
 
 
 
Origination of loans held for sale
 
$
197,754

 
$
134,409

 
$
74,128

 
$
70,826

 
$
81,665

Proceeds from loans held for sale, net of gains
 
171,880

 
105,418

 
71,693

 
73,883

 
81,029

Gain on sale of loans
 
4,900

 
3,715

 
2,375

 
2,097

 
2,451

Purchase volume as a % of originations
 
44.02
%
 
79.07
%
 
78.42
%
 
86.72
%
 
92.72
%
Gain on sale as a % of loans sold(4)
 
2.77
%
 
3.40
%
 
3.21
%
 
2.76
%
 
2.94
%
OpenSky Credit Card Portfolio Metrics:
 
 
 
 
 
 
 
 
Total active customer accounts
 
221,913

 
211,408

 
187,423

 
169,981

 
170,160

Total loans
 
$
44,058

 
$
40,141

 
$
32,359

 
$
34,673

 
$
33,821

Total deposits at the Bank
 
$
77,689

 
$
73,666

 
$
65,808

 
$
59,954

 
$
59,978

_______________
(1) 
Annualized.
(2) 
Gives effect to a four-for-one common stock split completed effective August 15, 2018.
(3) 
Loans are reflected net of deferred fees and costs.
(4) 
Gain on sale percentage is calculated as gain on sale of loans divided by the sum of gain on sale of loans and proceeds from loans held for sale, net of gains.

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 had assets of approximately $1.3 billion at September 30, 2019 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “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