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): November 4, 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 7.01 Regulation FD Disclosure
Beginning November 4, 2019, and throughout the month of November, 2019, Edward F. Barry, Chief Executive Officer; Scot Browning, President; and Alan W. Jackson, Executive Vice President and Chief Financial Officer, of Capital Bancorp, Inc. (NASDAQ: CBNK)(the “Company”), the holding company of Capital Bank, N.A., will participate in various investor conferences and hold meetings with institutional investors.
The Company is filing an investor presentation (the “Presentation”), which will be used by the management team for presentations to investors and others. A copy of the Presentation is attached hereto as Exhibit 99.1 and incorporated herein by reference. The Presentation is also available on the Company’s website at www.capitalbankmd.com. The Presentation replaces and supersedes investor presentation materials previously furnished as exhibits to the Company's Current Reports on Form 8-K.
Information contained herein, including Exhibit 99.1, shall not be deemed filed for the purposes of the Securities Exchange Act of 1934, as amended, nor shall such information and Exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
99.1 |
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 | |
November 4, 2019
3
Ed Barry Chief Executive Officer Scot Browning Alan Jackson President Chief Financial Officer September 30, 2019 Financial Review 1
Forward Looking Statements The statements contained in this presentation that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on Capital Bancorp, Inc. (the “Company” or “Capital”) including, without limitation, plans, strategies and goals, and statements about the Company’s expectations regarding revenue and asset growth, financial performance and profitability, loan and deposit growth, yields and returns, loan diversification and credit management, and shareholder value creation. These statements are often, but not always, made through the use of words or phrases such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “could,” “should,” “seeks,” "projects", "can", "ongoing", “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. The inclusion of or reference to forward-looking information in this presentation should not be regarded as a representation by Capital or any other person that the future plans, estimates or expectations contemplated by the Company will be achieved. Any or all of the forward-looking statements in (or conveyed orally regarding) this presentation may turn out to be inaccurate. Accordingly, you are cautioned not to place undue reliance on forward-looking statements and that any such forward- looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the expected results expressed or implied by such forward-looking statements. Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in the 2018 Annual Report on Form 10-K of Capital Bancorp, Inc. filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Unless otherwise required by law, Capital also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this presentation. Except as otherwise indicated, this presentation speaks as of the date hereof. The delivery of this presentation shall not, under any circumstances, create any implication that there has been no change in the affairs of Capital after the date hereof. Certain of the information contained herein may be derived from information provided by industry sources. The Company believes that such information is accurate and that the sources from which it has been obtained are reliable. Capital cannot guarantee the accuracy of such information, however, and has not independently verified such information. While Capital is not aware of any misstatements regarding the industry data presented in this presentation, Capital's estimates involve risks and uncertainties and are subject to change based on various factors. Similarly, Capital believes that its internal research is reliable, even though such research has not been verified by independent sources. This presentation includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. These non-GAAP financial measures should not be considered in isolation, and should be considered as additions to, and not substitutes for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of the Company's non- GAAP financial measures as tools for comparison. See the Appendix to this presentation for a reconciliation of the non-GAAP financial measures used in (or conveyed orally during) this presentation to their most directly comparable GAAP financial measures. 2
Table of Contents Page I. Introduction to Capital Bancorp (CBNK) 4 II. Investment Opportunity 5 A. Market Dynamics 6 B. Experienced Management Team 7 C. Strategy That Delivers Performance 9 D. Innovation Driven, Fee Based Businesses 20 E. Building Earnings Momentum 25 III. Appendix - Non-GAAP Reconciliations 27 3
Capital Bancorp, Inc. (NASDAQ - CBNK) Franchise Highlights Footprint Corporate Headquarters - Rockville, Unaudited Balance Sheet ($M, except per share amounts) September 30, 2019 Quarter Result Assets $ 1,311 6 % QoQ Loans 1,140 8 % QoQ Deposits 1,112 7 % QoQ Quarterly Financial Performance Earnings per Share, Diluted $ 0.32 10 % QoQ ROAA 1.42 % 2 % QoQ ROATCE 14.04 % 6 % QoQ Tangible Book Value per Share $ 9.27 3 % QoQ Efficiency Ratio 71.75 % 43 bps Net Interest Margin 5.83 % 4 bps Corporate Timeline 4
Investment Opportunity • The Washington, D.C. and Baltimore, MD MSAs make up one of the largest and wealthiest regions in the U.S. Operate in • Consolidation creates new opportunities for customer and talent Exceptional acquisition Markets • Market insulated from economic downturns by federal government presence Entrepreneurial • Experts in their fields combining large bank and community bank skills Management • Capabilities in data, analytics, marketing and technology Team • Significant board and management ownership • Profitability has consistently exceeded community banking peers Consistently • Entrepreneurial culture with a disciplined strategic approach High Performing • Strong organic balance sheet growth Community Bank • Superior asset quality Innovation • Secured credit card and mortgage divisions drive high fee income Driven, Fee • Proprietary technology and analytics Based • Digital enabled marketing Businesses Building • Significant investments in core deposit generation and commercial sales Earnings force Momentum • Scalable OpenSky® infrastructure and investment in analytics 5
Exceptional Markets Median Household Income by County ($000) Washington, D.C. – Baltimore, MD Market ∙ Recent M&A in market creating disruptions 128 124 and creating opportunities to acquire talent 108 and customers 83 • Total population of more than 9.1 million 63 ∙ Includes the four wealthiest counties in the U.S. (as measured by median HH income) Combined GDP of $722 billion (would rank U.S. Washington, Montgomery, Howard, MD Fairfax, MD ∙ rd D.C. MD 3 nationally among U.S. MSAs) Washington D.C. MSA added 60,700 jobs Growth of Capital Bank Cities of Operation(2) ∙ between Oct 2017 and Oct 2018(1) Pop. Growth 2010-Current Est. Pop. Growth Next Five Years ∙ Approximately 45% of the combined 5% 12% population of the Washington, DC and Baltimore, MD MSAs has a college degree(3) 4% ∙ Home to 15 companies from the 2017 7% Fortune 500 list and 5 of the U.S.’s largest 100 private companies, including the most recent announcement of Amazon's HQ2 ∙ Significant opportunity to take market share U.S. Capital U.S. Capital from large, out of market players: Top 6 banks in both Washington, D.C. and Baltimore, MD MSAs are $50B+ institutions Source: S&P Global Market Intelligence, Bureau of Labor Statistics and GMU Center for Regional Analysis. 1. Data is not seasonally adjusted. 2. Represents aggregate population growth of Capital’s cities of operation. Cities of operation defined as cities where the Company has a full service branch location. 3. 6 Determined as the percentage of the population with a bachelor’s degree or higher.
Experienced Management Team • Prior to joining Capital Bank, Mr. Barry held senior positions at Capital One Bank, Bank Edward F. Barry of America, and E&Y/Capgemini where he held a variety of roles primarily focusing on Chief Executive Officer marketing, data, analytics and strategy Joined 2012 • Recognized in 2017 as E&Y’s Entrepreneur of the Year, Mid-Atlantic Region(1) • Currently oversees the commercial lending department, which has grown from $13.7 million to over $917.5 million in funded loans during his tenure Scot R. Browning President • 30 years of banking experience primarily in commercial lending Joined 2002 • Prior leadership roles with United Bank, F&M Bank Allegiance and Century National Bank • Mr. Jackson has more than 30 years of financial services experience including Alan W. Jackson previously serving as CFO of two publicly traded banks Chief Financial Officer Joined 2017 • Prior to joining Capital Bank, Mr. Jackson was a Senior Managing Director with FinPro and spent 5 years with Banker’s Dashboard & S&P Global Market Intelligence • Prior to joining Capital Bank, Mr. Dicker spent 16 years with Capital One Bank rising to Karl Dicker Senior Vice President where he led Treasury Management Strategy, Marketing & Chief Operating Officer Analytics and served as Head of Enterprise Payments Joined 2018 • Key experience also includes core system and CRM implementations, sales enablement, banking innovation, data and analytics (1) Financial Services category. 7
Experienced Management Team ® Nick Bryan • Mr. Bryan leads the OpenSky credit card business line for Capital Bank and manages Chief Marketing Officer the Bank’s data analytics platforms GM – OpenSky® • Prior to Capital Bank, Mr. Bryan spent eight years with Capital One Bank in marketing, Joined 2013 operations and corporate finance and began his career at Donaldson, Lufkin & Jenrette Kathy M. Curtis • Day to day responsibilities include all aspects of enterprise risk management including Chief Risk/Compliance Bank Secrecy Act compliance, information security, and regulatory compliance Officer • Prior to Capital Bank, Ms. Curtis spent 16 years at Century National Bank until its Joined 2002 acquisition by United Bank in 2001 • Ms. Yamada is responsible for the credit administration function including credit policy, Kathy Yamada loan approval process, loan quality, portfolio risk management and special assets Chief Credit Officer Joined 2010 • Prior to Capital Bank, Ms. Yamada spent more than 20 years at Equitable Bank managing its loan origination and credit administration functions Eric M. Suss • Over 20 years of experience in human resources and talent recruitment Chief Human • Prior to Capital Bank, Mr. Suss spent nearly 10 years in human resources with CPA Resources Officer Joined 2012 Global, a leading international provider of outsourced intellectual property solutions 8
Unique Strategy Consistently Drives Performance Disciplined Business Strategy Total Assets ($M) Deliver premium, advice-based CAGR: 19% ∙ $1,311 solutions to our customers $1,105 $1,026 ∙ Leverage technology to differentiate products and $906 services through customization $743 $619 $489 ∙ Instill a sales-focused, entrepreneurial culture 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 9
Diversified Lines of Business Commercial OpenSky® Secured Residential Mortgage Banking Credit Card Origination ∙ Approximately $1.3 billion of ∙ $44.1 million loan portfolio ∙ 2.77% QTD GOS margin assets Credit related consumer ∙ ∙ 44% QTD purchase volume ∙ Provide sophisticated advice product secured by deposits and exceptional client service ∙ High yield plus fee income and ∙ MD, VA and DC comprise 70% ∙ Target customers with complex significant NIB deposits of origination volume financial needs ∙ Differentiated consumer ∙ Recent hires focused on ∙ Loan officers are trusted business line purchased money originations advisors to their clients ∙ Originated nationwide through and niche products ∙ Value proposition proven by digital channels significantly greater than peer Proprietary web/mobile loan yield with comparable risk ∙ origination platform Loans Held for Investment ($M) Number of Cards Outstanding (000s) Mortgage Volume ($M) & Gain on Sale $854 2.76% 2.77% $1,140 221.9 $755 $1,000 $887 170.0 $763 149.2 $639 $436 $417 96.4 $335 2.21% 63.4 1.58% 1.91% 2015Y 2016Y 2017Y 2018Y 2019Q3 2015Y 2016Y 2017Y 2018Y 2019Q3 2015Y 2016Y 2017Y 2018Y 2019Q3 10
Leveraging the Power of Technology ∙ In-house development team Internally ∙ Apollo customer acquisition system developed for OpenSky® provides automated Developed work flows for digital account applications processes Technology ∙ In-house staff participates in business development calls and designs bespoke Solutions technology solutions for customers to enhance their operational efficiency ∙ Proprietary data warehouse built to run analytics and identify opportunities ∙ OpenSky®: ◦ Proprietary customer behavior scoring (B-Score) Proprietary Business ◦ Algorithmic, selective credit line increases (CLIP program) Analytics ◦ Net present value driven models drive product and marketing decisions ∙ Internally developed commercial credit stress testing that tracks micro market performance ∙ Social media driven OpenSky® and mortgage marketing programs ∙ User-friendly OpenSky® mobile application; 82% of applications are submitted on Web and Mobile mobile devices using a digital platform Enabled ∙ Online marketing campaigns are closely tracked and analyzed to assess efficacy Platforms and ensure commercial effectiveness • QuickClose digital mortgage platform launched in fourth quarter 2018 11
Consistently High Performing ROAA (%) vs. Peer ROATCE (%) vs. Peer 1.42% 14.75% 1.22% 14.41% 13.94% 13.94% 14.04% 1.17% 1.13% 1.10% 1.02% 5.46% 0.50% 0.83% 0.80% 10.97% 8.72% 8.78% 0.65% 7.13% 2015Y 2016Y 2017Y 2018Y 20193Q 2015Y 2016Y 2017Y 2018Y 20193Q ROAA ROAA, as Adjusted (1) Peer Median (2) ROATCE ROATCE, as Adjusted (1) Peer Median (2) 2017 earnings impacted by $2.3 million of pre-tax, one-time data processing conversion costs, $2.4 million of pre-tax, non-recurring forgone interest and fees and a $1.4 million deferred tax asset revaluation. (1) ROAA, as Adjusted and ROATCE, as Adjusted are non-GAAP measures and exclude $4.2 million of non-recurring charges and lost revenue. Please refer to the non-GAAP schedules 12 included in the Appendix to this presentation for a reconciliation of this measure. (2) Peer group consists of major exchange traded (“MET”) banks with most recent quarter assets less than $2.0 billion. Peer data per S&P Global Market Intelligence.
Loan Portfolio Total Loans HFI ($M) Loan Composition CAGR: 20% $1,140 $1,000 Non-Owner Occ. CRE: 14% $887 Owner Occupied CRE: 16% $763 $639 Construction: 16% Com'l & Ind: 12% $506 $408 Credit Card: 4% Other Consumer: 0% Residential R.E.: 38% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 ∙ Owner-occupied commercial real estate "CRE" loans make up approximately 51% of total CRE ∙ Residential real estate loans consist primarily of investment 1-4 family property (rentals) ∙ Regular portfolio stress testing includes analyzing the construction portfolio for declines in property values 13
Balanced Loan Portfolio Fixed vs. Floating Rate Loan Mix Yield on Loans 7.58% 7.16% Adjustable: 20.4% 6.45% 6.44% 6.18% Fixed: 36.9% 6.00% 5.78% 5.76% 5.76% 5.57% 4.79% 4.86% 4.62% 4.66% Variable: 42.7% 2015Y 2016Y 2017Y 2018Y 2019Q3 Adjustable Variable Fixed Loan Yield ex Card Loan Yield Peer Median (2) ∙ Short duration loan portfolio well positioned for current interest rate environment ◦ 48% of the loan portfolio re-prices within three months and 53% re-prices within one year(1) ∙ Loan yields, excluding the credit card portfolio, have consistently averaged nearly 100bps above local peers since 2015 Data as of 9/30/19. (1) Data excludes loans held for sale. (2) Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence. 14
Deposit Portfolio Composition Core Deposit Momentum Deposit Portfolio Composition ($1,112M) • Recruiting deposit sales teams, including fiduciary salespeople, from recently acquired competitors Noninterest driving core deposit growth Bearing: 26.4% Interest bearing demand: 16.8% • Customizing solutions for clients, including fiduciary and non-profit organizations, to generate low-cost business deposit accounts • Selectively adding full service branches to support areas with high customer concentration Time Deposits Money Market: 28.1% >$100K: 25.2% • OpenSky® provides a unique channel for generating Time Deposits Savings: 0.4% non-interest bearing deposits <$100K: 3.2% Non-time Deposit Growth ($M) Cost of Deposits CAGR: 19% $78 1.35% $719 $60 1.08% $54 $620 $39 $534 0.76% $28 $443 0.68% 0.59% 0.79% $372 0.52% 0.45% 0.49% 2015Y 2016Y 2017Y 2018Y 2019Q3 2015Y 2016Y 2017Y 2018Y 2019Q3 Other Non-time Deposits Credit Card Deposits Cost of Deposits Peer Median (1) Data as of 9/30/19. YTD cost of deposit data is annualized. CAGR measured from 12/31/15 through 9/30/19. (1) Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence. 15
Delivering Superior Net Interest Margin Net Interest Margin(2) Deliver real, advice-based solutions to 5.83% ∙ 5.59% 5.59% 5.41% 5.37% 5.02% 5.18% complex credit needs rather than acting as the 3.93% 3.97% 4.01% 3.73% 3.72% 3.68% low-cost provider (largely avoid bid situations) ∙ Specifically target customers with complex 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 credit needs Net Interest Margin Peer Median (1) Net Interest Margin, excluding Credit Card Loans ∙ Net interest margin is enhanced by OpenSky® 4.60% 4.53% card returns and deposit contribution 4.31% 4.28% 4.37% ∙ Consistently collect loan fees 2015Y 2016Y 2017Y 2018Y 2019Q3 1. Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence. 2. ® 2017Y represents Net Interest Margin, as Adjusted and is a non-GAAP measure adjusted for the impact of non-recurring foregone interest and fees related to the OpenSky data processing conversion. Please refer to the non-GAAP schedules included in the Appendix to this presentation for a reconciliation of this measure. 16
Efficiency Ratio Efficiency Ratio(1) 73.9% 73.2% 71.6% 73.9% 71.8% 70.0% 70.0% 68.6% 6.1% 66.1% 65.0% 63.6% 62.0% 58.2% 59.3% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 Efficiency Ratio Peer Median (2) Recent investments driving a positive long-term impact on efficiency: ∙ Credit card data processing conversion has elevated expenses but positioned the business line for the long-term ∙ Hired significant deposit gathering business development officers since the beginning of 2017 to support core funding growth ∙ Reston, VA and Columbia, MD branch locations opened in Q2 2017 and Q2 2018, respectively Efficiency ratio is a non-GAAP measure. Please refer to the non-GAAP schedules included in the Appendix to this presentation for a reconciliation of this measure. 1. 2017Y includes Efficiency Ratio, as Adjusted and is a non-GAAP measure adjusted for the impact of $2.4M of non-recurring foregone interest and fees and $2.3 million of non-recurring data processing expenses related to the OpenSky data processing conversion. Please refer to the non-GAAP schedules included in the Appendix for a reconciliation of this measure. 17 2. Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence.
Superior Asset Quality Metrics Nonperforming Loans ($M) Nonperforming Assets / Assets 1.58% Construction: $2.1 Residential Real 1.10% Estate: $2.2 0.80% 0.90% 0.51% 0.54% 0.51% 0.68% 0.44% 0.63% 0.59% 0.44% 0.29% Commercial and Commercial Real Industrial: $0.8 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 Estate: $1.0 NPAs /Assets Peer Median (2) Commercial Real Estate NCOs(1) Net Charge-offs / Average Loans 0.33% 0.13% 0.09% 0.08% 0.07% 0.06% 0.05% 0.05% 0.15% 0.03% 0.10% 0.09% 0.09% 0.01% 0.07% 0.02% 0.05% (0.01)% —% —% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 CRE NCOs / Avg CRE Loans Peer Average (2) QTD net charge-off data is annualized. (1) Commercial RE includes all construction and commercial real estate loans. Average commercial real estate loans based upon 2 period averages. (2) Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence. 18
CRE Concentration Levels CRE / Total Risk Based Capital ("RBC") Breakdown 351% 340% 302% 205% 241% 175% 146% 127% 99% Peer Average Capital Bank, N.A. Capital Bancorp, Inc. Construction / RBC Non-Owner Occupied CRE / RBC ∙ Construction lending is a historical core competency focused on single family homes and individual condo and townhouse conversions to established builders ∙ Loan to value limits of 75% for investor and 80% for owner-occupied construction lending ∙ Construction loans provide a short-duration, high-yield asset class, plus loan fee income, which supports asset sensitivity ∙ Deep expertise in CRE and real estate development at the Board level (1) Source: S&P Global Market Intelligence. Data as of 9/30/19. Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Represents bank-level regulatory data. 19
Diversified Revenue Model Net Revenue ($M)(1) CAGR: 17% $89.2 $74.3 $66.4 $63.2 $48.6 $41.2 $35.5 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019 YTD Noninterest Income to Net Revenue(1) OpenSky & Church Street Mortgage contribute to fee income levels in excess of peer median 32.40% 30.70% 28.70% 27.80% 25.85% 22.80% 22.10% 11.10% 9.70% 9.60% 9.00% 9.00% 9.00% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019 YTD Capital Bank Peer Median (2) YTD amounts are shown on an annualized basis. (1) ® 2017Y data is based on Adjusted Revenue which is a non-GAAP measure adjusted for the impact of $2.4 million of non-recurring foregone interest and fees related to the OpenSky data processing conversion. Please refer to the non-GAAP schedules included in the Appendix to this presentation for a reconciliation of this measure. 20 (2) Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence.
OpenSky® Secured Credit Card Division Customer Demographics Number of Outstanding Accounts (000s) Underserved by traditional credit products ∙ CAGR: 43% 221.9 ∙ Poor or nonexistent credit history ∙ Nationwide customer base 170.0 149.2 ∙ Minimum initial deposit of $200 and maximum initial deposit of $3,000 per 96.4 card and $5,000 per individual 63.4 Value Proposition 38.9 28.3 ∙ Help customers repair or create acceptable credit history 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 ∙ Functions as a traditional VISA credit card Credit Card Loans & Deposits ($M) Technology driven Loan CAGR: 36% ∙ Nationwide web and mobile platform – Deposit CAGR:35% 82% of applications are submitted on mobile devices using adaptive digital $77.7 platform $60.0 $53.6 Perform proprietary analytics on customer ∙ $39.1 base to monitor and innovate the portfolio $27.8 $18.4 $14.1 $7.4 $9.6 $13.8 $20.4 $31.5 $34.7 $44.1 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 Loans Collateral Deposits CAGRs measured from 12/31/13 through 9/30/19. 21
Capital Bank Home Loan Division Purchase vs. Re-finance Volume & GOS Margin ∙ Increased sales staffing over past 18 months to combat industry headwinds $2.9B $0.4B $0.3B $0.4B ∙ Production hires since the beginning of 2017 focused on niche products and purchase 77.6% 47.5% 20.6% 56.0% originations 2.8% 2.8% • Right sizing of business model has led to profitability across the entire cycle • Positioning allows for capture of refinance activity 1.8% in current market conditions 1.5% • MD, VA and Washington, D.C. represent 70% of 79.4% origination volume within our primary market areas ∙ National technology-enabled consumer direct 52.5% 44.0% marketing efforts, including social media campaigns 22.4% • Launched digital mortgage platform to capture online leads, drive new customer experience, 2013Y - 2016Y 2017Y 2018Y 2019Q3 streamlining processes and costs Purchase Volume Re-finance Volume GOS Margin 22
Consistent Quarterly Performance Loans ($M) Assets ($M) $1,311 $1,234 $1,140 $1,105 $1,124 $1,056 $1,073 $1,000 $1,008 $955 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Deposits ($M) Equity ($M) $128 $123 $119 $115 $1,112 $107 $1,037 $955 $968 $911 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 23
Consistent Quarterly Performance Net Interest Margin Efficiency Ratio 76.08% 5.79% 5.83% 74.20% 5.56% 72.18% 5.46% 5.46% 71.34% 71.75% Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Return on Average Assets (1) Return on Average Tangible Common Equity (1) 1.42% 1.39% 14.04% 1.27% 13.69% 1.19% 1.22% 13.23% 12.26% 11.39% Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 (1) Data is annualized. 24
Building Earnings Momentum Earnings per Share (EPS) Growth Tangible Book Value per Share (TBV) Growth Capital CAGR: 10.2%(1) Capital CAGR: 13.3%(2) $9.27 Peer CAGR: 5.5% Peer CAGR: 7.0% $8.38 $1.02 $0.37 $6.94 $0.84 $0.85 $0.32 $6.35 $0.80 $5.83 $0.74 $0.76 $6.35 $0.72 $6.02 $0.69 $5.25 $0.68 $5.61 $0.65.65 $0.62 $4.53 $5.22 $4.87 $0.29 $4.53 $0.24 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 EPS, diluted EPS, as Adjusted(3) Indexed Peer Growth TBV per Share (3) Indexed Peer Growth Peer group consists of: EGBN, SASR, OLBK, ANCX, SONA, JMSB, HBMD, TCFC and FVCB. Peer data per S&P Global Market Intelligence. Note: 2013 earnings per share for Capital excludes bargain purchase gains. (1) Based on EPS, as adjusted for 2017. CAGR represents the period from 2013 through 9/30/2019. (2) 25 EPS, as Adjusted, is a non-GAAP measure and excludes $4.2 million of non-recurring charges and lost revenue. (3) Tangible book value per share and EPS, as Adjusted, are non-GAAP measures. Refer to the non-GAAP schedules included in the Appendix for a reconciliation of these measures.
Conclusions ∙ Operate in Premier Markets ∙ Entrepreneurial Management Team ∙ Consistently High Performing Community Bank ∙ Innovation Driven, Fee Based Businesses ∙ Building Earnings Momentum 26
Appendix 27
ROATCE and ROATCE, as Adjusted Reconciliations “Return on average tangible common equity” is a non-GAAP measure 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 Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Net Income $ 6,857 $ 6,793 $ 7,492 $ 9,441 $ 7,109 $ 12,767 $ 4,481 $ 11,823 Less: Bargain Purchase Gain, net of taxes (1,076) — — — — — — — Add: Intangible Asset Amortization, net of taxes 33 20 14 10 — — — — Net Income Excluding Intangible Amortization and Bargain Purchase Gain, net, as Adjusted $ 5,814 $ 6,813 $ 7,506 $ 9,451 $ 7,109 $ 12,767 $ 4,481 $ 11,823 Average Total Equity 36,965 45,775 53,883 65,590 76,543 91,590 126,617 122,257 Less: Average Preferred Equity — — — — — — — — Less: Average Intangible Assets (84) (53) (26) (8) — — — — Average Tangible Common Equity $ 36,881 $ 45,722 $ 53,857 $ 65,582 $ 76,543 $ 91,590 $ 126,617 $ 122,257 Return on Average Tangible Common Equity 15.76 % 14.90 % 13.94 % 14.41 % 9.29 % 13.94 % 14.04 % 14.53 % “Return on average tangible common equity, as adjusted” is a non-GAAP measure 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. Return on Average Tangible Common Equity, as Adjusted Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Net Income $ 6,857 $ 6,793 $ 7,492 $ 9,441 $ 7,109 $ 12,767 $ 4,481 $ 11,823 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 — — — — (1,847) — — — Net Income, as Adjusted $ 5,781 $ 6,793 $ 7,492 $ 9,441 $ 11,293 $ 12,767 $ 4,481 $ 11,823 Add: Intangible asset amortization, net of taxes 33 20 14 10 — — — — Net Income Excluding Intangible Amortization and Bargain Purchase Gain, net, as Adjusted $ 5,814 $ 6,813 $ 7,506 $ 9,451 $ 11,293 $ 12,767 $ 4,481 $ 11,823 Average Total Equity $ 36,965 $ 45,775 $ 53,883 $ 65,590 $ 76,543 $ 91,590 $ 126,617 $ 122,257 Less: Average Preferred Equity — — — — — — — — Less: Average Intangible Assets (84) (53) (26) (8) — — — — Average Tangible Common Equity $ 36,881 $ 45,722 $ 53,857 $ 65,582 $ 76,543 $ 91,590 $ 126,617 $ 122,257 Return on Average Tangible Common Equity, as Adjusted 15.76 % 14.90 % 13.94 % 14.41 % 14.75 % 13.94 % 14.04 % 12.93 % 28
ROAA and NIM, as Adjusted Reconciliations “Return on average assets, as adjusted” is a non-GAAP measure 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 Assets, as Adjusted Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Net Income $ 6,857 $ 6,793 $ 7,492 $ 9,441 $ 7,109 $ 12,767 $ 4,481 $ 11,823 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 — — — — (1,847) — — — Net Income, as Adjusted $ 5,781 $ 6,793 $ 7,492 $ 9,441 $ 11,293 $ 12,767 $ 4,481 $ 11,823 Average Total Assets $ 471,400 $ 541,934 $ 679,595 $ 832,619 $ 964,946 $ 1,045,732 $ 1,252,466 $ 1,175,114 Return on Average Assets, as Adjusted 1.23 % 1.25 % 1.10 % 1.13 % 1.17 % 1.22 % 1.42 % 1.35 % “Net interest margin, as adjusted” is a non-GAAP measure defined as net interest income, plus non-recurring foregone interest and fees, divided by average interest earning assets. Net Interest Margin, as Adjusted Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Net Interest Income $ 25,327 $ 29,717 $ 33,676 $ 42,759 $ 48,911 $ 57,888 $ 18,184 $ 49,459 Add: Non-recurring foregone interest and fees — — — — 2,370 — — — Net Interest Income, as Adjusted $ 25,327 $ 29,717 $ 33,676 $ 42,759 $ 51,281 $ 57,888 $ 18,184 $ 49,459 Average interest earning assets $ 467,772 $ 531,505 $ 671,275 $ 825,676 $ 955,479 $ 1,035,731 $ 1,236,558 $ 1,159,999 Net Interest Margin, as Adjusted 5.41 % 5.59 % 5.02 % 5.18 % 5.37 % 5.59 % 5.83 % 5.70 % 29
Adjusted Revenue & Noninterest Income to Adjusted Revenue and Efficiency Ratio, as Adjusted Reconciliations Net revenue for 2017 has been adjusted to exclude the impact of non-recurring foregone interest and fees and as such is considered a non-GAAP measure. Adjusted Revenue and Noninterest Income to Adjusted Revenue Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Noninterest Income $ 10,171 $ 11,442 $ 14,929 $ 20,473 $ 15,149 $ 16,124 $ 7,221 $ 17,240 Net Interest Income 25,327 29,717 33,676 42,759 48,911 57,888 18,184 49,459 Add: Noninterest Income 10,171 11,442 14,929 20,473 15,149 16,124 7,221 17,240 Add: Non-recurring foregone interest and fees — — — — 2,370 — — — Adjusted Revenue $ 35,498 $ 41,159 $ 48,605 $ 63,232 $ 66,430 $ 74,012 $ 25,404 $ 66,698 Noninterest Income to Adjusted Revenue 28.65 % 27.80 % 30.71 % 32.38 % 22.80 % 21.70 % 28.42 % 25.85 % “Efficiency ratio, as adjusted” is a non-GAAP measure 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. Efficiency Ratio, as Adjusted Dollars in Thousands Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Noninterest Expense $ 24,836 $ 28,821 $ 34,817 $ 43,380 $ 47,306 $ 54,123 $ 18,228 $ 48,768 Less: Non-recurring data processing expenses — — — — (2,275) — — — Adjusted Noninterest Expense 24,836 28,821 34,817 43,380 45,031 54,123 18,228 48,768 Net Interest Income 25,327 29,717 33,676 42,759 48,911 57,888 18,184 49,459 Add: Noninterest Income 10,171 11,442 14,929 20,473 15,149 16,124 7,221 17,240 Add: Non-recurring foregone interest and fees — — — — 2,370 — — — Adjusted Revenue $ 35,498 $ 41,159 $ 48,605 $ 63,232 $ 66,430 $ 74,012 $ 25,404 $ 66,698 Efficiency Ratio, as Adjusted 69.96 % 70.02 % 71.63 % 68.60 % 67.79 % 73.13 % 71.75 % 73.12 % 30
Diluted Earnings Per Share, as Adjusted and Tangible Book Value per Share Reconciliations “Diluted earnings per share, as adjusted” is a non-GAAP measure 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. Diluted Earnings per Share, as Adjusted Dollars in Thousands except Share Items Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Net Income $ 6,857 $ 6,793 $ 7,492 $ 9,441 $ 7,109 $ 12,767 $ 4,481 $ 11,823 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 — — — — (1,847) — — — Net Income, as Adjusted 5,781 6,793 7,492 9,441 11,293 12,767 4,481 11,823 Add: Convertible debt interest expense 281 281 281 — — — — — Net Income, as Adjusted for Diluted EPS $ 6,062 $ 7,074 $ 7,773 $ 9,441 $ 11,293 $ 12,767 $ 4,481 $ 11,823 Diluted Weighted Average Shares Outstanding 9,337 10,280 10,488 11,289 11,428 12,462 13,986 13,922 Diluted Earnings per Share, as Adjusted $ 0.65 $ 0.69 $ 0.74 $ 0.84 $ 0.99 $ 1.02 $ 0.32 $ 0.85 “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. Tangible Book Value per Share Dollars in Thousands except Share Items Year Ended December 31, Quarter Ended Year to Date 2013 2014 2015 2016 2017 2018 September 30, 2019 September 30, 2019 Total Stockholders' Equity $ 42,421 $ 50,216 $ 59,657 $ 70,748 $ 80,119 $ 114,563 $ 127,829 $ 127,829 Less: Preferred Equity — — — — — — — — Less: Intangible Assets (72) (39) (17) — — — — — Tangible Common Equity $ 42,349 $ 50,177 $ 59,640 $ 70,748 $ 80,119 $ 114,563 $ 127,829 $ 127,829 Period End Shares Outstanding 9,343 9,563 10,226 11,145 11,537 13,672 13,783 13,783 Tangible Book Value per Share $ 4.53 $ 5.25 $ 5.83 $ 6.35 $ 6.94 $ 8.38 $ 9.27 $ 9.27 31