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): January 26, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (Commission file number) | (IRS Employer Identification No.) | ||||||
(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:
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
Item 2.02 Results of Operations and Financial Disclosure
On January 26, 2022 , Capital Bancorp, Inc. (the “Company”) issued a press release announcing the Company’s unaudited financial results for the three months ended December 31, 2021. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K 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 Exhibit 99.1 to this Current Report on Form 8-K, 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
| 99.1 | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
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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 | |||||
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CBNK Accelerating Loan Growth Drives Steady Profits and Returns
Diluted EPS of $0.71, ROAA of 1.95%, and ROAE of 20.66% for 4Q 2021
Rockville, Maryland, January 27, 2022 (GLOBE NEWSWIRE) – Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $10.2 million, or $0.71 per diluted share, for the fourth quarter of 2021. By comparison, net income was $9.7 million, or $0.71 per diluted share, for the fourth quarter of 2020. Portfolio loans, net, increased $78.9 million when compared to the period ended September 30, 2021, and $208.5 million when compared to the period ended December 31, 2021.
“2021 was a tremendous year for Capital Bank,” said Steven Schwartz, Chairman of the Board of the Company. “The Commercial Bank, Capital Bank Home Loans and OpenSky® all outperformed expectations as investments in technology and people continued to deliver exceptional results. Building on the Bank’s success, we continue to seek out and invest in opportunities that will leverage our unique combination of technological innovation and community banking to build long-term shareholder value.”
"The fourth quarter’s results were driven by strong performance in the Commercial Bank and OpenSky® which more than made up for the slowdown of our mortgage business," said Ed Barry, CEO of the Company. "Capitalizing on market disruption, we made several strategic hires in the Commercial Bank which contributed to a 21.9 percent annualized portfolio loan growth in the fourth quarter. OpenSky® is poised to remain an engine of growth with the fourth quarter launch of our unsecured credit card line to our highest performing OpenSky® secured card holders. OpenSky's® annualized quarterly net loan growth of 18.1 percent continued to drive portfolio loan balances. Anticipated OpenSky® card holder attrition resulted in a modest decline in open accounts for the quarter but remains well-below historical levels.”
Fourth Quarter 2021 Highlights
Capital Bancorp, Inc.
•Stable Earnings - Continued strong performance by the Commercial Bank and OpenSky® contributed to the fourth quarter's results. Quarterly net income increased to $10.2 million from $9.7 million in the fourth quarter of 2020. Earnings were $0.71 per diluted share for the three months ended December 31, 2021 and 2020.
•Outstanding Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.95% and 20.66%, respectively, for the three months ended December 31, 2021 compared to 2.08% and 25.26%, respectively, for the three months ended December 31, 2020.
•Expanded Net Interest Margin - Net interest margin was 6.49% for the three months ended December 31, 2021, which is an increase of 92 basis points compared to 5.57% for the same three month period last year and an increase over linked quarter of 22 basis points, from 6.27%, for the three months ended September 30, 2021. The margin improvement over linked quarter
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was driven by an increase in average loans outstanding as well as management's concentrated effort to lower funding costs.
•Robust Capital Positions - As of December 31, 2021, the Company reported a common equity tier 1 capital ratio of 14.28% and an allowance for loan losses to total loans ratio of 1.54%, or 1.65% excluding Small Business Administration Payroll Protection Program ("SBA-PPP") loans. During the preceding twelve months, tangible book value per common share grew 22.4 percent to $14.17 at December 31, 2021.
Commercial Bank
•Accelerating Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to December 31, 2020, and by $73.4 million, compared to September 30, 2021. The year over year growth was mainly due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non-owner occupied. Also contributing to the year over year growth was a 12.0 percent increase in commercial and industrial loans of $18.8 million and a 13.4 percent increase in construction real estate loans of $30.2 million. Offsetting total growth was a $36.3 million decrease in residential real estate loans.
•Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 29.4 percent compared to December 31, 2020. The $179.1 million year over year increase was primarily due to an increase in commercial demand deposits reflecting management's ongoing strategic initiative to improve the deposit franchise. At December 31, 2021, noninterest bearing deposits represented 43.8% of total deposits compared to 36.8% at December 31, 2020. Overall, the cost of interest bearing liabilities was reduced 53 basis points, from 0.95% for the quarter ended December 31, 2020 to 0.42% for the quarter ended December 31, 2021.
•Improving Credit Metrics - Non-performing assets ("NPAs") decreased to 0.56% of total assets at December 31, 2021 compared to 0.77% at September 30, 2021 primarily due to the disposition of $3.2 million in other real estate owned during the fourth quarter of 2021 and a reduction in nonaccrual loans of $2.3 million as management continues to focus on reducing non-performing assets. Primarily as a result of improving market conditions, the provision for loan losses declined $933.0 thousand compared to the fourth quarter of 2020. The current provision for the three months ended December 31, 2021 was $1.1 million and primarily related to the credit card portfolio.
•SBA-PPP Loans - SBA-PPP loans, net of $3.2 million in unearned fees, totaled $108.3 million at December 31, 2021 which was comprised of $4.4 million in 2020 originations and $103.9 million of 2021 originations. As of December 31, 2021, the Company has obtained forgiveness for $261.6 million of SBA-PPP loans.
Capital Bank Home Loans
•Softening Mortgage Performance - Origination volumes declined 58.7 percent, to $158.1 million, in the fourth quarter of 2021, when compared to $382.3 million in the fourth quarter of 2020. The continued steepening of the yield curve in the fourth quarter of 2021 slowed originations from the year earlier when low interest rates fueled refinance volumes. In the most recent quarter, mortgage origination volumes declined $59.1 million or 27.2 percent from the three months ended September 30, 2021 due to normal seasonal patterns as well as the rate-related slow-down in the mortgage industry which has disproportionately impacted refinance activity.
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•Purchase Volume - Purchase volumes increased to 56.4 percent of total originations for the fourth quarter of 2021, up from 30.0 percent during the fourth quarter of 2020.
OpenSky®
•Strong Revenue Growth - OpenSky® revenue grew by 38.2 percent to $22.2 million for the quarter ended December 31, 2021 from the same period in 2020. As account growth, line usage and customer behaviors continue to revert to traditional seasonal patterns, management anticipates modest seasonal declines in open accounts as account opening and attrition normalize.
•Continued Growth in OpenSky® Loans and Deposits - OpenSky® loan balances, net of reserves, increased by $38.9 million to $141.1 million compared to $102.2 million in the fourth quarter of 2020 and from $135.0 million, or 4.5 percent, on a linked quarter basis. Corresponding deposit balances increased 19.2 percent or $37.0 million from $192.5 million at December 31, 2020 to $229.5 million at December 31, 2021.
2021 Highlights
Capital Bancorp
•Diversified Businesses Drive Net Income - Net income for the twelve months ended December 31, 2021 increased 54.8 percent to $40.0 million, or $2.84 per diluted share, from $25.8 million, or $1.87 per diluted share for the twelve months ended December 31, 2020. Continued strong operating results demonstrate the advantages of the Company's diversified business lines that are, in certain respects, non-correlated across economic cycles.
•Top Tier Performance Ratios - Improved earnings supported ROAA and ROAE of 1.96% and 22.27%, respectively, for the twelve months ended December 31, 2021 compared to 1.56% and 18.00%, respectively, for the twelve months ended December 31, 2020.
•Expanded Net Interest Margin - For the twelve months ended December 31, 2021, net interest margin increased by 72 basis points to 5.86% compared to 5.14% for the twelve months ended December 31, 2020. The margin improvement was largely driven by the increase in OpenSky® income.
•Stable Efficiency Ratio - The efficiency ratio increased slightly to 65.79% for the twelve months ended December 31, 2021 compared to 65.44% for the same twelve month period in the prior year.
•Strong Balance Sheet Growth - Total assets increased $178.7 million, or 9.5 percent during the twelve months ended December 31, 2021 and was primarily funded by a $145.0 million increase in deposits.The growth of earning assets on the balance sheet consisted primarily of increases in cash equivalents of $36.5 million, portfolio loans net of deferred fees of $208.5 million which includes OpenSky® net loan growth of $30.1 million, investments available for sale of $84.7 million, and Bank Owned Life Insurance ("BOLI") of $35.5 million. Asset growth was primarily offset by a decrease of $91.2 million in loans held for sale as well as a $92.7 million reduction in SBA-PPP loans.
Commercial Bank
•Strong Portfolio Loan Growth - Portfolio loans, excluding credit card loans, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to $1.2 billion at
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December 31, 2020. The growth was primarily due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non owner occupied.
•Improved Deposit Franchise and Lower Cost of Funding - Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, during the twelve months ended December 31, 2021 and represented 43.8 percent of total deposits at December 31, 2021. The cost of interest bearing liabilities declined to 0.61% from 1.29% for the same period in the prior year, due mainly to the average rate of interest bearing demand deposits dropping from 0.34% as of December 31, 2020 to 0.07% as of December 31, 2021.
•COVID-19 Related Deferrals - At December 31, 2021, outstanding loans deferred due to COVID-19 amounted to $4.0 million, a decrease of 86.9 percent from $30.5 million at December 31, 2020.
Capital Bank Home Loans
•Gain on Sale - The year-to-date gain on sale of mortgage loans decreased to $30.3 million at December 31, 2021 from $38.5 million at December 31, 2020 due mainly to the $314.4 million, or 24.0 percent, decline in mortgage originations. The steepening yield curve in 2021 has slowed originations from the year earlier period when low interest rates fueled refinance volumes. Gain on sale margins, down slightly from 3.02% for the twelve months ended December 31, 2020, remained strong at 2.79% for the twelve months ended December 31, 2021. Historically-low housing inventory, shortages in new home building materials, and fluctuating interest rates are likely to continue suppressing origination volumes into 2022.
OpenSky®
•Growth Elevates Performance - The 92 thousand net increase in the number of accounts in the twelve months ended December 31, 2021 resulted in a $37.0 million increase in noninterest bearing secured credit card deposits that totaled $229.5 million as of December 31, 2021. Credit card balances increased by $38.9 million, or 38.1 percent, for the twelve months ended December 31, 2021 and totaled $141.1 million at December 31, 2021. Account growth led to higher credit card fees, which increased by 64.4 percent to $27.9 million compared to $17.0 million for the same twelve month period last year, largely driven by the increase in the number of accounts in the portfolio.
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| COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited | |||||||||||||||||||||||||||||||||||
| Quarter Ended | Twelve months ended | ||||||||||||||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||||||||||||||
| (amounts in thousands except per share data) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 33,788 | $ | 28,318 | 19.3 | % | $ | 123,243 | $ | 97,251 | 26.7 | % | |||||||||||||||||||||||
| Interest expense | 1,117 | 2,599 | (57.0) | % | 6,550 | 13,182 | (50.3) | % | |||||||||||||||||||||||||||
| Net interest income | 32,671 | 25,719 | 27.0 | % | 116,693 | 84,069 | 38.8 | % | |||||||||||||||||||||||||||
| Provision for loan losses | 1,100 | 2,033 | (45.9) | % | 3,359 | 11,242 | (70.1) | % | |||||||||||||||||||||||||||
| Noninterest income | 10,617 | 16,030 | (33.8) | % | 50,636 | 50,144 | 1.0 | % | |||||||||||||||||||||||||||
| Noninterest expense | 28,495 | 26,680 | 6.8 | % | 110,094 | 87,834 | 25.3 | % | |||||||||||||||||||||||||||
| Income before income taxes | 13,693 | 13,036 | 5.0 | % | 53,876 | 35,137 | 53.3 | % | |||||||||||||||||||||||||||
| Income tax expense | 3,522 | 3,347 | 5.2 | % | 13,898 | 9,314 | 49.2 | % | |||||||||||||||||||||||||||
| Net income | $ | 10,171 | $ | 9,689 | 5.0 | % | $ | 39,978 | $ | 25,823 | 54.8 | % | |||||||||||||||||||||||
Pre-tax pre-provision net revenue ("PPNR") (2) | $ | 14,793 | $ | 15,069 | (1.8) | % | $ | 57,235 | $ | 46,379 | 23.4 | % | |||||||||||||||||||||||
| Weighted average common shares - Basic | 13,877 | 13,686 | 1.4 | % | 13,799 | 13,793 | — | % | |||||||||||||||||||||||||||
| Weighted average common shares - Diluted | 14,290 | 13,707 | 4.3 | % | 14,081 | 13,800 | 2.0 | % | |||||||||||||||||||||||||||
| Earnings per share - Basic | $ | 0.73 | $ | 0.71 | 2.8 | % | $ | 2.90 | $ | 1.87 | 55.1 | % | |||||||||||||||||||||||
| Earnings per share - Diluted | $ | 0.71 | $ | 0.71 | — | % | $ | 2.84 | $ | 1.87 | 51.9 | % | |||||||||||||||||||||||
Return on average assets (1) | 1.95 | % | 2.08 | % | (6.3) | % | 1.96 | % | 1.56 | % | 25.6 | % | |||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans(1) (2) | 1.80 | % | 1.88 | % | (4.3) | % | 1.75 | % | 1.42 | % | 23.2 | % | |||||||||||||||||||||||
| Return on average equity | 20.66 | % | 25.26 | % | (18.2) | % | 22.27 | % | 18.00 | % | 23.7 | % | |||||||||||||||||||||||
| Quarter Ended | 4Q21 vs. 4Q20 | Quarter Ended | |||||||||||||||||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | ||||||||||||||||||||||||||||||||
| (in thousands except per share data) | 2021 | 2020 | % Change | 2021 | 2021 | 2021 | |||||||||||||||||||||||||||||
| Balance Sheet Highlights | |||||||||||||||||||||||||||||||||||
| Assets | $ | 2,055,300 | $ | 1,876,593 | 9.5 | % | $ | 2,169,556 | $ | 2,151,850 | $ | 2,091,851 | |||||||||||||||||||||||
| Investment securities available for sale | 184,455 | 99,787 | 84.8 | % | 189,165 | 160,515 | 128,023 | ||||||||||||||||||||||||||||
| Mortgage loans held for sale | 15,989 | 107,154 | (85.1) | % | 36,005 | 47,935 | 60,816 | ||||||||||||||||||||||||||||
| SBA-PPP loans, net of fees | 108,285 | 201,018 | (46.1) | % | 137,178 | 202,763 | 265,712 | ||||||||||||||||||||||||||||
Portfolio loans receivable (3) | 1,523,982 | 1,315,502 | 15.8 | % | 1,445,126 | 1,392,471 | 1,312,375 | ||||||||||||||||||||||||||||
| Allowance for loan losses | 25,181 | 23,434 | 7.5 | % | 24,753 | 24,079 | 23,550 | ||||||||||||||||||||||||||||
| Deposits | 1,797,137 | 1,652,128 | 8.8 | % | 1,921,238 | 1,917,419 | 1,863,069 | ||||||||||||||||||||||||||||
| FHLB borrowings | 22,000 | 22,000 | — | % | 22,000 | 22,000 | 22,000 | ||||||||||||||||||||||||||||
| Other borrowed funds | 12,062 | 14,016 | (13.9) | % | 12,062 | 12,062 | 12,062 | ||||||||||||||||||||||||||||
| Total stockholders' equity | 197,903 | 159,311 | 24.2 | % | 189,080 | 177,204 | 167,003 | ||||||||||||||||||||||||||||
Tangible common equity(2) | 197,903 | 159,311 | 24.2 | % | 189,080 | 177,204 | 167,003 | ||||||||||||||||||||||||||||
| Common shares outstanding | 13,962 | 13,754 | 1.5 | % | 13,802 | 13,772 | 13,759 | ||||||||||||||||||||||||||||
Tangible book value per share (2) | $ | 14.17 | $ | 11.58 | 22.4 | % | $ | 13.70 | $ | 12.87 | $ | 12.14 | |||||||||||||||||||||||
______________
(1) Annualized for the quarterly periods
(2) Refer to Appendix for reconciliation of non-GAAP measures.
(3) Loans are reflected net of deferred fees and costs.
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Operating Results - Comparison of Three Months Ended December 31, 2021 and 2020
For the three months ended December 31, 2021, net interest income increased $7.0 million, or 27.0 percent, to $32.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 92 basis point to 6.49% for the three months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.70% for the fourth quarter of 2021 compared to 3.80% for the same period in 2020. For the three months ended December 31, 2021, average interest earning assets increased $160.0 million, or 8.7 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 58 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $37.8 million, or 3.5 percent, while the average cost of interest bearing liabilities decreased 53 basis points to 0.42% from 0.95%.
The provision for loan losses of $1.1 million for the three months ended December 31, 2021 was primarily related to growth in the credit card portfolio. Net charge-offs for the fourth quarter of 2021 were $671.6 thousand, or 0.18% on an annualized basis of average loans, compared to $615.0 thousand, or 0.19% on an annualized basis of average loans for the fourth quarter of 2020. The $671.6 thousand in net charge-offs during the quarter was related solely to the credit card portfolio.
For the quarter ended December 31, 2021, noninterest income was $10.6 million, a decrease of $5.4 million, or 33.8 percent, from $16.0 million in the prior year quarter. The decrease was primarily the result of reduced mortgage banking revenue.
Net credit card loan balances increased by $38.9 million to $141.1 million as of December 31, 2021 from $102.2 million at December 31, 2020. The related deposit account balances increased 19.2 percent to $229.5 million at December 31, 2021 when compared to $192.5 million at December 31, 2020. For the three months ended December 31, 2021, OpenSky's® secured credit card accounts decreased by 40 thousand net compared to 39 thousand net new accounts for the same period in 2020 suggesting consumer behaviors may be returning to historical trends after being elevated in response to COVID-19 throughout 2020 and the first two quarters of 2021.
The efficiency ratio for the three months ended December 31, 2021 increased to 65.83% compared to 63.91% for the three months ended December 31, 2020 due mainly to the reduction in mortgage income generated.
Noninterest expense was $28.5 million for the three months ended December 31, 2021, as compared to $26.7 million for the three months ended December 31, 2020, an increase of $1.8 million, or 6.8 percent. The increase was primarily driven by increases in salaries and employee benefits of $2.0 million, advertising expenses of $994.7 thousand, and data processing expenses of $390.1 thousand. Offsetting these expenses were decreases in occupancy and equipment expense of $507.2 thousand, loan processing expenses of $503.2 thousand, and professional fees of $474.0 thousand.
Operating Results - Comparison of Twelve Months Ended December 31, 2021 and 2020
For the twelve months ended December 31, 2021, net interest income increased $32.6 million, or 38.8 percent, to $116.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 72 basis points to 5.86% for the twelve months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.60% for the twelve months ended December 31, 2021 compared to 3.89% for the same period in 2020. For the twelve months ended December 31, 2021, average interest earning assets increased $356.1 million, or 21.8 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 24 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $60.3 million, or 5.9 percent, while the average cost of interest-bearing liabilities decreased 68 basis points to 0.61% from 1.29%.
For the twelve months ended December 31, 2021, the provision for loan losses was $3.4 million, a decrease of $7.9 million from the prior year. Net charge-offs for the twelve months ended December 31, 2021 were $1.6 million, or 0.12% of average portfolio loans, compared to $1.1 million, or 0.09% of average portfolio loans, for the same period in 2020. The $1.6 million in net charge-offs during the twelve months ended December 31, 2021 was
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comprised primarily of commercial real estate loan net charge-offs of $161.1 thousand, commercial loan net charge-offs of and net charge-offs of $1.4 million in the credit card portfolio.
For the twelve months ended December 31, 2021, noninterest income was $50.6 million, an increase of $491.5 thousand, or 1.0 percent, from the same period in 2020. The increase was primarily driven by significant growth in credit card fees of $10.9 million, which was partially offset by a decrease in mortgage banking revenues of $8.9 million.
For the twelve months ended December 31, 2021, the Bank had net growth of 92 thousand new OpenSky® secured credit card accounts, increasing the total number of open accounts to 660 thousand. This compares to 345 thousand new originations for the same period last year, which increased total open accounts to 568 thousand.
The efficiency ratio for the twelve months ended December 31, 2021 increased slightly to 65.79% compared to 65.44% for the twelve months ended December 31, 2020 due to increases in noninterest expense.
Noninterest expense was $110.1 million for the twelve months ended December 31, 2021, as compared to $87.8 million for the twelve months ended December 31, 2020, an increase of $22.3 million, or 25.3 percent. The increase was primarily driven by a $4.4 million, or 13.2 percent, increase in salaries and benefits, an increase in professional fees of 42.8 percent, or $2.1 million, a $12.3 million, or 45.8 percent, increase in data processing, a $2.3 million, or 89.8 percent, increase in advertising, and a $2.0 million, or 18.2 percent, increase in other operating expenses period over period. The increase of $12.3 million in data processing expenses was primarily due to the higher volume of open credit cards during the twelve months ended December 31, 2021. Additionally, operating expenses increased $2.0 million, primarily due to increases in outside service providers.
During the twelve months ended December 31, 2021, results of operations were impacted by the COVID-19 pandemic and the resulting issuance of SBA-PPP loans. At December 31, 2021, the $111.5 million of SBA-PPP loans had remaining deferred origination fees of $3.8 million, and deferred costs of $655.7 thousand.
Financial Condition
Total assets at December 31, 2021 were $2.1 billion, an increase of 9.5 percent from December 31, 2020. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.5 billion as of December 31, 2021, an increase of 15.8 percent as compared to $1.3 billion at December 31, 2020.
Total deposits at December 31, 2021 were $1.8 billion, an increase of $145.0 million, or 8.8 percent, as compared to $1.7 billion at December 31, 2020. Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, to $787.7 million at December 31, 2021 compared to the level at December 31, 2020. Deposit balances grew year over year in certain fiduciary accounts of title and property management companies, as well as noninterest bearing OpenSky® deposits.
The Company recorded a provision for loan losses of $3.4 million during the twelve months ended December 31, 2021, which increased the allowance for loan losses to $25.2 million, or 1.54% of total loans (1.65%, excluding SBA-PPP loans, on a non-GAAP basis) at December 31, 2021. Nonperforming assets were $11.5 million, or 0.56% of total assets, as of December 31, 2021, down from $12.6 million, or 0.67% of total assets, at December 31, 2020. Of the $11.5 million in total nonperforming assets as of December 31, 2021, nonperforming loans represented $11.4 million and foreclosed real estate totaled $86.4 thousand. Included in nonperforming loans at December 31, 2021 were troubled debt restructurings of $534 thousand.
Stockholders’ equity increased to $197.9 million as of December 31, 2021, compared to $159.3 million at December 31, 2020. This increase was primarily attributable to earnings during the period. As of December 31, 2021, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
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| Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Loans, including fees | $ | 33,235 | $ | 27,848 | $ | 120,784 | $ | 95,367 | |||||||||||||||
| Investment securities available for sale | 439 | 363 | 2,010 | 1,292 | |||||||||||||||||||
| Federal funds sold and other | 114 | 107 | 449 | 592 | |||||||||||||||||||
| Total interest income | 33,788 | 28,318 | 123,243 | 97,251 | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
Deposits | 934 | 2,323 | 5,808 | 11,524 | |||||||||||||||||||
| Borrowed funds | 183 | 276 | 742 | 1,658 | |||||||||||||||||||
| Total interest expense | 1,117 | 2,599 | 6,550 | 13,182 | |||||||||||||||||||
| Net interest income | 32,671 | 25,719 | 116,693 | 84,069 | |||||||||||||||||||
| Provision for loan losses | 1,100 | 2,033 | 3,359 | 11,242 | |||||||||||||||||||
Net interest income after provision for loan losses | 31,571 | 23,686 | 113,334 | 72,827 | |||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| Service charges on deposits | 136 | 143 | 609 | 520 | |||||||||||||||||||
| Credit card fees | 6,676 | 6,272 | 27,884 | 16,966 | |||||||||||||||||||
| Mortgage banking revenue | 3,365 | 8,748 | 20,843 | 29,732 | |||||||||||||||||||
| Gain on sale of investment securities available for sale, net | — | 20 | 153 | 20 | |||||||||||||||||||
| Other fees and charges | 440 | 847 | 1,147 | 2,906 | |||||||||||||||||||
| Total noninterest income | 10,617 | 16,030 | 50,636 | 50,144 | |||||||||||||||||||
| Noninterest expenses | |||||||||||||||||||||||
| Salaries and employee benefits | 10,564 | 8,592 | 37,843 | 33,442 | |||||||||||||||||||
| Occupancy and equipment | 1,005 | 1,512 | 4,327 | 5,170 | |||||||||||||||||||
| Professional fees | 1,454 | 1,928 | 6,996 | 4,900 | |||||||||||||||||||
| Data processing | 9,643 | 9,253 | 39,237 | 26,917 | |||||||||||||||||||
| Advertising | 1,650 | 655 | 4,803 | 2,530 | |||||||||||||||||||
| Loan processing | 857 | 1,360 | 3,527 | 3,811 | |||||||||||||||||||
| Other real estate expenses, net | 47 | (68) | 368 | 69 | |||||||||||||||||||
| Other operating | 3,275 | 3,448 | 12,993 | 10,995 | |||||||||||||||||||
| Total noninterest expenses | 28,495 | 26,680 | 110,094 | 87,834 | |||||||||||||||||||
| Income before income taxes | 13,693 | 13,036 | 53,876 | 35,137 | |||||||||||||||||||
| Income tax expense | 3,522 | 3,347 | 13,898 | 9,314 | |||||||||||||||||||
| Net income | $ | 10,171 | $ | 9,689 | $ | 39,978 | $ | 25,823 | |||||||||||||||
8
| Consolidated Balance Sheets | |||||||||||
| (in thousands except share data) | (unaudited) December 31, 2021 | December 31, 2020 | |||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | 42,914 | $ | 18,456 | |||||||
| Interest bearing deposits at other financial institutions | 136,824 | 126,081 | |||||||||
| Federal funds sold | 3,657 | 2,373 | |||||||||
Total cash and cash equivalents | 183,395 | 146,910 | |||||||||
| Investment securities available for sale | 184,455 | 99,787 | |||||||||
| Marketable equity securities | 245 | 245 | |||||||||
Restricted investments | 3,498 | 3,713 | |||||||||
| Loans held for sale | 15,989 | 107,154 | |||||||||
| SBA-PPP loans receivable, net of fees | 108,285 | 201,018 | |||||||||
| Portfolio loans receivable, net of deferred fees and costs | 1,523,982 | 1,315,502 | |||||||||
| Less allowance for loan losses | (25,181) | (23,434) | |||||||||
| Total portfolio loans held for investment, net | 1,498,801 | 1,292,068 | |||||||||
Premises and equipment, net | 3,282 | 4,464 | |||||||||
| Accrued interest receivable | 7,901 | 8,134 | |||||||||
| Deferred income taxes, net | 9,793 | 6,818 | |||||||||
| Other real estate owned | 86 | 3,326 | |||||||||
| Bank owned life insurance | 35,506 | — | |||||||||
| Other assets | 4,064 | 2,956 | |||||||||
Total assets | $ | 2,055,300 | $ | 1,876,593 | |||||||
| Liabilities | |||||||||||
| Deposits | |||||||||||
Noninterest bearing | $ | 787,650 | $ | 608,559 | |||||||
Interest bearing | 1,009,487 | 1,043,569 | |||||||||
Total deposits | 1,797,137 | 1,652,128 | |||||||||
| Federal Home Loan Bank advances | 22,000 | 22,000 | |||||||||
| Other borrowed funds | 12,062 | 14,016 | |||||||||
| Accrued interest payable | 473 | 1,134 | |||||||||
| Other liabilities | 25,725 | 28,004 | |||||||||
Total liabilities | 1,857,397 | 1,717,282 | |||||||||
| Stockholders' equity | |||||||||||
| Common stock, $.01 par value; 49,000,000 shares authorized; 13,962,334 and 13,753,529 issued and outstanding | 140 | 138 | |||||||||
| Additional paid-in capital | 54,306 | 50,602 | |||||||||
| Retained earnings | 144,533 | 106,854 | |||||||||
| Accumulated other comprehensive income (loss) | (1,076) | 1,717 | |||||||||
Total stockholders' equity | 197,903 | 159,311 | |||||||||
Total liabilities and stockholders' equity | $ | 2,055,300 | $ | 1,876,593 | |||||||
9
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 December 31, | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 198,070 | $ | 73 | 0.15 | % | $ | 152,720 | $ | 37 | 0.10 | % | |||||||||||||||||||||||
Federal funds sold | 2,048 | — | — | 5,537 | — | — | |||||||||||||||||||||||||||||
Investment securities available for sale | 186,603 | 439 | 0.93 | 73,931 | 363 | 1.95 | |||||||||||||||||||||||||||||
| Restricted stock and equity securities | 3,743 | 41 | 4.35 | 3,947 | 70 | 7.08 | |||||||||||||||||||||||||||||
| Loans held for sale | 23,395 | 179 | 3.04 | 105,922 | 701 | 2.63 | |||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 116,595 | 1,347 | 4.58 | 227,617 | 1,998 | 3.49 | |||||||||||||||||||||||||||||
Portfolio loans receivable(2) | 1,465,878 | 31,709 | 8.58 | 1,266,662 | 25,149 | 7.90 | |||||||||||||||||||||||||||||
Total interest earning assets | 1,996,332 | 33,788 | 6.71 | 1,836,336 | 28,318 | 6.13 | |||||||||||||||||||||||||||||
| Noninterest earning assets | 69,951 | 18,509 | |||||||||||||||||||||||||||||||||
Total assets | $ | 2,066,283 | $ | 1,854,845 | |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest bearing demand accounts | $ | 315,933 | 39 | 0.05 | $ | 238,078 | 102 | 0.17 | |||||||||||||||||||||||||||
Savings | 6,575 | 1 | 0.06 | 4,828 | 1 | 0.05 | |||||||||||||||||||||||||||||
Money market accounts | 501,070 | 267 | 0.21 | 467,727 | 633 | 0.54 | |||||||||||||||||||||||||||||
Time deposits | 190,795 | 627 | 1.30 | 337,170 | 1,586 | 1.87 | |||||||||||||||||||||||||||||
Borrowed funds | 34,062 | 183 | 2.13 | 38,447 | 277 | 2.86 | |||||||||||||||||||||||||||||
Total interest bearing liabilities | 1,048,435 | 1,117 | 0.42 | 1,086,250 | 2,599 | 0.95 | |||||||||||||||||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest bearing liabilities | 26,504 | 23,810 | |||||||||||||||||||||||||||||||||
Noninterest bearing deposits | 796,014 | 592,193 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 195,330 | 152,592 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,066,283 | $ | 1,854,845 | |||||||||||||||||||||||||||||||
| Net interest spread | 6.29 | % | 5.18 | % | |||||||||||||||||||||||||||||||
| Net interest income | $ | 32,671 | $ | 25,719 | |||||||||||||||||||||||||||||||
Net interest margin(3) | 6.49 | % | 5.57 | % | |||||||||||||||||||||||||||||||
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 279 and 177 basis points of the reported net interest margin, respectively.
10
| Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 228,420 | $ | 283 | 0.12 | % | $ | 112,249 | $ | 343 | 0.31 | % | |||||||||||||||||||||||
Federal funds sold | 2,850 | — | — | 3,128 | 4 | 0.12 | |||||||||||||||||||||||||||||
Investment securities available for sale | 151,479 | 2,010 | 1.33 | 58,071 | 1,292 | 2.22 | |||||||||||||||||||||||||||||
| Restricted stock and equity securities | 3,774 | 166 | 4.40 | 4,025 | 244 | 6.07 | |||||||||||||||||||||||||||||
| Loans held for sale | 43,126 | 1,224 | 2.84 | 84,928 | 2,610 | 3.07 | |||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 190,588 | 7,613 | 3.99 | 157,630 | 4,479 | 2.84 | |||||||||||||||||||||||||||||
Portfolio loans receivable(1) | 1,370,988 | 111,947 | 8.17 | 1,215,049 | 88,279 | 7.27 | |||||||||||||||||||||||||||||
Total interest earning assets | 1,991,225 | 123,243 | 6.19 | 1,635,080 | 97,251 | 5.95 | |||||||||||||||||||||||||||||
| Noninterest earning assets | 44,619 | 24,923 | |||||||||||||||||||||||||||||||||
Total assets | $ | 2,035,844 | $ | 1,660,003 | |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest bearing demand accounts | $ | 289,285 | 202 | 0.07 | $ | 195,794 | 656 | 0.34 | |||||||||||||||||||||||||||
Savings | 6,470 | 3 | 0.05 | 4,722 | 5 | 0.11 | |||||||||||||||||||||||||||||
Money market accounts | 482,225 | 1,484 | 0.31 | 480,218 | 4,786 | 1.00 | |||||||||||||||||||||||||||||
Time deposits | 269,262 | 4,119 | 1.53 | 297,997 | 6,077 | 2.04 | |||||||||||||||||||||||||||||
Borrowed funds | 34,214 | 742 | 2.17 | 42,471 | 1,658 | 3.90 | |||||||||||||||||||||||||||||
Total interest bearing liabilities | 1,081,456 | 6,550 | 0.61 | 1,021,202 | 13,182 | 1.29 | |||||||||||||||||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest bearing liabilities | 24,128 | 22,007 | |||||||||||||||||||||||||||||||||
Noninterest bearing deposits | 750,760 | 473,301 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 179,500 | 143,493 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,035,844 | $ | 1,660,003 | |||||||||||||||||||||||||||||||
| Net interest spread | 5.58 | % | 4.66 | % | |||||||||||||||||||||||||||||||
| Net interest income | $ | 116,693 | $ | 84,069 | |||||||||||||||||||||||||||||||
Net interest margin(2) | 5.86 | % | 5.14 | % | |||||||||||||||||||||||||||||||
_______________
(1)
(1)Includes nonaccrual loans.
(2)For the twelve months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 226 and 125 basis points of the reported net interest margin, respectively.
11
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||
| Earnings: | ||||||||||||||||||||||||||||||||
| Net income | $ | 10,171 | $ | 11,177 | $ | 9,648 | $ | 8,982 | $ | 9,689 | ||||||||||||||||||||||
| Earnings per common share, diluted | 0.71 | 0.79 | 0.68 | 0.65 | 0.71 | |||||||||||||||||||||||||||
| Net interest margin | 6.49 | % | 6.27 | % | 5.47 | % | 5.15 | % | 5.57 | % | ||||||||||||||||||||||
Net interest margin, excluding credit cards & SBA-PPP loans (1) | 3.70 | % | 3.52 | % | 3.55 | % | 3.70 | % | 3.80 | % | ||||||||||||||||||||||
Return on average assets(2) | 1.95 | % | 2.13 | % | 1.90 | % | 1.87 | % | 2.08 | % | ||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans (1)(2) | 1.80 | % | 1.99 | % | 1.65 | % | 1.60 | % | 1.88 | % | ||||||||||||||||||||||
Return on average equity(2) | 20.66 | % | 23.87 | % | 22.36 | % | 22.30 | % | 25.26 | % | ||||||||||||||||||||||
| Efficiency ratio | 65.83 | % | 64.10 | % | 66.37 | % | 67.11 | % | 63.91 | % | ||||||||||||||||||||||
| Balance Sheet: | ||||||||||||||||||||||||||||||||
| Total assets | $ | 2,055,300 | $ | 2,169,556 | $ | 2,151,850 | $ | 2,091,851 | $ | 1,876,593 | ||||||||||||||||||||||
| Asset Quality Ratios: | ||||||||||||||||||||||||||||||||
| Nonperforming assets to total assets | 0.56 | % | 0.77 | % | 0.54 | % | 0.58 | % | 0.67 | % | ||||||||||||||||||||||
Nonperforming assets to total assets, excluding the SBA-PPP loans (1) | 0.59 | % | 0.83 | % | 0.60 | % | 0.66 | % | 0.75 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans | 0.70 | % | 0.85 | % | 0.52 | % | 0.56 | % | 0.61 | % | ||||||||||||||||||||||
Nonperforming loans to portfolio loans (1) | 0.75 | % | 0.94 | % | 0.60 | % | 0.67 | % | 0.70 | % | ||||||||||||||||||||||
Net charge-offs to average portfolio loans (1)(2) | 0.18 | % | 0.08 | % | 0.08 | % | 0.12 | % | 0.19 | % | ||||||||||||||||||||||
| Allowance for loan losses to total loans | 1.54 | % | 1.56 | % | 1.51 | % | 1.49 | % | 1.54 | % | ||||||||||||||||||||||
Allowance for loan losses to portfolio loans (1) | 1.65 | % | 1.71 | % | 1.73 | % | 1.79 | % | 1.78 | % | ||||||||||||||||||||||
| Allowance for loan losses to non-performing loans | 220.40 | % | 182.48 | % | 287.40 | % | 267.07 | % | 253.71 | % | ||||||||||||||||||||||
| Bank Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 13.79 | % | 13.86 | % | 13.51 | % | 13.55 | % | 12.60 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 12.53 | % | 12.60 | % | 12.25 | % | 12.29 | % | 11.34 | % | ||||||||||||||||||||||
| Leverage ratio | 8.36 | % | 7.83 | % | 7.58 | % | 7.54 | % | 7.45 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 12.53 | % | 12.60 | % | 12.25 | % | 12.29 | % | 11.34 | % | ||||||||||||||||||||||
| Tangible common equity | 8.36 | % | 7.57 | % | 7.17 | % | 7.01 | % | 7.43 | % | ||||||||||||||||||||||
| Holding Company Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 16.41 | % | 15.75 | % | 16.14 | % | 16.07 | % | 15.19 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 14.43 | % | 14.49 | % | 14.10 | % | 13.98 | % | 13.10 | % | ||||||||||||||||||||||
| Leverage ratio | 9.73 | % | 9.12 | % | 8.78 | % | 8.84 | % | 8.78 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 14.28 | % | 14.34 | % | 13.94 | % | 13.81 | % | 12.94 | % | ||||||||||||||||||||||
| Tangible common equity | 9.63 | % | 8.72 | % | 8.23 | % | 7.98 | % | 8.48 | % | ||||||||||||||||||||||
| Composition of Loans: | ||||||||||||||||||||||||||||||||
| Residential real estate | $ | 401,607 | $ | 418,205 | $ | 420,015 | $ | 420,461 | $ | 437,860 | ||||||||||||||||||||||
| Commercial real estate | 556,339 | 502,523 | 471,807 | 433,336 | 392,550 | |||||||||||||||||||||||||||
| Construction real estate | 255,147 | 251,256 | 223,832 | 221,277 | 224,904 | |||||||||||||||||||||||||||
| Commercial and industrial - Other | 175,956 | 143,244 | 158,392 | 149,914 | 157,127 | |||||||||||||||||||||||||||
| Credit card, net of reserve | 141,120 | 134,979 | 121,410 | 83,740 | 102,186 | |||||||||||||||||||||||||||
| Other consumer loans | 1,033 | 1,425 | 1,034 | 4,487 | 1,649 | |||||||||||||||||||||||||||
| Portfolio loans receivable | $ | 1,531,202 | $ | 1,451,632 | $ | 1,396,490 | $ | 1,313,215 | $ | 1,316,276 | ||||||||||||||||||||||
| Deferred origination fees, net | (7,220) | (6,506) | (4,019) | (840) | (774) | |||||||||||||||||||||||||||
| Portfolio loans receivable, net | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | $ | 1,312,375 | $ | 1,315,502 | ||||||||||||||||||||||
| SBA-PPP loans, net | $ | 108,285 | $ | 137,178 | $ | 202,763 | $ | 265,712 | $ | 201,018 | ||||||||||||||||||||||
| Composition of Deposits: | ||||||||||||||||||||||||||||||||
| Noninterest bearing | $ | 787,650 | $ | 833,187 | $ | 828,308 | $ | 771,924 | $ | 608,559 | ||||||||||||||||||||||
| Interest bearing demand | 330,924 | 369,812 | 314,883 | 300,992 | 257,126 | |||||||||||||||||||||||||||
| Savings | 6,994 | 6,682 | 6,965 | 6,012 | 4,800 | |||||||||||||||||||||||||||
| Money Markets | 493,919 | 493,029 | 484,567 | 471,303 | 447,077 | |||||||||||||||||||||||||||
| Time Deposits | 177,650 | 218,528 | 282,696 | 312,838 | 334,566 | |||||||||||||||||||||||||||
| Total Deposits | $ | 1,797,137 | $ | 1,921,238 | $ | 1,917,419 | $ | 1,863,069 | $ | 1,652,128 | ||||||||||||||||||||||
12
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (Dollars in thousands except per share data) | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||
| Capital Bank Home Loan Metrics: | ||||||||||||||||||||||||||||||||
| Origination of loans held for sale | $ | 158,051 | $ | 217,175 | $ | 265,517 | $ | 353,774 | $ | 382,267 | ||||||||||||||||||||||
| Mortgage loans sold | 178,068 | 229,111 | 278,384 | 400,112 | 412,830 | |||||||||||||||||||||||||||
| Gain on sale of loans | 4,423 | 6,108 | 7,763 | 12,008 | 12,950 | |||||||||||||||||||||||||||
| Purchase volume as a % of originations | 56.44 | % | 50.98 | % | 50.64 | % | 24.59 | % | 30.03 | % | ||||||||||||||||||||||
Gain on sale as a % of loans sold(3) | 2.48 | % | 2.67 | % | 2.79 | % | 3.00 | % | 3.14 | % | ||||||||||||||||||||||
| Mortgage commissions | $ | 1,462 | $ | 1,884 | $ | 2,364 | $ | 3,320 | $ | 3,405 | ||||||||||||||||||||||
OpenSky® Portfolio Metrics: | ||||||||||||||||||||||||||||||||
| Active customer accounts | 660,397 | 700,383 | 707,600 | 642,272 | 568,373 | |||||||||||||||||||||||||||
| Credit card loans, net of reserve | $ | 141,120 | $ | 134,979 | $ | 121,410 | $ | 83,740 | $ | 102,186 | ||||||||||||||||||||||
| Noninterest secured credit card deposits | 229,530 | 242,405 | 241,724 | 215,883 | 192,520 | |||||||||||||||||||||||||||
(1)Refer to Appendix for reconciliation of non-GAAP measures.
(2)Annualized.
(3)Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.
13
Appendix
Reconciliation of Non-GAAP Measures
| Return on Average Assets, as Adjusted | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Net Income | $ | 10,171 | $ | 11,177 | $ | 9,648 | $ | 8,982 | $ | 9,689 | |||||||
| Less: SBA-PPP loan income | 1,347 | 1,525 | 2,272 | 2,205 | 1,998 | ||||||||||||
| Net Income, as Adjusted | $ | 8,824 | $ | 9,652 | $ | 7,376 | $ | 6,777 | $ | 7,691 | |||||||
| Average Total Assets | 2,066,283 | 2,084,772 | 2,041,232 | 1,949,265 | 1,854,845 | ||||||||||||
| Less: Average SBA-PPP Loans | 116,595 | 162,217 | 250,040 | 232,371 | 227,617 | ||||||||||||
| Average Total Assets, as Adjusted | $ | 1,949,688 | $ | 1,922,555 | $ | 1,791,192 | $ | 1,716,894 | $ | 1,627,228 | |||||||
| Return on Average Assets, as Adjusted | 1.80 | % | 1.99 | % | 1.65 | % | 1.60 | % | 1.88 | % | |||||||
| Net Interest Margin, as Adjusted | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Net Interest Income | $ | 32,671 | $ | 32,059 | $ | 27,520 | $ | 24,444 | $ | 25,719 | |||||||
| Less Secured credit card loan income | 15,010 | 15,086 | 10,497 | 7,660 | 9,306 | ||||||||||||
| Less SBA-PPP loan income | 1,347 | 1,525 | 2,272 | 2,205 | 1,998 | ||||||||||||
| Net Interest Income, as Adjusted | $ | 16,314 | $ | 15,448 | $ | 14,751 | $ | 14,579 | $ | 14,415 | |||||||
| Average Interest Earning Assets | 1,996,331 | 2,026,616 | 2,016,801 | 1,923,463 | 1,836,337 | ||||||||||||
| Less Average secured credit card loans | 131,306 | 124,771 | 100,456 | 93,520 | 95,739 | ||||||||||||
| Less Average SBA-PPP loans | 116,595 | 162,217 | 250,040 | 232,371 | 227,617 | ||||||||||||
| Total Average Interest Earning Assets, as Adjusted | $ | 1,748,430 | $ | 1,739,628 | $ | 1,666,305 | $ | 1,597,572 | $ | 1,512,981 | |||||||
| Net Interest Margin, as Adjusted | 3.70 | % | 3.52 | % | 3.55 | % | 3.70 | % | 3.80 | % | |||||||
| Tangible Book Value per Share | Quarters Ended | ||||||||||||||||
| Dollars in thousands, except per share amounts | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Total Stockholders' Equity | $ | 197,903 | $ | 189,080 | $ | 177,204 | $ | 167,003 | $ | 159,311 | |||||||
| Less: Preferred equity | — | — | — | — | — | ||||||||||||
| Less: Intangible assets | — | — | — | — | — | ||||||||||||
| Tangible Common Equity | $ | 197,903 | $ | 189,080 | $ | 177,204 | $ | 167,003 | $ | 159,311 | |||||||
| Period End Shares Outstanding | 13,962,334 | 13,801,936 | 13,771,615 | 13,759,218 | 13,753,529 | ||||||||||||
| Tangible Book Value per Share | $ | 14.17 | $ | 13.70 | $ | 12.87 | $ | 12.14 | $ | 11.58 | |||||||
14
Appendix
Reconciliation of Non-GAAP Measures
| Allowance for Loan Losses to Total Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Allowance for Loan Losses | $ | 25,181 | $ | 24,753 | $ | 24,079 | $ | 23,550 | $ | 23,434 | |||||||
| Total Loans | 1,632,267 | 1,582,304 | 1,595,234 | 1,578,087 | 1,516,520 | ||||||||||||
| Less: SBA-PPP loans | 108,285 | 137,178 | 202,763 | 265,712 | 201,018 | ||||||||||||
| Total Portfolio Loans | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | $ | 1,312,375 | $ | 1,315,502 | |||||||
| Allowance for Loan Losses to Total Portfolio Loans | 1.65 | % | 1.71 | % | 1.73 | % | 1.79 | % | 1.78 | % | |||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Total Nonperforming Assets | $ | 11,512 | $ | 16,801 | $ | 11,615 | $ | 12,112 | $ | 12,563 | |||||||
| Total Assets | 2,055,300 | 2,169,556 | 2,151,850 | 2,091,851 | 1,876,593 | ||||||||||||
| Less: SBA-PPP loans | 108,285 | 137,178 | 202,763 | 265,712 | 201,018 | ||||||||||||
| Total Assets, net SBA-PPP Loans | $ | 1,947,015 | $ | 2,032,378 | $ | 1,949,087 | $ | 1,826,139 | $ | 1,675,575 | |||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | 0.59 | % | 0.83 | % | 0.60 | % | 0.66 | % | 0.75 | % | |||||||
| Nonperforming Loans to Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Total Nonperforming Loans | $ | 11,425 | $ | 13,565 | $ | 8,378 | $ | 8,818 | $ | 9,237 | |||||||
| Total Loans | 1,632,267 | 1,582,304 | 1,595,234 | 1,578,087 | 1,516,520 | ||||||||||||
| Less: SBA-PPP loans | 108,285 | 137,178 | 202,763 | 265,712 | 201,018 | ||||||||||||
| Total Portfolio Loans | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | $ | 1,312,375 | $ | 1,315,502 | |||||||
| Nonperforming Loans to Total Portfolio Loans | 0.75 | % | 0.94 | % | 0.60 | % | 0.67 | % | 0.70 | % | |||||||
| Net Charge-offs to Average Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Total Net Charge-offs | $ | 672 | $ | 301 | $ | 251 | $ | 388 | $ | 615 | |||||||
| Total Average Loans | 1,582,473 | 1,569,198 | 1,567,973 | 1,532,093 | 1,494,279 | ||||||||||||
| Less: Average SBA-PPP loans | 116,595 | 162,217 | 250,040 | 232,371 | 227,617 | ||||||||||||
| Total Average Portfolio Loans | $ | 1,465,878 | $ | 1,406,981 | $ | 1,317,933 | $ | 1,299,722 | $ | 1,266,662 | |||||||
| Net Charge-offs to Average Portfolio Loans | 0.18 | % | 0.08 | % | 0.08 | % | 0.12 | % | 0.19 | % | |||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | Quarters Ended | ||||||||||||||||
| Dollars in thousands | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||
| Net income | $ | 10,171 | $ | 11,177 | $ | 9,648 | $ | 8,982 | $ | 9,689 | |||||||
| Add: Income Tax Expense | 3,522 | 3,877 | 3,357 | 3,143 | 3,347 | ||||||||||||
| Add: Provision for Loan Losses | 1,100 | 975 | 781 | 503 | 2,033 | ||||||||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | $ | 14,793 | $ | 16,029 | $ | 13,786 | $ | 12,628 | $ | 15,069 | |||||||
15
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 fourth largest bank headquartered in Maryland at December 31, 2021. 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 $2.1 billion at December 31, 2021 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,” "optimistic," “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. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As a result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are exposed to all of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen as planned, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of decisions made by the Federal Open Market Committee of the Federal Reserve and other factors, our net interest margin and spread may decline, which would adversely affect our earnings; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.
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
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