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): July 20, 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 July 20, 2022 , Capital Bancorp, Inc. (the “Company”) issued a press release announcing the Company’s unaudited financial results for the three and six months ended June 30, 2022. 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) | ||||
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 | |||||
3
CBNK Announces Record Quarterly Earnings
Diluted EPS of $0.80, ROAA of 2.23%, and ROAE of 22.16% for 2Q 2022
Rockville, Maryland, July 20, 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 $11.5 million, or $0.80 per diluted share, for the second quarter of 2022 representing 19.3% growth when compared to net income of $9.6 million, or $0.68 per diluted share, for the second quarter of 2021. Net portfolio loans increased $81.4 million, or 21.4 percent annualized, during the second quarter.
"Loan growth, stable deposit costs, OpenSky® performance and lower than anticipated expenses drove another quarter of outstanding performance," said Ed Barry, CEO of the Company and the Bank. "Credit quality in our commercial and consumer loan portfolios remains stable with an anticipated increase in loss provisions in our OpenSky® loan portfolio. Continued aggressive marketing by fintech and credit card companies offering unsecured subprime credit cards has resulted in account growth headwinds in OpenSky®, but we are confident that our approach to serving this market and our investments to scale our platform will continue to deliver substantial profits in this business. Our multi-year effort to transform our deposit franchise continues to show results and will help drive results in the rising rate environment."
"We are pleased with how well Capital Bank's diversified business model continues to perform despite changes in macroeconomic conditions" said Steven Schwartz, Chairman of the Board of the Company. "Our extremely dedicated management team and fully engaged Board remain focused on increasing shareholder value by improving our unique mix of products with the adoption of state-of-the-art technology to deliver coveted financial solutions to our customers."
Second Quarter 2022 Highlights
Capital Bancorp, Inc.
•Record Earnings - Continued strong performance by the Commercial Bank and OpenSky® contributed to the second quarter's record results. Quarterly net income increased to $11.5 million from $9.6 million in the second quarter of 2021 due mainly to increased net interest income due to loan growth and an increase in rates. The increase in net interest income was offset by an increase in the loan loss provision and a decrease in noninterest income. Earnings were $0.80 per diluted share for the three months ended June 30, 2022 and $0.68 for the three months ended June 30, 2021.
•Continued Outstanding Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 2.23% and 22.16%, respectively, for the three months ended June 30, 2022, compared to 1.90% and 22.36%, respectively, for the three months ended June 30, 2021.
•Expanded Net Interest Margin - Net interest margin was 7.06% for the three months ended June 30, 2022, compared to 5.47% for the same three month period last year. The margin expansion was primarily driven by increases in the yield on portfolio loans including credit card loans to card holders whose accounts have been open for more than a year as origination costs
1
on these accounts are amortized in the first year and no longer offset annual renewal fees. Rate increases in our adjustable rate portfolios also contributed to the margin expansion.
•Robust Capital Positions - As of June 30, 2022, the Company reported a common equity tier 1 capital ratio of 15.55% and an allowance for loan losses to total portfolio loans ratio of 1.63%, or 1.64% excluding SBA-PPP loans. Tangible book value per common share grew 15.0 percent to $14.80 at June 30, 2022 when compared to the same quarter in 2021.
Commercial Bank
•Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $199.2 million, or 15.6 percent, to $1.5 billion at June 30, 2022 compared to June 30, 2021. This growth was mainly due to a 29.0 percent increase in commercial real estate loans of $136.8 million, of which $92.9 million was owner occupied. Also contributing to the growth was a 22.0 percent increase in commercial and industrial loans of $34.9 million and an 7.8 percent increase in construction real estate loans of $17.4 million when comparing the quarter ended June 30, 2022 to the quarter ended June 30, 2021.
•Improving Credit Metrics - Non-performing assets ("NPAs") decreased to 0.34% of total assets at June 30, 2022 compared to 0.54% at June 30, 2021 with the disposition of $3.2 million in other real estate owned and a reduction in nonaccrual loans of $1.0 million as management continues to focus on reducing non-performing assets. The provision for loan losses increased $1.3 million compared to the second quarter of 2021. The current provision for the three months ended June 30, 2022 was $2.0 million and was related to the growth in the unsecured credit card loans and secured customer attrition which tends to result in an increase in charge offs of certain fees in excess of the secured portion of the loan.
•SBA-PPP Loans - SBA-PPP loans, net of $301 thousand in unearned fees, totaled $15.9 million at June 30, 2022 which was comprised of $1.4 million in 2020 originations and $14.7 million of 2021 originations. As of June 30, 2022, the Company has obtained forgiveness for $359.5 million of SBA-PPP loans.
Capital Bank Home Loans
•Slowing Mortgage Originations - Origination volumes declined 68.2 percent, to $84.4 million, in the second quarter of 2022, when compared to $265.5 million in the second quarter of 2021. The continued steepening of the yield curve in the second quarter of 2022 slowed originations from the year earlier when low interest rates fueled refinance volumes.
•Purchase Volume - While purchase volumes increased to 85.2 percent of total originations for the second quarter of 2022, up from 50.6 percent during the second quarter of 2021, total purchase originations declined by 46.7% during the same period.
OpenSky®
•Strong Revenue Growth - OpenSky® revenue grew by 22.1 percent to $23.0 million for the quarter ended June 30, 2022 from the same period in 2021 due to an increase in average credit card loan balances as well as an increase in the yield on those credit card loans. Normal customer attrition and aggressive marketing by fintech and credit card companies offering unsecured subprime credit cards has resulted in the continued decline in the total number of OpenSky® accounts.
•Continued Growth in OpenSky® Loans - OpenSky® loan balances, net of reserves, increased by $20.8 million to $142.2 million compared to $121.4 million in the second quarter of 2021. Corresponding deposit balances decreased 11.4 percent or $27.6 million from $241.7 million at June 30, 2021 to $214.1 million at June 30, 2022.
2
2022 Highlights
Capital Bancorp
•Diversified Businesses Drive Net Income - Net income for the six months ended June 30, 2022 increased 16.6 percent to $21.7 million, or $1.52 per diluted share, from $18.6 million, or $1.32 per diluted share for the six months ended June 30, 2021. 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 2.12% and 21.25%, respectively, for the six months ended June 30, 2022 compared to 1.88% and 22.33%, respectively, for the six months ended June 30, 2021.
•Expanded Net Interest Margin - For the six months ended June 30, 2022, net interest margin increased by 161 basis points to 6.93% compared to 5.32% for the six months ended June 30, 2021. The margin improvement was primarily driven by increases in the yield on portfolio loans including credit card loans to card holders whose accounts have been open for more than a year as origination costs on these accounts are amortized in the first year and no longer offset annual renewal fees.. Rate increases in our adjustable rate portfolios also contributed to the margin expansion.
•Stable Efficiency Ratio - The efficiency ratio decreased to 63.52% for the six months ended June 30, 2022 compared to 66.73% for the same six month period in the prior year.
•Strong Balance Sheet Growth - Total assets increased $99.5 million, or 4.8 percent during the six months ended June 30, 2022 and was primarily funded by a $91.8 million increase in deposits.The growth of earning assets on the balance sheet consisted primarily of increases in cash equivalents of $67.5 million, portfolio loans net of deferred fees of $83.7 million which includes OpenSky® net loan growth of $15.8 million, and investment securities available for sale of $42.1 million. Asset growth was primarily offset by a decrease of $92.4 million in SBA-PPP loans.
Commercial Bank
•Strong Portfolio Loan Growth - During the first six months of 2022, portfolio loans, excluding credit card loans, increased by $84.2 million, or 12.2 percent on an annualized basis, to $1.5 billion at June 30, 2022 compared to the first six months of 2021 when portfolio loans, excluding credit card loans, increased by $61.0 million to $1.3 billion at June 30, 2021. The 2022 growth was primarily due to a $52.3 million increase in commercial real estate loans, of which $47.7 million was owner occupied, and a $28.6 million increase in residential real estate.
•Improved Deposit Franchise and Lower Cost of Funding - While total deposits at June 30, 2022 decreased in comparison to total deposits at June 30, 2021, the composition of the deposit portfolio has continued to shift into a more favorable source of funding. Noninterest bearing deposits continue to grow and represented 44.6 percent of total deposits at June 30, 2022. The cost of interest bearing liabilities declined to 0.43% from 0.73% for the same period in the prior year, due mainly to the run-off of higher cost time deposits which have been replaced with lower cost money market accounts.
•COVID-19 Related Deferrals - At June 30, 2022, outstanding loans deferred due to COVID-19 amounted to $2.3 million, a decrease of 86.9 percent from $11.9 million at June 30, 2021.
3
Capital Bank Home Loans
•Gain on Sale - The year-to-date gain on sale of mortgage loans decreased to $5.0 million at June 30, 2022 from $19.8 million at June 30, 2021 due mainly to the $424.4 million, or 68.5 percent, decline in mortgage originations. The steepening yield curve in 2022 has slowed originations from the year earlier period when low interest rates fueled refinance volumes. Gain on sale margins, down slightly from 2.91% for the six months ended June 30, 2021, remained strong at 2.48% for the six months ended June 30, 2022. Historically-low housing inventory, shortages in new home building materials, and fluctuating interest rates are likely to continue suppressing origination volumes into 2022.
OpenSky®
•Balance Growth Offsets Account Attrition - Gross credit card balances increased by $20.7 million, or 16.7 percent, at June 30, 2022 when compared to June 30, 2021. The growth in credit card loan balances coupled with an increase in interest rates accounted for the $12.4 million growth in interest income when comparing the six months ended June 30, 2022 to the same period in 2021. A decrease in overall credit card accounts led to a reduction in credit card fees, which decreased by 11.1 percent to $12.1 million compared to $13.7 million for the same six month period last year.
4
| COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited | |||||||||||||||||||||||||||||||||||
| Quarter Ended | Six months ended | ||||||||||||||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||||||||||||||
| (dollars in thousands except per share data) | 2022 | 2021 | % Change | 2022 | 2021 | % Change | |||||||||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||||||||||
| Interest income | $ | 36,556 | $ | 29,289 | 24.8 | % | $ | 70,957 | $ | 55,927 | 26.9 | % | |||||||||||||||||||||||
| Interest expense | 1,156 | 1,769 | (34.7) | % | 2,226 | 3,964 | (43.8) | % | |||||||||||||||||||||||||||
| Net interest income | 35,400 | 27,520 | 28.6 | % | 68,731 | 51,963 | 32.3 | % | |||||||||||||||||||||||||||
| Provision for loan losses | 2,035 | 781 | 160.6 | % | 2,987 | 1,284 | 132.6 | % | |||||||||||||||||||||||||||
| Noninterest income | 8,362 | 13,471 | (37.9) | % | 16,650 | 27,421 | (39.3) | % | |||||||||||||||||||||||||||
| Noninterest expense | 27,130 | 27,205 | (0.3) | % | 54,232 | 52,972 | 2.4 | % | |||||||||||||||||||||||||||
| Income before income taxes | 14,597 | 13,005 | 12.2 | % | 28,162 | 25,128 | 12.1 | % | |||||||||||||||||||||||||||
| Income tax expense | 3,089 | 3,357 | (8.0) | % | 6,443 | 6,499 | (0.9) | % | |||||||||||||||||||||||||||
| Net income | $ | 11,508 | $ | 9,648 | 19.3 | % | $ | 21,719 | $ | 18,629 | 16.6 | % | |||||||||||||||||||||||
Pre-tax pre-provision net revenue ("PPNR") (2) | $ | 16,632 | $ | 13,786 | 20.6 | % | $ | 31,149 | $ | 26,412 | 17.9 | % | |||||||||||||||||||||||
| Weighted average common shares - Basic | 14,007 | 13,766 | 1.8 | % | 13,998 | 13,762 | 1.7 | % | |||||||||||||||||||||||||||
| Weighted average common shares - Diluted | 14,313 | 14,172 | 1.0 | % | 14,323 | 14,070 | 1.8 | % | |||||||||||||||||||||||||||
| Earnings per share - Basic | $ | 0.82 | $ | 0.70 | 17.1 | % | $ | 1.55 | $ | 1.35 | 14.8 | % | |||||||||||||||||||||||
| Earnings per share - Diluted | $ | 0.80 | $ | 0.68 | 17.6 | % | $ | 1.52 | $ | 1.32 | 15.2 | % | |||||||||||||||||||||||
Return on average assets (1) | 2.23 | % | 1.90 | % | 17.4 | % | 2.12 | % | 1.88 | % | 12.8 | % | |||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans(1) (2) | 2.04 | % | 1.65 | % | 23.6 | % | 1.86 | % | 1.60 | % | 16.3 | % | |||||||||||||||||||||||
| Return on average equity | 22.16 | % | 22.36 | % | (0.9) | % | 21.25 | % | 22.33 | % | (4.8) | % | |||||||||||||||||||||||
| Quarter Ended | 2Q22 vs. 2Q21 | Quarter Ended | |||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||||||||||||||||
| (in thousands except per share data) | 2022 | 2021 | % Change | 2022 | 2021 | 2021 | |||||||||||||||||||||||||||||
| Balance Sheet Highlights | |||||||||||||||||||||||||||||||||||
| Assets | $ | 2,154,846 | $ | 2,151,850 | 0.1 | % | $ | 2,122,453 | $ | 2,055,300 | $ | 2,169,556 | |||||||||||||||||||||||
| Investment securities available for sale | 226,509 | 160,515 | 41.1 | % | 172,712 | 184,455 | 189,165 | ||||||||||||||||||||||||||||
| Mortgage loans held for sale | 11,708 | 47,935 | (75.6) | % | 17,036 | 15,989 | 36,005 | ||||||||||||||||||||||||||||
| SBA-PPP loans, net of fees | 15,864 | 202,763 | (92.2) | % | 51,085 | 108,285 | 137,178 | ||||||||||||||||||||||||||||
Portfolio loans receivable (3) | 1,607,677 | 1,392,471 | 15.5 | % | 1,526,256 | 1,523,982 | 1,445,126 | ||||||||||||||||||||||||||||
| Allowance for loan losses | 26,419 | 24,079 | 9.7 | % | 25,252 | 25,181 | 24,753 | ||||||||||||||||||||||||||||
| Deposits | 1,888,920 | 1,917,419 | (1.5) | % | 1,862,722 | 1,797,137 | 1,921,238 | ||||||||||||||||||||||||||||
| FHLB borrowings | 22,000 | 22,000 | — | % | 22,000 | 22,000 | 22,000 | ||||||||||||||||||||||||||||
| Other borrowed funds | 12,062 | 12,062 | — | % | 12,062 | 12,062 | 12,062 | ||||||||||||||||||||||||||||
| Total stockholders' equity | 207,316 | 177,204 | 17.0 | % | 201,492 | 197,903 | 189,080 | ||||||||||||||||||||||||||||
Tangible common equity(2) | 207,316 | 177,204 | 17.0 | % | 201,492 | 197,903 | 189,080 | ||||||||||||||||||||||||||||
| Common shares outstanding | 14,010 | 13,772 | 1.7 | % | 14,001 | 13,962 | 13,802 | ||||||||||||||||||||||||||||
Tangible book value per share (2) | $ | 14.80 | $ | 12.87 | 15.0 | % | $ | 14.39 | $ | 14.17 | $ | 13.70 | |||||||||||||||||||||||
______________
(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.
5
Operating Results - Comparison of Three Months Ended June 30, 2022 and 2021
For the three months ended June 30, 2022, net interest income increased $7.9 million, or 28.6 percent, to $35.4 million from the same period in 2021, primarily due to an increase in interest earned on the credit card loan portfolio. The net interest margin increased 159 basis points to 7.06% for the three months ended June 30, 2022 from the same period in 2021 due in large part to the acceleration of the deferred fees associated with the SBA-PPP loan forgiveness as well as the recognition of deferred fees on the credit card loans. Net interest margin, excluding credit card and SBA-PPP loans, was 3.86% for the second quarter of 2022 compared to 3.55% for the same period in 2021. For the three months ended June 30, 2022, average interest earning assets decreased $4.9 million, or 0.2 percent, to $2.0 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 147 basis points. Compared to the same period in the prior year, average interest bearing liabilities decreased $60.0 million, or 5.5 percent, while the average cost of interest-bearing liabilities decreased 20 basis points to 0.45% from 0.65%.
The provision for loan losses of $2.0 million for the three months ended June 30, 2022 was related to growth in the credit card portfolio and the cycling of credit card accounts. Net charge-offs for the second quarter of 2022 were $868 thousand, or 0.23% on an annualized basis of average portfolio loans, compared to $252 thousand, or 0.08% on an annualized basis of average loans for the second quarter of 2021. All of the $868 thousand in net charge-offs during the quarter were related to the credit card portfolio.
For the quarter ended June 30, 2022, noninterest income was $8.4 million, a decrease of $5.1 million, or 37.9 percent, from $13.5 million in the prior year quarter. The decrease was primarily the result of reduced mortgage banking revenue.
Net credit card loan balances increased by $20.8 million to $142.2 million as of June 30, 2022 from $121.4 million at June 30, 2021. The related deposit account balances decreased 11.4 percent to $214.1 million at June 30, 2022 when compared to $241.7 million at June 30, 2021. For the three months ended June 30, 2022, OpenSky's® secured credit card accounts decreased by 14 thousand net compared to 65 thousand net new accounts for the same period in 2021 as the elevated new account originations related to Covid stimulus payments subside.
The efficiency ratio for the three months ended June 30, 2022 decreased to 62.00% compared to 66.37% for the three months ended June 30, 2021.
Noninterest expense was $27.1 million for the three months ended June 30, 2022, as compared to $27.2 million for the three months ended June 30, 2021, a decrease of $74 thousand, or 0.3 percent. The decrease was primarily driven by decreases in data processing expenses of $2.9 million and loan processing expenses of $640 thousand, and were offset by increases in salaries and employee benefits of $1.3 million, advertising expenses of $930 thousand, and professional fees of $1.1 million.
Operating Results - Comparison of Six Months Ended June 30, 2022 and 2021
For the six months ended June 30, 2022, net interest income increased $16.8 million, or 32.3 percent, to $68.7 million from the same period in 2021, primarily due to an increase in average balances in the portfolio loans. The net interest margin increased 161 basis points to 6.93% for the six months ended June 30, 2022 from the same period in 2021. Net interest margin, excluding credit card and SBA-PPP loans, was 3.84% for the six months ended June 30, 2022 compared to 3.59% for the same period in 2021. For the six months ended June 30, 2022, average interest earning assets increased $30.8 million, or 1.6 percent, to $2.0 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 143 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $56.9 million, or 5.2 percent, while the average cost of interest bearing liabilities decreased 30 basis points to 0.43% from 0.73%.
For the six months ended June 30, 2022, the provision for loan losses was $3.0 million, an increase of $1.7 million from the prior year. Net charge-offs for the six months ended June 30, 2022 were $1.7 million, or 0.23% annualized of average portfolio loans, compared to $640 thousand, or 0.10% annualized of average portfolio loans, for the same period in 2021. The $1.7 million in net charge-offs during the six months ended June 30, 2022 was comprised of credit card portfolio net charge-offs.
6
For the six months ended June 30, 2022, noninterest income was $16.7 million, a decrease of $10.8 million, or 39.3 percent, from the same period in 2021. The decrease was primarily driven by the reduction in mortgage banking revenues of $9.7 million.
For the six months ended June 30, 2022, the Bank had a net decrease of 44 thousand OpenSky® secured credit card accounts, decreasing the total number of open accounts to 616 thousand. This compares to 139 thousand net new originations for the same period last year, which increased total open accounts to 708 thousand.
The efficiency ratio for the six months ended June 30, 2022 decreased to 63.52% compared to 66.73% for the six months ended June 30, 2021 due to increases in interest income.
Noninterest expense was $54.2 million for the six months ended June 30, 2022, as compared to $53.0 million for the six months ended June 30, 2021, an increase of $1.3 million, or 2.4 percent. The increase was primarily driven by a $3.1 million, or 17.7 percent, increase in salaries and benefits, an increase in professional fees of 58.6 percent, or $1.8 million, and an $1.7 million, or 81.7 percent, increase in advertising expense. The increase was partially offset by a $3.9 million, or 20.0 percent, decrease in data processing and a $1.3 million, or 64.1 percent, decrease in loan processing. The decrease of $3.9 million in data processing expenses was primarily due to a contract renegotiation.
Financial Condition
Total assets at June 30, 2022 were $2.2 billion, comparable to the balance at June 30, 2021. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.6 billion as of June 30, 2022, an increase of 15.5 percent as compared to $1.4 billion at June 30, 2021.
While total deposits were $1.9 billion for the period ended June 30, 2022, a slight decline from the balance at June 30, 2021, the composition of the deposit portfolio shifted, with a decrease in higher costing time deposits of $121.9 million, or 43.1 percent, when comparing June 30, 2022 to June 30, 2021 to lower costing money market accounts and noninterest bearing accounts. At June 30, 2022, there were no listing service or brokered deposits compared to $68.2 million at June 30, 2021.
The Company recorded a provision for loan losses of $3.0 million during the six months ended June 30, 2022, which increased the allowance for loan losses to $26.4 million, or 1.63% of total loans (1.64%, excluding SBA-PPP loans, on a non-GAAP basis) at June 30, 2022. Nonperforming assets were $7.3 million, or 0.34% of total assets, as of June 30, 2022, down from $11.6 million, or 0.54% of total assets, at June 30, 2021, and was comprised solely of nonperforming loans. Included in nonperforming loans at June 30, 2022 were troubled debt restructurings of $519 thousand.
Stockholders’ equity increased to $207.3 million as of June 30, 2022, compared to $177.2 million at June 30, 2021. This increase was primarily attributable to earnings during the period of $21.7 million which were offset by unrealized losses recorded net of tax on the available for sale securities in the rising interest rate environment creating a $12.3 million reduction in accumulated other comprehensive income during the period. As of June 30, 2022, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
7
| Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Loans, including fees | $ | 35,304 | $ | 28,641 | $ | 69,193 | $ | 54,709 | |||||||||||||||
| Investment securities available for sale | 779 | 544 | 1,149 | 1,021 | |||||||||||||||||||
| Federal funds sold and other | 473 | 104 | 615 | 197 | |||||||||||||||||||
| Total interest income | 36,556 | 29,289 | 70,957 | 55,927 | |||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
Deposits | 964 | 1,582 | 1,847 | 3,589 | |||||||||||||||||||
| Borrowed funds | 192 | 187 | 379 | 375 | |||||||||||||||||||
| Total interest expense | 1,156 | 1,769 | 2,226 | 3,964 | |||||||||||||||||||
| Net interest income | 35,400 | 27,520 | 68,731 | 51,963 | |||||||||||||||||||
| Provision for loan losses | 2,035 | 781 | 2,987 | 1,284 | |||||||||||||||||||
Net interest income after provision for loan losses | 33,365 | 26,739 | 65,744 | 50,679 | |||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| Service charges on deposits | 183 | 165 | 346 | 312 | |||||||||||||||||||
| Credit card fees | 6,210 | 7,715 | 12,134 | 13,655 | |||||||||||||||||||
| Mortgage banking revenue | 1,528 | 5,270 | 3,318 | 13,013 | |||||||||||||||||||
| Gain on sale of investment securities available for sale, net | — | 153 | — | 153 | |||||||||||||||||||
| Other fees and charges | 441 | 168 | 852 | 288 | |||||||||||||||||||
| Total noninterest income | 8,362 | 13,471 | 16,650 | 27,421 | |||||||||||||||||||
| Noninterest expenses | |||||||||||||||||||||||
| Salaries and employee benefits | 10,071 | 8,750 | 20,381 | 17,317 | |||||||||||||||||||
| Occupancy and equipment | 1,313 | 1,195 | 2,339 | 2,324 | |||||||||||||||||||
| Professional fees | 2,417 | 1,362 | 4,738 | 2,987 | |||||||||||||||||||
| Data processing | 7,266 | 10,122 | 15,542 | 19,433 | |||||||||||||||||||
| Advertising | 2,223 | 1,293 | 3,862 | 2,126 | |||||||||||||||||||
| Loan processing | 335 | 975 | 727 | 2,026 | |||||||||||||||||||
| Other operating | 3,505 | 3,508 | 6,643 | 6,759 | |||||||||||||||||||
| Total noninterest expenses | 27,130 | 27,205 | 54,232 | 52,972 | |||||||||||||||||||
| Income before income taxes | 14,597 | 13,005 | 28,162 | 25,128 | |||||||||||||||||||
| Income tax expense | 3,089 | 3,357 | 6,443 | 6,499 | |||||||||||||||||||
| Net income | $ | 11,508 | $ | 9,648 | $ | 21,719 | $ | 18,629 | |||||||||||||||
8
| Consolidated Balance Sheets | |||||||||||
| (in thousands except share data) | (unaudited) June 30, 2022 | December 31, 2021 | |||||||||
| Assets | |||||||||||
| Cash and due from banks | $ | 14,776 | $ | 42,914 | |||||||
| Interest bearing deposits at other financial institutions | 234,823 | 136,824 | |||||||||
| Federal funds sold | 1,285 | 3,657 | |||||||||
Total cash and cash equivalents | 250,884 | 183,395 | |||||||||
| Investment securities available for sale | 226,509 | 184,455 | |||||||||
| Marketable equity securities | 245 | 245 | |||||||||
Restricted investments | 3,615 | 3,498 | |||||||||
| Loans held for sale | 11,708 | 15,989 | |||||||||
| SBA-PPP loans receivable, net of fees | 15,864 | 108,285 | |||||||||
| Portfolio loans receivable, net of deferred fees and costs | 1,607,677 | 1,523,982 | |||||||||
| Less allowance for loan losses | (26,419) | (25,181) | |||||||||
| Total portfolio loans held for investment, net | 1,581,258 | 1,498,801 | |||||||||
Premises and equipment, net | 3,315 | 3,282 | |||||||||
| Accrued interest receivable | 7,276 | 7,901 | |||||||||
| Deferred income taxes, net | 12,929 | 9,793 | |||||||||
| Other real estate owned | — | 86 | |||||||||
| Bank owned life insurance | 36,011 | 35,506 | |||||||||
| Other assets | 5,232 | 4,064 | |||||||||
Total assets | $ | 2,154,846 | $ | 2,055,300 | |||||||
| Liabilities | |||||||||||
| Deposits | |||||||||||
Noninterest bearing | $ | 842,363 | $ | 787,650 | |||||||
Interest bearing | 1,046,557 | 1,009,487 | |||||||||
Total deposits | 1,888,920 | 1,797,137 | |||||||||
| Federal Home Loan Bank advances | 22,000 | 22,000 | |||||||||
| Other borrowed funds | 12,062 | 12,062 | |||||||||
| Accrued interest payable | 300 | 473 | |||||||||
| Other liabilities | 24,248 | 25,725 | |||||||||
Total liabilities | 1,947,530 | 1,857,397 | |||||||||
| Stockholders' equity | |||||||||||
| Common stock, $.01 par value; 49,000,000 shares authorized; 14,010,158 and 13,962,334 issued and outstanding | 140 | 140 | |||||||||
| Additional paid-in capital | 55,762 | 54,306 | |||||||||
| Retained earnings | 164,750 | 144,533 | |||||||||
| Accumulated other comprehensive loss | (13,336) | (1,076) | |||||||||
Total stockholders' equity | 207,316 | 197,903 | |||||||||
Total liabilities and stockholders' equity | $ | 2,154,846 | $ | 2,055,300 | |||||||
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 June 30, | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 218,251 | $ | 429 | 0.79 | % | $ | 259,330 | $ | 63 | 0.10 | % | |||||||||||||||||||||||
Federal funds sold | 1,655 | 2 | 0.48 | 3,087 | — | — | |||||||||||||||||||||||||||||
Investment securities available for sale | 215,172 | 779 | 1.45 | 139,997 | 544 | 1.56 | |||||||||||||||||||||||||||||
| Restricted stock and equity securities | 3,854 | 42 | 4.37 | 3,478 | 41 | 4.70 | |||||||||||||||||||||||||||||
| Loans held for sale | 11,447 | 134 | 4.70 | 44,644 | 314 | 2.82 | |||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 28,870 | 1,120 | 15.56 | 250,040 | 2,272 | 3.64 | |||||||||||||||||||||||||||||
Portfolio loans receivable(2) | 1,532,671 | 34,050 | 8.91 | 1,316,224 | 26,055 | 7.94 | |||||||||||||||||||||||||||||
Total interest earning assets | 2,011,920 | 36,556 | 7.29 | 2,016,800 | 29,289 | 5.82 | |||||||||||||||||||||||||||||
| Noninterest earning assets | 56,298 | 24,432 | |||||||||||||||||||||||||||||||||
Total assets | $ | 2,068,218 | $ | 2,041,232 | |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest bearing demand accounts | $ | 259,192 | 38 | 0.06 | $ | 282,197 | 50 | 0.07 | |||||||||||||||||||||||||||
Savings | 9,913 | 1 | 0.04 | 6,634 | 1 | 0.05 | |||||||||||||||||||||||||||||
Money market accounts | 566,303 | 396 | 0.28 | 460,669 | 352 | 0.31 | |||||||||||||||||||||||||||||
Time deposits | 160,279 | 529 | 1.32 | 304,519 | 1,179 | 1.55 | |||||||||||||||||||||||||||||
Borrowed funds | 34,062 | 192 | 2.27 | 35,770 | 187 | 2.10 | |||||||||||||||||||||||||||||
Total interest bearing liabilities | 1,029,749 | 1,156 | 0.45 | 1,089,789 | 1,769 | 0.65 | |||||||||||||||||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest bearing liabilities | 22,647 | 20,111 | |||||||||||||||||||||||||||||||||
Noninterest bearing deposits | 807,558 | 758,255 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 208,264 | 173,077 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,068,218 | $ | 2,041,232 | |||||||||||||||||||||||||||||||
| Net interest spread | 6.84 | % | 5.17 | % | |||||||||||||||||||||||||||||||
| Net interest income | $ | 35,400 | $ | 27,520 | |||||||||||||||||||||||||||||||
Net interest margin(3) | 7.06 | % | 5.47 | % | |||||||||||||||||||||||||||||||
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended June 30, 2022 and June 30, 2021, collectively, SBA-PPP loans and credit card loans accounted for 320 and 192 basis points of the reported net interest margin, respectively.
10
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 208,043 | $ | 530 | 0.51 | % | $ | 232,712 | $ | 113 | 0.10 | % | |||||||||||||||||||||||
Federal funds sold | 3,148 | 2 | 0.13 | 3,477 | — | 0.00 | |||||||||||||||||||||||||||||
Investment securities available for sale | 197,965 | 1,149 | 1.17 | 123,443 | 1,022 | 1.67 | |||||||||||||||||||||||||||||
| Restricted stock and equity securities | 3,810 | 83 | 4.39 | 3,691 | 83 | 4.56 | |||||||||||||||||||||||||||||
| Loans held for sale | 12,467 | 245 | 3.96 | 58,475 | 794 | 2.74 | |||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 55,917 | 3,186 | 11.49 | 242,619 | 4,741 | 3.94 | |||||||||||||||||||||||||||||
Portfolio loans receivable(1) | 1,519,857 | 65,762 | 8.73 | 1,305,973 | 49,174 | 7.59 | |||||||||||||||||||||||||||||
Total interest earning assets | 2,001,207 | 70,957 | 7.15 | 1,970,390 | 55,927 | 5.72 | |||||||||||||||||||||||||||||
| Noninterest earning assets | 61,533 | 25,113 | |||||||||||||||||||||||||||||||||
Total assets | $ | 2,062,740 | $ | 1,995,503 | |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest bearing demand accounts | $ | 276,490 | 74 | 0.05 | $ | 269,647 | 118 | 0.09 | |||||||||||||||||||||||||||
Savings | 9,098 | 3 | 0.07 | 6,127 | 2 | 0.05 | |||||||||||||||||||||||||||||
Money market accounts | 552,858 | 697 | 0.25 | 465,882 | 881 | 0.38 | |||||||||||||||||||||||||||||
Time deposits | 165,485 | 1,073 | 1.31 | 318,512 | 2,588 | 1.64 | |||||||||||||||||||||||||||||
Borrowed funds | 34,062 | 379 | 2.24 | 34,699 | 375 | 2.18 | |||||||||||||||||||||||||||||
Total interest bearing liabilities | 1,037,993 | 2,226 | 0.43 | 1,094,867 | 3,964 | 0.73 | |||||||||||||||||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest bearing liabilities | 23,397 | 22,940 | |||||||||||||||||||||||||||||||||
Noninterest bearing deposits | 795,221 | 709,443 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 206,129 | 168,253 | |||||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,062,740 | $ | 1,995,503 | |||||||||||||||||||||||||||||||
| Net interest spread | 6.72 | % | 4.99 | % | |||||||||||||||||||||||||||||||
| Net interest income | $ | 68,731 | $ | 51,963 | |||||||||||||||||||||||||||||||
Net interest margin(2) | 6.93 | % | 5.32 | % | |||||||||||||||||||||||||||||||
_______________
(1)
(1)Includes nonaccrual loans.
(2)For the six months ended June 30, 2022 and June 30, 2021, collectively, SBA-PPP loans and credit card loans accounted for 309 and 173 basis points of the reported net interest margin, respectively.
11
The Company’s reportable segments represent business units with discrete financial information whose results are regularly reviewed by management. The four segments include Commercial Banking, Capital Bank Home Loans (the Company’s mortgage loan division), OpenSky® (the Company’s credit card division) and the Corporate Office. The following schedule presents financial information for each reportable segment for the three and six months ended June 30, 2022 and June 30, 2021.
| Segments | ||||||||||||||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky® | Corporate(2) | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||
| Interest income | $ | 18,912 | $ | 134 | $ | 16,780 | $ | 758 | $ | (28) | $ | 36,556 | ||||||||||||||||||||||||||
| Interest expense | 952 | 64 | — | 168 | (28) | 1,156 | ||||||||||||||||||||||||||||||||
| Net interest income | 17,960 | 70 | 16,780 | 590 | — | 35,400 | ||||||||||||||||||||||||||||||||
| Provision for loan losses | — | — | 2,035 | — | — | 2,035 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 17,960 | 70 | 14,745 | 590 | — | 33,365 | ||||||||||||||||||||||||||||||||
| Noninterest income | 526 | 1,626 | 6,210 | — | — | 8,362 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 12,859 | 2,217 | 11,940 | 114 | — | 27,130 | ||||||||||||||||||||||||||||||||
| Net income before taxes | $ | 5,627 | $ | (521) | $ | 9,015 | $ | 476 | $ | — | $ | 14,597 | ||||||||||||||||||||||||||
| Total assets | $ | 1,958,893 | $ | 12,257 | $ | 137,180 | $ | 226,950 | $ | (180,434) | $ | 2,154,846 | ||||||||||||||||||||||||||
| For the Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 17,297 | $ | 313 | $ | 11,114 | $ | 600 | $ | (35) | $ | 29,289 | ||||||||||||||||||||||||||
| Interest expense | 1,413 | 221 | — | 170 | (35) | 1,769 | ||||||||||||||||||||||||||||||||
| Net interest income | 15,884 | 92 | 11,114 | 430 | — | 27,520 | ||||||||||||||||||||||||||||||||
| Provision for loan losses | 349 | — | 432 | — | — | 781 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 15,535 | 92 | 10,682 | 430 | — | 26,739 | ||||||||||||||||||||||||||||||||
| Noninterest income | 260 | 5,454 | 7,715 | 42 | — | 13,471 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 10,489 | 3,283 | 13,328 | 105 | — | 27,205 | ||||||||||||||||||||||||||||||||
| Net income before taxes | $ | 5,306 | $ | 2,263 | $ | 5,069 | $ | 367 | $ | — | $ | 13,005 | ||||||||||||||||||||||||||
| Total assets | $ | 1,943,106 | $ | 49,110 | $ | 128,009 | $ | 197,071 | $ | (165,446) | $ | 2,151,850 | ||||||||||||||||||||||||||
________________________
(1) Noninterest expense includes $6.7 million and $9.3 million in data processing expense in OpenSky’s® segment for the three months ended June 30, 2022 and 2021, respectively.
(2) The Corporate segment invests idle cash in revenue producing assets including interest bearing cash accounts, loan participations and other appropriate investments for the Company.
12
| For the Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky® | Corporate(2) | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||
| Interest income | $ | 37,412 | $ | 245 | $ | 31,720 | $ | 1,645 | $ | (65) | $ | 70,957 | ||||||||||||||||||||||||||
| Interest expense | 1,805 | 145 | — | 341 | (65) | 2,226 | ||||||||||||||||||||||||||||||||
| Net interest income | 35,607 | 100 | 31,720 | 1,304 | — | 68,731 | ||||||||||||||||||||||||||||||||
| Provision for loan losses | — | — | 2,987 | — | — | 2,987 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 35,607 | 100 | 28,733 | 1,304 | — | 65,744 | ||||||||||||||||||||||||||||||||
| Noninterest income | 1,083 | 3,433 | 12,134 | — | — | 16,650 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 24,922 | 4,316 | 24,822 | 172 | — | 54,232 | ||||||||||||||||||||||||||||||||
| Net income before taxes | $ | 11,768 | $ | (783) | $ | 16,045 | $ | 1,132 | $ | — | $ | 28,162 | ||||||||||||||||||||||||||
| Total assets | $ | 1,958,893 | $ | 12,257 | $ | 137,180 | $ | 226,950 | $ | (180,434) | $ | 2,154,846 | ||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 34,861 | $ | 789 | $ | 19,309 | $ | 1,029 | (61) | $ | 55,927 | |||||||||||||||||||||||||||
| Interest expense | 3,124 | 569 | — | 332 | (61) | 3,964 | ||||||||||||||||||||||||||||||||
| Net interest income | 31,737 | 220 | 19,309 | 697 | — | 51,963 | ||||||||||||||||||||||||||||||||
| Provision for loan losses | 729 | — | 485 | 70 | — | 1,284 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 31,008 | 220 | 18,824 | 627 | — | 50,679 | ||||||||||||||||||||||||||||||||
| Noninterest income | 498 | 13,227 | 13,655 | 41 | — | 27,421 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 19,888 | 7,202 | 25,702 | 180 | — | 52,972 | ||||||||||||||||||||||||||||||||
| Net income before taxes | $ | 11,618 | $ | 6,245 | $ | 6,777 | $ | 488 | $ | — | $ | 25,128 | ||||||||||||||||||||||||||
| Total assets | $ | 1,943,106 | $ | 49,110 | $ | 128,009 | $ | 197,071 | $ | (165,446) | $ | 2,151,850 | ||||||||||||||||||||||||||
________________________
(1) Noninterest expense includes $14.3 million and $17.9 million in data processing expense in OpenSky’s® segment for the six months ended June 30, 2022 and 2021, respectively.
(2) The Corporate segment invests idle cash in revenue producing assets including interest bearing cash accounts, loan participations and other appropriate investments for the Company.
13
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (dollars in thousands except per share data) | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | |||||||||||||||||||||||||||
| Earnings: | ||||||||||||||||||||||||||||||||
| Net income | $ | 11,508 | $ | 10,211 | $ | 10,171 | $ | 11,177 | $ | 9,648 | ||||||||||||||||||||||
| Earnings per common share, diluted | 0.80 | 0.71 | 0.71 | 0.79 | 0.68 | |||||||||||||||||||||||||||
| Net interest margin | 7.06 | % | 6.79 | % | 6.49 | % | 6.27 | % | 5.47 | % | ||||||||||||||||||||||
Net interest margin, excluding credit cards & SBA-PPP loans (1) | 3.86 | % | 3.82 | % | 3.70 | % | 3.52 | % | 3.55 | % | ||||||||||||||||||||||
Return on average assets(2) | 2.23 | % | 2.01 | % | 1.95 | % | 2.13 | % | 1.90 | % | ||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans (1)(2) | 2.04 | % | 1.67 | % | 1.80 | % | 1.99 | % | 1.65 | % | ||||||||||||||||||||||
Return on average equity(2) | 22.16 | % | 20.30 | % | 20.66 | % | 23.87 | % | 22.36 | % | ||||||||||||||||||||||
| Efficiency ratio | 62.00 | % | 65.12 | % | 65.83 | % | 64.10 | % | 66.37 | % | ||||||||||||||||||||||
| Balance Sheet: | ||||||||||||||||||||||||||||||||
| Total portfolio loans receivable, net | $ | 1,607,677 | $ | 1,526,256 | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | ||||||||||||||||||||||
| Total deposits | 1,888,920 | 1,862,722 | 1,797,137 | 1,921,238 | 1,917,419 | |||||||||||||||||||||||||||
| Total assets | 2,154,846 | 2,122,453 | 2,055,300 | 2,169,556 | 2,151,850 | |||||||||||||||||||||||||||
| Total shareholders' equity | 207,316 | 201,492 | 197,903 | 189,080 | 177,204 | |||||||||||||||||||||||||||
| Asset Quality Ratios: | ||||||||||||||||||||||||||||||||
| Nonperforming assets to total assets | 0.34 | % | 0.28 | % | 0.56 | % | 0.77 | % | 0.54 | % | ||||||||||||||||||||||
Nonperforming assets to total assets, excluding the SBA-PPP loans (1) | 0.34 | % | 0.29 | % | 0.59 | % | 0.83 | % | 0.60 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans | 0.45 | % | 0.38 | % | 0.70 | % | 0.85 | % | 0.52 | % | ||||||||||||||||||||||
Nonperforming loans to portfolio loans (1) | 0.46 | % | 0.39 | % | 0.75 | % | 0.94 | % | 0.60 | % | ||||||||||||||||||||||
Net charge-offs to average portfolio loans (1)(2) | 0.23 | % | 0.24 | % | 0.18 | % | 0.08 | % | 0.08 | % | ||||||||||||||||||||||
| Allowance for loan losses to total loans | 1.63 | % | 1.60 | % | 1.54 | % | 1.56 | % | 1.51 | % | ||||||||||||||||||||||
Allowance for loan losses to portfolio loans (1) | 1.64 | % | 1.65 | % | 1.65 | % | 1.71 | % | 1.73 | % | ||||||||||||||||||||||
| Allowance for loan losses to non-performing loans | 360.06 | % | 422.65 | % | 220.40 | % | 182.48 | % | 287.40 | % | ||||||||||||||||||||||
| Bank Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 14.34 | % | 14.36 | % | 13.79 | % | 13.86 | % | 13.51 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 13.09 | % | 13.10 | % | 12.53 | % | 12.60 | % | 12.25 | % | ||||||||||||||||||||||
| Leverage ratio | 9.11 | % | 8.74 | % | 8.36 | % | 7.83 | % | 7.58 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 13.09 | % | 13.10 | % | 12.53 | % | 12.60 | % | 12.25 | % | ||||||||||||||||||||||
| Tangible common equity | 8.17 | % | 8.11 | % | 8.36 | % | 7.57 | % | 7.17 | % | ||||||||||||||||||||||
| Holding Company Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 17.66 | % | 17.16 | % | 16.41 | % | 15.75 | % | 16.14 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 15.70 | % | 15.19 | % | 14.43 | % | 14.49 | % | 14.10 | % | ||||||||||||||||||||||
| Leverage ratio | 10.93 | % | 10.25 | % | 9.73 | % | 9.12 | % | 8.78 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 15.55 | % | 15.04 | % | 14.28 | % | 14.34 | % | 13.94 | % | ||||||||||||||||||||||
| Tangible common equity | 9.62 | % | 9.49 | % | 9.63 | % | 8.72 | % | 8.23 | % | ||||||||||||||||||||||
14
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (dollars in thousands except per share data) | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | |||||||||||||||||||||||||||
| Composition of Loans: | ||||||||||||||||||||||||||||||||
| SBA-PPP loans, net | $ | 15,864 | $ | 51,085 | $ | 108,285 | $ | 137,178 | $ | 202,763 | ||||||||||||||||||||||
| Residential real estate | $ | 430,244 | $ | 420,242 | $ | 401,607 | $ | 418,205 | $ | 420,015 | ||||||||||||||||||||||
| Commercial real estate | 608,646 | 564,725 | 556,339 | 502,523 | 471,807 | |||||||||||||||||||||||||||
| Construction real estate | 241,249 | 245,722 | 255,147 | 251,256 | 223,832 | |||||||||||||||||||||||||||
| Commercial and industrial | 193,262 | 177,504 | 175,956 | 143,244 | 158,392 | |||||||||||||||||||||||||||
| Credit card, net of reserve | 142,166 | 123,750 | 141,120 | 134,979 | 121,410 | |||||||||||||||||||||||||||
| Other consumer loans | 856 | 909 | 1,033 | 1,425 | 1,034 | |||||||||||||||||||||||||||
| Portfolio loans receivable | $ | 1,616,423 | $ | 1,532,852 | $ | 1,531,202 | $ | 1,451,632 | $ | 1,396,490 | ||||||||||||||||||||||
| Deferred origination fees, net | (8,746) | (6,596) | (7,220) | (6,506) | (4,019) | |||||||||||||||||||||||||||
| Portfolio loans receivable, net | $ | 1,607,677 | $ | 1,526,256 | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | ||||||||||||||||||||||
| Composition of Deposits: | ||||||||||||||||||||||||||||||||
| Noninterest bearing | $ | 842,363 | $ | 825,174 | $ | 787,650 | $ | 833,187 | $ | 828,308 | ||||||||||||||||||||||
| Interest-bearing demand | 305,377 | 279,591 | 330,924 | 369,812 | 314,883 | |||||||||||||||||||||||||||
| Savings | 10,078 | 9,894 | 6,994 | 6,682 | 6,965 | |||||||||||||||||||||||||||
| Money markets | 570,298 | 585,920 | 493,919 | 493,029 | 484,567 | |||||||||||||||||||||||||||
| Time deposits | 160,804 | 162,143 | 177,650 | 218,528 | 282,696 | |||||||||||||||||||||||||||
| Total Deposits | $ | 1,888,920 | $ | 1,862,722 | $ | 1,797,137 | $ | 1,921,238 | $ | 1,917,419 | ||||||||||||||||||||||
| Capital Bank Home Loan Metrics: | ||||||||||||||||||||||||||||||||
| Origination of loans held for sale | $ | 84,432 | $ | 110,446 | $ | 158,051 | $ | 217,175 | $ | 265,517 | ||||||||||||||||||||||
| Mortgage loans sold | 89,797 | 109,953 | 178,068 | 229,111 | 278,384 | |||||||||||||||||||||||||||
| Gain on sale of loans | 1,918 | 3,042 | 4,423 | 6,108 | 7,763 | |||||||||||||||||||||||||||
| Purchase volume as a % of originations | 85.23 | % | 73.16 | % | 56.44 | % | 50.98 | % | 50.64 | % | ||||||||||||||||||||||
Gain on sale as a % of loans sold(3) | 2.14 | % | 2.77 | % | 2.48 | % | 2.67 | % | 2.79 | % | ||||||||||||||||||||||
| Mortgage commissions | $ | 772 | $ | 1,125 | $ | 1,462 | $ | 1,884 | $ | 2,364 | ||||||||||||||||||||||
OpenSky® Portfolio Metrics: | ||||||||||||||||||||||||||||||||
| Active customer accounts | 616,435 | 630,709 | 660,397 | 700,383 | 707,600 | |||||||||||||||||||||||||||
| Secured credit card loans, gross | $ | 118,938 | $ | 109,978 | $ | 125,898 | $ | 125,393 | $ | 116,054 | ||||||||||||||||||||||
| Unsecured credit card loans, gross | 25,641 | 16,233 | 17,682 | 12,037 | 7,808 | |||||||||||||||||||||||||||
| Noninterest secured credit card deposits | 214,110 | 220,354 | 229,530 | 242,405 | 241,724 | |||||||||||||||||||||||||||
_______________
(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.
15
Appendix
Reconciliation of Non-GAAP Measures
| Return on Average Assets, as Adjusted | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Net Income | 11,508 | 10,211 | 10,171 | 11,177 | 9,648 | ||||||||||||
| Less: SBA-PPP loan income | $ | 1,120 | 2,066 | 1,347 | 1,525 | 2,272 | |||||||||||
| Net Income, as Adjusted | $ | 10,388 | 8,145 | 8,824 | 9,652 | 7,376 | |||||||||||
| Average Total Assets | $ | 2,068,218 | 2,057,201 | 2,066,283 | 2,084,772 | 2,041,232 | |||||||||||
| Less: Average SBA-PPP Loans | 28,870 | 83,264 | 116,595 | 162,217 | 250,040 | ||||||||||||
| Average Total Assets, as Adjusted | $ | 2,039,348 | 1,973,937 | 1,949,688 | 1,922,555 | 1,791,192 | |||||||||||
| Return on Average Assets, as Adjusted | 2.04 | % | 1.67 | % | 1.80 | % | 1.99 | % | 1.65 | % | |||||||
| Net Interest Margin, as Adjusted | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Net Interest Income | $ | 35,400 | $ | 33,331 | $ | 32,671 | $ | 32,059 | $ | 27,520 | |||||||
| Less Credit card loan income | 16,376 | 14,487 | 15,010 | 15,086 | 10,497 | ||||||||||||
| Less SBA-PPP loan income | 1,120 | 2,066 | 1,347 | 1,525 | 2,272 | ||||||||||||
| Net Interest Income, as Adjusted | $ | 17,904 | $ | 16,778 | $ | 16,314 | $ | 15,448 | $ | 14,751 | |||||||
| Average Interest Earning Assets | 2,011,920 | 1,990,377 | 1,996,331 | 2,026,616 | 2,016,801 | ||||||||||||
| Less Average credit card loans | 124,548 | 124,923 | 131,306 | 124,771 | 100,456 | ||||||||||||
| Less Average SBA-PPP loans | 28,870 | 83,264 | 116,595 | 162,217 | 250,040 | ||||||||||||
| Total Average Interest Earning Assets, as Adjusted | $ | 1,858,502 | $ | 1,782,190 | $ | 1,748,430 | $ | 1,739,628 | $ | 1,666,305 | |||||||
| Net Interest Margin, as Adjusted | 3.86 | % | 3.82 | % | 3.70 | % | 3.52 | % | 3.55 | % | |||||||
| Tangible Book Value per Share | Quarters Ended | ||||||||||||||||
| Dollars in thousands, except per share amounts | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Total Stockholders' Equity | $ | 207,316 | $ | 201,492 | $ | 197,903 | $ | 189,080 | $ | 177,204 | |||||||
| Less: Preferred equity | — | — | — | — | — | ||||||||||||
| Less: Intangible assets | — | — | — | — | — | ||||||||||||
| Tangible Common Equity | $ | 207,316 | $ | 201,492 | $ | 197,903 | $ | 189,080 | $ | 177,204 | |||||||
| Period End Shares Outstanding | 14,010,158 | 14,000,520 | 13,962,334 | 13,801,936 | 13,771,615 | ||||||||||||
| Tangible Book Value per Share | $ | 14.80 | $ | 14.39 | $ | 14.17 | $ | 13.70 | $ | 12.87 | |||||||
16
Appendix
Reconciliation of Non-GAAP Measures
| Allowance for Loan Losses to Total Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Allowance for Loan Losses | $ | 26,419 | $ | 25,252 | $ | 25,181 | $ | 24,753 | $ | 24,079 | |||||||
| Total Loans | 1,623,541 | 1,577,341 | 1,632,267 | 1,582,304 | 1,595,234 | ||||||||||||
| Less: SBA-PPP loans | 15,864 | 51,085 | 108,285 | 137,178 | 202,763 | ||||||||||||
| Total Portfolio Loans | $ | 1,607,677 | $ | 1,526,256 | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | |||||||
| Allowance for Loan Losses to Total Portfolio Loans | 1.64 | % | 1.65 | % | 1.65 | % | 1.71 | % | 1.73 | % | |||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Total Nonperforming Assets | $ | 7,338 | $ | 5,975 | $ | 11,512 | $ | 16,801 | $ | 11,615 | |||||||
| Total Assets | 2,154,846 | 2,122,453 | 2,055,300 | 2,169,556 | 2,151,850 | ||||||||||||
| Less: SBA-PPP loans | 15,864 | 51,085 | 108,285 | 137,178 | 202,763 | ||||||||||||
| Total Assets, net SBA-PPP Loans | $ | 2,138,982 | $ | 2,071,368 | $ | 1,947,015 | $ | 2,032,378 | $ | 1,949,087 | |||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | 0.34 | % | 0.29 | % | 0.59 | % | 0.83 | % | 0.60 | % | |||||||
| Nonperforming Loans to Total Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Total Nonperforming Loans | $ | 7,338 | $ | 5,975 | $ | 11,425 | $ | 13,565 | $ | 8,378 | |||||||
| Total Loans | 1,623,541 | 1,577,341 | 1,632,267 | 1,582,304 | 1,595,234 | ||||||||||||
| Less: SBA-PPP loans | 15,864 | 51,085 | 108,285 | 137,178 | 202,763 | ||||||||||||
| Total Portfolio Loans | $ | 1,607,677 | $ | 1,526,256 | $ | 1,523,982 | $ | 1,445,126 | $ | 1,392,471 | |||||||
| Nonperforming Loans to Total Portfolio Loans | 0.46 | % | 0.39 | % | 0.75 | % | 0.94 | % | 0.60 | % | |||||||
| Net Charge-offs to Average Portfolio Loans | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Total Net Charge-offs | $ | 868 | $ | 881 | $ | 672 | $ | 301 | $ | 252 | |||||||
| Total Average Loans | 1,561,541 | 1,590,166 | 1,582,473 | 1,569,198 | 1,567,973 | ||||||||||||
| Less: Average SBA-PPP loans | 28,870 | 83,264 | 116,595 | 162,217 | 250,040 | ||||||||||||
| Total Average Portfolio Loans | $ | 1,532,671 | $ | 1,506,902 | $ | 1,465,878 | $ | 1,406,981 | $ | 1,317,933 | |||||||
| Net Charge-offs to Average Portfolio Loans | 0.23 | % | 0.24 | % | 0.18 | % | 0.08 | % | 0.08 | % | |||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | Quarters Ended | ||||||||||||||||
| Dollars in thousands | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | ||||||||||||
| Net income | $ | 11,508 | $ | 10,211 | $ | 10,171 | $ | 11,177 | $ | 9,648 | |||||||
| Add: Income Tax Expense | 3,089 | 3,354 | 3,522 | 3,877 | 3,357 | ||||||||||||
| Add: Provision for Loan Losses | 2,035 | 952 | 1,100 | 975 | 781 | ||||||||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | $ | 16,632 | $ | 14,517 | $ | 14,793 | $ | 16,029 | $ | 13,786 | |||||||
17
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 June 30, 2022. 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 $2.2 billion at June 30, 2022 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.
While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; the magnitude and duration of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results.
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
18