View:
Download DOC
Download PDF
Download XLS
Download XBRL
cbnk-20230420
false000141953600014195362023-04-202023-04-20



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): April 20, 2023

CAPITAL BANCORP, INC.
(Exact name of registrant as specified in its charter)
 
Maryland
001-38671
52-2083046
(State or other jurisdiction of incorporation or organization)
(Commission file number)
(IRS Employer Identification No.)
2275 Research Boulevard, Suite 600, Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
(301) 468-8848
Registrant’s telephone number, including area code

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareCBNKNASDAQ Stock Market



Item 2.02 Results of Operations and Financial Disclosure
On April 20, 2023, Capital Bancorp, Inc. (the “Company”) issued a press release announcing the Company’s unaudited financial results for the three months ended March 31, 2023. 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/ Connie Egan
Name: Connie Egan
Title: SVP, Chief Accounting Officer
April 20, 2023



3
Document



https://cdn.kscope.io/dc2cf7cc0fddcd0dcee225636aa6e617-capitalbancorplogoa21a.jpg
Stable Margin and Profitable Growth Drives Strong Profitability
Diluted EPS of $0.68, ROAA of 1.84%, and ROAE of 16.98% for 1Q 2023
Rockville, Maryland, April 20, 2023 (GLOBE NEWSWIRE) – Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.7 million, or $0.68 per diluted share, for the first quarter of 2023, compared to net income of $10.2 million, or $0.71 per diluted share, for the first quarter of 2022. Tangible book value per common share grew 15.7% to $16.65 at March 31, 2023 when compared to the same quarter in 2022. The Company maintains a strong liquidity position and remains well-capitalized as our Risk Based Capital was 16.15% as of March 31, 2023.
"Capital Bank’s diversified business model and prudent risk management anchored solid earnings in the the first quarter, and should provide us with opportunities to accelerate growth in the coming months as other less well-positioned lenders curtail activity,” said Ed Barry, Chief Executive Officer of the Company and the Bank. “Our capital position remains exceptionally strong and we are pleased that we have ready access to liquidity to fund growth and opportunistic activities. We are also encouraged that we have been able to grow deposits and maintain margin, even as our cost of funds has increased."

"Despite the failure of certain banks during the quarter, and the resulting challenges that followed, Capital Bank has been able to not only maintain, but continue to grow its deposits,” said Steven J. Schwartz, Chairman of the Company. “Fortunately, Capital Bank has consciously and consistently sought to dampen interest rate risk in its lending and investing activities, and we are fortunate to have a diverse deposit book, circumstances that meaningfully differentiate us from the banks that failed. Our liquidity and capital positions remain well above regulatory policy and our internal thresholds. I am also extremely pleased to see the 15.7% year over year growth in our tangible book value, which includes a mark to market of 100% of our investment portfolio. Notwithstanding current and anticipated economic conditions, we are steadfastly committed to continue to serve our community’s needs by continuing to lend to all qualified businesses and to grow the Bank as smartly as we can."

First Quarter 2023 Highlights
Capital Bancorp, Inc.
•Earnings Summary - Net income decreased to $9.7 million, or $0.68 per diluted share, compared to $10.2 million, or $0.71 per diluted share, for the first quarter of 2022. Interest income increased due to increasing yields on portfolio loans and investment securities. Improved interest income was offset by a decline in card fees and increased deposit costs that were a result of the rising interest rate environment and a shift within the portfolio from noninterest-bearing to interest-bearing deposits and increased CD and FHLB balances.
•Balance Sheet Growth - Total assets grew by $122.8 million, or 5.8% compared to March 31, 2022. The growth in earning assets consisted of increases in net portfolio loans and investment securities available for sale of $259.9 million and $83.1 million, respectively, compared to March 31, 2022. The investment securities portfolio continues to be classified as available for sale and had a fair market value of $255.8 million, or 11.4% of total assets, as of March 31, 2023. The accumulated other comprehensive income loss ("AOCI Loss") on the investment securities
1


portfolio improved $2.8 million during the quarter to $14.0 million as of March 31, 2023, which represents 6.0% of total shareholders' equity. The Company does not have a held to maturity ("HTM") portfolio.
•Performance and Efficiency Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.84% and 16.98%, respectively, for the three months ended March 31, 2023, compared to 2.01% and 20.30%, respectively, for the three months ended March 31, 2022. Our efficiency ratio decreased to 64.7% for the three months ended March 31, 2023 compared to 65.1% for the same period in the prior year as noninterest expense remained substantially unchanged while interest income increased.
•Stable Net Interest Margin - Net interest margin was 6.65%, or 3.81% excluding credit card and SBA-PPP loans, for the three months ended March 31, 2023, compared to 6.79%, or 3.82% excluding credit card and SBA-PPP loans, for the same three month period last year. The slightly lower margin is a result of the increased cost of interest-bearing liabilities. Average portfolio loans receivable increased $243.6 million compared to the same quarter in 2022, while yields on interest earning assets increased 136 basis points.
•Deposits and Cost of Funds - Total deposits at March 31, 2023 increased by $81.7 million, or 4.4%, compared to March 31, 2022. Average noninterest-bearing deposits decreased 16.4% compared to March 31, 2022 and represented 36.3% of total deposits at March 31, 2023. The elevated interest rate environment has driven up the cost of interest-bearing liabilities to 2.93% for the quarter ended March 31, 2023 compared to 0.42% for the same period in 2022.
•Robust Capital Positions - As of March 31, 2023, the Company reported a common equity tier 1 capital ratio of 14.90%, compared to 13.10% at March 31, 2022, and an allowance for credit losses to total loans ratio of 1.47%, compared to 1.60% in 2022. Tangible book value per common share grew 15.7% to $16.65 at March 31, 2023 when compared to the same quarter in 2022.
Commercial Bank
•Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $271.3 million, or 19.3%, to $1.7 billion, gross, at March 31, 2023 compared to March 31, 2022. This growth was mainly due to a 29.9% increase in residential real estate loans of $125.7 million. Also contributing to the growth was a 16.9% increase in commercial real estate loans of $95.5 million, of which $68.1 million was owner occupied, and a 24.6% increase in commercial and industrial loans of $43.8 million, when comparing the quarter ended March 31, 2023 to the quarter ended March 31, 2022. Business loans, comprised of commercial and industrial, SBA, and owner occupied real estate, represent 43% of our total commercial portfolio.
•Credit Metrics - Non-performing assets ("NPAs") increased 45 basis points to 0.73% of total assets at March 31, 2023 compared to 0.28% at March 31, 2022 as a result of an increase in nonaccrual loans at March 31, 2023 to $16.3 million compared to $6.0 million at March 31, 2022. The increase in NPAs was primarily the result of a March 2023 downgrade of a single $8.2 million, well-collateralized multi-unit residential real estate loan.
OpenSky®
•Revenues - Despite a decrease in active customer accounts, rising interest rates led to increased OpenSky® interest income. However, a decline in credit card fees resulted in a $523.4 thousand decrease in OpenSky® revenue from the same period of 2022. Total revenue was $20.3 million for the quarter ended March 31, 2023. Aggressive marketing and product strategies by competitors offering unsecured subprime credit cards has challenged our ability to maintain and grow the number of active OpenSky® accounts and has adversely impacted noninterest income.
2


Management believes it is taking a prudent approach to credit, product and marketing strategies towards subprime customers.
•Loan Balances - OpenSky® loan balances decreased by 9% or $10.9 million to $112.9 million compared to $123.7 million in the first quarter of 2022. Corresponding deposit balances decreased 16.1% or $35.5 million from $220.4 million at March 31, 2022 to $184.8 million at March 31, 2023. Gross unsecured loan balances stood at $25.8 million and $16.2 million at March 31, 2023 and 2022, respectively.
•OpenSky® Credit - Card delinquencies and utilization remained stable in the first quarter when compared to the prior year quarter. The Company has tightened credit standards in segments most susceptible to economic pressures. The provision for credit losses increased $707.4 thousand compared to the first quarter of 2022.
3


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended
March 31,
(in thousands except per share data)20232022% Change
Earnings Summary
Interest income$43,416 $34,402 26.2 %
Interest expense8,929 1,071 733.7 %
Net interest income34,487 33,331 3.5 %
Provision for credit losses1,660 952 74.4 %
Noninterest income6,026 8,288 (27.3)%
Noninterest expense26,203 27,102 (3.3)%
Income before income taxes12,650 13,565 (6.7)%
Income tax expense2,915 3,354 (13.1)%
Net income$9,735 $10,211 (4.7)%
Pre-tax pre-provision net revenue ("PPNR") (2)
$14,310 $14,517 (1.4)%
Weighted average common shares - Basic14,159 13,989 1.2 %
Weighted average common shares - Diluted14,272 14,339 (0.5)%
Earnings per share - Basic0.69 0.73 (5.8)%
Earnings per share - Diluted0.68 0.71 (4.2)%
Return on average assets (1)
1.84 %2.01 %(8.5)%
Return on average assets, excluding impact of SBA-PPP loans(1) (2)
1.84 %1.67 %10.2 %
Return on average equity16.98 %20.30 %(16.4)%

Quarter EndedQuarter Ended
March 31,December 31,September 30,June 30,
(in thousands except per share data)20232022% Change202220222022
Balance Sheet Highlights
Assets$2,245,286 $2,122,453 5.8 %$2,123,655 $2,009,358 $2,154,846 
Investment securities available for sale255,762 172,712 48.1 %252,481 269,620 226,509 
Mortgage loans held for sale9,620 17,036 (43.5)%7,416 6,875 11,708 
SBA-PPP loans, net of fees2,037 51,085 (96.0)%2,163 2,662 15,864 
Portfolio loans receivable (3)
1,786,109 1,526,256 17.0 %1,728,592 1,648,001 1,607,677 
Allowance for credit losses26,216 25,252 3.8 %26,385 26,091 26,419 
Deposits1,944,374 1,862,722 4.4 %1,758,072 1,737,591 1,888,920 
FHLB borrowings 32,000 22,000 45.5 %107,000 22,000 22,000 
Other borrowed funds12,062 12,062 — %12,062 12,062 12,062 
Total stockholders' equity234,517 201,492 16.4 %224,015 214,005 207,316 
Tangible common equity(2)
234,517 201,492 16.4 %224,015 214,005 207,316 
Common shares outstanding14,083 14,001 0.6 %14,139 14,039 14,010 
Tangible book value per share (2)
$16.65 $14.39 15.7 %$15.84 $15.24 $14.80 
______________
(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.



4


Operating Results - Comparison of Three Months Ended March 31, 2023 and 2022
For the three months ended March 31, 2023, net interest income increased $1.2 million, or 3.5%, to $34.5 million from the same period in 2022, primarily due to higher yields on portfolio loans offset by significant increases in the cost of funding. The net interest margin was 6.65% for the three months ended March 31, 2023, a decrease of 14 basis points from the three months ended March 31, 2022 as the increase in the costs of deposits and borrowed funds outpaced the increase in portfolio loan yields, including credit cards. Net interest margin, excluding credit card and SBA-PPP loans, remained flat at 3.81% for the first quarter of 2023 compared to 3.82% for the same period in 2022.
For the three months ended March 31, 2023, average interest earning assets increased $113.6 million, or 5.7%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 136 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $189.1 million, or 18.1%, and the average cost of interest-bearing liabilities increased to 2.93%, a 251 basis point increase from 0.42%.
The provision for credit losses was $1.7 million for the three months ended March 31, 2023, an increase from $1.0 million when compared to the same period in 2022. Contributors to the increase in provision were loan portfolio growth and an increase in credit card losses. Net charge-offs for the first quarter of 2023 were $2.6 million, or 0.61% on an annualized basis of average portfolio loans, compared to $0.9 million, or 0.24% on an annualized basis of average loans for the first quarter of 2022. A majority of the $2.6 million in net charge-offs during the quarter were related to the credit card portfolio with $1.1 million related to partially secured cards and $563 thousand related to unsecured cards.
For the quarter ended March 31, 2023, noninterest income was $6.0 million, a decrease of $2.3 million, or 27.3%, from $8.3 million in the prior year quarter. Credit card fees declined by $1.7 million as the number of active customer accounts declined year over year, which resulted in lower interchange and other income recognized compared to the prior year quarter. The elevated interest rate environment continues to put pressure on the mortgage market, resulting in declines in home loan sales and home loan refinances, which has resulted in a $0.6 million decrease in mortgage banking revenue compared to the prior year quarter.
Credit card loan balances, net of reserves, decreased by $10.9 million to $112.9 million as of March 31, 2023 from $123.7 million at March 31, 2022. The related deposit account balances decreased 16.1% to $184.8 million at March 31, 2023 when compared to $220.4 million at March 31, 2022 reflecting the reduction in the number of active customer accounts. During the first quarter of 2023, the number of OpenSky® credit card accounts declined by 7 thousand, net, compared to a 30 thousand net decrease in accounts for the same period in 2022.
The efficiency ratio for the three months ended March 31, 2023 decreased to 64.7%, compared to 65.1% for the three months ended March 31, 2022 as noninterest expense remained flat while interest income increased.
Noninterest expense was $26.2 million for the three months ended March 31, 2023, as compared to $27.1 million for the three months ended March 31, 2022, a decrease of $0.9 million, or 3.3%. The decrease was primarily driven by lower data processing expenses and advertising expenses of $1.7 million and $1.1 million, respectively, attributable to data processing contract renegotiations completed in the first quarter 2022 and lower marketing costs for the OpenSky® and Commercial Bank segments, offset by increased salaries and employee benefits of $2.2 million.
5


Financial Condition
Total assets at March 31, 2023 were $2.2 billion, an increase of $122.8 million or 5.8% from the balance at March 31, 2022 and an increase of $121.6 million or 5.7% from December 31, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.8 billion as of March 31, 2023, an increase of $259.9 million, or 17.0% as compared to $1.5 billion at March 31, 2022, and an increase of $83.9 million, or 4.9% from the balance at December 31, 2022.
The Company recorded a provision for credit losses of $1.7 million during the three months ended March 31, 2023, which increased the allowance for credit losses to $26.2 million, or 1.5% of total loans at March 31, 2023, representing a decrease of $169 thousand or 0.6% from the balance at December 31, 2022. Nonperforming assets, which were comprised solely of nonperforming loans as of March 31, 2023, were $16.3 million, or 0.73% of total assets, up from $6.0 million, or 0.28% of total assets, at March 31, 2022. Nonperforming assets increased $6.5 million from $9.8 million or 0.46% of total assets as of December 31, 2022. Included in nonperforming loans at March 31, 2023 were troubled debt restructurings of $287.6 thousand.
Special mention loans at March 31, 2023 decreased by $8.5 million to $29.5 million from $38.0 at December 31, 2022 due to the downward migration to nonaccrual of an $8.2 million, well-collateralized multi unit residential real estate loan.
Deposits were $1.9 billion for the period ended March 31, 2023, an increase of $81.7 million from the balance at March 31, 2022 and an increase from the balance at December 31, 2022 of $186.3 million. Rising interest rates have resulted in some customers moving balances from noninterest-bearing deposit accounts to interest bearing deposit accounts. This migration has impacted average noninterest-bearing deposit balances which decreased $128.7 million when compared to March 31, 2022 and decreased $127.9 million when compared to December 31, 2022. These deposits represented 36.3% of total deposits at March 31, 2023 compared to 44.3% at March 31, 2022. Uninsured deposits were approximately $888.9 million as of March 31, 2023, representing 45.7% of the Company's deposit portfolio, compared to $915.0 million, or 49.1%, at March 31, 2022, and $784.6 million, or 44.6% at December 31, 2022.
Stockholders’ equity increased to $234.5 million as of March 31, 2023 compared to $201.5 million at March 31, 2022 and $224.0 million at December 31, 2022. The first quarter of 2023 increase was primarily attributable to earnings during the period of $9.7 million. Shares repurchased and retired in 2023 as part of the Company's stock repurchase program total 146,937 shares at a weighted average price of $18.48, for a total cost of $2.7 million including commissions. As of March 31, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
6


Consolidated Statements of Income (Unaudited)
Three Months Ended March 31,
(in thousands)20232022
Interest income
Loans, including fees$41,275 $33,889 
Investment securities available for sale1,377 370 
Federal funds sold and other764 143 
Total interest income43,416 34,402 
Interest expense
Deposits
7,754 884 
Borrowed funds1,175 187 
Total interest expense8,929 1,071 
Net interest income34,487 33,331 
Provision for credit losses1,660 952 
Net interest income after provision for credit losses32,827 32,379 
Noninterest income
Service charges on deposits229 163 
Credit card fees4,210 5,924 
Mortgage banking revenue1,155 1,790 
Other income432 411 
Total noninterest income6,026 8,288 
Noninterest expenses
Salaries and employee benefits12,554 10,310 
Occupancy and equipment1,213 1,026 
Professional fees2,374 2,321 
Data processing6,530 8,276 
Advertising517 1,639 
Loan processing349 392 
Foreclosed real estate expenses, net6 — 
Other operating2,660 3,138 
Total noninterest expenses26,203 27,102 
Income before income taxes12,650 13,565 
Income tax expense2,915 3,354 
Net income$9,735 $10,211 

7


Consolidated Balance Sheets
(Unaudited)
(in thousands except share data)March 31, 2023December 31, 2022
Assets
Cash and due from banks$14,477 $19,963 
Interest-bearing deposits at other financial institutions125,448 39,764 
Federal funds sold462 20,688 
Total cash and cash equivalents
140,387 80,415 
Investment securities available for sale255,762 252,481 
Restricted investments4,215 7,362 
Loans held for sale9,620 7,416 
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs2,037 2,163 
Portfolio loans receivable, net of deferred fees and costs1,786,109 1,728,592 
   Less allowance for credit losses(26,216)(26,385)
Total portfolio loans held for investment, net1,759,893 1,702,207 
Premises and equipment, net5,367 3,386 
Accrued interest receivable9,985 9,489 
Deferred tax asset12,898 13,777 
Bank owned life insurance36,781 36,524 
Other assets8,341 8,435 
Total assets
$2,245,286 $2,123,655 
Liabilities
Deposits
Noninterest-bearing$705,801 $674,313 
Interest-bearing1,238,573 1,083,759 
Total deposits
1,944,374 1,758,072 
Federal Home Loan Bank advances32,000 107,000 
Other borrowed funds12,062 12,062 
Accrued interest payable1,977 1,031 
Other liabilities20,356 21,475 
Total liabilities
2,010,769 1,899,640 
Stockholders' equity
Common stock, $0.01 par value; 49,000,000 shares authorized; 14,082,657 and 14,138,829 issued and outstanding
141 141 
Additional paid-in capital57,277 58,190 
Retained earnings191,058 182,435 
Accumulated other comprehensive loss(13,959)(16,751)
Total stockholders' equity
234,517 224,015 
Total liabilities and stockholders' equity
$2,245,286 $2,123,655 

8



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 March 31,
20232022
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
(in thousands)
Assets
Interest earning assets:
Interest-bearing deposits$62,566 $615 3.99 %$197,720 $101 0.21 %
Federal funds sold
2,054 18 3.62 4,658 1 0.09 
Investment securities available for sale
274,685 1,377 2.03 180,567 370 0.83 
Restricted investments7,346 130 7.17 3,766 41 4.42 
 Loans held for sale 4,695 77 6.65 13,500 111 3.33 
 SBA-PPP loans receivable2,099 8 1.50 83,264 2,066 10.06 
Portfolio loans receivable(2)
1,750,539 41,191 9.54 1,506,902 31,712 8.53 
Total interest earning assets2,103,984 43,416 8.37 1,990,377 34,402 7.01 
Noninterest earning assets40,265 66,824 
Total assets
$2,144,249 $2,057,201 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts$186,184 70 0.15 $293,979 37 0.05 
Savings
6,502 1 0.05 8,274 1 0.05 
Money market accounts
604,864 4,587 3.08 539,264 301 0.23 
Time deposits
319,449 3,096 3.93 170,748 545 1.29 
Borrowed funds
118,379 1,175 4.02 34,062 187 2.23 
Total interest-bearing liabilities1,235,378 8,929 2.93 1,046,327 1,071 0.42 
Noninterest-bearing liabilities:
Noninterest-bearing liabilities22,355 24,156 
Noninterest-bearing deposits654,025 782,747 
Stockholders’ equity
232,491 203,971 
Total liabilities and stockholders’ equity
$2,144,249 $2,057,201 
Net interest spread5.44 %6.59 %
Net interest income$34,487 $33,331 
Net interest margin(3)
6.65 %6.79 %
_______________
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended March 31, 2023 and March 31, 2022, collectively, SBA-PPP loans and credit card loans accounted for 283 and 297 basis points of the reported net interest margin, respectively.










9


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 twelve months ended March 31, 2023 and March 31, 2022.

Segments
For the three months ended March 31, 2023
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$26,300 $77 $16,130 $978 $(69)$43,416 
Interest expense8,739 30 — 229 (69)8,929 
Net interest income17,561 47 16,130 749 — 34,487 
Provision for loan losses(161)— 1,821 — — 1,660 
Net interest income after provision17,722 47 14,309 749 — 32,827 
Noninterest income489 1,327 4,210 — — 6,026 
Noninterest expense(1)
14,980 1,581 9,450 192 — 26,203 
Net income (loss) before taxes$3,231 $(207)$9,069 $557 $— $12,650 
Total assets$2,074,634 $10,193 $106,761 $257,048 $(203,351)$2,245,286 
For the three months ended March 31, 2022
(in thousands)Commercial BankCBHL
OpenSky®
Corporate(2)
EliminationsConsolidated
Interest income$18,499 $111 $14,940 $889 $(37)$34,402 
Interest expense853 81 — 174 (37)1,071 
Net interest income17,646 30 14,940 715 — 33,331 
Provision for loan losses— — 952 — — 952 
Net interest income after provision17,646 30 13,988 715 — 32,379 
Noninterest income557 1,807 5,924 — — 8,288 
Noninterest expense(1)
12,063 2,099 12,882 58 — 27,102 
Net income (loss) before taxes$6,140 $(262)$7,030 $657 $— $13,565 
Total assets$1,938,326 $17,630 $122,756 $222,167 $(178,426)$2,122,453 
________________________
(1)     Noninterest expense includes $5.9 million and $7.6 million in data processing expense in OpenSky’s® segment for the three months ended March 31, 2023 and 2022, 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.



10

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended
(in thousands except per share data)March 31, 2023December 31, 2022September 30,
2022		June 30,
2022		March 31,
2022
Earnings:
Net income$9,735 $8,991 $11,095 $11,508 $10,211 
Earnings per common share, diluted0.68 0.62 0.77 0.80 0.71 
Net interest margin6.65 %6.64 %7.24 %7.06 %6.79 %
Net interest margin, excluding credit cards & SBA-PPP loans (1)
3.81 %3.91 %4.16 %3.86 %3.82 %
Return on average assets(2)
1.84 %1.67 %2.15 %2.23 %2.01 %
Return on average assets, excluding impact of SBA-PPP loans (1)(2)
1.84 %1.67 %2.10 %2.04 %1.67 %
Return on average equity(2)
16.98 %16.18 %20.32 %22.16 %20.30 %
Efficiency ratio64.68 %65.59 %64.16 %62.00 %65.12 %
Balance Sheet:
Total portfolio loans receivable, net deferred fees$1,786,109 $1,728,592 $1,648,001 $1,607,677 $1,526,256 
Total deposits1,944,374 1,758,072 1,737,591 1,888,920 1,862,722 
Total assets2,245,286 2,123,655 2,009,358 2,154,846 2,122,453 
Total shareholders' equity234,517 224,015 214,005 207,316 201,492 
Asset Quality Ratios:
Nonperforming assets to total assets0.73 %0.46 %0.43 %0.34 %0.28 %
Nonperforming assets to total assets, excluding the SBA-PPP loans (1)
0.73 %0.46 %0.43 %0.34 %0.29 %
Nonperforming loans to total loans0.91 %0.56 %0.52 %0.45 %0.38 %
Nonperforming loans to portfolio loans (1)
0.91 %0.56 %0.52 %0.46 %0.39 %
Net charge-offs to average portfolio loans (1)(2)
0.61 %0.49 %0.39 %0.23 %0.24 %
Allowance for credit losses to total loans1.47 %1.52 %1.58 %1.63 %1.60 %
Allowance for credit losses to portfolio loans (1)
1.47 %1.53 %1.58 %1.64 %1.65 %
Allowance for credit losses to non-performing loans160.91 %270.46 %303.76 %360.06 %422.65 %
Bank Capital Ratios:
Total risk based capital ratio14.06 %14.21 %14.65 %14.34 %14.36 %
Tier 1 risk based capital ratio12.80 %12.95 %13.39 %13.09 %13.10 %
Leverage ratio9.78 %9.47 %9.60 %9.11 %8.74 %
Common equity Tier 1 capital ratio12.80 %12.95 %13.39 %13.09 %13.10 %
Tangible common equity8.79 %8.85 %9.00 %8.17 %8.11 %
Holding Company Capital Ratios:
Total risk based capital ratio16.15 %16.33 %17.41 %17.66 %17.16 %
Tier 1 risk based capital ratio14.90 %15.13 %15.49 %15.70 %15.19 %
Leverage ratio11.47 %11.24 %11.31 %10.93 %10.25 %
Common equity Tier 1 capital ratio14.90 %15.00 %15.36 %15.55 %15.04 %
Tangible common equity10.44 %10.55 %10.65 %9.62 %9.49 %
11

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
Quarter Ended
(in thousands except per share data)March 31, 2023December 31, 2022September 30,
2022		June 30,
2022		March 31,
2022
Composition of Loans:
SBA-PPP loans, net$2,037 $2,163 $2,662 $15,864 $51,085 
Residential real estate$545,899 $484,735 $466,849 $430,244 $420,242 
Commercial real estate660,218 664,551 626,030 608,646 564,725 
Construction real estate251,494 238,099 235,045 241,249 245,722 
Commercial and industrial221,258 220,221 192,207 193,262 177,504 
Credit card, net of reserve112,860 128,434 136,658 142,166 123,750 
Other consumer loans1,578 1,179 1,055 856 909 
Portfolio loans receivable$1,793,307 $1,737,219 $1,657,844 $1,616,423 $1,532,852 
Deferred origination fees, net(7,198)(8,627)(9,843)(8,746)(6,596)
Portfolio loans receivable, net$1,786,109 $1,728,592 $1,648,001 $1,607,677 $1,526,256 
Composition of Deposits:
Noninterest-bearing$705,801 $674,313 $806,033 $842,363 $825,174 
Interest-bearing demand219,685 207,836 252,135 305,377 279,591 
Savings5,835 7,530 8,861 10,078 9,894 
Money markets632,087 574,978 518,184 570,298 585,920 
Time deposits380,966 293,415 152,378 160,804 162,143 
Total deposits$1,944,374 $1,758,072 $1,737,591 $1,888,920 $1,862,722 
Capital Bank Home Loan Metrics:
Origination of loans held for sale$44,448 $43,956 $60,516 $84,417 $111,087 
Mortgage loans sold40,483 43,415 65,349 89,745 110,039 
Gain on sale of loans1,223 912 1,340 1,918 3,042 
Purchase volume as a % of originations90.72 %88.94 %81.85 %85.23 %73.16 %
Gain on sale as a % of loans sold(3)
3.02 %2.10 %2.05 %2.14 %2.77 %
Mortgage commissions$378 $451 $587 $772 $1,125 
OpenSky® Portfolio Metrics:
Active customer accounts527,231 533,855 576,844 616,435 630,709 
Secured credit card loans, gross$89,078 $104,157 $111,842 $118,938 $109,978 
Unsecured credit card loans, gross25,782 26,795 27,335 25,641 16,233 
Noninterest secured credit card deposits184,809 187,412 201,277 214,110 220,354 
_______________
(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.
12

Appendix

Reconciliation of Non-GAAP Measures




Return on Average Assets, as AdjustedQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Net Income$9,735 $8,991 $11,095 $11,508 $10,211 
Less: SBA-PPP loan income8 28 263 1,120 2,066 
Net Income, as Adjusted$9,727 $8,963 $10,832 $10,388 $8,145 
Average Total Assets2,144,249 2,136,156 2,049,078 2,068,218 2,057,201 
Less: Average SBA-PPP Loans2,099 2,435 5,906 28,870 83,264 
Average Total Assets, as Adjusted$2,142,150 $2,133,721 $2,043,172 $2,039,348 $1,973,937 
Return on Average Assets, as Adjusted1.84%1.67%2.10%2.04%1.67%


Net Interest Margin, as AdjustedQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Net Interest Income$34,487 $35,199 $36,677 $35,400 $33,331 
Less Credit card loan income15,809 15,717 16,768 16,376 14,487 
Less SBA-PPP loan income8 28 263 1,120 2,066 
Net Interest Income, as Adjusted$18,670 $19,454 $19,646 $17,904 $16,778 
Average Interest Earning Assets2,103,984 2,101,617 2,010,070 2,011,920 1,990,377 
Less Average credit card loans115,850 124,120 132,246 124,548 124,923 
Less Average SBA-PPP loans2,099 2,435 5,906 28,870 83,264 
Total Average Interest Earning Assets, as Adjusted$1,986,035 $1,975,062 $1,871,918 $1,858,502 $1,782,190 
Net Interest Margin, as Adjusted3.81%3.91%4.16%3.86%3.82%


Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Net income$9,735 $8,991 $11,095 $11,508 $10,211 
Add: Income Tax Expense2,915 2,651 3,336 3,089 3,354 
Add: Provision for Credit Losses1,660 2,384 1,260 2,035 952 
Pre-tax, Pre-Provision Net Revenue ("PPNR")$14,310 $14,026 $15,691 $16,632 $14,517 


13

Appendix

Reconciliation of Non-GAAP Measures



Allowance for Credit Losses to Total Portfolio LoansQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Allowance for Credit Losses$26,216 $26,385 $26,091 $26,419 $25,252 
Total Loans1,788,146 1,730,755 1,650,663 1,623,541 1,577,341 
Less: SBA-PPP loans2,037 2,163 2,662 15,864 51,085 
Total Portfolio Loans$1,786,109 $1,728,592 $1,648,001 $1,607,677 $1,526,256 
Allowance for Credit Losses to Total Portfolio Loans1.47%1.53%1.58%1.64%1.65%
Nonperforming Assets to Total Assets, net SBA-PPP LoansQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Total Nonperforming Assets$16,293 $9,756 $8,589 $7,338 $5,975 
Total Assets2,245,286 2,123,655 2,009,358 2,154,846 2,122,453 
Less: SBA-PPP loans2,037 2,163 2,662 15,864 51,085 
Total Assets, net SBA-PPP Loans$2,243,249 $2,121,492 $2,006,696 $2,138,982 $2,071,368 
Nonperforming Assets to Total Assets, net SBA-PPP Loans0.73%0.46%0.43%0.34%0.29%
Nonperforming Loans to Total Portfolio LoansQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Total Nonperforming Loans$16,293 $9,756 $8,589 $7,338 $5,975 
Total Loans1,788,146 1,730,755 1,650,663 1,623,541 1,577,341 
Less: SBA-PPP loans2,037 2,163 2,662 15,864 51,085 
Total Portfolio Loans$1,786,109 $1,728,592 $1,648,001 $1,607,677 $1,526,256 
Nonperforming Loans to Total Portfolio Loans0.91%0.56%0.52%0.46%0.39%
Net Charge-offs to Average Portfolio LoansQuarters Ended
(in thousands)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Total Net Charge-offs$2,645 $2,090 $1,588 $868 $881 
Total Average Loans1,752,638 1,677,869 1,607,452 1,561,541 1,590,166 
Less: Average SBA-PPP loans2,099 2,435 5,906 28,870 83,264 
Total Average Portfolio Loans$1,750,539 $1,675,434 $1,601,546 $1,532,671 $1,506,902 
Net Charge-offs to Average Portfolio Loans0.61%0.49%0.39%0.23%0.24%
Tangible Book Value per ShareQuarters Ended
(in thousands, except per share amounts)March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
Total Stockholders' Equity$234,517 $224,015 $214,005 $207,316 $201,492 
Less: Preferred equity— — — — — 
Less: Intangible assets— — — — — 
Tangible Common Equity$234,517 $224,015 $214,005 $207,316 $201,492 
Period End Shares Outstanding14,082,657 14,138,829 14,038,599 14,010,158 14,000,520 
Tangible Book Value per Share$16.65 $15.84 $15.24 $14.80 $14.39 

14

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 March 31, 2023. 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 March 31, 2023 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: Connie Egan (301) 468-8848 x1225
MEDIA CONTACT: Ed Barry (240) 283-1912
WEB SITE: www.CapitalBankMD.com

15