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 27, 2023
(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 27, 2023, 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, 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 8.01. Other Events
On July 21, 2023, the Company's Board of Directors declared a $0.08 per share dividend, payable on August 23, 2023 to stockholders of record on August 7, 2023.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| 99.1 | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CAPITAL BANCORP, INC. | |||||
By: /s/ Jay Walker | |||||
| Name: Jay Walker | |||||
| Title: Chief Financial Officer | |||||
July 27, 2023
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Continued Deposit and Loan Growth Leads to Strong Net Interest Margin
Declares Quarterly Dividend of $0.08
Diluted EPS of $0.52, ROAA of 1.34%, and ROAE of 12.30% for 2Q 2023
Rockville, Maryland, July 27, 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 $7.3 million, or $0.52 per diluted share, for the second quarter 2023, compared to net income of $9.7 million, or $0.68 per diluted share, for the first quarter 2023 and $11.5 million, or $0.80 per diluted share, for the second quarter 2022. Total average deposits increased $110.4 million, or 25.0% annualized, the average loan portfolio grew $50.3 million and the net interest margin of 6.63% for the second quarter 2023 remained stable when compared to 6.65% for the first quarter 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans) of 4.06% for the second quarter 2023 grew on the back of steady loan and deposit growth, excluding brokered time deposits, when compared to adjusted net interest margin of 3.81% for the first quarter 2023.
The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on August 23, 2023 to shareholders of record on August 7, 2023. The dividend declared of $0.08 is $0.02, or 33.3% higher than the prior quarter dividend.
"We saw a significant number of positive signs in our performance this quarter and are making investments in our future,” said Ed Barry, Chief Executive Officer of the Company and the Bank. “Core deposit growth remains a priority and we continue to see traction on building our franchise and in particular our noninterest-bearing deposits. Net interest margin was stable with adjusted net interest margin increasing as we continued to price loans based on the marginal cost of deposits to generate attractive spreads. OpenSky® open customer accounts increased, with growth in corresponding loan and deposit balances, as initiatives began to deliver. Credit remained stable and we maintain a well positioned balance sheet with a strong capital base in the current environment."
“Despite some of the year-over-year declines, the Board is pleased with Capital Bank’s performance during the quarter.” said Steven J. Schwartz, Chairman of the Company. “Our continued solid increases in tangible book value, average non-interest-bearing deposits, loans, and cardholders are a direct result of the Bank’s smart growth strategy. We are also pleased with the results of our continuing focus on maintaining outstanding capital and liquidity metrics, as reflected in our quarter-end numbers. Declines in EPS and ROE resulted primarily from a decision to invest more heavily in our credit card franchise, loan and deposit growth personnel and branding, as well as the industry-wide migration of our deposit book to more expensive products. We are gratified nonetheless that our net interest margin remains largely unaffected, and we believe the Bank continues to be well positioned for any macroeconomic challenges that may lie ahead.”
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Second Quarter 2023 Highlights
Capital Bancorp, Inc.
Earnings Summary - Net income of $7.3 million, or $0.52 per diluted share, decreased $2.4 million compared to $9.7 million, or $0.68 per diluted share, for the first quarter 2023.
•Net interest income of $35.3 million increased $0.9 million compared to $34.5 million for the first quarter 2023. Interest income of $45.1 million increased $1.7 million compared to $43.4 million for the first quarter 2023 driven by loan growth, as average portfolio loans increased $50.3 million compared to the first quarter 2023 in tandem with slightly higher rates in the second quarter 2023. Interest expense of $9.7 million increased $0.8 million compared to $8.9 million for the first quarter 2023 driven by an increase in the cost of funds. Interest expense from interest-bearing deposits increased $1.7 million, as average interest-bearing deposits increased $88.0 million while interest expense from borrowed funds decreased $0.8 million, as average borrowed funds decreased $75.2 million from the first quarter 2023.
•The provision for credit losses was $2.9 million, an increase of $1.2 million from the first quarter 2023 driven by moderate changes to the economic forecast and loan growth.
•Noninterest income of $6.7 million increased $0.7 million compared to $6.0 million for the first quarter of 2023. Credit card fees increased $0.5 million as the number of open customer accounts increased quarter over quarter, which resulted in higher interchange and other income.
•Noninterest expense of $29.6 million increased $3.4 million compared to $26.2 million for the first quarter 2023. Within this category, significant variances included the following:
◦Advertising expense of $2.6 million increased $2.1 million due to marketing efforts related to OpenSky® customer acquisition.
◦Other operating expenses of $3.4 million increased $0.8 million including $0.2 million related to outside service provider expense, $0.2 million related to FDIC assessment expense, with the remainder among other categories.
◦Occupancy and equipment expense of $1.5 million increased $0.3 million related to software licensing expenses.
◦Loan processing expense of $0.7 million increased $0.3 million in line with the growth in the loan portfolio.
◦Professional fees of $2.6 million increased $0.2 million, attributable primarily to increases in third party consulting and legal fees.
◦Salaries and employee benefits of $12.1 million decreased $0.4 million reflecting a seasonal increase in payroll taxes and benefit expense in the first quarter 2023.
Balance Sheet – Total assets of $2.2 billion at June 30, 2023 decreased $17.4 million, or 0.8%, from March 31, 2023.
•Cash and cash equivalents decreased $21.0 million.
•Net portfolio loans of $1.8 billion increased $50.9 million, representing 11.4% annualized growth.
•Total deposits of $1.9 billion at June 30, 2023 decreased $10.0 million, or 0.5%, from March 31, 2023, while total average deposits increased $110.4 million, or 25.0% annualized, quarter over quarter. Federal Home Loan Bank advances decreased $10.0 million, or 31.3%, from March 31, 2023.
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•The investment securities portfolio continues to be classified as available for sale and had a fair market value of $208.5 million, or 9.4% of total assets, at June 30, 2023. The amortized cost of the investment securities portfolio was $229.9 million, with an effective duration of 3.48 years. U.S. Treasury securities represent 74.6% of the overall investment portfolio. Investment securities available for sale decreased $47.3 million, primarily due to $44.0 million of maturing U.S. Treasuries in the second quarter 2023. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio increased $2.1 million during the quarter to $16.1 million as of June 30, 2023, which represents 6.8% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.
Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.34% and 12.30%, respectively, for the three months ended June 30, 2023, compared to 1.84% and 16.98%, respectively, for the three months ended March 31, 2023.
•The efficiency ratio was 70.4% for the three months ended June 30, 2023, compared to 64.7% for the three months ended March 31, 2023. The change was primarily attributable to an increase in noninterest expense.
Stable Net Interest Margin - Net interest margin was 6.63% for the three months ended June 30, 2023, compared to 6.65% for the three months ended March 31, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), of 4.06%, increased 25 basis points compared to 3.81% for the three months ended March 31, 2023.
•The average yield on interest earning assets increased 9 basis points compared to the first quarter 2023. The average yield on investment securities available for sale decreased 4 basis points to 1.99%, and the average yield on portfolio loans increased 1 basis point.
•The average rate on interest-bearing liabilities increased 20 basis points compared to the first quarter 2023. Increases in average rates include money market accounts increasing 39 basis points to 3.47% and time deposits increasing 37 basis points to 4.30%, while average balances increased $20.7 million and $47.0 million, respectively, compared to the first quarter 2023. The average rate on borrowed funds decreased 95 basis points to 3.07%, while average balances decreased $75.2 million compared to the first quarter 2023.
Deposits and Cost of Funds - Total deposits at June 30, 2023 decreased by $10.0 million, or 0.5%, compared to March 31, 2023.
•Total brokered time deposits of $128.7 million decreased $53.2 million, or 29.2%, compared to March 31, 2023. Excluding the decline in brokered time deposits during the quarter, total deposits increased $43.1 million, or 9.8% annualized.
•Average noninterest-bearing deposits increased 3.4% compared to March 31, 2023, and represented 36.0% of total average deposits at June 30, 2023.
•The elevated interest rate environment has driven up the cost of interest-bearing liabilities to 3.13% for the quarter ended June 30, 2023, compared to 2.93% for the first quarter 2023.
Robust Capital Positions - As of June 30, 2023, the Company reported a common equity tier 1 capital ratio of 14.96%, compared to 14.90% at March 31, 2023, and an allowance for credit losses to total loans ratio of 1.50%, compared to an allowance for credit losses to total loans ratio of 1.47% as March 31, 2023. Shares repurchased and retired during the three months ended June 30, 2023, as part of the Company's stock repurchase program totaled 138,407 shares at an average price of $16.72, for a total cost of $2.3 million including commissions. Tangible book value per common share grew 2.0% to $16.98 at June 30, 2023 when compared to March 31, 2023.
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Liquidity - Total sources of available borrowings at June 30, 2023 totaled $665.8 million, including available collateralized lines of credit of $531.4 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $58.5 million.
Commercial Bank
Continued Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $41.2 million, or 10.1% annualized, to $1.7 billion, gross, at June 30, 2023 compared to March 31, 2023. The increase in portfolio loans included $13.9 million from commercial real estate, $12.3 million from commercial and industrial, $9.3 million from residential real estate and $6.9 million from construction real estate.
Credit Metrics - Nonperforming assets ("NPAs") decreased 2 basis points to 0.71% of total assets at June 30, 2023 compared to 0.73% at March 31, 2023 as a result of a decrease in nonaccrual loans at June 30, 2023 to $15.7 million compared to $16.3 million at March 31, 2023. Included in nonperforming assets is a single $8.2 million, well-collateralized multi-unit residential real estate loan that was downgraded in the first quarter of 2023. At June 30, 2023 commercial real estate loans with office space exposure totaled $55.8 million, or 3.0% of total portfolio loans.
OpenSky®
Revenues - Total revenue of $19.9 million decreased $0.5 million from the first quarter 2023. Interest income of $15.2 million decreased $1.0 million from the first quarter 2023 as income from late charges decreased $0.7 million. Noninterest income of $4.7 million increased $0.5 million due to credit card fees as compared to the first quarter 2023.
Noninterest Expense - Total noninterest expense of $12.1 million increased $2.6 million from the first quarter 2023 due to marketing expense of $2.3 million related to the Company’s strategy for OpenSky® customer acquisition. During the second quarter 2023, the number of OpenSky® credit card accounts increased by 12,827 to 540,058.
Loan Balances - OpenSky® loan balances, net of reserves, of $122.9 million increased by $10.1 million, or 8.9% compared to the first quarter 2023. Corresponding deposit balances of $186.6 million increased $1.8 million, or 1.0%, compared to the first quarter 2023. Gross unsecured loan balances stood at $25.3 million at June 30, 2023 and $25.8 million at March 31, 2023.
OpenSky® Credit - Card delinquencies and utilization remained stable in the second quarter 2023 when compared to the first quarter 2023. The provision for credit losses increased $0.3 million compared to the first quarter 2023, driven primarily by higher loan balances.
4
2023 Highlights
Capital Bancorp
Earnings Summary - Net income of $17.1 million, or $1.20 per diluted share for the six months ended June 30, 2023 decreased $4.7 million compared to $21.7 million, or $1.52 per diluted share for the six months ended June 30, 2022.
•Improved interest income was offset by 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 time deposits and FHLB balances. Further, SBA-PPP income totaled $3.2 million for the six months ended June 30, 2022 with no comparable amount in 2023. A decline in card fees of $3.2 million resulted in lower total noninterest income of $12.7 million for the six months ended June 30, 2023, as compared to $16.7 million for the same period in 2022.
Balance Sheet Growth - Total assets of $2.2 billion at June 30, 2023 increased $73.0 million, or 3.4%, from June 30, 2022. Net portfolio loans increased $229.4 million, or 14.3% partially offset by a $131.5 million reduction in cash and cash equivalents. Total deposits of $1.9 billion at June 30, 2023 increased $45.4 million, or 2.4%, from June 30, 2022.
Performance and Efficiency Ratios - Annualized ROAA and ROAE were 1.59% and 14.60%, respectively, for the six months ended June 30, 2023 compared to 2.12% and 21.25%, respectively, for the six months ended June 30, 2022.
•The efficiency ratio was 67.60% for the six months ended June 30, 2023, compared to 63.52% for the six months ended June 30, 2022.
Net Interest Margin - Net interest margin was 6.64%, or 3.94% excluding credit card and SBA-PPP loans, for the six months ended June 30, 2023, compared to 6.93%, or 3.84% excluding credit card and SBA-PPP loans, for the six months ended June 30, 2022. The lower margin is a result of a 260 basis point increase in the cost of interest-bearing liabilities despite a 127 basis point increase in yield for portfolio loans as the average balances of portfolio loans increased $256.0 million.
Robust Capital Positions - As of June 30, 2023, the Company reported a common equity tier 1 capital ratio of 14.96%, compared to 15.55% at June 30, 2022, and an allowance for loan losses to total loans ratio of 1.50%, compared to 1.64% in 2022. Tangible book value per common share grew 14.7% to $16.98 at June 30, 2023 as compared to $14.80 at June 30, 2022.
Commercial Bank
Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $226.2 million, or 15.7% to $1.7 billion, gross, at June 30, 2023 compared to June 30, 2022. The increase in portfolio loans included $123.0 million from residential real estate, $65.3 million from commercial real estate and $40.3 million from commercial and industrial.
OpenSky®
Revenues - Total revenue of $40.2 million for the six months ended June 30, 2023, decreased $3.6 million as compared to the six months ended June 30, 2022. Interest income of $31.3 million in 2023 decreased $0.4 million compared to 2022 while noninterest income of $8.9 million decreased $3.2 million due primarily to a decrease in credit card fees resulting from a lower number of open customer accounts and balances.
Noninterest Expense - Total noninterest expense of $21.5 million for the six months ended June 30, 2023, decreased $3.3 million as compared to the six months ended June 30, 2022 including decreases in data processing expense of $2.4 million and outside service provider expense of $1.0 million.
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| COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited | |||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | 2Q23 vs 1Q23 | 2Q23 vs 2Q22 | |||||||||||||||||||||||||||||||||||||||
| (in thousands except per share data) | June 30, 2023 | March 31, 2023 | June 30, 2022 | $ Change | % Change | $ Change | % Change | ||||||||||||||||||||||||||||||||||
| Earnings Summary | |||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 45,080 | $ | 43,416 | $ | 36,556 | $ | 1,664 | 3.8 | % | $ | 8,524 | 23.3 | % | |||||||||||||||||||||||||||
| Interest expense | 9,740 | 8,929 | 1,156 | 811 | 9.1 | % | 8,584 | 742.6 | % | ||||||||||||||||||||||||||||||||
| Net interest income | 35,340 | 34,487 | 35,400 | 853 | 2.5 | % | (60) | (0.2) | % | ||||||||||||||||||||||||||||||||
| Provision for credit losses | 2,862 | 1,660 | 2,035 | 1,202 | 72.4 | % | 827 | 40.6 | % | ||||||||||||||||||||||||||||||||
| Noninterest income | 6,687 | 6,026 | 8,362 | 661 | 11.0 | % | (1,675) | (20.0) | % | ||||||||||||||||||||||||||||||||
| Noninterest expense | 29,592 | 26,203 | 27,130 | 3,389 | 12.9 | % | 2,462 | 9.1 | % | ||||||||||||||||||||||||||||||||
| Income before income taxes | 9,573 | 12,650 | 14,597 | (3,077) | (24.3) | % | (5,024) | (34.4) | % | ||||||||||||||||||||||||||||||||
| Income tax expense | 2,255 | 2,915 | 3,089 | (660) | (22.6) | % | (834) | (27.0) | % | ||||||||||||||||||||||||||||||||
| Net income | $ | 7,318 | $ | 9,735 | $ | 11,508 | $ | (2,417) | (24.8) | % | $ | (4,190) | (36.4) | % | |||||||||||||||||||||||||||
Pre-tax pre-provision net revenue ("PPNR") (1) | $ | 12,435 | $ | 14,310 | $ | 16,632 | $ | (1,875) | (13.1) | % | $ | (4,197) | (25.2) | % | |||||||||||||||||||||||||||
| Weighted average common shares - Basic | 14,025 | 14,159 | 14,007 | (134) | (0.9) | % | 18 | 0.1 | % | ||||||||||||||||||||||||||||||||
| Weighted average common shares - Diluted | 14,059 | 14,272 | 14,313 | (213) | (1.5) | % | (254) | (1.8) | % | ||||||||||||||||||||||||||||||||
| Earnings per share - Basic | $ | 0.52 | $ | 0.69 | $ | 0.82 | $ | (0.17) | (24.6) | % | $ | (0.30) | (36.6) | % | |||||||||||||||||||||||||||
| Earnings per share - Diluted | $ | 0.52 | $ | 0.68 | $ | 0.80 | $ | (0.16) | (23.5) | % | $ | (0.28) | (35.0) | % | |||||||||||||||||||||||||||
| Return on average assets (annualized) | 1.34 | % | 1.84 | % | 2.23 | % | (0.50) | % | (27.2) | % | (0.89) | % | (39.9) | % | |||||||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans (annualized) (1) | 1.34 | % | 1.84 | % | 2.04 | % | (0.50) | % | (27.2) | % | (0.70) | % | (34.3) | % | |||||||||||||||||||||||||||
| Return on average equity (annualized) | 12.30 | % | 16.98 | % | 22.16 | % | (4.68) | % | (27.6) | % | (9.86) | % | (44.5) | % | |||||||||||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||||||
| June 30, | ||||||||||||||||||||||||||
| (in thousands except per share data) | 2023 | 2022 | $ Change | % Change | ||||||||||||||||||||||
| Earnings Summary | ||||||||||||||||||||||||||
| Interest income | $ | 88,496 | $ | 70,957 | $ | 17,539 | 24.7 | % | ||||||||||||||||||
| Interest expense | 18,669 | 2,226 | 16,443 | 738.7 | % | |||||||||||||||||||||
| Net interest income | 69,827 | 68,731 | 1,096 | 1.6 | % | |||||||||||||||||||||
| Provision for credit losses | 4,522 | 2,987 | 1,535 | 51.4 | % | |||||||||||||||||||||
| Noninterest income | 12,713 | 16,650 | (3,937) | (23.6) | % | |||||||||||||||||||||
| Noninterest expense | 55,795 | 54,232 | 1,563 | 2.9 | % | |||||||||||||||||||||
| Income before income taxes | 22,223 | 28,162 | (5,939) | (21.1) | % | |||||||||||||||||||||
| Income tax expense | 5,170 | 6,443 | (1,273) | (19.8) | % | |||||||||||||||||||||
| Net income | $ | 17,053 | $ | 21,719 | $ | (4,666) | (21.5) | % | ||||||||||||||||||
Pre-tax pre-provision net revenue ("PPNR") (1) | $ | 26,745 | $ | 31,149 | $ | (4,404) | (14.1) | % | ||||||||||||||||||
| Weighted average common shares - Basic | 14,092 | 13,998 | 94 | 0.7 | % | |||||||||||||||||||||
| Weighted average common shares - Diluted | 14,210 | 14,323 | (113) | (0.8) | % | |||||||||||||||||||||
| Earnings per share - Basic | $ | 1.21 | $ | 1.55 | $ | (0.34) | (21.9) | % | ||||||||||||||||||
| Earnings per share - Diluted | $ | 1.20 | $ | 1.52 | $ | (0.32) | (21.1) | % | ||||||||||||||||||
| Return on average assets (annualized) | 1.59 | % | 2.12 | % | (0.53) | % | (25.0) | % | ||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans (annualized) (1) | 1.59 | % | 1.86 | % | (0.27) | % | (14.5) | % | ||||||||||||||||||
| Return on average equity (annualized) | 14.60 | % | 21.25 | % | (6.65) | % | (31.3) | % | ||||||||||||||||||
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| Quarter Ended | Quarter Ended | ||||||||||||||||||||||||||||||||||
| June 30, | March 31, | December 31, | September 30, | ||||||||||||||||||||||||||||||||
| (in thousands except per share data) | 2023 | 2022 | % Change | 2023 | 2022 | 2022 | |||||||||||||||||||||||||||||
| Balance Sheet Highlights | |||||||||||||||||||||||||||||||||||
| Assets | $ | 2,227,866 | $ | 2,154,846 | 3.4 | % | $ | 2,245,286 | $ | 2,123,655 | $ | 2,009,358 | |||||||||||||||||||||||
| Investment securities available for sale | 208,464 | 226,509 | (8.0) | % | 255,762 | 252,481 | 269,620 | ||||||||||||||||||||||||||||
| Mortgage loans held for sale | 10,146 | 11,708 | (13.3) | % | 9,620 | 7,416 | 6,875 | ||||||||||||||||||||||||||||
| SBA-PPP loans, net of fees | 1,090 | 15,864 | (93.1) | % | 2,037 | 2,163 | 2,662 | ||||||||||||||||||||||||||||
Portfolio loans receivable (2) | 1,837,041 | 1,607,677 | 14.3 | % | 1,786,109 | 1,728,592 | 1,648,001 | ||||||||||||||||||||||||||||
| Allowance for credit losses | 27,495 | 26,419 | 4.1 | % | 26,216 | 26,385 | 26,091 | ||||||||||||||||||||||||||||
| Deposits | 1,934,361 | 1,888,920 | 2.4 | % | 1,944,374 | 1,758,072 | 1,737,591 | ||||||||||||||||||||||||||||
| FHLB borrowings | 22,000 | 22,000 | — | % | 32,000 | 107,000 | 22,000 | ||||||||||||||||||||||||||||
| Other borrowed funds | 12,062 | 12,062 | — | % | 12,062 | 12,062 | 12,062 | ||||||||||||||||||||||||||||
| Total stockholders' equity | 237,435 | 207,316 | 14.5 | % | 234,517 | 224,015 | 214,005 | ||||||||||||||||||||||||||||
Tangible common equity (1) | 237,435 | 207,316 | 14.5 | % | 234,517 | 224,015 | 214,005 | ||||||||||||||||||||||||||||
| Common shares outstanding | 13,981 | 14,010 | (0.2) | % | 14,083 | 14,139 | 14,039 | ||||||||||||||||||||||||||||
Tangible book value per share (1) | $ | 16.98 | $ | 14.80 | 14.7 | % | $ | 16.65 | $ | 15.84 | $ | 15.24 | |||||||||||||||||||||||
______________
(1) Refer to Appendix for reconciliation of non-GAAP measures.
(2) Loans are reflected net of deferred fees and costs.
7
Operating Results - Comparison of Three Months Ended June 30, 2023 and 2022
For the three months ended June 30, 2023, net interest income of $35.3 million decreased slightly from $35.4 million in the same period in 2022, primarily due to significant increases in the cost of funding partially offset by increased average balances of $268.1 million in portfolio loans combined with a 64 basis point increase in yield for portfolio loans. The net interest margin decreased 43 basis points to 6.63% for the three months ended June 30, 2023, from the same period in 2022 as the increase in the costs of deposits, including money market accounts and time deposits, outpaced the increase in portfolio loan yields, including credit cards. Further SBA-PPP income totaled $1.1 million for the three months ended June 30, 2022 with no comparable amount in 2023. Net interest margin, excluding credit card and SBA-PPP loans, increased to 4.06% for the three months ended June 30, 2023, compared to 3.86% for the same period in 2022.
For the three months ended June 30, 2023, average interest earning assets increased $125.0 million, or 6.2%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 117 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $218.5 million, or 21.2%, and the average cost of interest-bearing liabilities increased to 3.13%, a 268 basis point increase from 0.45%.
For the three months ended June 30, 2023, the provision for credit losses was $2.9 million, an increase of $0.8 million from the same period in 2022. Contributors to the increase in the provision were loan portfolio growth and change in credit card mix from fully secured to partially or fully unsecured. Net charge-offs for the three months ended June 30, 2023, were $1.6 million, or 0.35% on an annualized basis of average portfolio loans, compared to $0.9 million, or 0.23% on an annualized basis of average loans for the same period in 2022. Of the $1.6 million in net charge-offs during the quarter, $1.5 million related to secured and partially secured cards in the credit card portfolio and $0.1 million related to unsecured cards.
For the three months ended June 30, 2023, noninterest income of $6.7 million decreased $1.7 million, or 20.0%, from the same period in 2022. Credit card fees declined by $1.5 million as the number of open customer accounts declined year over year, which resulted in lower interchange and other fee income compared to the prior year quarter.
Credit card loan balances, net of reserves, decreased by $19.2 million to $122.9 million as of June 30, 2023, from $142.2 million at June 30, 2022. The related deposit account balances decreased 12.9% to $186.6 million at June 30, 2023 when compared to $214.1 million at June 30, 2022 reflecting the reduction in the number of open customer accounts year over year.
The efficiency ratio for the three months ended June 30, 2023, was 70.41% compared to 62.00% for the three months ended June 30, 2022. The change was due primarily to a decline in noninterest income from credit card fees and an increase in noninterest expense from salaries and employee benefits.
For the three months ended June 30, 2023, noninterest expense of $29.6 million increased $2.5 million, or 9.1%, from the same period in 2022. The increase was primarily driven by increased salaries and employee benefits of $2.1 million.
8
Operating Results - Comparison of Six Months Ended June 30, 2023 and 2022
For the six months ended June 30, 2023, net interest income of $69.8 million increased $1.1 million, or 1.6%, from the same period in 2022, primarily due to increased average balances of $256.0 million in portfolio loans combined with the 82 basis point increase in yield for portfolio loans offset by significant increases in the cost of funding. The net interest margin decreased 29 basis points to 6.64% for the six months ended June 30, 2023, from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.94% for the six months ended June 30, 2023, compared to 3.84% for the same period in 2022.
For the six months ended June 30, 2023, average interest earning assets increased $119.3 million, or 6.0%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 127 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $203.8 million, or 19.6%, while the cost of interest-bearing liabilities increased 260 basis points to 3.03% from 0.43%.
For the six months ended June 30, 2023, the provision for credit losses was $4.5 million, an increase of $1.5 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the six months ended June 30, 2023, were $4.2 million, or 0.48% annualized of average portfolio loans, compared to $1.7 million, or 0.23% annualized of average portfolio loans, for the same period in 2022. The $4.2 million in net charge-offs during the six months ended June 30, 2023, was comprised primarily of credit card portfolio net charge-offs with $2.6 million related to secured and partially secured cards while $0.7 million was related to unsecured cards.
For the six months ended June 30, 2023, noninterest income of $12.7 million decreased $3.9 million, or 23.6%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $3.2 million as the number of open customer accounts declined to 540,058 at June 30, 2023 from 616,435 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year. 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 $0.8 million decrease in mortgage banking revenue compared to the prior year.
The efficiency ratio for the six months ended June 30, 2023, was 67.60% compared to 63.52% for the six months ended June 30, 2022.
For the six months ended June 30, 2023, noninterest expense of $55.8 million increased $1.6 million, or 2.9%, from the same period in 2022. The increase was primarily driven by a $4.3 million, or 21.2%, increase in salaries and benefits, partially offset by a $2.5 million, or 15.8%, decrease in data processing expense. The decrease of $2.5 million in data processing expense was the result of a contract renegotiation entered into in the first quarter 2022 in the OpenSky® Division as well as fewer average open cards during the period.
9
Financial Condition
Total assets at June 30, 2023 were $2.2 billion, a decrease of $17.4 million, or 0.8%, from the balance at March 31, 2023 and an increase of $73.0 million, or 3.4%, from the balance at June 30, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.8 billion at June 30, 2023, an increase of $50.9 million, up 2.9% or 11.4% annualized, compared to March 31, 2023, and an increase of $229.4 million, or 14.3%, compared to $1.6 billion at June 30, 2022.
The Company recorded a provision for credit losses of $4.5 million during the six months ended June 30, 2023, which increased the allowance for credit losses to $27.5 million, or 1.5% of total loans at June 30, 2023, representing an increase of $1.3 million or 4.9%, from the balance at March 31, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of June 30, 2023, were $15.7 million, or 0.71% of total assets, down from $16.3 million, or 0.73% of total assets at March 31, 2023 and up from $7.3 million, or 0.34% of total assets at June 30, 2022.
Deposits were $1.9 billion at June 30, 2023, a slight decrease of $10.0 million, or 0.5%, from the balance at March 31, 2023 and an increase of $45.4 million, or 2.4%, from the balance at June 30, 2022. Average deposits of $1.9 billion for the three months ended June 30, 2023, increased $110.4 million, or 6.2%, as compared to the three months ended March 31, 2023. Rising interest rates have resulted in some customers moving balances from noninterest-bearing deposit accounts to interest-bearing deposit accounts. As a result of the migration, average noninterest-bearing deposit balances decreased $131.2 million to $676.4 million for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022. These deposits represented 35.8% of total deposits at June 30, 2023 compared to 44.6% at June 30, 2022. Uninsured deposits were approximately $860.4 million as of June 30, 2023, representing 44.5% of the Company's deposit portfolio, compared to $888.9 million, or 45.7%, at March 31, 2023, and $915.0 million, or 48.4%, at June 30, 2022.
Stockholders’ equity increased to $237.4 million as of June 30, 2023, compared to $234.5 million at March 31, 2023 and $207.3 million at June 30, 2022. Shares repurchased and retired through June 30, 2023 as part of the Company's stock repurchase program totaled 285,344 shares at an average price of $17.65, for a total cost of $5.0 million including commissions. As of June 30, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
10
| Consolidated Statements of Income (Unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | June 30, 2023 | June 30, 2022 | ||||||||||||||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||||||||||||||||||||
| Loans, including fees | $ | 42,991 | $ | 41,275 | $ | 38,763 | $ | 36,451 | $ | 35,304 | $ | 84,266 | $ | 69,193 | |||||||||||||||||||||||||||
| Investment securities available for sale | 1,266 | 1,377 | 1,402 | 1,362 | 779 | 2,643 | 1,149 | ||||||||||||||||||||||||||||||||||
| Federal funds sold and other | 823 | 764 | 1,183 | 527 | 473 | 1,587 | 615 | ||||||||||||||||||||||||||||||||||
| Total interest income | 45,080 | 43,416 | 41,348 | 38,340 | 36,556 | 88,496 | 70,957 | ||||||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||||||||
| Deposits | 9,409 | 7,754 | 4,377 | 1,386 | 964 | 17,163 | 1,847 | ||||||||||||||||||||||||||||||||||
| Borrowed funds | 331 | 1,175 | 1,772 | 277 | 192 | 1,506 | 379 | ||||||||||||||||||||||||||||||||||
| Total interest expense | 9,740 | 8,929 | 6,149 | 1,663 | 1,156 | 18,669 | 2,226 | ||||||||||||||||||||||||||||||||||
| Net interest income | 35,340 | 34,487 | 35,199 | 36,677 | 35,400 | 69,827 | 68,731 | ||||||||||||||||||||||||||||||||||
| Provision for credit losses | 2,862 | 1,660 | 2,384 | 1,260 | 2,035 | 4,522 | 2,987 | ||||||||||||||||||||||||||||||||||
| Net interest income after provision for credit losses | 32,478 | 32,827 | 32,815 | 35,417 | 33,365 | 65,305 | 65,744 | ||||||||||||||||||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||||||||||||||||||||
| Service charges on deposits | 245 | 229 | 222 | 199 | 183 | 474 | 346 | ||||||||||||||||||||||||||||||||||
| Credit card fees | 4,706 | 4,210 | 4,314 | 5,524 | 6,210 | 8,916 | 12,134 | ||||||||||||||||||||||||||||||||||
| Mortgage banking revenue | 1,332 | 1,155 | 554 | 969 | 1,528 | 2,487 | 3,318 | ||||||||||||||||||||||||||||||||||
| Other income | 404 | 432 | 471 | 416 | 441 | 836 | 852 | ||||||||||||||||||||||||||||||||||
| Total noninterest income | 6,687 | 6,026 | 5,561 | 7,108 | 8,362 | 12,713 | 16,650 | ||||||||||||||||||||||||||||||||||
| Noninterest expenses | |||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | 12,143 | 12,554 | 11,769 | 10,747 | 10,071 | 24,697 | 20,381 | ||||||||||||||||||||||||||||||||||
| Occupancy and equipment | 1,536 | 1,213 | 1,388 | 1,138 | 1,313 | 2,749 | 2,339 | ||||||||||||||||||||||||||||||||||
| Professional fees | 2,608 | 2,374 | 2,426 | 3,848 | 2,417 | 4,982 | 4,738 | ||||||||||||||||||||||||||||||||||
| Data processing | 6,559 | 6,530 | 6,697 | 7,178 | 7,266 | 13,089 | 15,542 | ||||||||||||||||||||||||||||||||||
| Advertising | 2,646 | 517 | 726 | 1,632 | 2,223 | 3,163 | 3,862 | ||||||||||||||||||||||||||||||||||
| Loan processing | 660 | 349 | 350 | 625 | 335 | 1,009 | 727 | ||||||||||||||||||||||||||||||||||
| Foreclosed real estate expenses, net | — | 6 | — | — | — | 6 | — | ||||||||||||||||||||||||||||||||||
| Other operating | 3,440 | 2,660 | 3,378 | 2,926 | 3,505 | 6,100 | 6,643 | ||||||||||||||||||||||||||||||||||
| Total noninterest expenses | 29,592 | 26,203 | 26,734 | 28,094 | 27,130 | 55,795 | 54,232 | ||||||||||||||||||||||||||||||||||
| Income before income taxes | 9,573 | 12,650 | 11,642 | 14,431 | 14,597 | 22,223 | 28,162 | ||||||||||||||||||||||||||||||||||
| Income tax expense | 2,255 | 2,915 | 2,651 | 3,336 | 3,089 | 5,170 | 6,443 | ||||||||||||||||||||||||||||||||||
| Net income | $ | 7,318 | $ | 9,735 | $ | 8,991 | $ | 11,095 | $ | 11,508 | $ | 17,053 | $ | 21,719 | |||||||||||||||||||||||||||
11
| Consolidated Balance Sheets | |||||||||||||||||||||||||||||
| (unaudited) | (unaudited) | (audited) | (unaudited) | (unaudited) | |||||||||||||||||||||||||
| (in thousands except share data) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
| Cash and due from banks | $ | 18,619 | $ | 14,477 | $ | 19,963 | $ | 14,774 | $ | 14,776 | |||||||||||||||||||
| Interest-bearing deposits at other financial institutions | 100,343 | 125,448 | 39,764 | 20,867 | 234,823 | ||||||||||||||||||||||||
| Federal funds sold | 376 | 462 | 20,688 | 1,421 | 1,285 | ||||||||||||||||||||||||
| Total cash and cash equivalents | 119,338 | 140,387 | 80,415 | 37,062 | 250,884 | ||||||||||||||||||||||||
| Investment securities available for sale | 208,464 | 255,762 | 252,481 | 269,620 | 226,509 | ||||||||||||||||||||||||
| Marketable equity securities | — | — | — | 232 | 245 | ||||||||||||||||||||||||
| Restricted investments | 3,803 | 4,215 | 7,362 | 3,627 | 3,615 | ||||||||||||||||||||||||
| Loans held for sale | 10,146 | 9,620 | 7,416 | 6,875 | 11,708 | ||||||||||||||||||||||||
| U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs | 1,090 | 2,037 | 2,163 | 2,662 | 15,864 | ||||||||||||||||||||||||
| Portfolio loans receivable, net of deferred fees and costs | 1,837,041 | 1,786,109 | 1,728,592 | 1,648,001 | 1,607,677 | ||||||||||||||||||||||||
| Less allowance for credit losses | (27,495) | (26,216) | (26,385) | (26,091) | (26,419) | ||||||||||||||||||||||||
| Total portfolio loans held for investment, net | 1,809,546 | 1,759,893 | 1,702,207 | 1,621,910 | 1,581,258 | ||||||||||||||||||||||||
| Premises and equipment, net | 5,494 | 5,367 | 3,386 | 3,212 | 3,315 | ||||||||||||||||||||||||
| Accrued interest receivable | 10,155 | 9,985 | 9,489 | 7,890 | 7,276 | ||||||||||||||||||||||||
| Deferred tax asset | 13,616 | 12,898 | 13,777 | 14,047 | 12,929 | ||||||||||||||||||||||||
| Bank owned life insurance | 37,041 | 36,781 | 36,524 | 36,267 | 36,011 | ||||||||||||||||||||||||
| Other assets | 9,173 | 8,341 | 8,435 | 5,954 | 5,232 | ||||||||||||||||||||||||
| Total assets | $ | 2,227,866 | $ | 2,245,286 | $ | 2,123,655 | $ | 2,009,358 | $ | 2,154,846 | |||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Deposits | |||||||||||||||||||||||||||||
| Noninterest-bearing | $ | 693,129 | $ | 705,801 | $ | 674,313 | $ | 806,033 | $ | 842,363 | |||||||||||||||||||
| Interest-bearing | 1,241,232 | 1,238,573 | 1,083,759 | 931,558 | 1,046,557 | ||||||||||||||||||||||||
| Total deposits | 1,934,361 | 1,944,374 | 1,758,072 | 1,737,591 | 1,888,920 | ||||||||||||||||||||||||
| Federal Home Loan Bank advances | 22,000 | 32,000 | 107,000 | 22,000 | 22,000 | ||||||||||||||||||||||||
| Other borrowed funds | 12,062 | 12,062 | 12,062 | 12,062 | 12,062 | ||||||||||||||||||||||||
| Accrued interest payable | 3,029 | 1,977 | 1,031 | 481 | 300 | ||||||||||||||||||||||||
| Other liabilities | 18,979 | 20,356 | 21,475 | 23,219 | 24,248 | ||||||||||||||||||||||||
| Total liabilities | 1,990,431 | 2,010,769 | 1,899,640 | 1,795,353 | 1,947,530 | ||||||||||||||||||||||||
| Stockholders' equity | |||||||||||||||||||||||||||||
| Common stock | 140 | 141 | 141 | 140 | 140 | ||||||||||||||||||||||||
| Additional paid-in capital | 55,856 | 57,277 | 58,190 | 56,532 | 55,762 | ||||||||||||||||||||||||
| Retained earnings | 197,490 | 191,058 | 182,435 | 174,916 | 164,750 | ||||||||||||||||||||||||
| Accumulated other comprehensive loss | (16,051) | (13,959) | (16,751) | (17,583) | (13,336) | ||||||||||||||||||||||||
| Total stockholders' equity | 237,435 | 234,517 | 224,015 | 214,005 | 207,316 | ||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,227,866 | $ | 2,245,286 | $ | 2,123,655 | $ | 2,009,358 | $ | 2,154,846 | |||||||||||||||||||
12
The following tables show 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, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Outstanding Balance | Interest Income/ Expense | Average Yield/ Rate(1) | 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 | $ | 66,401 | $ | 733 | 4.43 | % | $ | 62,566 | $ | 615 | 3.99 | % | $ | 218,251 | $ | 429 | 0.79 | % | |||||||||||||||||||||||||||||||||||
| Federal funds sold | 1,638 | 20 | 4.90 | 2,054 | 18 | 3.62 | 1,655 | 2 | 0.48 | ||||||||||||||||||||||||||||||||||||||||||||
| Investment securities available for sale | 255,057 | 1,266 | 1.99 | 274,685 | 1,377 | 2.03 | 215,172 | 779 | 1.45 | ||||||||||||||||||||||||||||||||||||||||||||
| Restricted investments | 4,185 | 71 | 6.80 | 7,346 | 130 | 7.17 | 3,854 | 42 | 4.37 | ||||||||||||||||||||||||||||||||||||||||||||
| Loans held for sale | 7,047 | 111 | 6.32 | 4,695 | 77 | 6.65 | 11,447 | 134 | 4.70 | ||||||||||||||||||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 1,808 | 7 | 1.55 | 2,099 | 8 | 1.50 | 28,870 | 1,120 | 15.56 | ||||||||||||||||||||||||||||||||||||||||||||
Portfolio loans receivable(2) | 1,800,800 | 42,872 | 9.55 | 1,750,539 | 41,191 | 9.54 | 1,532,671 | 34,050 | 8.91 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets | 2,136,936 | 45,080 | 8.46 | 2,103,984 | 43,416 | 8.37 | 2,011,920 | 36,556 | 7.29 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest earning assets | 47,415 | 40,265 | 56,298 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets | $ | 2,184,351 | $ | 2,144,249 | $ | 2,068,218 | |||||||||||||||||||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 207,264 | 67 | 0.13 | $ | 186,184 | 70 | 0.15 | $ | 259,192 | 38 | 0.06 | |||||||||||||||||||||||||||||||||||||||||
| Savings | 5,822 | 2 | 0.14 | 6,502 | 1 | 0.05 | 9,913 | 1 | 0.04 | ||||||||||||||||||||||||||||||||||||||||||||
| Money market accounts | 625,515 | 5,411 | 3.47 | 604,864 | 4,587 | 3.08 | 566,303 | 396 | 0.28 | ||||||||||||||||||||||||||||||||||||||||||||
| Time deposits | 366,421 | 3,929 | 4.30 | 319,449 | 3,096 | 3.93 | 160,279 | 529 | 1.32 | ||||||||||||||||||||||||||||||||||||||||||||
| Borrowed funds | 43,183 | 331 | 3.07 | 118,379 | 1,175 | 4.02 | 34,062 | 192 | 2.27 | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,248,205 | 9,740 | 3.13 | 1,235,378 | 8,929 | 2.93 | 1,029,749 | 1,156 | 0.45 | ||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | 21,104 | 22,355 | 22,647 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 676,358 | 654,025 | 807,558 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 238,684 | 232,491 | 208,264 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,184,351 | $ | 2,144,249 | $ | 2,068,218 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest spread | 5.33 | % | 5.44 | % | 6.84 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 35,340 | $ | 34,487 | $ | 35,400 | |||||||||||||||||||||||||||||||||||||||||||||||
Net interest margin(3) | 6.63 | % | 6.65 | % | 7.06 | % | |||||||||||||||||||||||||||||||||||||||||||||||
_______________
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended June 30, 2023, March 31, 2023, and June 30, 2022, collectively, SBA-PPP loans and credit card loans accounted for 257, 283 and 320 basis points of the reported net interest margin, respectively.
13
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 64,494 | $ | 1,348 | 4.21 | % | $ | 208,043 | $ | 530 | 0.51 | % | |||||||||||||||||||||||
| Federal funds sold | 1,845 | 38 | 4.15 | 3,148 | 2 | 0.13 | |||||||||||||||||||||||||||||
| Investment securities available for sale | 264,817 | 2,643 | 2.01 | 197,965 | 1,149 | 1.17 | |||||||||||||||||||||||||||||
| Restricted investments | 5,757 | 201 | 7.04 | 3,810 | 83 | 4.39 | |||||||||||||||||||||||||||||
| Loans held for sale | 5,878 | 188 | 6.45 | 12,467 | 245 | 3.96 | |||||||||||||||||||||||||||||
| SBA-PPP loans receivable | 1,953 | 15 | 1.55 | 55,917 | 3,186 | 11.49 | |||||||||||||||||||||||||||||
Portfolio loans receivable(2) | 1,775,809 | 84,063 | 9.55 | 1,519,857 | 65,762 | 8.73 | |||||||||||||||||||||||||||||
| Total interest earning assets | 2,120,553 | 88,496 | 8.42 | 2,001,207 | 70,957 | 7.15 | |||||||||||||||||||||||||||||
| Noninterest earning assets | 43,858 | 61,533 | |||||||||||||||||||||||||||||||||
Total assets | $ | 2,164,411 | $ | 2,062,740 | |||||||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Interest-bearing demand accounts | $ | 196,782 | 137 | 0.14 | $ | 276,490 | 74 | 0.05 | |||||||||||||||||||||||||||
| Savings | 6,160 | 3 | 0.10 | 9,098 | 3 | 0.07 | |||||||||||||||||||||||||||||
| Money market accounts | 615,247 | 9,998 | 3.28 | 552,858 | 697 | 0.25 | |||||||||||||||||||||||||||||
| Time deposits | 343,065 | 7,025 | 4.13 | 165,485 | 1,073 | 1.31 | |||||||||||||||||||||||||||||
| Borrowed funds | 80,573 | 1,506 | 3.77 | 34,062 | 379 | 2.24 | |||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,241,827 | 18,669 | 3.03 | 1,037,993 | 2,226 | 0.43 | |||||||||||||||||||||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Noninterest-bearing liabilities | 21,726 | 23,397 | |||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 665,253 | 795,221 | |||||||||||||||||||||||||||||||||
Stockholders’ equity | 235,605 | 206,129 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,164,411 | $ | 2,062,740 | |||||||||||||||||||||||||||||||
| Net interest spread | 5.39 | % | 6.72 | % | |||||||||||||||||||||||||||||||
| Net interest income | $ | 69,827 | $ | 68,731 | |||||||||||||||||||||||||||||||
Net interest margin(3) | 6.64 | % | 6.93 | % | |||||||||||||||||||||||||||||||
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the six months ended June 30, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 270 and 309 basis points of the reported net interest margin, respectively.
14
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, 2023 and June 30, 2022.
| Segments | ||||||||||||||||||||||||||||||||||||||
For the three months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky® | Corporate(2) | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||
| Interest income | $ | 28,742 | $ | 111 | $ | 15,168 | $ | 1,134 | $ | (75) | $ | 45,080 | ||||||||||||||||||||||||||
| Interest expense | 9,537 | 42 | — | 236 | (75) | 9,740 | ||||||||||||||||||||||||||||||||
| Net interest income | 19,205 | 69 | 15,168 | 898 | — | 35,340 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | 735 | — | 2,127 | — | — | 2,862 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 18,470 | 69 | 13,041 | 898 | — | 32,478 | ||||||||||||||||||||||||||||||||
| Noninterest income | 810 | 1,161 | 4,714 | 2 | — | 6,687 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 15,918 | 1,481 | 12,059 | 134 | — | 29,592 | ||||||||||||||||||||||||||||||||
| Net income (loss) before taxes | $ | 3,362 | $ | (251) | $ | 5,696 | $ | 766 | $ | — | $ | 9,573 | ||||||||||||||||||||||||||
| Total assets | $ | 2,047,400 | $ | 10,605 | $ | 116,123 | $ | 260,309 | $ | (206,571) | $ | 2,227,866 | ||||||||||||||||||||||||||
For the three months ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky® | Corporate(2) | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||
| Interest income | $ | 26,300 | $ | 77 | $ | 16,130 | $ | 978 | $ | (69) | $ | 43,416 | ||||||||||||||||||||||||||
| Interest expense | 8,739 | 30 | — | 229 | (69) | 8,929 | ||||||||||||||||||||||||||||||||
| Net interest income | 17,561 | 47 | 16,130 | 749 | — | 34,487 | ||||||||||||||||||||||||||||||||
| Provision (release of provision) for credit losses | (161) | — | 1,821 | — | — | 1,660 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 17,722 | 47 | 14,309 | 749 | — | 32,827 | ||||||||||||||||||||||||||||||||
| Noninterest income | 489 | 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 | $ | (203,350) | $ | 2,245,286 | ||||||||||||||||||||||||||
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 (loss) 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 | ||||||||||||||||||||||||||
________________________
(1) Noninterest expense includes $5.9 million, $5.9 million and $6.7 million in data processing expense in OpenSky’s® segment for the three months ended June 30, 2023 March 31, 2023, and June 30, 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.
15
| Segments | ||||||||||||||||||||||||||||||||||||||
For the six months ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky® | Corporate(2) | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||
| Interest income | $ | 55,042 | $ | 188 | $ | 31,298 | $ | 2,112 | $ | (144) | $ | 88,496 | ||||||||||||||||||||||||||
| Interest expense | 18,276 | 72 | — | 465 | (144) | 18,669 | ||||||||||||||||||||||||||||||||
| Net interest income | 36,766 | 116 | 31,298 | 1,647 | — | 69,827 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | 574 | — | 3,948 | — | — | 4,522 | ||||||||||||||||||||||||||||||||
| Net interest income after provision | 36,192 | 116 | 27,350 | 1,647 | — | 65,305 | ||||||||||||||||||||||||||||||||
| Noninterest income | 1,299 | 2,488 | 8,924 | 2 | — | 12,713 | ||||||||||||||||||||||||||||||||
Noninterest expense(1) | 30,898 | 3,062 | 21,509 | 326 | — | 55,795 | ||||||||||||||||||||||||||||||||
| Net income (loss) before taxes | $ | 6,593 | $ | (458) | $ | 14,765 | $ | 1,323 | $ | — | $ | 22,223 | ||||||||||||||||||||||||||
| Total assets | $ | 2,047,400 | $ | 10,605 | $ | 116,123 | $ | 260,309 | $ | (206,571) | $ | 2,227,866 | ||||||||||||||||||||||||||
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 (loss) 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 | ||||||||||||||||||||||||||
(1) Noninterest expense includes $11.9 million and $14.3 million in data processing expense in OpenSky’s® segment for the six months ended June 30, 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.
16
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (in thousands except per share data) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | |||||||||||||||||||||||||||
| Earnings: | ||||||||||||||||||||||||||||||||
| Net income | $ | 7,318 | $ | 9,735 | $ | 8,991 | $ | 11,095 | $ | 11,508 | ||||||||||||||||||||||
| Earnings per common share, diluted | 0.52 | 0.68 | 0.62 | 0.77 | 0.80 | |||||||||||||||||||||||||||
| Net interest margin | 6.63 | % | 6.65 | % | 6.64 | % | 7.24 | % | 7.06 | % | ||||||||||||||||||||||
Net interest margin, excluding credit cards & SBA-PPP loans (1) | 4.06 | % | 3.81 | % | 3.91 | % | 4.16 | % | 3.86 | % | ||||||||||||||||||||||
Return on average assets(2) | 1.34 | % | 1.84 | % | 1.67 | % | 2.15 | % | 2.23 | % | ||||||||||||||||||||||
Return on average assets, excluding impact of SBA-PPP loans (1)(2) | 1.34 | % | 1.84 | % | 1.67 | % | 2.10 | % | 2.04 | % | ||||||||||||||||||||||
Return on average equity(2) | 12.30 | % | 16.98 | % | 16.18 | % | 20.32 | % | 22.16 | % | ||||||||||||||||||||||
| Efficiency ratio | 70.41 | % | 64.68 | % | 65.59 | % | 64.16 | % | 62.00 | % | ||||||||||||||||||||||
| Balance Sheet: | ||||||||||||||||||||||||||||||||
| Total portfolio loans receivable, net deferred fees | $ | 1,837,041 | $ | 1,786,109 | $ | 1,728,592 | $ | 1,648,001 | $ | 1,607,677 | ||||||||||||||||||||||
| Total deposits | 1,934,361 | 1,944,374 | 1,758,072 | 1,737,591 | 1,888,920 | |||||||||||||||||||||||||||
| Total assets | 2,227,866 | 2,245,286 | 2,123,655 | 2,009,358 | 2,154,846 | |||||||||||||||||||||||||||
| Total stockholders' equity | 237,435 | 234,517 | 224,015 | 214,005 | 207,316 | |||||||||||||||||||||||||||
| Asset Quality Ratios: | ||||||||||||||||||||||||||||||||
| Nonperforming assets to total assets | 0.71 | % | 0.73 | % | 0.46 | % | 0.43 | % | 0.34 | % | ||||||||||||||||||||||
Nonperforming assets to total assets, excluding the SBA-PPP loans (1) | 0.71 | % | 0.73 | % | 0.46 | % | 0.43 | % | 0.34 | % | ||||||||||||||||||||||
| Nonperforming loans to total loans | 0.85 | % | 0.91 | % | 0.56 | % | 0.52 | % | 0.45 | % | ||||||||||||||||||||||
Nonperforming loans to portfolio loans (1) | 0.86 | % | 0.91 | % | 0.56 | % | 0.52 | % | 0.46 | % | ||||||||||||||||||||||
Net charge-offs to average portfolio loans (1)(2) | 0.35 | % | 0.61 | % | 0.49 | % | 0.39 | % | 0.23 | % | ||||||||||||||||||||||
| Allowance for credit losses to total loans | 1.50 | % | 1.47 | % | 1.52 | % | 1.58 | % | 1.64 | % | ||||||||||||||||||||||
Allowance for credit losses to portfolio loans (1) | 1.50 | % | 1.47 | % | 1.53 | % | 1.58 | % | 1.64 | % | ||||||||||||||||||||||
| Allowance for credit losses to non-performing loans | 175.03 | % | 160.91 | % | 270.46 | % | 303.76 | % | 360.06 | % | ||||||||||||||||||||||
| Bank Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 14.08 | % | 14.09 | % | 14.21 | % | 14.65 | % | 14.34 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 12.82 | % | 12.84 | % | 12.95 | % | 13.39 | % | 13.09 | % | ||||||||||||||||||||||
| Leverage ratio | 9.77 | % | 9.78 | % | 9.47 | % | 9.60 | % | 9.11 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 12.82 | % | 12.84 | % | 12.95 | % | 13.39 | % | 13.09 | % | ||||||||||||||||||||||
| Tangible common equity | 8.93 | % | 8.79 | % | 8.85 | % | 9.00 | % | 8.17 | % | ||||||||||||||||||||||
| Holding Company Capital Ratios: | ||||||||||||||||||||||||||||||||
| Total risk based capital ratio | 16.81 | % | 16.75 | % | 16.33 | % | 17.41 | % | 17.66 | % | ||||||||||||||||||||||
| Tier 1 risk based capital ratio | 14.96 | % | 14.90 | % | 15.13 | % | 15.49 | % | 15.70 | % | ||||||||||||||||||||||
| Leverage ratio | 11.50 | % | 11.47 | % | 11.24 | % | 11.31 | % | 10.93 | % | ||||||||||||||||||||||
| Common equity Tier 1 capital ratio | 14.96 | % | 14.90 | % | 15.00 | % | 15.36 | % | 15.55 | % | ||||||||||||||||||||||
| Tangible common equity | 10.66 | % | 10.44 | % | 10.55 | % | 10.65 | % | 9.62 | % | ||||||||||||||||||||||
17
| HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited | ||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||
| (in thousands except per share data) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | |||||||||||||||||||||||||||
| Composition of Loans: | ||||||||||||||||||||||||||||||||
| SBA-PPP loans, net | $ | 1,090 | $ | 2,037 | $ | 2,163 | $ | 2,662 | $ | 15,864 | ||||||||||||||||||||||
| Commercial real estate | 674,141 | 660,218 | 664,551 | 626,030 | 608,646 | |||||||||||||||||||||||||||
| Residential real estate | $ | 555,133 | $ | 545,899 | $ | 484,735 | $ | 466,849 | $ | 430,244 | ||||||||||||||||||||||
| Construction real estate | 258,400 | 251,494 | 238,099 | 235,045 | 241,249 | |||||||||||||||||||||||||||
| Commercial and industrial | 233,598 | 221,258 | 220,221 | 192,207 | 193,262 | |||||||||||||||||||||||||||
Credit card, net of reserve(3) | 122,925 | 112,860 | 128,434 | 136,658 | 142,166 | |||||||||||||||||||||||||||
| Other consumer loans | 1,187 | 1,578 | 1,179 | 1,055 | 856 | |||||||||||||||||||||||||||
| Portfolio loans receivable | $ | 1,845,384 | $ | 1,793,307 | $ | 1,737,219 | $ | 1,657,844 | $ | 1,616,423 | ||||||||||||||||||||||
| Deferred origination fees, net | (8,343) | (7,198) | (8,627) | (9,843) | (8,746) | |||||||||||||||||||||||||||
| Portfolio loans receivable, net | $ | 1,837,041 | $ | 1,786,109 | $ | 1,728,592 | $ | 1,648,001 | $ | 1,607,677 | ||||||||||||||||||||||
| Composition of Deposits: | ||||||||||||||||||||||||||||||||
| Noninterest-bearing | $ | 693,129 | $ | 705,801 | $ | 674,313 | $ | 806,033 | $ | 842,363 | ||||||||||||||||||||||
| Interest-bearing demand | 243,095 | 219,685 | 207,836 | 252,135 | 305,377 | |||||||||||||||||||||||||||
| Savings | 5,816 | 5,835 | 7,530 | 8,861 | 10,078 | |||||||||||||||||||||||||||
| Money markets | 631,148 | 632,087 | 574,978 | 518,184 | 570,298 | |||||||||||||||||||||||||||
| Brokered time deposits | 128,665 | 181,820 | 131,819 | — | — | |||||||||||||||||||||||||||
| Other time deposits | 232,508 | 199,146 | 161,596 | 152,378 | 160,804 | |||||||||||||||||||||||||||
| Total deposits | $ | 1,934,361 | $ | 1,944,374 | $ | 1,758,072 | $ | 1,737,591 | $ | 1,888,920 | ||||||||||||||||||||||
| Capital Bank Home Loan Metrics: | ||||||||||||||||||||||||||||||||
| Origination of loans held for sale | $ | 61,480 | $ | 44,448 | $ | 43,956 | $ | 60,516 | $ | 84,417 | ||||||||||||||||||||||
| Mortgage loans sold | 49,231 | 40,483 | 43,415 | 65,349 | 89,745 | |||||||||||||||||||||||||||
| Gain on sale of loans | 1,262 | 1,223 | 912 | 1,340 | 1,918 | |||||||||||||||||||||||||||
| Purchase volume as a % of originations | 93.12 | % | 90.72 | % | 88.94 | % | 81.85 | % | 85.23 | % | ||||||||||||||||||||||
Gain on sale as a % of loans sold(4) | 2.56 | % | 3.02 | % | 2.10 | % | 2.05 | % | 2.14 | % | ||||||||||||||||||||||
| Mortgage commissions | $ | 621 | $ | 378 | $ | 451 | $ | 587 | $ | 772 | ||||||||||||||||||||||
OpenSky® Portfolio Metrics: | ||||||||||||||||||||||||||||||||
| Open customer accounts | 540,058 | 527,231 | 533,855 | 576,844 | 616,435 | |||||||||||||||||||||||||||
| Secured credit card loans, gross | $ | 100,218 | $ | 89,078 | $ | 104,157 | $ | 111,842 | $ | 118,938 | ||||||||||||||||||||||
| Unsecured credit card loans, gross | 25,254 | 25,782 | 26,795 | 27,335 | 25,641 | |||||||||||||||||||||||||||
| Noninterest secured credit card deposits | 186,566 | 184,809 | 187,412 | 201,277 | 214,110 | |||||||||||||||||||||||||||
_______________
(1)Refer to Appendix for reconciliation of non-GAAP measures.
(2)Annualized.
(3)Credit card loans are presented net of reserve for interest and fees.
(4)Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.
18
Appendix
Reconciliation of Non-GAAP Measures
| Return on Average Assets, as Adjusted | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Net Income | $ | 7,318 | $ | 9,735 | $ | 8,991 | $ | 11,095 | $ | 11,508 | |||||||||||||||||||
| Less: SBA-PPP loan income | 7 | 8 | 28 | 263 | 1,120 | ||||||||||||||||||||||||
| Net Income, as Adjusted | $ | 7,311 | $ | 9,727 | $ | 8,963 | $ | 10,832 | $ | 10,388 | |||||||||||||||||||
| Average Total Assets | 2,184,351 | 2,144,249 | 2,136,156 | 2,049,078 | 2,068,218 | ||||||||||||||||||||||||
| Less: Average SBA-PPP Loans | 1,808 | 2,099 | 2,435 | 5,906 | 28,870 | ||||||||||||||||||||||||
| Average Total Assets, as Adjusted | $ | 2,182,543 | $ | 2,142,150 | $ | 2,133,721 | $ | 2,043,172 | $ | 2,039,348 | |||||||||||||||||||
| Return on Average Assets, as Adjusted | 1.34% | 1.84% | 1.67% | 2.10% | 2.04% | ||||||||||||||||||||||||
| Return on Average Assets, as Adjusted | Six Months Ended | ||||||||||
| (in thousands) | June 30, 2023 | June 30, 2022 | |||||||||
| Net Income | $ | 17,053 | $ | 21,719 | |||||||
| Less: SBA-PPP loan income | 15 | 3,186 | |||||||||
| Net Income, as Adjusted | $ | 17,038 | $ | 18,533 | |||||||
| Average Total Assets | 2,164,411 | 2,062,740 | |||||||||
| Less: Average SBA-PPP Loans | 1,953 | 55,917 | |||||||||
| Average Total Assets, as Adjusted | $ | 2,162,458 | $ | 2,006,823 | |||||||
| Return on Average Assets, as Adjusted | 1.59% | 1.81% | |||||||||
| Net Interest Margin, as Adjusted | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Net Interest Income | $ | 35,340 | $ | 34,487 | $ | 35,199 | $ | 36,677 | $ | 35,400 | |||||||||||||||||||
| Less Credit card loan income | 14,818 | 15,809 | 15,717 | 16,768 | 16,376 | ||||||||||||||||||||||||
| Less SBA-PPP loan income | 7 | 8 | 28 | 263 | 1,120 | ||||||||||||||||||||||||
| Net Interest Income, as Adjusted | $ | 20,515 | $ | 18,670 | $ | 19,454 | $ | 19,646 | $ | 17,904 | |||||||||||||||||||
| Average Interest Earning Assets | 2,136,936 | 2,103,984 | 2,101,617 | 2,010,070 | 2,011,920 | ||||||||||||||||||||||||
| Less Average credit card loans | 110,574 | 115,850 | 124,120 | 132,246 | 124,548 | ||||||||||||||||||||||||
| Less Average SBA-PPP loans | 1,808 | 2,099 | 2,435 | 5,906 | 28,870 | ||||||||||||||||||||||||
| Total Average Interest Earning Assets, as Adjusted | $ | 2,024,554 | $ | 1,986,035 | $ | 1,975,062 | $ | 1,871,918 | $ | 1,858,502 | |||||||||||||||||||
| Net Interest Margin, as Adjusted | 4.06% | 3.81% | 3.91% | 4.16% | 3.86% | ||||||||||||||||||||||||
| Net Interest Margin, as Adjusted | Six Months Ended | ||||||||||
| (in thousands) | June 30, 2023 | June 30, 2022 | |||||||||
| Net Interest Income | $ | 69,827 | $ | 68,731 | |||||||
| Less Credit card loan income | 30,627 | 30,863 | |||||||||
| Less SBA-PPP loan income | 15 | 3,186 | |||||||||
| Net Interest Income, as Adjusted | $ | 39,185 | $ | 34,682 | |||||||
| Average Interest Earning Assets | 2,120,553 | 2,001,207 | |||||||||
| Less Average credit card loans | 113,197 | 124,735 | |||||||||
| Less Average SBA-PPP loans | 1,953 | 55,917 | |||||||||
| Total Average Interest Earning Assets, as Adjusted | $ | 2,005,403 | $ | 1,820,555 | |||||||
| Net Interest Margin, as Adjusted | 3.94% | 3.84% | |||||||||
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Appendix
Reconciliation of Non-GAAP Measures
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Net income | $ | 7,318 | $ | 9,735 | $ | 8,991 | $ | 11,095 | $ | 11,508 | |||||||||||||||||||
| Add: Income Tax Expense | 2,255 | 2,915 | 2,651 | 3,336 | 3,089 | ||||||||||||||||||||||||
| Add: Provision for Credit Losses | 2,862 | 1,660 | 2,384 | 1,260 | 2,035 | ||||||||||||||||||||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | $ | 12,435 | $ | 14,310 | $ | 14,026 | $ | 15,691 | $ | 16,632 | |||||||||||||||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | Six Months Ended | ||||||||||
| (in thousands) | June 30, 2023 | June 30, 2022 | |||||||||
| Net income | $ | 17,053 | $ | 21,719 | |||||||
| Add: Income Tax Expense | 5,170 | 6,443 | |||||||||
| Add: Provision for Credit Losses | 4,522 | 2,987 | |||||||||
| Pre-tax, Pre-Provision Net Revenue ("PPNR") | $ | 26,745 | $ | 31,149 | |||||||
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Appendix
Reconciliation of Non-GAAP Measures
| Allowance for Credit Losses to Total Portfolio Loans | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Allowance for Credit Losses | $ | 27,495 | $ | 26,216 | $ | 26,385 | $ | 26,091 | $ | 26,419 | |||||||||||||||||||
| Total Loans | 1,838,131 | 1,788,146 | 1,730,755 | 1,650,663 | 1,623,541 | ||||||||||||||||||||||||
| Less: SBA-PPP loans | 1,090 | 2,037 | 2,163 | 2,662 | 15,864 | ||||||||||||||||||||||||
| Total Portfolio Loans | $ | 1,837,041 | $ | 1,786,109 | $ | 1,728,592 | $ | 1,648,001 | $ | 1,607,677 | |||||||||||||||||||
| Allowance for Credit Losses to Total Portfolio Loans | 1.50% | 1.47% | 1.53% | 1.58% | 1.64% | ||||||||||||||||||||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Total Nonperforming Assets | $ | 15,709 | $ | 16,293 | $ | 9,756 | $ | 8,589 | $ | 7,338 | |||||||||||||||||||
| Total Assets | 2,227,866 | 2,245,286 | 2,123,655 | 2,009,358 | 2,154,846 | ||||||||||||||||||||||||
| Less: SBA-PPP loans | 1,090 | 2,037 | 2,163 | 2,662 | 15,864 | ||||||||||||||||||||||||
| Total Assets, net SBA-PPP Loans | $ | 2,226,776 | $ | 2,243,249 | $ | 2,121,492 | $ | 2,006,696 | $ | 2,138,982 | |||||||||||||||||||
| Nonperforming Assets to Total Assets, net SBA-PPP Loans | 0.71% | 0.73% | 0.46% | 0.43% | 0.34% | ||||||||||||||||||||||||
| Nonperforming Loans to Total Portfolio Loans | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Total Nonperforming Loans | $ | 15,709 | $ | 16,293 | $ | 9,756 | $ | 8,589 | $ | 7,338 | |||||||||||||||||||
| Total Loans | 1,838,131 | 1,788,146 | 1,730,755 | 1,650,663 | 1,623,541 | ||||||||||||||||||||||||
| Less: SBA-PPP loans | 1,090 | 2,037 | 2,163 | 2,662 | 15,864 | ||||||||||||||||||||||||
| Total Portfolio Loans | $ | 1,837,041 | $ | 1,786,109 | $ | 1,728,592 | $ | 1,648,001 | $ | 1,607,677 | |||||||||||||||||||
| Nonperforming Loans to Total Portfolio Loans | 0.86% | 0.91% | 0.56% | 0.52% | 0.46% | ||||||||||||||||||||||||
| Net Charge-offs to Average Portfolio Loans | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Total Net Charge-offs | $ | 1,583 | $ | 2,633 | $ | 2,090 | $ | 1,588 | $ | 868 | |||||||||||||||||||
| Total Average Loans | 1,802,608 | 1,752,638 | 1,677,869 | 1,607,452 | 1,561,541 | ||||||||||||||||||||||||
| Less: Average SBA-PPP loans | 1,808 | 2,099 | 2,435 | 5,906 | 28,870 | ||||||||||||||||||||||||
| Total Average Portfolio Loans | $ | 1,800,800 | $ | 1,750,539 | $ | 1,675,434 | $ | 1,601,546 | $ | 1,532,671 | |||||||||||||||||||
| Net Charge-offs to Average Portfolio Loans | 0.35% | 0.61% | 0.49% | 0.39% | 0.23% | ||||||||||||||||||||||||
| Tangible Book Value per Share | Quarters Ended | ||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | June 30, 2023 | March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||
| Total Stockholders' Equity | $ | 237,435 | $ | 234,517 | $ | 224,015 | $ | 214,005 | $ | 207,316 | |||||||||||||||||||
| Less: Preferred equity | — | — | — | — | — | ||||||||||||||||||||||||
| Less: Intangible assets | — | — | — | — | — | ||||||||||||||||||||||||
| Tangible Common Equity | $ | 237,435 | $ | 234,517 | $ | 224,015 | $ | 214,005 | $ | 207,316 | |||||||||||||||||||
| Period End Shares Outstanding | 13,981,414 | 14,082,657 | 14,138,829 | 14,038,599 | 14,010,158 | ||||||||||||||||||||||||
| Tangible Book Value per Share | $ | 16.98 | $ | 16.65 | $ | 15.84 | $ | 15.24 | $ | 14.80 | |||||||||||||||||||
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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, 2023. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in four locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.2 billion at June 30, 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: Jay Walker (301) 468-8848 x1223
MEDIA CONTACT: Ed Barry (240) 283-1912
WEB SITE: www.CapitalBankMD.com
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