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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2024         OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission file number 001-38671
https://cdn.kscope.io/47eb4113fa1a1d31294cbf25cf2281ad-capitalbancorplogoa19.jpg
CAPITAL BANCORP INC.
(Exact name of registrant as specified in its charter)
Maryland
52-2083046
(State or other jurisdiction of incorporation or organization)
(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)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareCBNKNASDAQ Stock Market

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.             Yes x No ¨

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                         Yes x No ¨

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated Filer
Non-accelerated filer¨Smaller reporting company
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.     

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes No x

As of May 8, 2024, the Company had 13,892,251 shares of common stock, par value $0.01 per share, outstanding.


Capital Bancorp, Inc. and Subsidiaries
Form 10-Q
INDEX

PART I - CONSOLIDATED FINANCIAL INFORMATIONPage
Item 1.Consolidated Financial Statements (Unaudited)
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits




PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Capital Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)

(in thousands except share data)March 31, 2024December 31, 2023
Assets
Cash and due from banks$12,361 $14,513 
Interest-bearing deposits at other financial institutions72,787 39,044 
Federal funds sold56 407 
Total cash and cash equivalents
85,204 53,964 
Investment securities available for sale202,254 208,329 
Restricted investments4,441 4,353 
Loans held for sale10,303 7,481 
Portfolio loans receivable, net of deferred fees and costs1,964,525 1,903,288 
Less allowance for credit losses(29,350)(28,610)
Total portfolio loans held for investment, net1,935,175 1,874,678 
Premises and equipment, net
4,500 5,069 
Accrued interest receivable12,258 11,494 
Deferred tax asset12,311 12,252 
Bank owned life insurance38,062 37,711 
Accounts receivable11,637 1,055 
Other assets8,093 9,790 
Total assets
$2,324,238 $2,226,176 
Liabilities
Deposits
Noninterest-bearing$665,812 $617,373 
Interest-bearing1,339,883 1,278,623 
Total deposits
2,005,695 1,895,996 
Federal Home Loan Bank advances22,000 22,000 
Other borrowed funds12,062 27,062 
Accrued interest payable6,009 5,583 
Other liabilities19,007 20,675 
Total liabilities
2,064,773 1,971,316 
Stockholders' equity
Common stock, $0.01 par value; 49,000,000 shares authorized;
13,889,563 issued and outstanding at March 31, 2024;
13,922,532 issued and outstanding at December 31, 2023
139 139 
Additional paid-in capital54,229 54,473 
Retained earnings218,731 213,345 
Accumulated other comprehensive loss(13,634)(13,097)
Total stockholders' equity
259,465 254,860 
Total liabilities and stockholders' equity
$2,324,238 $2,226,176 


See accompanying Notes to Unaudited Consolidated Financial Statements
2


Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)

Three Months Ended
March 31,
(dollars in thousands except per share data)20242023
Interest income
Loans, including fees$45,991 $41,275 
Investment securities available for sale1,251 1,377 
Federal funds sold and other1,127 764 
Total interest income48,369 43,416 
Interest expense
Deposits12,833 7,754 
Borrowed funds528 1,175 
Total interest expense13,361 8,929 
Net interest income35,008 34,487 
Provision for credit losses2,727 1,660 
Provision for (release of) credit losses on unfunded commitments142 (19)
Net interest income after provision for credit losses32,139 32,846 
Noninterest income
Service charges on deposits207 229 
Credit card fees3,881 4,210 
Mortgage banking revenue1,453 1,155 
Other income431 432 
Total noninterest income5,972 6,026 
Noninterest expenses
Salaries and employee benefits
12,907 12,554 
Occupancy and equipment1,613 1,213 
Professional fees1,947 2,374 
Data processing6,761 6,530 
Advertising2,032 517 
Loan processing371 349 
Foreclosed real estate expenses, net1 6 
Merger-related expenses712  
Operational losses931 964 
Other operating2,212 1,715 
Total noninterest expenses29,487 26,222 
Income before income taxes8,624 12,650 
Income tax expense2,062 2,915 
Net income$6,562 $9,735 
Basic earnings per share$0.47 $0.69 
Diluted earnings per share$0.47 $0.68 
Weighted average common shares outstanding:
Basic13,918,724 14,159,383 
Diluted13,918,724 14,272,292 


See accompanying Notes to Unaudited Consolidated Financial Statements
3


Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended
March 31,
(in thousands)20242023
Net income$6,562 $9,735 
Other comprehensive (loss) income:
Unrealized (loss) gain on investment securities available for sale(589)3,736 
Income tax benefit (expense) relating to the items above52 (944)
Other comprehensive (loss) income(537)2,792 
Comprehensive income$6,025 $12,527 

See accompanying Notes to Unaudited Consolidated Financial Statements
4


Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated Other Comprehensive LossTotal
Stockholders'
Equity
(dollars in thousands)SharesAmount
Balance, December 31, 202214,138,829 $141 $58,190 $182,435 $(16,751)$224,015 
Cumulative effect adjustment due to adoption of the CECL standard   (29) (29)
Net income— — — 9,735 — 9,735 
Unrealized gain on investment securities available for sale, net of income taxes— — — — 2,792 2,792 
Stock options exercised, net of shares withheld for purchase price63,064 1 782 (194)— 589 
Shares issued as compensation28,081 — 585 (39)— 546 
Stock-based compensation— — 438 — — 438 
Cash dividends to stockholders ($0.06 per share)
— — — (850)— (850)
Shares repurchased and retired(146,937)(1)(2,718)— — (2,719)
Balance, March 31, 202314,083,037 $141 $57,277 $191,058 $(13,959)$234,517 
Balance, December 31, 202313,922,532 $139 $54,473 $213,345 $(13,097)$254,860 
Net income— — — 6,562 — 6,562 
Unrealized loss on investment securities available for sale, net of income taxes— — — — (537)(537)
Stock options exercised, net of shares withheld for purchase price10,171 — 146 (39)— 107 
Shares issued as compensation24,729 — 537 (22)— 515 
Stock-based compensation— — 472 — — 472 
Cash dividends to stockholders ($0.08 per share)
— — — (1,115)— (1,115)
Shares repurchased and retired(67,869)— (1,399)— — (1,399)
Balance, March 31, 202413,889,563 $139 $54,229 $218,731 $(13,634)$259,465 


See accompanying Notes to Unaudited Consolidated Financial Statements
5


Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended
March 31,
(in thousands)20242023
Cash flows from operating activities
Net income$6,562 $9,735 
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Provision for credit losses2,727 1,660 
Provision for (reversal of) credit losses on unfunded commitments142 (19)
Provision for mortgage put-back reserve, net13 5 
Net amortization (accretion) on investments60 (34)
Premises and equipment depreciation85 73 
Lease asset amortization238 266 
Increase in cash surrender value of BOLI(351)(257)
Executive long-term incentive plan expense149 152 
Stock-based compensation expense472 438 
Director and employee compensation paid in Company stock515 547 
Deferred income tax benefit(7)(65)
Gain on sale of securities available for sale 1 
Valuation allowance on derivatives 9 
Increase in valuation of loans held for sale carried at fair value 6 
Proceeds from sales of loans held for sale37,555 42,238 
Originations of loans held for sale(40,377)(44,448)
Changes in assets and liabilities:
Accrued interest receivable(764)(496)
Taxes payable489 2,927 
Accounts receivable(10,582)(105)
Other assets1,697 191 
Accrued interest payable426 946 
Other liabilities(2,461)(3,414)
Net cash (used for) provided by operating activities(3,412)10,356 
Cash flows from investing activities
Purchases of securities available for sale(15,362) 
Proceeds from calls and maturities of securities available for sale20,788 490 
Net (purchases) sales of restricted investments(88)3,147 
Net increase in portfolio loans receivable(63,224)(60,023)
Net sales (purchases) of premises and equipment246 (2,320)
Net cash used in investing activities(57,640)(58,706)
See accompanying Notes to Unaudited Consolidated Financial Statements
6


Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited) (Continued)
Three Months Ended
March 31,
(in thousands)20242023
Cash flows from financing activities
Net increase (decrease) in:
Noninterest-bearing deposits48,439 31,488 
Interest-bearing deposits61,260 154,814 
Federal Home Loan Bank repayments (75,000)
Other borrowed funds(15,000) 
Dividends paid(1,115)(850)
Repurchase of common stock(1,399)(2,719)
Net proceeds from exercise of stock options107 589 
Net cash provided by financing activities92,292 108,322 
Net increase in cash and cash equivalents31,240 59,972 
Cash and cash equivalents, beginning of year$53,964 80,415 
Cash and cash equivalents, end of period$85,204 $140,387 
Noncash investing and financing activities:
Change in unrealized (losses) gains on investments$(589)$3,736 
Cash paid during the period for:
Taxes$36 $35 
Interest$12,935 $5,920 
See accompanying Notes to Unaudited Consolidated Financial Statements
7


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 1 - Nature of Business and Basis of Presentation
Nature of operations:
Capital Bancorp, Inc. is a Maryland corporation and the bank holding company (the “Company”) for Capital Bank, N.A. (the “Bank”). The Company's primary operations are conducted by the Bank, which operates branches in Rockville and Columbia, Maryland; Reston, Virginia; and the District of Columbia. The Bank is principally engaged in the business of investing in commercial, real estate, and credit card loans and attracting deposits. The Company originates residential mortgages for sale in the secondary market through Capital Bank Home Loans (“CBHL”), the Bank’s residential mortgage banking arm, and issues credit cards through OpenSky™, a digitally-driven nationwide credit card platform providing secured, partially secured, and unsecured credit solutions.
The Company formed Church Street Capital, LLC (“Church Street Capital”) in 2014 to provide short-term secured real estate financing to Washington, D.C. area investors and developers that may not meet all Bank credit criteria. At March 31, 2024, Church Street Capital had loans totaling $7.6 million with a collectively assessed allowance for credit losses (“ACL”) of $184 thousand. Refer to Note 5 - “Portfolio Loans Receivable” to the “Notes to Unaudited Consolidated Financial Statements” for further discussion of the consolidated ACL.
In addition, the Company owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”). The Trust is a special purpose non-consolidated entity organized for the sole purpose of issuing trust preferred securities.
Basis of presentation:
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with rules and regulations of the Securities and Exchange Commission (“SEC”) and include the activity of the Company and its wholly-owned subsidiaries, the Bank and Church Street Capital. The statements do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments have been made which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Such adjustments are all of a normal and recurring nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2023, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
The Company reports its activities as four business segments: commercial banking; mortgage lending; credit cards; and corporate activities. In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment.
Significant accounting policies:
The preparation of consolidated financial statements in accordance with GAAP requires estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The primary reference point for the estimates is on historical experience and assumptions believed to be reasonable regarding the value of certain assets and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing
8


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

Note 1 - Nature of Business and Basis of Presentation (continued)
basis. Actual results may materially differ from these estimates under different assumptions or conditions. The Company’s significant accounting policies are described in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no changes to our significant accounting policies during the three months ended March 31, 2024.
Recently issued accounting pronouncements:
In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires public entities to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker (“CODM”) and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will update its segment related disclosures upon adoption.
In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on quantitative thresholds, among other things. ASU 2023-09 is effective for the Company for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company will update its income tax disclosures upon adoption.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.
Reclassifications:
Certain reclassifications have been made to amounts reported in prior periods to conform to the current period presentation. The reclassifications had no material effect on net income or total stockholders' equity.
Subsequent events:
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure.
9


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Pending Acquisition
Pending Acquisition of Integrated Financial Holdings, Inc.
On March 27, 2024, the Company and Integrated Financial Holdings, Inc., a North Carolina corporation (“IFHI”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). The Merger Agreement provides that, upon the terms and conditions thereof, IFHI will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger. IFHI is a financial holding company based in Raleigh, North Carolina with total assets of approximately $548 million at December 31, 2023. IFHI is the holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its full-service office located in the greater Chicago area and is a nationwide lender in government guaranteed lending across both U.S. Department of Agriculture (“USDA”) and U.S. Small Business Administration (“SBA”) government guaranteed lending. IFHI is also the parent company of Windsor Advantage, LLC, a loan service provider that offers community banks and credit unions with a comprehensive outsourced SBA 7(a) and USDA lending platform. IFHI is registered with and supervised by the Board of Governors of the Federal Reserve (“Federal Reserve”). West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC. Following the Merger, West Town Bank & Trust, will merge with and into the Bank, with the Bank as the surviving bank.
During the three months ended March 31, 2024, the Company incurred merger-related expenses related to the planned acquisition of IFHI totaling $0.7 million. The Merger is expected to close in the fourth quarter 2024 subject to regulatory approval.
Note 3 - Cash and Cash Equivalents
Cash and cash equivalents include cash and amounts due from banks, interest-bearing deposits and federal funds sold. The Bank is required by regulations to maintain an average cash reserve balance based on a percentage of deposits; however, on March 15, 2020, the Federal Reserve announced that, due to economic conditions, reserve requirement ratios for all depository institutions would be reduced to zero percent effective March 26, 2020. The reserve requirement is still at zero percent as of March 31, 2024.
Note 4 - Investment Securities
The following table summarizes the amortized cost, fair value and allowance for credit losses of securities available for sale at March 31, 2024 and December 31, 2023, respectively, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss):
10


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Investment Securities (continued)
(in thousands)
Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Allowance for Credit LossesFair
Value
March 31, 2024
U.S. Treasuries$141,347 $ $(12,664)$ $128,683 
Municipal11,699  (2,445) 9,254 
Corporate5,000  (543) 4,457 
Asset-backed securities6,601 18 (38) 6,581 
Mortgage-backed securities55,546  (2,267) 53,279 
Total$220,193 $18 $(17,957)$ $202,254 
December 31, 2023
U.S. Treasuries$161,420 $ $(12,192)$ $149,228 
Municipal11,699 4 (2,331) 9,372 
Corporate5,000  (587) 4,413 
Asset-backed securities7,069 13 (37) 7,045 
Mortgage-backed securities40,491  (2,220) 38,271 
Total$225,679 $17 $(17,367)$ $208,329 
There were no securities sold during the three months ended March 31, 2024 or the three months ended March 31, 2023. There was no ACL required on available for sale debt securities in an unrealized loss position at March 31, 2024 and December 31, 2023.
The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
March 31, 2024December 31, 2023
(in thousands)Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Within one year$29,962 $29,211 $39,918 $39,294 
One to five years91,580 83,076 101,688 93,218 
Five to ten years28,661 24,132 26,215 22,511 
Beyond ten years7,843 5,975 10,298 7,990 
Asset-backed securities(1)
6,601 6,581 7,069 7,045 
Mortgage-backed securities(1)
55,546 53,279 40,491 38,271 
Total$220,193 $202,254 $225,679 $208,329 
_______________
(1)    Asset-backed and Mortgage-backed securities are due in monthly installments.

There were no securities pledged at March 31, 2024 and December 31, 2023 to secure public deposits and repurchase agreements. Pledged securities at the Federal Reserve’s Bank Term Funding Program (“BTFP”) totaled $170.7 million at December 31, 2023 with no securities pledged as of March 31, 2024 as the program ended during the first quarter 2024.
At March 31, 2024 and December 31, 2023, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
11


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Investment Securities (continued)
The following table summarizes debt securities available for sale in an unrealized loss position for which an ACL has not been recorded at March 31, 2024 and December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position:
Less than 12 months12 months or longerTotal
(in thousands)Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
March 31, 2024
U.S. Treasuries$ $ $128,683 $(12,664)$128,683 $(12,664)
Municipal894 (3)8,360 (2,442)9,254 (2,445)
Corporate  4,457 (543)4,457 (543)
Asset-backed securities  4,760 (38)4,760 (38)
Mortgage-backed securities21,234 (194)32,045 (2,073)53,279 (2,267)
Total$22,128 $(197)$178,305 $(17,760)$200,433 $(17,957)
December 31, 2023
U.S. Treasuries$ $ $149,228 $(12,192)$149,228 $(12,192)
Municipal  8,473 (2,331)8,473 (2,331)
Corporate  4,413 (587)4,413 (587)
Asset-backed securities  5,154 (37)5,154 (37)
Mortgage-backed securities6,057 (8)32,214 (2,212)38,271 (2,220)
Total$6,057 $(8)$199,482 $(17,359)$205,539 $(17,367)
As of March 31, 2024, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available for sale debt securities in an unrealized loss position at March 31, 2024 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of March 31, 2024 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at March 31, 2024, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:
Corporate Securities — There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are five securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.
Municipal Securities — All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. Summary ratings information at March 31, 2024, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows: AAA - 82% of the portfolio; AA+ - 8%; AA - 10%.
Asset-backed Securities — There were three investment grade asset-backed securities, and there have been no payment defaults on these securities.
As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of March 31, 2024.
12


Capital Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses
The following is a summary of the major categories of total loans outstanding:
March 31, 2024December 31, 2023
(in thousands)AmountPercentAmountPercent
Real estate:
Residential$577,112 29 %$573,104 30 %
Commercial736,316 37 %684,229 35 %
Construction290,016 15 %290,108 15 %
Commercial and Industrial254,577 13 %239,208 13 %
Credit card, net of reserve(1)
111,898 6 %123,331 7 %
Other consumer738  %950  %
Portfolio loans receivable, gross1,970,657 100 %1,910,930 100 %
Deferred origination fees, net(6,132)(7,642)
Allowance for credit losses(29,350)(28,610)
Portfolio loans receivable, net$1,935,175 $1,874,678 
_____________
(1)    Credit card loans are presented net of reserve for interest and fees.

The following tables set forth the changes in the ACL and an allocation of the ACL by loan segment class for the three months ended March 31, 2024 and March 31, 2023.
(in thousands)Beginning
Balance
Provision (Release of Provision) for
Credit Losses
Charge-OffsRecoveriesEnding
Balance
Three Months Ended March 31, 2024
Real estate:
Residential$5,518 $633 $(225)$ $5,926 
Commercial10,316 807   11,123 
Construction2,271 28   2,299 
Commercial and Industrial4,406 (306)(98) 4,002 
Credit card6,087 1,567 (1,768)104 5,990 
Other consumer12 (2)  10 
Total$28,610 $2,727 $(2,091)$104 $29,350 
Three Months Ended March 31, 2023
Real estate:
Residential$4,283 $1,125 $ $ $5,408 
Commercial12,039 (2,165)(943) 8,931 
Construction1,809 (56)  1,753 
Commercial and Industrial4,008 940  10 4,958 
Credit card5,033 1,818 (1,702)2 5,151 
Other consumer17 (2)  15 
Total$27,189 $1,660 $(2,645)$12 $26,216 
13


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Past due loans, segregated by age and class of loans, as of March 31, 2024 and December 31, 2023 were as follows:
Portfolio Loans Past Due
Loans
30-59 Days
Past Due
Loans
60-89 Days
Past Due
Loans
90 or More
Days
Past Due
Total Past
Due Loans
Current
Loans
Total
Portfolio
Loans
Accruing
Loans 90 or
More Days
Past Due
Nonaccrual
Loans
(in thousands)
March 31, 2024
Real estate:
Residential$2,479 $818 $6,303 $9,600 $567,512 $577,112 $ $6,762 
Commercial1,391 11,610 551 13,552 722,764 736,316  3,064 
Construction 661 3,876 4,537 285,479 290,016  3,868 
Commercial and Industrial2,008 1,353 448 3,809 250,768 254,577  667 
Credit card5,544 5,494 621 11,659 100,239 111,898 621  
Other consumer    738 738   
Total$11,422 $19,936 $11,799 $43,157 $1,927,500 $1,970,657 $621 $14,361 
Loans
30-59 Days
Past Due
Loans
60-89 Days
Past Due
Loans
90 or More
Days
Past Due
Total Past
Due Loans
Current
Loans
Total
Portfolio
Loans
Accruing
Loans 90 or
More Days
Past Due
Nonaccrual
Loans
December 31, 2023
Real estate:
Residential$2,201 $3,096 $11,066 $16,363 $556,741 $573,104 $17 $11,398 
Commercial1,577 322 582 2,481 681,748 684,229  582 
Construction 1,165 3,296 4,461 285,647 290,108  3,288 
Commercial and Industrial1,356 74 454 1,884 237,324 239,208  774 
Credit card7,767 6,877 519 15,163 108,168 123,331 519  
Other consumer    950 950   
Total$12,901 $11,534 $15,917 $40,352 $1,870,578 $1,910,930 $536 $16,042 
There were $2.4 million and $8.1 million of loans secured by one-to-four family residential properties in the process of foreclosure as of March 31, 2024 and December 31, 2023, respectively.
The increase in loans 60-89 days past due and special mention loan levels at March 31, 2024 from December 31, 2023 includes a single owner-occupied commercial real estate loan relationship with a total outstanding exposure amount of $11.6 million. The borrower fell behind in payments due to unexpected timing delays in the collection of outstanding receivables. Payments have resumed and the borrower remains actively engaged with the Company in resolving the past due status.
14


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
The following presents the nonaccrual loans as of March 31, 2024 and December 31, 2023:
March 31, 2024
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual LoansInterest Recognized on Nonaccrual Loans
(in thousands)
Real estate:
Residential$6,111 $651 $6,762 $221 
Commercial3,064  3,064 93 
Construction3,868  3,868 180 
Commercial and Industrial439 228 667 56 
Total$13,482 $879 $14,361 $550 
December 31, 2023
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual LoansInterest Recognized on Nonaccrual Loans
Real estate:
Residential$11,152 $246 $11,398 $236 
Commercial582  582 46 
Construction3,288  3,288 185 
Commercial and Industrial598 176 774 71 
Total$15,620 $422 $16,042 $538 
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
Residential real estate loans are primarily secured by owner-occupied primary residences and, to a lesser extent, investor-owned residences.
Commercial real estate loans can be secured by either owner-occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner-occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
Construction loans are typically secured by owner-occupied commercial real estate or non-owner occupied investment real estate. Typically, owner-occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development, and other commercial and industrial real estate in process of construction.
Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property.
15


Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Collateral dependent loans amortized cost
(in thousands)March 31, 2024December 31, 2023
Real estate:
Residential$5,345 $11,152 
Commercial3,064 582 
Construction5,038 3,288 
Commercial and Industrial537 657 
Total$13,984 $