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CBNK Accelerating Loan Growth Drives Steady Profits and Returns

·40-min read

Diluted EPS of $0.71, ROAA of 1.95%, and ROAE of 20.66% for 4Q 2021

ROCKVILLE, Md., Jan. 26, 2022 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $10.2 million, or $0.71 per diluted share, for the fourth quarter of 2021. By comparison, net income was $9.7 million, or $0.71 per diluted share, for the fourth quarter of 2020. Portfolio loans, net, increased $78.9 million when compared to the period ended September 30, 2021, and $208.5 million when compared to the period ended December 31, 2021.

“2021 was a tremendous year for Capital Bank,” said Steven Schwartz, Chairman of the Board of the Company. “The Commercial Bank, Capital Bank Home Loans and OpenSky® all outperformed expectations as investments in technology and people continued to deliver exceptional results. Building on the Bank’s success, we continue to seek out and invest in opportunities that will leverage our unique combination of technological innovation and community banking to build long-term shareholder value.”

"The fourth quarter’s results were driven by strong performance in the Commercial Bank and OpenSky® which more than made up for the slowdown of our mortgage business," said Ed Barry, CEO of the Company. "Capitalizing on market disruption, we made several strategic hires in the Commercial Bank which contributed to a 21.9 percent annualized portfolio loan growth in the fourth quarter. OpenSky® is poised to remain an engine of growth with the fourth quarter launch of our unsecured credit card line to our highest performing OpenSky® secured card holders. OpenSky's® annualized quarterly net loan growth of 18.1 percent continued to drive portfolio loan balances. Anticipated OpenSky® card holder attrition resulted in a modest decline in open accounts for the quarter but remains well-below historical levels."

Fourth Quarter 2021 Highlights

Capital Bancorp, Inc.

  • Stable Earnings - Continued strong performance by the Commercial Bank and OpenSky® contributed to the fourth quarter's results. Quarterly net income increased to $10.2 million from $9.7 million in the fourth quarter of 2020. Earnings were $0.71 per diluted share for the three months ended December 31, 2021 and 2020.

  • Outstanding Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.95% and 20.66%, respectively, for the three months ended December 31, 2021 compared to 2.08% and 25.26%, respectively, for the three months ended December 31, 2020.

  • Expanded Net Interest Margin - Net interest margin was 6.49% for the three months ended December 31, 2021, which is an increase of 92 basis points compared to 5.57% for the same three month period last year and an increase over linked quarter of 22 basis points, from 6.27%, for the three months ended September 30, 2021. The margin improvement over linked quarter was driven by an increase in average loans outstanding as well as management's concentrated effort to lower funding costs.

  • Robust Capital Positions - As of December 31, 2021, the Company reported a common equity tier 1 capital ratio of 14.28% and an allowance for loan losses to total loans ratio of 1.54%, or 1.65% excluding Small Business Administration Payroll Protection Program ("SBA-PPP") loans. During the preceding twelve months, tangible book value per common share grew 22.4 percent to $14.17 at December 31, 2021.

Commercial Bank

  • Accelerating Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to December 31, 2020, and by $73.4 million, compared to September 30, 2021. The year over year growth was mainly due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non-owner occupied. Also contributing to the year over year growth was a 12.0 percent increase in commercial and industrial loans of $18.8 million and a 13.4 percent increase in construction real estate loans of $30.2 million. Offsetting total growth was a $36.3 million decrease in residential real estate loans.

  • Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 29.4 percent compared to December 31, 2020. The $179.1 million year over year increase was primarily due to an increase in commercial demand deposits reflecting management's ongoing strategic initiative to improve the deposit franchise. At December 31, 2021, noninterest bearing deposits represented 43.8% of total deposits compared to 36.8% at December 31, 2020. Overall, the cost of interest bearing liabilities was reduced 53 basis points, from 0.95% for the quarter ended December 31, 2020 to 0.42% for the quarter ended December 31, 2021.

  • Improving Credit Metrics - Non-performing assets ("NPAs") decreased to 0.56% of total assets at December 31, 2021 compared to 0.77% at September 30, 2021 primarily due to the disposition of $3.2 million in other real estate owned during the fourth quarter of 2021 and a reduction in nonaccrual loans of $2.3 million as management continues to focus on reducing non-performing assets. Primarily as a result of improving market conditions, the provision for loan losses declined $933.0 thousand compared to the fourth quarter of 2020. The current provision for the three months ended December 31, 2021 was $1.1 million and primarily related to the credit card portfolio.

  • SBA-PPP Loans - SBA-PPP loans, net of $3.2 million in unearned fees, totaled $108.3 million at December 31, 2021 which was comprised of $4.4 million in 2020 originations and $103.9 million of 2021 originations. As of December 31, 2021, the Company has obtained forgiveness for $261.6 million of SBA-PPP loans.

Capital Bank Home Loans

  • Softening Mortgage Performance - Origination volumes declined 58.7 percent, to $158.1 million, in the fourth quarter of 2021, when compared to $382.3 million in the fourth quarter of 2020. The continued steepening of the yield curve in the fourth quarter of 2021 slowed originations from the year earlier when low interest rates fueled refinance volumes. In the most recent quarter, mortgage origination volumes declined $59.1 million or 27.2 percent from the three months ended September 30, 2021 due to normal seasonal patterns as well as the rate-related slow-down in the mortgage industry which has disproportionately impacted refinance activity.

  • Purchase Volume - Purchase volumes increased to 56.4 percent of total originations for the fourth quarter of 2021, up from 30.0 percent during the fourth quarter of 2020.

OpenSky®

  • Strong Revenue Growth - OpenSky® revenue grew by 38.2 percent to $22.2 million for the quarter ended December 31, 2021 from the same period in 2020. As account growth, line usage and customer behaviors continue to revert to traditional seasonal patterns, management anticipates modest seasonal declines in open accounts as account opening and attrition normalize.

  • Continued Growth in OpenSky® Loans and Deposits - OpenSky® loan balances, net of reserves, increased by $38.9 million to $141.1 million compared to $102.2 million in the fourth quarter of 2020 and from $135.0 million, or 4.5 percent, on a linked quarter basis. Corresponding deposit balances increased 19.2 percent or $37.0 million from $192.5 million at December 31, 2020 to $229.5 million at December 31, 2021.

2021 Highlights

Capital Bancorp

  • Diversified Businesses Drive Net Income - Net income for the twelve months ended December 31, 2021 increased 54.8 percent to $40.0 million, or $2.84 per diluted share, from $25.8 million, or $1.87 per diluted share for the twelve months ended December 31, 2020. Continued strong operating results demonstrate the advantages of the Company's diversified business lines that are, in certain respects, non-correlated across economic cycles.

  • Top Tier Performance Ratios - Improved earnings supported ROAA and ROAE of 1.96% and 22.27%, respectively, for the twelve months ended December 31, 2021 compared to 1.56% and 18.00%, respectively, for the twelve months ended December 31, 2020.

  • Expanded Net Interest Margin - For the twelve months ended December 31, 2021, net interest margin increased by 72 basis points to 5.86% compared to 5.14% for the twelve months ended December 31, 2020. The margin improvement was largely driven by the increase in OpenSky® income.

  • Stable Efficiency Ratio - The efficiency ratio increased slightly to 65.79% for the twelve months ended December 31, 2021 compared to 65.44% for the same twelve month period in the prior year.

  • Strong Balance Sheet Growth - Total assets increased $178.7 million, or 9.5 percent during the twelve months ended December 31, 2021 and was primarily funded by a $145.0 million increase in deposits. The growth of earning assets on the balance sheet consisted primarily of increases in cash equivalents of $36.5 million, portfolio loans net of deferred fees of $208.5 million which includes OpenSky® net loan growth of $30.1 million, investments available for sale of $84.7 million, and Bank Owned Life Insurance ("BOLI") of $35.5 million. Asset growth was primarily offset by a decrease of $91.2 million in loans held for sale as well as a $92.7 million reduction in SBA-PPP loans.

Commercial Bank

  • Strong Portfolio Loan Growth - Portfolio loans, excluding credit card loans, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to $1.2 billion at December 31, 2020. The growth was primarily due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non owner occupied.

  • Improved Deposit Franchise and Lower Cost of Funding - Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, during the twelve months ended December 31, 2021 and represented 43.8 percent of total deposits at December 31, 2021. The cost of interest bearing liabilities declined to 0.61% from 1.29% for the same period in the prior year, due mainly to the average rate of interest bearing demand deposits dropping from 0.34% as of December 31, 2020 to 0.07% as of December 31, 2021.

  • COVID-19 Related Deferrals - At December 31, 2021, outstanding loans deferred due to COVID-19 amounted to $4.0 million, a decrease of 86.9 percent from $30.5 million at December 31, 2020.

Capital Bank Home Loans

  • Gain on Sale - The year-to-date gain on sale of mortgage loans decreased to $30.3 million at December 31, 2021 from $38.5 million at December 31, 2020 due mainly to the $314.4 million, or 24.0 percent, decline in mortgage originations. The steepening yield curve in 2021 has slowed originations from the year earlier period when low interest rates fueled refinance volumes. Gain on sale margins, down slightly from 3.02% for the twelve months ended December 31, 2020, remained strong at 2.79% for the twelve months ended December 31, 2021. Historically-low housing inventory, shortages in new home building materials, and fluctuating interest rates are likely to continue suppressing origination volumes into 2022.

OpenSky®

  • Growth Elevates Performance - The 92 thousand net increase in the number of accounts in the twelve months ended December 31, 2021 resulted in a $37.0 million increase in noninterest bearing secured credit card deposits that totaled $229.5 million as of December 31, 2021. Credit card balances increased by $38.9 million, or 38.1 percent, for the twelve months ended December 31, 2021 and totaled $141.1 million at December 31, 2021. Account growth led to higher credit card fees, which increased by 64.4 percent to $27.9 million compared to $17.0 million for the same twelve month period last year, largely driven by the increase in the number of accounts in the portfolio.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited

Quarter Ended

Twelve months ended

December 31,

December 31,

(amounts in thousands except per share data)

2021

2020

% Change

2021

2020

% Change

Earnings Summary

Interest income

$

33,788

$

28,318

19.3

%

$

123,243

$

97,251

26.7

%

Interest expense

1,117

2,599

(57.0

)%

6,550

13,182

(50.3

)%

Net interest income

32,671

25,719

27.0

%

116,693

84,069

38.8

%

Provision for loan losses

1,100

2,033

(45.9

)%

3,359

11,242

(70.1

)%

Noninterest income

10,617

16,030

(33.8

)%

50,636

50,144

1.0

%

Noninterest expense

28,495

26,680

6.8

%

110,094

87,834

25.3

%

Income before income taxes

13,693

13,036

5.0

%

53,876

35,137

53.3

%

Income tax expense

3,522

3,347

5.2

%

13,898

9,314

49.2

%

Net income

$

10,171

$

9,689

5.0

%

$

39,978

$

25,823

54.8

%

Pre-tax pre-provision net revenue ("PPNR") (2)

$

14,793

$

15,069

(1.8

)%

$

57,235

$

46,379

23.4

%

Weighted average common shares - Basic

13,877

13,686

1.4

%

13,799

13,793

%

Weighted average common shares - Diluted

14,290

13,707

4.3

%

14,081

13,800

2.0

%

Earnings per share - Basic

$

0.73

$

0.71

2.8

%

$

2.90

$

1.87

55.1

%

Earnings per share - Diluted

$

0.71

$

0.71

%

$

2.84

$

1.87

51.9

%

Return on average assets (1)

1.95

%

2.08

%

(6.3

)%

1.96

%

1.56

%

25.6

%

Return on average assets, excluding impact of SBA-PPP loans(1) (2)

1.80

%

1.88

%

(4.3

)%

1.75

%

1.42

%

23.2

%

Return on average equity

20.66

%

25.26

%

(18.2

)%

22.27

%

18.00

%

23.7

%


Quarter Ended

4Q21 vs. 4Q20

Quarter Ended

December 31,

September 30,

June 30,

March 31,

(in thousands except per share data)

2021

2020

% Change

2021

2021

2021

Balance Sheet Highlights

Assets

$

2,055,300

$

1,876,593

9.5

%

$

2,169,556

$

2,151,850

$

2,091,851

Investment securities available for sale

184,455

99,787

84.8

%

189,165

160,515

128,023

Mortgage loans held for sale

15,989

107,154

(85.1

)%

36,005

47,935

60,816

SBA-PPP loans, net of fees

108,285

201,018

(46.1

)%

137,178

202,763

265,712

Portfolio loans receivable (3)

1,523,982

1,315,502

15.8

%

1,445,126

1,392,471

1,312,375

Allowance for loan losses

25,181

23,434

7.5

%

24,753

24,079

23,550

Deposits

1,797,137

1,652,128

8.8

%

1,921,238

1,917,419

1,863,069

FHLB borrowings

22,000

22,000

%

22,000

22,000

22,000

Other borrowed funds

12,062

14,016

(13.9

)%

12,062

12,062

12,062

Total stockholders' equity

197,903

159,311

24.2

%

189,080

177,204

167,003

Tangible common equity(2)

197,903

159,311

24.2

%

189,080

177,204

167,003

Common shares outstanding

13,962

13,754

1.5

%

13,802

13,772

13,759

Tangible book value per share (2)

$

14.17

$

11.58

22.4

%

$

13.70

$

12.87

$

12.14

______________

(1) Annualized for the quarterly periods
(2) Refer to Appendix for reconciliation of non-GAAP measures.
(3) Loans are reflected net of deferred fees and costs.

Operating Results - Comparison of Three Months Ended December 31, 2021 and 2020

For the three months ended December 31, 2021, net interest income increased $7.0 million, or 27.0 percent, to $32.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 92 basis point to 6.49% for the three months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.70% for the fourth quarter of 2021 compared to 3.80% for the same period in 2020. For the three months ended December 31, 2021, average interest earning assets increased $160.0 million, or 8.7 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 58 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $37.8 million, or 3.5 percent, while the average cost of interest bearing liabilities decreased 53 basis points to 0.42% from 0.95%.

The provision for loan losses of $1.1 million for the three months ended December 31, 2021 was primarily related to growth in the credit card portfolio. Net charge-offs for the fourth quarter of 2021 were $671.6 thousand, or 0.18% on an annualized basis of average loans, compared to $615.0 thousand, or 0.19% on an annualized basis of average loans for the fourth quarter of 2020. The $671.6 thousand in net charge-offs during the quarter was related solely to the credit card portfolio.

For the quarter ended December 31, 2021, noninterest income was $10.6 million, a decrease of $5.4 million, or 33.8 percent, from $16.0 million in the prior year quarter. The decrease was primarily the result of reduced mortgage banking revenue.

Net credit card loan balances increased by $38.9 million to $141.1 million as of December 31, 2021 from $102.2 million at December 31, 2020. The related deposit account balances increased 19.2 percent to $229.5 million at December 31, 2021 when compared to $192.5 million at December 31, 2020. For the three months ended December 31, 2021, OpenSky's® secured credit card accounts decreased by 40 thousand net compared to 39 thousand net new accounts for the same period in 2020 suggesting consumer behaviors may be returning to historical trends after being elevated in response to COVID-19 throughout 2020 and the first two quarters of 2021.

The efficiency ratio for the three months ended December 31, 2021 increased to 65.83% compared to 63.91% for the three months ended December 31, 2020 due mainly to the reduction in mortgage income generated.

Noninterest expense was $28.5 million for the three months ended December 31, 2021, as compared to $26.7 million for the three months ended December 31, 2020, an increase of $1.8 million, or 6.8 percent. The increase was primarily driven by increases in salaries and employee benefits of $2.0 million, advertising expenses of $994.7 thousand, and data processing expenses of $390.1 thousand. Offsetting these expenses were decreases in occupancy and equipment expense of $507.2 thousand, loan processing expenses of $503.2 thousand, and professional fees of $474.0 thousand.

Operating Results - Comparison of Twelve Months Ended December 31, 2021 and 2020

For the twelve months ended December 31, 2021, net interest income increased $32.6 million, or 38.8 percent, to $116.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 72 basis points to 5.86% for the twelve months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.60% for the twelve months ended December 31, 2021 compared to 3.89% for the same period in 2020. For the twelve months ended December 31, 2021, average interest earning assets increased $356.1 million, or 21.8 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 24 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $60.3 million, or 5.9 percent, while the average cost of interest-bearing liabilities decreased 68 basis points to 0.61% from 1.29%.

For the twelve months ended December 31, 2021, the provision for loan losses was $3.4 million, a decrease of $7.9 million from the prior year. Net charge-offs for the twelve months ended December 31, 2021 were $1.6 million, or 0.12% of average portfolio loans, compared to $1.1 million, or 0.09% of average portfolio loans, for the same period in 2020. The $1.6 million in net charge-offs during the twelve months ended December 31, 2021 was comprised primarily of commercial real estate loan net charge-offs of $161.1 thousand and net charge-offs of $1.4 million in the credit card portfolio.

For the twelve months ended December 31, 2021, noninterest income was $50.6 million, an increase of $491.5 thousand, or 1.0 percent, from the same period in 2020. The increase was primarily driven by significant growth in credit card fees of $10.9 million, which was partially offset by a decrease in mortgage banking revenues of $8.9 million.

For the twelve months ended December 31, 2021, the Bank had net growth of 92 thousand new OpenSky® secured credit card accounts, increasing the total number of open accounts to 660 thousand. This compares to 345 thousand new originations for the same period last year, which increased total open accounts to 568 thousand.

The efficiency ratio for the twelve months ended December 31, 2021 increased slightly to 65.79% compared to 65.44% for the twelve months ended December 31, 2020 due to increases in noninterest expense.

Noninterest expense was $110.1 million for the twelve months ended December 31, 2021, as compared to $87.8 million for the twelve months ended December 31, 2020, an increase of $22.3 million, or 25.3 percent. The increase was primarily driven by a $4.4 million, or 13.2 percent, increase in salaries and benefits, an increase in professional fees of 42.8 percent, or $2.1 million, a $12.3 million, or 45.8 percent, increase in data processing, a $2.3 million, or 89.8 percent, increase in advertising, and a $2.0 million, or 18.2 percent, increase in other operating expenses period over period. The increase of $12.3 million in data processing expenses was primarily due to the higher volume of open credit cards during the twelve months ended December 31, 2021. Additionally, operating expenses increased $2.0 million, primarily due to increases in outside service providers.

During the twelve months ended December 31, 2021, results of operations were impacted by the COVID-19 pandemic and the resulting issuance of SBA-PPP loans. At December 31, 2021, the $111.5 million of SBA-PPP loans had remaining deferred origination fees of $3.8 million, and deferred costs of $655.7 thousand.

Financial Condition

Total assets at December 31, 2021 were $2.1 billion, an increase of 9.5 percent from December 31, 2020. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.5 billion as of December 31, 2021, an increase of 15.8 percent as compared to $1.3 billion at December 31, 2020.

Total deposits at December 31, 2021 were $1.8 billion, an increase of $145.0 million, or 8.8 percent, as compared to $1.7 billion at December 31, 2020. Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, to $787.7 million at December 31, 2021 compared to the level at December 31, 2020. Deposit balances grew year over year in certain fiduciary accounts of title and property management companies, as well as noninterest bearing OpenSky® deposits.

The Company recorded a provision for loan losses of $3.4 million during the twelve months ended December 31, 2021, which increased the allowance for loan losses to $25.2 million, or 1.54% of total loans (1.65%, excluding SBA-PPP loans, on a non-GAAP basis) at December 31, 2021. Nonperforming assets were $11.5 million, or 0.56% of total assets, as of December 31, 2021, down from $12.6 million, or 0.67% of total assets, at December 31, 2020. Of the $11.5 million in total nonperforming assets as of December 31, 2021, nonperforming loans represented $11.4 million and foreclosed real estate totaled $86.4 thousand. Included in nonperforming loans at December 31, 2021 were troubled debt restructurings of $534 thousand.

Stockholders’ equity increased to $197.9 million as of December 31, 2021, compared to $159.3 million at December 31, 2020. This increase was primarily attributable to earnings during the period. As of December 31, 2021, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.

Consolidated Statements of Income (Unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

(in thousands)

2021

2020

2021

2020

Interest income

Loans, including fees

$

33,235

$

27,848

$

120,784

$

95,367

Investment securities available for sale

439

363

2,010

1,292

Federal funds sold and other

114

107

449

592

Total interest income

33,788

28,318

123,243

97,251

Interest expense

Deposits

934

2,323

5,808

11,524

Borrowed funds

183

276

742

1,658

Total interest expense

1,117

2,599

6,550

13,182

Net interest income

32,671

25,719

116,693

84,069

Provision for loan losses

1,100

2,033

3,359

11,242

Net interest income after provision for loan losses

31,571

23,686

113,334

72,827

Noninterest income

Service charges on deposits

136

143

609

520

Credit card fees

6,676

6,272

27,884

16,966

Mortgage banking revenue

3,365

8,748

20,843

29,732

Gain on sale of investment securities available for sale, net

20

153

20

Other fees and charges

440

847

1,147

2,906

Total noninterest income

10,617

16,030

50,636

50,144

Noninterest expenses

Salaries and employee benefits

10,564

8,592

37,843

33,442

Occupancy and equipment

1,005

1,512

4,327

5,170

Professional fees

1,454

1,928

6,996

4,900

Data processing

9,643

9,253

39,237

26,917

Advertising

1,650

655

4,803

2,530

Loan processing

857

1,360

3,527

3,811

Other real estate expenses, net

47

(68

)

368

69

Other operating

3,275

3,448

12,993

10,995

Total noninterest expenses

28,495

26,680

110,094

87,834

Income before income taxes

13,693

13,036

53,876

35,137

Income tax expense

3,522

3,347

13,898

9,314

Net income

$

10,171

$

9,689

$

39,978

$

25,823


Consolidated Balance Sheets

(in thousands except share data)

(unaudited)
December 31, 2021

December 31, 2020

Assets

Cash and due from banks

$

42,914

$

18,456

Interest bearing deposits at other financial institutions

136,824

126,081

Federal funds sold

3,657

2,373

Total cash and cash equivalents

183,395

146,910

Investment securities available for sale

184,455

99,787

Marketable equity securities

245

245

Restricted investments

3,498

3,713

Loans held for sale

15,989

107,154

SBA-PPP loans receivable, net of fees

108,285

201,018

Portfolio loans receivable, net of deferred fees and costs

1,523,982

1,315,502

Less allowance for loan losses

(25,181

)

(23,434

)

Total portfolio loans held for investment, net

1,498,801

1,292,068

Premises and equipment, net

3,282

4,464

Accrued interest receivable

7,901

8,134

Deferred income taxes, net

9,793

6,818

Other real estate owned

86

3,326

Bank owned life insurance

35,506

Other assets

4,064

2,956

Total assets

$

2,055,300

$

1,876,593

Liabilities

Deposits

Noninterest bearing

$

787,650

$

608,559

Interest bearing

1,009,487

1,043,569

Total deposits

1,797,137

1,652,128

Federal Home Loan Bank advances

22,000

22,000

Other borrowed funds

12,062

14,016

Accrued interest payable

473

1,134

Other liabilities

25,725

28,004

Total liabilities

1,857,397

1,717,282

Stockholders' equity

Common stock, $.01 par value; 49,000,000 shares authorized; 13,962,334 and 13,753,529 issued and outstanding

140

138

Additional paid-in capital

54,306

50,602

Retained earnings

144,533

106,854

Accumulated other comprehensive income (loss)

(1,076

)

1,717

Total stockholders' equity

197,903

159,311

Total liabilities and stockholders' equity

$

2,055,300

$

1,876,593


The following table shows the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.


Three Months Ended December 31,

2021

2020

Average
Outstanding
Balance

Interest Income/
Expense

Average
Yield/
Rate(1)

Average
Outstanding
Balance

Interest Income/
Expense

Average
Yield/
Rate(1)

(Dollars in thousands)

Assets

Interest earning assets:

Interest bearing deposits

$

198,070

$

73

0.15

%

$

152,720

$

37

0.10

%

Federal funds sold

2,048

5,537

Investment securities available for sale

186,603

439

0.93

73,931

363

1.95

Restricted stock and equity securities

3,743

41

4.35

3,947

70

7.08

Loans held for sale

23,395

179

3.04

105,922

701

2.63

SBA-PPP loans receivable

116,595

1,347

4.58

227,617

1,998

3.49

Portfolio loans receivable(2)

1,465,878

31,709

8.58

1,266,662

25,149

7.90

Total interest earning assets

1,996,332

33,788

6.71

1,836,336

28,318

6.13

Noninterest earning assets

69,951

18,509

Total assets

$

2,066,283

$

1,854,845

Liabilities and Stockholders’ Equity

Interest bearing liabilities:

Interest bearing demand accounts

$

315,933

39

0.05

$

238,078

102

0.17

Savings

6,575

1

0.06

4,828

1

0.05

Money market accounts

501,070

267

0.21

467,727

633

0.54

Time deposits

190,795

627

1.30

337,170

1,586

1.87

Borrowed funds

34,062

183

2.13

38,447

277

2.86

Total interest bearing liabilities

1,048,435

1,117

0.42

1,086,250

2,599

0.95

Noninterest bearing liabilities:

Noninterest bearing liabilities

26,504

23,810

Noninterest bearing deposits

796,014

592,193

Stockholders’ equity

195,330

152,592

Total liabilities and stockholders’ equity

$

2,066,283

$

1,854,845

Net interest spread

6.29

%

5.18

%

Net interest income

$

32,671

$

25,719

Net interest margin(3)

6.49

%

5.57

%

_______________

(1) Annualized.
(2) Includes nonaccrual loans.
(3) For the three months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 279 and 177 basis points of the reported net interest margin, respectively.

Twelve Months Ended December 31,

2021

2020

Average
Outstanding
Balance

Interest Income/
Expense

Average
Yield/
Rate(1)

Average
Outstanding
Balance

Interest Income/
Expense

Average
Yield/
Rate(1)

(Dollars in thousands)

Assets

Interest earning assets:

Interest bearing deposits

$

228,420

$

283

0.12

%

$

112,249

$

343

0.31

%

Federal funds sold

2,850

3,128

4

0.12

Investment securities available for sale

151,479

2,010

1.33

58,071

1,292

2.22

Restricted stock and equity securities

3,774

166

4.40

4,025

244

6.07

Loans held for sale

43,126

1,224

2.84

84,928

2,610

3.07

SBA-PPP loans receivable

190,588

7,613

3.99

157,630

4,479

2.84

Portfolio loans receivable(1)

1,370,988

111,947

8.17

1,215,049

88,279

7.27

Total interest earning assets

1,991,225

123,243

6.19

1,635,080

97,251

5.95

Noninterest earning assets

44,619

24,923

Total assets

$

2,035,844

$

1,660,003

Liabilities and Stockholders’ Equity

Interest bearing liabilities:

Interest bearing demand accounts

$

289,285

202

0.07

$

195,794

656

0.34

Savings

6,470

3

0.05

4,722

5

0.11

Money market accounts

482,225

1,484

0.31

480,218

4,786

1.00

Time deposits

269,262

4,119

1.53

297,997

6,077

2.04

Borrowed funds

34,214

742

2.17

42,471

1,658

3.90

Total interest bearing liabilities

1,081,456

6,550

0.61

1,021,202

13,182

1.29

Noninterest bearing liabilities:

Noninterest bearing liabilities

24,128

22,007

Noninterest bearing deposits

750,760

473,301

Stockholders’ equity

179,500

143,493

Total liabilities and stockholders’ equity

$

2,035,844

$

1,660,003

Net interest spread

5.58

%

4.66

%

Net interest income

$

116,693

$

84,069

Net interest margin(2)

5.86

%

5.14

%

_______________

(1) Includes nonaccrual loans.
(2) For the twelve months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 226 and 125 basis points of the reported net interest margin, respectively.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited

Quarter Ended

(Dollars in thousands except per share data)

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

Earnings:

Net income

$

10,171

$

11,177

$

9,648

$

8,982

$

9,689

Earnings per common share, diluted

0.71

0.79

0.68

0.65

0.71

Net interest margin

6.49

%

6.27

%

5.47

%

5.15

%

5.57

%

Net interest margin, excluding credit cards & SBA-PPP loans (1)

3.70

%

3.52

%

3.55

%

3.70

%

3.80

%

Return on average assets(2)

1.95

%

2.13

%

1.90

%

1.87

%

2.08

%

Return on average assets, excluding impact of SBA-PPP loans (1)(2)

1.80

%

1.99

%

1.65

%

1.60

%

1.88

%

Return on average equity(2)

20.66

%

23.87

%

22.36

%

22.30

%

25.26

%

Efficiency ratio

65.83

%

64.10

%

66.37

%

67.11

%

63.91

%

Balance Sheet:

Total assets

$

2,055,300

$

2,169,556

$

2,151,850

$

2,091,851

$

1,876,593

Asset Quality Ratios:

Nonperforming assets to total assets

0.56

%

0.77

%

0.54

%

0.58

%

0.67

%

Nonperforming assets to total assets, excluding the SBA-PPP loans (1)

0.59

%

0.83

%

0.60

%

0.66

%

0.75

%

Nonperforming loans to total loans

0.70

%

0.85

%

0.52

%

0.56

%

0.61

%

Nonperforming loans to portfolio loans (1)

0.75

%

0.94

%

0.60

%

0.67

%

0.70

%

Net charge-offs to average portfolio loans (1)(2)

0.18

%

0.08

%

0.08

%

0.12

%

0.19

%

Allowance for loan losses to total loans

1.54

%

1.56

%

1.51

%

1.49

%

1.54

%

Allowance for loan losses to portfolio loans (1)

1.65

%

1.71

%

1.73

%

1.79

%

1.78

%

Allowance for loan losses to non-performing loans

220.40

%

182.48

%

287.40

%

267.07

%

253.71

%

Bank Capital Ratios:

Total risk based capital ratio

13.79

%

13.86

%

13.51

%

13.55

%

12.60

%

Tier 1 risk based capital ratio

12.53

%

12.60

%

12.25

%

12.29

%

11.34

%

Leverage ratio

8.36

%

7.83

%

7.58

%

7.54

%

7.45

%

Common equity Tier 1 capital ratio

12.53

%

12.60

%

12.25

%

12.29

%

11.34

%

Tangible common equity

8.36

%

7.57

%

7.17

%

7.01

%

7.43

%

Holding Company Capital Ratios:

Total risk based capital ratio

16.41

%

15.75

%

16.14

%

16.07

%

15.19

%

Tier 1 risk based capital ratio

14.43

%

14.49

%

14.10

%

13.98

%

13.10

%

Leverage ratio

9.73

%

9.12

%

8.78

%

8.84

%

8.78

%

Common equity Tier 1 capital ratio

14.28

%

14.34

%

13.94

%

13.81

%

12.94

%

Tangible common equity

9.63

%

8.72

%

8.23

%

7.98

%

8.48

%

Composition of Loans:

Residential real estate

$

401,607

$

418,205

$

420,015

$

420,461

$

437,860

Commercial real estate

556,339

502,523

471,807

433,336

392,550

Construction real estate

255,147

251,256

223,832

221,277

224,904

Commercial and industrial - Other

175,956

143,244

158,392

149,914

157,127

Credit card, net of reserve

141,120

134,979

121,410

83,740

102,186

Other consumer loans

1,033

1,425

1,034

4,487

1,649

Portfolio loans receivable

$

1,531,202

$

1,451,632

$

1,396,490

$

1,313,215

$

1,316,276

Deferred origination fees, net

(7,220

)

(6,506

)

(4,019

)

(840

)

(774

)

Portfolio loans receivable, net

$

1,523,982

$

1,445,126

$

1,392,471

$

1,312,375

$

1,315,502

SBA-PPP loans, net

$

108,285

$

137,178

$

202,763

$

265,712

$

201,018

Composition of Deposits:

Noninterest bearing

$

787,650

$

833,187

$

828,308

$

771,924

$

608,559

Interest bearing demand

330,924

369,812

314,883

300,992

257,126

Savings

6,994

6,682

6,965

6,012

4,800

Money Markets

493,919

493,029

484,567

471,303

447,077

Time Deposits

177,650

218,528

282,696

312,838

334,566

Total Deposits

$

1,797,137

$

1,921,238

$

1,917,419

$

1,863,069

$

1,652,128

Capital Bank Home Loan Metrics:

Origination of loans held for sale

$

158,051

$

217,175

$

265,517

$

353,774

$

382,267

Mortgage loans sold

178,068

229,111

278,384

400,112

412,830

Gain on sale of loans

4,423

6,108

7,763

12,008

12,950

Purchase volume as a % of originations

56.44

%

50.98

%

50.64

%

24.59

%

30.03

%

Gain on sale as a % of loans sold(3)

2.48

%

2.67

%

2.79

%

3.00

%

3.14

%

Mortgage commissions

$

1,462

$

1,884

$

2,364

$

3,320

$

3,405

OpenSky® Portfolio Metrics:

Active customer accounts

660,397

700,383

707,600

642,272

568,373

Credit card loans, net of reserve

$

141,120

$

134,979

$

121,410

$

83,740

$

102,186

Noninterest secured credit card deposits

229,530

242,405

241,724

215,883

192,520

_______________

(1) Refer to Appendix for reconciliation of non-GAAP measures.
(2) Annualized.
(3) Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.


Appendix

Reconciliation of Non-GAAP Measures

Return on Average Assets, as Adjusted

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Net Income

$

10,171

$

11,177

$

9,648

$

8,982

$

9,689

Less: SBA-PPP loan income

1,347

1,525

2,272

2,205

1,998

Net Income, as Adjusted

$

8,824

$

9,652

$

7,376

$

6,777

$

7,691

Average Total Assets

2,066,283

2,084,772

2,041,232

1,949,265

1,854,845

Less: Average SBA-PPP Loans

116,595

162,217

250,040

232,371

227,617

Average Total Assets, as Adjusted

$

1,949,688

$

1,922,555

$

1,791,192

$

1,716,894

$

1,627,228

Return on Average Assets, as Adjusted

1.80

%

1.99

%

1.65

%

1.60

%

1.88

%


Net Interest Margin, as Adjusted

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Net Interest Income

$

32,671

$

32,059

$

27,520

$

24,444

$

25,719

Less Secured credit card loan income

15,010

15,086

10,497

7,660

9,306

Less SBA-PPP loan income

1,347

1,525

2,272

2,205

1,998

Net Interest Income, as Adjusted

$

16,314

$

15,448

$

14,751

$

14,579

$

14,415

Average Interest Earning Assets

1,996,331

2,026,616

2,016,801

1,923,463

1,836,337

Less Average secured credit card loans

131,306

124,771

100,456

93,520

95,739

Less Average SBA-PPP loans

116,595

162,217

250,040

232,371

227,617

Total Average Interest Earning Assets, as Adjusted

$

1,748,430

$

1,739,628

$

1,666,305

$

1,597,572

$

1,512,981

Net Interest Margin, as Adjusted

3.70

%

3.52

%

3.55

%

3.70

%

3.80

%


Tangible Book Value per Share

Quarters Ended

Dollars in thousands, except per share amounts

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Total Stockholders' Equity

$

197,903

$

189,080

$

177,204

$

167,003

$

159,311

Less: Preferred equity

Less: Intangible assets

Tangible Common Equity

$

197,903

$

189,080

$

177,204

$

167,003

$

159,311

Period End Shares Outstanding

13,962,334

13,801,936

13,771,615

13,759,218

13,753,529

Tangible Book Value per Share

$

14.17

$

13.70

$

12.87

$

12.14

$

11.58


Allowance for Loan Losses to Total Portfolio Loans

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Allowance for Loan Losses

$

25,181

$

24,753

$

24,079

$

23,550

$

23,434

Total Loans

1,632,267

1,582,304

1,595,234

1,578,087

1,516,520

Less: SBA-PPP loans

108,285

137,178

202,763

265,712

201,018

Total Portfolio Loans

$

1,523,982

$

1,445,126

$

1,392,471

$

1,312,375

$

1,315,502

Allowance for Loan Losses to Total Portfolio Loans

1.65

%

1.71

%

1.73

%

1.79

%

1.78

%

Nonperforming Assets to Total Assets, net SBA-PPP Loans

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Total Nonperforming Assets

$

11,512

$

16,801

$

11,615

$

12,112

$

12,563

Total Assets

2,055,300

2,169,556

2,151,850

2,091,851

1,876,593

Less: SBA-PPP loans

108,285

137,178

202,763

265,712

201,018

Total Assets, net SBA-PPP Loans

$

1,947,015

$

2,032,378

$

1,949,087

$

1,826,139

$

1,675,575

Nonperforming Assets to Total Assets, net SBA-PPP Loans

0.59

%

0.83

%

0.60

%

0.66

%

0.75

%

Nonperforming Loans to Portfolio Loans

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Total Nonperforming Loans

$

11,425

$

13,565

$

8,378

$

8,818

$

9,237

Total Loans

1,632,267

1,582,304

1,595,234

1,578,087

1,516,520

Less: SBA-PPP loans

108,285

137,178

202,763

265,712

201,018

Total Portfolio Loans

$

1,523,982

$

1,445,126

$

1,392,471

$

1,312,375

$

1,315,502

Nonperforming Loans to Total Portfolio Loans

0.75

%

0.94

%

0.60

%

0.67

%

0.70

%

Net Charge-offs to Average Portfolio Loans

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Total Net Charge-offs

$

672

$

301

$

251

$

388

$

615

Total Average Loans

1,582,473

1,569,198

1,567,973

1,532,093

1,494,279

Less: Average SBA-PPP loans

116,595

162,217

250,040

232,371

227,617

Total Average Portfolio Loans

$

1,465,878

$

1,406,981

$

1,317,933

$

1,299,722

$

1,266,662

Net Charge-offs to Average Portfolio Loans

0.18

%

0.08

%

0.08

%

0.12

%

0.19

%

Pre-tax, Pre-Provision Net Revenue ("PPNR")

Quarters Ended

Dollars in thousands

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

December 31, 2020

Net income

$

10,171

$

11,177

$

9,648

$

8,982

$

9,689

Add: Income Tax Expense

3,522

3,877

3,357

3,143

3,347

Add: Provision for Loan Losses

1,100

975

781

503

2,033

Pre-tax, Pre-Provision Net Revenue ("PPNR")

$

14,793

$

16,029

$

13,786

$

12,628

$

15,069

ABOUT CAPITAL BANCORP, INC.

Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Company’s wholly-owned subsidiary, Capital Bank, N.A., is the fourth largest bank headquartered in Maryland at December 31, 2021. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.1 billion at December 31, 2021 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.

FORWARD-LOOKING STATEMENTS

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "optimistic," “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As a result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are exposed to all of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen as planned, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of decisions made by the Federal Open Market Committee of the Federal Reserve and other factors, our net interest margin and spread may decline, which would adversely affect our earnings; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

FINANCIAL CONTACT: Alan Jackson (240) 283-0402

MEDIA CONTACT: Ed Barry (240) 283-1912

WEB SITE: www.CapitalBankMD.com


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