Capital Bancorp, Inc. Reports Fourth Quarter 2023 Net Income of $9.0 million, or $0.65 per share

Rhea-AI Summary

Capital Bancorp, Inc. (CBNK) reported a diluted EPS of $0.65, ROAA of 1.63%, and ROAE of 14.44% for 4Q 2023. The Tangible Book Value Per Share increased by 15.6% from 4Q 2022 to $18.31. Loan growth stood at $40.7 million, or 8.7% annualized for 4Q 2023. The company also declared a cash dividend of $0.08 per share. Despite a year-over-year net income stagnation, the company's strategy led to a 29% increase in book value, emphasizing growth and profitability.

Insights

Financial Analyst

Analyzing the financial performance of Capital Bancorp, Inc., the reported diluted EPS (Earnings Per Share) of $0.65 for the fourth quarter of 2023 indicates a slight decrease from the previous quarter but an increase from the same quarter the previous year. This suggests a stable earnings trend with potential seasonal fluctuations. The ROAA (Return on Average Assets) of 1.63% and ROAE (Return on Average Equity) of 14.44% are noteworthy as they provide investors with insight into the company's efficiency in generating profits from its assets and equity, respectively. A ROAA above 1% is typically considered good for banks, indicating Capital Bancorp is performing well in this regard. The tangible book value per share increase of 15.6% year-over-year is a strong indicator of the company's growing intrinsic value, which could be a positive signal to investors about the company's asset management and potential for future profitability.

Market Research Analyst

From a market perspective, the loan growth of $40.7 million, or 8.7% annualized, is a significant figure that reflects the company's ability to expand its lending operations, a core aspect of any bank's business model. The growth in lending can be a positive sign for investors, suggesting an increasing demand for the bank's products and services and an ability to capitalize on market opportunities. Furthermore, the declaration of a cash dividend of $0.08 per share represents a commitment to returning value to shareholders and may influence investor sentiment positively. It's important to note that dividends can also signal confidence from the bank's management in its current financial stability and future earnings potential.

Economist

Considering the broader economic context, the CEO's remarks on the company's strategy amidst market volatility are pertinent. A focus on growth and profitability, particularly in a volatile market, requires a delicate balance between risk management and seizing growth opportunities. The acknowledgment of no advancement in net income year-over-year, despite positive performance indicators, suggests a competitive and challenging banking environment. The bank's investment in people and technology, as mentioned by the CEO, is an essential strategy for long-term sustainability and competitiveness, particularly in an industry experiencing rapid technological advancements and shifting consumer behaviors.

• Diluted EPS of $0.65, ROAA of 1.63%, and ROAE of 14.44% for 4Q 2023
• Tangible Book Value Per Share⁽¹⁾ of $18.31 for 4Q 2023 up 15.6% from 4Q 2022
• Loan Growth of $40.7 million, or 8.7% annualized for 4Q 2023
• Cash dividend of $0.08 per share declared

ROCKVILLE, Md., Jan. 22, 2024 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.0 million, or $0.65 per diluted share, for the fourth quarter 2023, compared to net income of $9.8 million, or $0.70 per diluted share, for the third quarter 2023 and $9.0 million, or $0.62 per diluted share, for the fourth quarter 2022.

The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on February 21, 2024 to shareholders of record on February 5, 2024.

“Over the past two years, our strategy, which emphasizes both growth and profitability, has led to a 29% increase in book value," said Ed Barry, Chief Executive Officer of the Company and the Bank. “Despite persistent market volatility, we continue to identify opportunities to generate attractive loans and core deposits and expand our talented team. We are investing in our people and technology to build on our momentum, diversify our business, and achieve profitable expansion.”

“While acknowledging that net income year-over-year did not advance, there are many performance indicators that are cause for optimism about the Bank’s future,” said Steven J. Schwartz, Chairman of the Company. "Substantial stability of core net interest margin and core deposits year-over-year positions the Bank for continued outperformance of peers, as does our ongoing commitment to maintain a strong credit culture and eschew the assumption of undue interest rate risk. Moreover, our investment in best-in-class C-suite executives should give us competitive advantages as we seek to meaningfully grow both sides of our balance sheet. Also encouraging is the promise that our ongoing investments in technology applications will enable improvements to our already strong customer-facing and back office functions.”

⁽¹⁾ Reconciliations of the non–U.S. generally accepted accounting principles ("GAAP") measures are set forth in the Appendix at the end of this press release.

Fourth Quarter 2023 Highlights

Capital Bancorp, Inc.

Earnings Summary - Net income of $9.0 million, or $0.65 per diluted share, decreased $0.8 million compared to $9.8 million, or $0.70 per diluted share, for the third quarter 2023.

• Net interest income of $34.9 million decreased $1.9 million compared to $36.8 million for the third quarter 2023. Interest income of $47.0 million decreased $0.8 million compared to $47.7 million for the third quarter 2023 as interest income from credit card loans decreased $1.1 million. Interest expense of $12.1 million increased $1.2 million compared to $10.9 million for the third quarter 2023 reflecting the rising cost of interest-bearing deposits.
• The provision for credit losses was $2.8 million, an increase of $0.5 million from the third quarter 2023. The provision for credit losses includes net charge-offs of $2.5 million in the fourth quarter 2023 including $1.9 million from credit card related loans and $0.6 million from commercial loans. Commercial loan net charge-offs include a charge-off of $0.7 million in the fourth quarter 2023 of which $0.4 million was specifically reserved in the third quarter 2023 on a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2023. This loan was classified as nonperforming in the first quarter of 2023. As of January 22, 2024, sales of three of the properties totaling $7.1 million are currently pending. The third quarter 2023 provision for credit losses included net charge-offs of $1.8 million primarily related to credit card loans.
• Noninterest income of $5.9 million decreased $0.4 million compared to $6.3 million for the third quarter 2023. Credit card fees decreased $0.4 million primarily due to lower interchange and other fee income.
• Noninterest expense of $26.9 million decreased $1.1 million compared to $28.0 million for the third quarter 2023. Within this category, significant variances included the following:
  • Salaries and employee benefits of $11.6 million decreased $0.8 million primarily due to adjustments to annual incentive based compensation.
  • Professional fees of $1.6 million decreased $0.4 million related to decreases in third party consulting fees.
  • Data processing expense of $6.1 million decreased $0.3 million primarily from processor rebates.
  • Loan processing expense of $0.2 million decreased $0.2 million.
  • Other operating expenses of $4.0 million increased $0.6 million related to operational losses.
• Income tax expense of $2.2 million, or 19.5% of pre-tax income for the fourth quarter 2023 decreased $0.8 million from $3.0 million, or 23.4% of pre-tax income for the third quarter 2023, reflecting a decrease in pre-tax income of $1.6 million. The lower effective tax rate for the fourth quarter 2023 when compared to the third quarter 2023 is primarily driven by the tax benefit recognized on the exercise of non-qualified stock options during the fourth quarter. The stock option exercises also contributed to the reduction in the total year effective tax rate.

Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.63% and 14.44%, respectively, for the three months ended December 31, 2023, compared to 1.75% and 16.00%, respectively, for the three months ended September 30, 2023.

• The efficiency ratio was 65.91% for the three months ended December 31, 2023, compared to 65.02% for the three months ended September 30, 2023.
  

Balance Sheet – Total assets of $2.2 billion at December 31, 2023 decreased $47.8 million, or 2.1%, from September 30, 2023.

• Cash and cash equivalents of $54.0 million at December 31, 2023 decreased $92.2 million, or 63.1% from September 30, 2023, as total deposits decreased $72.0 million and total portfolio loans increased $40.4 million partially offset by an increase in other borrowed funds of $15.0 million.
• Net portfolio loans of $1.9 billion increased $40.7 million, representing 8.7% annualized growth.
• Total deposits of $1.9 billion at December 31, 2023 decreased $72.0 million, or 3.7%, from September 30, 2023, while total average deposits decreased $33.4 million quarter over quarter. The reduction in deposits is traditionally seasonal in nature, with title companies typically experiencing slower mortgage activity in the fourth quarter and some other commercial operating businesses typically drawing down demand deposits in the fourth quarter. Average portfolio loans-to-deposit ratio of 98.8% for the three months ended December 31, 2023 increased from 96.3% for the three months ended September 30, 2023.
• The investment securities portfolio continues to be classified as available for sale and had a fair market value of $208.3 million, or 9.4% of total assets, at December 31, 2023 up slightly from $206.1 million at September 30, 2023. The amortized cost of the investment securities portfolio was $225.7 million, with an effective duration of 3.22 years. U.S. Treasury securities represented 71.5% of the overall investment portfolio at December 31, 2023. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio decreased $4.7 million during the quarter to $13.1 million as of December 31, 2023, which represents 5.1% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.

Net Interest Margin - Net interest margin decreased to 6.40% for the three months ended December 31, 2023, compared to 6.71% for the three months ended September 30, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), a non-GAAP measure, decreased to 3.92%, compared to 4.05% for the three months ended September 30, 2023.

• The average yield on interest earning assets decreased 8 basis points compared to the third quarter 2023. The decrease in average yield was due to a 13 basis point decline in the yield for portfolio loans to 9.59% as interest income from credit card loans of $14.7 million in the fourth quarter 2023 declined $1.1 million from $15.8 million in the third quarter 2023. The yield on portfolio loans, as adjusted (excluding credit card loans), a non-GAAP measure, of 6.89% for the fourth quarter 2023 increased 13 basis points from 6.76% for the third quarter 2023. New portfolio loans (excluding credit card loans) originated in the fourth quarter 2023 totaled $91.1 million with a weighted average yield of 8.46% as compared to $98.9 million with a weighted average yield of 8.37% in the third quarter 2023.
• The average rate on interest-bearing liabilities increased 31 basis points compared to the third quarter 2023. Increases in average rates include money market accounts increasing 31 basis points to 4.16% and time deposits increasing 21 basis points to 4.72%, while average balances increased $24.7 million and $6.3 million, respectively, compared to the third quarter 2023. Further, the average rate on interest-bearing demand accounts increased 3 basis points to 0.18%, while the average balance decreased $20.0 million compared to the third quarter 2023.

Deposits - Total deposits at December 31, 2023 decreased by $72.0 million, or 3.7%, compared to September 30, 2023.

• Noninterest-bearing deposits of $617.4 million decreased $63.4 million, or 9.3%, compared to September 30, 2023. Interest-bearing deposits of $1.3 billion decreased $8.6 million, or 0.7%, compared to September 30, 2023 with a reduction in interest-bearing demand accounts of $29.7 million, money market accounts of $5.6 million and savings of $0.5 million while other time deposits increased $13.6 million. Brokered time deposits totaled $142.4 million at December 31, 2023, an increase of $13.7 million from September 30, 2023.
  

Cost of Interest-Bearing Liabilities - The elevated interest rate environment has driven up the average cost of interest-bearing liabilities to 3.68% for the quarter ended December 31, 2023, compared to 3.37% for the third quarter 2023.

• Average noninterest-bearing deposits of $622.9 million decreased $44.0 million, or 6.6%, compared to September 30, 2023, and represented 33.0% of total average deposits at December 31, 2023.
• Average borrowed funds of $41.8 million increased $6.9 million, or 19.7%, compared to September 30, 2023.

Robust Capital Positions - As of December 31, 2023, the Company reported a common equity tier 1 capital ratio of 15.43%, compared to 15.27% at September 30, 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 1.52% at September 30, 2023. Shares repurchased and retired during the three months ended December 31, 2023, as part of the Company's stock repurchase program, totaled 89,427 shares at an average price of $20.52, for a total cost of $1.8 million including commissions. Tangible book value per common share grew 4.5% to $18.31 at December 31, 2023 when compared to September 30, 2023. The Company did not have goodwill or other intangible assets during any of the periods presented and therefore, tangible book value per share is equal to book value per share.

Liquidity - Total sources of available borrowings at December 31, 2023 totaled $576.9 million, including available collateralized lines of credit of $463.7 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $37.2 million.

Commercial Bank

Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $39.6 million, to $1.8 billion, gross, at December 31, 2023 compared to September 30, 2023.

Net Interest Income - Interest income of $31.0 million increased $0.5 million compared to $30.4 million for the third quarter 2023, driven primarily by loan growth. Interest expense of $11.9 million increased $1.1 million, driven by an increase in the average cost of interest-bearing liabilities in the fourth quarter 2023.

Credit Metrics - Nonperforming assets ("NPAs") increased 5 basis points to 0.72% of total assets at December 31, 2023 compared to 0.67% at September 30, 2023 as a result of an increase in nonaccrual loans at December 31, 2023 to $16.0 million compared to $15.2 million at September 30, 2023. Included in nonperforming assets is a single $7.6 million, multi-unit residential real estate loan as previously mentioned. At December 31, 2023 commercial real estate loans with office space exposure totaled $56.3 million, or 3.0% of total portfolio loans, with a weighted average loan-to-value ("LTV") of 49.5%. Included in the total are owner-occupied commercial real estate loans with office exposure totaling $42.8 million with a weighted average LTV of 48.2% and non owner-occupied commercial real estate loans with office exposure totaling $13.5 million with a weighted average LTV of 54.2%.

OpenSky^®

Revenues - Total revenue of $19.0 million decreased $1.5 million from the third quarter 2023. Interest income of $15.0 million decreased $1.1 million from the third quarter 2023. Average OpenSky^® loan balances, net of reserves and deferred fees of $114.6 million for the fourth quarter 2023, decreased $2.3 million, or 1.9%, compared to $116.8 million for the third quarter 2023. Noninterest income of $4.0 million decreased $0.4 million due to a decline in credit card fees as compared to the third quarter 2023.

Noninterest Expense - Total noninterest expense of $10.4 million decreased $0.3 million from the third quarter 2023. Noninterest expense declined in the fourth quarter 2023 due primarily to a reduction in data processing expense of $0.4 million primarily from processor rebates. During the fourth quarter 2023, the number of OpenSky^® credit card accounts declined by 3,891 to 525,314.

Loan Balances - OpenSky^® loan balances, net of reserves, of $123.3 million at December 31, 2023 increased by $0.8 million, or 0.7%, compared to $122.5 million at September 30, 2023. Corresponding deposit balances of $173.9 million at December 31, 2023 decreased $7.3 million, or 4.0%, compared to $181.2 million at September 30, 2023. Gross unsecured loan balances of $30.8 million at December 31, 2023 increased $3.4 million, or 12.4%, compared to $27.4 million at September 30, 2023.

OpenSky^® Credit - Card delinquencies remained stable in the fourth quarter 2023 when compared to the third quarter 2023. The provision for credit losses increased $0.3 million compared to the third quarter 2023 as card balances, net of reserves, increased $0.8 million during the fourth quarter 2023 as compared to a decrease of $0.4 million during the third quarter 2023.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
	Quarter Ended												4Q23 vs 3Q23							4Q23 vs 4Q22
(in thousands except per share data)	December 31, 2023				September 30, 2023				December 31, 2022				$ Change				% Change			$ Change				% Change
Earnings Summary
Interest income	$	46,969			$	47,741			$	41,348			$	(772	)		(1.6	)%		$	5,621			13.6	%
Interest expense		12,080				10,931				6,149				1,149			10.5	%			5,931			96.5	%
Net interest income		34,889				36,810				35,199				(1,921	)		(5.2	)%			(310	)		(0.9	)%
Provision for credit losses		2,808				2,280				2,384				528			23.2	%			424			17.8	%
(Release of) provision for credit losses on unfunded commitments		(106	)			24				—				(130	)		(541.7	)%			(106	)		—	%
Noninterest income		5,936				6,326				5,561				(390	)		(6.2	)%			375			6.7	%
Noninterest expense		26,907				28,046				26,734				(1,139	)		(4.1	)%			173			0.6	%
Income before income taxes		11,216				12,786				11,642				(1,570	)		(12.3	)%			(426	)		(3.7	)%
Income tax expense		2,186				2,998				2,651				(812	)		(27.1	)%			(465	)		(17.5	)%
Net income	$	9,030			$	9,788			$	8,991			$	(758	)		(7.7	)%		$	39			0.4	%
Pre-tax pre-provision net revenue ("PPNR")(1)	$	13,918			$	15,090			$	14,026			$	(1,172	)		(7.8	)%		$	(108	)		(0.8	)%
Common Share Data
Earnings per share - Basic	$	0.65			$	0.70			$	0.64			$	(0.05	)		(7.1	)%		$	0.01			1.6	%
Earnings per share - Diluted	$	0.65			$	0.70			$	0.62			$	(0.05	)		(7.1	)%		$	0.03			4.8	%
Weighted average common shares - Basic		13,897				13,933				14,071
Weighted average common shares - Diluted		13,989				14,024				14,408
Return Ratios
Return on average assets (annualized)		1.63	%			1.75	%			1.67	%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1)		1.63	%			1.75	%			1.67	%
Return on average equity (annualized)		14.44	%			16.00	%			16.18	%

______________

⁽¹⁾ Refer to Appendix for reconciliation of non-GAAP measures.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
		Year Ended
		December 31,
(in thousands except per share data)			2023				2022			$ Change				% Change
Earnings Summary
Interest income		$	183,206			$	150,646			$	32,560			21.6	%
Interest expense			41,680				10,039				31,641			315.2	%
Net interest income			141,526				140,607				919			0.7	%
Provision for credit losses			9,610				6,631				2,979			44.9	%
(Release of) provision for credit losses on unfunded commitments			(101	)			—				(101	)		—	%
Noninterest income			24,975				29,372				(4,397	)		(15.0	)%
Noninterest expense			110,767				109,114				1,653			1.5	%
Income before income taxes			46,225				54,234				(8,009	)		(14.8	)%
Income tax expense			10,354				12,430				(2,076	)		(16.7	)%
Net income		$	35,871			$	41,804			$	(5,933	)		(14.2	)%
Pre-tax pre-provision net revenue ("PPNR")(1)		$	55,734			$	60,865			$	(5,131	)		(8.4	)%
Common Share Data
Earnings per share - Basic		$	2.56			$	2.98			$	(0.42	)		(14.1	)%
Earnings per share - Diluted		$	2.55			$	2.91			$	(0.36	)		(12.4	)%
Weighted average common shares - Basic			14,003				14,025
Weighted average common shares - Diluted			14,081				14,362
Return Ratios
Return on average assets (annualized)			1.64	%			2.01	%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1)			1.64	%			1.87	%
Return on average equity (annualized)			14.91	%			19.68	%

______________

⁽¹⁾ Refer to Appendix for reconciliation of non-GAAP measures.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
	Quarter Ended									Quarter Ended
	December 31,									September 30,			June 30,			March 31,
(in thousands except per share data)		2023			2022		% Change				2023			2023			2022
Balance Sheet Highlights
Assets	$	2,224,667		$	2,123,655		4.8	%		$	2,272,484		$	2,227,866		$	2,245,286
Investment securities available for sale		208,329			252,481		(17.5	)%			206,055			208,464			255,762
Mortgage loans held for sale		7,481			7,416		0.9	%			4,843			10,146			9,620
SBA-PPP loans, net of fees		645			2,163		(70.2	)%			750			1,090			2,037
Portfolio loans receivable(2)		1,902,643			1,728,592		10.1	%			1,861,929			1,837,041			1,786,109
Allowance for credit losses		28,610			26,385		8.4	%			28,279			27,495			26,216
Deposits		1,895,996			1,758,072		7.8	%			1,967,988			1,934,361			1,944,374
FHLB borrowings		22,000			107,000		(79.4	)%			22,000			22,000			32,000
Other borrowed funds		27,062			12,062		124.4	%			12,062			12,062			12,062
Total stockholders' equity		254,860			224,015		13.8	%			242,878			237,435			234,517
Tangible common equity(1)		254,860			224,015		13.8	%			242,878			237,435			234,517
Common shares outstanding		13,923			14,139		(1.5	)%			13,893			13,981			14,083
Book value per share	$	18.31		$	15.84		15.6	%		$	17.48		$	16.98		$	16.65
Tangible book value per share(1)	$	18.31		$	15.84		15.6	%		$	17.48		$	16.98		$	16.65
Dividends per share	$	0.08		$	0.06		33.3	%		$	0.08		$	0.06		$	0.06

______________

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

Operating Results - Comparison of Three Months Ended December 31, 2023 and 2022

For the three months ended December 31, 2023, net interest income of $34.9 million decreased slightly from $35.2 million in the same period in 2022. The net interest margin decreased 24 basis points to 6.40% for the three months ended December 31, 2023 from the same period in 2022 as interest income on credit card decreased $1.1 million. Net interest margin, excluding credit card and SBA-PPP loans, increased to 3.92% for the three months ended December 31, 2023, compared to 3.91% for the same period in 2022 as yields on interest-bearing deposits and portfolio loans generally kept pace with the rising costs of deposits, including money market accounts and time deposits.

For the three months ended December 31, 2023, average interest earning assets increased $60.8 million, or 2.9%, to $2.2 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 81 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $147.7 million, or 12.8%, and the average cost of interest-bearing liabilities increased to 3.68%, a 157 basis point increase from 2.11%.

For the three months ended December 31, 2023, the provision for credit losses was $2.8 million, an increase of $0.4 million from the same period in 2022. Net charge-offs for the three months ended December 31, 2023 were $2.5 million, or 0.53% on an annualized basis of average portfolio loans, compared to $2.1 million, or 0.49% on an annualized basis of average loans for the same period in 2022. The change in provision was partially due to a charge-off of $0.7 million in the fourth quarter 2023 of which $0.4 million was specifically reserved in the third quarter 2023 on a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2023. This loan was classified as nonperforming in the first quarter of 2023. As of January 22, 2024, sales of three of the properties totaling $7.1 million are currently pending. Of the $2.5 million in net charge-offs during the quarter, $1.4 million related to secured and partially secured cards in the credit card portfolio and $0.4 million related to unsecured cards.

For the three months ended December 31, 2023, noninterest income of $5.9 million increased $0.4 million, or 6.7%, from the same period in 2022. Mortgage banking revenue of $1.2 million increased $0.6 million due to an increase in home loan sales. Credit card fees of $4.0 million decreased $0.3 million as the number of open customer accounts declined year over year, which resulted in lower interchange and other fee income.

Credit card loan balances, net of reserves, decreased by $5.1 million to $123.3 million as of December 31, 2023, from $128.4 million at December 31, 2022. The related deposit account balances decreased 7.2% to $173.9 million at December 31, 2023 when compared to $187.4 million at December 31, 2022, reflective of the reduction in the number of open customer accounts year over year.

The efficiency ratio for the three months ended December 31, 2023 was 65.91% compared to 65.59% for the three months ended December 31, 2022.

For the three months ended December 31, 2023, noninterest expense of $26.9 million increased slightly from $26.7 million for the same period in 2022. The change includes increases in advertising expense of $0.7 million and other operating expense of $0.6 million, partially offset by decreases in data processing expense of $0.6 million and professional fees of $0.5 million.

Operating Results - Comparison of Year Ended December 31, 2023 and 2022

For the year ended December 31, 2023, net interest income of $141.5 million increased $0.9 million from the same period in 2022, primarily due to increased average balances of $235.9 million in portfolio loans combined with a 71 basis point increase in yield for portfolio loans, offset by significant increases in the cost of funding. The net interest margin decreased 32 basis points to 6.60% for the year ended December 31, 2023 from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.96% for the year ended December 31, 2023, compared to 3.93% for the same period in 2022.

For the year ended December 31, 2023, average interest earning assets increased $112.0 million, or 5.5%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 113 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $209.1 million, or 19.7%, while the average cost of interest-bearing liabilities increased 234 basis points to 3.29% from 0.95%.

For the year ended December 31, 2023, the provision for credit losses was $9.6 million, an increase of $3.0 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the year ended December 31, 2023 were $8.5 million, or 0.47% annualized of average portfolio loans, compared to $5.4 million, or 0.34% annualized of average portfolio loans, for the same period in 2022. The $8.5 million in net charge-offs during the year ended December 31, 2023 was comprised primarily of credit card portfolio net charge-offs, with $5.5 million related to secured and partially secured cards while $1.4 million was related to unsecured cards.

For the year ended December 31, 2023, noninterest income of $25.0 million decreased $4.4 million, or 15.0%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $4.7 million as the number of open customer accounts declined to 525,314 at December 31, 2023 from 533,855 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year.

The efficiency ratio for the year ended December 31, 2023 was 66.53% compared to 64.19% for the year ended December 31, 2022.

For the year ended December 31, 2023, noninterest expense of $110.8 million increased $1.7 million, or 1.5%, from the same period in 2022. The increase was primarily driven by a $5.9 million, or 13.7%, increase in salaries and employee benefits and a $0.8 million, or 16.6%, increase in occupancy and equipment, partially offset by a $3.7 million, or 12.7%, decrease in data processing expense and a $1.7 million, or 15.8%, decrease in professional fees due to a reduction in third party consulting fees. The decrease 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.

Financial Condition

Total assets at December 31, 2023 were $2.2 billion, a decrease of $47.8 million, or 2.1%, from the balance at September 30, 2023 and an increase of $101.0 million, or 4.8%, from the balance at December 31, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.9 billion at December 31, 2023, an increase of $40.7 million, up 2.2% or 8.7% annualized, compared to September 30, 2023, and an increase of $174.1 million, or 10.1%, compared to $1.7 billion at December 31, 2022.

The Company recorded a provision for credit losses of $9.6 million during the year ended December 31, 2023, which increased the allowance for credit losses to $28.6 million, or 1.50% of total loans at December 31, 2023, representing an increase of $0.3 million over the balance at September 30, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of December 31, 2023, were $16.0 million, or 0.72% of total assets, up from $15.2 million, or 0.67% of total assets at September 30, 2023, and up from $9.8 million, or 0.46% of total assets at December 31, 2022. Included in nonperforming assets at December 31, 2023 is a single $7.6 million, multi-unit residential real estate loan, with respect to which $0.7 million was charged off in the fourth quarter 2023.

Deposits were $1.9 billion at December 31, 2023, a decrease of $72.0 million, or 3.7%, from the balance at September 30, 2023 and an increase of $137.9 million, or 7.8%, from the balance at December 31, 2022. Average deposits of $1.9 billion for the three months ended December 31, 2023 decreased $33.4 million, or 1.7%, as compared to the three months ended September 30, 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 $112.5 million to $622.9 million as of December 31, 2023, as compared to December 31, 2022. Noninterest-bearing deposits represented 32.6% of total deposits at December 31, 2023 compared to 38.4% at December 31, 2022. Uninsured deposits were approximately $789.4 million as of December 31, 2023, representing 41.6% of the Company's deposit portfolio, compared to $857.7 million, or 43.6%, at September 30, 2023, and $784.6 million, or 44.6%, at December 31, 2022.

Stockholders’ equity increased to $254.9 million as of December 31, 2023, compared to $242.9 million at September 30, 2023 and $224.0 million at December 31, 2022. Shares repurchased and retired for the year ended December 31, 2023 as part of the Company's stock repurchase program totaled 475,346 shares at an average price of $18.12, for a total cost of $8.8 million including commissions. As of December 31, 2023, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.

Consolidated Statements of Income (Unaudited)
	Three Months Ended																	Year Ended
(in thousands)	December 31, 2023				September 30, 2023			June 30, 2023			March 31, 2023				December 31, 2022			December 31, 2023				December 31, 2022
Interest income
Loans, including fees	$	45,109			$	45,385		$	42,991		$	41,275			$	38,763		$	174,760			$	144,408
Investment securities available for sale		1,083				1,089			1,266			1,377				1,402			4,815				3,912
Federal funds sold and other		777				1,267			823			764				1,183			3,631				2,326
Total interest income		46,969				47,741			45,080			43,416				41,348			183,206				150,646
Interest expense
Deposits		11,759				10,703			9,409			7,754				4,377			39,625				7,611
Borrowed funds		321				228			331			1,175				1,772			2,055				2,428
Total interest expense		12,080				10,931			9,740			8,929				6,149			41,680				10,039
Net interest income		34,889				36,810			35,340			34,487				35,199			141,526				140,607
Provision for credit losses		2,808				2,280			2,862			1,660				2,384			9,610				6,631
(Release of) provision for credit losses on unfunded commitments		(106	)			24			—			(19	)			—			(101	)			—
Net interest income after provision for credit losses		32,187				34,506			32,478			32,846				32,815			132,017				133,976
Noninterest income
Service charges on deposits		240				250			245			229				222			964				767
Credit card fees		3,970				4,387			4,706			4,210				4,314			17,273				21,972
Mortgage banking revenue		1,166				1,243			1,332			1,155				554			4,896				4,866
Other income		560				446			404			432				471			1,842				1,767
Total noninterest income		5,936				6,326			6,687			6,026				5,561			24,975				29,372
Noninterest expenses
Salaries and employee benefits		11,638				12,419			12,143			12,554				11,769			48,754				42,898
Occupancy and equipment		1,573				1,351			1,536			1,213				1,388			5,673				4,865
Professional fees		1,930				2,358			2,608			2,374				2,426			9,270				11,012
Data processing		6,128				6,469			6,559			6,530				6,697			25,686				29,418
Advertising		1,433				1,565			2,646			517				726			6,161				6,220
Loan processing		198				426			660			349				350			1,633				1,702
Foreclosed real estate expenses, net		—				1			—			6				—			7				(183	)
Other operating		4,007				3,457			3,440			2,679				3,378			13,583				13,182
Total noninterest expenses		26,907				28,046			29,592			26,222				26,734			110,767				109,114
Income before income taxes		11,216				12,786			9,573			12,650				11,642			46,225				54,234
Income tax expense		2,186				2,998			2,255			2,915				2,651			10,354				12,430
Net income	$	9,030			$	9,788		$	7,318		$	9,735			$	8,991		$	35,871			$	41,804

Consolidated Balance Sheets
	(unaudited)				(unaudited)				(unaudited)				(unaudited)				(audited)
(in thousands except share data)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Assets
Cash and due from banks	$	14,513			$	13,767			$	18,619			$	14,477			$	19,963
Interest-bearing deposits at other financial institutions		39,044				130,428				100,343				125,448				39,764
Federal funds sold		407				1,957				376				462				20,688
Total cash and cash equivalents		53,964				146,152				119,338				140,387				80,415
Investment securities available for sale		208,329				206,055				208,464				255,762				252,481
Restricted investments		4,353				4,340				3,803				4,215				7,362
Loans held for sale		7,481				4,843				10,146				9,620				7,416
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs		645				750				1,090				2,037				2,163
Portfolio loans receivable, net of deferred fees and costs		1,902,643				1,861,929				1,837,041				1,786,109				1,728,592
Less allowance for credit losses		(28,610	)			(28,279	)			(27,495	)			(26,216	)			(26,385	)
Total portfolio loans held for investment, net		1,874,033				1,833,650				1,809,546				1,759,893				1,702,207
Premises and equipment, net		5,069				5,297				5,494				5,367				3,386
Accrued interest receivable		11,494				11,231				10,155				9,985				9,489
Deferred tax asset		12,252				13,644				13,616				12,898				13,777
Bank owned life insurance		37,711				37,315				37,041				36,781				36,524
Other assets		9,336				9,207				9,173				8,341				8,435
Total assets	$	2,224,667			$	2,272,484			$	2,227,866			$	2,245,286			$	2,123,655
Liabilities
Deposits
Noninterest-bearing	$	617,373			$	680,803			$	693,129			$	705,801			$	674,313
Interest-bearing		1,278,623				1,287,185				1,241,232				1,238,573				1,083,759
Total deposits		1,895,996				1,967,988				1,934,361				1,944,374				1,758,072
Federal Home Loan Bank advances		22,000				22,000				22,000				32,000				107,000
Other borrowed funds		27,062				12,062				12,062				12,062				12,062
Accrued interest payable		5,583				5,204				3,029				1,977				1,031
Other liabilities		19,166				22,352				18,979				20,356				21,475
Total liabilities		1,969,807				2,029,606				1,990,431				2,010,769				1,899,640
Stockholders' equity
Common stock		139				139				140				141				141
Additional paid-in capital		54,473				54,549				55,856				57,277				58,190
Retained earnings		213,345				206,033				197,490				191,058				182,435
Accumulated other comprehensive loss		(13,097	)			(17,843	)			(16,051	)			(13,959	)			(16,751	)
Total stockholders' equity		254,860				242,878				237,435				234,517				224,015
Total liabilities and stockholders' equity	$	2,224,667			$	2,272,484			$	2,227,866			$	2,245,286			$	2,123,655

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 December 31, 2023									Three Months Ended September 30, 2023									Three Months Ended December 31, 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	$	65,336		$	680		4.13	%		$	87,112		$	1,183		5.39	%		$	111,404		$	1,006		3.58	%
Federal funds sold		1,574			21		5.29				1,134			15		5.25				4,054			35		3.41
Investment securities available for sale		223,132			1,083		1.93				229,731			1,089		1.88				292,117			1,402		1.90
Restricted investments		4,518			76		6.67				4,058			69		6.75				10,111			142		5.57
Loans held for sale		4,601			83		7.16				6,670			111		6.60				6,062			88		5.74
SBA-PPP loans receivable		699			4		2.27				906			11		4.82				2,435			28		4.59
Portfolio loans receivable(2)(3)		1,862,599			45,022		9.59				1,846,866			45,263		9.72				1,675,434			38,647		9.15
Total interest earning assets		2,162,459			46,969		8.62				2,176,477			47,741		8.70				2,101,617			41,348		7.81
Noninterest earning assets		40,020									44,640									34,539
Total assets	$	2,202,479								$	2,221,117								$	2,136,156
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	195,539			90		0.18			$	215,527			71		0.13			$	218,518			61		0.11
Savings		5,184			2		0.15				5,582			3		0.21				8,261			1		0.05
Money market accounts		680,697			7,139		4.16				655,990			6,373		3.85				552,185			3,016		2.17
Time deposits		380,731			4,528		4.72				374,429			4,256		4.51				177,346			1,299		2.91
Borrowed funds		41,823			321		3.05				34,932			228		2.59				199,982			1,772		3.52
Total interest-bearing liabilities		1,303,974			12,080		3.68				1,286,460			10,931		3.37				1,156,292			6,149		2.11
Noninterest-bearing liabilities:
Noninterest-bearing liabilities		27,529									25,047									23,941
Noninterest-bearing deposits		622,941									666,939									735,416
Stockholders’ equity		248,035									242,671									220,507
Total liabilities and stockholders’ equity	$	2,202,479								$	2,221,117								$	2,136,156
Net interest spread							4.94	%								5.33	%								5.70	%
Net interest income				$	34,889								$	36,810								$	35,199
Net interest margin(4)							6.40	%								6.71	%								6.64	%

_______________

⁽¹⁾ Annualized.
⁽²⁾ Includes nonaccrual loans.
⁽³⁾ For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, collectively, portfolio loans yield excluding credit card loans was 6.89%, 6.76% and 5.86%, respectively.
⁽⁴⁾ For the three months ended December 31, 2023, September 30, 2023, and December 31, 2022, collectively, SBA-PPP loans and credit card loans accounted for 248, 266 and 273 basis points of the reported net interest margin, respectively.

	Year Ended December 31,
		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	$	70,407		$	3,211		4.56	%		$	156,751		$	2,007		1.28	%
Federal funds sold		1,597			74		4.63				2,959			44		1.49
Investment securities available for sale		245,466			4,815		1.96				248,869			3,912		1.57
Restricted investments		5,016			346		6.90				5,475			275		5.02
Loans held for sale		5,755			382		6.64				9,696			435		4.49
SBA-PPP loans receivable		1,373			30		2.18				29,831			3,477		11.66
Portfolio loans receivable(2)(3)		1,815,595			174,348		9.60				1,579,661			140,496		8.89
Total interest earning assets		2,145,209			183,206		8.54				2,033,242			150,646		7.41
Noninterest earning assets		43,090									44,559
Total assets	$	2,188,299								$	2,077,801
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	201,194			298		0.15			$	253,923			174		0.07
Savings		5,768			8		0.14				8,917			5		0.06
Money market accounts		642,013			23,510		3.66				553,388			4,529		0.82
Time deposits		360,464			15,809		4.39				165,854			2,903		1.75
Borrowed funds		59,302			2,055		3.47				77,556			2,428		3.13
Total interest-bearing liabilities		1,268,741			41,680		3.29				1,059,638			10,039		0.95
Noninterest-bearing liabilities:
Noninterest-bearing liabilities		24,026									23,797
Noninterest-bearing deposits		655,013									781,971
Stockholders’ equity		240,519									212,395
Total liabilities and stockholders’ equity	$	2,188,299								$	2,077,801
Net interest spread							5.25	%								6.46	%
Net interest income				$	141,526								$	140,607
Net interest margin(4)							6.60	%								6.92	%

⁽¹⁾ Annualized.
⁽²⁾ Includes nonaccrual loans.
⁽³⁾ For the years ended December 31, 2023 and 2022, collectively, portfolio loans yield excluding credit card loans was 6.66% and 5.31%, respectively.
⁽⁴⁾ For the years ended December 31, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 264 and 299 basis points of the reported net interest margin, respectively.

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 year ended December 31, 2023 and December 31, 2022.

Segments
For the three months ended December 31, 2023
(in thousands)		Commercial Bank				CBHL				OpenSky®			Corporate(2)				Eliminations				Consolidated
Interest income		$	30,957			$	83			$	15,035		$	964			$	(70	)		$	46,969
Interest expense			11,884				31				—			235				(70	)			12,080
Net interest income			19,073				52				15,035			729				—				34,889
Provision (release of provision) for credit losses			691				—				2,125			(8	)			—				2,808
Release of credit losses on unfunded commitments			(106	)			—				—			—				—				(106	)
Net interest income after provision			18,488				52				12,910			737				—				32,187
Noninterest income			773				1,166				3,996			1				—				5,936
Noninterest expense(1)			15,135				1,437				10,378			(43	)			—				26,907
Net income (loss) before taxes		$	4,126			$	(219	)		$	6,528		$	781			$	—			$	11,216
Total assets		$	2,050,436			$	8,589			$	117,477		$	276,831			$	(228,666	)		$	2,224,667
For the three months ended September 30, 2023
(in thousands)		Commercial Bank				CBHL				OpenSky®			Corporate(2)				Eliminations				Consolidated
Interest income		$	30,409			$	111			$	16,143		$	1,162			$	(84	)		$	47,741
Interest expense			10,736				32				—			247				(84	)			10,931
Net interest income			19,673				79				16,143			915				—				36,810
Provision for credit losses			275				—				1,875			130				—				2,280
Provision for credit losses on unfunded commitments			24				—				—			—				—				24
Net interest income after provision			19,374				79				14,268			785				—				34,506
Noninterest income			665				1,255				4,405			1				—				6,326
Noninterest expense(1)			15,784				1,502				10,637			123				—				28,046
Net income (loss) before taxes		$	4,255			$	(168	)		$	8,036		$	663			$	—			$	12,786
Total assets		$	2,102,749			$	5,280			$	116,318		$	264,950			$	(216,813	)		$	2,272,484
For the three months ended December 31, 2022
(in thousands)		Commercial Bank				CBHL				OpenSky®			Corporate(2)				Eliminations				Consolidated
Interest income		$	24,389			$	88			$	16,035		$	891			$	(55	)		$	41,348
Interest expense			5,990				33				—			181				(55	)			6,149
Net interest income			18,399				55				16,035			710				—				35,199
Provision for loan losses			—				—				2,384			—				—				2,384
Net interest income after provision			18,399				55				13,651			710				—				32,815
Noninterest income			550				696				4,314			1				—				5,561
Noninterest expense(1)			13,811				2,085				10,724			114				—				26,734
Net income (loss) before taxes		$	5,138			$	(1,334	)		$	7,241		$	597			$	—			$	11,642
Total assets		$	1,939,601			$	7,936			$	122,418		$	245,399			$	(191,699	)		$	2,123,655

________________________

⁽¹⁾ Noninterest expense includes $5.7 million, $6.1 million and $6.1 million in data processing expense in OpenSky’s^® segment for the three months ended December 31, 2023 September 30, 2023, and December 31, 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.

Segments
For the year ended December 31, 2023
(in thousands)		Commercial Bank				CBHL				OpenSky®			Corporate(2)			Eliminations				Consolidated
Interest income		$	116,408			$	382			$	62,476		$	4,238		$	(298	)		$	183,206
Interest expense			40,896				135				—			947			(298	)			41,680
Net interest income			75,512				247				62,476			3,291			—				141,526
Provision for credit losses			1,540				—				7,948			122			—				9,610
Release of credit losses on unfunded commitments			(101	)			—				—			—			—				(101	)
Net interest income after provision			74,073				247				54,528			3,169			—				132,017
Noninterest income			2,737				4,909				17,325			4			—				24,975
Noninterest expense(1)			61,836				6,001				42,524			406			—				110,767
Net income (loss) before taxes		$	14,974			$	(845	)		$	29,329		$	2,767		$	—			$	46,225
Total assets		$	2,050,436			$	8,589			$	117,477		$	276,831		$	(228,666	)		$	2,224,667
For the year ended December 31, 2022
(in thousands)		Commercial Bank				CBHL				OpenSky®			Corporate(2)			Eliminations				Consolidated
Interest income		$	82,182			$	435			$	64,859		$	3,349		$	(179	)		$	150,646
Interest expense			9,245				218				—			755			(179	)			10,039
Net interest income			72,937				217				64,859			2,594			—				140,607
Provision (release of provision) for loan losses			(980	)			—				7,611			—			—				6,631
Net interest income after provision			73,917				217				57,248			2,594			—				133,976
Noninterest income			2,122				5,276				21,972			2			—				29,372
Noninterest expense(1)			52,552				8,450				47,647			465			—				109,114
Net income (loss) before taxes		$	23,487			$	(2,957	)		$	31,573		$	2,131		$	—			$	54,234
Total assets		$	1,939,601			$	7,936			$	122,418		$	245,399		$	(191,699	)		$	2,123,655

⁽¹⁾ Noninterest expense includes $23.7 million and $27.0 million in data processing expense in OpenSky’s^® segment for the years ended December 31, 2023 and 2022, respectively.
⁽²⁾ The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
		Quarter Ended
(in thousands except per share data)		December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Earnings:
Net income		$	9,030			$	9,788			$	7,318			$	9,735			$	8,991
Earnings per common share, diluted			0.65				0.70				0.52				0.68				0.62
Net interest margin			6.40	%			6.71	%			6.63	%			6.65	%			6.64	%
Net interest margin, excluding credit cards & SBA-PPP loans(1)			3.92	%			4.05	%			4.06	%			3.81	%			3.91	%
Return on average assets(2)			1.63	%			1.75	%			1.34	%			1.84	%			1.67	%
Return on average assets, excluding impact of SBA-PPP loans(1)(2)			1.63	%			1.75	%			1.34	%			1.84	%			1.67	%
Return on average equity(2)			14.44	%			16.00	%			12.30	%			16.98	%			16.18	%
Efficiency ratio			65.91	%			65.02	%			70.41	%			64.73	%			65.59	%
Balance Sheet:
Total portfolio loans receivable, net deferred fees		$	1,902,643			$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592
Total deposits			1,895,996				1,967,988				1,934,361				1,944,374				1,758,072
Total assets			2,224,667				2,272,484				2,227,866				2,245,286				2,123,655
Total stockholders' equity			254,860				242,878				237,435				234,517				224,015
Total average portfolio loans receivable, net deferred fees			1,862,599				1,846,866				1,800,800				1,750,539				1,675,434
Total average deposits			1,885,092				1,918,467				1,881,380				1,771,024				1,691,726
Portfolio loans-to-deposit ratio (period-end balances)			100.35	%			94.61	%			94.97	%			91.86	%			98.32	%
Portfolio loans-to-deposit ratio (average balances)			98.81	%			96.27	%			95.72	%			98.84	%			99.04	%
Asset Quality Ratios:
Nonperforming assets to total assets			0.72	%			0.67	%			0.71	%			0.73	%			0.46	%
Nonperforming assets to total assets, excluding the SBA-PPP loans(1)			0.72	%			0.67	%			0.71	%			0.73	%			0.46	%
Nonperforming loans to total loans			0.84	%			0.82	%			0.85	%			0.91	%			0.56	%
Nonperforming loans to portfolio loans(1)			0.84	%			0.82	%			0.86	%			0.91	%			0.56	%
Net charge-offs to average portfolio loans(1)(2)			0.53	%			0.38	%			0.35	%			0.61	%			0.49	%
Allowance for credit losses to total loans			1.50	%			1.52	%			1.50	%			1.47	%			1.52	%
Allowance for credit losses to portfolio loans(1)			1.50	%			1.52	%			1.50	%			1.47	%			1.53	%
Allowance for credit losses to non-performing loans			178.34	%			185.61	%			175.03	%			160.91	%			270.46	%
Bank Capital Ratios:
Total risk based capital ratio			14.81	%			14.51	%			14.08	%			14.09	%			14.21	%
Tier 1 risk based capital ratio			13.56	%			13.25	%			12.82	%			12.84	%			12.95	%
Leverage ratio			10.51	%			10.04	%			9.77	%			9.78	%			9.47	%
Common equity Tier 1 capital ratio			13.56	%			13.25	%			12.82	%			12.84	%			12.95	%
Tangible common equity			9.91	%			9.08	%			8.93	%			8.79	%			8.85	%
Holding Company Capital Ratios:
Total risk based capital ratio			17.38	%			17.11	%			16.81	%			16.75	%			16.33	%
Tier 1 risk based capital ratio			15.55	%			15.27	%			14.96	%			14.90	%			15.13	%
Leverage ratio			12.14	%			11.62	%			11.50	%			11.47	%			11.24	%
Common equity Tier 1 capital ratio			15.43	%			15.27	%			14.96	%			14.90	%			15.00	%
Tangible common equity			11.71	%			10.69	%			10.66	%			10.44	%			10.55	%
Composition of Loans:
SBA-PPP loans, net		$	645			$	750			$	1,090			$	2,037			$	2,163
Commercial real estate, non owner-occupied		$	351,116			$	350,637			$	348,892			$	348,047			$	351,423
Commercial real estate, owner-occupied		$	307,911			$	305,802			$	311,972			$	299,966			$	300,809
Residential real estate			573,104				558,147				555,133				545,899				484,735
Construction real estate			290,108				280,905				258,400				251,494				238,099
Commercial and industrial			238,548				236,782				233,598				221,258				220,221
Lender finance			11,085				—				—				—				—
Business equity lines of credit			14,117				14,155				13,277				12,205				12,319
Credit card, net of reserve(3)			123,331				122,533				122,925				112,860				128,434
Other consumer loans			950				948				1,187				1,578				1,179
Portfolio loans receivable		$	1,910,270			$	1,869,909			$	1,845,384			$	1,793,307			$	1,737,219
Deferred origination fees, net			(7,627	)			(7,980	)			(8,343	)			(7,198	)			(8,627	)
Portfolio loans receivable, net		$	1,902,643			$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592
Composition of Deposits:
Noninterest-bearing		$	617,373			$	680,803			$	693,129			$	705,801			$	674,313
Interest-bearing demand			199,308				229,035				243,095				219,685				207,836
Savings			5,211				5,686				5,816				5,835				7,530
Money markets			663,129				668,774				631,148				632,087				574,978
Brokered time deposits			142,356				128,665				128,665				181,820				131,819
Other time deposits			268,619				255,025				232,508				199,146				161,596
Total deposits		$	1,895,996			$	1,967,988			$	1,934,361			$	1,944,374			$	1,758,072
Capital Bank Home Loan Metrics:
Origination of loans held for sale		$	45,152			$	50,023			$	61,480			$	44,448			$	43,956
Mortgage loans sold			34,140				39,364				49,231				40,483				43,415
Gain on sale of loans			1,015				1,011				1,262				1,223				912
Purchase volume as a % of originations			89.99	%			92.29	%			93.12	%			90.72	%			88.94	%
Gain on sale as a % of loans sold(4)			2.97	%			2.57	%			2.56	%			3.02	%			2.10	%
Mortgage commissions		$	465			$	528			$	621			$	378			$	451
OpenSky®Portfolio Metrics:
Open customer accounts			525,314				529,205				540,058				527,231				533,855
Secured credit card loans, gross		$	95,300			$	98,138			$	100,218			$	89,078			$	104,157
Unsecured credit card loans, gross			30,817				27,430				25,254				25,782				26,795
Noninterest secured credit card deposits			173,857				181,185				186,566				184,809				187,412

_______________

⁽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.

Appendix

Reconciliation of Non-GAAP Measures

The Company has presented the following non-GAAP (U.S. Generally Accepted Accounting Principles) financial measures because it believes that these measures provide useful and comparative information to assess trends in the Company’s results of operations and financial condition. Presentation of these non-GAAP financial measures is consistent with how the Company evaluates its performance internally and these non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company’s industry. Investors should recognize that the Company’s presentation of these non-GAAP financial measures might not be comparable to similarly-titled measures of other companies. These non-GAAP financial measures should not be considered a substitute for GAAP basis measures and the Company strongly encourages a review of its condensed consolidated financial statements in their entirety.

Return on Average Assets, as Adjusted	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Net Income	$	9,030			$	9,788			$	7,318			$	9,735			$	8,991
Less: SBA-PPP Loan Income		4				11				7				8				28
Net Income, as Adjusted	$	9,026			$	9,777			$	7,311			$	9,727			$	8,963
Average Total Assets		2,202,479				2,221,117				2,184,351				2,144,249				2,136,156
Less: Average SBA-PPP Loans		699				906				1,808				2,099				2,435
Average Total Assets, as Adjusted	$	2,201,780			$	2,220,211			$	2,182,543			$	2,142,150			$	2,133,721
Return on Average Assets, as Adjusted		1.63	%			1.75	%			1.34	%			1.84	%			1.67	%

Return on Average Assets, as Adjusted	Year Ended
(in thousands)	December 31, 2023				December 31, 2022
Net Income	$	35,871			$	41,804
Less: SBA-PPP Loan Income		30				3,477
Net Income, as Adjusted	$	35,841			$	38,327
Average Total Assets		2,188,299				2,077,801
Less: Average SBA-PPP Loans		1,373				29,831
Average Total Assets, as Adjusted	$	2,186,926			$	2,047,970
Return on Average Assets, as Adjusted		1.64	%			1.87	%

Net Interest Margin, as Adjusted	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Net Interest Income	$	34,889			$	36,810			$	35,340			$	34,487			$	35,199
Less: Credit Card Loan Income		14,677				15,792				14,818				15,809				15,717
Less: SBA-PPP Loan Income		4				11				7				8				28
Net Interest Income, as Adjusted	$	20,208			$	21,007			$	20,515			$	18,670			$	19,454
Average Interest Earning Assets		2,162,459				2,176,477				2,136,936				2,103,984				2,101,617
Less: Average Credit Card Loans		114,551				116,814				110,574				115,850				124,120
Less: Average SBA-PPP Loans		699				906				1,808				2,099				2,435
Total Average Interest Earning Assets, as Adjusted	$	2,047,209			$	2,058,757			$	2,024,554			$	1,986,035			$	1,975,062
Net Interest Margin, as Adjusted		3.92	%			4.05	%			4.06	%			3.81	%			3.91	%

Net Interest Margin, as Adjusted	Year Ended
(in thousands)	December 31, 2023				December 31, 2022
Net Interest Income	$	141,526			$	140,607
Less: Credit Card Loan Income		61,096				63,348
Less: SBA-PPP Loan Income		30				3,477
Net Interest Income, as Adjusted	$	80,400			$	73,782
Average Interest Earning Assets		2,145,209				2,033,242
Less: Average Credit Card Loans		114,450				126,473
Less: Average SBA-PPP Loans		1,373				29,831
Total Average Interest Earning Assets, as Adjusted	$	2,029,386			$	1,876,938
Net Interest Margin, as Adjusted		3.96	%			3.93	%

Portfolio Loans Receivable Yield, as Adjusted	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Portfolio Loans Receivable Interest Income	$	45,022			$	45,263			$	42,872			$	41,191			$	38,647
Less: Credit Card Loan Income		14,677				15,792				14,818				15,809				15,717
Portfolio Loans Receivable Interest Income, as Adjusted	$	30,345			$	29,471			$	28,054			$	25,382			$	22,930
Average Portfolio Loans Receivable		1,862,599				1,846,866				1,800,800				1,750,539				1,675,434
Less: Average Credit Card Loans		114,551				116,814				110,574				115,850				124,120
Total Average Portfolio Loans Receivable, as Adjusted	$	1,748,048			$	1,730,052			$	1,690,226			$	1,634,689			$	1,551,314
Portfolio Loans Receivable Yield, as Adjusted		6.89	%			6.76	%			6.66	%			6.30	%			5.86	%

Portfolio Loans Receivable Yield, as Adjusted	Year Ended
(in thousands)	December 31, 2023				December 31, 2022
Portfolio Loans Receivable Interest Income	$	174,348			$	140,496
Less: Credit Card Loan Income		61,096				63,348
Portfolio Loans Receivable Interest Income, as Adjusted	$	113,252			$	77,148
Average Portfolio Loans Receivable		1,815,595				1,579,661
Less: Average Credit Card Loans		114,450				126,473
Total Average Portfolio Loans Receivable, as Adjusted	$	1,701,145			$	1,453,188
Portfolio Loans Receivable Yield, as Adjusted		6.66	%			5.31	%

Pre-tax, Pre-Provision Net Revenue ("PPNR")	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023			June 30, 2023			March 31, 2023				December 31, 2022
Net Income	$	9,030			$	9,788		$	7,318		$	9,735			$	8,991
Add: Income Tax Expense		2,186				2,998			2,255			2,915				2,651
Add: Provision for Credit Losses		2,808				2,280			2,862			1,660				2,384
Add: (Release of) Provision for Credit Losses on Unfunded Commitments		(106	)			24			—			(19	)			—
Pre-tax, Pre-Provision Net Revenue ("PPNR")	$	13,918			$	15,090		$	12,435		$	14,291			$	14,026

Pre-tax, Pre-Provision Net Revenue ("PPNR")	Year Ended
(in thousands)	December 31, 2023				December 31, 2022
Net Income	$	35,871			$	41,804
Add: Income Tax Expense		10,354				12,430
Add: Provision for Credit Losses		9,610				6,631
Add: Release of Credit Losses on Unfunded Commitments		(101	)			—
Pre-tax, Pre-Provision Net Revenue ("PPNR")	$	55,734			$	60,865

Allowance for Credit Losses to Total Portfolio Loans	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Allowance for Credit Losses	$	28,610			$	28,279			$	27,495			$	26,216			$	26,385
Total Loans		1,903,288				1,862,679				1,838,131				1,788,146				1,730,755
Less: SBA-PPP Loans		645				750				1,090				2,037				2,163
Total Portfolio Loans	$	1,902,643			$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592
Allowance for Credit Losses to Total Portfolio Loans		1.50	%			1.52	%			1.50	%			1.47	%			1.53	%

Nonperforming Assets to Total Assets, net SBA-PPP Loans	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Total Nonperforming Assets	$	16,042			$	15,236			$	15,709			$	16,293			$	9,756
Total Assets		2,224,667				2,272,484				2,227,866				2,245,286				2,123,655
Less: SBA-PPP Loans		645				750				1,090				2,037				2,163
Total Assets, net SBA-PPP Loans	$	2,224,022			$	2,271,734			$	2,226,776			$	2,243,249			$	2,121,492
Nonperforming Assets to Total Assets, net SBA-PPP Loans		0.72	%			0.67	%			0.71	%			0.73	%			0.46	%

Nonperforming Loans to Total Portfolio Loans	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Total Nonperforming Loans	$	16,042			$	15,236			$	15,709			$	16,293			$	9,756
Total Loans		1,903,288				1,862,679				1,838,131				1,788,146				1,730,755
Less: SBA-PPP Loans		645				750				1,090				2,037				2,163
Total Portfolio Loans	$	1,902,643			$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592
Nonperforming Loans to Total Portfolio Loans		0.84	%			0.82	%			0.86	%			0.91	%			0.56	%

Net Charge-offs to Average Portfolio Loans	Quarter Ended
(in thousands)	December 31, 2023				September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022
Total Net Charge-offs	$	2,477			$	1,780			$	1,583			$	2,633			$	2,090
Total Average Loans		1,863,298				1,847,772				1,802,608				1,752,638				1,677,869
Less: Average SBA-PPP Loans		699				906				1,808				2,099				2,435
Total Average Portfolio Loans	$	1,862,599			$	1,846,866			$	1,800,800			$	1,750,539			$	1,675,434
Net Charge-offs to Average Portfolio Loans		0.53	%			0.38	%			0.35	%			0.61	%			0.49	%

Net Charge-offs to Average Portfolio Loans	Year Ended
(in thousands)	December 31, 2023				December 31, 2022
Total Net Charge-offs	$	8,473			$	5,427
Total Average Loans		1,816,968				1,609,492
Less: Average SBA-PPP Loans		1,373				29,831
Total Average Portfolio Loans	$	1,815,595			$	1,579,661
Net Charge-offs to Average Portfolio Loans		0.47	%			0.34	%

Tangible Book Value per Share	Quarter Ended
(in thousands, except per share amounts)	December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022
Total Stockholders' Equity	$	254,860		$	242,878		$	237,435		$	234,517		$	224,015
Less: Preferred Equity		—			—			—			—			—
Less: Intangible Assets		—			—			—			—			—
Tangible Common Equity	$	254,860		$	242,878		$	237,435		$	234,517		$	224,015
Period End Shares Outstanding		13,922,532			13,893,083			13,981,414			14,082,657			14,138,829
Tangible Book Value per Share	$	18.31		$	17.48		$	16.98		$	16.65		$	15.84

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, 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 December 31, 2023 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.

FORWARD-LOOKING STATEMENTS

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

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing wars in Ukraine and in the Middle East; 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; any failure to adequately manage the transition from USD LIBOR as a reference rate; 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; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; 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.

FAQ

What were the diluted EPS, ROAA, and ROAE for 4Q 2023?

The diluted EPS for 4Q 2023 was $0.65, with an ROAA of 1.63% and an ROAE of 14.44%.

What was the Tangible Book Value Per Share for 4Q 2023?

The Tangible Book Value Per Share for 4Q 2023 was $18.31, showing a 15.6% increase from the previous year.

How much was the loan growth for 4Q 2023?

The loan growth for 4Q 2023 was $40.7 million, or 8.7% annualized.

What was the cash dividend declared by Capital Bancorp, Inc.?

Capital Bancorp, Inc. declared a cash dividend of $0.08 per share.

What was the net income for the fourth quarter of 2023?

The net income for the fourth quarter of 2023 was $9.0 million, with a diluted EPS of $0.65.

Who is the Chief Executive Officer of Capital Bancorp, Inc.?

Ed Barry is the Chief Executive Officer of Capital Bancorp, Inc.