Capital Bancorp, Inc. Reports Third Quarter 2023 Net Income of $9.8 million, or $0.70 per share

Rhea-AI Summary

Capital Bancorp reports a 33.8% increase in net income for Q3 2023, with diluted EPS of $0.70. Loan and deposit growth contribute to positive operating leverage. Tangible book value per share increases by 15% compared to Q3 2022. Cash dividend of $0.08 per share declared.

Positive

• Net income expands by 33.8% for Q3 2023
• Loan and deposit growth generates positive operating leverage
• Tangible book value per share increases by 15% compared to Q3 2022
• Cash dividend of $0.08 per share declared

Negative

• None.

• Net Income Expands 33.8% with Improved Net Interest Margin from 2Q 2023
• Diluted EPS of $0.70, ROAA of 1.75%, and ROAE of 16.00% for 3Q 2023
• Loan and Deposit Growth Generates Positive Operating Leverage
• Tangible Book Value Per Share⁽¹⁾ of $17.48 for 3Q 2023 up 15% from 3Q 2022
• Cash dividend of $0.08 per share declared
  

ROCKVILLE, Md., Oct. 23, 2023 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.8 million, or $0.70 per diluted share, for the third quarter 2023, compared to net income of $7.3 million, or $0.52 per diluted share, for the second quarter 2023 and $11.1 million, or $0.77 per diluted share, for the third quarter 2022. For the quarter, total average deposits increased $37.1 million and the average loan portfolio grew $42.9 million. In addition, the net interest margin of 6.71% for the third quarter 2023 improved when compared to 6.63% for the second quarter 2023. Adjusted net interest margin⁽¹⁾ (excluding credit card and SBA-PPP loans) of 4.05% for the third quarter 2023 remained stable when compared to adjusted net interest margin⁽¹⁾ of 4.06% for the second quarter 2023.

The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on November 22, 2023 to shareholders of record on November 6, 2023.

"Our business model is proving to be stable and resilient against a challenging backdrop," said Ed Barry, Chief Executive Officer of the Company and the Bank. "Our focus on core deposit relationships and differentiated lending has enabled profitable growth. We continue to make investments in technology, people, and asset generation that should further strengthen our franchise. Credit remains stable and we maintained high capital levels allowing us to be opportunistic moving forward."

“The Board is pleased with our improved quarter over quarter performance,” said Steven J. Schwartz, Chairman of the Company. "Our continued, stable net interest margin, coupled with growth in loans and deposits, enabled our ROAA and ROE to bounce back nicely and positions the Bank for continued best-in-class performance. In addition, we are gratified by our year-over-year growth in tangible book value per share, particularly considering the challenges facing banks today due to a rapidly changing interest rate environment, and falling values of certain real estate asset classes.”

⁽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.

Third Quarter 2023 Highlights

Capital Bancorp, Inc.

Earnings Summary - Net income of $9.8 million, or $0.70 per diluted share, increased $2.5 million compared to $7.3 million, or $0.52 per diluted share, for the second quarter 2023.

• Net interest income of $36.8 million increased $1.5 million compared to $35.3 million for the second quarter 2023. Interest income of $47.7 million increased $2.7 million compared to $45.1 million for the second quarter 2023. Interest expense of $10.9 million increased $1.2 million compared to $9.7 million for the second quarter 2023.
• The provision for credit losses was $2.3 million, a decrease of $0.6 million from the second quarter 2023. The change in provision was partially due to lower loan growth of $24.9 million from June 30, 2023 to September 30, 2023 as compared to loan growth of $50.9 million from March 31, 2023 to June 30, 2023.
• Noninterest income of $6.3 million decreased $0.4 million compared to $6.7 million for the second quarter 2023. Credit card fees decreased $0.3 million partially due to interchange fees from lower customer purchases as the number of open customer accounts decreased quarter over quarter.
• Noninterest expense of $28.0 million decreased $1.5 million compared to $29.6 million for the second quarter 2023 including total advertising expense of $1.6 million decreasing $1.1 million off of seasonally higher second quarter levels.

Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.75% and 16.00%, respectively, for the three months ended September 30, 2023, compared to 1.34% and 12.30%, respectively, for the three months ended June 30, 2023.

• The efficiency ratio was 65.0% for the three months ended September 30, 2023, compared to 70.4% for the three months ended June 30, 2023. The change was primarily attributable to a $1.5 million increase in net interest income and a $1.5 million reduction in noninterest expense quarter over quarter.
  

Balance Sheet – Total assets of $2.3 billion at September 30, 2023 increased $44.6 million, or 2.0%, from June 30, 2023.

• Cash and cash equivalents increased $26.8 million.
• Net portfolio loans of $1.9 billion increased $24.9 million, representing 5.4% annualized growth.
• Total deposits of $2.0 billion at September 30, 2023 increased $33.6 million, or 1.7%, from June 30, 2023, while total average deposits increased $37.1 million, or 7.8% annualized, quarter over quarter.
• The investment securities portfolio continues to be classified as available for sale and had a fair market value of $206.1 million, or 9.1% of total assets, at September 30, 2023 down slightly from $208.5 million at June 30, 2023. The amortized cost of the investment securities portfolio was $229.4 million, with an effective duration of 3.21 years. U.S. Treasury securities represent 74.8% of the overall investment portfolio. The accumulated other comprehensive loss ("AOCI Loss") on the investment securities portfolio increased $1.8 million during the quarter to $17.8 million as of September 30, 2023, which represents 7.3% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.

Net Interest Margin - Net interest margin improved to 6.71% for the three months ended September 30, 2023, compared to 6.63% for the three months ended June 30, 2023. Adjusted net interest margin (excluding credit card and SBA-PPP loans), of 4.05%, remained stable compared to 4.06% for the three months ended June 30, 2023.

• The average yield on interest earning assets increased 24 basis points compared to the second quarter 2023. The increase in average yield is due to portfolio loans increasing 17 basis points to 9.72%, and interest-bearing deposits held at other institutions increased 96 basis points to 5.39%. Average portfolio loans increased $46.1 million and average interest-bearing deposits held at other institutions increased $20.7 million, compared to the second quarter 2023.
• The average rate on interest-bearing liabilities increased 24 basis points compared to the second quarter 2023. Increases in average rates include money market accounts increasing 38 basis points to 3.85% and time deposits increasing 21 basis points to 4.51%, while average balances increased $30.5 million and $8.0 million, respectively, compared to the second quarter 2023. The average rate on borrowed funds decreased 48 basis points to 2.59%, as a result of a reduction in average short-term FHLB advances of $8.3 million to $0.9 million in the third quarter 2023 from $9.1 million in the second quarter 2023.

Deposits and Cost of Funds - Total deposits at September 30, 2023 increased by $33.6 million, or 1.7%, compared to June 30, 2023.

• Interest-bearing deposits of $1.3 billion increased $46.0 million, or 3.7%, compared to June 30, 2023 with growth in money market accounts of $37.6 million, other time deposits of $22.5 million and a reduction in interest-bearing demand accounts of $14.1 million. Noninterest-bearing deposits of $680.8 million decreased $12.3 million, or 1.8%, compared to June 30, 2023. Brokered time deposits totaled $128.7 million at September 30, 2023, unchanged from June 30, 2023.
• The elevated interest rate environment has driven up the average cost of interest-bearing liabilities to 3.37% for the quarter ended September 30, 2023, compared to 3.13% for the second quarter 2023.
• Average noninterest-bearing deposits of $666.9 million decreased $9.4 million, or 1.4%, compared to June 30, 2023, and represented 34.8% of total average deposits at September 30, 2023.
• Average borrowed funds of $34.9 million decreased $8.3 million, or 19.1%, compared to June 30, 2023.

Robust Capital Positions - As of September 30, 2023, the Company reported a common equity tier 1 capital ratio of 15.71%, compared to 14.96% at June 30, 2023, and an allowance for credit losses to total loans ratio of 1.52%, compared to an allowance for credit losses to total loans ratio of 1.50% as June 30, 2023. Management expects the Company to remain well-capitalized for the foreseeable future. Shares repurchased and retired during the three months ended September 30, 2023, as part of the Company's stock repurchase program, totaled 100,575 shares at an average price of $19.47, for a total cost of $2.0 million including commissions. Tangible book value per common share grew 2.9% to $17.48 at September 30, 2023 when compared to June 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 September 30, 2023 totaled $646.6 million, including available collateralized lines of credit of $514.5 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $56.1 million.

Commercial Bank

Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $29.9 million, to $1.7 billion, gross, at September 30, 2023 compared to June 30, 2023.

Net Interest Income - Interest income of $30.4 million increased $1.7 million compared to $28.7 million for the second quarter 2023 driven primarily by loan growth. Interest expense of $10.7 million increased $1.2 million driven by an increase in average interest-bearing deposits with slightly higher rates in the third quarter 2023.

Credit Metrics - Nonperforming assets ("NPAs") decreased 4 basis points to 0.67% of total assets at September 30, 2023 compared to 0.71% at June 30, 2023 as a result of a decrease in nonaccrual loans at September 30, 2023 to $15.2 million compared to $15.7 million at June 30, 2023. Included in nonperforming assets is a single $8.2 million, multi-unit residential real estate loan that was downgraded in the first quarter of 2023. At September 30, 2023 commercial real estate loans with office space exposure totaled $55.4 million, or 3.0% of total portfolio loans, with a weighted average loan-to-value ("LTV") of 48.2%. Owner-occupied commercial real estate loans with office exposure totaled $42.5 million with a weighted average LTV of 47.8% and non owner-occupied commercial real estate loans with office exposure totaled $12.8 million with a weighted average LTV of 49.8%.

OpenSky^®

Revenues - Total revenue of $20.5 million increased $0.7 million from the second quarter 2023. Interest income of $16.1 million increased $1.0 million from the second quarter 2023. Average OpenSky^® loan balances, net of reserves and deferred fees of $116.8 million for the third quarter 2023, increased $6.2 million, or 5.6%, compared to $110.6 million for the second quarter 2023. Noninterest income of $4.4 million decreased $0.3 million due to a decline in credit card fees as compared to the second quarter 2023.

Noninterest Expense - Total noninterest expense of $10.6 million decreased $1.4 million from the second quarter 2023. Noninterest expense declined in the third quarter off of higher seasonal second quarter levels driven primarily by higher advertising expense. Advertising expense can vary throughout the year based on market opportunities for new account acquisition. During the third quarter 2023, the number of OpenSky^® credit card accounts declined by 10,853 to 529,205.

Loan Balances - OpenSky^® loan balances, net of reserves, of $122.5 million at September 30, 2023 decreased by $0.4 million, or 0.3%, compared to $122.9 million at June 30, 2023. Corresponding deposit balances of $181.2 million at September 30, 2023 decreased $5.4 million, or 2.9%, compared to $186.6 million at June 30, 2023. Gross unsecured loan balances of $27.4 million at September 30, 2023 increased $2.2 million compared to $25.3 million at June 30, 2023.

OpenSky^® Credit - Card delinquencies and utilization remained stable in the third quarter 2023 when compared to the second quarter 2023. The provision for credit losses decreased $0.3 million compared to the second quarter 2023 as card balances, net of reserve decreased $0.4 million during the third quarter 2023 as compared to an increase of $10.1 million during the second quarter 2022.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited
	Quarter Ended												3Q23 vs 2Q23							3Q23 vs 3Q22
(in thousands except per share data)	September 30, 2023				June 30, 2023				September 30, 2022				$ Change				% Change			$ Change				% Change
Earnings Summary
Interest income	$	47,741			$	45,080			$	38,340			$	2,661			5.9	%		$	9,401			24.5	%
Interest expense		10,931				9,740				1,663				1,191			12.2	%			9,268			557.3	%
Net interest income		36,810				35,340				36,677				1,470			4.2	%			133			0.4	%
Provision for credit losses		2,280				2,862				1,260				(582	)		(20.3	)%			1,020			81.0	%
Provision for credit losses on unfunded commitments		24				—				—				24			—	%			24			—	%
Noninterest income		6,326				6,687				7,108				(361	)		(5.4	)%			(782	)		(11.0	)%
Noninterest expense		28,046				29,592				28,094				(1,546	)		(5.2	)%			(48	)		(0.2	)%
Income before income taxes		12,786				9,573				14,431				3,213			33.6	%			(1,645	)		(11.4	)%
Income tax expense		2,998				2,255				3,336				743			32.9	%			(338	)		(10.1	)%
Net income	$	9,788			$	7,318			$	11,095			$	2,470			33.8	%		$	(1,307	)		(11.8	)%
Pre-tax pre-provision net revenue ("PPNR")(1)	$	15,090			$	12,435			$	15,691			$	2,655			21.4	%		$	(601	)		(3.8	)%
Weighted average common shares - Basic		13,933				14,025				14,030				(92	)		(0.7	)%			(97	)		(0.7	)%
Weighted average common shares - Diluted		14,024				14,059				14,375				(35	)		(0.2	)%			(351	)		(2.4	)%
Earnings per share - Basic	$	0.70			$	0.52			$	0.79			$	0.18			34.6	%		$	(0.09	)		(11.4	)%
Earnings per share - Diluted	$	0.70			$	0.52			$	0.77			$	0.18			34.6	%		$	(0.07	)		(9.1	)%
Return on average assets (annualized)		1.75	%			1.34	%			2.15	%			0.41	%		30.6	%		(0.40		)%		(18.6	)%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1)		1.75	%			1.34	%			2.10	%			0.41	%		30.6	%		(0.35		)%		(16.7	)%
Return on average equity (annualized)		16.00	%			12.30	%			20.32	%			3.70	%		30.1	%		(4.32		)%		(21.3	)%

______________

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

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)
		Nine Months Ended
		September 30,
(in thousands except per share data)		2023				2022				$ Change				% Change
Earnings Summary
Interest income		$	136,237			$	109,298			$	26,939			24.6	%
Interest expense			29,600				3,890				25,710			660.9	%
Net interest income			106,637				105,408				1,229			1.2	%
Provision for credit losses			6,802				4,247				2,555			60.2	%
Provision for credit losses on unfunded commitments			5				—				5			—	%
Noninterest income			19,039				23,811				(4,772	)		(20.0	)%
Noninterest expense			83,860				82,379				1,481			1.8	%
Income before income taxes			35,009				42,593				(7,584	)		(17.8	)%
Income tax expense			8,168				9,779				(1,611	)		(16.5	)%
Net income		$	26,841			$	32,814			$	(5,973	)		(18.2	)%
Pre-tax pre-provision net revenue ("PPNR")(1)		$	41,816			$	46,840			$	(5,024	)		(10.7	)%
Weighted average common shares - Basic			14,038				14,009				29			0.2	%
Weighted average common shares - Diluted			14,112				14,329				(217	)		(1.5	)%
Earnings per share - Basic		$	1.91			$	2.34			$	(0.43	)		(18.4	)%
Earnings per share - Diluted		$	1.90			$	2.29			$	(0.39	)		(17.0	)%
Return on average assets (annualized)			1.64	%			2.13	%		(0.49		)%		(23.0	)%
Return on average assets, excluding impact of SBA-PPP loans (annualized)(1)			1.64	%			1.94	%		(0.30		)%		(15.5	)%
Return on average equity (annualized)			15.08	%			20.93	%		(5.85		)%		(28.0	)%

	Quarter Ended											Quarter Ended
	September 30,											June 30,				March 31,				December 31,
(in thousands except per share data)	2023				2022				% Change			2023				2023				2022
Balance Sheet Highlights
Assets	$	2,272,484			$	2,009,358			13.1	%		$	2,227,866			$	2,245,286			$	2,123,655
Investment securities available for sale		206,055				269,620			(23.6	)%			208,464				255,762				252,481
Mortgage loans held for sale		4,843				6,875			(29.6	)%			10,146				9,620				7,416
SBA-PPP loans, net of fees		750				2,662			(71.8	)%			1,090				2,037				2,163
Portfolio loans receivable(2)		1,861,929				1,648,001			13.0	%			1,837,041				1,786,109				1,728,592
Allowance for credit losses		28,279				26,091			8.4	%			27,495				26,216				26,385
Deposits		1,967,988				1,737,591			13.3	%			1,934,361				1,944,374				1,758,072
FHLB borrowings		22,000				22,000			—	%			22,000				32,000				107,000
Other borrowed funds		12,062				12,062			—	%			12,062				12,062				12,062
Total stockholders' equity		242,878				214,005			13.5	%			237,435				234,517				224,015
Tangible common equity(1)		242,878				214,005			13.5	%			237,435				234,517				224,015
Common shares outstanding		13,896				14,039			(1.0	)%			13,981				14,083				14,139
Book value per share	$	17.48			$	15.24			14.7	%		$	16.98			$	16.65			$	15.84
Tangible book value per share(1)	$	17.48			$	15.24			14.7	%		$	16.98			$	16.65			$	15.84
Dividends per share	$	0.08			$	0.06			33.3	%		$	0.06			$	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 September 30, 2023 and 2022

For the three months ended September 30, 2023, net interest income of $36.8 million increased slightly from $36.7 million in the same period in 2022, primarily due to increased average balances of $245.3 million in portfolio loans combined with a 78 basis point increase in yield for portfolio loans partially offset by significant increases in the cost of funding. The net interest margin decreased 53 basis points to 6.71% for the three months ended September 30, 2023, from the same period in 2022 as interest income on credit cards decreased $1.0 million and interest income on SBA-PPP totaled $0.3 million for the three months ended September 30, 2022 with no comparable amount in 2023. Net interest margin, excluding credit card and SBA-PPP loans, decreased to 4.05% for the three months ended September 30, 2023, compared to 4.16% for the same period in 2022 as the costs of deposits, including money market accounts and time deposits, outpaced the increases in yields on interest-bearing deposits and portfolio loans.

For the three months ended September 30, 2023, average interest earning assets increased $166.4 million, or 8.3%, to $2.2 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 $280.9 million, or 27.9%, and the average cost of interest-bearing liabilities increased to 3.37%, a 271 basis point increase from 0.66%.

For the three months ended September 30, 2023, the provision for credit losses was $2.3 million, an increase of $1.0 million from the same period in 2022. Net charge-offs for the three months ended September 30, 2023 were $1.8 million, or 0.38% on an annualized basis of average portfolio loans, compared to $1.6 million, or 0.39% on an annualized basis of average loans for the same period in 2022. Of the $1.8 million in net charge-offs during the quarter, $1.4 million related to secured and partially secured cards in the credit card portfolio and $0.3 million related to unsecured cards.

For the three months ended September 30, 2023, noninterest income of $6.3 million decreased $0.8 million, or 11.0%, from the same period in 2022. Credit card fees declined by $1.1 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 $14.1 million to $122.5 million as of September 30, 2023, from $136.7 million at September 30, 2022. The related deposit account balances decreased 10.0% to $181.2 million at September 30, 2023 when compared to $201.3 million at September 30, 2022 reflecting the reduction in the number of open customer accounts year over year.

The efficiency ratio for the three months ended September 30, 2023 was 65.02% compared to 64.16% for the three months ended September 30, 2022.

For the three months ended September 30, 2023, noninterest expense of $28.0 million decreased slightly from $28.1 million for the same period in 2022. The change includes decreases in professional fees of $1.5 million and data processing expense of $0.8 million partially offset by increases in salaries and employee benefits of $1.7 million and other operating expense of $0.5 million.

Operating Results - Comparison of Nine Months Ended September 30, 2023 and 2022

For the nine months ended September 30, 2023, net interest income of $106.6 million increased $1.2 million from the same period in 2022, primarily due to increased average balances of $252.4 million in portfolio loans combined with the 81 basis point increase in yield for portfolio loans offset by significant increases in the cost of funding. The net interest margin decreased 35 basis points to 6.66% for the nine months ended September 30, 2023 from the same period in 2022. Net interest margin, excluding credit card and SBA-PPP loans, was 3.98% for the nine months ended September 30, 2023, compared to 3.94% for the same period in 2022.

For the nine months ended September 30, 2023, average interest earning assets increased $129.2 million, or 6.4%, to $2.1 billion as compared to the same period in 2022, and the average yield on interest earning assets increased 124 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $229.8 million, or 22.4%, while the average cost of interest-bearing liabilities increased 264 basis points to 3.15% from 0.51%.

For the nine months ended September 30, 2023, the provision for credit losses was $6.8 million, an increase of $2.6 million from the prior year, attributable primarily to the credit card portfolio. Net charge-offs for the nine months ended September 30, 2023 were $6.0 million, or 0.45% annualized of average portfolio loans, compared to $1.7 million, or 0.23% annualized of average portfolio loans, for the same period in 2022. The $6.0 million in net charge-offs during the nine months ended September 30, 2023 was comprised primarily of credit card portfolio net charge-offs with $4.1 million related to secured and partially secured cards while $1.0 million was related to unsecured cards.

For the nine months ended September 30, 2023, noninterest income of $19.0 million decreased $4.8 million, or 20.0%, from the same period in 2022. The decrease was primarily driven by the decline in credit card fees of $4.4 million as the number of open customer accounts declined to 529,205 at September 30, 2023 from 576,844 year over year, which resulted in lower interchange and other fee income recognized compared to the prior year. The elevated interest rate environment continues to put pressure on the mortgage market, resulting in declines in home loan sales and home loan refinances, which has resulted in a $0.6 million decrease in mortgage banking revenue compared to the prior year.

The efficiency ratio for the nine months ended September 30, 2023 was 66.73% compared to 63.75% for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023, noninterest expense of $83.9 million increased $1.5 million, or 1.8%, from the same period in 2022. The increase was primarily driven by a $6.0 million, or 19.2%, increase in salaries and employee benefits, partially offset by a $3.2 million, or 13.9%, decrease in data processing expense and a $1.2 million 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 September 30, 2023 were $2.3 billion, an increase of $44.6 million, or 2.0%, from the balance at June 30, 2023 and an increase of $263.1 million, or 13.1%, from the balance at September 30, 2022. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.9 billion at September 30, 2023, an increase of $24.9 million, up 1.4% or 5.4% annualized, compared to June 30, 2023, and an increase of $213.9 million, or 13.0%, compared to $1.6 billion at September 30, 2022.

The Company recorded a provision for credit losses of $6.8 million during the nine months ended September 30, 2023, which increased the allowance for credit losses to $28.3 million, or 1.52% of total loans at September 30, 2023, representing an increase of $0.8 million or 2.9%, from the balance at June 30, 2023. Nonperforming assets, which were comprised solely of nonperforming loans as of September 30, 2023, were $15.2 million, or 0.67% of total assets, down from $15.7 million, or 0.71% of total assets at June 30, 2023 and up from $8.6 million, or 0.43% of total assets at September 30, 2022. Included in nonperforming assets is a single $8.2 million, multi-unit residential real estate loan that was downgraded in the first quarter of 2023.

Deposits were $2.0 billion at September 30, 2023, an increase of $33.6 million, or 1.7%, from the balance at June 30, 2023 and an increase of $230.4 million, or 13.3%, from the balance at September 30, 2022. Average deposits of $1.9 billion for the three months ended September 30, 2023, increased $37.1 million, or 2.0%, as compared to the three months ended June 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 $135.5 million to $666.9 million for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022. These deposits represented 34.6% of total deposits at September 30, 2023 compared to 46.4% at September 30, 2022. Uninsured deposits were approximately $857.7 million as of September 30, 2023, representing 43.6% of the Company's deposit portfolio, compared to $860.4 million, or 44.5%, at June 30, 2023, and $960.2 million, or 55.3%, at September 30, 2022.

Stockholders’ equity increased to $242.9 million as of September 30, 2023, compared to $237.4 million at June 30, 2023 and $214.0 million at September 30, 2022. Shares repurchased and retired through September 30, 2023 as part of the Company's stock repurchase program totaled 385,919 shares at an average price of $18.12, for a total cost of $7.0 million including commissions. As of September 30, 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																				Nine Months Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				September 30, 2023				September 30, 2022
Interest income
Loans, including fees	$	45,385			$	42,991			$	41,275			$	38,763			$	36,451			$	129,651			$	105,645
Investment securities available for sale		1,089				1,266				1,377				1,402				1,362				3,732				2,510
Federal funds sold and other		1,267				823				764				1,183				527				2,854				1,143
Total interest income		47,741				45,080				43,416				41,348				38,340				136,237				109,298
Interest expense
Deposits		10,703				9,409				7,754				4,377				1,386				27,866				3,234
Borrowed funds		228				331				1,175				1,772				277				1,734				656
Total interest expense		10,931				9,740				8,929				6,149				1,663				29,600				3,890
Net interest income		36,810				35,340				34,487				35,199				36,677				106,637				105,408
Provision for credit losses		2,280				2,862				1,660				2,384				1,260				6,802				4,247
Provision for (release of) credit losses on unfunded commitments		24				—				(19	)			—				—				5				—
Net interest income after provision for credit losses		34,506				32,478				32,846				32,815				35,417				99,830				101,161
Noninterest income
Service charges on deposits		250				245				229				222				199				724				545
Credit card fees		4,387				4,706				4,210				4,314				5,524				13,303				17,658
Mortgage banking revenue		1,243				1,332				1,155				554				969				3,730				4,312
Other income		446				404				432				471				416				1,282				1,296
Total noninterest income		6,326				6,687				6,026				5,561				7,108				19,039				23,811
Noninterest expenses
Salaries and employee benefits		12,419				12,143				12,554				11,769				10,747				37,116				31,129
Occupancy and equipment		1,351				1,536				1,213				1,388				1,138				4,100				3,476
Professional fees		2,358				2,608				2,374				2,426				3,848				7,340				8,586
Data processing		6,469				6,559				6,530				6,697				7,178				19,558				22,721
Advertising		1,565				2,646				517				726				1,632				4,728				5,494
Loan processing		426				660				349				350				625				1,435				1,352
Foreclosed real estate expenses, net		1				—				6				—				—				7				—
Other operating		3,457				3,440				2,679				3,378				2,926				9,576				9,621
Total noninterest expenses		28,046				29,592				26,222				26,734				28,094				83,860				82,379
Income before income taxes		12,786				9,573				12,650				11,642				14,431				35,009				42,593
Income tax expense		2,998				2,255				2,915				2,651				3,336				8,168				9,779
Net income	$	9,788			$	7,318			$	9,735			$	8,991			$	11,095			$	26,841			$	32,814

Consolidated Balance Sheets
	(unaudited)				(unaudited)				(unaudited)				(audited)				(unaudited)
(in thousands except share data)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Assets
Cash and due from banks	$	13,767			$	18,619			$	14,477			$	19,963			$	14,774
Interest-bearing deposits at other financial institutions		130,428				100,343				125,448				39,764				20,867
Federal funds sold		1,957				376				462				20,688				1,421
Total cash and cash equivalents		146,152				119,338				140,387				80,415				37,062
Investment securities available for sale		206,055				208,464				255,762				252,481				269,620
Marketable equity securities		—				—				—				—				232
Restricted investments		4,340				3,803				4,215				7,362				3,627
Loans held for sale		4,843				10,146				9,620				7,416				6,875
U.S. Small Business Administration (“SBA”) Payroll Protection Program (“PPP”) loans receivable, net of fees and costs		750				1,090				2,037				2,163				2,662
Portfolio loans receivable, net of deferred fees and costs		1,861,929				1,837,041				1,786,109				1,728,592				1,648,001
Less allowance for credit losses		(28,279	)			(27,495	)			(26,216	)			(26,385	)			(26,091	)
Total portfolio loans held for investment, net		1,833,650				1,809,546				1,759,893				1,702,207				1,621,910
Premises and equipment, net		5,297				5,494				5,367				3,386				3,212
Accrued interest receivable		11,231				10,155				9,985				9,489				7,890
Deferred tax asset		13,644				13,616				12,898				13,777				14,047
Bank owned life insurance		37,315				37,041				36,781				36,524				36,267
Other assets		9,207				9,173				8,341				8,435				5,954
Total assets	$	2,272,484			$	2,227,866			$	2,245,286			$	2,123,655			$	2,009,358
Liabilities
Deposits
Noninterest-bearing	$	680,803			$	693,129			$	705,801			$	674,313			$	806,033
Interest-bearing		1,287,185				1,241,232				1,238,573				1,083,759				931,558
Total deposits		1,967,988				1,934,361				1,944,374				1,758,072				1,737,591
Federal Home Loan Bank advances		22,000				22,000				32,000				107,000				22,000
Other borrowed funds		12,062				12,062				12,062				12,062				12,062
Accrued interest payable		5,204				3,029				1,977				1,031				481
Other liabilities		22,352				18,979				20,356				21,475				23,219
Total liabilities		2,029,606				1,990,431				2,010,769				1,899,640				1,795,353
Stockholders' equity
Common stock		139				140				141				141				140
Additional paid-in capital		54,549				55,856				57,277				58,190				56,532
Retained earnings		206,033				197,490				191,058				182,435				174,916
Accumulated other comprehensive loss		(17,843	)			(16,051	)			(13,959	)			(16,751	)			(17,583	)
Total stockholders' equity		242,878				237,435				234,517				224,015				214,005
Total liabilities and stockholders' equity	$	2,272,484			$	2,227,866			$	2,245,286			$	2,123,655			$	2,009,358

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 September 30, 2023											Three Months Ended June 30, 2023											Three Months Ended September 30, 2022
	Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate(1)			Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate(1)			Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate(1)
	(in thousands)
Assets
Interest earning assets:
Interest-bearing deposits	$	87,112			$	1,183			5.39	%		$	66,401			$	733			4.43	%		$	101,187			$	471			1.85	%
Federal funds sold		1,134				15			5.25				1,638				20			4.90				1,492				7			1.87
Investment securities available for sale		229,731				1,089			1.88				255,057				1,266			1.99				287,944				1,362			1.88
Restricted investments		4,058				69			6.75				4,185				71			6.80				4,116				49			4.72
Loans held for sale		6,670				111			6.60				7,047				111			6.32				7,879				102			5.15
SBA-PPP loans receivable		906				11			4.82				1,808				7			1.55				5,906				263			17.66
Portfolio loans receivable(2)		1,846,866				45,263			9.72				1,800,800				42,872			9.55				1,601,546				36,086			8.94
Total interest earning assets		2,176,477				47,741			8.70				2,136,936				45,080			8.46				2,010,070				38,340			7.57
Noninterest earning assets		44,640											47,415											39,008
Total assets	$	2,221,117										$	2,184,351										$	2,049,078
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	215,527				71			0.13			$	207,264				67			0.13			$	244,929				39			0.06
Savings		5,582				3			0.21				5,822				2			0.14				9,216				1			0.04
Money market accounts		655,990				6,373			3.85				625,515				5,411			3.47				555,634				815			0.58
Time deposits		374,429				4,256			4.51				366,421				3,929			4.30				155,091				531			1.36
Borrowed funds		34,932				228			2.59				43,183				331			3.07				40,700				277			2.70
Total interest-bearing liabilities		1,286,460				10,931			3.37				1,248,205				9,740			3.13				1,005,570				1,663			0.66
Noninterest-bearing liabilities:
Noninterest-bearing liabilities		25,047											21,104											24,440
Noninterest-bearing deposits		666,939											676,358											802,458
Stockholders’ equity		242,671											238,684											216,610
Total liabilities and stockholders’ equity	$	2,221,117										$	2,184,351										$	2,049,078
Net interest spread									5.33	%										5.33	%										6.91	%
Net interest income					$	36,810										$	35,340										$	36,677
Net interest margin(3)									6.71	%										6.63	%										7.24	%

_______________

⁽¹⁾   Annualized.
⁽²⁾   Includes nonaccrual loans.
⁽³⁾   For the three months ended September 30, 2023, June 30, 2023, and September 30, 2022, collectively, SBA-PPP loans and credit card loans accounted for 266, 257 and 308 basis points of the reported net interest margin, respectively.

	Nine Months Ended September 30,
	2023											2022
	Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate(1)			Average Outstanding Balance				Interest Income/ Expense				Average Yield/ Rate(1)
	(in thousands)
Assets
Interest earning assets:
Interest-bearing deposits	$	72,116			$	2,531			4.69	%		$	172,033			$	1,001			0.78	%
Federal funds sold		1,605				53			4.42				2,590				9			0.48
Investment securities available for sale		252,993				3,732			1.97				234,294				2,510			1.43
Restricted investments		5,184				270			6.96				3,913				133			4.54
Loans held for sale		6,145				299			6.51				10,921				347			4.25
SBA-PPP loans receivable		1,600				26			2.17				39,063				3,449			11.80
Portfolio loans receivable(2)		1,799,755				129,326			9.61				1,547,386				101,849			8.80
Total interest earning assets		2,139,398				136,237			8.51				2,010,200				109,298			7.27
Noninterest earning assets		44,123											47,936
Total assets	$	2,183,521										$	2,058,136
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	203,099				208			0.14			$	265,854				114			0.06
Savings		5,965				6			0.13				9,138				4			0.06
Money market accounts		628,977				16,371			3.48				553,794				1,512			0.37
Time deposits		353,635				11,281			4.27				161,982				1,604			1.32
Borrowed funds		65,192				1,734			3.56				36,299				656			2.41
Total interest-bearing liabilities		1,256,868				29,600			3.15				1,027,067				3,890			0.51
Noninterest-bearing liabilities:
Noninterest-bearing liabilities		22,846											23,748
Noninterest-bearing deposits		665,821											797,660
Stockholders’ equity		237,986											209,661
Total liabilities and stockholders’ equity	$	2,183,521										$	2,058,136
Net interest spread									5.36	%										6.76	%
Net interest income					$	106,637										$	105,408
Net interest margin(3)									6.66	%										7.01	%

⁽¹⁾   Annualized.
⁽²⁾   Includes nonaccrual loans.
⁽³⁾   For the nine months ended September 30, 2023 and 2022, collectively, SBA-PPP loans and credit card loans accounted for 268 and 307 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 three and nine months ended September 30, 2023 and September 30, 2022.

Segments
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
Release of 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 June 30, 2023
(in thousands)		Commercial Bank				CBHL				OpenSky®				Corporate(2)				Eliminations				Consolidated
Interest income		$	28,742			$	111			$	15,168			$	1,134			$	(75	)		$	45,080
Interest expense			9,537				42				—				236				(75	)			9,740
Net interest income			19,205				69				15,168				898				—				35,340
Provision for credit losses			735				—				2,127				—				—				2,862
Net interest income after provision			18,470				69				13,041				898				—				32,478
Noninterest income			810				1,161				4,714				2				—				6,687
Noninterest expense(1)			15,918				1,481				12,059				134				—				29,592
Net income (loss) before taxes		$	3,362			$	(251	)		$	5,696			$	766			$	—			$	9,573
Total assets		$	2,047,400			$	10,605			$	116,123			$	260,309			$	(206,571	)		$	2,227,866
For the three months ended September 30, 2022
(in thousands)		Commercial Bank				CBHL				OpenSky®				Corporate(2)				Eliminations				Consolidated
Interest income		$	20,382			$	102			$	17,103			$	812			$	(59	)		$	38,340
Interest expense			1,449				40				—				233				(59	)			1,663
Net interest income			18,933				62				17,103				579				—				36,677
Provision (release of provision) for loan losses			(980	)			—				2,240				—				—				1,260
Net interest income after provision			19,913				62				14,863				579				—				35,417
Noninterest income			468				1,115				5,524				1				—				7,108
Noninterest expense(1)			13,798				2,017				12,101				178				—				28,094
Net income (loss) before taxes		$	6,583			$	(840	)		$	8,286			$	402			$	—			$	14,431
Total assets		$	1,823,049			$	7,664			$	128,842			$	234,731			$	(184,928	)		$	2,009,358

________________________

⁽¹⁾   Noninterest expense includes $6.1 million, $5.9 million and $6.6 million in data processing expense in OpenSky’s^® segment for the three months ended September 30, 2023 June 30, 2023, and September 30, 2022, respectively.
⁽²⁾   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.

Segments
For the nine months ended September 30, 2023
(in thousands)		Commercial Bank				CBHL				OpenSky®				Corporate(2)				Eliminations				Consolidated
Interest income		$	85,451			$	299			$	47,441			$	3,274			$	(228	)		$	136,237
Interest expense			29,012				104				—				712				(228	)			29,600
Net interest income			56,439				195				47,441				2,562				—				106,637
Provision for credit losses			849				—				5,823				130				—				6,802
Release of credit losses on unfunded commitments			5				—				—				—				—				5
Net interest income after provision			55,585				195				41,618				2,432				—				99,830
Noninterest income			1,964				3,743				13,329				3				—				19,039
Noninterest expense(1)			46,701				4,564				32,146				449				—				83,860
Net income (loss) before taxes		$	10,848			$	(626	)		$	22,801			$	1,986			$	—			$	35,009
Total assets		$	2,102,749			$	5,280			$	116,318			$	264,950			$	(216,813	)		$	2,272,484
For the nine months ended September 30, 2022
(in thousands)		Commercial Bank				CBHL				OpenSky®				Corporate(2)				Eliminations				Consolidated
Interest income		$	57,794			$	347			$	48,823			$	2,457			$	(123	)		$	109,298
Interest expense			3,255				185				—				573				(123	)			3,890
Net interest income			54,539				162				48,823				1,884				—				105,408
Provision (release of provision) for loan losses			(980	)			—				5,227				—				—				4,247
Net interest income after provision			55,519				162				43,596				1,884				—				101,161
Noninterest income			1,571				4,580				17,658				2				—				23,811
Noninterest expense(1)			38,741				6,364				36,923				351				—				82,379
Net income (loss) before taxes		$	18,349			$	(1,622	)		$	24,331			$	1,535			$	—			$	42,593
Total assets		$	1,823,049			$	7,664			$	128,842			$	234,731			$	(184,928	)		$	2,009,358

⁽¹⁾   Noninterest expense includes $17.9 million and $20.9 million in data processing expense in OpenSky’s^® segment for the nine months ended September 30, 2023 and 2022, respectively.
⁽²⁾   The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited
		Quarter Ended
(in thousands except per share data)		September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Earnings:
Net income		$	9,788			$	7,318			$	9,735			$	8,991			$	11,095
Earnings per common share, diluted			0.70				0.52				0.68				0.62				0.77
Net interest margin			6.71	%			6.63	%			6.65	%			6.64	%			7.24	%
Net interest margin, excluding credit cards & SBA-PPP loans(1)			4.05	%			4.06	%			3.81	%			3.91	%			4.16	%
Return on average assets(2)			1.75	%			1.34	%			1.84	%			1.67	%			2.15	%
Return on average assets, excluding impact of SBA-PPP loans(1)(2)			1.75	%			1.34	%			1.84	%			1.67	%			2.10	%
Return on average equity(2)			16.00	%			12.30	%			16.98	%			16.18	%			20.32	%
Efficiency ratio			65.02	%			70.41	%			64.73	%			65.59	%			64.16	%
Balance Sheet:
Total portfolio loans receivable, net deferred fees		$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592			$	1,648,001
Total deposits			1,967,988				1,934,361				1,944,374				1,758,072				1,737,591
Total assets			2,272,484				2,227,866				2,245,286				2,123,655				2,009,358
Total stockholders' equity			242,878				237,435				234,517				224,015				214,005
Asset Quality Ratios:
Nonperforming assets to total assets			0.67	%			0.71	%			0.73	%			0.46	%			0.43	%
Nonperforming assets to total assets, excluding the SBA-PPP loans(1)			0.67	%			0.71	%			0.73	%			0.46	%			0.43	%
Nonperforming loans to total loans			0.82	%			0.85	%			0.91	%			0.56	%			0.52	%
Nonperforming loans to portfolio loans(1)			0.82	%			0.86	%			0.91	%			0.56	%			0.52	%
Net charge-offs to average portfolio loans(1)(2)			0.38	%			0.35	%			0.61	%			0.49	%			0.39	%
Allowance for credit losses to total loans			1.52	%			1.50	%			1.47	%			1.52	%			1.58	%
Allowance for credit losses to portfolio loans(1)			1.52	%			1.50	%			1.47	%			1.53	%			1.58	%
Allowance for credit losses to non-performing loans			185.61	%			175.03	%			160.91	%			270.46	%			303.76	%
Bank Capital Ratios:
Total risk based capital ratio			14.51	%			14.08	%			14.09	%			14.21	%			14.65	%
Tier 1 risk based capital ratio			13.25	%			12.82	%			12.84	%			12.95	%			13.39	%
Leverage ratio			10.04	%			9.77	%			9.78	%			9.47	%			9.60	%
Common equity Tier 1 capital ratio			13.25	%			12.82	%			12.84	%			12.95	%			13.39	%
Tangible common equity			9.08	%			8.93	%			8.79	%			8.85	%			9.00	%
Holding Company Capital Ratios:
Total risk based capital ratio			17.61	%			16.81	%			16.75	%			16.33	%			17.41	%
Tier 1 risk based capital ratio			15.71	%			14.96	%			14.90	%			15.13	%			15.49	%
Leverage ratio			11.62	%			11.50	%			11.47	%			11.24	%			11.31	%
Common equity Tier 1 capital ratio			15.71	%			14.96	%			14.90	%			15.00	%			15.36	%
Tangible common equity			10.69	%			10.66	%			10.44	%			10.55	%			10.65	%
Composition of Loans:
SBA-PPP loans, net		$	750			$	1,090			$	2,037			$	2,163			$	2,662
Commercial real estate		$	670,594			$	674,141			$	660,218			$	664,551			$	626,030
Residential real estate			558,147				555,133				545,899				484,735				466,849
Construction real estate			280,905				258,400				251,494				238,099				235,045
Commercial and industrial			236,782				233,598				221,258				220,221				192,207
Credit card, net of reserve(3)			122,533				122,925				112,860				128,434				136,658
Other consumer loans			948				1,187				1,578				1,179				1,055
Portfolio loans receivable		$	1,869,909			$	1,845,384			$	1,793,307			$	1,737,219			$	1,657,844
Deferred origination fees, net			(7,980	)			(8,343	)			(7,198	)			(8,627	)			(9,843	)
Portfolio loans receivable, net		$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592			$	1,648,001
Composition of Deposits:
Noninterest-bearing		$	680,803			$	693,129			$	705,801			$	674,313			$	806,033
Interest-bearing demand			229,035				243,095				219,685				207,836				252,135
Savings			5,686				5,816				5,835				7,530				8,861
Money markets			668,774				631,148				632,087				574,978				518,184
Brokered time deposits			128,665				128,665				181,820				131,819				—
Other time deposits			255,025				232,508				199,146				161,596				152,378
Total deposits		$	1,967,988			$	1,934,361			$	1,944,374			$	1,758,072			$	1,737,591
Capital Bank Home Loan Metrics:
Origination of loans held for sale		$	50,023			$	61,480			$	44,448			$	43,956			$	60,516
Mortgage loans sold			39,364				49,231				40,483				43,415				65,349
Gain on sale of loans			1,011				1,262				1,223				912				1,340
Purchase volume as a % of originations			92.29	%			93.12	%			90.72	%			88.94	%			81.85	%
Gain on sale as a % of loans sold(4)			2.57	%			2.56	%			3.02	%			2.10	%			2.05	%
Mortgage commissions		$	528			$	621			$	378			$	451			$	587
OpenSky®Portfolio Metrics:
Open customer accounts			529,205				540,058				527,231				533,855				576,844
Secured credit card loans, gross		$	98,138			$	100,218			$	89,078			$	104,157			$	111,842
Unsecured credit card loans, gross			27,430				25,254				25,782				26,795				27,335
Noninterest secured credit card deposits			181,185				186,566				184,809				187,412				201,277

_______________

⁽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	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Net Income	$	9,788			$	7,318			$	9,735			$	8,991			$	11,095
Less: SBA-PPP loan income		11				7				8				28				263
Net Income, as Adjusted	$	9,777			$	7,311			$	9,727			$	8,963			$	10,832
Average Total Assets		2,221,117				2,184,351				2,144,249				2,136,156				2,049,078
Less: Average SBA-PPP Loans		906				1,808				2,099				2,435				5,906
Average Total Assets, as Adjusted	$	2,220,211			$	2,182,543			$	2,142,150			$	2,133,721			$	2,043,172
Return on Average Assets, as Adjusted		1.75	%			1.34	%			1.84	%			1.67	%			2.10	%

Return on Average Assets, as Adjusted	Nine Months Ended
(in thousands)	September 30, 2023				September 30, 2022
Net Income	$	26,841			$	32,814
Less: SBA-PPP loan income		26				3,449
Net Income, as Adjusted	$	26,815			$	29,365
Average Total Assets		2,183,521				2,058,136
Less: Average SBA-PPP Loans		1,600				39,063
Average Total Assets, as Adjusted	$	2,181,921			$	2,019,073
Return on Average Assets, as Adjusted		1.64	%			1.94	%

Net Interest Margin, as Adjusted	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Net Interest Income	$	36,810			$	35,340			$	34,487			$	35,199			$	36,677
Less Credit card loan income		15,792				14,818				15,809				15,717				16,768
Less SBA-PPP loan income		11				7				8				28				263
Net Interest Income, as Adjusted	$	21,007			$	20,515			$	18,670			$	19,454			$	19,646
Average Interest Earning Assets		2,176,477				2,136,936				2,103,984				2,101,617				2,010,070
Less Average credit card loans		116,814				110,574				115,850				124,120				132,246
Less Average SBA-PPP loans		906				1,808				2,099				2,435				5,906
Total Average Interest Earning Assets, as Adjusted	$	2,058,757			$	2,024,554			$	1,986,035			$	1,975,062			$	1,871,918
Net Interest Margin, as Adjusted		4.05	%			4.06	%			3.81	%			3.91	%			4.16	%

Net Interest Margin, as Adjusted	Nine Months Ended
(in thousands)	September 30, 2023				September 30, 2022
Net Interest Income	$	106,637			$	105,408
Less Credit card loan income		46,419				47,631
Less SBA-PPP loan income		26				3,449
Net Interest Income, as Adjusted	$	60,192			$	54,328
Average Interest Earning Assets		2,139,398				2,010,200
Less Average credit card loans		114,416				127,266
Less Average SBA-PPP loans		1,600				39,063
Total Average Interest Earning Assets, as Adjusted	$	2,023,382			$	1,843,871
Net Interest Margin, as Adjusted		3.98	%			3.94	%

Pre-tax, Pre-Provision Net Revenue ("PPNR")	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Net income	$	9,788			$	7,318			$	9,735			$	8,991			$	11,095
Add: Income Tax Expense		2,998				2,255				2,915				2,651				3,336
Add: Provision for Credit Losses		2,280				2,862				1,660				2,384				1,260
Add: Provision (release of provision) for Credit Losses on Unfunded Commitments		24				—				(19	)			—				—
Pre-tax, Pre-Provision Net Revenue ("PPNR")	$	15,090			$	12,435			$	14,291			$	14,026			$	15,691

Pre-tax, Pre-Provision Net Revenue ("PPNR")	Nine Months Ended
(in thousands)	September 30, 2023				September 30, 2022
Net income	$	26,841			$	32,814
Add: Income Tax Expense		8,168				9,779
Add: Provision for Credit Losses		6,802				4,247
Add: Provision for Credit Losses on Unfunded Commitments		5				—
Pre-tax, Pre-Provision Net Revenue ("PPNR")	$	41,816			$	46,840

Allowance for Credit Losses to Total Portfolio Loans	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Allowance for Credit Losses	$	28,279			$	27,495			$	26,216			$	26,385			$	26,091
Total Loans		1,862,679				1,838,131				1,788,146				1,730,755				1,650,663
Less: SBA-PPP loans		750				1,090				2,037				2,163				2,662
Total Portfolio Loans	$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592			$	1,648,001
Allowance for Credit Losses to Total Portfolio Loans		1.52	%			1.50	%			1.47	%			1.53	%			1.58	%

Nonperforming Assets to Total Assets, net SBA-PPP Loans	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Total Nonperforming Assets	$	15,236			$	15,709			$	16,293			$	9,756			$	8,589
Total Assets		2,272,484				2,227,866				2,245,286				2,123,655				2,009,358
Less: SBA-PPP loans		750				1,090				2,037				2,163				2,662
Total Assets, net SBA-PPP Loans	$	2,271,734			$	2,226,776			$	2,243,249			$	2,121,492			$	2,006,696
Nonperforming Assets to Total Assets, net SBA-PPP Loans		0.67	%			0.71	%			0.73	%			0.46	%			0.43	%

Nonperforming Loans to Total Portfolio Loans	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Total Nonperforming Loans	$	15,236			$	15,709			$	16,293			$	9,756			$	8,589
Total Loans		1,862,679				1,838,131				1,788,146				1,730,755				1,650,663
Less: SBA-PPP loans		750				1,090				2,037				2,163				2,662
Total Portfolio Loans	$	1,861,929			$	1,837,041			$	1,786,109			$	1,728,592			$	1,648,001
Nonperforming Loans to Total Portfolio Loans		0.82	%			0.86	%			0.91	%			0.56	%			0.52	%

Net Charge-offs to Average Portfolio Loans	Quarters Ended
(in thousands)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Total Net Charge-offs	$	1,780			$	1,583			$	2,633			$	2,090			$	1,588
Total Average Loans		1,847,772				1,802,608				1,752,638				1,677,869				1,607,452
Less: Average SBA-PPP loans		906				1,808				2,099				2,435				5,906
Total Average Portfolio Loans	$	1,846,866			$	1,800,800			$	1,750,539			$	1,675,434			$	1,601,546
Net Charge-offs to Average Portfolio Loans		0.38	%			0.35	%			0.61	%			0.49	%			0.39	%

Net Charge-offs to Average Portfolio Loans	Nine Months Ended
(in thousands)	September 30, 2023				September 30, 2022
Total Net Charge-offs	$	5,996			$	1,749
Total Average Loans		1,801,355				1,586,449
Less: Average SBA-PPP loans		1,600				39,063
Total Average Portfolio Loans	$	1,799,755			$	1,547,386
Net Charge-offs to Average Portfolio Loans		0.45	%			0.23	%

Tangible Book Value per Share	Quarters Ended
(in thousands, except per share amounts)	September 30, 2023				June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022
Total Stockholders' Equity	$	242,878			$	237,435			$	234,517			$	224,015			$	214,005
Less: Preferred equity		—				—				—				—				—
Less: Intangible assets		—				—				—				—				—
Tangible Common Equity	$	242,878			$	237,435			$	234,517			$	224,015			$	214,005
Period End Shares Outstanding		13,896,062				13,981,414				14,082,657				14,138,829				14,038,599
Tangible Book Value per Share	$	17.48			$	16.98			$	16.65			$	15.84			$	15.24

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 September 30, 2023. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in four locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.3 billion at September 30, 2023 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.

FORWARD-LOOKING STATEMENTS

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

While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing 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.

FINANCIAL CONTACT: Jay Walker (301) 468-8848 x1223

MEDIA CONTACT: Ed Barry (240) 283-1912

WEB SITE: www.CapitalBankMD.com

FAQ

What is the net income growth for Q3 2023?

The net income for Q3 2023 expanded by 33.8%.

What contributed to the positive operating leverage?

Loan and deposit growth generated positive operating leverage.

How much did the tangible book value per share increase?

The tangible book value per share increased by 15% compared to Q3 2022.

Is there a cash dividend declared?

Yes, a cash dividend of $0.08 per share has been declared.