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Headline: CBNK Reports Fourth Quarter 2022 Results and Record Annual Earnings
Location: Rockville, MD, US
Post Date: Jan 25, 2023 5:10 PM
TAG ID: pznews423003
DocID: 202301258736869-en.xml
Word Count: approx. 5480 words
 
 
Full story:
CBNK Reports Fourth Quarter 2022 Results and Record Annual Earnings

Diluted EPS of $0.62, ROAA of 1.67%, and ROAE of 16.18% for 4Q 2022

ROCKVILLE, Md., Jan. 25, 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 $9.0 million, or $0.62 per diluted share, for the fourth quarter of 2022, compared to net income of $10.2 million, or $0.71 per diluted share, for the fourth quarter of 2021. Net portfolio loans increased $80.6 million, or 19.4 percent annualized, during the fourth quarter. "Strong loan growth in the commercial bank was a highlight in the fourth quarter but was tempered by a challenging deposit environment," said Ed Barry, CEO of the Company and the Bank. "Strategic hires, market disruption and a focus on customized solutions continue to deliver growth in the commercial bank. OpenSky® had a record year of profitability and looks set to remain very profitable but inflation is having an impact on unsecured credit while competition and normal attrition has reduced the number of open accounts. Competition for deposits has increased our costs as we focus on retaining high-quality customers. We continue to invest in the business to build a foundation that will be scalable and allow us to grow and drive value over the long term." Steven Schwartz, Chairman of the Board of the Company said, "I am pleased with the record full-year earnings being reported today. Despite the significant headwinds experienced by our mortgage division in 2022, our other diversified sources of revenue -- the Commercial Bank and OpenSky® -- continued to deliver. We are well positioned for continued strong profitability in 2023. We expect our Commercial Bank loan portfolio to continue to grow, our marketing efforts at OpenSky® to be rewarded with renewed growth in cardholder count and outstandings, and our Mortgage division to be restored to profitability. Notwithstanding potential macroeconomic challenges in 2023, I am confident that our best-in-class credit culture will permit us to adroitly manage any issues that may arise." Fourth Quarter 2022 Highlights Capital Bancorp, Inc. Earnings Summary - Net income decreased to $9.0 million, or $0.62 per diluted share, compared to $10.2 million, or $0.71 per diluted share, for the fourth quarter of 2021. Increasing interest rates led to a sharp increase in deposit costs and a continued slowdown in mortgage revenues in the fourth quarter of 2022. These factors, when combined with an increase in loan loss provisions due to economic uncertainty and a decline in credit card revenue, contributed to the decrease in fourth quarter net income. Net interest income increased by $2.5 million to $35.2 million for the fourth quarter of 2022 when compared to the same period in 2021 but was largely offset by increasing deposit costs.Strong Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.67% and 16.18%, respectively, for the three months ended December 31, 2022, compared to 1.95% and 20.66%, respectively, for the three months ended December 31, 2021.Elevated Net Interest Margin - Net interest margin was 6.64%, or 3.91% excluding PPP and credit card loans, for the three months ended December 31, 2022, compared to 6.49%, or 3.70% excluding PPP and credit card loans, for the same three month period last year. Increases in portfolio loan yields and average loan balances were partially offset by increasing deposit costs.Robust Capital Positions - As of December 31, 2022, the Company reported a common equity tier 1 capital ratio of 15.00% and an allowance for loan losses to total loans ratio of 1.52%. Tangible book value per common share grew 11.8 percent to $15.84 at December 31, 2022 when compared to the same quarter in 2021. Commercial Bank Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $218.7 million, or 15.7 percent, to $1.6 billion at December 31, 2022 compared to December 31, 2021. This growth was mainly due to a 19.5 percent increase in commercial real estate loans of $108.2 million, of which $87.6 million was owner occupied. Also contributing to the growth was a 20.7 percent increase in residential real estate loans of $83.1 million, and a 25.2 percent increase in commercial and industrial loans of $44.3 million when comparing the quarter ended December 31, 2022 to the quarter ended December 31, 2021. Business loans, comprised of commercial and industrial, SBA, and owner occupied real estate, represent 42% of our total commercial portfolio.Stable Credit Metrics - Non-performing assets ("NPAs") decreased 10 basis points to 0.46% of total assets at December 31, 2022 compared to 0.56% at December 31, 2021 with the disposition of our remaining other real estate owned and a reduction in nonaccrual loans of $1.7 million. OpenSky® Revenues - OpenSky® revenue declined by 8.2 percent to $20.3 million for the quarter ended December 31, 2022 from the same period in 2021 due to the decrease in active customer accounts which led to decreases in interchange, renewal and other fees. Normal customer attrition and aggressive marketing and product strategies by fintech and credit card companies offering unsecured subprime credit cards has resulted in the continued decline in the total number of OpenSky® accounts.Loan Balances - OpenSky® loan balances, net of reserves, decreased by $12.7 million to $128.4 million compared to $141.1 million in the fourth quarter of 2021. Corresponding deposit balances decreased 18.3 percent or $42.1 million from $229.5 million at December 31, 2021 to $187.4 million at December 31, 2022. Gross unsecured loan balances stood at $26.8 million and $17.7 million at December 31, 2022 and 2021, respectively.OpenSky® Credit - Card delinquencies and utilization remained stable in the fourth quarter. Unsecured credit overall has performed in line with expectations while charge offs remained elevated due to higher severity levels among unsecured customers. The Company has tightened credit in the segments that have deteriorated while focusing on lower risk customers. Unsecured balances at quarter end were $26.8 million, flat for the quarter. The provision for loan losses increased $1.3 million compared to the fourth quarter of 2021. 2022 Highlights Capital Bancorp Diversified Businesses Drive Net Income - Net income for the twelve months ended December 31, 2022 increased 4.6 percent to $41.8 million, or $2.91 per diluted share, from $40.0 million, or $2.84 per diluted share for the twelve months ended December 31, 2021.Above Average Performance Ratios - Strong earnings supported ROAA and ROAE of 2.01% and 19.68%, respectively, for the twelve months ended December 31, 2022 compared to 1.96% and 22.27%, respectively, for the twelve months ended December 31, 2021.Expanded Net Interest Margin - For the twelve months ended December 31, 2022, net interest margin was 6.92%, or 3.93% excluding PPP and credit card loans, compared to 5.86%, or 3.60% excluding PPP and credit card loans for the twelve months ended December 31, 2021. The margin improvement was primarily driven by increases in the yield on portfolio loans. Additionally, average balances and yields on our investment securities available for sale portfolio increased $98.1 million and 24 basis points, respectively, for the twelve months ended December 31, 2022 when compared to the same period last year.Stable Efficiency Ratio - The efficiency ratio decreased to 64.19% for the twelve months ended December 31, 2022 compared to 65.79% for the same twelve month period in the prior year due to higher levels of net interest income.Balance Sheet Growth - Total assets increased $68.4 million, or 3.3%, during the twelve months ended December 31, 2022. The growth in earning assets consisted of increases in net portfolio loans and investment securities available for sale of $204.6 million and $68.0 million, respectively. Asset growth was primarily funded by cash received for the payoff of SBA-PPP loans totaling $106.1 million and a $103.0 million redeployment of lower yielding cash and cash equivalents. Total deposits decreased by $39.1 million while Federal Home Loan Bank advances increased $85.0 million during the twelve months ended December 31, 2022. Commercial Bank Strong Portfolio Loan Growth - In 2022, portfolio loans, excluding credit card loans, increased by $218.7 million, or 15.7 percent to $1.6 billion compared to 2021 when portfolio loans, excluding credit card loans, increased by $176.0 million to $1.4 billion. Growth in 2022 was primarily due to a $108.2 million increase in commercial real estate loans, of which $87.6 million was owner occupied, an $83.1 million increase in residential real estate loans, and a $44.3 million increase in commercial and industrial loans. These increases were partially offset by a $17.0 million decline in construction real estate loans.Deposits - While total deposits at December 31, 2022 decreased during the twelve months, our average noninterest bearing deposit balances increased $31.2 million when compared to December 31, 2021. Noninterest bearing deposits represented 38.4% of total deposits at December 31, 2022. The cost of interest bearing liabilities increased to 0.95% from 0.61% for the same period in the prior year, due to the increase in interest rates. Redeployment of funds by multiple commercial clients out of deposit accounts and into operating businesses impacted overall deposit balances in 2022. OpenSky® Interest Rate Increases Offset Gross Balance Declines - Credit card balances, net of reserves, decreased by $12.7 million, or 9.0 percent, for the twelve months of 2022 compared to an increase of $38.9 million for the twelve months of 2021 when government stimulus funds contributed to balance growth in the credit card portfolio. For the twelve months of 2022, the increase in average credit card balances as well as an increase in interest rates accounted for the $14.4 million growth in interest income when compared to the same period in 2021. The decrease in overall credit card accounts led to the reduction in credit card fees, which declined by 21.2 percent to $22.0 million compared to $27.9 million for the same twelve month period last year. COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited                 Quarter Ended   Twelve Months Ended   December 31,   December 31,  (in thousands except per share data) 2022   2021  % Change  2022   2021  % ChangeEarnings Summary           Interest income$41,348  $33,788  22.4% $150,646  $123,243  22.2%Interest expense 6,149   1,117  450.5%  10,039   6,550  53.3%Net interest income 35,199   32,671  7.7%  140,607   116,693  20.5%Provision for loan losses 2,384   1,100  116.7%  6,631   3,359  97.4%Noninterest income 5,561   10,617  (47.6)%  29,372   50,636  (42.0)%Noninterest expense 26,734   28,495  (6.2)%  109,114   110,094  (0.9)%Income before income taxes 11,642   13,693  (15.0)%  54,234   53,876  0.7%Income tax expense 2,651   3,522  (24.7)%  12,430   13,898  (10.6)%Net income$8,991  $10,171  (11.6)% $41,804  $39,978  4.6%            Pre-tax pre-provision net revenue ("PPNR") (2)$14,026  $14,793  (5.2)% $60,865  $57,235  6.3%Weighted average common shares - Basic 14,071   13,877  1.4%  14,025   13,799  1.6%Weighted average common shares - Diluted 14,408   14,290  0.8%  14,362   14,081  2.0%Earnings per share - Basic$0.64  $0.73  (12.3)% $2.98  $2.90  2.8%Earnings per share - Diluted$0.62  $0.71  (12.7)% $2.91  $2.84  2.5%Return on average assets (1) 1.67%  1.95% (14.4)%  2.01%  1.96% 2.6%Return on average assets, excluding impact of SBA-PPP loans(1) (2) 1.67%  1.80% (7.2)%  1.87%  1.75% 6.9%Return on average equity 16.18%  20.66% (21.7)%  19.68%  22.27% (11.6)%  Quarter Ended 4Q22 vs. 4Q21 Quarter Ended December 31,  September 30, June 30, March 31,(in thousands except per share data) 2022  2021 % Change  2022  2022  2022Balance Sheet Highlights           Assets$2,123,655 $2,055,300 3.3% $2,009,358 $2,154,846 $2,122,453Investment securities available for sale 252,481  184,455 36.9%  269,620  226,509  172,712Mortgage loans held for sale 7,416  15,989 (53.6)%  6,875  11,708  17,036SBA-PPP loans, net of fees 2,163  108,285 (98.0)   2,662  15,864  51,085Portfolio loans receivable (3) 1,728,592  1,523,982 13.4%  1,648,001  1,607,677  1,526,256Allowance for loan losses 26,385  25,181 4.8%  26,091  26,419  25,252Deposits 1,758,072  1,797,137 (2.2)%  1,737,591  1,888,920  1,862,722FHLB borrowings 107,000  22,000 386.4%  22,000  22,000  22,000Other borrowed funds 12,062  12,062 —%  12,062  12,062  12,062Total stockholders' equity 224,015  197,903 13.2%  214,005  207,316  201,492Tangible common equity(2) 224,015  197,903 13.2%  214,005  207,316  201,492            Common shares outstanding 14,139  13,962 1.3%  14,039  14,010  14,001Tangible book value per share (2)$15.84 $14.17 11.8% $15.24 $14.80 $14.39 ______________ (1) Annualized for the quarterly periods(2) Refer to Appendix for reconciliation of non-GAAP measures.(3) Loans are reflected net of deferred fees and costs. Operating Results - Comparison of Three Months Ended December 31, 2022 and 2021 For the three months ended December 31, 2022, net interest income increased $2.5 million, or 7.7 percent, to $35.2 million from the same period in 2021, primarily due to an increase in interest earned on portfolio loans. The net interest margin increased 15 basis points to 6.64% for the three months ended December 31, 2022 from 6.49% for the same period in 2021 due in large part to the growth in portfolio loan balances and an increase in loan yields, including on credit card loans to customers whose accounts have been open for more than a year as origination costs on these accounts are amortized in the first year and thereafter no longer offset annual renewal fees. Net interest margin, excluding credit card and SBA-PPP loans, was 3.91% for the fourth quarter of 2022 compared to 3.70% for the same period in 2021. For the three months ended December 31, 2022, average interest earning assets increased $104.5 million, or 5.2 percent, to $2.1 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 110 basis points. Compared to the same period in the prior year, average interest bearing liabilities increased $107.9 million, or 10.3 percent, while the average cost of interest-bearing liabilities increased 169 basis points to 2.11% from 0.42%. The provision for loan losses of $2.4 million for the three months ended December 31, 2022 was related to the credit card portfolio and the cycling of credit card accounts. Net charge-offs for the fourth quarter of 2022 were $2.1 million, or 0.49% on an annualized basis of average portfolio loans, compared to $672 thousand, or 0.18% on an annualized basis of average loans for the fourth quarter of 2021. A majority of the $2.1 million in net charge-offs during the quarter were related to the credit card portfolio with $1.8 million related to secured cards and $229 thousand related to unsecured cards. For the quarter ended December 31, 2022, noninterest income was $5.6 million, a decrease of $5.1 million, or 47.6 percent, from $10.6 million in the prior year quarter. The decrease was primarily the result of a reduction in mortgage banking revenue of $2.8 million due to the decline in home loan sales and home loan refinances brought on by the rising interest rate environment as well as a decline in credit card fees of $2.4 million associated with the decline in active customer accounts and interchange income. Credit card loan balances, net of reserves, decreased by $12.7 million to $128.4 million as of December 31, 2022 from $141.1 million at December 31, 2021. The related deposit account balances decreased 18.3 percent to $187.4 million at December 31, 2022 when compared to $229.5 million at December 31, 2021 reflecting the reduction in active customer accounts. For the three months ended December 31, 2022, OpenSky® credit card accounts decreased by 43 thousand net compared to a 40 thousand net decrease in accounts for the same period in 2021. Elevated new account originations related to COVID-19 stimulus payments that were realized during the pandemic did not recur in 2022. The efficiency ratio for the three months ended December 31, 2022 decreased to 65.59% compared to 65.83% for the three months ended December 31, 2021 due to higher levels of net interest income. Noninterest expense was $26.7 million for the three months ended December 31, 2022, as compared to $28.5 million for the three months ended December 31, 2021, a decrease of $1.8 million, or 6.2 percent. The decrease was primarily driven by decreases in data processing expenses of $2.9 million due to successful contract negotiations in the first quarter of 2022 for OpenSky® and advertising expenses of $924 thousand, or 56.0 percent due to a strategic refocus and were offset by increases in salaries and employee benefits of $1.2 million, or 11.4 percent and professional fees of $972 thousand, or 66.8 percent. Operating Results - Comparison of Twelve Months Ended December 31, 2022 and 2021 For the twelve months ended December 31, 2022, net interest income increased $23.9 million, or 20.5 percent, to $140.6 million from the same period in 2021, primarily due to the $208.7 million increase in average balances in portfolio loans combined with the 72 basis point increase in yield for portfolio loans. The net interest margin increased 106 basis points to 6.92% for the twelve months ended December 31, 2022 from the same period in 2021. Net interest margin, excluding credit card and SBA-PPP loans, was 3.93% for the twelve months ended December 31, 2022 compared to 3.60% for the same period in 2021. For the twelve months ended December 31, 2022, average interest earning assets increased $42.7 million, or 2.1 percent, to $2.0 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 122 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $21.8 million, or 2.0 percent, while the average cost of interest bearing liabilities increased 34 basis points to 0.95% from 0.61%. For the twelve months ended December 31, 2022, the provision for loan losses was $6.6 million, an increase of $3.3 million from the prior year and was related primarily to the credit card portfolio. Net charge-offs for the twelve months ended December 31, 2022 were $5.4 million, or 0.34% of average portfolio loans, compared to $1.6 million, or 0.12% of average portfolio loans, for the same period in 2021. The $5.4 million in net charge-offs during the twelve months ended December 31, 2022 was comprised of credit card portfolio net charge-offs with $5.1 million related to secured cards while $345 thousand was related to unsecured cards. For the twelve months ended December 31, 2022, noninterest income was $29.4 million, a decrease of $21.3 million, or 42.0 percent, from the same period in 2021. The decrease was primarily driven by the reduction in mortgage banking revenues of $16.0 million due to the decline in home loan sales and home loan refinances brought on by the rising interest rate environment as well as a decline in credit card fees of $5.9 million. The rising interest rate environment is expected to continue depressing the contribution made by Capital Bank Home Loans into 2023. For the twelve months ended December 31, 2022, the Bank had a net decrease of 127 thousand OpenSky® active credit card accounts, decreasing the total number of open accounts to 534 thousand. This compares to 92 thousand of net new originations for the same period last year, which increased total open accounts to 660 thousand at December 31, 2021. Elevated new account originations related to COVID-19 stimulus payments that were realized in 2021 which did not recur in 2022 and aggressive marketing by competitors both contributed to the decline. The efficiency ratio for the twelve months ended December 31, 2022 decreased to 64.19% compared to 65.79% for the twelve months ended December 31, 2021 due to higher levels of net interest income. Noninterest expense was $109.1 million for the twelve months ended December 31, 2022, as compared to $110.1 million for the twelve months ended December 31, 2021, a decrease of $1.0 million, or 0.9 percent. The decrease was primarily driven by a $9.8 million, or 25.0 percent, decrease in data processing and a $1.8 million, or 51.7 percent, decrease in loan processing. The decrease was partially offset by a $5.1 million, or 13.4 percent, increase in salaries and benefits, an increase in professional fees of 57.4 percent, or $4.0 million, and a $1.4 million, or 29.5 percent, increase in advertising expense. The decrease of $9.8 million in data processing expenses was primarily due to a contract renegotiation entered into in the first quarter of 2022 in the OpenSky® Division. Financial Condition Total assets at December 31, 2022 were $2.1 billion, an increase of $68.4 million or 3.3% from the balance at December 31, 2021. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.7 billion as of December 31, 2022, an increase of $204.6 million or 13.4 percent as compared to $1.5 billion at December 31, 2021. The Company recorded a provision for loan losses of $6.6 million during the twelve months ended December 31, 2022, which increased the allowance for loan losses to $26.4 million, or 1.52% of total loans at December 31, 2022. Nonperforming assets were $9.8 million, or 0.46% of total assets, as of December 31, 2022, down from $11.5 million, or 0.56% of total assets, at December 31, 2021, and was comprised solely of nonperforming loans. Included in nonperforming loans at December 31, 2022 were troubled debt restructurings of $288 thousand. Special mention loans at December 31, 2022 increased by $13.5 million compared to December 31, 2021.  The increase is attributable, in part, to the reclassification of the Bank’s $18.4 million participation interest in two commercial loans that are secured by the same collateral.  The borrowers, an individual and a related entity, breached a negative covenant and thereafter agreed, in consideration of a forbearance agreement and an extension of the maturity date of each loan, to increase the applicable interest rate and to provide enhanced reporting to the lead bank.  Interest payments are current on both loans.  The lead bank is in discussions with the borrowers regarding a plan for full repayment of the loans. While total deposits were $1.8 billion for the period ended December 31, 2022, a slight decline from the balance at December 31, 2021, average noninterest bearing deposit balances increased $31.2 million when compared to December 31, 2021. Noninterest bearing deposits represented 38.4% of total deposits at December 31, 2022. Stockholders’ equity increased to $224.0 million as of December 31, 2022, compared to $197.9 million at December 31, 2021. This increase was primarily attributable to earnings during the period of $41.8 million which were offset by unrealized losses recorded net of tax on available for sale securities in the rising interest rate environment creating a $15.7 million reduction in accumulated other comprehensive income during the period. As of December 31, 2022, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution. Consolidated Statements of Income (Unaudited)       Three Months Ended December 31, Twelve Months Ended December 31,(Dollars in thousands) 2022  2021  2022  2021Interest income       Loans, including fees$38,763 $33,235 $144,408 $120,784Investment securities available for sale 1,402  439  3,912  2,010Federal funds sold and other 1,183  114  2,326  449Total interest income 41,348  33,788  150,646  123,243        Interest expense       Deposits 4,377  934  7,611  5,808Borrowed funds 1,772  183  2,428  742Total interest expense 6,149  1,117  10,039  6,550        Net interest income 35,199  32,671  140,607  116,693Provision for loan losses 2,384  1,100  6,631  3,359Net interest income after provision for loan losses 32,815  31,571  133,976  113,334        Noninterest income       Service charges on deposits 222  136  767  609Credit card fees 4,314  6,676  21,972  27,884Mortgage banking revenue 554  3,365  4,866  20,843Gain on sale of investment securities available for sale, net —  —  —  153Other fees and charges 471  440  1,767  1,147Total noninterest income 5,561  10,617  29,372  50,636        Noninterest expenses       Salaries and employee benefits 11,769  10,564  42,898  37,843Occupancy and equipment 1,388  1,005  4,865  4,327Professional fees 2,426  1,454  11,012  6,996Data processing 6,697  9,643  29,418  39,237Advertising 726  1,650  6,220  4,803Loan processing 350  857  1,702  3,527Other operating 3,378  3,322  12,999  13,361Total noninterest expenses 26,734  28,495  109,114  110,094Income before income taxes 11,642  13,693  54,234  53,876Income tax expense 2,651  3,522  12,430  13,898Net income$8,991 $10,171 $41,804 $39,978 Consolidated Balance Sheets    (in thousands except share data)(unaudited) December 31, 2022 December 31, 2021Assets   Cash and due from banks$19,963  $42,914 Interest bearing deposits at other financial institutions 39,764   136,824 Federal funds sold 20,688   3,657 Total cash and cash equivalents 80,415   183,395 Investment securities available for sale 252,481   184,455 Marketable equity securities —   245 Restricted investments 7,362   3,498 Loans held for sale 7,416   15,989 SBA-PPP loans receivable, net of fees 2,163   108,285 Portfolio loans receivable, net of deferred fees and costs 1,728,592   1,523,982 Less allowance for loan losses (26,385)  (25,181)Total portfolio loans held for investment, net 1,702,207   1,498,801 Premises and equipment, net 3,386   3,282 Accrued interest receivable 9,489   7,901 Deferred income taxes, net 13,777   9,793 Other real estate owned —   86 Bank owned life insurance 36,524   35,506 Other assets 8,435   4,064 Total assets$2,123,655  $2,055,300     Liabilities   Deposits   Noninterest bearing$674,313  $787,650 Interest bearing 1,083,759   1,009,487 Total deposits 1,758,072   1,797,137 Federal Home Loan Bank advances 107,000   22,000 Other borrowed funds 12,062   12,062 Accrued interest payable 1,031   473 Other liabilities 21,475   25,725 Total liabilities 1,899,640   1,857,397     Stockholders' equity   Common stock, $.01 par value; 49,000,000 shares authorized; 14,138,829 and 13,962,334 issued and outstanding 141   140 Additional paid-in capital 58,190   54,306 Retained earnings 182,435   144,533 Accumulated other comprehensive loss (16,751)  (1,076)Total stockholders' equity 224,015   197,903 Total liabilities and stockholders' equity$2,123,655  $2,055,300  The following table shows the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.  Three Months Ended December 31,  2022   2021  Average Outstanding Balance Interest Income/ Expense Average Yield/ Rate(1) Average Outstanding Balance Interest Income/ Expense Average Yield/ Rate(1) (Dollars in thousands)Assets           Interest earning assets:           Interest bearing deposits$111,404 $1,006 3.58% $198,070 $73 0.15%Federal funds sold 4,054  35 3.41   2,048  — — Investment securities available for sale 292,117  1,402 1.90   187,388  439 0.93 Restricted stock and equity securities 10,111  142 5.57   3,743  41 4.35 Loans held for sale 6,062  88 5.74   23,395  179 3.04 SBA-PPP loans receivable 2,435  28 4.59   116,595  1,347 4.58 Portfolio loans receivable(2) 1,675,434  38,647 9.15   1,465,878  31,709 8.58 Total interest earning assets 2,101,617  41,348 7.81   1,997,117  33,788 6.71 Noninterest earning assets 34,539      69,166    Total assets$2,136,156     $2,066,283                Liabilities and Stockholders’ Equity           Interest bearing liabilities:           Interest bearing demand accounts$218,518  61 0.11  $315,933  39 0.05 Savings 8,261  1 0.05   6,575  1 0.06 Money market accounts 552,185  3,016 2.17   501,070  267 0.21 Time deposits 177,346  1,299 2.91   190,795  627 1.30 Borrowed funds 199,982  1,772 3.52   34,062  183 2.13 Total interest bearing liabilities 1,156,292  6,149 2.11   1,048,435  1,117 0.42 Noninterest bearing liabilities:           Noninterest bearing liabilities 23,941      26,504    Noninterest bearing deposits 735,416      796,014    Stockholders’ equity 220,507      195,330    Total liabilities and stockholders’ equity$2,136,156     $2,066,283                Net interest spread    5.70%     6.29%Net interest income  $35,199     $32,671  Net interest margin(3)    6.64%     6.49% _______________ (1) Annualized.(2) Includes nonaccrual loans.(3) For the three months ended December 31, 2022 and December 31, 2021, collectively, SBA-PPP loans and credit card loans accounted for 273 and 279 basis points of the reported net interest margin, respectively.  Twelve Months Ended December 31,  2022   2021  Average Outstanding Balance Interest Income/ Expense Average Yield/ Rate(1) Average Outstanding Balance Interest Income/ Expense Average Yield/ Rate(1) (Dollars in thousands)Assets           Interest earning assets:           Interest bearing deposits$156,751 $2,007 1.28% $228,420 $283 0.12%Federal funds sold 2,959  44 1.49   2,850  — — Investment securities available for sale 248,869  3,912 1.57   150,750  2,010 1.33 Restricted stock and equity securities 5,475  275 5.02   3,774  166 4.40 Loans held for sale 9,696  435 4.49   43,126  1,224 2.84 SBA-PPP loans receivable 29,831  3,477 11.66   190,588  7,613 3.99 Portfolio loans receivable(1) 1,579,661  140,496 8.89   1,370,988  111,947 8.17 Total interest earning assets 2,033,242  150,646 7.41   1,990,496  123,243 6.19 Noninterest earning assets 44,559      45,348    Total assets$2,077,801     $2,035,844                Liabilities and Stockholders’ Equity           Interest bearing liabilities:           Interest bearing demand accounts$253,923  174 0.07  $289,285  202 0.07 Savings 8,917  5 0.06   6,470  3 0.05 Money market accounts 553,388  4,529 0.82   482,225  1,484 0.31 Time deposits 165,854  2,903 1.75   269,262  4,119 1.53 Borrowed funds 77,556  2,428 3.13   34,214  742 2.17 Total interest bearing liabilities 1,059,638  10,039 0.95   1,081,456  6,550 0.61 Noninterest bearing liabilities:           Noninterest bearing liabilities 23,797      24,128    Noninterest bearing deposits 781,971      750,760    Stockholders’ equity 212,395      179,500    Total liabilities and stockholders’ equity$2,077,801     $2,035,844                Net interest spread    6.46%     5.58%Net interest income  $140,607     $116,693  Net interest margin(2)    6.92%     5.86% _______________ (1) Includes nonaccrual loans.(2) For the twelve months ended December 31, 2022 and December 31, 2021, collectively, SBA-PPP loans and credit card loans accounted for 299 and 226 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 twelve months ended December 31, 2022 and December 31, 2021. Segments                         For the three months ended December 31, 2022          (in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations ConsolidatedInterest income $24,389 $88  $16,035 $891 $(55) $41,348Interest expense  5,990  33   —  181  (55)  6,149Net interest income  18,399  55   16,035  710  —   35,199Provision for loan losses  —  —   2,384  —  —   2,384Net interest income after provision  18,399  55   13,651  710  —   32,815Noninterest income  550  696   4,314  1  —   5,561Noninterest expense(1)  13,811  2,085   10,724  114  —   26,734Net 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             For the three months ended December 31, 2021          Interest income $17,464 $180  $15,479 $702 $(37) $33,788Interest expense  857  129   —  168  (37)  1,117Net interest income  16,607  51   15,479  534  —   32,671Provision for loan losses  —  —   1,100  —  —   1,100Net interest income after provision  16,607  51   14,379  534  —   31,571Noninterest income  520  3,382   6,676  39  —   10,617Noninterest expense(1)  12,740  2,772   12,852  131  —   28,495Net income before taxes $4,387 $661  $8,203 $442 $—  $13,693             Total assets $1,859,201 $16,698  $138,232 $217,993 $(176,824) $2,055,300 ________________________(1) Noninterest expense includes $6.1 million and $8.8 million in data processing expense in OpenSky’s® segment for the three months ended December 31, 2022 and 2021, 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. For the twelve months ended December 31, 2022        (in thousands) Commercial Bank CBHL OpenSky® Corporate(2) Eliminations ConsolidatedInterest income $82,182  $435  $64,859 $3,349 $(179) $150,646Interest expense  9,245   218   —  755  (179)  10,039Net interest income  72,937   217   64,859  2,594  —   140,607Provision for loan losses  (980)  —   7,611  —  —   6,631Net interest income after provision  73,917   217   57,248  2,594  —   133,976Noninterest income  2,122   5,276   21,972  2  —   29,372Noninterest expense(1)  52,552   8,450   47,647  465  —   109,114Net 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             For the twelve months ended December 31, 2021        Interest income $69,433  $1,217  $50,422 $2,307 $(136) $123,243Interest expense  5,142   874   —  670  (136)  6,550Net interest income  64,291   343   50,422  1,637  —   116,693Provision for loan losses  433   —   2,856  70  —   3,359Net interest income after provision  63,858   343   47,566  1,567  —   113,334Noninterest income  1,759   20,911   27,884  82  —   50,636Noninterest expense(1)  44,729   12,713   52,231  421  —   110,094Net income before taxes $20,888  $8,541  $23,219 $1,228 $—  $53,876             Total assets $1,859,201  $16,698  $138,232 $217,993 $(176,824) $2,055,300 ________________________(1) Noninterest expense includes $27.0 million and $36.1 million in data processing expense in OpenSky’s® segment for the twelve months ended December 31, 2022 and 2021, 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(dollars in thousands except per share data) December 31, 2022 September 30,2022 June 30,2022 March 31,2022 December 31,2021Earnings:          Net income $8,991  $11,095  $11,508  $10,211  $10,171 Earnings per common share, diluted  0.62   0.77   0.80   0.71   0.71 Net interest margin  6.64%  7.24%  7.06%  6.79%  6.49%Net interest margin, excluding credit cards & SBA-PPP loans (1)  3.91%  4.16%  3.86%  3.82%  3.70%Return on average assets(2)  1.67%  2.15%  2.23%  2.01%  1.95%Return on average assets, excluding impact of SBA-PPP loans (1)(2)  1.67%  2.10%  2.04%  1.67%  1.80%Return on average equity(2)  16.18%  20.32%  22.16%  20.30%  20.66%Efficiency ratio  65.59%  64.16%  62.00%  65.12%  65.83%Balance Sheet:          Total portfolio loans receivable, net deferred fees $1,728,592  $1,648,001  $1,607,677  $1,526,256  $1,523,982 Total deposits  1,758,072   1,737,591   1,888,920   1,862,722   1,797,137 Total assets  2,123,655   2,009,358   2,154,846   2,122,453   2,055,300 Total shareholders' equity  224,015   214,005   207,316   201,492   197,903 Asset Quality Ratios:          Nonperforming assets to total assets  0.46%  0.43%  0.34%  0.28%  0.56%Nonperforming assets to total assets, excluding the SBA-PPP loans (1)  0.46%  0.43%  0.34%  0.29%  0.59%Nonperforming loans to total loans  0.56%  0.52%  0.45%  0.38%  0.70%Nonperforming loans to portfolio loans (1)  0.56%  0.52%  0.46%  0.39%  0.75%Net charge-offs to average portfolio loans (1)(2)  0.49%  0.39%  0.23%  0.24%  0.18%Allowance for loan losses to total loans  1.52%  1.58%  1.63%  1.60%  1.54%Allowance for loan losses to portfolio loans (1)  1.53%  1.58%  1.64%  1.65%  1.65%Allowance for loan losses to non-performing loans  270.46%  303.76%  360.06%  422.65%  220.40%Bank Capital Ratios:          Total risk based capital ratio  14.21%  14.65%  14.34%  14.36%  13.79%Tier 1 risk based capital ratio  12.95%  13.39%  13.09%  13.10%  12.53%Leverage ratio  9.47%  9.60%  9.11%  8.74%  8.36%Common equity Tier 1 capital ratio  12.95%  13.39%  13.09%  13.10%  12.53%Tangible common equity  8.85%  9.00%  8.17%  8.11%  8.36%Holding Company Capital Ratios:          Total risk based capital ratio  16.33%  17.41%  17.66%  17.16%  16.41%Tier 1 risk based capital ratio  15.13%  15.49%  15.70%  15.19%  14.43%Leverage ratio  11.24%  11.31%  10.93%  10.25%  9.73%Common equity Tier 1 capital ratio  15.00%  15.36%  15.55%  15.04%  14.28%Tangible common equity  10.55%  10.65%  9.62%  9.49%  9.63%Composition of Loans:          SBA-PPP loans, net $2,163  $2,662  $15,864  $51,085  $108,285 Residential real estate $484,735  $466,849  $430,244  $420,242  $401,607 Commercial real estate  664,551   626,030   608,646   564,725   556,339 Construction real estate  238,099   235,045   241,249   245,722   255,147 Commercial and industrial  220,221   192,207   193,262   177,504   175,956 Credit card, net of reserve  128,434   136,658   142,166   123,750   141,120 Other consumer loans  1,179   1,055   856   909   1,033 Portfolio loans receivable $1,737,219  $1,657,844  $1,616,423  $1,532,852  $1,531,202 Deferred origination fees, net  (8,627)  (9,843)  (8,746)  (6,596)  (7,220)Portfolio loans receivable, net $1,728,592  $1,648,001  $1,607,677  $1,526,256  $1,523,982 Composition of Deposits:          Noninterest bearing $674,313  $806,033  $842,363  $825,174  $787,650 Interest-bearing demand  207,836   252,135   305,377   279,591   330,924 Savings  7,530   8,861   10,078   9,894   6,994 Money markets  574,978   518,184   570,298   585,920   493,919 Time deposits  293,415   152,378   160,804   162,143   177,650 Total Deposits $1,758,072  $1,737,591  $1,888,920  $1,862,722  $1,797,137 Capital Bank Home Loan Metrics:        Origination of loans held for sale $43,956  $60,516  $84,417  $111,087  $158,051 Mortgage loans sold  43,415   65,349   89,745   110,039   178,068 Gain on sale of loans  912   1,340   1,918   3,042   4,423 Purchase volume as a % of originations  88.94%  81.85%  85.23%  73.16%  56.44%Gain on sale as a % of loans sold(3)  2.10%  2.05%  2.14%  2.77%  2.48%Mortgage commissions $451  $587  $772  $1,125  $1,462 OpenSky® Portfolio Metrics:        Active customer accounts  533,855   576,844   616,435   630,709   660,397 Secured credit card loans, gross $104,157  $111,842  $118,938  $109,978  $125,898 Unsecured credit card loans, gross  26,795   27,335   25,641   16,233   17,682 Noninterest secured credit card deposits  187,412   201,277   214,110   220,354   229,530  _______________ (1) Refer to Appendix for reconciliation of non-GAAP measures.(2) Annualized.(3) Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold. Return on Average Assets, as AdjustedQuarters Ended Years EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021 December 31, 2022December 31, 2021         Net Income$8,991 $11,095 $11,508 $10,211 $10,171  $41,804 $39,978 Less: SBA-PPP loan income 28  263  1,120  2,066  1,347   3,477  7,613 Net Income, as Adjusted$8,963 $10,832 $10,388 $8,145 $8,824  $38,327 $32,365 Average Total Assets 2,136,156  2,049,078  2,068,218  2,057,201  2,066,283   2,077,801  2,035,844 Less: Average SBA-PPP Loans 2,435  5,906  28,870  83,264  116,595   29,831  190,588 Average Total Assets, as Adjusted$2,133,721 $2,043,172 $2,039,348 $1,973,937 $1,949,688  $2,047,970 $1,845,256 Return on Average Assets, as Adjusted 1.67% 2.10% 2.04% 1.67% 1.80%  1.87% 1.75% Net Interest Margin, as AdjustedQuarters Ended Years EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021 December 31, 2022December 31, 2021         Net Interest Income$35,199 $36,677 $35,400 $33,331 $32,671  $140,607 $116,693 Less Credit card loan income 15,717  16,768  16,376  14,487  15,010   63,348  48,253 Less SBA-PPP loan income 28  263  1,120  2,066  1,347   3,477  7,613 Net Interest Income, as Adjusted$19,454 $19,646 $17,904 $16,778 $16,314  $73,782 $60,827 Average Interest Earning Assets 2,101,617  2,010,070  2,011,920  1,990,377  1,996,331   2,033,242  1,990,496 Less Average credit card loans 124,120  132,246  124,548  124,923  131,306   126,473  112,313 Less Average SBA-PPP loans 2,435  5,906  28,870  83,264  116,595   29,831  190,588 Total Average Interest Earning Assets, as Adjusted$1,975,062 $1,871,918 $1,858,502 $1,782,190 $1,748,430  $1,876,938 $1,687,595 Net Interest Margin, as Adjusted 3.91% 4.16% 3.86% 3.82% 3.70%  3.93% 3.60% Pre-tax, Pre-Provision Net Revenue ("PPNR")Quarters Ended Years EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021 December 31, 2022December 31, 2021         Net income$8,991$11,095$11,508$10,211$10,171 $41,804$39,978Add: Income Tax Expense 2,651 3,336 3,089 3,354 3,522  12,430 13,898Add: Provision for Loan Losses 2,384 1,260 2,035 952 1,100  6,631 3,359Pre-tax, Pre-Provision Net Revenue ("PPNR")$14,026$15,691$16,632$14,517$14,793 $60,865$57,235 Allowance for Loan Losses to Total Portfolio LoansQuarters EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021      Allowance for Loan Losses$26,385 $26,091 $26,419 $25,252 $25,181 Total Loans 1,730,755  1,650,663  1,623,541  1,577,341  1,632,267 Less: SBA-PPP loans 2,163  2,662  15,864  51,085  108,285 Total Portfolio Loans$1,728,592 $1,648,001 $1,607,677 $1,526,256 $1,523,982 Allowance for Loan Losses to Total Portfolio Loans 1.53% 1.58% 1.64% 1.65% 1.65%      Nonperforming Assets to Total Assets, net SBA-PPP LoansQuarters EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021      Total Nonperforming Assets$9,756 $8,589 $7,338 $5,975 $11,512 Total Assets 2,123,655  2,009,358  2,154,846  2,122,453  2,055,300 Less: SBA-PPP loans 2,163  2,662  15,864  51,085  108,285 Total Assets, net SBA-PPP Loans$2,121,492 $2,006,696 $2,138,982 $2,071,368 $1,947,015 Nonperforming Assets to Total Assets, net SBA-PPP Loans 0.46% 0.43% 0.34% 0.29% 0.59%      Nonperforming Loans to Total Portfolio LoansQuarters EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021      Total Nonperforming Loans$9,756 $8,589 $7,338 $5,975 $11,425 Total Loans 1,730,755  1,650,663  1,623,541  1,577,341  1,632,267 Less: SBA-PPP loans 2,163  2,662  15,864  51,085  108,285 Total Portfolio Loans$1,728,592 $1,648,001 $1,607,677 $1,526,256 $1,523,982 Nonperforming Loans to Total Portfolio Loans 0.56% 0.52% 0.46% 0.39% 0.75%      Net Charge-offs to Average Portfolio LoansQuarters EndedDollars in thousandsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021      Total Net Charge-offs$2,090 $1,588 $868 $881 $672 Total Average Loans 1,677,869  1,607,452  1,561,541  1,590,166  1,582,473 Less: Average SBA-PPP loans 2,435  5,906  28,870  83,264  116,595 Total Average Portfolio Loans$1,675,434 $1,601,546 $1,532,671 $1,506,902 $1,465,878 Net Charge-offs to Average Portfolio Loans 0.49% 0.39% 0.23% 0.24% 0.18%      Tangible Book Value per ShareQuarters EndedDollars in thousands, except per share amountsDecember 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021      Total Stockholders' Equity$224,015 $214,005 $207,316 $201,492 $197,903 Less: Preferred equity —  —  —  —  — Less: Intangible assets —  —  —  —  — Tangible Common Equity$224,015 $214,005 $207,316 $201,492 $197,903 Period End Shares Outstanding 14,138,829  14,038,599  14,010,158  14,000,520  13,962,334 Tangible Book Value per Share$15.84 $15.24 $14.80 $14.39 $14.17  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, 2022. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.1 billion at December 31, 2022 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page. FORWARD-LOOKING STATEMENTS This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "optimistic," “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.  Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission. While there is no assurance that any list of risks and uncertainties or risk factors is complete, below are certain factors which could cause actual results to differ materially from those contained or implied in the forward-looking statements: changes in general economic, political, or industry conditions; geopolitical concerns, including the ongoing war in Ukraine; the magnitude and duration of the COVID-19 pandemic and related variants and mutations and their impact on the global economy and financial market conditions and our business, results of operations, and financial condition; uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Board of Governors of the Federal Reserve System; inflation/deflation, interest rate, market, and monetary fluctuations; volatility and disruptions in global capital and credit markets; the transition away from USD LIBOR and uncertainty regarding potential alternative reference rates, including SOFR; competitive pressures on product pricing and services; success, impact, and timing of our business strategies, including market acceptance of any new products or services; the impact of changes in financial services policies, laws, and regulations, including those concerning taxes, banking, securities, and insurance, and the application thereof by regulatory bodies; cybersecurity threats and the cost of defending against them, including the costs of compliance with potential legislation to combat cybersecurity at a state, national, or global level; and other factors that may affect our future results. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law. FINANCIAL CONTACT: Alan Jackson (240) 283-0402 MEDIA CONTACT: Ed Barry (240) 283-1912 WEB SITE: www.CapitalBankMD.com 

 
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