Net Income of $6.6 million, or $0.47 per share. Net Income, as adjusted⁽¹⁾ of $7.1 million, or $0.51 per share
ROAA of 1.15% and ROAE of 10.19% for 1Q 2024
Adjusted Metrics⁽¹⁾ excluding Merger-Related Expenses:
- ROAA of 1.24% and ROAE of 11.03% for 1Q 2024
Loan Growth of $61.2 million, or 12.9% annualized for 1Q 2024
Deposit Growth of $109.7 million; Noninterest bearing deposits increased $48.4 million, or 7.8% from 4Q 2023
Cash dividend of $0.08 per share declared

ROCKVILLE, Md., April 22, 2024 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ:CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $6.6 million, or $0.47 per diluted share, for the first quarter 2024, compared to net income of $9.0 million, or $0.65 per diluted share, for the fourth quarter 2023, and $9.7 million, or $0.68 per diluted share, for the first quarter 2023. Net income, as adjusted⁽¹⁾ to exclude the impact of merger-related expenses was $7.1 million, or $0.51 per diluted share for the first quarter 2024.

The Company also declared a cash dividend on its common stock of $0.08 per share. The dividend is payable on May 22, 2024 to shareholders of record on May 6, 2024.

"We had another strong quarter of performance with robust strong loan and deposit growth, increasing credit card accounts and continued credit stability," said Ed Barry, Chief Executive Officer of the Company and the Bank. "The announced acquisition of Integrated Financial Holdings, Inc. ("IFHI") diversifies our business while prudently deploying capital. IFHI's expertise in niche C&I lending complements our strategy and extends our capabilities. At the same time, CBNK continues to make the investments in people and technology that will enable us to elevate our franchise while maintaining a strong growth and profitability profile."

"Notwithstanding the significant headwinds currently facing many community and regional banks, we continue to be well positioned for continued value creation," said Steven J Schwartz, Chairman of the Company. "Our net cardholder growth for the quarter plus strong loan and deposit growth and a resilient core net interest margin are all positive signs for the future. Moreover, we anticipate that the acquisition of Integrated Financial Holdings, Inc., if approved by the regulators, will set us on a path of additional strategic acquisitions that, together with organic growth, will assure we can continue to deliver top tier performance. The Board reiterates its thanks and appreciation to our extremely hard working and dedicated employees."

_{⁽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.}

Pending Acquisition of Integrated Financial Holdings, Inc.

On March 28, 2024, the Company and Integrated Financial Holdings, Inc. ("IFHI") issued a joint press release announcing the execution of an Agreement and Plan of Merger and Reorganization, dated as of March 27, 2024, by and between the Company and IFHI, pursuant to which, upon the terms and subject to the conditions set forth therein, the Company and IFHI will merge, with the Company continuing as the surviving entity.

The Company incurred pre-tax merger-related expenses related to the IFHI transaction of $0.7 million for the first quarter 2024. The merger is expected to close in the fourth quarter 2024 subject to regulatory approval.

The following table provides a reconciliation of the Company's net income under GAAP to non-GAAP results excluding merger-related expenses.

	First Quarter 2024
^{(in thousands except per share data)}	Income Before Income Taxes		Income Tax Expense		Net Income		Diluted Earnings per Share
GAAP Earnings	$	8,624	$	2,062	$	6,562	$	0.47
Add: Merger-Related Expenses		712		174		538
Non-GAAP Earnings	$	9,336	$	2,236	$	7,100	$	0.51

^{Note: The tax benefit associated with merger-related e}^{xpenses has be}^{en adjusted to reflect the es}^{timated nondeductible portion of the expenses.}

First Quarter 2024 Highlights

Capital Bancorp, Inc.

Earnings Summary - Net income of $6.6 million, or $0.47 per diluted share, decreased $2.5 million compared to $9.0 million, or $0.65 per diluted share, for the fourth quarter 2023. Net income, as adjusted⁽¹⁾, was $7.1 million, or $0.51 per diluted share for the first quarter 2024.

Net interest income of $35.0 million increased $0.1 million compared to $34.9 million for the fourth quarter 2023. Interest income of $48.4 million increased $1.4 million compared to $47.0 million for the fourth quarter 2023 as interest income from portfolio loans increased $0.9 million and interest income from interest-bearing deposits held at other financial institutions increased $0.4 million. Interest expense of $13.4 million increased $1.3 million compared to $12.1 million for the fourth quarter 2023 as interest expense from time deposits increased $1.1 million and the average rate of time deposits increased 27 basis points to 4.99% as growth in average time deposits totaled $69.2 million for the first quarter 2024.
The provision for credit losses was $2.7 million, a decrease of $0.1 million from the fourth quarter 2023. Net charge-offs totaled $2.0 million in the first quarter first including $1.7 million from credit card related loans and $0.3 million from commercial loans. Net charge-offs totaled $2.5 million in the fourth quarter 2023 including $1.9 million from credit card related loans and $0.6 million from commercial loans. A charge-off of $0.7 million was recorded in the fourth quarter 2023 on a single multi-unit residential real estate loan.
Noninterest income of $6.0 million increased $0.1 million compared to $5.9 million for the fourth quarter 2023. Mortgage banking revenue increased $0.3 million primarily due to increased mortgage loans sold while credit card fees decreased $0.1 million and other income decreased $0.1 million.
Noninterest expense of $29.5 million increased $2.6 million compared to $26.9 million for the fourth quarter 2023. Within this category, significant variances included the following:
- Salaries and employee benefits of $12.9 million increased $1.3 million due to an increase in incentive based compensation expense of $1.0 million, annual merit-based increases of $0.3 million and a seasonal increase in payroll taxes of $0.3 million partially offset by an increase in deferred salary expense (a reduction in expense) of $0.3 million. In the fourth quarter 2023 the Company adjusted annual performance based incentive compensation.
- Merger-related expenses of $0.7 million in the first quarter 2024 were related to professional fees including legal fees, third party consulting fees and other outside service provider expenses, with no comparable expense in the fourth quarter 2023.
- Data processing expense of $6.8 million increased $0.6 million as the fourth quarter 2023 had lower expense primarily from processor rebates.
- Advertising expense of $2.0 million increased $0.6 million related primarily to seasonal increases in OpenSky^TM card acquisition strategies.
- Loan processing expense of $0.4 million increased $0.2 million in line with the growth in the loan portfolio.
- Other operating expenses of $3.1 million decreased $0.9 million as operational losses were higher in the fourth quarter 2023.
Income tax expense of $2.1 million, or 23.9% of pre-tax income for the first quarter 2024, decreased $0.1 million from $2.2 million, or 19.5% of pre-tax income for the fourth quarter 2023, reflective of a decrease in pre-tax income of $2.6 million. The lower effective tax rate for the fourth quarter 2023 was primarily driven by the tax benefit recognized on the exercise of non-qualified stock options. There was no comparable activity in the first quarter 2024.

Performance and Efficiency Ratios – Annualized return on average assets ("ROAA") and annualized return on average equity ("ROAE") were 1.15% and 10.19%, respectively, for the three months ended March 31, 2024, compared to 1.63% and 14.44%, respectively, for the three months ended December 31, 2023.

Annualized ROAA and annualized ROAE, as adjusted⁽¹⁾ to exclude the impact of merger-related expenses, were 1.24% and 11.03%, respectively, for the three months ended March 31, 2024.
The efficiency ratio was 71.95% for the three months ended March 31, 2024, compared to 65.91% for the three months ended December 31, 2023. The efficiency ratio, as adjusted⁽¹⁾ to exclude the impact of merger-related expenses, was 70.22% for the three months ended March 31, 2024.

Balance Sheet – Total assets of $2.3 billion at March 31, 2024 increased $98.1 million, or 4.4%, from December 31, 2023.

Cash and cash equivalents of $85.2 million at March 31, 2024 increased $31.2 million, or 57.9%, from December 31, 2023, as total deposits increased $109.7 million, partially offset by an increase in total portfolio loans of $61.2 million and a decrease in other borrowed funds of $15.0 million.
Total portfolio loans of $2.0 billion at March 31, 2024 increased $61.2 million, representing 12.9% annualized growth from December 31, 2023. Growth in the loan portfolio included $46.7 million within the commercial real estate loan category. Total average loans increased $64.1 million quarter over quarter.
Total deposits of $2.0 billion at March 31, 2024 increased $109.7 million, or 5.8%, from December 31, 2023, while total average deposits increased $72.5 million quarter over quarter. The increase in deposits, when comparing March 31, 2024 to December 31, 2023, includes $48.4 million of noninterest-bearing deposits. Average portfolio loans-to-deposit ratio of 98.4% for the three months ended March 31, 2024 decreased from 98.8% for the three months ended December 31, 2023.
The investment securities portfolio continues to be classified as available for sale and had a fair market value of $202.3 million, or 8.7% of total assets, at March 31, 2024 down from $208.3 million at December 31, 2023. The amortized cost of the investment securities portfolio was $218.4 million, with an effective duration of 3.14 years. U.S. Treasury securities represented 64.2% of the overall investment portfolio at March 31, 2024. The accumulated other comprehensive loss on the investment securities portfolio increased $0.5 million during the quarter to $13.6 million as of March 31, 2024, which represents 5.3% of total stockholders' equity. The Company does not have a held to maturity ("HTM") investment securities portfolio.

Net Interest Margin - Net interest margin decreased to 6.24% for the three months ended March 31, 2024, compared to 6.40% for the three months ended December 31, 2023. Adjusted net interest margin⁽¹⁾ (excluding credit card loans) decreased to 3.85% compared to 3.92% for the three months ended December 31, 2023.

The average yield on interest earning assets of 8.63% increased 1 basis point compared to the fourth quarter 2023. The yield on portfolio loans, as adjusted⁽¹⁾ (excluding credit card loans) of 6.96% for the first quarter 2024 increased 7 basis points from 6.89% for the fourth quarter 2023. New portfolio loans (excluding credit card loans) originated in the first quarter 2024 totaled $122.7 million with a weighted average yield of 8.24% as compared to $91.1 million with a weighted average yield of 8.46% in the fourth quarter 2023.
The average rate on interest-bearing liabilities increased 22 basis points compared to the fourth quarter 2023. The average rate for time deposits increased 27 basis points to 4.99% and average balances increased $69.2 million, compared to the fourth quarter 2023. Further, the average rate on money market accounts increased 5 basis points to 4.21% and the average rate on interest-bearing demand accounts increased 6 basis points to 0.24%.

Deposits - Total deposits at March 31, 2024 increased by $109.7 million, or 5.8%, compared to December 31, 2023.

Noninterest-bearing deposits of $665.8 million increased $48.4 million, or 7.8%, compared to December 31, 2023, primarily due to increases in title account balances. Interest-bearing deposits of $1.3 billion increased $61.3 million, or 4.8%, compared to December 31, 2023 including an increase in money market accounts of $15.3 million and other time deposits of $33.7 million partially offset by a reduction in interest-bearing demand accounts of $5.3 million and savings of $0.7 million. Brokered time deposits totaled $160.6 million at March 31, 2024, an increase of $18.3 million from December 31, 2023.

Cost of Interest-Bearing Liabilities - The elevated interest rate environment, combined with an increase in time deposits, resulted in the average cost of interest-bearing liabilities increasing to 3.90% for the quarter ended March 31, 2024, compared to 3.68% for the fourth quarter 2023.

Average time deposits of $450.0 million increased $69.2 million, or 18.2%, compared to December 31, 2023.
Average noninterest-bearing deposits of $637.1 million increased $14.2 million, or 2.3%, compared to December 31, 2023, and represented 32.5% of total average deposits at March 31, 2024.
Average borrowed funds of $59.0 million increased $17.1 million, or 41.0%, compared to December 31, 2023.

Robust Capital Positions - As of March 31, 2024, the Company reported a common equity tier 1 capital ratio of 14.92%, compared to 15.43% at December 31, 2023, and an allowance for credit losses to total loans ratio of 1.49%, compared to an allowance for credit losses to total loans ratio of 1.50% at December 31, 2023. Shares repurchased and retired during the three months ended March 31, 2024, as part of the Company's stock repurchase program, totaled 67,869 shares at an average price of $20.62, for a total cost of $1.4 million including commissions. Tangible book value per common share⁽¹⁾ grew 2.0% to $18.68 at March 31, 2024 when compared to December 31, 2023. The Company did not have goodwill or other intangible assets during any of the periods presented and therefore, tangible book value per share⁽¹⁾ is equal to book value per share.

Liquidity - Total sources of available borrowings at March 31, 2024 totaled $743.9 million, including available collateralized lines of credit of $465.6 million, unsecured lines of credit with other banks of $76.0 million and unpledged investment securities available as collateral for potential additional borrowings of $202.3 million.

Commercial Bank

Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $71.2 million, to $1.9 billion, gross, at March 31, 2024 compared to December 31, 2023.

Net Interest Income - Interest income of $32.5 million increased $1.5 million compared to $31.0 million for the fourth quarter 2024, driven primarily by loan growth. Interest expense of $13.2 million increased $1.3 million, driven by an increase in average balances and average cost of interest-bearing liabilities in the first quarter 2024.

Credit Metrics - Nonperforming assets decreased 10 basis points to 0.62% of total assets at March 31, 2024 compared to 0.72% at December 31, 2023 as a result of a decrease in nonaccrual loans at March 31, 2024 to $14.4 million compared to $16.0 million at December 31, 2023. The near complete resolution of a single nonperforming asset from $7.6 million to $0.6 million was offset by a $5.4 million increase in nonperforming assets comprised of $2.4 million of residential real estate secured loans and $3.0 million of non owner-occupied commercial real estate loans to various borrowers that the Company is proactively managing toward resolution.

At March 31, 2024 commercial real estate loans with office space exposure totaled $55.0 million, or 2.8% of total portfolio loans, with a weighted average loan-to-value ("LTV") of 48.1%. Included in the total are owner-occupied commercial real estate loans with office exposure totaling $43.2 million with a weighted average LTV of 47.0% and non owner-occupied commercial real estate loans with office exposure totaling $11.8 million with a weighted average LTV of 52.9%. At March 31, 2024 multi-family loans totaled $153.4 million, or 7.8% of total portfolio loans, with a weighted average LTV of 47.3%.

OpenSky^™

Revenues - Total revenue of $18.8 million decreased $0.2 million from the fourth quarter 2023. Interest income of $14.9 million decreased $0.1 million from the fourth quarter 2023. Average OpenSky^™ loan balances, net of reserves and deferred fees of $110.5 million for the first quarter 2024, decreased $4.1 million, or 3.6%, compared to $114.6 million for the fourth quarter 2023. Noninterest income of $3.9 million decreased $0.1 million from the fourth quarter 2023.

Noninterest Expense - Total noninterest expense of $13.6 million increased $0.9 million from the fourth quarter 2023. Data processing expense was lower in the fourth quarter 2023, attributable primarily to processor rebates. During the first quarter 2024, the number of OpenSky^™ credit card accounts increased by 1,636 to 526,950.

Loan and Deposit Balances - OpenSky^™ loan balances, net of reserves, of $111.9 million at March 31, 2024 decreased by $11.4 million, or 9.3%, compared to $123.3 million at December 31, 2023. Corresponding deposit balances of $171.8 million at March 31, 2024 decreased $2.1 million, or 1.2%, compared to $173.9 million at December 31, 2023. Gross unsecured loan balances of $28.5 million at March 31, 2024 decreased $2.3 million, or 7.5%, compared to $30.8 million at December 31, 2023.

OpenSky^™ Credit - Card delinquencies remained stable in the first quarter 2024 when compared to the fourth quarter 2023. The provision for credit losses decreased $0.6 million compared to the fourth quarter 2023 as card balances, net of reserves, decreased $11.4 million during the first quarter 2024 as compared to an increase of $0.8 million during the fourth quarter 2023.


COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited

	Quarter Ended									1Q24 vs 4Q23					1Q24 vs 1Q23
^{(in thousands except per share data)}	March 31, 2024			December 31, 2023			March 31, 2023			$ Change			% Change		$ Change			% Change
Earnings Summary
Interest income	$	48,369		$	46,969		$	43,416		$	1,400		3.0	%	$	4,953		11.4	%
Interest expense		13,361			12,080			8,929			1,281		10.6	%		4,432		49.6	%
Net interest income		35,008			34,889			34,487			119		0.3	%		521		1.5	%
Provision for credit losses		2,727			2,808			1,660			(81	)	(2.9	)%		1,067		64.3	%
Provision for (release of) credit losses on unfunded commitments		142			(106	)		(19	)		248		(234.0	)%		161		(847.4	)%
Noninterest income		5,972			5,936			6,026			36		0.6	%		(54	)	(0.9	)%
Noninterest expense		29,487			26,907			26,222			2,580		9.6	%		3,265		12.5	%
Income before income taxes		8,624			11,216			12,650			(2,592	)	(23.1	)%		(4,026	)	(31.8	)%
Income tax expense		2,062			2,186			2,915			(124	)	(5.7	)%		(853	)	(29.3	)%
Net income	$	6,562		$	9,030		$	9,735		$	(2,468	)	(27.3	)%	$	(3,173	)	(32.6	)%

Pre-tax pre-provision net revenue ("PPNR") ⁽¹⁾	$	11,493		$	13,918		$	14,291		$	(2,425	)	(17.4	)%	$	(2,798	)	(19.6	)%
PPNR, as adjusted⁽¹⁾	$	12,205		$	13,918		$	14,291		$	(1,713	)	(12.3	)%	$	(2,086	)	(14.6	)%

Common Share Data
Earnings per share - Basic	$	0.47		$	0.65		$	0.69		$	(0.18	)	(27.7	)%	$	(0.22	)	(31.9	)%
Earnings per share - Diluted	$	0.47		$	0.65		$	0.68		$	(0.18	)	(27.7	)%	$	(0.21	)	(30.9	)%
Earnings per share - Diluted, as adjusted⁽¹⁾	$	0.51		$	0.65		$	0.68		$	(0.14	)	(21.5	)%	$	(0.17	)	(25.0	)%
Weighted average common shares - Basic		13,919			13,897			14,159
Weighted average common shares - Diluted		13,919			13,989			14,272

Return Ratios
Return on average assets (annualized)		1.15	%		1.63	%		1.84	%
Return on average assets, as adjusted (annualized)⁽¹⁾		1.24	%		1.63	%		1.84	%
Return on average equity (annualized)		10.19	%		14.44	%		16.98	%
Return on average equity, as adjusted (annualized)⁽¹⁾		11.03	%		14.44	%		16.98	%

______________

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

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited (Continued)

	Quarter Ended						Quarter Ended
	March 31,						December 31,		September 30,		June 30,
^{(in thousands except per share data)}		2024		2023	% Change			2023		2023		2023
Balance Sheet Highlights
Assets	$	2,324,238	$	2,245,286	3.5	%	$	2,226,176	$	2,272,484	$	2,227,866
Investment securities available for sale		202,254		255,762	(20.9	)%		208,329		206,055		208,464
Mortgage loans held for sale		10,303		9,620	7.1	%		7,481		4,843		10,146
Portfolio loans receivable ⁽²⁾		1,964,525		1,788,146	9.9	%		1,903,288		1,862,679		1,838,131
Allowance for credit losses		29,350		26,216	12.0	%		28,610		28,279		27,495
Deposits		2,005,695		1,944,374	3.2	%		1,895,996		1,967,988		1,934,361
FHLB borrowings		22,000		32,000	(31.3	)%		22,000		22,000		22,000
Other borrowed funds		12,062		12,062	—	%		27,062		12,062		12,062
Total stockholders' equity		259,465		234,517	10.6	%		254,860		242,878		237,435
Tangible common equity ⁽¹⁾		259,465		234,517	10.6	%		254,860		242,878		237,435

Common shares outstanding		13,890		14,083	(1.4	)%		13,923		13,893		13,981
Book value per share	$	18.68	$	16.65	12.2	%	$	18.31	$	17.48	$	16.98
Tangible book value per share⁽¹⁾	$	18.68	$	16.65	12.2	%	$	18.31	$	17.48	$	16.98
Dividends per share	$	0.08	$	0.06	33.3	%	$	0.08	$	0.08	$	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 March 31, 2024 and 2023

For the three months ended March 31, 2024, net interest income of $35.0 million increased slightly from $34.5 million in the same period in 2023. The net interest margin decreased 41 basis points to 6.24% for the three months ended March 31, 2024 from the same period in 2023 as interest income on credit card decreased $1.4 million. Net interest margin, excluding credit card loans, increased to 3.85% for the three months ended March 31, 2024, compared to 3.81% for the same period in 2023 as yields on interest-bearing deposits and portfolio loans generally kept pace with the rising costs of deposits, including money market accounts and time deposits.

For the three months ended March 31, 2024, average interest earning assets increased $150.7 million, or 7.2%, to $2.3 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 26 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $144.0 million, or 11.7%, and the average cost of interest-bearing liabilities increased to 3.90%, a 97 basis point increase from 2.93%.

For the three months ended March 31, 2024, the provision for credit losses was $2.7 million, an increase of $1.1 million from the same period in 2023, primarily driven by loan growth. Net charge-offs for the three months ended March 31, 2024 were $2.0 million, or 0.41% on an annualized basis of average portfolio loans, compared to $2.6 million, or 0.61% on an annualized basis of average loans for the same period in 2023. Of the $2.0 million in net charge-offs during the first quarter 2024, $1.2 million related to secured and partially secured cards in the credit card portfolio and $0.5 million related to unsecured cards.

For the three months ended March 31, 2024, noninterest income of $6.0 million decreased $0.1 million, or 0.9%, from the same period in 2023. Mortgage banking revenue of $1.5 million increased $0.3 million due to an increase in home loan sales. Credit card fees of $3.9 million decreased $0.3 million primarily related to lower interchange and other fee income.

Credit card loan balances, net of reserves, decreased by $1.0 million to $111.9 million as of March 31, 2024, from $112.9 million at March 31, 2023. The related deposit account balances decreased 7.1% to $171.8 million at March 31, 2024 when compared to $184.8 million at March 31, 2023, reflective of the reduction in the number of open secured card customer accounts year over year.

The efficiency ratio for the three months ended March 31, 2024 was 71.95% compared to 64.72% for the three months ended March 31, 2023.

For the three months ended March 31, 2024, noninterest expense of $29.5 million increased $3.3 million, or 12.5%, from $26.2 million for the same period in 2023. The change includes increases in advertising expense of $1.5 million, merger-related expenses of $0.7 million, other operating expense of $0.5 million, occupancy and equipment expenses of $0.4 million, salaries and employee benefits expenses of $0.4 million and data processing expense of $0.2 million, partially offset by a decrease professional fees of $0.4 million.

Financial Condition

Total assets at March 31, 2024 were $2.3 billion, an increase of $98.1 million, or 4.4%, from the balance at December 31, 2023 and an increase of $79.0 million, or 3.5%, from the balance at March 31, 2023.

Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.0 billion at March 31, 2024, an increase of $61.2 million, up 3.2% or 12.9% annualized, compared to December 31, 2023, and an increase of $176.4 million, or 9.9%, compared to $1.8 billion at March 31, 2023.

The Company recorded a provision for credit losses of $2.7 million during the three months ended March 31, 2024, which increased the allowance for credit losses to $29.4 million, or 1.49% of total loans at March 31, 2024, representing an increase of $0.7 million over the balance at December 31, 2023.

Nonperforming assets, which were comprised solely of nonperforming loans as of March 31, 2024, were $14.4 million, or 0.62% of total assets, down from $16.0 million, or 0.72% of total assets at December 31, 2023, and down from $16.3 million, or 0.73% of total assets at March 31, 2023. The near complete resolution of a single nonperforming asset from $7.6 million to $0.6 million was offset by a $5.8 million increase in nonperforming assets comprised of $2.4 million of residential real estate secured loans and $3.0 million of non owner-occupied commercial real estate loans to various borrowers that the Company is proactively managing toward resolution.

Deposits were $2.0 billion at March 31, 2024, an increase of $109.7 million, or 5.8%, from the balance at December 31, 2023 and an increase of $61.3 million, or 3.2%, from the balance at March 31, 2023. Average deposits of $2.0 billion for the three months ended March 31, 2024 increased $72.5 million, or 3.8%, as compared to the three months ended December 31, 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 $16.9 million to $637.1 million as of March 31, 2024, as compared to March 31, 2023.

Noninterest-bearing deposits represented 33.2% of total deposits at March 31, 2024 compared to 36.3% at March 31, 2023. Uninsured deposits were approximately $855.7 million as of March 31, 2024, representing 42.7% of the Company's deposit portfolio, compared to $789.4 million, or 41.6%, at December 31, 2023, and $888.9 million, or 45.7%, at March 31, 2023.

Stockholders' equity increased to $259.5 million as of March 31, 2024, compared to $254.9 million at December 31, 2023 and $234.5 million at March 31, 2023. Shares repurchased and retired for the three months ended March 31, 2024 as part of the Company's stock repurchase program totaled 67,869 shares at an average price of $20.62, for a total cost of $1.4 million including commissions. As of March 31, 2024, the Bank's capital ratios continued to exceed the regulatory requirements for a "well-capitalized" institution.


Consolidated Statements of Income (Unaudited)
	Three Months Ended
^{(in thousands)}	March 31, 2024		December 31, 2023			September 30, 2023		June 30, 2023		March 31, 2023
Interest income
Loans, including fees	$	45,991	$	45,109		$	45,385	$	42,991	$	41,275
Investment securities available for sale		1,251		1,083			1,089		1,266		1,377
Federal funds sold and other		1,127		777			1,267		823		764
Total interest income		48,369		46,969			47,741		45,080		43,416

Interest expense
Deposits		12,833		11,759			10,703		9,409		7,754
Borrowed funds		528		321			228		331		1,175
Total interest expense		13,361		12,080			10,931		9,740		8,929

Net interest income		35,008		34,889			36,810		35,340		34,487
Provision for credit losses		2,727		2,808			2,280		2,862		1,660
Provision for (release of) credit losses on unfunded commitments		142		(106	)		24		—		(19	)
Net interest income after provision for credit losses		32,139		32,187			34,506		32,478		32,846

Noninterest income
Service charges on deposits		207		240			250		245		229
Credit card fees		3,881		3,970			4,387		4,706		4,210
Mortgage banking revenue		1,453		1,166			1,243		1,332		1,155
Other income		431		560			446		404		432
Total noninterest income		5,972		5,936			6,326		6,687		6,026

Noninterest expenses
Salaries and employee benefits		12,907		11,638			12,419		12,143		12,554
Occupancy and equipment		1,613		1,573			1,351		1,536		1,213
Professional fees		1,947		1,930			2,358		2,608		2,374
Data processing		6,761		6,128			6,469		6,559		6,530
Advertising		2,032		1,433			1,565		2,646		517
Loan processing		371		198			426		660		349
Foreclosed real estate expenses, net		1		—			1		—		6
Merger-related expenses		712		—			—		—		—
Other operating		3,143		4,007			3,457		3,440		2,679
Total noninterest expenses		29,487		26,907			28,046		29,592		26,222
Income before income taxes		8,624		11,216			12,786		9,573		12,650
Income tax expense		2,062		2,186			2,998		2,255		2,915
Net income	$	6,562	$	9,030		$	9,788	$	7,318	$	9,735


Consolidated Balance Sheets
	(unaudited)			(audited)			(unaudited)			(unaudited)			(unaudited)
^{(in thousands except share data)}	March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Assets
Cash and due from banks	$	12,361		$	14,513		$	13,767		$	18,619		$	14,477
Interest-bearing deposits at other financial institutions		72,787			39,044			130,428			100,343			125,448
Federal funds sold		56			407			1,957			376			462
Total cash and cash equivalents		85,204			53,964			146,152			119,338			140,387
Investment securities available for sale		202,254			208,329			206,055			208,464			255,762
Restricted investments		4,441			4,353			4,340			3,803			4,215
Loans held for sale		10,303			7,481			4,843			10,146			9,620
Portfolio loans receivable, net of deferred fees and costs		1,964,525			1,903,288			1,862,679			1,838,131			1,788,146
Less allowance for credit losses		(29,350	)		(28,610	)		(28,279	)		(27,495	)		(26,216	)
Total portfolio loans held for investment, net		1,935,175			1,874,678			1,834,400			1,810,636			1,761,930
Premises and equipment, net		4,500			5,069			5,297			5,494			5,367
Accrued interest receivable		12,258			11,494			11,231			10,155			9,985
Deferred tax asset		12,311			12,252			13,644			13,616			12,898
Bank owned life insurance		38,062			37,711			37,315			37,041			36,781
Accounts receivable		11,637			1,055			696			450			551
Other assets		8,093			9,790			8,511			8,723			7,790
Total assets	$	2,324,238		$	2,226,176		$	2,272,484		$	2,227,866		$	2,245,286

Liabilities
Deposits
Noninterest-bearing	$	665,812		$	617,373		$	680,803		$	693,129		$	705,801
Interest-bearing		1,339,883			1,278,623			1,287,185			1,241,232			1,238,573
Total deposits		2,005,695			1,895,996			1,967,988			1,934,361			1,944,374
Federal Home Loan Bank advances		22,000			22,000			22,000			22,000			32,000
Other borrowed funds		12,062			27,062			12,062			12,062			12,062
Accrued interest payable		6,009			5,583			5,204			3,029			1,977
Other liabilities		19,007			20,675			22,352			18,979			20,356
Total liabilities		2,064,773			1,971,316			2,029,606			1,990,431			2,010,769

Stockholders' equity
Common stock		139			139			139			140			141
Additional paid-in capital		54,229			54,473			54,549			55,856			57,277
Retained earnings		218,731			213,345			206,033			197,490			191,058
Accumulated other comprehensive loss		(13,634	)		(13,097	)		(17,843	)		(16,051	)		(13,959	)
Total stockholders' equity		259,465			254,860			242,878			237,435			234,517
Total liabilities and stockholders' equity	$	2,324,238		$	2,226,176		$	2,272,484		$	2,227,866		$	2,245,286

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 March 31, 2024						Three Months Ended December 31, 2023						Three Months Ended March 31, 2023
	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	$	84,531	$	1,049	4.99	%	$	65,336	$	680	4.13	%	$	62,566	$	615	3.99	%
Federal funds sold		56		1	7.18			1,574		21	5.29			2,054		18	3.62
Investment securities available for sale		233,231		1,251	2.16			223,132		1,083	1.93			274,685		1,377	2.03
Restricted investments		4,601		77	6.73			4,518		76	6.67			7,346		130	7.17
Loans held for sale		4,872		83	6.85			4,601		83	7.16			4,695		77	6.65
Portfolio loans receivable⁽²⁾⁽³⁾		1,927,372		45,908	9.58			1,863,298		45,026	9.59			1,752,638		41,199	9.53
Total interest earning assets		2,254,663		48,369	8.63			2,162,459		46,969	8.62			2,103,984		43,416	8.37
Noninterest earning assets		44,571						40,020						40,265
Total assets	$	2,299,234					$	2,202,479					$	2,144,249

Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Interest-bearing demand accounts	$	183,217		110	0.24		$	195,539		90	0.18		$	186,184		70	0.15
Savings		4,841		1	0.08			5,184		2	0.15			6,502		1	0.05
Money market accounts		682,414		7,136	4.21			680,697		7,139	4.16			604,864		4,587	3.08
Time deposits		449,963		5,586	4.99			380,731		4,528	4.72			319,449		3,096	3.93
Borrowed funds		58,963		528	3.60			41,823		321	3.05			118,379		1,175	4.02
Total interest-bearing liabilities		1,379,398		13,361	3.90			1,303,974		12,080	3.68			1,235,378		8,929	2.93
Noninterest-bearing liabilities:
Noninterest-bearing liabilities		23,820						27,529						22,355
Noninterest-bearing deposits		637,124						622,941						654,025
Stockholders' equity		258,892						248,035						232,491
Total liabilities and stockholders' equity	$	2,299,234					$	2,202,479					$	2,144,249

Net interest spread					4.73	%					4.94	%					5.44	%
Net interest income			$	35,008					$	34,889					$	34,487
Net interest margin⁽⁴⁾					6.24	%					6.40	%					6.65	%

_______________

_{⁽¹⁾Annualized.}

_{⁽²⁾Includes nonaccrual loans.}

_{⁽³⁾For the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, collectively, portfolio loans yield excluding credit card loans was 6.96%, 6.89% and 6.30%, respectively.}

_{⁽⁴⁾For the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, collectively, credit card loans accounted for 239, 248 and 284 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.

Effective January 1, 2024, the Company allocated certain expenses previously recorded directly to the Commercial Bank segment to the other segments. These expenses are for shared services also consumed by OpenSky^T^M, CBHL, and Corporate. The Company performs an allocation process based on several metrics the Company believes more accurately ascribe shared service overhead to each segment. The Company believes this reflects the cost of support for each segment that should be considered in assessing segment performance. Historical information has been recast to reflect financial information consistently with the 2024 presentation.

The following schedule presents financial information for the periods indicated. Total assets are presented as of March 31, 2024, December 31, 2023, and March 31, 2023.


Segments
For the three months ended March 31, 2024
^{(in thousands)}	Commercial Bank			CBHL			OpenSky^™		Corporate⁽²⁾			Eliminations			Consolidated
Interest income	$	32,529		$	83		$	14,921	$	899		$	(63	)	$	48,369
Interest expense		13,154			41			—		229			(63	)		13,361
Net interest income		19,375			42			14,921		670			—			35,008
Provision for credit losses		1,109			—			1,559		59			—			2,727
Provision for credit losses on unfunded commitments		142			—			—		—			—			142
Net interest income after provision		18,124			42			13,362		611			—			32,139
Noninterest income		704			1,352			3,915		1			—			5,972
Noninterest expense⁽¹⁾		12,259			2,105			13,599		1,524			—			29,487
Net income (loss) before taxes	$	6,569		$	(711	)	$	3,678	$	(912	)	$	—		$	8,624

Total assets	$	2,160,051		$	10,785		$	105,318	$	281,766		$	(233,682	)	$	2,324,238

For the three months ended December 31, 2023
^{(in thousands)}	Commercial Bank			CBHL			OpenSky^™		Corporate⁽²⁾			Eliminations			Consolidated
Interest income	$	30,957		$	83		$	15,035	$	964		$	(70	)	$	46,969
Interest expense		11,884			31			—		235			(70	)		12,080
Net interest income		19,073			52			15,035		729			—			34,889
Provision for (release of) credit losses		691			—			2,125		(8	)		—			2,808
Release of credit losses on unfunded commitments		(106	)		—			—		—			—			(106	)
Net interest income after provision		18,488			52			12,910		737			—			32,187
Noninterest income		773			1,166			3,996		1			—			5,936
Noninterest expense⁽¹⁾		12,303			1,617			12,669		318			—			26,907
Net income (loss) before taxes	$	6,958		$	(399	)	$	4,237	$	420		$	—		$	11,216

Total assets	$	2,051,945		$	8,589		$	117,477	$	277,565		$	(229,400	)	$	2,226,176

For the three months ended March 31, 2023
^{(in thousands)}	Commercial Bank			CBHL			OpenSky^™		Corporate⁽²⁾			Eliminations			Consolidated
Interest income	$	26,300		$	77		$	16,130	$	978		$	(69	)	$	43,416
Interest expense		8,739			30			—		229			(69	)		8,929
Net interest income		17,561			47			16,130		749			—			34,487
(Release of) provision for credit losses		(161	)		—			1,821		—			—			1,660
Release of credit losses on unfunded commitments		(19	)		—			—		—			—			(19	)
Net interest income after provision		17,741			47			14,309		749			—			32,846
Noninterest income		489			1,327			4,210		—			—			6,026
Noninterest expense⁽¹⁾		11,759			2,336			11,738		389			—			26,222
Net income (loss) before taxes	$	6,471		$	(962	)	$	6,781	$	360		$	—		$	12,650

Total assets	$	2,074,634		$	10,193		$	106,761	$	257,048		$	(203,350	)	$	2,245,286

________________________

_{⁽¹⁾Noninterest expense includes $6.1 million, $5.7 million, and $5.9 million in data processing expense in OpenSky's^™ segment for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, 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)}	March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Earnings:
Net income	$	6,562		$	9,030		$	9,788		$	7,318		$	9,735
Earnings per common share, diluted		0.47			0.65			0.70			0.52			0.68
Net interest margin		6.24	%		6.40	%		6.71	%		6.63	%		6.65	%
Net interest margin, excluding credit card loans ⁽¹⁾		3.85	%		3.92	%		4.05	%		4.06	%		3.81	%
Return on average assets⁽²⁾		1.15	%		1.63	%		1.75	%		1.34	%		1.84	%
Return on average equity⁽²⁾		10.19	%		14.44	%		16.00	%		12.30	%		16.98	%
Efficiency ratio		71.95	%		65.91	%		65.02	%		70.41	%		64.73	%

Balance Sheet:
Total portfolio loans receivable, net deferred fees	$	1,964,525		$	1,902,643		$	1,861,929		$	1,837,041		$	1,786,109
Total deposits		2,005,695			1,895,996			1,967,988			1,934,361			1,944,374
Total assets		2,324,238			2,226,176			2,272,484			2,227,866			2,245,286
Total stockholders' equity		259,465			254,860			242,878			237,435			234,517
Total average portfolio loans receivable, net deferred fees		1,926,778			1,862,599			1,846,866			1,800,800			1,750,539
Total average deposits		1,957,558			1,885,092			1,918,467			1,881,380			1,771,024
Portfolio loans-to-deposit ratio (period-end balances)		97.95	%		100.35	%		94.61	%		94.97	%		91.86	%
Portfolio loans-to-deposit ratio (average balances)		98.43	%		98.81	%		96.27	%		95.72	%		98.84	%

Asset Quality Ratios:
Nonperforming assets to total assets		0.62	%		0.72	%		0.67	%		0.71	%		0.73	%
Nonperforming loans to total loans		0.73	%		0.84	%		0.82	%		0.85	%		0.91	%
Net charge-offs to average portfolio loans ⁽²⁾		0.41	%		0.53	%		0.38	%		0.35	%		0.61	%
Allowance for credit losses to total loans		1.49	%		1.50	%		1.52	%		1.50	%		1.47	%
Allowance for credit losses to non-performing loans		204.37	%		178.34	%		185.61	%		175.03	%		160.91	%

Bank Capital Ratios:
Total risk based capital ratio		14.36	%		14.81	%		14.51	%		14.08	%		14.09	%
Tier 1 risk based capital ratio		13.10	%		13.56	%		13.25	%		12.82	%		12.84	%
Leverage ratio		10.29	%		10.51	%		10.04	%		9.77	%		9.78	%
Common equity Tier 1 capital ratio		13.10	%		13.56	%		13.25	%		12.82	%		12.84	%
Tangible common equity		9.66	%		9.91	%		9.08	%		8.93	%		8.79	%

Holding Company Capital Ratios:
Total risk based capital ratio		16.83	%		17.38	%		17.11	%		16.81	%		16.75	%
Tier 1 risk based capital ratio		15.03	%		15.55	%		15.27	%		14.96	%		14.90	%
Leverage ratio		11.87	%		12.14	%		11.62	%		11.50	%		11.47	%
Common equity Tier 1 capital ratio		14.92	%		15.43	%		15.27	%		14.96	%		14.90	%
Tangible common equity		11.16	%		11.45	%		10.69	%		10.66	%		10.44	%

_______________

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

_{⁽²⁾Annualized.}

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited (Continued)
	Quarter Ended
^{(in thousands except per share data)}	March 31, 2024			December 31, 2023			September 30, 2023			June 30, 2023			March 31, 2023
Composition of Loans:
Commercial real estate, non owner-occupied	$	377,224		$	351,116		$	350,637		$	348,892		$	348,047
Commercial real estate, owner-occupied		328,540			307,911			305,802			311,972			299,966
Residential real estate		577,112			573,104			558,147			555,133			545,899
Construction real estate		292,316			290,108			280,905			258,400			251,494
Commercial and industrial		254,577			239,208			237,549			234,714			223,323
Lender finance		13,484			11,085			—			—			—
Business equity lines of credit		14,768			14,117			14,155			13,277			12,205
Credit card, net of reserve⁽³⁾		111,898			123,331			122,533			122,925			112,860
Other consumer loans		738			950			948			1,187			1,578
Portfolio loans receivable	$	1,970,657		$	1,910,930		$	1,870,676		$	1,846,500		$	1,795,372
Deferred origination fees, net		(6,132	)		(7,642	)		(7,997	)		(8,369	)		(7,226	)
Portfolio loans receivable, net	$	1,964,525		$	1,903,288		$	1,862,679		$	1,838,131		$	1,788,146

Composition of Deposits:
Noninterest-bearing	$	665,812		$	617,373		$	680,803		$	693,129		$	705,801
Interest-bearing demand		193,963			199,308			229,035			243,095			219,685
Savings		4,525			5,211			5,686			5,816			5,835
Money markets		678,435			663,129			668,774			631,148			632,087
Brokered time deposits		160,641			142,356			128,665			128,665			181,820
Other time deposits		302,319			268,619			255,025			232,508			199,146
Total deposits	$	2,005,695		$	1,895,996		$	1,967,988		$	1,934,361		$	1,944,374

Capital Bank Home Loan Metrics:
Origination of loans held for sale	$	52,080		$	45,152		$	50,023		$	61,480		$	44,448
Mortgage loans sold		40,377			34,140			39,364			49,231			40,483
Gain on sale of loans		1,238			1,015			1,011			1,262			1,223
Purchase volume as a % of originations		97.83	%		89.99	%		92.29	%		93.12	%		90.72	%
Gain on sale as a % of loans sold⁽⁴⁾		3.07	%		2.97	%		2.57	%		2.56	%		3.02	%
Mortgage commissions	$	490		$	465		$	528		$	621		$	378

OpenSky^™ Portfolio Metrics:
Open customer accounts		526,950			525,314			529,205			540,058			527,231
Secured credit card loans, gross	$	85,663		$	95,300		$	98,138		$	100,218		$	89,078
Unsecured credit card loans, gross		28,508			30,817			27,430			25,254			25,782
Noninterest secured credit card deposits		171,771			173,857			181,185			186,566			184,809

_______________

_{⁽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.


Earnings Metrics, as Adjusted	Quarter Ended
^{(in thousands except per share data)}	March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023		March 31, 2023

Net Income	$	6,562	$	9,030	$	9,788	$	7,318	$	9,735
Add: Merger-Related Expenses, net of tax		538		—		—		—		—
Net Income, as Adjusted	$	7,100	$	9,030	$	9,788	$	7,318	$	9,735

Weighted average common shares - Diluted		13,919		13,989

Capital Bancorp, Inc. Reports First Quarter 2024 Results