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CBNK Accelerating Loan Growth Drives Steady Profits and Returns
المصدر: Nasdaq GlobeNewswire / 26 يناير 2022 15:45:01 America/Chicago
ROCKVILLE, Md., Jan. 26, 2022 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $10.2 million, or $0.71 per diluted share, for the fourth quarter of 2021. By comparison, net income was $9.7 million, or $0.71 per diluted share, for the fourth quarter of 2020. Portfolio loans, net, increased $78.9 million when compared to the period ended September 30, 2021, and $208.5 million when compared to the period ended December 31, 2021.
“2021 was a tremendous year for Capital Bank,” said Steven Schwartz, Chairman of the Board of the Company. “The Commercial Bank, Capital Bank Home Loans and OpenSky® all outperformed expectations as investments in technology and people continued to deliver exceptional results. Building on the Bank’s success, we continue to seek out and invest in opportunities that will leverage our unique combination of technological innovation and community banking to build long-term shareholder value.”
"The fourth quarter’s results were driven by strong performance in the Commercial Bank and OpenSky® which more than made up for the slowdown of our mortgage business," said Ed Barry, CEO of the Company. "Capitalizing on market disruption, we made several strategic hires in the Commercial Bank which contributed to a 21.9 percent annualized portfolio loan growth in the fourth quarter. OpenSky® is poised to remain an engine of growth with the fourth quarter launch of our unsecured credit card line to our highest performing OpenSky® secured card holders. OpenSky's® annualized quarterly net loan growth of 18.1 percent continued to drive portfolio loan balances. Anticipated OpenSky® card holder attrition resulted in a modest decline in open accounts for the quarter but remains well-below historical levels."
Fourth Quarter 2021 Highlights
Capital Bancorp, Inc.
- Stable Earnings - Continued strong performance by the Commercial Bank and OpenSky® contributed to the fourth quarter's results. Quarterly net income increased to $10.2 million from $9.7 million in the fourth quarter of 2020. Earnings were $0.71 per diluted share for the three months ended December 31, 2021 and 2020.
- Outstanding Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.95% and 20.66%, respectively, for the three months ended December 31, 2021 compared to 2.08% and 25.26%, respectively, for the three months ended December 31, 2020.
- Expanded Net Interest Margin - Net interest margin was 6.49% for the three months ended December 31, 2021, which is an increase of 92 basis points compared to 5.57% for the same three month period last year and an increase over linked quarter of 22 basis points, from 6.27%, for the three months ended September 30, 2021. The margin improvement over linked quarter was driven by an increase in average loans outstanding as well as management's concentrated effort to lower funding costs.
- Robust Capital Positions - As of December 31, 2021, the Company reported a common equity tier 1 capital ratio of 14.28% and an allowance for loan losses to total loans ratio of 1.54%, or 1.65% excluding Small Business Administration Payroll Protection Program ("SBA-PPP") loans. During the preceding twelve months, tangible book value per common share grew 22.4 percent to $14.17 at December 31, 2021.
Commercial Bank
- Accelerating Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to December 31, 2020, and by $73.4 million, compared to September 30, 2021. The year over year growth was mainly due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non-owner occupied. Also contributing to the year over year growth was a 12.0 percent increase in commercial and industrial loans of $18.8 million and a 13.4 percent increase in construction real estate loans of $30.2 million. Offsetting total growth was a $36.3 million decrease in residential real estate loans.
- Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 29.4 percent compared to December 31, 2020. The $179.1 million year over year increase was primarily due to an increase in commercial demand deposits reflecting management's ongoing strategic initiative to improve the deposit franchise. At December 31, 2021, noninterest bearing deposits represented 43.8% of total deposits compared to 36.8% at December 31, 2020. Overall, the cost of interest bearing liabilities was reduced 53 basis points, from 0.95% for the quarter ended December 31, 2020 to 0.42% for the quarter ended December 31, 2021.
- Improving Credit Metrics - Non-performing assets ("NPAs") decreased to 0.56% of total assets at December 31, 2021 compared to 0.77% at September 30, 2021 primarily due to the disposition of $3.2 million in other real estate owned during the fourth quarter of 2021 and a reduction in nonaccrual loans of $2.3 million as management continues to focus on reducing non-performing assets. Primarily as a result of improving market conditions, the provision for loan losses declined $933.0 thousand compared to the fourth quarter of 2020. The current provision for the three months ended December 31, 2021 was $1.1 million and primarily related to the credit card portfolio.
- SBA-PPP Loans - SBA-PPP loans, net of $3.2 million in unearned fees, totaled $108.3 million at December 31, 2021 which was comprised of $4.4 million in 2020 originations and $103.9 million of 2021 originations. As of December 31, 2021, the Company has obtained forgiveness for $261.6 million of SBA-PPP loans.
Capital Bank Home Loans
- Softening Mortgage Performance - Origination volumes declined 58.7 percent, to $158.1 million, in the fourth quarter of 2021, when compared to $382.3 million in the fourth quarter of 2020. The continued steepening of the yield curve in the fourth quarter of 2021 slowed originations from the year earlier when low interest rates fueled refinance volumes. In the most recent quarter, mortgage origination volumes declined $59.1 million or 27.2 percent from the three months ended September 30, 2021 due to normal seasonal patterns as well as the rate-related slow-down in the mortgage industry which has disproportionately impacted refinance activity.
- Purchase Volume - Purchase volumes increased to 56.4 percent of total originations for the fourth quarter of 2021, up from 30.0 percent during the fourth quarter of 2020.
OpenSky®
- Strong Revenue Growth - OpenSky® revenue grew by 38.2 percent to $22.2 million for the quarter ended December 31, 2021 from the same period in 2020. As account growth, line usage and customer behaviors continue to revert to traditional seasonal patterns, management anticipates modest seasonal declines in open accounts as account opening and attrition normalize.
- Continued Growth in OpenSky® Loans and Deposits - OpenSky® loan balances, net of reserves, increased by $38.9 million to $141.1 million compared to $102.2 million in the fourth quarter of 2020 and from $135.0 million, or 4.5 percent, on a linked quarter basis. Corresponding deposit balances increased 19.2 percent or $37.0 million from $192.5 million at December 31, 2020 to $229.5 million at December 31, 2021.
2021 Highlights
Capital Bancorp
- Diversified Businesses Drive Net Income - Net income for the twelve months ended December 31, 2021 increased 54.8 percent to $40.0 million, or $2.84 per diluted share, from $25.8 million, or $1.87 per diluted share for the twelve months ended December 31, 2020. Continued strong operating results demonstrate the advantages of the Company's diversified business lines that are, in certain respects, non-correlated across economic cycles.
- Top Tier Performance Ratios - Improved earnings supported ROAA and ROAE of 1.96% and 22.27%, respectively, for the twelve months ended December 31, 2021 compared to 1.56% and 18.00%, respectively, for the twelve months ended December 31, 2020.
- Expanded Net Interest Margin - For the twelve months ended December 31, 2021, net interest margin increased by 72 basis points to 5.86% compared to 5.14% for the twelve months ended December 31, 2020. The margin improvement was largely driven by the increase in OpenSky® income.
- Stable Efficiency Ratio - The efficiency ratio increased slightly to 65.79% for the twelve months ended December 31, 2021 compared to 65.44% for the same twelve month period in the prior year.
- Strong Balance Sheet Growth - Total assets increased $178.7 million, or 9.5 percent during the twelve months ended December 31, 2021 and was primarily funded by a $145.0 million increase in deposits. The growth of earning assets on the balance sheet consisted primarily of increases in cash equivalents of $36.5 million, portfolio loans net of deferred fees of $208.5 million which includes OpenSky® net loan growth of $30.1 million, investments available for sale of $84.7 million, and Bank Owned Life Insurance ("BOLI") of $35.5 million. Asset growth was primarily offset by a decrease of $91.2 million in loans held for sale as well as a $92.7 million reduction in SBA-PPP loans.
Commercial Bank
- Strong Portfolio Loan Growth - Portfolio loans, excluding credit card loans, increased by $176.0 million, or 14.5 percent, to $1.4 billion at December 31, 2021 compared to $1.2 billion at December 31, 2020. The growth was primarily due to a 41.7 percent increase in commercial real estate loans of $163.8 million, of which $102.2 million was owner occupied while $61.6 was non owner occupied.
- Improved Deposit Franchise and Lower Cost of Funding - Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, during the twelve months ended December 31, 2021 and represented 43.8 percent of total deposits at December 31, 2021. The cost of interest bearing liabilities declined to 0.61% from 1.29% for the same period in the prior year, due mainly to the average rate of interest bearing demand deposits dropping from 0.34% as of December 31, 2020 to 0.07% as of December 31, 2021.
- COVID-19 Related Deferrals - At December 31, 2021, outstanding loans deferred due to COVID-19 amounted to $4.0 million, a decrease of 86.9 percent from $30.5 million at December 31, 2020.
Capital Bank Home Loans
- Gain on Sale - The year-to-date gain on sale of mortgage loans decreased to $30.3 million at December 31, 2021 from $38.5 million at December 31, 2020 due mainly to the $314.4 million, or 24.0 percent, decline in mortgage originations. The steepening yield curve in 2021 has slowed originations from the year earlier period when low interest rates fueled refinance volumes. Gain on sale margins, down slightly from 3.02% for the twelve months ended December 31, 2020, remained strong at 2.79% for the twelve months ended December 31, 2021. Historically-low housing inventory, shortages in new home building materials, and fluctuating interest rates are likely to continue suppressing origination volumes into 2022.
OpenSky®
- Growth Elevates Performance - The 92 thousand net increase in the number of accounts in the twelve months ended December 31, 2021 resulted in a $37.0 million increase in noninterest bearing secured credit card deposits that totaled $229.5 million as of December 31, 2021. Credit card balances increased by $38.9 million, or 38.1 percent, for the twelve months ended December 31, 2021 and totaled $141.1 million at December 31, 2021. Account growth led to higher credit card fees, which increased by 64.4 percent to $27.9 million compared to $17.0 million for the same twelve month period last year, largely driven by the increase in the number of accounts in the portfolio.
COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended Twelve months ended December 31, December 31, (amounts in thousands except per share data) 2021 2020 % Change 2021 2020 % Change Earnings Summary Interest income $ 33,788 $ 28,318 19.3 % $ 123,243 $ 97,251 26.7 % Interest expense 1,117 2,599 (57.0 )% 6,550 13,182 (50.3 )% Net interest income 32,671 25,719 27.0 % 116,693 84,069 38.8 % Provision for loan losses 1,100 2,033 (45.9 )% 3,359 11,242 (70.1 )% Noninterest income 10,617 16,030 (33.8 )% 50,636 50,144 1.0 % Noninterest expense 28,495 26,680 6.8 % 110,094 87,834 25.3 % Income before income taxes 13,693 13,036 5.0 % 53,876 35,137 53.3 % Income tax expense 3,522 3,347 5.2 % 13,898 9,314 49.2 % Net income $ 10,171 $ 9,689 5.0 % $ 39,978 $ 25,823 54.8 % Pre-tax pre-provision net revenue ("PPNR") (2) $ 14,793 $ 15,069 (1.8 )% $ 57,235 $ 46,379 23.4 % Weighted average common shares - Basic 13,877 13,686 1.4 % 13,799 13,793 — % Weighted average common shares - Diluted 14,290 13,707 4.3 % 14,081 13,800 2.0 % Earnings per share - Basic $ 0.73 $ 0.71 2.8 % $ 2.90 $ 1.87 55.1 % Earnings per share - Diluted $ 0.71 $ 0.71 — % $ 2.84 $ 1.87 51.9 % Return on average assets (1) 1.95 % 2.08 % (6.3 )% 1.96 % 1.56 % 25.6 % Return on average assets, excluding impact of SBA-PPP loans(1) (2) 1.80 % 1.88 % (4.3 )% 1.75 % 1.42 % 23.2 % Return on average equity 20.66 % 25.26 % (18.2 )% 22.27 % 18.00 % 23.7 % Quarter Ended 4Q21 vs. 4Q20 Quarter Ended December 31, September 30, June 30, March 31, (in thousands except per share data) 2021 2020 % Change 2021 2021 2021 Balance Sheet Highlights Assets $ 2,055,300 $ 1,876,593 9.5 % $ 2,169,556 $ 2,151,850 $ 2,091,851 Investment securities available for sale 184,455 99,787 84.8 % 189,165 160,515 128,023 Mortgage loans held for sale 15,989 107,154 (85.1 )% 36,005 47,935 60,816 SBA-PPP loans, net of fees 108,285 201,018 (46.1 )% 137,178 202,763 265,712 Portfolio loans receivable (3) 1,523,982 1,315,502 15.8 % 1,445,126 1,392,471 1,312,375 Allowance for loan losses 25,181 23,434 7.5 % 24,753 24,079 23,550 Deposits 1,797,137 1,652,128 8.8 % 1,921,238 1,917,419 1,863,069 FHLB borrowings 22,000 22,000 — % 22,000 22,000 22,000 Other borrowed funds 12,062 14,016 (13.9 )% 12,062 12,062 12,062 Total stockholders' equity 197,903 159,311 24.2 % 189,080 177,204 167,003 Tangible common equity(2) 197,903 159,311 24.2 % 189,080 177,204 167,003 Common shares outstanding 13,962 13,754 1.5 % 13,802 13,772 13,759 Tangible book value per share (2) $ 14.17 $ 11.58 22.4 % $ 13.70 $ 12.87 $ 12.14 ______________
(1) Annualized for the quarterly periods
(2) Refer to Appendix for reconciliation of non-GAAP measures.
(3) Loans are reflected net of deferred fees and costs.Operating Results - Comparison of Three Months Ended December 31, 2021 and 2020
For the three months ended December 31, 2021, net interest income increased $7.0 million, or 27.0 percent, to $32.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 92 basis point to 6.49% for the three months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.70% for the fourth quarter of 2021 compared to 3.80% for the same period in 2020. For the three months ended December 31, 2021, average interest earning assets increased $160.0 million, or 8.7 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 58 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $37.8 million, or 3.5 percent, while the average cost of interest bearing liabilities decreased 53 basis points to 0.42% from 0.95%.
The provision for loan losses of $1.1 million for the three months ended December 31, 2021 was primarily related to growth in the credit card portfolio. Net charge-offs for the fourth quarter of 2021 were $671.6 thousand, or 0.18% on an annualized basis of average loans, compared to $615.0 thousand, or 0.19% on an annualized basis of average loans for the fourth quarter of 2020. The $671.6 thousand in net charge-offs during the quarter was related solely to the credit card portfolio.
For the quarter ended December 31, 2021, noninterest income was $10.6 million, a decrease of $5.4 million, or 33.8 percent, from $16.0 million in the prior year quarter. The decrease was primarily the result of reduced mortgage banking revenue.
Net credit card loan balances increased by $38.9 million to $141.1 million as of December 31, 2021 from $102.2 million at December 31, 2020. The related deposit account balances increased 19.2 percent to $229.5 million at December 31, 2021 when compared to $192.5 million at December 31, 2020. For the three months ended December 31, 2021, OpenSky's® secured credit card accounts decreased by 40 thousand net compared to 39 thousand net new accounts for the same period in 2020 suggesting consumer behaviors may be returning to historical trends after being elevated in response to COVID-19 throughout 2020 and the first two quarters of 2021.
The efficiency ratio for the three months ended December 31, 2021 increased to 65.83% compared to 63.91% for the three months ended December 31, 2020 due mainly to the reduction in mortgage income generated.
Noninterest expense was $28.5 million for the three months ended December 31, 2021, as compared to $26.7 million for the three months ended December 31, 2020, an increase of $1.8 million, or 6.8 percent. The increase was primarily driven by increases in salaries and employee benefits of $2.0 million, advertising expenses of $994.7 thousand, and data processing expenses of $390.1 thousand. Offsetting these expenses were decreases in occupancy and equipment expense of $507.2 thousand, loan processing expenses of $503.2 thousand, and professional fees of $474.0 thousand.
Operating Results - Comparison of Twelve Months Ended December 31, 2021 and 2020
For the twelve months ended December 31, 2021, net interest income increased $32.6 million, or 38.8 percent, to $116.7 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin increased 72 basis points to 5.86% for the twelve months ended December 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.60% for the twelve months ended December 31, 2021 compared to 3.89% for the same period in 2020. For the twelve months ended December 31, 2021, average interest earning assets increased $356.1 million, or 21.8 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 24 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $60.3 million, or 5.9 percent, while the average cost of interest-bearing liabilities decreased 68 basis points to 0.61% from 1.29%.
For the twelve months ended December 31, 2021, the provision for loan losses was $3.4 million, a decrease of $7.9 million from the prior year. Net charge-offs for the twelve months ended December 31, 2021 were $1.6 million, or 0.12% of average portfolio loans, compared to $1.1 million, or 0.09% of average portfolio loans, for the same period in 2020. The $1.6 million in net charge-offs during the twelve months ended December 31, 2021 was comprised primarily of commercial real estate loan net charge-offs of $161.1 thousand and net charge-offs of $1.4 million in the credit card portfolio.
For the twelve months ended December 31, 2021, noninterest income was $50.6 million, an increase of $491.5 thousand, or 1.0 percent, from the same period in 2020. The increase was primarily driven by significant growth in credit card fees of $10.9 million, which was partially offset by a decrease in mortgage banking revenues of $8.9 million.
For the twelve months ended December 31, 2021, the Bank had net growth of 92 thousand new OpenSky® secured credit card accounts, increasing the total number of open accounts to 660 thousand. This compares to 345 thousand new originations for the same period last year, which increased total open accounts to 568 thousand.
The efficiency ratio for the twelve months ended December 31, 2021 increased slightly to 65.79% compared to 65.44% for the twelve months ended December 31, 2020 due to increases in noninterest expense.
Noninterest expense was $110.1 million for the twelve months ended December 31, 2021, as compared to $87.8 million for the twelve months ended December 31, 2020, an increase of $22.3 million, or 25.3 percent. The increase was primarily driven by a $4.4 million, or 13.2 percent, increase in salaries and benefits, an increase in professional fees of 42.8 percent, or $2.1 million, a $12.3 million, or 45.8 percent, increase in data processing, a $2.3 million, or 89.8 percent, increase in advertising, and a $2.0 million, or 18.2 percent, increase in other operating expenses period over period. The increase of $12.3 million in data processing expenses was primarily due to the higher volume of open credit cards during the twelve months ended December 31, 2021. Additionally, operating expenses increased $2.0 million, primarily due to increases in outside service providers.
During the twelve months ended December 31, 2021, results of operations were impacted by the COVID-19 pandemic and the resulting issuance of SBA-PPP loans. At December 31, 2021, the $111.5 million of SBA-PPP loans had remaining deferred origination fees of $3.8 million, and deferred costs of $655.7 thousand.
Financial Condition
Total assets at December 31, 2021 were $2.1 billion, an increase of 9.5 percent from December 31, 2020. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.5 billion as of December 31, 2021, an increase of 15.8 percent as compared to $1.3 billion at December 31, 2020.
Total deposits at December 31, 2021 were $1.8 billion, an increase of $145.0 million, or 8.8 percent, as compared to $1.7 billion at December 31, 2020. Noninterest bearing deposits increased by $179.1 million, or 29.4 percent, to $787.7 million at December 31, 2021 compared to the level at December 31, 2020. Deposit balances grew year over year in certain fiduciary accounts of title and property management companies, as well as noninterest bearing OpenSky® deposits.
The Company recorded a provision for loan losses of $3.4 million during the twelve months ended December 31, 2021, which increased the allowance for loan losses to $25.2 million, or 1.54% of total loans (1.65%, excluding SBA-PPP loans, on a non-GAAP basis) at December 31, 2021. Nonperforming assets were $11.5 million, or 0.56% of total assets, as of December 31, 2021, down from $12.6 million, or 0.67% of total assets, at December 31, 2020. Of the $11.5 million in total nonperforming assets as of December 31, 2021, nonperforming loans represented $11.4 million and foreclosed real estate totaled $86.4 thousand. Included in nonperforming loans at December 31, 2021 were troubled debt restructurings of $534 thousand.
Stockholders’ equity increased to $197.9 million as of December 31, 2021, compared to $159.3 million at December 31, 2020. This increase was primarily attributable to earnings during the period. As of December 31, 2021, the Bank's capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
Consolidated Statements of Income (Unaudited) Three Months Ended December 31, Twelve Months Ended December 31, (in thousands) 2021 2020 2021 2020 Interest income Loans, including fees $ 33,235 $ 27,848 $ 120,784 $ 95,367 Investment securities available for sale 439 363 2,010 1,292 Federal funds sold and other 114 107 449 592 Total interest income 33,788 28,318 123,243 97,251 Interest expense Deposits 934 2,323 5,808 11,524 Borrowed funds 183 276 742 1,658 Total interest expense 1,117 2,599 6,550 13,182 Net interest income 32,671 25,719 116,693 84,069 Provision for loan losses 1,100 2,033 3,359 11,242 Net interest income after provision for loan losses 31,571 23,686 113,334 72,827 Noninterest income Service charges on deposits 136 143 609 520 Credit card fees 6,676 6,272 27,884 16,966 Mortgage banking revenue 3,365 8,748 20,843 29,732 Gain on sale of investment securities available for sale, net — 20 153 20 Other fees and charges 440 847 1,147 2,906 Total noninterest income 10,617 16,030 50,636 50,144 Noninterest expenses Salaries and employee benefits 10,564 8,592 37,843 33,442 Occupancy and equipment 1,005 1,512 4,327 5,170 Professional fees 1,454 1,928 6,996 4,900 Data processing 9,643 9,253 39,237 26,917 Advertising 1,650 655 4,803 2,530 Loan processing 857 1,360 3,527 3,811 Other real estate expenses, net 47 (68 ) 368 69 Other operating 3,275 3,448 12,993 10,995 Total noninterest expenses 28,495 26,680 110,094 87,834 Income before income taxes 13,693 13,036 53,876 35,137 Income tax expense 3,522 3,347 13,898 9,314 Net income $ 10,171 $ 9,689 $ 39,978 $ 25,823 Consolidated Balance Sheets (in thousands except share data) (unaudited)
December 31, 2021December 31, 2020 Assets Cash and due from banks $ 42,914 $ 18,456 Interest bearing deposits at other financial institutions 136,824 126,081 Federal funds sold 3,657 2,373 Total cash and cash equivalents 183,395 146,910 Investment securities available for sale 184,455 99,787 Marketable equity securities 245 245 Restricted investments 3,498 3,713 Loans held for sale 15,989 107,154 SBA-PPP loans receivable, net of fees 108,285 201,018 Portfolio loans receivable, net of deferred fees and costs 1,523,982 1,315,502 Less allowance for loan losses (25,181 ) (23,434 ) Total portfolio loans held for investment, net 1,498,801 1,292,068 Premises and equipment, net 3,282 4,464 Accrued interest receivable 7,901 8,134 Deferred income taxes, net 9,793 6,818 Other real estate owned 86 3,326 Bank owned life insurance 35,506 — Other assets 4,064 2,956 Total assets $ 2,055,300 $ 1,876,593 Liabilities Deposits Noninterest bearing $ 787,650 $ 608,559 Interest bearing 1,009,487 1,043,569 Total deposits 1,797,137 1,652,128 Federal Home Loan Bank advances 22,000 22,000 Other borrowed funds 12,062 14,016 Accrued interest payable 473 1,134 Other liabilities 25,725 28,004 Total liabilities 1,857,397 1,717,282 Stockholders' equity Common stock, $.01 par value; 49,000,000 shares authorized; 13,962,334 and 13,753,529 issued and outstanding 140 138 Additional paid-in capital 54,306 50,602 Retained earnings 144,533 106,854 Accumulated other comprehensive income (loss) (1,076 ) 1,717 Total stockholders' equity 197,903 159,311 Total liabilities and stockholders' equity $ 2,055,300 $ 1,876,593 The following table shows the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
Three Months Ended December 31, 2021 2020 Average
Outstanding
BalanceInterest Income/
ExpenseAverage
Yield/
Rate(1)Average
Outstanding
BalanceInterest Income/
ExpenseAverage
Yield/
Rate(1)(Dollars in thousands) Assets Interest earning assets: Interest bearing deposits $ 198,070 $ 73 0.15 % $ 152,720 $ 37 0.10 % Federal funds sold 2,048 — — 5,537 — — Investment securities available for sale 186,603 439 0.93 73,931 363 1.95 Restricted stock and equity securities 3,743 41 4.35 3,947 70 7.08 Loans held for sale 23,395 179 3.04 105,922 701 2.63 SBA-PPP loans receivable 116,595 1,347 4.58 227,617 1,998 3.49 Portfolio loans receivable(2) 1,465,878 31,709 8.58 1,266,662 25,149 7.90 Total interest earning assets 1,996,332 33,788 6.71 1,836,336 28,318 6.13 Noninterest earning assets 69,951 18,509 Total assets $ 2,066,283 $ 1,854,845 Liabilities and Stockholders’ Equity Interest bearing liabilities: Interest bearing demand accounts $ 315,933 39 0.05 $ 238,078 102 0.17 Savings 6,575 1 0.06 4,828 1 0.05 Money market accounts 501,070 267 0.21 467,727 633 0.54 Time deposits 190,795 627 1.30 337,170 1,586 1.87 Borrowed funds 34,062 183 2.13 38,447 277 2.86 Total interest bearing liabilities 1,048,435 1,117 0.42 1,086,250 2,599 0.95 Noninterest bearing liabilities: Noninterest bearing liabilities 26,504 23,810 Noninterest bearing deposits 796,014 592,193 Stockholders’ equity 195,330 152,592 Total liabilities and stockholders’ equity $ 2,066,283 $ 1,854,845 Net interest spread 6.29 % 5.18 % Net interest income $ 32,671 $ 25,719 Net interest margin(3) 6.49 % 5.57 % _______________
(1) Annualized.
(2) Includes nonaccrual loans.
(3) For the three months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 279 and 177 basis points of the reported net interest margin, respectively.Twelve Months Ended December 31, 2021 2020 Average
Outstanding
BalanceInterest Income/
ExpenseAverage
Yield/
Rate(1)Average
Outstanding
BalanceInterest Income/
ExpenseAverage
Yield/
Rate(1)(Dollars in thousands) Assets Interest earning assets: Interest bearing deposits $ 228,420 $ 283 0.12 % $ 112,249 $ 343 0.31 % Federal funds sold 2,850 — — 3,128 4 0.12 Investment securities available for sale 151,479 2,010 1.33 58,071 1,292 2.22 Restricted stock and equity securities 3,774 166 4.40 4,025 244 6.07 Loans held for sale 43,126 1,224 2.84 84,928 2,610 3.07 SBA-PPP loans receivable 190,588 7,613 3.99 157,630 4,479 2.84 Portfolio loans receivable(1) 1,370,988 111,947 8.17 1,215,049 88,279 7.27 Total interest earning assets 1,991,225 123,243 6.19 1,635,080 97,251 5.95 Noninterest earning assets 44,619 24,923 Total assets $ 2,035,844 $ 1,660,003 Liabilities and Stockholders’ Equity Interest bearing liabilities: Interest bearing demand accounts $ 289,285 202 0.07 $ 195,794 656 0.34 Savings 6,470 3 0.05 4,722 5 0.11 Money market accounts 482,225 1,484 0.31 480,218 4,786 1.00 Time deposits 269,262 4,119 1.53 297,997 6,077 2.04 Borrowed funds 34,214 742 2.17 42,471 1,658 3.90 Total interest bearing liabilities 1,081,456 6,550 0.61 1,021,202 13,182 1.29 Noninterest bearing liabilities: Noninterest bearing liabilities 24,128 22,007 Noninterest bearing deposits 750,760 473,301 Stockholders’ equity 179,500 143,493 Total liabilities and stockholders’ equity $ 2,035,844 $ 1,660,003 Net interest spread 5.58 % 4.66 % Net interest income $ 116,693 $ 84,069 Net interest margin(2) 5.86 % 5.14 % _______________
(1) Includes nonaccrual loans.
(2) For the twelve months ended December 31, 2021 and December 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 226 and 125 basis points of the reported net interest margin, respectively.HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended (Dollars in thousands except per share data) December 31,
2021September 30,
2021June 30,
2021March 31,
2021December 31,
2020Earnings: Net income $ 10,171 $ 11,177 $ 9,648 $ 8,982 $ 9,689 Earnings per common share, diluted 0.71 0.79 0.68 0.65 0.71 Net interest margin 6.49 % 6.27 % 5.47 % 5.15 % 5.57 % Net interest margin, excluding credit cards & SBA-PPP loans (1) 3.70 % 3.52 % 3.55 % 3.70 % 3.80 % Return on average assets(2) 1.95 % 2.13 % 1.90 % 1.87 % 2.08 % Return on average assets, excluding impact of SBA-PPP loans (1)(2) 1.80 % 1.99 % 1.65 % 1.60 % 1.88 % Return on average equity(2) 20.66 % 23.87 % 22.36 % 22.30 % 25.26 % Efficiency ratio 65.83 % 64.10 % 66.37 % 67.11 % 63.91 % Balance Sheet: Total assets $ 2,055,300 $ 2,169,556 $ 2,151,850 $ 2,091,851 $ 1,876,593 Asset Quality Ratios: Nonperforming assets to total assets 0.56 % 0.77 % 0.54 % 0.58 % 0.67 % Nonperforming assets to total assets, excluding the SBA-PPP loans (1) 0.59 % 0.83 % 0.60 % 0.66 % 0.75 % Nonperforming loans to total loans 0.70 % 0.85 % 0.52 % 0.56 % 0.61 % Nonperforming loans to portfolio loans (1) 0.75 % 0.94 % 0.60 % 0.67 % 0.70 % Net charge-offs to average portfolio loans (1)(2) 0.18 % 0.08 % 0.08 % 0.12 % 0.19 % Allowance for loan losses to total loans 1.54 % 1.56 % 1.51 % 1.49 % 1.54 % Allowance for loan losses to portfolio loans (1) 1.65 % 1.71 % 1.73 % 1.79 % 1.78 % Allowance for loan losses to non-performing loans 220.40 % 182.48 % 287.40 % 267.07 % 253.71 % Bank Capital Ratios: Total risk based capital ratio 13.79 % 13.86 % 13.51 % 13.55 % 12.60 % Tier 1 risk based capital ratio 12.53 % 12.60 % 12.25 % 12.29 % 11.34 % Leverage ratio 8.36 % 7.83 % 7.58 % 7.54 % 7.45 % Common equity Tier 1 capital ratio 12.53 % 12.60 % 12.25 % 12.29 % 11.34 % Tangible common equity 8.36 % 7.57 % 7.17 % 7.01 % 7.43 % Holding Company Capital Ratios: Total risk based capital ratio 16.41 % 15.75 % 16.14 % 16.07 % 15.19 % Tier 1 risk based capital ratio 14.43 % 14.49 % 14.10 % 13.98 % 13.10 % Leverage ratio 9.73 % 9.12 % 8.78 % 8.84 % 8.78 % Common equity Tier 1 capital ratio 14.28 % 14.34 % 13.94 % 13.81 % 12.94 % Tangible common equity 9.63 % 8.72 % 8.23 % 7.98 % 8.48 % Composition of Loans: Residential real estate $ 401,607 $ 418,205 $ 420,015 $ 420,461 $ 437,860 Commercial real estate 556,339 502,523 471,807 433,336 392,550 Construction real estate 255,147 251,256 223,832 221,277 224,904 Commercial and industrial - Other 175,956 143,244 158,392 149,914 157,127 Credit card, net of reserve 141,120 134,979 121,410 83,740 102,186 Other consumer loans 1,033 1,425 1,034 4,487 1,649 Portfolio loans receivable $ 1,531,202 $ 1,451,632 $ 1,396,490 $ 1,313,215 $ 1,316,276 Deferred origination fees, net (7,220 ) (6,506 ) (4,019 ) (840 ) (774 ) Portfolio loans receivable, net $ 1,523,982 $ 1,445,126 $ 1,392,471 $ 1,312,375 $ 1,315,502 SBA-PPP loans, net $ 108,285 $ 137,178 $ 202,763 $ 265,712 $ 201,018 Composition of Deposits: Noninterest bearing $ 787,650 $ 833,187 $ 828,308 $ 771,924 $ 608,559 Interest bearing demand 330,924 369,812 314,883 300,992 257,126 Savings 6,994 6,682 6,965 6,012 4,800 Money Markets 493,919 493,029 484,567 471,303 447,077 Time Deposits 177,650 218,528 282,696 312,838 334,566 Total Deposits $ 1,797,137 $ 1,921,238 $ 1,917,419 $ 1,863,069 $ 1,652,128 Capital Bank Home Loan Metrics: Origination of loans held for sale $ 158,051 $ 217,175 $ 265,517 $ 353,774 $ 382,267 Mortgage loans sold 178,068 229,111 278,384 400,112 412,830 Gain on sale of loans 4,423 6,108 7,763 12,008 12,950 Purchase volume as a % of originations 56.44 % 50.98 % 50.64 % 24.59 % 30.03 % Gain on sale as a % of loans sold(3) 2.48 % 2.67 % 2.79 % 3.00 % 3.14 % Mortgage commissions $ 1,462 $ 1,884 $ 2,364 $ 3,320 $ 3,405 OpenSky® Portfolio Metrics: Active customer accounts 660,397 700,383 707,600 642,272 568,373 Credit card loans, net of reserve $ 141,120 $ 134,979 $ 121,410 $ 83,740 $ 102,186 Noninterest secured credit card deposits 229,530 242,405 241,724 215,883 192,520 _______________
(1) Refer to Appendix for reconciliation of non-GAAP measures.
(2) Annualized.
(3) Gain on sale percentage is calculated as gain on sale of loans divided by mortgage loans sold.Appendix
Reconciliation of Non-GAAP Measures
Return on Average Assets, as Adjusted Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Net Income $ 10,171 $ 11,177 $ 9,648 $ 8,982 $ 9,689 Less: SBA-PPP loan income 1,347 1,525 2,272 2,205 1,998 Net Income, as Adjusted $ 8,824 $ 9,652 $ 7,376 $ 6,777 $ 7,691 Average Total Assets 2,066,283 2,084,772 2,041,232 1,949,265 1,854,845 Less: Average SBA-PPP Loans 116,595 162,217 250,040 232,371 227,617 Average Total Assets, as Adjusted $ 1,949,688 $ 1,922,555 $ 1,791,192 $ 1,716,894 $ 1,627,228 Return on Average Assets, as Adjusted 1.80 % 1.99 % 1.65 % 1.60 % 1.88 % Net Interest Margin, as Adjusted Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Net Interest Income $ 32,671 $ 32,059 $ 27,520 $ 24,444 $ 25,719 Less Secured credit card loan income 15,010 15,086 10,497 7,660 9,306 Less SBA-PPP loan income 1,347 1,525 2,272 2,205 1,998 Net Interest Income, as Adjusted $ 16,314 $ 15,448 $ 14,751 $ 14,579 $ 14,415 Average Interest Earning Assets 1,996,331 2,026,616 2,016,801 1,923,463 1,836,337 Less Average secured credit card loans 131,306 124,771 100,456 93,520 95,739 Less Average SBA-PPP loans 116,595 162,217 250,040 232,371 227,617 Total Average Interest Earning Assets, as Adjusted $ 1,748,430 $ 1,739,628 $ 1,666,305 $ 1,597,572 $ 1,512,981 Net Interest Margin, as Adjusted 3.70 % 3.52 % 3.55 % 3.70 % 3.80 % Tangible Book Value per Share Quarters Ended Dollars in thousands, except per share amounts December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Total Stockholders' Equity $ 197,903 $ 189,080 $ 177,204 $ 167,003 $ 159,311 Less: Preferred equity — — — — — Less: Intangible assets — — — — — Tangible Common Equity $ 197,903 $ 189,080 $ 177,204 $ 167,003 $ 159,311 Period End Shares Outstanding 13,962,334 13,801,936 13,771,615 13,759,218 13,753,529 Tangible Book Value per Share $ 14.17 $ 13.70 $ 12.87 $ 12.14 $ 11.58 Allowance for Loan Losses to Total Portfolio Loans Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Allowance for Loan Losses $ 25,181 $ 24,753 $ 24,079 $ 23,550 $ 23,434 Total Loans 1,632,267 1,582,304 1,595,234 1,578,087 1,516,520 Less: SBA-PPP loans 108,285 137,178 202,763 265,712 201,018 Total Portfolio Loans $ 1,523,982 $ 1,445,126 $ 1,392,471 $ 1,312,375 $ 1,315,502 Allowance for Loan Losses to Total Portfolio Loans 1.65 % 1.71 % 1.73 % 1.79 % 1.78 % Nonperforming Assets to Total Assets, net SBA-PPP Loans Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Total Nonperforming Assets $ 11,512 $ 16,801 $ 11,615 $ 12,112 $ 12,563 Total Assets 2,055,300 2,169,556 2,151,850 2,091,851 1,876,593 Less: SBA-PPP loans 108,285 137,178 202,763 265,712 201,018 Total Assets, net SBA-PPP Loans $ 1,947,015 $ 2,032,378 $ 1,949,087 $ 1,826,139 $ 1,675,575 Nonperforming Assets to Total Assets, net SBA-PPP Loans 0.59 % 0.83 % 0.60 % 0.66 % 0.75 % Nonperforming Loans to Portfolio Loans Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Total Nonperforming Loans $ 11,425 $ 13,565 $ 8,378 $ 8,818 $ 9,237 Total Loans 1,632,267 1,582,304 1,595,234 1,578,087 1,516,520 Less: SBA-PPP loans 108,285 137,178 202,763 265,712 201,018 Total Portfolio Loans $ 1,523,982 $ 1,445,126 $ 1,392,471 $ 1,312,375 $ 1,315,502 Nonperforming Loans to Total Portfolio Loans 0.75 % 0.94 % 0.60 % 0.67 % 0.70 % Net Charge-offs to Average Portfolio Loans Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Total Net Charge-offs $ 672 $ 301 $ 251 $ 388 $ 615 Total Average Loans 1,582,473 1,569,198 1,567,973 1,532,093 1,494,279 Less: Average SBA-PPP loans 116,595 162,217 250,040 232,371 227,617 Total Average Portfolio Loans $ 1,465,878 $ 1,406,981 $ 1,317,933 $ 1,299,722 $ 1,266,662 Net Charge-offs to Average Portfolio Loans 0.18 % 0.08 % 0.08 % 0.12 % 0.19 % Pre-tax, Pre-Provision Net Revenue ("PPNR") Quarters Ended Dollars in thousands December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Net income $ 10,171 $ 11,177 $ 9,648 $ 8,982 $ 9,689 Add: Income Tax Expense 3,522 3,877 3,357 3,143 3,347 Add: Provision for Loan Losses 1,100 975 781 503 2,033 Pre-tax, Pre-Provision Net Revenue ("PPNR") $ 14,793 $ 16,029 $ 13,786 $ 12,628 $ 15,069 ABOUT CAPITAL BANCORP, INC.
Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Company’s wholly-owned subsidiary, Capital Bank, N.A., is the fourth largest bank headquartered in Maryland at December 31, 2021. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $2.1 billion at December 31, 2021 and its common stock is traded in the NASDAQ Global Market under the symbol “CBNK.” More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.
FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our management’s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "optimistic," “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on some of the factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.
Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As a result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are exposed to all of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen as planned, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of decisions made by the Federal Open Market Committee of the Federal Reserve and other factors, our net interest margin and spread may decline, which would adversely affect our earnings; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.
These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.
FINANCIAL CONTACT: Alan Jackson (240) 283-0402
MEDIA CONTACT: Ed Barry (240) 283-1912
WEB SITE: www.CapitalBankMD.com