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CBNK Announces Record Quarterly Earnings

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Capital Bancorp, Inc.
Capital Bancorp, Inc.

Diluted EPS of $0.80, ROAA of 2.23%, and ROAE of 22.16% for 2Q 2022

ROCKVILLE, Md., July 20, 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 $11.5 million, or $0.80 per diluted share, for the second quarter of 2022 representing 19.3% growth when compared to net income of $9.6 million, or $0.68 per diluted share, for the second quarter of 2021. Net portfolio loans increased $81.4 million, or 21.4 percent annualized, during the second quarter.

"Loan growth, stable deposit costs, OpenSky® performance and lower than anticipated expenses drove another quarter of outstanding performance," said Ed Barry, CEO of the Company and the Bank. "Credit quality in our commercial and consumer loan portfolios remains stable with an anticipated increase in loss provisions in our OpenSky® loan portfolio. Continued aggressive marketing by fintech and credit card companies offering unsecured subprime credit cards has resulted in account growth headwinds in OpenSky®, but we are confident that our approach to serving this market and our investments to scale our platform will continue to deliver substantial profits in this business. Our multi-year effort to transform our deposit franchise continues to show results and will help drive results in the rising rate environment."

"We are pleased with how well Capital Bank's diversified business model continues to perform despite changes in macroeconomic conditions" said Steven Schwartz, Chairman of the Board of the Company. "Our extremely dedicated management team and fully engaged Board remain focused on increasing shareholder value by improving our unique mix of products with the adoption of state-of-the-art technology to deliver coveted financial solutions to our customers."

Second Quarter 2022 Highlights

Capital Bancorp, Inc.

  • Record Earnings - Continued strong performance by the Commercial Bank and OpenSky® contributed to the second quarter's record results. Quarterly net income increased to $11.5 million from $9.6 million in the second quarter of 2021 due mainly to increased net interest income due to loan growth and an increase in rates. The increase in net interest income was offset by an increase in the loan loss provision and a decrease in noninterest income. Earnings were $0.80 per diluted share for the three months ended June 30, 2022 and $0.68 for the three months ended June 30, 2021.

  • Continued Outstanding Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 2.23% and 22.16%, respectively, for the three months ended June 30, 2022, compared to 1.90% and 22.36%, respectively, for the three months ended June 30, 2021.

  • Expanded Net Interest Margin - Net interest margin was 7.06% for the three months ended June 30, 2022, compared to 5.47% for the same three month period last year. The margin expansion was primarily driven by increases in the yield on portfolio loans including credit card loans to card holders whose accounts have been open for more than a year as origination costs on these accounts are amortized in the first year and no longer offset annual renewal fees. Rate increases in our adjustable rate portfolios also contributed to the margin expansion.

  • Robust Capital Positions - As of June 30, 2022, the Company reported a common equity tier 1 capital ratio of 15.55% and an allowance for loan losses to total portfolio loans ratio of 1.63%, or 1.64% excluding SBA-PPP loans. Tangible book value per common share grew 15.0 percent to $14.80 at June 30, 2022 when compared to the same quarter in 2021.

Commercial Bank

  • Strong Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $199.2 million, or 15.6 percent, to $1.5 billion at June 30, 2022 compared to June 30, 2021. This growth was mainly due to a 29.0 percent increase in commercial real estate loans of $136.8 million, of which $92.9 million was owner occupied. Also contributing to the growth was a 22.0 percent increase in commercial and industrial loans of $34.9 million and an 7.8 percent increase in construction real estate loans of $17.4 million when comparing the quarter ended June 30, 2022 to the quarter ended June 30, 2021.

  • Improving Credit Metrics - Non-performing assets ("NPAs") decreased to 0.34% of total assets at June 30, 2022 compared to 0.54% at June 30, 2021 with the disposition of $3.2 million in other real estate owned and a reduction in nonaccrual loans of $1.0 million as management continues to focus on reducing non-performing assets. The provision for loan losses increased $1.3 million compared to the second quarter of 2021. The current provision for the three months ended June 30, 2022 was $2.0 million and was related to the growth in the unsecured credit card loans and secured customer attrition which tends to result in an increase in charge offs of certain fees in excess of the secured portion of the loan.

  • SBA-PPP Loans - SBA-PPP loans, net of $301 thousand in unearned fees, totaled $15.9 million at June 30, 2022 which was comprised of $1.4 million in 2020 originations and $14.7 million of 2021 originations. As of June 30, 2022, the Company has obtained forgiveness for $359.5 million of SBA-PPP loans.

Capital Bank Home Loans

  • Slowing Mortgage Originations - Origination volumes declined 68.2 percent, to $84.4 million, in the second quarter of 2022, when compared to $265.5 million in the second quarter of 2021. The continued steepening of the yield curve in the second quarter of 2022 slowed originations from the year earlier when low interest rates fueled refinance volumes.

  • Purchase Volume - While purchase volumes increased to 85.2 percent of total originations for the second quarter of 2022, up from 50.6 percent during the second quarter of 2021, total purchase originations declined by 46.7% during the same period.

OpenSky®

  • Strong Revenue Growth - OpenSky® revenue grew by 22.1 percent to $23.0 million for the quarter ended June 30, 2022 from the same period in 2021 due to an increase in average credit card loan balances as well as an increase in the yield on those credit card loans. Normal customer attrition and aggressive marketing by fintech and credit card companies offering unsecured subprime credit cards has resulted in the continued decline in the total number of OpenSky® accounts.

  • Continued Growth in OpenSky® Loans - OpenSky® loan balances, net of reserves, increased by $20.8 million to $142.2 million compared to $121.4 million in the second quarter of 2021. Corresponding deposit balances decreased 11.4 percent or $27.6 million from $241.7 million at June 30, 2021 to $214.1 million at June 30, 2022.

2022 Highlights

Capital Bancorp

  • Diversified Businesses Drive Net Income - Net income for the six months ended June 30, 2022 increased 16.6 percent to $21.7 million, or $1.52 per diluted share, from $18.6 million, or $1.32 per diluted share for the six months ended June 30, 2021. 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 2.12% and 21.25%, respectively, for the six months ended June 30, 2022 compared to 1.88% and 22.33%, respectively, for the six months ended June 30, 2021.

  • Expanded Net Interest Margin - For the six months ended June 30, 2022, net interest margin increased by 161 basis points to 6.93% compared to 5.32% for the six months ended June 30, 2021. The margin improvement was primarily driven by increases in the yield on portfolio loans including credit card loans to card holders whose accounts have been open for more than a year as origination costs on these accounts are amortized in the first year and no longer offset annual renewal fees.. Rate increases in our adjustable rate portfolios also contributed to the margin expansion.

  • Stable Efficiency Ratio - The efficiency ratio decreased to 63.52% for the six months ended June 30, 2022 compared to 66.73% for the same six month period in the prior year.

  • Strong Balance Sheet Growth - Total assets increased $99.5 million, or 4.8 percent during the six months ended June 30, 2022 and was primarily funded by a $91.8 million increase in deposits.The growth of earning assets on the balance sheet consisted primarily of increases in cash equivalents of $67.5 million, portfolio loans net of deferred fees of $83.7 million which includes OpenSky® net loan growth of $15.8 million, and investment securities available for sale of $42.1 million. Asset growth was primarily offset by a decrease of $92.4 million in SBA-PPP loans.

Commercial Bank

  • Strong Portfolio Loan Growth - During the first six months of 2022, portfolio loans, excluding credit card loans, increased by $84.2 million, or 12.2 percent on an annualized basis, to $1.5 billion at June 30, 2022 compared to the first six months of 2021 when portfolio loans, excluding credit card loans, increased by $61.0 million to $1.3 billion at June 30, 2021. The 2022 growth was primarily due to a $52.3 million increase in commercial real estate loans, of which $47.7 million was owner occupied, and a $28.6 million increase in residential real estate.

  • Improved Deposit Franchise and Lower Cost of Funding - While total deposits at June 30, 2022 decreased in comparison to total deposits at June 30, 2021, the composition of the deposit portfolio has continued to shift into a more favorable source of funding. Noninterest bearing deposits continue to grow and represented 44.6 percent of total deposits at June 30, 2022. The cost of interest bearing liabilities declined to 0.43% from 0.73% for the same period in the prior year, due mainly to the run-off of higher cost time deposits which have been replaced with lower cost money market accounts.

  • COVID-19 Related Deferrals - At June 30, 2022, outstanding loans deferred due to COVID-19 amounted to $2.3 million, a decrease of 86.9 percent from $11.9 million at June 30, 2021.

Capital Bank Home Loans

  • Gain on Sale - The year-to-date gain on sale of mortgage loans decreased to $5.0 million at June 30, 2022 from $19.8 million at June 30, 2021 due mainly to the $424.4 million, or 68.5 percent, decline in mortgage originations. The steepening yield curve in 2022 has slowed originations from the year earlier period when low interest rates fueled refinance volumes. Gain on sale margins, down slightly from 2.91% for the six months ended June 30, 2021, remained strong at 2.48% for the six months ended June 30, 2022. Historically-low housing inventory, shortages in new home building materials, and fluctuating interest rates are likely to continue suppressing origination volumes into 2022.

OpenSky®

  • Balance Growth Offsets Account Attrition - Gross credit card balances increased by $20.7 million, or 16.7 percent, at June 30, 2022 when compared to June 30, 2021. The growth in credit card loan balances coupled with an increase in interest rates accounted for the $12.4 million growth in interest income when comparing the six months ended June 30, 2022 to the same period in 2021. A decrease in overall credit card accounts led to a reduction in credit card fees, which decreased by 11.1 percent to $12.1 million compared to $13.7 million for the same six month period last year.

 

 

 

 

 

 

 

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

 

 

Six months ended

 

 

 

June 30,

 

 

 

June 30,

 

 

(dollars in thousands except per share data)

 

2022

 

 

 

2021

 

 

% Change

 

 

2022

 

 

 

2021

 

 

% Change

Earnings Summary

 

 

 

 

 

 

 

 

 

 

 

Interest income

$

36,556

 

 

$

29,289

 

 

24.8

%

 

$

70,957

 

 

$

55,927

 

 

26.9

%

Interest expense

 

1,156

 

 

 

1,769

 

 

(34.7

)%

 

 

2,226

 

 

 

3,964

 

 

(43.8

)%

Net interest income

 

35,400

 

 

 

27,520

 

 

28.6

%

 

 

68,731

 

 

 

51,963

 

 

32.3

%

Provision for loan losses

 

2,035

 

 

 

781

 

 

160.6

%

 

 

2,987

 

 

 

1,284

 

 

132.6

%

Noninterest income

 

8,362

 

 

 

13,471

 

 

(37.9

)%

 

 

16,650

 

 

 

27,421

 

 

(39.3

)%

Noninterest expense

 

27,130

 

 

 

27,205

 

 

(0.3

)%

 

 

54,232

 

 

 

52,972

 

 

2.4

%

Income before income taxes

 

14,597

 

 

 

13,005

 

 

12.2

%

 

 

28,162

 

 

 

25,128

 

 

12.1

%

Income tax expense

 

3,089

 

 

 

3,357

 

 

(8.0

)%

 

 

6,443

 

 

 

6,499

 

 

(0.9

)%

Net income

$

11,508

 

 

$

9,648

 

 

19.3

%

 

$

21,719

 

 

$

18,629

 

 

16.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Pre-tax pre-provision net revenue ("PPNR") (2)

$

16,632

 

 

$

13,786

 

 

20.6

%

 

$

31,149

 

 

$

26,412

 

 

17.9

%

Weighted average common shares - Basic

 

14,007

 

 

 

13,766

 

 

1.8

%

 

 

13,998

 

 

 

13,762

 

 

1.7

%

Weighted average common shares - Diluted

 

14,313

 

 

 

14,172

 

 

1.0

%

 

 

14,323

 

 

 

14,070

 

 

1.8

%

Earnings per share - Basic

$

0.82

 

 

$

0.70

 

 

17.1

%

 

$

1.55

 

 

$

1.35

 

 

14.8

%

Earnings per share - Diluted

$

0.80

 

 

$

0.68

 

 

17.6

%

 

$

1.52

 

 

$

1.32

 

 

15.2

%

Return on average assets (1)

 

2.23

%

 

 

1.90

%

 

17.4

%

 

 

2.12

%

 

 

1.88

%

 

12.8

%

Return on average assets, excluding impact of SBA-PPP loans(1) (2)

 

2.04

%

 

 

1.65

%

 

23.6

%

 

 

1.86

%

 

 

1.60

%

 

16.3

%

Return on average equity

 

22.16

%

 

 

22.36

%

 

(0.9

)%

 

 

21.25

%

 

 

22.33

%

 

(4.8

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

Quarter Ended

 

2Q22 vs. 2Q21

 

Quarter Ended

 

June 30,

 

 

March 31,

 

December 31,

 

September 30,

(in thousands except per share data)

 

2022

 

 

2021

 

% Change

 

 

2022

 

 

2021

 

 

2021

Balance Sheet Highlights

 

 

 

 

 

 

 

 

 

 

 

Assets

$

2,154,846

 

$

2,151,850

 

0.1

%

 

$

2,122,453

 

$

2,055,300

 

$

2,169,556

Investment securities available for sale

 

226,509

 

 

160,515

 

41.1

%

 

 

172,712

 

 

184,455

 

 

189,165

Mortgage loans held for sale

 

11,708

 

 

47,935

 

(75.6

)%

 

 

17,036

 

 

15,989

 

 

36,005

SBA-PPP loans, net of fees

 

15,864

 

 

202,763

 

(92.2

)%

 

 

51,085

 

 

108,285

 

 

137,178

Portfolio loans receivable (3)

 

1,607,677

 

 

1,392,471

 

15.5

%

 

 

1,526,256

 

 

1,523,982

 

 

1,445,126

Allowance for loan losses

 

26,419

 

 

24,079

 

9.7

%

 

 

25,252

 

 

25,181

 

 

24,753

Deposits

 

1,888,920

 

 

1,917,419

 

(1.5

)%

 

 

1,862,722

 

 

1,797,137

 

 

1,921,238

FHLB borrowings

 

22,000

 

 

22,000

 

%

 

 

22,000

 

 

22,000

 

 

22,000

Other borrowed funds

 

12,062

 

 

12,062

 

%

 

 

12,062

 

 

12,062

 

 

12,062

Total stockholders' equity

 

207,316

 

 

177,204

 

17.0

%

 

 

201,492

 

 

197,903

 

 

189,080

Tangible common equity(2)

 

207,316

 

 

177,204

 

17.0

%

 

 

201,492

 

 

197,903

 

 

189,080

 

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding

 

14,010

 

 

13,772

 

1.7

%

 

 

14,001

 

 

13,962

 

 

13,802

Tangible book value per share (2)

$

14.80

 

$

12.87

 

15.0

%

 

$

14.39

 

$

14.17

 

$

13.70


______________

(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 June 30, 2022 and 2021

For the three months ended June 30, 2022, net interest income increased $7.9 million, or 28.6 percent, to $35.4 million from the same period in 2021, primarily due to an increase in interest earned on the credit card loan portfolio. The net interest margin increased 159 basis points to 7.06% for the three months ended June 30, 2022 from the same period in 2021 due in large part to the acceleration of the deferred fees associated with the SBA-PPP loan forgiveness as well as the recognition of deferred fees on the credit card loans. Net interest margin, excluding credit card and SBA-PPP loans, was 3.86% for the second quarter of 2022 compared to 3.55% for the same period in 2021. For the three months ended June 30, 2022, average interest earning assets decreased $4.9 million, or 0.2 percent, to $2.0 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 147 basis points. Compared to the same period in the prior year, average interest bearing liabilities decreased $60.0 million, or 5.5 percent, while the average cost of interest-bearing liabilities decreased 20 basis points to 0.45% from 0.65%.

The provision for loan losses of $2.0 million for the three months ended June 30, 2022 was related to growth in the credit card portfolio and the cycling of credit card accounts. Net charge-offs for the second quarter of 2022 were $868 thousand, or 0.23% on an annualized basis of average portfolio loans, compared to $252 thousand, or 0.08% on an annualized basis of average loans for the second quarter of 2021. All of the $868 thousand in net charge-offs during the quarter were related to the credit card portfolio.

For the quarter ended June 30, 2022, noninterest income was $8.4 million, a decrease of $5.1 million, or 37.9 percent, from $13.5 million in the prior year quarter. The decrease was primarily the result of reduced mortgage banking revenue.

Net credit card loan balances increased by $20.8 million to $142.2 million as of June 30, 2022 from $121.4 million at June 30, 2021. The related deposit account balances decreased 11.4 percent to $214.1 million at June 30, 2022 when compared to $241.7 million at June 30, 2021. For the three months ended June 30, 2022, OpenSky's® secured credit card accounts decreased by 14 thousand net compared to 65 thousand net new accounts for the same period in 2021 as the elevated new account originations related to Covid stimulus payments subside.

The efficiency ratio for the three months ended June 30, 2022 decreased to 62.00% compared to 66.37% for the three months ended June 30, 2021.

Noninterest expense was $27.1 million for the three months ended June 30, 2022, as compared to $27.2 million for the three months ended June 30, 2021, a decrease of $74 thousand, or 0.3 percent. The decrease was primarily driven by decreases in data processing expenses of $2.9 million and loan processing expenses of $640 thousand, and were offset by increases in salaries and employee benefits of $1.3 million, advertising expenses of $930 thousand, and professional fees of $1.1 million.

Operating Results - Comparison of Six Months Ended June 30, 2022 and 2021

For the six months ended June 30, 2022, net interest income increased $16.8 million, or 32.3 percent, to $68.7 million from the same period in 2021, primarily due to an increase in average balances in the portfolio loans. The net interest margin increased 161 basis points to 6.93% for the six months ended June 30, 2022 from the same period in 2021. Net interest margin, excluding credit card and SBA-PPP loans, was 3.84% for the six months ended June 30, 2022 compared to 3.59% for the same period in 2021. For the six months ended June 30, 2022, average interest earning assets increased $30.8 million, or 1.6 percent, to $2.0 billion as compared to the same period in 2021, and the average yield on interest earning assets increased 143 basis points. Compared to the same period in the prior year, average interest-bearing liabilities decreased $56.9 million, or 5.2 percent, while the average cost of interest bearing liabilities decreased 30 basis points to 0.43% from 0.73%.

For the six months ended June 30, 2022, the provision for loan losses was $3.0 million, an increase of $1.7 million from the prior year. Net charge-offs for the six months ended June 30, 2022 were $1.7 million, or 0.23% annualized of average portfolio loans, compared to $640 thousand, or 0.10% annualized of average portfolio loans, for the same period in 2021. The $1.7 million in net charge-offs during the six months ended June 30, 2022 was comprised of credit card portfolio net charge-offs.

For the six months ended June 30, 2022, noninterest income was $16.7 million, a decrease of $10.8 million, or 39.3 percent, from the same period in 2021. The decrease was primarily driven by the reduction in mortgage banking revenues of $9.7 million.

For the six months ended June 30, 2022, the Bank had a net decrease of 44 thousand OpenSky® secured credit card accounts, decreasing the total number of open accounts to 616 thousand. This compares to 139 thousand net new originations for the same period last year, which increased total open accounts to 708 thousand.

The efficiency ratio for the six months ended June 30, 2022 decreased to 63.52% compared to 66.73% for the six months ended June 30, 2021 due to increases in interest income.

Noninterest expense was $54.2 million for the six months ended June 30, 2022, as compared to $53.0 million for the six months ended June 30, 2021, an increase of $1.3 million, or 2.4 percent. The increase was primarily driven by a $3.1 million, or 17.7 percent, increase in salaries and benefits, an increase in professional fees of 58.6 percent, or $1.8 million, and an $1.7 million, or 81.7 percent, increase in advertising expense. The increase was partially offset by a $3.9 million, or 20.0 percent, decrease in data processing and a $1.3 million, or 64.1 percent, decrease in loan processing. The decrease of $3.9 million in data processing expenses was primarily due to a contract renegotiation.

Financial Condition

Total assets at June 30, 2022 were $2.2 billion, comparable to the balance at June 30, 2021. Net portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.6 billion as of June 30, 2022, an increase of 15.5 percent as compared to $1.4 billion at June 30, 2021.

While total deposits were $1.9 billion for the period ended June 30, 2022, a slight decline from the balance at June 30, 2021, the composition of the deposit portfolio shifted, with a decrease in higher costing time deposits of $121.9 million, or 43.1 percent, when comparing June 30, 2022 to June 30, 2021 to lower costing money market accounts and noninterest bearing accounts. At June 30, 2022, there were no listing service or brokered deposits compared to $68.2 million at June 30, 2021.

The Company recorded a provision for loan losses of $3.0 million during the six months ended June 30, 2022, which increased the allowance for loan losses to $26.4 million, or 1.63% of total loans (1.64%, excluding SBA-PPP loans, on a non-GAAP basis) at June 30, 2022. Nonperforming assets were $7.3 million, or 0.34% of total assets, as of June 30, 2022, down from $11.6 million, or 0.54% of total assets, at June 30, 2021, and was comprised solely of nonperforming loans. Included in nonperforming loans at June 30, 2022 were troubled debt restructurings of $519 thousand.

Stockholders’ equity increased to $207.3 million as of June 30, 2022, compared to $177.2 million at June 30, 2021. This increase was primarily attributable to earnings during the period of $21.7 million which were offset by unrealized losses recorded net of tax on the available for sale securities in the rising interest rate environment creating a $12.3 million reduction in accumulated other comprehensive income during the period. As of June 30, 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 June 30,

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

Interest income

 

 

 

 

 

 

 

Loans, including fees

$

35,304

 

$

28,641

 

$

69,193

 

$

54,709

Investment securities available for sale

 

779

 

 

544

 

 

1,149

 

 

1,021

Federal funds sold and other

 

473

 

 

104

 

 

615

 

 

197

Total interest income

 

36,556

 

 

29,289

 

 

70,957

 

 

55,927

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

Deposits

 

964

 

 

1,582

 

 

1,847

 

 

3,589

Borrowed funds

 

192

 

 

187

 

 

379

 

 

375

Total interest expense

 

1,156

 

 

1,769

 

 

2,226

 

 

3,964

 

 

 

 

 

 

 

 

Net interest income

 

35,400

 

 

27,520

 

 

68,731

 

 

51,963

Provision for loan losses

 

2,035

 

 

781

 

 

2,987

 

 

1,284

Net interest income after provision for loan losses

 

33,365

 

 

26,739

 

 

65,744

 

 

50,679

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

Service charges on deposits

 

183

 

 

165

 

 

346

 

 

312

Credit card fees

 

6,210

 

 

7,715

 

 

12,134

 

 

13,655

Mortgage banking revenue

 

1,528

 

 

5,270

 

 

3,318

 

 

13,013

Gain on sale of investment securities available for sale, net

 

 

 

153

 

 

 

 

153

Other fees and charges

 

441

 

 

168

 

 

852

 

 

288

Total noninterest income

 

8,362

 

 

13,471

 

 

16,650

 

 

27,421

 

 

 

 

 

 

 

 

Noninterest expenses

 

 

 

 

 

 

 

Salaries and employee benefits

 

10,071

 

 

8,750

 

 

20,381

 

 

17,317

Occupancy and equipment

 

1,313

 

 

1,195

 

 

2,339

 

 

2,324

Professional fees

 

2,417

 

 

1,362

 

 

4,738

 

 

2,987

Data processing

 

7,266

 

 

10,122

 

 

15,542

 

 

19,433

Advertising

 

2,223

 

 

1,293

 

 

3,862

 

 

2,126

Loan processing

 

335

 

 

975

 

 

727

 

 

2,026

Other operating

 

3,505

 

 

3,508

 

 

6,643

 

 

6,759

Total noninterest expenses

 

27,130

 

 

27,205

 

 

54,232

 

 

52,972

Income before income taxes

 

14,597

 

 

13,005

 

 

28,162

 

 

25,128

Income tax expense

 

3,089

 

 

3,357

 

 

6,443

 

 

6,499

Net income

$

11,508

 

$

9,648

 

$

21,719

 

$

18,629

 

 

 

 

 

 

 

 

 

 

 

 


Consolidated Balance Sheets

 

 

 

(in thousands except share data)

(unaudited)
June 30, 2022

 

December 31, 2021

Assets

 

 

 

Cash and due from banks

$

14,776

 

 

$

42,914

 

Interest bearing deposits at other financial institutions

 

234,823

 

 

 

136,824

 

Federal funds sold

 

1,285

 

 

 

3,657

 

Total cash and cash equivalents

 

250,884

 

 

 

183,395

 

Investment securities available for sale

 

226,509

 

 

 

184,455

 

Marketable equity securities

 

245

 

 

 

245

 

Restricted investments

 

3,615

 

 

 

3,498

 

Loans held for sale

 

11,708

 

 

 

15,989

 

SBA-PPP loans receivable, net of fees

 

15,864

 

 

 

108,285

 

Portfolio loans receivable, net of deferred fees and costs

 

1,607,677

 

 

 

1,523,982

 

Less allowance for loan losses

 

(26,419

)

 

 

(25,181

)

Total portfolio loans held for investment, net

 

1,581,258

 

 

 

1,498,801

 

Premises and equipment, net

 

3,315

 

 

 

3,282

 

Accrued interest receivable

 

7,276

 

 

 

7,901

 

Deferred income taxes, net

 

12,929

 

 

 

9,793

 

Other real estate owned

 

 

 

 

86

 

Bank owned life insurance

 

36,011

 

 

 

35,506

 

Other assets

 

5,232

 

 

 

4,064

 

Total assets

$

2,154,846

 

 

$

2,055,300

 

 

 

 

 

Liabilities

 

 

 

Deposits

 

 

 

Noninterest bearing

$

842,363

 

 

$

787,650

 

Interest bearing

 

1,046,557

 

 

 

1,009,487

 

Total deposits

 

1,888,920

 

 

 

1,797,137

 

Federal Home Loan Bank advances

 

22,000

 

 

 

22,000

 

Other borrowed funds

 

12,062

 

 

 

12,062

 

Accrued interest payable

 

300

 

 

 

473

 

Other liabilities

 

24,248

 

 

 

25,725

 

Total liabilities

 

1,947,530

 

 

 

1,857,397

 

 

 

 

 

Stockholders' equity

 

 

 

Common stock, $.01 par value; 49,000,000 shares authorized; 14,010,158 and 13,962,334 issued and outstanding

 

140

 

 

 

140

 

Additional paid-in capital

 

55,762

 

 

 

54,306

 

Retained earnings

 

164,750

 

 

 

144,533

 

Accumulated other comprehensive loss

 

(13,336

)

 

 

(1,076

)

Total stockholders' equity

 

207,316

 

 

 

197,903

 

Total liabilities and stockholders' equity

$

2,154,846

 

 

$

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 June 30,

 

 

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

$

218,251

 

$

429

 

0.79

%

 

$

259,330

 

$

63

 

0.10

%

Federal funds sold

 

1,655

 

 

2

 

0.48

 

 

 

3,087

 

 

 

 

Investment securities available for sale

 

215,172

 

 

779

 

1.45

 

 

 

139,997

 

 

544

 

1.56

 

Restricted stock and equity securities

 

3,854

 

 

42

 

4.37

 

 

 

3,478

 

 

41

 

4.70

 

Loans held for sale

 

11,447

 

 

134

 

4.70

 

 

 

44,644

 

 

314

 

2.82

 

SBA-PPP loans receivable

 

28,870

 

 

1,120

 

15.56

 

 

 

250,040

 

 

2,272

 

3.64

 

Portfolio loans receivable(2)

 

1,532,671

 

 

34,050

 

8.91

 

 

 

1,316,224

 

 

26,055

 

7.94

 

Total interest earning assets

 

2,011,920

 

 

36,556

 

7.29

 

 

 

2,016,800

 

 

29,289

 

5.82

 

Noninterest earning assets

 

56,298

 

 

 

 

 

 

24,432

 

 

 

 

Total assets

$

2,068,218

 

 

 

 

 

$

2,041,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest bearing demand accounts

$

259,192

 

 

38

 

0.06

 

 

$

282,197

 

 

50

 

0.07

 

Savings

 

9,913

 

 

1

 

0.04

 

 

 

6,634

 

 

1

 

0.05

 

Money market accounts

 

566,303

 

 

396

 

0.28

 

 

 

460,669

 

 

352

 

0.31

 

Time deposits

 

160,279

 

 

529

 

1.32

 

 

 

304,519

 

 

1,179

 

1.55

 

Borrowed funds

 

34,062

 

 

192

 

2.27

 

 

 

35,770

 

 

187

 

2.10

 

Total interest bearing liabilities

 

1,029,749

 

 

1,156

 

0.45

 

 

 

1,089,789

 

 

1,769

 

0.65

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities

 

22,647

 

 

 

 

 

 

20,111

 

 

 

 

Noninterest bearing deposits

 

807,558

 

 

 

 

 

 

758,255

 

 

 

 

Stockholders’ equity

 

208,264

 

 

 

 

 

 

173,077

 

 

 

 

Total liabilities and stockholders’ equity

$

2,068,218

 

 

 

 

 

$

2,041,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

6.84

%

 

 

 

 

 

5.17

%

Net interest income

 

 

$

35,400

 

 

 

 

 

$

27,520

 

 

Net interest margin(3)

 

 

 

 

7.06

%

 

 

 

 

 

5.47

%


_______________

(1)

Annualized.

(2)

Includes nonaccrual loans.

(3)

For the three months ended June 30, 2022 and June 30, 2021, collectively, SBA-PPP loans and credit card loans accounted for 320 and 192 basis points of the reported net interest margin, respectively.

 

 


 

Six Months Ended June 30,

 

 

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

$

208,043

 

$

530

 

0.51

%

 

$

232,712

 

$

113

 

0.10

%

Federal funds sold

 

3,148

 

 

2

 

0.13

 

 

 

3,477

 

 

 

0.00

 

Investment securities available for sale

 

197,965

 

 

1,149

 

1.17

 

 

 

123,443

 

 

1,022

 

1.67

 

Restricted stock and equity securities

 

3,810

 

 

83

 

4.39

 

 

 

3,691

 

 

83

 

4.56

 

Loans held for sale

 

12,467

 

 

245

 

3.96

 

 

 

58,475

 

 

794

 

2.74

 

SBA-PPP loans receivable

 

55,917

 

 

3,186

 

11.49

 

 

 

242,619

 

 

4,741

 

3.94

 

Portfolio loans receivable(1)

 

1,519,857

 

 

65,762

 

8.73

 

 

 

1,305,973

 

 

49,174

 

7.59

 

Total interest earning assets

 

2,001,207

 

 

70,957

 

7.15

 

 

 

1,970,390

 

 

55,927

 

5.72

 

Noninterest earning assets

 

61,533

 

 

 

 

 

 

25,113

 

 

 

 

Total assets

$

2,062,740

 

 

 

 

 

$

1,995,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Interest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Interest bearing demand accounts

$

276,490

 

 

74

 

0.05

 

 

$

269,647

 

 

118

 

0.09

 

Savings

 

9,098

 

 

3

 

0.07

 

 

 

6,127

 

 

2

 

0.05

 

Money market accounts

 

552,858

 

 

697

 

0.25

 

 

 

465,882

 

 

881

 

0.38

 

Time deposits

 

165,485

 

 

1,073

 

1.31

 

 

 

318,512

 

 

2,588

 

1.64

 

Borrowed funds

 

34,062

 

 

379

 

2.24

 

 

 

34,699

 

 

375

 

2.18

 

Total interest bearing liabilities

 

1,037,993

 

 

2,226

 

0.43

 

 

 

1,094,867

 

 

3,964

 

0.73

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities

 

23,397

 

 

 

 

 

 

22,940

 

 

 

 

Noninterest bearing deposits

 

795,221

 

 

 

 

 

 

709,443

 

 

 

 

Stockholders’ equity

 

206,129

 

 

 

 

 

 

168,253

 

 

 

 

Total liabilities and stockholders’ equity

$

2,062,740

 

 

 

 

 

$

1,995,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest spread

 

 

 

 

6.72

%

 

 

 

 

 

4.99

%

Net interest income

 

 

$

68,731

 

 

 

 

 

$

51,963

 

 

Net interest margin(2)

 

 

 

 

6.93

%

 

 

 

 

 

5.32

%


_______________

(1)

Includes nonaccrual loans.

(2)

For the six months ended June 30, 2022 and June 30, 2021, collectively, SBA-PPP loans and credit card loans accounted for 309 and 173 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 six months ended June 30, 2022 and June 30, 2021.

 

 

 

 

 

 

 

 

 

 

 

 

 

Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2022

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Commercial Bank

 

CBHL

 

OpenSky®

 

Corporate(2)

 

Eliminations

 

Consolidated

Interest income

 

$

18,912

 

$

134

 

 

$

16,780

 

$

758

 

$

(28

)

 

$

36,556

Interest expense

 

 

952

 

 

64

 

 

 

 

 

168

 

 

(28

)

 

 

1,156

Net interest income

 

 

17,960

 

 

70

 

 

 

16,780

 

 

590

 

 

 

 

 

35,400

Provision for loan losses

 

 

 

 

 

 

 

2,035

 

 

 

 

 

 

 

2,035

Net interest income after provision

 

 

17,960

 

 

70

 

 

 

14,745

 

 

590

 

 

 

 

 

33,365

Noninterest income

 

 

526

 

 

1,626

 

 

 

6,210

 

 

 

 

 

 

 

8,362

Noninterest expense(1)

 

 

12,859

 

 

2,217

 

 

 

11,940

 

 

114

 

 

 

 

 

27,130

Net income before taxes

 

$

5,627

 

$

(521

)

 

$

9,015

 

$

476

 

$

 

 

$

14,597

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

1,958,893

 

$

12,257

 

 

$

137,180

 

$

226,950

 

$

(180,434

)

 

$

2,154,846

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

17,297

 

$

313