Core Insights - The Mulvihill Canadian Bank Enhanced Yield ETF reported an increase in net assets attributable to holders of Units amounting to $9.54 million or $0.71 per Unit for the six months ended June 30, 2025 [1][5] - As of June 30, 2025, net assets attributable to holders of Units were $106.37 million or $8.98 per Unit, with cash distributions of $0.35 per Unit paid to unitholders during the period [1][5] Investment Strategy - The Fund aims to provide long-term capital appreciation through exposure to a portfolio primarily consisting of common shares of major Canadian banks, including Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and The Toronto-Dominion Bank [2] - The Fund invests substantially all of its assets in common shares of these banks and employs modest leverage of 25 percent to enhance dividend yields and return potential [3] - Option strategies are utilized to enhance income and reduce portfolio volatility, and the Fund is permitted to invest in public investment funds that provide exposure to similar securities [3] Financial Performance - For the six months ended June 30, 2025, the Fund reported total income, including net gains on investments, of $10.52 million, with expenses amounting to $0.98 million [5] - The increase in net assets attributable to holders of Units reflects the overall positive performance of the Fund during this period [5] Management and Listing - The investment portfolio of the Fund is managed by Mulvihill Capital Management Inc., and the Fund's Units are listed on the Toronto Stock Exchange under the symbol CBNK [4]

PART I - CONSOLIDATED FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of Capital Bancorp, Inc. [Item 1. Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements of Capital Bancorp, Inc. and its subsidiaries, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, cash flow statements, and accompanying notes, providing a detailed view of the Company's financial performance and position for the periods ended June 30, 2025 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets provide a snapshot of the Company's financial position, showing a notable increase in total assets, portfolio loans, deposits, and stockholders' equity from December 31, 2024, to June 30, 2025 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $3,388,662 | $3,206,911 | $181,751 | 5.7% | | Portfolio loans receivable, net | $2,692,361 | $2,581,511 | $110,850 | 4.3% | | Total deposits | $2,940,738 | $2,761,939 | $178,799 | 6.5% | | Total stockholders' equity | $380,035 | $355,139 | $24,896 | 7.0% | | Allowance for credit losses | $47,447 | $48,652 | $(1,205) | (2.5%) | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income reveal significant growth in net income for both the three and six months ended June 30, 2025, driven by increased interest and noninterest income, despite higher noninterest expenses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net income | $13,136 | $8,205 | 60.1% | | Total interest income | $64,586 | $50,615 | 27.6% | | Total noninterest income | $13,106 | $6,890 | 90.2% | | Total noninterest expenses | $39,572 | $29,493 | 34.2% | | Basic earnings per share | $0.79 | $0.59 | 33.9% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net income | $27,068 | $14,767 | 83.3% | | Basic earnings per share | $1.63 | $1.06 | 53.8% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income show a substantial increase in comprehensive income for both the three and six months ended June 30, 2025, primarily due to higher net income and an increase in unrealized gains on available-for-sale investment securities | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Comprehensive income | $14,231 | $8,725 | 63.1% | | Unrealized gain on investment securities available-for-sale (net of tax) | $1,095 | $520 | 110.6% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Comprehensive income | $30,425 | $14,750 | 106.3% | | Unrealized gain on investment securities available-for-sale (net of tax) | $3,357 | $(17) | N/A | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details the movements in stockholders' equity, reflecting increases from net income and unrealized gains on investment securities, partially offset by cash dividends and share repurchases, leading to an overall increase in total stockholders' equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total stockholders' equity | $380,035 | $355,139 | | Retained earnings | $261,093 | $237,843 | | Accumulated other comprehensive loss | $(8,112) | $(11,469) | - Cash dividends to stockholders were **$0.10 per share** for both the three months ended March 31, 2025, and June 30, 2025[10](index=10&type=chunk) - Shares repurchased and retired totaled **93,170 shares** during the three months ended June 30, 2025, and **22,185 shares** during the three months ended March 31, 2025[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows illustrate the Company's cash generation and usage across operating, investing, and financing activities, showing an overall increase in cash and cash equivalents for the six months ended June 30, 2025 | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net cash provided by operating activities | $18,368 | $9,486 | 93.6% | | Net cash used in investing activities | $(121,361) | $(123,145) | (1.4%) | | Net cash provided by financing activities | $172,267 | $196,206 | (12.3%) | | Net increase in cash and cash equivalents | $69,274 | $82,547 | (16.1%) | | Cash and cash equivalents, end of period | $274,606 | $136,511 | 101.2% | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations for the unaudited consolidated financial statements, covering the Company's business nature, recent acquisition, investment securities, loan servicing, portfolio loans, leases, goodwill, fair value measurements, segment reporting, and subsequent events [Note 1 - Nature of Business and Basis of Presentation](index=9&type=section&id=Note%201%20-%20Nature%20of%20Business%20and%20Basis%20of%20Presentation) This note describes Capital Bancorp, Inc. as a Maryland corporation and bank holding company for Capital Bank, N.A., operating through four divisions: Commercial Banking, OpenSky™, Windsor Advantage, LLC, and Capital Bank Home Loans. It outlines the basis of presentation for the unaudited interim consolidated financial statements, adherence to GAAP, and recent accounting standard adoptions - Capital Bancorp, Inc. operates through four divisions: Commercial Banking, OpenSky™, Windsor Advantage, LLC, and Capital Bank Home Loans (CBHL)[13](index=13&type=chunk)[15](index=15&type=chunk)[17](index=17&type=chunk) - The Company adopted ASU 2023-07, 'Segment Reporting,' effective December 31, 2024, requiring enhanced segment disclosures[19](index=19&type=chunk) - Future accounting pronouncements include ASU 2023-09 (Income Taxes) for fiscal years beginning after December 15, 2024, and ASU 2024-03 (Expense Disaggregation) for fiscal years beginning after December 15, 2026[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 2 - Acquisition](index=11&type=section&id=Note%202%20-%20Acquisition) This note details the acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024, including the consideration paid, assets acquired, and liabilities assumed, and the subsequent integration of banking systems. A measurement period adjustment increased goodwill - The Company completed its acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024, and successfully converted IFH's banking systems and operations onto Capital Bank's platforms during the first quarter of 2025[25](index=25&type=chunk) - A **$1.4 million** increase in goodwill at June 30, 2025, resulted from a revised estimate of adjusted servicing assets and other liabilities post-acquisition[26](index=26&type=chunk) | Merger-Related Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Merger-related expenses | $1,398 | $83 | | Merger-Related Expenses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Merger-related expenses | $2,664 | $795 | [Note 3 - Investment Securities](index=13&type=section&id=Note%203%20-%20Investment%20Securities) This note provides a breakdown of investment securities available-for-sale by type, amortized cost, fair value, and unrealized gains/losses, along with maturity profiles and credit quality assessments. Management determined no allowance for credit losses was required for securities in an unrealized loss position | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Investment securities available-for-sale (Amortized Cost) | $239,598 | $238,969 | | Total Investment securities available-for-sale (Fair Value) | $228,923 | $223,630 | | Gross Unrealized Gains | $366 | $74 | | Gross Unrealized Losses | $(11,041) | $(15,413) | - Management determined no allowance for credit losses was required on available-for-sale debt securities in an unrealized loss position at June 30, 2025, as there was no intent to sell, nor was it more likely than not that the Company would be required to sell before recovering the amortized cost basis, and no credit-related declines in fair value were identified[28](index=28&type=chunk)[34](index=34&type=chunk) | Contractual Maturity (June 30, 2025) | Amortized Cost (in thousands) | Fair Value (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------ | | Within one year | $53,783 | $52,945 | | One to five years | $68,916 | $65,438 | | Five to ten years | $35,857 | $31,924 | | Beyond ten years | $4,517 | $3,430 | [Note 4 - Loan Servicing](index=15&type=section&id=Note%204%20-%20Loan%20Servicing) This note details the activity and fair value changes of loan servicing rights, which saw a decrease primarily due to the refinement of valuation assumptions post-acquisition | Loan Servicing Rights (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Balance at end of period | $2,221 | $5,511 | | Additions | $968 | $5,096 | | Other changes in fair value | $(4,258) | $415 | - The decrease in loan servicing rights was primarily due to the refinement of assumptions used in the valuation of servicing assets post-acquisition[35](index=35&type=chunk) - Fair value at June 30, 2025, was determined using a discount rate of **13.5%**, a weighted average prepayment speed of **16.4%**, and a weighted average default rate of **0.8%**[35](index=35&type=chunk) [Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses](index=16&type=section&id=Note%205%20-%20Portfolio%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) This note provides a detailed breakdown of portfolio loans by major categories, changes in the Allowance for Credit Losses (ACL), loan delinquency status, nonaccrual loans, and credit quality indicators. It also covers loan modifications and outstanding loan commitments, highlighting an increase in nonaccrual loans and net charge-offs | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Portfolio loans receivable, gross | $2,748,063 | $2,637,228 | | Allowance for credit losses | $47,447 | $48,652 | | Total nonaccrual loans | $36,167 | $30,241 | | Provision for Credit Losses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Provision for credit losses | $4,081 | $3,417 | | Provision for Credit Losses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Provision for credit losses | $6,327 | $6,144 | | Net Charge-Offs (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | | Total net charge-offs | $5,088 | $1,935 | | Net Charge-Offs (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | | Total net charge-offs | $7,532 | $3,922 | - The Company made **9 loan modifications** totaling **$1,974 thousand** in amortized cost basis during the six months ended June 30, 2025, for borrowers experiencing financial difficulty[42](index=42&type=chunk) | Outstanding Loan Commitments (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Unused lines of credit | $394,352 | $403,029 | | Letters of credit | $3,122 | $3,122 | | Total credit extension commitments | $400,188 | $408,865 | [Note 6 - Leases](index=26&type=section&id=Note%206%20-%20Leases) This note outlines the Company's operating lease activities for branch and back-office operations, detailing Right of Use (ROU) assets and lease liabilities, and future minimum lease payments. Net lease assets and liabilities decreased from December 31, 2024, to June 30, 2025 | Lease Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Net lease ROU asset | $4,420 | $5,268 | | Net lease liability | $5,033 | $5,872 | - The Company's operating leases have remaining terms ranging from **one to eight years**, including extension options[62](index=62&type=chunk) - The historical weighted average discount rate used for lease calculations was **5.11%** at June 30, 2025[61](index=61&type=chunk) [Note 7 - Goodwill and Intangible Assets](index=28&type=section&id=Note%207%20-%20Goodwill%20and%20Intangible%20Assets) This note details the changes in goodwill, primarily due to a measurement period adjustment related to the IFH acquisition, and provides a summary of acquired amortizing intangible assets and their scheduled amortization | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Goodwill | $22,478 | $21,126 | | Total amortized intangible assets (Net Carrying Amount) | $15,295 | $15,817 | - Goodwill increased by **$1.352 million** due to a measurement period adjustment related to the IFH acquisition[64](index=64&type=chunk) - Amortization expense was **$261 thousand** for the three months ended June 30, 2025, and **$522 thousand** for the six months ended June 30, 2025[67](index=67&type=chunk) [Note 8 - Fair Value](index=30&type=section&id=Note%208%20-%20Fair%20Value) This note explains the Company's fair value measurement hierarchy (Level 1, 2, 3) and methods used for various financial instruments, including investment securities, loans held for sale, loan servicing assets, and individually evaluated loans for credit loss. Most recurring fair value measurements are categorized as Level 1 or Level 2 - The Company categorizes financial instruments measured at fair value into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[70](index=70&type=chunk)[71](index=71&type=chunk) | Recurring Fair Value Measurements (June 30, 2025, in thousands) | Total | Level 1 | Level 2 | Level 3 | | :------------------------------------------------- | :---- | :------ | :------ | :------ | | Investment securities available-for-sale | $228,923 | $135,501 | $93,422 | $0 | | Loans held for sale | $20,925 | $0 | $20,925 | $0 | | Loan servicing assets | $2,221 | $0 | $2,221 | $0 | - Individually evaluated loans for credit loss, measured on a nonrecurring basis, totaled **$33.366 million** at June 30, 2025, and are categorized as Level 3 fair values[80](index=80&type=chunk)[82](index=82&type=chunk) [Note 9 - Segments](index=34&type=section&id=Note%209%20-%20Segments) This note identifies the Company's four reportable segments—Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)—and provides detailed financial performance and asset information for each segment, highlighting the impact of the IFH acquisition on segment reporting - The Company's four reportable segments are Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)[94](index=94&type=chunk) | Segment Performance (Three Months Ended June 30, 2025, in thousands) | Net Income (Loss) Before Taxes | Total Assets | | :---------------------------------------------------- | :----------------------------- | :----------- | | Commercial Bank | $13,821 | $3,211,421 | | OpenSky™ | $2,790 | $129,397 | | Windsor Advantage™ | $1,166 | $25,936 | | CBHL | $(678) | $21,908 | | Segment Performance (Six Months Ended June 30, 2025, in thousands) | Net Income (Loss) Before Taxes | Total Assets | | :---------------------------------------------------- | :----------------------------- | :----------- | | Commercial Bank | $28,804 | $3,211,421 | | OpenSky™ | $5,865 | $129,397 | | Windsor Advantage™ | $2,112 | $25,936 | | CBHL | $(1,385) | $21,908 | - The Corporate reportable segment was restructured prior to January 1, 2025, with its activities now associated with the Commercial Bank for comparability[99](index=99&type=chunk) [Note 10 - Subsequent Events](index=40&type=section&id=Note%2010%20-%20Subsequent%20Events) This note reports the Board of Directors' declaration of a $0.12 per share dividend in July 2025, representing a 20% increase from the prior quarterly dividend - In July 2025, the Board of Directors declared a **$0.12 per share dividend**, a **20% increase** from the prior quarterly dividend, payable on August 27, 2025[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, offering insights into net income drivers, interest income and margin analysis, credit loss provisions, noninterest income and expenses, income tax, and overall financial health. It also includes reconciliations of non-GAAP financial measures [PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT](index=41&type=section&id=PRIVATE%20SECURITIES%20LITIGATION%20REFORM%20ACT%20SAFE%20HARBOR%20STATEMENT) This statement serves as a cautionary note regarding forward-looking statements within the report, emphasizing that such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements that are subject to risks and uncertainties, including general economic conditions, geopolitical events, regulatory changes, and operational risks[115](index=115&type=chunk)[116](index=116&type=chunk)[121](index=121&type=chunk) - Readers are advised to consider risk factors detailed in Item 1A of the Annual Report on Form 10-K for December 31, 2024, and other SEC filings[119](index=119&type=chunk) [Critical Accounting Estimates](index=44&type=section&id=Critical%20Accounting%20Estimates) This section states that the Company's financial statements are prepared in accordance with GAAP, requiring management estimates and judgments that can materially affect reported amounts. Critical accounting policies are discussed in the Annual Report on Form 10-K - The Company's financial position and results of operations are affected by management's application of GAAP, including estimates, assumptions, and judgments[122](index=122&type=chunk) - Significant accounting policies are discussed in detail in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024[123](index=123&type=chunk) [Overview](index=44&type=section&id=Overview) This overview reaffirms Capital Bancorp, Inc. as a Maryland-based bank holding company operating through Capital Bank, N.A., with four divisions: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL). It also mentions the recent IFH acquisition and the Bank's 'well capitalized' status - Capital Bancorp, Inc. operates primarily through Capital Bank, N.A., with four divisions: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)[124](index=124&type=chunk)[125](index=125&type=chunk) - The Company completed its acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024[125](index=125&type=chunk) - As of June 30, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as 'well capitalized'[128](index=128&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) This section analyzes the Company's operational performance, highlighting significant increases in net income, net interest income, and noninterest income, largely driven by organic growth and the IFH acquisition. It also details changes in credit loss provisions and noninterest expenses [Non-GAAP Financial Measures](index=45&type=section&id=Non-GAAP%20Financial%20Measures) This sub-section explains that non-GAAP financial measures are used by management to evaluate operating performance and enhance comparability, while cautioning investors to consider them alongside GAAP results due to potential calculation differences - Non-GAAP financial measures are used by management to evaluate operating performance and increase comparability of period-to-period results[129](index=129&type=chunk) - Investors are cautioned not to place undue reliance on non-GAAP measures but to consider them with the most directly comparable GAAP measures[130](index=130&type=chunk) [Net Income](index=46&type=section&id=Net%20Income) Net income saw substantial growth for both the three and six months ended June 30, 2025, primarily due to organic growth and the IFH acquisition, with significant increases in net interest income and noninterest income | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $13,136 | $8,205 | 60.1% | | Net interest income | $47,646 | $37,057 | 28.6% | | Noninterest income | $13,106 | $6,890 | 90.2% | | Noninterest expenses | $39,572 | $29,493 | 34.2% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $27,068 | $14,767 | 83.3% | | Net interest income | $93,693 | $72,065 | 30.0% | | Noninterest income | $25,655 | $12,862 | 99.5% | | Noninterest expenses | $77,625 | $58,980 | 31.6% | - Net income, adjusted to exclude merger-related expenses (non-GAAP), was **$14.2 million** for Q2 2025, up from **$8.3 million** in Q2 2024[133](index=133&type=chunk) [Net Interest Income and Net Margin Analysis](index=47&type=section&id=Net%20Interest%20Income%20and%20Net%20Margin%20Analysis) This analysis focuses on the Company's net interest income, net interest margin, and net interest spread. While the overall net interest margin decreased due to the IFH acquisition, the Commercial Bank's net interest margin improved, and interest income benefited significantly from volume growth in earning assets | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | | Net interest margin | 6.04% | 6.46% | (42) | | Commercial Bank net interest margin (non-GAAP) | 4.36% | 3.90% | 46 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | | Net interest margin | 6.04% | 6.35% | (31) | | Commercial Bank net interest margin (non-GAAP) | 4.33% | 3.84% | 49 | - Average interest earning assets increased by **$856.4 million (37.1%)** to **$3.2 billion** for the three months ended June 30, 2025, compared to the same period in 2024[148](index=148&type=chunk) - Volume growth in the loan portfolio (excluding credit card loans) contributed **$13.1 million** to the increase in interest income for Q2 2025[154](index=154&type=chunk) [Provision for Credit Losses](index=51&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased for both the three and six months ended June 30, 2025, primarily due to higher OpenSky™ volumes and specific reserves for collateral-dependent loans. Net charge-offs also rose significantly | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Provision for credit losses | $4,081 | $3,417 | 19.4% | | Net charge-offs (annualized % of average portfolio loans) | 0.75% | 0.39% | 92.3% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Provision for credit losses | $6,327 | $6,144 | 3.0% | | Net charge-offs (annualized % of average portfolio loans) | 0.57% | 0.40% | 42.5% | - The increase in provision for credit losses for Q2 2025 was primarily driven by **$0.6 million** higher provision from OpenSky™ due to higher volumes in the secured and unsecured portfolio[157](index=157&type=chunk) - The Allowance for Credit Losses (ACL) as a percent of portfolio loans decreased to **1.73%** at June 30, 2025, from **1.85%** at December 31, 2024[158](index=158&type=chunk) [Noninterest Income](index=51&type=section&id=Noninterest%20Income) Noninterest income significantly increased for both the three and six months ended June 30, 2025, primarily due to contributions from the IFH acquisition, particularly in government loan servicing and lending revenue. Credit card fees remained stable, while mortgage banking revenue saw a slight decline | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest income | $13,106 | $6,890 | 90.2% | | Government loan servicing and packaging revenue | $3,644 | $0 | 100.0% | | Government lending revenue | $3,112 | $0 | 100.0% | | Credit card fees | $4,298 | $4,330 | (0.7%) | | Mortgage banking revenue | $1,754 | $1,990 | (11.9%) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest income | $25,655 | $12,862 | 99.5% | | Government loan servicing and packaging revenue | $7,212 | $0 | 100.0% | | Government lending revenue | $4,208 | $0 | 100.0% | | Credit card fees | $8,020 | $8,211 | (2.3%) | | Mortgage banking revenue | $3,585 | $3,443 | 4.1% | - The increase in noninterest income was primarily due to contributions from the businesses acquired through the IFH acquisition[160](index=160&type=chunk) - The reserve for potential losses on mortgage loans sold was **$2.3 million** at June 30, 2025, with no repurchases during the six months ended June 30, 2025[164](index=164&type=chunk)[165](index=165&type=chunk) [Noninterest Expense](index=53&type=section&id=Noninterest%20Expense) Noninterest expenses increased substantially for both the three and six months ended June 30, 2025, driven mainly by higher salaries and employee benefits, merger-related expenses, and occupancy costs, partially offset by a decrease in advertising expenses | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest expense | $39,572 | $29,493 | 34.2% | | Salaries and employee benefits | $18,460 | $13,272 | 39.1% | | Merger-related expenses | $1,398 | $83 | 1584.3% | | Occupancy and equipment | $2,995 | $1,864 | 60.7% | | Advertising | $1,371 | $2,072 | (33.8%) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest expense | $77,625 | $58,980 | 31.6% | | Salaries and employee benefits | $36,527 | $26,179 | 39.5% | | Merger-related expenses | $2,664 | $795 | 235.1% | | Occupancy and equipment | $5,905 | $3,477 | 69.8% | | Advertising | $3,150 | $4,104 | (23.2%) | [Income Tax Expense](index=53&type=section&id=Income%20Tax%20Expense) Income tax expense increased for both the three and six months ended June 30, 2025, but the effective tax rate decreased. This reduction was attributed to lower non-deductible merger and equity compensation costs, coupled with increased benefits from tax optimization strategies | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Income tax expense | $3,963 | $2,728 | 45.3% | | Effective tax rate | 23.2% | 25.0% | (1.8 pp) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Income tax expense | $8,328 | $4,790 | 73.9% | | Effective tax rate | 23.5% | 24.5% | (1.0 pp) | - The decrease in the effective tax rate was due to a reduction in non-deductible merger and equity compensation costs, along with an increase in benefits from tax optimization strategies, including investments eligible for Low Income Housing Tax Credits[171](index=171&type=chunk) [Financial Condition](index=54&type=section&id=Financial%20Condition) This section provides a comprehensive review of the Company's financial condition, detailing changes in assets, liabilities, and equity. It covers investment securities, the loan portfolio, nonperforming assets, allowance for credit losses, deposits, borrowings, liquidity, and capital resources [Summary of Financial Condition](index=54&type=section&id=Summary%20of%20Financial%20Condition) A high-level overview of the Company's financial position shows increases in total assets, portfolio loans, deposits, and stockholders' equity from December 31, 2024, to June 30, 2025, alongside an increase in tangible book value per share | Metric (in thousands, except per share data) | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :----------------------------------------- | :------------ | :---------------- | :------- | :------- | | Total assets | $3,388,662 | $3,206,911 | $181,751 | 5.7% | | Portfolio loans receivable, net of deferred fees and costs | $2,739,808 | $2,630,163 | $109,645 | 4.2% | | Deposits | $2,940,738 | $2,761,939 | $178,799 | 6.5% | | Total stockholders' equity | $380,035 | $355,139 | $24,896 | 7.0% | | Tangible book value per share | $20.64 | $19.10 | N/A | 8.1% | [Investment Securities](index=54&type=section&id=Investment%20Securities) The Company's investment strategy focuses on U.S. Treasuries, MBS, government agency bonds, asset-backed securities, and high-quality municipal and corporate bonds to manage liquidity and supplement interest income. Management confirmed no credit-related declines in fair value for these securities - The Company invests in U.S. Treasuries, high-quality mortgage-backed securities (MBS), government agency bonds, asset-backed securities, and high-quality municipal and corporate bonds[174](index=174&type=chunk) - Management determined there were no credit-related declines in fair value for available-for-sale debt securities in an unrealized loss position at June 30, 2025[177](index=177&type=chunk)[179](index=179&type=chunk) - All municipal bonds held by the Company were investment grade at June 30, 2025 (**AAA - 76%**, **AA+ - 24%**)[178](index=178&type=chunk) [Portfolio Loans Receivable](index=55&type=section&id=Portfolio%20Loans%20Receivable) The Company's loan portfolio consists primarily of real estate, commercial and industrial, and credit card loans. It provides details on the contractual maturities and rate characteristics of these loans, along with LTV ratios for commercial real estate segments - The loan portfolio includes residential, commercial, and construction real estate loans, commercial and industrial loans, and credit card loans[180](index=180&type=chunk) - Credit card loans are offered nationwide through the OpenSky™ division, with approximately **$86.4 million** in secured and partially secured balances protected by savings deposits at June 30, 2025[187](index=187&type=chunk) | Contractual Maturities of Portfolio Loans (June 30, 2025, in thousands) | Amount | | :----------------------------------------------------- | :----- | | One Year or Less | $1,031,795 | | One to Five Years | $828,602 | | Five Years to Fifteen Years | $490,563 | | After Fifteen Years | $397,103 | | **Total portfolio loans, gross** | **$2,748,063** | - Non-owner-occupied commercial real estate loans totaled **$495.341 million** with a weighted average LTV of **54.3%** at June 30, 2025. Owner-occupied commercial real estate loans totaled **$436.421 million** with a weighted average LTV of **59.9%**[193](index=193&type=chunk)[195](index=195&type=chunk) [Nonperforming Assets](index=60&type=section&id=Nonperforming%20Assets) This section outlines the Company's policies for classifying nonaccrual loans and charge-offs, along with its credit quality indicators (pass/watch, special mention, substandard, doubtful, loss). It emphasizes proactive credit review and risk management to maintain asset quality - Loans are generally placed on nonaccrual status when **90 days past due** or earlier if collection of principal or interest is in doubt[197](index=197&type=chunk) - Loans are charged off when determined to be uncollectible, typically after **180 days past due** (or **120 days for credit cards**), unless well-secured and in the process of collection[198](index=198&type=chunk) - The Company uses a risk grading matrix to assign credit quality indicators: pass/watch, special mention, substandard, doubtful, or loss[200](index=200&type=chunk) - At June 30, 2025, the recorded investment in individually assessed loans was **$39.8 million**, requiring a specific reserve of **$6.5 million**[204](index=204&type=chunk) [Allowance for Credit Losses](index=61&type=section&id=Allowance%20for%20Credit%20Losses) This section discusses the methodology for maintaining the Allowance for Credit Losses (ACL), which reflects management's estimate of expected credit losses. It presents key ACL ratios and its allocation by loan category, noting a decrease in the overall ACL coverage ratio - The ACL is management's estimate of expected credit losses and risks inherent in the loan portfolio, based on risk classifications, historical loss rates, portfolio changes, and economic factors[205](index=205&type=chunk) | ACL Ratios | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Allowance for credit losses to period end portfolio loans | 1.73% | 1.85% | | Nonaccrual loans to total portfolio loans | 1.32% | 1.15% | | Allowance for credit losses to nonaccrual loans | 131% | 161% | - Total charge-offs for the six months ended June 30, 2025, were primarily comprised of credit card charge-offs, resulting from portfolio aging and the shift to partially secured and unsecured exposures[209](index=209&type=chunk) | ACL Allocation (June 30, 2025, in thousands) | Amount | Percent of Total ACL | | :------------------------------------------- | :----- | :------------------- | | Residential Real Estate | $6,772 | 14% | | Commercial Real Estate | $14,262 | 30% | | Construction | $3,410 | 7% | | Commercial and Industrial | $16,249 | 35% | | Credit Card | $6,749 | 14% | | Other Consumer | $5 | 0% | [Total Liabilities](index=63&type=section&id=Total%20Liabilities) Total liabilities increased from December 31, 2024, to June 30, 2025, primarily driven by growth in the deposit portfolio - Total liabilities increased by **$156.9 million** from December 31, 2024, to June 30, 2025, primarily due to a **$178.8 million** growth in the deposit portfolio[213](index=213&type=chunk) [Deposits](index=63&type=section&id=Deposits) Deposits are a major funding source, with a variety of products offered. Credit card customers contribute significantly to low-cost deposits, and a large portion of deposits are insured or protected | Deposit Category (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Total deposits | $2,940,738 | $2,761,939 | | Noninterest-bearing demand accounts | $836,979 | $810,928 | | Total Interest-bearing deposits | $2,103,759 | $1,951,011 | - Noninterest-bearing deposits represented **28.5%** of total deposits at June 30, 2025[217](index=217&type=chunk) - Credit card customers accounted for **$168.9 million (20.2%)** of total noninterest-bearing deposit balances at June 30, 2025[214](index=214&type=chunk) - Insured and protected deposits were approximately **$2.1 billion (69.9% of the portfolio)** as of June 30, 2025[217](index=217&type=chunk) [Borrowings](index=65&type=section&id=Borrowings) The Company utilizes various short-term and long-term borrowings, including FHLB advances, junior subordinated debentures, and subordinated notes, to supplement deposits and fund its lending and investment activities. Total borrowings remained stable - Total borrowings of **$34.1 million** at June 30, 2025, remained consistent with December 31, 2024[220](index=220&type=chunk) - Outstanding FHLB advances were **$22.0 million** at June 30, 2025, with an available borrowing capacity of **$628.0 million**[221](index=221&type=chunk) - Other borrowed funds amounted to **$12.1 million**, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures (**$2.1 million**) and subordinated notes (**$10.0 million**)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Liquidity](index=66&type=section&id=Liquidity) Liquidity is managed through a robust risk management process, ensuring the Bank can meet its cash and collateral obligations. Key funding sources include core deposits and various borrowing capacities from FHLB, Federal Reserve, and correspondent banks - The Company maintains an adequate level of liquidity through a risk management process that identifies, measures, monitors, and controls liquidity risk[227](index=227&type=chunk)[228](index=228&type=chunk) - Available borrowing capacity at June 30, 2025, included **$628.0 million** from the FHLB, **$122.6 million** from the Federal Reserve Bank of Richmond, and **$76.0 million** from other correspondent banks[230](index=230&type=chunk) - Cash and cash equivalents totaled **$274.6 million** at June 30, 2025[230](index=230&type=chunk) [Capital Resources](index=66&type=section&id=Capital%20Resources) Stockholders' equity increased due to net income, despite share repurchases. The Company and Bank remain in compliance with all regulatory capital requirements, with the Bank classified as 'well capitalized,' although unrealized losses on investment securities impact accumulated other comprehensive loss - Stockholders' equity increased by **$24.9 million** for the period ended June 30, 2025, primarily due to net income of **$27.1 million**[231](index=231&type=chunk) - The Company repurchased **93,170 shares** in Q2 2025 for **$2.5 million**, with **$11.9 million** remaining under the authorized stock repurchase plan[231](index=231&type=chunk) - Accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities (net of deferred income tax) amounted to **$8.1 million** at June 30, 2025[232](index=232&type=chunk) - Both the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was classified as 'well capitalized' at June 30, 2025[237](index=237&type=chunk) | Company Regulatory Capital Ratios (June 30, 2025) | Actual Ratio | Minimum Capital Adequacy | To Be Well Capitalized | | :------------------------------------------------ | :----------- | :----------------------- | :--------------------- | | Tier 1 leverage ratio | 10.90% | 4.00% | 5.00% | | Tier 1 capital ratio | 13.66% | 6.00% | 8.00% | | Common equity tier 1 capital ratio | 13.58% | 4.50% | 6.50% | | Total capital ratio | 15.30% | 8.00% | 10.00% | [Contractual Obligations](index=68&type=section&id=Contractual%20Obligations) The Company has contractual obligations related to debt and lease agreements, which are continuously monitored and managed as part of its liquidity strategy - The Company has contractual obligations to make future payments on debt and lease agreements[241](index=241&type=chunk) - These obligations are considered in the Company's liquidity monitoring and management[241](index=241&type=chunk) [Off-Balance Sheet Items](index=68&type=section&id=Off-Balance%20Sheet%20Items) The Company engages in off-balance sheet transactions, primarily commitments to extend credit and issue letters of credit, which involve credit and interest rate risks. These are managed with the same rigorous credit policies as on-balance sheet instruments - Off-balance sheet items include commitments to extend credit and issue letters of credit, which carry elements of credit risk and interest rate risk[242](index=242&type=chunk) - The Company's exposure to credit loss is represented by the contractual amounts of these commitments, which are subject to the same credit policies as on-balance sheet instruments[242](index=242&type=chunk)[245](index=245&type=chunk) | Total Credit Extension Commitments (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Unfunded lines of credit | $394,352 | $403,029 | | Letters of credit | $3,122 | $3,122 | | Commitment to fund other investments | $2,714 | $2,714 | | **Total** | **$400,188** | **$408,865** | [Impact of Inflation](index=69&type=section&id=Impact%20of%20Inflation) Given that most of the Company's assets and liabilities are monetary, interest rates have a more significant impact on its performance than general inflation, although operating expenses are sensitive to inflationary changes - Interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation, as substantially all assets and liabilities are monetary in nature[249](index=249&type=chunk) - Most other operating expenses are sensitive to changes in levels of inflation[249](index=249&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=69&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides detailed reconciliations of various non-GAAP financial measures, including Core Net Income, Core EPS, Core Return on Average Assets/Equity, Core Efficiency Ratio, Commercial Bank Net Interest Margin/Loan Yield, PPNR, and Tangible Book Value per Share, to their most directly comparable GAAP measures | Core Earnings Metrics (in thousands, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $27,068 | $14,767 | | Add: Merger-Related Expenses, net of tax | $2,034 | $600 | | **Core Net Income** | **$29,102** | **$15,367** | | Earnings per share - Diluted | $1.60 | $1.06 | | **Core Earnings per share - Diluted** | **$1.72** | **$1.10** | | Return on Average Assets | 1.68% | 1.28% | | **Core Return on Average Assets** | **1.80%** | **1.33%** | | Efficiency Ratio | 65.04% | 69.45% | | **Core Efficiency Ratio** | **62.81%** | **68.51%** | | Commercial Bank Net Interest Margin | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Commercial Bank Net Interest Margin | 4.33% | 3.84% | | Commercial Bank Portfolio Loans Receivable Yield | 7.14% | 7.00% | | Tangible Book Value per Share (in thousands, except share and per share data) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------- | :------------ | :---------------- | | Tangible Common Equity | $342,262 | $318,196 | | Period End Shares Outstanding | 16,581,990 | 16,662,626 | | **Tangible Book Value per Share** | **$20.64** | **$19.10** | | Return on Average Tangible Common Equity (Six Months Ended June 30, 2025) | 16.82% | 11.37% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the Company's primary market risk, interest rate volatility, and how it is managed through balance sheet structuring and oversight by the Asset/Liability Management Committee (ALCO). It presents results from Earnings at Risk (EAR) and Economic Value of Equity (EVE) simulations under various interest rate shock scenarios - The Company's primary component of market risk is interest rate volatility, managed by the Bank's Asset/Liability Management Committee (ALCO) through balance sheet structuring[264](index=264&type=chunk)[267](index=267&type=chunk) - The Company does not enter into leveraged derivatives, financial options, or financial futures contracts for the purpose of reducing interest rate risk[266](index=266&type=chunk) - At June 30, 2025, the Company was in an asset-sensitive position for periods less than one year, with rate-sensitive assets exceeding rate-sensitive liabilities[268](index=268&type=chunk)[271](index=271&type=chunk) | Earnings at Risk (June 30, 2025) | -400 bps | -300 bps | -200 bps | -100 bps | Flat | +100 bps | +200 bps | +300 bps | +400 bps | | :------------------------------- | :------- | :------- | :------- | :------- | :--- | :------- | :------- | :------- | :------- | | Impact on Net Interest Income (12-month horizon) | (13.6)% | (10.3)% | (7.3)% | (3.8)% | 0.0% | 4.1% | 8.2% | 12.1% | 16.1% | | Economic Value of Equity (June 30, 2025) | -400 bps | -300 bps | -200 bps | -100 bps | Flat | +100 bps | +200 bps | +300 bps | +400 bps | | :--------------------------------------- | :------- | :------- | :------- | :------- | :--- | :------- | :------- | :------- | :------- | | Impact on Economic Value of Equity | (25.3)% | (15.4)% | (8.0)% | (3.2)% | 0.0% | 2.0% | 3.1% | 4.6% | 5.7% | [Item 4. Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes to internal control over financial reporting were reported during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[277](index=277&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[278](index=278&type=chunk) PART II - OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits [Item 1. LEGAL PROCEEDINGS.](index=77&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS.) The Company is not currently involved in any legal proceedings that are expected to have a material adverse impact on its results of operations or financial condition - The Company is not presently a party to any legal proceedings which are believed to have a material adverse impact on its results of operations or financial condition[279](index=279&type=chunk) [Item 1A. RISK FACTORS.](index=77&type=section&id=Item%201A.%20RISK%20FACTORS.) There are no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There are no material changes to the risk factors as previously disclosed under Item 1A in the Annual Report on Form 10-K for the year ended December 31, 2024[280](index=280&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=78&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) This section reports no unregistered sales of equity securities and details the Company's stock repurchase program, including shares repurchased during the quarter and the remaining authorization - There were no unregistered sales of the Company's stock during the year-to-date period ended June 30, 2025[281](index=281&type=chunk) - The Company is authorized to repurchase up to **$15 million** (or **483,559 shares**) of its Common Stock under a program expiring on February 28, 2026[282](index=282&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------------ | :----------------------------- | :--------------------------- | | April 1, 2025 to April 30, 2025 | 93,170 | $26.66 | - As of June 30, 2025, **$11.9 million** remained authorized for repurchase under the stock repurchase program[284](index=284&type=chunk) [Item 3. DEFAULTS UPON SENIOR SECURITIES.](index=79&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[285](index=285&type=chunk) [Item 4. MINE SAFETY DISCLOSURES.](index=79&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES.) This item is not applicable to the Company's operations - Mine Safety Disclosures are not applicable to the Company[286](index=286&type=chunk) [Item 5. OTHER INFORMATION.](index=79&type=section&id=Item%205.%20OTHER%20INFORMATION.) During the quarter ended June 30, 2025, no officer or director of the Company adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements - No officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[287](index=287&type=chunk) [Item 6. EXHIBITS.](index=79&type=section&id=Item%206.%20EXHIBITS.) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, organizational documents, employment agreements, and various certifications - Exhibits include the Agreement and Plan of Merger and Reorganization (2.1), Amended and Restated Articles of Incorporation (3.1), Amended and Restated Bylaws (3.2), Employment Agreements (10.1, 10.2), Rule 13a-14(a) Certifications (31.1, 31.2), Section 1350 Certification (32.1), and XBRL financial statements (101, 104)[288](index=288&type=chunk)

Core Viewpoint - Capital Bancorp reported strong revenue growth in Q2 2025, but missed earnings per share estimates, indicating mixed results in profitability and efficiency despite top-line progress [1][2]. Financial Performance - Revenue for Q2 2025 was $60.8 million, a 38.3% increase from $43.9 million in Q2 2024 [1][2]. - Non-GAAP diluted earnings per share (EPS) was $0.85, missing estimates of $0.88 by $0.03, reflecting a 44.1% increase year-over-year from $0.59 [1][2]. - Net interest income rose to $47.6 million, up 28.6% from $37.1 million a year earlier [2][6]. - Fee revenue increased significantly to $13.1 million, a 90.2% rise from $6.9 million in Q2 2024 [2][7]. Business Overview - Capital Bancorp operates in commercial banking, government-guaranteed lending, and credit card services, primarily in the Washington, D.C. and Baltimore metro areas, with additional operations in Florida and Illinois [3]. - The company focuses on commercial and industrial lending, commercial real estate loans, and secured credit cards, aiming to diversify revenue and manage risk [4]. Growth and Expansion - Gross loans increased by $61.4 million quarter-over-quarter, representing a 9.2% annualized growth, with year-over-year growth of $718.2 million [5]. - Total deposits grew by $49.4 million during the quarter and $840.3 million compared to Q2 2024, marking a 40.0% annual increase [5]. - The integration of the IFH acquisition contributed $373.5 million to loan growth, alongside $344.7 million from organic growth [5][9]. Credit Quality and Expenses - Net charge-offs rose to $5.1 million, or 0.75% of portfolio loans, nearly double the previous quarter's ratio [10]. - Nonperforming assets as a percentage of total assets decreased to 1.11%, down from 1.21% in the prior quarter, but remain higher than last year [10]. - Noninterest expenses increased by $10.1 million year-over-year, partly due to investments in digital technologies [9]. Shareholder Returns - The company raised its quarterly dividend by 20% to $0.12 per share [11]. - Tangible book value per share increased by 7.2% year-over-year to $20.64, reflecting ongoing capital strength [9][10]. Future Outlook - Management expressed confidence in ongoing expansion and highlighted multiple growth levers, although no specific earnings or revenue guidance was provided for Q3 or fiscal 2025 [12]. - Key areas to monitor include cost pressures, credit quality normalization, and the integration of acquired operations [12].

Group 1 - Capital Bancorp reported quarterly earnings of $0.85 per share, missing the Zacks Consensus Estimate of $0.89 per share, but showing an increase from $0.59 per share a year ago, resulting in an earnings surprise of -4.49% [1] - The company posted revenues of $60.75 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 1.54%, compared to $43.95 million in the same quarter last year [2] - Capital Bancorp shares have increased approximately 20.1% since the beginning of the year, outperforming the S&P 500's gain of 8.6% [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $0.90 on revenues of $62.9 million, and for the current fiscal year, it is $3.48 on revenues of $246.4 million [7] - The Zacks Industry Rank for Banks - Northeast is currently in the top 15% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] Group 3 - The estimate revisions trend for Capital Bancorp was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, suggesting expected underperformance in the near future [6]

[Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) [Key Financial and Operational Highlights](index=1&type=section&id=2.1%20Key%20Financial%20and%20Operational%20Highlights) Capital Bancorp, Inc. reported strong Q2 2025 profitability with $13.1 million GAAP net income, driven by growth in loans and deposits Key Financial Performance (GAAP & Core) | Metric | 2Q 2025 (GAAP) | 2Q 2025 (Core) | Change from 1Q 2025 (GAAP) | Change from 2Q 2024 (GAAP) | | :-------------------------------- | :--------------- | :--------------- | :------------------------- | :------------------------- | | Net Income (in millions) | $13.1 | $14.2 | -$0.8 | +$4.9 | | EPS (per share) | $0.78 | $0.85 | -$0.04 | +$0.19 | | ROA (%) | 1.60% | 1.73% | -0.15% | +0.20% | | ROE (%) | 14.17% | 15.33% | -1.39% | +1.64% | | ROTCE (%) | 16.10% | 17.39% | -1.47% | +3.57% | Key Operational Metrics | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :-------------------------------- | :------ | :------------------ | :------------------ | | Gross Loans (in billions) | $2.74 | +$61.4 million (+9.2% annualized) | +$718.2 million (+35.5%) | | Total Deposits (in billions) | $2.94 | +$49.4 million (+6.9% annualized) | +$840.3 million (+40.0%) | | Customer Deposits (in millions) | N/A | +$87.1 million (+13.5% annualized) | +$725.3 million (+37.3%) | | Net Interest Income (in millions) | $47.6 | +$1.6 million (+3.5%) | +$10.6 million (+28.6%) | | Net Interest Margin (NIM) (%) | 6.04% | -1 bps | -42 bps | | Commercial Bank NIM (%) | 4.36% | +4 bps | +46 bps | | Fee Revenue (in millions) | $13.1 | +$0.6 million | +$6.2 million | | ACL Coverage Ratio (%) | 1.73% | -8 bps | +20 bps | | Book Value per Share (per share) | $22.92 | +$0.73 | +$3.66 | | Tangible Book Value per Share (per share) | $20.64 | +$0.83 (+4.2%) | +$1.38 (+7.2%) | | Cash Dividend per Share (per share) | $0.12 | +20% | +25% | | Shares Repurchased (shares) | 93,170 | N/A | N/A | | Cost of Repurchases (in millions) | $2.5 | N/A | N/A | [Executive Summary and Management Commentary](index=2&type=section&id=Executive%20Summary%20and%20Management%20Commentary) [Management Commentary](index=2&type=section&id=2.1%20Management%20Commentary) Management highlighted record H1 2025 results, strategic plan progress, and the Commercial Bank's strong position for profitable growth - CEO Ed Barry expressed satisfaction with the significant progress on the Strategic Plan, leading to **record results for the first half of 2025**, and highlighted the successful integration of the IFH acquisition and overall franchise growth[6](index=6&type=chunk) - Chairman Steven J. Schwartz emphasized the Commercial Bank's strong positioning for profitable growth, driven by a focus on commercial and industrial loans, successful core deposit building, and a robust net interest margin. He also noted the maintenance of fee revenue above **20% of total revenue** and the company's commitment to shareholder returns through consistent dividend increases (4th consecutive year) and stock buybacks[6](index=6&type=chunk) [GAAP to Non-GAAP Net Income Reconciliation](index=2&type=section&id=2.2%20GAAP%20to%20Non-GAAP%20Net%20Income%20Reconciliation) The company provides a reconciliation of GAAP net income to core net income, which excludes merger-related expenses and other one-time non-recurring adjustments GAAP to Non-GAAP Net Income Reconciliation (in thousands, except per share data) | (in thousands, except per share data) | 2Q 2025 (GAAP) | 2Q 2025 (Core) | 1Q 2025 (GAAP) | 1Q 2025 (Core) | | :------------------------------------ | :------------- | :------------- | :------------- | :------------- | | Income Before Taxes | $17,099 | $18,497 | $18,297 | $19,563 | | Income Tax Expense | $3,963 | $4,291 | $4,365 | $4,667 | | Net Income | $13,136 | $14,206 | $13,932 | $14,896 | | Diluted Earnings per Share | $0.78 | $0.85 | $0.82 | $0.88 | | Add: Merger-Related Expenses | $1,398 | N/A | $1,266 | N/A | - Core net income for 2Q 2025 was **$14.2 million**, or **$0.85 per diluted share**, which excludes merger-related expenses and other one-time non-recurring adjustments, providing a clearer view of operational performance[8](index=8&type=chunk)[9](index=9&type=chunk) [Earnings Summary](index=3&type=section&id=Earnings%20Summary) [Net Income and EPS](index=3&type=section&id=3.1%20Net%20Income%20and%20EPS) Q2 2025 net income was $13.1 million ($0.78 EPS), a decrease quarter-over-quarter but a significant increase year-over-year Net Income and EPS | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :-------------------- | :------ | :------ | :------ | | Net Income (GAAP, in millions) | $13.1 | $13.9 | $8.2 | | EPS (GAAP Diluted, per share) | $0.78 | $0.82 | $0.59 | | Core Net Income (in millions) | $14.2 | $14.9 | N/A | | Core EPS (Diluted, per share) | $0.85 | $0.88 | N/A | [Net Interest Income (NII)](index=3&type=section&id=3.2%20Net%20Interest%20Income%20(NII)) Net interest income increased quarter-over-quarter and year-over-year, primarily driven by strong balance sheet growth from the Commercial Bank and the IFH acquisition Net Interest Income (in millions) | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :---------------- | :------ | :------------------ | :------------------ | | Net Interest Income | $47.6 | +$1.6 (+3.5%) | +$10.6 (+28.6%) | | Interest Income | $64.6 | +$1.8 (+2.9%) | +$14.0 (+27.6%) | | Interest Expense | $16.9 | +$0.2 (+1.4%) | +$3.4 (+24.9%) | - The quarter-over-quarter increase in interest income was driven by Commercial Bank loan interest income due to portfolio growth, while the year-over-year increase was primarily from organic growth and the IFH acquisition[11](index=11&type=chunk) - Interest expense increased quarter-over-quarter mainly due to a lower benefit from net purchase accounting accretion, with higher deposit volumes offset by lower deposit rates. Year-over-year increase was due to organic growth and the IFH acquisition[11](index=11&type=chunk) [Provision for Credit Losses and Net Charge-offs](index=3&type=section&id=3.3%20Provision%20for%20Credit%20Losses%20and%20Net%20Charge-offs) The provision for credit losses increased significantly from the prior quarter, mainly due to higher volumes in OpenSky™ portfolios and higher charge-offs in the Commercial Bank Provision for Credit Losses and Net Charge-offs | Metric | 2Q 2025 | 1Q 2025 | Change QoQ | | :-------------------------------- | :------ | :------ | :--------- | | Provision for Credit Losses (in millions) | $4.1 | $2.3 | +$1.8 | | Net Charge-offs (in millions) | $5.1 | $2.4 | +$2.7 | | Net Charge-offs (% of portfolio loans, annualized) | 0.75% | 0.38% | +0.37% | | ACL Coverage Ratio (period end, %) | 1.73% | 1.81% | -8 bps | - The increase in provision for credit losses was primarily driven by **$1.1 million from OpenSky™** due to higher volumes in both secured and unsecured portfolios, and **$0.7 million from the Commercial Bank** due to higher charge-offs not previously provided for[11](index=11&type=chunk) - Commercial Bank charge-offs included **$2.1 million from the acquired IFH portfolio**, with a **$1.5 million charge-off** from a loan sale[11](index=11&type=chunk) [Noninterest Income (Fee Revenue)](index=4&type=section&id=3.4%20Noninterest%20Income%20(Fee%20Revenue)) Fee revenue increased quarter-over-quarter and significantly year-over-year, largely due to contributions from IFH businesses Fee Revenue (in millions) | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :-------------------- | :------ | :------------------ | :------------------ | | Fee Revenue | $13.1 | +$0.6 | +$6.2 | | Core Fee Revenue Mix (%) | 21.6% | +0.2% | +5.9% | - The increase in fee revenue was primarily due to **$2.0 million higher government lending revenue**, **$0.6 million higher credit card fees** from OpenSky™, and **$0.1 million higher government loan servicing revenue**, partially offset by a **$1.1 million negative fair value adjustment** related to the loan servicing portfolio and **$1.0 million lower other income**[14](index=14&type=chunk) [Noninterest Expense](index=4&type=section&id=3.5%20Noninterest%20Expense) Noninterest expense increased both quarter-over-quarter and year-over-year, driven by higher personnel expenses, business activities, technology investments, and the IFH acquisition Noninterest Expense (in millions) | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :-------------------- | :------ | :------------------ | :------------------ | | Noninterest Expense | $39.6 | +$1.5 | +$10.1 | | Core Noninterest Expense | $38.2 | +$1.4 | +$8.8 | - The quarter-over-quarter increase in core noninterest expense was driven by higher personnel expenses, growth from business-related activities (including USDA portfolio servicing costs), and continued investments in technology, such as a new digital banking solution[14](index=14&type=chunk) - Year-over-year expense growth was primarily attributable to the acquisition of IFH[14](index=14&type=chunk) [Income Tax Expense](index=4&type=section&id=3.6%20Income%20Tax%20Expense) Income tax expense decreased quarter-over-quarter, with the core effective income tax rate remaining relatively stable Income Tax Expense (in millions) | Metric | 2Q 2025 | 1Q 2025 | Change QoQ | | :-------------------- | :------ | :------ | :--------- | | Income Tax Expense | $4.0 | $4.4 | -$0.4 | | Pre-tax Income (%) | 23.2% | 23.9% | -0.7% | | Core Effective Tax Rate (%) | 23.2% | 23.7% | -0.5% | [Balance Sheet Analysis](index=5&type=section&id=Balance%20Sheet%20Analysis) [Total Assets](index=5&type=section&id=4.1%20Total%20Assets) Total assets grew quarter-over-quarter and significantly year-over-year, driven by organic growth and the IFH acquisition Total Assets (in billions) | Metric | June 30, 2025 | Change from Mar 31, 2025 | Change from June 30, 2024 | | :-------------------- | :------------ | :----------------------- | :------------------------ | | Total Assets | $3.4 | +$38.9 million (+4.7% annualized) | +$1.0 billion (+39.0%) | | IFH Acquisition Contribution (in millions) | N/A | N/A | $559.4 | | Organic Growth Contribution (in millions) | N/A | N/A | $440.6 | - The **$38.9 million** quarter-over-quarter growth in total assets was primarily driven by Gross Loan growth of **$61.4 million** and Investment portfolio growth of **$15.5 million**, partially offset by decreases in total Cash of **$19.4 million** and Loans Held for Sale of **$13.7 million**[16](index=16&type=chunk) [Gross Loans](index=5&type=section&id=4.2%20Gross%20Loans) Gross loans experienced strong growth both quarter-over-quarter and year-over-year, with significant contributions from the IFH acquisition and organic growth Gross Loans (in billions) | Metric | June 30, 2025 | Change from Mar 31, 2025 | Change from June 30, 2024 | | :-------------------- | :------------ | :----------------------- | :------------------------ | | Gross Loans | $2.74 | +$61.4 million (+9.2% annualized) | +$718.2 million | | IFH Acquisition Contribution (in millions) | N/A | N/A | $373.5 | | Organic Growth Contribution (in millions) | N/A | N/A | $344.7 | - Quarterly loan growth was primarily driven by **$26.7 million from commercial real estate**, **$17.1 million from residential real estate**, **$12.3 million from OpenSky™**, and **$9.3 million from lender finance**[16](index=16&type=chunk) - Commercial and industrial loans, plus owner-occupied commercial real estate loans, constituted **37.6% of total portfolio loans** at June 30, 2025, consistent with the prior quarter[16](index=16&type=chunk) [Total Deposits](index=5&type=section&id=4.3%20Total%20Deposits) Total deposits showed solid growth quarter-over-quarter and substantial growth year-over-year, with both the IFH acquisition and organic growth contributing significantly Total Deposits (in billions) | Metric | June 30, 2025 | Change from Mar 31, 2025 | Change from June 30, 2024 | | :-------------------- | :------------ | :----------------------- | :------------------------ | | Total Deposits | $2.94 | +$49.4 million (+6.9% annualized) | +$840.3 million (+40.0% annualized) | | IFH Acquisition Contribution (in millions) | N/A | N/A | $459.0 | | Organic Growth Contribution (in millions) | N/A | N/A | $381.3 | | Insured & Protected Deposits | $2.1 (69.9%) | N/A | N/A | | Low-and-no interest-bearing DDA | $1.2 (39.8%) | +$47.8 million (+17.1% annualized) | +$214.4 million (+22.4%) | - Quarterly deposit growth was driven by **$47.8 million in customer money market deposits**, **$24.8 million in noninterest-bearing deposits**, and **$23.0 million in interest-bearing demand accounts**, partially offset by decreases in brokered time deposits and customer time deposits[16](index=16&type=chunk) - The average rate on low-and-no interest-bearing deposits was **0.14% for 2Q 2025**, a decrease of **1 bps** from 1Q 2025[16](index=16&type=chunk) [Investment Securities and Liquidity](index=5&type=section&id=4.4%20Investment%20Securities%20and%20Liquidity) The investment securities portfolio, classified as available-for-sale, had a fair market value of $228.9 million, and the company maintained stable and reliable sources of available borrowings Investment Securities and Liquidity | Metric | June 30, 2025 | | :-------------------------------- | :------------ | | Investment Securities (FMV, in millions) | $228.9 | | % of Total Assets | 6.8% | | Effective Duration (years) | 2.7 | | U.S. Treasury Securities (%) | 60% | | Accumulated Other Comprehensive Income (Loss, in millions) | -$8.1 | | Available Borrowings (in millions) | $834.8 | | Collateralized Lines of Credit (in millions) | $750.6 | | Unsecured Lines of Credit (in millions) | $76.0 | | Unpledged Investment Securities (in millions) | $8.2 | - The accumulated other comprehensive income (loss) on the investment securities portfolio improved by **$1.1 million** during the quarter[16](index=16&type=chunk) [Capital Positions](index=6&type=section&id=4.5%20Capital%20Positions) The company and the Bank maintained regulatory capital ratios exceeding all requirements, with the Common Equity Tier-1 capital ratio improving quarter-over-quarter Capital Positions | Metric | June 30, 2025 | March 31, 2025 | | :-------------------------- | :------------ | :------------- | | Common Equity Tier-1 Ratio (%) | 13.58% | 13.24% | | Shares Repurchased (2Q 2025, shares) | 93,170 | N/A | | Cost of Repurchases (2Q 2025, in millions) | $2.5 | N/A | | Remaining Repurchase Authority (in millions) | $11.9 | N/A | - The company and the Bank maintained regulatory capital ratios that exceed all capital adequacy requirements as of June 30, 2025[17](index=17&type=chunk) [Key Financial Metrics and Ratios](index=7&type=section&id=Key%20Financial%20Metrics%20and%20Ratios) [Net Interest Margin (NIM)](index=7&type=section&id=5.1%20Net%20Interest%20Margin%20(NIM)) Overall NIM slightly decreased quarter-over-quarter and year-over-year, influenced by the IFH acquisition, while Commercial Bank NIM increased Net Interest Margin (NIM) | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :-------------------- | :------ | :------------------ | :------------------ | | NIM (%) | 6.04% | -1 bps | -42 bps | | Commercial Bank NIM (%) | 4.36% | +4 bps | +46 bps | | Net PAA Impact on NIM (%) | 16 bps | N/A | N/A | - The decrease in overall NIM was due to the acquisition of commercial loans from IFH, diluting the impact from OpenSky™[4](index=4&type=chunk) [Fee Revenue Mix](index=7&type=section&id=5.2%20Fee%20Revenue%20Mix) The fee revenue mix as a percentage of total revenue slightly increased quarter-over-quarter and significantly improved year-over-year Fee Revenue Mix | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :-------------------- | :------ | :------ | :------ | | Fee Revenue Mix (%) | 21.6% | 21.4% | 15.7% | [Credit Metrics and Asset Quality](index=7&type=section&id=5.3%20Credit%20Metrics%20and%20Asset%20Quality) The ACL Coverage Ratio decreased quarter-over-quarter but increased year-over-year, while nonperforming assets and nonaccrual loans decreased quarter-over-quarter due to a loan sale Credit Metrics and Asset Quality | Metric | June 30, 2025 | Mar 31, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :----------- | :------------ | | ACL Coverage Ratio (%) | 1.73% | 1.81% | 1.53% | | Nonperforming Assets to Total Assets (%) | 1.11% | 1.28% | 0.58% | | Total Nonaccrual Loans (in millions) | $37.5 | $42.9 | $14.0 | | Special Mention Loans (% of total portfolio loans) | $54.2 (2.0%) | $63.0 (2.4%) | $23.3 (1.2%) | | Substandard Loans (% of total portfolio loans) | $44.6 (1.7%) | $48.4 (1.8%) | $22.1 (1.2%) | - The decrease in nonperforming assets quarter-over-quarter was primarily due to the sale of a purchase credit deteriorated (PCD) loan acquired from IFH[19](index=19&type=chunk) [Efficiency Ratios](index=7&type=section&id=5.4%20Efficiency%20Ratios) The efficiency ratio slightly increased quarter-over-quarter but improved year-over-year, with the core efficiency ratio remaining flat quarter-over-quarter Efficiency Ratios | Metric | 2Q 2025 | 1Q 2025 | 2Q 2024 | | :-------------------- | :------ | :------ | :------ | | Efficiency Ratio (%) | 65.1% | 64.9% | 67.1% | | Core Efficiency Ratio (%) | 62.8% | 62.8% | 66.9% | [Yields and Cost of Deposits](index=7&type=section&id=5.5%20Yields%20and%20Cost%20of%20Deposits) The average yield on interest-earning assets decreased, while the Commercial Bank Loan Yield remained flat quarter-over-quarter, and the total cost of deposits decreased Yields and Cost of Deposits | Metric | 2Q 2025 | Change from 1Q 2025 | Change from 2Q 2024 | | :-------------------------------- | :------ | :------------------ | :------------------ | | Average Yield on Interest Earning Assets (%) | 8.19% | -5 bps | -63 bps | | Commercial Bank Loan Yield (%) | 7.14% | Flat | +10 bps | | Total Cost of Deposits (%) | 2.36% | -6 bps | -25 bps | | Total Cost of Interest-Bearing Deposits (%) | 3.29% | -8 bps | -57 bps | - The decrease in average yield on interest-earning assets was due to minor changes in portfolio mix and the acquisition of commercial loans from IFH diluting the positive impact from OpenSky™[21](index=21&type=chunk) - The decrease in the total cost of deposits was due to lower rates on most products and a mix shift, while the decrease in interest-bearing deposits was primarily due to changes in product mix[21](index=21&type=chunk) [Performance Ratios](index=8&type=section&id=5.6%20Performance%20Ratios) Return on average assets (ROA), return on average equity (ROE), and return on average tangible common equity (ROTCE) all decreased quarter-over-quarter but improved year-over-year Performance Ratios | Metric | 2Q 2025 (GAAP) | 2Q 2025 (Core) | 1Q 2025 (GAAP) | 1Q 2025 (Core) | 2Q 2024 (GAAP) | 2Q 2024 (Core) | | :-------------------- | :------------- | :------------- | :------------- | :------------- | :------------- | :------------- | | ROA (%) | 1.60% | 1.73% | 1.75% | 1.87% | 1.40% | 1.41% | | ROE (%) | 14.17% | 15.33% | 15.56% | 16.64% | 12.53% | 12.62% | | ROTCE (%) | 16.10% | 17.39% | 17.57% | 18.77% | 12.53% | 12.62% | [Book Value and Tangible Book Value](index=8&type=section&id=5.7%20Book%20Value%20and%20Tangible%20Book%20Value) Both book value per common share and tangible book value per share increased quarter-over-quarter and year-over-year, with tangible book value impacted by IFH acquisition adjustments Book Value and Tangible Book Value (per share) | Metric | June 30, 2025 | Change from Mar 31, 2025 | Change from June 30, 2024 | | :-------------------------- | :------------ | :----------------------- | :------------------------ | | Book Value per Common Share | $22.92 | +$0.73 | +$3.66 | | Tangible Book Value per Share | $20.64 | +$0.83 (+4.2%) | +$1.39 (+7.2%) | - Tangible book value was impacted by the purchase accounting adjustments required as part of the IFH acquisition[22](index=22&type=chunk) [Segment Performance Review](index=9&type=section&id=Segment%20Performance%20Review) [Commercial Bank](index=9&type=section&id=6.1%20Commercial%20Bank) The Commercial Bank saw loan growth and increased net interest income, with improving asset quality metrics quarter-over-quarter Commercial Bank Performance | Metric | June 30, 2025 | Change from Mar 31, 2025 | | :-------------------------------- | :------------ | :----------------------- | | Portfolio Loans (in millions) | +$52.0 | N/A | | Interest Income (in millions) | $49.9 | +$1.8 | | Interest Expense (in millions) | $16.9 | +$0.2 | | Nonperforming Assets (% of total assets) | 1.11% | -17 bps | | Total Nonaccrual Loans (in millions) | $37.5 | -$5.4 | | Special Mention Loans (% of total portfolio loans) | $54.2 (2.0%) | -$8.8 (-0.4%) | | Substandard Loans (% of total portfolio loans) | $44.6 (1.7%) | -$1.1 (flat %) | - Commercial Bank loan growth was driven by **$10.9 million from CRE owner and non-owner occupied**, **$17.1 million from residential real estate**, and **$9.3 million from lender finance loans**[24](index=24&type=chunk) [OpenSky™ Accounts](index=9&type=section&id=6.2%20OpenSky%E2%84%A2%20Accounts) OpenSky™ saw an increase in credit card accounts and loan balances, with stable net interest income and increased fee revenue, despite higher provision for credit losses due to portfolio growth OpenSky™ Accounts Performance | Metric | June 30, 2025 | Change from Mar 31, 2025 | Change from June 30, 2024 | | :-------------------------------- | :------------ | :----------------------- | :------------------------ | | Credit Card Accounts (in thousands) | 585.4 | +21.7 (+3.8%) | +47.6 (+8.9%) | | Secured & Unsecured Loan Balances (net of reserves, in millions) | $131.0 | +$12.3 (+10.4%) | N/A | | Gross Unsecured Loan Balances (in millions) | $46.4 | +$7.4 (+18.9%) | +$12.8 | | Gross Secured Loan Balances (in millions) | $86.4 | +$5.1 (+6.3%) | -$4.6 (-5.0%) | | Deposit Balances (in millions) | $168.9 | Flat | N/A | | Net Interest Income (in millions) | $14.5 | In-line | N/A | | Total Fee Revenue (in millions) | $4.3 | +$0.6 | N/A | | Provision for Credit Losses (in millions) | $2.9 | +$1.1 | N/A | - The increase in OpenSky's provision for credit losses was mainly due to growth in both the secured and unsecured portfolios[31](index=31&type=chunk) [Capital Bank Home Loans (CBHL)](index=10&type=section&id=6.3%20Capital%20Bank%20Home%20Loans%20(CBHL)) CBHL saw an increase in loan originations held for sale, though the gain on sale as a percentage of loans sold slightly decreased quarter-over-quarter Capital Bank Home Loans (CBHL) Metrics | Metric | 2Q 2025 | 1Q 2025 | | :-------------------------- | :------ | :------ | | Originations of Loans Held for Sale (in millions) | $80.3 | $65.8 | | Mortgage Loans Sold (in millions) | $59.7 | $54.1 | | Gain on Sale of Loans (in millions) | $1.6 | $1.7 | | Gain on Sale as % of Loans Sold (%) | 2.68% | 3.07% | [Windsor Advantage™](index=10&type=section&id=6.4%20Windsor%20Advantage%E2%84%A2) Windsor Advantage™ reported a slight increase in gross government loan servicing revenue and continued growth in its total servicing portfolio Windsor Advantage™ Metrics | Metric | 2Q 2025 | 1Q 2025 | | :-------------------------------- | :------ | :------ | | Gross Government Loan Servicing Revenue (in millions) | $4.7 | $4.6 | | Capital Bank Related Servicing Fees (in millions) | $1.1 | $1.0 | | Total Servicing Portfolio (period end, in billions) | $2.9 | $2.7 | [Comparative Financial Highlights](index=11&type=section&id=Comparative%20Financial%20Highlights) [Quarterly Financial Performance](index=11&type=section&id=7.1%20Quarterly%20Financial%20Performance) This section provides a comparative overview of quarterly earnings, common share data, and return ratios for Q2 2025, Q1 2025, and Q2 2024 Quarterly Financial Performance (in thousands, except per share data) | (in thousands, except per share data) | June 30, 2025 | March 31, 2025 | June 30, 2024 | 2Q25 vs 1Q25 ($ Change) | 2Q25 vs 1Q25 (% Change) | 2Q25 vs 2Q24 ($ Change) | 2Q25 vs 2Q24 (% Change) | | :------------------------------------ | :------------ | :------------- | :------------ | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Interest income | $64,586 | $62,760 | $50,615 | $1,826 | 2.9% | $13,971 | 27.6% | | Interest expense | $16,940 | $16,713 | $13,558 | $227 | 1.4% | $3,382 | 24.9% | | Net interest income | $47,646 | $46,047 | $37,057 | $1,599 | 3.5% | $10,589 | 28.6% | | Provision for credit losses | $4,081 | $2,246 | $3,417 | $1,835 | 81.7% | $664 | 19.4% | | Noninterest income | $13,106 | $12,549 | $6,890 | $557 | 4.4% | $6,216 | 90.2% | | Noninterest expense | $39,572 | $38,053 | $29,493 | $1,519 | 4.0% | $10,079 | 34.2% | | Net income | $13,136 | $13,932 | $8,205 | $(796) | (5.7)% | $4,931 | 60.1% | | Diluted Earnings per share | $0.78 | $0.82 | $0.59 | $(0.04) | (4.9)% | $0.19 | 32.2% | | Return on average assets (annualized, %) | 1.60% | 1.75% | 1.40% | N/A | N/A | N/A | N/A | | Return on average equity (annualized, %) | 14.17% | 15.56% | 12.53% | N/A | N/A | N/A | N/A | [Six Months Ended Financial Performance](index=12&type=section&id=7.2%20Six%20Months%20Ended%20Financial%20Performance) This section presents the financial performance for the six months ended June 30, 2025, compared to the same period in 2024, showing significant year-over-year growth Six Months Ended Financial Performance (in thousands, except per share data) | (in thousands, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | :------- | | Interest income | $127,346 | $98,984 | $28,362 | 28.7% | | Interest expense | $33,653 | $26,919 | $6,734 | 25.0% | | Net interest income | $93,693 | $72,065 | $21,628 | 30.0% | | Provision for credit losses | $6,327 | $6,144 | $183 | 3.0% | | Noninterest income | $25,655 | $12,862 | $12,793 | 99.5% | | Noninterest expense | $77,625 | $58,980 | $18,645 | 31.6% | | Net income | $27,068 | $14,767 | $12,301 | 83.3% | | Diluted Earnings per share | $1.60 | $1.06 | $0.54 | 50.9% | | Return on average assets (annualized, %) | 1.68% | 1.28% | N/A | N/A | | Return on average equity (annualized, %) | 14.85% | 11.37% | N/A | N/A | [Balance Sheet Highlights](index=13&type=section&id=7.3%20Balance%20Sheet%20Highlights) This section provides a comparative view of key balance sheet items across several quarters, showing significant growth in total assets, portfolio loans, and deposits year-over-year Balance Sheet Highlights (in thousands, except per share data) | (in thousands, except per share data) | June 30, 2025 | June 30, 2024 | % Change | March 31, 2025 | December 31, 2024 | September 30, 2024 | | :------------------------------------ | :------------ | :------------ | :------- | :------------- | :---------------- | :----------------- | | Assets | $3,388,662 | $2,438,583 | 39.0% | $3,349,805 | $3,206,911 | $2,560,788 | | Portfolio loans receivable | $2,739,808 | $2,021,588 | 35.5% | $2,678,406 | $2,630,163 | $2,107,522 | | Deposits | $2,940,738 | $2,100,428 | 40.0% | $2,891,333 | $2,761,939 | $2,186,224 | | Total stockholders' equity | $380,035 | $267,854 | 41.9% | $369,577 | $355,139 | $280,111 | | Tangible common equity | $342,262 | $267,854 | 27.8% | $329,936 | $318,196 | $280,111 | | Book value per share | $22.92 | $19.26 | 19.0% | $22.19 | $21.31 | $20.13 | | Tangible book value per share | $20.64 | $19.26 | 7.2% | $19.81 | $19.10 | $20.13 | | Dividends per share | $0.10 | $0.08 | 25.0% | $0.10 | $0.10 | $0.10 | [Consolidated Financial Statements](index=14&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Income](index=14&type=section&id=8.1%20Consolidated%20Statements%20of%20Income) This table presents unaudited consolidated statements of income for various periods, detailing interest income/expense, noninterest items, and net income Consolidated Statements of Income (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | :----------------------------- | :----------------------------- | | Total interest income | $64,586 | $62,760 | $61,707 | $52,610 | $50,615 | $127,346 | $98,984 | | Total interest expense | $16,940 | $16,713 | $17,380 | $14,256 | $13,558 | $33,653 | $26,919 | | Net interest income | $47,646 | $46,047 | $44,327 | $38,354 | $37,057 | $93,693 | $72,065 | | Provision for credit losses | $4,081 | $2,246 | $7,828 | $3,748 | $3,417 | $6,327 | $6,144 | | Total noninterest income | $13,106 | $12,549 | $11,913 | $6,635 | $6,890 | $25,655 | $12,862 | | Total noninterest expenses | $39,572 | $38,053 | $37,514 | $29,725 | $29,493 | $77,625 | $58,980 | | Net income | $13,136 | $13,932 | $7,533 | $8,672 | $8,205 | $27,068 | $14,767 | [Consolidated Balance Sheets](index=15&type=section&id=8.2%20Consolidated%20Balance%20Sheets) This table presents unaudited consolidated balance sheets for various quarterly periods, detailing assets, liabilities, and stockholders' equity, showing the company's financial position Consolidated Balance Sheets (in thousands, except share data) | (in thousands, except share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total assets | $3,388,662 | $3,349,805 | $3,206,911 | $2,560,788 | $2,438,583 | | Total portfolio loans held for investment, net | $2,692,361 | $2,629,952 | $2,581,511 | $2,075,597 | $1,990,756 | | Total deposits | $2,940,738 | $2,891,333 | $2,761,939 | $2,186,224 | $2,100,428 | | Total liabilities | $3,008,627 | $2,980,228 | $2,851,772 | $2,280,677 | $2,170,729 | | Total stockholders' equity | $380,035 | $369,577 | $355,139 | $280,111 | $267,854 | [Average Balances and Interest Rate Analysis](index=16&type=section&id=Average%20Balances%20and%20Interest%20Rate%20Analysis) [Quarterly Average Balances and Rates](index=16&type=section&id=9.1%20Quarterly%20Average%20Balances%20and%20Rates) This section details average outstanding balances, interest income/expense, and average yields/rates for assets and liabilities for quarterly periods Quarterly Average Balances and Rates | | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :------------ | | **Assets** | | | | | Total interest earning assets (Avg. Outstanding Balance, in thousands) | $3,163,421 | $3,087,943 | $2,307,070 | | Total interest earning assets (Interest Income, in thousands) | $64,586 | $62,760 | $50,615 | | Total interest earning assets (Yield, %) | 8.19% | 8.24% | 8.82% | | **Liabilities** | | | | | Total interest bearing liabilities (Avg. Outstanding Balance, in thousands) | $2,070,576 | $2,019,328 | $1,412,581 | | Total interest bearing liabilities (Interest Expense, in thousands) | $16,940 | $16,713 | $13,558 | | Total interest bearing liabilities (Rate, %) | 3.28% | 3.36% | 3.86% | | Net interest spread (%) | 4.91% | 4.88% | 4.96% | | Net interest margin (%) | 6.04% | 6.05% | 6.46% | [Six Months Ended Average Balances and Rates](index=18&type=section&id=9.2%20Six%20Months%20Ended%20Average%20Balances%20and%20Rates) This table provides the average outstanding balances, interest income/expense, and average yields/rates for assets and liabilities for the six months ended June 30, 2025, and June 30, 2024 Six Months Ended Average Balances and Rates | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | **Assets** | | | | Total interest earning assets (Avg. Outstanding Balance, in thousands) | $3,125,891 | $2,280,867 | | Total interest earning assets (Interest Income, in thousands) | $127,346 | $98,984 | | Total interest earning assets (Yield, %) | 8.22% | 8.73% | | **Liabilities** | | | | Total interest-bearing liabilities (Avg. Outstanding Balance, in thousands) | $2,045,094 | $1,395,989 | | Total interest-bearing liabilities (Interest Expense, in thousands) | $33,653 | $26,919 | | Total interest-bearing liabilities (Rate, %) | 3.32% | 3.88% | | Net interest spread (%) | 4.90% | 4.85% | | Net interest margin (%) | 6.04% | 6.35% | [Segment Financial Performance Tables](index=19&type=section&id=Segment%20Financial%20Performance%20Tables) [Segment Overview and Restructuring](index=19&type=section&id=10.1%20Segment%20Overview%20and%20Restructuring) The company's reportable segments include Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans, with Corporate activities now in Commercial Bank - The company's reportable segments are Commercial Banking, OpenSky™ (credit card division), Windsor Advantage™, and Capital Bank Home Loans (mortgage loan division)[44](index=44&type=chunk) - The previously disclosed Corporate reportable segment has been restructured, with its activities now reflected within the Commercial Bank, ensuring appropriate comparability for financial disclosures[44](index=44&type=chunk) [Quarterly Segment Performance](index=19&type=section&id=10.2%20Quarterly%20Segment%20Performance) These tables present the financial performance for each reportable segment for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024 Quarterly Segment Performance - 2Q25 (in thousands) | (in thousands) | Commercial Bank (2Q25) | OpenSky™ (2Q25) | Windsor Advantage™ (2Q25) | CBHL (2Q25) | Consolidated (2Q25) | | :------------------------------------ | :--------------------- | :-------------- | :------------------------ | :---------- | :------------------ | | Interest income | $49,929 | $14,494 | $0 | $163 | $64,586 | | Net interest income | $33,073 | $14,494 | $0 | $79 | $47,646 | | Provision for credit losses | $1,159 | $2,922 | $0 | $0 | $4,081 | | Total noninterest income | $2,546 | $4,323 | $4,696 | $1,541 | $13,106 | | Total noninterest expenses | $20,639 | $13,105 | $3,530 | $2,298 | $39,572 | | Net income (loss) before taxes | $13,821 | $2,790 | $1,166 | $(678) | $17,099 | | Total assets | $3,211,421 | $129,397 | $25,936 | $21,908 | $3,388,662 | Quarterly Segment Performance - 1Q25 (in thousands) | (in thousands) | Commercial Bank (1Q25) | OpenSky™ (1Q25) | Windsor Advantage™ (1Q25) | CBHL (1Q25) | Consolidated (1Q25) | | :------------------------------------ | :--------------------- | :-------------- | :------------------------ | :---------- | :------------------ | | Interest income | $48,164 | $14,444 | $0 | $152 | $62,760 | | Net interest income | $31,515 | $14,444 | $0 | $88 | $46,047 | | Provision for credit losses | $446 | $1,800 | $0 | $0 | $2,246 | | Total noninterest income | $2,474 | $3,733 | $4,606 | $1,736 | $12,549 | | Total noninterest expenses | $18,560 | $13,302 | $3,660 | $2,531 | $38,053 | | Net income (loss) before taxes | $14,983 | $3,075 | $946 | $(707) | $18,297 | | Total assets | $3,192,327 | $119,636 | $23,750 | $14,092 | $3,349,805 | Quarterly Segment Performance - 2Q24 (in thousands) | (in thousands) | Commercial Bank (2Q24) | OpenSky™ (2Q24) | Windsor Advantage™ (2Q24) | CBHL (2Q24) | Consolidated (2Q24) | | :------------------------------------ | :--------------------- | :-------------- | :------------------------ | :---------- | :------------------ | | Interest income | $34,698 | $15,785 | $0 | $132 | $50,615 | | Net interest income | $21,223 | $15,785 | $0 | $49 | $37,057 | | Provision for credit losses | $1,118 | $2,299 | $0 | $0 | $3,417 | | Total noninterest income | $677 | $4,368 | $0 | $1,845 | $6,890 | | Total noninterest expense | $13,218 | $13,775 | $0 | $2,500 | $29,493 | | Net income (loss) before taxes | $7,460 | $4,079 | $0 | $(606) | $10,933 | | Total assets | $2,303,368 | $115,593 | $0 | $19,622 | $2,438,583 | [Six Months Ended Segment Performance](index=22&type=section&id=10.3%20Six%20Months%20Ended%20Segment%20Performance) These tables provide the financial performance for each reportable segment for the six months ended June 30, 2025, and June 30, 2024, offering a half-year comparative view Six Months Ended Segment Performance - 6M25 (in thousands) | (in thousands) | Commercial Bank (6M25) | OpenSky™ (6M25) | Windsor Advantage™ (6M25) | CBHL (6M25) | Consolidated (6M25) | | :------------------------------------ | :--------------------- | :-------------- | :------------------------ | :---------- | :------------------ | | Interest income | $98,093 | $28,938 | $0 | $315 | $127,346 | | Net interest income | $64,588 | $28,938 | $0 | $167 | $93,693 | | Provision for credit losses | $1,605 | $4,722 | $0 | $0 | $6,327 | | Total noninterest income | $5,020 | $8,056 | $9,302 | $3,277 | $25,655 | | Total noninterest expenses | $39,199 | $26,407 | $7,190 | $4,829 | $77,625 | | Net income (loss) before taxes | $28,804 | $5,865 | $2,112 | $(1,385) | $35,396 | | Total assets | $3,211,421 | $129,397 | $25,936 | $21,908 | $3,388,662 | Six Months Ended Segment Performance - 6M24 (in thousands) | (in thousands) | Commercial Bank (6M24) | OpenSky™ (6M24) | Windsor Advantage™ (6M24) | CBHL (6M24) | Consolidated (6M24) | | :------------------------------------ | :--------------------- | :-------------- | :------------------------ | :---------- | :------------------ | | Interest income | $68,063 | $30,706 | $0 | $215 | $98,984 | | Net interest income | $41,268 | $30,706 | $0 | $91 | $72,065 | | Provision for credit losses | $2,286 | $3,858 | $0 | $0 | $6,144 | | Total noninterest income | $1,382 | $8,283 | $0 | $3,197 | $12,862 | | Total noninterest expenses | $27,001 | $27,374 | $0 | $4,605 | $58,980 | | Net income (loss) before taxes | $13,117 | $7,757 | $0 | $(1,317) | $19,557 | | Total assets | $2,303,368 | $115,593 | $0 | $19,622 | $2,438,583 | [Historical Financial Highlights](index=24&type=section&id=Historical%20Financial%20Highlights) [Key Financial and Asset Quality Ratios](index=24&type=section&id=11.1%20Key%20Financial%20and%20Asset%20Quality%20Ratios) This section provides a historical overview of key earnings, balance sheet, asset quality, and capital ratios across several quarters Key Financial and Asset Quality Ratios | (in thousands, except per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net income (in thousands) | $13,136 | $13,932 | $7,533 | $8,672 | $8,205 | | Earnings per common share, diluted (per share) | $0.78 | $0.82 | $0.45 | $0.62 | $0.59 | | Net interest margin (%) | 6.04% | 6.05% | 5.87% | 6.41% | 6.46% | | Return on average assets (%) | 1.60% | 1.75% | 0.96% | 1.42% | 1.40% | | Efficiency ratio (%) | 65.14% | 64.94% | 66.70% | 66.07% | 67.11% | | Total portfolio loans receivable, net deferred fees (in thousands) | $2,739,808 | $2,678,406 | $2,630,163 | $2,107,522 | $2,021,588 | | Total deposits (in thousands) | $2,940,738 | $2,891,333 | $2,761,939 | $2,186,224 | $2,100,428 | | Nonperforming assets to total assets (%) | 1.11% | 1.28% | 0.94% | 0.60% | 0.58% | | Net charge-offs to average portfolio loans (annualized, %) | 0.75% | 0.38% | 0.37% | 0.51% | 0.39% | | Allowance for credit losses to total loans (%) | 1.73% | 1.81% | 1.85% | 1.51% | 1.53% | | Common Equity Tier-1 capital ratio (Holding Company, %) | 13.58% | 13.24% | 13.74% | 14.78% | 15.08% | [Composition of Loans and Deposits](index=25&type=section&id=11.2%20Composition%20of%20Loans%20and%20Deposits) This section details the historical composition of the loan portfolio by type and deposits by interest-bearing status, along with key metrics for Capital Bank Home Loans and OpenSky™ portfolio Composition of Loans and Deposits (in thousands, except accounts and percentages) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | **Composition of Loans:** | | | | | | | Commercial real estate, non owner occupied | $495,341 | $484,399 | $471,329 | $403,487 | $397,080 | | Residential real estate | $710,730 | $693,597 | $688,552 | $623,684 | $601,312 | | Commercial and industrial | $593,279 | $594,331 | $554,550 | $271,811 | $255,686 | | Credit card, net of reserve | $131,029 | $118,709 | $127,766 | $127,098 | $122,217 | | Portfolio loans receivable, net | $2,739,808 | $2,678,406 | $2,630,163 | $2,107,522 | $2,021,588 | | **Composition of Deposits:** | | | | | | | Noninterest-bearing | $836,979 | $812,224 | $810,928 | $718,120 | $684,574 | | Money markets | $960,237 | $912,418 | $816,708 | $686,526 | $672,455 | | Total deposits | $2,940,738 | $2,891,333 | $2,761,939 | $2,186,224 | $2,100,428 | | **Capital Bank Home Loan Metrics:** | | | | | | | Origination of loans held for sale | $80,334 | $65,815 | $89,998 | $74,690 | $82,363 | | Gain on sale as a % of loans sold | 2.68% | 3.07% | 2.45% | 2.44% | 2.61% | | **OpenSky™ Portfolio Metrics:** | | | | | | | Open customer accounts (accounts) | 585,372 | 563,718 | 552,566 | 548,952 | 537,734 | | Secured credit card loans, gross | $86,400 | $81,252 | $87,226 | $89,641 | $90,961 | | Unsecured credit card loans, gross | $46,352 | $38,987 | $42,430 | $39,730 | $33,560 | [Appendix: Non-GAAP Reconciliations](index=26&type=section&id=Appendix%3A%20Non-GAAP%20Reconciliations) [Core Earnings Metrics Reconciliation](index=26&type=section&id=12.1%20Core%20Earnings%20Metrics%20Reconciliation) This section provides a reconciliation of GAAP net income, EPS, ROA, ROE, and efficiency ratios to their respective core (non-GAAP) measures for quarterly and six-month periods Core Earnings Metrics Reconciliation - Quarterly (in thousands, except per share data) | (in thousands, except per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net Income (GAAP) | $13,136 | $13,932 | $7,533 | $8,672 | $8,205 | | Core Net Income | $14,206 | $14,896 | $15,473 | $9,229 | $8,267 | | Earnings per Share - Diluted (GAAP) | $0.78 | $0.82 | $0.45 | $0.62 | $0.59 | | Core Earnings per Share - Diluted | $0.85 | $0.88 | $0.92 | $0.66 | $0.59 | | Return on Average Assets (GAAP, %) | 1.60% | 1.75% | 0.96% | 1.42% | 1.40% | | Core Return on Average Assets (%) | 1.73% | 1.87% | 1.97% | 1.51% | 1.41% | | Efficiency Ratio (GAAP, %) | 65.1% | 64.9% | 66.7% | 66.1% | 67.1% | | Core Efficiency Ratio (%) | 62.8% | 62.8% | 59.3% | 64.9% | 66.9% | Core Earnings Metrics Reconciliation - Six Months Ended (in thousands, except per share data) | (in thousands, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net Income (GAAP) | $27,068 | $14,767 | | Core Net Income | $29,102 | $15,367 | | Earnings per Share - Diluted (GAAP) | $1.60 | $1.06 | | Core Earnings per Share - Diluted | $1.72 | $1.10 | | Return on Average Assets (GAAP, %) | 1.68% | 1.28% | | Core Return on Average Assets (%) | 1.80% | 1.33% | | Efficiency Ratio (GAAP, %) | 65.0% | 69.4% | | Core Efficiency Ratio (%) | 62.8% | 68.5% | [Commercial Bank Net Interest Margin and Loan Yield Reconciliation](index=29&type=section&id=12.2%20Commercial%20Bank%20Net%20Interest%20Margin%20and%20Loan%20Yield%20Reconciliation) This section reconciles the Commercial Bank's net interest margin and portfolio loans receivable yield, separating out non-Commercial Bank components to provide a focused view of its performance Commercial Bank Net Interest Margin and Loan Yield Reconciliation - Quarterly (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Commercial Bank Net Interest Income | $33,073 | $31,515 | $28,812 | $22,676 | $21,223 | | Average Commercial Bank Interest Earning Assets | $3,044,348 | $2,959,665 | $2,869,680 | $2,251,040 | $2,187,269 | | Commercial Bank Net Interest Margin (%) | 4.36% | 4.32% | 3.99% | 4.01% | 3.90% | | Commercial Bank Portfolio Loans Receivable Interest Income | $46,531 | $44,305 | $43,387 | $34,749 | $32,938 | | Total Commercial Bank Average Portfolio Loans Receivable | $2,612,451 | $2,515,387 | $2,471,967 | $1,934,161 | $1,881,342 | | Commercial Bank Portfolio Loans Receivable Yield (%) | 7.14% | 7.14% | 6.98% | 7.15% | 7.04% | Commercial Bank Net Interest Margin and Loan Yield Reconciliation - Six Months Ended (in thousands) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Commercial Bank Net Interest Income | $64,588 | $41,268 | | Average Commercial Bank Interest Earning Assets | $3,008,413 | $2,162,867 | | Commercial Bank Net Interest Margin (%) | 4.33% | 3.84% | | Commercial Bank Portfolio Loans Receivable Interest Income | $90,836 | $64,389 | | Total Commercial Bank Average Portfolio Loans Receivable | $2,564,187 | $1,849,116 | | Commercial Bank Portfolio Loans Receivable Yield (%) | 7.14% | 7.00% | [Pre-tax, Pre-Provision Net Revenue (PPNR) Reconciliation](index=30&type=section&id=12.3%20Pre-tax%2C%20Pre-Provision%20Net%20Revenue%20(PPNR)%20Reconciliation) This section reconciles net income to Pre-tax, Pre-provision Net Revenue (PPNR) and Core PPNR for quarterly and six-month periods Pre-tax, Pre-Provision Net Revenue (PPNR) Reconciliation - Quarterly (in thousands) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Net Income | $13,136 | $13,932 | $7,533 | $8,672 | $8,205 | | Pre-tax, Pre-Provision Net Revenue ("PPNR") | $21,180 | $20,543 | $18,726 | $15,264 | $14,454 | | Core PPNR | $22,578 | $21,809 | $23,961 | $15,784 | $14,537 | Pre-tax, Pre-Provision Net Revenue (PPNR) Reconciliation - Six Months Ended (in thousands) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $27,068 | $14,767 | | Pre-tax, Pre-Provision Net Revenue ("PPNR") | $41,723 | $25,947 | | Core PPNR | $44,387 | $26,742 | [Asset Quality Ratios Reconciliation](index=31&type=section&id=12.4%20Asset%20Quality%20Ratios%20Reconciliation) This section provides reconciliations for various asset quality ratios, including Allowance for Credit Losses (ACL) to Total Portfolio Loans, Nonperforming Assets to Total Assets, and Net Charge-Offs to Average Portfolio Loans for quarterly periods Asset Quality Ratios Reconciliation (in thousands, except percentages) | (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Allowance for Credit Losses | $47,447 | $48,454 | $48,652 | $31,925 | $30,832 | | Total Portfolio Loans | $2,739,808 | $2,678,406 | $2,630,163 | $2,107,522 | $2,021,588 | | Allowance for Credit Losses to Total Portfolio Loans (%) | 1.73% | 1.81% | 1.85% | 1.51% | 1.53% | | Commercial Bank Allowance for Credit Losses to Total Portfolio Loans (%) | 1.56% | 1.67% | 1.70% | 1.24% | 1.26% | | Total Nonperforming Assets | $37,505 | $42,934 | $30,241 | $15,460 | $14,053 | | Nonperforming Assets to Total Assets (%) | 1.11% | 1.28% | 0.94% | 0.60% | 0.58% | | Total Net Charge-Offs | $5,088 | $2,427 | $2,444 | $2,655 | $1,935 | | Net Charge-Offs to Average Portfolio Loans, Annualized (%) | 0.75% | 0.38% | 0.37% | 0.51% | 0.39% | [Tangible Book Value and Return on Average Tangible Common Equity Reconciliation](index=32&type=section&id=12.5%20Tangible%20Book%20Value%20and%20Return%20on%20Average%20Tangible%20Common%20Equity%20Reconciliation) This section reconciles total stockholders' equity to tangible common equity and book value per share to tangible book value per share, and derives Return on Average Tangible Common Equity (ROTCE) and Core ROTCE Tangible Book Value and Return on Average Tangible Common Equity Reconciliation - Quarterly (in thousands, except share and per share data) | (in thousands, except share and per share data) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Total Stockholders' Equity | $380,035 | $369,577 | $355,139 | $280,111 | $267,854 | | Tangible Common Equity | $342,262 | $329,936 | $318,196 | $280,111 | $267,854 | | Tangible Book Value per Share | $20.64 | $19.81 | $19.10 | $20.13 | $19.26 | | Return on Average Tangible Common Equity (%) | 16.10% | 17.57% | 9.33% | 12.59% | 12.53% | | Core Return on Average Tangible Common Equity (%) | 17.39% | 18.77% | 18.91% | 13.40% | 12.62% | Tangible Book Value and Return on Average Tangible Common Equity Reconciliation - Six Months Ended (in thousands) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net Tangible Income | $27,467 | $14,767 | | Net Average Tangible Common Equity | $329,247 | $261,159 | | Return on Average Tangible Common Equity (%) | 16.82% | 11.37% | | Core Net Tangible Income | $29,501 | $15,367 | | Core Return on Average Tangible Common Equity (%) | 18.07% | 11.83% | [Company Information and Disclosures](index=33&type=section&id=Company%20Information%20and%20Disclosures) [About Capital Bancorp, Inc.](index=33&type=section&id=13.1%20About%20Capital%20Bancorp%2C%20Inc.) Capital Bancorp, Inc. is a Maryland-incorporated bank holding company established in 1999, with approximately $3.4 billion in assets as of June 30, 2025 - Capital Bancorp, Inc. is a Maryland-incorporated bank holding company providing financial services since 1999[78](index=78&type=chunk) - The company operates bank branches in Washington, D.C., Baltimore, other Maryland markets, Fort Lauderdale, Florida, Chicago, Illinois, and Raleigh, North Carolina[78](index=78&type=chunk) Company Overview | Metric | Value | | :-------------------- | :------------ | | Total Assets (June 30, 2025, in billions) | ~$3.4 | | NASDAQ Ticker | CBNK | [Forward-Looking Statements](index=33&type=section&id=13.2%20Forward-Looking%20Statements) This section contains cautionary statements regarding forward-looking information, emphasizing that actual results may differ materially due to various factors, and the company disclaims any obligation to update these statements - Forward-looking statements reflect current views on future events and financial performance, but actual results may differ materially due to various factors[79](index=79&type=chunk) - Key factors that could cause actual results to differ include the strength of the U.S. economy, geopolitical concerns, uncertainty in U.S. fiscal and monetary policy (including interest rates), inflation/deflation, market volatility, competitive pressures, changes in financial services policies and regulations, cybersecurity threats, climate change, and the integration impact of acquisitions like IFH[80](index=80&type=chunk) - 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, except as required by law[81](index=81&type=chunk)

Core Insights - Capital Bancorp, Inc. reported a net income of $13.1 million for Q2 2025, a decrease from $13.9 million in Q1 2025 but an increase from $8.2 million in Q2 2024 [3][10] - Core net income for Q2 2025 was $14.2 million, down from $14.9 million in Q1 2025 [3][10] - The company declared a cash dividend of $0.12 per share, marking a 20% increase from the previous quarter [4] Financial Performance - Net interest income increased by $1.6 million, or 3.5%, from Q1 2025, and by $10.6 million, or 28.6%, year-over-year [10][29] - Total assets reached $3.4 billion, reflecting a growth of $38.9 million, or 4.7% (annualized), from Q1 2025 [14] - Gross loans grew by $61.4 million, or 9.2% (annualized), during Q2 2025, with a year-over-year increase of $718.2 million [6][16] Loan and Deposit Growth - Total deposits increased by $49.4 million, or 6.9% (annualized), from Q1 2025, and by $840.3 million, or 40.0%, year-over-year [16][17] - Customer deposits grew by $87.1 million, or 13.5% (annualized), from Q1 2025, and by $725.3 million, or 37.3%, year-over-year [6][17] Credit Quality and Metrics - The allowance for credit losses (ACL) coverage ratio was 1.73% at June 30, 2025, down 8 bps from March 31, 2025 [19] - Nonperforming assets decreased to 1.11% of total assets at June 30, 2025, compared to 1.28% at March 31, 2025 [20][30] Efficiency and Return Ratios - Return on average assets (ROA) was 1.60% for Q2 2025, down from 1.75% in Q1 2025 [25][41] - Core return on average equity (ROE) was 15.33% for Q2 2025, compared to 16.64% for Q1 2025 [41] Capital and Shareholder Returns - The company repurchased 93,170 shares at an average price of $26.66 during Q2 2025, with $11.9 million remaining under the stock repurchase plan [21] - Book value per common share increased to $22.92 at June 30, 2025, up $0.73 from Q1 2025 [26]

Group 1 - Capital Bancorp (NASDAQ: CBNK) is the holding company for Capital Bank, which operates in the Baltimore, Maryland, and Washington DC areas [1] - The bank expanded its operations last year by acquiring Integrated Financial Holdings, a one-branch bank [1] Group 2 - The investment group European Small Cap Ideas focuses on high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

Core Insights - Capital Bank has launched a new digital banking platform powered by Q2, marking a significant step in its digital evolution [1][2] - The platform enhances efficiency and includes advanced digital treasury management capabilities, allowing for scalability into new markets and customer segments [2][3] - The CEO emphasizes that this upgrade aligns technology with the bank's growth strategy, aiming to meet complex business needs while maintaining a personal touch [3][4] Company Overview - Capital Bank is a subsidiary of Capital Bancorp, Inc., with over $3.3 billion in assets as of March 31, 2025 [4] - The bank is a member of the Federal Reserve Bank System and is FDIC-insured [4] - Since its inception in 1999, Capital Bank has focused on combining innovative technology with customized financial solutions [5]

Core Insights - Capital Bancorp is expanding its Commercial Banking operations in Delaware by adding experienced relationship managers, which is a significant step in its Mid-Atlantic growth strategy [1][5] - The new hires include Ritchie Francia, Sarah Ferguson, and John Hassiepen, who bring extensive experience and strong community ties to the bank [2][3] - The expansion aims to enhance Capital Bank's ability to serve businesses in Delaware and surrounding areas, reflecting a commitment to local market expertise [5] Company Overview - As of March 31, 2025, Capital Bancorp reported $3.3 billion in assets and was ranked 9 in American Banker's Top 20 High Performing Banks in 2024 [6] - The bank has a consultative approach and has been serving commercial customers in the DC Metro Region for over 25 years [6] - Capital Bank is a member of the Federal Reserve Bank system and is committed to helping customers achieve their financial goals while maintaining fiduciary duties to shareholders [6]

PART I - CONSOLIDATED FINANCIAL INFORMATION [Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents the unaudited consolidated balance sheets, income statements, and cash flow statements for Q1 2025 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The company's assets, liabilities, and equity are detailed as of March 31, 2025, compared to year-end 2024 Consolidated Balance Sheet Highlights (Unaudited) | (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$3,349,805** | **$3,206,911** | | Total portfolio loans held for investment, net | $2,629,952 | $2,581,511 | | Total cash and cash equivalents | $293,987 | $205,332 | | Goodwill | $24,085 | $21,126 | | **Total Liabilities** | **$2,980,228** | **$2,851,772** | | Total deposits | $2,891,333 | $2,761,939 | | **Total Stockholders' Equity** | **$369,577** | **$355,139** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Reports the company's revenues, expenses, and net income for the three months ended March 31, 2025 Consolidated Income Statement Highlights (Unaudited) | (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Interest Income | $46,047 | $35,008 | | Provision for Credit Losses | $2,246 | $2,727 | | Noninterest Income | $12,549 | $5,972 | | Noninterest Expenses | $38,053 | $29,487 | | **Net Income** | **$13,932** | **$6,562** | | **Diluted Earnings Per Share** | **$0.82** | **$0.47** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities for Q1 2025 Consolidated Cash Flow Summary (Unaudited) | (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $22,581 | $(3,412) | | Net cash used in investing activities | $(61,079) | $(57,640) | | Net cash provided by financing activities | $127,153 | $92,292 | | **Net increase in cash and cash equivalents** | **$88,655** | **$31,240** | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Provides supplementary details on accounting policies and specific financial statement items - The Company operates through **four reporting segments**: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans[15](index=15&type=chunk)[17](index=17&type=chunk) - Goodwill increased by **$3.0 million** in Q1 2025 due to a measurement period adjustment from the IFH acquisition[28](index=28&type=chunk)[30](index=30&type=chunk) - Total nonperforming loans increased to **$42.9 million** as of March 31, 2025, from $30.2 million at December 31, 2024[47](index=47&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.10 per share** in April 2025[109](index=109&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2025 performance, highlighting significant net income growth driven by the IFH acquisition [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Details the key drivers of the company's operating results, comparing Q1 2025 performance to Q1 2024 Q1 2025 vs. Q1 2024 Performance | (in thousands) | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $46,047 | $35,008 | 31.5% | | Noninterest Income | $12,549 | $5,972 | 110.1% | | Noninterest Expenses | $38,053 | $29,487 | 29.1% | | **Net Income** | **$13,932** | **$6,562** | **112.3%** | - The **110.1% increase in noninterest income** was primarily due to contributions from the businesses acquired from IFH[132](index=132&type=chunk)[149](index=149&type=chunk) - The provision for credit losses decreased to **$2.2 million**, with net charge-offs of $2.4 million primarily from the credit card portfolio[131](index=131&type=chunk)[147](index=147&type=chunk) - Noninterest expense increased by **$8.6 million**, driven by higher salaries and merger-related costs from the IFH acquisition[133](index=133&type=chunk)[153](index=153&type=chunk) [Financial Condition](index=51&type=section&id=Financial%20Condition) Analyzes the changes in the company's balance sheet, including loans, deposits, and liquidity position Balance Sheet Changes | (in thousands) | March 31, 2025 | December 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $3,349,805 | $3,206,911 | 4.5% | | Portfolio loans receivable, net | $2,678,406 | $2,630,163 | 1.8% | | Deposits | $2,891,333 | $2,761,939 | 4.7% | | Total Stockholders' Equity | $369,577 | $355,139 | 4.1% | - The Allowance for Credit Losses (ACL) as a percentage of total portfolio loans was **1.81%** at March 31, 2025[148](index=148&type=chunk)[192](index=192&type=chunk) - The company had significant available liquidity, including **$509.7 million** from the FHLB and **$115.7 million** from the Federal Reserve[215](index=215&type=chunk) [Capital Resources](index=63&type=section&id=Capital%20Resources) Outlines the company's capital position, regulatory capital ratios, and compliance status - As of March 31, 2025, both the Company and the Bank were in compliance with all regulatory capital requirements and classified as **'well capitalized'**[223](index=223&type=chunk) Regulatory Capital Ratios (The Company) | Ratio | March 31, 2025 | Minimum Adequacy | To Be Well Capitalized | | :--- | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.68% | 4.00% | 5.00% | | Common equity tier 1 capital ratio | 13.24% | 4.50% | 6.50% | | Total capital ratio | 14.97% | 8.00% | 10.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's primary market risk from interest rate volatility and its management through ALCO - The company's primary market risk is **interest rate volatility**, which is managed by the Asset/Liability Management Committee (ALCO)[247](index=247&type=chunk)[250](index=250&type=chunk) Earnings at Risk (EAR) - Impact on Net Interest Income | Interest Rate Shock | % Change in NII (12-Month Horizon) | | :--- | :--- | | +300 bps | +10.6% | | +200 bps | +7.1% | | +100 bps | +3.6% | | -100 bps | -3.2% | | -200 bps | -6.1% | Economic Value of Equity (EVE) Analysis | Interest Rate Shock | % Change in EVE | | :--- | :--- | | +300 bps | +4.3% | | +200 bps | +2.9% | | +100 bps | +1.9% | | -100 bps | -3.0% | | -200 bps | -7.3% | [Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and notes enhancements to internal controls - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were **effective**[260](index=260&type=chunk) - During Q1 2025, the Company **enhanced internal controls** over business combinations, specifically for Day 1 accounting[261](index=261&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings expected to have a significant adverse financial impact - The Company is not presently a party to any legal proceedings which are believed to have a **material adverse impact** on its operations or financial condition[262](index=262&type=chunk) [Risk Factors](index=75&type=section&id=Item%201A.%20Risk%20Factors) Confirms no material changes to risk factors disclosed in the 2024 Annual Report on Form 10-K - There are **no material changes** to the risk factors as previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[263](index=263&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the new $15 million stock repurchase program and Q1 2025 repurchase activity - On February 21, 2025, the Company announced a new stock repurchase program authorizing up to **$15 million** of its Common Stock[265](index=265&type=chunk) Share Repurchase Activity (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Maximum Value Remaining ($) | | :--- | :--- | :--- | :--- | | Jan 2025 | 0 | N/A | $15,000,000 | | Feb 2025 | 0 | N/A | $15,000,000 | | Mar 2025 | 22,185 | $27.85 | $14,382,077 | [Other Information](index=77&type=section&id=Item%205.%20Other%20Information) Reports no adoption or termination of Rule 10b5-1 trading plans by officers or directors in Q1 2025 - **No officer or director** adopted or terminated any Rule 10b5-1 trading plan during the quarter ended March 31, 2025[270](index=270&type=chunk)