Capital Bancorp(CBNK) - 2024 Q3 - Quarterly Report

Capital Position and Regulatory Compliance - As of September 30, 2024, the Bank was classified as "well capitalized" and in compliance with all applicable regulatory capital requirements[131]. - The Company monitors its capital position closely to ensure it remains strong following the recent merger[131]. - The Company reported a Tier 1 capital ratio of 14.88% and a total capital ratio of 16.65% as of September 30, 2024[254]. - The common equity tier 1 capital ratio was 14.78% as of September 30, 2024, compared to 15.43% as of December 31, 2023[254]. - The common equity to total assets ratio was 10.94% at September 30, 2024, down from 11.45% at December 31, 2023[246]. Merger and Business Segments - The Company completed its merger with Integrated Financial Holdings, Inc. on October 1, 2024, with IFHI having over $541 million in assets and$450 million in total deposits[133][135]. - The Company operates through four business segments: commercial banking, mortgage lending, credit cards, and corporate activities[127]. Financial Performance - Net income for the three months ended September 30, 2024 was $8.7 million, an 11.4$9.8 million in the same period in 2023[140]. - Net income for the nine months ended September 30, 2024 was $23.4 million, a 12.7$26.8 million in the same period in 2023[143]. - Total revenue for the three months ended September 30, 2024, was $44,989,000, compared to$43,136,000 for the same period in 2023, reflecting a growth of 4.3%[269]. - The efficiency ratio for the three months ended September 30, 2024, was 66.07%, slightly higher than 65.02% in the previous year[269]. Income and Expenses - Net interest income increased by $1.5 million, or 4.2$38.4 million, primarily due to increased average balances of $205.8 million in portfolio loans[140]. - Noninterest income for the three months ended September 30, 2024 was$6.6 million, a 4.9% increase from $6.3 million in the prior year[141]. - Noninterest expenses increased to$29.7 million for the three months ended September 30, 2024, compared to $28.0 million in the same period in 2023[142]. - Salaries and employee benefits increased by$0.9 million, or 7.5%, for the three months ended September 30, 2024, compared to the same period in 2023[171]. Loan and Credit Quality - Provision for credit losses for the three months ended September 30, 2024 was $3.7 million, an increase of$1.5 million from the same period in 2023[140]. - The allowance for credit losses (ACL) was $31.9 million as of September 30, 2024, up from$28.6 million at December 31, 2023[220]. - Net charge-offs for the three months ended September 30, 2024, were $2.7 million, or 0.51$1.8 million, or 0.38% for the same period in 2023[162]. - Nonperforming assets are monitored closely, with loans placed on nonaccrual status generally when they become 90 days past due[204]. Asset and Deposit Growth - Total assets reached $2,363,928 thousand for the three months ended September 30, 2024, up from$2,183,521 thousand in the same period in 2023[154]. - Total liabilities increased by $309.4 million from December 31, 2023, primarily due to a$290.2 million growth in the deposit portfolio[221]. - Total interest-bearing deposits increased to $1,468.1 million as of September 30, 2024, up from$1,278.6 million at December 31, 2023, representing a growth of 14.8%[223]. - Average total deposits for the nine months ended September 30, 2024, were $2,020.1 million, with an average rate of 2.63$1,864.5 million and 2.13% for the year ended December 31, 2023[225]. Interest Rate Sensitivity and Risk Management - The Earnings at Risk (EAR) analysis indicated a potential decrease in net interest income of 4.6% under a -400 bps interest rate shock scenario as of September 30, 2024[293]. - The Economic Value of Equity (EVE) analysis showed a decrease of 20.0% under a -400 bps interest rate shock scenario, indicating significant sensitivity to interest rate changes[294]. - The company utilizes both static and dynamic simulation models to assess interest rate impacts, indicating a comprehensive risk management approach[289]. - Management has the ability to adjust asset and liability durations to manage interest rate sensitivity, showcasing proactive risk management strategies[292].