Capital Bancorp(CBNK) - 2025 Q3 - Quarterly Report

Regulatory Compliance and Capital Management - As of September 30, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements and classified as "well capitalized" under prompt corrective action regulations [131]. - The Company intends to monitor and control growth relative to earnings to maintain compliance with regulatory capital standards [131]. - The Tier 1 capital ratio to risk-weighted assets was 13.62% for the Company and 11.69% for the Bank as of September 30, 2025 [250]. - The Company and the Bank were in compliance with all applicable regulatory capital requirements as of September 30, 2025, with the Bank classified as "well capitalized" [248]. Acquisition and Business Operations - The Company completed its acquisition of Integrated Financial Holdings, Inc. on October 1, 2024, which included the merger of West Town Bank & Trust into Capital Bank [129]. - The Company operates four divisions: Commercial Banking, OpenSky, Windsor Advantage, and Capital Bank Home Loans, focusing on personalized service and national consumer business lines [129][130]. - OpenSky provides secured and unsecured credit cards to under-banked populations, while Windsor Advantage generates fee revenue through servicing SBA and USDA loans [130]. - The Company serves businesses and not-for-profit associations across multiple states, including Maryland, Florida, Illinois, and North Carolina, through various banking offices [128]. Financial Performance - Net income for the three months ended September 30, 2025, was $15.1 million, a 73.7% increase from $8.7 million in the same period in 2024 [136]. - Net income for the nine months ended September 30, 2025, was $42.1 million, a 79.8% increase from $23.4 million in the same period in 2024 [139]. - Total revenue for the nine months ended September 30, 2025, was $177,818,000, an increase from $129,916,000 in 2024, marking a growth of 37% [264]. - Core net income for the nine months ended September 30, 2025, was $41,253,000, up from $24,596,000 in 2024, reflecting a growth of 67.5% [264]. Income and Expenses - Net interest income increased by $13.7 million, or 35.6%, to $52.0 million compared to the same period in 2024, primarily driven by organic growth and the acquisition of IFH [136]. - Noninterest income for the three months ended September 30, 2025, was $11.1 million, an increase of $4.4 million, or 66.8%, from the same period in 2024 [137]. - Noninterest expenses for the three months ended September 30, 2025, were $38.4 million, an increase of $8.7 million, or 29.0%, from the same period in 2024 [138]. - Noninterest expense for the nine months ended September 30, 2025, was $116.0 million, an increase of 30.7% from $88.7 million in the same period in 2024 [170]. Asset Quality and Credit Losses - The allowance for credit losses (ACL) as a percent of portfolio loans was 1.88% at September 30, 2025, compared to 1.85% at December 31, 2024 [160]. - Nonperforming assets increased to $52.2 million, up $22.0 million from December 31, 2024, primarily due to two loan relationships acquired from the IFH transactions [208]. - The allowance for credit losses (ACL) is based on risk classifications, historical loss rates, and current economic conditions, reflecting management's estimate of expected credit losses [211]. - Total charge-offs for the nine months ended September 30, 2025, amounted to $10.0 million, with a net charge-off rate of 0.49% of average loans [219]. Interest Rate Sensitivity and Management - The bank's asset-sensitive position suggests that rising interest rates could positively impact net interest income, while falling rates would have the opposite effect [280]. - The Earnings at Risk (EAR) analysis indicates that under a static balance sheet, a 100 basis point increase in interest rates could lead to a 3.6% increase in net interest income [285]. - The Economic Value of Equity (EVE) analysis shows that a 100 basis point increase in interest rates could result in a 1.7% increase in economic value of equity [287]. - The bank does not engage in leveraged derivatives or financial options to manage interest rate risk, focusing instead on traditional balance sheet management [278]. Deposits and Liabilities - Total deposits reached $2.912 billion as of September 30, 2025, up from $2.762 billion at December 31, 2024 [226]. - Total liabilities increased by $142.9 million from December 31, 2024, primarily due to a growth in the deposit portfolio of $150.1 million [223]. - Noninterest-bearing demand accounts represented 29.4% of total deposits at both September 30, 2025, and December 31, 2024 [227]. - The average rate on interest-bearing deposits decreased to 3.01% for the nine months ended September 30, 2025, from 3.76% for the year ended December 31, 2024 [227]. Equity and Book Value - Stockholders' equity increased by $39.6 million for the period ended September 30, 2025, largely due to net income of $42.1 million for the nine months ended September 30, 2025 [242]. - The company reported a book value per share of $23.80 at September 30, 2025, an increase of 11.7% from $21.31 at December 31, 2024 [174]. - Tangible book value per share increased to $21.33 as of September 30, 2025, compared to $19.10 in 2024 [272]. - The common equity to total assets ratio was 10.60% at September 30, 2025, down from 11.07% at December 31, 2024 [244].