Financial Performance - Net income for the three months ended September 30, 2022 was $11.1 million, a decrease of 0.7% compared to $11.2 million for the same period in 2021[184]. - For the nine months ended September 30, 2022, net income was $32.8 million, an increase of approximately $3.0 million, or 10.1%, from $29.8 million for the same period in 2021[185]. - Noninterest income decreased by $5.5 million, or 43.6%, to $7.1 million, primarily due to a reduction in mortgage banking revenue and credit card fees[184]. - Noninterest income for the nine months ended September 30, 2022, was $23.8 million, a decrease of $16.2 million, or 40.5% from the same period in 2021, primarily due to a reduction in mortgage banking revenues[216]. Interest Income and Expenses - Net interest income increased by $4.6 million, or 14.4%, to $36.7 million for the three months ended September 30, 2022, primarily due to an increase in interest earned on portfolio loans[184]. - Net interest income for the nine months ended September 30, 2022 increased by $21.4 million compared to the prior year[185]. - Noninterest expenses for the three months ended September 30, 2022 were $28.1 million, a decrease of 1.9% from $28.6 million in the prior year[184]. - Noninterest expense for the nine months ended September 30, 2022, was $82.4 million, an increase of $808 thousand, or 1.0%, primarily due to a 14.1% increase in salaries and benefits[187]. Loan Loss Provisions - Provision for loan losses increased by 88.0% to $4.2 million for the nine months ended September 30, 2022[185]. - The provision for loan losses increased by $2.0 million, primarily related to the credit card portfolio[187]. - Provision for loan losses for Q3 2022 was $1.3 million, reflecting growth in certain segments of the credit card portfolio[206]. - The allowance for loan losses as a percentage of portfolio loans was 1.58% as of September 30, 2022, down from 1.65% at December 31, 2021[209]. Asset and Liability Management - Total assets as of September 30, 2022, were $2.049 billion, a decrease from $2.085 billion as of September 30, 2021[195]. - Average interest-earning assets decreased by $15.2 million, or 0.8%, to $2.0 billion compared to the same period in 2021, while the average yield on interest-earning assets increased by 100 basis points[196]. - Average interest-bearing liabilities decreased by $85.5 million, or 7.8%, while the average cost of interest-bearing liabilities increased by 13 basis points to 0.66%[196]. - The cumulative gap ratio to total earning assets was 50.28%, indicating a strong asset-liability management position[316]. Capital and Equity - The Bank exceeded all capital requirements and is considered well-capitalized as of September 30, 2022[181]. - Stockholders' equity increased by $16.1 million compared to December 31, 2021, primarily due to a year-to-date net income of $32.8 million for 2022, offset by a $16.5 million unrealized loss in available-for-sale securities[285]. - The average common equity to average assets ratio improved to 10.19% as of September 30, 2022, up from 8.82% at December 31, 2021[286]. - The company was classified as "well capitalized" under regulatory capital requirements as of September 30, 2022, with Tier 1 leverage ratio at 11.31% and total capital ratio at 17.41%[291][294]. Credit Quality and Risk Management - The Company maintains a disciplined lending approach to manage nonperforming assets and ensure sound asset quality[240]. - The total allowance for loan losses is based on historical loan loss rates and current economic conditions[252]. - The Company monitors delinquency levels and has established underwriting guidelines to maintain loan portfolio quality[240]. - The credit card portfolio had an allowance for loan losses of 4.06% as of September 30, 2022[253]. Deposits and Liquidity - Deposits as of September 30, 2022, totaled $1,788,428,000, with a noninterest-bearing demand account balance of $797,660,000[266]. - Approximately $960.2 million or 55.3% of the deposit portfolio was uninsured as of September 30, 2022[271]. - The company’s liquidity resources are deemed sufficient to fund loans and meet cash needs as necessary[283]. - The company expects funds to be available from core deposit base, loan repayments, and investment security cash flows[282]. Interest Rate Risk Management - The company’s exposure to interest rate risk is managed by the Asset/Liability Management Committee, which regularly reviews the sensitivity of assets and liabilities to interest rate changes[312]. - The company does not engage in leveraged derivatives or financial options to reduce interest rate risk, focusing instead on managing its balance sheet[311]. - Earnings at Risk (EAR) analysis showed a potential decrease in net interest income of 5.5% under a -300 bps interest rate shock scenario[321]. - Economic Value of Equity (EVE) analysis indicated an 8.1% decrease under a -300 bps interest rate shock scenario[323].
Capital Bancorp(CBNK) - 2022 Q3 - Quarterly Report