Capital Bancorp(CBNK) - 2023 Q4 - Annual Report

Financial Performance - Net income for the year ended December 31, 2023, was $35.9 million, a decrease of $5.9 million, or 14.2%, compared to the prior year[177]. - Noninterest income decreased by $4.4 million, or 15.0%, to $25.0 million, primarily due to a decline in credit card fees as the number of open customer accounts fell to 525,314[179]. - The OpenSky Division contributed $29.3 million of income before taxes, a decrease of $2.2 million from the prior year, with average loan balances decreasing by 9.5%[183]. - The Capital Bank Home Loans division reported a net loss before taxes of $0.8 million, an improvement from a net loss of $3.0 million in the prior year, despite a decline in mortgage originations[183]. - The company reported a 16.6% increase in occupancy and equipment expenses, totaling $5.7 million[209]. - Pre-tax, pre-provision net revenue (PPNR) for the year ended December 31, 2023, was $55,734,000, down from $60,865,000 in 2022[304]. Interest Income and Margin - Total interest income for the year ended December 31, 2023, was $183.2 million, an increase from $150.6 million in 2022, reflecting a growth of 21.7%[195]. - The net interest margin decreased by 32 basis points to 6.60%, with the net interest spread declining to 5.25% from 6.46% in the prior year[178]. - The net interest margin for 2023 was 6.60%, down from 6.92% in 2022, indicating a contraction in profitability from interest-earning assets[198]. - The Company’s net interest margin, as adjusted, was 3.96% for the year ended December 31, 2023, compared to 3.93% in 2022[303]. Credit Losses and Charge-offs - The provision for credit losses was $9.6 million, an increase of $3.0 million from the prior year, primarily related to the credit card portfolio[178]. - Net charge-offs for 2023 were $8.5 million, or 0.47% of average portfolio loans, compared to $5.4 million, or 0.34%, in 2022[201]. - Total Net Charge-offs rose to $8,473,000 in 2023 from $5,427,000 in 2022, an increase of 56.5%[306]. - Nonperforming Loans to Total Portfolio Loans increased to 0.84% in 2023 from 0.56% in 2022[306]. Assets and Liabilities - Total assets increased by $102.5 million, or 4.8%, to $2.2 billion, while total liabilities rose by $71.7 million, or 3.8%, to $2.0 billion[181]. - Total assets increased to $2.19 billion in 2023 from $2.08 billion in 2022, reflecting a growth of 5.1%[195]. - Total liabilities increased by $71.7 million from December 31, 2022, primarily due to a $137.9 million growth in the deposit portfolio[257]. Deposits - Deposits reached $1.9 billion, an increase of $137.9 million, or 7.8%, with average deposits rising by $100.4 million, or 5.7%[182]. - The average balance of noninterest-bearing deposits decreased by $127.0 million to $655.0 million in 2023 from $782.0 million in 2022[199]. - Total interest-bearing deposits reached $1.28 billion as of December 31, 2023, up from $1.08 billion in 2022[259]. - Noninterest-bearing deposits decreased to 32.6% of total deposits as of December 31, 2023, down from 38.4% in 2022, with uninsured deposits at approximately $789.4 million[262]. Equity and Capital Ratios - Total stockholders' equity rose by $30.8 million, or 13.8%, to $254.9 million as of December 31, 2023[214]. - Common equity to total assets ratio improved to 11.45% at December 31, 2023, compared to 10.55% in 2022[279]. - The Company was classified as "well capitalized" under regulatory capital requirements as of December 31, 2023[284]. - The Company reported a Tier 1 leverage ratio of 12.14% as of December 31, 2023, exceeding the minimum requirement of 4.00%[287]. Expenses - Noninterest expense increased by $1.7 million, or 1.5%, to $110.8 million, mainly due to a $5.9 million increase in salaries and employee benefits[180]. - Data processing expenses decreased by $3.7 million, or 12.7%, to $25.7 million due to contract renegotiations[209]. - Outside service provider expenses decreased by $1.4 million, or 42.1%, reflecting lower fees related to card services[209]. Loan Portfolio - Net portfolio loans reached $1.9 billion, reflecting a $174.1 million increase, or 10.1%, from the previous year[214]. - The allowance for credit losses (ACL) as a percentage of portfolio loans was 1.50% at December 31, 2023, compared to 1.53% at the end of 2022[202]. - The company has $95.3 million in secured and partially secured credit card balances as of December 31, 2023, compared to $109.4 million in the previous year[228]. - The company offers a variety of commercial loans, including lines of credit and equipment financing, primarily secured by business assets[227]. Interest Rate Sensitivity - The ratio of cumulative gap to total earning assets was 38.62% as of December 31, 2023, indicating a significant asset-sensitive position[321]. - The Economic Value of Equity analysis showed a decrease of 9.8% under a -400 bps interest rate shock scenario as of December 31, 2023[313]. - The company has established a measurement system for monitoring net interest rate sensitivity and managing exposure to interest rate risks[315].