ROCKVILLE, Md., April 22, 2021 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (NASDAQ: CBNK), the holding company for Capital Bank, N.A, today reported net income of $9.0 million, or $0.65 per diluted share, for the first quarter of 2021. By comparison, net income was $2.9 million, or $0.21 per diluted share, for the first quarter of 2020. Return on average assets was 1.87% for the first quarter of 2021, compared to 0.84% for the same period in 2020. Return on average equity was 22.3% for the first quarter of 2021, compared to 8.6% for the same period in 2020.
“Capital Bancorp started the year with solid first quarter results and is well-positioned to continue our profitable growth in 2021,” said Steven Schwartz, Chairman of the Board of the Company. “Investments in technology and personnel continue to drive results and support the Bank’s differentiated and diversified business model that has demonstrated resiliency in a variety of economic environments.”
“Strong performance by all of our business lines delivered another quarter of exceptional revenue and earnings,” said Ed Barry, CEO of the Company. “We continue to navigate through the COVID-19 pandemic and are building substantial long-term momentum across all of our lines of business. We are optimistic about the potential of our investments in technology and infrastructure to support continued profitable growth in a post COVID-19, fintech-enabled world.”
First Quarter 2021 Highlights
Capital Bancorp, Inc.
- Solid Earnings - The Commercial Bank, Capital Bank Home Loans and OpenSky® all continued to perform well. In the first quarter of 2021, net income of $9.0 million more than tripled from $2.9 million in the first quarter of 2020 as the economy continued to recover from COVID-19. Earnings were $0.65 per diluted share for the three months ended March 31, 2021 compared to $0.21 per share for the same period last year. Book value per common share grew 23.2 percent to $12.14 at March 31, 2021 compared to $9.85 per share at March 31, 2020.
- Robust Performance Ratios - Return on average assets (“ROAA”) and return on average equity (“ROAE”) were 1.87% and 22.30%, respectively, for the three months ended March 31, 2021 compared to 0.84% and 8.59%, respectively, for the three months ended March 31, 2020.
- Stable Net Interest Margin - The net interest margin was 5.15% for the three months ended March 31, 2021, which is in line with the 5.16% net interest margin for the same three month period last year.
- Strong Balance Sheet - As of March 31, 2021, the Company reported a common equity tier 1 capital ratio of 13.81% and an allowance for loan and lease losses (“ALLL”) to total loans ratio of 1.49%, or 1.79% excluding Small Business Administration Payroll Protection Program (“SBA-PPP”) loans.
- Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $15.4 million, or 5.1 percent annualized, for the quarter ended March 31, 2021 to $1.23 billion compared to $1.21 billion at December 31, 2020. The quarter over quarter growth was mainly due to strong growth in commercial real estate loans which increased by $40.8 million, or 10.4 percent, despite several large loan payoffs.
- Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased by $163.4 million, or 26.8 percent, during the quarter ended March 31, 2021, due to increases in OpenSky® and SBA-PPP loan-related deposits. At March 31, 2021, noninterest bearing deposits represented 41.4% of total deposits compared to 36.8% at December 31, 2020 and 27.9% at March 31, 2020. Overall, the cost of interest bearing liabilities was reduced 14 bps, from 0.95% for the quarter ended December 31, 2020 to 0.81% for the quarter ended March 31, 2021. This reduction was primarily due to the Bank’s ongoing strategic initiative to improve its funding mix and to reduce overall rates paid.
- Proactive Management Improves Credit Metrics - We are gaining more clarity into our customers’ ability to rebound from the impact of COVID-19 and as the recovery begins to take hold, our customers are experiencing increased stability in their financial condition. As a result of the improving economic environment, provisions for loan losses declined from $1.9 million for the three months ended March 31, 2020 to $503 thousand in the first quarter of 2021. Non-performing assets (“NPAs”) decreased to 0.58% of total assets in the first quarter of 2021 compared to 0.61% in the same three month period last year.
- Stable Core Margin - Net interest margin, excluding OpenSky® and SBA-PPP loans was 3.70% for the three months ended March 31, 2021 compared to 3.80% for the three months ended December 31, 2020.
- SBA-PPP Loans - SBA-PPP loans, net of $6.4 million in fees, totaled $265.7 million at March 31, 2021 which was comprised of $146.1 million from the 2020 vintage and $119.6 million originated thus far this year. Through March 31, 2021, through the SBA, we have obtained forgiveness for $91.6 million of SBA-PPP loans.
- COVID-19 Related Deferrals - At March 31, 2021, 25 loans with an outstanding balance of $25.4 million remained in deferred status, compared to 43 loans, with an outstanding balance of $30.5 million on December 31, 2020. The majority of deferred loans are in the Accommodation and Food Services sector and are believed to be well-secured by real estate.
|Loan Modifications (1)|
|(dollars in millions)|
|March 31, 2021||December 31, 2020||September 30, 2020||June 30, 2020|
|Deferred Loans||Deferred Loans||Deferred Loans||Deferred Loans|
|Sector||Total Loans Outstanding||Balance||# of Loans Deferred||Balance||# of Loans Deferred||Balance||# of Loans Deferred||Balance||# of Loans Deferred|
|Accommodation & Food Services||$||112.0||$||16.1||15||$||14.7||16||$||11.2||14||$||42.6||36|
|Real Estate and Rental Leasing||462.7||3.2||4||5.5||10||9.3||16||45.6||67|
|Other Services Including Private Households||282.7||—||—||1.1||3||5.6||11||17.3||36|
|Professional, Scientific, and Technical Services||80.7||1.1||2||1.4||3||1.1||2||5.0||11|
|Arts, Entertainment & Recreation||40.5||1.3||1||0.7||2||1.4||2||5.0||9|
|Healthcare & Social Assistance||100.4||—||—||0.9||1||0.9||1||4.7||11|
|All other (1)||197.2||3.7||3||5.9||7||0.5||2||5.9||13|
(1) Excludes modifications and deferrals made for OpenSky® secured card customers.
Capital Bank Home Loans
- Strong Mortgage Performance - Despite a seasonally slower first quarter, Capital Bank Home Loans originated $354 million of mortgage loans and generated mortgage banking revenue of $7.7 million compared to $382 million in originations and $8.7 million in revenue for the previous quarter, and $180 million in originations and $3.0 million in revenue for the same three month period of the previous year.
- Resilient Gain on Sale Margin - The first quarter 2021 gain on sale margin was 3.00%, up from 2.52% for the same quarter last year, as active product management benefited results.
- Growth in OpenSky® Accounts Remains Robust - OpenSky® increased customer accounts 13.0 percent with net growth during the quarter of 74 thousand accounts, driving total accounts to 642 thousand at March 31, 2021.
- Government Stimulus Impacted Results - Government stimulus programs have improved the credit performance of our customer base which resulted in lower outstanding balances, reduced fees and lower delinquencies. As a result of this improvement, OpenSky® loan balances decreased by $18.4 million or 18.1 percent to $83.7 million and late fees were adversely impacted compared to the fourth quarter of 2020. The increase in accounts opened drove 12.1 percent growth in deposit balances to $215.9 million. This most recent customer behavior appears similar in nature to what was observed with the previous issuance of stimulus payments during 2020.
|COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited|
|(amounts in thousands except per share data)||2021||2020||% Change|
|Net interest income||24,444||17,687||38.2||%|
|Provision for loan losses||503||2,409||(79.1||)%|
|Income before income taxes||12,125||4,014||202.1||%|
|Income tax expense||3,143||1,080||191.0||%|
|Pre-tax pre-provision net revenue (“PPNR”) (2)||$||12,628||$||6,423||96.6||%|
|Weighted average common shares - Basic||13,757||13,876||(0.9||)%|
|Weighted average common shares - Diluted||13,899||14,076||(1.3||)%|
|Earnings per share - Basic||$||0.65||$||0.21||208.7||%|
|Earnings per share - Diluted||$||0.65||$||0.21||210.0||%|
|Return on average assets (1)||1.87||%||0.84||%||122.6||%|
|Return on average assets, excluding impact of SBA-PPP loans (1) (2)||1.60||%||0.84||%||90.5||%|
|Return on average equity||22.30||%||8.59||%||159.6||%|
|Quarter Ended||Quarter Ended|
|March 31,||1Q21 vs. 1Q20||December 31,||September 30,||June 30,|
|(in thousands except per share data)||2021||2020||% Change||2020||2020||2020|
|Balance Sheet Highlights|
|Investment securities available for sale||128,023||59,524||115.1||%||99,787||53,992||56,796|
|Mortgage loans held for sale||60,816||73,955||(17.8||)%||107,154||137,717||116,969|
|SBA-PPP loans, net of fees (3)||265,712||—||100.0||%||201,018||233,349||229,646|
|Portfolio loans receivable (3)||1,312,375||1,187,798||10.5||%||1,315,503||1,244,613||1,211,477|
|Allowance for loan losses||23,550||15,513||51.8||%||23,434||22,016||18,680|
|Other borrowed funds||12,062||15,430||(21.8||)%||14,016||17,516||17,392|
|Total stockholders' equity||167,003||136,080||22.7||%||159,311||149,377||142,108|
|Tangible common equity (2)||167,003||136,080||22.7||%||159,311||149,377||142,108|
|Common shares outstanding||13,759||13,817||(0.4||)%||13,754||13,682||13,818|
|Tangible book value per share (2)||$||12.14||$||9.85||23.2||%||$||11.58||$||10.92||$||10.28|
(1) Annualized. (2) Refer to Appendix for reconciliation of non-GAAP measures. (3) Loans are reflected net of deferred fees and costs.
Operating Results - Comparison of Three Months Ended March 31, 2021 and 2020
For the three months ended March 31, 2021, net interest income increased $6.8 million, or 38.2 percent, to $24.4 million from the same period in 2020, primarily due to an increase in interest earning assets and a decrease in rates on interest bearing liabilities. The net interest margin decreased 1 basis point to 5.15% for the three months ended March 31, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA PPP loans, was 3.70% for the first quarter of 2021 compared to 3.96% for the same period in 2020. For the three months ended March 31, 2021, average interest earning assets increased $544.3 million, or 39.5 percent, to $1.9 billion as compared to the same period in 2020, and the average yield on interest earning assets decreased 73 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $156.7 million, or 16.6 percent, while the average cost decreased 92 basis points to 0.81% from 1.73%.
The provision for loan losses of $503 thousand for the three months ended March 31, 2021 was due primarily to a small number of loan charge-offs, which was offset by improving overall credit metrics. Net charge-offs for the first quarter of 2021 were $388 thousand, or 0.12% of average loans on an annualized basis, compared to $197 thousand, or 0.07% of average loans on an annualized basis, for the first quarter of 2020. The $388 thousand in net charge-offs during the quarter, was comprised of $105 thousand in commercial loans and $283 thousand in credit cards.
For the quarter ended March 31, 2021, noninterest income was $14.0 million, an increase of $8.4 million, or 152 percent from $5.5 million in the prior year quarter. The increase was primarily driven by significant growth in mortgage banking revenues of $4.8 million and credit card fees of $3.9 million resulting from the higher number of credit card accounts.
For the three months ended March 31, 2021, OpenSky’s® net growth was 74 thousand secured credit card accounts, increasing the total number of open accounts to 642 thousand. This compares to 43 thousand new originations for the same period last year, which increased total open accounts to 244 thousand. At March 31, 2021 compared to March 31, 2020, credit card loan balances have increased to $83.7 million from $41.9 million, while the related deposit account balances have increased 155 percent to $215.9 million. The growth in open accounts was primarily driven by enhanced marketing and economic conditions that led consumers to recognize the value and convenience of the Bank's secured credit card product.
The efficiency ratio for the three months ended March 31, 2021 improved to 67.1% compared to 73.5% for the three months ended March 31, 2020 on higher levels of revenue and improved operating leverage.
Noninterest expense was $25.8 million for the three months ended March 31, 2021, as compared to $16.8 million for the three months ended March 31, 2020, an increase of $9.0 million, or 53.4 percent. The increase was primarily driven by a $5.2 million, or 126 percent, increase in data processing expenses, a $1.2 million, or 15.6 percent, increase in salaries and benefits, an increase in professional services of $0.9 million or 111 percent, an increase in loan processing fees of $605 thousand, or 135 percent, and an increase in operating expenses of $1.1 million, or 48.0 percent, quarter over quarter. The increase of $5.2 million in data processing expenses was largely attributable to the higher volume of open credit cards, and increased portfolio and mortgage loan processing volumes during the first quarter of 2021. The Company’s organic growth was supported by a 14.7 percent increase in employees to 265 at March 31, 2021, up from 231 at March 31, 2020. Additionally, operating expenses increased $1.1 million due to increases in marketing and advertising, credit expenses, FDIC insurance and miscellaneous expenses.
Total assets at March 31, 2021 were $2.1 billion, an increase of 38.7 percent from March 31, 2020. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.3 billion as of March 31, 2021, an increase of 10.5 percent as compared to $1.2 billion at March 31, 2020.
Total deposits at March 31, 2021 were $1.9 billion, an increase of 43.0 percent as compared to $1.3 billion at March 31, 2020. Noninterest bearing deposits increased by $408.5 million, or 112.4 percent, to $771.9 million at March 31, 2021 compared to the level at March 31, 2020. During the quarter, deposit balances grew in certain fiduciary accounts of title and property management companies, as well as noninterest bearing SBA-PPP loan customers and secured card deposits.
The Company recorded a provision for loan losses of $503 thousand during the three months ended March 31, 2021, which increased the allowance for loan losses to $23.5 million, or 1.49% of total loans (1.79%, excluding SBA-PPP loans, on a non-GAAP basis) at March 31, 2021. This level of reserve provides approximately 267.1% coverage of nonperforming loans at March 31, 2021, compared to the reserve at March 31, 2020 of $15.5 million, or 1.31% of total loans, which represented a coverage ratio of 268%. Nonperforming assets were $12.1 million, or 0.58% of total assets, as of March 31, 2021, up from $9.2 million, or 0.61% of total assets, at March 31, 2020. Of the $12.1 million in total nonperforming assets as of March 31, 2021, nonperforming loans represented $8.8 million and foreclosed real estate totaled $3.3 million. Included in nonperforming loans at March 31, 2021 were troubled debt restructurings of $437 thousand.Stockholders’ equity increased to $167.0 million as of March 31, 2021, compared to $136.1 million at March 31, 2020. This increase was primarily attributable to earnings during the period. As of March 31, 2021, the Bank’s capital ratios continued to exceed the regulatory requirements for a “well-capitalized” institution.
|Consolidated Statements of Income (Unaudited)|
|Three Months Ended March 31,|
|Loans, including fees||$||26,068||$||21,074|
|Investment securities available for sale||478||340|
|Federal funds sold and other||92||330|
|Total interest income||26,638||21,744|
|Total interest expense||2,194||4,057|
|Net interest income||24,444||17,687|
|Provision for loan losses||503||2,409|
|Net interest income after provision for loan losses||23,941||15,278|
|Service charges on deposits||147||149|
|Credit card fees||5,940||2,008|
|Mortgage banking revenue||7,743||2,973|
|Other fees and charges||120||405|
|Total noninterest income||13,951||5,535|
|Salaries and employee benefits||8,568||7,413|
|Occupancy and equipment||1,129||1,178|
|Other real estate expenses, net||4||45|
|Total noninterest expenses||25,767||16,799|
|Income before income taxes||12,125||4,014|
|Income tax expense||3,143||1,080|
|Consolidated Balance Sheets|
|(in thousands except share data)||(unaudited) March 31, 2021||December 31, 2020|
|Cash and due from banks||$||22,678||$||18,456|
|Interest bearing deposits at other financial institutions||294,777||126,081|
|Federal funds sold||567||2,373|
|Total cash and cash equivalents||318,022||146,910|
|Investment securities available for sale||128,023||99,787|
|Loans held for sale||60,816||107,154|
|U.S. Small Business Administration Payroll Protection Program (“SBA-PPP”) loans receivable, net of fees||265,712||201,018|
|Portfolio loans receivable, net of deferred fees and costs and net of allowance for loan losses of $23,550 and $23,434||1,288,825||1,292,068|
|Premises and equipment, net||4,004||4,464|
|Accrued interest receivable||8,104||8,134|
|Deferred income taxes, net||7,430||6,818|
|Other real estate owned||3,293||3,326|
|Federal Home Loan Bank advances||22,000||22,000|
|Other borrowed funds||12,062||14,016|
|Accrued interest payable||1,210||1,134|
|Common stock, $.01 par value; 49,000,000 shares authorized; 13,759,218 and 13,753,529 issued and outstanding||138||138|
|Additional paid-in capital||51,042||50,602|
|Accumulated other comprehensive income||18||1,717|
|Total stockholders’ equity||167,003||159,311|
|Total liabilities and stockholders’ equity||$||2,091,851||$||1,876,593|
The following table shows the average outstanding balance of each principal category of our assets, liabilities and stockholders’ equity, together with the average yields on our assets and the average costs of our liabilities for the periods indicated. Such yields and costs are calculated by dividing the annualized income or expense by the average daily balances of the corresponding assets or liabilities for the same period.
|Three Months Ended March 31,|
|Average Outstanding Balance||Interest Income/ Expense||Average Yield/ Rate(1)||Average Outstanding Balance||Interest Income/ Expense||Average Yield/ Rate(1)|
|(Dollars in thousands)|
|Interest earning assets:|
|Interest bearing deposits||$||205,799||$||49||0.10||%||$||96,622||$||259||1.08||%|
|Federal funds sold||3,871||—||0.01||1,068||4||1.45|
|Investment securities available for sale||106,704||478||1.82||60,396||340||2.26|
|Loans held for sale||72,460||481||2.69||42,105||366||3.49|
|SBA-PPP loans receivable||232,371||2,205||3.85||—||—||—|
|Portfolio loans receivable (2)||1,298,352||23,382||7.30||1,175,090||20,708||7.09|
|Total interest earning assets||1,923,463||26,638||5.62||1,379,199||21,744||6.34|
|Noninterest earning assets||25,803||18,099|
|Liabilities and Stockholders’ Equity|
|Interest bearing liabilities:|
|Interest bearing demand accounts||$||256,958||68||0.11||$||143,875||228||0.64|
|Money market accounts||471,154||530||0.46||446,928||1,687||1.52|
|Total interest bearing liabilities||1,101,746||2,194||0.81||945,022||4,057||1.73|
|Noninterest bearing liabilities:|
|Noninterest bearing liabilities||24,059||19,835|
|Noninterest bearing deposits||660,086||295,060|
|Total liabilities and stockholders’ equity||$||1,949,266||$||1,397,298|
|Net interest spread||4.81||%||4.61||%|
|Net interest income||$||24,444||$||17,687|
|Net interest margin (3)||5.15||%||5.16||%|
(1) Annualized. (2) Includes nonaccrual loans. (3) For the three months ended March 31, 2021 and March 31, 2020, collectively, SBA-PPP loans and credit card loans accounted for 145 and 120 basis points of the reported net interest margin, respectively.
|HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited|
|(Dollars in thousands except per share data)||March 31, 2021||December 31, 2020||September 30, 2020||June 30, 2020||March 31, 2020|
|Earnings per common share, diluted||0.65||0.71||0.61||0.34||0.21|
|Net interest margin||5.15||%||5.57||%||5.01||%||4.72||%||5.16||%|
|Net interest margin, excluding credit cards & SBA-PPP loans (1)||3.70||%||3.80||%||3.84||%||3.96||%||3.96||%|
|Return on average assets (2)||1.87||%||2.08||%||1.89||%||1.19||%||0.84||%|
|Return on average assets, excluding impact of SBA-PPP loans (1)(2)||1.60||%||1.88||%||1.80||%||1.04||%||0.84||%|
|Return on average equity (2)||22.30||%||25.26||%||23.28||%||13.70||%||8.59||%|
|Portfolio loans receivable (3)||$||1,312,375||$||1,315,503||$||1,244,613||$||1,211,477||$||1,187,798|
|Asset Quality Ratios:|
|Nonperforming assets to total assets||0.58||%||0.67||%||0.79||%||0.50||%||0.61||%|
|Nonperforming assets to total assets, excluding the SBA-PPP loans (1)||0.66||%||0.75||%||0.90||%||0.58||%||0.61||%|
|Nonperforming loans to total loans||0.56||%||0.61||%||0.78||%||0.41||%||0.49||%|
|Nonperforming loans to portfolio loans (1)||0.67||%||0.70||%||0.92||%||0.48||%||0.49||%|
|Net charge-offs to average portfolio loans (1)(2)||0.12||%||0.19||%||0.06||%||0.05||%||0.07||%|
|Allowance for loan losses to total loans||1.49||%||1.54||%||1.49||%||1.30||%||1.31||%|
|Allowance for loan losses to portfolio loans (1)||1.79||%||1.78||%||1.77||%||1.54||%||1.31||%|
|Allowance for loan losses to non-performing loans||267.07||%||253.71||%||191.78||%||318.25||%||268.13||%|
|Bank Capital Ratios:|
|Total risk based capital ratio||13.55||%||12.60||%||12.74||%||12.35||%||12.18||%|
|Tier 1 risk based capital ratio||12.29||%||11.34||%||11.48||%||11.10||%||10.93||%|
|Common equity Tier 1 capital ratio||12.29||%||11.34||%||11.48||%||11.10||%||10.93||%|
|Tangible common equity||7.01||%||7.43||%||7.09||%||6.91||%||8.03||%|
|Holding Company Capital Ratios:|
|Total risk based capital ratio||16.07||%||15.19||%||15.35||%||15.02||%||13.63||%|
|Tier 1 risk based capital ratio||13.98||%||13.10||%||12.93||%||12.58||%||12.38||%|
|Common equity Tier 1 capital ratio||13.81||%||12.94||%||12.75||%||12.39||%||12.19||%|
|Tangible common equity||7.98||%||8.48||%||7.95||%||7.80||%||11.08||%|
|Composition of Loans:|
|Residential real estate||$||420,460||$||437,860||$||422,698||$||437,429||$||430,870|
|Commercial real estate||433,336||392,550||372,972||364,071||360,601|
|Construction real estate||221,277||224,904||227,661||212,957||204,047|
|Commercial and industrial - Other||149,914||157,127||134,889||142,673||151,551|
|Other consumer loans||4,487||1,649||2,268||947||1,103|
|Composition of Deposits:|
|Interest bearing demand||300,992||257,126||247,150||268,150||175,924|