GlobeNewswire Inc | Jan 27, 2021 08:46AM EST

January 27, 2021

ROCKVILLE, Md., Jan. 27, 2021 (GLOBE NEWSWIRE) -- Capital Bancorp, Inc. (the "Company") (NASDAQ: CBNK), the holding company for Capital Bank, N.A. (the "Bank"), today reported net income of $9.7 million, or $0.71 per diluted share, for the fourth quarter of 2020. By comparison, net income was $5.1 million, or $0.36 per diluted share, for the fourth quarter of 2019. Return on average assets was 2.08% for the fourth quarter of 2020, compared to 1.48% for the same period in 2019. Return on average equity was 25.3% for the fourth quarter of 2020, compared to 15.3% for the same period in 2019.

Capital Bancorp finished 2020 with excellent fourth quarter results, bringing to a close a year in which we navigated a challenging environment while delivering record results, said Steven Schwartz, Chairman of the Board of Capital Bancorp. For the full year, net income increased by more than 50% and book value per share increased by more than 20% as loans grew, deposit costs decreased, and both OpenSky and Capital Bank Home Loans exceeded expectations. We enter 2021 well-positioned for continued profitable growth as we expect, and certainly hope, the effects of the pandemic to recede.

We are pleased to have generated record earnings with our diversified revenue model despite the disruption caused by COVID-19. Our differentiated strategy of leveraging next-generation capabilities continues to build momentum and be a source of strength, said Ed Barry, CEO of Capital Bancorp. We were encouraged to see the return of commercial loan growth driven by our participation in the first round of the Small Business Administration Payroll Protection Program and anticipate similar success in the recently-launched second round. Additionally, our customers' financial health continues to show signs of improvement as we saw a sharp reduction in classified and non-performing loans. While significant uncertainty remains, we remain focused on executing and expanding on our technology-based strategy to drive profitable growth.

Fourth Quarter 2020 Highlights

Capital Bancorp

-- Record Net Income - Continued strong performance by the Commercial Bank, Capital Bank Home Loans and OpenSky secured credit cards contributed to another quarter of record results. In the fourth quarter of 2020, net income increased 90.9 percent to a record $9.7 million from $5.1 million in the fourth quarter of 2019. On a per share basis, earnings were $0.71 per basic and diluted share for the three months ended December 31, 2020 compared to $0.37 per basic and $0.36 per diluted share for the same period last year. -- Record Performance Ratios - Strong earnings performance by Capital Bank Home Loans and OpenSky boosted return on average assets ("ROAA") and return on average equity ("ROAE"). ROAA and ROAE were 2.08% and 25.26%, respectively, for the three months ended December 31, 2020 compared to 1.48% and 15.32%, respectively, for the three months ended December 31, 2019. -- Net Interest Margin Improvement - Net interest margin ("NIM") increased by 56 basis points to 5.57% from the prior quarter. The improvement in NIM was driven by active investment portfolio management, a lower cost of funds, and increased yields on OpenSky assets. -- Balance Sheet Supported By Robust Capital Levels, Elevated Reserves, and Surplus Liquidity - As of December 31, 2020, the Company reported a common equity tier 1 capital ratio of 12.94% and an allowance for loan and lease losses ("ALLL") to total loans ratio of 1.54%, or 1.78% excluding Small Business Administration Payroll Protection Program ("SBA-PPP") loans. The Bank is well-capitalized and has taken measures to navigate COVID-19 related disruptions, including taking additional loan loss provisions and maintaining higher than normal levels of liquidity on its balance sheet. -- Subordinated Debt Cost Reduced - In December, the Company issued $10.0 million in subordinated notes due in 2030 to replace the outstanding higher yielding $13.5 million, reducing quarterly interest expense by approximately $110 thousand.

Commercial Bank

-- Focus on PPP Borrowers Delivers Results - Of the 1,220 SBA-PPP customers for whom we granted a total of $236.3 million in loans in 2020, during the quarter, we expanded relationships with more than 100 of those SBA-PPP borrowers who had no previous relationship with the Bank. As of December 31, 2020, 120 SBA-PPP loans totaling $33.6 million have been paid and forgiven. -- Continued Portfolio Loan Growth - Portfolio loans, which excludes SBA-PPP loans, increased by $53.6 million, or 4.62 percent, for the quarter ended December 31, 2020 to $1.21 billion compared to $1.16 billion at September30, 2020. The quarter over quarter growth was broad-based with commercial real estate loans increasing by 5.2 percent, and commercial and industrial loans increasing by 16.5 percent. -- Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased by $12.3 million, or 2.1 percent, during the quarter ended December 31, 2020 and now represent 36.8% of total deposits. Overall, the cost of interest bearing liabilities was reduced from 1.18% for the quarter ending September30, 2020 to 0.95% for the quarter ending December 31, 2020 primarily due to the Bank's ongoing strategic initiative to improve its funding mix by decreasing reliance on non-core time deposits. -- Continued Proactive Management of Elevated Risk Loans - Non-performing assets ("NPAs") decreased to 0.67% of total assets, or $12.6 million, in the fourth quarter of 2020 compared to 0.79% in the prior quarter. The net $2.2 million improvement resulted primarily from the resolution of $4.9 million of non-performing assets, partially offset by the inclusion of $3.1 million of well collateralized loans being downgraded to substandard.

Capital Bank Home Loans

-- Strong Mortgage Performance Supported by 30% Purchase Volume - In the fourth quarter of 2020, Capital Bank Home Loans continued to produce strong mortgage loan originations of $382 million and generated mortgage banking revenue of $12.2million compared to $431 million in originations and $14.4 million in revenue for the previous quarter.

OpenSky

-- Continued Robust Growth in OpenSky Credit Card Accounts - Despite seasonally slower fourth quarter activity, OpenSky Credit Card accounts grew by 7.4 percent to 568 thousand accounts since last quarter. -- Account Growth Translates to Financial Performance - Consumer behavior, which had modified due to the pandemic, continued to normalize in the fourth quarter. This normalizing behavior, along with card growth, resulted in secured credit card loan balances increasing 22.7 percent to $104.3 million during the three months ended December 31, 2020. The normalizing behavior and higher loan balances drove record credit card revenue of $15.2 million for the quarter and resulted in a $15.8 million increase in noninterest bearing secured credit card deposits.

Full Year Highlights

Capital Bancorp

-- Diversified Businesses Drive Record Net Income - Net income for 2020 increased 52.8 percent to $25.8million, or $1.87 per diluted share, from $16.9million, or $1.21 per diluted share for the year ended 2019. Our continued strong operating results demonstrate the advantages of the Bank's diversified business lines that are complementary across economic cycles. -- Improved Performance Ratios - Superior earnings provided ROAA and ROAE of 1.56% and 18.00%, respectively, for the year ended December 31, 2020 compared to 1.38% and 13.66% for the year ended December 31, 2019. -- Net Interest Margin Above Peers - For the year ended December 31, 2020, net interest margin declined to 5.14%, 46 basis points below prior year levels. The year over year decline was driven by historically low interest rates which reduced the yield on earning assets at a higher pace than deposits. Other factors leading to the decline were lower yielding SBA-PPP loans and additional liquidity. -- Improved Efficiency Ratio - Higher levels of revenue and controlled expense growth improved the efficiency ratio to 68.0%, despite higher levels of mortgage commissions, for the year ended December 31, 2020 compared to 72.3% for the prior year. -- Asset Growth - Total assets increased $450.2 million, or 31.5 percent, during year ended December 31, 2020 primarily due to increases in SBA-PPP loans of $201.0 million, portfolio loans of $146.4 million and credit card loans of $57.8 million. -- Stock repurchases - During the twelve months ended December 31, 2020, 304,114 shares were repurchased at an average price of $10.81 per share.

Commercial Bank

-- Strong Portfolio Loan Growth - Portfolio loans, which exclude SBA-PPP loans, increased by $87.0 million, or 7.72 percent to $1.21 billion for the year ended December 31, 2020 compared to $1.13billion at December 31, 2019. Contributing to this growth were commercial and industrial loans which increased 4.0 percent, commercial real estate loans which increased 12.8 percent, and construction real estate loans which increased by 13.2 percent. -- Improved Deposit Franchise and Lower Cost of Funding - Noninterest bearing deposits increased by $316.8 million, or 108.6 percent, December 31, 2020 and now represent 36.8% of total deposits. During the year ended, the cost of interest bearing liabilities declined to 1.29% from 1.93% in the prior year, in line with our market rates. -- COVID-19 Related Deferrals - Outstanding loans deferred due to COVID-19 decreased by 78.9 percent from June 30, 2020 to December 31, 2020 as shown in the table below.

LoanModifications ^(1)(dollars in millions) December 31, 2020 September 30, June 30, 2020 2020 Deferred Loans Deferred Loans Deferred Loans Total Loans # of # of # ofSector Outstanding Balance Loans Balance Loans Balance Loans Deferred Deferred DeferredAccommodation& Food $ 89.1 $ 14.7 16 $ 11.2 14 $ 42.6 36 ServicesReal Estateand Rental 508.7 5.5 10 9.3 16 45.6 67 LeasingOtherServicesIncluding 278.5 1.1 3 5.6 11 17.3 36 PrivateHouseholdsEducational 20.9 ? ? ? ? 9.8 6 ServicesConstruction 264.5 ? ? 0.3 1 4.2 6 Professional,Scientific, 86.3 1.4 3 1.1 2 5.0 11 and TechnicalServicesArts,Entertainment 39 0.7 2 1.4 2 5.0 9 & RecreationRetail Trade 24.6 0.3 1 ? ? 3.0 8 Healthcare &Social 88.5 0.9 1 0.9 1 4.7 11 AssistanceWholesale 13.6 ? ? ? ? 0.9 1 TradeAll other ^ 81.4 5.9 7 0.5 2 5.9 13 (1)Total $ 1,495.1 $ 30.5 43 $ 30.3 49 $ 144.0 204

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(1) Excludes modifications and deferrals made for OpenSky secured card customers.

Capital Bank Home Loans

-- Record Mortgage Originations and Revenues - Capital Bank Home Loans benefited from favorable industry trends, strategic hires and our ability to originate purchase volume (as distinct from refinance volume) equal to 31.9% of our $1.3 billion of mortgage originations in 2020, which compares to mortgage originations of $592 million in 2019. Mortgage revenues increased to $40.6 million in 2020 compared to $16 million in 2019. Efforts to optimize product pricing and mix improved the average gain on sale to 3.02% compared to 2.43% in the prior year.

OpenSky

-- 155% Annual Growth in OpenSky Credit Card Accounts - Improved marketing and favorable market conditions resulted in the origination of 345 thousand new OpenSky credit card accounts in 2020, increasing the number of accounts to 568 thousand at December 31, 2020. -- Account Growth Contributing to Bank Performance - Annual account growth resulted in a $114.3 million increase in noninterest bearing secured credit card deposits that totaled $192.5 million at year end. Corresponding credit card loans increased by $57.8 million, or 124.6 percent, and totaled $104.3 million at December 31, 2020, driving a $9.4 million increase in credit card fees to $17.0million for the year.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended Twelve Months Ended December 31, December 31, (amounts inthousands 2020 2019 % 2020 2019 %except per Change Changeshare data)Earnings SummaryInterest $ 28,318 $ 22,393 26.5 % $ 97,251 $ 83,354 16.7 %incomeInterest 2,599 4,339 (40.1 ) 13,182 15,842 (16.8 )expense % %Netinterest 25,719 18,054 42.5 % 84,069 67,512 24.5 %incomeProvisionfor loan 2,033 921 120.7 % 11,242 2,791 302.8 %lossesNoninterest 19,435 7,278 167.0 % 61,061 24,518 149.0 %incomeNoninterest 30,085 17,757 69.4 % 98,751 66,525 48.4 %expenseIncomebefore 13,036 6,654 95.9 % 35,137 22,714 54.7 %incometaxesIncome tax 3,347 1,581 111.7 % 9,314 5,819 60.1 %expenseNet income $ 9,689 $ 5,073 91.0 % $ 25,823 $ 16,895 52.8 % Weightedaverage )common 13,686 13,790 (0.8 % 13,793 13,733 0.4 %shares -BasicWeightedaverage ) )common 13,707 14,091 (2.7 % 13,800 13,969 (1.2 %shares -DilutedEarningsper share - $ 0.71 $ 0.37 92.4 % $ 1.87 $ 1.23 52.0 %BasicEarningsper share - $ 0.71 $ 0.36 96.3 % $ 1.87 $ 1.21 54.5 %DilutedReturn onaverage 2.08 % 1.48 % 40.5 % 1.56 % 1.38 % 13.0 %assets ^(1)Return onaverageassets,excluding 1.88 % 1.48 % 27.0 % 1.42 % 1.38 % 2.9 %impact ofSBA-PPPloans^(1)(2)Return onaverage 25.26 % 15.32 % 64.9 % 18.00 % 13.66 % 31.8 %equity

Quarter Ended Quarter Ended 4Q20 December 31, vs. September 30, June 30, March 31, 4Q19(in thousands %except per 2020 2019 Change 2020 2020 2020share data)Balance Sheet HighlightsAssets $ 1,878,659 $ 1,428,495 31.5 % $ 1,879,029 $ 1,822,365 $ 1,507,847 Investmentsecurities 99,787 60,828 64.0 % 53,992 56,796 59,524 available forsaleMortgageloans held 107,154 71,030 50.9 % 137,717 116,969 73,955 for saleSBA-PPPloans, net of 201,018 ? 100.0 % 233,349 229,646 ? fees ^(3)Portfolioloans 1,317,568 1,171,121 12.5 % 1,244,613 1,211,477 1,187,798 receivable ^(3)Allowance for 23,434 13,301 76.2 % 22,016 18,680 15,513 loan lossesDeposits 1,652,128 1,225,421 34.8 % 1,662,211 1,608,726 1,302,913 FHLB 22,000 32,222 (31.7 ) 22,222 25,556 28,889 borrowings %Other )borrowed 14,016 15,423 (9.1 % 17,516 17,392 15,430 fundsTotalstockholders' 159,311 133,331 19.5 % 149,377 142,108 136,080 equityTangiblecommon equity 159,311 133,331 19.5 % 149,377 142,108 136,080 ^(2) Common shares 13,754 13,895 (1.0 ) 13,682 13,818 13,817 outstanding %Tangible bookvalue per $ 11.58 $ 9.60 20.7 % $ 10.92 $ 10.28 $ 9.85 share^ (2)

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(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 December 31, 2020 and 2019

For the three months ended December 31, 2020, net interest income increased $7.7 million, or 42.5 percent, to $25.7 million from the same period in 2019, primarily due to an increase in average interest earning assets and a decrease in average rates on interest bearing liabilities. The net interest margin increased 24 basis points to 5.57% for the three months ended December 31, 2020 from the same period in 2019 as interest rates on deposits were reduced faster than the decline in rates on loans and investments. Net interest margin, excluding credit card and SBA PPP loans, was 3.80% for the fourth quarter of 2020 compared to 4.02% for the same period in 2019. For the three months ended December 31, 2020, average interest earning assets increased $491.5 million, or 36.6 percent, to $1.8 billion as compared to the same period in 2019, and the average yield on interest earning assets decreased 48 basis points. Compared to the same period the prior year, average interest-bearing liabilities increased $162.6 million, or 17.6 percent, while the average cost decreased 91 basis points to 0.95% from 1.86%.

The provision for loan losses of $2.0 million for the three months ended December 31, 2020 was due primarily to the deterioration in the macro-economics environment as a result of the impact of COVID-19 and loan growth during the quarter. Net charge-offs for the fourth quarter of 2020 were $615 thousand, or 0.16% of average loans on an annualized basis, compared to $111 thousand, or 0.04% of average loans on an annualized basis, for the fourth quarter of 2019.

For the quarter ended December 31, 2020, noninterest income was $19.4 million, an increase of $12.2 million, or 167.0 percent from $7.3 million in the prior year quarter. The increase was primarily driven by significant growth in mortgage banking revenues of $7.2 million and credit card fees of $4.2 million resulting from the higher level of credit card accounts.

For the three months ended December 31, 2020, OpenSky originated 82 thousand new secured credit card accounts, increasing the total number of open accounts to 568 thousand. This compares to 24 thousand new originations for the same period last year, which increased total open accounts to 223 thousand. Since December 31, 2019, credit card loan balances increased to $104.3 million from $46.4 million, while the related deposit account balances increased 146 percent to $192.5 million. The record 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 December 31, 2020 decreased to 66.63% compared to 70.10% for the three months ended December 31, 2019. The period saw higher levels of mortgage commissions and increased data processing costs, which supported the generation of higher levels of revenue. Management continues its efforts to control expense growth and increase operational leverage.

Noninterest expense was $30.1 million for the three months ended December 31, 2020, as compared to $17.8 million for the three months ended December 31, 2019, an increase of $12.3 million, or 69.4 percent. The increase was primarily driven by a $5.0 million, or 115.7 percent increase in data processing, a $3.5 million, or 42.0 percent, increase in salaries and benefits, an increase in professional services of $1.0million or 110.0 percent and an increase in operating expenses of $1.6 million, or 85.8 percent quarter over quarter. The increase of $5.0 million in data processing expenses is largely attributable to the higher volume of open credit cards, and increased portfolio and mortgage loan processing volumes during the fourth quarter of 2020. Included in salaries and benefits are commissions paid on mortgage originations, which increased from $1.3 million to $3.4 million, primarily due to an increase in the number of mortgage originations. By comparison, in the three month period ended December 31, 2020, $382.3 million of mortgage loans were originated for sale compared to $185.7 million in the three months ended December 31, 2019. The Company's organic growth was supported by a 5.6 percent increase in employees to 244 at December 31, 2020, up from 231 at December 31, 2019. The increase included the addition of 13 new employees in the revenue producing teams of the commercial banking and mortgage banking divisions. Additionally, operating expenses increased $1.6 million due to increases in marketing and advertising, credit expenses, FDIC insurance and miscellaneous expenses.

Operating Results - Comparison of Twelve Months Ended December 31, 2020 and 2019

For the twelve months ended December 31, 2020, net interest income increased $16.6 million, or 24.5 percent, to $84.1 million from the same period in 2019, primarily due to an increase in average interest-earning assets and a decrease in the average rate on interest-earning liabilities. The net interest margin decreased 46 basis points to 5.14% for the twelve months ended December 31, 2020 compared to 2019. The declining margin was a result of the declining interest rate environment, which began in the fourth quarter of 2019, and the rapid increase in SBA-PPP loans. Net interest margin, excluding credit cards and SBA-PPP loans, was 3.89% for the twelve months ended December 31, 2020 compared to 4.26% for the same period in 2019. For the twelve months ended December 31, 2020, average interest earning assets increased $430 million, or 35.7 percent, to $1.6 billion as compared to 2019, and the average yield on interest earning assets decreased 98 basis points. Comparing year ended 2020 to 2019, average interest-bearing liabilities increased $201.8 million, or 24.6 percent, while the average cost decreased 64 basis points to 1.29% from 1.93%.

Due primarily to the deterioration in the macro-economic environment as a result of the impact of COVID-19 in addition to organic loan growth, the Company recorded a provision for loan losses of $11.2 million during the twelve months ended December 31, 2020, an increase of $8.5 million from the year earlier. Net charge-offs for the twelve months ended December 31, 2020 were $1.1 million, or 0.09% of average portfolio loans, compared to $192 thousand, or 0.10% of average portfolio loans, for the same period in 2019.

For the twelve months ended December 31, 2020, noninterest income was $61.1 million, an increase of $36.5 million, or 149.0 percent, from the same period in 2019. The increase was primarily driven by significant growth in mortgage banking revenues, which were up $24.7 million, and credit card fees, which increased by $9.4 million.

For the twelve months ended December 31, 2020, the Bank originated 345 thousand new OpenSky secured credit card accounts, increasing the total number of open accounts to 568 thousand. This compares to 72 thousand new originations for 2019, which increased total open accounts to 223 thousand. The record growth in open accounts was primarily driven by enhanced marketing and economic conditions that led consumers to recognize the value and convenience of OpenSky's secured credit card product.

The efficiency ratio for the year ended December 31, 2020 improved to 68.04% compared to 72.29% for the twelve months ended December 31, 2019, primarily resulting from increased revenue. The period saw higher levels of mortgage commissions and increased data processing costs, which supported the generation of higher levels of revenue. Management continues its efforts to control expense growth and increase operational leverage.

Noninterest expense was $98.8 million for the twelve months ended December 31, 2020, as compared to $66.5 million for the prior year, an increase of $32.2 million, or 48.4 percent. The increase was primarily driven by an $11.8 million, or 36.1 percent, increase in salaries and benefits, an $11.4 million, or 73.5 percent increase in data processing, a $2.0million or 70.7 percent increase in professional fees, an increase in loan processing of 101.2 percent or $1.9 million and a $3.9 million, or 54.6 percent increase in other operating expenses year over year. Included in salaries and benefits are commissions paid on mortgage originations, which increased from $5.4 million to $10.9 million primarily due to an increase in the number of mortgage originations. By comparison, in the twelve months ended December 31, 2020, $1.3 billion of mortgage loans were originated for sale compared to $592 million in the twelve months ended December 31, 2019. The increase of $11.4 million in data processing expense was primarily due to the higher volume of open credit cards and increased mortgage loan processing volumes during the year. Additionally, operating expenses increased $3.9 million due to increases in marketing and advertising, credit expenses, FDIC insurance and miscellaneous expenses.

During the year ended December 31, 2020, results of operations were impacted by the COVID-19 pandemic and the resulting issuance of SBA-PPP loans. At December 31, 2020, SBA-PPP loans had remaining deferred origination fees of $4.7 million, and deferred costs of $831 thousand.

Financial Condition

Total assets at December 31, 2020 were $1.88 billion, an increase of 31.5 percent from December 31, 2019. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.32 billion as of December 31, 2020, an increase of 12.5 percent as compared to $1.17 billion at December 31, 2019.

Deposits at December 31, 2020 were $1.65 billion, an increase of 34.8 percent as compared to $1.23 billion at December 31, 2019. Noninterest bearing deposits increased by $317 million. These deposits include certain fiduciary accounts of title companies and property management companies, as well as SBA-PPP loan customers and the secured card deposits highlighted above. Interest bearing accounts increased by $109.9 million, mainly driven by a 76.2 percent increase in fiduciary accounts.

Due primarily to the deterioration in the macro-economic environment as a result of the impact of COVID-19, the Company recorded a provision for loan losses of $11.2 million during the twelve months ended December 31, 2020, which increased the allowance for loan losses to $23.4 million, or 1.54% of total loans (1.78%, excluding SBA-PPP loans, on a non-GAAP basis) at December 31, 2020. This level of reserve provides approximately 254 percent coverage of nonperforming loans at December 31, 2020, compared to the prior year's reserve of $13.3 million, or 1.14 percent of total loans, which represented a coverage ratio of 282 percent. Nonperforming assets were $12.6 million, or 0.67% of total assets, as of December 31, 2020, up from $7.1 million, or 0.50% of total assets, at December 31, 2019. Of the $12.6 million in total nonperforming assets as of December 31, 2020, nonperforming loans represented $9.2 million and foreclosed real estate totaled $3.3 million. The increase is primarily due to two residential loans totaling $3.1 million and one construction loan for $1.4 million. Included in nonperforming loans at December 31, 2020 are troubled debt restructurings of $440 thousand.

Stockholders equity increased to $159.3 million as of December 31, 2020, compared to $133.3 million at December 31, 2019. This increase was primarily attributable to earningsduringthe period. Shares repurchased and retired in 2020 as part of the Company's stock repurchase program totaled 304,114 shares at a weighted average price of $10.81, for a total cost of $3.3 million including commissions. As of December 31, 2020, the Bank's capital ratios continue to exceed the regulatory requirements for a well-capitalized institution.

Consolidated Statements of Income (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31,(in thousands) 2020 2019 2020 2019Interest income Loans, including fees $ 27,848 $ 21,758 $ 95,367 $ 81,305 Investment securities 363 217 1,292 924 available for saleFederal funds sold and other 107 418 592 1,125 Total interest income 28,318 22,393 97,251 83,354 Interest expense Deposits 2,323 3,801 11,524 13,689 Borrowed funds 276 538 1,658 2,153 Total interest expense 2,599 4,339 13,182 15,842 Net interest income 25,719 18,054 84,069 67,512 Provision for loan losses 2,033 921 11,242 2,791 Net interest income after 23,686 17,133 72,827 64,721 provision for loan losses Noninterest income Service charges on deposits 143 159 520 542 Credit card fees 6,272 2,082 16,966 7,602 Mortgage banking revenue 12,153 4,964 40,649 15,955 Gain on sale of investmentsecurities available for 20 ? 20 26 sale, netOther fees and charges 847 73 2,906 393 Total noninterest income 19,435 7,278 61,061 24,518 Noninterest expenses Salaries and employee 11,997 8,450 44,359 32,586 benefitsOccupancy and equipment 1,512 1,053 5,170 4,360 Professional fees 1,928 918 4,899 2,871 Data processing 9,253 4,290 26,917 15,512 Advertising 655 509 2,530 2,066 Loan processing 1,360 615 3,811 1,894 Other real estate expenses (68 ) 66 69 122 (income), netOther operating 3,448 1,856 10,995 7,114 Total noninterest expenses 30,085 17,757 98,751 66,525 Income before income taxes 13,036 6,654 35,137 22,714 Income tax expense 3,347 1,581 9,314 5,819 Net income $ 9,689 $ 5,073 $ 25,823 $ 16,895

Consolidated Balance Sheets (unaudited) December 31,(in thousands except share data) December 31, 2019 2020Assets Cash and due from banks $ 18,456 $ 10,530 Interest bearing deposits at other financial 126,081 102,447 institutionsFederal funds sold 2,373 1,847 Total cash and cash equivalents 146,910 114,824 Investment securities available for sale 99,787 60,828 Restricted investments 3,958 3,966 Loans held for sale 107,154 71,030 U.S. Small Business Administration PayrollProtection Program ("SBA-PPP") loans receivable, 201,018 ? net of feesPortfolio loans receivable, net of deferred feesand costs and net of allowance for loan losses of 1,294,134 1,157,820 $23,434 and $13,301Premises and equipment, net 4,464 6,092 Accrued interest receivable 8,134 4,770 Deferred income taxes, net 6,818 4,263 Other real estate owned 3,326 2,384 Other assets 2,956 2,518 Total assets $ 1,878,659 $ 1,428,495 Liabilities Deposits Noninterest bearing $ 608,559 $ 291,777 Interest bearing 1,043,569 933,644 Total deposits 1,652,128 1,225,421 Federal Home Loan Bank advances 22,000 32,222 Other borrowed funds 14,016 15,423 Accrued interest payable 1,134 1,801 Other liabilities 30,070 20,297 Total liabilities 1,719,348 1,295,164 Stockholders' equity Preferred stock, $.01 par value; 1,000,000 shares ? ? authorized; no shares issued or outstandingCommon stock, $.01 par value; 49,000,000 sharesauthorized; 13,753,529 and 13,894,842 issued and 138 139 outstandingAdditional paid-in capital 50,602 51,561 Retained earnings 106,854 81,618 Accumulated other comprehensive income 1,717 13 Total stockholders' equity 159,311 133,331 Total liabilities and stockholders' equity $ 1,878,659 $ 1,428,495

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 December 31, 2020 2019 Average Interest Average Average Interest Average Outstanding Income/ Yield/ Outstanding Income/ Yield/ Balance Expense Rate^ Balance Expense Rate^ (1) (1) (Dollars in thousands)Assets Interestearning assets:Interestbearing $ 152,720 $ 37 0.10 % $ 85,148 $ 311 1.45 %depositsFederal funds 5,537 ? 0.01 5,841 22 1.49 soldInvestmentsecurities 73,931 363 1.95 37,716 216 2.27 available forsaleRestricted 3,947 70 7.08 4,505 84 7.42 stockLoans held 105,922 701 2.63 71,941 972 5.36 for saleSBA-PPP loans 227,617 1,998 3.49 ? ? ? receivablePortfolioloans 1,266,662 25,149 7.90 1,139,646 20,788 7.24 receivable^(2)Totalinterest 1,836,336 28,318 6.13 1,344,797 22,393 6.61 earningassetsNoninterestearning 18,509 15,043 assetsTotal assets $ 1,854,845 $ 1,359,840 Liabilitiesand Stockholders?EquityInterestbearing liabilities:Interestbearing $ 238,078 102 0.17 $ 147,521 284 0.77 demandaccountsSavings 4,828 1 0.05 3,552 3 0.33 Money market 467,727 633 0.54 386,367 1,620 1.66 accountsTime deposits 337,170 1,586 1.87 324,272 1,894 2.32 Borrowed 38,447 277 2.86 61,963 538 3.44 fundsTotalinterest 1,086,250 2,599 0.95 923,675 4,339 1.86 bearingliabilitiesNoninterestbearing liabilities:Noninterestbearing 23,810 19,137 liabilitiesNoninterestbearing 592,193 285,619 depositsStockholders? 152,592 131,409 equityTotalliabilitiesand $ 1,854,845 $ 1,359,840 stockholders?equity Net interest 5.18 % 4.75 %spreadNet interest $ 25,719 $ 18,054 incomeNet interest 5.57 % 5.33 %margin^(3)

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(1) Annualized.(2) Includes nonaccrual loans.(3) For the three months ended December 31, 2020 and December 31, 2019, collectively, SBA-PPP loans and credit card loans accounted for 177 and 131 basis points of the reported net interest margin, respectively.

Twelve Months Ended December 31, 2020 2019 Average Interest Average Average Interest Average Outstanding Income/ Yield/ Outstanding Income/ Yield/ Balance Expense Rate Balance Expense Rate (Dollars in thousands)Assets Interestearning assets:Interestbearing $ 112,249 $ 343 0.31 % $ 47,762 $ 832 1.74 %depositsFederal funds 3,128 4 0.12 2,733 50 1.83 %soldInvestmentsecurities 58,071 1,292 2.22 41,130 924 2.25 %available forsaleRestricted 4,025 244 6.07 4,334 243 5.61 %stockLoans held 84,928 2,610 3.07 44,483 2,899 6.52 %for saleSBA-PPP loans 157,630 4,479 2.84 ? ? ? %receivablePortfolioloans 1,215,049 88,279 7.27 1,064,421 78,406 7.37 %receivable^(1)Totalinterest 1,635,080 97,251 5.95 1,204,863 83,354 6.92 %earningassetsNoninterestearning 24,923 15,046 assetsTotal assets $ 1,660,003 $ 1,219,909 Liabilitiesand Stockholders?EquityInterestbearing liabilities:Interestbearing $ 195,794 656 0.34 $ 109,977 672 0.61 demandaccountsSavings 4,722 5 0.11 3,597 13 0.36 Money market 480,218 4,786 1.00 344,272 5,822 1.69 accountsTime deposits 297,997 6,077 2.04 302,149 7,182 2.38 Borrowed 42,471 1,658 3.90 59,387 2,153 3.63 fundsTotalinterest 1,021,202 13,182 1.29 819,382 15,842 1.93 bearingliabilitiesNoninterestbearing liabilities:Noninterestbearing 22,007 16,144 liabilitiesNoninterestbearing 473,301 260,726 depositsStockholders? 143,493 123,657 equityTotalliabilitiesand $ 1,660,003 $ 1,219,909 stockholders?equity Net interest 4.66 % 4.99 %spreadNet interest $ 84,069 $ 67,512 incomeNet interest 5.14 % 5.60 %margin^(2)

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(1) Includes nonaccrual loans.(2) For the twelve months ended December 31, 2020 and December 31, 2019, collectively, SBA-PPP loans and credit card loans accounted for 125 and 134 basis points of the reported net interest margin, respectively.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended(Dollars inthousands December 31, September 30, June 30, March 31, December 31,except per 2020 2020 2020 2020 2019share data)Earnings: Net income $ 9,689 $ 8,438 $ 4,761 $ 2,934 $ 5,073 Earnings percommon share, 0.71 0.61 0.34 0.21 0.36 dilutedNet interest 5.57 % 5.01 % 4.72 % 5.16 % 5.33 %marginNet interestmargin,excluding 3.80 % 3.84 % 3.96 % 3.96 % 4.02 %credit cards &SBA-PPP loans^(1)Return onaverage assets 2.08 % 1.89 % 1.19 % 0.84 % 1.48 %^(2)Return onaverage assetsexcluding 1.88 % 1.80 % 1.04 % 0.84 % 1.48 %impact ofSBA-PPP loans^(1)(2)Return onaverage equity 25.26 % 23.28 % 13.70 % 8.59 % 15.32 %^(2)Efficiency 66.63 % 65.17 % 69.74 % 73.53 % 70.10 %ratioBalance Sheet: Portfolioloans $ 1,317,568 $ 1,244,613 $ 1,211,477 $ 1,187,798 $ 1,171,121 receivable ^(3)Deposits 1,652,128 1,662,211 1,608,726 1,302,913 1,225,421 Total assets 1,878,659 1,879,029 1,822,365 1,507,847 1,428,495 Asset Quality Ratios:Nonperformingassets to 0.67 % 0.79 % 0.50 % 0.61 % 0.50 %total assetsNonperformingassets tototal assets, 0.75 % 0.90 % 0.58 % 0.61 % 0.50 %excluding theSBA-PPP loans^(1)Nonperformingloans to total 0.61 % 0.78 % 0.41 % 0.49 % 0.40 %loansNonperformingloans to 0.70 % 0.92 % 0.48 % 0.49 % 0.40 %portfolioloans ^(1)Netcharge-offs toaverage 0.19 % 0.12 % 0.05 % 0.07 % 0.10 %portfolioloans ^(1)(2)Netcharge-offs to 0.10 % 0.12 % 0.05 % 0.07 % 0.10 %average loans^(2)Allowance forloan losses to 1.54 % 1.49 % 1.30 % 1.31 % 1.14 %total loansAllowance forloan losses to 1.78 % 1.77 % 1.54 % 1.31 % 1.14 %portfolioloans ^(1)Allowance forloan losses to 253.71 % 191.78 % 318.25 % 268.13 % 281.80 %non-performingloansBank Capital Ratios:Total riskbased capital 12.60 % 12.74 % 12.35 % 12.18 % 11.98 %ratioTier 1 riskbased capital 11.34 % 11.48 % 11.10 % 10.93 % 10.73 %ratioLeverage ratio 7.45 % 7.44 % 7.73 % 8.61 % 8.65 %Common equityTier 1 capital 11.34 % 11.48 % 11.10 % 10.93 % 10.73 %ratioTangible 7.43 % 7.09 % 6.91 % 8.03 % 8.21 %common equityHoldingCompany CapitalRatios:Total riskbased capital 15.19 % 15.35 % 15.02 % 13.63 % 13.56 %ratioTier 1 riskbased capital 13.10 % 12.93 % 12.58 % 12.38 % 12.31 %ratioLeverage ratio 8.78 % 8.63 % 8.85 % 9.83 % 9.96 %Common equityTier 1 capital 12.94 % 12.75 % 12.39 % 12.19 % 12.12 %ratioTangible 8.48 % 7.95 % 7.80 % 11.08 % 10.71 %common equityComposition of Loans:Residential $ 437,860 $ 422,698 $ 437,429 $ 430,870 $ 427,926 real estateCommercial 392,550 372,972 364,071 360,601 348,091 real estateConstruction 224,904 227,661 212,957 204,047 198,702 real estateCommercial andindustrial - 157,127 134,889 142,673 151,551 151,109 OtherSBA-PPP loans 204,920 238,735 236,325 ? ? Credit card 104,252 84,964 54,732 41,881 46,412 Other 1,649 2,268 947 1,103 1,285 Composition of Deposits:Noninterest $ 608,559 $ 596,239 $ 563,995 $ 363,423 $ 291,777 bearingInterest 257,126 247,150 268,150 175,924 174,166 bearing demandSavings 4,800 4,941 5,087 4,290 3,675 Money Markets 447,077 472,447 507,432 473,958 429,078 Time Deposits 334,566 341,435 264,062 285,318 326,725 Capital Bank Home Loan Metrics:Origination ofloans held for $ 382,267 $ 431,060 $ 315,165 $ 180,421 $ 185,739 saleMortgage loans 412,830 410,312 272,151 177,496 183,691 soldGain on sale 12,950 12,837 8,088 4,580 4,587 of loansPurchasevolume as a % 30.03 % 33.76 % 31.16 % 32.79 % 28.95 %oforiginationsGain on saleas a % of 3.14 % 3.13 % 2.97 % 2.52 % 2.44 %loans sold^(4)OpenSky Credit Card Portfolio Metrics:Activecustomer 568,373 529,114 400,530 244,024 223,379 accountsCredit card $ 104,252 $ 84,964 $ 54,732 $ 41,881 $ 46,412 loansNoninterestsecured credit 192,520 176,708 131,854 84,689 78,223 card deposits

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(1) Refer to Appendix for reconciliation of non-GAAP measures.(2) Annualized.(3) Loans are reflected net of deferred fees and costs.(4) Gain on sale percentage is calculated as gain on sale of loans divided by the sum of gain on sale of loans and proceeds from loans held for sale, net of gains.

Appendix

Reconciliation of Non-GAAP Measures

Return on Average Assets, Year Ended Year Ended Quarter Ended Quarter Endedas AdjustedDollars in Thousands December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Net Income $ 25,823 $ 16,895 $ 9,689 $ 5,073 Less: SBA-PPP loan income 4,479 ? 1,998 ? Net Income, as Adjusted $ 21,344 $ 16,895 $ 7,691 $ 5,073 Average Total Assets $ 1,660,003 1,219,909 $ 1,854,846 1,359,840 Less: Average SBA-PPP 157,630 ? 227,617 ? LoansAverage Total Assets, as $ 1,502,373 $ 1,219,909 $ 1,627,229 $ 1,359,840 AdjustedReturn on Average Assets, 1.42 % 1.38 % 1.88 % 1.48 %as Adjusted

Net Interest Margin, as Year Ended Year Ended Quarter Ended Quarter EndedAdjustedDollars in Thousands December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Net Interest Income $ 84,069 $ 67,512 $ 25,719 $ 18,054 Less Secured credit 24,531 17,760 9,306 4,867 card loan incomeLess SBA-PPP loan 4,479 ? 1,998 ? incomeNet Interest Income, as $ 55,059 $ 49,752 $ 14,415 13,187 AdjustedAverage Interest $ 1,635,079 1,204,863 $ 1,836,337 1,344,797 Earning AssetsLess Average secured $ 62,462 37,921 95,739 43,406 credit card loansLess Average SBA-PPP 157,630 ? 227,617 ? loansTotal Average InterestEarning Assets, as $ 1,414,987 $ 1,166,942 $ 1,512,981 $ 1,301,392 AdjustedNet Interest Margin, as 3.89 % 4.26 % 3.80 % 4.02 %Adjusted

Tangible Book Quarter Quarter Quarter Quarter QuarterValue per Ended Ended Ended Ended EndedShareDollars in December 31, December 31, September June 30, March 31,Thousands 2020 2019 30, 2020 2020 2020 TotalStockholders' $ 159,311 $ 133,331 $ 149,377 $ 142,108 $ 136,080 EquityLess:Preferred ? ? ? ? ? equityLess:Intangible ? ? ? ? ? assetsTangible $ 159,311 $ 133,331 $ 149,377 $ 142,108 $ 136,080 Common EquityPeriod EndShares 13,753,529 13,894,842 13,682,198 13,818,223 13,816,723 OutstandingTangible BookValue per $ 11.58 $ 9.60 $ 10.92 $ 10.28 $ 9.85 Share

Allowance for Loan Losses to Total Portfolio Loans Dollars in Thousands December 31, December 31, 2020 2019 Allowance for Loan Losses $ 23,434 $ 13,301 Total Loans 1,518,586 1,171,121 Less: SBA-PPP loans 201,018 ? Total Portfolio Loans $ 1,317,568 $ 1,171,121 Allowance for Loan Losses to Total Portfolio 1.78 % 1.14 % Loans Nonperforming Assets to Total Assets, net SBA-PPP Loans Dollars in Thousands December 31, December 31, 2020 2019 Total Nonperforming Assets $ 12,563 $ 7,104 Total Assets $ 1,878,659 1,428,495 Less: SBA-PPP loans 201,018 ? Total Assets, net SBA-PPP Loans $ 1,677,641 $ 1,428,495 Nonperforming Assets to Total Assets, net 0.75 % 0.50 % SBA-PPP Loans Nonperforming Loans to Portfolio Loans Dollars in Thousands December 31, December 31, 2020 2019 Total Nonperforming Loans $ 9,237 $ 4,720 Total Loans 1,518,586 1,171,121 Less: SBA-PPP loans 201,018 ? Total Portfolio Loans $ 1,317,568 $ 1,171,121 Nonperforming Loans to Total Portfolio Loans 0.70 % 0.40 % Net Charge-offs to Average Portfolio Loans Year Ended Year Ended Dollars in Thousands December 31, December 31, 2020 2019 Total Net Charge-offs $ 1,109 $ 798 Total Average Loans 1,215,049 1,064,421 Less: Average SBA-PPP loans 157,630 ? Total Average Loans, Excluding SBA-PPP Loans $ 1,057,419 $ 1,064,421 Net Charge-offs to Average Portfolio Loans 0.10 % 0.08 % Net Charge-offs to Average Portfolio Loans Quarter Ended Quarter Ended Dollars in Thousands December 31, December 31, 2020 2019 Total Net Charge-offs $ 615 $ 438 Total Average Loans $ 1,494,278 $ 1,139,646 Less: Average SBA-PPP loans 227,617 Total Average Loans, Excluding SBA-PPP Loans $ 1,266,662 $ 1,139,646 Net Charge-offs to Average Portfolio Loans 0.19 % 0.15 %

ABOUT CAPITAL BANCORP, INC.

Capital Bancorp, Inc., Rockville, Maryland is a registered bank holding company incorporated under the laws of Maryland. The Companys wholly-owned subsidiary, Capital Bank, N.A., is the fifth largest bank headquartered in Maryland at December 31, 2020. Capital Bancorp has been providing financial services since 1999 and now operates bank branches in five locations in the greater Washington, D.C. and Baltimore, Maryland markets. Capital Bancorp had assets of approximately $1.9 billion at December 31, 2020 and its common stock is traded in the NASDAQ Global Market under the symbol CBNK. More information can be found at the Company's website www.CapitalBankMD.com under its investor relations page.

FORWARD-LOOKING STATEMENTS

This earnings release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. Any statements about our managements expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as anticipate, believes, can, could, may, predicts, potential, should, will, estimate, plans, projects, continuing, ongoing, expects, intends and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements. Accordingly, we caution you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. For details on factors that could affect these expectations, see risk factors and other cautionary language included in the Company's Annual Report on Form 10-K and other periodic and current reports filed with the Securities and Exchange Commission.

Further, given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be fully reopened. As a result of the COVID-19 pandemic and the related adverse local and national economic consequences, we are exposed to all of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to substantially reopen as planned, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for loan losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; as the result of the decline in the Federal Reserve Boards target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; our cyber security risks are increased as the result of an increase in the number of employees working remotely; and Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

FINANCIAL CONTACT: Alan Jackson (240) 283-0402

MEDIA CONTACT: Ed Barry (240) 283-1912

WEB SITE: www.CapitalBankMD.com