GlobeNewswire Inc | Jul 22, 2021 07:45AM EDT

July 22, 2021

ROCKVILLE, Md., July 22, 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 $9.6 million, or $0.68 per diluted share, for the second quarter of 2021. By comparison, net income was $4.8 million, or $0.34 per diluted share, for the second quarter of 2020. Return on average assets ("ROAA") was 1.90% for the second quarter of 2021, compared to 1.19% for the same period in 2020. Return on average equity ("ROAE") was 22.36% for the second quarter of 2021, compared to 13.70% for the same period in 2020.

Capital Bancorps second quarter results once again demonstrated the strength of our diversified business model that performs well in a variety of economic environments, said Steven Schwartz, Chairman of the Board of the Company. The strength of our earnings has made it possible to continue to invest in the business while delivering attractive returns to our shareholders.

"Growth has accelerated, leading to another strong and balanced quarter. The continued strong performance by all of our business lines emphasizes the momentum we have built through investment and strategic decisions at Capital Bank," said Ed Barry, CEO of the Company. "OpenSky's performance remains above expectations as consumers increasingly recognize the value of our product offerings. The Commercial Bank continues to grow and take advantage of dislocations in the market. Capital Bank Home Loans delivered another solid quarter despite a rapidly cooling origination environment. We believe we have laid the foundation for continued profitable growth and look forward to leading the market with our technology-led capabilities."

Second Quarter 2021 Highlights

Capital Bancorp, Inc.

-- Strong Earnings - Continued strong performance by the Commercial Bank, Capital Bank Home Loans and OpenSky contributed to another quarter of solid results. In the second quarter of 2021, net income doubled to $9.6 million from $4.8 million in the second quarter of 2020. Earnings were $0.68 per diluted share for the three months ended June 30, 2021 compared to $0.34 per share for the same period last year. -- Industry-Leading Performance Ratios - Return on average assets ("ROAA") and return on average equity ("ROAE") were 1.90% and 22.36%, respectively, for the three months ended June 30, 2021 compared to 1.19% and 13.70%, respectively, for the three months ended June 30, 2020. -- Expanded Net Interest Margin - The net interest margin was 5.47% for the three months ended June 30, 2021, which is an increase of 75 basis points compared to 4.72% for the same three month period last year. -- Robust Capital Levels - As of June 30, 2021, the Company reported a common equity tier 1 capital ratio of 13.94% and an allowance for loan and lease losses ("ALLL") to total loans ratio of 1.51%, or 1.73% excluding Small Business Administration Payroll Protection Program ("SBA-PPP") loans. During the preceding twelve months, book value per common share grew 25.1 percent to $12.87 at June 30, 2021 compared to $10.28 per share at June 30, 2020.

Commercial Bank

-- Continued Portfolio Loan Growth - Portfolio loans, excluding credit cards, increased by $148.0 million to $1.3 billion at June 30, 2021 compared to June 30, 2020, and by $45.6 million, or 14.8 percent annualized, compared to March31, 2021. The year over year growth was mainly due to a 29.6 percent increase in commercial real estate loans of $107.7 million, an 11.0 percent increase in commercial and industrial loans of $15.7 million, and a 5.1 percent increase in construction real estate loans of $10.9million. -- Further Growth in Core Deposits and Reduced Cost of Funds - Noninterest bearing deposits increased 46.9 percent compared to June 30, 2020, and by 29.2 percent annualized, compared to March31, 2021. The $264.3 million year over year increase, and the $56.4 million increase over the prior quarter was primarily due to increases in OpenSky and SBA-PPP loan-related deposits. At June 30, 2021, noninterest bearing deposits represented 43.2% of total deposits compared to 41.4% at March31, 2021 and 35.1% at June 30, 2020. Overall, the cost of interest bearing liabilities was reduced 73 basis points, from 1.38% for the quarter ended June 30, 2020 to 0.65% for the quarter ended June 30, 2021. This reduction was primarily due to the Bank's ongoing strategic initiative to improve the deposit franchise. -- Stable Credit Metrics - Non-performing assets ("NPAs") remained steady at 0.54% of total assets at June 30, 2021 compared to 0.50% at June 30, 2020. The provision for loan losses declined from $2.5 million for the three months ended June 30, 2020 to $781 thousand in the second quarter of 2021. -- SBA-PPP Loans- SBA-PPP loans, net of $5.3 million in unearned fees, totaled $202.8 million at June 30, 2021 which was comprised of $74.1 million in 2020 originations and $128.7 million originated thus far in 2021. As of June 30, 2021, the Company has obtained forgiveness for $169.0 million of SBA-PPP loans, through the SBA.

Capital Bank Home Loans

-- Strong Mortgage Performance - New home purchase volume increased to 50.6% of total originations for the second quarter, up from 31.2% during the second quarter of 2020 as a result of a strategic shift to emphasize the financing of home purchases over the refinancing of existing mortgages. Mortgage loan originations were $266 million and mortgage banking revenue was $5.3million for the three months ended June 30, 2021 compared to $315 million in originations and $7.3 million in revenue for the same three month period of the previous year. -- Steady Gain on Sale Margin - The second quarter 2021 gain on sale margin was 2.79%, compared to 2.97% for the same quarter last year.

OpenSky

-- Continued Growth in OpenSky Accounts - OpenSky increased customer accounts by 10.2 percent with net growth during the quarter of 65 thousand accounts, driving total accounts to 708 thousand at June 30, 2021. -- Robust Growth in OpenSky Loans and Deposits - OpenSky loan balances increased by $68.3 million to $121.4 million compared to $53.1 million in the second quarter of 2020. Corresponding deposit balances increased 83.3 percent or $109.9 million from $131.9 million at June 30, 2021 to $241.7 million at June 30, 2021. This strong growth in loans and deposits appears to indicate that consumer behaviors are returning to historical trends.

Year to Date 2021 Highlights

Capital Bancorp

-- Diversified Businesses Drive Net Income - Net income for the six months ended June 30, 2021 increased 142.1 percent to $18.6million, or $1.32 per diluted share, from $7.7 million, or $0.55 per diluted share for the six months ended June 30, 2020. Continued strong operating results demonstrate the advantages of the Bank's diversified business lines that are, in certain respects, uncorrelated across economic cycles. -- Elevated Performance Ratios - Improved earnings supported ROAA and ROAE of 1.88% and 22.33%, respectively, for the six months ended June 30, 2021 compared to 1.03% and 11.17%, respectively, for the six months ended June 30, 2020. -- Expanded Net Interest Margin - For the six months ended June 30, 2021, net interest margin ("NIM") increased by 40 basis points to 5.32% compared to 4.92% for the six months ended June 30, 2020. The improvement in NIM was driven by an increase in average loans outstanding, including SBA-PPP and OpenSky, improving loan yields, and lower funding costs. -- Efficiency Ratio Continues to Improve - Increased revenue and active expense management improved the efficiency ratio to 66.73% for the six months ended June 30, 2021 compared to 69.32% for the same six month period in the prior year. -- Balance Sheet Growth - Total assets increased $275.3 million, or 14.7 percent, during the six months ended June 30, 2021. The growth of earning assets on the balance sheet consisted of increases in cash equivalents of $161.8 million, portfolio loans of $76.3 million, OpenSky loans of $19.2 million, investments available for sale of $60.7 million, and Bank Owned Life Insurance ("BOLI") of $35.0 million. Asset growth was primarily funded by a $265.3 million increase in deposits and a $17.9 million increase in shareholders' equity.

Commercial Bank

-- Strong Portfolio Loan Growth - Portfolio loans, which exclude SBA-PPP loans, increased by $61.0 million, or 5.0 percent to $1.3 billion for the six months ended June 30, 2021 compared to $1.2 billion at December31, 2020. The growth was primarily due to a 20.2 percent increase in commercial real estate loans. -- Improved Deposit Franchise and Lower Cost of Funding - Noninterest bearing deposits increased by $219.7 million, or 36.1 percent, during the six months ended June 30, 2021 and represent 43.2% of total deposits at June 30, 2021. The cost of interest bearing liabilities declined to 0.73% from 1.55% in the prior year. -- COVID-19 Related Deferrals - At June 30, 2021, outstanding loans deferred due to COVID-19 amounted to $11.9 million, a decrease of 91.7 percent from the high of $144.0 million at June 30, 2020 as shown in the table below.

LoanModifications ^(1)(dollars in millions) June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020 Deferred Loans Deferred Loans Deferred Loans Deferred Loans Total Loans # of # of # of # ofSector Outstanding Balance Loans Balance Loans Balance Loans Balance Loans Deferred Deferred Deferred DeferredAccommodation& Food $ 114.2 $ 5.0 7 $ 16.1 15 $ 14.7 16 $ 42.6 36 ServicesReal Estateand Rental 463.1 0.8 1 3.2 4 5.5 10 45.6 67 LeasingOtherServicesIncluding 171.2 0.3 1 ? ? 1.1 3 17.3 36 PrivateHouseholdsEducational 19.5 ? ? ? ? ? ? 9.8 6 ServicesConstruction 231.7 ? ? ? ? ? ? 4.2 6 Professional,Scientific, 57.4 ? ? 1.1 2 1.4 3 5.0 11 and TechnicalServicesArts,Entertainment 37.2 2.0 3 1.3 1 0.7 2 5.0 9 & RecreationRetail Trade 22.2 0.3 1 ? ? 0.3 1 3.0 8 Healthcare &Social 94.3 ? ? ? ? 0.9 1 4.7 11 AssistanceWholesale 16.0 ? ? ? ? ? ? 0.9 1 TradeAll other^ 368.4 3.5 3 3.7 3 5.9 7 5.9 13 (1)Total $ 1,595.2 $ 11.9 16 $ 25.4 25 $ 30.5 43 $ 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 35.7% of our $619.3 million of mortgage originations during the six months ended June 30, 2021, which compares to mortgage originations of $495.6 million for the same six month period last year. Mortgage revenues increased by $2.7 million or 26.4 percent to $13.0 million for the six months ended June 30, 2021 compared to $10.3 million for the six months ended June 30, 2020. Efforts to optimize product pricing and mix improved the average gain on sale to 2.91% compared to 2.82% in the prior year.

OpenSky

-- Growth in OpenSky Credit Card Accounts - Improved marketing and favorable market conditions resulted in the origination of 223 thousand new OpenSky credit card accounts during the six months ended June 30, 2021 compared to 215 thousand for the same six month period in 2020. At June 30, 2021, total open accounts had increased by 76.7 percent, or 307 thousand to 708 thousand from 401 thousand at June 30, 2020. -- Growth Contributing to Bank Performance - Account growth in the six months ended June 30, 2021 resulted in a $49.2 million increase in noninterest bearing secured credit card deposits that totaled $241.7 million at the end of the quarter. Corresponding credit card loans increased by $19.2 million, or 18.8 percent, for the six months ended June 30, 2021 and totaled $121.4 million. As a result, credit card fees increased by 177.5 percent, or $8.7 million, to $13.7 million compared to $4.9 million for the same six month period last year.

COMPARATIVE FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended Six Months Ended June 30, June 30, (amounts inthousands 2021 2020 % 2021 2020 %except per Change Changeshare data)Earnings SummaryInterest $ 29,289 $ 22,000 33.1 % $ 55,927 $ 43,744 27.9 %incomeInterest 1,769 3,376 (47.6 ) 3,964 7,433 (46.7 )expense % %Net interest 27,520 18,624 47.8 % 51,963 36,311 43.1 %incomeProvision for 781 3,300 (76.3 ) 1,284 5,709 (77.5 )loan losses % %Noninterest 13,471 11,101 21.3 % 27,421 16,636 64.8 %incomeNoninterest 27,205 19,905 36.7 % 52,972 36,704 44.3 %expenseIncome before 13,005 6,520 99.5 % 25,128 10,534 138.5 %income taxesIncome tax 3,357 1,759 90.8 % 6,499 2,839 128.9 %expenseNet income $ 9,648 $ 4,761 102.6 % $ 18,629 $ 7,695 142.1 % Pre-taxpre-provision $ 13,786 $ 9,820 40.4 % $ 26,412 $ 16,243 62.6 %net revenue("PPNR") ^(2)Weightedaverage 13,766 13,817 (0.4 ) 13,762 13,847 (0.6 )common shares % %- BasicWeightedaverage 14,172 13,817 2.6 % 14,070 13,877 1.4 %common shares- DilutedEarnings per $ 0.70 $ 0.34 103.4 % $ 1.35 $ 0.56 141.1 %share - BasicEarnings pershare - $ 0.68 $ 0.34 97.6 % $ 1.32 $ 0.55 140.0 %DilutedReturn onaverage 1.90 % 1.19 % 59.7 % 1.88 % 1.03 % 82.5 %assets ^(1)Return onaverageassets,excluding 1.65 % 1.04 % 58.7 % 1.60 % 0.95 % 68.4 %impact ofSBA-PPP loans^(1) (2)Return onaverage 22.36 % 13.70 % 63.2 % 22.33 % 11.17 % 99.9 %equity

Quarter Ended 2Q21 vs. Quarter Ended June 30, 2Q20 March 31, December 31, September 30,(in thousandsexcept per 2021 2020 % Change 2021 2020 2020share data)Balance Sheet HighlightsAssets $ 2,151,850 $ 1,822,365 18.1 % $ 2,091,851 $ 1,876,593 $ 1,879,029 Investmentsecurities 160,515 56,796 182.6 % 128,023 99,787 53,992 available forsaleMortgageloans held 47,935 116,969 (59.0 )% 60,816 107,154 137,717 for saleSBA-PPPloans, net of 202,763 229,646 (11.7 )% 265,712 201,018 233,349 fees ^(3)Portfolioloans 1,392,471 1,209,895 15.1 % 1,312,375 1,315,503 1,244,613 receivable ^(3)Allowance for 24,079 18,680 28.9 % 23,550 23,434 22,016 loan lossesDeposits 1,917,419 1,608,726 19.2 % 1,863,069 1,652,128 1,662,211 FHLB 22,000 25,556 (13.9 )% 22,000 22,000 22,222 borrowingsOtherborrowed 12,062 17,392 (30.6 )% 12,062 14,016 17,516 fundsTotalstockholders' 177,204 142,108 24.7 % 167,003 159,311 149,377 equityTangiblecommon equity 177,204 142,108 24.7 % 167,003 159,311 149,377 ^(2) Common shares 13,772 13,818 (0.3 )% 13,759 13,754 13,682 outstandingTangible bookvalue per $ 12.87 $ 10.28 25.1 % $ 12.14 $ 11.58 $ 10.92 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 June 30, 2021 and 2020

For the three months ended June 30, 2021, net interest income increased $8.9 million, or 47.8 percent, to $27.5 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 increased 75 basis point to 5.47% for the three months ended June 30, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.55% for the second quarter of 2021 compared to 3.96% for the same period in 2020. For the three months ended June 30, 2021, average interest earning assets increased $428.4 million, or 27.0 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets increased 25 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $103.0 million, or 10.4 percent, while the average cost decreased 73 basis points to 0.65% from 1.38%.

The provision for loan losses of $781 thousand for the three months ended June 30, 2021 was due primarily to a small number of loan charge-offs, which was offset by improving overall credit metrics. On an annualized basis, net charge-offs for the second quarter of 2021 were $252 thousand, or 0.08% of average loans, compared to $134 thousand, or 0.05% of average loans on an annualized basis, for the second quarter of 2020. The $252 thousand in net charge-offs during the quarter was comprised of $90 thousand in commercial loans and $162 thousand in credit cards.

For the quarter ended June 30, 2021, noninterest income was $13.5 million, an increase of $2.4 million, or 21.34 percent, from $11.1 million in the prior year quarter. The increase was primarily driven by significant growth in credit card fees of $4.8 million resulting from the higher number of credit card accounts which was partially offset by a decrease of $2.1 million in mortgage banking revenue.

For the three months ended June 30, 2021, OpenSky's net growth was 65 thousand secured credit card accounts, increasing the total number of open accounts to 708 thousand. This compares to 157 thousand net new accounts for the same period last year, which increased total open accounts to 401 thousand. Credit card loan balances increased by $37.7 million to $121.4 million as of June 30, 2021 from $53.1 million at June 30, 2020 and the related deposit account balances have increased 83 percent to $241.7 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 June 30, 2021 improved to 66.37% compared to 69.74% for the three months ended June 30, 2020 on higher levels of revenue and improved operating leverage.

Noninterest expense was $27.2 million for the three months ended June 30, 2021, as compared to $19.9 million for the three months ended June 30, 2020, an increase of $7.3 million, or 36.7 percent. The increase was primarily driven by a $4.5 million, or 79 percent, increase in data processing expenses, an increase in professional services of $0.5million, an increase in marketing and advertising of $0.7 million, and an increase in operating expenses of $1.0 million, or 42.8 percent, quarter over quarter. The increase of $4.5 million in data processing expenses was mainly attributed to the higher volume of open credit cards during the second quarter of 2021. In addition, the $1.0 million increase in operating expenses is due to increases in credit expenses, outside service providers, and FDIC insurance.

Operating Results - Comparison of Six Months Ended June 30, 2021 and 2020

For the six months ended June 30, 2021, net interest income increased $15.7 million, or 43.1 percent, to $52.0 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 increased 40 basis points to 5.32% for the six months ended June 30, 2021 from the same period in 2020. Net interest margin, excluding credit card and SBA-PPP loans, was 3.59% six months ended June 30, 2020 compared to 3.96% for the same period in 2020. For the six months ended June 30, 2021, average interest earning assets increased $486.6 million, or 32.8 percent, to $2.0 billion as compared to the same period in 2020, and the average yield on interest earning assets decreased 20 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $129.0 million, or 13.4 percent, while the average cost decreased 82 basis points to 0.73% from 1.55%.

For the six months ended June 30, 2021, the provision for loan losses was $1.3 million, a decrease of $4.4 million from the prior year to date period primarily due to the continued economic recovery from COVID-19. On an annualized basis, net charge-offs for the six months ended June 30, 2021 were $640 thousand, or 0.10% of average portfolio loans, compared to $330 thousand, or 0.05% of average portfolio loans on an annualized basis, for the same period in 2020. The $640 thousand in net charge-offs during the quarter was comprised of commercial loan charge-offs amounting to $195thousand and $445 thousand in our credit card portfolio.

For the six months ended June 30, 2021, noninterest income was $27.4 million, an increase of $10.8 million, or 64.8 percent, from the same period in 2020. The increase was primarily driven by significant growth in credit card fees, which increased by $8.7 million, and mortgage banking revenues, which increased $2.7 million.

For the six months ended June 30, 2021, the Bank originated 223 thousand new OpenSky secured credit card accounts, increasing the total number of open accounts to 708 thousand. This compares to 215 thousand new originations for the same period last year, which increased total open accounts to 401 thousand.

The efficiency ratio for the six months ended June 30, 2021 decreased to 66.73% compared to 69.32% for the six months ended June 30, 2020, primarily resulting from increased revenue in addition to management's efforts to control expenses.

Noninterest expense was $53.0 million for the six months ended June 30, 2021, as compared to $36.7 million for the six months ended June 30, 2020, an increase of $16.3 million, or 44.3%. The increase was primarily driven by an $1.4 million, or 8.8 percent, increase in salaries and benefits, an increase in professional fees of 79.5 percent, or $1.3 million, a $9.6 million, or 98.6 percent, increase in data processing, and a $2.0 million, or 45.4 percent, increase in other operating expenses period over the period. The increase of $6.4 million in data processing expenses was due to the higher volume of open credit cards and increased mortgage originations during the year. Additionally, operating expenses increased $2.0 million due to increases in credit expenses, outside service providers, and FDIC insurance.

During the six months ended June 30, 2021, results of operations were impacted by the COVID-19 pandemic and the resulting issuance of SBA-PPP loans. At June 30, 2021, SBA-PPP loans had remaining deferred origination fees of $6.5 million, and deferred costs of $1.2 million.

Financial Condition

Total assets at June 30, 2021 were $2.2 billion, an increase of 18.1 percent from June 30, 2020. Portfolio loans, which exclude mortgage loans held for sale and SBA-PPP loans, totaled $1.4 billion as of June 30, 2021, an increase of 15.1 percent as compared to $1.2 billion at June 30, 2020.

Total deposits at June 30, 2021 were $1.9 billion, an increase of 19.2 percent as compared to $1.6 billion at June 30, 2020. Noninterest bearing deposits increased by $264.3 million, or 46.9 percent, to $828.3 million at June 30, 2021 compared to the level at June 30, 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 OpenSky deposits.

The Company recorded a provision for loan losses of $1.3 million during the six months ended June 30, 2021, which increased the allowance for loan losses to $24.1 million, or 1.51% of total loans (1.73%, excluding SBA-PPP loans, on a non-GAAP basis) at June 30, 2021. Nonperforming assets were $11.6 million, or 0.54% of total assets, as of June 30, 2021, up from $9.2 million, or 0.50% of total assets, at June 30, 2020. Of the $11.6 million in total nonperforming assets as of June 30, 2021, nonperforming loans represented $8.4 million and foreclosed real estate totaled $3.2 million. Included in nonperforming loans at June 30, 2021 were troubled debt restructurings of $558 thousand.

Stockholders equity increased to $177.2 million as of June 30, 2021, compared to $142.1 million at June 30, 2020. This increase was primarily attributable to earnings during the period. As of June 30, 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 June Six Months Ended June 30, 30,(in thousands) 2021 2020 2021 2020Interest income Loans, including fees $ 28,641 $ 21,609 $ 54,709 $ 42,683 Investment securities 544 316 1,021 656 available for saleFederal funds sold and other 104 75 197 405 Total interest income 29,289 22,000 55,927 43,744 Interest expense Deposits 1,582 2,954 3,589 6,567 Borrowed funds 187 422 375 866 Total interest expense 1,769 3,376 3,964 7,433 Net interest income 27,520 18,624 51,963 36,311 Provision for loan losses 781 3,300 1,284 5,709 Net interest income after 26,739 15,324 50,679 30,602 provision for loan losses Noninterest income Service charges on deposits 165 110 312 259 Credit card fees 7,715 2,912 13,655 4,921 Mortgage banking revenue 5,270 7,321 13,013 10,293 Gain on sale of investmentsecurities available for 153 ? 153 ? sale, netOther fees and charges 168 758 288 1,163 Total noninterest income 13,471 11,101 27,421 16,636 Noninterest expenses Salaries and employee 8,750 8,498 17,317 15,910 benefitsOccupancy and equipment 1,195 1,152 2,324 2,330 Professional fees 1,362 894 2,987 1,664 Data processing 10,122 5,667 19,433 9,784 Advertising 1,293 606 2,126 1,242 Loan processing 975 740 2,026 1,187 Other real estate expenses, 273 82 277 128 netOther operating 3,235 2,266 6,482 4,459 Total noninterest expenses 27,205 19,905 52,972 36,704 Income before income taxes 13,005 6,520 25,128 10,534 Income tax expense 3,357 1,759 6,499 2,839 Net income $ 9,648 $ 4,761 $ 18,629 $ 7,695

Consolidated Balance Sheets (in thousands except share data) (unaudited) December 31, June 30, 2021 2020Assets Cash and due from banks $ 19,691 $ 18,456 Interest bearing deposits at other financial 286,738 126,081 institutionsFederal funds sold 2,237 2,373 Total cash and cash equivalents 308,666 146,910 Investment securities available for sale 160,515 99,787 Marketable equity securities 245 245 Restricted investments 3,478 3,713 Loans held for sale 47,935 107,154 U.S. Small Business Administration PayrollProtection Program ("SBA-PPP") loans receivable, 202,763 201,018 net of feesPortfolio loans receivable, net of deferred feesand costs and net of allowance for loan losses of 1,368,392 1,292,068 $24,079 and $23,434Premises and equipment, net 4,134 4,464 Accrued interest receivable 7,786 8,134 Deferred income taxes, net 7,381 6,818 Other real estate owned 3,236 3,326 Bank owned life insurance 35,004 ? Other assets 2,315 2,956 Total assets $ 2,151,850 $ 1,876,593 Liabilities Deposits Noninterest bearing $ 828,308 $ 608,559 Interest bearing 1,089,111 1,043,569 Total deposits 1,917,419 1,652,128 Federal Home Loan Bank advances 22,000 22,000 Other borrowed funds 12,062 14,016 Accrued interest payable 959 1,134 Other liabilities 22,206 28,004 Total liabilities 1,974,646 1,717,282 Stockholders' equity Common stock, $.01 par value; 49,000,000 sharesauthorized; 13,771,615 and 13,753,529 issued and 138 138 outstandingAdditional paid-in capital 51,487 50,602 Retained earnings 125,431 106,854 Accumulated other comprehensive income 148 1,717 Total stockholders' equity 177,204 159,311 Total liabilities and stockholders' equity $ 2,151,850 $ 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 June 30, 2021 2020 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 $ 259,330 $ 63 0.10 % $ 79,854 $ 19 0.09 %depositsFederal funds 3,087 ? 0.00 1,889 ? 0.05 soldInvestmentsecurities 139,997 544 1.56 58,860 316 2.16 available forsaleRestricted 3,478 41 4.70 4,152 56 5.46 stockLoans held 44,644 314 2.82 78,254 687 3.53 for saleSBA-PPP loans 250,040 2,272 3.64 166,033 1,011 2.45 receivablePortfolioloans 1,316,224 26,055 7.94 1,199,338 19,911 6.68 receivable^(2)Totalinterest 2,016,800 29,289 5.82 1,588,380 22,000 5.57 earningassetsNoninterestearning 24,432 24,459 assetsTotal assets $ 2,041,232 $ 1,612,839 Liabilitiesand Stockholders?EquityInterestbearing liabilities:Interestbearing $ 282,197 50 0.07 $ 182,095 171 0.38 demandaccountsSavings 6,634 1 0.05 4,522 1 0.05 Money market 460,669 352 0.31 472,802 1,279 1.09 accountsTime deposits 304,519 1,179 1.55 282,695 1,503 2.14 Borrowed 35,770 187 2.10 44,672 422 3.79 fundsTotalinterest 1,089,789 1,769 0.65 986,786 3,376 1.38 bearingliabilitiesNoninterestbearing liabilities:Noninterestbearing 20,111 21,647 liabilitiesNoninterestbearing 758,255 464,702 depositsStockholders? 173,077 139,704 equityTotalliabilitiesand $ 2,041,232 $ 1,612,839 stockholders?equity Net interest 5.17 % 4.19 %spreadNet interest $ 27,520 $ 18,624 incomeNet interest 5.47 % 4.72 %margin^(3)

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(1) Annualized.(2) Includes nonaccrual loans.(3) For the three months ended June 30, 2021 and June 30, 2020, collectively, SBA-PPP loans and credit card loans accounted for 192 and 76 basis points of the reported net interest margin, respectively.

Six Months Ended June 30, 2021 2020 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 $ 232,712 $ 113 0.10 % $ 88,238 $ 278 0.63 %depositsFederal funds 3,477 ? 0.00 1,479 4 0.51 soldInvestmentsecurities 123,443 1,022 1.67 59,628 656 2.21 available forsaleRestricted 3,691 83 4.56 4,035 123 6.15 stockLoans held 58,475 794 2.74 60,180 1,053 3.52 for saleSBA-PPP loans 242,619 4,741 3.94 83,060 1,011 2.45 receivablePortfolioloans 1,305,973 49,174 7.59 1,187,170 40,619 6.88 receivable^(2)Totalinterest 1,970,390 55,927 5.72 1,483,790 43,744 5.93 earningassetsNoninterestearning 25,113 21,279 assetsTotal assets $ 1,995,503 $ 1,505,069 Liabilitiesand Stockholders?EquityInterestbearing liabilities:Interestbearing $ 269,647 118 0.09 $ 162,985 398 0.49 demandaccountsSavings 6,127 2 0.05 4,463 4 0.17 Money market 465,882 881 0.38 459,865 2,967 1.30 accountsTime deposits 318,512 2,588 1.64 293,374 3,198 2.19 Borrowed 34,699 375 2.18 45,214 866 3.85 fundsTotalinterest 1,094,867 3,964 0.73 965,901 7,433 1.55 bearingliabilitiesNoninterestbearing liabilities:Noninterestbearing 22,940 20,744 liabilitiesNoninterestbearing 709,443 379,881 depositsStockholders? 168,253 138,543 equityTotalliabilitiesand $ 1,995,503 $ 1,505,069 stockholders?equity Net interest 4.99 % 4.38 %spreadNet interest $ 51,963 $ 36,311 incomeNet interest 5.32 % 4.92 %margin^(3)

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(1) Annualized.(2) Includes nonaccrual loans.(3) For the six months ended June 30, 2021 and June 30, 2020, collectively, SBA-PPP loans and credit card loans accounted for 173 and 96 basis points of the reported net interest margin, respectively.

HISTORICAL FINANCIAL HIGHLIGHTS - Unaudited Quarter Ended(Dollars inthousands June 30, 2021 March 31, December 31, September 30, June 30,except per 2021 2020 2020 2020share data)Earnings: Net income $ 9,648 $ 8,982 $ 9,689 $ 8,438 $ 4,761 Earnings percommon share, 0.68 0.65 0.71 0.61 0.34 dilutedNet interest 5.47 % 5.15 % 5.57 % 5.01 % 4.72 %marginNet interestmargin,excluding 3.55 % 3.70 % 3.80 % 3.84 % 3.96 %credit cards &SBA-PPP loans^(1)Return onaverage assets 1.90 % 1.87 % 2.08 % 1.89 % 1.19 %^(2)Return onaverageassets,excluding 1.65 % 1.60 % 1.88 % 1.80 % 1.04 %impact ofSBA-PPP loans^(1)(2)Return onaverage equity 22.36 % 22.30 % 25.26 % 23.28 % 13.70 %^(2)Efficiency 66.37 % 67.11 % 66.63 % 65.17 % 69.74 %ratioBalance Sheet: Portfolioloans $ 1,392,471 $ 1,312,375 $ 1,315,503 $ 1,244,613 $ 1,209,895 receivable ^(3)Deposits 1,917,419 1,863,069 1,652,128 1,662,211 1,608,726 Total assets 2,151,850 2,091,851 1,876,593 1,879,029 1,822,365 Asset Quality Ratios:Nonperformingassets to 0.54 % 0.58 % 0.67 % 0.79 % 0.50 %total assetsNonperformingassets tototal assets, 0.60 % 0.66 % 0.75 % 0.90 % 0.58 %excluding theSBA-PPP loans^(1)Nonperformingloans to total 0.52 % 0.56 % 0.61 % 0.78 % 0.41 %loansNonperformingloans to 0.60 % 0.67 % 0.70 % 0.92 % 0.48 %portfolioloans ^(1)Netcharge-offs toaverage 0.10 % 0.12 % 0.19 % 0.06 % 0.05 %portfolioloans ^(1)(2)Allowance forloan losses to 1.51 % 1.49 % 1.54 % 1.49 % 1.30 %total loansAllowance forloan losses to 1.73 % 1.79 % 1.78 % 1.77 % 1.54 %portfolioloans ^(1)Allowance forloan losses to 287.40 % 267.07 % 253.71 % 191.78 % 318.25 %non-performingloansBank Capital Ratios:Total riskbased capital 13.51 % 13.55 % 12.60 % 12.74 % 12.35 %ratioTier 1 riskbased capital 12.25 % 12.29 % 11.34 % 11.48 % 11.10 %ratioLeverage ratio 7.58 % 7.54 % 7.45 % 7.44 % 7.73 %Common equityTier 1 capital 12.25 % 12.29 % 11.34 % 11.48 % 11.10 %ratioTangible 7.17 % 7.01 % 7.43 % 7.09 % 6.91 %common equityHoldingCompany CapitalRatios:Total riskbased capital 16.14 % 16.07 % 15.19 % 15.35 % 15.02 %ratioTier 1 riskbased capital 14.10 % 13.98 % 13.10 % 12.93 % 12.58 %ratioLeverage ratio 8.78 % 8.84 % 8.78 % 8.63 % 8.85 %Common equityTier 1 capital 13.94 % 13.81 % 12.94 % 12.75 % 12.39 %ratioTangible 8.23 % 7.98 % 8.48 % 7.95 % 7.80 %common equityComposition of Loans:Residential $ 420,015 $ 420,460 $ 437,860 $ 422,698 $ 437,429 real estateCommercial 471,807 433,336 392,550 372,972 364,071 real estateConstruction 223,832 221,277 224,904 227,661 212,957 real estateCommercial andindustrial - 158,392 149,914 157,127 134,889 142,673 OtherSBA-PPP loans 208,094 272,090 204,920 238,735 236,325 Credit card 121,410 83,740 102,186 84,964 53,150 Other consumer 1,034 4,487 1,649 2,268 947 loansComposition of Deposits:Noninterest $ 828,308 $ 771,924 $ 608,559 $ 596,239 $ 563,995 bearingInterest 314,883 300,992 257,126 247,150 268,150 bearing demandSavings 6,965 6,012 4,800 4,941 5,087 Money Markets 484,567 471,303 447,077 472,447 507,432 Time Deposits 282,696 312,839 334,566 341,435 264,062 Capital Bank Home Loan Metrics: Origination ofloans held for $ 265,517 $ 353,774 $ 382,267 $ 431,060 $ 315,165 saleMortgage loans 278,284 400,112 412,830 410,312 272,151 soldGain on sale 7,763 12,008 12,950 12,837 8,088 of loansPurchasevolume as a % 50.64 % 24.59 % 30.03 % 33.76 % 31.16 %oforiginationsGain on saleas a % of 2.79 % 3.00 % 3.14 % 3.13 % 2.97 %loans sold^(4)Mortgage $ 2,364 $ 3,320 3,405 $ 3,669 $ 2,798 commissionsOpenSky^ Portfolio Metrics: Activecustomer 707,600 642,272 568,373 529,114 400,530 accountsCredit card $ 121,410 $ 83,740 $ 102,186 $ 83,101 $ 53,150 loans, netNoninterestsecured credit 241,724 215,883 192,520 176,708 131,854 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 mortgage loans sold.



Appendix

Reconciliation of Non-GAAP Measures

Return onAverageAssets, Quarters EndedasAdjustedDollars December 31, September 30,in June 30, 2021 March 31, 2021 2020 2020 June 30, 2020Thousands Net $ 9,648 $ 8,982 $ 9,689 $ 8,438 $ 4,761 IncomeLess:SBA-PPP 2,272 2,205 1,998 1,470 1,011 loanincomeNetIncome, $ 7,376 $ 6,777 $ 7,691 $ 6,968 $ 3,750 asAdjustedAverageTotal 2,041,232 1,949,265 1,854,846 1,781,295 1,612,839 AssetsLess:Average 250,040 232,371 227,617 238,071 168,490 SBA-PPPLoansAverageTotalAssets, $ 1,791,192 $ 1,716,894 $ 1,627,229 $ 1,543,224 $ 1,444,349 asAdjustedReturn onAverageAssets, 1.65 % 1.60 % 1.88 % 1.80 % 1.04 %asAdjusted

NetInterestMargin, Quarters EndedasAdjustedDollars December 31, September 30,in June 30, 2021 March 31, 2021 2020 2020 June 30, 2020Thousands NetInterest $ 27,520 $ 24,444 $ 25,719 $ 22,039 $ 18,624 IncomeLessSecuredcredit 10,497 7,660 9,306 6,632 4,066 card loanincomeLessSBA-PPP 2,272 2,205 1,998 1,470 1,011 loanincomeNetInterestIncome, $ 14,750 $ 14,580 $ 14,415 $ 13,937 $ 13,547 asAdjustedAverageInterest 2,016,801 1,923,463 1,836,337 1,748,894 1,588,380 EarningAssetsLessAveragesecured 100,456 93,520 95,739 68,585 42,538 creditcardloansLessAverage 250,040 232,371 227,617 235,160 168,490 SBA-PPPloansTotalAverageInterestEarning $ 1,666,304 $ 1,597,573 $ 1,512,981 $ 1,445,149 $ 1,377,352 Assets,asAdjustedNetInterestMargin, 3.55 % 3.70 % 3.80 % 3.84 % 3.96 %asAdjusted

Tangible BookValue per Quarters EndedShareDollars inThousands, June 30, March 31, December 31, September June 30,Except Per 2021 2021 2020 30, 2020 2020Share Amount TotalStockholders' $ 177,204 $ 167,003 $ 159,311 $ 149,377 $ 142,108 EquityLess:Preferred ? ? ? ? ? equityLess:Intangible ? ? ? ? ? assetsTangible $ 177,204 $ 167,003 $ 159,311 $ 149,377 $ 142,108 Common EquityPeriod EndShares 13,771,615 13,759,218 13,753,529 13,682,198 13,818,223 OutstandingTangible BookValue per $ 12.87 $ 12.14 $ 11.58 $ 10.92 $ 10.28 Share

Allowance forLoan Lossesto Total Quarters EndedPortfolioLoansDollars in June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020Thousands 2020 2020 Allowance for $ 24,079 $ 23,550 $ 23,434 $ 22,016 $ 18,680 Loan LossesTotal Loans 1,595,234 1,578,087 1,516,520 1,477,962 1,441,123 Less: SBA-PPP 202,763 265,712 201,018 233,349 229,646 loansTotalPortfolio $ 1,392,471 $ 1,312,375 $ 1,315,503 $ 1,244,613 $ 1,211,477 LoansAllowance forLoan Lossesto Total 1.73 % 1.79 % 1.78 % 1.77 % 1.54 %PortfolioLoans NonperformingAssets toTotal Assets, Quarters Endednet SBA-PPPLoansDollars in June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020Thousands 2020 2020 TotalNonperforming $ 11,615 $ 12,112 $ 12,563 $ 14,806 $ 9,195 AssetsTotal Assets 2,151,850 2,091,851 1,876,593 1,879,029 1,822,365 Less: SBA-PPP 202,763 265,712 201,018 233,349 229,646 loansTotal Assets,net SBA-PPP $ 1,949,087 $ 1,826,139 $ 1,675,575 $ 1,645,680 $ 1,592,719 LoansNonperformingAssets toTotal Assets, 0.60 % 0.66 % 0.75 % 0.90 % 0.58 %net SBA-PPPLoans NonperformingLoans to Quarters EndedPortfolioLoansDollars in June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020Thousands 2020 2020 TotalNonperforming $ 8,378 $ 8,818 $ 9,237 $ 11,480 $ 5,869 LoansTotal Loans 1,595,234 1,578,087 1,516,520 1,477,962 1,441,123 Less: SBA-PPP 202,763 265,712 201,018 233,349 229,646 loansTotalPortfolio $ 1,392,471 $ 1,312,375 $ 1,315,503 $ 1,244,613 $ 1,211,477 LoansNonperformingLoans toTotal 0.60 % 0.67 % 0.70 % 0.92 % 0.48 %PortfolioLoans NetCharge-offsto Average Quarters EndedPortfolioLoansDollars in June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020Thousands 2020 2020 Total Net $ 640 $ 388 $ 615 $ 163 $ 134 Charge-offsTotal Average 1,567,973 1,532,093 1,494,278 1,477,962 1,365,371 LoansLess: Average 250,040 232,371 227,617 233,349 84,245 SBA-PPP loansTotal AveragePortfolio $ 1,317,932 $ 1,299,722 $ 1,266,661 $ 1,244,613 $ 1,281,126 LoansNetCharge-offsto Average 0.19 % 0.12 % 0.19 % 0.05 % 0.05 %PortfolioLoans Pre-tax,Pre-provision Quarters EndedNet Revenue("PPNR")Dollars in June 30, 2021 March 31, 2021 December 31, September 30, June 30, 2020Thousands 2020 2020 Net income $ 9,648 $ 8,982 $ 9,689 $ 8,438 $ 4,761 Add: Income 3,357 3,143 3,347 3,128 1,759 Tax ExpenseAdd:Provision for 781 503 2,033 3,500 3,300 Loan LossesPre-tax,Pre-provision $ 13,786 $ 12,628 $ 15,069 $ 15,066 $ 9,820 Net Revenue("PPNR")

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 June 30, 2021. 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 $2.2 billion at June 30, 2021 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.comunder 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, "optimistic," 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 some of the 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