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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2025         OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission file number 001-38671
capitalbancorplogoa19.jpg
CAPITAL BANCORP INC.
(Exact name of registrant as specified in its charter)
Maryland
52-2083046
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
2275 Research Boulevard
Suite 600
Rockville
Maryland
20850
(Address of principal executive offices)
(Zip Code)
(301) 468-8848
Registrant’s telephone number, including area code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareCBNKNASDAQ Stock Market

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.             Yes x No ¨

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                         Yes x No ¨

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated Filer☒
Non-accelerated filer¨Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes ☐ No x

As of May 7, 2025, the Company had 16,564,341 shares of common stock, par value $0.01 per share, outstanding.

Capital Bancorp, Inc. and Subsidiaries
Form 10-Q
INDEX

PART I - CONSOLIDATED FINANCIAL INFORMATIONPage
Item 1.Consolidated Financial Statements (Unaudited)
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits



PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Capital Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)

(in thousands, except share data)March 31, 2025December 31, 2024
Assets
Cash and due from banks$27,836 $25,433 
Interest-bearing deposits at other financial institutions266,092 179,841 
Federal funds sold59 58 
Total cash and cash equivalents
293,987 205,332 
Investment securities available-for-sale213,452 223,630 
Restricted investments7,031 4,479 
Loans held for sale34,656 21,270 
Portfolio loans receivable, net of deferred fees and costs2,678,406 2,630,163 
Less allowance for credit losses(48,454)(48,652)
Total portfolio loans held for investment, net2,629,952 2,581,511 
Premises and equipment, net
15,085 15,525 
Accrued interest receivable19,458 16,664 
Goodwill24,085 21,126 
Intangible assets13,861 14,072 
Core deposit intangibles1,695 1,745 
Loan servicing assets2,244 5,511 
Deferred tax asset15,902 16,670 
Bank owned life insurance44,335 43,956 
Other assets34,062 35,420 
Total assets
$3,349,805 $3,206,911 
Liabilities
Deposits
Noninterest-bearing$812,224 $810,928 
Interest-bearing2,079,109 1,951,011 
Total deposits
2,891,333 2,761,939 
Federal Home Loan Bank advances22,000 22,000 
Other borrowed funds12,062 12,062 
Accrued interest payable9,995 9,393 
Other liabilities44,838 46,378 
Total liabilities
2,980,228 2,851,772 
Stockholders' equity
Common stock, $0.01 par value; 49,000,000 shares authorized;
16,657,168 issued and outstanding at March 31, 2025;
16,662,626 issued and outstanding at December 31, 2024
167 167 
Additional paid-in capital128,692 128,598 
Retained earnings249,925 237,843 
Accumulated other comprehensive loss(9,207)(11,469)
Total stockholders' equity
369,577 355,139 
Total liabilities and stockholders' equity
$3,349,805 $3,206,911 


See accompanying Notes to Unaudited Consolidated Financial Statements
2

Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (unaudited)

Three Months Ended
March 31,
(dollars in thousands, except per share data)20252024
Interest income
Loans, including fees$58,691 $45,991 
Investment securities available-for-sale1,861 1,251 
Federal funds sold and other2,208 1,127 
Total interest income62,760 48,369 
Interest expense
Deposits16,512 12,833 
Borrowed funds201 528 
Total interest expense16,713 13,361 
Net interest income46,047 35,008 
Provision for credit losses2,246 2,727 
Provision for credit losses on unfunded commitments— 142 
Net interest income after provision for credit losses43,801 32,139 
Noninterest income
Service charges on deposits258 207 
Credit card fees3,722 3,881 
Mortgage banking revenue1,831 1,453 
Government lending revenue1,096 — 
Government loan servicing revenue3,568 — 
Loan servicing rights (government guaranteed)472 — 
Other income1,602 431 
Total noninterest income12,549 5,972 
Noninterest expenses
Salaries and employee benefits
18,067 12,907 
Occupancy and equipment2,910 1,613 
Professional fees2,112 1,947 
Data processing7,112 6,761 
Advertising1,779 2,032 
Loan processing743 371 
Foreclosed real estate expenses, net1 1 
Merger-related expenses1,266 712 
Operational losses903 931 
Regulatory assessment expenses889 473 
Other operating2,271 1,739 
Total noninterest expenses38,053 29,487 
Income before income taxes18,297 8,624 
Income tax expense4,365 2,062 
Net income$13,932 $6,562 
Basic earnings per share$0.84 $0.47 
Diluted earnings per share$0.82 $0.47 
Weighted average common shares outstanding:
Basic16,665,528 13,918,724 
Diluted16,925,454 13,918,724 

See accompanying Notes to Unaudited Consolidated Financial Statements
3

Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (unaudited)

Three Months Ended
March 31,
(in thousands)20252024
Net income$13,932 $6,562 
Other comprehensive income (loss):
Unrealized gain (loss) on investment securities available-for-sale2,991 (589)
Income tax (expense) benefit relating to the items above(729)52 
Other comprehensive income (loss)2,262 (537)
Comprehensive income$16,194 $6,025 

See accompanying Notes to Unaudited Consolidated Financial Statements
4

Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

Common StockAdditional
Paid-in
Capital		Retained
Earnings		Accumulated Other Comprehensive LossTotal
Stockholders'
Equity
(dollars in thousands)SharesAmount
Balance, December 31, 202313,922,532 $139 $54,473 $213,345 $(13,097)$254,860 
Net income— — — 6,562 — 6,562 
Unrealized loss on investment securities available-for-sale, net of income taxes— — — — (537)(537)
Stock options exercised, net of shares withheld for purchase price10,171 — 146 (39)— 107 
Shares issued as compensation24,729 — 537 (22)— 515 
Stock-based compensation— — 472 — — 472 
Cash dividends to stockholders ($0.08 per share)
— — — (1,115)— (1,115)
Shares repurchased and retired(67,869)— (1,399)— — (1,399)
Balance, March 31, 202413,889,563 $139 $54,229 $218,731 $(13,634)$259,465 
Balance, December 31, 202416,662,626 $167 $128,598 $237,843 $(11,469)$355,139 
Net income— — — 13,932 — 13,932 
Unrealized gain on investment securities available-for-sale, net of income taxes— — — — 2,262 2,262 
Stock options exercised, net of shares withheld for purchase price10,396 — 164 (121)— 43 
Shares issued as compensation6,331 — 141 (63)— 78 
Stock-based compensation— — 407 — — 407 
Cash dividends to stockholders ($0.10 per share)
— — — (1,666)— (1,666)
Shares repurchased and retired(22,185)— (618)— — (618)
Balance, March 31, 202516,657,168 $167 $128,692 $249,925 $(9,207)$369,577 


See accompanying Notes to Unaudited Consolidated Financial Statements
5

Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
Three Months Ended
March 31,
(in thousands)20252024
Cash flows from operating activities
Net income$13,932 $6,562 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses2,246 2,727 
Provision for credit losses on unfunded commitments— 142 
Provision for mortgage put-back reserve, net16 13 
Net amortization on investment securities available-for-sale35 60 
Premises and equipment depreciation215 85 
Lease asset amortization419 238 
Amortization of intangible assets261 — 
Increase in cash surrender value of BOLI(379)(351)
Net change in loan servicing assets3,267 — 
Executive long-term incentive plan expense143 149 
Stock-based compensation expense407 472 
Director and employee compensation paid in Company stock78 515 
Deferred income tax benefit1 (7)
Valuation allowance on derivatives28 — 
Decrease in valuation of loans held for sale carried at fair value(63)— 
Proceeds from sales of loans held for sale81,462 37,555 
Originations of loans held for sale(72,909)(40,377)
Government lending revenue(1,096)— 
Changes in assets and liabilities:
Accrued interest receivable(2,794)(764)
Taxes payable4,037 489 
Other assets(1,657)(8,885)
Accrued interest payable602 426 
Other liabilities(5,670)(2,461)
Net cash provided by (used in) operating activities22,581 (3,412)
Cash flows from investing activities
Purchases of securities available-for-sale(240)(15,362)
Proceeds from calls and maturities of securities available-for-sale13,374 20,788 
Net purchases of restricted investments(2,552)(88)
Net increase in portfolio loans receivable(71,467)(63,224)
Net (purchases) sales of premises and equipment(194)246 
Net cash used in investing activities(61,079)(57,640)
See accompanying Notes to Unaudited Consolidated Financial Statements
6

Capital Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited) (continued)
Three Months Ended
March 31,
(in thousands)20252024
Cash flows from financing activities
Net increase (decrease) in:
Noninterest-bearing deposits1,296 48,439 
Interest-bearing deposits128,098 61,260 
Other borrowed funds— (15,000)
Dividends paid(1,666)(1,115)
Repurchase of common stock(618)(1,399)
Net proceeds from exercise of stock options43 107 
Net cash provided by financing activities127,153 92,292 
Net increase in cash and cash equivalents88,655 31,240 
Cash and cash equivalents, beginning of year$205,332 53,964 
Cash and cash equivalents, end of period$293,987 $85,204 
Noncash investing and financing activities:
Change in unrealized gains (losses) on investments$2,991 $(589)
Goodwill measurement period adjustment$2,959 $— 
Cash paid during the period for:
Taxes$8 $36 
Interest$16,111 $12,935 
See accompanying Notes to Unaudited Consolidated Financial Statements
7

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 1 - Nature of Business and Basis of Presentation
Nature of operations:
Capital Bancorp, Inc. is a Maryland corporation and the bank holding company (the “Company”) for Capital Bank, N.A. (the “Bank”). The Company's primary operations are conducted by the Bank, which is headquartered in Rockville, Maryland. The Company serves businesses, not-for-profit associations, entrepreneurs and others throughout the Washington D.C., Baltimore, other Maryland metropolitan areas, Florida, Illinois and North Carolina through seven commercial bank branches, one mortgage banking office, three loan production offices, three government loan servicing offices, and one credit card operations office. The Bank is principally engaged in providing commercial, real estate, and credit card loans along with other banking services, and attracting deposits.
The Company issues credit cards through OpenSky™, a digitally-driven, nationwide credit card platform providing secured, partially secured, and unsecured credit solutions, and originates residential mortgages for sale in the secondary market through Capital Bank Home Loans (“CBHL”), the Bank’s residential mortgage banking arm. Additionally, Windsor Advantage™, a wholly-owned subsidiary of the Company, is a loan service provider that offers community banks and credit unions with a comprehensive U.S. Small Business Association (“SBA”) 7(a) and U.S. Department of Agriculture (“USDA”) lending platform.
In addition, the Company owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”). The Trust is a special purpose non-consolidated entity organized for the sole purpose of issuing trust preferred securities.
Basis of presentation:
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with rules and regulations of the Securities and Exchange Commission (“SEC”) and include the activity of the Company and its wholly-owned subsidiaries, the Bank, Windsor Advantage™, and Church Street Capital. The statements do not include all of the information and footnotes required by GAAP for complete financial statements. All adjustments have been made which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Such adjustments are all of a normal and recurring nature. All significant inter-company accounts and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto as of December 31, 2024, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
The Company reports its activities as four divisions and reporting segments: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans. In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment.
Significant accounting policies:
The preparation of consolidated financial statements in accordance with GAAP requires estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The primary reference point for the estimates is on historical experience and assumptions believed to be reasonable regarding the value of certain assets
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Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

Note 1 - Nature of Business and Basis of Presentation (continued)
and liabilities that are not readily available from other sources. Estimates are evaluated on an ongoing basis. Actual results may materially differ from these estimates under different assumptions or conditions. The Company’s significant accounting policies are described in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no changes to our significant accounting policies during the three months ended March 31, 2025.
Recent Adoption of New Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). ASU 2023-07 requires public entities to disclose significant segment expenses, an amount and description for other segment items, the title and position of the entity’s chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measures of profit or loss to assess segment performance, and, on an interim basis, certain segment related disclosures that previously were required only on an annual basis. ASU 2023-07 also clarifies that entities with a single reportable segment are subject to both new and existing segment reporting requirements and that an entity is permitted to disclose multiple measures of segment profit or loss, provided that certain criteria are met. ASU 2023-07 is effective for the Company for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07 effective December 31, 2024. See Note 9 - Segments for new disclosures required by ASU 2023-07.
Recently Issued Accounting Pronouncements:
In December 2023, the FASB issued Accounting Standards Update 2023-09, “Income Taxes (Topic 740), Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. ASU 2023-09 also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. ASU 2023-09 is effective for the Company for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company will update its income tax disclosures upon adoption.
In November 2024, the FASB issued Accounting Standards Update 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)" ("ASU 2024-03"). ASU 2024-03 requires public entities to provide disaggregated disclosures, in the notes to the financial statements, of certain categories of expenses that are included in expense line items on the face of the income statement. ASU 2024-03 is effective for the Company for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company will update its expense disclosures upon adoption.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.
Reclassifications:
Certain reclassifications have been made to amounts reported in prior periods to conform to the
9

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

Note 1 - Nature of Business and Basis of Presentation (continued)
current period presentation. The reclassifications had no material effect on net income or total stockholders' equity.
Subsequent events:
Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. For further information on a subsequent event related to the Company’s quarterly dividend, refer to Note 10.
10

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Acquisition
Acquisition of Integrated Financial Holdings, Inc.
On October 1, 2024, the Company completed its acquisition of Integrated Financial Holdings, Inc. (“IFH”). IFH merged with and into the Company, with the Company continuing as the surviving corporation in the acquisition. Immediately following the acquisition, West Town Bank & Trust, merged with and into Capital Bank, with Capital Bank as the surviving bank. During the first quarter of 2025, the Company successfully converted IFH’s banking systems and operations onto Capital Bank’s platforms.

11

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Acquisition
The following table summarizes the consideration paid for IFH and the amounts of the assets acquired and liabilities assumed at the October 1, 2024 acquisition date:
Purchase Price Consideration and Net Assets Acquired
(dollars in thousands, except shares issued and price per share)
Common share consideration
Shares of common stock issued2,631,847 
Price per share on September 30, 2024$25.71 
Common stock consideration$67,665 
Cash consideration12,652 
Consideration for other equity instruments3,199 
Purchase price consideration$83,516 
Assets
Cash and cash equivalents$77,822 
Investment securities available-for-sale1,019 
Loans held for sale41,723 
Portfolio loans held for investment, net362,180 
Premises and equipment, net7,104 
Customer list intangible12,200 
Trade name intangible2,100 
Core deposits intangible1,779 
Loan servicing assets4,515 
Deferred tax asset9,324 
Bank owned life insurance4,779 
Other assets13,731 
Total assets acquired$538,276 
Liabilities
Deposits$458,952 
Other liabilities16,934 
Total liabilities assumed$475,886 
Total identifiable net assets$62,390 
Goodwill$21,126 
The assets purchased and liabilities assumed in the acquisition were recorded at their estimated fair values at the time of closing, subject to refinement for up to one year after the closing date. During the
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Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Acquisition
first quarter of 2025, the Company revised the estimate of adjusted servicing assets and other liabilities resulting in a $3.0 million increase in goodwill at March 31, 2025 as compared to December 31, 2024. The Company’s acquisition of IFH is discussed in detail in Note 2 “Business Combination” in the “Notes to the Consolidated Financial Statements” contained in Part II. Item 8 "Financial Statements and Supplementary Data" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
During the three months ended March 31, 2025 and 2024, the Company incurred merger-related expenses related to the acquisition of IFH totaling $1.3 million and $0.7 million, respectively.
Note 3 - Investment Securities
The following table summarizes the amortized cost, fair value and allowance for credit losses (“ACL”) of securities available-for-sale at March 31, 2025 and December 31, 2024, respectively, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss:
(in thousands)
Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Allowance for Credit LossesFair
Value
March 31, 2025
U.S. Treasuries$126,780 $75 $(8,068)$— $118,787 
Municipal11,698 8 (2,156)— 9,550 
Corporate5,000 — (289)— 4,711 
Asset-backed securities5,391 23 — — 5,414 
Mortgage-backed securities76,697 94 (1,801)— 74,990 
Total$225,566 $200 $(12,314)$— $213,452 
December 31, 2024
U.S. Treasuries$136,831 $42 $(10,038)$— $126,835 
Municipal11,698 5 (2,420)— 9,283 
Corporate5,000 — (289)— 4,711 
Asset-backed securities5,501 25 — — 5,526 
Mortgage-backed securities79,939 2 (2,666)— 77,275 
Total$238,969 $74 $(15,413)$— $223,630 
There were no securities sold during the three months ended March 31, 2025 or the three months ended March 31, 2024. There was no ACL required on available-for-sale debt securities in an unrealized loss position at March 31, 2025 and December 31, 2024.
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Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 3 - Investment Securities (continued)
The amortized cost and fair value of debt securities are shown by contractual maturity. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
March 31, 2025December 31, 2024
(in thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Within one year$10,000 $9,993 $20,003 $19,882 
One to five years97,014 91,901 97,052 90,570 
Five to ten years31,946 27,732 29,785 25,446 
Beyond ten years4,518 3,422 6,689 4,931 
Asset-backed securities(1)
5,391 5,414 5,501 5,526 
Mortgage-backed securities(1)
76,697 74,990 79,939 77,275 
Total$225,566 $213,452 $238,969 $223,630 
_______________
(1)    Asset-backed and Mortgage-backed securities are due in monthly installments.

There were no securities pledged at March 31, 2025 and December 31, 2024 to secure public deposits and repurchase agreements.
At March 31, 2025 and December 31, 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
The following table summarizes debt securities available-for-sale in an unrealized loss position for which an ACL has not been recorded at March 31, 2025 and December 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position:
Less than 12 months12 months or longerTotal
(in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
March 31, 2025
U.S. Treasuries$— $— $102,987 $(8,068)$102,987 $(8,068)
Municipal— — 8,634 (2,156)8,634 (2,156)
Corporate— — 4,711 (289)4,711 (289)
Mortgage-backed securities36,339 (342)18,201 (1,459)54,540 (1,801)
Total$36,339 $(342)$134,533 $(11,972)$170,872 $(12,314)
December 31, 2024
U.S. Treasuries$10,883 $(93)$111,196 $(9,945)$122,079 $(10,038)
Municipal— — 8,373 (2,420)8,373 (2,420)
Corporate— — 4,711 (289)4,711 (289)
Mortgage-backed securities55,243 (901)18,272 (1,765)73,515 (2,666)
Total$66,126 $(994)$142,552 $(14,419)$208,678 $(15,413)
As of March 31, 2025, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at March 31, 2025 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of March 31, 2025 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at March 31, 2025,
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Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 3 - Investment Securities (continued)
other than securities issued or guaranteed by U.S. Government entities or agencies including U.S. Treasuries and substantially all of the Company’s mortgage-backed securities, is as follows:
Corporate Securities — There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are five securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.
Municipal Securities — All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. Summary ratings information at March 31, 2025, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows: AAA - 82% of the portfolio; AA+ - 8%; AA - 10%.
Asset-backed Securities — There were three investment grade asset-backed securities, and there have been no payment defaults on these securities.
As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of March 31, 2025.
15

Note 4 - Loan Servicing
Activity for loan servicing rights and the related valuation allowance as follows for the periods presented:
Loan servicing rights:
(in thousands)March 31, 2025December 31, 2024
Balance at beginning of period$5,511 $— 
Additions110 5,096 
Other changes in fair value(3,377)415 
Balance at end of period$2,244 $5,511 
The fair value at March 31, 2025 was determined using a discount rate of 13.5%, prepayment speeds ranging from 13.2% to 18.5%, depending on the stratification of the specific right, and a weighted average default rate of 0.7%. The fair value at December 31, 2024 was determined using a discount rate of 13.5%, prepayment speeds ranging from 12.8% to 18.2%, depending on the stratification of the specific right, and a weighted average default rate of 0.7%. The changes in fair value for loan servicing rights from December 31, 2024 to March 31, 2025 was due to the refinement of assumptions used in the valuation of the servicing assets post acquisition.


16

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements

Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses
The following is a summary of the major categories of total loans outstanding:
March 31, 2025December 31, 2024
(in thousands)AmountPercentAmountPercent
Real estate:
Residential$693,597 26 %$688,552 26 %
Commercial931,675 35 %943,019 36 %
Construction343,280 13 %321,252 12 %
Commercial and Industrial594,331 22 %554,550 21 %
Credit card, net of reserve(1)
118,709 4 %127,766 5 %
Other consumer2,200 — %2,089 — %
Portfolio loans receivable, gross2,683,792 100 %2,637,228 100 %
Deferred origination fees, net(5,386)(7,065)
Allowance for credit losses(48,454)(48,652)
Portfolio loans receivable, net$2,629,952 $2,581,511 
_____________
(1)    Credit card loans are presented net of reserve for interest and fees.

The following tables set forth the changes in the ACL and an allocation of the ACL by loan segment class for the three months ended March 31, 2025 and March 31, 2024.
(in thousands)Beginning
Balance		Provision (Release of Provision) for
Credit Losses		Charge-OffsRecoveriesEnding
Balance
Three Months Ended March 31, 2025
Real estate:
Residential$6,945 $(614)$(1)$1 $6,331 
Commercial16,041 1,229 — — 17,270 
Construction2,973 288 — — 3,261 
Commercial and Industrial16,377 (542)(147)— 15,688 
Credit card6,301 1,894 (2,297)— 5,898 
Other consumer15 (9)— — 6 
Total$48,652 $2,246 $(2,445)$1 $48,454 
Three Months Ended March 31, 2024
Real estate:
Residential$5,518 $633 $(225)$— $5,926 
Commercial10,316 807 — — 11,123 
Construction2,271 28 — — 2,299 
Commercial and Industrial4,406 (306)(98)— 4,002 
Credit card6,087 1,567 (1,768)104 5,990 
Other consumer12 (2)— — 10 
Total$28,610 $2,727 $(2,091)$104 $29,350 
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Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Past due loans, segregated by age and class of loans, as of March 31, 2025 and December 31, 2024 were as follows:
Portfolio Loans Past Due
Loans
30-59 Days
Past Due		Loans
60-89 Days
Past Due		Loans
90 or More
Days
Past Due		Total Past
Due Loans		Current
Loans		Total
Portfolio
Loans		Accruing
Loans 90 or
More Days
Past Due		Nonaccrual
Loans
(in thousands)
March 31, 2025
Real estate:
Residential$5,111 $914 $6,221 $12,246 $681,351 $693,597 $63 $9,374 
Commercial8,753 817 18,785 28,355 903,320 931,675 — 21,441 
Construction5,777 — 4,275 10,052 333,228 343,280 — 4,268 
Commercial and Industrial14,181 1,811 6,241 22,233 572,098 594,331 — 7,851 
Credit card5,767 5,040 1,504 12,311 106,398 118,709 1,504 — 
Other consumer— — — — 2,200 2,200 — — 
Total$39,589 $8,582 $37,026 $85,197 $2,598,595 $2,683,792 $1,567 $42,934 
Loans
30-59 Days
Past Due		Loans
60-89 Days
Past Due		Loans
90 or More
Days
Past Due		Total Past
Due Loans		Current
Loans		Total
Portfolio
Loans		Accruing
Loans 90 or
More Days
Past Due		Nonaccrual
Loans
December 31, 2024
Real estate:
Residential$1,656 $4,913 $6,644 $13,213 $675,339 $688,552 $— $8,652 
Commercial4,957 7,570 7,001 19,528 923,491 943,019 100 14,312 
Construction1,000 415 4,309 5,724 315,528 321,252 — 4,309 
Commercial and Industrial10,981 1,245 1,049 13,275 541,275 554,550 — 2,968 
Credit card6,923 6,561 1,544 15,028 112,738 127,766 1,544 — 
Other consumer— — — — 2,089 2,089 — — 
Total$25,517 $20,704 $20,547 $66,768 $2,570,460 $2,637,228 $1,644 $30,241 
There were $9.0 million and $7.2 million of loans secured by one-to-four family residential properties in the process of foreclosure as of March 31, 2025 and December 31, 2024, respectively.
18

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
The following presents the nonaccrual loans as of March 31, 2025 and December 31, 2024:
March 31, 2025
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual LoansInterest Recognized on Nonaccrual Loans
(in thousands)
Real estate:
Residential$9,328 $46 $9,374 $138 
Commercial16,900 4,541 21,441 103 
Construction4,268 — 4,268 315 
Commercial and Industrial2,384 5,467 7,851 119 
Total$32,880 $10,054 $42,934 $675 
December 31, 2024
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual LoansInterest Recognized on Nonaccrual Loans
Real estate:
Residential$8,055 $597 $8,652 $38 
Commercial3,205 11,107 14,312 122 
Construction4,309 — 4,309 144 
Commercial and Industrial247 2,721 2,968 106 
Total$15,816 $14,425 $30,241 $410 
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
•Residential real estate loans are primarily secured by owner-occupied primary residences and, to a lesser extent, investor-owned residences.
•Commercial real estate loans can be secured by either owner-occupied commercial real estate or non-owner-occupied investment commercial real estate. Typically, owner-occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner-occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development and/or industrial properties, as well as other commercial or industrial real estate.
•Construction loans are typically secured by owner-occupied commercial real estate or non-owner-occupied investment real estate. Typically, owner-occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner-occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development and/or other commercial and industrial real estate in process of construction.
•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable and/or other commercial property.
19

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Collateral dependent loans amortized cost
(in thousands)March 31, 2025December 31, 2024
Real estate:
Residential$8,094 $8,780 
Commercial19,475 14,803 
Construction4,268 4,301 
Commercial and Industrial10,755 6,551 
Total$42,592 $34,435 
Of the collateral dependent loans as of March 31, 2025, a specific reserve of $46 thousand, $4.5 million and $5.1 million was assessed for residential real estate, commercial real estate and commercial and industrial loans, respectively. Of the collateral dependent loans as of December 31, 2024, a specific reserve of $147 thousand, $4.1 million and $4.8 million was assessed for residential real estate, commercial real estate and commercial and industrial loans.
The Company made 12 loan modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025 as follows:
Modifications
(in thousands)Amortized Cost Basis% of Total Loan TypeFinancial Effect
Real estate:
Residential$806 0.116 %
Payment recast based on new extended maturity to lower payments on one loan;
Reduced contractual interest rate from 8.375% to 6.375% on one loan.
Residential - Home Equity90 0.159 %
Reduced contractual interest rate from 10.490% to 6.375% on one loan.
Commercial665 0.073 %
Provided 3 months and 12 months payment deferral on two different loans through the Bank’s standard deferral program. The deferred payments were added to the end of the original loan terms.
Commercial and Industrial2,523 0.425 %
Provided 9 months payment deferral on two loans and 12 months payment deferral on two loans through the Bank’s standard deferral program. The deferred payments were added to the end of the original loan terms;
Extended maturity date of one loan which reduced monthly payment amount for the borrower;
Reduced contractual floating interest rate based on Prime to 6.000% fixed rate and extended terms for 60 months on one loan;
Reduced contractual floating interest rate based on Prime to 6.000% fixed rate, extended terms for 60 months and provided 3 months payment deferral on one loan with the deferred payments added to the end of the original loan terms.
Total$4,084 

20

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
The following table presents the payment status of loans that have been modified in the last twelve months:
March 31, 2025
Past DuePast Due
(in thousands)Current30-89 Days90 Days or MoreNonaccrualTotal
Real estate:
Residential$806 $— $— $— $806 
Residential - Home Equity90 — — — 90 
Commercial528 — — 1,031 1,559 
Commercial and Industrial 2,722 — — 442 3,164 
$4,146 4146000$— $— $1,473 $5,619 
The Company did not make any modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2024.
Credit quality indicators
As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grade of loans, the level of classified loans, net charge-offs, nonperforming loans, and general economic conditions in the Company’s market. From a credit risk standpoint, the Company utilizes a risk grading matrix to assign a risk grade to each of its loans. The classifications of loans reflect a judgment about the risk of expected credit loss associated with each loan. Credit quality indicators are reviewed and adjusted regularly to account for the degree of risk and expected credit loss that the Company believes to be appropriate for each financial asset.
A description of the general risk ratings are described as follows:
Pass
Loans characterized as pass includes loans graded exceptional, very good, good, satisfactory and pass/watch. The Company believes that there is a low likelihood of credit deterioration related to those loans that are considered pass.
Special mention
A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.
Borrowers may exhibit poor liquidity and leverage positions resulting from generally negative cash flow or negative trends in earnings. Access to alternative financing may be limited to finance companies for business borrowers and may be unavailable for commercial real estate borrowers.
21

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Substandard
A substandard loan is inadequately protected by the current financial condition and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Borrowers may exhibit recent or unexpected unprofitable operations, an inadequate debt service coverage ratio, or marginal liquidity and capitalization. These loans require more intense supervision by Company management.
Doubtful
A doubtful loan has all the weaknesses associated with a substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
Ungraded
Ungraded loans represent credit card loans not included in the individual credit grading process due to the borrower type. The credit quality indicator for credit card loans is based on the delinquency status of the borrower as of the date presented.
The following table presents the balances of classified loans based on the most recent credit quality indicator analysis. Classified loans include Special Mention, Substandard and Doubtful loans. Pass classified loans include loans graded exceptional, very good, good, satisfactory, and pass/watch. Credit card loans are ungraded as they are not individually graded. Charge-offs presented represent gross charge-offs recognized in the current period:
22

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
March 31, 2025Term Loans by Origination Year
(in thousands)20252024202320222021PriorRevolvingTotal
Residential – Real estate
Pass$25,022 $135,833 $114,820 $119,827 $69,801 $214,030 $— $679,333 
Special Mention— — 1,967 2,051 1,237 2,084 — 7,339 
Substandard— — — 33 322 6,570 — 6,925 
Doubtful— — — — — — — — 
Total25,022 135,833 116,787 121,911 71,360 222,684 — 693,597 
Commercial – Real estate
Pass37,623 223,818 66,036 157,792 136,190 260,077 — 881,536 
Special Mention— — 2,255 17,673 5,918 2,534 — 28,380 
Substandard— — 2,693 3,474 — 15,592 — 21,759 
Doubtful— — — — — — — — 
Total37,623 223,818 70,984 178,939 142,108 278,203 — 931,675 
Construction – Real estate
Pass25,047 109,287 115,953 46,978 20,952 19,788 — 338,005 
Special Mention— — 1,000 — — — — 1,000 
Substandard— — — — — 4,275 — 4,275 
Doubtful— — — — — — — — 
Total25,047 109,287 116,953 46,978 20,952 24,063 — 343,280 
Commercial and Industrial
Pass34,280 167,510 121,596 85,623 39,837 106,620 — 555,466 
Special Mention— 222 15,702 1,969 201 8,047 — 26,141 
Substandard— 273 4,232 847 1,343 6,029 — 12,724 
Doubtful— — — — — — — — 
Total34,280 168,005 141,530 88,439 41,381 120,696 — 594,331 
Other consumer
Pass— 1,221 — 67 82 830 — 2,200 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total— 1,221 — 67 82 830 — 2,200 
Credit card
Ungraded— — — — — — 118,709 118,709 
Portfolio loans receivable, gross$121,972 $638,164 $446,254 $436,334 $275,883 $646,476 $118,709 $2,683,792 
March 31, 2025
(in thousands)20252024202320222021PriorRevolvingTotal
Gross Charge-Offs
Residential real estate$— $— $— $— $— $1 $— $1 
Commercial real estate— — — — — — — — 
Commercial and Industrial— — — — — 147 — 147 
Credit card— — — — — — 2,297 2,297 
Total$— $— $— $— $— $148 $2,297 $2,445 
23

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
December 31, 2024Term Loans by Origination Year
(in thousands)20242023202220212020PriorRevolvingTotal
Residential – Real estate
Pass$155,867 $129,639 $122,203 $76,906 $69,647 $117,272 $— $671,534 
Special Mention— — 2,065 1,242 3,604 — — 6,911 
Substandard— — — 3,422 189 6,496 — 10,107 
Doubtful— — — — — — — — 
Total155,867 129,639 124,268 81,570 73,440 123,768 — 688,552 
Commercial – Real estate
Pass235,929 61,372 170,611 146,642 92,038 207,631 — 914,223 
Special Mention— 2,300 10,747 5,052 — 788 — 18,887 
Substandard— — 7,558 — 320 2,031 — 9,909 
Doubtful— — — — — — — — 
Total235,929 63,672 188,916 151,694 92,358 210,450 — 943,019 
Construction – Real estate
Pass98,942 129,202 46,532 20,634 15,458 6,175 — 316,943 
Special Mention— — — — — — — — 
Substandard— — — — 2,252 2,057 — 4,309 
Doubtful— — — — — — — — 
Total98,942 129,202 46,532 20,634 17,710 8,232 — 321,252 
Commercial and Industrial
Pass129,043 130,647 117,346 42,747 21,356 107,953 — 549,092 
Special Mention232 — 489 — — 270 — 991 
Substandard— 209 712 205 3,239 102 — 4,467 
Doubtful— — — — — — — — 
Total129,275 130,856 118,547 42,952 24,595 108,325 — 554,550 
Other consumer
Pass1,226 278 73 95 76 341 — 2,089 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total1,226 278 73 95 76 341 — 2,089 
Credit card
Ungraded— — — — — — 127,766 127,766 
Portfolio loans receivable, gross$621,239 $453,647 $478,336 $296,945 $208,179 $451,116 $127,766 $2,637,228 
December 31, 2024
(in thousands)20242023202220212020PriorRevolvingTotal
Gross Charge-Offs
Residential real estate$— $— $— $— $— $907 $— $907 
Commercial real estate— — 570 — — — — 570 
Commercial and Industrial84 80 306 — — 136 — 606 
Credit card— — — — — — 7,145 7,145 
Total$84 $80 $876 $— $— $1,043 $7,145 $9,228 
24

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Outstanding loan commitments were as follows:
(in thousands)March 31, 2025December 31, 2024
Unused lines of credit
Real Estate:
Residential$21,076 $20,996 
Residential - Home Equity45,441 46,900 
Commercial48,469 44,201 
Construction85,377 85,984 
Commercial and Industrial67,495 79,961 
Credit card(1)
135,112 124,732 
Other consumer238 255 
Total$403,208 $403,029 
Letters of credit$3,122 $3,122 
_______________
(1)Outstanding loan commitments in the credit card portfolio include $106.5 million and $97.2 million in secured and partially secured balances as of March 31, 2025 and December 31, 2024, respectively.

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition of the contract. Lines of credit generally have variable interest rates. Such lines do not represent future cash requirements because it is unlikely that all customers will, at any given time, draw upon their lines in full. Loan commitments generally have variable interest rates, fixed expiration dates, and may require payment of a fee.
The Company's maximum exposure to credit loss in the event of nonperformance by the customer is the contractual amount of the credit commitment. Loan commitments and lines of credit are generally made on the same terms, including with regard to collateral, as outstanding loans. Management is not aware of any accounting loss to be incurred by funding these loan commitments.
The Company maintains an estimated reserve for unfunded commitments and certain off-balance sheet items such as unfunded lines of credit, which is reflected in other liabilities, with increases or decreases in the reserve being charged to or released from operating expense. Activity for this account is as follows for the periods presented:
Three months ended
(in thousands)March 31, 2025March 31, 2024
Balance at beginning of period$1,191 $806 
Provision for credit losses on unfunded commitments— 142 
Balance at end of period$1,191 $948 
The Company makes representations and warranties that loans sold to investors meet the investors’ program guidelines and that the information provided by the borrowers is accurate and complete. In the event of a default on a loan sold, the investor may have the right to make a claim for losses due to document deficiencies, program non-compliance, early payment default, and fraud or borrower misrepresentations.
25

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
The Company maintains a reserve for potential losses on mortgage loans sold, which is reflected in other liabilities, with changes being charged to or released from operating expense. Activity in this reserve is as follows for the periods presented:
Three months ended
(in thousands)March 31, 2025March 31, 2024
Balance at beginning of period$2,260 $985 
Provision for mortgage loan put-back reserve16 13 
Balance at end of period$2,276 $998 
Note 6 - Leases
The Company’s primary leasing activities relate to certain real estate leases entered into in support of the Company’s branch operations and back office operations. The Company leases five of its full service branches and seven other locations for corporate/administration activities, operations, and loan production. All property leases under lease agreements have been designated as operating leases. The Company does not have leases designated as finance leases.
The Company determines if an arrangement is a lease at inception. Operating lease Right of Use (“ROU”) assets are included in premises and equipment, and operating lease liabilities are included as other liabilities in the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The historical weighted average discount rate was 5.10% at March 31, 2025 and 5.08% at December 31, 2024. The operating lease ROU asset also includes any lease pre-payments. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which the Company has elected to account for separately as the non-lease component amounts are readily determinable under most leases.
As of March 31, 2025, the Company’s net lease ROU assets and related lease liabilities were $4.8 million and $5.5 million, respectively, compared to December 31, 2024 balances of $5.3 million of ROU assets and $5.9 million of lease liabilities, and have remaining terms ranging from one to eight years, including extension options that the Company is reasonably certain will be exercised. As of March 31, 2025, the Company had not entered into any material leases that have not yet commenced. The Company’s lease information is summarized as follows:
26

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 6 - Leases (continued)
(in thousands)March 31, 2025December 31, 2024
Lease Right of Use Asset:
Lease asset$6,821 $6,821 
Less: Accumulated amortization(1,976)(1,557)
Net lease asset$4,845 $5,264 
Lease Liability:
Lease liability$7,154 7,154 
Less: Accumulated amortization(1,669)(1,282)
Net lease liability$5,485 $5,872 
Future minimum payments for operating leases with initial or remaining terms of one year or more are as follows:
(in thousands)March 31, 2025
Amounts due in:
2025$1,569 
20261,933 
2027626 
2028449 
2029441 
2030 and thereafter1,188 
Total future lease payments6,206 
Discount of cash flows(721)
Present value of net future lease payments$5,485 

27

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 7 - Goodwill and Intangible Assets
The change in goodwill during the periods ended March 31, 2025 and December 31, 2024 is as follows:
(in thousands)March 31, 2025December 31, 2024
Balance at beginning of period$21,126 $— 
Acquired goodwill— 21,126 
Measurement period adjustment2,959 — 
Balance at end of period$24,085 $21,126 
During the first quarter of 2025, the Company revised the estimate of adjusted servicing assets and other liabilities resulting in a $3.0 million increase in goodwill at March 31, 2025 as compared to December 31, 2025. Goodwill is preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.
At March 31, 2025, the Company’s reporting units include attributable goodwill from the IFH acquisition. The Company has elected to perform a qualitative assessment annually as of October 1 to determine if it is more likely than not that the fair value of the reporting unit exceeded its carrying value, including goodwill.
Acquired amortizing intangible assets were as follows for the period presented:
March 31, 2025December 31, 2024
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized intangible assets:
Customer list intangible$12,200 $(364)$11,836 $12,200 $(188)$12,012 
Trade name intangible2,100 (75)2,025 2,100 (40)2,060 
Core deposits intangible1,779 (84)1,695 1,779 (34)1,745 
Total amortized intangible assets$16,079 $(523)$15,556 $16,079 $(262)$15,817 
Goodwill represents the intangible value of IFH’s business and reputation within the markets it previously served and is not expected to be deductible for income tax purposes. The customer list intangible and trade name intangible will be amortized over its expected useful life of 17 years and 15 years, respectively, using the straight-line method. The core deposit intangible will be amortized over its expected useful life of 10 years using the sum-of-the-years-digits method.
Amortization expense was $261 thousand and zero for the three months ended March 31, 2025 and 2024, respectively.

28

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 7 - Goodwill and Intangible Assets (continued)
At March 31, 2025, scheduled amortization of the intangible assets for each of the next five years is as follows:
(in thousands)
2025$785 
20261,043 
20271,038 
20281,033 
20291,026 
Thereafter10,631 
Total$15,556 
29

Capital Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 8 - Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:
Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. This includes certain U.S. Treasury and other U.S. Government and government agency securities actively traded in over-the-counter markets.
Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The Company used the following methods and significant assumptions to estimate fair value on a recurring basis:
Investment securities available-for-sale - The fair values for investment securities available-for-sale are provided by an independent pricing service and are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2), using matrix pricing. Matrix pricing, which is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).
Loans held for sale - The fair value of loans held for sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2).
Loan servicing assets - The fair values of loan servicing assets are determined at a tranche level, based on market prices for comparable servicing contracts (Level 2), when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income and that can be validated against available market data (Level 2).

30

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
The Company has categorized its financial instruments measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 as follows:
(in thousands)
March 31, 2025TotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Investment securities available-for-sale
U.S. Treasuries$118,787 $118,787 $— $— 
Municipal9,550 — 9,550 — 
Corporate4,711 — 4,711 — 
Asset-backed securities5,414 — 5,414 — 
Mortgage-backed securities74,990 — 74,990 — 
Total$213,452 $118,787 $94,665 $— 
Loans held for sale$34,656 $— $34,656 $— 
Loan servicing assets$2,244 $— $2,244 $— 
December 31, 2024
Investment securities available-for-sale
U.S. Treasuries$126,835 $126,835 $— $— 
Municipal9,283 — 9,283 — 
Corporate4,711 — 4,711 — 
Asset-backed securities5,526 — 5,526 — 
Mortgage-backed securities77,275 — 77,275 — 
Total$223,630 $126,835 $96,795 $— 
Loans held for sale$21,270 $— $21,270 $— 
Loan servicing assets$5,511 $— $5,511 $— 
Financial instruments recorded using FASB ASC 825-10
Under FASB ASC 825-10, the Company may elect to report most financial instruments and certain other items at fair value on an instrument-by-instrument basis with changes in fair value reported in net income. After the initial adoption, the election is made at the acquisition of an eligible financial asset, financial liability or firm commitment or when certain specified reconsideration events occur. The fair value election, with respect to an item, may not be revoked once an election is made.
The following table reflects the difference between the fair value carrying amount of loans held for sale, measured at fair value under FASB ASC 825-10, and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity:
Fair Value of Loans Held for Sale
(in thousands)March 31, 2025December 31, 2024
Aggregate fair value$34,656 $21,270 
Contractual principal29,796 16,721 
Difference$4,860 $4,549 
31

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
The Company has elected to account for loans held for sale at fair value to eliminate the mismatch that would occur by recording changes in market value on derivative instruments used to hedge loans held for sale while carrying the loans at the lower of cost or market. As of March 31, 2025 and December 31, 2024, there were no held for sale loans which were classified as nonaccrual.
Fair value measurements on a nonrecurring basis
Individually evaluated loans - The Company has measured expected credit losses based on the fair value of the loan's collateral and discounted cash flow analysis, where appropriate. Fair value of the collateral is generally determined based upon independent third-party appraisals of the properties, or discounted cash flows based upon the expected proceeds. These assets are included as Level 3 fair values. As of March 31, 2025 and December 31, 2024, the fair values consist of loan balances of $46.6 million and $34.9 million, with specific reserves of $10.1 million and $9.3 million, respectively.
Foreclosed real estate - The Company's foreclosed real estate is measured at fair value less cost to sell. Fair value is determined based on offers and/or appraisals. Cost to sell the real estate is based on standard market factors. The Company categorizes its foreclosed real estate as Level 3. As of March 31, 2025 and December 31, 2024, there was no foreclosed real estate held by the Company.
The Company has categorized its financial instruments measured at fair value on a nonrecurring basis as of March 31, 2025 and December 31, 2024 as follows:
(in thousands)March 31, 2025December 31, 2024
Individually evaluated loans for credit loss, net
Level 3 inputs
$36,510 $25,521 
Total$36,510 $25,521 
The following table provides information describing the unobservable inputs used in Level 3 fair value measurements at March 31, 2025 and December 31, 2024:
Unobservable Inputs
Valuation TechniqueUnobservable InputsRange of Inputs
March 31, 2025
Individually evaluated loansAppraised Value/Discounted Cash FlowsDiscounts to appraisals or cash flows for estimated holding and/or selling costs
0 to 30%
December 31, 2024Valuation TechniqueUnobservable InputsRange of Inputs
Individually evaluated loansAppraised Value/Discounted Cash FlowsDiscounts to appraisals or cash flows for estimated holding and/or selling costs
0 to 30%
Fair value of financial instruments
Fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practical to estimate the value is based upon the characteristics of the instruments and relevant market information. Financial instruments include cash, evidence of ownership in an entity, or contracts that convey or impose on an entity the contractual right or obligation to either receive or deliver cash for another financial instrument.
32

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
The information used to determine fair value is highly subjective in nature and, therefore, the results are imprecise. Subjective factors include, among other things, estimates of cash flows, risk characteristics, credit quality, and interest rates, all of which are subject to change. Since the fair value is estimated as of the balance sheet date, the amounts that will actually be realized or paid upon settlement or maturity on these various instruments could be significantly different.
As of March 31, 2025, the techniques used by the Company to estimate the exit price of the loan portfolio consists of similar procedures to those used as of December 31, 2024. The fair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, individually evaluated loans, and all other loans. The results are then adjusted to account for credit risk as described above, and a further credit risk discount is applied through the use of a discounted cash flow model to compensate for illiquidity risk, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan.
For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for individually evaluated loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.
The fair value of cash and cash equivalents and investments in restricted stocks is the carrying amount. Restricted investments includes equity of the Federal Reserve and other banker’s banks.
The fair value of noninterest-bearing deposits and securities sold under agreements to repurchase is the carrying amount.
The fair value of checking, savings, and money market deposits is the amount payable on demand at the reporting date. Fair value of fixed maturity term accounts and individual retirement accounts is estimated using rates currently offered for accounts of similar remaining maturities.
The fair value of borrowings is estimated by discounting the value of contractual cash flows using current market rates for borrowings with similar terms and remaining maturities.
The fair value of outstanding loan commitments, unused lines of credit, and letters of credit are not included in the table since the carrying value generally approximates fair value. These instruments generate fees that approximate those currently charged to originate similar commitments.

33

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
The table below presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments.
March 31, 2025December 31, 2024
(in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial assets
Level 1
Cash and due from banks$27,836 $27,836 $25,433 $25,433 
Interest-bearing deposits at other financial institutions266,092 266,092 179,841 179,841 
Federal funds sold59 59 58 58 
Level 2
Accrued interest receivable$19,458 $19,458 $16,664 $16,664 
Level 3
Portfolio loans receivable, net$2,629,952 $2,576,493 $2,581,511 $2,499,578 
Restricted investments7,031 7,031 4,479 4,479 
Financial liabilities
Level 1
Noninterest-bearing deposits$812,224 $812,224 $810,928 $810,928 
Level 2
Accrued interest payable$9,995 $9,995 $9,393 $9,393 
Level 3
Interest-bearing deposits$2,079,109 $2,090,429 $1,951,011 $1,960,728 
FHLB advances and other borrowed funds34,062 33,654 34,062 32,372 

Note 9 - Segments
The Company’s reportable segments represent business units with discrete financial information whose results are regularly reviewed by management. The four segments include Commercial Banking, OpenSky™ (the Company’s credit card division), Windsor Advantage and Capital Bank Home Loans (the Company’s mortgage loan division).
Our Commercial Banking division operates primarily in the Washington, D.C. and Baltimore metropolitan areas and focuses on providing personalized service to commercial clients throughout our area of operations supplemented by lending outside of our primary market, and nationwide deposit verticals. Additionally, the commercial bank engages in government-guaranteed lending on a national basis.
The Company issues credit cards through OpenSky™, a digitally-driven, nationwide credit card platform providing secured, partially secured, and unsecured credit solutions, and originates residential mortgages for sale in the secondary market through Capital Bank Home Loans (“CBHL”), the Bank’s residential mortgage banking arm. Additionally, Windsor Advantage™, a wholly-owned subsidiary of the Company, is a loan service provider that offers community banks and credit unions with a comprehensive U.S. Small Business Association (“SBA”) 7(a) and U.S. Department of Agriculture (“USDA”) lending platform.
The Company’s reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon organizational design, leadership structure and
34

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 9 - Segments (continued)

the Company’s products and services offered. The Company’s reportable segments are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.
The chief operating decision maker evaluates the financial performance of the Company’s business components by evaluating revenue streams, significant expenses, and variance to the annual financial plan to assess the performance of the Company’s segments and in the determination of allocating resources and investments.
The chief operating decision maker uses revenue streams and other relevant market data to evaluate product pricing and significant expenses to assess segment performance. Segment pretax income or loss, return on assets and the efficiency ratio is used to assess the performance of the commercial bank segment by monitoring the margin between interest income and interest expense. Segment pretax income or loss is used to assess the performance of the CBHL segment by monitoring the mortgage banking revenue from loan originations and sales. Segment pretax income or loss is used to assess the performance of the OpenSky™ segment by monitoring credit card interest income, interchange fees, and other fees. Segment pretax income or loss is used to assess the performance of the Windsor Advantage™ segment by monitoring the service charge revenues from Windsor™ customers.
Loans, investments, and deposits and fees provide the revenues in the commercial bank, loan sales provide the revenues in CBHL, credit card loan interest and fees provide the revenues in OpenSky™, and service charges and ancillary fees provide the revenues in Windsor Advantage™. Interest expense, provisions for credit losses and personnel provide the significant expenses in the commercial bank, cost of loan sales and personnel provide the significant expenses in CBHL, data processing and personnel provide the significant expenses in OpenSky™, and personnel provide the significant expenses in Windsor Advantage™.
Prior to March 31, 2025, the Company disclosed Corporate as a reportable segment. The Company has determined that what was previously deemed the Corporate reportable segment consists of other business activities that are associated with the Commercial Bank and are reflected in the tabular disclosures that follow. It should be noted that such restructuring of the tabular disclosure did not result in any changes to the Company’s revenue and expense allocation methodology. The Company restructured prior period tabular disclosures to achieve appropriate comparability.
Church Street Capital, LLC (“CSCl”) operates as a wholly owned subsidiary of Capital Bancorp, Inc. CSC originates and services a portfolio of primarily mezzanine loans with certain characteristics that do not meet Capital Bank’s general underwriting standards, but command a higher rate of return. At March 31, 2025, CSC had loans totaling $6.7 million with a collectively assessed allowance for credit losses (“ACL”) of $184 thousand. Refer to Note 5 - “Portfolio Loans Receivable and Allowance for Credit Losses” to the “Notes to Unaudited Consolidated Financial Statements” for further discussion of the consolidated ACL. The operations of CSC are included within the Commercial Bank segment performance.
Accounting policies for segments are discussed in detail in Note 1 “Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Segment performance is evaluated using income (loss) before taxes. Indirect expenses are allocated on revenue. Transactions among segments are made at fair value.
The following schedules reported internally for performance assessment by the chief operating
35

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 9 - Segments (continued)

decision maker presents financial information for each reportable segment at and for the three months ended March 31, 2025 and 2024.
For the Three Months Ended March 31, 2025
(in thousands)Commercial BankOpenSky™
Windsor Advantage™
CBHLConsolidated
Interest income$48,164 $14,444 $— $152 $62,760 
Interest expense16,649 — — 64 16,713 
Net interest income31,515 14,444 — 88 46,047 
Provision for credit losses446 1,800 — — 2,246 
Net interest income after provision31,069 12,644 — 88 43,801 
Noninterest income
Service charges on deposits258 — — — 258 
Credit card fees— 3,722 — — 3,722 
Mortgage banking revenue263 — — 1,568 1,831 
Government lending revenue1,096 — — — 1,096 
Government loan servicing revenue(1)
(1,038)— 4,606 — 3,568 
Loan servicing rights (government guaranteed)472 — — — 472 
Other income1,423 11 — 168 1,602 
Total noninterest income2,474 3,733 4,606 1,736 12,549 
Noninterest expenses
Salaries and employee benefits
10,626 3,345 2,406 1,690 18,067 
Occupancy and equipment1,577 488 711 134 2,910 
Professional fees1,151 591 120 250 2,112 
Data processing440 6,582 53 37 7,112 
Advertising718 874 104 83 1,779 
Loan processing477 19 7 240 743 
Foreclosed real estate expenses, net1 — — — 1 
Merger-related expenses1,266 — — — 1,266 
Operational losses31 872 — — 903 
Regulatory assessment expenses865 15 5 4 889 
Other operating1,408 516 254 93 2,271 
Total noninterest expenses18,560 13,302 3,660 2,531 38,053 
Net income (loss) before taxes$14,983 $3,075 $946 $(707)$18,297 
Total assets$3,192,327 $119,636 $23,750 $14,092 $3,349,805 
(1) Gross government loan servicing revenue totaled $4.6 million, including $1.0 million of Commercial Bank related servicing fees, during 1Q 2025.
36

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 9 - Segments (continued)

For the Three Months Ended March 31, 2024
(in thousands)Commercial BankOpenSky™CBHLConsolidated
Interest income$33,365 $14,921 $83 $48,369 
Interest expense13,320 — 41 13,361 
Net interest income20,045 14,921 42 35,008 
Provision for credit losses1,168 1,559 — 2,727 
Provision for credit losses on unfunded commitments142 — — 142 
Net interest income after provision18,735 13,362 42 32,139 
Noninterest income
Service charges on deposits207 — 207 
Credit card fees— 3,881 — 3,881 
Mortgage banking revenue288 — 1,165 1,453 
Other income210 34 187 431 
Total noninterest income705 3,915 1,352 5,972 
Noninterest expense
Salaries and employee benefits
8,709 2,812 1,386 12,907 
Occupancy and equipment1,044 434 135 1,613 
Professional fees801 941 205 1,947 
Data processing316 6,407 38 6,761 
Advertising382 1,592 58 2,032 
Loan processing159 13 199 371 
Merger-related expenses712 — — 712 
Regulatory assessment expenses473 — — 473 
Other operating1,187 1,400 84 2,671 
Total noninterest expenses13,783 13,599 2,105 29,487 
Net income (loss) before taxes$5,657 $3,678 $(711)$8,624 
Total assets$2,208,135 $105,318 $10,785 $2,324,238 
Notable items:
–Total assets includes goodwill and intangible assets of $24.1 million at the Commercial Bank and $13.9 million within Windsor Advantage™ at March 31, 2025.
–Commercial Bank’s return on assets of 1.90% and 1.03% for the three months ended March 31, 2025 and 2024, respectively, is calculated by dividing net income before taxes by total assets.
–Commercial Bank’s efficiency ratio of 54.6% and 66.4% for the three months ended March 31, 2025 and 2024, respectively, is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).
–Windsor Advantage’s™ service charge revenues from Windsor™ customers, included within noninterest income, totaled $4.6 million, including $1.0 million of Capital Bank related servicing fees, for the three months ended March 31, 2025.

Note 10 - Subsequent Events
In April 2025, the Company’s Board of Directors declared a $0.10 per share dividend, payable on May 28, 2025 to shareholders of record on May 12, 2025.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this Quarterly Report on Form 10-Q, unless we state otherwise or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “Capital” refer to Capital Bancorp, Inc. and its wholly owned subsidiaries, Capital Bank, N.A., which we sometimes refer to as “Capital Bank,” “the Bank” or “our Bank,” Church Street Capital, LLC, which we refer to as “Church Street Capital” or “CSC” and Windsor Advantage, LLC™, which we refer to as “Windsor Advantage, LLC™”.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes and the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025.
PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
This Quarterly Report on Form 10-Q and oral statements made from time-to-time by our representatives contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties relating to our operations and the business environment in which we operate, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy, expectations, beliefs, projections, anticipated events or trends, growth prospects, financial performance, and similar expressions concerning matters that are not historical facts. These statements often include words such as “may,” “believe,” “expect,” “anticipate,” “potential,” “opportunity,” “intend,” “endeavor,” “plan,” “estimate,” “could,” “project,” “seek,” “should,” “will,” or “would,” or the negative of these words and phrases or similar words and phrases.
These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to:
General Economic, Macro and External Conditions
•economic conditions (including the interest rate environment, government economic and monetary policies, the strength of global financial markets and inflation/deflation) that impact the financial services industry as a whole and/or our business;
•adverse developments in the banking industry such as, for example, high-profile bank failures, and the potential impact of such developments on customer confidence, liquidity, and regulatory responses to those developments;
•the concentration of our business in certain geographies and the effect of changes in economic, political and environmental conditions in those markets, including proposed reductions in the federal workforce and a decline in federal government spending;
•interest rate risk associated with our business, including sensitivity of our interest earning assets and interest-bearing liabilities to changes in interest rates, and the impact to our earnings from changes in interest rates;
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•geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the ongoing wars in Ukraine and the Middle East, which could impact business and economic conditions in the U.S. and abroad;
•climate change, and other catastrophic events or disasters;
•natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;
•the impact of changes in the Federal Deposit Insurance Corporation (“FDIC”) insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments;
•changes in U.S. trade policies, including the implementation of tariffs and other protectionist trade policies;
•the impact of governmental efforts to restructure or adjust the U.S. financial regulatory system;
•changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters;
•the financial soundness of other financial institutions;
General Business Operations
•our ability to prudently manage our growth and execute our strategy;
•the effect of acquisitions we have undertaken, such as our recent acquisition of Integrated Financial Holdings, Inc. (“IFH”), including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations, including the planned growth of Windsor Advantage™;
•strategic acquisitions we may undertake to achieve our goals;
•our dependence on our management team and board of directors and changes in management and board composition;
•increased competition in the financial services industry, particularly from regional and national institutions;
•our plans to grow our commercial real estate and commercial business loan portfolios which may carry material risks of non-payment or other unfavorable consequences;
•adequacy of reserves, including our allowance for credit losses (“ACL”);
•deterioration of our asset quality;
•results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our ACL or to write-down assets;
•risks associated with our residential mortgage banking business;
•risks associated with our OpenSky™ credit card division, including compliance with applicable consumer finance and fraud prevention regulations;
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•changes in Small Business Administration (“SBA”) and U.S. Department of Agriculture (“USDA”) U.S. government guaranteed lending rules, regulations, loan and lease products and funding limits, including specifically the SBA Section 7(a) program, as well as changes in SBA or USDA standard operating procedures, all of which could impact our ability to originate these types of loans within Capital Bank, N.A. or the servicing, processing and packaging by Windsor Advantage™ of such loans on behalf of others;
•changes in the value of collateral securing our loans;
•operational risks associated with our business;
•the adequacy of our risk management framework;
•our dependence on our information technology and telecommunications systems, including third party vendors, and the potential for any data privacy incidents or other systems failures, interruptions, or security breaches and risks related to the development and use of artificial intelligence;
•our ability to develop and use technologies to provide products and services that will satisfy customer demands;
•potential exposure to fraud, negligence, computer theft and cyber crime;
•the sufficiency of our capital, including sources of capital and the extent to which we may be required to raise additional capital to meet our goals;
•liquidity and funding risks associated with our business;
•our ability to maintain important customer deposit relationships and our reputation;
•fluctuations in the fair value of our investment securities;
•our engagement in derivative transactions;
•volatility and direction of market interest rates;
•our dependence upon outside third parties for the processing and handling of our records and data;
•changes to local rent control laws, which may impact the credit quality of multifamily housing loans; and
•our involvement from time to time in legal proceedings, examinations and remedial actions by regulators.
As you read and consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions and can change as a result of many possible events or factors, not all of which are known to us or in our control. Although we believe that these forward-looking statements are based on reasonable assumptions, beliefs and expectations, if a change occurs or our beliefs, assumptions or expectations were incorrect, our business, financial condition, liquidity and/or results of operations may vary materially from those expressed in our forward-looking statements. You should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include those described under the heading “Risk Factors” under Item 1A. in our Annual Report on Form 10-K for the year ended December 31, 2024 and those referenced herein and in other reports on file with the Securities and Exchange Commission (“SEC”).
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You should keep in mind that any forward-looking statement made by us speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, and disclaim any obligation to, update or revise any industry information or forward-looking statements after the date on which they are made. In light of these risks and uncertainties, you should keep in mind that any forward-looking statement made in this report or elsewhere might not reflect actual results and may prove unreliable.
Critical Accounting Estimates
The accounting and reporting policies of the Company are in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them, as deemed necessary. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of Directors of the Company.
The Company’s critical accounting policies and reporting estimates are fundamental to understanding the Company’s consolidated financial position and consolidated results of operations. Accordingly, the Company’s significant accounting policies are discussed in detail in Note 1 “Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II. Item 8 "Financial Statements and Supplementary Data" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Overview
We are Capital Bancorp, Inc., a bank holding company and a Maryland corporation incorporated in 1998, operating primarily through our wholly-owned subsidiary, Capital Bank, N.A., a commercial-focused community bank based in the Washington, D.C. and Baltimore metropolitan areas. The Bank is headquartered in Rockville, Maryland, received its charter in 1999 and began operations the same year. We serve businesses, not-for-profit associations, entrepreneurs and others throughout the Washington, D.C., Baltimore, other Maryland metropolitan areas, Florida, Illinois and North Carolina through seven commercial bank branches, one mortgage banking office, three loan production offices, three government loan servicing offices, and one credit card operations office.
On October 1, 2024, the Company completed its acquisition of IFH. IFH merged with and into the Company, with the Company continuing as the surviving corporation in the acquisition. Immediately following the acquisition, West Town Bank & Trust, merged with and into Capital Bank, with Capital Bank as the surviving bank.
The Company currently operates four divisions and reporting segments: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans, In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment. The accompanying consolidated financial statements have been prepared in accordance with GAAP, and conform to general practices within the banking industry.
Our Commercial Banking division operates primarily in the Washington, D.C. and Baltimore metropolitan areas and focuses on providing personalized service to commercial clients throughout our area of operations, supplemented by lending outside of our primary market, and nationwide deposit
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verticals. Additionally, the commercial bank engages in government-guaranteed lending on a national basis. Capital Bank Home Loans and OpenSky™ both leverage Capital Bank’s national banking charter to operate national consumer business lines. Capital Bank Home Loans acts as our residential mortgage origination platform and OpenSky™ provides nationwide, digitally-originated and served, secured, partially-secured, and unsecured credit cards to under-banked populations and those looking to rebuild their credit scores. Windsor Advantage™ generates fee income for the Company through its servicing, processing and packaging of SBA and USDA loans for its financial institution clients.
In addition to its subsidiaries discussed above, Capital Bancorp, Inc. owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”). The Trust is a special purpose, non-consolidated entity organized for the sole purpose of issuing trust preferred securities.
Capital
As of March 31, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we intend to monitor and control our growth relative to our earnings in order to remain in compliance with all regulatory capital standards applicable to us.
Results of Operations
Non-GAAP Financial Measures
This report contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions. In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.
Other companies may use similarly titled non-GAAP financial measures that may be calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.
For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
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Net Income
The following table sets forth the principal components of net income for the periods indicated.
Three Months Ended March 31,
20252024% Change
(in thousands)
Interest income$62,760 $48,369 29.8 %
Interest expense16,713 13,361 25.1 %
Net interest income46,047 35,008 31.5 %
Provision for credit losses2,246 2,727 (17.6)%
Provision for credit losses on unfunded commitments— 142 (100.0)%
Net interest income after provision for credit losses43,801 32,139 36.3 %
Noninterest income12,549 5,972 110.1 %
Noninterest expenses38,053 29,487 29.1 %
Net income before income taxes18,297 8,624 112.2 %
Income tax expense4,365 2,062 111.7 %
Net income$13,932 $6,562 112.3 %
Net income for the three months ended March 31, 2025 was $13.9 million, compared to net income of $6.6 million for the same period in 2024, a 112.3% increase. Net income, as adjusted to exclude the impact of merger-related expenses (non-GAAP, excluding merger-related expenses), was $14.9 million for the three months ended March 31, 2025. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
Net interest income increased by $11.0 million, or 31.5%, to $46.0 million when comparing the three months ended March 31, 2025 to the three months ended March 31, 2024, primarily driven by organic growth and the acquisition of IFH.
The provision for credit losses for the three months ended March 31, 2025 was $2.2 million, a decrease of $0.5 million from the same period in 2024. Net charge-offs for the three months ended March 31, 2025 were $2.4 million, or 0.38% on an annualized basis of average portfolio loans, compared to $2.0 million, or 0.41% on an annualized basis of average loans for the same period in 2024. Of the $2.4 million in net charge-offs during the quarter, $0.9 million related to secured and partially secured credit cards and $1.4 million related to unsecured credit cards. Further, $0.1 million of net charge-offs were related to commercial and industrial loans.
For the three months ended March 31, 2025, noninterest income of $12.5 million increased $6.6 million, or 110.1%, from the same period in 2024, primarily due to the contributions made by the businesses IFH brought to the merged entity. Mortgage banking revenue of $1.8 million increased $0.4 million primarily due to an increase in home loan sales while credit card fees of $3.7 million decreased $0.2 million from lower interchange and other fee income recognized compared to the same period in the prior year.
Noninterest expense was $38.1 million for the three months ended March 31, 2025, as compared to $29.5 million for the three months ended March 31, 2024. The change included increases in salaries and employee benefits expenses of $5.2 million, occupancy and equipment expenses of $1.3 million, merger-related expenses of $0.6 million, other operating expense of $0.5 million, regulatory assessment expenses of $0.4 million, loan processing expenses of $0.4 million, data processing expense of $0.4 million and professional fees of $0.2 million. Offsetting decreases included advertising expenses of $0.3 million and operational losses of $28.0 thousand .

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Net Interest Income and Net Margin Analysis
Net interest income is our largest component of revenue and the driver of net income. Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets.
We analyze our ability to maximize income generated from interest earning assets and control the interest expenses associated with our liabilities, measured as net interest income, through our net interest margin and net interest spread. Net interest margin is a ratio calculated as net interest income annualized divided by average interest earning assets for the same period. Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities.
The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the three months ended March 31, 2025 and 2024. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived by utilizing average daily balances for the time periods shown. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.
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AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
Three Months Ended March 31,
20252024
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
($ in thousands)
Assets
Interest earning assets:
Interest-bearing deposits$203,053 $2,138 4.27 %$84,531 $1,049 4.99 %
Federal funds sold
58 1 6.99 56 1 7.18 
Investment securities available-for-sale235,605 1,861 3.20 233,231 1,251 2.16 
Restricted investments
5,761 69 4.86 4,601 77 6.73 
Loans held for sale
9,356 238 10.32 4,872 83 6.85 
Portfolio loans receivable(2)(3)
2,634,110 58,453 9.00 1,927,372 45,908 9.58 
Total interest earning assets
3,087,943 62,760 8.24 2,254,663 48,369 8.63 
Noninterest earning assets134,021 44,571 
Total assets
$3,221,964 $2,299,234 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts$242,355 $368 0.62 %$183,217 $110 0.24 %
Savings
13,204 18 0.55 4,841 1 0.08 
Money market accounts
869,978 7,399 3.45 682,414 7,136 4.21 
Time deposits
859,729 8,727 4.12 449,963 5,586 4.99 
Borrowed funds
34,062 201 2.39 58,963 528 3.60 
Total interest-bearing liabilities2,019,328 16,713 3.36 1,379,398 13,361 3.90 
Noninterest-bearing liabilities:
Noninterest-bearing liabilities56,503 23,820 
Noninterest-bearing deposits783,018 637,124 
Stockholders’ equity
363,115 258,892 
Total liabilities and stockholders’ equity
$3,221,964 $2,299,234 
Net interest spread4.88 %4.73 %
Net interest income$46,047 $35,008 
Net interest margin(4)
6.05 %6.24 %
_______________
(1)Annualized.
(2)Includes nonaccrual loans.
(3)For the three months ended March 31, 2025 and 2024, collectively, portfolio loans yield excluding credit card loans was 7.14% and 6.96%, respectively.
(4)For the three months ended March 31, 2025 and 2024, collectively, credit card loans accounted for 169 and 239 basis points of the reported net interest margin, respectively.

The net interest margin decreased 19 basis points to 6.05% for the three months ended March 31, 2025 from the same period in 2024 due to the acquisition of commercial loans from IFH, diluting the impact from OpenSkyTM. Commercial Bank net interest margin (non-GAAP) increased to 4.32% for the three months ended March 31, 2025, compared to 3.77% for the same period in 2024. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
For the three months ended March 31, 2025, average interest earning assets increased $833.3 million, or 37.0%, to $3.1 billion as compared to the same period in 2024, and the average yield on interest earning assets decreased to 8.24%, a 39 basis point decrease from 8.63%. Compared to the
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same period in the prior year, average interest-bearing liabilities increased $639.9 million, or 46.4%, and the average cost of interest-bearing liabilities decreased to 3.36%, a 54 basis point decrease from 3.90%.
The rate/volume table below presents the composition of the change in net interest income for the periods indicated, as allocated between the change in net interest income due to changes in the volume of average earning assets and interest-bearing liabilities, and the changes in net interest income due to changes in interest rates.
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
Three Months Ended
March 31, 2025
Compared to
March 31, 2024
Change Due To
Interest Variance
(in thousands)
Volume
Rate
Interest Income:
Interest-bearing deposits
$1,239 $(150)$1,089 
Investment securities available-for-sale19 591 610 
Restricted investments
14 (22)(8)
Loans held for sale
113 42 155 
Portfolio loans receivable excluding credit card loans12,050 804 12,854 
Credit card loans979 (1,288)(309)
Total interest income
14,414 (23)14,391 
Interest Expense:
Interest-bearing demand accounts
90 168 258 
Savings
11 6 17 
Money market accounts
1,538 (1,275)263 
Time deposits
4,104 (963)3,141 
Borrowed funds
(146)(181)(327)
Total interest expense
5,597 (2,245)3,352 
Net interest income
$8,817 $2,222 $11,039 

When comparing the three months ended March 31, 2025 to the three months ended March 31, 2024, the largest positive impact to total interest income was the growth in interest earning assets, from organic growth and the IFH acquisition. Growth (change due to volume) in the loan portfolio, excluding credit card loans, contributed $12.1 million to the increase in interest income. The variance in interest expense year over year was primarily impacted by organic growth in interest-bearing liabilities, and the IFH acquisition. Growth in interest bearing liabilities contributed $5.6 million to increased interest expense, while decreased rates contributed a reduction of $2.2 million of interest expense.

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Provision for Credit Losses
The provision for credit losses represents the amount of expense charged to current earnings to fund the ACL. For a description of the factors taken into account by our management in determining the ACL, see Note 1 “Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
For the three months ended March 31, 2025, the provision for credit losses was $2.2 million, a decrease of $0.5 million from the same period in 2024, primarily from a lower commercial loan portfolio provision of $0.7 million, offset by a slightly higher provision for OpenSky of $0.2 million. Net charge-offs for the three months ended March 31, 2025 were $2.4 million, or 0.38% on an annualized basis of average portfolio loans, compared to $2.0 million, or 0.41% on an annualized basis of average portfolio loans for the same period in 2024. Of the $2.4 million in net charge-offs during the quarter, $0.9 million related to secured and partially secured credit cards and $1.4 million related to unsecured credit cards. Further, $0.1 million of net charge-offs were related to commercial and industrial loans.
The ACL as a percent of portfolio loans was 1.81% at March 31, 2025 as compared to 1.85% at December 31, 2024. The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company. See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at March 31, 2025 in “Financial Condition - Allowance for Credit Losses.”
Noninterest Income
Our primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, mortgage banking revenue and Windsor Advantage™ fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients. Noninterest income does not include (i) loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method or (ii) annual, renewal and late fees related to our credit card portfolio, which are generally recognized over the twelve month life of the related loan as an adjustment to yield using the interest method.
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The following table presents, for the periods indicated, the major categories of noninterest income:
Three Months Ended March 31,
20252024% Change
(in thousands)
Noninterest income:
Service charges on deposit accounts$258 $207 24.6 %
Credit card fees3,722 3,881 (4.1)
Mortgage banking revenue1,831 1,453 26.0 
Government lending revenue1,096 —  
Government loan servicing and packaging revenue3,568 —  
Loan servicing rights (government guaranteed)472 —  
Other income1,602 431 271.7 
Total noninterest income$12,549 $5,972 110.1 %
For the three months ended March 31, 2025, noninterest income of $12.5 million increased $6.6 million, or 110.1%, from the same period in 2024 primarily due to contributions from the IFH acquisition. Government loan servicing revenue (Windsor Advantage™) totaled $3.6 million net of intercompany charges, government lending revenue (gain on sale) totaled $1.1 million, and revenue from loan servicing rights totaled $0.5 million.
For the three months ended March 31, 2025, credit card fees of $3.7 million declined by $0.2 million as compared to the three months ended March 31, 2024, primarily related to lower interchange and other fee income.
The Bank’s Capital Bank Home Loans (“CBHL”) division experienced an increase of 26.4% in mortgage originations during the three months ended March 31, 2025 when compared to the same period in the prior year. Origination volumes increased $13.7 million, to $65.8 million, in the first quarter of 2025, when compared to $52.1 million in the first quarter of 2024. The gain on sale margin of 3.07% was the same for the three months ended March 31, 2025 and the three months ended March 31, 2024. Mortgage banking revenue of $1.8 million increased $0.4 million for the three months ended March 31, 2025 due to an increase in salable originations as compared to the prior year.
Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale. The Bank has established a reserve under GAAP for possible repurchases. The reserve was $2.3 million and $2.3 million at March 31, 2025 and December 31, 2024, respectively. The Bank did not repurchase any loans during the three months ended March 31, 2025 or 2024. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.
Noninterest Expense
Generally, noninterest expense is comprised of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services, with the largest component being salaries and employee benefits expenses. Noninterest expense also includes operational expenses, such as occupancy and equipment expenses, professional fees, advertising expenses, loan processing expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage.
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The following table presents, for the periods indicated, the major categories of noninterest expense:
Three Months Ended March 31,
20252024% Change
(in thousands)
Noninterest expense:
Salaries and employee benefits
$18,067 $12,907 40.0 %
Occupancy and equipment
2,910 1,613 80.4 
Professional fees2,112 1,947 8.5 
Data processing
7,112 6,761 5.2 
Advertising
1,779 2,032 (12.5)
Loan processing
743 371 100.3 
Foreclosed real estate expenses, net1 1 — 
Merger-related expenses1,266 712 77.8 
Operational losses903 931 (3.0)
Regulatory assessment expenses889 473 87.9 
Other operating2,271 1,739 30.6 
Total noninterest expense$38,053 $29,487 29.1 
Noninterest expense was $38.1 million for the three months ended March 31, 2025, as compared to $29.5 million for the three months ended March 31, 2024, an increase of $8.6 million. The change includes increases in salaries and employee benefits expenses of $5.2 million, occupancy and equipment expenses of $1.3 million, merger-related expenses of $0.6 million, other operating expenses of $0.5 million, regulatory assessment expenses of $0.4 million, loan processing expenses of $0.4 million, data processing expense of $0.4 million and professional fees of $0.2 million. Offsetting decreases include advertising expenses of $0.3 million and operational losses of $28.0 thousand .
Income Tax Expense
The amount of income tax expense we incur is influenced by our pre-tax income, our tax exempt revenue and our nondeductible expenses. Deferred tax assets and liabilities are reflected at enacted tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense was $4.4 million for the three months ended March 31, 2025 compared to $2.1 million for the same period in 2024. Our effective tax rate was 23.9% for the three months ended March 31, 2025 and for the three months ended March 31, 2024.
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Financial Condition
The following table summarizes the Company’s financial condition at the dates indicated.
(in thousands, except per share data)March 31, 2025December 31, 2024$ Change% Change
Total assets$3,349,805 $3,206,911 $142,894 4.5 %
Investment securities available-for-sale213,452 223,630 (10,178)(4.6)
Mortgage loans held for sale34,656 21,270 13,386 62.9 
Portfolio loans receivable, net of deferred fees and costs2,678,406 2,630,163 48,243 1.8 
Allowance for credit losses48,454 48,652 (198)(0.4)
Deposits2,891,333 2,761,939 129,394 4.7 
FHLB borrowings22,000 22,000 — — 
Other borrowed funds12,062 12,062 — — 
Total stockholders’ equity369,577 355,139 14,438 4.1 
Tangible common equity (1)
329,936 318,196 11,740 3.7 
Equity to total assets at end of period11.03 %11.07 %(0.4)
Weighted average number of basic shares outstanding, YTD16,666 14,584 14.3 
Weighted average number of diluted shares outstanding, YTD16,925 14,640 15.6 
Common shares outstanding16,657 16,663 0.0 
Book value per share$22.19 $21.31 4.1 
Tangible book value per share (1)
19.81 19.10 3.7 
Dividends per share, YTD0.10 0.36 
_____________
(1)    See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

Total assets at March 31, 2025 increased $142.9 million from the balance at December 31, 2024. Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.7 billion as of March 31, 2025, an increase of $48.2 million, or 1.8%, from $2.6 billion at December 31, 2024. Mortgage loans held for sale increased $13.4 million, or 62.9%, when comparing the period end balances at March 31, 2025 to December 31, 2024.
Investment Securities
To manage liquidity and supplement interest income earned on our loan portfolio, the Company invests in U.S. Treasuries, high-quality mortgage-backed securities (“MBS”), government agency bonds, asset-backed securities and high-quality municipal and corporate bonds. The asset-backed securities are comprised of student loan collateral issued by the Federal Family Education Loan Program, which includes a minimum of a 97% government repayment guarantee, as well as additional support in excess of the government guaranteed portion.
The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates, and weighted-average yields of investment securities at March 31, 2025 and the amortized cost and carrying value of those securities as of the indicated dates. The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results to arrive at the weighted average yield. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.
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INVESTMENT MATURITIES
One Year or LessMore Than One Year Through Five YearsMore Than Five Years Through Ten YearsMore Than Ten YearsTotal
March 31, 2025Amortized CostWeighted Average YieldAmortized CostWeighted Average YieldAmortized CostWeighted Average YieldAmortized CostWeighted Average YieldAmortized CostFair ValueWeighted Average Yield
(in thousands)
Securities Available-for-Sale:
U.S. Treasuries$10,000 2.68 %$96,106 1.57 %$20,674 1.48 %$— — %$126,780 $118,787 1.64 %
Municipal— — 908 4.84 6,272 4.45 4,518 1.95 11,698 9,550 3.51 
Corporate— — — — 5,000 4.31 — — 5,000 4,711 4.31 
Asset-backed securities— — — — — — 5,391 5.69 5,391 5,414 5.69 
Mortgage-backed securities5,892 4.91 37,813 3.98 542 2.99 32,450 4.89 76,697 74,990 4.43 
Total$15,892 3.51 %$134,827 2.27 %$32,488 2.51 %$42,359 4.68 %$225,566 $213,452 2.87 %
As described in Note 3 - “Investment Securities” in the “Notes to Unaudited Consolidated Financial Statements,” at March 31, 2025, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at March 31, 2025 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of March 31, 2025 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at March 31, 2025, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:
Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are five securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.
Municipal Securities – All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. Summary ratings information at March 31, 2025, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows: AAA – 82% of the portfolio; AA+ – 8%; AA – 10%.
Asset-backed Securities – There were three investment grade asset-backed securities, and there have been no payment defaults on these securities.
As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of March 31, 2025.
Portfolio Loans Receivable
Our primary source of income is derived from interest earned on loans. Our portfolio loans consist of loans secured by real estate as well as commercial business loans, credit card loans secured by corresponding deposits at the Bank and, to a limited extent, other consumer loans. Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals. Our owner-occupied commercial real estate loans, residential construction loans and commercial business and investment loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. Our credit card portfolio supplements our traditional lending products with enhanced yields. Our traditional commercial real estate and commercial
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and industrial lending are principally directed to our market area consisting of the Washington, D.C. and Baltimore, Maryland metropolitan areas.
Residential Real Estate Loans. One-to-four family mortgage loans are primarily secured by owner-occupied primary and secondary residences and, to a lesser extent, investor-owned residences. Residential loans are originated through the commercial sales teams and CBHL division. Residential loans also include home equity lines of credit. Owner-occupied residential real estate loans usually have fixed rates for five or seven years and adjust on an annual basis after the initial term based on a typical maturity of 30 years. Investor residential real estate loans are generally based on 25-year terms with a balloon payment due after five years. Generally, the required minimum debt service coverage ratio is 115%.
Commercial Real Estate Loans. Commercial real estate loans are originated on owner-occupied and non-owner-occupied properties. These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $3.5 million as of March 31, 2025 and $3.1 million as of December 31, 2024, are included in the commercial real estate loan category. Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties. Lender finance loans totaling $23.2 million as of March 31, 2025 and $28.6 million as of December 31, 2024, are also included in the commercial real estate loan category. Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers. The primary sources of repayment are the operating incomes of the borrowers and the collection of the finance receivables securing the loans. Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are included in the commercial real estate loan category. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. The interest rates on commercial real estate loans generally have initial fixed rate terms that adjust typically at five years. Origination fees are routinely charged for services. Personal guarantees from the principal owners of the business are generally required, supported by a review of the principal owners’ personal financial statements and global debt service obligations. The properties securing the portfolio are diverse in type. This diversity may help reduce the exposure to adverse economic events that affect any single industry.
Construction Loans. Construction loans are offered within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months. The Company frequently transitions the end purchaser to permanent financing or re-underwriting and sale into the secondary market through its CBHL division. According to underwriting standards, the ratio of loan principal to collateral value, as established by an independent appraisal, cannot exceed 75% for investor-owned and 80% for owner-occupied properties, although exceptions are sometimes made. The Company performs a stress test of the construction loan portfolio at least once a year, and underlying real estate conditions are monitored as well as trends in sales outcomes versus underwriting valuations as part of ongoing risk management efforts. The borrowers’ progress in construction buildout is monitored against the original underwriting guidelines for construction milestones and completion timelines.
Commercial and Industrial. In addition to other loan products, general commercial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, letters of credit, government guaranteed loans and solar energy related loans and other loan products, are offered, primarily in target markets, and underwritten based on each borrower’s ability to service debt from income. These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and equipment. Personal guaranties from the borrower or other principal are generally obtained.
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Credit Cards. Through the OpenSky™ credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores through a fully digital and mobile platform. The secured lines of credit are secured by a noninterest-bearing demand account at the Bank in an amount equal to the full credit limit of the credit card. For the partially secured lines of credit, the Bank offers certain customers an unsecured line in excess of their secured line of credit by using a proprietary scoring model, which considers credit score and repayment history (typically a minimum of six months of on-time payments, but ultimately determined on a case-by-case basis). Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $81.3 million and $87.2 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of March 31, 2025 and December 31, 2024, respectively. Unsecured balances were $39.0 million and $42.4 million, respectively, at the same dates.
Other Consumer Loans. To a limited extent and typically as an accommodation to existing customers, personal consumer loans, such as term loans, car loans and boat loans are offered.
Purchased Credit Deterioration. Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as purchased credit deteriorated (“PCD”). An allowance is recognized for a PCD loan by adding it to the purchase price or fair value in a business combination. There is no provision for credit losses recognized upon acquisition of a PCD loan since the initial allowance is established through purchase accounting. After initial recognition, the accounting for a PCD loan follows the credit loss model that applies to the loan category. Purchased financial loans that do not have a more-than-significant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans. An allowance for credit losses is recorded with a corresponding charge to provision for credit losses. Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans. There were no loans purchased with credit deterioration during the three months ended March 31, 2025 or the three months ended March 31, 2024.
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The repayment of loans is a source of additional liquidity for the Company. The following table details contractual maturities of our portfolio loans, along with an analysis of loans maturing after one year categorized by rate characteristic. Loans with adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments.

As of March 31, 2025
One Year
or Less		One to
Five Years		Over
Five Years to Fifteen Years		After Fifteen Years
(in thousands)AmountAmountAmountAmountTotal
Real estate:
Residential$139,441 $258,177 $64,402 $231,577 $693,597 
Commercial210,755 404,102 276,519 40,299 931,675 
Construction302,398 37,325 3,557 — 343,280 
Commercial and Industrial235,747 109,701 127,782 121,101 594,331 
Credit card118,709 — — — 118,709 
Other consumer734 242 1,224 — 2,200 
Total portfolio loans, gross$1,007,784 $809,547 $473,484 $392,977 $2,683,792 
Loans above maturing after one year categorized by rate characteristic:Predetermined Interest RatesFloating or Variable RatesTotal
Real estate:
Residential$368,233 $185,923 $554,156 
Commercial429,097 291,823 720,920 
Construction4,792 36,090 40,882 
Commercial and Industrial105,963 252,621 358,584 
Other consumer243 1,223 1,466 
Total portfolio loans, gross$908,328 $767,680 $1,676,008 
The following tables present non-owner-occupied and owner-occupied commercial real estate loans and multi-family loans and the weighted average loan-to-value (“LTV”) and fixed rate maturities by year and loan type:

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Non-owner-occupied commercial real estate loans, including multi-family
As of March 31, 2025
(in thousands)AmountAverage Loan Size
Weighted Average LTV(1)
% of Non-Owner-Occupied Commercial Real Estate Loans% of Total Portfolio Loans, Gross
Loan type:
Multi-family$184,100 $1,509 54.8 %Not Applicable6.9 %
Retail$154,614 $1,546 47.1 %31.9 %5.8 %
Mixed use132,535 1,506 55.1 %27.4 %4.9 %
Hotel69,107 4,319 51.8 %14.3 %2.6 %
Industrial64,835 1,063 51.6 %13.4 %2.4 %
Office23,240 894 50.8 %4.8 %0.9 %
Other(2)
40,068 1,336 54.9 %8.2 %1.5 %
Total non-owner-occupied commercial real estate loans$484,399 $1,509 51.4 %100.0 %18.0 %
Total portfolio loans, gross$2,683,792 
Scheduled maturities of fixed rate non-owner-occupied commercial real estate loans, including multi-family
As of March 31, 2025
(in thousands)20252026202720282029 and OnwardsTotal
Loan type:
Multi-family$8,865 $16,903 $20,631 $39,416 $42,712 $128,527 
Retail$15,152 $10,879 $19,054 $2,116 $41,262 $88,463 
Mixed use7,127 22,863 9,419 4,854 18,430 62,693 
Industrial7,989 8,053 8,172 1,853 15,862 41,929 
Hotel351 — — — 21,964 22,315 
Office3,286 524 2,937 167 10,172 17,086 
Other6,383 4,695 6,731 — 3,581 21,390 
Total fixed rate non-owner-occupied commercial real estate loans$40,288 $47,014 $46,313 $8,990 $111,271 $253,876 
Owner-occupied commercial real estate loans
As of March 31, 2025
(in thousands)AmountAverage Loan Size
Weighted Average LTV(1)
% of Owner-Occupied Commercial Real Estate Loans% of Total Portfolio Loans, Gross
Loan type:
Industrial$110,328 $1,254 54.8 %26.2 %4.1 %
Office48,447 629 55.7 %11.5 %1.8 %
Retail43,573 650 59.9 %10.4 %1.6 %
Mixed use15,846 932 57.7 %3.8 %0.6 %
Other(3)
202,449 1,569 57.2 %48.1 %7.5 %
Total owner-occupied commercial real estate loans$420,643 $1,113 56.7 %100.0 %15.7 %
Total portfolio loans, gross$2,683,792 
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Scheduled maturities of fixed rate owner-occupied commercial real estate loans
As of March 31, 2025
(in thousands)20252026202720282029 and OnwardsTotal
Loan type:
Industrial$1,238 $9,856 $7,151 $7,030 $39,651 $64,926 
Office2,519 745 2,188 2,429 25,485 33,366 
Retail2,684 592 3,725 10,222 16,842 34,065 
Mixed use— 1,087 885 685 9,837 12,494 
Other20,275 25,863 10,148 2,096 45,421 103,803 
Total fixed rate owner-occupied commercial real estate loans$26,716 $38,143 $24,097 $22,462 $137,236 $248,654 
_______________
(1)Weighted average LTV is calculated by reference to the most recent available appraisal of the property securing each loan.
(2)Other non-owner-occupied commercial real estate loans include a land loan of $12.4 million, skilled nursing loans of $9.9 million, special purpose loans of $9.7 million, and other loans of $8.0 million.
(3)Other owner-occupied commercial real estate loans include special purpose loans of $89.7 million, skilled nursing loans of $58.9 million, and other loans of $53.9 million.

Nonperforming Assets
Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When the interest accrual is discontinued, all unpaid accrued interest is reversed from income. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured.
Loans are generally charged-off in part or in full when management determines the loan to be uncollectible. Factors for charge-off that may be considered include: repayments deemed to be extended out beyond reasonable time frames, customer bankruptcy and lack of assets, and/or collateral deficiencies. Consumer credit card balances are moved into the charge off queue after they become more than 90 days past due and are charged off not later than 120 days after they become past due. Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.
The Company believes its approach to lending and the management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. The Company has established underwriting guidelines to be followed by our bankers, and routinely monitors our delinquency levels for any negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit.
From a credit risk standpoint, we grade watchlist and problem loans into one of five credit quality indicators: pass/watch, special mention, substandard, doubtful or loss. The classifications of loans reflect a judgment about the risks of default and loss associated with each loan. Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit. Our lending policy requires the routine monitoring of past due reports, daily overdraft reports, monthly maturing loans, monthly risk rating reports and internal loan review reports. The lending and credit management of the Bank meet periodically to review loans rated pass/watch. The focus of each meeting is to identify and promptly determine any necessary required action within this loan population, which consists of loans that, although considered satisfactory and performing to terms, may exhibit special risk features that warrant management’s attention.
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Management is intent on maintaining a strong credit review function and risk rating process. The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system, and continually endeavors to adapt and enhance the monitoring of the loan portfolio. The loan portfolio analysis process is intended to contribute to the identification of weaknesses before they become more severe.
A special mention loan has potential weaknesses deserving of management’s attention. If uncorrected, such weaknesses may, at a future date, impair the repayment prospects for the asset or our credit position.
Loans that are deemed special mention, substandard, doubtful or loss are listed in the Bank’s Problem Loan Status Report. The Problem Loan Status Report provides a detailed summary of the borrower and guarantor status, loan accrual status and collateral evaluation and it includes a description of the planned collection and administration program designed to mitigate the Bank’s risk of loss and remove the loan from problem status. The Special Asset Committee reviews the Problem Loan Status Report on a quarterly basis for borrowers with an overall loan exposure in excess of $250,000.
At March 31, 2025, the recorded investment in individually assessed loans was $46.6 million, requiring a specific reserve of $10.1 million. At December 31, 2024, the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million. The $34.9 million of individually assessed loans at December 31, 2024 included a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2024.
Allowance for Credit Losses (“ACL”)
We maintain an ACL that represents management’s estimate of expected credit losses and risks inherent in our loan portfolio. The balance of the ACL is based on internally assigned risk classifications of loans, historical loss rates, changes in the nature of our loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loss rates.
We continue to monitor the unique economic environment in the DMV area with regard to the impact on our customers and credit risk. Management believes that the current ACL coverage ratio captures currently forecasted economic conditions and management’s assessment of the economic forecast through qualitative factors.
A major consideration in the determination of the ACL on the credit card portfolio is based on historical loss experience in that portfolio. The Company calculates the credit card ACL collectively, applying segmentation based on collateral positions: secured, partially secured and unsecured.
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The following table presents key ratios for the ACL and nonaccrual loans for the periods indicated:
Allowance for credit losses to period end portfolio loansNonaccrual loans to total portfolio loansAllowance for credit losses to nonaccrual loans
(in thousands)March 31, 2025December 31, 2024March 31, 2025December 31, 2024March 31, 2025December 31, 2024
Real estate:
Residential0.91 %1.01 %1.35 %1.26 %68 %80 %
Commercial1.85 1.70 2.30 1.52 81 112 
Construction0.95 0.93 1.24 1.34 76 69 
Commercial and Industrial2.64 2.95 1.32 0.54 200 552 
Credit card4.97 4.93 — — — — 
Other consumer0.27 0.72 — — — — 
Total1.81 %1.85 %1.60 %1.15 %113 %161 %

Total charge-offs for the three months ended March 31, 2025 and for the same period in 2024 were primarily comprised of credit card charge-offs resulting both from the aging of the portfolio and the shift from an almost exclusively secured card portfolio to a portfolio that also includes partially secured and unsecured exposures. The following tables present a summary of the net charge-offs (recovery) of loans as a percentage of average loans for the periods indicated:
Three Months Ended March 31,
20252024
(in thousands)Net Charge-OffsAverage Loans
Percent of average portfolio loans(1)
Net Charge-OffsAverage Loans
Percent of average portfolio loans(1)
Real estate:
Residential$— $688,528 — %$225 $572,665 — %
Commercial— 920,894 — — 706,880 — 
Construction— 322,270 — — 295,836 — 
Commercial and Industrial147 580,372 0.10 98 238,514 0.17 
Credit card2,297 118,723 7.85 1,664 110,483 6.06 
Other consumer— 3,323 — — 2,994 — 
Total$2,444 $2,634,110 0.38 %$1,987 $1,927,372 0.41 %
_____________
(1)    Annualized.

As the loan portfolio and ACL review processes continue to evolve, there may be changes to elements of the allowance and this may influence the overall level of the allowance maintained. Historically, the Bank has enjoyed a high-quality loan portfolio with relatively low levels of net charge-offs and low delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.
Although we believe we have established our ACL in accordance with GAAP and that the ACL is currently adequate to provide for known and inherent losses in the portfolio, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio.
The following table shows the allocation of the ACL among loan categories as of the dates indicated. The total allowance is available to absorb losses from any loan category.
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March 31, 2025December 31, 2024
Amount
Percent (1)
Amount
Percent (1)
(in thousands)
Real estate:
Residential$6,331 13 %$6,945 14 %
Commercial17,270 36 %16,041 33 %
Construction3,261 7 %2,973 6 %
Commercial and Industrial15,688 32 %16,377 33 %
Credit card5,898 12 %6,301 14 %
Other consumer6 — %15 — %
Total allowance for credit losses$48,454 100 %$48,652 100 %
_______________
(1)Loan category as a percentage of total portfolio loans.

Total Liabilities
Total liabilities at March 31, 2025 increased $128.5 million from December 31, 2024, primarily due to growth in the deposit portfolio of $129.4 million.
Deposits
Deposits are a major source of funding for the Company. We offer a variety of deposit products including interest-bearing demand, savings, money market and time accounts, all of which we actively market at competitive pricing. We generate deposits from our customers on a relationship basis and through the efforts of our commercial and business banking officers. Our credit card customers are a significant source of low cost deposits. As of March 31, 2025 and December 31, 2024, our credit card customers accounted for $168.8 million and $166.4 million, or 20.8% and 20.5%, respectively, of our total noninterest-bearing deposit balances.
Major categories of interest-bearing deposits are as follows:
Interest-Bearing Deposits
(in thousands)March 31, 2025December 31, 2024
Interest-bearing demand accounts$296,455 $238,881 
Savings12,819 13,488 
Money markets912,418 816,708 
Customer time deposits549,630 548,901 
Brokered time deposits307,787 333,033 
Total Interest-bearing deposits$2,079,109 $1,951,011 
The Company had $307.8 million in brokered deposits at March 31, 2025 compared to $333.0 million at December 31, 2024.
Deposits securing our OpenSky™ card lines of credit and deposits from title companies represent the largest concentrations in the deposit portfolio. As of March 31, 2025, these concentrations represented 6% and 13% of deposits, respectively. As of December 31, 2024, these deposits represented 6% and 11% of deposits, respectively.
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The following table presents the average balances and average rates paid on deposits for the periods indicated:
For the Three Months Ended March 31, 2025For the Year Ended
December 31, 2024
(in thousands)
Average
Balance
Average
Rate(1)
Average
Balance		Average
Rate
Interest-bearing demand accounts$242,355 0.62 %$221,437 0.45 %
Savings13,204 0.55 6,732 0.40 
Money market accounts
869,978 3.45 704,002 4.08 
Time deposits859,729 4.12 561,369 4.70 
Total interest-bearing deposits1,985,266 3.37 1,493,540 3.76 
Noninterest-bearing demand accounts783,018 675,360 
Total deposits
$2,768,284 2.42 %$2,168,900 2.59 %
_____________
(1)    Annualized.

Deposit costs decreased 17 basis points during the three months ended March 31, 2025 primarily driven by a lower interest rate environment.
Noninterest-bearing deposits represented 28.1% of total deposits at March 31, 2025 compared to 29.4% at December 31, 2024. Insured and protected deposits were approximately $2.0 billion as of March 31, 2025, representing 70.4% of the Company’s deposit portfolio. The insured and protected amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.
The following table presents the maturities of our certificates of deposit as of March 31, 2025.
Three
Months or
Less		Over
Three
Through
Six
Months		Over Six
Through
Twelve
Months		Over
Twelve
Months		Total
(in thousands)
$250,000 or more$52,857 $65,449 $116,910 $8,447 $243,663 
Less than $250,000244,798 107,967 125,466 135,523 613,754 
Total$297,655 $173,416 $242,376 $143,970 $857,417 
Borrowings
We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below. Total borrowings of $34.1 million at March 31, 2025 remained the same compared to December 31, 2024.
FHLB Advances. The FHLB allows us to borrow up to 25% of our assets on a blanket floating lien status collateralized by certain securities and loans. As of March 31, 2025, approximately $785.5 million in real estate loans were pledged as collateral to the FHLB and our total borrowing capacity from the FHLB was $531.7 million. As of March 31, 2025, no investment securities were pledged with the FHLB. We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio. As of March 31, 2025, we had $22.0 million in outstanding advances and $509.7 million in available borrowing capacity from the FHLB.
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Other Borrowed Funds. The Company has also issued junior subordinated debentures and other subordinated notes. At March 31, 2025, these other borrowings amounted to $12.1 million, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures and subordinated notes.
At March 31, 2025, our Floating Rate Junior Subordinated Deferrable Interest Debentures amounted to $2.1 million. The Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”) were issued in June of 2006, mature on June 15, 2036, and may be redeemed prior to that date under certain circumstances. The principal amount of the Floating Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to the three-month CME Term SOFR plus a spread adjustment of 0.26161% (or 26.161 basis points) plus 187 basis points, payable quarterly. As of March 31, 2025, the rate for the Floating Rate Debentures was 6.43%.
On November 30, 2020, the Company issued $10.0 million in subordinated notes due in 2030 (the “Notes”). The Notes have a ten year term and have a fixed rate of 5.00% for the first five years; thereafter, the rate resets quarterly to a benchmark rate, which is expected to be the three-month SOFR, plus 490 basis points. The Notes may be redeemed in part or in whole, upon the occurrence of certain events.
Federal Reserve Bank of Richmond. The Federal Reserve Bank of Richmond has an available borrower in custody arrangement which allows us to borrow on a collateralized basis. The Company’s borrowing capacity under the Federal Reserve’s discount window program was $115.7 million as of March 31, 2025. Certain investment securities and commercial loans are pledged under this arrangement. During the first quarter of 2023, we established a line of credit under the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”). As of March 31, 2024, participation in the BTFP had concluded and the Company had no outstanding balances under the BTFP at March 31, 2024.
Other Borrowings. The Company also has available lines of credit of $76.0 million with other correspondent banks at March 31, 2025, as well as access to certificate of deposit funding through financial intermediaries. There were no outstanding balances on the lines of credit from correspondent banks at March 31, 2025.
Liquidity
Liquidity is defined as the Bank’s capacity to meet its cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Bank’s ability to meet both expected and unexpected cash flows and collateral needs efficiently and without adversely affecting either daily operations or the financial condition of the Bank. Liquidity risk is the risk that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding. The Bank’s obligations, and the funding sources used to meet them, depend significantly on our business mix, balance sheet structure and the cash flow profiles of our on- and off-balance sheet obligations. In managing our cash flows, management endeavors to anticipate situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints on the ability to convert assets into cash or in accessing sources of funds (i.e., market liquidity) and contingent liquidity events. Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also could affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity and asset/liability management.
Management has established a risk management process for identifying, measuring, monitoring and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is integrated into our risk management processes. Critical elements of our liquidity risk management include: corporate governance consisting of oversight by the board of directors and active involvement by management; strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the complexity and business activities of the Bank; active management of intraday liquidity and collateral; a
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diverse mix of existing and potential future funding sources; holding liquid marketable securities that can be used to meet liquidity needs in situations of stress; contingency funding plans that address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes believed to be sufficient to assure the adequacy of the institution’s liquidity risk management process.
We expect funds to be available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans and investment security cash flows. Other potential funding sources include brokered certificates of deposit, deposit listing services, CDARS, borrowings from the FHLB and other lines of credit.
As of March 31, 2025, we had $509.7 million of available borrowing capacity from the FHLB, $115.7 million of available borrowing capacity from the Federal Reserve Bank of Richmond Borrower in Custody program from certain pledged investment securities and commercial loans under this arrangement and available lines of credit of $76.0 million with other correspondent banks. Further, unpledged investment securities available as collateral for potential additional borrowings totaled $119.5 million at March 31, 2025. Cash and cash equivalents were $294.0 million at March 31, 2025.
Capital Resources
Stockholders’ equity increased $14.4 million for the period ended March 31, 2025 compared to December 31, 2024 largely due to net income of $13.9 million for the three months ended March 31, 2025. Shares repurchased and retired for the three months ended March 31, 2025, as part of the Company’s stock repurchase program, totaled 22,185 shares at an average price of $27.85, for a total cost of $0.6 million including commissions.
The Company’s total stockholders’ equity is affected by fluctuations in the fair values of investment securities available-for-sale. The difference between amortized cost and fair value of investment securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity. Accumulated other comprehensive loss is excluded from the Bank’s and Company’s regulatory capital ratios. The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $9.2 million at March 31, 2025 and $11.5 million at December 31, 2024. Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity. To the extent unrealized losses on investment securities available-for-sale result from credit losses, unrealized losses are recorded as a charge against earnings. The investment securities section of the MD&A and Notes 1 and 4 to the “Notes to the Unaudited Consolidated Financial Statements” provide additional information concerning management’s evaluation of investment securities available-for-sale for credit losses at March 31, 2025.
The Company uses several indicators of capital strength. The most commonly used measure is common equity to total assets (computed as equity divided by total assets), which was 9.94% at March 31, 2025 and 11.07% at December 31, 2024.
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can precipitate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios of common equity Tier 1, Tier 1, and total capital as a percentage of assets and
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off-balance sheet exposures, adjusted for risk weights ranging from 0% to 1,250%. The Bank is also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio.
The ability of the Company to continue to grow is dependent on its earnings and those of the Bank, and the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock, or through the issuance of additional qualifying capital instruments, such as subordinated debt. The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in commercial real estate loans. See "Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A - Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2024.
As of March 31, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we intend to monitor and control our growth relative to our earnings in order to remain in compliance with all regulatory capital standards applicable to us.
The following table presents the regulatory capital ratios for the Company and the Bank as of the dates indicated.
(in thousands)ActualMinimum Capital
Adequacy		To Be Well
Capitalized
March 31, 2025AmountRatioAmountRatioAmountRatio
The Company
Tier 1 leverage ratio (to average assets)$344,298 10.68 %$128,955 4.00 %$161,193 5.00 %
Tier 1 capital (to risk-weighted assets)344,298 13.32 155,047 6.00 206,730 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
342,236 13.24 116,286 4.50 167,968 6.50 
Total capital ratio (to risk-weighted assets)386,813 14.97 206,730 8.00 258,412 10.00 
The Bank
Tier 1 leverage ratio (to average assets)$293,705 9.27 %$126,764 4.00 %$158,455 5.00 %
Tier 1 capital (to risk-weighted assets)293,705 11.67 151,020 6.00 201,360 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
293,705 11.67 113,265 4.50 163,605 6.50 
Total capital ratio (to risk-weighted assets)325,384 12.93 201,360 8.00 251,700 10.00 
December 31, 2024
The Company
Tier 1 leverage ratio (to average assets)$346,840 11.07 %$125,348 4.00 %$156,685 5.00 %
Tier 1 capital (to risk-weighted assets)346,840 13.83 150,512 6.00 200,6838.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
344,778 13.74 112,884 4.50 163,0556.50 
Total capital ratio (to risk-weighted assets)388,425 15.48 200,683 8.00 250,853 10.00 
The Bank
Tier 1 leverage ratio (to average assets)$283,828 9.17 %$123,818 4.00 %$154,772 5.00 %
Tier 1 capital (to risk-weighted assets)281,563 11.54 146,451 6.00 195,268 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
281,563 11.54 109,838 4.50 158,655 6.50 
Total capital ratio (to risk-weighted assets)312,304 12.79 195,268 8.00 244,085 10.00 
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Contractual Obligations
We have contractual obligations to make future payments on debt and lease agreements. Our liquidity monitoring and management consider both present and future demands for and sources of liquidity.
Off-Balance Sheet Items
In the normal course of business, we enter into various transactions that, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and issue letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets. Our exposure to credit loss is represented by the contractual amounts of these commitments. The same credit policies and procedures are generally used in making these commitments as for on-balance sheet instruments. We are not aware of any accounting loss to be incurred by funding these commitments; however, we maintain a reserve for unfunded commitments and certain off-balance sheet credit risks, which is recorded in other liabilities on the consolidated balance sheet.
Our commitments associated with outstanding letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect actual future cash funding requirements.
As of March 31, 2025As of December 31, 2024
(in thousands)
Unfunded lines of credit$403,208 $403,029 
Letters of credit3,122 3,122 
Commitment to fund other investments2,714 2,714 
Total credit extension commitments$409,044 $408,865 
Unfunded lines of credit represent unused credit facilities to our current borrowers. Lines of credit generally have variable interest rates. Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer from the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. Our policies generally require that letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements. We believe the credit risk associated with issuing letters of credit is substantially the same as the risk involved in extending loan facilities to our customers.
We seek to minimize our exposure to loss under letters of credit and credit commitments by subjecting them to the same credit approval and monitoring procedures as we do for on-balance sheet instruments. The effect on our revenue, expenses, cash flows and liquidity of the unused portions of these letters of credit commitments cannot be precisely predicted because we do not control the extent to which the lines of credit may be used.
Commitments to extend credit are agreements to lend funds to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have variable interest rates, fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn, the total commitment amounts disclosed
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above do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us, upon extension of credit is based on management’s credit evaluation of the customer.
The commitment to fund other investments reflects an obligation to make an investment in a Small Business Investment Company.
Impact of Inflation
The consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.
Unlike many industrial companies, substantially all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, most other operating expenses are sensitive to changes in levels of inflation.
Non-GAAP Financial Measures and Reconciliations
The Company has presented the following non-GAAP financial measures because it believes that these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.
Other companies may use similarly titled non-GAAP financial measures that may be calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.

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Core Earnings MetricsThree Months Ended
(in thousands, except per share data)March 31, 2025March 31, 2024
Net Income$13,932 $6,562 
Add: Merger-Related Expenses, net of tax964 538 
Core Net Income$14,896 $7,100 
Weighted average common shares - Diluted16,925 13,919 
Earnings per share - Diluted$0.82 $0.47 
Core Earnings per share - Diluted$0.88 $0.51 
Average Assets$3,221,964 $2,299,234 
Return on Average Assets(1)
1.75 %1.15 %
Core Return on Average Assets(1)
1.87 %1.24 %
Average Equity$363,115 $258,892 
Return on Average Equity(1)
15.56 %10.19 %
Core Return on Average Equity(1)
16.64 %11.03 %
Net Interest Income (a)$46,047 $35,008 
Noninterest Income12,549 5,972 
Total Revenue$58,596 $40,980 
Noninterest Expense38,053 $29,487 
Efficiency Ratio(2)
64.94 %71.95 %
Noninterest Income$12,549 $5,972 
Core Noninterest Income (b)12,549 5,972 
Core Revenue (a) + (b)$58,596 $40,980 
Noninterest Expense$38,053 $29,487 
Less: Merger-Related Expenses1,266 712 
Core Noninterest Expense$36,787 $28,775 
Core Efficiency Ratio (2)
62.78 %70.22 %
_____________
(1)    Annualized.
(2)    The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).

Commercial Bank Net Interest MarginThree Months Ended
(in thousands)March 31, 2025March 31, 2024
Commercial Bank Net Interest Income$31,515 $20,045 
Average Interest Earning Assets3,087,943 2,254,663 
Less: Average Non-Commercial Bank Interest Earning Assets128,278 116,197 
Average Commercial Bank Interest Earning Assets$2,959,665 $2,138,466 
Commercial Bank Net Interest Margin4.32%3.77%

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Commercial Bank Portfolio Loans Receivable YieldThree Months Ended
(in thousands)March 31, 2025March 31, 2024
Portfolio Loans Receivable Interest Income$58,453 $45,908 
Less: Credit Card Loan Income14,148 14,457 
Commercial Bank Portfolio Loans Receivable Interest Income$44,305 $31,451 
Average Portfolio Loans Receivable2,634,110 1,927,372 
Less: Average Credit Card Loans118,723 110,483 
Total Commercial Bank Average Portfolio Loans Receivable$2,515,387 $1,816,889 
Commercial Bank Portfolio Loans Receivable Yield7.14%6.96%

Pre-tax, Pre-Provision Net Revenue ("PPNR")Three Months Ended
(in thousands)March 31, 2025March 31, 2024
Net Income
$13,932 $6,562 
Add: Income Tax Expense4,365 2,062 
Add: Provision for Credit Losses2,246 2,727 
Add: Provision for Credit Losses on Unfunded Commitments— 142 
Pre-tax, Pre-Provision Net Revenue ("PPNR")$20,543 $11,493 

Core PPNRThree Months Ended
(in thousands)March 31, 2025March 31, 2024
Net Income
$13,932 $6,562 
Add: Income Tax Expense4,365 2,062 
Add: Provision for Credit Losses2,246 2,727 
Add: Provision for Credit Losses on Unfunded Commitments— 142 
Add: Merger-Related Expenses1,266 712 
Core PPNR$21,809 $12,205 
Allowance for Credit Losses to Total Portfolio Loans
(in thousands)March 31, 2025December 31, 2024
Allowance for Credit Losses$48,454 $48,652 
Total Portfolio Loans2,678,406 2,630,163 
Allowance for Credit Losses to Total Portfolio Loans1.81%1.85%
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Commercial Bank Allowance for Credit Losses to Commercial Bank Portfolio Loans
(in thousands)March 31, 2025December 31, 2024
Allowance for Credit Losses$48,454 $48,652 
Less: Credit Card Allowance for Credit Losses5,905 6,402 
Commercial Bank Allowance for Credit Losses42,549 42,250 
Total Portfolio Loans2,678,406 2,630,163 
Less: Gross Credit Card Loans115,991 122,928 
Commercial Bank Portfolio Loans2,562,415 2,507,235 
Commercial Bank Allowance for Credit Losses to Total Portfolio Loans1.67%1.70%
Nonperforming Assets to Total Assets
(in thousands)March 31, 2025December 31, 2024
Total Nonperforming Assets$42,934 $30,241 
Total Assets3,349,805 3,206,911 
Nonperforming Assets to Total Assets1.28%0.94%

Nonperforming Loans to Total Portfolio Loans
(in thousands)March 31, 2025December 31, 2024
Total Nonperforming Loans$42,934 $30,241 
Total Portfolio Loans2,678,406 2,630,163 
Nonperforming Loans to Total Portfolio Loans1.60%1.15%

Net Charge-Offs to Average Portfolio Loans
(in thousands)March 31, 2025December 31, 2024
Total Net Charge-Offs$2,444 $2,427 
Total Average Portfolio Loans2,634,110 2,592,960 
Net Charge-Offs to Average Portfolio Loans, Annualized0.38%0.37%

Tangible Book Value per Share
(in thousands, except share and per share data)March 31, 2025December 31, 2024
Total Stockholders' Equity$369,577 $355,139 
Less: Preferred Equity
— — 
Less: Intangible Assets
39,641 36,943 
Tangible Common Equity$329,936 $318,196 
Period End Shares Outstanding16,657,168 16,662,626 
Tangible Book Value per Share$19.81 $19.10 
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Return on Average Tangible Common Equity
(in thousands)March 31, 2025March 31, 2024
Net Income
$13,932 $6,562 
Add: Intangible Amortization, Net of Tax199 — 
Net Tangible Income$14,131 $6,562 
Average Equity363,115 258,892 
Less: Average Intangible Assets36,896 — 
Net Average Tangible Common Equity$326,219 $258,892 
Return on Average Equity15.56 %10.19 %
Return on Average Tangible Common Equity17.57 %10.19 %
Core Return on Average Tangible Common Equity
(in thousands)March 31, 2025March 31, 2024
Net Income, as Adjusted$14,896 $7,100 
Add: Intangible Amortization, Net of Tax199 — 
Core Net Tangible Income$15,095 $7,100 
Core Return on Average Tangible Common Equity18.77 %11.03 %




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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity and Market Risk
As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability and funds management policy provides management with the guidelines for funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We endeavor to manage our sensitivity position within our established guidelines.
Fluctuations in interest rates will ultimately impact both the level of income and the market value of all interest earning assets and interest-bearing liabilities, other than those that have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.
We endeavor to manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, financial options or financial futures contracts for the purpose of reducing interest rate risk. We endeavor to hedge the interest rate risks of our available-for-sale mortgage pipeline by using MBS, and short positions. Based on the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
Our exposure to interest rate risk is managed by the Bank’s Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by our board of directors. The ALCO formulates strategies based on perceived levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest earning assets and interest-bearing liabilities and an interest rate shock simulation model.
The following table indicates that, for periods less than one year, rate-sensitive assets exceeded rate-sensitive liabilities, resulting in an asset-sensitive position. For a bank with an asset-sensitive position, or positive gap, rising interest rates would generally be expected to have a positive effect on net interest income, and falling interest rates would generally be expected to have the opposite effect.
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INTEREST SENSITIVITY GAP
March 31, 2025Within One MonthAfter One Month Through Three MonthsAfter Three Through Twelve MonthsWithin One YearGreater Than One Year or Non-SensitiveTotal
(in thousands)
Assets
Interest earning assets
Loans (1)
$969,251 $205,654 $451,627 $1,626,532 $1,086,530 $2,713,062 
Securities
15,454 24,318 40,395 80,167 140,316 220,483 
Interest-bearing deposits at other financial institutions266,092 — — 266,092 — 266,092 
Federal funds sold
59 — — 59 — 59 
Total earning assets
$1,250,856 $229,972 $492,022 $1,972,850 $1,226,846 $3,199,696 
Liabilities
Interest-bearing liabilities
Interest-bearing deposits$18,332 $36,664 $164,989 $219,985 $1,001,707 $1,221,692 
Time deposits
133,374 164,287 414,770 712,431 144,986 857,417 
Total interest-bearing deposits151,706 200,951 579,759 932,416 1,146,693 2,079,109 
FHLB Advances
— — — — 22,000 22,000 
Other borrowed funds
— — — — 12,062 12,062 
Total interest-bearing liabilities$151,706 $200,951 $579,759 $932,416 $1,180,755 $2,113,171 
Period gap
$1,099,150 $29,021 $(87,737)$1,040,434 $46,091 $1,086,525 
Cumulative gap1,099,150 1,128,171 1,040,434 1,040,434 1,086,525 
Ratio of cumulative gap to total earning assets
34.35 %35.26 %32.52 %32.52 %33.96 %
_______________
(1)Includes loans held for sale.

We use quarterly Earnings at Risk (“EAR”) simulations to assess the impact of changing interest rates on our earnings under a variety of scenarios and time horizons. These simulations utilize both instantaneous and parallel changes in the level of interest rates, as well as non-parallel changes such as changing slopes and twists of the yield curve. Static simulation models are based on current exposures and assume a constant balance sheet with no new growth. Dynamic simulation models are also utilized that rely on assumptions regarding changes in existing lines of business, new business, and changes in management and client behavior.
We also use economic value-based methodologies to measure the degree to which the economic values of the Bank’s positions change under different interest rate scenarios. The economic-value approach focuses on a longer-term time horizon and endeavors to capture all future cash flows expected from existing assets and liabilities. The economic value model utilizes a static approach in that the analysis does not incorporate new business; rather, the analysis shows a snapshot in time of the risk inherent in the balance sheet.
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Many assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, such as asset prepayments, non-maturity deposit price sensitivity and decay rates, and key rate drivers. Because of the inherent use of these estimates and assumptions in the model, our actual results may, and very likely will, differ from our static EAR results. In addition, static EAR results do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates or client behavior. For example, as part of our asset/liability management strategy, management has the ability to increase asset duration and decrease liability duration in order to reduce asset sensitivity, or to decrease asset duration and increase liability duration in order to increase asset sensitivity.
The following table summarizes the results of our EAR analysis in simulating the change in net interest income and fair value of equity over a 12-month horizon as of March 31, 2025:
IMPACT ON NET INTEREST INCOME UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK
Earnings at Risk -400 bps-300 bps-200 bps-100 bpsFlat+100 bps+200 bps+300 bps +400 bps
March 31, 2025
(11.1)%(8.6)%(6.1)%(3.2)%0.0 %3.6 %7.1 %10.6 %14.1 %
Utilizing an economic value of equity (“EVE”) approach, we analyze the risk to capital from the effects of various interest rate scenarios through a long-term discounted cash flow model. This measures the difference between the economic value of our assets and the economic value of our liabilities, which is a proxy for our liquidation value. While this provides some value as a risk measurement tool, management believes EAR is more appropriate in accordance with the going concern principle.
The following table illustrates the results of our EVE analysis as of March 31, 2025.
ECONOMIC VALUE OF EQUITY ANALYSIS UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK
Economic Value of Equity -400 bps-300 bps-200 bps-100 bpsFlat+100 bps+200 bps+300 bps +400 bps
March 31, 2025
(23.4)%(13.9)%(7.3)%(3.0)%0.0 %1.9 %2.9 %4.3 %5.5 %

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Item 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
The Company’s management, including our Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. This evaluation did not include an assessment of those disclosure controls and procedures that are involved in, and did not include an assessment of, internal control over financial reporting as it relates to IFH. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. During the first quarter of 2025, management enhanced the Company’s internal controls over business combinations with specific attention to Day 1 accounting controls. The revisions explicitly address the processes required to provide adequate evidence of the review of the controls over the Purchase Accounting workbook, including the calculation of goodwill, and the controls over documentation supporting the identification and establishment of day 1 PCD credit marks. These controls are acquisition related and will be tested if there is a future acquisition.

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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.

From time to time, we are a party to various litigation matters incidental to the ordinary conduct of our business. We are not presently a party to any legal proceedings which the Company believes will have a material adverse impact on the results of operations or financial condition of the Company.
Item 1A. RISK FACTORS.
There are no material changes to the risk factors as previously disclosed under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2024 and those referenced in other reports on file with the SEC.

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Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

There were no unregistered sales of the Company’s stock during the year to date period ended March 31, 2025.
On February 21, 2025, the Company announced a new stock repurchase program. Under the new stock repurchase program, the Company is authorized to repurchase up to $15 million of its Common Stock, or an aggregate of 483,559 shares of Common Stock. The new stock repurchase program will expire on February 28, 2026, but may be limited or terminated at any time without prior notice.
During the three months ended March 31, 2025, the Company repurchased Common Stock under the stock repurchase program as reflected in the following table.
PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2025 to January 31, 2025— $— — $15,000,000 
February 1, 2025 to February 28, 2025— — — 15,000,000 
March 1, 2025 to March 31, 202522,185 27.85 22,185 14,382,077 
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Item 3. DEFAULTS UPON SENIOR SECURITIES.

None.

Item 4. MINE SAFETY DISCLOSURES.

Not applicable.

Item 5. OTHER INFORMATION.

Rule 10b5-1 Trading Plans
During the quarter ended March 31, 2025, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Exchange Act Rule 10b5-1(c), or adopted or terminated any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).

Item 6. EXHIBITS.


Exhibit NumberDescription
2.1 
3.1 
3.2 
31.1 
31.2 
32.1 
101 
The following materials from the Quarterly Report on Form 10-Q of Capital Bancorp, Inc. for the quarter ended March 31, 2025, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CAPITAL BANCORP, INC.                             
 
 
Date: May 9, 2025
By: /s/ Edward F. Barry
Name: Edward F. Barry
Title: Chief Executive Officer
            (Principal Executive Officer)
Date: May 9, 2025
By: /s/ Dominic Canuso
Name: Dominic Canuso
Title: Chief Financial Officer
            (Principal Financial and Accounting Officer)
77