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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, 2026         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 6, 2026, the Company had 16,288,055 shares of common stock, par value $0.01 per share, outstanding.

Capital Bancorp, Inc. and Subsidiaries
Form 10-Q
Table of Contents

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, 2026December 31, 2025
Assets
Cash and due from banks$20,182 $30,894 
Interest-bearing deposits at other financial institutions379,069 224,611 
Federal funds sold60 60 
Total cash and cash equivalents
399,311 255,565 
Investment securities available-for-sale230,525 230,083 
Restricted investments8,691 8,397 
Loans held for sale13,739 25,828 
Portfolio loans receivable, net of deferred fees and costs3,026,431 2,959,457 
Less allowance for credit losses(54,680)(54,660)
Total portfolio loans held for investment, net2,971,751 2,904,797 
Premises and equipment, net
17,732 15,072 
Accrued interest receivable16,795 16,695 
Goodwill25,969 25,969 
Intangible assets14,511 14,771 
Loan servicing assets1,957 1,816 
Deferred tax asset15,187 14,992 
Bank owned life insurance45,871 45,488 
Other assets46,428 46,734 
Total assets
$3,808,467 $3,606,207 
Liabilities
Deposits
Noninterest-bearing$871,677 $852,741 
Interest-bearing2,420,370 2,240,459 
Total deposits
3,292,047 3,093,200 
Federal Home Loan Bank advances50,000 50,000 
Other borrowed funds2,062 2,062 
Accrued interest payable8,944 8,745 
Other liabilities46,555 50,443 
Total liabilities
3,399,608 3,204,450 
Stockholders' equity
Common stock, $0.01 par value; 49,000,000 shares authorized;
16,286,480 issued and outstanding at March 31, 2026;
16,373,288 issued and outstanding at December 31, 2025
163 164 
Additional paid-in capital112,268 114,604 
Retained earnings302,808 292,749 
Accumulated other comprehensive loss(6,380)(5,760)
Total stockholders' equity
408,859 401,757 
Total liabilities and stockholders' equity
$3,808,467 $3,606,207 


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)20262025
Interest income
Loans, including fees$64,186 $58,691 
Investment securities available-for-sale1,459 1,861 
Federal funds sold and other2,325 2,208 
Total interest income67,970 62,760 
Interest expense
Deposits18,070 16,512 
Borrowed funds502 201 
Total interest expense18,572 16,713 
Net interest income49,398 46,047 
Provision for credit losses3,014 2,246 
Provision for credit losses on unfunded commitments205 — 
Net interest income after provision for credit losses46,179 43,801 
Noninterest income
Service charges on deposits403 258 
Credit card fees4,692 3,722 
Mortgage banking revenue1,556 1,831 
Government lending revenue923 1,096 
Government loan servicing revenue4,345 3,568 
Loan servicing rights (government guaranteed)497 472 
Other income957 1,602 
Total noninterest income13,373 12,549 
Noninterest expenses
Salaries and employee benefits
20,317 18,067 
Occupancy and equipment3,562 2,910 
Professional fees4,965 2,112 
Data processing7,767 7,112 
Advertising1,466 1,779 
Loan processing1,383 743 
Merger-related expenses— 1,266 
Operational and other card fraud related losses690 903 
Regulatory assessment expenses941 889 
Other operating2,590 2,272 
Total noninterest expenses43,681 38,053 
Income before income taxes15,871 18,297 
Income tax expense3,853 4,365 
Net income$12,018 $13,932 
Basic earnings per share$0.74 $0.84 
Diluted earnings per share$0.73 $0.82 
Weighted average common shares outstanding:
Basic16,345,156 16,665,528 
Diluted16,440,911 16,925,454 

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)20262025
Net income$12,018 $13,932 
Other comprehensive income:
Unrealized gain (loss) on investment securities available-for-sale(814)2,991 
Income tax benefit (expense) relating to the items above194 (729)
Other comprehensive income (loss)(620)2,262 
Comprehensive income$11,398 $16,194 

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, 202416,662,626 $167 $123,566 $242,875 $(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 — 43 — — 43 
Shares issued as compensation6,331 — 78 — — 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 $123,476 $255,141 $(9,207)$369,577 
Balance, December 31, 202516,373,288 $164 $114,604 $292,749 $(5,760)$401,757 
Net income— — — 12,018 — 12,018 
Unrealized loss on investment securities available-for-sale, net of income taxes— — — — (620)(620)
Stock options exercised, net of shares withheld for purchase price13,214 — 87 — — 87 
Shares issued as compensation22,735 — 621 — — 621 
Stock-based compensation— — 512 — — 512 
Cash dividends to stockholders ($0.12 per share)
— — — (1,959)— (1,959)
Shares repurchased and retired(122,757)(1)(3,556)— — (3,557)
Balance, March 31, 202616,286,480 $163 $112,268 $302,808 $(6,380)$408,859 


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)20262025
Cash flows from operating activities
Net income$12,018 $13,932 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit losses3,014 2,246 
Provision for credit losses on unfunded commitments205 — 
Provision for mortgage put-back reserve, net16 16 
Net amortization (accretion) on investment securities available-for-sale(92)35 
Premises and equipment depreciation724 215 
Lease asset amortization433 419 
Amortization of intangible assets260 261 
Increase in cash surrender value of BOLI(383)(379)
Net decrease (increase) in loan servicing assets(141)3,267 
Executive long-term incentive plan expense207 143 
Stock-based compensation expense512 407 
Director and employee compensation paid in Company stock255 78 
Deferred income tax expense (benefit)(436)1 
Decrease (increase) in valuation of loans held for sale carried at fair value30 (63)
Proceeds from sales of loans held for sale88,430 81,462 
Originations of loans held for sale(75,448)(72,909)
Government lending revenue(923)(1,096)
Changes in assets and liabilities:
Accrued interest receivable(100)(2,794)
Taxes payable3,461 4,037 
Other assets306 (1,601)
Accrued interest payable199 602 
Other liabilities(10,771)(5,698)
Net cash provided by operating activities21,776 22,581 
Cash flows from investing activities
Purchases of securities available-for-sale(9,490)(240)
Proceeds from calls and maturities of securities available-for-sale8,326 13,374 
Net purchases of restricted investments(294)(2,552)
Net increase in portfolio loans receivable(69,968)(71,467)
Net purchases of premises and equipment(643)(194)
Net cash used in investing activities(72,069)(61,079)
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)20262025
Cash flows from financing activities
Net increase (decrease) in:
Noninterest-bearing deposits18,936 1,296 
Interest-bearing deposits179,911 128,098 
Dividends paid(1,959)(1,666)
Repurchase of common stock(3,557)(618)
Net proceeds from exercise of stock708 43 
Net cash provided by financing activities194,039 127,153 
Net increase in cash and cash equivalents143,746 88,655 
Cash and cash equivalents, beginning of year255,565 205,332 
Cash and cash equivalents, end of period$399,311 $293,987 
Noncash investing and financing activities:
Recognition of right-of-use lease asset and lease liability$3,174 $— 
Change in unrealized gains (losses) on investments$(814)$2,991 
Goodwill measurement period adjustment$— $2,959 
Cash paid during the period for:
Taxes$40 $8 
Interest$18,373 $16,111 
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 operates three additional divisions including, OpenSky™, Windsor Advantage, LLC (“Windsor Advantage™”) and Capital Bank Home Loans (“CBHL”).
The Company serves businesses, not-for-profit associations, entrepreneurs and others throughout Washington D.C., Baltimore, other Maryland markets, Delaware, 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. Windsor Advantage™, a wholly-owned subsidiary of the Company, is a loan service provider that offers community banks and credit unions a comprehensive U.S. Small Business Administration (“SBA”) 7(a) and U.S. Department of Agriculture (“USDA”) lending platform. The Company originates residential mortgages for sale in the secondary market through CBHL, the Bank’s residential mortgage banking arm.
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 conform to general practices within the banking industry. The consolidated financial statements include the activity of the Company and its wholly-owned subsidiaries, the Bank, Windsor Advantage™, and Church Street Capital, LLC (“CSC”). 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, 2026 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, 2025, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
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.
8

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

Note 1 - Nature of Business and Basis of Presentation (continued)
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 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, 2025. There have been no changes to our significant accounting policies during the three months ended March 31, 2026.
Recently Issued Accounting Pronouncements:
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.
In September 2025, the FASB issued Accounting Standards Update 2025-06 “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” (“ASU 2025-06”). ASU 2025-06 makes targeted improvements to Subtopic 350-40 to increase the operability of the recognition guidance considering different methods of software development. ASU 2025-06 is effective for the Company for fiscal years beginning after December 15, 2027, and interim reporting periods in those years, with early adoption permitted. The Company will update its software capitalization policy upon adoption.
In November 2025, the FASB issued Accounting Standards Update 2025-08 “Financial Instruments - Credit Losses (Topic 326): Purchased Loans” (“ASU 2025-08”), which expands the gross-up approach applied to purchased credit deteriorated (“PCD”) loans in an acquisition to certain purchased financial assets, including certain seasoned loans that do not meet the definition of PCD. Upon adoption of this guidance, qualifying seasoned loans acquired in future transactions would be recorded by grossing up the purchase price for the initial allowance for credit losses rather than recognizing the allowance through provision expense at acquisition. As a result, future acquisitions may not generate the same level of initial provision expense and related earnings volatility associated with the historical accounting treatment. The guidance would be effective for the Company for fiscal years beginning after December 15, 2026, with early adoption permitted, and is to be applied prospectively. The Company is currently evaluating the impact of this standard and has not elected early adoption.
In November 2025, the FASB issued Accounting Standards Update 2025-09, “Derivatives and Hedging (Topic 815): Hedge Accounting Improvements” (“ASU 2025-09”). ASU 2025-09 is intended to clarify guidance on hedge accounting and to address several incremental hedge accounting issues arising from the global reference rate reform initiative. The guidance would be effective for the Company for fiscal years beginning after December 15, 2026, with early adoption permitted, and is to be applied prospectively. The Company is currently evaluating the impact of this standard and has not elected early adoption.
9

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

Note 1 - Nature of Business and Basis of Presentation (continued)
In November 2025, the FASB issued Accounting Standards Update 2025-11, "Interim Reporting" ("ASU 2025-11"). ASU 2025-11 is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for the Company for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2025-11 may have on the Company’s consolidated financial statements.
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 current period presentation. The reclassifications had no material effect on net income or total stockholders' equity.
Certain prior period amounts in the consolidated statements of changes in stockholders’ equity have been reclassified to conform to the current period presentation. These reclassifications were made within total stockholders’ equity and had no impact on previously reported net income, earnings per share, 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 11.
Note 2 - 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, 2026 and December 31, 2025, respectively, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss:
10

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Investment Securities (continued)
(in thousands)Amortized
Cost		Gross Unrealized
Gains		Gross Unrealized
Losses		Allowance for Credit LossesFair
Value
March 31, 2026
U.S. Treasuries$145,984 $63 $(5,355)$— $140,692 
Municipal15,613 19 (1,832)— 13,800 
Corporate3,500 — (93)— 3,407 
Asset-backed securities4,828 13 — — 4,841 
Mortgage-backed securities68,985 179 (1,379)— 67,785 
Total$238,910 $274 $(8,659)$— $230,525 
December 31, 2025
U.S. Treasuries$142,381 $157 $(5,302)$— $137,236 
Municipal15,615 66 (1,784)— 13,897 
Corporate3,500 — (96)— 3,404 
Asset-backed securities5,013 13 — — 5,026 
Mortgage-backed securities71,145 581 (1,206)— 70,520 
Total$237,654 $817 $(8,388)$— $230,083 
There were no securities sold during the three months ended March 31, 2026 or the three months ended March 31, 2025. There was no ACL required on available-for-sale debt securities in an unrealized loss position at March 31, 2026 and December 31, 2025.
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, 2026December 31, 2025
(in thousands)Amortized
Cost		Fair
Value		Amortized
Cost		Fair
Value
Within one year$53,711 $53,611 $54,110 $53,767 
One to five years74,544 71,718 70,534 67,955 
Five to ten years34,336 30,604 34,346 30,847 
Beyond ten years2,506 1,966 2,506 1,968 
Asset-backed securities(1)
4,828 4,841 5,013 5,026 
Mortgage-backed securities(1)
68,985 67,785 71,145 70,520 
Total$238,910 $230,525 $237,654 $230,083 
_______________
(1)    Asset-backed and Mortgage-backed securities are due in monthly installments.
Securities pledged had a carrying amount of $0.9 million and $1.0 million at March 31, 2026 and December 31, 2025, respectively, to secure public deposits. As of March 31, 2026, approximately $119.3 million of investment securities were pledged as collateral to the FHLB to secure FHLB advances. As of December 31, 2025, approximately $124.3 million of investment securities were pledged as collateral to the FHLB to secure FHLB advances.
At March 31, 2026 and December 31, 2025, 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.
11

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Investment Securities (continued)
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, 2026 and December 31, 2025, 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, 2026
U.S. Treasuries$19,898 $(9)$95,373 $(5,346)$115,271 $(5,355)
Municipal2,291 (3)8,950 (1,829)11,241 (1,832)
Corporate— — 3,407 (93)3,407 (93)
Mortgage-backed securities22,226 (96)18,250 (1,283)40,476 (1,379)
Total$44,415 $(108)$125,980 $(8,551)$170,395 $(8,659)
December 31, 2025
U.S. Treasuries$9,853 $(32)$95,531 $(5,270)$105,384 $(5,302)
Municipal— — 8,998 (1,784)8,998 (1,784)
Corporate— — 3,404 (96)3,404 (96)
Mortgage-backed securities214 (29)18,466 (1,177)18,680 (1,206)
Total$10,067 $(61)$126,399 $(8,327)$136,466 $(8,388)
At March 31, 2026, there were two treasury securities, one municipal security, and seven mortgage-backed securities that had been in an unrealized loss position for less than twelve months. At December 31, 2025, there was one treasury security and three mortgage-backed securities that had been in an unrealized loss position for less than twelve months. At March 31, 2026, there were ten treasury securities, ten municipal securities, three corporate securities, and ten mortgage-backed securities that had been in an unrealized loss position for greater than twelve months. At December 31, 2025, there were ten treasury securities, ten municipal securities, three corporate securities, and eight mortgage-backed securities that had been in an unrealized loss position for greater than twelve months.
As of March 31, 2026, 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, 2026 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of March 31, 2026 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at March 31, 2026, 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 three 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, 2026, 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 - 76% of the portfolio; AA+ - 24%.
Asset-backed Securities — There are three investment grade asset-backed securities, and there have been no payment defaults on these securities.
12

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 2 - Investment Securities (continued)
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, 2026.
Note 3 - Loan Servicing
Activity for loan servicing rights is as follows for the periods presented:
Loan servicing rights:
(in thousands)March 31, 2026December 31, 2025
Balance at beginning of period$1,816 $5,511 
Additions185 182 
Measurement period adjustments— (2,107)
Other changes in fair value(44)(1,770)
Balance at end of period$1,957 $1,816 
The loan servicing rights balance consisted of a principal balance of $753 million and $739 million as of March 31, 2026 and December 31, 2025, respectively. The fair value at March 31, 2026 was determined using a discount rate of 12.8%, a weighted average prepayment speed of 17.3% and a weighted average default rate of 0.7%. The fair value at December 31, 2025 was determined using a discount rate of 12.8%, a weighted average prepayment speed of 16.6% and a weighted average default rate of 0.7%.
13

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

Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses
The following is a summary of the major categories of total loans outstanding:
March 31, 2026December 31, 2025
(in thousands)AmountPercentAmountPercent
Real estate:
Residential$795,505 26 %$765,808 26 %
Commercial999,075 33 997,081 34 
Construction365,706 12 359,566 12 
Commercial and Industrial730,576 24 698,289 23 
Credit card, net of reserve(1)
134,789 5 142,397 5 
Other consumer4,779 — 1,930 — 
Portfolio loans receivable, gross3,030,430 100 %2,965,071 100 %
Deferred origination fees, net(3,999)(5,614)
Allowance for credit losses(54,680)(54,660)
Portfolio loans receivable, net$2,971,751 $2,904,797 
_____________
(1)    Credit card loans are presented net of reserve for interest and fees.

The following tables set forth the changes in the ACL by loan segment class for the three months ended March 31, 2026 and March 31, 2025.
(in thousands)Beginning
Balance		Provision (Release of Provision) for
Credit Losses		Charge-OffsRecoveriesEnding
Balance
Three Months Ended March 31, 2026
Real estate:
Residential$7,444 $184 $— $— $7,628 
Commercial14,917 (611)— — 14,306 
Construction4,250 84 (27)— 4,307 
Commercial and Industrial19,818 684 (562)695 20,635 
Credit card8,226 2,671 (3,103)3 7,797 
Other consumer5 2 — — 7 
Total$54,660 $3,014 $(3,692)$698 $54,680 
(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 
14

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Past due loans, segregated by age and class of loans, as of March 31, 2026 and December 31, 2025 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, 2026
Real estate:
Residential$7,510 $4,276 $7,402 $19,188 $776,317 $795,505 $2 $7,400 
Commercial6,433 2,804 18,727 27,964 971,111 999,075 925 17,802 
Construction12,870 — 4,124 16,994 348,712 365,706 — 4,124 
Commercial and Industrial3,023 1,363 25,899 30,285 700,291 730,576 70 26,091 
Credit card5,890 5,442 2,708 14,040 120,749 134,789 2,708 — 
Other consumer— — — — 4,779 4,779 — — 
Total$35,726 $13,885 $58,860 $108,471 $2,921,959 $3,030,430 $3,705 $55,417 
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, 2025
Real estate:
Residential$3,886 $573 $8,480 $12,939 $752,869 $765,808 $740 $7,741 
Commercial8,148 1,166 15,660 24,974 972,107 997,081 862 15,624 
Construction2,591 — 4,717 7,308 352,258 359,566 — 4,717 
Commercial and Industrial3,501 5,134 22,496 31,131 667,158 698,289 279 26,339 
Credit card7,555 6,887 2,691 17,133 125,264 142,397 2,691 — 
Other consumer— — — — 1,930 1,930 — — 
Total$25,681 $13,760 $54,044 $93,485 $2,871,586 $2,965,071 $4,572 $54,421 
There were $5.6 million and $6.1 million of loans secured by one-to-four family residential properties in the process of foreclosure as of March 31, 2026 and December 31, 2025, respectively.
15

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
The following presents the nonaccrual loans as of March 31, 2026 and December 31, 2025:
March 31, 2026
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual Loans
(in thousands)
Real estate:
Residential$6,749 $651 $7,400 
Commercial12,839 4,963 17,802 
Construction4,124 — 4,124 
Commercial and Industrial8,121 17,970 26,091 
Total$31,833 $23,584 $55,417 
December 31, 2025
Nonaccrual with No Allowance for Credit LossNonaccrual with an Allowance for Credit LossTotal Nonaccrual Loans
Real estate:
Residential$7,435 $306 $7,741 
Commercial10,159 5,465 15,624 
Construction4,717 — 4,717 
Commercial and Industrial6,907 19,432 26,339 
Total$29,218 $25,203 $54,421 
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.
16

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Collateral dependent loans amortized cost
(in thousands)March 31, 2026December 31, 2025
Real estate:
Residential$7,013 $6,449 
Commercial17,592 15,653 
Construction3,084 5,079 
Commercial and Industrial17,038 18,605 
Total$44,727 $45,786 
Of the collateral dependent loans as of March 31, 2026, a specific reserve of $2 thousand, $1.2 million and $4.5 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, 2025, a specific reserve of $40 thousand, $1.3 million and $4.2 million was assessed for residential real estate, commercial real estate and commercial and industrial loans.
The Company made nine loan modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2026 as follows:
Modifications
(in thousands)Amortized Cost Basis% of Total Loan TypeFinancial Effect
Real estate:
Commercial1,847 0.185 %
Restructured payment terms for 8 months on two loans, after which payments resume on a fully amortizing principal and interest basis for the remaining term.
Commercial and Industrial1,729 0.237 %
For one loan, restructured payment terms for 8 months, after which payments resume on a fully amortizing principal and interest basis for the remaining term.
For one loan, a payment deferral of 6 months followed by modified payments for 15 months, after which payments resume on a fully amortizing principal and interest basis for the remaining term.
For two loans, a payment deferral of 3 months and subsequent 4 months interest-only payment period, followed by a return to fully amortizing principal and interest payments under original contractual terms.
For one loan, a payment deferral of 4 months and reduced contractual floating interest rate based on Prime to 7.000% fixed rate for 6 months.
For one loan, a payment deferral of 6 months.
For one loan, a payment deferral of 7 months.
Total$3,576 
The Company made no loan modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025.
17

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - 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, 2026
Past DuePast Due
(in thousands)Current30-89 Days90 Days or MoreNonaccrualTotal
Real estate:
Commercial$— $374 $— $1,847 $2,221 
Commercial and Industrial 919 321 — 2,342 3,582 
$919 $695 $— $4,189 $5,803 
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.
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.
18

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
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:
19

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
March 31, 2026Term Loans by Origination Year
(in thousands)20262025202420232022PriorRevolvingTotal
Residential – Real estate
Pass$84,225 $186,295 $107,158 $98,719 $101,185 $200,898 $— $778,480 
Special Mention— — — 1,985 1,871 4,812 — 8,668 
Substandard1,628 — — — 132 6,597 — 8,357 
Doubtful— — — — — — — — 
Total85,853 186,295 107,158 100,704 103,188 212,307 — 795,505 
Commercial – Real estate
Pass16,428 204,593 204,171 51,116 124,398 331,132 — 931,838 
Special Mention— — — 2,300 39,832 7,590 — 49,722 
Substandard— — 86 5,907 5,911 5,611 — 17,515 
Doubtful— — — — — — — — 
Total16,428 204,593 204,257 59,323 170,141 344,333 — 999,075 
Construction – Real estate
Pass24,315 114,241 73,666 71,686 40,366 23,728 — 348,002 
Special Mention— — — 1,000 — 725 — 1,725 
Substandard— — 5,946 3,967 2,197 3,869 — 15,979 
Doubtful— — — — — — — — 
Total24,315 114,241 79,612 76,653 42,563 28,322 — 365,706 
Commercial and Industrial
Pass76,967 177,595 142,680 94,043 85,697 122,473 — 699,455 
Special Mention— — — — — 219 — 219 
Substandard— 1,570 762 14,505 992 12,134 — 29,963 
Doubtful— — — 11 928 — — 939 
Total76,967 179,165 143,442 108,559 87,617 134,826 — 730,576 
Other consumer
Pass3,312 336 949 — 39 143 — 4,779 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total3,312 336 949 — 39 143 — 4,779 
Credit card
Ungraded— — — — — — 134,789 134,789 
Portfolio loans receivable, gross$206,875 $684,630 $535,418 $345,239 $403,548 $719,931 $134,789 $3,030,430 
March 31, 2026
(in thousands)20262025202420232022PriorRevolvingTotal
Gross Charge-Offs
Residential real estate$— $— $— $— $— $— $— $— 
Commercial real estate— — — — — — — — 
Construction— — — — 27 — — 27 
Commercial and Industrial— — — 70 454 38 — 562 
Credit card— — — — — — 3,103 3,103 
Total$— $— $— $70 $481 $38 $3,103 $3,692 
20

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
December 31, 2025Term Loans by Origination Year
(in thousands)20252024202320222021PriorRevolvingTotal
Residential – Real estate
Pass$217,066 $110,098 $99,956 $101,423 $68,092 $153,724 $— $750,359 
Special Mention— — 1,992 1,882 1,236 3,567 — 8,677 
Substandard— 287 — 132 792 5,561 — 6,772 
Doubtful— — — — — — — — 
Total217,066 110,385 101,948 103,437 70,120 162,852 — 765,808 
Commercial – Real estate
Pass197,639 206,587 56,303 126,746 125,612 218,736 — 931,623 
Special Mention— — 2,300 39,276 4,933 2,820 — 49,329 
Substandard— 86 5,957 5,860 1,744 2,482 — 16,129 
Doubtful— — — — — — — — 
Total197,639 206,673 64,560 171,882 132,289 224,038 — 997,081 
Construction – Real estate
Pass110,320 94,973 77,852 41,729 7,198 18,856 — 350,928 
Special Mention— — 1,000 — 724 — — 1,724 
Substandard— — 255 2,197 1,536 2,926 — 6,914 
Doubtful— — — — — — — — 
Total110,320 94,973 79,107 43,926 9,458 21,782 — 359,566 
Commercial and Industrial
Pass210,890 146,107 94,365 91,066 30,540 95,813 — 668,781 
Special Mention— — — 320 — 221 — 541 
Substandard— 892 14,941 2,414 5,401 5,319 — 28,967 
Doubtful— — — — — — — — 
Total210,890 146,999 109,306 93,800 35,941 101,353 — 698,289 
Other consumer
Pass760 963 — 46 40 121 — 1,930 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total760 963 — 46 40 121 — 1,930 
Credit card
Ungraded— — — — — — 142,397 142,397 
Portfolio loans receivable, gross$736,675 $559,993 $354,921 $413,091 $247,848 $510,146 $142,397 $2,965,071 
December 31, 2025
(in thousands)20252024202320222021PriorRevolvingTotal
Gross Charge-Offs
Residential real estate$— $— $— $— $— $— $— $— 
Commercial real estate— — — 197 — 1,695 — 1,892 
Construction— — — — — 264 — 264 
Commercial and Industrial— 101 2,339 347 8 625 — 3,420 
Credit card— — — — — — 9,036 9,036 
Total$— $101 $2,339 $544 $8 $2,584 $9,036 $14,612 
21

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses (continued)
Outstanding loan commitments were as follows:
(in thousands)March 31, 2026December 31, 2025
Unused lines of credit
Real Estate:
Residential$19,269 $22,858 
Residential - Home Equity40,008 41,864 
Commercial37,709 69,887 
Construction110,662 91,203 
Commercial and Industrial113,591 90,990 
Credit card(1)
153,487 138,632 
Other consumer234 232 
Total$474,960 $455,666 
Letters of credit$1,633 $1,633 
_______________
(1)Outstanding loan commitments in the credit card portfolio include $59.0 million and $95.9 million in secured and partially secured balances as of March 31, 2026 and December 31, 2025, 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, 2026March 31, 2025
Balance at beginning of period$1,379 $1,191 
Provision for credit losses on unfunded commitments205 — 
Balance at end of period$1,584 $1,191 
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.
22

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 4 - 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, 2026March 31, 2025
Balance at beginning of period$2,339 $2,260 
Provision for mortgage loan put-back reserve16 16 
Balance at end of period$2,355 $2,276 
Note 5 - Derivative Financial Instruments
The Company may enter into mortgage origination commitments, which are commitments to originate loans as part of its mortgage banking activities. The Company then locks the loan with an investor and commits to deliver the loan if settlement occurs (Best Efforts). Certain loans under mortgage origination commitments are covered under forward sales contracts. Forward sales contracts are recorded at fair value with changes in fair value recorded in mortgage banking revenue. Mortgage origination commitments and commitments to deliver loans to investors are considered to be derivatives. These derivatives are used to economically manage interest rate risk in the Company’s mortgage banking pipeline and are not designated as hedging instruments. Changes in fair value are reported in mortgage banking revenue.
The market value of mortgage origination commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. The Company determines the fair value of mortgage origination commitments by estimating the fair value of the underlying asset, which is impacted by current interest rates and takes into consideration the probability that the rate lock commitments will close or will be funded. See Note 8 - Fair Value Measurements for information regarding valuation techniques, significant inputs, and fair value hierarchy classification for derivative instruments.
The notional amount and estimated fair value of mortgage banking derivatives included in the consolidated balance sheets is summarized as follows:
March 31, 2026December 31, 2025
(in thousands)Notional AmountEstimated Fair ValueNotional AmountEstimated Fair Value
Included in other assets:
Mortgage origination commitments$195,492 $6,235 $176,106 $5,892 
Open forward delivery sales agreements (hedge MTM)11,000 30 — — 
Open mandatory delivery commitments— — 7,981 31 
Open forward delivery sales agreements (pipeline hedge)— — 4,772 18 
Total included in assets$206,492 $6,265 $188,859 $5,941 
Included in other liabilities:
Open forward delivery sales agreements (pipeline hedge)$9,216 $54 $— $— 
Open mandatory delivery commitments8,447 93 — — 
Open forward delivery sales agreements (hedge MTM)— — 8,500 30 
Total included in other liabilities$17,663 $147 $8,500 $30 
23

Capital Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 5 - Derivative Financial Instruments (continued)
The net gains (losses) relating to mortgage banking derivative instruments included in mortgage banking revenue is summarized as follows:
Three months ended
March 31, 2026March 31, 2025
(in thousands)
Mortgage origination commitments$343 $444 
Open forward delivery sales agreements (hedge MTM)60 (56)
Open forward delivery sales agreements (pipeline hedge)(72)28 
Open mandatory delivery commitments(124)64 
Total$207 $480 
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 4.70% at March 31, 2026 and 5.08% at December 31, 2025. 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, 2026, the Company’s net lease ROU assets and related lease liabilities were $6.8 million and $7.6 million, respectively, compared to December 31, 2025 balances of $4.0 million of ROU assets and $4.6 million of lease liabilities, and have remaining terms ranging from one to seven years, including extension options that the Company is reasonably certain will be exercised. As of March 31, 2026, the Company had not entered into any material leases that have not yet commenced. The Company’s lease information is summarized as follows:
24

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 6 - Leases (continued)
(in thousands)March 31, 2026December 31, 2025
Lease Right of Use Asset:
Lease asset$10,152 $6,978 
Less: Accumulated amortization(3,392)(2,959)
Net lease asset$6,760 $4,019 
Lease Liability:
Lease liability$10,586 7,326 
Less: Accumulated amortization(3,014)(2,754)
Net lease liability$7,572 $4,572 
Future minimum payments for operating leases with initial or remaining terms of one year or more are as follows:
(in thousands)March 31, 2026
Amounts due in:
2026$1,412 
20271,811 
20281,661 
20291,652 
20301,399 
2031 and thereafter777 
Total future lease payments8,712 
Discount of cash flows(1,140)
Present value of net future lease payments$7,572 
Note 7 - Goodwill and Intangible Assets
The change in goodwill during the periods ended March 31, 2026 and December 31, 2025 is as follows:
(in thousands)March 31, 2026December 31, 2025
Balance at beginning of period$25,969 $21,126 
Acquired goodwill— — 
Measurement period adjustment— 4,843 
Balance at end of period$25,969 $25,969 
At March 31, 2026, 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:
25

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 7 - Goodwill and Intangible Assets (continued)
March 31, 2026December 31, 2025
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized intangible assets:
Customer list intangible$12,200 $(1,055)$11,145 $12,200 $(879)$11,321 
Trade name intangible2,100 (210)1,890 2,100 (175)1,925 
Core deposits intangible1,779 (303)1,476 1,779 (254)1,525 
Total amortized intangible assets$16,079 $(1,568)$14,511 $16,079 $(1,308)$14,771 
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 $260 thousand for the three months ended March 31, 2026. There was $261 thousand amortization expense during the three months ended March 31, 2025.
At March 31, 2026, scheduled amortization of the intangible assets for each of the next five years is as follows:
(in thousands)
2026$783 
20271,038 
20281,033 
20291,026 
20301,019 
Thereafter9,612 
Total$14,511 
26

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).
Derivative financial instruments - The fair value of derivatives are based on valuation models using observable market data as of the measurement date (Level 2). Our derivatives are traded in an over-the-counter market where quoted market prices are not always available. Therefore, the fair values of derivatives are determined using quantitative models that utilize multiple market inputs. The inputs will vary based on the type of derivative, but could include interest rates, prices and indices to generate continuous yield or pricing curves, prepayment rates, and volatility factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. See Note 5 - Derivative Financial Instruments for additional information on derivatives.

27

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, 2026 and December 31, 2025 as follows:
(in thousands)
March 31, 2026TotalQuoted 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$140,692 $140,692 $— $— 
Municipal13,800 — 13,800 — 
Corporate3,407 — 3,407 — 
Asset-backed securities4,841 — 4,841 — 
Mortgage-backed securities67,785 — 67,785 — 
Total$230,525 $140,692 $89,833 $— 
Loans held for sale$13,739 $— $13,739 $— 
Loan servicing assets$1,957 $— $1,957 $— 
Derivative assets$6,265 $— $6,265 $— 
Derivative liabilities$147 $— $147 $— 
December 31, 2025
Investment securities available-for-sale
U.S. Treasuries$137,236 $137,236 $— $— 
Municipal13,897 — 13,897 — 
Corporate3,404 — 3,404 — 
Asset-backed securities5,026 — 5,026 — 
Mortgage-backed securities70,520 — 70,520 — 
Total$230,083 $137,236 $92,847 $— 
Loans held for sale$25,828 $— $25,828 $— 
Loan servicing assets$1,816 $— $1,816 $— 
Derivative assets$5,941 $— $5,941 $— 
Derivative liabilities$30 $— $30 $— 
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
28

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
Company is contractually entitled to receive at maturity:
Fair Value of Loans Held for Sale
(in thousands)March 31, 2026December 31, 2025
Aggregate fair value$13,739 $25,828 
Contractual principal13,380 25,332 
Difference$359 $496 
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, 2026 and December 31, 2025, 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, 2026 and December 31, 2025, the fair values consist of loan balances of $52.0 million and $52.1 million, with specific reserves of $10.0 million and $10.1 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, 2026, the Company held $3.9 million of foreclosed real estate, which rolls up into Other assets on the consolidated balance sheet. As of December 31, 2025, there was $3.9 million of 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, 2026 and December 31, 2025 as follows:
(in thousands)
March 31, 2026
December 31, 2025
Individually evaluated loans
Level 3 inputs
$
42,036 
$
42,945 
Foreclosed real estate
Level 3 inputs
3,856 3,856 
Total$45,892 $46,801 
29

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
The following table provides information describing the unobservable inputs used in Level 3 fair value measurements at March 31, 2026 and December 31, 2025:
Unobservable Inputs
Valuation TechniqueUnobservable InputsRange of Inputs
March 31, 2026
Individually evaluated loansAppraised Value/Discounted Cash FlowsDiscounts to appraisals or cash flows for estimated holding and/or selling costs
0 to 30% 1
Foreclosed real estateAppraised ValueDiscounts to appraisals for estimated holding and/or selling costs
0 to 30%
December 31, 2025Valuation 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% 1
Foreclosed Real EstateAppraised ValueDiscounts to appraisals for estimated holding and/or selling costs
0 to 30%
(1)A discount rate of 63.4% was used for the acquired PCD loan that was evaluated as a measurement period adjustment during 2025 to the Day-1 purchase accounting. All other individually evaluated loans used a range of 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.
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, 2026, 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, 2025. 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.
30

Capital Bancorp, Inc. and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 8 - Fair Value (continued)
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.
The table below presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company’s financial instruments.
March 31, 2026December 31, 2025
(in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial assets
Level 1
Cash and due from banks$20,182 $20,182 $30,894 $30,894 
Interest-bearing deposits at other financial institutions379,069 379,069 224,611 224,611 
Federal funds sold60 60 60 60 
Level 2
Accrued interest receivable$16,795 $16,795 $16,695 $16,695 
Level 3
Portfolio loans receivable, net$2,971,751 $2,917,829 $2,904,797 $2,853,268 
Restricted investments8,691 8,691 8,397 8,397 
Foreclosed real estate3,856 3,856 3,856 3,856 
Financial liabilities
Level 1
Noninterest-bearing deposits$871,677 $871,677 $852,741 $852,741 
Level 2
Accrued interest payable$8,944 $8,944 $8,745 $8,745 
Level 3
Interest-bearing deposits$2,420,370 $2,422,306 $2,240,459 $2,243,002 
FHLB advances and other borrowed funds52,062 52,135 52,062 51,937 

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™ (the Company’s SBA/USDA loan servicing provider) and CBHL (the Company’s residential mortgage loan division).
31

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

The Company’s 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 as well as engaging in government guaranteed lending on a national basis. Additionally, the Commercial Bank engages in deposit verticals on a nationwide scale providing services to HOAs, mortgage companies and other customers.
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 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 a comprehensive SBA 7(a) and USDA lending platform.
The Company’s reportable segments are determined by the Company’s designated chief operating decision maker, which is comprised of the Company’s Chief Executive Officer (“CEO”) and the Bank’s CEO, based upon organizational design, leadership structure and 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, which is used 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 Advantage™ 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™.
The Company formed Church Street Capital, LLC (“Church Street Capital” or “CSC”) in 2024 to provide short-term real estate financing to Washington, D.C. area investors and developers that may not meet all Bank credit criteria. CSC 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, 2026, CSC had loans totaling $5.1 million with a collectively assessed ACL of $203 thousand. Refer to
32

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

Note 4 - “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, 2025. 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 decision maker present financial information for each reportable segment at and for the three months ended March 31, 2026 and 2025.

33

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

For the Three Months Ended March 31, 2026
(in thousands)
Commercial Bank(2)(3)
OpenSky™
Windsor Advantage™
CBHLConsolidated
Interest income$52,732 $15,061 $— $177 $67,970 
Interest expense18,472 — — 100 18,572 
Net interest income34,260 15,061 — 77 49,398 
Provision for credit losses344 2,670 — — 3,014 
Provision for credit losses on unfunded commitments205 — — — 205 
Net interest income after provision33,711 12,391 — 77 46,179 
Noninterest income
Service charges on deposits403 — — — 403 
Credit card fees— 4,692 — — 4,692 
Mortgage banking revenue416 — — 1,140 1,556 
Government lending revenue923 — — — 923 
Government loan servicing revenue(1)
(1,262)— 5,607 — 4,345 
Loan servicing rights (government guaranteed)497 — — — 497 
Other (loss) income707 12 — 238 957 
Total noninterest income1,684 4,704 5,607 1,378 13,373 
Noninterest expenses
Salaries and employee benefits
12,090 3,887 2,664 1,676 20,317 
Occupancy and equipment1,870 1,118 392 182 3,562 
Professional fees2,468 1,861 278 358 4,965 
Data processing545 7,107 59 56 7,767 
Advertising718 592 60 96 1,466 
Loan processing1,076 47 22 238 1,383 
Operational and other card fraud related losses65 625 — — 690 
Regulatory assessment expenses598 215 66 62 941 
Other operating1,140 715 605 130 2,590 
Total noninterest expenses20,570 16,167 4,146 2,798 43,681 
Net income (loss) before taxes$14,825 $928 $1,461 $(1,343)$15,871 
Total assets$3,624,207 $135,414 $28,535 $20,311 $3,808,467 
(1) Gross government loan servicing revenue totaled $5.6 million, including $1.3 million of servicing fees earned from the Commercial Bank by Windsor Advantage™, for the three months ended March 31, 2026.
(2) Commercial Bank’s return on assets of 1.66% for the three months ended March 31, 2026 is calculated by dividing net income before taxes by total assets.
(3) Commercial Bank’s efficiency ratio of 57.2% for the three months ended March 31, 2026 is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).
34

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

For the Three Months Ended March 31, 2025
(in thousands)
Commercial Bank(2)(3)
OpenSky™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 
Merger-related expenses1,266 — — — 1,266 
Operational and other card fraud related losses31 872 — — 903 
Regulatory assessment expenses865 15 5 4 889 
Other operating1,409 516 254 93 2,272 
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 servicing fees earned from the Commercial Bank by Windsor Advantage™, for the three months ended March 31, 2025.
(2) Commercial Bank’s return on assets of 1.90% for the three months ended March 31, 2025 is calculated by dividing net income before taxes by total assets.
(3) Commercial Bank’s efficiency ratio of 54.6% for the three months ended March 31, 2025 is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).


35

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

The following table presents financial information as of March 31, 2026, December 31, 2025 and March 31, 2025.
March 31, 2026
(in thousands)Commercial BankOpenSky™
Windsor Advantage™
CBHLConsolidated
Cash and cash equivalents$383,795 $8,208 $7,308 $— $399,311 
Goodwill22,448 — 3,521 — 25,969 
Intangible assets1,479 — 13,032 — 14,511 
Other segment assets3,216,485 127,206 4,674 20,311 3,368,676 
Total assets$3,624,207 $135,414 $28,535 $20,311 $3,808,467 
December 31, 2025
(in thousands)Commercial BankOpenSky™
Windsor Advantage™
CBHLConsolidated
Cash and cash equivalents$242,149 $8,039 $5,377 $— $255,565 
Goodwill22,448 — 3,521 — 25,969 
Intangible assets1,528 — 13,243 — 14,771 
Other segment assets3,141,201 132,875 3,852 31,974 3,309,902 
Total assets$3,407,326 $140,914 $25,993 $31,974 $3,606,207 
March 31, 2025
(in thousands)Commercial BankOpenSky™
Windsor Advantage™
CBHLConsolidated
Cash and cash equivalents$280,842 $7,468 $5,677 $— $293,987 
Goodwill24,085 — — — 24,085 
Intangible assets1,698 — 13,858 — 15,556 
Other segment assets2,885,702 112,168 4,215 14,092 3,016,177 
Total assets$3,192,327 $119,636 $23,750 $14,092 $3,349,805 

Note 10 - Interest Income and Interest Expense
The following table presents the components of interest income and interest expense:
Three months ended
(in thousands)20262025
Interest income
Taxable interest income$67,793 $62,688 
Non-taxable interest income53 3 
Dividends124 69 
Total interest income$67,970 $62,760 
Interest expense
Deposits$18,070 $16,512 
Short-term borrowings471 51 
Long-term debt31 150 
Total interest expense$18,572 $16,713 
36

Capital Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 11 - Subsequent Events
In April 2026, the Company’s Board of Directors declared a $0.12 per share dividend payable on May 27, 2026 to shareholders of record on May 11, 2026.
37

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™”.
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, 2025. The results for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.
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
•the strength of the United States (“U.S.”) economy and general economic conditions (including the interest rate environment, government economic and monetary policies, the strength of global financial markets, inflation/deflation, and the overall strength of the consumer) that impact the financial services industry as a whole and/or our business;
•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;
•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 Israel, Iran and Ukraine, which could impact business and economic conditions in the U.S. and abroad;
38

•climate change, and other catastrophic events or disasters, 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 effects of federal government shutdowns, debt ceiling standoff, or other fiscal policy uncertainty;
•volatility in our stock price due to investor sentiment and perception of the banking industry;
•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 institutions, 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 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 with regard to 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 banks, financial holding companies, and other traditional and non-traditional financial service providers;
•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;
•changes in the mix of loan sectors, or types, and the level of non-performing assets, charge-offs, and delinquencies;
•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, 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 the 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 (“AI”);
•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;
•our ability to attract, develop, motivate and retain skilled employees;
•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;
•our involvement from time to time in legal proceedings, examinations and remedial actions by regulators;
•our ability to assess the effect of and incorporate the evolving uses of AI on our business;
•the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures; and
•our ability to remediate the material weakness in the Company’s internal control over financial reporting.
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
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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, 2025 and those referenced herein and in other reports on file with the Securities and Exchange Commission (“SEC”).
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, 2025.
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 markets, Delaware, 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. Windsor Advantage™, a wholly-owned subsidiary of the Company, was acquired in connection with the IFH acquisition.
The Company currently operates four divisions and reporting segments: Commercial Banking,
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OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (“CBHL”). 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 primarily operates within a corridor extending from Raleigh, North Carolina to Delaware, with significant activity in the Washington, D.C. and Baltimore metropolitan statistical areas. The Commercial Bank also maintains offices in Chicago, Illinois and Fort Lauderdale, Florida. In addition to providing relationship-driven banking services within its primary geographic markets, the Commercial Bank conducts certain lending and deposit activities on a nationwide basis through specialized verticals. These lending verticals include lender finance, government guaranteed lending and other forms of commercial and industrial (“C&I”) lending. The Commercial Bank also operates national deposit verticals servicing homeowners associations (“HOAs”), title companies, political action committees (“PACs”), not-for-profit organizations, and other commercial clients.
OpenSky™ and CBHL both leverage Capital Bank’s national banking charter to operate national consumer business lines. 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. CBHL acts as our residential mortgage origination platform. Windsor Advantage™ generates fee revenue 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, 2026, 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.
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For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
Net Income
The following table sets forth the principal components of net income for the periods indicated.
Three Months Ended March 31,
20262025% Change
(in thousands)
Interest income$67,970 $62,760 8.3 %
Interest expense18,572 16,713 11.1 
Net interest income49,398 46,047 7.3 
Provision for credit losses3,014 2,246 34.2 
Provision for credit losses on unfunded commitments205 — — 
Net interest income after provision for credit losses46,179 43,801 5.4 
Noninterest income13,373 12,549 6.6 
Noninterest expenses43,681 38,053 14.8 
Net income before income taxes15,871 18,297 (13.3)
Income tax expense3,853 4,365 (11.7)
Net income$12,018 $13,932 (13.7)
Net income for the three months ended March 31, 2026 was $12.0 million, compared to net income of $13.9 million for the same period in 2025, a 13.7% decrease. There were no non-GAAP adjustments to net income of $12.0 million for three months ended March 31, 2026, a $3.0 million decrease from net income, as adjusted (non-GAAP) of $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 $3.4 million, or 7.3%, to $49.4 million when comparing the three months ended March 31, 2026 to the three months ended March 31, 2025, primarily driven by increased interest income of $4.6 million from the Commercial Bank due to strong balance sheet growth offset by $0.9 million of lower purchase accounting accretion (“PAA”).
The provision for credit losses for the three months ended March 31, 2026 was $3.0 million, an increase of $0.8 million from the same period in 2025. Net charge-offs for the three months ended March 31, 2026 were $3.0 million, or 0.40% on an annualized basis of average portfolio loans, compared to $2.4 million, or 0.38% on an annualized basis of average portfolio loans for the same period in 2025. Net charge-offs during the quarter included $3.1 million from OpenSky™ loans slightly offset by a net recovery of $0.1 million from Commercial Bank loans. OpenSky™ net charge-offs totaled $3.1 million including $2.3 million related to unsecured credit cards and $0.8 million related to secured and partially secured credit cards.
For the three months ended March 31, 2026, noninterest income of $13.4 million increased $0.8 million, or 6.6%, from the same period in 2025, primarily due to a $0.8 million increase from government loan servicing and packaging revenue. Credit card fees of $4.7 million for the three months ended March 31, 2026 increased $1.0 million compared to the same period in the prior year primarily due to growth in unsecured product. For the three months ended March 31, 2026, mortgage banking revenue of $1.6 million decreased $0.3 million primarily due to a $0.2 million decrease in gain on sale.
Noninterest expense was $43.7 million for the three months ended March 31, 2026, an increase of $5.6 million from the same period in 2025. The change was primarily driven by increases in professional fees of $2.9 million, salaries and employee benefits expenses of $2.3 million, data processing expense of
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$0.7 million, occupancy and equipment expenses of $0.7 million, and loan processing expenses of $0.6 million, offset by decreases in merger-related expenses of $1.3 million and operating losses of $0.2 million.
Net Interest Income and Net Margin Analysis
Net interest income is our largest component of revenue and the largest driver of net income. Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets.
We analyze our ability to maximize income generated from interest earning assets and control the interest expenses associated with our liabilities, measured as net interest income, through our net interest margin and net interest spread. Net interest margin is a ratio calculated as net interest income annualized divided by average interest earning assets for the same period. Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities.
The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the three months ended March 31, 2026 and 2025. Weighted average yields are derived by dividing annualized income by the average balance of the related assets, and weighted average rates are derived by dividing annualized expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived by utilizing average daily balances for the time periods shown. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.
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AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
Three Months Ended March 31,
20262025
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
Average
Outstanding
Balance		Interest Income/
Expense
Average
Yield/
Rate(1)
($ in thousands)
Assets
Interest earning assets:
Interest-bearing deposits$246,346 $2,200 3.62 %$203,053 $2,138 4.27 %
Federal funds sold
60 1 6.76 58 1 6.99 
Investment securities available-for-sale233,165 1,459 2.54 235,605 1,861 3.20 
Restricted investments
8,441 124 5.96 5,761 69 4.86 
Loans held for sale
12,916 177 5.56 9,356 238 10.32 
Portfolio loans receivable(2)(3)
3,008,187 64,009 8.63 2,634,110 58,453 9.00 
Total interest earning assets
3,509,115 67,970 7.86 3,087,943 62,760 8.24 
Noninterest earning assets142,697 134,021 
Total assets
$3,651,812 $3,221,964 
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing demand accounts$263,645 $414 0.64 %$242,355 $368 0.62 %
Savings
13,701 30 0.89 13,204 18 0.55 
Money market accounts
1,189,642 9,479 3.23 869,978 7,399 3.45 
Time deposits
842,137 8,147 3.92 859,729 8,727 4.12 
Borrowed funds
52,062 502 3.91 34,062 201 2.39 
Total interest-bearing liabilities2,361,187 18,572 3.19 2,019,328 16,713 3.36 
Noninterest-bearing liabilities:
Noninterest-bearing liabilities64,056 56,503 
Noninterest-bearing deposits821,267 783,018 
Stockholders’ equity
405,302 363,115 
Total liabilities and stockholders’ equity
$3,651,812 $3,221,964 
Net interest spread4.67 %4.88 %
Net interest income$49,398 $46,047 
Net interest margin(4)
5.71 %6.05 %
_______________
(1)Annualized.
(2)Portfolio loans receivable balance includes nonaccrual loans.
(3)For the three months ended March 31, 2026 and 2025, collectively, Core Loan Yield was 6.93% and 7.14%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.
(4)For the three months ended March 31, 2026 and 2025, collectively, Core Net Interest Margin was 4.15% and 4.36%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

The net interest margin decreased 34 basis points to 5.71% for the three months ended March 31, 2026 from the same period in 2025. Core net interest margin (non-GAAP) decreased to 4.15% for the three months ended March 31, 2026, compared to 4.36% for the same period in 2025. 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, 2026, average interest earning assets increased $421.2 million, or 13.6%, to $3.5 billion as compared to the same period in 2025, but the average yield on interest earning assets decreased to 7.86%, a 38 basis point decrease from 8.24% for the comparable 2025 period primarily due to changes in the rate environment, particularly impacting OpenSky™ products. Compared to the same period in the prior year, average interest-bearing liabilities increased
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$341.9 million, or 16.9%, and the average cost of interest-bearing liabilities decreased to 3.19%, a 17 basis point decrease from 3.36%, primarily as a result of a shift in the product mix of the portfolio as well as changes in the rate environment.
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, 2026
Compared to
March 31, 2025
Change Due To
Interest Variance
(in thousands)
Volume
Rate
Interest Income:
Interest-bearing deposits
$387 $(325)$62 
Federal funds sold
— — — 
Investment securities available-for-sale(15)(387)(402)
Restricted investments
39 16 55 
Loans held for sale
49 (110)(61)
Portfolio loans receivable excluding credit card loans6,124 (1,302)4,822 
Credit card loans1,668 (934)734 
Total interest income
8,252 (3,042)5,210 
Interest Expense:
Interest-bearing demand accounts
34 12 46 
Savings
1 11 12 
Money market accounts
2,552 (472)2,080 
Time deposits
(163)(417)(580)
Borrowed funds
174 127 301 
Total interest expense
2,598 (739)1,859 
Net interest income
$5,654 $(2,303)$3,351 

When comparing the three months ended March 31, 2026 to the three months ended March 31, 2025, the largest positive impact to total interest income was the growth in interest earning assets, from organic growth. Growth (change due to volume) in the loan portfolio, excluding credit card loans, contributed $6.1 million to the increase in interest income. The $1.9 million increase in interest expense year over year was primarily driven by a $0.9 million lower benefit from net PAA, $0.7 million from a shift in deposit mix and $0.3 million of higher borrowing costs.
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
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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, 2025.
For the three months ended March 31, 2026, the provision for credit losses was $3.0 million, an increase of $0.8 million from the same period in 2025. The increased provision for credit losses was primarily driven by increases of $1.2 million for C&I loans, $0.8 million for residential real estate loans, and $0.8 million for OpenSky™, offset slightly by $1.8 million of decreases for commercial real estate loans. The C&I and residential real estate loan portfolios grew 22.9% and 14.7%, respectively, from March 31, 2025, resulting in an increase to the reserve. The provision from OpenSky™ increased $0.8 million, primarily driven by higher volumes in the unsecured portfolio - as unsecured card balances increased $19.9 million from $26.7 million, or 22% of the credit card portfolio at March 31, 2025 to $46.6 million, or 34% of the credit card portfolio at March 31, 2026. Additionally, net charge-offs for OpenSky™ increased $0.8 million compared to the three months ended March 31, 2025. The $1.8 million decrease to the provision for commercial real estate was largely attributable to the run-off of PCD loans in the loan portfolio, resulting in a lower reserve requirement than in 2025. Net charge-offs for the three months ended March 31, 2026 were $3.0 million, or 0.40% on an annualized basis of average portfolio loans, compared to $2.4 million, or 0.38% on an annualized basis of average portfolio loans for the same period in 2025. Of the $3.0 million in net charge-offs during the quarter, there was a net recovery of $0.1 million from Commercial Bank loans, driven by commercial and industrial loans, and OpenSky™ net charge-offs totaled $3.1 million including $2.3 million related to unsecured credit cards and $0.8 million related to secured and partially secured credit cards.
The ACL as a percent of portfolio loans was 1.81% at March 31, 2026, as compared to 1.85% at December 31, 2025. 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, 2026 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, government guaranteed lending revenue (gain on sale), mortgage banking revenue and Windsor Advantage™ fee revenue in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients, and mortgage banking revenue. 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,
20262025% Change
(in thousands)
Noninterest income:
Service charges on deposit accounts$403 $258 56.2 %
Credit card fees4,692 3,722 26.1 
Mortgage banking revenue1,556 1,831 (15.0)
Government lending revenue923 1,096 (15.8)
Government loan servicing and packaging revenue4,345 3,568 21.8 
Loan servicing rights497 472 5.3 
Other income957 1,602 (40.3)
Total noninterest income$13,373 $12,549 6.6 %
For the three months ended March 31, 2026, noninterest income of $13.4 million increased $0.8 million, or 6.6%, from the same period in 2025. The increase was primarily driven by $1.0 million of increased credit card fees and $0.8 million of increased government loan servicing and packaging revenue (Windsor Advantage™), offset by a $0.6 million decrease in other income.
Credit card fees of $4.7 million for the three months ended March 31, 2026 increased $1.0 million as compared to the three months ended March 31, 2025, primarily as a result of credit-card related fees associated with the unsecured product.
Originations of loans held for sale within the Bank’s CBHL division increased $7.1 million to $72.9 million in the first quarter of 2026 when compared to $65.8 million in the first quarter of 2025. The gain on sale margin decreased to 2.85% for the three months ended March 31, 2026 from 3.07% for the three months ended March 31, 2025.
Mortgage banking revenue of $1.6 million decreased $0.3 million from the three months ended March 31, 2025, primarily driven by the decreased gain on sale of $0.2 million.
Government lending revenue of $0.9 million for the three months ended March 31, 2026 decreased $0.2 million as compared to the three months ended March 31, 2025, primarily as a result of significant budget cuts within the USDA and changes to investment tax credits for commercial solar loans that began to take effect in 2025 and resulted in decreased volumes for government guaranteed loans. However, the reduced volume was slightly offset by increased SBA loan sales generated by a new team.
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 $2.4 million at March 31, 2026 and $2.3 million at December 31, 2025, respectively. The Bank did not repurchase any loans during the three months ended March 31, 2026 or 2025. 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,
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advertising expenses, loan processing expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage.
The following table presents, for the periods indicated, the major categories of noninterest expense:
Three Months Ended March 31,
20262025% Change
(in thousands)
Noninterest expense:
Salaries and employee benefits
$20,317 $18,067 12.5 %
Occupancy and equipment
3,562 2,910 22.4 
Professional fees4,965 2,112 135.1 
Data processing
7,767 7,112 9.2 
Advertising
1,466 1,779 (17.6)
Loan processing
1,383 743 86.1 
Merger-related expenses— 1,266 (100.0)
Operational and other card fraud related losses690 903 (23.6)
Regulatory assessment expenses941 889 5.8 
Other operating2,590 2,272 14.0 
Total noninterest expense$43,681 $38,053 14.8 %
Noninterest expense was $43.7 million for the three months ended March 31, 2026, as compared to $38.1 million for the three months ended March 31, 2025, an increase of $5.6 million. The change included increases of $2.9 million in professional fees associated with strategic investments in shared service areas and card partnerships for OpenSky™, $2.3 million of increases in salaries and employee benefits expenses due to headcount growth, $0.7 million in data processing costs related to investments in data infrastructure for OpenSky™ and core processing for the Commercial Bank, $0.7 million in occupancy and equipment due to an increase in software contracts and the acceleration of depreciation of capitalized assets related to OpenSky™ technology, $0.6 million in loan processing costs from loan expenses associated with our government guaranteed lending portfolio, and $0.2 million in other operating expenses. The increased spending was slightly offset by decreases of $1.3 million in merger-related expenses, $0.3 million in advertising, and $0.2 million in operational and other card fraud related losses.
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.
The following table presents, for the periods indicated, our effective income tax rate:
Three Months Ended March 31,
20262025
(in thousands)
Income before income taxes$15,871 $18,297 
Income tax expense3,853 4,365 
Effective income tax rate24.3 %23.9 %
Income tax expense was $3.9 million and $4.4 million for the three months ended March 31, 2026 and 2025, respectively. Our effective tax rate increased from 23.9% for the three months ended March 31,
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2025 to 24.3% for the three months ended March 31, 2026 due to an increase in nondeductible stock-based compensation expense and nondeductible compensation expense. Additional information regarding the Company’s income taxes are discussed in detail in Note 13 “Income Taxes” in the “Notes to the Consolidated Financial Statements” contained in Part II. Item 8 “Financial Statements and Supplementary Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.
Financial Condition
The following table summarizes the Company’s financial condition at the dates indicated.
(in thousands, except per share data)March 31, 2026December 31, 2025$ Change% Change
Total assets$3,808,467 $3,606,207 $202,260 5.6 %
Investment securities available-for-sale230,525 230,083 442 0.2 
Mortgage loans held for sale13,739 25,828 (12,089)(46.8)
Portfolio loans receivable, net of deferred fees and costs3,026,431 2,959,457 66,974 2.3 
Allowance for credit losses54,680 54,660 20 — 
Goodwill25,969 25,969 — — 
Intangible assets14,511 14,771 (260)(1.8)
Deposits3,292,047 3,093,200 198,847 6.4 
FHLB borrowings50,000 50,000 — — 
Other borrowed funds2,062 2,062 — — 
Total stockholders’ equity408,859 401,757 7,102 1.8 
Tangible common equity (1)
368,379 361,017 7,362 2.0 
Equity to total assets at end of period10.74 %11.14 %(3.6)
Weighted average number of basic shares outstanding, YTD16,345 16,582 (1.4)
Weighted average number of diluted shares outstanding, YTD16,441 16,768 (2.0)
Common shares outstanding16,286 16,373 (0.5)
Book value per share$25.10 $24.54 2.3 
Tangible book value per share (1)
22.62 22.05 2.6 
Dividends per share, YTD0.12 0.44 
_____________
(1)    See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

Total assets at March 31, 2026 increased $202.3 million from the balance at December 31, 2025. Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.0 billion as of March 31, 2026, an increase of $67.0 million, or 2.3%, from $3.0 billion at December 31, 2025. Mortgage loans held for sale decreased $12.1 million, or 46.8%, when comparing the period end balances at March 31, 2026 to December 31, 2025.
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.
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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, 2026 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.
INVESTMENT MATURITIES
One Year or LessMore Than One Year Through Five YearsMore Than Five Years Through Ten YearsMore Than Ten YearsTotal
March 31, 2026Amortized 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$52,794 2.19 %$72,544 2.00 %$20,646 1.48 %$— — %$145,984 $140,692 2.00 %
Municipal917 4.79 — — 12,190 6.70 2,506 2.09 15,613 13,800 5.85 
Corporate— — 2,000 7.36 1,500 3.75 — — 3,500 3,407 5.81 
Asset-backed securities— — — — 395 4.52 4,433 5.53 4,828 4,841 5.45 
Mortgage-backed securities— — 36,483 3.91 6,136 3.15 26,366 4.60 68,985 67,785 4.11 
Total$53,711 2.23 %$111,027 2.72 %$40,867 3.40 %$33,305 4.53 %$238,910 $230,525 2.98 %
As described in Note 2 - ''Investment Securities'' in the “Notes to Unaudited Consolidated Financial Statements,” at March 31, 2026, 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, 2026 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of March 31, 2026 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at March 31, 2026, 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 three 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, 2026, 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 – 76% of the portfolio; AA+ – 24%.
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, 2026.
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 and, to a limited extent, other consumer loans. Our loan customers primarily consist of small- to medium-sized
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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 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 $4.2 million as of March 31, 2026 and $3.8 million as of December 31, 2025, 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 $43.8 million as of March 31, 2026 and $41.4 million as of December 31, 2025, 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 primarily 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 sometimes 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
52

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.
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 $90.0 million and $97.3 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of March 31, 2026 and December 31, 2025, respectively. Unsecured balances were $46.6 million and $47.1 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.
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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, 2026
One Year
or Less		One to
Five Years		Over
Five Years to Fifteen Years		After Fifteen Years
(in thousands)AmountAmountAmountAmountTotal
Real estate:
Residential$167,584 $315,423 $69,994 $242,504 795,505 
Commercial244,849 433,280 285,546 35,400 999,075 
Construction292,861 61,946 10,899 — 365,706 
Commercial and Industrial240,108 200,378 136,870 153,220 730,576 
Credit card134,789 — — — 134,789 
Other consumer1,990 1,504 1,285 — 4,779 
Total portfolio loans, gross$1,082,181 $1,012,531 $504,594 $431,124 $3,030,430 
Loans above maturing after one year categorized by rate characteristic:Predetermined Interest RatesFloating or Variable RatesTotal
Real estate:
Residential$406,644 $221,277 $627,921 
Commercial396,774 357,452 754,226 
Construction30,775 42,070 72,845 
Commercial and Industrial166,541 323,927 490,468 
Other consumer2,789 — 2,789 
Total portfolio loans, gross$1,003,523 $944,726 $1,948,249 
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, 2026
(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$216,407 $1,615 56.1 %Not Applicable7.1 %
Retail$181,513 $1,681 49.0 %34.7 %6.0 %
Mixed use150,451 1,904 49.9 28.8 %5.0 
Hotel70,464 5,033 47.1 13.5 %2.3 
Industrial56,873 1,058 45.2 10.9 %1.8 
Office24,364 936 47.6 4.7 %0.8 
Other(2)
38,833 1,232 53.8 7.4 %1.3 
Total non-owner-occupied commercial real estate loans$522,498 $1,692 48.5 %100.00 %17.2 %
Total portfolio loans, gross$3,030,430 
Scheduled maturities of fixed rate non-owner-occupied commercial real estate loans, including multi-family
As of March 31, 2026
(in thousands)20262027202820292030 and OnwardsTotal
Loan type:
Multi-family$34,240 $18,813 $46,164 $35,333 $81,830 $216,380 
Retail$21,435 $38,664 $2,038 $25,132 $94,230 $181,499 
Mixed use68,015 30,532 4,605 25,095 22,206 150,453 
Hotel12,574 9,210 3,172 5,444 26,726 57,126 
Industrial15,027 — — 1,437 54,000 70,464 
Office909 5,770 151 9,493 8,018 24,341 
Other18,208 6,628 8,190 1,070 4,097 38,193 
Total fixed rate non-owner-occupied commercial real estate loans$136,168 $90,804 $18,156 $67,671 $209,277 $522,076 
Owner-occupied commercial real estate loans
As of March 31, 2026
(in thousands)AmountAverage Loan Size
Weighted Average LTV(1)
% of Owner-Occupied Commercial Real Estate Loans% of Total Portfolio Loans, Gross
Loan type:
Industrial$107,609 $1,167 48.8 %25.1 3.6 %
Retail66,590 853 57.6 15.5 2.2 %
Office55,224 702 56.4 12.9 1.8 %
Mixed use19,346 879 76.2 4.5 0.6 %
Other(3)
179,863 938 47.6 42.0 5.9 %
Total owner-occupied commercial real estate loans$428,632 $1,080 53.9 %100.0 %14.1 %
Total portfolio loans, gross$3,030,430 
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Scheduled maturities of fixed rate owner-occupied commercial real estate loans
As of March 31, 2026
(in thousands)20262027202820292030 and OnwardsTotal
Loan type:
Industrial$10,799 $7,145 $6,589 $22,587 $60,248 $107,368 
Retail3,773 8,600 9,192 8,696 36,264 66,525 
Office3,547 2,415 2,781 9,271 37,451 55,465 
Mixed use1,836 868 902 6,230 9,509 19,345 
Other44,428 11,102 1,925 8,749 116,165 182,369 
Total fixed rate owner-occupied commercial real estate loans$64,383 $30,130 $21,389 $55,533 $259,637 $431,072 
_______________
(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 $13.6 million, special purpose loans of $8.6 million, skilled nursing loans of $8.4 million, and other loans of $8.2 million.
(3)Other owner-occupied commercial real estate loans include special purpose loans of $97.8 million, skilled nursing loans of $30.5 million, $25.3 million of religious facility loans and other loans of $26.3 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. Secured consumer credit card balances are eligible for the charge-off queue after they become more than 90 days past due. Unsecured consumer credit card balances are eligible for charge-off after they become more than 150 days past due and are charged-off no later than 180 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 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 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, administers the Company’s risk rating system, and monitors 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, 2026, the recorded investment in individually assessed loans was $52.0 million, requiring a specific reserve of $10.0 million. At December 31, 2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million. At March 31, 2026, nonperforming assets were $55.4 million, an increase of $1.0 million from December 31, 2025.
Past Due Loans
The past due loans balance increased $15.0 million, from $93.5 million or 3.2% of gross loans as of December 31, 2025 to $108.5 million or 3.6% of gross loans as of March 31, 2026. The increase was primarily driven by $9.7 million of increases in construction loans and $3.0 million in commercial real estate loans. During management’s quarterly review it was noted that the $9.7 million increase for construction real estate loans was driven by 3 loans from a single relationship that are 30-59 days past due. One commercial real estate loan accounted for $1.5 million of the $3.0 million increase in both total and 90+ days past due loans and is attributable to a well-known borrower with the property pending sale. Further, although the past due balance for C&I loans decreased $0.8 million, there was a $3.4 million increase in loans 90+ days past due. The increase in loans past due 90 days or more was driven by a single commercial loan relationship with a balance of approximately $3.8 million, of which 80% is guaranteed by the USDA. Management believes the credit remains appropriately monitored and reflected within the allowance for credit losses.
Allowance for Credit Losses
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 DC-Maryland-Virginia 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, 2026December 31, 2025March 31, 2026December 31, 2025March 31, 2026December 31, 2025
Real estate:
Residential0.96 %0.97 %0.93 %1.01 %103 %96 %
Commercial1.43 1.50 1.78 1.57 80 
95 
Construction1.18 1.18 1.13 1.31 104 90 
Commercial and Industrial2.82 2.84 3.57 3.77 79 75 
Credit card5.78 5.78 — — — — 
Other consumer0.15 0.26 — — — — 
Total1.81 %1.85 %1.83 %1.84 %
99 
%
100 
%

At March 31, 2026, the ACL coverage ratio was 1.81%, down 4 bps from December 31, 2025 and flat compared to March 31, 2025.
Total charge-offs for the three months ended March 31, 2026 and 2025 were primarily comprised of credit card charge-offs resulting from the aging of the portfolio and continued growth in the partially secured and unsecured card portfolio. 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,
20262025
(in thousands)Net Charge-Offs (Recovery)Average Loans
Percent of average portfolio loans(1)
Net Charge-OffsAverage Loans
Percent of average portfolio loans(1)
Real estate:
Residential$— $775,711 — %$— $688,528 — %
Commercial— 1,001,877 — — 920,894 — 
Construction27 365,886 0.03 — 322,270 — 
Commercial and Industrial(133)730,707 (0.07)147 580,372 0.10 
Credit card3,100 133,712 9.40 2,297 118,723 7.85 
Other consumer— 294 — — 3,323 — 
Total$2,994 $3,008,187 0.40 %$2,444 $2,634,110 0.38 %
_____________
(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 maintained 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, 2026December 31, 2025
Amount
Percent (1)
Amount
Percent (1)
(in thousands)
Real estate:
Residential$7,628 14 %$7,444 14 %
Commercial14,306 26 14,917 27 
Construction4,307 8 4,250 8 
Commercial and Industrial20,635 38 19,818 36 
Credit card7,797 14 8,226 15 
Other consumer7 — 5 — 
Total allowance for credit losses$54,680 100 %$54,660 100 %
_______________
(1)Loan category as a percentage of total portfolio loans.
Total Liabilities
Total liabilities at March 31, 2026 increased $195.2 million from December 31, 2025, due to growth in the deposit portfolio of $198.8 million.
Deposits
Deposits are a major source of funding for the Company. We offer a variety of deposit products including noninterest-bearing demand, 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 relationship managers. Our credit card customers are a significant source of low cost deposits. As of March 31, 2026 and December 31, 2025, our credit card customers accounted for $165.5 million and $163.2 million, or 19.0% and 19.1%, respectively, of our total noninterest-bearing deposit balances.
Major deposit categories are as follows:
Deposits
(in thousands)March 31, 2026December 31, 2025
Interest-bearing demand accounts$341,723 $257,233 
Savings21,471 11,679 
Money markets1,276,034 1,105,183 
Customer time deposits478,085 489,687 
Brokered time deposits303,057 376,677 
Total Interest-bearing deposits2,420,370 2,240,459 
Noninterest-bearing demand accounts871,677 852,741 
Total deposits
$3,292,047 $3,093,200 
The Company had $303.1 million in brokered deposits at March 31, 2026 compared to $376.7 million at December 31, 2025.
Deposits securing our OpenSky™ card lines of credit and deposits from title companies represent the largest product concentrations in the deposit portfolio. As of March 31, 2026, these product concentrations represented 5% and 11% of deposits, respectively. As of December 31, 2025, these deposits represented 5% and 10% 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, 2026For the Year Ended
December 31, 2025
(in thousands)
Average
Balance
Average
Rate(1)
Average
Balance		Average
Rate
Interest-bearing demand accounts$263,645 0.64 %$269,224 0.56 %
Savings13,701 0.89 12,789 0.47 
Money market accounts1,189,642 3.23 960,882 3.45 
Time deposits842,137 3.92 825,847 3.51 
Total interest-bearing deposits2,309,125 3.17 2,068,742 3.08 
Noninterest-bearing demand accounts821,267 811,798 
Total deposits$3,130,392 2.34 %$2,880,540 2.21 %
_____________
(1)    Annualized.

Deposit costs decreased 13 basis points during the three months ended March 31, 2026, as compared to the year ended December 31, 2025, primarily driven by a shift in the product mix of the portfolio and changes in the rate environment.
Noninterest-bearing deposits represented 26.5% of total deposits at March 31, 2026 compared to 27.57% at December 31, 2025. Insured and protected deposits (including deposits that are indirectly protected under the product terms) were approximately $2.3 billion as of March 31, 2026, representing 69.4% 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, including brokered and customer deposits as of March 31, 2026.
Three
Months or
Less		Over
Three
Through
Six
Months		Over Six
Through
Twelve
Months		Over
Twelve
Months		Total
(in thousands)
$250,000 or more$64,244 $54,743 $53,517 $3,540 $176,044 
Less than $250,000232,064 155,292 204,264 13,478 605,098 
Total$296,308 $210,035 $257,781 $17,018 $781,142 
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 $52.1 million at March 31, 2026 remained the same compared to December 31, 2025.
FHLB Advances. The Federal Home Loan Bank (“FHLB”) provides the Company with secured borrowing capacity collateralized by eligible loans and investment securities pledged under a blanket lien arrangement. As of March 31, 2026, approximately $513.5 million of loans and $119.3 million of investment securities were pledged as collateral to the FHLB, supporting total borrowing capacity of $632.8 million. The Company utilizes FHLB advances to support liquidity management and overall balance-sheet positioning, including funding certain fixed-rate loans. As of March 31, 2026, the Company had $50.0 million in outstanding FHLB advances and $582.8 million of available borrowing capacity.
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Other Borrowed Funds. The Company has also issued junior subordinated debentures. At March 31, 2026, these other borrowings amounted to $2.1 million, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate 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, 2026, the rate for the Floating Rate Debentures was 5.81%.
Federal Reserve Bank of Richmond. The Federal Reserve Bank of Richmond provides access to liquidity under the Federal Reserve’s discount window through borrower-in-custody (“BIC”) and national book-entry (”NBE”) arrangements, which allow us to borrow on a collateralized basis using different types of collateral. The Company’s borrowing capacity under the Federal Reserve’s discount window was $122.5 million as of March 31, 2026.
Other Borrowings. The Company also has available lines of credit of $96.0 million with other correspondent banks at March 31, 2026, 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, 2026.
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 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.
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As of March 31, 2026, we had $582.8 million of available borrowing capacity from the FHLB and $122.5 million of available borrowing capacity from the Federal Reserve Bank of Richmond through its discount window arrangement, secured by pledged commercial loans and securities. The Company also maintained $96.0 million of available unsecured lines of credit with other correspondent banks. Unpledged investment securities available as collateral for potential additional borrowings totaled $8.2 million at March 31, 2026. Cash and cash equivalents were $399.3 million at March 31, 2026.
Capital Resources
Stockholders’ equity increased $7.1 million for the period ended March 31, 2026 compared to December 31, 2025 largely due to net income of $12.0 million for the three months ended March 31, 2026. Shares repurchased and retired for the three months ended March 31, 2026, as part of the Company’s stock repurchase program, totaled 122,757 shares at an average price of $28.89, for a total cost of $3.5 million including commissions. There is $12.4 million remaining to be repurchased under the stock repurchase plan authorized and approved in March 2026. The stock repurchase program will expire on December 31, 2026, but may be limited or terminated at any time without prior notice.
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 $6.4 million at March 31, 2026 and $5.8 million at December 31, 2025. 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 2 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, 2026.
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 10.74% at March 31, 2026 and 11.14% at December 31, 2025.
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 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
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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, 2025.
As of March 31, 2026, 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, 2026AmountRatioAmountRatioAmountRatio
The Company
Tier 1 leverage ratio (to average assets)$379,490 10.48 %$144,848 4.00 %$181,060 5.00 %
Tier 1 capital (to risk-weighted assets)379,490 12.99 175,326 6.00 233,768 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
377,428 12.92 131,495 4.50 189,937 6.50 
Total capital ratio (to risk-weighted assets)416,260 14.25 233,768 8.00 292,210 10.00 
The Bank
Tier 1 leverage ratio (to average assets)$322,061 9.00 %$143,072 4.00 %$178,840 5.00 %
Tier 1 capital (to risk-weighted assets)322,061 11.26 171,665 6.00 228,886 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
322,061 11.26 128,749 4.50 185,970 6.50 
Total capital ratio (to risk-weighted assets)358,071 12.52 228,886 8.00 286,108 10.00 
December 31, 2025
The Company
Tier 1 leverage ratio (to average assets)$371,638 10.71 %$138,757 4.00 %$173,446 5.00 %
Tier 1 capital (to risk-weighted assets)371,638 13.05 170,835 6.00 227,780 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
369,576 12.98 128,126 4.50 185,071 6.50 
Total capital ratio (to risk-weighted assets)407,481 14.31 227,780 8.00 284,725 10.00 
The Bank
Tier 1 leverage ratio (to average assets)$316,082 9.24 %$136,858 4.00 %$171,073 5.00 %
Tier 1 capital (to risk-weighted assets)316,082 11.34 167,207 6.00 222,942 8.00 
Common equity tier 1 capital ratio (to risk-weighted assets)
316,082 11.34 125,405 4.50 181,141 6.50 
Total capital ratio (to risk-weighted assets)351,170 12.60 222,942 8.00 278,678 10.00 
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. The Company experienced no material changes in contractual obligations related to long-term borrowings, operating leases, and other commitments from December 31, 2025. Management believes that cash flows from operations and available liquidity sources will be sufficient to meet these obligations as they come due.
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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, 2026As of December 31, 2025
(in thousands)
Unfunded lines of credit$474,960 $455,666 
Letters of credit1,633 1,633 
Commitment to fund other investments2,714 2,714 
Total credit extension commitments$479,307 $460,013 
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 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.
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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, 2026March 31, 2025
Net Income$12,018 $13,932 
Add: Merger-Related Expenses, Net of Tax— 964 
Core Net Income$12,018 $14,896 
Weighted Average Common Shares - Diluted16,441 16,925 
Earnings per Share - Diluted$0.73 $0.82 
Core Earnings per Share - Diluted$0.73 $0.88 
Average Assets$3,651,812 $3,221,964 
Return on Average Assets(1)
1.33 %1.75 %
Core Return on Average Assets(1)
1.33 %1.87 %
Average Equity$405,302 $363,115 
Return on Average Equity(1)
12.03 %15.56 %
Core Return on Average Equity(1)
12.03 %16.64 %
Net Interest Income$49,398 $46,047 
Noninterest Income13,373 12,549 
Total Revenue$62,771 $58,596 
Noninterest Expense$43,681 $38,053 
Efficiency Ratio(2)
69.59 %64.94 %
Net Interest Income (a)$49,398 $46,047 
Noninterest Income13,373 12,549 
Core Fee Revenue (b)$13,373 $12,549 
Core Revenue (a) + (b)$62,771 $58,596 
Noninterest Expense$43,681 $38,053 
Less: Merger-Related Expenses— 1,266 
Core Noninterest Expense$43,681 $36,787 
Core Efficiency Ratio (2)
69.59 %62.78 %
_____________
(1)    Annualized.
(2)    The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).

Core Net Interest MarginThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Net Interest Income$49,398 $46,047 
Less: Credit Card Loan Income14,882 14,147 
Core Net Interest Income34,516 31,900 
Average Interest Earning Assets3,509,115 3,087,943 
Less: Average Credit Card Loans133,712 118,723 
Average Core Interest Earning Assets$3,375,403 $2,969,220 
Core Net Interest Margin4.15%4.36%
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Core Loan YieldThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Portfolio Loans Receivable Interest Income$64,009 $58,453 
Less: Credit Card Loan Income14,882 14,148 
Core Portfolio Loans Receivable Interest Income$49,127 $44,305 
Average Portfolio Loans Receivable3,008,187 2,634,110 
Less: Average Credit Card Loans133,712 118,723 
Total Core Average Portfolio Loans Receivable$2,874,475 $2,515,387 
Core Portfolio Loans Receivable Yield6.93%7.14%
Pre-tax, Pre-Provision Net Revenue ("PPNR")Three Months Ended
(in thousands)March 31, 2026March 31, 2025
Net Income
$12,018 $13,932 
Add: Income Tax Expense3,853 4,365 
Add: Provision for Credit Losses3,014 2,246 
Add: Provision for Credit Losses on Unfunded Commitments205 — 
Pre-tax, Pre-Provision Net Revenue ("PPNR")$19,090 $20,543 
Core PPNRThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Net Income
$12,018 $13,932 
Add: Income Tax Expense3,853 4,365 
Add: Provision for Credit Losses3,014 2,246 
Add: Provision for Credit Losses on Unfunded Commitments205 — 
Add: Merger-Related Expenses— 1,266 
Core PPNR$19,090 $21,809 
Allowance for Credit Losses to Total Portfolio Loans
(in thousands)March 31, 2026December 31, 2025
Allowance for Credit Losses$54,680 $54,660 
Total Portfolio Loans3,026,431 2,959,457 
Allowance for Credit Losses to Total Portfolio Loans1.81%1.85%
Commercial Bank Allowance for Credit Losses to Commercial Bank Portfolio Loans
(in thousands)March 31, 2026December 31, 2025
Allowance for Credit Losses$54,680 $54,660 
Less: Credit Card Allowance for Credit Losses7,802 8,232 
Commercial Bank Allowance for Credit Losses$46,878 $46,428 
Total Portfolio Loans3,026,431 2,959,457 
Less: Gross Credit Card Loans131,887 137,905 
Commercial Bank Portfolio Loans$2,894,544 $2,821,552 
Commercial Bank Allowance for Credit Losses to Total Portfolio Loans1.62%1.65%
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Nonperforming Assets to Total Assets
(in thousands)March 31, 2026December 31, 2025
Total Nonperforming Assets$59,273 $58,276 
Total Assets3,808,467 3,606,207 
Nonperforming Assets to Total Assets1.56%1.62%
Nonperforming Loans to Total Portfolio Loans
(in thousands)March 31, 2026December 31, 2025
Total Nonperforming Loans$55,417 $54,421 
Total Portfolio Loans3,026,431 2,959,457 
Nonperforming Loans to Total Portfolio Loans1.83%1.84%
Net Charge-Offs to Average Portfolio LoansThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Total Net Charge-Offs$2,994 $2,444 
Total Average Portfolio Loans3,008,187 2,634,110 
Net Charge-Offs to Average Portfolio Loans, Annualized0.40%0.38%
Tangible Book Value per Share
(in thousands, except share and per share data)March 31, 2026December 31, 2025
Total Stockholders' Equity$408,859 $401,757 
Less: Intangible Assets
40,480 40,740 
Tangible Common Equity$368,379 $361,017 
Period End Shares Outstanding16,286,480 16,373,288 
Tangible Book Value per Share$22.62 $22.05 
Return on Average Tangible Common EquityThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Net Income
$12,018 $13,932 
Add: Intangible Amortization, Net of Tax197 199 
Net Tangible Income$12,215 $14,131 
Average Equity405,302 363,115 
Less: Average Intangible Assets40,628 36,896 
Net Average Tangible Common Equity$364,674 $326,219 
Return on Average Equity12.03 %15.56 %
Return on Average Tangible Common Equity13.58 %17.57 %
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Core Return on Average Tangible Common EquityThree Months Ended
(in thousands)March 31, 2026March 31, 2025
Core Net Income$12,018 $14,896 
Add: Intangible Amortization, Net of Tax197 199 
Core Net Tangible Income$12,215 $15,095 
Core Return on Average Tangible Common Equity13.58 %18.77 %




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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, 2026Within 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)
$1,104,328 $273,325 $520,726 $1,898,379 $1,141,791 $3,040,170 
Securities
2,016 60,294 26,397 88,707 150,509 239,216 
Interest-bearing deposits at other financial institutions379,069 — — 379,069 — 379,069 
Federal funds sold
60 — — 60 — 60 
Total earning assets
$1,485,473 $333,619 $547,123 $2,366,215 $1,292,300 $3,658,515 
Liabilities
Interest-bearing liabilities
Interest-bearing deposits$25,090 $50,180 $225,808 $301,078 $1,338,150 $1,639,228 
Time deposits
93,420 205,898 410,426 709,744 71,398 781,142 
Total interest-bearing deposits118,510 256,078 636,234 1,010,822 1,409,548 2,420,370 
FHLB Advances
— 50,000 — 50,000 — 50,000 
Other borrowed funds
— 2,062 — 2,062 — 2,062 
Total interest-bearing liabilities$118,510 $308,140 $636,234 $1,062,884 $1,409,548 $2,472,432 
Period gap
$1,366,963 $25,479 $(89,111)$1,303,331 $(117,248)$1,186,083 
Cumulative gap1,366,963 1,392,442 1,303,331 1,303,331 1,186,083 
Ratio of cumulative gap to total earning assets
37.36 %38.06 %35.62 %35.62 %32.42 %
_______________
(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, 2026:
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, 2026
(14.5)%(10.6)%(7.4)%(4.0)%0.0 %4.5 %9.0 %13.3 %17.7 %
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, 2026.
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, 2026
(25.0)%(15.9)%(8.0)%(3.0)%0.0 %2.1 %3.3 %4.8 %5.8 %

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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”) that are designed 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.

As previously disclosed in Item 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, management identified a material weakness in the Company’s internal control over financial reporting. As a result of this material weakness, the Company’s Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report. Notwithstanding the material weakness, based on additional analyses and other procedures performed, management believes the consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows, as of the periods presented, in accordance with GAAP.
Management has implemented, and continues to implement, measures designed to remediate the material weakness described in the Company’s Form 10-K. Although the control enhancements comprising the Company’s remediation plan have been implemented, the controls have not yet operated for a sufficient period of time to allow management to conclude that the material weakness has been fully remediated.
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, other than the continued execution of the remediation plan previously disclosed in Item 9A of the Company’s Form 10-K for the year ended December 31, 2025. Management will continue to evaluate the design and operating effectiveness of the remediation measures as they operate over future periods.


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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, 2025 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, 2026.
On February 21, 2025, the Company announced a new stock repurchase program under which the Company was authorized to repurchase up to $15 million of its Common Stock, par value $0.01 per share (“Common Stock”), or an aggregate of 483,559 shares of Common Stock. The stock repurchase program expired on February 28, 2026.
On March 16, 2026, 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 550,000 shares of common stock. The new stock repurchase program will expire on December 31, 2026, but may be limited or terminated at any time without prior notice.
During the three months ended March 31, 2026, the Company repurchased Common Stock under the stock repurchase programs 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, 2026 to January 31, 202634,699 $28.39 454,342 $2,355,153 
February 1, 2026 to February 28, 2026— — 454,342 2,355,153 
March 1, 2026 to March 31, 202688,058 29.09 88,058 12,438,329 
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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, 2026, 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 
10.1 
10.2 
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, 2026, 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 8, 2026
By: /s/ Edward F. Barry
Name: Edward F. Barry
Title: Chief Executive Officer
            (Principal Executive Officer)
Date: May 8, 2026
By: /s/ Jacob Dalaya
Name: Jacob Dalaya
Title: Executive Vice President, Chief Financial Officer
            (Principal Financial Officer)
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