Capital Bancorp, Inc. · NASDAQ:CBNK
Capital Bancorp — Q3 2019 Earnings Presentation
31 slides from Capital Bancorp's earnings presentation, Nov 4, 2019
Slide 1: Financial Review September 30, 2019
Ed Barry Chief Executive Officer Scot Browning Alan Jackson President Chief Financial Officer September 30, 2019 Financial Review 1
Slide 2: Forward Looking Statements
Forward Looking Statements The statements contained in this presentation that are not historical facts are forward-looking statements based on management’s current expectations and beliefs concerning future developments and their potential effects on Capital Bancorp, Inc. (the “Company” or “Capital”
Slide 3: Table of Contents
Table of Contents Page I. Introduction to Capital Bancorp (CBNK) 4 II. Investment Opportunity 5 A. Market Dynamics 6 B. Experienced Management Team 7 C. Strategy That Delivers Performance 9 D. Innovation Driven, Fee Based Businesses 20 E. Building Earnings Momentum 25 III. Appendix - Non-GAAP Reconc
Slide 4: Capital Bancorp, Inc. (NASDAQ - CBNK) Franchise Highlights
Capital Bancorp, Inc. (NASDAQ - CBNK) Franchise Highlights Footprint Corporate Headquarters - Rockville, Unaudited Balance Sheet ($M, except per share amounts) September 30, 2019 Quarter Result Assets $ 1,311 6 % QoQ Loans 1,140 8 % QoQ Deposits 1,112 7 % QoQ Quarterly Financial Performance Earnings
Slide 5: Investment Opportunity
Investment Opportunity • The Washington, D.C. and Baltimore, MD MSAs make up one of the largest and wealthiest regions in the U.S. Operate in • Consolidation creates new opportunities for customer and talent Exceptional acquisition Markets • Market insulated from economic downturns by federal govern
Slide 6: Exceptional Markets
Exceptional Markets Median Household Income by County ($000) Washington, D.C. – Baltimore, MD Market ∙ Recent M&A in market creating disruptions 128 124 and creating opportunities to acquire talent 108 and customers 83 • Total population of more than 9.1 million 63 ∙ Includes the four wealthiest cou
Slide 7: Experienced Management Team
Experienced Management Team • Prior to joining Capital Bank, Mr. Barry held senior positions at Capital One Bank, Bank Edward F. Barry of America, and E&Y/Capgemini where he held a variety of roles primarily focusing on Chief Executive Officer marketing, data, analytics and strategy Joined 2012 • Re
Slide 8: Experienced Management Team
Experienced Management Team ® Nick Bryan • Mr. Bryan leads the OpenSky credit card business line for Capital Bank and manages Chief Marketing Officer the Bank’s data analytics platforms GM – OpenSky® • Prior to Capital Bank, Mr. Bryan spent eight years with Capital One Bank in marketing, Joined 2013
Slide 9: Unique Strategy Consistently Drives Performance
Unique Strategy Consistently Drives Performance Disciplined Business Strategy Total Assets ($M) Deliver premium, advice-based CAGR: 19% ∙ $1,311 solutions to our customers $1,105 $1,026 ∙ Leverage technology to differentiate products and $906 services through customization $743 $619 $489 ∙ Instill a
Slide 10: Diversified Lines of Business
Diversified Lines of Business Commercial OpenSky® Secured Residential Mortgage Banking Credit Card Origination ∙ Approximately $1.3 billion of ∙ $44.1 million loan portfolio ∙ 2.77% QTD GOS margin assets Credit related consumer ∙ ∙ 44% QTD purchase volume ∙ Provide sophisticated advice product secur
Slide 11: Leveraging the Power of Technology
Leveraging the Power of Technology ∙ In-house development team Internally ∙ Apollo customer acquisition system developed for OpenSky® provides automated Developed work flows for digital account applications processes Technology ∙ In-house staff participates in business development calls and designs
Slide 12: Consistently High Performing
Consistently High Performing ROAA (%) vs. Peer ROATCE (%) vs. Peer 1.42% 14.75% 1.22% 14.41% 13.94% 13.94% 14.04% 1.17% 1.13% 1.10% 1.02% 5.46% 0.50% 0.83% 0.80% 10.97% 8.72% 8.78% 0.65% 7.13% 2015Y 2016Y 2017Y 2018Y 20193Q 2015Y 2016Y 2017Y 2018Y 20193Q ROAA ROAA, as Adjusted (1) Peer Median (2) RO
Slide 13: Loan Portfolio
Loan Portfolio Total Loans HFI ($M) Loan Composition CAGR: 20% $1,140 $1,000 Non-Owner Occ. CRE: 14% $887 Owner Occupied CRE: 16% $763 $639 Construction: 16% Com'l & Ind: 12% $506 $408 Credit Card: 4% Other Consumer: 0% Residential R.E.: 38% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 ∙ Owner-occupie
Slide 14: Balanced Loan Portfolio
Balanced Loan Portfolio Fixed vs. Floating Rate Loan Mix Yield on Loans 7.58% 7.16% Adjustable: 20.4% 6.45% 6.44% 6.18% Fixed: 36.9% 6.00% 5.78% 5.76% 5.76% 5.57% 4.79% 4.86% 4.62% 4.66% Variable: 42.7% 2015Y 2016Y 2017Y 2018Y 2019Q3 Adjustable Variable Fixed Loan Yield ex Card Loan Yield Peer Media
Slide 15: Deposit Portfolio Composition and Core Deposit Momentum
Deposit Portfolio Composition Core Deposit Momentum Deposit Portfolio Composition ($1,112M) • Recruiting deposit sales teams, including fiduciary salespeople, from recently acquired competitors Noninterest driving core deposit growth Bearing: 26.4% Interest bearing demand: 16.8% • Customizing soluti
Slide 16: Delivering Superior Net Interest Margin
Delivering Superior Net Interest Margin Net Interest Margin(2) Deliver real, advice-based solutions to 5.83% ∙ 5.59% 5.59% 5.41% 5.37% 5.02% 5.18% complex credit needs rather than acting as the 3.93% 3.97% 4.01% 3.73% 3.72% 3.68% low-cost provider (largely avoid bid situations) ∙ Specifically target
Slide 17: Efficiency Ratio
Efficiency Ratio Efficiency Ratio(1) 73.9% 73.2% 71.6% 73.9% 71.8% 70.0% 70.0% 68.6% 6.1% 66.1% 65.0% 63.6% 62.0% 58.2% 59.3% 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019Q3 Efficiency Ratio Peer Median (2) Recent investments driving a positive long-term impact on efficiency: ∙ Credit card data processin
Slide 18: Superior Asset Quality Metrics
Superior Asset Quality Metrics Nonperforming Loans ($M) Nonperforming Assets / Assets 1.58% Construction: $2.1 Residential Real 1.10% Estate: $2.2 0.80% 0.90% 0.51% 0.54% 0.51% 0.68% 0.44% 0.63% 0.59% 0.44% 0.29% Commercial and Commercial Real Industrial: $0.8 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 201
Slide 19: CRE Concentration Levels
CRE Concentration Levels CRE / Total Risk Based Capital ("RBC") Breakdown 351% 340% 302% 205% 241% 175% 146% 127% 99% Peer Average Capital Bank, N.A. Capital Bancorp, Inc. Construction / RBC Non-Owner Occupied CRE / RBC ∙ Construction lending is a historical core competency focused on single family
Slide 20: Diversified Revenue Model
Diversified Revenue Model Net Revenue ($M)(1) CAGR: 17% $89.2 $74.3 $66.4 $63.2 $48.6 $41.2 $35.5 2013Y 2014Y 2015Y 2016Y 2017Y 2018Y 2019 YTD Noninterest Income to Net Revenue(1) OpenSky & Church Street Mortgage contribute to fee income levels in excess of peer median 32.40% 30.70% 28.70% 27.80% 25
Slide 21: OpenSky Secured Credit Card Division
OpenSky® Secured Credit Card Division Customer Demographics Number of Outstanding Accounts (000s) Underserved by traditional credit products ∙ CAGR: 43% 221.9 ∙ Poor or nonexistent credit history ∙ Nationwide customer base 170.0 149.2 ∙ Minimum initial deposit of $200 and maximum initial deposit of
Slide 22: Capital Bank Home Loan Division
Capital Bank Home Loan Division Purchase vs. Re-finance Volume & GOS Margin ∙ Increased sales staffing over past 18 months to combat industry headwinds $2.9B $0.4B $0.3B $0.4B ∙ Production hires since the beginning of 2017 focused on niche products and purchase 77.6% 47.5% 20.6% 56.0% originations 2
Slide 23: Consistent Quarterly Performance
Consistent Quarterly Performance Loans ($M) Assets ($M) $1,311 $1,234 $1,140 $1,105 $1,124 $1,056 $1,073 $1,000 $1,008 $955 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Deposits ($M) Equity ($M) $128 $123 $119 $115 $1,112 $107 $1,037 $955 $968 $911 Sep 20
Slide 24: Consistent Quarterly Performance
Consistent Quarterly Performance Net Interest Margin Efficiency Ratio 76.08% 5.79% 5.83% 74.20% 5.56% 72.18% 5.46% 5.46% 71.34% 71.75% Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Return on Average Assets (1) Return on Average Tangible Common Equity (1) 1
Slide 25: Building Earnings Momentum
Building Earnings Momentum Earnings per Share (EPS) Growth Tangible Book Value per Share (TBV) Growth Capital CAGR: 10.2%(1) Capital CAGR: 13.3%(2) $9.27 Peer CAGR: 5.5% Peer CAGR: 7.0% $8.38 $1.02 $0.37 $6.94 $0.84 $0.85 $0.32 $6.35 $0.80 $5.83 $0.74 $0.76 $6.35 $0.72 $6.02 $0.69 $5.25 $0.68 $5.61
Slide 26: Conclusions
Conclusions ∙ Operate in Premier Markets ∙ Entrepreneurial Management Team ∙ Consistently High Performing Community Bank ∙ Innovation Driven, Fee Based Businesses ∙ Building Earnings Momentum 26
Slide 27: Appendix
6 CAPITAL BANCORP, INC. CAPITAL BANK PARTNERS in YOUR VISION Appendix
Slide 28: ROATCE and ROATCE, as Adjusted Reconciliations
ROATCE and ROATCE, as Adjusted Reconciliations “Return on average tangible common equity” is a non-GAAP measure defined as net income, less bargain purchase gain (net of taxes), plus the amortization of intangible assets (net of taxes) divided by average total equity net of average intangible assets
Slide 29: ROAA and NIM, as Adjusted Reconciliations
ROAA and NIM, as Adjusted Reconciliations “Return on average assets, as adjusted” is a non-GAAP measure defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processing expenses, plus non-recurring deferred tax revalu
Slide 30: Adjusted Revenue and Efficiency Ratio Reconciliations
Adjusted Revenue & Noninterest Income to Adjusted Revenue and Efficiency Ratio, as Adjusted Reconciliations Net revenue for 2017 has been adjusted to exclude the impact of non-recurring foregone interest and fees and as such is considered a non-GAAP measure. Adjusted Revenue and Noninterest Income t
Slide 31: Diluted EPS and Tangible Book Value per Share Reconciliations
Diluted Earnings Per Share, as Adjusted and Tangible Book Value per Share Reconciliations “Diluted earnings per share, as adjusted” is a non-GAAP measure defined as net income, less bargain purchase gain (net of taxes), plus non-recurring foregone interest and fees, plus non-recurring data processin