Capital Bancorp Inc
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
CBNK$42.39-0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001419536-26-000100
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001419536-26-000112
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 216 previous paragraphs and 220 current paragraphs.
160 unchanged; 49 reworded; 8 added; 5 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 34 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Net interest income increased by $3.3 million, or 6.9%, to $50.9 million when comparing the three months ended June 30, 2026 to the three months ended June 30, 2025, primarily driven by increased interest income of $3.8 million from the Commercial Bank due to organic loan growth, and $1.5 million from OpenSky™ due to growth from the unsecured loan product offset by $2.1 million of increased interest expense. The $2.1 million increased interest expense was driven by $1.0 million from higher balances and a shift in deposit mix, $0.8 million of lower PAA, and $0.3 million of higher borrowing costs.
Current report
For the three months ended June 30, 2026, noninterest income of $14.4 million increased $1.3 million, or 9.6%, from the same period in 2025, driven by a $1.7 million increase from government loan servicing and packaging revenue and $0.9 million from loan servicing rights, and a $0.2 million increase in mortgage banking revenue, offset by a $1.9 million decrease in government lending revenue.
Current report
(4)For the six months ended June 30, 2026 and 2025, collectively, Core Net Interest Margin was 4.09% and 4.39%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.
Current report
When comparing the six months ended June 30, 2026 to the same period in 2025, the largest positive impact to total interest income was the growth in interest earning assets due to organic growth. The loan portfolio, excluding credit card loans contributed $7.6 million of the $10.6 million increase in interest income, with growth (due to change in volume) accounting for an $11.3 million increase in interest income, slightly offset by a $3.7 million decrease as a result of the rate environment. Growth in both secured and unsecured product drove an additional $3.5 million increase in volume for credit card loans. The $3.9 million increase in interest expense year over year was primarily driven by $1.6 million from a shift in deposit mix, $1.7 million lower benefit from PAA and $0.6 million of higher borrowing costs.
Current report
For the three months ended June 30, 2026, the provision for credit losses was $3.6 million, a decrease of $0.5 million from the same period in 2025. The decreased provision for credit losses was primarily driven by decreases of $3.2 million for C&I loans, offset by increases of $1.4 million for commercial real estate loans and $1.1 million of increases for OpenSky™ loans. The $3.2 million decrease in provision for C&I loans was driven by decreases of $3.4 million in the specific reserve for two individually analyzed loans during the three months ended June 30, 2026. For commercial real estate loans in the three months ended June 30, 2025 there was a loan sale that resulted in the removal of a $2.9 million specific reserve from the allowance, thereby decreasing the amount of provision required, offset by $1.7 million in additional charge-offs, increasing the amount of provision required. This resulted in a negative provision of $1.3 million for commercial real estate loans during the three months ended June 30, 2025. There were no charge-offs or significant fluctuations in the required reserve for commercial real estate loans during the three months ended June 30, 2026. Therefore, the provision required for the quarter was approximately $0.1 million, a $1.4 million increase from the same period in 2025. The provision from OpenSky™ increased $1.1 million, primarily driven by higher volumes in the unsecured portfolio - as unsecured card balances increased $18.5 million from $32.7 million at June 30, 2025 to $51.2 million. Additionally, net charge-offs for OpenSky™ increased $0.9 million compared to the three months ended June 30, 2025.
Current report
At June 30, 2026, nonperforming loans were $57.0 million, an increase of $2.6 million from December 31, 2025. The $2.6 million increase was in line with the growth in loans, as nonperforming assets as a percentage of total assets decreased from 1.62% at December 31, 2025 to 1.56% at June 30, 2026.
Current report
(1)Allowance for reserve amount for each loan category shown as a percentage of allowance for credit losses for total portfolio loans.
Current report
During the six months ended June 30, 2026, brokered time deposits decreased $145.7 million from December 31, 2025, reflecting management’s decision to reduce reliance on higher-cost funding. This reduction did not signal a constraint on the Company’s liquidity position; rather, it was more than offset by organic deposit growth across customer deposits. Total deposits increased $277.9 million, or 9%, from December 31, 2025 to $3.4 billion at June 30, 2026, driven by growth in noninterest-bearing demand, money market, savings and interest-bearing demand accounts. The shift in deposit mix from brokered time deposits towards lower-cost, relationship-based core deposits reflects continued execution of the Company’s funding strategy and is expected to reduce overall deposit costs over time. Management believes the Company maintains ample liquidity through its diversified funding base, core deposit growth, and significant available borrowing capacity.
Removed paragraphs (5)
Previous report
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”).
Previous report
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.
Previous report
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.
Previous report
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,
Previous report
(1)Loan category as a percentage of total portfolio loans.
Reworded paragraphs (49)
Previous wording
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.
Current wording
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 and six months ended June 30, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026.
Previous wording
•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;
Current wording
•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 Iran and Ukraine, which could impact business and economic conditions in the U.S. and abroad;
Previous wording
•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;
Current wording
•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 and/or the servicing, processing and packaging by Windsor Advantage™ of such loans on behalf of others;
Previous wording
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.”
Current wording
Net income for the three months ended June 30, 2026 was $14.3 million, compared to net income of $13.1 million for the same period in 2025, an 8.5% increase. There were no non-GAAP adjustments to net income of $14.3 million for three months ended June 30, 2026, a $44 thousand increase from net income, as adjusted (non-GAAP) of $14.2 million for the three months ended June 30, 2025. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
Previous wording
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.
Current wording
The provision for credit losses for the three months ended June 30, 2026 was $3.6 million, a decrease of $0.5 million from the same period in 2025. Net charge-offs for the three months ended June 30, 2026 were $3.8 million, or 0.50% on an annualized basis of average portfolio loans, compared to $5.1 million, or 0.75% on an annualized basis of average portfolio loans for the same period in 2025.
Previous wording
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
Current wording
Noninterest expense was $43.2 million for the three months ended June 30, 2026, an increase of $3.6 million from the same period in 2025. The change was primarily driven by increases in professional fees of $1.7 million, salaries and employee benefits expenses of $1.6 million, occupancy and equipment expenses of $0.9 million, loan processing expenses of $0.5 million, and advertising expenses of $0.4 million, offset by decreases in merger-related expenses of $1.4 million and operating losses of $0.2 million.
Previous wording
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.
Current wording
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 and six months ended June 30, 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.
Previous wording
(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.
Current wording
(3)For the three months ended June 30, 2026 and 2025, collectively, Core Loan Yield was 6.77% and 7.14%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.
Previous wording
(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.
Current wording
(4)For the three months ended June 30, 2026 and 2025, collectively, Core Net Interest Margin was 4.04% and 4.42%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.
Previous wording
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.”
Current wording
The net interest margin decreased 40 basis points to 5.64% for the three months ended June 30, 2026 from the same period in 2025. Core net interest margin (non-GAAP) decreased to 4.04% for the three months ended June 30, 2026, compared to 4.42% for the same period in 2025. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”
Previous wording
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
Current wording
For the three months ended June 30, 2026, average interest earning assets increased $456.5 million, or 14.4%, to $3.6 billion as compared to the same period in 2025, but the average yield on interest earning assets decreased to 7.75%, a 44 basis point decrease from 8.19% for the comparable 2025 period. The 44 basis point decrease was 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 $383.2 million, or 18.5%, and the average cost of interest-bearing liabilities decreased to 3.11%, a 17 basis point decrease from 3.28%, primarily as a result of a shift in the product mix of the portfolio as well as changes in the rate environment.
Previous wording
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.
Current wording
When comparing the three months ended June 30, 2026 to the three months ended June 30, 2025, the largest positive impact to total interest income was the growth in interest earning assets due to organic growth. The loan portfolio, excluding credit card loans contributed $2.8 million of the $5.4 million increase in interest income, with growth (due to change in volume) accounting for a $5.2 million increase in interest income, offset by a $2.4 million decrease as a result of the rate environment. Growth in both secured and unsecured product drove an additional $1.8 million increase in volume for credit card loans. The $2.1 million increase in interest expense year over year was primarily driven by a $0.8 million lower benefit from net PAA, $1.0 million from a shift in deposit mix and $0.3 million of higher borrowing costs.
Previous wording
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.”
Current wording
The ACL as a percent of portfolio loans was 1.76% at June 30, 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 June 30, 2026 in “Financial Condition - Allowance for Credit Losses.”
Previous wording
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.
Current wording
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 deferred and recognized over the corresponding twelve-month cardholder service period as an adjustment to yield using the interest method.
Previous wording
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.
Current wording
For the three months ended June 30, 2026, noninterest income of $14.4 million increased $1.3 million, or 9.6%, from the same period in 2025. The increase was primarily driven by $1.7 million of increased government loan servicing and packaging revenue (Windsor Advantage™), $0.9 million of increased loan servicing rights, and $0.2 million of increased mortgage banking revenue, offset by a $1.9 million decrease in government lending revenue.
Previous wording
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.
Current wording
Credit card fees of $4.4 million for the three months ended June 30, 2026 increased $0.1 million as compared to the three months ended June 30, 2025, primarily as a result of growth in the unsecured product.
Previous wording
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.
Current wording
Originations of loans held for sale within the Bank’s CBHL division increased $26.6 million to $106.9 million in the second quarter of 2026 when compared to $80.3 million in the second quarter of 2025. The gain on sale margin increased to 2.71% for the three months ended June 30, 2026 from 2.68% for the three months ended June 30, 2025.
Previous wording
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.
Current wording
Mortgage banking revenue of $2.0 million increased $0.2 million from the three months ended June 30, 2025, primarily driven by the increased gain on sale of $0.8 million, offset by a $0.4 million increase in commissions.
Previous wording
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.
Current wording
Mortgage loans and USDA/SBA 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 $1.5 million at June 30, 2026 and $2.3 million at December 31, 2025, respectively. The Bank did not repurchase any loans during the six months ended June 30, 2026 or 2025. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.
Previous wording
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.
Current wording
Government lending revenue of $1.2 million for the three months ended June 30, 2026 decreased $1.9 million as compared to the three months ended June 30, 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 continued increases in SBA loan sales.
Previous wording
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.
Current wording
Noninterest expense was $43.2 million for the three months ended June 30, 2026, as compared to $39.6 million for the three months ended June 30, 2025, an increase of $3.6 million. The change included increases of $1.7 million in professional fees associated with strategic investments in shared service areas and card partnerships for OpenSky™, $1.6 million of increases in salaries and employee benefits expenses due to headcount growth, $0.9 million in occupancy and equipment due to an increase in software contracts and the acceleration of depreciation of capitalized assets related to OpenSky™ technology, $0.5 million in loan processing costs from loan expenses associated with our government guaranteed lending portfolio, and $0.4 million in advertising expenses. The increased spending was offset by decreases of $1.4 million in merger-related expenses and $0.2 million in operational and other card fraud related losses.
Previous wording
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.
Current wording
Income tax expense was $4.2 million and $8.1 million for the three and six months ended June 30, 2026, respectively, compared to $4.0 million and $8.3 million for the same periods, respectively, in 2025. Our effective tax rate decreased from 23.2% for the three months ended June 30, 2025 to 22.8% for the three months ended June 30, 2026 following an updated estimate related to the deferred tax liability associated with fixed assets acquired in the IFH acquisition. Our effective tax rate was unchanged at 23.5% for the six months ended June 30, 2026 compared to the same period in 2025. 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.
Previous wording
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.
Current wording
Total assets at June 30, 2026 increased $283.7 million from the balance at December 31, 2025. Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.1 billion as of June 30, 2026, an increase of $126.5 million, or 4.3%, from $3.0 billion at December 31, 2025. Mortgage loans held for sale decreased $3.5 million, or 13.4%, when comparing the period end balances at June 30, 2026 and December 31, 2025.
Previous wording
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.
Current wording
Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are two securities each of which is subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $1 million.
Previous wording
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 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.
Current wording
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 businesses, professionals, real estate investors, small residential builders and individuals. Our owner- occupied commercial real estate loans, residential construction loans and commercial business and industrial 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.
Previous wording
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.
Current wording
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 $4.9 million as of June 30, 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 $50.0 million as of June 30, 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.
Previous wording
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.
Current wording
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, as part of its ongoing risk management efforts, 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. The borrowers’ progress in construction buildout is monitored against the original underwriting guidelines for construction milestones and completion timelines.
Previous wording
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.
Current wording
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 extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $96.0 million and $97.3 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of June 30, 2026 and December 31, 2025, respectively. Unsecured balances were $51.2 million and $47.1 million, respectively, at the same dates.
Previous wording
(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.
Current wording
(2)Other non-owner-occupied commercial real estate loans include special purpose loans of $14.7 million, multi-family loans of $8.5 million, skilled nursing loans of $8.4 million, a land loan of $7.3 million, and other loans of $8.2 million.
Previous wording
(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.
Current wording
(3)Other owner-occupied commercial real estate loans include special purpose loans of $96.6 million, skilled nursing loans of $30.8 million, $25.1 million of religious facility loans and other loans of $20.4 million.
Previous wording
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.
Current wording
At June 30, 2026, the recorded investment in individually assessed loans was $56.7 million, requiring a specific reserve of $8.3 million. At December 31, 2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million.
Previous wording
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.
Current wording
The past due loans balance increased $26.9 million, from $93.5 million or 3.2% of gross loans as of December 31, 2025 to $120.4 million or 3.9% of gross loans as of June 30, 2026. The increase was primarily driven by $16.7 million of increases in C&I loans and $12.6 million of increases in construction loans. Within C&I loans, one relationship across two loans contributed $21.2 million of the past due loans. The two loans were modified in July 2026, and payments received under the modification brought the loans to current status as of the date of this report. Excluding this customer, the past due C&I loans balance as of June 30, 2026, decreased $4.5 million. It was noted in the previous quarter that a single relationship for 3 construction real estate loans accounted for $9.7 million of the increase in 30-59 days past due loans, for which construction has stalled. The loans are now 90+ days past due and foreclosure sales are expected on the underlying properties. A specific reserve of $0.8 million has been recorded on one of the loans. Management believes the credit remains appropriately monitored and reflected within the allowance for credit losses.
Previous wording
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.
Current wording
At June 30, 2026, the ACL coverage ratio was 1.76%, down 9 bps from December 31, 2025 and up 3 bps compared to June 30, 2025.
Previous wording
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:
Current wording
Total charge-offs for the six months ended June 30, 2026 were primarily comprised of credit card charge-offs resulting from continued growth in the partially secured and unsecured card portfolio. There were no charge-offs to the commercial real estate loan portfolio for the three and six months ended June 30, 2026, a decrease of $1.7 million from the same periods in 2025. Net charge-offs on an annualized basis of average portfolio loans for the three and six months ended June 30, 2026 were 0.50% and 0.45%, respectively, compared to 0.75% and 0.57% for the same periods in 2025.
Previous wording
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.
Current wording
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 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.
Previous wording
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.
Current wording
Total liabilities at June 30, 2026 increased $263.3 million from December 31, 2025, due to growth in the deposit portfolio of $277.9 million.
Previous wording
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.
Current wording
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 June 30, 2026 and December 31, 2025, our credit card customers accounted for $166.2 million and $163.2 million, or 18.5% and 19.1%, respectively, of our total noninterest-bearing deposit balances.
Previous wording
The Company had $303.1 million in brokered deposits at March 31, 2026 compared to $376.7 million at December 31, 2025.
Current wording
The Company had $231.0 million in brokered deposits at June 30, 2026 compared to $376.7 million at December 31, 2025.
Previous wording
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.
Current wording
Deposits securing our OpenSky™card lines of credit and deposits from title companies represent the largest product concentrations in the deposit portfolio. As of June 30, 2026, these product concentrations represented 5% and 13% of deposits, respectively. As of December 31, 2025, these deposits represented 5% and 10% of deposits, respectively.
Previous wording
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.
Current wording
Deposit costs increased 10 basis points during the six months ended June 30, 2026, as compared to the year ended December 31, 2025, driven by changes in the rate environment and shift in product mix, primarily growth from customer money market deposits with offsetting activity across other deposit products.
Showing the first 40 of 49 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
(2)Portfolio loans receivable balance includes nonaccrual loans.
Current report — wording carried from elsewhere
(3)For the six months ended June 30, 2026 and 2025, collectively, Core Loan Yield was 6.85% and 7.14%, respectively. See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.
Current report — wording carried from elsewhere
The following tables present a summary of the net charge-offs of loans as a percentage of average loans for the periods indicated:
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
$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.
Previous report — wording carried elsewhere
$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.