What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-15 compared with 2021-03-15 · 7 added, 217 removed, 15 unchanged (94% of the section changed)

3 unchanged sentences

As of March 11, 2022, there were approximately 157 holders of record of our common stock.

It is our policy to retain earnings, if any, to provide funds for use in our business.

Although we have never declared or paid dividends on our common stock, our board of directors periodically reviews whether to declare or pay cash dividends taking into account, among other things, general business conditions, our financial results, future prospects, capital requirements, legal and regulatory restrictions, and such other factors as our board may deem relevant.

Commencing with the third quarter of 2021, shareholders received quarterly cash dividends on shares of common stock which totaled $1.4 million in 2021.

As a general matter, the payment of dividends is at the discretion of the Company’s board of directors, based on such factors as operating results, financial condition, capital adequacy, regulatory requirements, and stockholder return.

Although we have no obligation to pay dividends and we may change our dividend policy at any time without notice to shareholders,the Company anticipates continuing a regular quarterly cash dividend..

Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant.

Our ability to pay dividends on our common stock is dependent on the Bank’s ability to pay dividends to the Company.

Various statutory provisions restrict the amount of dividends that the Bank can pay without regulatory approval.

For information on the statutory and regulatory limitations on the ability of the Company to pay dividends to its stockholders and on the Bank to pay dividends to the Company, see “Item 1.

Business-Supervision and Regulation—Dividends” and “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity.

Equity Compensation Plan Information

2 unchanged sentences

Equity compensation plans approved by security holders:

HCNB Bancorp, Inc.

2002 Stock Option Plan 172,976 $ 8.50 —

Capital Bancorp, Inc.

3 unchanged sentences

Unregistered Sales and Issuer Repurchases of Common Stock

There were no unregistered sales of the Company’s stock during the year ended December 31, 2020.

On April 25, 2019, the Company announced a stock repurchase program.

The program enables the Company to repurchase up to $5.0 million of its outstanding common stock, and expired on December 31, 2020.

During the year ended December 31, 2019 and the year ended December 31, 2020, the Company repurchased shares under the approved stock repurchase program, as reflected in the following table.

Periods Total Number of Shares Purchased Average price paid per share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs

Through December 31, 2019 28,480 $ 13.00 28,480 $ 4,629,646

For the three months ended March 31, 2020 112,134 $ 11.41 112,134 $ 3,349,806

For the three months ended June 30, 2020 1,500 $ 9.41 1,500 $ 3,335,691

For the three months ended September 30, 2020 141,200 $ 10.40 141,200 $ 1,866,947

October 1, 2020 to October 31, 2020 11,946 $ 9.91 11,946 $ 1,748,899

November 1, 2020 to November 30, 2020 37,334 $ 10.92 37,334 $ 1,342,748

December 1, 2020 to December 31, 2020 — $ — — $ —

For the three months ended December 31, 2020 49,280 $ 10.67 49,280 $ 1,342,748

For the twelve months ended December 31, 2020 304,114 $ 10.81 304,114 $ 1,342,748

Total 332,594 332,594

SELECTED FINANCIAL DATA

You should read the following selected historical consolidated financial and other data in conjunction with our consolidated financial statements and related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

The following tables set forth selected historical consolidated financial and other data for the years ended December 31, 2020, 2019, 2018, 2017 and 2016.

Selected financial data as of and for the years ended December 31, 2020 and 2019 have been derived from our audited financial statements included elsewhere in this report.

We have derived the selected financial data as of and for the years ended December 31, 2018 2017 and 2016 from our audited financial statements not included in this filing.

The information presented in the table below has been adjusted to give effect to a four-for-one stock split of our common stock completed effective August 15, 2018.

The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented below.

Our historical results are not necessarily indicative of any future period.

The performance ratios, asset quality and capital ratios, mortgage metrics and credit card portfolio metrics are unaudited and derived from our audited financial statements and other financial information as of and for the periods presented.

Average balances have been calculated using daily averages.

The selected historical consolidated financial and other data presented below contains certain financial measures that are not presented in accordance with accounting principles generally accepted in the United States and have not been audited.

See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures.”

Years Ended December 31,

(Dollars are in thousands, except per share information)

2020 2019 2018 2017 2016

Statement of Income Data:

Interest income

$ 97,251 $ 82,180 $ 69,127 $ 56,666 $ 49,243

Interest expense

13,182 15,842 11,239 7,755 6,484

Net interest income

84,069 67,512 57,888 48,911 42,759

Provision for loan losses

11,242 2,791 2,140 2,655 4,291

Noninterest income

61,061 25,692 16,124 15,149 20,473

Noninterest expense

98,751 66,525 54,123 47,306 43,380

Income before income taxes

35,137 23,888 17,749 14,099 15,561

Income tax expense

9,314 5,819 4,982 6,990 6,120

25,823 16,895 12,767 7,109 9,441

Balance Sheet Data:

Cash and due from banks

$ 18,456 $ 10,530 $ 10,431 $ 8,189 $ 4,827

Investment securities available for sale

99,787 60,828 46,932 54,029 47,985

Mortgage loans held for sale

107,154 71,030 18,526 26,344 49,167

Loans, net of deferred fees and allowance

1,292,068 1,156,934 1,002,260 887,420 763,430

SBA-PPP loans receivable, net

201,018 — — — —

1,876,593 1,428,495 1,105,058 1,026,009 905,600

1,652,128 1,225,421 955,240 904,899 790,924

FHLB advances and repurchase agreements

22,000 32,222 5,332 13,260 15,659

Subordinated debentures

14,016 15,423 15,393 15,361 15,327

Total liabilities

1,717,282 1,295,164 990,494 945,890 834,853

Total stockholders’ equity

159,311 133,331 114,564 80,119 70,748

Tangible common equity (1)

159,311 133,331 114,564 80,119 70,748

Years Ended December 31,

(Dollars are in thousands, except per share information)

2020 2019 2018 2017 2016

Selected Performance Ratios:

Return on average assets (ROAA)

1.56 % 1.38 % 1.22 % 0.74 % 1.13 %

Return on average equity (ROAE)

18.00 13.66 13.94 9.29 14.39

Net interest margin 5.14 5.60 5.59 5.12 5.18

Noninterest income / average assets

3.68 2.01 1.54 1.57 2.46

Noninterest expense / average assets

5.95 5.45 5.18 4.90 5.21

Net operating expense / average assets

2.27 3.44 3.63 3.33 2.75

Efficiency ratio (1)

68.04 72.29 73.13 73.85 68.60

Loan yield (5)

7.27 7.37 7.16 6.44 6.45

Loan yield, excluding credit card portfolio (2)

5.53 5.91 5.76 5.57 5.76

Per Share Data:

Basic earnings per share

$ 1.87 $ 1.23 $ 1.05 $ 0.63 $ 0.86

Diluted earnings per share (4)

1.87 1.21 1.02 0.62 0.84

Book value per share

11.58 9.60 8.38 6.94 6.35

Tangible book value per share (1)

11.58 9.60 8.38 6.94 6.35

Common shares issued and outstanding

13,753,529 13,894,842 13,672,479 11,537,196 11,144,696

Basic weighted average shares outstanding

13,793,256 13,733,131 12,116,459 11,261,132 10,963,132

Diluted weighted average shares outstanding

13,800,176 13,968,585 12,462,138 11,428,000 11,289,044

Non-Performing Assets (“NPA”):

Non-performing loans (“NPL”) $ 9,237 $ 4,720 $ 4,679 $ 5,407 $ 4,518

Troubled debt restructurings 440 459 284 3,811 941

Foreclosed real estate

3,326 2,384 142 93 90

Non-performing assets 12,563 7,104 4,821 5,500 4,608

Asset Quality Ratios:

0.67 % 0.50 % 0.44 % 0.54 % 0.51 %

NPL / loans (5)

0.61 0.40 0.47 0.61 0.59

NPA / loans (5) + foreclosed real estate

0.82 0.60 0.48 0.62 0.60

Net charge-offs (recoveries) to average loans (5)

0.09 0.08 0.09 0.15 0.33

Allowance for loan losses to total loans (5)

1.78 1.14 1.13 1.13 1.13

Allowance for loan losses to NPL

253.71 281.80 241.72 185.57 190.32

Bank Capital Ratios:

Tier 1 leverage ratio 7.45 % 8.65 % 9.06 % 8.55 % 8.86 %

Common equity tier 1 capital 11.34 10.73 11.00 10.78 11.12

Tier 1 risk-based capital 11.34 10.73 11.00 10.78 11.12

Total risk-based capital ratio 12.60 11.98 12.25 12.03 12.37

Common equity to total assets 8.49 9.33 8.89 8.46 8.94

Years Ended December 31,

(Dollars are in thousands, except per share information)

2020 2019 2018 2017 2016

Composition of Loans Held for Investment:

Portfolio Loans Receivable

Residential real estate

$ 437,860 $ 427,926 $ 407,844 $ 342,684 $ 286,332

Commercial real estate

392,550 348,091 278,691 259,853 234,869

Construction real estate

224,904 198,702 157,586 144,932 134,540

157,127 151,109 122,264 108,982 87,563

102,186 45,526 34,673 31,507 20,446

Other consumer

1,649 1,285 1,202 1,053 1,157

SBA - PPP Loans Receivable

204,920 — — — —

Composition of Deposits:

Noninterest bearing $ 608,559 $ 291,778 $ 293,378 $ 175,707 $ 141,525

Interest bearing demand 257,125 174,166 186,422 69,455 50,628

Savings 4,800 3,675 3,994 3,365 3,326

Money Markets 447,077 429,078 313,131 282,840 252,486

Time Deposits 334,566 326,725 315,520 315,979 264,626

Capital Bank Home Loan Metrics:

Origination of loans held for sale

$ 1,308,912 $ 593,189 $ 337,122 $ 418,912 $ 853,674

Proceeds from loans held for sale, net of mortgage banking revenue

1,272,788 540,686 344,940 441,960 844,464

Purchase volume as a % of originations

31.90 % 51.89 % 79.43 % 52.50 % 18.79 %

Mortgage banking revenue

$ 40,649 $ 15,955 $ 9,477 $ 10,377 $ 15,373

Gain on sale as a % of loan sold

3.02 % 2.95 % 2.75 % 2.01 % 1.82 %

OpenSky Credit Card Portfolio Metrics:

Total active customer accounts 568,373 223,379 169,981 149,226 96,404

Total loans $ 102,186 $ 45,526 $ 34,673 $ 31,507 $ 20,446

Total deposits at the Bank $ 192,520 $ 78,223 $ 59,954 $ 53,625 $ 39,062

_______________

(1) This financial measure is not recognized under GAAP and is therefore considered to be a non-GAAP measure.

See “—GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this financial measure to its most comparable GAAP financial measure.

(2) Includes non-accrual loans and loans 90 days and more past due.

(3) Gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018.

The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented.

(4) Calculations of diluted earnings per share before bargain purchase gain, diluted earnings per share and diluted earnings per share, as adjusted, include interest on convertible debt.

(5) Loans exclude loans held for sale at each of the dates presented.

GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry.

However, we also evaluate our performance based on certain additional financial measures discussed in this report as being “non-GAAP financial measures.” We classify a financial measure as a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

Non-GAAP financial measures do not include operating and other statistical measures or ratios that are calculated using exclusively financial measures presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP.

However, non-GAAP financial measures have a number of limitations, are not necessarily comparable to GAAP measures and should not be considered in isolation or viewed as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP.

Moreover, the manner in which we calculate non-GAAP financial measures may differ from that of other companies reporting non-GAAP measures with similar names.

You should understand how such other companies calculate their financial measures that may be similar or have names that are similar to the non-GAAP financial measures discussed herein when comparing such non-GAAP financial measures.

Our management uses the non-GAAP financial measures set forth below in its analysis of our performance

• “Tangible common equity” is a non-GAAP measure defined as total stockholders’ equity, less intangible assets.

• “Tangible book value per share” is a non-GAAP measure defined as total stockholders’ equity, less intangible assets, divided by shares of common stock outstanding.

The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:

Years Ended December 31,

(Dollars are in thousands, except per share information)

2020 2019 2018 2017 2016

Tangible Common Equity:

Total stockholders’ equity

$ 159,311 $ 133,331 $ 114,564 $ 80,119 $ 70,748

intangible assets

Tangible common equity $ 159,311 $ 133,331 $ 114,564 $ 80,119 $ 70,748

Tangible Book Value per Share:

Total stockholders’ equity

$ 159,311 $ 133,331 $ 114,564 $ 80,119 $ 70,748

intangible assets — — — — —

Tangible common equity

$ 159,311 $ 133,331 $ 114,564 $ 80,119 $ 70,748

Divide by shares of common stock outstanding (1)

13,753,529 13,894,842 13,672,479 11,537,196 11,144,696

Tangible book value per share (1)

$ 11.58 $ 9.60 $ 8.38 $ 6.94 $ 6.35

_______________

(1) Gives effect to a four-for-one stock split of our common stock completed effective August 15, 2018.

The effect of the stock split on outstanding shares and per share figures has been retroactively applied to all periods presented.

There were no unregistered sales of the Company’s stock during the fourth quarter of 2021.

The Company did not repurchase any of its shares during the fourth quarter of 2021.

The Company has an authorized share repurchase program pending regulator approval.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity