Capital Bancorp Q2 Revenue Up 38 Percent

Key Points

• - Non-GAAP earnings per share for Q2 2025 missed estimates, coming in at $0.85 versus the expected $0.88.

• - Revenue (GAAP) for Q2 2025 grew 38.2% year over year to $60.752 million, driven by strong gains in net interest and fee income.

• - The quarterly dividend for Q2 2025 rose 20% to $0.12 per share, marking the fourth consecutive year of increases.

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Capital Bancorp (NASDAQ:CBNK), a community bank and diversified financial services provider, released its second quarter 2025 earnings on July 28, 2025. The company reported revenue of $60.8 million, up from $43.9 million a year earlier, representing a 38.3% increase for Q2 2025. Net interest income and fee revenue (GAAP) also posted significant year-over-year gains. However, non-GAAP earnings per share of $0.85 missed analyst estimates of $0.88 by $0.03, a 3.4% shortfall. The period showcased continued balance sheet growth and dividend increases, but also revealed higher expenses and some pressures in credit quality. Overall, the quarter showed strong top-line progress, but mixed results in core profitability and efficiency compared to expectations.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Recent Focus

Capital Bancorp operates as a diversified financial services company with commercial banking, government-guaranteed lending, and credit card services through its OpenSky™ division. Its primary footprint is the Washington, D.C. and Baltimore metro areas, but it also has reach in Florida and Illinois, along with nationwide credit card operations.

The company centers its business on commercial and industrial lending, commercial real estate loans, and secured credit cards. Its strategy over recent years has included expanding fee-based businesses, integrating new acquisitions—such as Integrated Financial Holdings (IFH)—and pushing investment in digital platforms. These focus areas contribute to diversification of revenue and help manage risk. Key drivers for success include disciplined loan growth, fee income generation, and prudent technology investments.

Highlights from the Quarter

This quarter, commercial banking operations delivered noticeable expansion. Gross loans increased by $61.4 million, translating to 9.2% annualized quarter-over-quarter growth. Year over year, gross loans were up $718.2 million, almost evenly split between the impact of the IFH acquisition ($373.5 million) and organic growth ($344.7 million). Commercial and industrial lending, plus owner-occupied commercial real estate, formed 37.6% of the loan portfolio, up from 28.4% a year earlier. Total deposits also grew, up $49.4 million during the quarter and $840.3 million versus Q2 2024, marking a 40.0% annual rise.

Net interest income showed broad-based strength, increasing 28.6% year over year, with the net interest margin (NIM) settling at 6.04%. Though NIM (Net Interest Margin, GAAP) held steady sequentially, it is down 42 basis points from the prior year, mainly because the acquisition of commercial loans from IFH has diluted the higher-return OpenSky™ portfolio. The company’s efficiency ratio—an indicator of cost versus revenue—worsened slightly from Q1 to Q2 2025 (65.1% vs. 64.9%) but improved compared to Q2 2024 (67.1%). Management reported that cost of deposits declined to 2.36%, showing some discipline even as deposit growth continued.

Fee revenue (GAAP) experienced standout growth, climbing to $13.1 million and making up 21.6% of total revenue. This reflects the continued expansion of government-guaranteed lending activities led by Windsor Advantage, which added more than $200 million in servicing portfolio during the quarter. The company’s government-guaranteed loan servicing revenue reached $3.6 million.

OpenSky™, the company’s credit card product line, reached more than 585,000 active accounts and saw net loans climb to $131.0 million, a 10.4% increase compared to the prior quarter. This business, known for offering secured and partially secured credit cards to underbanked and credit-rebuilding customers, also saw fee income rise as customer usage and portfolio size grew. New unsecured loans remain limited to existing customers, maintaining a level of credit discipline within this segment.

Management continued to highlight the integration of the IFH acquisition and related business units. This integration is visible in the broader customer base, fee income growth, and the expanding footprint of the Windsor Advantage division, now facilitating $2.9 billion in loan servicing. Management noted ongoing investments in digital technologies, aimed at improving efficiency and expanding revenue opportunities. However, these investments contributed to an increase in noninterest expense, which rose by $10.1 million year over year. Company-wide, tangible book value per share increased 7.2% year-over-year to $20.64. Shareholder returns also included repurchases—93,170 shares bought back for $2.5 million—and a 20% raise in the quarterly dividend to $0.12 per share.

Credit quality showed some pressure. Net charge-offs, which are loans written off as uncollectible, rose to $5.1 million, equivalent to 0.75% of portfolio loans, nearly double the ratio from the previous quarter. Nonperforming assets as a percentage of total assets declined compared to last quarter (now 1.11%, down from 1.21%), but remain much higher than last year’s metric. The allowance for credit losses decreased slightly on a sequential basis but increased year over year, reflecting ongoing monitoring of the loan book, particularly in light of the IFH-acquired portfolio. The quarter included a one-time charge-off of $1.5 million tied to a resolved IFH loan issue. Overall credit provisions increased, but management reports OpenSky™ credit metrics are “consistent with modeled expectations.”

The company continued to make steady progress on capital strength. The common equity tier 1 ratio rose to 13.58%, well above regulatory minimums. Book value per share (GAAP) grew, while the company continued to return capital to shareholders through ongoing buybacks.

The quarterly dividend was raised 20% to $0.12 per share.

Looking Ahead

Capital Bancorp did not provide quantitative earnings or revenue guidance for the third quarter or for fiscal 2025. Management expressed a general sense of confidence in ongoing expansion, citing “multiple growth levers” and highlighting expected ongoing profit and tangible book value growth “in the absence of any unexpected headwinds,”

Investors may want to focus on how the company addresses ongoing cost pressures, credit quality normalization, and further integration of acquired operations in the quarters ahead. The growth of fee-based lines and continued investment in technology remain important watchpoints.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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