Capital Bancorp IncCBNK
Capital Bancorp Inc Debt Disclosure
Borrowed Funds
As of December 31, 2024 and 2023, the Company was indebted as follows:
| 2024 | 2023 | |||||||||||||||||||||||||
| (dollars in thousands) | Balance | Interest | Balance | Interest | ||||||||||||||||||||||
| FHLB fixed rate advance due October 16, 2025 | $ | 22,000 | 0.93 | % | $ | 22,000 | 0.93 | % | ||||||||||||||||||
| Junior subordinated debentures due June 15, 2036 | $ | 2,062 | 6.49 | % | $ | 2,062 | 7.52 | % | ||||||||||||||||||
| Other subordinated notes due November 30, 2030 | 10,000 | 5.00 | 10,000 | 5.00 | ||||||||||||||||||||||
| Bank Term Funding Program borrowings | — | — | 15,000 | 4.84 | ||||||||||||||||||||||
| Total - Other borrowed funds | $ | 12,062 | 5.25 | % | $ | 27,062 | 5.10 | % | ||||||||||||||||||
The FHLB fixed rate advances accrue interest on a daily basis and are paid semi-annually.
Junior subordinated debentures
In June 2006, the Company formed Capital Bancorp (MD) Statutory Trust I (the “Trust”) and on June 15, 2006, the Trust issued 2,000 floating rate capital securities (the “Capital Securities”) with an aggregate liquidation value of $2.0 million to a third party in a private placement. Concurrent with the issuance of the Capital Securities, the Trust issued trust common securities to the Company in the aggregate liquidation value of $62 thousand.
Note 10 - Borrowed Funds (continued)
The proceeds of the issuance of the Capital Securities and trust common securities were invested in the Company’s Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”). The Floating Rate Debentures for the Trust will mature on June 15, 2036, which may be shortened if certain conditions are met (including the Company having received prior approval of the Board of Governors of the Federal Reserve System and any other required regulatory approvals). These Floating Rate Debentures, which are the only assets of the Trust, are subordinate and junior in right of payment to all present and future senior indebtedness (as defined in the Indenture dated June 15, 2006) of the Company. The Floating Rate Debentures for the Trust 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 December 31, 2024 and 2023, the rate for the Trust was 6.49% and 7.52%, respectively. The quarterly distributions on the Capital Securities will be paid at the same rate that interest is paid on the Floating Rate Debentures.
The Company has fully and unconditionally guaranteed the Trust’s obligation under the Capital Securities. The Trust must redeem the Capital Securities when the Floating Rate Debentures are paid at maturity or upon any earlier prepayment of the Floating Rate Debentures. The Floating Rate Debentures may be prepaid if certain events occur, including a change in the tax status or regulatory capital treatment of the Capital Securities, or a change in existing laws that requires the Trust to register as an investment company.
The junior subordinated debentures are treated as Tier 1 capital by the Company, to a limited extent, by the Federal Reserve.
Other subordinated notes
On November 30, 2020, the Company issued $10.0 million of subordinated notes (the “Notes”). The Notes mature on November 30, 2030 and are redeemable in whole or part on November 30, 2025. The Notes bear interest at a fixed annual rate of 5.00% for the first five years, then adjust quarterly to an interest rate per annum equal to a benchmark rate, which is expected to be the three-month SOFR, plus 490 basis points. There were related debt issuance costs incurred totaling $50,000 which were fully expensed at the time of issuance. The Company used the proceeds from the Notes to redeem the outstanding $13.5 million, 6.95% fixed-to-floating rate subordinated notes issued in November 2015 and called on December 1, 2020.
Federal Reserve’s Bank Term Funding Program
On March 12, 2023, in response to liquidity concerns in the banking system, the Federal Deposit Insurance Corporation, Federal Reserve and U.S. Department of Treasury, collaboratively approved certain actions with a stated intention to reduce stress across the financial system, support financial stability and minimize any impact on business, households, taxpayers, and the broader economy. Among other actions, the Federal Reserve Board created the BTFP to make additional funding available to eligible depository institutions to help assure institutions can meet the needs of their depositors. During the first quarter of 2023, we established a line of credit under the BTFP. As of March 31, 2024, participation in the BTFP had concluded and the Company had no outstanding balances under the BTFP at December 31, 2024.
Note 10 - Borrowed Funds (continued)
Available lines of credit
The Company has available lines of credit of $76.0 million with other correspondent banks. There were no outstanding line of credit balances at December 31, 2024 and December 31, 2023.
The Company may borrow up to 25% of its assets from the FHLB, based on collateral available to pledge to secure the borrowings. Borrowings from the FHLB are secured by a portion of the Company’s loan and/or investment portfolio. As of December 31, 2024 and 2023, the Company had pledged loans providing borrowing capacity of $507.5 million and $313.5 million, respectively. The Company did not have any pledged investment securities to the FHLB at December 31, 2024 or December 31, 2023. As of December 31, 2024 and 2023, the Company had available borrowing capacity, net of advances and amounts pledged for letters of credit, from the FHLB of $485.5 million and $291.5 million, respectively.
As of December 31, 2024 and 2023, the Company had pledged commercial loans to the Federal Reserve Bank of Richmond to secure a borrowing capacity totaling $20.6 million and $16.6 million, respectively, under its discount window program. Further, the Company had pledged available-for-sale securities to the Federal Reserve Bank of Richmond to secure an additional borrowing capacity of $89.6 million at December 31, 2024 as compared to a borrowing capacity of $155.7 million under the BTFP as previously mentioned at December 31, 2023.
The Company limits its certificate of deposit funding through financial networks to 15% of the Bank’s assets, or approximately $471.3 million and $326.5 million as of December 31, 2024 and 2023, respectively. The Company had $333.0 million outstanding as of December 31, 2024 and $142.4 million outstanding as of December 31, 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 17, 2025 | Showing above |
| 2018 | Apr 1, 2019 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.