Capital Bancorp IncCBNK
Capital Bancorp Inc Segments Disclosure
Segments
The Company’s reportable segments represent business units with discrete financial performance and information whose results are regularly reviewed by management. The five segments include Commercial Banking, Capital Bank Home Loans (the Company’s mortgage loan division), OpenSky™ (the Company’s credit card division), Windsor Advantage (the Company’s government loan servicing division), and the Corporate Office.
The Company’s reportable segments are determined by the Chief Executive Officer, who is the designated chief operating decision maker, based upon organizational design, leadership structure and the Company’s products and services offered. The Company’s reportable segments are also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated if operating performance, products/services, and customers are similar.
The chief operating decision maker evaluates the financial performance of the Company’s business components by evaluating revenue streams, significant expenses, and variance to the annual financial plan to assess the performance of the Company’s segments and in the determination of allocating resources and investments.
The chief operating decision maker uses revenue streams and other relevant market data to evaluate product pricing and significant expenses to assess segment performance. Segment pretax income or loss, return on assets and the efficiency ratio is used to assess the performance of the commercial bank segment by monitoring the margin between interest income and interest expense. Segment pretax income or loss is used to assess the performance of the CBHL segment by monitoring the mortgage banking revenue from loan originations and sales. Segment pretax income or loss is used to assess the performance of the OpenSky™ segment by monitoring credit card interest income, interchange fees, and other fees. Segment pretax income or loss is used to assess the performance of the Windsor Advantage segment by monitoring the service charge revenues from Windsor customers.
Loans, investments, and deposits and fees provide the revenues in the commercial bank, loan sales provide the revenues in CBHL, credit card loan interest and fees provide the revenues in OpenSky™, and service charges and ancillary fees provide the revenues in Windsor Advantage. Interest expense, provisions for credit losses and personnel provide the significant expenses in the commercial bank, cost of loan sales and personnel provide the significant expenses in CBHL, data processing and personnel provide the significant expenses in OpenSky™, and personnel provide the significant expenses in Windsor Advantage.
Segment pretax income or loss is used to assess the performance of the Corporate segment by monitoring net interest income generated by revenue-producing assets from idle cash. The Corporate segment includes non-recurring expenses, merger-related expenses, and operational expenses related to the Bank Holding Company. All operations are domestic.
Effective January 1, 2024, the Company allocated certain expenses previously recorded directly to the Commercial Bank segment to the other segments. These expenses are for shared services also consumed by OpenSky™, CBHL, Windsor Advantage and Corporate. The Company performs an allocation process based on several metrics the Company believes more accurately ascribe shared service overhead to each segment. The Company believes this reflects the cost of support for each segment that should be considered in assessing segment performance. Historical information has been recast to reflect financial information consistently with the 2024 presentation.
Accounting policies for segments are the same as those described in Note 1. Segment performance is evaluated using income (loss) before taxes. Indirect expenses are allocated on revenue. Transactions among segments are made at fair value. The following schedule reported internally for performance assessment by the chief operating decision maker presents financial information for each reportable segment at and for the years ended December 31, 2024 and 2023.
Note 18 - Segments (continued)
For the Year Ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky™ | Windsor Advantage | Corporate(2) | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||
| Interest income | $ | 147,464 | $ | 568 | $ | 61,785 | $ | — | $ | 3,646 | $ | (162) | $ | 213,301 | ||||||||||||||||||||||||||||||
| Interest expense | 57,536 | 363 | — | — | 818 | (162) | 58,555 | |||||||||||||||||||||||||||||||||||||
| Net interest income | 89,928 | 205 | 61,785 | 2,828 | — | 154,746 | ||||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 10,331 | — | 7,329 | — | 60 | — | 17,720 | |||||||||||||||||||||||||||||||||||||
| Provision for credit losses on unfunded commitments | 385 | — | — | — | — | — | 385 | |||||||||||||||||||||||||||||||||||||
| Net interest income after provision | 79,212 | 205 | 54,456 | 2,768 | — | 136,641 | ||||||||||||||||||||||||||||||||||||||
| Noninterest income | 6,654 | 6,684 | 16,122 | 4,566 | (2,616) | — | 31,410 | |||||||||||||||||||||||||||||||||||||
Noninterest expense(1) | 53,429 | 9,377 | 53,245 | 2,670 | 7,498 | — | 126,219 | |||||||||||||||||||||||||||||||||||||
| Net income (loss) before taxes | $ | 32,437 | $ | (2,488) | $ | 17,333 | $ | 1,896 | $ | (7,346) | $ | — | $ | 41,832 | ||||||||||||||||||||||||||||||
Total assets(3) | $ | 2,994,356 | $ | 21,691 | $ | 125,913 | $ | 25,515 | $ | 359,337 | $ | (319,901) | $ | 3,206,911 | ||||||||||||||||||||||||||||||
For the Year Ended December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Commercial Bank | CBHL | OpenSky™ | Windsor Advantage | Corporate(2) | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||||||
| Interest income | $ | 116,408 | $ | 382 | $ | 62,476 | $ | — | $ | 4,238 | $ | (298) | $ | 183,206 | ||||||||||||||||||||||||||||||
| Interest expense | 40,896 | 135 | — | — | 947 | (298) | 41,680 | |||||||||||||||||||||||||||||||||||||
| Net interest income | 75,512 | 247 | 62,476 | — | 3,291 | — | 141,526 | |||||||||||||||||||||||||||||||||||||
| Provision for credit losses | 1,540 | — | 7,948 | — | 122 | — | 9,610 | |||||||||||||||||||||||||||||||||||||
| Release of credit losses on unfunded commitments | (101) | — | — | — | — | — | (101) | |||||||||||||||||||||||||||||||||||||
| Net interest income after provision | 74,073 | 247 | 54,528 | — | 3,169 | — | 132,017 | |||||||||||||||||||||||||||||||||||||
| Noninterest income | 2,737 | 4,909 | 17,325 | — | 4 | — | 24,975 | |||||||||||||||||||||||||||||||||||||
Noninterest expense(1) | 48,347 | 8,155 | 52,752 | — | 1,513 | — | 110,767 | |||||||||||||||||||||||||||||||||||||
| Net income (loss) before taxes | $ | 28,463 | $ | (2,999) | $ | 19,101 | $ | — | $ | 1,660 | $ | — | $ | 46,225 | ||||||||||||||||||||||||||||||
| Total assets | $ | 2,051,945 | $ | 8,589 | $ | 117,477 | $ | — | $ | 277,565 | $ | (229,400) | $ | 2,226,176 | ||||||||||||||||||||||||||||||
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(1)Noninterest expense includes $24.9 million and $23.7 million in data processing expense in OpenSky’s™ segment for the years ended December 31, 2024 and 2023, respectively.
(2)The Corporate segment invests idle cash in revenue-producing assets including interest-bearing cash accounts, loan participations and other appropriate investments for the Company.
(3)Total assets includes goodwill and intangible assets of $19.3 million at the Commercial Bank and $17.6 million within Windsor Advantage.
(4)Commercial Bank’s return on assets of 1.08% and 1.39% for the years ended December 31, 2024 and 2023, respectively, is calculated by dividing net income before taxes by total assets.
(5)Commercial Bank’s efficiency ratio of 55.3% and 61.8% for the years ended December 31, 2024 and 2023, respectively, is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).
(6)CBHL’s mortgage banking revenue from loans sales, included within noninterest income, totaled $6.1 million and $4.0 million for the years ended December 31, 2024 and 2023, respectively.
(7)OpenSky’s™ credit card interchange fees and other fees, included within noninterest income, totaled $16.0 million and $17.3 million for the years ended December 31, 2024 and 2023, respectively.
(8)Windsor Advantage’s service charge revenues from Windsor customers, included within noninterest income, totaled $4.6 million, including $0.6 million of Capital Bank related servicing fees, for the year ended December 31, 2024.
(9)Personnel expense for Commercial Bank, CBHL, OpenSky™ and Windsor Advantage, included within noninterest expense, totaled $44.5 million, $4.2 million, $6.0 million and $1.3 million, respectively, for the year ended December 31, 2024
(10)Personnel expense for Commercial Bank, CBHL and OpenSky™, included within noninterest expense, totaled $40.0 million, $3.6 million and $5.1 million, respectively, for the year ended December 31, 2023.
(11)CBHL’s cost of loan sales, or non-personnel noninterest expense, totaled $5.2 million and $4.6 million, respectively for the years ended December 31, 2024 and December 31, 2023.
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.