Capital Bancorp (CBNK) 8-K/A Financial Statements and Exhibits

EXHIBIT 99.4

CAPITAL BANCORP, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma combined condensed consolidated financial information and explanatory notes show the impact on the historical financial positions and results of operations of Capital Bancorp, Inc. (“Capital”) and Integrated Financial Holdings, Inc. (“IFHI”) and have been prepared to illustrate the effects of the merger of IFHI with and into Capital, with Capital continuing as the surviving corporation (the “Merger”), under the acquisition method of accounting with Capital treated as the acquirer. (Please see the “Explanatory Note” included in the beginning of this Current Report Amendment No. 1 on Form 8-K/A (the “Amendment”).)

The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting, giving effect to the merger. The unaudited pro forma combined condensed consolidated balance sheet combines the historical information of Capital and IFHI as of September 30, 2024 and assumes the merger was completed on that date. The unaudited pro forma combined condensed consolidated income statement combines the historical financial information of Capital and IFHI and gives effect to the merger as if it had been completed as of January 1, 2023 and carried forward through the interim period presented. The unaudited pro forma combined condensed consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial condition had the merger been completed on the date described above, nor is it necessarily indicative of the results of operations in future periods or the future financial condition and results of operations of the combined entities. The financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma combined condensed consolidated financial information. Certain reclassifications have been made to IFHI historical financial information to conform to Capital’s presentation of financial information.

The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with Capital’s historical consolidated financial information and related notes, which are contained in Capital’s 10-Q for the three-month and nine-month periods ended September 30, 2024, IFHI’s audited financial statements as of and for the years ended December 31, 2023 and 2022 which were included in Capital’s Form S-4/A filed on June 21, 2024, and IFHI’s unaudited financial statements as of and for the nine-month period ended September 30, 2024 which appear elsewhere in the Amendment.

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Unaudited Pro Forma Condensed Consolidated Balance Sheets

As of September 30, 2024

(in thousands except share data)	CBNK Historical			IFHI Historical			Pro Forma Merger Adjustments			Notes	Pro Forma Combined
ASSETS
Cash and cash equivalents:
Cash and due from banks	$	23,462		$	6,379		$	(12,652	)	(j)	$	17,189
Interest bearing deposits at other financial institutions		133,180			71,443							204,623
Federal funds sold		58			-							58
Total cash and cash equivalents		156,700			77,822			(12,652	)			221,870
Investment securities available for sale		208,700			1,019							209,719
Restricted investments		5,895			-							5,895
Marketable equity securities		-			-							-
Loans held for sale		19,554			41,723							61,277
Portfolio loans receivable, net of deferred fees and costs		2,107,522			382,755			(17,086	)			2,472,470
Less allowance for credit losses		(31,925	)		(7,660	)		(3,261	)			(42,847	)
Total portfolio loans held for investment, net		2,075,597			375,095			(21,068	)	(a)		2,429,624
Premises and equipment, net		5,959			3,638			3,826		(b)		13,423
Accrued interest receivable		12,468			4,299							16,767
Deferred tax asset		10,748			784			8,452		(c)		19,984
Bank owned life insurance		38,779			4,779							43,558
Goodwill		-			13,161			4,218		(d)		17,378
Intangible assets		-			4,520			11,559		(e)		16,079
Loan servicing assets		-			4,515							4,515
Accounts receivable		597			1,158							1,755
Other assets		25,791			9,664			(681	)	(f)		34,774
TOTAL ASSETS	$	2,560,788		$	542,178		$	1,656			$	3,096,619
LIABILITIES
Deposits
Noninterest-bearing	$	718,120		$	85,609						$	803,729
Interest-bearing		1,468,104			364,274			9,070		(g)		1,841,447
Total deposits		2,186,224			449,883			9,070				2,645,176
Federal Home Loan Bank advances		52,000			-							52,000
Other borrowed funds		12,062			-							12,062
Accrued interest payable		8,503			1,277							9,780
Other liabilities		21,888			8,388			7,150		(h)		37,426
TOTAL LIABILITIES		2,280,677			459,548			16,220				2,756,445
TOTAL STOCKHOLDERS’ EQUITY		280,111			82,630			(22,567	)	(i)		340,175
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,560,788		$	542,178		$	(6,347	)		$	3,096,619

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Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Nine Months Ended September 30, 2024

(in thousands except share data)	CBNK Historical		IFHI Historical				Pro Forma Merger Adjustments			Notes	Pro Forma Combined
INTEREST INCOME
Loans, including fees	$	144,313	$	27,357			$	(234	)	(a)	$	171,435
Investment securities available-for-sale		3,902		1,698								5,600
Federal funds sold and other		3,379		-								3,379
Investment securities & deposits		-		-								-
Total interest income		151,594		29,054				(234	)			180,414
INTEREST EXPENSE
Deposits		39,785		11,083				3,344		(b)		54,212
Borrowed funds		1,390		474								1,864
Total interest expense		41,175		11,557				3,344				56,076
NET INTEREST INCOME		110,419		17,497				(3,578	)			124,338
Provision for credit losses		9,892		1,850				(2,797	)	(c)		8,945
Provision for credit losses on unfunded commitments		263		-								263
Net interest income after provision for credit losses		100,264		15,647				(781	)			115,130
NONINTEREST INCOME
Service charges on deposits		642		-								642
Credit card fees		12,266		-								12,266
Mortgage banking revenue		5,325		-								5,325
Government loan servicing and processing revenue				10,952								10,952
Government lending revenue				4,693								4,693
Loan servicing rights				549								549
Bank-owned life insurance				91								91
Other income		1,264		(10,510	)	(g)						(9,246	)
Total noninterest income		19,497		5,775				-				25,272
NONINTEREST EXPENSE
Salaries and employee benefits		39,524		16,184								55,708
Occupancy and equipment		5,268		862								6,130
Professional fees		5,696		1,317								7,013
Data processing		20,479		765								21,244
Advertising		5,327		350								5,677
Loan processing		1,462		1,788								3,250
Intangible amortization expense				498				(785	)	(d)		(287	)
Foreclosed real estate expenses, net		2		-								2
Merger-related expenses		1,315		5,133								6,448
Operational losses		2,721		-								2,721
Other operating		6,911		4,229								11,140
Total noninterest expenses		88,705		31,127				(785	)			119,047
Income (loss) before income taxes		31,056		(9,705	)			4				21,355
Income tax expense		7,617		1,719				1		(e)		9,337
Net income (loss)	$	23,439	$	(7,986	)		$	3			$	15,456
Weighted average common shares outstanding:
Basic		13,909,090		2,369,645				262,202		(f)		16,540,937
Diluted		13,909,090		2,402,438				353,828		(f)		16,665,356
Earnings per share:												-
Basic earning (loss) per share	$	1.69	$	(3.37	)			-			$	1.07
Diluted earnings (loss) per share	$	1.69	$	(3.32	)			-			$	1.08

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Unaudited Pro Forma Condensed Consolidated Statements of Income

For the Twelve Months Ended December 31, 2023

(in thousands except share data)	CBNK Historical			IFHI Historical			Pro Forma Merger Adjustments			Notes	Pro Forma Combined
INTEREST INCOME
Loans, including fees	$	174,760		$	31,008		$	(157	)	(a)	$	205,611
Investment securities available-for-sale		4,815										4,815
Federal funds sold and other		3,631										3,631
Investment securities & deposits					2,095
Total interest income		183,206			33,103			(157	)			216,152
INTEREST EXPENSE
Deposits		39,625			10,127			4,192		(b)		53,944
Borrowed funds		2,055			261							2,316
Total interest expense		41,680			10,388			4,192				56,260
NET INTEREST INCOME		141,526			22,715			(4,349	)			159,892
Provision for credit losses		9,610			1,245			(2,797	)	(c)		8,058
Provision for (release of) credit losses on unfunded commitments		(101	)		(64	)						(165	)
Net interest income after provision for credit losses		132,017			21,534			(1,552	)			151,999
NONINTEREST INCOME												-
Service charges on deposits		964			-							964
Credit card fees		17,273			-							17,273
Mortgage banking revenue		4,896			-							4,896
Government loan servicing and processing revenue		-			11,058							11,058
Government lending revenue		-			7,746							7,746
Loan servicing rights		-			251							251
Bank-owned life insurance		-			742							742
Change in fair value of marketable equity securities		-			1,615							1,615
Other income		1,842			3,354							5,196
Total noninterest income		24,975			24,766			-				49,741
NONINTEREST EXPENSE
Salaries and employee benefits		48,754			19,946							68,700
Occupancy and equipment		5,673			1,331							8,880
Professional fees		9,270			2,001							11,271
Data processing		25,686			997							26,683
Advertising		6,161			629							6,790
Loan processing		1,633			1,930							3,563
Merger-related expenses		-			177							177
Intangible amortization expense		-			664			(1,046	)	(d)		(382	)
Foreclosed real estate expenses (income), net		7			-							7
Operational losses		4,613			-							4,613
Outside service providers		1,932			-							1,932
Other operating		7,038			3,651							8,813
Total noninterest expenses		110,767			31,326			(1,046	)			141,047
Income before income taxes		46,225			14,974			(505	)			60,694
Income tax expense		10,354			3,797			(124	)	(e)		14,027
Net income before noncontrolling interest		35,871			11,177			(383	)			46,665
Net income attributable to noncontrolling interest		-			(47	)						(47	)
Net income		35,871			11,130			(383	)			46,618
Weighted average common shares outstanding:
Basic		14,002,556			2,224,846			407,001		(f)		16,634,403
Diluted		14,080,547			2,265,987			490,279		(f)		16,758,822
Earnings per share:
Basic earnings per share	$	2.56		$	5.00			-			$	2.80
Diluted earnings per share	$	2.55		$	5.00			-			$	2.78

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NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Pro Forma Adjustments to the Unaudited Consolidated Balance Sheet

(a) The pro forma adjustment to the estimate fair value of IFHI’s portfolio loans reflects preliminary estimated fair value adjustment for non-purchased credit deteriorated loans (“PCD”) and preliminary estimated credit mark on PCD loans. The market rate adjustment represents the impact of movement in interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment represents changes in credit quality of the underlying borrowers from loan inception to the acquisition date;

(b) The pro forma adjustment to premises and equipment reflects preliminary estimated fair value adjustments;

(c) The pro forma adjustment to deferred tax asset reflects preliminary estimated fair value adjustments;

(d) The pro forma adjustment to goodwill reflects the elimination of historical IFHI goodwill of $13.2 million and record preliminary estimated goodwill associated with the merger of $9.1 million;

(e) The pro forma adjustment to intangible assets reflects Capital’s estimate of the fair value of identifiable intangible assets determined based on financial, economic, market and other conditions as of the merger date;

(f) The pro forma adjustment to other assets reflects preliminary estimated adjustments to prepaid expenses & right of use assets;

(g) The pro forma adjustment to interest-bearing deposits reflects differences in interest rates, based on a comparison of rates on IFHI’s time deposits to recent market rates as of the merger date for terms corresponding with the maturity dates of IFHI’s interest-bearing deposits;

(h) The pro forma adjustment to other liabilities reflects preliminary estimated adjustments to establish mortgage and SBA repurchase reserves, as well as update estimated deferred tax liability and lease liabilities;

(i) The pro forma adjustment to stockholders’ equity is reduced by the elimination of IFHI’s stockholders’ equity; and

(j) The pro forma adjustment to cash reflects the cash consideration paid to acquire IFH

Note 2. Pro Forma Adjustments to the Unaudited Consolidated Income Statements

(a) The pro forma adjustment to interest income on loans reflects preliminary estimated fair value adjustments including a market rate adjustment and credit mark adjustments on acquired loans receivable. The loan fair value adjustment is amortized using the sum-of-the-years-digits method over four years;

(b) The pro forma adjustment to interest expense on deposits reflects differences in interest rates, based on comparison of rates of IFHI’s time deposits to recent market rates for maturity dates corresponding to the maturity dates of IFHI’s time deposits. The fair value adjustment is amortized into interest expense over the estimated remaining life of the applicable time deposits;

(c) The pro forma adjustment to the provision for credit losses on loans reflects the preliminary estimated day 2 current expected credit losses (“CECL”) adjustment on the loan portfolio;

(d) The pro forma adjustment to intangible amortization expense reflects preliminary estimated amortization of acquired identifiable intangible assets. Identifiable intangible assets are amortized on a straight-line basis over their respective periods;

(e) The pro forma adjustment to income tax expense reflects an assumed tax rate of 24.5%;

(f) The pro forma adjustments to common shares outstanding represents additional shares issued by Capital, net of IFHI shares exchanged, in the merger; and

(g) IFH other income loss mainly driven by one-time loss associated with Special Dividend distribution.

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