Portfolio Loans Receivable and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2026

Portfolio Loans Receivable and Allowance for Credit Losses

Note 4 - Portfolio Loans Receivable and Allowance for Credit Losses

The following is a summary of the major categories of total loans outstanding:



	March 31, 2026				December 31, 2025
(in thousands)	Amount		Percent		Amount		Percent
Real estate:
Residential	$	795,505	26	%	$	765,808	26	%
Commercial	999,075		33		997,081		34
Construction	365,706		12		359,566		12
Commercial and Industrial	730,576		24		698,289		23
Credit card, net of reserve(1)	134,789		5		142,397		5
Other consumer	4,779		—		1,930		—
Portfolio loans receivable, gross	3,030,430		100	%	2,965,071		100	%
Deferred origination fees, net	(3,999)				(5,614)
Allowance for credit losses	(54,680)				(54,660)
Portfolio loans receivable, net	$	2,971,751			$	2,904,797

_____________

(1) Credit card loans are presented net of reserve for interest and fees.

The following tables set forth the changes in the ACL by loan segment class for the three months ended March 31, 2026 and March 31, 2025.


(in thousands)	Beginning Balance		Provision (Release of Provision) for Credit Losses		Charge-Offs		Recoveries		Ending Balance
Three Months Ended March 31, 2026
Real estate:
Residential	$	7,444	$	184	$	—	$	—	$	7,628
Commercial	14,917		(611)		—		—		14,306
Construction	4,250		84		(27)		—		4,307
Commercial and Industrial	19,818		684		(562)		695		20,635
Credit card	8,226		2,671		(3,103)		3		7,797
Other consumer	5		2		—		—		7
Total	$	54,660	$	3,014	$	(3,692)	$	698	$	54,680


(in thousands)	Beginning Balance		Provision (Release of Provision) for Credit Losses		Charge-Offs		Recoveries		Ending Balance
Three Months Ended March 31, 2025










Real estate:
Residential	$	6,945	$	(614)	$	(1)	$	1	$	6,331
Commercial	16,041		1,229		—		—		17,270
Construction	2,973		288		—		—		3,261
Commercial and Industrial	16,377		(542)		(147)		—		15,688
Credit card	6,301		1,894		(2,297)		—		5,898
Other consumer	15		(9)		—		—		6
Total	$	48,652	$	2,246	$	(2,445)	$	1	$	48,454

Past due loans, segregated by age and class of loans, as of March 31, 2026 and December 31, 2025 were as follows:


Portfolio Loans Past Due
	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Portfolio Loans		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans
(in thousands)
March 31, 2026
Real estate:
Residential	$	7,510	$	4,276	$	7,402	$	19,188	$	776,317	$	795,505	$	2	$	7,400
Commercial	6,433		2,804		18,727		27,964		971,111		999,075		925		17,802
Construction	12,870		—		4,124		16,994		348,712		365,706		—		4,124
Commercial and Industrial	3,023		1,363		25,899		30,285		700,291		730,576		70		26,091
Credit card	5,890		5,442		2,708		14,040		120,749		134,789		2,708		—
Other consumer	—		—		—		—		4,779		4,779		—		—
Total	$	35,726	$	13,885	$	58,860	$	108,471	$	2,921,959	$	3,030,430	$	3,705	$	55,417



	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Portfolio Loans		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans

December 31, 2025

Real estate:
Residential	$	3,886	$	573	$	8,480	$	12,939	$	752,869	$	765,808	$	740	$	7,741
Commercial	8,148		1,166		15,660		24,974		972,107		997,081		862		15,624
Construction	2,591		—		4,717		7,308		352,258		359,566		—		4,717
Commercial and Industrial	3,501		5,134		22,496		31,131		667,158		698,289		279		26,339
Credit card	7,555		6,887		2,691		17,133		125,264		142,397		2,691		—
Other consumer	—		—		—		—		1,930		1,930		—		—
Total	$	25,681	$	13,760	$	54,044	$	93,485	$	2,871,586	$	2,965,071	$	4,572	$	54,421

There were $5.6 million and $6.1 million of loans secured by one-to-four family residential properties in the process of foreclosure as of March 31, 2026 and December 31, 2025, respectively.

The following presents the nonaccrual loans as of March 31, 2026 and December 31, 2025:


	March 31, 2026
	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual Loans
(in thousands)

Real estate:
Residential	$	6,749	$	651	$	7,400
Commercial	12,839		4,963		17,802
Construction	4,124		—		4,124
Commercial and Industrial	8,121		17,970		26,091


Total	$	31,833	$	23,584	$	55,417

	December 31, 2025
	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Loss		Total Nonaccrual Loans


Real estate:
Residential	$	7,435	$	306	$	7,741
Commercial	10,159		5,465		15,624
Construction	4,717		—		4,717
Commercial and Industrial	6,907		19,432		26,339
Total	$	29,218	$	25,203	$	54,421

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

•Residential real estate loans are primarily secured by owner-occupied primary residences and, to a lesser extent, investor-owned residences.

•Commercial real estate loans can be secured by either owner-occupied commercial real estate or non-owner-occupied investment commercial real estate. Typically, owner-occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner-occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development and/or industrial properties, as well as other commercial or industrial real estate.

•Construction loans are typically secured by owner-occupied commercial real estate or non-owner-occupied investment real estate. Typically, owner-occupied construction loans are secured by office buildings, warehouses, manufacturing facilities, and other commercial and industrial properties that are in process of construction. Non-owner-occupied commercial construction loans are generally secured by office buildings and complexes, multi-family complexes, land under development and/or other commercial and industrial real estate in process of construction.

•Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable and/or other commercial property.


Collateral dependent loans amortized cost
(in thousands)	March 31, 2026		December 31, 2025
Real estate:
Residential	$	7,013	$	6,449
Commercial	17,592		15,653
Construction	3,084		5,079
Commercial and Industrial	17,038		18,605

Total	$	44,727	$	45,786

Of the collateral dependent loans as of March 31, 2026, a specific reserve of $2 thousand, $1.2 million and $4.5 million was assessed for residential real estate, commercial real estate and commercial and industrial loans, respectively. Of the collateral dependent loans as of December 31, 2025, a specific reserve of $40 thousand, $1.3 million and $4.2 million was assessed for residential real estate, commercial real estate and commercial and industrial loans.

The Company made nine loan modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2026 as follows:


Modifications
(in thousands)	Amortized Cost Basis		% of Total Loan Type		Financial Effect
Real estate:


Commercial	1,847		0.185	%	Restructured payment terms for 8 months on two loans, after which payments resume on a fully amortizing principal and interest basis for the remaining term.
Commercial and Industrial	1,729		0.237	%	For one loan, restructured payment terms for 8 months, after which payments resume on a fully amortizing principal and interest basis for the remaining term. For one loan, a payment deferral of 6 months followed by modified payments for 15 months, after which payments resume on a fully amortizing principal and interest basis for the remaining term. For two loans, a payment deferral of 3 months and subsequent 4 months interest-only payment period, followed by a return to fully amortizing principal and interest payments under original contractual terms. For one loan, a payment deferral of 4 months and reduced contractual floating interest rate based on Prime to 7.000% fixed rate for 6 months. For one loan, a payment deferral of 6 months. For one loan, a payment deferral of 7 months.

Total	$	3,576

The Company made no loan modifications on loans to borrowers experiencing financial difficulty during the three months ended March 31, 2025.

The following table presents the payment status of loans that have been modified in the last twelve months:


	March 31, 2026
			Past Due		Past Due
(in thousands)	Current		30-89 Days		90 Days or More		Nonaccrual		Total
Real estate:


Commercial	$	—	$	374	$	—	$	1,847	$	2,221
Commercial and Industrial	919		321		—		2,342		3,582
	$	919	$	695	$	—	$	4,189	$	5,803

Credit quality indicators

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grade of loans, the level of classified loans, net charge-offs, nonperforming loans, and general economic conditions in the Company’s market. From a credit risk standpoint, the Company utilizes a risk grading matrix to assign a risk grade to each of its loans. The classifications of loans reflect a judgment about the risk of expected credit loss associated with each loan. Credit quality indicators are reviewed and adjusted regularly to account for the degree of risk and expected credit loss that the Company believes to be appropriate for each financial asset.

A description of the general risk ratings are described as follows:

Pass

Loans characterized as pass includes loans graded exceptional, very good, good, satisfactory and pass/watch. The Company believes that there is a low likelihood of credit deterioration related to those loans that are considered pass.

Special mention

A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Borrowers may exhibit poor liquidity and leverage positions resulting from generally negative cash flow or negative trends in earnings. Access to alternative financing may be limited to finance companies for business borrowers and may be unavailable for commercial real estate borrowers.

Substandard

A substandard loan is inadequately protected by the current financial condition and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Borrowers may exhibit recent or unexpected unprofitable operations, an inadequate debt service coverage ratio, or marginal liquidity and capitalization. These loans require more intense supervision by Company management.

Doubtful

A doubtful loan has all the weaknesses associated with a substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Ungraded

Ungraded loans represent credit card loans not included in the individual credit grading process due to the borrower type. The credit quality indicator for credit card loans is based on the delinquency status of the borrower as of the date presented.

The following table presents the balances of classified loans based on the most recent credit quality indicator analysis. Classified loans include Special Mention, Substandard and Doubtful loans. Pass classified loans include loans graded exceptional, very good, good, satisfactory, and pass/watch. Credit card loans are ungraded as they are not individually graded. Charge-offs presented represent gross charge-offs recognized in the current period:


March 31, 2026	Term Loans by Origination Year
(in thousands)	2026		2025		2024		2023		2022		Prior		Revolving		Total
Residential – Real estate
Pass	$	84,225	$	186,295	$	107,158	$	98,719	$	101,185	$	200,898	$	—	$	778,480
Special Mention	—		—		—		1,985		1,871		4,812		—		8,668
Substandard	1,628		—		—		—		132		6,597		—		8,357
Doubtful	—		—		—		—		—		—		—		—
Total	85,853		186,295		107,158		100,704		103,188		212,307		—		795,505
Commercial – Real estate
Pass	16,428		204,593		204,171		51,116		124,398		331,132		—		931,838
Special Mention	—		—		—		2,300		39,832		7,590		—		49,722
Substandard	—		—		86		5,907		5,911		5,611		—		17,515
Doubtful	—		—		—		—		—		—		—		—
Total	16,428		204,593		204,257		59,323		170,141		344,333		—		999,075
Construction – Real estate
Pass	24,315		114,241		73,666		71,686		40,366		23,728		—		348,002
Special Mention	—		—		—		1,000		—		725		—		1,725
Substandard	—		—		5,946		3,967		2,197		3,869		—		15,979
Doubtful	—		—		—		—		—		—		—		—
Total	24,315		114,241		79,612		76,653		42,563		28,322		—		365,706
Commercial and Industrial
Pass	76,967		177,595		142,680		94,043		85,697		122,473		—		699,455
Special Mention	—		—		—		—		—		219		—		219
Substandard	—		1,570		762		14,505		992		12,134		—		29,963
Doubtful	—		—		—		11		928		—		—		939
Total	76,967		179,165		143,442		108,559		87,617		134,826		—		730,576
Other consumer
Pass	3,312		336		949		—		39		143		—		4,779
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	3,312		336		949		—		39		143		—		4,779
Credit card
Ungraded	—		—		—		—		—		—		134,789		134,789
Portfolio loans receivable, gross	$	206,875	$	684,630	$	535,418	$	345,239	$	403,548	$	719,931	$	134,789	$	3,030,430


March 31, 2026
(in thousands)	2026		2025		2024		2023		2022		Prior		Revolving		Total
Gross Charge-Offs
Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		—		—		—		—		—
Construction	—		—		—		—		27		—		—		27
Commercial and Industrial	—		—		—		70		454		38		—		562
Credit card	—		—		—		—		—		—		3,103		3,103
Total	$	—	$	—	$	—	$	70	$	481	$	38	$	3,103	$	3,692


December 31, 2025	Term Loans by Origination Year
(in thousands)	2025		2024		2023		2022		2021		Prior		Revolving		Total
Residential – Real estate
Pass	$	217,066	$	110,098	$	99,956	$	101,423	$	68,092	$	153,724	$	—	$	750,359
Special Mention	—		—		1,992		1,882		1,236		3,567		—		8,677
Substandard	—		287		—		132		792		5,561		—		6,772
Doubtful	—		—		—		—		—		—		—		—
Total	217,066		110,385		101,948		103,437		70,120		162,852		—		765,808
Commercial – Real estate
Pass	197,639		206,587		56,303		126,746		125,612		218,736		—		931,623
Special Mention	—		—		2,300		39,276		4,933		2,820		—		49,329
Substandard	—		86		5,957		5,860		1,744		2,482		—		16,129
Doubtful	—		—		—		—		—		—		—		—
Total	197,639		206,673		64,560		171,882		132,289		224,038		—		997,081
Construction – Real estate
Pass	110,320		94,973		77,852		41,729		7,198		18,856		—		350,928
Special Mention	—		—		1,000		—		724		—		—		1,724
Substandard	—		—		255		2,197		1,536		2,926		—		6,914
Doubtful	—		—		—		—		—		—		—		—
Total	110,320		94,973		79,107		43,926		9,458		21,782		—		359,566
Commercial and Industrial
Pass	210,890		146,107		94,365		91,066		30,540		95,813		—		668,781
Special Mention	—		—		—		320		—		221		—		541
Substandard	—		892		14,941		2,414		5,401		5,319		—		28,967
Doubtful	—		—		—		—		—		—		—		—
Total	210,890		146,999		109,306		93,800		35,941		101,353		—		698,289
Other consumer
Pass	760		963		—		46		40		121		—		1,930
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	760		963		—		46		40		121		—		1,930
Credit card
Ungraded	—		—		—		—		—		—		142,397		142,397
Portfolio loans receivable, gross	$	736,675	$	559,993	$	354,921	$	413,091	$	247,848	$	510,146	$	142,397	$	2,965,071


December 31, 2025
(in thousands)	2025		2024		2023		2022		2021		Prior		Revolving		Total
Gross Charge-Offs
Residential real estate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate	—		—		—		197		—		1,695		—		1,892
Construction	—		—		—		—		—		264		—		264
Commercial and Industrial	—		101		2,339		347		8		625		—		3,420
Credit card	—		—		—		—		—		—		9,036		9,036
Total	$	—	$	101	$	2,339	$	544	$	8	$	2,584	$	9,036	$	14,612

Outstanding loan commitments were as follows:


(in thousands)	March 31, 2026		December 31, 2025
Unused lines of credit
Real Estate:
Residential	$	19,269	$	22,858
Residential - Home Equity	40,008		41,864
Commercial	37,709		69,887
Construction	110,662		91,203
Commercial and Industrial	113,591		90,990
Credit card(1)	153,487		138,632
Other consumer	234		232
Total	$	474,960	$	455,666



Letters of credit	$	1,633	$	1,633

_______________

(1)Outstanding loan commitments in the credit card portfolio include $59.0 million and $95.9 million in secured and partially secured balances as of March 31, 2026 and December 31, 2025, respectively.

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition of the contract. Lines of credit generally have variable interest rates. Such lines do not represent future cash requirements because it is unlikely that all customers will, at any given time, draw upon their lines in full. Loan commitments generally have variable interest rates, fixed expiration dates, and may require payment of a fee.

The Company's maximum exposure to credit loss in the event of nonperformance by the customer is the contractual amount of the credit commitment. Loan commitments and lines of credit are generally made on the same terms, including with regard to collateral, as outstanding loans. Management is not aware of any accounting loss to be incurred by funding these loan commitments.

The Company maintains an estimated reserve for unfunded commitments and certain off-balance sheet items such as unfunded lines of credit, which is reflected in other liabilities, with increases or decreases in the reserve being charged to or released from operating expense. Activity for this account is as follows for the periods presented:


	Three months ended
(in thousands)	March 31, 2026		March 31, 2025
Balance at beginning of period	$	1,379	$	1,191

Provision for credit losses on unfunded commitments	205		—


Balance at end of period	$	1,584	$	1,191

The Company makes representations and warranties that loans sold to investors meet the investors’ program guidelines and that the information provided by the borrowers is accurate and complete. In the event of a default on a loan sold, the investor may have the right to make a claim for losses due to document deficiencies, program non-compliance, early payment default, and fraud or borrower misrepresentations.

The Company maintains a reserve for potential losses on mortgage loans sold, which is reflected in other liabilities, with changes being charged to or released from operating expense. Activity in this reserve is as follows for the periods presented:


	Three months ended
(in thousands)	March 31, 2026		March 31, 2025
Balance at beginning of period	$	2,339	$	2,260
Provision for mortgage loan put-back reserve	16		16


Balance at end of period	$	2,355	$	2,276

Capital Bancorp Inc 10-Q