Capital Bancorp Inc

Other than the additional risk factors referenced below, there are no material changes to the risk factors as previously disclosed under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023 and those referenced in other reports on file with the SEC.

Risks Related to the Proposed Merger

We expect to continue to incur substantial costs related to the merger and integration.

We have incurred and will continue to incur substantial costs in connection with the proposed merger with IFHI. These costs include legal, financial advisory, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs. While we have attempted to accurately forecast these costs, factors that are beyond our control or that we have failed to accurately estimate could result in us incurring future charges in excess of our current estimates. These charges could be material and could materially adversely affect our future earnings. If the merger is not completed, we will have incurred these expenses without realizing the expected benefits of the merger.

Failure to complete the proposed merger could negatively impact the Company.

If the merger with IFHI is not completed for any reason, there may be various adverse consequences and we may experience negative reactions from the financial markets and from our customers and employees. For example, our business may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, the benefits from which may not be realized. Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. We also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against us to perform obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, we may be required to pay a termination fee of $3,000,000 to IFHI.

The proposed integration of the Company and IFHI may be more difficult, costly or time consuming than expected and the Company may fail to realize the anticipated benefits of the proposed merger.

The success of the proposed merger will depend, in part, on the ability to realize the anticipated growth opportunities and cost savings from combining the businesses of the Company and IFHI. To realize the anticipated benefits and cost savings from the proposed merger, we must successfully integrate and combine the businesses of the Company and IFHI in a manner that permits those cost savings to be realized. If we are not able to successfully achieve these objectives, or if we have failed to accurately estimate the anticipated benefits of the proposed merger, the anticipated benefits may not be realized fully or at all, they may take longer to realize than expected, and we may incur additional unforeseen expenses.

The integration process could result In the loss of key employees, diversion of management’s attention and resources, the disruption of the combined company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to maintain relationships with clients, customers, depositors and employees.

We will be subject to business uncertainties and contractual restrictions while the proposed merger with IFHI is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on the Company. These uncertainties may impair our ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with us to seek to change existing business relationships with the Company. In addition, subject to certain exceptions, we have agreed to operate our business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect our ability to consummate the transactions contemplated by the merger agreement on a timely basis without the consent of IFHI. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger.

As a result of the proposed merger, the size, scope, and complexity of our business would increase significantly beyond that of either the Company’s or IFHI’s business prior to the proposed merger. Our future success will depend, in part, upon our ability to manage and achieve the benefits we anticipate will be associated with this expanded business, challenges, including challenges related to the management and monitoring of new operations, and the associated increased costs and complexity. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings, growth opportunities, revenue enhancements or other benefits currently anticipated.

There were no unregistered sales of the Company’s stock during the year to date period ended March 31, 2024.

On July 25, 2022, the Company announced a new stock repurchase program. Under the new program, the Company is authorized to repurchase up to $10.0 million of its outstanding common stock or 500,000 shares of Common Stock, par value $0.01 per share (“Common Stock”). On April 13, 2023, the Company announced approval of up to an additional $5.0 million or 175,000 shares of Common Stock incremental to the July 2022 announcement. The program will expire on December 31, 2024. There were no stock repurchases by the Company under the repurchase program announced on July 25, 2022, prior to the quarter ended March 31, 2023. In connection with the pending acquisition of IFHI, the Company temporarily suspended repurchases under its stock program during the first quarter 2024.

During the three months ended March 31, 2024, the Company repurchased Common Stock under the stock repurchase program as reflected in the following table.

None.

Not applicable.