Commercial Bancgroup (CBK) risk factors, FY2025 10-K

Other

1. 01Increases in interest rates have in the past resulted in, and could in the future result in, unrealized losses in our investment securities portfolio
2. 02If the average interest rate we pay on our deposits increases, our cost of funds would rise
3. 03Increases in interest rates could result in a decrease in the market value of our loans
4. 04We have a concentration of credit exposure to borrowers in certain industries, and we also target small to medium-sized businesses and make other loans that may carry increased levels of credit risk
5. 05We could suffer losses from a decline in the credit quality of the assets that we hold
6. 06We may not be able to adequately measure and limit the credit risks associated with our loan portfolio, which could adversely affect our profitability
7. 07CRE lending may expose us to increased lending risks
8. 08We are subject to environmental risks associated with owning real estate or collateral
9. 09Our allowance for estimated loan losses may not be adequate to cover actual loan losses, which may require us to take a charge to earnings and adversely impact our financial condition and results of operations
10. 10We depend on the accuracy and completeness of information about customers and counterparties
11. 11Our liquidity needs might adversely affect our financial condition and results of operations
12. 12We may be materially and adversely affected by the creditworthiness and liquidity of other financial institutions
13. 13Our ability to maintain required capital levels and adequate sources of funding and liquidity could be impacted by changes in the capital markets and deteriorating economic and market conditions

Operational and Market Risks

1. 14Our business is concentrated in, and largely dependent upon, the continued growth of, and economic conditions in, the markets where we operate
2. 15Negative developments in the U.S. economy and local economies in our primary markets may adversely impact our results in the future
3. 16There can be no assurance that economic conditions will improve in the near term or that economic conditions will not worsen. Deteriorating economic conditions could adversely affect our business, financial condition, and results of operations
4. 17As a community bank, our ability to maintain our reputation is critical to the success of our business, and our failure to do so may materially adversely affect our performance
5. 18As a community banking institution, we have smaller lending limits and different lending risks than certain of our larger, more diversified competitors
6. 19Our business success and growth depend significantly on key management personnel and our ability to attract and retain key people
7. 20We operate in a highly competitive industry and face significant competition from other financial institutions and financial services providers, which may impair our growth or profits
8. 21Our business may suffer if there are significant declines in the value of real estate
9. 22Our selection of accounting policies and methods may affect our reported financial results
10. 23We currently invest in BOLI and may continue to do so in the future
11. 24The internal controls that we have implemented in order to mitigate risks inherent to the business of banking might fail or be circumvented
12. 25Changes in accounting standards could materially impact our financial statements
13. 26Severe weather, natural disasters, pandemics, epidemics, acts of war or terrorism or other external events could have significant effects on our business
14. 27The implementation of other new lines of business or new products and services may subject us to additional risk

Risks Related to Acquisition and Other Expansionary Activity

1. 28We may grow through mergers or acquisitions and other future expansionary activity, which strategy may not be successful or, if successful, may result in additional risks
2. 29If we cannot maintain our “satisfactory” rating under the CRA, we may face restrictions on our operations and limitations on our ability to pursue certain strategic opportunities
3. 30Acquisitions may disrupt our business and dilute shareholder value, and integrating acquired companies may be more difficult, costly, or time-consuming than we expect
4. 31Our financial performance will be negatively impacted if we are unable to execute our growth strategy
5. 32If the communities in which we operate do not grow, or if the prevailing economic conditions locally or nationally are less favorable than we have historically realized, then our ability to implement our business strategies may be adversely affected and our actual growth and financial performance may materially change

Risks Related to Technology and Cybersecurity

1. 33We are dependent on our information technology and telecommunications systems and third-party servicers, and systems failures or interruptions or breaches of security could have a material adverse effect on our financial condition and results of operations, as well as cause legal or reputational harm
2. 34We continually encounter technological change and may have fewer resources than our competitors to continue to invest in technological improvements
3. 35The adoption of AI tools by us and our third-party vendors and service providers may increase the risk of errors, omissions, unfair treatment or fraudulent behavior by our employees, customers or counterparties, or other third parties

Legal, Regulatory and Compliance Risks

1. 36We are subject to extensive regulation in the conduct of our business, which imposes additional costs on us and adversely affects our profitability
2. 37Federal and state banking agencies periodically conduct examinations of our business, including our compliance with laws and regulations, and our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially and adversely affect us
3. 38Federal, state and local consumer lending laws may restrict our ability to originate certain mortgage loans or increase our risk of liability with respect to such loans and could increase our cost of doing business
4. 39We are subject to federal and state fair lending laws, and our failure to comply with these laws could lead to material penalties
5. 40We have a concentration in CRE lending that could cause our regulators to restrict our ability to grow
6. 41We face the risk of noncompliance with and enforcement actions related to the Bank Secrecy Act and other anti-money laundering laws and regulations
7. 42FDIC deposit insurance assessments may materially increase in the future, which would have an adverse effect on our earnings and results of operations
8. 43The Bank is, and the Company may become, subject to regulatory capital requirements
9. 44The Federal Reserve may require us to commit capital resources to support the Bank
10. 45We may need to raise additional capital in the future, including as a result of heightened regulatory capital requirements, but that capital may not be available, or available on favorable terms, when it is needed or may be dilutive to shareholders
11. 46The Company is an entity separate and distinct from the Bank
12. 47Our ability to pay dividends is subject to restriction by various laws and regulations and other factors
13. 48The costs and effects of litigation, investigations or similar matters, or adverse facts and developments related thereto, could materially affect our business, operating results and financial condition

Risks Related to Our Common Stock

1. 49The Company’s ability to pay cash dividends is limited, and we may be unable to pay future dividends even if we desire to do so
2. 50The Company may also from time to time enter into contractual arrangements, including borrowing relationships with other financial institutions, that could limit the ability of the Company to pay dividends on its common stock in the future
3. 51The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volumes, prices and times desired
4. 52We have shareholders who own significant portions of our common stock and those shareholders’ interests may differ from those of our other shareholders
5. 53Our corporate governance documents and the provisions of Tennessee law to which we are subject could make a takeover more difficult, which could adversely affect the market price of our common stock
6. 54There are substantial regulatory limitations on changes of control of bank holding companies that may discourage investors from purchasing shares of our common stock
7. 55We are an “emerging growth company” and a “smaller reporting company” and the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors
8. 56The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate
9. 57Any deficiencies in our financial reporting or internal controls could materially and adversely affect our business and the market price of our common stock
10. 58If securities analysts do not initiate or continue coverage on us, or if securities analysts publish unfavorable commentary or downgrade our common stock, the price and trading volume of our common stock could decline
11. 59If we fail to maintain compliance with Nasdaq listing rules, our common stock may be delisted from Nasdaq, which would result in a limited trading market for our shares and make obtaining future debt or equity financing more difficult for the Company
12. 60An investment in our common stock is not an insured deposit and is subject to risk of loss
13. 61Our management team has limited experience managing and operating a public company