Capital Bancorp (CBNK) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions
2. 02Adverse developments affecting financial institutions or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity
3. 03Our commercial business and operations are concentrated in the greater Washington, D.C. and Baltimore metropolitan areas and we are sensitive to adverse changes in the local economy
4. 04Our customers and businesses in the Washington, D.C. metropolitan area may be adversely impacted as a result of changes in government spending or government shutdown
5. 05We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses
6. 06Our Allowance for Credit Losses (“ACL”) may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations
7. 07The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans
8. 08Our commercial real estate and real estate construction loan portfolio exposes us to credit risks that may be greater than the risks related to other types of loans
9. 09Because a significant portion of our loan portfolio held for investment is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses
10. 10A portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could expose us to credit losses
11. 11Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset
12. 12A lack of liquidity could impair our ability to fund operations and adversely impact our business, financial condition and results of operations
13. 13We have several large depositor relationships, the loss of which could force us to fund our business through more expensive and less stable sources
14. 14Our mortgage banking division may not meaningfully contribute to noninterest income
15. 15We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions in that market could reduce our operating income
16. 16Our financial condition, earnings and asset quality could be adversely affected if we are required to repurchase loans originated for sale by our mortgage banking division
17. 17Delinquencies and credit losses from our OpenSky™ credit card division could adversely affect our business, financial condition and results of operations
18. 18We do not know if we will be able to retain existing customers or attract new customers, or that we will be able to increase account balances for new or existing customers
19. 19Our participation in government guaranteed lending activities subjects us to additional risks
20. 20Any modification or reduction in the level of government support for government guaranteed loan programs could result in a significant impact to our results of operations
21. 21However, the availability and terms of these tax credits, and the continuation of other federal support programs, are subject to the actions of the U.S. federal government, which may evolve under the current administration
22. 22We are subject to interest rate risk as fluctuations in interest rates may adversely affect our earnings
23. 23We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate
24. 24We face strong competition from financial services companies and other companies that offer banking services
25. 25Our computer systems and network infrastructure could be vulnerable to hardware and cybersecurity issues. Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations
26. 26We face security risks, including denial of service attacks, hacking, malware intrusion and data corruption attempts, and identity theft that could result in the disclosure of confidential information, materially and adversely affect our business or reputation, and create significant legal and financial exposure

Risks Related to Our Operations and the Regulation of Our Industry

1. 27We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us
2. 28Federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could adversely affect us
3. 29Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability
4. 30Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business

Risks Related to Strategic Growth

1. 31A merger or acquisition requires us to make estimates, including the fair value of acquired assets and assumed liabilities
2. 32If our goodwill were determined to be impaired, it could have a negative impact on our profitability
3. 33Acquisitions may disrupt our business

Risks Related to Ownership of Our Common Stock

1. 34The 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 volume, prices and times desired
2. 35The market price of our common stock may be highly volatile, which may make it difficult for you to resell your shares at the volume, prices and times desired. There are many factors that may affect the market price and trading volume of our common stock, most of which are outside of our control
3. 36The market price of our common stock could decline significantly and you may experience future dilution due to actual or anticipated issuances or sales of our common stock in the future
4. 37Our management and board of directors have significant control over our business
5. 38Our common stock is subordinate to our existing and future indebtedness and preferred stock
6. 39Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies