Capital City Bank Group (CCBG) risk factors, FY2024 10-K

Market Risks

1. 01We may incur losses if we are unable to successfully manage interest rate risk
2. 02Inflationary pressures and rising prices may affect our results of operations and financial condition
3. 03Our profitability depends significantly on economic conditions in the States of Florida and Georgia
4. 04Individual, economic, political, industry
5. 05The fair value of our investments could decline which would cause a reduction in shareowners’ equity
6. 06Changes in interest rates can impact our mortgage-related revenues and net revenues associated with our mortgage activities
7. 07While our common stock is listed and traded on the Nasdaq Global Select Market, there has historically been limited trading activity in our common stock
8. 08Securities analysts may not initiate coverage or continue to cover our common stock, and this may have a negative impact on its market price

Credit Risks

1. 09Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan losses and nonperforming assets
2. 10Commercial Real Estate Loans
3. 11A borrower’s ability to make a balloon payment typically will depend on the borrower’s ability to either refinance the loan or timely sell the underlying property
4. 12Commercial Loans
5. 13Construction Loans
6. 14Vacant Land Loans
7. 15At December 31, 2024, vacant land loans comprised approximately 3.7% of our total loan portfolio
8. 16Consumer Loans
9. 17Loan defaults would likely increase our loan losses and nonperforming assets and could adversely affect our allowance for credit losses and our results of operations
10. 18Our interest-earning assets are heavily concentrated in mortgage loans secured by real estate, particularly real estate located in Florida and Georgia
11. 19Our concentration in loans secured by real estate may increase our credit losses, which would negatively affect our financial results
12. 20Due to the exposure in these concentrations, disruptions in markets, economic conditions, changes in laws or regulations or other events could cause a significant impact on the ability of borrowers to repay and may financial condition and results of operations
13. 21An inadequate allowance for credit losses would reduce our earnings
14. 22The allowance is based on management’s reasonable estimate and may not prove sufficient to cover future loan losses
15. 23Our regulators may require us to recognize additional losses based on their judgments about information available to them at the time of their examination
16. 24Failures in the analytical and forecasting models relied upon for our accounting estimates and risk management processes could have a material adverse effect on our business, financial condition, and results of operations
17. 25These models reflect assumptions accurate, particularly times stress unforeseen circumstances
18. 26Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate

Liquidity and Capital Risks

1. 27Liquidity risk could impair our ability to fund operations and jeopardize our financial condition
2. 28In particular, a majority of our liabilities during 2024 were checking accounts and other liquid deposits, which are generally payable on demand or upon short notice
3. 29Periods of high interest rates could promote increased competition for deposits, including from new financial technology competitors, or provide customers with alternative investment options
4. 30If we are unable to maintain adequate liquidity, it could materially and adversely affect our business, results of operations or financial condition
5. 31Unrealized losses in our securities portfolio could materially and adversely affect our liquidity
6. 32Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity
7. 33In 2024, our Board of Directors declared four quarterly cash dividends

Regulatory and Compliance Risks

1. 34Regulators have continued to focus on compliance with AMLA and BSA obligations and the rules enforced by OFAC
2. 35Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations
3. 36U.S. federal banking agencies may require us to increase our regulatory capital, long-term debt or liquidity requirements, which could result in the need to issue additional qualifying securities or to take other actions, such as to sell company assets
4. 37It is possible that regulators may increase regulatory capital requirements, change how regulatory capital is calculated or increase liquidity requirements. Requirements to maintain higher levels of capital may lower our return on equity
5. 38Changes in accounting standards or assumptions in applying accounting policies could adversely affect us
6. 39Revenues derived from transaction fees associated with overdraft protection programs offered to consumers represent a significant portion of our noninterest income. In 2024, the Company collected approximately $9.5 million in net consumer overdraft transaction fees

Operational Risks

1. 40We regularly assess and monitor operational risk in our businesses. Despite our efforts to assess and monitor operational risk, our risk management framework may not be effective in all cases
2. 41While we have in place many controls and business continuity plans designed to address these factors and others, these plans may not operate successfully to mitigate these risks effectively
3. 42Insurance coverage may not be available for losses relating to such event, or where available, such losses may exceed insurance limits
4. 43Cybersecurity incidents, security breaches failures information systems significantly disrupt business, result unintended disclosure misuse confidential proprietary information, damage reputation, increase our costs, and cause losses
5. 44Increased fraudulent activity may cause losses to us or our clients, damage to our brand, and increases in our costs, in turn, materially and adversely affecting our business, financial condition, Additionally, fraud losses have risen in recent years due in large part to growing and evolving schemes
6. 45We may not be able to attract and retain skilled people, which may have a negative impact on our business and operations
7. 46Issues we encounter with respect to external vendors upon which we rely could have a material adverse effect on our business and, in turn, our financial condition and results of operations
8. 47In addition, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements. Although we have selected these external vendors carefully, we do not control their actions
9. 48Severe weather, natural disasters, global climate change, widespread health emergencies (including pandemics), acts of terrorism and global conflicts may have a negative impact on our business and operations
10. 49Litigation may adversely affect our results
11. 50Section 404 of the Sarbanes

Strategic Risks

1. 51Our future success is dependent on our ability to compete effectively in the highly competitive banking and financial services industry
2. 52Technology and other changes have lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks
3. 53We rely on a diversified mix of financial products and services through multiple distribution channels
4. 54Smith, Jr. is the Chairman, President, and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial over all matters on a day-to-day basis, including the nomination and election of directors
5. 55CCBG is registered with the Federal Reserve as a financial holding company under the Bank Holding Company Act, or BHC Act
6. 56Potential acquisitions by us, or our inability to complete acquisitions, may financial condition, and results of operations

Reputational Risks

1. 57Reputation risk, or the risk to our earnings, liquidity, and capital from negative public opinion, is inherent in our business
2. 58Harm to our reputation may adversely and materially affect our competitive position, business prospects, and financial results