CAPITAL CITY BANK GROUP INC
For the period ended Dec 31, 2024. Filed Mar 11, 2025.
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FY2024 · Filed Mar 11, 2025
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Item 1A. Risk Factors
An investment in our common stock contains a high degree
of risk. You should
consider carefully the following risk factors before
deciding whether to invest in our common stock. Our business, including
our operating results and financial condition, could be
harmed by any of these risks. Additional risks and uncertainties not currently
known to us or that we currently deem to be
immaterial also may materially and adversely affect our business. The trading
price of our common stock could decline due to
any of these risks, and you may lose all or part of your investment. In assessing these risks,
you should also refer to the other
information contained in our filings with the SEC, including our financial
statements and related notes.
Market Risks
We may incur losses if we are
unable to successfully manage interest rate risk.
Our profitability depends to a large extent on Capital City Bank’s
net interest income, which is the difference between income on
interest-earning assets, such as loans and investment securities, and
expense on interest-bearing liabilities such as deposits and
borrowings. We
are unable to predict changes in market interest rates, which are affected
by many factors beyond our control,
including inflation, recession, unemployment, federal funds target
rate, money supply, domestic and
international events and
changes in the United States and other financial markets. Our net interest income
may be reduced if: (i) more interest-earning
assets than interest-bearing liabilities reprice or mature during a time when
interest rates are declining or (ii) more interest-bearing
liabilities than interest-earning assets reprice or mature during a time when
interest rates are rising.
Changes in the difference between short-term
and long-term interest rates may also harm our business. We
generally use short-
term deposits to fund longer-term assets. When interest rates change,
assets and liabilities with shorter terms reprice more quickly
than those with longer terms, which could have a material adverse effect
on our net interest margin. During 2022 and 2023, the
Federal Reserve raised the federal funds rate 11
times for a cumulative increase of 5.25%. In 2024, the Federal Reserve began
lowering the federal funds rate and lowered it three times during the year for a cumulative
decrease of 1.00%. In December 2024,
the Federal Reserve released its economic projections suggesting that it will reduce
the federal funds rate twice in 2025 for a
cumulative decrease of 0.50% for the year, but
there is no guarantee that the Federal Reserve will further reduce the federal funds
rate in the near-term and could maintain the rate at the current level or
even increase it.
Although we continuously monitor interest rates and have a number
of tools to manage our interest rate risk exposure, changes in
market assumptions regarding future interest rates could significantly impact our
interest rate risk strategy, our financial
position
and results of operations. If we do not properly monitor our interest rate risk management
strategies, these activities may not
effectively mitigate our interest rate sensitivity or have the desired
impact on our results of operations or financial condition.
Interest rates and economic conditions affect consumer
demand for housing and can create volatility in the mortgage industry.
These risks can have a material impact on the volume of mortgage originations
and refinancings, adversely affecting mortgage
banking revenues and the profitability of our mortgage banking business.
See Item 7.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations under the section captioned
“Net Interest Income” and “Market Risk and Interest Rate Sensitivity” elsewhere
in this report for further discussion related to
interest rate sensitivity and our management of interest rate risk.
Inflationary pressures and rising prices may
affect our results of operations and financial condition.
Inflation rose sharply at the end of 2021 and continued rising in 2022 at levels not
seen for over 40 years. Inflationary pressures
eased but remained elevated throughout 2023 and 2024. Small to medium
-sized businesses may be impacted more during periods
of high inflation as they are not able to leverage economies of scale to mitigate cost pressures compared
to larger businesses.
Consequently, the
ability of our business customers to repay their loans may deteriorate, and in some cases this deterioration
may
occur quickly,
which would adversely impact our results of operations and financial condition. Furthermore,
a prolonged period
of inflation could cause wages and other costs to further increase which could
adversely affect our results of operations and
financial condition. Sustained higher interest rates by the Federal Reserve may
be needed to tame persistent inflationary price
pressures, which could push down asset prices and weaken economic
activity. A deterioration in economic
conditions in the
United States and our markets could result in an increase in loan delinquencies
and non-performing assets, decreases in loan
collateral values and a decrease in demand for our products and services, all of
which, in turn, would adversely affect our
business, financial condition and results of operations.
Our profitability depends significantly on economic
conditions in the States of Florida and Georgia.
Our profitability and the success of our business depends substantially on the
general economic conditions of the States of Florida
and, to a lesser extent, Georgia, as well as the specific local markets in
which we operate. Unlike larger national or other regional
banks that are more geographically diversified, we provide banking
and financial services primarily to customers across northern
Florida and Georgia. The local economic conditions in
these areas have a significant impact on the demand for our products and
services as well as the ability of our customers to repay loans, the value of the
collateral securing loans and the stability of our
deposit funding sources. As a result, a significant decline in general economic
conditions in Florida or Georgia, whether caused
by recession, inflation, unemployment, in-flows and out-flows of residents,
shifts in political landscape, changes in securities
markets, acts of terrorism, pandemics, natural disasters, climate change,
outbreak of hostilities or other occurrences or other
factors could have a material adverse effect on our business, financial
condition and results of operations.
Changes in customer behavior may have a negative impact on our business, financial
condition, and results of operations.
Individual,
economic,
political, industry
-specific
conditions and
other factors
outside of
our
control,
such as
fuel prices,
energy
costs,
real
estate
values,
inflation,
taxes
or
other
factors
that
affect
customer
income
levels,
could
alter
anticipated
customer
behavior,
borrowing,
repayment,
investment
and
deposit
practices.
Such
a
change
in
these
practices
could
materially
adversely affect
our ability
to anticipate
business needs
and meet
regulatory requirements.
Further,
difficult economic
conditions
may negatively
affect consumer
confidence levels.
A decrease in
consumer confidence
levels would
likely aggravate
the adverse
effects of these difficult market conditions
on us and our customers.
The fair value of our investments could decline which would cause a reduction
in shareowners’ equity.
A portion of our investment securities portfolio (41.5%) at December 31,
2024 has been designated as available-for-sale pursuant
to U.S. generally accepted accounting principles relating to accounting for
investments. Such principles require that unrealized
gains and losses in the estimated value of the available-for-sale
portfolio be “marked to market” and reflected as a separate item in
shareowners’ equity (net of tax) as accumulated other comprehensive
income/losses. Shareowners’ equity will continue to reflect
the unrealized gains and losses (net of tax) of these investments. The fair value
of our investment portfolio may decline, causing a
corresponding decline in shareowners’ equity.
Management believes that several factors will affect the
fair values of our investment portfolio. These include, but are not limited
to, changes in interest rates or expectations of changes in interest rates, the degree
of volatility in the securities markets, inflation
rates or expectations of inflation and the slope of the interest rate yield curve
(the yield curve refers to the differences between
short-term and long-term interest rates; a positively sloped yield curve means short
-term rates are lower than long-term rates).
These and other factors may impact specific categories of the portfolio differently,
and we cannot predict the effect these factors
may have on any specific category.
The impact of interest rates on our mortgage banking business can
have a significant impact on revenues.
Changes in interest rates can impact our mortgage-related revenues and net revenues
associated with our mortgage activities.
A
decline in mortgage rates generally increases the demand for mortgage loans
as borrowers refinance, but also generally leads to
accelerated payoffs. Conversely,
in a constant or increasing rate environment, we would expect fewer loans to be refinanced
and a
decline in payoffs. Although we use models to assess the impact
of interest rates on mortgage-related revenues, the estimates of
revenues produced by these models are dependent on estimates and assumptions
of future loan demand, prepayment speeds and
other factors which may differ from actual subsequent
experience.
Shares of our common stock are not an insured
deposit and may lose value.
The shares of our common stock are not a bank deposit and will not be insured or guaranteed
by the FDIC or any other
government agency.
Your
investment will be subject to investment risk, and you must be capable of affording the
loss of your
entire investment.
Limited trading activity for shares of our common stock may
contribute to price volatility.
While our common stock is listed and traded on the Nasdaq Global Select Market, there
has historically been limited trading
activity in our common stock.
The average daily trading volume of our common stock over the 12-month
period ending
December 31, 2024 was approximately 31,390 shares. Due to the limited trading
activity of our common stock, relativity small
trades may have a significant impact on the price of our common stock. Similarly,
significant sales of our common stock, or the
expectation of these sales, could cause our stock prices to fall.
Securities analysts may not initiate coverage or continue to cover our common
stock, and this may have a negative impact
on its market price.
The trading market for our common stock will depend in part on the research
and reports that securities analysts publish about us
and our business. We do
not have any control over securities analysts, and they may not initiate coverage
or continue to cover our
common stock. If any securities analysts covering our common stock publishes
an unfavorable report, our stock price would
likely decline. If one or more of analysts covering our common stock ceases to cover
our Company or fails to publish regular
reports on us, the lack of research coverage and lose of visibility in the financial
markets may cause our stock price or trading
volume to decline.
Credit Risks
Our loan portfolio includes loans with a higher risk of loss which could lead to higher loan losses and nonperforming
assets.
We originate
commercial real estate loans, commercial loans, construction loans, vacant land
loans, consumer loans, and
residential mortgage loans primarily within our market area. Commercial
real estate, commercial, construction, vacant land, and
consumer loans may expose a lender to greater credit risk than traditional
fixed-rate fully amortizing loans secured by residential
real estate because the collateral securing these loans may not be sold as easily as residential
real estate. In addition, these loan
types tend to involve larger loan balances to a single borrower or
groups of related borrowers and are more susceptible to a risk of
loss during a downturn in the business cycle. These loans also have historically
had greater credit risk than other loans for the
following reasons:
Commercial Real Estate Loans
. Repayment is dependent on income being generated in amounts sufficient
to cover
operating expenses and debt service. These loans also involve greater risk because
they are generally not fully amortizing
over the loan period, but rather have a balloon payment due at maturity.
A 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.
Further,
these loans generally are more affected by adverse conditions in the
economy. Because payments
on loans secured by
commercial real estate often depend upon the successful operation and
management of the properties and the businesses
which operate from within them, repayment of such loans may be affected
by factors outside the borrower’s control,
such as adverse conditions in the real estate market or the economy or changes
in government regulations.
At December
31, 2024, commercial mortgage loans comprised approximately 29.4%
of our total loan portfolio.
Commercial Loans
. Repayment is generally dependent upon the successful operation
of the borrower’s business. In
addition, the collateral securing the loans may depreciate over time, be
difficult to appraise, be illiquid, or fluctuate in
value based on the success of the business. At December 31, 2024, commercial
loans comprised approximately 7.1% of
our total loan portfolio.
Construction Loans
. The risk of loss is largely dependent on our initial estimate of whether
the property’s value at
completion equals or exceeds the cost of property construction and the availability
of take-out financing. During the
construction phase, a number of factors can result in delays or cost overruns. If
our estimate is inaccurate or if actual
construction costs exceed estimates, the value of the property securing our
loan may be insufficient to ensure full
repayment when completed through a permanent loan, sale of the property,
or by seizure of collateral.
2024, construction loans comprised approximately 8.3% of our total loan portfolio.
Vacant
Land Loans
. Because vacant or unimproved land is generally held by the borrower
for investment purposes or
future use, payments on loans secured by vacant or unimproved land will typically
rank lower in priority to the borrower
than a loan the borrower may have on their primary residence or business. These loans
are susceptible to adverse
conditions in the real estate market and local economy.
At December 31, 2024, vacant land loans comprised
approximately 3.7% of our total loan portfolio.
HELOCs
. Our open-ended home equity loans have an interest-only draw period
followed by a five-year repayment
period of 0.75% of the principal balance monthly and a balloon payment
at maturity. Upon the commencement
of the
repayment period, the monthly payment can increase significantly,
thus, there is a heightened risk that the borrower will
be unable to pay the increased payment. Further,
these loans also involve greater risk because they are generally not fully
amortizing over the loan period, but rather have a balloon payment due
at maturity.
A borrower’s ability to make a
balloon payment may depend on the borrower’s ability
to either refinance the loan or timely sell the underlying property.
At December 31, 2024, HELOCs comprised approximately 8.3% of
our total loan portfolio.
Consumer Loans
. Consumer loans (such as automobile loans and personal lines of
credit) are collateralized, if at all,
with assets that may not provide an adequate source of payment of the loan due
to depreciation, damage, or loss. At
December 31, 2024, consumer loans comprised approximately 7.6%
of our total loan portfolio, with indirect auto loans
making up a majority of this portfolio at approximately 87.9% of the total balance.
The increased risks associated with these types of loans result in a correspondingly
higher probability of default on such loans (as
compared to fixed-rate fully amortizing single-family real estate loans).
Loan defaults would likely increase our loan losses and
nonperforming assets and could adversely affect our allowance
for credit losses and our results of operations.
Our loan portfolio is heavily concentrated in mortgage loans secured
by properties in Florida and Georgia which causes
our risk of loss to be higher than if we had a more geographically diversified
portfolio.
Our interest-earning assets are heavily concentrated in mortgage loans secured
by real estate, particularly real estate located in
Florida and Georgia.
At December 31, 2024, approximately 85.3% of our loans included real estate as a primary,
secondary, or
tertiary component of collateral. The real estate collateral in each case provides
an alternate source of repayment in the event of
default by the borrower; however, the value
of the collateral may decline during the time the credit is extended. If we are required
to liquidate the collateral securing a loan during a period of reduced real estate values
to satisfy the debt, our earnings and capital
could be adversely affected.
Additionally, at December
31, 2024, a significant number of our loans secured by real estate are secured by commercial and
residential properties located in Florida and Georgia. The
concentration of our loans in these areas subjects us to risk that a
downturn in the economy or recession in these areas could result in a decrease in
loan originations and increases in delinquencies
and foreclosures, which would more greatly affect us than
if our lending were more geographically diversified. In addition, since
a large portion of our portfolio is secured by properties located
in Florida and Georgia, the occurrence of a natural disaster,
such
as a hurricane, or a man-made disaster could result in a decline in loan originations,
a decline in the value or destruction of
mortgaged properties and an increase in the risk of delinquencies, foreclosures
or loss on loans originated by us. We
may suffer
further losses due to the decline in the value of the properties underlying our
mortgage loans, which would have an adverse
impact on our results of operations and financial condition.
Our concentration in loans secured by real estate
may increase our credit losses, which would negatively
affect our
financial results.
Due to the lack of diversified industry within some of the markets served by CCB and the relatively
close proximity of our
geographic markets, we have both geographic concentrations as well as concentrations
in the types of loans funded. Specifically,
due to the nature of our markets, a significant portion of the portfolio has historically
been secured with real estate. At December
31, 2024, approximately 29.4% and 47.6% of our $2.652 billion loan
portfolio was secured by commercial real estate and
residential real estate, respectively.
As of this same date, approximately 8.3% was secured by property under construction.
Due 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.
In weak economies, or in areas where real estate market conditions are distressed,
we may experience a higher than normal level
of nonperforming real estate loans. The collateral value of the portfolio and the revenue stream
from those loans could come
under stress, and additional provisions for the allowance for credit losses could
be necessitated. In the event we are required to
foreclose on a property securing one of our mortgage loans or otherwise pursue
our remedies in order to protect our investment,
we may be unable to recover funds in an amount equal to our projected return
on our investment or in an amount sufficient to
prevent a loss to us due to prevailing economic conditions, real estate values and
other factors associated with the ownership of
real property. As a result,
the market value of the real estate or other collateral underlying our loans may not, at any given
time, be
sufficient to satisfy the outstanding principal amount of the
loans, and consequently, we would
sustain loan losses.
An inadequate allowance for credit losses would reduce our
earnings.
We are exposed
to the risk that our clients may be unable to repay their loans according to their terms and
that any collateral
securing the payment of their loans may not be sufficient
to assure full repayment. This could result in credit losses that are
inherent in the lending business. We
evaluate the collectability of our loan portfolio and provide an allowance
for credit losses
that we believe is adequate based upon such factors as:
the risk characteristics of various classifications of loans;
previous loan loss experience;
specific loans that have loss potential;
delinquency trends;
estimated fair market value of the collateral;
current and future economic conditions; and
geographic and industry loan concentrations.
At December 31, 2024, our allowance for credit losses for loans held for investment
was $29.3 million, which represented
approximately 1.10% of our total loans held for investment.
We had $6.3
million in nonaccruing loans at December 31, 2024.
The allowance is based on management’s
reasonable estimate and may not prove sufficient to cover future loan
losses.
Although
management uses the best information available to make determinations
with respect to the allowance for credit losses, future
adjustments may be necessary if economic conditions differ substantially
from the assumptions used or adverse developments
arise with respect to our nonperforming or performing loans.
In addition, regulatory agencies, as an integral part of their
examination process, periodically review our estimated losses on loans.
Our regulators may require us to recognize additional
losses based on their judgments about information available to them at the time of
their examination.
Accordingly, the allowance
for credit losses may not be adequate to cover all future loan losses and significant increases
to the allowance may be required in
the future if, for example, economic conditions worsen.
A material increase in our allowance for credit losses would adversely
impact our net income and capital in future periods, while having the effect
of overstating our current period earnings.
Failures 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.
The processes
we use
to estimate
our expected
credit losses and
to measure
the fair value
of financial
instruments, as
well as
the
processes used
to estimate
the effects
of changing
interest rates
and other
market measures
on our
financial condition
and results
of
operations,
depends
upon
the
use
of
analytical
and
forecasting
models.
These
models
reflect
that
may
not
be
accurate,
particularly
in
times
of
market
stress
or
other
unforeseen
circumstances.
Even
if
these
are
adequate,
the
models may
prove to
be inadequate
or inaccurate
because of
other flaws
in their
design or
their implementation,
including flaws
caused by failures in controls, data management, human error
or from the reliance on technology.
If the models we use for interest
rate
risk
and
asset-liability
are
we
may
incur
increased
or
unexpected
losses
upon
changes
in
market
interest
rates
or
other
market
measures.
If
the
models
we
use
for
estimating
our
expected
credit
losses
are
the
allowance for
credit losses
may not
be sufficient
to support
future charge-offs.
If the
models we
use to
measure the
fair value
of
instruments
are
the
fair
value
of
such
instruments
may
fluctuate
unexpectedly
or
may
not
accurately reflect
what we
could realize
upon sale
or settlement
of such
financial instruments.
Any such
failure in
our analytical
or forecasting models could have a material adverse effect
We may incur significant costs associated
with the ownership of real property
as a result of foreclosures, which could
reduce our net income.
Since 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.
The amount that we, as a mortgagee, may realize after a foreclosure is dependent
upon factors outside of our control, including,
but not limited to:
general or local economic conditions;
environmental cleanup liability;
neighborhood values;
interest rates;
real estate tax rates;
operating expenses of the mortgaged properties;
supply of and demand for rental units or properties;
ability to obtain and maintain adequate occupancy of the properties;
zoning laws;
governmental rules, regulations and fiscal policies; and
acts of God.
Certain expenditures associated with the ownership of real estate, including
real estate taxes, insurance and maintenance costs,
may adversely affect the income from the real estate. Furthermore,
we may need to advance funds to continue to operate or to
protect these assets. As a result, the cost of operating real property
assets may exceed the rental income earned from such
properties or we may be required to dispose of the real property at a loss.
Reliance on inaccurate or misleading financial statements, credit
reports, or other financial information could have a
material adverse impact on our business, financial condition,
In deciding whether to extend credit or enter into other transactions, we
rely on information furnished by or on behalf of
customers and counterparties, including financial statements, credit
reports, and other financial information. We
also rely on
representations of those customers, counterparties, or other third parties, such
as independent auditors, as to the accuracy and
completeness of that information. Reliance on inaccurate or misleading
financial statements, credit reports, or other financial
information could have a material adverse impact on our business, financial condition,
Liquidity and Capital Risks
Liquidity risk could impair our ability to fund operations and jeopardize our financial
condition.
Effective liquidity management is essential for the operation of
our business. We require
sufficient liquidity to meet client loan
requests, client deposit maturities and withdrawals, payments on our debt obligations
as they come due and other cash
commitments under both normal operating conditions and other unpredictable
circumstances causing industry or general financial
market stress. If we are unable to raise funds through deposits, borrowings,
earnings and other sources, it could have a substantial
negative effect on our liquidity.
In 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.
By comparison, a substantial majority of our assets were
loans, which cannot generally be called or sold in the same time frame. Although
we have historically been able to replace
maturing deposits and advances as necessary,
we might not be able to replace such funds in the future, especially if a large
number of our depositors seek to withdraw their accounts at the same time, regardless
of the reason. Our access to funding
sources in amounts adequate to finance our activities on terms that are acceptable
to us could be impaired by factors that affect us
specifically or the financial services industry or economy in general.
Factors that could negatively impact our access to liquidity
sources include a decrease in the level of our business activity as a result of a downturn
in the markets in which our loans are
concentrated, adverse regulatory action against us, or our inability to attract and
retain deposits. Our access to deposits may be
negatively impacted by,
among other factors, periods of low interest rates or high interest rates.
Periods of high interest rates
could promote increased competition for deposits, including from new
financial technology competitors, or provide customers
with alternative investment options.
Our ability to borrow could also be impaired by factors that are not specific to us, such
as a
disruption in the financial markets or negative views and expectations about
the prospects for the financial services industry.
If we
are unable to maintain adequate liquidity,
it could materially and adversely affect our business, results of operations
or financial
condition.
A
decrease
in
our
public
fund
deposit
balances
as
a
result
of
increased
competition
in
the
current
higher
interest-rate environment and seasonal nature
of these deposits could materially and adversely affect our liquidity.
The Company has many long-standing relationships with municipal
entities throughout its markets and the deposits held by these
customers have provided a relatively attractive and stable (although seasonal)
funding source for the Company over an extended
period of time. Public fund deposits from local government entities such as universities,
counties, school districts, and other
municipalities generally have higher average balances and historically been
more volatile than nonpublic deposits because they
are heavily impacted by the seasonality of tax collection, changes in competitive
and market forces, and fiscal spending patterns,
as well as the longer-term financial position of local government entities, which
can change from year to year. Such public
fund
deposits are often subject to competitive bidding and in many cases must be secured
by pledging a portion of our investment
The Company’s inability to
retain public fund deposit balances due to increased competition in the current higher
interest-rate environment and seasonal nature of these deposits could materially
and adversely affect our liquidity or result in the
use of higher-cost funding sources, which, in turn, could
materially and adversely affect our business, results of operations or
financial condition.
Unrealized losses in our securities portfolio could materially
and adversely affect our liquidity.
We have experienced
significant unrealized losses on our available-for-sale securities portfolio
as a result of increases in market
interest rates. Unrealized losses related to available-for-sale
securities are reflected in accumulated other comprehensive income
in our consolidated statements of financial condition and reduce the level of our
book capital and tangible common equity.
However, such unrealized losses do not
affect our regulatory capital ratios. We
actively monitor our available-for-sale securities
portfolio and we do not currently anticipate the need to realize material losses from
the sale of securities for liquidity purposes.
Furthermore, 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.
Nonetheless, our access to liquidity sources could be affected by unrealized
losses if securities
must be sold at a loss, tangible capital ratios decline from an increase in unrealized
losses or realized credit losses, the Federal
Home Loan Bank of Atlanta (“FHLB”) or other funding sources reduce capacity,
or bank regulators impose restrictions on us that
impact the level of interest rates we may pay on deposits or our ability to access federal
funds lines or brokered deposits.
Additionally, significant
unrealized losses could negatively impact market and customer perceptions
of the Company, which
could lead to a loss of depositor confidence and an increase in deposit withdrawals,
particularly among those with uninsured
deposits.
We may need to raise additional capital
in the future, and such capital may not be available on acceptable terms or at all.
We
may
need
to
raise
additional
capital
in
the
future
to
provide
us
with
sufficient
capital
resources
and
liquidity
to
meet
our
commitments and business
needs, particularly if our
asset quality or earnings
were to deteriorate significantly.
Our ability to raise
additional capital,
if needed, will
depend on, among
other things, conditions
in the capital
markets at that
time, which are
outside
of our
control, and
our financial
condition. Economic
conditions and
the loss of
confidence in
financial institutions
may increase
our
cost
of
funding
and
limit
access
to
certain
customary
sources
of
capital,
inter-bank
borrowings,
repurchase
agreements and borrowings from the discount window of the Federal Reserve.
Further, as a result of our failure to timely file our
Quarterly Report on Form 10-Q for the three-month period ended March 31,
2024, we are currently ineligible to file new short form registration statements
on Form S-3 and, absent a waiver of the Form S-3
eligibility requirements, we are not currently permitted to use our existing registration
statement on Form S-3D. If we seek to
access the capital markets through a registered offering during the
period of time that we are unable to use Form S-3, we may be
required to publicly disclose the proposed offering and the material
terms thereof before the offering commences and we will be
required to use a registration statement on Form S-1 to register securities with
the SEC, which would hinder our ability to act
quickly in raising capital to take advantage of market conditions in our capital
raising activities and would increase our cost of
raising capital.
As a result, we may be unable to raise capital on terms favorable to us, in a timely manner
or at all, which could materially and
adversely affect our liquidity,
business, results of operations, or financial condition. Moreover,
if we need to raise capital in the
future, we may have to do so when many other financial institutions are also seeking
to raise capital and would have to compete
with those institutions for investors.
We may be unable to pay dividends in the future.
In 2024, our Board of Directors declared four quarterly cash dividends.
Declarations of any future dividends will be contingent on
our ability to earn sufficient profits and to remain well capitalized,
including our ability to hold and generate sufficient capital
to
comply with the Common Equity Tier 1 (“CET1”)
Capital conservation buffer requirement. In addition,
due to our contractual
obligations with the holders of our trust preferred securities, if we defer the payment of accrued
interest owed to the holders of our
trust preferred securities, we may not make dividend payments to our
Further, under applicable statutes and regulations,
CCB’s board of directors,
after charging-off bad debts, depreciation and other
worthless assets, if any,
and making provisions for reasonably anticipated future losses on loans and other assets, may
quarterly,
semi-annually, or
annually declare and pay dividends to CCBG of up to the aggregate net income
of that period combined with
the CCB’s retained net income for
the preceding two years and, with the approval of the Florida OFR, declare a dividend from
retained net income which accrued prior to the preceding two years. The prior
approval of the Federal Reserve is required if the
total of all dividends declared by a state-chartered member bank in any calendar
year would exceed the sum of the bank’s net
income for that year and its retained net income for the preceding two calendar
years, less any required transfers to surplus or to
fund the retirement of preferred stock. Additional state laws generally
applicable to Florida corporations and guidelines of the
Federal Reserve may also limit our ability to declare and pay dividends. Thus,
our ability to fund future dividends may be
restricted by state and federal laws and regulations.
Regulatory and Compliance Risks
extensive regulation, which could restrict our activities
and impose financial requirements or limitations
on the conduct of our business.
extensive regulation, supervision and examination by our regulators, including
the Florida OFR, the Federal
Reserve, and the FDIC. Our compliance with these industry regulations
is costly and restricts certain of our activities, including
payment of dividends, mergers and acquisitions, investments,
lending and interest rates charged on loans, interest rates paid
on
deposits, the fees we can charge for certain products or transactions, access to
capital and brokered deposits, and locations of
banking offices. If we are unable to meet these regulatory requirements,
our financial condition, liquidity and results of operations
would be materially and adversely affected.
Our activities are also regulated under consumer protection laws applicable to
our lending, deposit, and other activities. Many of
these regulations are intended primarily for the protection of our
depositors, the DIF,
and the banking system as a whole, and not
for the benefit of our shareowners. In addition to the regulations of the bank regulatory
agencies, as a member of the FHLB of
Atlanta, we must also comply with applicable regulations of the Federal
Housing Finance Agency and the Federal Home Loan
Bank.
Regulators have continued to focus on compliance with AMLA and BSA obligations
and the rules enforced by OFAC.
If our
policies, procedures and systems are deemed deficient or the policies, procedures
are deficient, we would be subject to liability,
including fines and regulatory actions such as restrictions on our
ability to pay dividends and the necessity to obtain regulatory
approvals to proceed with certain aspects of our business plan, including any acquisition
plans.
Our failure to comply with these laws and regulations could subject us to the loss of
FDIC insurance, reputational damage, the
revocation of our banking charter,
enforcement actions, sanctions, or other legal actions by regulatory agencies, restrictions
on our
business activities, fines, and other penalties, any of which could adversely
affect our results of operations, capital base, and the
price of our securities. Changes to any new laws, rules, regulations, policies,
and supervisory guidance (including changes in
interpretation and implementation) have and could make compliance
more difficult or expensive and could otherwise adversely
affect our business and financial condition.
Government authorities, including the bank regulatory agencies, are pursuing
aggressive enforcement actions with respect to
compliance and other legal matters involving financial activities, which heightens
the risks associated with actual and perceived
compliance failures. Directives issued to enforce such actions may be
confidential and thus, in some instances, we are not
permitted to publicly disclose these actions. Litigation challenging actions or
regulations by federal or state authorities could,
depending on the outcome, significantly affect the regulatory
and supervisory framework affecting our operations.
Any of the
foregoing could have a material adverse effect on our
business, financial condition, and results of operations.
In addition, we face increased regulatory scrutiny,
in the course of routine examinations and otherwise, and new regulations
in
response to negative developments in the banking industry,
which may increase our cost of doing business and reduce our
profitability. Among
other things, there may be increased focus by both regulators and investors on
deposit composition, the level
of uninsured deposits, brokered deposits, unrealized losses in securities portfolios,
liquidity, commercial real estate loan
composition and concentrations, and capital as well as general oversight
and control of the foregoing. We
could face increased
scrutiny or be viewed as higher risk by regulators and the investor community,
which could have a material adverse effect on our
business, financial condition, and results of operations.
U.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.
U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum
requirements to
qualify as a well-capitalized institution. If CCB fails to maintain its status as well capitalized
under the applicable regulatory
capital rules, the Federal Reserve will require us to agree to bring the bank back to
well-capitalized status. For the duration of
such an agreement, the Federal Reserve may impose restrictions on our
activities. If we were to fail to enter into or comply with
such an agreement or fail to comply with the terms of such agreement, the Federal
Reserve may impose more severe restrictions
on our activities, including requiring us to cease and desist activities permitted
under the Bank Holding Company Act of 1956.
Additionally, if our
CET1 to Risk Weighted Assets ratio
does not exceed the minimum required plus the additional CET1
conservation buffer,
we may be restricted in our ability to pay dividends or make other distributions of capital to our shareowners.
Capital and liquidity requirements are frequently introduced and amended.
It 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.
Further changes to and compliance with the regulatory capital and liquidity requirements
may impact our operations by requiring
us to liquidate assets, increase borrowings, issue additional equity or other securities,
cease or alter certain operations, sell
company assets or hold highly liquid assets, which may adversely affect
our results of operations. We
may be prohibited from
taking capital actions such as paying or increasing dividends or repurchasing
Changes in accounting standards or assumptions in applying accounting policies
could adversely affect us.
Our accounting policies and methods are fundamental to how we record and report
our financial condition and results of
operations. Some of these policies require use of estimates and assumptions that
may affect the reported value of our assets or
liabilities and results of operations and are critical because they require management
to make difficult, subjective and complex
judgments about matters that are inherently uncertain. If those assumptions, estimates or
judgments were incorrectly made, we
could be required to correct and restate prior-period financial statements. Accounting
standard-setters and those who interpret the
accounting standards, the SEC, banking regulators and our independent registered
public accounting firm may also amend or even
reverse their previous interpretations or positions on how various standards
should be applied. These changes may be difficult to
predict and could impact how we prepare and report our financial statements. In
some cases, we could be required to apply a new
or revised standard retrospectively,
resulting in us revising prior-period financial statements.
government regulation and oversight relating to
data and privacy protection.
Our business requires the collection and retention of large
volumes of customer data, including personally identifiable information
in various information systems that we maintain and in those maintained
by third parties with whom we contract. We
also
maintain important internal company data such as personally identifiable information
about our associates and information
relating to our operations. The integrity and protection of that customer and company
data is important to us.
complex and evolving laws and regulations relating to the privacy of the information
of our customers,
associates and others, and any failure to comply with these laws and regulations,
or any misuse or mismanagement of such
information, could expose us to liability and reputational damage, which could
adversely affect our financial condition and results
of operations. As new privacy-related laws and regulations are implemented,
the time and resources needed for us to comply with
such laws and regulations, as well as our potential liability for non-compliance
and reporting obligations in the case of data
breaches, may significantly increase. It is possible that these laws may be interpreted
and applied by various jurisdictions in a
manner inconsistent with our current or future practices, or that is inconsistent
with one another.
Fee revenues from overdraft protection
programs constitute a significant portion of our noninterest income
and may
continue to be subject to increased supervisory scrutiny.
Revenues 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.
In response to increased congressional and regulatory scrutiny (See
Laws and Regulations”), and in anticipation of enhanced supervision and enforcement
of overdraft protection practices in the
future, certain banking organizations have begun to modify their
overdraft protection programs, including by discontinuing the
imposition of overdraft transaction fees, lowering their overdraft transaction
fees, and amending their payment priority policies
and procedures. These competitive pressures from our peers, as well as any adoption
by our regulators of new rules or supervisory
guidance or more aggressive examination and enforcement policies in respect
of banks’ overdraft protection practices, could
cause us to modify our program and practices in ways that may have a negative impact
on our revenue and earnings, which, in
turn, could have an adverse effect on our financial condition and
Operational Risks
Many types of operational risks can affect our earnings negatively.
We 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.
Factors that can impact operations and expose us to risks varying
in
size, scale and scope include:
failures of technological systems or breaches of security measures, including, but not
limited to, those resulting from
computer viruses or cyber-attacks;
unsuccessful or difficult implementation of computer
systems upgrades;
human errors or omissions, including failures to comply with applicable
laws or corporate policies and procedures;
theft, fraud or misappropriation of assets, whether arising from the intentional
actions of internal personnel or external
third parties;
breakdowns in processes, breakdowns in internal controls or failures of
the systems and facilities that support our
operations;
deficiencies in services or service delivery;
negative developments in relationships with key counterparties, third-party
vendors, or associates in our day-to-day
operations; and
external events that are wholly or partially beyond our control, such as pandemics,
geopolitical events, political unrest,
natural disasters or acts of terrorism.
While 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.
If our controls and business continuity plans do not mitigate the
associated risks successfully,
such factors may have a negative impact on our business, financial condition or results
of
operations. In addition, an important aspect of managing our operational
risk is creating a risk culture in which all associates fully
understand that there is risk in every aspect of our business and the importance of
managing risk as it relates to their job functions.
We continue
to enhance our risk management program to support our risk culture.
Nonetheless, if we fail to provide the
appropriate environment that sensitizes all of our associates to managing
risk, our business could be impacted adversely.
certain operational risks, including, but not limited to
risk arising from failure or circumvention
of our
Our internal controls, including fraud detection and controls, disclosure controls
and procedures, and corporate governance
procedures are based in part on certain assumptions and can provide only reasonable,
not absolute, assurances that the objectives
of the controls and procedures are met. Notwithstanding the proliferation of
technology and technology-based risk and control
systems, we rely on the ability of our associates and systems to process a high number
of transactions, and we are subject to the
risk that our associates may make mistakes or engage in violations of applicable
policies, laws, rules, or procedures that in the
past have not, and in the future may not, always be prevented by our technological
processes or by our controls and other
procedures intended to prevent and detect such errors or violations. Any
failure or circumvention of our controls and procedures,
failure to comply with regulations related to controls and procedures, failure to comply
with our corporate governance procedures,
fraud by associates or persons outside our Company,
the execution of unauthorized transactions by associates, or errors relating to
transaction processing and technology could have a material adverse effect
on our reputation, business, financial condition and
results of operations, including subjecting us to litigation, customer attrition,
regulatory fines, penalties, or other sanctions.
Insurance coverage may not be available for losses relating to such event,
or where available, such losses may exceed insurance
limits.
credit and/or settlement risk arising from
the soundness of other financial institutions and
counterparties which may have a material adverse effect on our business, financial condition,
Financial services institutions are interrelated as a result of trading,
clearing, counterparty, or other
relationships. We
have
exposure to many different industries and counterparties,
and routinely execute transactions with counterparties in the financial
services industry, including
commercial banks, brokers and dealers, investment banks, other institutional clients,
and certain
vendors. Many of these transactions expose us to credit or settlement risk in the
event of a default or other failure to adhere to
contractual obligations by a counterparty or client. In addition, our credit or
settlement risk may be exacerbated when any
collateral held by us cannot be realized upon or is liquidated at prices not sufficient
to recover the full amount of the credit or
derivative exposure due to us. Increased interconnectivity amongst
financial institutions also increases the risk of cyber-attacks
and information system failures for financial institutions. Any such losses could
financial condition, and results of operations.
incidents,
security
breaches
and
failures
of
our
information
systems
could
significantly
disrupt
our
result
in
the
unintended
disclosure
or
misuse
of
confidential
or
proprietary
information,
damage
our
reputation, increase our costs, and cause losses.
In the ordinary course of business, we rely on electronic communications
and information systems to conduct our operations and
to store sensitive data
, including our proprietary business information and that of our clients, and personally
identifiable
information of our clients and associates. The secure processing, maintenance,
and transmission of this information is critical to
our operations.
Our systems, or those of our clients, could be vulnerable to cybersecurity-related incidents, which
include
breaches of information systems, attempts to access information, including
customer and company information, malicious code,
computer viruses and denial of service attacks that could result in unauthorized
access, theft, misuse, loss, release, or destruction
of data (including confidential customer information), account takeovers, unavailability
of service, or other events. These types of
threats may derive from human error, fraud, or
malice on the part of external or internal parties or may result from accidental
technological failure. Further, these types of
threats may be exacerbated by recent developments in artificial intelligence and
its
increased use to produce sophisticated malware, phishing schemes, and
other fraudulent activities. Any failure, interruption, or
breach in security of these systems could result in significant disruption
to our operations.
Financial institutions and companies engaged in data processing have
increasingly reported breaches in the security of their
websites or other systems, some of which have involved sophisticated and
targeted attacks intended to obtain unauthorized access
to confidential information, destroy data, disrupt or degrade service, sabotage
systems, or cause other damage. Our technologies,
systems, networks, and software have been and continue to be subject to cybersecurity
threats and attacks, which range from
uncoordinated individual attempts to sophisticated and targeted
measures directed at us. Our customers, associates, and third
parties that we do business with have been, and will likely continue to be,
targeted in cybersecurity-related incidents by parties
using fraudulent e-mails, artificial intelligence, and other communications
in attempts to misappropriate passwords, bank account
information, or other personal information or to introduce viruses or other
malware programs to our information systems, the
information systems of our third-party service providers and our customers’
personal devices, which are beyond our security
control systems. Though we endeavor to mitigate these threats through product
improvements, use of encryption and
authentication technology and customer and employee education, such cyber-attacks
against us, our third-party service providers
and our customers remain a serious issue and have been successful in the past.
We may be required
to spend significant capital and other resources to protect against the threat of
cybersecurity-related incidents
or to alleviate problems caused by such incidents. Any failures related to
upgrades and maintenance of our technology and
information systems could increase our information and system security
risk. Our increased use of cloud and other technologies,
such as remote work technologies, and the increased connectivity of third parties
and electronic devices to our systems also
increases our risk of being subject to a cyber-related incident. The risk of a cybersecurity
-related incident has increased as the
number, intensity,
and sophistication of attempted attacks and intrusions from around the world have increased.
A cybersecurity-
related incident or other significant disruption of our information systems or
those of our customers or third-party vendors could
(i) disrupt the proper functioning of our networks and systems and therefore
our operations and those of our customers; (ii) result
in the unauthorized access to, and destruction, loss, theft, misappropriation,
or release of confidential, sensitive, or otherwise
valuable information of ours or our customers; (iii) result in a violation
of applicable privacy, data
protection, and other laws,
subjecting us to additional regulatory scrutiny and exposing us to civil litigation,
enforcement actions, governmental fines, and
possible financial liability; (iv) require significant management attention
and resources to remedy the damages that result; or (v)
harm our reputation or cause a decrease in the number of customers that choose
to do business with us, damaging our ability to
generate deposits. The occurrence of any of the foregoing could have a material adverse
effect on our business, financial
condition, and results of operations. Furthermore, in the event of a cyber-related
incident, we may be delayed in identifying or
responding to the incident, which could increase the negative impact of the incident on our
business, financial condition, and
results of operations. While we maintain “cyber” insurance coverage, which
would apply in the event of certain cyber-related
incidents, the amount of coverage may not be adequate depending on
the magnitude of the incident. Furthermore, because cyber-
related incidents are inherently difficult to predict and can take many forms,
some incidents may not be covered under our cyber
insurance coverage.
Increased 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.
Fraudulent activity has
taken many forms, ranging from wire fraud, debit card fraud, credit card fraud,
check fraud, mechanical devices attached to
ATMs,
social engineering, and phishing attacks to obtain personal information, business
email compromise, or impersonation of
clients through the use of falsified or stolen credentials. Many financial
institutions have suffered significant losses in recent years
due to the theft of cardholder data that has been illegally exploited for personal gain.
The potential for debit and credit card fraud,
as well as check fraud, against us or our clients and our third-party
service providers is a serious issue. Debit and credit card fraud
and check fraud are pervasive, and the risks of cybercrime are complex
and continue to evolve. While we have policies and
procedures, as well as fraud detection tools, designed to prevent fraud losses, such
policies, procedures, and tools may be
insufficient to accurately detect and prevent fraud. A significant increase
in fraudulent activities could lead us to take additional
steps to reduce fraud risk, which could increase our costs. Fraud losses
could cause losses to us or our clients, damage to our
brand, and an increase in our costs, in turn, materially and adversely affecting
our business, financial condition, and results of
operations.
We may not be able to attract and
retain skilled people, which may have a negative impact on
our business and
operations.
Our success depends, in large part, on our ability to attract and retain
key people. Competition for the best people in many
activities engaged in by us is intense, including with respect to compensation
and emerging workplace practices and
accommodations, and, as a result, we may not be able to sufficiently
hire or to retain key people. We
do not currently have
employment agreements or non-competition agreements with any of our senior officers.
The unexpected loss of service of key
personnel could have a material adverse impact on our business, financial
condition, and results of operations because of their
customer relationships, skills, knowledge of our market, years of industry
experience, and the difficulty of promptly finding
qualified replacement personnel. In addition, the scope and content of U.S. banking
regulators’ policies on incentive
compensation, as well as changes to these policies, could adversely affect
our ability to hire, retain, and motivate our key
associates.
Issues 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.
We rely on
certain external vendors to provide products and services necessary to maintain our day-to-day
operations. These
third-party vendors are sources of operational, cybersecurity and informational
security risk to us, including risks associated with
operational errors, coding errors, information system failures, interruptions
or breaches, and unauthorized disclosures of sensitive
or confidential client or customer information. If we encounter any of these
issues in connection with our external vendors, or if
we have difficulty communicating with these vendors, we
could be exposed to disruption of operations, loss of service, or
connectivity to customers, reputational damage, and litigation risk that could
have a material adverse effect on our business and,
in turn, our financial condition and results of operations.
In 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.
The
failure of an external vendor to perform in accordance with the contracted
arrangements under service level agreements could be
disruptive to our operations, which could have a material adverse effect
on our business and, in turn, our financial condition and
results of operations. Replacing these external vendors could also entail
significant delay and expense.
Severe 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.
Severe weather, natural disasters, global
climate change, widespread health emergencies (including pandemics),
acts of terrorism,
global conflicts, or other similar events have in the past, and may in the future
have, a negative impact on our business and
operations. These events impact us negatively to the extent that they result
in reduced capital markets activity,
lower asset price
levels, or disruptions in general economic activity in the United States or abroad,
or in financial market settlement functions. In
addition, such events could affect the stability of our deposit base,
impair the ability of borrowers to repay outstanding loans,
impair the value of collateral securing loans, cause significant property damage,
result in loss of revenue, cause us to incur
additional expenses, and impact economic growth negatively.
If any of these risks materialized, they could have an adverse effect
on our business and operations and may have other adverse effects on
us in ways that we are unable to predict.
Litigation may adversely affect our results.
litigation in the ordinary course of business. Claims and legal actions, including
claims pertaining to our
performance of our fiduciary responsibilities as well as supervisory actions
by our regulators, could involve large monetary
claims and significant defense costs. The outcome of litigation and regulatory
matters as well as the timing of ultimate resolution
are inherently difficult to predict. Actual legal and other costs of resolving
claims may be greater than our legal reserves. The
ultimate resolution of a pending legal proceeding, depending on the remedy sought
and granted, could materially adversely affect
our results of operations and financial condition.
In addition, governmental authorities have, at times, sought criminal penalties
against companies in the financial services sector
for violations, and, at times, have required an admission of wrongdoing from
financial institutions in connection with resolving
such matters. Criminal convictions or admissions of wrongdoing in a settlement with
the government can lead to greater exposure
in civil litigation and reputational harm.
Substantial legal liability or significant regulatory action against us could have material
adverse financial effects or cause
significant reputational harm, which adversely impact our business prospects. Further,
we may be exposed to substantial
uninsured liabilities, which could adversely affect
our results of operations and financial condition.
If
we
fail
to
maintain
an
effective
system
of
control
over
reporting,
we
may
not
be
able
to accurately
report our
financial results,
prevent fraud,
or file
our periodic
reports in
a timely
manner,
which may
cause investors
to
lose confidence in our reported financial information and may lead
to a decline in our stock price.
As a public
company,
we are required
to maintain internal
control over financial
reporting and to
report any material
weaknesses
in such internal control.
Section 404 of the Sarbanes
-Oxley Act requires that
we furnish a report
by management on, among
other
things,
the
effectiveness
of
our
control
over
reporting.
This
assessment
requires
disclosure
of
any
material
weaknesses
by
our
in
our
control
over
reporting.
Our
independent
registered
public
accounting firm
also needs
to attest to
the effectiveness
of our
internal control
over financial
reporting. Effective
internal control
over financial reporting is necessary for us to provide reliable financial
reports and, together with adequate disclosure controls and
procedures,
is
designed
to
prevent
fraud.
Any
failure
to
maintain
or
implement
required
new
or
improved
controls
(as
we
had
recently
discussed
in
Item
9A),
or
difficulties
encountered
in
implementation
could
cause
us
to
fail
to
meet
our
reporting
obligations,
which
could
subject
the
Company
to
litigation,
investigations,
or
breach
of
contract
claims,
require
resources, increase costs, negatively affect investor confidence,
and adversely impact its stock price.
Strategic Risks
Our future success is dependent on our ability to compete effectively
in the highly competitive banking and financial
services industry.
We face vigorous
competition for deposits, loans and other financial services in our market area
from other banks and financial
institutions, including savings and loan associations, savings banks,
finance companies and credit unions. A number of our
competitors are significantly larger than we are and have greater access to
capital and other resources. Many of our competitors
also have higher lending limits, more expansive branch networks, and offer
a wider array of financial products and services.
We also compete
with other non-bank providers of financial services, such as money market mutual
funds, brokerage firms,
consumer finance companies, insurance companies, governmental
organizations, and non-bank financial technology providers,
including digital asset service providers. Many of our non-bank competitors
are not subject to the same extensive regulations that
govern our activities. As a result, these non-bank competitors have advantages
over us in providing certain services, including the
ability to offer financial products and services on more favorable
terms than we are able to offer.
Technology and other
changes
have lowered barriers to entry and made it possible for non-banks to offer
products and services traditionally provided by banks.
In particular, the activity of financial technology
companies has grown significantly over recent years and is expected to continue
to grow. The emergence,
adoption and evolution of new technologies that do not require intermediation,
including distributed
ledgers such as digital assets and blockchain, as well as advances in robotic process
automation, could significantly affect the
competition for financial services.
The effect of this competition may reduce or limit our net income,
margins or our market share and may adversely affect our
results of operations and financial condition. Further,
the process of eliminating banks as intermediaries for financial transactions
could result in the loss of fee income, as well as the loss of customer deposits and the related
income generated from those
deposits. The foregoing could have a material adverse effect
on our financial condition and results of operations. Increased
competition may negatively affect our earnings by creating
pressure to lower prices or credit standards on our products and
services requiring additional investment to improve the quality and
delivery of our technology, reducing
our market share, or
affecting the willingness of our clients to do business with us.
Our inability to adapt our business strategies, products, and services could
harm our business.
We rely on
a diversified mix of financial products and services through multiple distribution channels.
Our success depends on
our and our third-party providers’ of products and services abilities to adapt our
business strategies, products, and services and
their respective features in a timely manner,
including available payment processing services and technology to rapidly
evolving
industry standards and consumer preferences.
The widespread adoption and rapid evolution of emerging
technologies in the financial services industry,
including artificial
intelligence, analytic capabilities, cloud technologies, self-service
digital trading platforms and automated trading markets,
internet services, and digital assets, such as central bank digital currencies,
cryptocurrencies (including stablecoins and
memecoins), tokens, and other cryptoassets that utilize blockchain and distributed
ledger technology (DLT),
as well as DLT in
payment, clearing, and settlement processes creates additional risks, could
negatively impact our ability to compete, and require
substantial expenditures to the extent we were to modify or adapt our existing
products and services to keep pace with such new
technologies.
We may not
be timely or successful in developing or introducing new products and services, integrating
new products or services
into our existing offerings, responding, managing, or adapting
to changes in consumer behavior, preferences, spending,
investing
and saving habits, achieving market acceptance of our products and services,
or reducing costs in response to pressures to deliver
products and services at lower prices. There are substantial risks and uncertainties
associated with these efforts, particularly in
instances where the markets are not fully developed. In developing
and marketing new products and services, we invest
significant time and resources. Initial timetables for the introduction and development
of new products or services may not be
achieved, and price and profitability targets may not prove
feasible. External factors, such as compliance with regulations,
competitive alternatives, and shifting market preferences, may also impact
the successful implementation of new products or
services. The Company’s, or
its third-party providers’, inability or resistance to timely innovate or adapt its operations, products,
and services to evolving industry standards and consumer preferences could result
in service disruptions and harm our business,
and materially and adversely affect our results of operations, financial
condition, and reputation.
Furthermore, our implementation of new products, services, or technology
could have unintended negative consequences,
including a significant impact on the effectiveness of
our system of internal controls. Failure to successfully manage these risks in
the development and implementation of new products or services could
have a material adverse effect on our business, financial
condition, and results of operations.
Our directors, executive officers, and principal shareowners,
if acting together,
have substantial control over all matters
requiring shareowner approval,
including changes of control. Because Mr.
is a principal
shareowner and our Chairman, President, and Chief Executive
Officer and Chairman of CCB, he has substantial control
over all matters on a day-to-day basis.
Our directors, executive officers, and principal shareowners beneficially
owned approximately 19.5% of the outstanding shares of
our common stock at December 31, 2024.
William G. Smith, Jr.,
our Chairman, President and Chief Executive Officer
beneficially owned 17.3% of our shares as of that date.
Accordingly, these directors, executive
officers, and principal
shareowners, if acting together, may be
able to influence or control matters requiring approval by our shareowners, including
the
election of directors and the approval of mergers, acquisitions or
other extraordinary transactions. Moreover,
because William G.
Smith, Jr. is the Chairman, President,
and Chief Executive Officer of CCBG and Chairman of CCB, he has substantial
control
over all matters on a day-to-day basis, including the nomination and election
of directors.
These directors, executive officers, and principal shareowners may
also have interests that differ from yours and may vote in a
way with which you disagree, and which may be adverse to your interests. The concentration
of ownership may have the effect of
delaying, preventing or deterring a change of control of our Company,
could deprive our shareowners of an opportunity to receive
a premium for their common stock as part of a sale of our Company and might ultimately
affect the market price of our common
stock. You
may also have difficulty changing management, the composition of
the Board of Directors, or the general direction of
our Company.
Our Articles of Incorporation, Bylaws, and certain laws and regulations
may prevent or delay transactions you might
favor,
including a sale or merger of CCBG.
CCBG is registered with the Federal Reserve as a financial holding
company under the Bank Holding Company Act, or BHC Act.
As a result, we are subject to supervisory regulation and examination by the
Federal Reserve. The GLBA, the Dodd-Frank Act,
the BHC Act, and other federal laws subject financial holding companies to
restrictions on the types of activities in which they
may engage, and to a range of supervisory requirements and activities, including
regulatory enforcement actions for violations of
laws and regulations.
Provisions of our Articles of Incorporation, Bylaws, certain laws and regulations
and various other factors may make it more
difficult and expensive for companies or persons to acquire control
of us without the consent of our Board of Directors. It is
possible, however, that you would want a
takeover attempt to succeed because, for example, a potential buyer could offer
a
premium over the then prevailing price of our common stock.
For example, our Articles of Incorporation permit our Board of Directors
to issue preferred stock without shareowner action. The
ability to issue preferred stock could discourage a company from attempting
to obtain control of us by means of a tender offer,
merger, proxy contest or
otherwise. We are also subject to
certain provisions of the Florida Business Corporation Act and our
Articles of Incorporation that relate to business combinations with interested
shareowners. Other provisions in our Articles of
Incorporation or Bylaws that may discourage takeover attempts or make them
more difficult include:
Supermajority voting requirements to remove a director from office;
Provisions regarding the timing and content of shareowner proposals
and nominations;
Supermajority voting requirements to amend Articles of Incorporation
unless approval is received by a majority of
“disinterested directors”;
Absence of cumulative voting; and
Inability for shareowners to take action by written consent.
Potential acquisitions by us, or our inability to complete acquisitions, may
financial condition, and results of operations.
We may seek to
acquire other banks, businesses, or branches, which involves various risks, including,
among other things, (i)
(ii) exposure to potential asset quality issues of the
target company; (iii) potential disruption to our business; (iv) potential
diversion of our management’s time
and attention; (v) the
possible loss of key employees and customers of the target
company; (vi) difficulty in estimating the value of the target
company;
and (vii) potential changes in banking or tax laws or regulations that may
affect the target company.
Acquisitions by financial institutions, including us, are subject to approval by a variety
of regulatory agencies and, therefore,
dependent on the regulators' views at the time as to, among other things, our capital
levels, quality of management, compliance
with laws, and overall condition, in addition to their assessment of a variety of
other factors. Regulatory approvals could be
delayed, impeded, restrictively conditioned, or denied due to existing or new
regulatory issues we have, or may have, with
regulatory agencies. We
may fail to pursue, evaluate or complete strategic and competitively significant
acquisition opportunities
as a result of our inability, or perceived
or anticipated inability, to obtain
regulatory approvals in a timely manner,
under
reasonable conditions or at all. Difficulties associated with potential
acquisitions that may result from these and other factors
could have a material adverse effect on our business, financial condition
Acquisitions typically involve the payment of a premium over book and market
values, and, therefore, some dilution of our
tangible book value and net income per common share may occur in
connection with any future transaction. Acquisitions may
also result in potential dilution to existing shareowners of our earnings per share
if we issue common stock in connection with the
acquisition. Furthermore, failure to realize the expected revenue increases,
cost savings, increases in geographic or product
presence, and/or other projected benefits from an acquisition could have
a material adverse effect on our business, financial
condition and results of operations.
Reputational Risks
Damage to our reputation could harm our businesses, including our
competitive position and business prospects.
Reputation risk, or the risk to our earnings, liquidity,
and capital from negative public opinion, is inherent in our business.
Negative public opinion could adversely affect our ability to attract
and retain customers, clients, investors and associates and
expose us to adverse legal and regulatory consequences. Negative public
opinion could result from our actual or alleged conduct
and can arise from various sources, including (a) officer,
director or associate fraud, misconduct, and unethical behavior; (b)
security breaches; (c) litigation or regulatory outcomes; (d) compensation
practices; (e) lending practices; (f) branching strategy;
(g) the suitability or reasonableness of recommending particular trading or
investment strategies, including the reliability of our
research and models; (h) prohibiting clients from engaging in certain transactions;
(h) associate sales practices; (i) failure to
deliver products and services; (j) subpar standards of service and quality expected
by our customers, clients, and the community;
(k) compliance failures; (l) mergers and acquisitions; (m) the inability
to manage technology change or maintain effective data
management; (n) cyber incidents; (o) internal and external fraud (including
check fraud and debit card and credit card fraud); (p)
inadequacy of responsiveness to internal controls; (q) unintended
disclosure of personal, proprietary or confidential information;
(r) failure (or perceived failure) to identify and manage actual and potential conflicts
of interest; (s) breach of fiduciary
obligations; (t) the handling of health emergencies or pandemics, (u)
the activities of our clients, customers, counterparties, and
third parties, including vendors; (v) our environmental, social, and
governance practices and disclosures, including practices and
disclosures related to climate change; (w) our response (or lack of response)
to social and sustainability concerns; and (x) actions
by the financial services industry generally or by certain members or individuals
in the industry.
There has been an increased focus by investors and other stakeholders on topics related
to corporate policies and approaches
regarding ESG and diversity,
equity and inclusion matters. Due to divergent stakeholder
views on these matters, we are at
increased risk that any action, or lack thereof, concerning these matters will be perceived
negatively by some stakeholders, which
could negatively affect our business and reputation. In
addition, adverse publicity or negative information posted on social media
by associates, the media or otherwise, whether or not factually correct, may
adversely impact our reputation or future prospects.
Harm to our reputation may adversely and materially affect our
competitive position, business prospects, and financial results.
Further, events that result in damage to our
reputation may also increase our litigation risk, increase regulatory scrutiny,
affect our
ability to attract and retain customers and employees and have other consequences
that we may not be able to predict.
Tax Risks
Changes in the Federal, State or Local Tax
Laws May Negatively Impact Our Financial Performance and We
are Subject
to Examinations and Challenges by Tax
Authorities
We are subject
to federal and applicable state tax laws and regulations. Changes in these
tax laws and regulations, some of which
may be retroactive to previous periods, could increase our effective
tax rates and, as a result, could negatively affect our current
and future financial performance. Furthermore, tax laws and regulations are often
complex and require interpretation. In the
normal course of business, we are routinely subject to examinations and challenges
from federal and applicable state tax
authorities regarding the amount of taxes due in connection with investments we
have made and the businesses in which we have
engaged. Recently,
federal and state taxing authorities have become increasingly been aggressive in challenging
tax positions
taken by financial institutions. These tax positions may relate to tax compliance,
sales and use, franchise, gross receipts, payroll,
property and income tax issues, including tax base, apportionment and tax
credit planning. The challenges made by tax authorities
may result in adjustments to the timing or amount of taxable income or deductions
or the allocation of income among tax
jurisdictions. If any such challenges are made and are not resolved in our
favor, they could have a material adverse effect
on our
business, financial condition and results of operations.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.