FIRSTSUN CAPITAL BANCORP 10-K

fcb-20231231 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________ FORM 10-K __________________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31 , 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File N umber 333-258176 __________________________________ FIRSTSUN CAPITAL BANCORP (Exact name of registrant as specified in its charter) __________________________________ Delaware 81-4552413 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 1400 16th Street , Suite 250 Denver , Colorado 80202 ( 303 ) 831-6704 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) __________________________________ Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒ As of June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was $ 212.9 million. Accordingly, the registrant became an accelerated filer as of January 1, 2024. The registrant continues to qualify as an emerging growth company. As of March 6, 2024, there were approximately 27,430,682 shares of the registrant’s common stock, $0.0001 par value, outstanding. 1 Table of Contents Table of Contents Page Cautionary Note Regarding Forward-Looking Statements 3 Summary of Material Risks 5 Part I 7 Item 1. Business 7 Item 1A. Risk Factors 28 Item 1B. Unresolved Staff Comments 56 Item 1C. Cybersecurity 56 Item 2. Properties 58 Item 3. Legal Proceedings 58 Item 4. Mine Safety Disclosures 58 Part II 59 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 59 Item 6. [Reserved] 59 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 60 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 83 Item 8. Financial Statements and Supplementary Data 84 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures 150 Item 9A. Controls and Procedures 150 Item 9B. Other Information 151 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection 152 Part III 152 Item 10. Directors, Executive Officers and Corporate Governance 152 Item 11. Executive Compensation 155 Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters 168 Item 13. Certain Relationships and Related Transactions, and Director Independence 170 Item 14. Principal Accounting Fees and Services 177 Part IV 178 Item 15. Exhibits, Financial Statement Schedules 178 Item 16. Form 10-K Summary 180 Signatures 181 2 Table of Contents CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains certain forward-looking statements that are included pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current views with respect to, among other things, statements relating to the Company’s assets, business, cash flows, condition (financial or otherwise), credit quality, financial performance, liquidity, short and long-term performance goals, prospects, results of operations, strategic initiatives, the benefits, cost and synergies of completed acquisitions or dispositions, and the timing, benefits, costs and synergies of future acquisitions, disposition and other growth opportunities, including statements regarding our pending merger with HomeStreet, Inc. (“HomeStreet”). They are not statements of historical or current fact nor are they assurances of future performance, and they generally can be identified by the use of forward-looking terminology, such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time, are difficult to predict and are generally beyond our control and should be viewed with caution. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: • potential fluctuations or unanticipated changes in the interest rate environment, including interest rate changes made by the Board of Governors of the Federal Reserve, and their related impacts on macroeconomic conditions, customer and client behavior, our funding costs, and our loan and securities portfolios, as well as cash flow reassessments may reduce net interest margin and/or the volumes and values of loans made or held as well as the value of other financial assets; • changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Department of the Treasury and the Federal Reserve; • other actions of the Federal Reserve and legislative and regulatory actions and reforms; • the potential effects of events beyond our control that may have a destabilizing effect on financial markets, economic growth, customer and client behavior and the economy in general, such as inflation and recessions, epidemics and pandemics, terrorist activities, wars and other foreign conflicts, essential utility outages, climate change, deterioration in the global economy, instability in the credit markets, disruptions in our customers’ supply chains or disruption in transportation; • the potential effects of pandemics or public health conditions on the economic and business environments in which we operate, including the impact of actions taken by governmental authorities to address these situations, and the resulting effect of these items on our operations, liquidity and capital position, and on the financial condition of our borrowers and other customers; • changes in legislation, regulation, policies or administrative practices, whether by judicial, governmental or legislative action and other changes pertaining to banking, securities, taxation, rent regulation and housing, financial accounting and reporting, environmental protection and insurance and the ability to comply with such changes in a timely manner; • the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technological changes in the financial services market; • competition from financial institutions and other financial service providers including non-bank financial technology providers and our ability to attract customers from other financial institutions; • any unanticipated or greater than anticipated adverse conditions in the national or local economies in which we operate; • our loan concentration in industries or sectors that may experience unanticipated or greater than anticipated adverse conditions than other industries or sectors in the national or local economies in which we operate; • increased capital requirements, other regulatory requirements or enhanced regulatory supervision; • cyber-security risks and the vulnerability of our network and online banking portals, and the systems or parties with whom we contract, to unauthorized access, computer viruses, phishing schemes, spam attacks, human error, natural disasters, power loss and other security breaches that could adversely affect our business and financial performance or reputation; • risks with respect to our ability to identify and complete future mergers or acquisitions, including our proposed merger with HomeStreet, as well as our ability to successfully expand and integrate those businesses and operations that we acquire; • the failure to close our previously announced merger with HomeStreet when expected or at all because required regulatory approvals and other conditions to closing are not received or satisfied on a timely basis or at all, and the 3 Table of Contents risk that any regulatory approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the proposed merger; • the dilutive effect of shares of FirstSun’s common stock to be issued at the completion of the proposed merger with HomeStreet and the related effects on our stock price; • the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the merger agreement with HomeStreet; • any change in the purchase accounting assumptions used regarding the HomeStreet assets acquired and liabilities assumed to determine the fair value and credit marks, particularly in light of the current interest rate environment; • the possibility that the anticipated benefits of the proposed merger with HomeStreet, including anticipated cost savings and strategic gains, are not realized when expected or at all; • the proposed merger with HomeStreet being more expensive or taking longer to complete than anticipated, including as a result of unexpected factors or events; • the diversion of management’s attention from ongoing business operations and opportunities due to the proposed merger with HomeStreet; • potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed merger with HomeStreet; • additional regulatory burdens that may be imposed upon the completion of the HomeStreet merger due to having assets in excess of $10 billion; • changes in FirstSun’s or HomeStreet’s share price before closing; • the risks of expansion into new geographic or product markets; • the inability to manage strategic initiatives and/or organizational changes; • our ability to attract and retain key employees; • volatility in the allowance for credit losses resulting from the CECL methodology, either alone or as that may be affected by conditions affecting our business; • changes in accounting principles, policies, practices or guidelines; • our reliance on third parties to provide key components of our business infrastructure and services required to operate our business; • the availability of and access to capital; failures of internal controls and other risk management systems; • the outcome (including judgments, costs, fines, reputational harm, inability to obtain necessary approvals and/or other negative effects) of pending or threatened litigation or of matters before or involving regulatory agencies, whether currently existing or commencing in the future; • losses due to fraudulent or negligent conduct of our customers, third-party service providers or employees; and • limitations on our ability to declare and pay dividends and other distributions from our bank to our holding company, which could affect our holding company’s liquidity, including its ability to pay dividends to shareholders or take other capital actions; and • other factors, many of which are beyond our control. We caution readers that the foregoing list of factors is not exclusive, and is not necessarily in order of importance and readers should not place undue reliance on any forward-looking statements. These factors should also be read in conjunction with “ Item 1.A. Risk Factors ,” included in this report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and we do not intend to and disclaim any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, unless required to do so under the federal securities laws. 4 Table of Contents SUMMARY OF MATERIAL RISKS An investment in our securities involves risks, including those summarized below. For a more complete discussion of the material risks facing our business, see “ Item 1A. Risk Factors .” Risks Related to Our Business Economic and Geographic-Related Risks • Our business may be adversely affected by economic conditions, including inflation. • Changes in economic and market conditions may negatively affect our wealth management business. Risks Associated with Monetary Events • Our business and results of operations may be adversely impacted by fiscal, monetary and regulatory policies. Lending Risks • If we fail to effectively manage credit risk, our business and financial condition will suffer. • Our allowance for credit losses may be insufficient to absorb credit losses. • We are exposed to higher credit risk by commercial and industrial and commercial real estate lending. • A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business. • Nonperforming assets may adversely affect our financial condition. Interest Rate and Yield Curve Risks • We are subject to interest rate risk, which could adversely affect our financial condition and profitability. • Our cost of funds may increase due to various market, regulatory or competitive factors. • Rapidly rising interest rates may negatively affect the value of our loans and securities. • A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios. Mortgage Banking Risks • Our mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, regulatory changes and slowdowns in the housing market. • Our mortgage revenue generally decreases in rising or high interest rate conditions. • U.S. government policy changes could impact our ability to originate and sell mortgages. • We may be terminated as a servicer of mortgage loans or incur fines if we fail to satisfy our servicing obligations. • We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances. Operational Risks • We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients or others. • We are exposed to the possibility of technology failure and a disruption in our operations. • A failure in, or breach of, our operational or security systems or infrastructure, or those of our third-party vendors or others, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses. • Our risk management framework may not be effective in mitigating risks and/or losses. • Our reputation, which is critical to our success as a community bank, could be damaged by operational failures. • A failure to retain or hire key employees could harm our business. Industry-Related Risks • Our customers may prepay their loans, which could reduce our interest income and profitability. • Competition with other banks and consumers deciding not to use banks may adversely affect our business. • Failure to keep pace with technological change could result in losses. • Other financial services institutions could experience financial or business stress which could expose us to counter-party risks. • Our deposit insurance premiums could be higher in the future, which could reduce our earnings. Capital and Liquidity Risks • If we need additional capital resources in the future, they may not be available when needed or at all. • Liquidity, primarily through deposits, is essential to our business model, and a lack of liquidity, an increase in the cost of liquidity or even bank failures, could materially impair our ability to fund our operations. • We may not be able to maintain a strong core deposit base or access other low-cost funding sources. • Deposit levels may be affected by changes in economic conditions, including monetary policy. 5 Table of Contents Risks Related to Strategic Plans • Mergers and acquisitions, including our proposed merger with HomeStreet, may subject us to risks, which could disrupt our business and dilute stockholder value. • We may issue stock in connection with mergers and acquisitions that could dilute stockholders and cause our stock price to decline. • Mergers and acquisitions may be delayed or prohibited due to regulatory matters. • We face risks and uncertainties related to our proposed merger with HomeStreet, including interest rate volatility that may affect the fair value of assets and liabilities acquired. • HomeStreet shareholders may exercise dissenters’ rights, which could cause us to incur significant costs. • We expect to incur substantial expenditures and devote considerable management time in connection with the proposed merger with HomeStreet, subjecting us to loss of management resources for other activities and increased costs. • If we close the proposed merger with HomeStreet, we will have greater than $10 billion in assets, which will result in additional regulations, increased supervision by bank regulators and increased costs. • We may be unable to grow our business organically, which could adversely affect our business. • New lines of business or new products and services may subject us to additional risk. Risks Related to Public Health Issues • Outbreaks of pandemics or diseases could adversely affect our ability to operate or our financial condition and results of operations. Legal, Accounting, Regulatory and Compliance Risks • As a banking entity, we are heavily regulated. • We are subject to regulatory requests, reviews, investigations and proceedings. • Failure to maintain certain regulatory capital levels and ratios could result in regulatory actions. • We face risks related to noncompliance with the Bank Secrecy Act and other anti-money laundering statutes. • Consumer lending laws impact mortgage originations and could increase credit risk on such loans. • We are subject to fair lending laws. • The Federal Reserve may require us to commit capital resources to support Sunflower Bank. • We are party to various claims and lawsuits incidental to our banking business. • Political dysfunction and volatility within the federal government creates significant potential for changes in bank regulation, taxes, and the economy. • The expanding laws and regulations that govern data privacy may pose onerous compliance obligations for us. • Our preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make significant assumptions, estimates and judgements that affect our financial statements, and which, if incorrect, could adversely affect our financial results. • Changes in tax laws, regulations and interpretations or challenges to our income tax provision may adversely affect us. • Our internal controls and procedures may fail or be circumvented. Risks Related to Our Common Stock • Our common stock is thinly traded, which may hinder your ability to sell our common stock and may lower the market price of the stock. • Our Significant Stockholders could exercise significant influence over us, and their interests in us may be different than yours. • Some provisions of our organizational documents, our Stockholders’ Agreement and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others. • Our future ability to pay dividends is subject to restrictions. • An investment in our stock is not an insured deposit and is subject to risk of loss. • We are an emerging growth company with reduced reporting requirements. • We may issue additional shares in the future, including additional shares in connection with the proposed merger with HomeStreet. • Sales by our larger stockholders of substantial amounts of our common stock, much of which is, or will be in the near future, available for public resale, could depress the market price of our common stock. • Shareholder litigation could prevent or delay the completion of the proposed merger with HomeStreet, which may negatively impact our business or financial results. Climate Risks • Natural disasters and weather-related events exacerbated by climate change could have a negative impact on our results of operations and financial condition. General Risk Factors • Our historical operating results may not be indicative of our future operating results. 6 Table of Contents Part I Item 1. Business In this report, unless the context suggests otherwise, references to “we,” “us,” and “our” mean the combined business of FirstSun and its wholly-owned subsidiaries, including Sunflower Bank, Logia Portfolio Management, LLC, and FEIF Capital Partners, LLC. Overview FirstSun Capital Bancorp (“FirstSun”), a financial holding company headquartered in Denver, Colorado, provides a full spectrum of deposit, lending, treasury management, wealth management and online banking products and services through its two primary operating wholly-owned subsidiaries—Sunflower Bank, National Association (“Sunflower Bank” or the “Bank”), a national banking association headquartered in Dallas, Texas, that operates as Sunflower Bank, N.A., First National 1870 and Guardian Mortgage and Logia Portfolio Management, LLC, a registered investment advisor organized under the laws of the State of Kansas that provides discretionary investment management to retail and institutional accounts. FirstSun has a third wholly-owned subsidiary—FEIF Capital Partners, LLC, a Delaware limited liability company, which is planned to serve as the investment manager of a prospective income fund. Sunflower Bank was founded in 1892 and offers a full range of specialized financial services to business customers as well as relationship-focused services to meet personal, business and wealth management financial objectives for its customers, with a branch network in Texas, Kansas, Colorado, New Mexico, Arizona and Washington and mortgage banking capabilities in 43 states. Our product line includes commercial and industrial loans and commercial real estate loans, residential mortgage and other consumer loans, a variety of commercial, consumer and private banking deposit products, including noninterest-bearing accounts, interest-bearing demand products, savings accounts, money market accounts and certificates of deposit and treasury management products and services. Additionally, Sunflower Bank provides treasury management products and services and offers wealth management and trust products including personal trust and agency accounts, employee benefit and retirement related trust and agency accounts, investment management and advisory agency accounts, and foundation and endowment trust and agency accounts. As of December 31, 2023, we had consolidated total assets of $7.9 billion, total net loans of $6.2 billion, total deposits of $6.4 billion and total stockholders’ equity of $877.2 million. Proposed Merger with HomeStreet, Inc. and Common Equity Raise On January 16, 2024, FirstSun and Seattle based HomeStreet, Inc. (“HomeStreet”), the holding company of HomeStreet Bank (“HomeStreet Bank”) entered into a definitive merger agreement (the “merger agreement”). Under the merger agreement, HomeStreet will merge with and into FirstSun, with FirstSun continuing as the surviving entity (the “merger”). Immediately following the merger, HomeStreet Bank will merge with and into Sunflower Bank, with Sunflower bank continuing as the surviving bank. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of HomeStreet common stock will be converted into the right to receive 0.4345 of a share of FirstSun common stock. The combined entity is expected to have total assets of approximately $17 billion and 129 branch locations. The combined entity’s expanded footprint includes FirstSun’s current presence in the Southwest and Midwest together with HomeStreet’s presence in Southern California, Hawaii and the Pacific Northwest. The parties to the merger expect to complete the merger in the middle of 2024, subject to satisfaction of closing conditions, including receipt of customary required regulatory approvals and the approval of the merger agreement by the HomeStreet shareholders. Concurrently with entry into the HomeStreet merger agreement, FirstSun entered into investment agreements with investors to raise capital to support the merger. In aggregate, $175 million of common stock will be issued to those investors: (a) $80 million of which was issued immediately following the merger announcement, and (b) the remaining $95 million of which will be issued substantially concurrently with, and subject to, the closing of the merger. The proceeds of this equity raise are expected to support the combined entity and result in capital ratios that exceed regulatory requirements. For additional information on the proposed merger and equity raise, see Note 27 - Subsequent Events included in our consolidated financial statements included elsewhere in this report. 7 Table of Contents History and Growth We were originally incorporated in the State of Kansas on November 9, 1981, as Handi-Bancshares, Inc., to serve as the holding company of Sunflower Bank (formerly The First National Bank and Trust Company of Salina), before we changed our name to Sunflower Financial, Inc. in 2008. We subsequently changed our name to FirstSun Capital Bancorp and simultaneously reincorporated under the laws of the State of Delaware in June 2017. The subsequent name change and reincorporation were completed pursuant to the merger agreement entered into on July 28, 2016, by and among FirstSun, Strategic Growth Bank Incorporated, which we refer to as “SGB,” Strategic Growth Bancorp Incorporated, which we refer to as “Strategic” and First National Bancorp Incorporated, which we refer to as “FNB,” and together with SGB and Strategic, as the “SGB parties.” On June 19, 2017, we completed our merger with the SGB parties. Under the merger agreement for the SGB mergers, FirstSun also acquired Guardian Mortgage Company, Inc., which we refer to as “Guardian,” a former subsidiary of Strategic. Guardian was merged with and into Sunflower Bank, and now operates as a division of Sunflower Bank. With the SGB mergers, we acquired two branches in El Paso, Texas and 21 branches in New Mexico and Colorado, as well as residential mortgage loan origination and servicing activities in 13 states. We also relocated our headquarters from Salina, Kansas to Denver, Colorado. On April 1, 2022, FirstSun completed its merger with Pioneer Bancshares, Inc. (“Pioneer”). Pioneer’s wholly-owned subsidiary, Pioneer Bank, SSB, a Texas state savings bank, was merged with and into the Bank, with the Bank continuing as the surviving bank. Pursuant to the terms of the merger agreement, at the Effective Time, each Pioneer shareholder had the right to receive 1.0443 shares of FirstSun common stock, for each share of Pioneer common stock owned by the shareholder, with cash paid in lieu of fractional shares. Each outstanding share of FirstSun common stock remained outstanding and was unaffected by the merger. With the acquisition, we acquired 19 branches in Texas. The fair value of assets acquired and liabilities assumed were $1.5 billion and $1.4 billion respectively. Total consideration paid in the Pioneer merger was $240.8 million. Further information is presented in Note 2 - Merger with Pioneer Bancshares, Inc included in our consolidated financial statements included elsewhere in this report. In November 2023, the Bank relocated its main office from Denver, Colorado, to Dallas, Texas. Our Market Areas We currently operate our principal executive office at 1400 16th Street, Suite 250, Denver, Colorado 80202, with Sunflower Bank’s main office at 8117 Preston Road, Suite 220, Dallas, Texas 75225. We also have 69 banking branches principally located in five states, Texas, Kansas, Colorado, New Mexico and Arizona, with one branch located in Washington. In addition, through our mortgage division, Guardian, we originate home mortgages in over 40 states. ($ in thousands) Principal Markets Sunflower Bank State Total Deposits in Market (1) # of Branches (1) Market Share (1) Deposits in Market (1) Texas (2) $ 1,515,388,501 22 0.12 % $ 1,754,794 Kansas $ 98,757,771 23 1.59 % $ 1,570,147 Colorado (3) $ 187,293,227 12 0.75 % $ 1,402,073 New Mexico $ 43,818,063 9 2.62 % $ 1,149,729 Arizona $ 208,902,217 4 0.15 % $ 311,763 Washington $ 214,360,148 1 — % $ 2,841 (1) Based solely on FDIC data, including total deposits, number of branches, market share and deposits in market as of June 30, 2023. (2) Texas deposits and branch count includes Sunflower Bank’s office located at 3 Sugar Creek Center Blvd Suite 200, Sugar Land, TX 77478. (3) Colorado deposits and branch count includes Sunflower Bank’s office located at 1400 16th Street, Suite 250, Denver, CO 80202. 8 Table of Contents Our Business Strategy Our goal is to build a premier regional bank serving our key markets, primarily through our organic growth strategy of investing in people, technology and infrastructure to create a top-tier banking platform. Our business is focused on providing specialized commercial and consumer banking services to our clients, with an emphasis on key Southwest growth markets. Upon completion of our proposed merger with HomeStreet, we intend to expand our focus to the additional western markets in which HomeStreet operates, including the Pacific Northwest, Southern California and Hawaii. Our unwavering commitment to serving local communities has led to a high-quality core deposit franchise focused in higher growth metropolitan markets as well as stable, non-metropolitan markets that provides a low cost funding base for our lending opportunities. In addition, our mortgage, wealth management, private banking and treasury management offerings provide revenue diversification and best-in-class fee income generation. Lastly, we believe our experience as an acquirer with a successful track record of integrating and re-positioning acquired companies complements and will further fuel our organic growth strategy. Leverage our Relationships and Service Capabilities to Drive Organic Growth. From our modest beginning in 1892, our founders understood that our success would be closely tied to that of the communities in which we operate, and that long-term value creation would require an uncompromising commitment to service and the establishment of enduring relationships with our clients. That vision continues to drive us today, as our 1,110 full-time equivalent employee base, as of December 31, 2023, serves our business and consumer customers, including through our network of 69 branches principally located in Texas, Kansas, Colorado, New Mexico and Arizona. Our core competencies include a relationship-centered and multi-line sales approach, a focus on collaboration across a highly skilled and seasoned team of bankers and a dynamic ability to provide our clients with the highest quality services and solutions. This strategy has enabled us to attract commercial and industrial business customers across our traditional and expanded geographic footprint. The objective is to be a trusted advisor to our clients as they build their businesses with our resources, support and advice. Continue to Grow our Core Deposit Franchise. The strength of our deposit franchise is derived from strong, lasting relationships with our clients and a focus on being an integral part of the communities where we do business. Our deposit footprint has provided, and we believe will continue to provide, principal support for the growth of our loan portfolio. A key element of our funding strategy is a focus on commercial and consumer banking relationships in our markets, including our historically stable, lower growth markets in Kansas and New Mexico. Additionally, we believe our growing treasury management business will continue to benefit our attractive funding base. Continue our Greater Texas Market Expansion Strategy. The greater Texas market has been a top strategic priority for our organization from an organic and acquisition perspective. We deployed our organic growth strategy in the Dallas, Texas market beginning in late 2019 with a commercial team lift-out that by December 2020 generated significant loans and deposits, making Dallas our fastest growing loan market over this period. In addition to our organic expansion in Dallas, we closed our merger with Pioneer on April 1, 2022, which further increased our Texas loans and deposit market position. The Bank’s headquarters was relocated to Dallas, Texas in November 2023. We anticipate continuing to grow our Texas loan and deposit customer base in the years to come. Engage in Opportunistic M&A. An important component of the FirstSun story is our expertise and experience in mergers and acquisitions. Our executive team has extensive experience with successful acquisitions and integrations. We plan to continue to evaluate acquisitions that we believe are strategic and could produce attractive returns for our stockholders. These could include fee-based businesses, whole bank or branch acquisitions that would improve or expand our market position into geographies with attractive demographics and business trends, expand our existing branch network in existing or new markets, enhance our earnings power or product and service offerings, or expand our wealth management activities. Competition The financial services industry is highly competitive and we compete for loans, deposits and customer relationships in our geographic footprint. We compete with commercial banks, credit unions, savings institutions, mortgage banking firms, consumer finance companies, securities brokerage firms, insurance companies, money market funds and other mutual funds, loan production offices and other providers of financial services, including nontraditional financial technology companies or FinTech companies, as well as super-regional, national and international financial institutions that operate offices in our market areas and elsewhere. Many of our nonbank competitors which are not subject to the same extensive federal regulations that govern bank holding companies and banks, may have certain competitive advantages. We compete for loans principally through the quality of our client service and our responsiveness to client needs in addition to competing on interest rates and loan fees. Management believes that our long-standing presence in the community and personal one-on-one service philosophy enhances our ability to compete favorably in attracting and 9 Table of Contents retaining individual and business customers. We actively solicit deposit-related clients and compete for deposits by offering personal attention, competitive interest rates, and professional services made available through experienced bankers and multiple delivery channels that fit the needs of our markets. In wealth management and trust services, we compete with a variety of custodial banks as well as a diverse group of investment managers. We believe the financial services industry will likely continue to become more competitive as further technological advances enable more financial institutions to provide expanded financial services without having a physical presence in our markets. We have focused on providing value-added products and services to our clients, which we are able to do because of our close relationships with them. We believe our ability to provide flexible, sophisticated products and a customer-centric process to our customers and clients allows us to stay competitive in the financial services environment. Our Banking Services Our operations are managed along two reportable operating segments consisting of Banking and Mortgage Operations. Our Banking segment has been, and is, the cornerstone of our operations and our primary segment, through which we provide a full range of deposit and lending products. We are dedicated to serving the banking needs of businesses, professionals and individuals in our markets through our approach of personalized, relationship-based service. We strive to become trusted advisers to our clients and achieve long-term relationships. We deliver a wide range of banking products and services tailored to meet the needs of our clients across our geographic footprint. Our Mortgage Operations segment offers full-service residential mortgage products, including conforming residential loans and services through Guardian, our mortgage division. Additionally, our Mortgage Operations segment includes the servicing of residential mortgage loans and the packaging and securitization of loans to governmental agencies. For further information, see “ Segments ” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 23 - Segment Information in the notes to consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” elsewhere in this report. Lending Activities We offer a range of lending services, including commercial and industrial, commercial real estate, residential real estate, public finance, consumer and other loans. Our customers are generally commercial businesses, professional services and retail consumers within our market areas. For further information, see “Loans” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 4 - Loans in the notes to consolidated financial statements included in “Item 8. Financial Statements and Supplementary Data” elsewhere in this report. Commercial and Industrial Loans Our commercial and industrial loans are typically made to small- and medium-sized manufacturing, service, wholesale and retail businesses for working capital and operation needs and business expansions, including the purchase of capital equipment. Commercial and industrial loans include our specialty lending verticals such as structured finance products, asset based lending and family office. Commercial and industrial also includes our healthcare, SBA and other small business lending products. Commercial and industrial loans generally include lines of credit and loans with maturities of five years or less. Because we are a bank with long standing ties to the businesses and professionals operating in our geographic footprint, we are able to tailor our commercial and industrial loan programs to meet the needs of our clients. Growing our commercial and industrial loan portfolio is an important area of emphasis for us and we intend to continue to grow this portfolio. Commercial and industrial loans are generally made with operating cash flows as the primary source of repayment, but may also include collateralization by inventory, accounts receivable, equipment and personal guarantees. As a result, the repayment risk is subject to the ongoing business operations of the borrower. Any interruption or discontinuance of operating cash flows from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in governmental regulations, could materially affect the ability of the borrower to repay the loan. Further, commercial and industrial loans may be secured by the collateral described above, which if the business is unsuccessful, typically have values insufficient to satisfy the loan without a loss. SBA loans . We participate in the SBA 7(a) program in order to meet the needs of our small business community as well as customers nationwide. As an approved participant in the SBA Preferred Lender’s Program, we enable our clients to obtain 10 Table of Contents SBA loans without being subject to the potentially lengthy SBA approval process necessary for lenders that are not SBA Preferred Lenders. Presently, pursuant to the Consolidated Appropriations Act, 2021, the SBA guaranteed 90% of the principal amount of each qualifying SBA loan originated under the SBA’s 7(a) loan program. After this date, the SBA will guarantee 75% to 85% of the principal amount of qualifying loans originated under the 7(a) loan program. The guarantee is conditional and covers a portion of the risk of payment default by the borrower, but not the risk of improper closing and servicing by the lender. As such, prudent underwriting and closing processes are essential to effective utilization of the 7(a) program. Commercial and Residential Real Estate Loans Real estate loans are subject to the same general risks as other loans and are particularly sensitive to fluctuations in the value of real estate. Fluctuations in the value of real estate, as well as other factors arising after a loan has been made, could negatively affect a borrower’s cash flow, creditworthiness and ability to repay the loan. When we make new real estate loans, we obtain a security interest in real estate whenever possible, in addition to any other available collateral, to increase the likelihood of the ultimate repayment of the loan. To control concentration risk, we monitor collateral type and industry concentrations within this portfolio. Our real estate loans generally fall into one of two broad categories: commercial real estate loans or residential real estate loans. • Commercial Real Estate Loans . Our commercial real estate (“CRE”) loans consist of both owner-occupied and non-owner occupied commercial real estate loans, construction and land loans, as well as multifamily loans. The real estate securing our existing commercial real estate loans includes a wide variety of property types, such as offices, warehouses, production facilities, health care facilities, hotels, mixed-use residential/commercial, retail centers, restaurants, assisted living facilities and self-storage facilities. Non-owner occupied CRE loans were 85.2% of the Company’s risk-based capital, or 13.0% of total loans as of December 31, 2023. Non-owner occupied CRE loans associated with office space were $109.3 million, or 1.7% of total loans as of December 31, 2023. Owner occupied CRE loans associated with office space were $149.4 million, or 2.4% of total loans as of December 31, 2023. We are primarily focused on growing the owner-occupied portion of our commercial real estate loan portfolio. Commercial real estate loans are often larger and involve greater risks than other types of lending. Adverse developments affecting commercial real estate values in our market areas could increase the credit risk associated with these loans, impair the value of property pledged as collateral for these loans, and affect our ability to sell the collateral upon foreclosure without a loss. Furthermore, adverse developments affecting the business operations of the borrowers of our owner-occupied commercial real estate loans could significantly increase the credit risk associated with these loans. Due to the larger average size of commercial real estate loans, we face the risk that losses incurred on a small number of commercial real estate loans could have a material adverse impact on our financial condition and results of operations. • Residential Real Estate Loans . Our residential real estate loans consist of 1-4 family loans, home equity loans and multi-family loans. The residential real estate loans described below exclude mortgage loans that are held-for-sale. Like our commercial real estate loans, our residential real estate loans are secured by real estate, the value of which may fluctuate significantly over a short period of time as a result of market conditions in the area in which the real estate is located. Adverse developments affecting real estate values in our market areas could therefore increase the credit risk associated with these loans, impair the value of property pledged as collateral on loans and affect our ability to sell the collateral upon foreclosure without a loss or additional losses. We primarily make our residential real estate loans to qualified individuals and investors in accordance with our real estate lending policies, which detail maximum loan to value ratios and maturities. The repayment of these loans are also affected by a borrower’s adverse personal circumstances. Public Finance Loans We offer public finance loans consisting primarily of loans to our charter school and municipal based customers. Consumer Loans We offer a variety of consumer loans, such as installment loans to individuals for personal, family and household purposes, including car, boat and other recreational vehicle loans. Our consumer loans typically are part of an overall client 11 Table of Contents relationship designed to support the individual consumer borrowing needs of our commercial and industrial loan and deposit clients, and are well diversified across our markets. Consumer loans typically have shorter terms, lower balances, higher yields and higher risks of default than residential real estate mortgage loans. Consumer loan collections are dependent on the borrower’s continuing financial stability and are therefore more likely to be affected by adverse personal circumstances, such as the loss of employment, unexpected medical costs or divorce. These loans are often secured by the underlying personal property, which typically has insufficient value to satisfy the loan without a loss due to damage to the collateral and general depreciation. Mortgage Banking Activities We offer full-service residential mortgage products and services through Guardian, our mortgage division, with offices strategically located throughout our bank branches, as well as in other locations both in and outside our community banking footprint. We intend to continue to take advantage of opportunities to profitably grow our mortgage business as they present themselves, including by continuing to strategically expand our retail-based mortgage business outside of our community banking geographic footprint, improving the client experience through an enhanced fulfillment process, attracting experienced loan officers and improving profitability through centralized efficiencies. We maintain a high-degree of scalability to control costs in the event of a downturn in our mortgage business. Our mortgage loan office leases are primarily shorter-term in nature and the majority of our mortgage-related compensation is in the form of variable compensation. We look to originate quality mortgage loans with a focus on purchase money mortgages. In accordance with our lending policy, each loan undergoes a detailed underwriting process which incorporates uniform underwriting standards and oversight that satisfies secondary market standards as outlined by our investors to the size and complexity of the lending relationship. Mortgage loans are subject to the same uniform lending policies referenced below and consist primarily of loans with relatively stronger borrower credit scores, with an average FICO score of 736 in 2023. The residential mortgage industry is highly competitive and we compete with other community banks, regional banks, national banks, credit unions, mortgage companies, financial service companies and online mortgage companies. Due to the highly competitive nature of the residential mortgage industry, we expect to face industry-wide competitive pressures related to changing market conditions that will reduce our pricing margins and mortgage revenues generally, especially in a rising rate environment. Our mortgage banking business is also directly impacted by the interest rate environment, increased regulations, consumer demand, driven in large part by general economic conditions and the real estate markets, and investor demand for mortgage securities. Mortgage production, especially refinancing activity, declines in rising interest rate environments. In 2023, we experienced a continuing slowdown in our mortgage origination volume due to rising interest rates. We expect to see lower origination volumes in at least the first half of 2024 within the industry as a whole as interest rates are expected to remain relatively elevated. Sale of residential mortgages . We sell a large majority of the residential mortgage loans we originate through our mortgage banking business to Fannie Mae, Freddie Mac or, to a lesser extent, an array of private national mortgage investors. As part of our overall asset/liability management objectives, we may also retain certain residential loans that we originate and, in such an instance, would bear the risk of default with respect to these loans. To reduce the interest rate risk associated with commitments made to borrowers for mortgage loans that have not yet been closed and that we intend to sell in the secondary markets, we routinely enter into commitments (considered to be derivatives) to hedge the interest rate risk. Derivative instruments are recognized at fair value in our consolidated balance sheets as either assets or liabilities. We monitor our interest rate risk position daily to maintain appropriate coverage of our loan commitments made to borrowers. Loan servicing . We service residential mortgage loans for investors under contracts. We receive a fee for performing mortgage servicing activities on mortgage loans that are not owned by us and are not included on our consolidated balance sheet. This process involves collecting monthly mortgage payments on behalf of investors, reporting information to those investors on a timely basis and maintaining custodial escrow accounts for the payment of principal and interest to investors, and property tax and insurance premiums on behalf of borrowers. As compensation for our loan servicing activities, we receive a base servicing fee of approximately 0.25% per year of the loan balances serviced, plus any late charges collected from the delinquent borrowers and other fees incidental to the services provided. In the event of a default by the borrower, we receive no servicing fees until the default is cured. In times when interest rates are rising or at high levels, servicing mortgage loans can represent a steady source of noninterest 12 Table of Contents income and can, at times, offset decreases in mortgage banking gains. Conversely, in times when interest rates are falling or at very low levels, servicing mortgage loans can become comparatively less profitable due to the rapid payoff of loans and the negative impact due to the change in fair value of the servicing asset. We account for our residential mortgage loan servicing rights at fair value. The amount of loan servicing rights initially recorded is based on the fair value of the loan servicing rights determined on the date when the underlying loan is sold. Our determination of fair value and the amount we record is based on a valuation model using discounted cash-flow analysis and available market pricing. Third-party valuations of the loan servicing rights portfolio are obtained on a regular basis and are used to determine the fair value of the servicing rights at the end of the reporting period. Estimates of fair value reflect, among other things, the following variables: • anticipated prepayment speeds; • product type (i.e., conventional, government, balloon); • fixed or adjustable rate of interest; • interest rate; • servicing costs per loan; • discounted yield rate; • estimate of ancillary income; and • geographic location of the loan. We monitor the level of our investment in mortgage servicing rights in relation to our other mortgage banking activities in order to limit our exposure to significant fluctuations in loan servicing income. We use a hedging program to seek to mitigate the volatility from changes in the fair value of our mortgage servicing rights. Nonetheless, we remain exposed to significant potential volatility in the value of our mortgage servicing rights. Accordingly, in the future, we may sell loan servicing rights depending on a variety of factors, including capital sufficiency, the size of the mortgage servicing rights portfolio relative to total assets and current market conditions. Deposit Products We obtain most of our deposits from individuals, small and medium-sized businesses and municipalities in our markets. We solicit deposits through our relationship-driven team of dedicated and accessible bankers and through community-focused marketing. We emphasize obtaining deposit relationships at loan origination. We provide a high level of customer service to our depositors. We have invested in personnel, business and compliance processes and technology that enable us to acquire, and efficiently and effectively serve, a wide array of business deposit accounts, while continuing to provide the level of customer service for which we are known. We currently offer a comprehensive range of business deposit products and services to assist with the banking needs of our business customers, including a variety of remote deposit and cash management products along with commercial transaction accounts. Wealth Management We offer our clients a comprehensive suite of services that include private banking, wealth planning, investment management, trust and retirement plan services through our team of wealth advisors, trust specialists and investment professionals. Our holistic and personalized approach delivers a customized asset management solution focused on the client’s personal, family and multi-generational needs. Our asset management solutions are focused on seeking to generate the highest net after tax returns for our clients relative to their appropriate risk level. Credit Administration and Loan Review Certain credit risks are inherent in making loans. These include repayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual borrowers. We seek to control credit risk both through disciplined underwriting of each transaction, as well as active credit management processes and procedures to manage risk and minimize loss throughout the life of a loan. We seek to maintain a broadly diversified loan portfolio in terms of type of customer, type of loan product, geographic area and industries in which our business customers are engaged. We have developed tailored underwriting criteria and credit management processes for each of the various loan product types we offer our customers. Underwriting. In evaluating each potential loan relationship, we adhere to a disciplined underwriting evaluation process that includes the following: • understanding the customer’s financial condition and ability to repay the loan; 13 Table of Contents • verifying that the primary and secondary sources of repayment are adequate in relation to the amount and structure of the loan; • observing appropriate loan-to-value guidelines for collateral secured loans; • maintaining our targeted levels of diversification for the loan portfolio as to type of borrower; and • ensuring that each loan is properly documented with perfected liens on collateral. Loan Approval Authority. Our lending activities follow written, non-discriminatory, underwriting standards and loan origination procedures established by our board of directors and management. We have established several levels of lending authority that have been delegated by the board of directors to our Chief Executive Officer, Chief Credit Officer and other personnel in accordance with our loan policy. Authority limits are based on the total exposure of the borrower and are conditioned on the loan conforming to the policies contained in the loan policy. Any loan policy exceptions are fully disclosed to the approving authority. Ongoing Credit Risk Management. In addition to the tailored underwriting process described above, we perform ongoing risk monitoring and review processes for credit exposures. An internal loan review team that utilizes a mix of internal and external resources perform regular loan reviews and confirm loan classifications. We strive to identify potential problem loans early in an effort to aggressively seek resolution of these situations before they create a loss. We record any necessary charge-offs promptly and maintain adequate allowance levels for probable credit losses incurred in the loan portfolio. In general, whenever a particular loan or overall borrower relationship is downgraded from a pass grade to a watch or substandard grade based on one or more standard loan grading factors, our relationship manager (who is typically the loan officer) and credit team members engage in active evaluation of the asset to determine the appropriate resolution strategy. Management regularly reviews the status of the watch list and classified assets portfolio as well as the larger credits in the portfolio. Concentrations of Credit Risk. Diversification of risk is a key factor in prudent asset management. Our loan portfolio is balanced between our metropolitan and community markets and by type, thereby diversifying our loan concentration. Our granular loan portfolio reflects a balanced mix of consumer and commercial clients across these markets that we think provides a natural hedge to industry and market cycles. In addition, risk from concentration is actively managed by management and reviewed by our board of directors, and exposures relating to borrower, industry and commercial real estate categories are tracked and measured against established policy limits and guidelines. Lending Limits. Our lending activities are subject to a variety of lending limits imposed by federal law. In general, Sunflower Bank is subject to a legal lending limit on loans to a single borrower of 15% of its capital and unimpaired surplus, or 25% if the loan is fully secured. The dollar amounts of the Bank’s lending limit increases or decreases as its capital increases or decreases. We are able to sell participations in larger loans to other financial institutions, which allows us to better manage the risk and exposure involved with larger loans and to meet the lending needs of our customers requiring extensions of credit in excess of regulatory limits. Sunflower Bank’s legal lending limit as of December 31, 2023, on loans to a single borrower was $137.7 million (15%) and $229.5 million (25%, for fully secured loans). Human Capital Resources We are committed to provide, develop and retain a high performing and diverse workforce that fosters a healthy, safe and productive work environment for our employees to maximize individual and organizational potential and position us as an employer of choice. Employee Profile. As of December 31, 2023, we had 1,128 total employees and 1,110 full-time equivalent employees, primarily located in Texas, Kansas, Colorado, New Mexico and Arizona. Our employees are not covered by a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements. Compensation and Benefits. We believe our competitive compensation and benefits package, along with our positive and inclusive work environment, bring out the best in our employees. We have designed our compensation program around the philosophy of mutual respect and the continued success of our organization. We know that our most valuable asset is our people. We offer competitive benefits to our employees and their families. These programs include a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, flexible spending accounts, paid time off, tuition reimbursement, volunteer and parenting leave and an employee assistance program. 14 Table of Contents We annually review benefit programs and compensation programs to seek to ensure that we remain competitive in our markets to meet the needs of our employees and their families. Learning and Development. Our goal is to better equip our managers and leaders with the most effective resources and tools to succeed in their roles. We want to create strong leaders with a platform that allows open communication, provides consistency across regions as well as fosters growth and development. Our goal is to establish strong leaders who will be able to effectively engage their employees to meet and reinforce the mission and goals of Sunflower Bank. We have internal programs for emerging managers and leaders that are designed to train and enhance the skills of our employees to promote career advancement from within our company. In addition, we facilitate the educational and professional development of our employees through financial support to attend conferences and obtain degrees, licenses and certifications while employed by us. Employee Engagement Surveys. We are committed to seeking to ensure that all of our employees feel a sense of belonging in the workplace and that they are given an opportunity to share their opinions and be heard by management and our leaders. We believe that engaged employees are the foundation of a successful company. Our employee engagement surveys serve as a learning tool and provide us with the information to allow us to identify areas of strength and opportunities for improvement to seek to ensure continued satisfaction and retention of our employees. In addition to our employee engagement surveys, we have additional tools that employees can provide feedback to co-workers, departments, and other areas of Sunflower Bank besides management or leadership through our Intranet and HRIS. These tools provide positive feedback and success stories for all employees to share. Implications of Being an Emerging Growth Company FirstSun qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the “JOBS Act.” An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. Among other things, as an emerging growth company: • FirstSun is exempt from the requirement to obtain an attestation from its auditors on management’s assessment of FirstSun’s internal control over financial reporting under the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act”; • FirstSun will be permitted an extended transition period for complying with new or revised accounting standards affecting public companies and such new or revised accounting standards will not be applicable to FirstSun until such time as they are applicable to private companies; • FirstSun is permitted to provide reduced disclosure regarding its executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, which means FirstSun does not have to include a compensation discussion and analysis and certain other disclosures regarding its executive compensation arrangements; and • FirstSun is not required to hold non-binding stockholder advisory votes on executive compensation or golden parachute arrangements. FirstSun has taken advantage of certain reduced reporting obligations in this Annual Report on Form 10-K. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold securities. Supervision and Regulation General FirstSun and Sunflower Bank are subject to extensive banking regulations that impose restrictions on and provide for general regulatory oversight of their operations. These laws generally are intended to protect consumers and depositors, rather than FirstSun stockholders. The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on our operations. It is intended only to briefly summarize some material provisions. The following summary is qualified by reference to the statutory and regulatory provisions discussed. These statutes and regulations are subject to change, and additional statutes, regulations, and corresponding guidance may be adopted. We are unable to predict these future changes or the effects, if any, that these changes could have on our business, revenues, and results of operations. 15 Table of Contents Legislative and Regulatory Developments Although the 2008 financial crisis has now passed, the legislative and regulatory response, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), will continue to have an impact on our operations. The Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank Act was signed into law in July 2010 and impacts financial institutions in numerous ways, including: • The creation of a Financial Stability Oversight Council responsible for monitoring and managing systemic risk; • Granting additional authority to the Federal Reserve to regulate certain types of nonbank financial companies; • Granting new authority to the FDIC as liquidator and receiver; • Changing the manner in which deposit insurance assessments are made; • Requiring regulators to modify capital standards; • Establishing the Consumer Financial Protection Bureau (the “CFPB”); • Capping interchange fees that certain banks charge merchants for debit card transactions; • Imposing more stringent requirements on mortgage lenders; and • Limiting banks’ proprietary trading activities. There are many provisions in the Dodd-Frank Act mandating regulators to adopt new regulations and conduct studies upon which future regulation may be based. While some have been issued, many remain to be issued. Governmental intervention and new regulations could materially and adversely affect our business, financial condition and results of operations. Bank Holding Company Regulation We own 100% of the outstanding capital stock of Sunflower Bank, and, therefore, we are considered to be a bank holding company registered under the federal Bank Holding Company Act of 1956 (the “BHC Act”). As a result, we are primarily subject to the supervision, examination and reporting requirements of the Federal Reserve under the BHC Act and its regulations promulgated thereunder. Permitted Activities We are a bank holding company, and have elected to be a financial holding company, which permits us to engage in expanded financial activities as a bank holding company. Under the BHC Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than 5% of the voting shares of any company engaged in, the following activities: • banking or managing or controlling banks; • furnishing services to or performing services for our subsidiaries; and • any activity that the Federal Reserve determines to be so closely related to banking as to be a proper incident to the business of banking. Activities that the Federal Reserve has found to be so closely related to banking as to be a proper incident to the business of banking include: • factoring accounts receivable; • making, acquiring, brokering or servicing loans and usual related activities; • leasing personal or real property; • operating a non-bank depository institution, such as a savings association; • trust company functions; • financial and investment advisory activities; • conducting discount securities brokerage activities; • underwriting and dealing in government obligations and money market instruments; • providing specified management consulting and counseling activities; • performing selected data processing services and support services; • acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and • performing selected insurance underwriting activities. 16 Table of Contents The Federal Reserve has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company’s continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries. Financial Holding Company Provisions of the Gramm-Leach-Bliley Act have expanded the permissible activities of a bank holding company that qualifies as a financial holding company. A bank holding company can elect to be treated as a “financial holding company,” which would allow it to engage in a broader array of activities. In summary, a financial holding company can engage in activities that are financial in nature or incidental or complementary to financial activities, including insurance underwriting, sales and brokerage activities, providing financial and investment advisory services, underwriting services and limited merchant banking activities. FirstSun is currently a financial holding company. In order to remain a financial holding company, FirstSun must continue to be considered well managed and well capitalized by the Federal Reserve, and the Bank must continue to be considered well managed and well capitalized by the Office of the Comptroller of the Currency (the “OCC”) and have at least a “satisfactory” rating under the Community Reinvestment Act. Expansion Activities The BHC Act requires a bank holding company to obtain the prior approval of the Federal Reserve before merging with another bank holding company, acquiring substantially all the assets of any bank or bank holding company, or acquiring directly or indirectly any ownership or control of more than 5% of the voting shares of any bank. In addition, the prior approval of the OCC is required for a national bank to merge with another bank or purchase the assets or assume the deposits of another bank. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other factors, the effect of the acquisition on competition, the public benefits expected to be received from the acquisition, the projected capital ratios and levels on a post-acquisition basis, and the acquiring institution’s record of addressing the credit needs of the communities it serves, including the needs of low and moderate income neighborhoods, consistent with the safe and sound operation of the bank, under the Community Reinvestment Act (discussed below). On July 9, 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy. Among other initiatives, the Executive Order encouraged the federal banking agencies to review their current merger oversight practices under the BHC Act and the Bank Merger Act and adopt a plan for revitalization of such practices. There are many steps that must be taken by the agencies before any formal changes to the framework for evaluating bank mergers can be finalized and the prospects for such action are uncertain at this time; however, the adoption of more expansive or prescriptive standards may have an impact on our acquisition activities. On December 18, 2023, the U.S. Department of Justice (“DOJ”) released its updated merger guidelines, which modified certain criteria, including a reduction of market concentration calculations by which the DOJ would presume a substantial lessening of competition or the creation of a monopoly. Additionally, the updated merger guidelines focus on a number of other factors related to competitiveness and the impact of the merger upon various constituencies, including customers and workers. While bank regulators, and not the DOJ, typically have addressed anti-trust concerns in connection with bank mergers with a focus on market concentration, the DOJ guidelines and public comments from DOJ officials suggest that the DOJ could weigh in on more bank mergers in the future. On January 29, 2024, the Office of the Comptroller of the Currency proposed amendments to its business combination rules and added a proposed policy statement regarding its evaluation of factors under the Bank Merger Act. While the amendments and policy statement are not final, it is expected that the proposed policy statement would set forth standards by which certain mergers would raise regulatory concerns as well as procedures to extend and augment public comments on proposed mergers. These amendments and the policy statement could delay merger and other business combination approvals in the future. Change in Control Two statutes, the BHC Act and the Change in Bank Control Act, together with regulations promulgated under them, require some form of regulatory review before any company may acquire “control” of a bank or a bank holding company. Under the BHC Act, control is deemed to exist if a company acquires 25% or more of any class of voting securities of a bank holding company; controls the election of a majority of the members of the board of directors; or exercises a controlling influence over the management or policies of a bank or bank holding company. On January 30, 2020, the Federal Reserve issued a final rule (which became effective September 30, 2020) that clarified and codified the Federal Reserve’s standards for determining whether one company has control over another. The final rule established four categories of tiered presumptions of noncontrol that are based on the percentage of voting shares held by the investor (less 17 Table of Contents than 5%, 5-9.9%, 10-14.9% and 15-24.9%) and the presence of other indicia of control. As the percentage of ownership increases, fewer indicia of control are permitted without falling outside of the presumption of noncontrol. These indicia of control include nonvoting equity ownership, director representation, management interlocks, business relationship and restrictive contractual covenants. Under the final rule, investors can hold up to 24.9% of the voting securities and up to 33% of the total equity of a company without necessarily having a controlling influence. Under the Change in Bank Control Act, a person or company is generally required to file a notice with the Federal Reserve if it will, as a result of the transaction, own or control 10% or more of any class of voting securities or direct the management or policies of a bank or bank holding company and either if the bank or bank holding company has registered securities or if the acquirer would be the largest holder of that class of voting securities after the ac quisition. Transa ctions subject to the BHC Act are exempt from Change in Bank Control Act requirements. Source of Strength There are a number of obligations and restrictions imposed by law and regulatory policy on bank holding companies with regard to their depository institution subsidiaries that are designed to minimize potential loss to depositors and to the FDIC insurance funds in the event that the depository institution becomes in danger of defaulting under its obligations to repay deposits. Under a policy of the Federal Reserve and the Dodd-Frank Act, a bank holding company is required to serve as a source of financial strength to its subsidiary depository institutions and to commit resources to support such institutions in circumstances where it might not do so absent such policy. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, to avoid receivership of its insured depository institution subsidiary, a bank holding company is required to guarantee the compliance of any insured depository institution subsidiary that may become “undercapitalized” within the terms of any capital restoration plan filed by such subsidiary with its appropriate federal banking agency up to the lesser of (a) an amount equal to 5% of the institution’s total assets at the time the institution became undercapitalized, or (b) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all applicable capital standards as of the time the institution fails to comply with such capital restoration plan. The Federal Reserve also has the authority under the BHC Act to require a bank holding company to terminate any activity or relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the Federal Reserve’s determination that such activity or control constitutes a serious risk to the financial soundness or stability of any subsidiary depository institution of the bank holding company. Further, federal law grants federal bank regulatory authorities’ additional discretion to require a bank holding company to divest itself of any bank or nonbank subsidiary if the agency determines that divestiture may aid the depository institution’s financial condition. The Federal Deposit Insurance Act also provides that amounts received from the liquidation or other resolution of any insured depository institution by any receiver must be distributed (after payment of secured claims) to pay the deposit liabilities of the institution prior to payment of any other general or unsecured senior liability, subordinated liability, general creditor or stockholder. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment. Capital Requirements The Federal Reserve imposes certain capital requirements on bank holding companies under the BHC Act, including a minimum leverage ratio and a minimum ratio of “qualifying” capital to risk-weighted assets. These requirements are essentially the same as those that apply to such holding company’s bank subsidiary and are described below under “Bank Regulation—Capital and Related Requirements.” Dividend Payments Our ability to pay dividends to our stockholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies. FirstSun is a Delaware corporation and subject to the limitations of the Delaware General Corporation Law, which we refer to as the “DGCL.” The DGCL allows FirstSun to pay dividends only out of its surplus (as defined and computed in accordance with the provisions of the DGCL) or if FirstSun has no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. 18 Table of Contents In addition, as a general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should eliminate, defer or significantly reduce dividends to stockholders if: (a) the company’s net income available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; (b) the prospective rate of earnings retention is inconsistent with the company’s capital needs and overall current and prospective financial condition; or (c) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios. Under Federal Reserve policy, bank holding companies are expected to inform the Federal Reserve reasonably in advance of declaring or paying a dividend that exceeds earnings for the period (e.g., quarter) for which the dividend is being paid or that could result in a material adverse change to the organization’s capital structure. The Federal Reserve also possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. In addition, under the Basel III rules, financial institutions that seek to pay dividends must maintain the 2.5% capital conservation buffer. See “Bank Regulation—Capital and Related Requirements” below. Stock Buybacks and Other Capital Redemptions Under Federal Reserve policies and regulations, bank holding companies must seek regulatory approval prior to any redemption that would reduce the bank holding company’s consolidated net worth by 10% or more, prior to the redemption of most instruments included in Tier 1 or Tier 2 capital with features permitting redemption at the option of the issuing bank holding company, or prior to the redemption of equity or other capital instruments included in Tier 1 or Tier 2 capital prior to stated maturity, if such redemption could have a material effect on the level or composition of the organization’s capital base. Bank holding companies are also expected to both inform the Federal Reserve reasonably in advance of a redemption or repurchase of common stock if such buyback results in a net reduction of the company’s outstanding amount of common stock below the amount outstanding at the beginning of the fiscal quarter, and to consult with the Federal Reserve generally prior to engaging in stock buybacks. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002, which we refer to as “Sarbanes-Oxley,” implemented a broad range of corporate governance, accounting and reporting measures for companies, that have securities registered under the Exchange Act. FirstSun became subject to Sarbanes-Oxley on August 10, 2021. Sarbanes-Oxley and the various regulations promulgated under Sarbanes-Oxley, established, among other things: (a) requirements for audit committees, including independence, expertise, and responsibilities; (b) additional responsibilities relating to financial statements for the Chief Executive Officer and Chief Financial Officer of reporting companies; (c) standards for auditors and regulation of audits, including independence provisions that restrict non-audit services that accountants may provide to their audit clients; (d) increased disclosure and reporting obligations for reporting companies and their directors and executive officers, including accelerated reporting of stock transactions and a prohibition on trading during blackout periods; and (e) a range of civil and criminal penalties for fraud and other violations of the securities laws. Bank Regulation Sunflower Bank is a national banking association with its main office in Dallas, Texas, which is subject to regulation and supervision primarily by the OCC and secondarily by the Federal Reserve, the FDIC, and the CFPB. We are subject to requirements and restrictions under federal law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted and the interest that may be charged thereon and limitations on the types of investments that may be made and the types of services that may be offered. Various consumer laws and regulations also affect the operations of Sunflower Bank. The OCC regularly examines Sunflower Bank’s operations and has the authority to approve or disapprove mergers, the establishment of branches and similar corporate actions. The OCC also has the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. Sunflower Bank is also subject to numerous state and federal statutes and regulations that affect its business, activities, and operations. Branching National banks are required by the National Bank Act to adhere to branching laws applicable to state banks in the states in which they are located. Under Texas law, the Riegle-Neal Act and the Dodd-Frank Act, and with the prior approval of the OCC, Sunflower Bank may open branch offices within or outside of Texas, where our Bank headquarters was relocated to in 2023, provided that a state bank chartered by the state in which the branch is to be located would also be permitted to establish a branch in Texas. In addition, with prior regulatory approval, Sunflower Bank may acquire branches of existing banks located in Texas or other states. 19 Table of Contents Capital and Related Requirements We are subject to comprehensive capital adequacy requirements intended to protect against losses that we may incur. Regulatory capital rules, which we refer to as Basel III, impose minimum capital requirements for bank holding companies and banks. The Basel III rules apply to all state and national banks and savings and loan associations regardless of size and bank holding companies and savings and loan holding companies other than “small bank holding companies,” generally holding companies with consolidated assets of less than $3 billion. More stringent requirements are imposed on “advanced approaches” banking organizations—those organizations with $250 billion or more in total consolidated assets, $10 billion or more in total foreign exposures, or that have opted into the Basel II capital regime. The rules include certain higher risk-based capital and leverage requirements than those previously in place. Specifically, we are required to maintain the following minimum capital requirements: • a common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%; • a Tier 1 risk-based capital ratio of 6%; • a total risk-based capital ratio of 8%; and • a leverage ratio of 4%. Under Basel III, Tier 1 capital includes two components: CET1 capital and additional Tier 1 capital. The highest form of capital, CET1 capital, consists solely of common stock (plus related surplus), retained earnings, accumulated other comprehensive income, otherwise referred to as AOCI, and limited amounts of minority interests that are in the form of common stock. Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, Tier 1 minority interests and grandfathered trust preferred securities. Tier 2 capital generally includes the allowance for credit losses up to 1.25% of risk-weighted assets, qualifying preferred stock, subordinated debt and qualifying tier 2 minority interests, less any deductions in Tier 2 instruments of an unconsolidated financial institution. AOCI is presumptively included in CET1 capital and often would operate to reduce this category of capital. When implemented, Basel III provided a one-time opportunity for covered banking organizations to opt out of much of this treatment of AOCI. We made this opt-out election. In addition, in order to avoid restrictions on capital distributions or discretionary bonus payments to executives, under Basel III, a banking organization must maintain a “capital conservation buffer” on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity, but the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital). The following effective minimum capital plus capital conservation buffer ratios are applicable: (a) a CET1 capital ratio of 7.0%, (b) a Tier 1 risk-based capital ratio of 8.5%, and (c) a total risk-based capital ratio of 10.5%. The capital rules require that goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities (“DTLs”), be deducted from CET1 capital. Additionally, deferred tax assets (“DTAs”) that arise from net operating loss and tax credit carryforwards, net of associated DTLs and valuation allowances, are fully deducted from CET1 capital. However, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, along with mortgage servicing assets and “significant” (defined as greater than 10% of the issued and outstanding common stock of the unconsolidated financial institution) investments in the common stock of unconsolidated “financial institutions” are partially includible in CET1 capital, subject to deductions defined in the rules. The OCC also considers interest rate risk (arising when the interest rate sensitivity of Sunflower Bank’s assets does not match the sensitivity of its liabilities or its off-balance sheet position) in the evaluation of the bank’s capital adequacy. Banks with excessive interest rate risk exposure are required to hold additional amounts of capital against their exposure to losses resulting from that risk. Through the risk-weighting of assets, the regulators also require banks to incorporate market risk components into their risk-based capital. Under these market risk requirements, capital is allocated to support the amount of market risk related to a bank’s lending and trading activities. Sunflower Bank’s capital categories are determined solely for the purpose of applying the “prompt corrective action” rules described below and they are not necessarily an accurate representation of its overall financial condition or prospects for other purposes. Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business. See “Prompt Corrective Action” below. Banks and holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets and 20 Table of Contents trading assets plus trading liabilities of 5% or less of total consolidated assets, are deemed “qualifying community banking organizations” are eligible to opt into the “community bank leverage ratio framework.” A qualifying community banking organization that elects to use the community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the generally applicable risk-based and leverage capital requirements under the Basel III rules and, if applicable, is considered to have met the “well capitalized” ratio requirements for purposes of its primary federal regulator’s prompt corrective action rules, discussed below. We do not have any immediate plans to use the community bank leverage ratio framework but may make such an election in the future. Prompt Corrective Action As an insured depository institution, we are required to comply with the capital requirements promulgated under the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). The FDICIA requires each federal banking agency to take prompt corrective action (“PCA”) to resolve the problems of insured depository institutions, including those that fall below one or more prescribed minimum capital ratios. The law requires each federal banking agency to promulgate regulations defining the following five categories in which an insured depository institution will be placed, based on the level of capital ratios: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” As of December 31, 2023, we maintained capital ratios that exceeded the minimum ratios established for a “well capitalized” institution. The following is a list of the criteria for each PCA capital category: Well Capitalized —The institution exceeds the required minimum level for each relevant capital measure. A well-capitalized institution: • has total risk-based capital ratio of 10% or greater; and • has a Tier 1 risk-based capital ratio of 8% or greater; and • has a common equity Tier 1 risk-based capital ratio of 6.5% or greater; and • has a leverage capital ratio of 5% or greater; and • is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure. Adequately Capitalized —The institution meets the required minimum level for each relevant capital measure. The institution may not make a capital distribution if it would result in the institution becoming undercapitalized. An adequately capitalized institution: • has a total risk-based capital ratio of 8% or greater; and • has a Tier 1 risk-based capital ratio of 6% or greater; and • has a common equity Tier 1 risk-based capital ratio of 4.5% or greater; and • has a leverage capital ratio of 4% or greater. Undercapitalized —The institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized institution: • has a total risk-based capital ratio of less than 8%; or • has a Tier 1 risk-based capital ratio of less than 6%; or • has a common equity Tier 1 risk-based capital ratio of less than 4.5% or greater; or • has a leverage capital ratio of less than 4%. Significantly Undercapitalized —The institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized institution: • has a total risk-based capital ratio of less than 6%; or • has a Tier 1 risk-based capital ratio of less than 4%; or • has a common equity Tier 1 risk-based capital ratio of less than 3% or greater; or • has a leverage capital ratio of less than 3%. Critically Undercapitalized —The institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution has a ratio of tangible equity to total assets that is equal to or less than 2%. 21 Table of Contents Depending upon the capital category to which an institution is assigned, the primary federal regulators’ corrective powers include: (a) requiring the institution to submit a capital restoration plan; (b) limiting the institution’s asset growth and restricting its activities; (c) requiring the institution to issue additional capital stock (including additional voting stock) or to sell itself; (d) restricting transactions between the institution and its affiliates; (e) restricting the interest rate that the institution may pay on deposits; (f) ordering a new election of directors of the institution; (g) requiring that senior executive officers or directors be dismissed; (h) prohibiting the institution from accepting deposits from correspondent banks; (i) requiring the institution to divest certain subsidiaries; (j) prohibiting the payment of principal or interest on subordinated debt; and (k) ultimately, appointing a receiver for the institution. CECL On December 21, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to (a) address the implementation of a new credit impairment model, the Current Expected Credit Loss, or CECL model, an accounting standard under United States generally accepted accounting principles (U.S. GAAP); (b) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations are expected to experience upon adopting CECL; and (c) require the use of CECL in stress tests beginning with the 2020 capital planning and stress testing cycle for certain banking organizations that are subject to stress testing. We implemented CECL effective January 1, 2023. Upon adoption, we recorded an increase to the allowance for credit losses on loans held-for-investment of $5.3 million, a reduction in the allowance for credit losses on unfunded commitments of $0.2 million, an increase to deferred tax assets of $1.2 million, and a corresponding one-time cumulative reduction to retained earnings, net of tax, of $3.8 million in the consolidated balance sheet as of January 1, 2023. Dividend Payments The primary source of funds for FirstSun is dividends from Sunflower Bank. Under the National Bank Act, a national bank may pay dividends out of its undivided profits in such amounts and at such times as the bank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate, exceed the bank’s year-to-date net income plus the bank’s retained net income for the two preceding years. The payment of dividends by any FDIC-insured institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and an FDIC-insured institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its capital requirements under applicable guidelines as of December 31, 2023. Notwithstanding the availability of funds for dividends, the OCC may prohibit the payment of dividends by the Bank if it determines such payment would constitute an unsafe or unsound practice. In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends will have to maintain the 2.5% capital conservation buffer. See “Capital and Related Requirements” above. Community Reinvestment Act and Fair Lending Requirements Sunflower Bank is subject to certain fair lending requirements and reporting obligations involving its home mortgage lending operations. Each bank is also subject to certain requirements and reporting obligations under the Community Reinvestment Act, or “CRA.” The CRA generally requires federal banking agencies to evaluate the record of a financial institution in meeting the credit needs of its local communities, including low- and moderate-income neighborhoods. The CRA further requires the agencies to take into account a bank’s record of meeting community credit needs when evaluating applications for, among other things, new branches or mergers. Sunflower Bank received a “satisfactory” CRA Assessment Rating from the OCC in its most recent examination. In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. On October 24, 2023, the federal banking agencies issued a final rule to amend the regulations implementing the CRA. The rule significantly expands the number of areas in which a bank is evaluated, materially changes the tests used to evaluate the bank in those areas and expands the data a bank must collect and report. The final rule takes effect April 1, 2024, but the majority of its operative provisions are effective January 1, 2026, with the data reporting requirements effective January 1, 2027. We expect the rule will increase Sunflower Bank’s obligations and compliance costs necessary to achieve a “Satisfactory” or “Outstanding” rating under the CRA. 22 Table of Contents Fair Lending Requirements We are subject to certain fair lending requirements and reporting obligations involving lending operations. A number of laws and regulations provide these fair lending requirements and reporting obligations, including, at the federal level, the Equal Credit Opportunity Act, or the “ECOA,” as amended by the Dodd-Frank Act, and Regulation B, as well as the Fair Housing Act, or the “FHA,” and regulations implementing the FHA. ECOA and Regulation B prohibit discrimination in any aspect of a credit transaction based on a number of prohibited factors, including race or color, religion, national origin, sex, marital status, age, the applicant’s receipt of income derived from public assistance programs, and the applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act. ECOA and Regulation B include lending acts and practices that are specifically prohibited, permitted, or required, and these laws and regulations proscribe data collection requirements, legal action statute of limitations, and disclosure of the consumer’s ability to receive a copy of any appraisal(s) and valuation(s) prepared in connection with certain loans secured by dwellings. FHA prohibits discrimination in all aspects of residential real-estate related transactions based on prohibited factors, including race or color, national origin, religion, sex, familial status, and handicap. In addition to prohibiting discrimination in credit transactions on the basis of prohibited factors, these laws and regulations can cause a lender to be liable for policies that result in a disparate treatment of or have a disparate impact on a protected class of persons. If a pattern or practice of lending discrimination is alleged by a regulator, then the matter may be referred by the agency to the DOJ, for investigation. In December 2012, the DOJ and CFPB entered into a Memorandum of Understanding under which the agencies have agreed to share information, coordinate investigations, and have generally committed to strengthen their coordination efforts. In addition to substantive penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with fair lending requirements into account when regulating and supervising other activities of the bank, including in acting on expansionary proposals. Consumer Protection Regulations The activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. Bank regulatory agencies have increasingly used a general consumer protection statute to address “unethical” or otherwise “bad” business practices that may not necessarily fall directly under the purview of a specific banking or consumer finance law. The law of choice for enforcement against such business practices has been Section 5 of the Federal Trade Commission Act—the primary federal law that prohibits “unfair or deceptive acts or practices” and unfair methods of competition in or affecting commerce (“UDAP” or “FTC Act”). “Unjustified consumer injury” is the principal focus of the FTC Act. Prior to the Dodd-Frank Act, there was little formal guidance to provide insight to the parameters for compliance with the UDAP law. However, the UDAP provisions have been expanded under the Dodd-Frank Act to apply to “unfair, deceptive or abusive acts or practices” (“UDAAP”). The CFPB has brought a variety of enforcement actions for violations of UDAAP provisions and CFPB guidance continues to evolve. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The loan operations of the Bank are also subject to federal laws applicable to credit transactions, such as: • the Truth-In-Lending Act, or “TILA,” and Regulation Z, governing disclosures of credit and servicing terms to consumer borrowers and including substantial requirements for mortgage lending and servicing, as mandated by the Dodd-Frank Act; • the Home Mortgage Disclosure Act and Regulation C, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the communities they serve; • ECOA and Regulation B, prohibiting discrimination on the basis of race, color, religion, or other prohibited factors in any aspect of a credit transaction; • the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act and Regulation V, as well as the rules and regulations of the FDIC governing the use of consumer reports, provision of information to credit reporting agencies, certain identity theft protections and certain credit and other disclosures; • the Fair Debt Collection Practices Act and Regulation F, governing the manner in which consumer debts may be collected by collection agencies and intending to eliminate abusive, deceptive, and unfair debt collection practices; • the Real Estate Settlement Procedures Act, or “RESPA,” and Regulation X, which governs various aspects of residential mortgage loans, including the settlement and servicing process, dictates certain disclosures to be provided to consumers, and imposes other requirements related to compensation of service providers, insurance escrow accounts, and loss mitigation procedures; 23 Table of Contents • The Secure and Fair Enforcement for Mortgage Licensing Act, the “SAFE Act,” which mandates a nationwide licensing and registration system for residential mortgage loan originators. The SAFE Act also prohibits individuals from engaging in the business of a residential mortgage loan originator without first obtaining and maintaining annually registration as either a federal or state licensed mortgage loan originator; • The Homeowners Protection Act, or the PMI Cancellation Act, provides requirements relating to private mortgage insurance on residential mortgages, including the cancellation and termination of PMI, disclosure and notification requirements, and the requirement to return unearned premiums; • The Fair Housing Act prohibits discrimination in all aspects of residential real-estate related transactions based on race or color, national origin, religion, sex, and other prohibited factors; • The Servicemembers Civil Relief Act and Military Lending Act, providing certain protections for servicemembers, members of the military, and their respective spouses, dependents and others; and • Section 106(c)(5) of the Housing and Urban Development Act requires making home ownership available to eligible homeowners. The deposit operations of the Bank are also subject to federal laws, such as: • the Federal Deposit Insurance Act which, among other things, limits the amount of deposit insurance available per insured depositor category to $250,000 and imposes other limits on deposit-taking; • the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • the Electronic Funds Transfer Act and Regulation E, which governs the rights, liabilities, and responsibilities of consumers and financial institutions using electronic fund transfer services, and which generally mandates disclosure requirements, establishes limitations on liability applicable to consumers for unauthorized electronic fund transfers, dictates certain error resolution processes, and applies other requirements relating to automatic deposits to and withdrawals from deposit accounts; • The Expedited Funds Availability Act and Regulation CC, setting forth requirements to make funds deposited into transaction accounts available according to specified time schedules, disclose funds availability policies to customers, and relating to the collection and return of checks and electronic checks, including the rules regarding the creation or receipt of substitute checks; and • the Truth in Savings Act and Regulation DD, which requires depository institutions to provide disclosures so that consumers can make meaningful comparisons about depository institutions and accounts. The CFPB is an independent regulatory authority housed within the Federal Reserve. The CFPB has broad authority to regulate the offering and provision of consumer financial products and services. The CFPB has the authority to supervise and examine depository institutions with more than $10 billion in assets for compliance with federal consumer laws. The authority to supervise and examine depository institutions with $10 billion or less in assets, such as us, for compliance with federal consumer laws remains largely with those institutions’ primary regulators. However, the CFPB may participate in examinations of these smaller institutions on a “sampling basis” and may refer potential enforcement actions against such institutions to their primary regulators. As such, the CFPB may participate in examinations of the Bank. In addition, states are permitted to adopt consumer protection laws and regulations that are stricter than the regulations promulgated by the CFPB, and state attorneys general are permitted to enforce consumer protection rules adopted by the CFPB against certain institutions. The CFPB has issued a number of significant rules that impact nearly every aspect of the lifecycle of consumer financial products and services, including rules regarding residential mortgage loans. These rules implement Dodd-Frank Act amendments to ECOA, TILA and RESPA. Among other things, the rules adopted by the CFPB require banks to: (i) develop and implement procedures to ensure compliance with a “reasonable ability-to-repay” test; (ii) implement new or revised disclosures, policies and procedures for originating and servicing mortgages, including, but not limited to, pre-loan counseling, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower’s principal residence, and mortgage origination disclosures, which integrate existing requirements under TILA and RESPA; (iii) comply with additional restrictions on mortgage loan originator hiring and compensation; and (iv) comply with new disclosure requirements and standards for appraisals and certain financial products. The CFPB may issue regulations that impact products and services offered by Sunflower Bank. The CFPB has engaged in rulemakings that affect, among other things, credit card late fees, overdraft fees, data collection and reporting requirements for small business lenders such as Sunflower Bank, and personal financial data rights, including a proposed rule announced on January 17, 2024, that would, among other requirements, limit the overdraft fees that banks with greater than $10 billion in assets could charge. 24 Table of Contents Bank regulators take into account compliance with consumer protection laws when considering approval of any proposed expansionary proposals, including merger proposals. Anti-Money Laundering and the USA Patriot Act Financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The program must comply with the anti-money laundering provisions of the Bank Secrecy Act, or the “BSA.” FirstSun and the Bank are also prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence and “knowing your customer” in their dealings with foreign financial institutions, foreign customers, and other high risk customers. Financial institutions must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions, and certain laws provide law enforcement authorities with increased access to financial information maintained by banks. Financial institutions must comply with requirements regarding risk-based procedures for conducing ongoing customer due diligence, which requires the institutions to take appropriate steps to understand the nature and purpose of customer relationships and identify and verify the identity of the beneficial owners of legal entity customers. Anti-money laundering obligations have been substantially strengthened as a result of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, which we refer to as the “USA PATRIOT Act.” Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications. The regulatory authorities have been active in imposing cease and desist orders and money penalty sanctions against institutions that have not complied with these requirements. The USA PATRIOT Act amended the Bank Secrecy Act and provides, in part, for the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering by enhancing anti-money laundering and financial transparency laws, as well as enhanced information collection tools and enforcement mechanics for the U.S. government, including: (a) requiring standards for verifying customer identification at account opening; (b) rules to promote cooperation among financial institutions, regulators, and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; (c) reports by nonfinancial trades and businesses filed with the U.S. Treasury Department’s Financial Crimes Enforcement Network for transactions exceeding $10,000; (d) filing suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations; and (e) requires enhanced due diligence requirements for financial institutions that administer, maintain, or manage private bank accounts or correspondent accounts for non-U.S. persons. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications. Under the USA PATRIOT Act, the regulators can provide lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested, to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact the applicable governmental authorities. On January 1, 2021, Congress overrode former President Trump’s veto and thereby enacted the National Defense Authorization Act for Fiscal Year 2022, or “NDAA.” The NDAA provides for one of the most significant overhauls of the BSA and related anti-money laundering laws since the USA Patriot Act. Notably, changes include: • expansion of coordination and information sharing efforts among the agencies tasked with administering anti-money laundering and countering the financing of terrorism requirements, including the Financial Crimes Enforcement Network, or “FinCEN,” the primary federal banking regulators, federal law enforcement agencies, national security agencies, the intelligence community, and financial institutions; • providing additional penalties with respect to violations of BSA and enhancing the powers of FinCEN; • significant updates to the beneficial ownership collection rules and the creation of a registry of beneficial ownership which will track the beneficial owners of reporting companies which may be shared with law enforcement and financial institutions conducting due diligence under certain circumstances; • improvements to existing information sharing provisions that permit financial institutions to share information relating to SARs with foreign branches, subsidiaries, and affiliates (except those located in China, Russia, or certain other jurisdictions) for the purpose of combating illicit finance risks; and • enhanced whistleblower protection provisions, allowing whistleblower(s) who provide original information which leads to successful enforcement of anti-money laundering laws in certain judicial or administrative actions 25 Table of Contents resulting in certain monetary sanctions to receive up to 30% of the amount that is collected in monetary sanctions as well as increased protections. Under the USA PATRIOT Act, FinCEN can send our banking regulatory agencies lists of the names of persons suspected of involvement in terrorist activities. The Bank can be requested, to search its records for any relationships or transactions with persons on those lists. If the Bank finds any relationships or transactions, it must file a suspicious activity report and contact FinCEN. The Office of Foreign Assets Control The Office of Foreign Assets Control, or “OFAC,” which is an office in the U.S. Department of the Treasury, is responsible for helping to ensure that U.S. entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts; owned or controlled by, or acting on behalf of target countries, and narcotics traffickers. If a bank finds a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze or block the transactions on the account. Financial Privacy and Cybersecurity Under privacy protection provisions of the Gramm-Leach-Bliley Act of 1999, and related regulations, we are limited in our ability to disclose non-public information about consumers to nonaffiliated third parties. These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a nonaffiliated third-party. Federal banking agencies, including the OCC, have adopted guidelines for establishing information security standards and cybersecurity programs for implementing safeguards under the supervision of the board of directors. These guidelines, along with related regulatory materials, increasingly focus on risk management and processes related to information technology and the use of third parties in the provision of financial services. Consumers must be notified in the event of a data breach under applicable federal and state laws. Under federal regulations, banking organizations are required to notify their primary federal regulator as soon as possible and no later than 36 hours after the discovery of a “computer-security incident” that rises to the level of a “notification incident” within the meaning attributed to those terms by the federal regulation. Banks’ service providers are required under the federal regulation to notify any affected bank to or on behalf of which the service provider provides services “as soon as possible” after determining that it has experienced an incident that materially disrupts or degrades, or is reasonably likely to materially disrupt or degrade, covered services provided to such bank for as much as four hours. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of risk management strategies and governance processes related to cybersecurity. Deposit Premiums and Assessments Sunflower Bank’s deposits are insured by the Deposit Insurance Fund (“DIF”) of the FDIC up to $250,000, the maximum amount permitted by law. The FDIC uses the DIF to protect against the loss of insured deposits if an FDIC-insured bank or savings association fails. As an FDIC-insured bank, we must pay deposit insurance assessments to the FDIC based on our average total assets minus our average tangible equity. As an institution with less than $10 billion in assets, our assessment rates are based on the level of risk we pose to the FDIC’s DIF. The initial base rate for deposit insurance for institutions with less than $10 billion in assets is between five and 32 basis points. Total base assessment after possible adjustments now ranges between 2.5 and 32 basis points. For established smaller institutions, such as us, the total base assessment rate is calculated by using supervisory ratings as well as (a) an initial base assessment rate, (b) an unsecured debt adjustment (which can be positive or negative), and (c) a brokered deposit adjustment. In addition to the ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances. For example, under the Dodd-Frank Act, the minimum designated reserve ratio for the DIF was increased to 1.35% of the estimated total amount of insured deposits. Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35%. In November 2023, following the closures of Silicon Valley Bank and Signature Bank and in connection with its systemic risk determination announced on March 12, 2023, the FDIC announced a special deposit insurance assessment rate of 13.4 26 Table of Contents basis points beginning in the first quarterly assessment period of 2024, adjusted to exclude the first $5 billion in deposits for an anticipated total of eight quarterly assessment periods. The FDIC may terminate the deposit insurance of any insured depository institution if it determines after a notice and hearing that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. CRE Guidance In December 2015, the federal banking regulators released a statement entitled “Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending,” or the “CRE Guidance.” In the CRE Guidance, the federal banking regulators (a) expressed concerns with institutions that ease CRE underwriting standards, (b) directed financial institutions to maintain underwriting discipline and exercise risk management practices to identify, measure and monitor lending risks, and (c) indicated that they will continue to pay special attention to CRE lending activities and concentrations. The federal banking regulators previously issued guidance in December 2006, entitled “Interagency Guidance on Concentrations in CRE Lending, Sound Risk Management Practices,” which stated that an institution that is potentially exposed to significant CRE concentration risk should employ enhanced risk management practices. Specifically, the guidance states that such institutions that are potentially exposed to significant CRE concentration risk and may warrant greater supervisory scrutiny are those institutions which have (i) total CRE loans representing 300% or more of the institution’s total capital and (ii) the outstanding balance of such institution’s CRE loan portfolio has increased by 50% or more during the prior 36 months. Effect of Governmental Monetary Policies Our earnings are affected by domestic economic conditions and the monetary policies of the U.S. and its agencies. The Federal Open Market Committee’s monetary policies have had, and are likely to continue to have, an important effect on the operating results of banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve have major effects on the levels of bank loans, investments and deposits through its open market operations in U.S. government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. We cannot predict the nature or effect of future changes in such monetary policies. Future Legislation and Regulation Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied or interpreted. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although enactment of the proposed legislation has in the past and may in the future affect the regulatory structure under which we operate and may significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital or modify our business strategy, or limit our ability to pursue business opportunities in an efficient manner. Our business, financial condition, results of operations or prospects may be adversely affected, perhaps materially, as a result. Available Information We file reports with the Securities and Exchange Commission (the “SEC”) including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and proxy statements, as well as any amendments to those reports and statements. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports and statements filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are also accessible at no cost on our internet website at http://ir.firstsuncb.com after they are electronically filed with the SEC. No information contained on our website is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K. 27 Table of Contents Item 1A. Risk Factors An investment in our securities involves various risks, many of which are beyond our control, which could cause our results to differ significantly from management’s expectations. Some of these risk factors are described below. Any risk factor discussed below could, by itself or together with one or more other factors, materially and adversely affect our business, results of operations and/or financial condition, and cause the loss of part or all of the value of an investment in FirstSun. Additional risks and uncertainties not currently known to us or that we currently consider to not be material also may materially and adversely affect us and the value of an investment in our securities. In assessing these risks, you should also refer to other information disclosed in this Form 10-K (and in our subsequent SEC filings), including the financial statements and notes thereto. Any of the risks discussed below could also cause our actual results to differ materially from those discussed, anticipated or implied in these forward-looking statements. See “ CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ” above in this annual report. Risks Related to Our Business Economic and Geographic-Related Risks Our business may be adversely affected by economic conditions. Generally, in periods of economic downturns, including periods of rising interest rates and recessions, our realized credit losses increase, our deposit and funding costs increase, demand for our products and services declines, and the credit quality of our loan portfolio declines. Our financial performance generally, and in particular, the ability of borrowers to pay interest on and repay the principal of outstanding loans and the value of collateral securing those loans, as well as demand for loans and other products and services we offer and whose success we rely on to drive our growth, is highly dependent upon the business environment in the primary markets where we operate and in the United States as a whole. Unlike larger financial institutions that are more geographically diversified, we are a regional bank that provides banking and financial services to customers primarily in Texas, Kansas, Colorado, New Mexico and Arizona. HomeStreet operates in California, Hawaii, Oregon and Washington, and, if completed, the proposed HomeStreet merger will provide additional geographic diversity. However, the economic conditions in our current, and potential future, markets may be different from, and in some instances worse than, the economic conditions in the United States as a whole. Some elements of the business environment that affect our financial performance include short-term and long-term interest rates, the prevailing yield curve, inflation, monetary supply, fluctuations in the debt and equity capital markets, and the strength of the domestic economy and the local economies in the markets in which we operate. Unfavorable market conditions can result in a deterioration of the credit quality of borrowers, an increase in the number of loan delinquencies, defaults and charge-offs, foreclosures, additional provisions for credit losses, adverse asset values, a reduction in assets under management or administration, and an increase in our deposit and funding costs. A component of our loan portfolio is secured by real estate. A decline in real estate values can negatively impact our ability to recover our investment should the borrower become delinquent. Loans secured by stock or other collateral may be adversely impacted by a downturn in the economy and other factors that could reduce the recoverability of our investment. Unsecured loans are dependent on the solvency of the borrower, which can deteriorate, leaving us with a risk of loss. Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence, limitations on the availability of or increases in the cost of credit and capital, increases in inflation or interest rates, high unemployment, natural disasters, epidemics and pandemics (such as COVID-19), state or local government insolvency, or a combination of these or other factors. More specifically, the market conditions in the markets in which we have (and if the proposed HomeStreet merger is completed, the additional markets in which we will have) a presence may be different from, and could be worse than, the economic conditions in the United States as a whole. As discussed elsewhere in this Item 1A, inflationary pressures have caused the Federal Reserve to increase interest rates. Increases in interest rates in the past have led to recessions of various lengths and intensities and might lead to such a recession in the near future. Such a recession or any other adverse changes in business and economic conditions generally or specifically in the markets in which we operate could affect our business, including causing one or more of the following negative developments: • an increase in our deposit and funding costs; • a decrease in the demand for loans, mortgage banking products and services and other products and services we offer; • a decrease in our deposit account balances as customers move funds to seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates; • a decrease in the value of the collateral securing our residential or commercial real estate loans; 28 Table of Contents • a permanent impairment of our assets; or • an increase in the number of customers or other counterparties who default on their loans or other obligations to us, which could result in a higher level of NPAs, net charge-offs and provision for credit losses. The Federal Reserve has shifted its focus to limiting inflationary and other potentially adverse economic effects or market conditions, which signals the potential for a continued period of economic uncertainty. In addition, there are continuing concerns related to, among other things, the level of U.S. government debt and fiscal actions that may be taken to address that debt, the potential impacts of artificial intelligence, potential pandemic risks, the potential resurgence of economic and political tensions with China, the Middle East or the continuing Russian invasion of Ukraine, any of which may have a destabilizing effect on financial markets and economic activity. Economic pressure on consumers and overall economic uncertainty may result in changes in consumer and business spending, borrowing and saving habits. These economic conditions and/or other negative developments in the domestic or international credit markets may significantly affect the markets in which we do business, the value of our loans and investments, and our ongoing operations, costs and profitability. Declines in real estate values and sales volumes and high unemployment or underemployment may also result in higher than expected loan delinquencies, increases in our levels of nonperforming and classified assets and a decline in demand for our products and services. These negative events may cause us to incur losses and may adversely affect our capital, liquidity and financial condition. Inflationary pressures present a potential threat to our results of operation and financial condition. The United States generally and the regions in which we operate specifically have experienced significant inflationary pressures, evidenced by higher gas prices, higher food prices and other consumer items. Inflation represents a loss in purchasing power because the value of investments does not keep up with inflation and erodes the purchasing power of money and the potential value of investments over time. Accordingly, inflation can result in material adverse effects upon our customers, their businesses and, as a result, our financial position and results of operation. Inflation also can and does generally lead to higher interest rates, which have their own separate risks. Decreased deposit balances could result in our reliance upon higher cost funding sources. See Risks Associated with Monetary Events, Interest Rate and Yield Curve Risks and Capital and Liquidity Risks in this Item 1A of this report. Our wealth management business may be negatively impacted by changes in economic and market conditions and clients may seek legal remedies for investment performance. Our wealth management business may be negatively impacted by changes in general economic and market conditions because the performance of this businesses is directly affected by conditions in the financial and securities markets. The financial markets and businesses operating in the securities industry are highly volatile (meaning that performance results can vary greatly within short periods of time) and are directly affected by, among other factors, domestic and foreign economic conditions and general trends in business and finance, and by the threat, as well as the occurrence of global conflicts or events, all of which are beyond our control. We cannot assure you that broad market performance will be favorable in the future. Declines in the financial markets or a lack of sustained growth may result in a decline in the performance of our wealth management business and may adversely affect the market value and performance of the investment securities that we manage, which could lead to reductions in our wealth management fees, because they are based primarily on the market value of the securities we manage, and could lead some of our clients to reduce their assets under management by us or seek legal remedies for investment performance. If any of these events occur, the financial performance of our wealth management business could be materially and adversely affected. Risks Associated with Monetary Events The Federal Reserve has implemented significant economic strategies that have affected interest rates, inflation, asset values, and the shape of the yield curve. These strategies have had, and will continue to have, a significant impact on our business and on many of our clients. To illustrate: in response to the recession in 2008-09 and the following uneven recovery, the Federal Reserve implemented a series of domestic monetary initiatives designed to lower rates and make credit easier to obtain. The Federal Reserve changed course in 2015, raising rates several times through 2018. The last raise in 2018 was accompanied by a substantial and broad stock market decline. In 2019, the Federal Reserve began to lower rates. In 2020, in response to economic disruption associated with the COVID-19 pandemic, the Federal Reserve quickly reduced short-term rates to extremely low levels and acted to influence the markets to reduce long-term rates as well. During 2021, the Federal Reserve significantly reduced its “easing” actions that held down long-term rates. During 2022, the Federal Reserve switched to a tightening policy. It raised short term rates significantly and rapidly over most of the year. Those actions triggered a significant decline in the values of most categories of U.S. stocks and bonds; significantly raised recessionary expectations for the 29 Table of Contents U.S.; and inverted the yield curve in the U.S. for much of the last two quarters of 2022. During the first half of 2023, the Federal Reserve continued to raise short term rates, leading to continuing yield curve inversion. Subsequent to July 2023 and continuing into 2024, the Federal Reserve has held short term interest rates flat, but has not specifically indicated as to when interest rates may change. Federal Reserve strategies can, and often are intended to, affect the domestic money supply, inflation, interest rates, and the shape of the yield curve. Effects on the yield curve often are most pronounced at the short end of the curve, which is of particular importance to us and other banks. Among other things, easing strategies are intended to lower interest rates, expand the money supply, and stimulate economic activity, while tightening strategies are intended to increase interest rates, discourage borrowing, tighten the money supply, and restrain economic activity. However, as noted above, since the second half of 2022 short term rates continued to rise faster than long term rates to the point that the yield curve remained inverted for 2023 and early 2024. It is not clear when long term rates are likely to catch up. Many external factors may interfere with the effects of these actions or cause them to be changed, sometimes quickly. Such factors include significant economic trends or events as well as significant international monetary policies and events. As exemplified by the March 2023 bank failures in the U.S., such strategies also can affect the U.S. and world-wide financial systems in ways that may be difficult to predict. Risks associated with interest rates and the yield curve and their potential effects on financial institutions are discussed in this Item 1A under the caption Interest Rate and Yield Curve Risks and Capital and Liquidity Risks . Lending Risks If we fail to effectively manage credit risk, our business and financial condition will suffer. We must effectively manage credit risk. There are risks inherent in making any loan, including risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting and guidelines, risks resulting from changes in economic and industry conditions, risks inherent in dealing with individual borrowers and risks resulting from uncertainties as to the future value of collateral. There is no assurance that our credit risk monitoring and loan approval procedures are or will be adequate or will reduce the inherent risks associated with lending. Our risk management practices, such as monitoring the concentration of our loans within specific industries and our credit approval, review and administrative practices, may not adequately reduce credit risk, and our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. Many of our loans are made to small and medium-sized businesses that are less able to withstand competitive, economic and financial pressures than larger borrowers. Consequently, we may have significant exposure if any of these borrowers become unable to pay their loan obligations as a result of economic or market conditions, or personal circumstances. In addition, we are a middle-market lender, as such, the relative size of individual credits in our commercial portfolio increases the potential impact from singular credit events. A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our allowance for credit losses, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition and results of operations. Our allowance for credit losses in our loan portfolio may prove to be inadequate, which may adversely affect our business, financial condition and results of operations. We are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to ensure full repayment. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results and ability to meet our obligations. We evaluate the collectability of our loan portfolio and we maintain an allowance for credit losses on such loans that represents management’s best estimate of current expected losses in our loan portfolio considering available information, from internal and external sources, relevant to assessing exposure to credit loss over the contractual term of the loan portfolio. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. As a result, the determination of the appropriate level of allowance for credit losses inherently involves a high degree of subjectivity and requires us to make significant estimates related to current and expected future credit risks and trends, all of which may undergo material changes. Continuing deterioration in economic conditions, including the possibility of a recession, affecting borrowers; inflation; rising interest rates; new information regarding existing loans, credit commitments; the lingering effects of the COVID-19 pandemic or other global pandemics; natural 30 Table of Contents disasters and risks related to climate change; and identification of additional problem loans, and other factors, both within and outside of our control, may require an increase in the allowance for credit losses on loans. In addition, bank regulatory agencies periodically review our allowance for credit losses and may require an increase in credit loss expense or the recognition of further loan charge-offs, based on judgments different than those of management. Furthermore, if any charge-offs related to loans in future periods exceed our allowance for credit losses on loans, we will need to recognize additional credit loss expense to increase the applicable allowance. Any increase in the allowance for credit losses on loans will result in a decrease in net income and, possibly, capital, and may have a material adverse effect on our business, financial condition and results of operations. We are exposed to higher credit risk by commercial and industrial and commercial real estate lending. Commercial and industrial lending and commercial real estate lending usually involves higher credit risks than that of single-family residential lending. At December 31, 2023, approximately 69.6% of our loan portfolio consisted of commercial and industrial and commercial real estate loans. These types of loans generally involve larger loan balances to a single borrower or groups of related borrowers. Commercial and industrial business loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses, which may be unpredictable, and the collateral securing these loans may fluctuate in value. Although commercial and industrial business loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business. Accordingly, the repayment of commercial business loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity of the guarantor. Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends in some cases on successful development of their properties, as well as the factors affecting residential real estate borrowers. These loans may involve greater risk because they generally are not fully amortizing over the loan period, but have a balloon payment due at maturity. A borrower’s ability to make a balloon payment typically will depend on being able to either refinance the loan or sell the underlying property in a timely manner. Risk of loss on a construction and land development loan depends largely upon whether our initial estimate of the property’s value at completion of construction exceeds the cost of the property construction (including interest) and the availability of permanent take-out financing. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral. These types of loans are more susceptible to a risk of loss during a downturn in the business cycle. Our underwriting, review, and monitoring cannot eliminate all of the risks related to these loans. As of December 31, 2023, our commercial real estate loans were equal to 198.9% of our total risk-based capital. The banking regulators give commercial real estate lending greater scrutiny, and may require banks with higher levels of commercial real estate loans to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures. A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could hurt our business. A significant portion of our loans are secured by real estate. As of December 31, 2023, approximately 48.8% of our loan portfolio had real estate as primary collateral (owner occupied, non-owner occupied, non-residential construction, multifamily, and residential). Additionally, certain loans may have real estate as a secondary component of collateral. The real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. Deterioration in the real estate market could cause us to adjust our opinion of the level of credit quality in our loan portfolio. Such a determination may lead to an additional increase in our provisions for credit losses, which could also adversely affect our business, financial condition, and results of operations. 31 Table of Contents Nonperforming assets take significant time and resources to resolve and adversely affect our results of operations and financial condition. At December 31, 2023, we had a total of approximately $67.2 million of nonperforming assets or approximately 0.85% of total assets. Our nonperforming assets adversely affect our net income in various ways. We do not record interest income on nonaccrual loans or other real estate owned, thereby adversely affecting our net income and returns on assets and equity, increasing our loan administration costs and adversely affecting our efficiency ratio. When we take collateral in foreclosures and similar proceedings, we are required to mark the related asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of nonperforming assets increases our risk profile and may impact the capital levels regulators believe are appropriate in light of the ensuing risk profile. In addition, the resolution of nonperforming assets requires significant commitments of time from management, which may materially and adversely impact their ability to perform their other responsibilities. If we experience increases in nonperforming loans and nonperforming assets, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity. Interest Rate and Yield Curve Risks We are subject to interest rate risk, which could adversely affect our financial condition and profitability. The majority of our banking assets are subject to changes in interest rates. Like most financial institutions, our earnings significantly depend on our net interest income, the principal component of our earnings, which is the difference between interest earned by us from our interest-earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to our position, this “gap” will negatively impact our earnings. Many factors beyond our control impact interest rates, including economic conditions, governmental monetary policies, inflation, recession, changes in unemployment, the money supply, and disorder and instability in domestic and foreign financial markets. Changes in monetary policies of the various government agencies could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could also affect our ability to originate loans and obtain deposits, the fair value of our financial assets and liabilities, and the average duration of our assets and liabilities. An increase in interest rates may not increase our net interest income to the same extent we currently anticipate based on our modeling estimates and the assumptions underlying such modeling. Our failure to benefit from an increased interest rate environment to the extent we currently estimate, to the same extent as our competitors or at all could have a material adverse effect on our business, financial condition and results of operations. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. Interest rate increases often result in larger payment requirements for our floating interest rate borrowers, which increases the potential for default. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from higher interest rates. An increase (or decrease) in interest rates may also require us to increase (or decrease) the interest rates that we pay on our deposits. Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to increases in nonperforming assets, charge-offs and delinquencies, further increases to the allowance for credit losses, and a reduction of income recognized, among others, which could have a material adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to have a cost to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets could have a material adverse impact on our net interest income. Our cost of funds may increase as a result of general economic conditions, FDIC insurance assessments, interest rates and competitive pressures. We have traditionally obtained funds through local deposits and thus we have a base of lower cost transaction deposits. Generally, we believe local deposits are a cheaper and more stable source of funds than other borrowings because interest rates paid for local deposits are typically lower than interest rates charged for borrowings from the Federal Reserve or from other institutional lenders and reflect a mix of transaction and time deposits. Further, economic conditions and rising 32 Table of Contents interest rates could result in a decrease of our transaction deposit account balances as customers seek to obtain maximum federal deposit insurance coverage or to seek higher interest rates. Our cost of funds has increased in the past 12 months due largely to overall increases in the cost of our deposits. These trends could continue in the remainder of 2024. Additionally, our costs of funds and our profitability and liquidity are likely to be adversely affected if, and to the extent, we have to rely upon higher cost borrowings from the Federal Reserve or other institutional lenders, such as the Federal Home Loan Bank, or upon brokers to fund liquidity needs, and changes in our deposit mix, pricing, and growth could adversely affect our profitability and the ability to expand our loan portfolio. Further, as a result of bank closures or other factors, regulators could increase the cost of our FDIC insurance assessments and affect our profitability. Rapidly rising interest rates will impact the value of our investment securities and the cost of our funding sources, including deposits. Our profitability is highly dependent on our net interest income, which is the difference between the interest income paid to us on our loans and investments and the interest we pay to third parties such as our depositors, lenders and debt holders. Changes in interest rates can impact our profits and the fair values of certain of our assets and liabilities. Higher market interest rates and increased competition for deposits may result in higher interest expense, as we may offer higher rates to attract or retain customer deposits. Increases in interest rates also may increase the amount of interest expense we pay to creditors on short and long-term debt. Interest rate risk can also result from mismatches between the dollar amounts of re-pricing or maturing assets and liabilities and from mismatches in the timing and rates at which our assets and liabilities re-price. Changes in market values of investment securities classified as available for sale are impacted by interest rates and can negatively impact our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized gains and losses on those securities. Further, such losses could be realized into earnings should liquidity and/or business strategy necessitate the sales of securities in a loss position. A flat or inverted yield curve may reduce our net interest margin and adversely affect our loan and investment portfolios. The yield curve is a reflection of interest rates applicable to short and long-term debt. The yield curve is steep when short-term rates are much lower than long-term rates; it is flat when short-term rates and long-term rates are nearly the same; and it is inverted when short-term rates exceed long-term rates. Historically, the yield curve is usually upward sloping (higher rates for longer terms). However, the yield curve can be relatively flat or inverted (downward sloping), which has happened several times in the past few years. A flat or inverted yield curve, which tends to decrease net interest margin, would adversely impact our lending businesses and investment portfolio. The Federal Reserve, consistent with long-term goals, has raised rates in response to inflation, and the yield curve has remained inverted in early 2024. We cannot predict how long those conditions will exist. There is significant risk, especially if inversion remains common and a recession begins, that our net interest margin could compress. See Risks Associated with Monetary Events in this Item 1A of this report. Mortgage Banking Risks Our mortgage revenue is cyclical and is sensitive to the level of interest rates, changes in economic conditions, decreased economic activity, and slowdowns in the housing market. Mortgage activity decreased significantly in 2023 and 2022. We may not be able to return our mortgage business to the rates of growth achieved in previous years or even grow our mortgage business at all. The success of our mortgage division is dependent upon our ability to originate loans and sell them to investors, in each case at or near current volumes. Loan production levels are sensitive to changes in the level of interest rates and changes in economic conditions. Mortgage production, especially refinancing activity, declines in rising interest rate environments. Our mortgage origination volume could be materially and adversely affected by rising interest rates. Accordingly, when interest rates increase, we generally expect that our mortgage production will decline. Because we sell a substantial portion of the mortgage loans we originate, the profitability of our mortgage banking business also depends in large part on our ability to aggregate a high volume of loans and sell them in the secondary market at a gain. In fact, when rates rise, we expect increasing industry-wide competitive pressures related to changing market conditions to reduce pricing margins and mortgage revenues generally. If our level of mortgage production declines, our continued profitability will depend upon our ability to reduce our costs commensurate with the reduction of revenue from our mortgage operations. If we are unable to do so, our continued profitability may be materially and adversely affected. See Risks Associated With Monetary Events in this Item 1A of this report. 33 Table of Contents We are subject to certain risks related to originating and selling mortgage loans that could have a material adverse effect on our financial condition and results of operations. We sell mortgage loans to generate earnings and manage our liquidity and capital levels, as well as to create geographical and product diversity in our loan portfolio. Disruptions in the financial markets, a decrease in demand for these loans, or changes to laws or regulations that reduce the attractiveness of such loans to purchasers of the loans could require us to decrease our lending activities or retain a greater portion of the loans we originate. Selling fewer loans would generally result in a decrease in the gains recognized on the sale of loans, could increase our capital needs as a result of the increase of risk weighted assets, result in decreased liquidity, and result in increased credit risk as our loan portfolio increased in size, any of which could have a material adverse effect on our financial condition and results of operations. The structure of certain loan sales may result in the retention of credit or financial risks. We retain mortgage servicing rights on a majority of the mortgage loans we sell. Mortgage servicing rights, the right to service a loan and receive servicing income over the life of the loan, are recognized as assets or liabilities at estimated fair value. The value of mortgage servicing rights are affected by prepayment speeds of mortgage loans and changes; therefore, actual performance may differ from our expectations. The impact of such factors could have a material adverse effect on the value of these mortgage servicing rights and on our financial condition and results of operations. When loans are sold or securitized, it is customary to make representations, warranties and covenants to the purchaser or investors about the loans, including the manner in which they were originated and will be serviced. These agreements generally require the repurchase of loans or indemnification in the event we breach these representations, warranties or covenants and such breaches are not cured. In addition, some agreements contain a requirement to repurchase loans as a result of early payoffs by the borrower, early payment default of the borrower or defects affecting the security interest in the collateral. We have not been obligated to make significant repurchases of sold loans in the past. A material increase in the amount of loans repurchased could have a material adverse effect on our financial condition and results of operations. In a period of rising interest rates, we expect our mortgage revenue to decrease due to decreased residential mortgage origination volume and pricing decisions of competitors may adversely affect our profitability. Our mortgage division originates, sells and services residential mortgage loans. Changes in interest rates, housing prices, applicable government regulations and pricing decisions by our loan competitors may adversely affect demand for our residential mortgage loan products, the revenue realized on the sale of loans, the revenues received from servicing such loans for others and, ultimately, reduce our net income. In particular, when rates are higher, client activity (and our related income) tends to be muted. Lower rates tend to foster higher activity. Rising rates have substantially reduced our income from our mortgage division. Further reductions in income from our mortgage-related businesses are possible. In addition, new regulations, increased regulatory reviews, and/or changes in the structure of the secondary mortgage markets which we utilize to sell mortgage loans may increase costs and make it more difficult to operate a residential mortgage origination business. Our revenue from the mortgage banking business was $31.4 million in 2023 and $46.3 million in 2022. This revenue will likely decline in future periods if interest rates continue to rise or if the other risks highlighted in this paragraph are realized, which will adversely affect our profitability. We depend on U.S. government-sponsored entities and government agencies, and any changes in these entities, their current roles or the leadership at such entities or their regulators could materially and adversely affect our business, financial condition, liquidity and results of operations. Our ability to generate revenues through mortgage loan sales depends on programs administered by government-sponsored entities (“GSEs”), such as Fannie Mae and Freddie Mac, government agencies, including Ginnie Mae, and others that facilitate the issuance of mortgage-backed securities (“MBS”), in the secondary market. Presently, almost all of the newly originated loans that we originate directly with borrowers qualify under existing standards for inclusion in MBS issued by Fannie Mae or Freddie Mac or guaranteed by Ginnie Mae. A number of legislative proposals have been introduced in recent years that would wind down or phase out the GSEs. It is not possible to predict the scope and nature of the actions that the U.S. government, will ultimately take with respect to the GSEs. Any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and their regulators or the U.S. federal government, and any changes in leadership at these entities, could adversely affect our business and prospects. Any discontinuation of, or significant reduction in, the operation of Fannie Mae or Freddie Mac or any significant adverse change in their capital structure, financial condition, activity levels in the primary or secondary mortgage markets or in underwriting criteria could materially and adversely affect our business, financial condition, liquidity and results of operations. Elimination of the traditional roles of Fannie Mae and Freddie Mac, or any changes to the nature or extent of the guarantees provided by Fannie Mae and Freddie Mac or the fees, terms and guidelines that govern our selling and servicing 34 Table of Contents relationships with them, could also materially and adversely affect our ability to sell and securitize loans through our loan production segment, and the performance, liquidity and market value of our investments. Moreover, any changes to the nature of the GSEs or their guarantee obligations could redefine what constitutes an Agency MBS and could have broad adverse implications for the market and our business, financial condition, liquidity and results of operations. We may be terminated as a servicer of mortgage loans, be required to repurchase a mortgage loan or reimburse investors for credit losses on a mortgage loan, or incur costs, liabilities, fines and other sanctions if we fail to satisfy our servicing obligations, including our obligations with respect to mortgage loan foreclosure actions. We act as servicer for approximately $5.4 billion of residential loans owned by third parties as of December 31, 2023. As a servicer for those loans we have certain contractual obligations, including foreclosing on defaulted mortgage loans or, to the extent applicable, considering alternatives to foreclosure such as loan modifications or short sales. If we commit a material breach of our obligations as servicer, we may be subject to termination if the breach is not cured within a specified period of time following notice, causing us to lose servicing income. For certain investors and/or certain transactions, we may be contractually obligated to repurchase a mortgage loan or reimburse the investor for credit losses incurred on the loan as a remedy for servicing errors with respect to the loan. If we have increased repurchase obligations because of claims that we did not satisfy our obligations as a servicer, or increased loss severity on such repurchases, we may have a significant reduction to net servicing income within our mortgage banking noninterest income. We may incur costs if we are required to, or if we elect to, re-execute or re-file documents or take other action in our capacity as a servicer in connection with pending or completed foreclosures. We may incur litigation costs if the validity of a foreclosure action is challenged by a borrower. If a court were to overturn a foreclosure because of errors or deficiencies in the foreclosure process, we may have liability to the borrower and/or to any title insurer of the property sold in foreclosure if the required process was not followed. These costs and liabilities may not be legally or otherwise reimbursable to us. In addition, if certain documents required for a foreclosure action are missing or defective, we could be obligated to cure the defect or repurchase the loan. We may incur liability to securitization investors relating to delays or deficiencies in our processing of mortgage assignments or other documents necessary to comply with state law governing foreclosures. The fair value of our mortgage servicing rights may be negatively affected to the extent our servicing costs increase because of higher foreclosure costs. We may be subject to fines and other sanctions imposed by federal or state regulators as a result of actual or perceived deficiencies in our foreclosure practices or in the foreclosure practices of other mortgage loan servicers. Any of these actions may harm our reputation or negatively affect our home lending or servicing business. We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could harm our liquidity, results of operations and financial condition. When mortgage loans are sold, whether as whole loans or pursuant to a securitization, we are required to make customary representations and warranties to purchasers, guarantors and insurers, including the GSEs, about the mortgage loans and the manner in which they were originated. Whole loan sale agreements require repurchase or substitute mortgage loans, or indemnify buyers against losses, in the event we breach these representations or warranties. In addition, we may be required to repurchase mortgage loans as a result of early payment default of the borrower on a mortgage loan. If repurchase and indemnity demands increase and such demands are valid claims and are in excess of our provision for potential losses, our liquidity, results of operations and financial condition may be adversely affected. Operational Risks We are subject to losses due to errors, omissions or fraudulent behavior by our employees, clients, counterparties or other third parties. We are exposed to many types of operational risk, including the risk of fraud by employees and third parties, clerical recordkeeping errors and transactional errors. Our business is dependent on our employees as well as third-party service providers to process a large number of increasingly complex transactions. We could be materially and adversely affected if employees, clients, counterparties or other third parties caused an operational breakdown or failure, either as a result of human error, fraudulent manipulation or purposeful damage to any of our operations or systems. In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to clients, we may assume that a customer’s audited financial statements conform to GAAP and present 35 Table of Contents fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings are significantly affected by our ability to properly originate, underwrite and service loans. Our financial condition and results of operations could be negatively impacted to the extent we incorrectly assess the creditworthiness of our borrowers, fail to detect or respond to deterioration in asset quality in a timely manner, or rely on financial statements that do not comply with GAAP or are materially misleading. Fraud is a major, and increasing, operational risk for us and all banks. Two traditional areas, deposit fraud (check kiting, wire fraud, etc.) and loan fraud, continue to be major sources of fraud attempts and loss. The sophistication and methods used to perpetrate fraud continue to evolve as technology changes. In addition to cybersecurity risk (discussed below), new technologies have made it easier for bad actors to obtain and use client personal information, mimic signatures and otherwise create false documents that look genuine. The industry fraud threat continues to evolve, including but not limited to card fraud, check fraud, social engineering and phishing attacks for identity theft and account takeover. Our anti-fraud measures are both preventive and, when necessary, responsive; however, some level of fraud loss is unavoidable, and the risk of a major loss cannot be eliminated. Our ability to conduct and grow our businesses is dependent in part upon our ability to create, maintain, expand, and evolve an appropriate operational and organizational infrastructure, manage expenses, and recruit and retain personnel with the ability to manage a complex business. Operational risk can arise in many ways, including: errors related to failed or inadequate physical, operational, information technology, or other processes; faulty or disabled computer or other technology systems; fraud, theft, physical security breaches, electronic data and related security breaches, or other criminal conduct by associates or third parties; and exposure to other external events. Inadequacies may present themselves in myriad ways. Actions taken to manage one risk may be ineffective against others. For example, information technology systems may be sufficiently redundant to withstand a fire, incursion, malware, or other major casualty, but they may be insufficiently adaptable to new business conditions or opportunities. Efforts to make systems more robust may make them less adaptable, and vice-versa. Also, our efforts to control expenses, which is a significant priority for us, increases our operational challenges as we strive to maintain client service and compliance at high quality and low cost. We are exposed to the possibility of technology failure and a disruption in our operations may adversely affect our business. We rely on our computer systems and the technology of outside service providers. Our daily operations depend on the operational effectiveness of their technology. We rely on our systems to accurately track and record our assets and liabilities. If our computer systems or outside technology sources become unreliable, fail, or experience a breach of security, our ability to maintain accurate financial records may be impaired, which could materially affect our business operations and financial condition. In addition, a disruption in our operations resulting from failure of transportation and telecommunication systems, loss of power, interruption of other utilities, natural disaster, fire, global climate changes, computer hacking or viruses, failure of technology, terrorist activity or the domestic and foreign response to such activity or other events outside of our control could have an adverse impact on the financial services industry as a whole and/or on our business. Our business recovery plan may not be adequate and may not prevent significant interruptions of our operations or substantial losses. The increased number of cyberattacks during the past few years has further heightened our attention to this risk. As such, we are continuously reviewing and implementing additional security controls and generally expanding our cybersecurity team to monitor and assist with the mitigation of this ever-increasing risk. A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers or other third parties, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, result in litigation or investigations, and damage our reputation, increase our costs and cause losses. We rely heavily on communications and information systems to conduct our business. Information security risks for financial institutions such as ours have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. As client, public, and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions, and breakdowns. Our business, financial, accounting and data processing systems, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunications outages; natural disasters such as 36 Table of Contents earthquakes, tornadoes, and hurricanes; disease pandemics (such as the COVID-19 pandemic); events arising from local or larger scale political or social matters, including terrorist acts; and cyber-attacks. As noted above, our business relies on our digital technologies, computer and email systems, software, and networks to conduct our operations. Although we have information security procedures and controls in place, our technologies, systems, networks, and our clients’ devices may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our clients’ confidential, proprietary and other information, or otherwise disrupt our or our clients’ or other third parties’ business operations. Third parties with whom we do business or that facilitate our business activities, including financial intermediaries, or vendors that provide services or security solutions for our operations, and other third parties, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. During 2023, we were notified, by our vendor, Progress Software Corporation, of vulnerabilities in Progress Software’s MOVEit file transfer software the Bank utilizes for securely transferring sensitive and confidential information and other data, resulting in unauthorized parties likely gaining access to certain Bank customer data that included personally identifiable information. We publicly disclosed this breach and provided appropriate notifications to potentially impacted customers. While our business has not been materially impacted by these cybersecurity incidents, similar incidents could have a material adverse effect on our business in the future. See “Vendor Incident” in Item 1.C, of this Annual Report on Form 10-K. While we have disaster recovery and other policies and procedures designed to prevent or limit the effect of the failure, interruption or security breach of our information systems, there can be no assurance that any such failures, interruptions or security breaches will not occur or, if they do occur, that they will be adequately addressed. Our risk and exposure to these matters remains heightened because of the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities. Disruptions or failures in the physical infrastructure or operating systems that support our businesses and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services could result in client attrition, regulatory fines, penalties or intervention, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs, any of which could materially adversely affect our results of operations or financial condition. Our risk management framework may not be effective in mitigating risks and/or losses. We have implemented a risk management framework to mitigate our risk and loss exposure. This framework is comprised of various processes, systems and strategies, and is designed to identify, measure, monitor, report and manage the types of risk to which we are subject, including, among others, credit risk, interest rate risk, liquidity risk, legal and regulatory risk, compliance risk, strategic risk, cybersecurity risk, reputational risk and operational risk related to our employees, systems and vendors, among others. Any system of control and any system to reduce risk exposure, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met and will be effective under all circumstances or that it will adequately identify, manage or mitigate any risk or loss to us. Additionally, instruments, systems and strategies used to hedge or otherwise manage exposure to various types of interest rate, price, legal and regulatory compliance, credit, liquidity, operational and business risks and enterprise-wide risk could be less effective than anticipated. As a result, we may not be able to effectively mitigate our risk exposures in particular market environments or against particular types of risk. If our risk management framework is not effective, we could suffer unexpected losses and become subject to litigation, negative regulatory consequences, or reputational damage among other adverse consequences, any of which could result in our business, financial condition, results of operations or prospects being materially adversely affected. We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. We are a community bank, and our reputation is one of the most valuable components of our business. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values: being an integral part of the communities we serve; delivering superior service to our customers; and caring about our customers and associates. Damage to our reputation could undermine the confidence of our current and potential clients in our ability to provide financial services. Such damage could also impair the 37 Table of Contents confidence of our counterparties and business partners, and ultimately affect our ability to effect transactions. Maintenance of our reputation depends not only on our success in maintaining our core values and controlling and mitigating the various risks described herein, but also on our success in identifying and appropriately addressing issues that may arise in areas such as potential conflicts of interest, anti-money laundering, client personal information and privacy issues, record-keeping, regulatory investigations and any litigation that may arise from the failure or perceived failure of us to comply with legal and regulatory requirements. If our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our operating results may be materially adversely affected. Further, negative public opinion can expose us to litigation and regulatory action as we seek to implement our growth strategy, which could adversely affect our business, financial condition and results of operations. We depend on our executive officers and other key employees, and our ability to attract additional key personnel, to continue the implementation of our long-term business strategy, and we could be harmed by the unexpected loss of their services. We believ e that our continued growth and future success will depend in large part on the skills of our executive officers and other key employees and our ability to motivate and retain these individuals, as well as our ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees. Our business is primarily relationship-driven in that many of our key personnel have extensive customer or asset management relationships. Loss of key personnel with such relationships may lead to the loss of business if the customers were to follow that employee to a competitor or if asset management expertise was not replaced in a timely manner. Competition for employees is intense, and the process of locating key personnel with the combination of skills and attributes required to execute our business strategy may be lengthy. We may not be successful in retaining key personnel, and the unexpected loss of services of one or more of our key personnel could have a material adverse effect on our business because of their skill, knowledge of our primary markets, years of industry experience and the difficulty of promptly finding qualified replacement personnel. In particular, the success of the proposed HomeStreet merger, if completed, will depend in part on the combined company’s ability to retain the talents and dedication of employees currently employed by HomeStreet. The consummation of the proposed HomeStreet merger will expand FirstSun’s market areas to include operations in Washington, California, Hawaii, Oregon and other smaller markets, and retaining HomeStreet personnel within such markets is important to the success of the integration of the operations and business of HomeStreet and the success of the combined company. It is possible that these employees may decide not to remain with HomeStreet or FirstSun while the proposed HomeStreet merger is pending or with the combined company after the proposed HomeStreet merger is consummated. If employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, the combined company’s business activities may be adversely affected and management’s attention may be diverted from successfully integrating HomeStreet to hiring suitable replacements, all of which may cause the combined company’s business to suffer. In addition, FirstSun may not be able to locate suitable replacements for any such employees who leave the combined company, or to offer employment to potential replacements on reasonable terms. Further, FirstSun’s lack of operating experience in HomeStreet’s existing markets may adversely impact the combined company’s ability to successfully compete in such market areas without retaining HomeStreet’s employees. If the services of any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on terms acceptable us, or at all, which could have a material adverse effect on our business, financial condition, results of operation and future prospects. We are subject to environmental and climate change risks. We own certain of our properties, and a significant portion of our loan portfolio is secured by real property. During the ordinary course of business, we may foreclose on and take title to properties securing certain loans. As a result, we could be subject to environmental liabilities with respect to these properties. If hazardous or toxic substances are found, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Although we have policies and procedures to obtain an environmental study during the underwriting process for certain commercial real estate loan originations and to perform an environmental review before initiating any foreclosure action on real property, these reviews may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business financial condition and results of operations. In addition, we are subject to the growing risk of climate change. See Climate Risks in this Item 1A of this report. 38 Table of Contents Industry-Related Risks We are exposed to the possibility that more prepayments may be made by customers to pay down loan balances, which could reduce our interest income and profitability. Prepayment rates stem from consumer behavior, conditions in the housing and financial markets, general U.S. economic conditions, and the relative interest rates on fixed-rate and adjustable-rate loans. Therefore, changes in prepayment rates are difficult to predict. Recognition of deferred loan origination costs and premiums paid in originating these loans are normally recognized over the contractual life of each loan. As prepayments occur, the rate at which net deferred loan origination costs and premiums are expensed will accelerate. The effect of the acceleration of deferred costs and premium amortization may be mitigated by prepayment penalties paid by the borrower when the loan is paid in full within a certain period of time, which varies between loans. If prepayment occurs after the period of time when the loan is subject to a prepayment penalty, the effect of the acceleration of premium and deferred cost amortization is no longer mitigated. We recognize premiums paid on mortgage-backed securities as an adjustment from interest income over the expected life of the security based on the rate of repayment of the securities. Acceleration of prepayments on the loans underlying a mortgage-backed security shortens the life of the security, increases the rate at which premiums are expensed and further reduces interest income. We may not be able to reinvest loan and security prepayments at rates comparable to the prepaid instrument particularly in a period of declining interest rates. We could experience a loss due to competition with other financial institutions. We face substantial competition in all areas of our operations from a variety of different competitors, both within and beyond our principal markets, many of which are larger and may have more financial resources than us. Such competitors primarily include national, super-regional, and internet banks within the various markets in which we operate. We also face competition from many other types of financial institutions, including, without limitation, savings and loans, credit unions, finance companies, brokerage firms, insurance companies, and other financial intermediaries. The financial services industry could become even more competitive as a result of legislative and regulatory changes and continued consolidation. In addition, as customer preferences and expectations continue to evolve, technology has lowered barriers to entry and made it possible for nonbanks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems. Many of our competitors have fewer regulatory constraints and may have lower cost structures. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broader range of products and services as well as better pricing for those products and services than we can. Our ability to compete successfully depends on a number of factors, including, among other things: • our ability to develop, maintain, and build upon long‑term customer relationships based on top quality service, high ethical standards, and safe and sound assets; • our ability to expand our market position; • the scope, relevance, and pricing of the products and services we offer to meet our customers’ needs and demands; • the rate at which we introduce new products and services relative to our competitors; • customer satisfaction with our level of service; and • industry and general economic trends. Failure to perform in any of these areas could significantly weaken our competitive position, making it more difficult to attract new and retain existing clients and our net interest margin, net interest income and wealth management fees could decline, which would adversely affect our results of operations and could cause us to incur losses in the future. In addition, our ability to successfully attract and retain wealth management clients is dependent on our ability to compete with competitors’ investment products, level of investment performance, client services and marketing and distribution capabilities. If we are not successful in attracting new and retaining existing clients, our business, financial condition, results of operations and prospects may be materially and adversely affected. 39 Table of Contents Consumers may decide not to use banks to complete their financial transactions. Technology and other changes are allowing parties to complete financial transactions through alternative methods that historically have involved banks. For example, consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” 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 loss of these revenue streams and the lower cost of deposits as a source of funds could have a material adverse effect on our financial condition and results of operations. Failure to keep pace with technological change could adversely affect our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business, financial condition and results of operations. Through technological innovations and changes in client habits, the manner in which clients use financial services continues to change at a rapid pace. We provide a large number of services remotely (online and mobile), and physical branch utilization has been in long-term decline throughout the industry for many years. Technology has helped us reduce costs and improve service, but also has weakened traditional geographic and relationship ties, and has allowed disruptors to enter traditional banking areas. Through digital marketing and service platforms, many banks are making client inroads unrelated to physical presence. This competitive risk is especially pronounced from the largest U.S. banks, and from online-only banks, due in part to the investments they are able to sustain in their digital platforms. Companies as disparate as PayPal and Starbucks provide payment and exchange services which compete directly with banks in ways not possible traditionally. Recently, some government leaders have discussed having the U.S. Post Office offer banking services. The nature of technology-driven disruption to our industry is changing, in some cases seeking to displace traditional financial service providers rather than merely enhance traditional services or their delivery. A number of recent technologies have worked with the existing financial system and traditional banks, such as the evolution of ATM cards into debit/credit cards and the evolution of debit/credit cards into smart phones. These sorts of technologies often have expanded the market for banking services overall while siphoning a portion of the revenues from those services away from banks and disrupting prior methods of delivering those services. Additionally, some recent innovations may tend to replace traditional banks as financial service providers rather than merely augmenting those services. For example, companies which claim to offer applications and services based on artificial intelligence are beginning to compete much more directly with traditional financial services companies in areas involving personal advice, including high-margin services such as financial planning and wealth management. The low-cost, high-speed nature of these “robo-advisor” services can be especially attractive to younger, less-affluent clients and potential clients, as well as persons interested in “self-service” investment management. Other industry changes, such as zero-commission trading offered by certain large firms able to use trading as a loss-leader, may amplify this trend. Similarly, inventions based on blockchain technology eventually may be the foundation for greatly enhancing transactional security throughout the banking industry, but also eventually may reduce the need for banks as secure deposit-keepers and intermediaries. We may be adversely affected by the lack of soundness of other financial institutions. 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, and other institutional clients. Many of these transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient 40 Table of Contents to recover the full amount of the credit or derivative exposure due to us. Any such losses could have a material adverse effect on our financial condition and results of operations. The value of securities in our investment portfolio may decline in the future. As of December 31, 2023, we had a carrying amount of $553.7 million of investment securities. The fair value of our investment securities may be adversely affected by market conditions, including changes in interest rates, and the occurrence of any events adversely affecting the issuer of particular securities in our investments portfolio. We analyze our securities on a quarterly basis to determine if an expected credit loss has occurred. The process for determining whether a credit loss has occurred usually requires complex, subjective judgments about the future financial performance of the issuer in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers, we may be required to recognize expected credit losses on our securities in future periods, which could have a material adverse effect on our business, financial condition or results of operations. Our deposit insurance premiums could be higher in the future, which could have an adverse effect on our future earnings. The FDIC insures deposits at FDIC-insured depository institutions, such as Sunflower Bank, up to the maximum federal deposit insurance level per account. Our regular assessments are based on its average consolidated total assets minus average tangible equity as well as by risk classification, which includes regulatory capital levels and the level of supervisory concern. In addition to ordinary assessments described above, the FDIC has the ability to impose special assessments in certain instances. If the proposed merger with HomeStreet is completed, we will have more than $10 billion in assets and will be subject to a modified methodology for calculating FDIC insurance assessments and potentially higher assessment rates as a result of institutions with $10 billion or more in assets being required to bear a greater portion of the cost of achieving the DIF minimum reserve ratio of 1.35% as required by the Dodd-Frank Act. We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. If there are additional bank or financial institution failures, we may be required to pay even higher FDIC premiums. Also, if our financial condition deteriorates or if the bank regulators otherwise have supervisory concerns about us, then our assessments could rise. Any future additional assessments, increases or required prepayments in FDIC insurance premiums could reduce our profitability, may limit our ability to pursue certain business opportunities, or otherwise negatively impact our operations. Capital and Liquidity Risks We may be exposed to a need for additional capital resources in the future and these capital resources may not be available when needed or at all. We may need to incur additional debt or equity financing in the future to make strategic acquisitions or investments or to strengthen our capital position. 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 performance. Accordingly, we cannot provide assurance that such financing will be available to us on acceptable terms or at all. If we cannot raise additional capital when needed, our ability to further expand our operations through internal growth and acquisitions could be materially impaired. In addition, if we decide to raise additional equity capital, our current stockholders’ interests could be diluted. In connection with our entry into the HomeStreet merger agreement, FirstSun issued 2,461,538 shares of our common stock to certain institutional investors in a private placement that closed on January 17, 2024. FirstSun is also contractually obligated, concurrently with and subject to the closing of the proposed HomeStreet merger, to issue to those institutional investors warrants (which we refer to as the “Warrants”) to purchase approximately 1.15 million shares of FirstSun common stock with such Warrants having an initial exercise price of $32.50 per share. The Warrants will carry a term of three years. In the event the proposed HomeStreet merger is not consummated, no Warrants will be issued. C oncurrently with our entry into the HomeStreet merger agreement, FirstSun entered into an acquisition finance securities purchase agreement with certain institutional investors (the “Acquisition Finance Securities Purchase Agreement”). Pursuant to the Acquisition Finance Securities Purchase Agreement, on the terms and subject to the conditions set forth therein, substantially concurrently with, and subject to, the closing of the proposed HomeStreet merger, certain institutional investors will invest an aggregate of $95 million in exchange for the sale and issuance, at a purchase price of $32.50 per share, of approximately 2.92 million shares of FirstSun common stock. We may need to incur additional debt or equity 41 Table of Contents financing in the future in connection with strategic acquisitions, including the proposed HomeStreet merger, or investments or to strengthen our capital position. Liquidity, primarily through deposits, is essential to our business model and a lack of liquidity, or an increase in the cost of liquidity could materially impair our ability to fund our operations and jeopardize our results of operation, financial condition and cash flows. Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that we may be unable to satisfy current or future funding requirements and needs. Deposit levels may be affected by several factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, customers seeking to maximize deposit insurance by limiting their deposits at a single financial institution to the maximum federal deposit insurance level, general economic and market conditions and other factors. Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans generally are not readily convertible to cash. From time to time, if deposits and loan payments are not sufficient to meet our needs, we may be required to rely on secondary sources of liquidity to meet growth in loans, deposit withdrawal demands or otherwise fund operations. Such secondary sources include FHLB advances, brokered deposits, secured and unsecured federal funds lines of credit from correspondent banks, Federal Reserve borrowings and/or accessing the equity or debt capital markets. The availability of these secondary funding sources is subject to broad economic conditions, to regulation and to investor assessment of our financial strength and, as such, the cost of funds may fluctuate significantly and/or the availability of such funds may be restricted, thus impacting our net interest income, our immediate liquidity and/or our access to additional liquidity. Additionally, if we fail to remain “well-capitalized” our ability to utilize brokered deposits may be restricted. We have somewhat similar risks to the extent high balance core deposits exceed the amount of deposit insurance coverage available. We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity. Additionally, when necessary, the secondary sources of borrowed funds described above will be used to augment our primary funding sources. During 2023, the Federal Reserve announced the creation of a new Bank Term Funding Program in an effort to minimize the need for banks to sell securities at a loss in times of stress. The Federal Reserve has announced that it will cease making new advances under this program after March 11, 2024. An inability to maintain or raise funds (including the inability to access secondary funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our financial results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our creditworthiness and business. Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings. Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest rate fluctuations, severe volatility or disruption of the financial markets, bank closures or negative views and expectations about the prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets and have a material adverse effect on our results of operations or financial condition. We may not be able to maintain a strong core deposit base or access other low-cost funding sources. We rely on bank deposits to be a low cost and stable source of funding. In addition, our future growth will largely depend on our ability to maintain and grow a strong core deposit base. If we are unable to continue to attract and retain core deposits, to obtain third-party financing on favorable terms, or to have access to interbank or other liquidity sources, we 42 Table of Contents may not be able to grow our assets as quickly. We compete with banks and other financial services companies for deposits. If our competitors raise the rates they pay on deposits in response to interest rate changes initiated by the Federal Reserve or for other reasons of their choice, our funding costs may increase, either because we raise our rates to retain deposits or because of deposit outflows that require us to rely on more expensive sources of funding. In addition, we could experience deposit outflows as a result of depositors seeking to maximize deposit insurance by limiting their deposits at a single financial institution to the maximum federal deposit insurance level. Inflation and higher interest rates, along with monetary events, can cause some of our business customers who have greater operating cash needs to reduce their deposit balances with us. Higher funding costs could reduce our net interest margin and net interest income. Any decline in available funding could adversely affect our ability to continue to implement our business strategy which could have a material adverse effect on our liquidity, business, financial condition and results of operations. Deposits traditionally have provided our most affordable funds and by far the largest portion of funding. However, deposit trends can shift with economic conditions. If interest rates fall, deposit levels in our Bank might fall, perhaps fairly quickly if a tipping point is reached, as depositors become more comfortable with risk and seek higher returns in other vehicles. Further, if interest rates remain high, our competitors, which include other banks and non-banks, may raise interest rates for deposits materially and our depositors may move their funds to other institutions, a process which has become easier with advances in technology and operations. These circumstances could result in material changes in deposit levels over relatively short time periods, and they could pressure us to raise interest we pay on our deposits, which could shrink our net interest margin if loan rates do not rise correspondingly. Risks Related to Strategic Plans We may be adversely affected by risks associated with mergers and acquisitions, including execution risk, which could disrupt our business and dilute stockholder value. In accordance with our strategic plan, we evaluate opportunities to acquire other banks and branch locations, as well as other fee generating lines of business, such as fee based advisory and trust services. As a result, we may engage in mergers, acquisitions and other transactions that could have a material effect on our operating results and financial condition, including short and long‑term liquidity. Our merger and acquisition activities could be material and could require us to issue a significant number of shares of our common stock or other securities and/or to use a substantial amount of cash, other liquid assets, and/or incur debt. Our merger and acquisition activities, including our proposed merger with HomeStreet, could involve a number of additional risks, including the risks of: • the possibility that the expected benefits of a transaction, including cost savings, may not materialize in the timeframe expected or at all, or may be costlier to achieve; • the incurrence and possible impairment of goodwill and other intangible assets associated with an acquisition or merger and possible adverse short-term effects on our results of operations; • the occurrence of a change in the interest rate environment, including the magnitude and duration of interest rate changes, which could adversely affect both ours and HomeStreet’s revenue and expenses, value of assets and obligations, and the availability and cost of capital and liquidity, along with the consummation of the merger; • incurring the time and expense associated with identifying, evaluating and negotiating with potential merger or acquisition targets and with seeking to complete and preparing for integration with proposed mergers or acquisitions; • our inability to obtain regulatory and other approvals necessary to consummate mergers, acquisitions or other expansion activities, or the risk that such regulatory approvals are delayed, impeded, or conditioned due to existing or new regulatory issues surrounding us, the target institution or the proposed combined entity as a result of, among other things, issues related to anti-money laundering/Bank Secrecy Act compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive or abusive acts or practices regulations, or the Community Reinvestment Act; • diversion of our management’s attention to the negotiation of a transaction, and the integration of the operations and personnel of the combining businesses; • the inability to obtain alternative capital in the event it becomes necessary to complete the proposed merger; • our estimates and judgments used to evaluate financial performance, credit, asset values, operations, management and market risks with respect to the acquired or merged company may not be accurate; 43 Table of Contents • the ability to develop and maintain a strong core deposit base or other low cost funding sources necessary to fund ours and HomeStreet’s activities, particularly in a rising or high interest rate environment; • potential exposure to unknown or contingent liabilities of the acquired or merged company; • difficulty or unanticipated expense associated with converting the operating systems of, and otherwise integrating the business of, the acquired or merged company into ours; • the possibility that we will be unable to successfully implement integration strategies, due to challenges associated with integrating complex systems, technology, banking centers, and other assets of the acquired or merged company in a manner that minimizes any adverse effect on customers, suppliers, employees, and other constituencies; • delays in completing or failure to complete a merger or acquisition due to litigation, closing conditions or the regulatory approval process; • the possibility that a proposed acquisition or merger may not be timely completed, if at all; • creating an adverse short‑term effect on our results of operations; and • the possible loss of our key employees and customers or those of the acquired or merged company. If we do not successfully manage these risks, our merger and acquisition activities could have a material adverse effect on our business, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully implement our strategic plan and our stock price. We may issue stock or equity derivative securities in connection with mergers and acquisitions that will dilute the percentage ownership and voting percentage interest of our existing stockholders and result in our existing stockholders exercising less influence over management, and such issuances may reduce the book value or earnings per share of our common stock, cause the price of our common stock to decline and adversely affect the terms on which we may obtain additional capital. We may issue stock or equity derivative securities in connection with mergers and acquisitions that will dilute the percentage ownership and voting percentage interest of our existing stockholders and result in our existing stockholders exercising less influence over management, and such issuances may reduce the book value or earnings per share of our common stock, cause the price of our common stock to decline and adversely affect the terms on which we may obtain additional capital. If the proposed HomeStreet merger is completed, holders of FirstSun common stock will have a reduced ownership and voting interest in the combined company and will exercise less influence over management. If the proposed HomeStreet merger is completed, each HomeStreet shareholder and equity award holder who receives shares of FirstSun common stock will become a FirstSun stockholder. Based on the number of shares of HomeStreet common stock and HomeStreet equity awards outstanding as of the date of the merger agreement, the total number of shares of FirstSun common stock estimated to be issued to holders of HomeStreet common stock and equity awards in connection with, and subject to, the completion of the merger is approximately 8.44 million shares. In addition, FirstSun is also obligated, substantially concurrently with the closing of the proposed HomeStreet merger, to issue to certain institutional investors Warrants (having an initial exercise price of $32.50 per share, and a term of three years) to purchase approximately 1.15 million shares of FirstSun common stock and to issue to certain institutional investors approximately 2.92 million shares of FirstSun common stock at a purchase price of $32.50 per share. Based on the number of shares of FirstSun and HomeStreet common stock outstanding as of the close of business on March 6, 2024, an d based on the number of shares of FirstSun common stock estimated to be issued to holders of HomeStreet common stock and equity awards in the proposed HomeStreet merger and, in connection the closing of the merger, expected to be issued pursuant to the Acquisition Finance Securities Purchase Agreement, the former holders of HomeStreet common stock and equity awards, as a group, are estimated to own approximately 22% of the outstanding common shares of the combined company immediately after completion of the proposed HomeStreet merger, and the holders of FirstSun common stock, as a group, immediately prior to the HomeStreet merger, including and together with the institutional investors that purchase shares of FirstSun common stock pursuant to the Acquisition Finance Securities Purchase Agreement in connection with the completion of the HomeStreet merger, are estimated to own approximately 78% of the outstanding shares of the combined company immediately after completion of the proposed HomeStreet merger (assuming no exercise of FirstSun stock options prior to the closing of the HomeStreet merger, and excluding shares issuable upon exercise of the FirstSun stock options and the Warrants). And because of this, if the proposed the HomeStreet merger is completed, FirstSun stockholders may have less influence than they now have the management and policies of FirstSun. 44 Table of Contents Future mergers and acquisitions may be delayed, impeded, or prohibited due to regulatory issues. Our mergers and acquisitions, including our proposed merger with HomeStreet, are subject to approval by a variety of federal and state regulatory agencies. The process for obtaining these required regulatory approvals has become substantially more difficult in recent years. Regulatory approvals could be delayed, impeded, restrictively conditioned or denied due to existing or new regulatory issues we or the target company has, or may have, with regulatory agencies, including, without limitation, issues related to adverse public comments to merger applications, anti-money laundering/Bank Secrecy Act compliance, fair lending laws, fair housing laws, consumer protection laws, unfair, deceptive, or abusive acts or practices regulations, Community Reinvestment Act issues, anti-trust issues, and other similar laws and regulations. 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 mergers and acquisitions that may result from these factors could have a material adverse effect on our business, and, in turn, our financial condition and results of operations. We face risks and uncertainties related to our proposed merger with HomeStreet. Before the transactions contemplated in the merger agreement can be completed, various approvals must be obtained, including approval of the Federal Reserve and the Office of the Comptroller of the Currency. The terms and conditions of the approvals that are granted may impose conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reduce the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. If the proposed HomeStreet merger is completed, HomeStreet’s business, financial condition (including the value of its assets and liabilities), liquidity and results of operations, and our ability to successfully implement strategies to integrate HomeStreet’s business into FirstSun, will be of major significance with respect to the combined company and may materially impact the value of FirstSun common stock. HomeStreet’s total assets and total liabilities of approximately $9.4 billion and $8.9 billion, respe ctively, as of December 31, 2023, exceeded FirstSun’s total assets and total liabilities of approximately $7.9 billion and $7.0 billion, respectively, as of that date. If the proposed HomeStreet merger is completed, among other things, the net interest income, assets, such as securities and loans, and economic value of equity of the combined company are expected to have different sensitivities to changes in interest rates than the current sensitivities of net interest income, assets, such as securities and loans, and economic value of equity of FirstSun independently to changes in interest rates, which will present risks that are different from and in addition to those currently affecting FirstSun. Additionally, HomeStreet’s business and operations differ from FirstSun’s, and, if completed, the proposed HomeStreet merger will expand FirstSun’s market areas to include operations in Washington, California, Hawaii, Oregon and other smaller markets, which presents challenges and risk with respect to the integration of the operations and business of HomeStreet into FirstSun. FirstSun and HomeStreet have operated and, until the completion of the merger, will continue to operate independently. There can be no assurances that the businesses of FirstSun and HomeStreet can be integrated successfully. It is possible that the integration process could result in the loss of key FirstSun employees or key HomeStreet employees, the loss of customers, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, unexpected integration issues, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. The success of the merger will depend on, among other things, the ability of FirstSun and HomeStreet to combine their businesses in a manner that facilitates growth opportunities and realizes cost savings. However, if the combined company is not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully, or at all, or may take longer to realize than expected. In addition, the merger agreement contains provisions that restrict each of FirstSun’s and HomeStreet’s ability to, among other things, initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to its board of directors’ exercise of its fiduciary duties, engage in any negotiations concerning, or provide any confidential information relating to, any alternative acquisition proposals. These provisions, which include a $10.0 million termination fee payable under certain circumstances, might discourage a potential competing 45 Table of Contents acquirer that might have an interest in acquiring all or a significant part of FirstSun from considering or proposing that acquisition, or might result in a potential competing acquirer proposing to pay a lower per share price to acquire FirstSun than it might otherwise have proposed to pay. Failure to complete our proposed merger with HomeStreet could negatively impact our business, financial results and stock price. If we complete the proposed HomeStreet merger but do not successfully manage the risks associated with the proposed HomeStreet merger, the proposed HomeStreet merger could have a material adverse effect on our business, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully implement our strategic plan and our stock price. If HomeStreet shareholders exercise dissenters’ rights and the proposed HomeStreet merger is completed, FirstSun may incur significant additional costs. HomeStreet shareholders are entitled to exercise dissenters’ rights in connection with the proposed HomeStreet merger. If the proposed HomeStreet merger is completed, a HomeStreet shareholder who has complied with applicable requirements under the merger agreement and Chapter 23B.13 of the Washington Business Corporation Act may dissent and require FirstSun to pay in cash the appraised value of such shareholders’ dissenting shares instead of the merger consideration. FirstSun cannot predict the number of shares of HomeStreet common stock that may constitute dissenting shares, the amount of cash that FirstSun may be required to pay following the completion of the proposed HomeStreet merger with respect to the dissenting shares, or the expenses that FirstSun may incur in connection with the appraisal process. However, if the proposed HomeStreet merger is completed, FirstSun payments with respect to the dissenting shares and FirstSun expenses in connection with the dissent and potential appraisal process may negatively impact FirstSun’s liquidity and capital, which could adversely affect our business, stock price, financial condition, and results of operations, including short-term and long‑term liquidity, our ability to successfully close the merger, our ability to implement our strategic plan, and could also result in FirstSun taking steps to strengthen its liquidity or capital position, including by issuing additional stock or equity derivative securities. We expect to incur substantial expenses related to the proposed HomeStreet merger. We expect to incur substantial expenses in connection with completing the proposed HomeStreet merger and combining the business, operations, networks, systems, technologies, policies and procedures of FirstSun and those of HomeStreet. Although we have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the proposed HomeStreet merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the proposed HomeStreet merger. In addition, before completing the proposed HomeStreet merger, we will incur or have incurred substantial expenses in connection with the negotiation and completion of the transactions contemplated by the HomeStreet merger agreement. In preparation for the consummation of the proposed HomeStreet merger, we will also incur the additional costs and expenses of preparing and filing a merger registration statement with the SEC, printing and mailing the proxy statement/prospectus to solicit HomeStreet shareholder approval of the merger proposal, and all filing and other fees expected to be paid to the SEC, bank regulatory authorities and other governmental agencies in connection with the proposed HomeStreet merger. If the proposed HomeStreet merger is not completed, FirstSun would have to recognize these expenses without realizing the anticipated benefits of the proposed HomeStreet merger. If our proposed merger with HomeStreet is not completed for any reason, our ongoing business may be adversely affected, and, without realizing any of the benefits of having completed the merger, we will be subject to a number of risks, including the following: • we may be required, under certain circumstances, to pay HomeStreet a termination fee of $10.0 million under the merger agreement; • we will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting, financial advisor and printing fees; • the merger agreement places certain restrictions on the conduct of both FirstSun’s and HomeStreet’s business prior to completion of the merger, which may adversely affect our ability to execute certain of our business strategies; and 46 Table of Contents • matters relating to the merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have been beneficial to us, as an independent company. In addition, if the merger is not completed, we may experience negative reactions from the financial markets and from our customers and employees. For example, we may be impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. The market price of our common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. We also could be subject to litigation related to the proposed merger, any failure to complete the merger or to proceedings commenced against us to perform our obligations under the merger agreement. If the merger is not completed, we cannot assure you that the risks described above will not materialize and will not materially affect our business, financial results and stock price. Additional growth will subject FirstSun to additional regulation, increased supervision and increased costs. The Dodd-Frank Act imposes additional regulatory requirements on institutions with $10 billion or more in assets. We had $7.88 billion in assets as of December 31, 2023. If the pending merger with HomeStreet is completed, then FirstSun expects to have more than $15 billion in assets and, as a result, will be subject to the additional regulatory requirements, increased supervision and increased costs, including the following: • Supervision, examination and enforcement by the CFPB with respect to consumer financial protection laws; • A different methodology for calculating FDIC insurance assessments and potentially higher assessment rates for institutions with $10 billion or more in assets; • If we exceed $15 billion in assets through an acquisition (or make an acquisition after exceeding $15 billion in assets through organic growth), then our trust preferred securities will be excluded from Tier 1 capital and instead included in Tier 2 capital; and if the proposed HomeStreet merger is completed, we expect to have more than $15 billion in assets, and therefore any trust preferred securities of the combined company will be excluded from Tier 1 capital and instead included in Tier 2 capital (as of December 31, 2023, FirstSun had approximately $13.9 million in trust preferred securities and HomeStreet had approximately $62 million in trust preferred securities); • Heightened compliance standards under the Volcker Rule; • Enhanced supervision as a larger financial institution; and • Under the Durbin Amendment to the Dodd-Frank Act, institutions with $10 billion or more in assets are subject to a cap on the interchange fees that may be charged in certain electronic debit and prepaid card transactions. The imposition of these regulatory requirements and increased supervision may require additional commitment of financial resources to regulatory compliance and may increase FirstSun’s cost of operations. Failure to achieve one or more key elements needed for successful organic growth could adversely affect our business and earnings. There are a number of risks to the successful execution of our organic growth strategy that could result in a material and adverse effect upon our results of operation and financial condition. These risks include, without limitation, the following: • our inability to attract and retain clients in our banking market areas; • our inability to achieve and maintain growth in our earnings while pursuing new business opportunities; • our inability to maintain a high level of client service while optimizing our physical branch count due to changing client demand, all while expanding our remote banking services and expanding or enhancing our information processing, technology, compliance, and other operational infrastructures effectively and efficiently; • our inability to maintain loan quality in the context of significant loan growth; • our inability to attract or maintain sufficient deposits and capital to fund anticipated loan growth; • our inability to maintain adequate common equity and regulatory capital while managing the liquidity and capital requirements associated with growth, especially organic growth and cash-funded acquisitions; • our inability to hire or retain adequate management personnel and systems to oversee and support such growth; • our inability to implement additional policies, procedures and operating systems required to support our growth; and • our inability to manage effectively and efficiently the changes and adaptations necessitated by a complex, burdensome, and evolving regulatory environment. Although we have in place strategies designed to achieve those elements that are significant to us at present, our challenge is to execute those strategies and adjust them, or adopt new strategies, as conditions change. 47 Table of Contents New lines of business or new products and services may subject us to additional risk. From time to time, we may implement new lines of business or offer new products and services within existing lines of business. 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 lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or 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 a new line of business and/or a new product or service. Furthermore, any new line of business and/or new product or service could have 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 lines of business and/or new products or services could have a material adverse effect on our business, financial condition and results of operations. Risks Related to Public Health Issues Outbreaks of communicable diseases, including COVID-19 and its variants, have led to periods of significant volatility in financial, commodities (including oil and gas) and other markets, adversely affected our ability to conduct normal business, adversely affected our clients, and are likely to harm our businesses, financial condition and results of operations. The COVID-19 pandemic caused and may continue to cause significant disruption in the international and United States economies and financial markets and has had an adverse effect on our business and results of operations. We have also seen a surge in flu and other respiratory illnesses of varying seriousness and magnitude. The spread of these diseases, including COVID variants, has caused illness and death resulting in quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, supply chain interruptions, and overall economic and financial market instability. In response to the COVID-19 pandemic, the governments of the states in which we have branches, and most other states, periodically have taken preventative or protective actions, such as imposing restrictions on travel and business operations, advising or requiring individuals to limit or forego their time outside of their homes, and ordering temporary closures of businesses that have been deemed to be non-essential. These restrictions and other consequences of public health issues have resulted in significant adverse effects for many different types of businesses, including, among others, those in the hospitality (including hotels and lodging) and restaurant industries, and resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which we operate. We may experience other negative impacts to our business as a result of an outbreak of a communicable disease that could exacerbate other risks discussed in this “Risk Factors” section. Legal, Accounting, Tax, Regulatory and Compliance Risks The banking industry is heavily regulated and that regulation could limit or restrict our activities and adversely affect our operations or financial results. We operate in an extensively regulated industry and we are subject to examination, supervision, and comprehensive regulation by various federal and state agencies. FirstSun is subject to Federal Reserve regulations, and Sunflower Bank is subject to regulation, supervision and examination by the OCC. Our compliance with banking regulations is costly and restricts some of our activities, including payment of dividends, mergers and acquisitions, investments, loans and interest rates and locations of offices. We are also subject to capitalization guidelines established by our regulators, which require us to maintain adequate capital to support our business. If, as a result of an examination, a banking agency were to determine that the financial condition, capital adequacy, asset quality, asset concentration, earnings prospects, management, liquidity sensitivity to market risk or other aspects of any of our operations has become unsatisfactory, or that we or our management are in violation of any law or regulation, the banking agency could take a number of different remedial actions as it deems appropriate. Regulation by these agencies is intended primarily for the protection of our depositors and the deposit insurance fund and not for the benefit of our stockholders. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. The Dodd-Frank Act, enacted in July 2010, instituted major changes to the banking and financial institutions regulatory regimes. The burden of regulatory compliance has increased under the Dodd-Frank Act and has increased our costs of doing business and, as a result, may create an advantage for our competitors who may not be subject to similar legislative and regulatory requirements. Regulations and laws may be modified at any time, and new legislation may be enacted that will affect us or our subsidiaries. 48 Table of Contents Furthermore, our regulators also have the ability to compel us to take certain actions, or restrict us from taking certain actions entirely, such as actions that our regulators deem to constitute an unsafe or unsound banking practice. Our failure to comply with any applicable laws or regulations, or regulatory policies and interpretations of such laws and regulations, could result in sanctions by regulatory agencies (such as a memorandum of understanding, a written supervisory agreement or a cease and desist order), civil money penalties or damage to our reputation, all of which could have a material adverse effect on our business, financial condition or results of operations. From time to time we are, or may become, involved in suits, legal proceedings, information-gatherings, reviews, investigations and proceedings by governmental and self-regulatory agencies that may lead to material adverse consequences. Many aspects of the banking business involve a substantial risk of legal liability. From time to time, we are, or may become, the subject of information-gathering requests, reviews, investigations and proceedings, and other forms of regulatory inquiry, including by bank regulatory agencies, self-regulatory agencies, the SEC and law enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties, including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, financial statement restatements, restrictions on the way we conduct our business, reputational harm and other potentially material adverse consequences. Failure to maintain certain regulatory capital levels and ratios could result in regulatory actions that would be materially adverse to our shareholders. Pressures to maintain appropriate capital levels and address business needs in a changing economy could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could be dilutive or otherwise have an adverse effect on our shareholders. Such actions could include: reduction or elimination of dividends; the issuance of common or preferred stock, or securities convertible into stock; or the issuance of any class of stock having rights that are adverse to those of the holders of our existing classes of common or preferred stock. In addition, these requirements could have a negative impact on our ability to lend, grow deposit balances, make acquisitions or make share repurchases or redemptions. Higher capital levels could also lower our return on equity. Additional information concerning these risks and our management of them, all of which is incorporated into this Item 1A by this reference, appears: under the captions Capital and Related Requirements in Item 1 of this report; under the caption “ Capital ” of Part II, Item 7; and “ Note 19 - Regulatory Capital Requirements ,” under Part II, Item 8. We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations. The federal Bank Secrecy Act, the USA Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain effective anti-money laundering programs and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the Bank Secrecy Act, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service, or the “IRS.” There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control. Federal and state bank regulators also have begun to focus on compliance with Bank Secrecy Act and anti-money laundering regulations. If our policies, procedures and systems are deemed deficient or the policies, procedures and systems of the financial institutions that we have already acquired or may acquire in the future 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 our acquisition plans, which would negatively impact our business, financial condition and results of operations. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Federal, state and local consumer lending laws restrict our ability to originate certain mortgage loans and increase our risk of liability with respect to such loans and increase our cost of doing business. Federal, state and local laws have been adopted that are intended to eliminate certain lending practices considered “predatory.” These laws prohibit practices such as steering borrowers away from more affordable products, selling unnecessary insurance to borrowers, repeatedly refinancing loans and making loans without a reasonable expectation that the borrowers will be able to repay the loans irrespective of the value of the underlying property. The CFPB has issued several rules on mortgage lending, notably a rule requiring all home mortgage lenders to determine a borrower’s ability to repay the loan. Loans with certain terms and conditions and that otherwise meet the definition of a “qualified mortgage” 49 Table of Contents may be protected from liability to a borrower for failing to make the necessary determinations. In response to these laws and related CFPB rules, we have tightened, and in the future may further tighten, our mortgage loan underwriting standards to determine borrowers’ ability to repay. Although it is our policy not to make predatory loans and to determine borrowers’ ability to repay, these laws and related rules create the potential for increased liability with respect to our lending and loan investment activities. They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. We are subject to federal and state fair lending laws, and failure to comply with these laws could lead to material penalties and materially restrict our organic growth and strategic growth and expansion activity. Federal and state fair lending laws and regulations, such as the Equal Credit Opportunity Act and the Fair Housing Act, impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice, CFPB and other federal and state agencies are responsible for enforcing these laws and regulations. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. A successful challenge to our performance under the fair lending laws and regulations could adversely impact our rating under the Community Reinvestment Act and result in a wide variety of sanctions, including the required payment of damages and civil money penalties, injunctive relief, imposition of restrictions on merger and acquisition activity and restrictions on expansion activity, which could negatively impact our reputation, business, financial condition and results of operations. The Federal Reserve may require us to commit capital resources to support Sunflower Bank. The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to a subsidiary bank and to commit resources to support such subsidiary bank. Under the “source of strength” doctrine, the Federal Reserve may require a bank holding company to make capital injections into a troubled subsidiary bank and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. In addition, the Dodd-Frank Act directs the federal bank regulators to require that all companies that directly or indirectly control an insured depository institution serve as a source of strength for the institution. Under these requirements, in the future, we could be required to provide financial assistance to Sunflower Bank if it experiences financial distress. A capital injection may be required at times when we do not have the resources to provide it, and therefore we may be required to borrow the funds. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of its note obligations. Thus, any borrowing that must be done by the holding company in order to make the required capital injection becomes more difficult and expensive and will adversely impact the holding company’s cash flows, financial condition, results of operations and prospects. We could become subject to claims and litigation pertaining to our fiduciary responsibility. Some of the services we provide, such as wealth management services require us to act as fiduciaries for our customers and others. Customers make claims and on occasion take legal action pertaining to our performance of our fiduciary responsibilities. Whether customer claims and legal action related to our performance of our fiduciary responsibilities are founded or unfounded, if such claims and legal action are not resolved in a manner favorable to us, they may result in significant financial liability and/or adversely affect the market perception of us and our products and services as well as impact customer demand for those products and services. Any financial liability or reputational damage could have a material adverse effect on our business, which, in turn, could have a material adverse impact on our financial condition and results of operations. We are party to various claims and lawsuits incidental to our business. Litigation is subject to many uncertainties such that the expenses and ultimate exposure with respect to many of these matters cannot be ascertained. From time to time, we, our directors and our management are the subject of various claims and legal actions by customers, employees, stockholders and others. Whether such claims and legal actions are legitimate or unfounded, if such claims and legal actions are not resolved in our favor, they may result in significant financial liability and/or adversely affect our reputation and our products and services as well as impact customer demand for those products and services. In light of the potential cost and uncertainty involved in litigation, we have in the past and may in the future settle matters even when we believe we have a meritorious defense. Certain claims may seek injunctive relief, which could disrupt the ordinary conduct of our business and operations, increase our cost of doing business or delay or prevent our planned mergers or acquisitions. 50 Table of Contents Our insurance or indemnities may not cover all claims that may be asserted against us. Any judgments or settlements in any pending litigation or future claims, litigation or investigation could have a material adverse effect on our business, reputation, financial condition and results of operations. The expanding body of federal, state and local regulations and/or the licensing of loan servicing, collections or other aspects of our business and our sales of loans to third parties may increase the cost of compliance and the risks of noncompliance and subject us to litigation. We service many of our own loans, and loan servicing is subject to extensive regulation by federal, state and local governmental authorities as well as to various laws and judicial and administrative decisions imposing requirements and restrictions on those activities. The volume of new or modified laws and regulations has increased in recent years and, in addition, some individual municipalities have begun to enact laws that restrict loan servicing activities including delaying or temporarily preventing foreclosures or forcing the modification of certain mortgages. If regulators impose new or more restrictive requirements, we may incur additional significant costs to comply with such requirements which may further adversely affect us. In addition, were we to be subject to regulatory investigation or regulatory action regarding our loan modification and foreclosure practices, our financial condition and results of operation could be adversely affected. In addition, we have sold loans to third parties. In connection with these sales, we make or have made various representations and warranties, breaches of which may result in a requirement that we repurchase the loans, or otherwise make whole or provide other remedies to counterparties. These aspects of our business or our failure to comply with applicable laws and regulations could possibly lead to: civil and criminal liability; loss of licensure; damage to our reputation in the industry; fines and penalties and litigation, including class action lawsuits; and administrative enforcement actions. Any of these outcomes could materially and adversely affect us. Political dysfunction and volatility within the federal government, both at the regulatory and Congressional level, creates significant potential for major and abrupt shifts in federal policy regarding bank regulation, taxes, and the economy, any of which could have significant and adverse impacts on our business and financial performance. Certain of our operations and customers are dependent on the regular operation of the federal or state government or programs they administer. For example, our SBA lending program depends on interaction with the SBA, an independent agency of the federal government. During a lapse in funding, such as has occurred during previous federal government “shutdowns”, the SBA may not be able to engage in such interaction. Similarly, loans we make through USDA lending programs may be delayed or adversely affected by lapses in funding for the USDA. In addition, customers who depend directly or indirectly on providing goods and services to federal or state governments or their agencies may reduce their business with us or delay repayment of loans due to lost or delayed revenue from those relationships. If funding for these lending programs or federal spending generally is reduced as part of the appropriations process or by administrative decision, demand for our services may be reduced. Any of these developments could have a material adverse effect on our financial condition, results of operations or liquidity. Data privacy is a major political concern. The laws governing it are new, and they are likely to evolve and expand. Many non-regulated, non-banking companies have gathered large amounts of personal details about millions of people, and they have the ability to analyze that data and act on that analysis very quickly. This situation has prompted governmental responses. Two prominent responses are the European Union General Data Protection Regulation and the California Consumer Privacy Act. Neither is a banking industry regulation, but both apply to banks in relation to certain clients. Further general regulation to protect data privacy appears likely, and banking industry regulations might be enlarged as well. The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant assumptions, estimates and judgments that affect the financial statements. Management must make significant assumptions and estimates and exercise significant judgment in selecting and applying accounting and reporting policies. In some cases, management must select a policy from two or more alternatives, any of which may be reasonable under the circumstances, which may result in reporting materially different results than would have been reported under a different alternative. The estimate that is consistently one of our most critical is the level of the allowance for credit losses. However, other estimates can be highly significant at discrete times or during periods of varying length, for example the valuation (or impairment) of our deferred tax assets. Estimates are made at specific points in time. As actual events unfold, estimates are adjusted accordingly. Due to the inherent nature of these estimates, it is possible that, at some time in the future, we may significantly increase the allowance for credit losses and/or sustain credit 51 Table of Contents losses that are significantly higher than the provided allowance, or we may recognize a significant provision for impairment of assets, or we may make some other adjustment that will differ materially from the estimates that we make today. Moreover, in some cases, especially concerning litigation and other contingency matters where critical information is inadequate, often we are unable to make estimates until fairly late in a lengthy process. We could be subject to changes in tax laws, regulations and interpretations or challenges to our income tax provision. We compute our income tax provision based on enacted tax rates in the jurisdictions in which we operate. Any change in enacted tax laws, rules or regulatory or judicial interpretations, or any change in the pronouncements relating to accounting for income taxes could adversely affect our effective tax rate, tax payments and results of operations. The taxing authorities in the jurisdictions in which we operate may challenge our tax positions, which could increase our effective tax rate and harm our financial position and results of operations. We are subject to audit and review by U.S. federal and state tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, changes in enacted tax laws, such as adoption of a lower income tax rate in any of the jurisdictions in which we operate, could impact our ability to obtain the future tax benefits represented by our deferred tax assets. In addition, the determination of our provision for income taxes and other liabilities requires significant judgment by management. The ultimate tax outcome may differ from the amounts recorded in our financial statements and could have a material adverse effect on our financial results in the period or periods for which such determination is made. Our internal controls and procedures may fail or be circumvented. Maintaining and adapting our internal controls over financial reporting, disclosure controls and procedures and effective corporate governance policies and procedures (“controls and procedures”) is expensive and requires significant management attention. Moreover, as we continue to grow, including as a result of the proposed HomeStreet merger, if it is completed, our controls and procedures may become more complex and require additional resources to ensure they remain effective amid dynamic regulatory and other guidance. Failure to implement effective controls and procedures or circumvention of our controls and procedures could harm our business, results of operations and financial condition or cause us to fail to meet our public reporting obligations. Risks Related to FirstSun Common Stock There is a limited trading market in our common stock, which would hinder your ability to sell our common stock and may lower the market price of the stock. Our common stock is currently quoted on the OTC Market Group, Inc.’s OTCQX Market. The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The num ber of active buyers and sellers of the shares of our common stock at any particular time may be limited. Under such circumstances, you could have difficulty selling your shares of our common stock on short notice. In addition, the total number of our outstanding shares less the shares beneficially owned by our directors, executive officers and greater than 5% stockholders, is quite limited. As a result, there is not currently an active trading market for our common stock. Accordingly, shareholders should consider the potential illiquid and long-term nature of an investment in FirstSun common stock. A closing condition to the HomeStreet merger agreements (and consistent with undertakings in the Acquisition Finance Securities Purchase Agreement), FirstSun is required to uplist its common stock to Nasdaq. And pursuant to undertakings in the Upfront Securities Purchase Agreement, FirstSun is required to use its reasonable best efforts to list its common stock on Nasdaq (or the New York Stock Exchange or the NYSE American) within 120 days of January 17, 2024, provided that, to the extent reasonably necessary to effect the transactions contemplated by the HomeStreet merger agreement, FirstSun may extend such deadline by up to 60 days with the prior written consent of the selling stockholders (which consent shall not be unreasonably withheld, delayed or conditioned), regardless of whether the HomeStreet merger is consummated. If the proposed HomeStreet merger is completed, the shares of FirstSun common stock which will be issued to HomeStreet shareholders in the proposed HomeStreet merger will be freely transferable. However, regardless of whether the HomeStreet merger is completed, there is a limited trading market in FirstSun common stock, which may hinder shareholders’ ability to sell FirstSun common stock and may lower the market price of the stock. The development of a trading market depends upon the existence of willing buyers and sellers, the presence of which is not within the control of FirstSun. Accordingly, investing in FirstSun stock could potentially be illiquid and a long-term investment. Even though the FirstSun stockholder base would increase as a result of the completion of the proposed HomeStreet merger and even if the FirstSun common stock begins trading on Nasdaq or any other stock exchange, there can be no assurance that an active and liquid trading market for FirstSun will develop, or once developed, will continue. 52 Table of Contents FirstSun’s Significant Stockholders could exercise significant influence over FirstSun, and their interests in FirstSun may be different than yours. Certain of the Significant Stockholders of FirstSun (those identified under “ Item 13. Certain Relationships and Related Transactions, and Director Independence ,” under the heading “Stockholders’ Agreement”), own, in the aggregate, approximately 70.4% of our common stock. As a result, our Significant Stockholders exercise significant influence over FirstSun through such ownership. In addition, under our Stockholders’ Agreement, as amended, certain of FirstSun’s Significant Stockholders, are entitled to designate nominees for nine of the ten directors, in each case, so long as certain stock ownership thresholds are maintained. The directors nominated by the Significant Stockholders will have significant authority to make decisions affecting our business, including, among others, the issuance of additional capital stock, the incurrence of additional indebtedness, mergers and acquisitions, the decision of whether or not to declare dividends and other extraordinary corporate matters. Pursuant to the Stockholders’ Agreement, as amended, FirstSun stockholders also have certain rights and obligations related to its governance, transfer restrictions, rights of first refusal, tag-along rights, and with respect to the Significant Stockholders, certain preemptive rights. See “ Item 13. Certain Relationships and Related Transactions, and Director Independence ,” under the heading “Stockholders’ Agreement.” The interests of FirstSun’s Significant Stockholders may conflict with the interests of our stockholders. For example, some or all of FirstSun’s Significant Stockholders may support certain long-term strategies or objectives for FirstSun that may not be accretive to our stockholders in the short term. The concentration of ownership may also delay, defer or even prevent a change in control of FirstSun, even if such a change in control would benefit our other stockholders, and may make some transactions more difficult or impossible without the support of FirstSun’s Significant Stockholders. Some provisions of our organizational documents, our Stockholders’ Agreement and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders. Provisions in our certificate of incorporation, bylaws and Stockholders’ Agreement, as well as provisions of the DGCL, could make it more difficult for a third-party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include: • establishing a classified board of directors such that not all members of the board are elected at one time, with nine of our ten director seats being nominated by certain Significant Stockholders under the Stockholders’ Agreement, so long as certain stock ownership thresholds are maintained; • providing for a plurality voting standard in the election of directors without cumulative voting; • providing that our stockholders may remove members of our board of directors only for cause; • enabling our board of directors to issue additional shares of authorized, but unissued capital stock; • enabling our board to issue “blank check” preferred stock without further stockholder approval; and • enabling our board of directors to amend our bylaws without stockholder approval. We do not intend to pay dividends for the foreseeable future. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. As a result, a stockholder may only receive a return on their investment in our common stock if the trading price of our common stock increases. Also, as a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve and any future payment of dividends will depend on the Bank’s ability to make distributions and payments to the Company as our principal source of funds to pay such dividends. The Bank is also subject to various legal, regulatory and other restrictions on its ability to make distributions and payments to the Company. In addition, in the future, we may enter into borrowing or other contractual arrangements that restrict our ability to pay dividends. As a consequence of these various limitations and restrictions, we may not be able to pay dividends on our common stock. See “Item 1. Business - Supervision and Regulation - Dividend Payments” for additional information. 53 Table of Contents An investment in FirstSun common stock is not an insured deposit and is subject to risk of loss. An investment in FirstSun common stock will not be 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. We are an “emerging growth company,” and the reduced reporting requirements applicable to emerging growth companies may make our common stock less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies but not to “emerging growth companies,” including, but not limited to: • not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act; • not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; • reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and • exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of some or all of these provisions for up to five years or such earlier time as we cease to qualify as an emerging growth company, which will occur if we have more than $1.235 billion in total annual gross revenue, if we issue more than $1.0 billion of non-convertible debt in a three-year period, or if we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, in which case we would no longer be an emerging growth company as of the following December 31. Investors may find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile. We may issue additional shares of stock or equity derivative securities that may dilute the percentage ownership of existing stockholders and the book value per share of our common stock, which may cause the price of our common stock to decline and adversely affect the terms on which we may obtain additional capital. Issuances of FirstSun common stock or equity derivative securities, or the perception that these issuances could occur, could cause the market price of FirstSun common stock to decline and make it more difficult for us to sell equity or equity-related securities in the future, at a time and place that we deem appropriate. Accordingly, the market price of FirstSun common stock could be adversely affected by actual or anticipated issuances of a significant number of shares of FirstSun common stock in the future. We are authorized to issue up to 50,000,000 shares of our common stock, and to issue up to 10,000,000 shares of preferred stock, w ithout further stockholder approval. As of March 6, 2024, FirstSun had 27,430,682 shares of common stock outstanding, and no shares of preferred stock outstanding. On or prior to closing of the proposed HomeStreet merger, FirstSun intends to file an amendment to its certificate of incorporation to increase the number of FirstSun’s authorized shares of capital stock from 60,000,000 to 110,000,000, consisting of 100,000,000 shares of FirstSun common stock and 10,000,000 shares of preferred stock. Such amendment to the certificate of incorporation will become effective upon filing with the Secretary of State of the State of Delaware. We may issue additional shares of our stock or equity derivative securities in the future pursuant to current or future equity compensation plans, in connection with future acquisitions or financings (including in connection with the proposed HomeStreet merger), or to raise additional capital to support our growth or to otherwise strengthen our balance sheet. Any issuance of shares of our stock or derivative equity securities will dilute the percentage ownership of our shareholders, may dilute the book value per share of our common stock, may dilute the economic and voting ownership interest of our existing stockholders, and could have a material negative effect on the value of our common stock. 54 Table of Contents Sales by FirstSun stockholders of substantial amounts of our common stock, as well as the anticipation of such sales by the public markets, could depress the market price of our common stock. FirstSun has filed a resale shelf registration statement, which was declared effective by the SEC on November 1, 2023 and remains in effect, with respect to the potential resale of up to approximately 20.47 million shares of our common stock by certain stockholders, including certain significant stockholders, of FirstSun. FirstSun is obligated to (and intends to promptly) file with the SEC a resale shelf registration statement with respect to the potential resale of up to approximately 2.46 million shares of our common stock by certain institutional stockholders who purchased such shares from FirstSun in a private placement on January 17, 2024. If the proposed HomeStreet merger is completed, the shares of FirstSun common stock which will be issued to HomeStreet shareholders in the proposed HomeStreet merger will be freely transferable, and FirstSun will be required to file resale shelf registration statements with respect to the resale by certain institutional investors of up to approximately 2.92 million additional shares of FirstSun common stock that would be issued pursuant to the Acquisition Finance Securities Purchase Agreement and the resale by certain institutional stockholders of up to approximately 1.15 million shares of FirstSun common stock issuable upon exercise of the Warrants. Sales by stockholders of FirstSun, before or after any completion of the proposed HomeStreet merger, of significant amounts of our common stock, as well as the anticipation of such sales by the public markets, could cause the market price of our common stock to decline. These sales may also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate to raise funds through future offerings of our common stock or derivative equity securities. Shareholder litigation could prevent or delay the completion of the merger or otherwise negatively impact the business and operations of FirstSun and HomeStreet. Shareholders of FirstSun or HomeStreet may file lawsuits against FirstSun, HomeStreet and/or the directors and officers of either company in connection with the merger. One of the conditions to the closing is that there must be no order, injunction or decree issued by any court or governmental entity of competent jurisdiction or other legal restraint preventing the consummation of the merger or any of the other transactions contemplated by the merger agreement. If any plaintiff were successful in obtaining an injunction prohibiting FirstSun or HomeStreet from completing the merger or any of the other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in significant costs to FirstSun or HomeStreet, including any cost associated with the indemnification of directors and officers of each company. FirstSun and HomeStreet may incur costs in connection with the defense or settlement of any stockholder or shareholder lawsuits filed in connection with the merger. Such litigation could have an adverse effect on the financial condition and results of operations of FirstSun and HomeStreet and could prevent or delay the completion of the merger. Climate Risks Natural disasters and weather-related events exacerbated by climate change could have a negative impact on our results of operations and financial condition. We operate in markets in which natural disasters, including tornadoes, severe storms, fires, floods, droughts, hurricanes and earthquakes have occurred. Such natural disasters could significantly affect the local population and economies, the activities of many of our customers and clients, and our business, and could pose physical risks to our properties. Although our banking offices are geographically dispersed throughout portions of the midwestern and southwestern United States and we maintain insurance coverage for such events, a significant natural disaster in or near one or more of our markets could have a material adverse effect on our financial condition, results of operations or liquidity. The markets in which we operate also are exposed to the adverse impacts of climate change, as well as uncertainties related to the transition to a low-carbon economy. Climate change presents both immediate and long-term risks to us and our customers and clients, with the risks expected to increase over time. Climate risks can arise from both physical risks (those risks related to the physical effects of climate change) and transition risks (risks related to regulatory, compliance, technological, stakeholder and legal changes from a transition to a low-carbon economy). The physical and transition risks can manifest themselves differently across our risk categories in the short, medium and long terms. The physical risk from climate change could result from increased frequency and/or severity of adverse weather events. For example, adverse weather events could damage or destroy our properties or our counterparties’ properties and other assets and disrupt operations, making it more difficult for counterparties to repay their obligations, whether due to reduced 55 Table of Contents profitability, asset devaluations or otherwise. These events could also increase the volatility in financial markets and increase our counterparty exposures and other financial risks, which may result in lower revenues and higher cost of credit. Transition risks may arise from changes in regulations or market preferences toward a low-carbon economy, which in turn could have negative impacts on asset values, results of operations or our reputation or that of our customers and clients. For example, our corporate credit exposures include industries that may experience reduced demand for carbon-intensive products due to the transition to a low-carbon economy. Moreover, banking regulators and others are increasingly focusing on the issue of climate risk at financial institutions, both directly and with respect to their clients. Even as regulators, such as the SEC, begin to propose or mandate additional disclosure of climate-related information by companies across sectors, there may continue to be a lack of information for more robust climate-related risk analyses. Third-party exposures to climate-related risks and other data generally are limited in availability and variable in quality. Modeling capabilities to analyze climate-related risks and interconnections are improving but remain incomplete. Legislative or regulatory uncertainties and changes regarding climate-related risk management and disclosures are likely to result in higher regulatory, compliance, credit, reputational and other risks and costs (for additional information, see the ongoing regulatory and legislative uncertainties and changes risk factor above). In addition, we could face increased regulatory, reputational and legal scrutiny as a result of its climate risk. General Risk Factors Our historical operating results may not be indicative of our future operating results. We may not be able to sustain our historical rate of growth, and, consequently, our historical results of operations will not necessarily be indicative of our future operations. Various factors, such as economic conditions, regulatory and legislative considerations, and competition, may also impede our ability to expand our market presence. If we experience a significant decrease in our historical rate of growth, our results of operations and financial condition may be adversely affected because a high percentage of our operating costs are fixed expenses. Item 1B. Unresolved Staff Comments None. Item 1C. Cybersecurity Risk Management and Strategy Cybersecurity is a critical component of our overall risks given the increasing reliance on technology and potential of cyber threats. Our Chief Information Security Officer is primarily responsible for this cybersecurity component and is a member of the information technology organization, reporting directly to the Chief Information Officer and regularly reports on the state of the program to the Risk Committee of our Bank’s Board of Directors. Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuse our systems or information. The structure of our information security program is designed around the Federal Financial Institutions Examination Council (“FFIEC”) regulatory guidance, and other industry standards such as the Center for Internet Security (“CIS”). In addition, we leverage certain industry and government associations, third-party benchmarking, audits, and threat intelligence feeds to facilitate and promote program effectiveness. Our Chief Information Security Officer and our Chief Information Officer regularly collaborate with industry groups to discuss cybersecurity trends and issues and identify best practices. The information security program is periodically reviewed by such personnel with the goal of addressing changing threats and conditions. We leverage people, processes, and technology with an in-depth, layered, defensive strategy as part of our efforts to manage and maintain cybersecurity controls. We also employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regarding suspicious activity, as well as to report on suspected advanced persistent threats. We have established processes and systems designed to mitigate cyber risk, including regular and on-going education and training for employees, preparedness simulations and tabletop exercises, and recovery and resilience tests. We engage in regular assessments of our infrastructure, software systems, and network architecture, using internal cybersecurity experts and third-party specialists. We also maintain a third-party risk management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external service providers and our supply chain. We also actively monitor our email gateways for malicious phishing email campaigns and monitor remote 56 Table of Contents connections as a significant portion of our workforce has the option to work remotely. We leverage internal and external auditors and independent external partners to periodically review our processes, systems, and controls, including with respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our risk management program. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is severe. Therefore, we will experience risk to potential vulnerabilities now and in the future but have built a program to recognize and respond to these vulnerabilities for the purposes of identification and remediation of those vulnerabilities and the impact they can have on our business. Our internal systems, processes, and controls are designed to mitigate loss from cyber-attacks. Additionally, we maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, including timely notification of and escalation to the appropriate management and/or executives. We have created and maintain a Crisis Management Plan as part of our overall Incident Response Plan which provides for the escalation path and management of an incident by the appropriate designated executives. The Incident Response Plan is coordinated through the Chief Information Security Officer and key members of the information technology management team are embedded by design. The Crisis Management Plan facilitates coordination across multiple parts of our organization and is evaluated at least annually. Further, our risk from cybersecurity threats includes failure in or breach of our operational or security systems or infrastructure managed by third-party vendors and extends to other third parties, which could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs, and/or cause losses. While we have experienced cybersecurity incidents in the past, to date, risks from cybersecurity threats have not materially affected the Company. For further discussion of risks from cybersecurity threats, see the section captioned “A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers or other third parties, including as a result of cyber-attacks, could disrupt our businesses, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and cause losses .” in Item 1A. Risk Factors . Governance Our Chief Information Security Officer is accountable for managing our enterprise information security department and delivering our information security program. The responsibilities of this department include cybersecurity risk assessment, threat intelligence, control evaluation and assessment, incident response, vulnerability assessment, threat intelligence, third-party risk management, change management, and business resilience. The foregoing responsibilities are covered on a day-to-day basis by a first line of defense function. The second line of defense function is separated from the first line of defense function through organizational structure and overall cybersecurity management is independently reviewed by a third line through the audit function. The department, as a whole, consists of information security professionals with varying degrees of education and experience. Individuals within the department are generally subject to professional education and certification requirements. In particular, our Chief Information Security Officer has substantial relevant expertise and formal training in the areas of information security and cybersecurity risk management. Various management committees exist including the Information Technology Steering Committee, which focuses on technology impact. This committee provides oversight and governance of the technology program and the information security program. This committee is chaired by the Chief Information Officer and includes other executives across the Bank and the Chief Information Security Officer is a part of this committee. This committee meets quarterly to provide oversight of technology projects and services including strategy, standards, policies, practices, controls, and mitigation and prevention efforts employed to manage security risks. The Chief Information Security Officer reports summaries of key issues, including significant cybersecurity and/or privacy incidents, discussed at the meeting and the actions taken to the Risk Committee of our Board of Directors on a quarterly basis (or more frequently as may be required by the Incident Response Plan). The Risk Committee of our Bank’s Board of Directors is responsible for overseeing our information security and technology programs, including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Chief Information Security Officer and our Chief Information Officer provide quarterly reports to the Risk Committee of our Bank’s Board of Directors regarding the information security program and the 57 Table of Contents technology program, key enterprise cybersecurity initiatives, and other matters relating to cybersecurity processes. The Risk Committee of our Bank’s Board of Directors reviews and approves our information security policies and strategies. The Risk Committee of our Bank’s Board of Directors provides a report of their activities to the full Board of Directors at each board meeting. Vendor Incident As disclosed in our Form 8-K filed on July 14, 2023 , on or about May 31, 2023, we were informed by a third-party vendor of a zero-day vulnerability in the vendor’s managed file transfer software MOVEit (the “Vendor Incident”). The Bank utilizes MOVEit for securely transferring sensitive and confidential information and other data, including for its First National 1870 and Guardian Mortgage divisions. We publicly disclosed this breach and provided appropriate notifications to potentially impacted customers. We now understand that the SEC is conducting an investigation into data breaches resulting from the failures in the Progress software and on or about February 26, 2024, we received a request from the SEC to preserve and provide various documents and information relating to the SEC’s investigation. The fact that the SEC has begun an investigation does not mean that the SEC believes that anyone (including FirstSun) has violated federal securities laws, nor does it mean that the SEC has a negative opinion of any person, entity, or security. It is a non-public fact-finding inquiry, with which we intend to fully cooperate. The costs associated with the Vendor Incident have not had, and neither it nor the SEC’s investigation (including responding to any information requests from the SEC) are expected to have a material adverse impact on the Company’s financial condition or results of operation. Item 2. Properties Our principal executive office is located at 1400 16th Street, Suite 250, Denver, Colorado 80202. Sunflower Bank’s main office was relocated from Denver, Colorado to 8117 Preston Road, Suite 220, Dallas, Texas 75225 in November 2023. In addition, we currently operate 23 branches located in Texas, 21 branches located in Kansas, 11 branches located in Colorado, nine branches located in New Mexico, four branches located in Arizona and one branch located in Washington. We also operate 11 mortgage offices located in Arizona, Idaho, Michigan, New Mexico, Oregon, Texas and Washington. We own 43 of our banking branches and lease our other 26 banking branches. In addition, we also lease our executive office. Our mortgage banking offices are typically leased for shorter-terms. We believe that our facilities are in good condition and are adequate to meet our operating needs for the foreseeable future. Item 3. Legal Proceedings FirstSun and its subsidiaries may be involved from time to time in various routine legal proceedings incidental to our respective businesses. Neither we nor any of our subsidiaries are currently engaged in any legal proceedings that are expected to have a material adverse effect on our results of operations or financial position. For further information regarding legal proceedings, see Note 24 - Commitments and Contingencies in our audited consolidated financial statements contained elsewhere in this report. Item 4. Mine Safety Disclosures Not Applicable. 58 Table of Contents Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for FirstSun Common Stock As of December 31, 2023, we had 24,960,639 shares of common stock outstanding and approximately 369 stockholders of record. On January 17, 2024 we issued an additional 2,461,538 shares of our common stock at $32.50 per share in conjunction with the proposed merger with HomeStreet and related investment agreements. In August 2022, our common stock began trading on the OTCQX® Best Market under the ticker symbol “FSUN”. There was no public trading market for the common stock before that date. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. Dividends We have not declared or paid any cash dividends on our common stock since we converted from an S corporation to a C corporation in 2016. For the foreseeable future, we do not intend to declare cash dividends and instead we plan to retain earnings to grow our business. Although we have no current expectations to pay dividends, any future determination relating to our dividend policy will be made by our board of directors and will depend on a number of factors. As a Delaware corporation and a bank holding company, dividend payments are subject to numerous limitations. For additional information, see Item 1. “Business –Supervision and Regulation—Bank Holding Company Regulation—Dividend Payments”, and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity" and Note 16 - Stockholders’ Equity included in our consolidated financial statements included elsewhere in this report. Item 6. [Reserved] 59 Table of Contents Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FIRSTSUN In this section, unless the context suggests otherwise, references to “we,” “us,” and “our” mean the combined business of FirstSun and its wholly-owned subsidiaries, Sunflower Bank, Logia Portfolio Management, LLC, and FEIF Capital Partners, LLC. The following discussion is an analysis of our consolidated results of operations for the years ended December 31, 2023, 2022 and 2021, and financial condition for the years ended December 31, 2023 and 2022. This discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying footnotes filed with this report in “ Part II, Item 8. Financial Statements .” We have omitted discussion of 2021 results where it would be redundant to the discussion previously included in “ Management’s Discussion and Analysis of Financial Condition and Results of Operations of FirstSun ” section of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 16, 2023. Historical results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or results of operations for any future periods. Comments regarding our business that are not historical facts are considered forward-looking statements that involve inherent risks and uncertainties. Actual results may differ materially from those contained in these forward-looking statements. For additional information regarding our cautionary disclosures, See the “Cautionary Note Regarding Forward-Looking Statements” beginning on page 3 of this report. General Overview FirstSun Capital Bancorp, headquartered in Denver, Colorado, is the financial holding company for Sunflower Bank, National Association, which is headquartered in Dallas, Texas and operates as Sunflower Bank, First National 1870 and Guardian Mortgage. We conduct a full-service community banking and trust business through our wholly-owned subsidiaries—Sunflower Bank, Logia Portfolio Management, LLC, and FEIF Capital Partners, LLC. We offer a full range of relationship-focused services to meet our clients’ personal, business and wealth management financial objectives, with a branch network in Texas, Kansas, Colorado, New Mexico, and Arizona and mortgage capabilities in 43 states. Our product line includes commercial and industrial loans, commercial real estate loans, residential mortgage, public finance and other consumer loans, and a variety of commercial and consumer deposit products, including noninterest-bearing accounts, interest-bearing demand products, savings accounts, money market accounts and certificates of deposit. We also offer wealth management and trust products including personal trust and agency accounts, employee benefit and retirement related trust and agency accounts, investment management and advisory agency accounts, and foundation and endowment trust and agency accounts. We also offer online banking and bill payment services, online cash management, safe deposit box rentals, debit card and ATM card services and the availability of a network of ATMs for our customers. We operate FirstSun through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. The expenses included in Corporate are not deemed to be allocable to our operating segments. The operating segments have been determined based on the products and services we offer and reflect the manner in which our financial information is evaluated by management. Each of the operating segments is complementary to each other and because of the interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. For additional information on our segments, see Note 23 - Segment Information included in our consolidated financial statements included elsewhere in this report. Merger with Pioneer Bancshares, Inc. On April 1, 2022, we completed our merger with Pioneer Bancshares, Inc. (“Pioneer”), pursuant to which Pioneer was merged with and into FirstSun, with FirstSun continuing as the surviving entity, and Pioneer’s wholly-owned subsidiary, Pioneer Bank, SSB, a Texas state savings bank, was merged with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank. With the acquisition, we acquired 19 branches in Texas. The results for Pioneer are reflected in our results of operations and financial condition since April 1, 2022. Further information is presented in Note 2 - Merger with Pioneer Bancshares, Inc . included in our consolidated financial statements included elsewhere in this report. 60 Table of Contents Pending Merger with HomeStreet, Inc. and Common Equity Raise On January 16, 2024, FirstSun and Seattle-based HomeStreet, Inc. (“HomeStreet”), the holding company of HomeStreet Bank (“HomeStreet Bank”) entered into a definitive merger agreement (the “merger agreement”). Under the merger agreement, HomeStreet will merge with and into FirstSun, with FirstSun continuing as the surviving entity. Immediately following the merger, HomeStreet Bank will merge with and into Sunflower Bank, with Sunflower Bank continuing as the surviving bank. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of HomeStreet common stock will be converted into the right to receive 0.4345 of a share of FirstSun common stock. The combined entity is expected to have total assets of approximately $17 billion and 129 branch locations. The combined entity’s expanded footprint includes, FirstSun’s current presence in the Southwest and Midwest together with HomeStreet’s presence in Southern California, Hawaii and the Pacific Northwest. The parties to the merger expect to complete the merger in the middle of 2024, subject to satisfaction of closing conditions, including receipt of customary required regulatory approvals and the approval of the merger agreement by the HomeStreet shareholders. Concurrently with entry into the HomeStreet merger agreement, FirstSun entered into investment agreements with investors to raise capital to support the merger. In aggregate, $175 million of common stock will be issued to those investors: (a) $80 million of which was issued immediately following the merger announcement, and (b) the remaining $95 million of which will be issued substantially concurrently with, and subject to, the closing of the merger. The proceeds of this equity raise are expected to support the combined entity and result in capital ratios that exceed regulatory requirements. For additional information on the proposed merger and equity raise, see Note 27 - Subsequent Events included in our consolidated financial statements included elsewhere in this report. Financial Highlights For 2023 We delivered strong financial results in 2023, which included: • Net income of $103.5 million, $4.08 per diluted share • Net interest margin of 4.23% • Return on average total assets of 1.38% • Return on average stockholders’ equity of 12.50% • Loan growth of 6.0% • Average deposit growth of 9.7% • 21.2% fee revenue to total revenue 1 Net income totaled $103.5 million, or $4.08 per diluted share, in 2023, compared to $59.2 million, or $2.48 per diluted share, in 2022. Net income in 2022 included merger costs, net of tax, of $17.0 million, or $0.72 per diluted share. There were no merger costs recorded in 2023. The return on average total assets was 1.38% in 2023, compared to 0.88% in 2022, and the return on average stockholders’ equity was 12.50% in 2023, compared to 8.55% in 2022. The unfavorable impact in 2022 of merger costs, net of tax, to return on average total assets was 0.25% and to return on average stockholders’ equity was 2.46%. 1 Total revenue is net interest income plus noninterest income. 61 Table of Contents Financial Highlights The following table sets forth certain financial highlights of FirstSun as of and for the year ended December 31,: ($ in thousands, except share and per share amounts) 2023 2022 2021 Income Statement: Net interest income $ 293,431 $ 241,632 $ 155,233 Taxable equivalent adjustment 5,086 5,059 5,755 Net interest income - fully tax equivalent ("FTE") basis (non-GAAP) (3) $ 298,517 $ 246,691 $ 160,988 Provision for credit losses $ 18,247 $ 18,050 $ 3,000 Noninterest income $ 79,092 $ 89,566 $ 124,244 Noninterest expense $ 222,793 $ 239,126 $ 224,635 Net income $ 103,533 $ 59,182 $ 43,164 Per Common Share Data: Weighted average diluted common shares 25,387,196 23,838,471 18,770,785 Net income (basic) $ 4.15 $ 2.55 $ 2.36 Net income (diluted) $ 4.08 $ 2.48 $ 2.30 Cash dividends $ — $ — $ — Dividend payout ratio — % — % — % Book value $ 35.14 $ 31.08 $ 28.56 Tangible book value (non-GAAP) (3) $ 30.96 $ 26.69 $ 26.31 Performance Ratios: Return on average total assets 1.38 % 0.88 % 0.79 % Return on average stockholders' equity 12.50 % 8.55 % 8.37 % Return on average tangible common stockholders' equity (non-GAAP) (3) 14.88 % 10.45 % 9.35 % Net interest margin 4.23 % 3.87 % 3.00 % Net interest margin (on FTE basis) (3) 4.29 % 3.95 % 3.11 % Efficiency ratio (1) 59.81 % 72.20 % 80.38 % Net charge-offs (recoveries) to average loans outstanding 0.13 % (0.01) % 0.09 % Allowance for credit losses to loans 1.28 % 1.12 % 1.18 % Nonperforming loans to total loans (2) 1.01 % 0.49 % 0.70 % Balance Sheet: Total loans, excluding loans held-for-sale $ 6,267,096 $ 5,911,832 $ 4,037,123 Total assets $ 7,879,724 $ 7,430,322 $ 5,666,814 Total deposits $ 6,374,103 $ 5,765,062 $ 4,854,948 Total borrowed funds $ 464,781 $ 724,120 $ 109,458 Total stockholders' equity $ 877,197 $ 774,536 $ 524,038 Capital Ratios: Total risk-based capital to risk-weighted assets 13.25 % 11.99 % 11.76 % Tier 1 risk-based capital to risk-weighted assets 11.10 % 9.94 % 9.70 % Common Equity Tier 1 (CET 1) to risk-weighted assets 11.10 % 9.94 % 9.70 % Tier 1 leverage capital to average assets 10.52 % 9.71 % 8.24 % Average stockholders' equity to average total assets 11.05 % 10.28 % 9.43 % Tangible common stockholders' equity to tangible assets (non-GAAP) (3) 9.94 % 9.09 % 8.58 % Tangible common stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) (3) 9.90 % 9.03 % 8.59 % Nonfinancial Data: Full-time equivalent employees 1,110 1,149 1,042 Banking branches 69 72 53 (1) The efficiency ratio is one measure of profitability in the banking industry. This ratio measures the cost of generating one dollar of revenue. That is, the ratio is designed to reflect the percentage of one dollar which must be expended to generate that dollar of revenue. We calculate this ratio by dividing noninterest expense by the sum of net interest income and noninterest income. (2) Nonperforming loans include nonaccrual loans and accrual loans greater than 90 days past due. On January 1, 2023, we adopted ASU 2022-02, whereby we no longer recognize or account for TDRs. The loans previously classified as accrual TDRs are no longer considered nonperforming. We have adjusted prior periods to reflect this change in accounting. (3) See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent. 62 Table of Contents Non-GAAP Financial Measures and Reconciliations The non-GAAP financial measures presented below are used by our management and our board of directors on a regular basis in addition to our GAAP results to facilitate the assessment of our financial performance. Management believes these non-GAAP financial measures enhance an investor’s understanding of our financial results by providing a meaningful basis for period-to-period comparisons, assisting in operating results analysis, and predicting future performance. This information supplements our GAAP reported results, and should not be viewed in isolation from, or as a substitute for, our GAAP results. Accordingly, this financial information should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2023, included elsewhere in this report. Non-GAAP financial measures exclude certain items that are included in the financial results presented in accordance with GAAP. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although these non-GAAP financial measures are frequently used by investors to evaluate a company, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These non-GAAP measures are not necessarily comparable to similar measures that may be represented by other companies. The following table presents GAAP to non-GAAP reconciliations as of and for the year ended December 31,: ($ in thousands, except share and per share amounts) 2023 2022 2021 Tangible common stockholders’ equity and tangible book value per common share: Total common stockholders' equity (GAAP) $ 877,197 $ 774,536 $ 524,038 Less: Goodwill and other intangible assets Goodwill (93,483) (93,483) (33,050) Other intangible assets (10,984) (15,806) (8,250) Tangible common stockholders' equity (non-GAAP) $ 772,730 $ 665,247 $ 482,738 Total common shares outstanding 24,960,639 24,920,984 18,346,288 Tangible book value per common share (non-GAAP) $ 30.96 $ 26.69 $ 26.31 Tangible net income: Net Income (GAAP) $ 103,533 $ 59,182 $ 43,164 Add: Intangible amortization, net of tax 3,809 3,330 1,119 Tangible net income (non-GAAP) $ 107,342 $ 62,512 $ 44,283 Return on average tangible common stockholders’ equity: Tangible net income (non-GAAP) (see above) $ 107,342 $ 62,512 $ 44,283 Total average common stockholders' equity (GAAP) $ 828,102 $ 692,524 $ 515,773 Less: Average goodwill and other intangible assets Average goodwill (93,483) (78,582) (33,050) Average other intangible assets (13,178) (15,811) (8,964) Total average tangible common stockholders' equity (non-GAAP) $ 721,441 $ 598,131 $ 473,759 Return on average tangible common stockholders’ equity (non-GAAP) 14.88 % 10.45 % 9.35 % Net interest margin - FTE basis: Net interest income (GAAP) $ 293,431 $ 241,632 $ 155,233 Taxable equivalent adjustment 5,086 5,059 5,755 Net interest income - FTE basis (non-GAAP) $ 298,517 $ 246,691 $ 160,988 Average earning assets $ 6,935,567 $ 6,244,221 $ 5,180,650 Net interest margin - FTE basis (non-GAAP) 4.29 % 3.95 % 3.11 % Tangible common stockholders’ equity to tangible assets: Total assets (GAAP) $ 7,879,724 $ 7,430,322 $ 5,666,814 Less: Goodwill and other intangible assets Goodwill (93,483) (93,483) (33,050) Other intangible assets (10,984) (15,806) (8,250) Total tangible assets (non-GAAP) $ 7,775,257 $ 7,321,033 $ 5,625,514 Tangible common stockholders’ equity (non-GAAP) (see above) $ 772,730 $ 665,247 $ 482,738 Tangible common stockholders’ equity to tangible assets (non-GAAP) 9.94 % 9.09 % 8.58 % 63 Table of Contents ($ in thousands, except share and per share amounts) 2023 2022 2021 Tangible common stockholders’ equity to tangible assets, reflecting net unrealized losses on HTM securities, net of tax: Total tangible common stockholders' equity (non-GAAP) (see above) $ 772,730 $ 665,247 $ 482,738 Less: Net unrealized losses on HTM securities, net of tax (3,629) (4,295) 447 Total tangible common stockholders’ equity less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 769,101 $ 660,952 $ 483,185 Total tangible assets (non-GAAP) (see above) $ 7,775,257 $ 7,321,033 $ 5,625,514 Less: Net unrealized losses on HTM securities, net of tax (3,629) (4,295) 447 Total tangible assets less net unrealized losses on HTM securities, net of tax (non-GAAP) $ 7,771,628 $ 7,316,738 $ 5,625,961 Tangible common stockholders’ equity to tangible assets (non-GAAP) 9.94 % 9.09 % 8.58 % Tangible common stockholders’ equity to tangible assets reflecting net unrealized losses on HTM securities, net of tax (non-GAAP) 9.90 % 9.03 % 8.59 % Net income excluding merger costs: Net income (GAAP) $ 103,533 $ 59,182 $ 43,164 Add: Merger costs Merger related expenses — 18,751 3,085 Income tax effect on merger related expenses — (4,083) (509) Provision for loan loss on Pioneer loans marked at a premium — 2,884 — Income tax effect on provision for loan loss on Pioneer loans marked at a premium — (521) — Total merger costs — 17,031 2,576 Net income excluding merger costs (non-GAAP) $ 103,533 $ 76,213 $ 45,740 Return on average total assets excluding merger costs: Return on average total assets (ROAA) (GAAP) 1.38 % 0.88 % 0.79 % Add: Impact of merger costs, net of tax — % 0.25 % 0.05 % ROAA excluding merger costs (non-GAAP) 1.38 % 1.13 % 0.84 % Return on average stockholders’ equity excluding merger costs: Return on average stockholders' equity (ROAE) (GAAP) 12.50 % 8.55 % 8.37 % Add: Impact of merger costs, net of tax — % 2.46 % 0.50 % ROAE excluding merger costs (non-GAAP) 12.50 % 11.01 % 8.87 % Efficiency ratio excluding merger related expenses: Efficiency ratio (GAAP) 59.81 % 72.20 % 80.38 % Less: Impact of merger related expenses — % (5.66) % (1.11) % Efficiency ratio excluding merger related expenses (non-GAAP) 59.81 % 66.54 % 79.27 % Diluted earnings per share excluding merger costs: Diluted earnings per share (GAAP) $ 4.08 $ 2.48 $ 2.30 Add: Impact of merger costs, net of tax — 0.72 0.14 Diluted earnings per share excluding merger costs (non-GAAP) $ 4.08 $ 3.20 $ 2.44 Segments Our operations are conducted through two operating segments: Banking and Mortgage Operations. We also allocate certain expenses to Corporate, which is not an operating segment. The operating segments have been determined based on the products and services we offer and reflect the manner in which our financial information is currently evaluated by management. Each of the operating segments is complementary to each other and because of the interrelationship of the segments, the information presented is not indicative of how the segments would perform if they operated as independent entities. For additional information on our segments, see Note 23 - Segment Information included in our audited consolidated financial statements included elsewhere in this report. Comparison of fiscal years 2023 and 2022 Banking Income before income taxes increased $58.6 million to $147.2 million in 2023, from $88.5 million in 2022. The period over period increase was primarily driven by an increase in net interest income and to a lesser extent noninterest income and a reduction in noninterest expense, partially offset by an increase in provision for credit losses. Net interest income increased $50.7 million to $292.6 million in 2023 compared to $241.8 million in 2022. The increase in net interest income was primarily due to organic growth in our loan portfolios and an increase in net interest margin. Noninterest expense 64 Table of Contents decreased $3.1 million to $175.7 million in 2023, compared to $178.8 million in 2022. The decrease in noninterest expense was primarily the result of the absence of merger costs in 2023 compared to $18.8 million ($0.62 diluted earnings per share) in merger-related expenses incurred in 2022 related to the Pioneer merger, partially offset by an increase in salary and employee benefits of $11.7 million and an increase of $3.1 million in occupancy expenses in 2023. Provision for credit losses increased $1.0 million to $15.8 million in 2023 compared to $14.8 million in 2022. The increase in the provision for credit losses was attributed to both organic loan growth and our implementation of a new allowance for credit loss methodology in 2023. For additional information on our new allowance for credit loss methodology see “Critical Accounting Estimates” below. Identifiable assets for our Banking segment grew by $0.3 billion to $6.9 billion at December 31, 2023 from $6.6 billion at December 31, 2022. The growth in identifiable assets was primarily driven by organic growth in our loan portfolios. Mortgage Operations Loss before income taxes increased to $6.5 million in 2023, compared to a loss of $4.6 million in 2022, primarily due to a $16.3 million decrease in mortgage banking services revenue, net, partially offset by a $13.1 million decrease in salary and employee benefits expenses from the decline in mortgage loan originations and reductions in staffing levels. MSR capitalization and changes in fair value, net of derivative activity, decreased $10.8 million for the year ended December 31, 2023, compared to 2022. The decrease in revenue related to our MSRs was primarily the result of market interest rate movement and the impact to fair values and overall origination activity, which led to a year over year decline in the net fair value for MSRs and the related derivative activity of $5.8 million, as the total fair value change for 2023 for MSRs, net of derivative activity, was a loss of $1.1 million. The year over year decline in capitalized servicing value for MSRs was $5.0 million. Overall gains on sale of mortgage loans declined by $4.6 million as a result of the decline in origination activity, continued margin compression, and a decline in the rate lock pipeline volume and valuation due to rising interest rates. Total loan originations for sale were $0.8 billion in 2023, a decline of $0.3 billion from $1.1 billion in 2022. The decline in gains from mortgage loan sales was partially offset by a $0.6 million increase in servicing fee income related to our mortgage servicing rights (“MSRs”), resulting from an increase of $0.2 billion in 2023 of the unpaid principal balance of loans serviced to $5.4 billion, from $5.2 billion in 2022. Critical Accounting Estimates In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Our accounting and reporting estimates are in accordance with generally accepted accounting principles, or “U.S. GAAP,” and conform to general practices within the banking industry. Estimates that are susceptible to significant changes include accounting for the allowance for credit losses and fair value measurements, both of which require significant judgments by management. Actual results could result in material changes to our consolidated financial condition or consolidated results of operations. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. We have identified the determination of the allowance for credit losses and fair value measurements to be the accounting areas that require the most subjective or complex judgments and, as such, could be most subject to revision as new or additional information becomes available or circumstances change, including overall changes in the economic climate and/or market interest rates. Therefore, we consider these policies to be critical accounting estimates and discuss them directly with the Audit Committee of our board of directors. During the year ended December 31, 2023, we adopted ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments which required a change to our estimate of the allowance for credit losses. These critical accounting estimates and their application are reviewed at least annually by our audit committee. The following is a description of our critical accounting estimates and an explanation of the methods and assumptions underlying their application. Allowance for Credit Losses - Management maintains an ACL for loans based upon management’s estimate of the lifetime expected credit losses in the loan portfolio, as of the balance sheet date, excluding loans held for sale. Additionally, management maintains an ACL for held-to-maturity or available-for-sale debt securities, and other off-balance sheet credit exposures (e.g., unfunded loan commitments). For loans and unfunded loan commitments, the estimate of lifetime credit losses includes the use of quantitative models that incorporate forward-looking macroeconomic scenarios that are applied over the contractual lives of the portfolios, adjusted, as appropriate, for prepayments and permitted extension options using historical experience. For purposes of the ACL for lending commitments, such allowance is determined using the same 65 Table of Contents methodology as the ACL for loans, while also taking into consideration the probability of drawdowns or funding, and whether such commitments are cancellable by us. The ACL for held-to-maturity and available-for-sale debt securities is measured using a risk-adjusted discounted cash flow approach that also considers relevant current and forward-looking economic variables and the ACL is limited to the difference between the fair value of the security and its amortized cost. Judgment is specifically applied in the determination of economic assumptions, length of the initial loss forecast period, the reversion of losses beyond the initial forecast period, usage of macroeconomic scenarios, probabilities of default, losses given default, amortization and prepayment rates, and qualitative factors, which may not be adequately captured in the loss model, as further discussed below. The macroeconomic scenarios utilized by management include variables that have historically been key drivers of increases and decreases in credit losses. These variables include, but are not limited to, unemployment rates, housing and commercial real estate prices, gross domestic product levels, corporate bond spreads and changes in equity market prices. Management derives the economic forecasts it uses in its ACL model from Moody’s Analytics. The latter has a large team of economics, database managers and operational engineers with a history of producing monthly economic forecasts for over 25 years. Management has currently set an initial forecast period (“reasonable and supportable period”) of four years and a reversion period of one year, utilizing a straight-line approach and reverting back to the historical macroeconomic mean. After the reversion period, a historical loss forecast period covering the remaining contractual life, adjusted for prepayments, is used based on changes in key historical economic variables during representative historical expansionary and recessionary periods. Changes in economic forecasts impact the probability of default (“PD”), loss-given default (“LGD”), and exposure at default (“EAD”) for each instrument, and therefore influence the amount of future cash flows for each instrument that management does not expect to collect. Further, management periodically considers the need for qualitative adjustments to the ACL. Qualitative adjustments may be related to and include, but not limited to, factors such as the following: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions; (ii) organization specific risks such as credit concentrations, collateral specific risks, nature, and size of the portfolio and external factors that may ultimately impact credit quality, and (iii) other limitations associated with factors such as changes in underwriting and loan resolution strategies, among others. The qualitative factors applied on January 1, 2023, and December 31, 2023, and the importance and levels of the qualitative factors applied, may change in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level of credit risk within the loan portfolio as a result of such changes, compared to the amount of ACL calculated by the model. The evaluation of qualitative factors is inherently imprecise and requires significant management judgement. The ACL can also be impacted by factors outside of management’s control, which include unanticipated changes in asset quality of the portfolio, such as deterioration in borrower delinquencies, or credit scores in our residential real estate and consumer portfolio. Further, the current fair value of collateral is utilized to assess the expected credit losses when a financial asset is considered to be collateral dependent. Our process for determining ACL is further discussed in “Note 1- Basis of Presentation, Description of Business and Summary of Significant Accounting Policies” included in Item 8 of this Form 10-K. Additionally, as an “emerging growth company” under Section 107 of the JOBS Act, we did not to adopt ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) (CECL) until January 1, 2023. As such, our allowance for credit losses for years prior to 2023 may not be comparable to other public financial institutions that adopted CECL in an earlier year. Fair Value Measurement of MSRs - Our residential mortgage servicing rights are measured at fair value on a recurring basis. We estimate the fair value of our MSRs using a process that utilizes a discounted cash flow model and analysis of current market data to arrive at the estimate. The cash flow assumptions used in the model are based on numerous factors, with the key assumptions being mortgage prepayment speeds, discount rates and cost to service that management believes are consistent with the assumptions that other similar market participants use in valuing MSRs. The change of any of these key assumptions due to market conditions or other factors could materially affect the fair value of our MSRs. We also utilize a third-party consulting firm to assist us with the valuation. Because of the nature of the valuation inputs, we classify the valuation of our MSRs as Level 3 in the fair value hierarchy. See Note 5 - Mortgage Servicing Rights included in our audited consolidated financial statements included elsewhere in this report for our assumptions used in valuing the MSRs. For information concerning the hypothetical sensitivity of the key assumptions under adverse changes on our MSRs, see 66 Table of Contents the table under “Noninterest Income” elsewhere in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. Results of Operations Comparison of fiscal years 2023 and 2022 The follow table sets forth our results of operations as of and for the year ended December 31,: ($ in thousands, except per share amounts) 2023 2022 2021 Net interest income $ 293,431 $ 241,632 $ 155,233 Provision for credit losses 18,247 18,050 3,000 Noninterest income 79,092 89,566 124,244 Noninterest expense 222,793 239,126 224,635 Income before income taxes 131,483 74,022 51,842 Provision for income taxes 27,950 14,840 8,678 Net income 103,533 59,182 43,164 Diluted earnings per share $ 4.08 $ 2.48 $ 2.30 Return on average total assets 1.38 % 0.88 % 0.79 % Return on average stockholders' equity 12.50 % 8.55 % 8.37 % Net interest margin 4.23 % 3.87 % 3.00 % Net interest margin (FTE basis) (1) 4.29 % 3.95 % 3.11 % Efficiency ratio 59.81 % 72.20 % 80.38 % Noninterest income to total revenue (2) 21.2 % 27.0 % 44.5 % (1) See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent. (2) Total revenue is presented net of interest expense. General Our results of operations depend significantly on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans and investment securities and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent on our generation of noninterest income, consisting primarily of income from mortgage banking services, service charges on deposit accounts, trust and investment advisory fees and credit and debit card fees. Other factors contributing to our results of operations include our provisions for credit losses, income taxes, and noninterest expenses, such as salaries and employee benefits, occupancy and equipment, amortization of intangible assets and other operating costs. Net Interest Income Net interest income, representing interest income less interest expense, is a significant contributor to our revenues and earnings. We generate interest income from interest and dividends on interest-earning assets, which are principally comprised of loans and investment securities. We incur interest expense from interest owed or paid on interest-bearing liabilities, including interest-bearing deposits, FHLB advances and other borrowings. Net interest income and margin are shaped by the characteristics of the underlying products, including volume, term and structure of each product. We measure and monitor yields on our loans and other interest-earning assets, the costs of our deposits and other funding sources, our net interest spread and our net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Interest earned on our loan portfolio is the largest component of our interest income. Our loan portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. Non-PCD loans acquired are initially recorded at fair value and the resulting discount or premium are recognized as an adjustment of the yield on the related loans. Our net interest income can be significantly influenced by a variety of factors, including overall loan demand, economic conditions, credit risk, the amount of non-earning assets including nonperforming loans and OREO, the amounts of and 67 Table of Contents rates at which assets and liabilities reprice, variances in prepayment of loans and securities, exercise of call options on borrowings or securities, a general rise or decline in interest rates, changes in the slope of the yield-curve, and balance sheet growth or contraction. Our net interest income was $293.4 million for the year ended December 31, 2023, an increase of $51.8 million, or 21.4%, from 2022. Interest income on loans increased by $137.6 million for the year ended December 31, 2023, from 2022. Interest income on investment securities increased by $3.8 million for the year ended December 31, 2023, from 2022. Interest expense from total interest-bearing liabilities increased by $95.1 million for the year ended December 31, 2023, from 2022. Total average loans, including loans held-for-sale grew to $6.2 billion at December 31, 2023, an increase of $1.0 billion, compared to December 31, 2022, primarily due to organic growth in our loan portfolios. Yield on loans held-for-investment increased 149 basis points for the year ended December 31, 2023, from 2022, primarily due to the rising interest rate environment and its impact on variable rate loans in the loan portfolio and higher yields on new originations. Average interest-bearing liabilities increased $0.7 billion, or 17.5%, for the year ended December 31, 2023, from 2022 primarily to support the growth in our loan portfolio. Average interest-bearing deposits increased $0.7 billion, or 18.5%, for the year ended December 31, 2023, from 2022, with organic growth as the primary driver. Total cost of deposits increased by 192 basis points to 2.27% in 2023 compared to 2022, primarily due to increased pricing on our deposit products as a result of the rising interest rate environment. Average FHLB borrowings increased $54.4 million in 2023, compared to 2022. The cost of FHLB borrowings increased by 216 basis points to 5.05% in 2023, compared to 2022, also due to the rising interest rate environment. Our net interest margin was 4.23% for the year ended December 31, 2023, compared to 3.87% for the same period in 2022, an increase of 36 basis points. We experienced a 169 basis point increase in yield from earning assets and our total cost of funds increased by 187 basis points for the year ended December 31, 2023, compared to the same period in 2022. While we have experienced a significant increase in our cost of funds in this rising interest rate environment, we do not expect our cost of funds to continue to rise in 2024 at the level of increase experienced in 2023. 68 Table of Contents The following tables set forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods presented. We derived these yields by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated. As of and for the year ended December 31,: 2023 2022 2021 (In thousands) Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Interest Earning Assets Loans (1) $ 6,178,414 $ 385,637 6.24 % $ 5,216,212 $ 247,988 4.75 % $ 3,906,458 $ 159,303 4.08 % Investment securities 554,433 17,032 3.07 % 605,119 13,185 2.18 % 531,803 7,979 1.50 % Interest-bearing cash and other assets 202,720 11,015 5.43 % 422,890 5,644 1.33 % 742,389 2,072 0.28 % Total earning assets 6,935,567 413,684 5.96 % 6,244,221 266,817 4.27 % 5,180,650 169,354 3.27 % Other assets 556,083 494,065 288,617 Total assets $ 7,491,650 $ 6,738,286 $ 5,469,267 Interest-bearing liabilities Demand and NOW deposits $ 385,424 $ 11,574 3.00 % $ 214,516 $ 1,775 0.83 % $ 254,679 $ 756 0.30 % Savings deposits 453,654 2,676 0.59 % 496,131 799 0.16 % 455,451 460 0.10 % Money market deposits 2,122,410 28,301 1.33 % 2,528,308 6,770 0.27 % 2,208,498 4,292 0.19 % Certificates of deposits 1,512,638 58,804 3.89 % 536,325 3,810 0.71 % 344,224 3,036 0.88 % Total deposits 4,474,126 101,355 2.27 % 3,775,280 13,154 0.35 % 3,262,852 8,544 0.26 % Repurchase agreements 28,316 225 0.80 % 54,335 119 0.22 % 125,867 59 0.05 % Total deposits and repurchase agreements 4,502,442 101,580 2.26 % 3,829,615 13,273 0.35 % 3,388,719 8,603 0.25 % FHLB borrowings 269,613 13,621 5.05 % 215,166 6,221 2.89 % 42,527 909 2.14 % Other long-term borrowings 78,654 5,052 6.42 % 82,111 5,691 6.93 % 68,918 4,609 6.69 % Total interest-bearing liabilities 4,850,709 120,253 2.48 % 4,126,892 25,185 0.61 % 3,500,164 14,121 0.40 % Noninterest-bearing deposits 1,678,240 1,835,578 1,376,968 Other liabilities 134,599 83,292 76,362 Stockholders’ equity 828,102 692,524 515,773 Total liabilities and stockholders’ equity $ 7,491,650 $ 6,738,286 $ 5,469,267 Net interest income $ 293,431 $ 241,632 $ 155,233 Net interest spread 3.48 % 3.66 % 2.87 % Net interest margin 4.23 % 3.87 % 3.00 % Net interest margin (on a FTE basis) (2) 4.29 % 3.95 % 3.11 % (1) Includes loans held-for-investment, including nonaccrual loans, and loans held-for-sale. (2) See section entitled “ Non-GAAP Financial Measures and Reconciliations ” for information regarding these non-GAAP financial measures and a reconciliation to the most comparable GAAP equivalent. 69 Table of Contents Rate-Volume Analysis The tables below present the effect of volume and rate changes on interest income and expense. Changes in volume are changes in the average balance multiplied by the previous period’s average rate. Changes in rate are changes in the average rate multiplied by the average balance from the current period. The net changes attributable to the combined impact of both rate and volume have been allocated proportionately to the changes due to volume and the changes due to rate. For the year ended December 31, For the year ended December 31, 2023 Versus 2022 Increase (Decrease) Due to: 2022 Versus 2021 Increase (Decrease) Due to: (In thousands) Rate Volume Total Rate Volume Total Interest Earning Assets Loans (1) $ 86,596 $ 51,053 $ 137,649 $ 34,316 $ 54,369 $ 88,685 Investment securities 4,835 (988) 3,847 4,106 1,100 5,206 Interest-bearing cash 6,788 (1,417) 5,371 4,464 (892) 3,572 Total earning assets 98,219 48,648 146,867 42,886 54,577 97,463 Interest-bearing liabilities Demand and NOW deposits 7,520 2,279 9,799 1,138 (119) 1,019 Savings deposits 1,939 (62) 1,877 298 41 339 Money market deposits 22,436 (905) 21,531 1,857 621 2,478 Certificates of deposits 39,086 15,908 54,994 (920) 1,694 774 Total deposits 70,981 17,220 88,201 2,373 2,237 4,610 Repurchase agreements 130 (24) 106 93 (33) 60 Total deposits and repurchase agreements 71,111 17,196 88,307 2,466 2,204 4,670 FHLB borrowings 5,528 1,872 7,400 1,621 3,691 5,312 Other long-term borrowings (406) (233) (639) 200 882 1,082 Total interest-bearing liabilities 76,233 18,835 95,068 4,287 6,777 11,064 Net interest income $ 21,986 $ 29,813 $ 51,799 $ 38,599 $ 47,800 $ 86,399 Provision for Credit Losses We established an allowance for credit losses through a provision for credit losses charged as an expense in our consolidated statements of income. The provision for credit losses is the amount of expense that, based on our judgment, is required to maintain the allowance for credit losses at an adequate level to absorb expected losses in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under GAAP. Our determination of the amount of the allowance for credit losses and corresponding provision for credit losses considers ongoing evaluations of the credit quality and level of credit risk inherent in our loan portfolio, levels of nonperforming loans and charge-offs, statistical trends and economic and other relevant factors. The allowance for credit losses is increased by the provision for credit losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs We had a provision for credit losses of $18.2 million for the year ended December 31, 2023, compared to a provision for credit losses of $18.1 million for 2022. During 2022, our provision for credit losses was negatively impacted by $2.9 million for certain non-impaired loans acquired in the Pioneer Merger at a premium valuation. Upon elimination of the $2.9 million merger related provision for 2022, the adjusted increase in the provision for credit losses is $3.1 million for 2023. This adjusted increase is primarily due to loan growth and the charge-offs of two specific customer relationships in our loan portfolio. For a further discussion of the allowance for credit losses, refer to the “Allowance for Credit Losses” section of this financial review. 70 Table of Contents Noninterest Income The following table presents noninterest income for the year ended December 31,: (In thousands) 2023 2022 2021 Service charges on deposit accounts $ 21,345 $ 18,211 $ 12,504 Credit and debit card fees 12,000 11,511 9,596 Trust and investment advisory fees 5,693 6,806 7,795 Income from mortgage banking services, net 31,384 46,285 86,410 Other 8,670 6,753 7,939 Total noninterest income $ 79,092 $ 89,566 $ 124,244 Our noninterest income decreased $10.5 million to $79.1 million for the year ended December 31, 2023 from $89.6 million in 2022, primarily due to a decrease in income from mortgage banking services, net. Service charges on deposit accounts includes overdraft and non-sufficient funds charges, treasury management services provided to our business customers, and other maintenance fees on deposit accounts. For the year ended December 31, 2023, service charges on deposit accounts increased $3.1 million, primarily due to growth in treasury management services provided to our business customers, as compared to 2022. Credit and debit card fees represent interchange income from credit and debit card activity and referral fees earned from processing fees on card transactions by our business customers. Credit and debit card fees increased $0.5 million for the year ended December 31, 2023 compared to 2022, primarily due to increased card transaction volumes. Trust and investment advisory fees represent fees we receive in connection with our investment advisory and custodial management services of investment accounts. Trust and investment advisory fees decreased $1.1 million for the year ended December 31, 2023 compared to 2022 primarily due to lower average assets under management. The components of income from mortgage banking services, net, were as follows for the year ended December 31,: (In thousands) 2023 2022 2021 Net sale gains and fees from mortgage loan originations, including loans held-for-sale changes in fair value and hedging $ 14,275 $ 18,924 $ 63,468 Mortgage servicing income 15,674 15,088 12,525 MSR capitalization and changes in fair value, net of derivative activity 1,435 12,273 10,417 Income from mortgage banking services, net $ 31,384 $ 46,285 $ 86,410 For the year ended December 31, 2023, income from mortgage banking services decreased $14.9 million, compared to 2022. We experienced a decline in revenue related to net sale gains and fees from mortgage loan originations, including fair value changes in the held-for-sale portfolio and hedging activity, which decreased $4.6 million for the year ended December 31, 2023, compared to 2022. Total loan originations for sale were $0.8 billion for the year ended December 31, 2023, a decline of $0.3 billion from $1.1 billion in 2022. We retain servicing rights on the majority of mortgage loans that we sell, which drove the increase in servicing income of $0.6 million to $15.7 million for the year ended December 31, 2023, from $15.1 million for 2022. MSR capitalization and changes in fair value, net of derivative activity, decreased $10.8 million for the year ended December 31, 2023, compared to 2022. The decrease in revenue related to our MSRs was primarily the result of market interest rate movement and the impact to fair values and overall origination activity, which led to a year over year decline in the net fair value for MSRs and the related derivative activity of $5.8 million, as the total fair value change for 2023 for MSRs, net of derivative activity, was a loss of $1.1 million. The year over year decline in capitalized servicing value for MSRs was $5.0 million. We recognize fair value adjustments to our MSR asset, which includes changes in assumptions to the valuation model and pay-offs and pay-downs of the MSR portfolio. See the impact of changes to our key MSR valuation assumptions in the table below. 71 Table of Contents The following table shows the hypothetical effect on the fair value of our MSRs when applying certain unfavorable variations of key assumptions to these assets as of December 31, 2023. (In thousands) 10% 20% Discount rate $ (3,451) $ (6,265) Total prepayment speeds (2,982) (5,394) Cost of servicing each loan (1,324) (2,193) These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. We also maintain a hedging strategy to manage a portion of the risk associated with changes in the fair value of our MSR portfolio. Changes in fair value of the derivative instruments used to economically hedge the MSRs are also included as a component of income from mortgage banking services. Due to a number of factors, including the overall elevated level of interest rates, low inventory in the housing market, lower refinance volumes and lower margin on loans sales, we expect revenue from mortgage banking activities to remain at a lesser level as compared to levels we experienced during the lower market rate environment experienced during 2021 and 2020. Other noninterest income increased $1.9 million for the year ended December 31, 2023 compared to 2022, primarily due to an increase in the fair value of investments related to our deferred compensation plan. Noninterest Expense The following table presents noninterest expense for the year ended December 31,: (In thousands) 2023 2022 2021 Salary and employee benefits $ 133,231 $ 134,359 $ 151,926 Occupancy and equipment 33,426 31,344 27,628 Amortization of intangible assets 4,822 4,215 1,417 Merger related expenses — 18,751 3,085 Other ( Note 18 - Other noninterest expenses ) 51,314 50,457 40,579 Total noninterest expenses $ 222,793 $ 239,126 $ 224,635 Our noninterest expenses decreased $16.3 million to $222.8 million for the year ended December 31, 2023, from $239.1 million for 2022. The decrease is primarily due to the decrease of $18.8 million in merger related expenses. We incurred no merger related expenses for the year ended December 31, 2023. Our merger with Pioneer was completed on April 1, 2022. The decrease of $1.1 million in our salary and employee benefits expense for the year ended December 31, 2023, compared to 2022, was driven by a decrease in commissions paid to our mortgage loan officers related to decreased mortgage origination activity during 2023, partially offset by annual compensation increases occurring in 2023. Occupancy and equipment increased $2.1 million for the year ended December 31, 2023, compared to 2022. This increase was primarily due to having a full year of expenses related to the facilities acquired in the Pioneer merger in 2023 compared to only nine months in 2022. Income Taxes We had income tax expense for the year ended December 31, 2023 of $28.0 million, compared to $14.8 million in 2022. The increase in income tax expense was primarily due to our increased income during 2023. Our effective tax rate was 21.3% for the year ended December 31, 2023, compared to 20.0% in 2022. For additional information on our income taxes, see Note 17 - Income Tax es included in our audited consolidated financial statements included elsewhere in this report. 72 Table of Contents Financial Condition Balance Sheet Our total assets were $7.9 billion at December 31, 2023, compared to $7.4 billion at December 31, 2022. Our total loans held-for-investment, net of deferred fees, costs, premiums and discounts were $6.3 billion at December 31, 2023, an increase of $0.4 billion from 2022, which was due to organic growth. Investment Securities Our securities portfolio is used to make various term investments, maintain a source of liquidity and serve as collateral for certain types of deposits and borrowings. We manage our investment portfolio according to written investment policies approved by our board of directors. Investment in our securities portfolio may change over time based on our funding needs and interest rate risk management objectives. Our liquidity levels take into account anticipated future cash flows and other available sources of funds, and are maintained at levels that we believe are appropriate to provide the necessary flexibility to meet our anticipated funding requirements. Our investment securities portfolio consists of securities classified as available-for-sale and held-to-maturity. There were no trading securities in our investment portfolio as of December 31, 2023 and 2022. All available-for sale securities are carried at fair value and may be used for liquidity purposes should management consider it to be in our best interest. Our securities available-for-sale decreased by $20.2 million to $516.8 million at December 31, 2023, compared to December 31, 2022. The decrease was primarily due to amortization of the portfolio and a decrease in fair value due to the rising interest rate environment. Securities held-to-maturity decreased $1.9 million to $37.0 million at December 31, 2023, compared to December 31, 2022, due to amortization of the portfolio. The following table is a summary of our investment portfolio as of December 31,: 2023 2022 (In thousands) Carrying Amount % of Portfolio Carrying Amount % of Portfolio Available-for-sale: U.S. treasury $ 54,234 10.5 % $ 56,649 10.5 % U.S. agency 1,839 0.4 % 2,834 0.5 % Obligations of states and political subdivisions 25,970 5.0 % 24,899 4.6 % Mortgage backed - residential 106,433 20.6 % 116,135 21.6 % Collateralized mortgage obligations 181,533 35.1 % 204,265 38.1 % Mortgage backed - commercial 131,192 25.4 % 117,336 21.9 % Other debt 15,556 3.0 % 14,855 2.8 % Total available-for-sale $ 516,757 100 % $ 536,973 100 % Held-to-maturity: Obligations of states and political subdivisions $ 25,542 69.1 % $ 25,378 65.2 % Mortgage backed - residential 7,548 20.4 % 8,705 22.4 % Collateralized mortgage obligations 3,893 10.5 % 4,818 12.4 % Total held-to-maturity $ 36,983 100 % $ 38,901 100 % 73 Table of Contents The following tables show the weighted average yield to average life of each category of investment securities as of December 31, 2023: (In thousands) One year or less One to five years Five to ten years After ten years Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield Carrying Amount Average Yield Available-for-sale: U.S. treasury $ 19,863 1.97 % $ 34,371 1.29 % $ — — % $ — — % U.S. agency — — % 1,016 7.00 % 823 6.00 % — — % Obligations of states and political subdivisions — — % — — % 11,281 3.00 % 14,689 3.00 % Mortgage backed - residential 730 2.00 % 27,973 3.00 % 36,127 2.00 % 41,603 3.00 % Collateralized mortgage obligations 2,633 3.00 % 31,433 3.00 % 133,539 4.00 % 13,928 2.00 % Mortgage backed - commercial 1,445 3.00 % 40,964 4.00 % 88,783 3.00 % — — % Other debt — — % — — % 12,674 3.00 % 2,882 4.00 % Total available-for-sale $ 24,671 2.15 % $ 135,757 2.97 % $ 283,227 3.17 % $ 73,102 2.53 % Held-to-maturity: Obligations of states and political subdivisions $ — — % $ 1,018 2.06 % $ — — % $ 24,524 3.52 % Mortgage backed - residential — — % 4,312 2.50 % 872 2.57 % 2,364 3.24 % Collateralized mortgage obligations — — % 1,941 2.67 % 1,952 3.13 % — — % Total held-to-maturity $ — — % $ 7,271 2.49 % $ 2,824 2.95 % $ 26,888 3.50 % We had no securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity. 74 Table of Contents Loans Our loan portfolio represents a broad range of borrowers primarily in our markets in Texas, Kansas, Colorado, New Mexico and Arizona, primarily comprised of commercial and industrial, commercial real estate, residential real estate, public finance and consumer financing loans. We have a diversified portfolio across a variety of industries, and the portfolio is generally centered in the states in which we have branch offices. Our lending focus continues to be on operating companies, including commercial and industrial loans and lines-of-credit, as well as owner occupied commercial real estate loans. Total loans, net of deferred origination fees, premiums and discounts, as of December 31, 2023 and 2022 were $6.3 billion and $5.9 billion, respectively. The following table sets forth the composition of our loan portfolio, as of December 31,: 2023 2022 (In thousands) Amount % of total loans Amount % of total loans Commercial and industrial $ 2,467,688 39.4 % $ 2,310,929 39.1 % Commercial real estate: Non-owner occupied 812,235 13.0 % 779,546 13.2 % Owner occupied 635,365 10.2 % 636,272 10.8 % Construction and land 345,430 5.5 % 327,817 5.5 % Multifamily 103,066 1.6 % 102,068 1.7 % Total commercial real estate 1,896,096 30.3 % 1,845,703 31.2 % Residential real estate 1,110,610 17.7 % 1,003,931 17.0 % Public finance 602,913 9.6 % 590,284 10.0 % Consumer 36,371 0.6 % 42,588 0.7 % Other 153,418 2.4 % 118,397 2.0 % Total loans $ 6,267,096 100.0 % $ 5,911,832 100.0 % Commercial and industrial loans include loans to commercial customers for use in normal business operations to finance working capital needs, equipment and inventory purchases, and other expansion projects. These loans are made primarily in our market areas and are underwritten on the basis of the borrower’s ability to service the debt from revenue, and are generally extended under our normal credit standards, controls and monitoring systems. Commercial real estate (“CRE”) loans include owner occupied and non-owner occupied commercial real estate mortgage loans to operating commercial and agricultural businesses, and include both loans for long-term financing of land and buildings and loans made for the initial development or construction of a commercial real estate project. Non-owner occupied CRE loans were 85.2% of the Company’s risk-based capital, or 13.0% of total loans as of December 31, 2023. Non-owner occupied CRE loans associated with office space were $109.3 million, or 1.7% of total loans as of December 31, 2023. Owner occupied CRE loans associated with office space were $149.4 million, or 2.4% of total loans as of December 31, 2023. Residential real estate loans represent loans to consumers collateralized by a mortgage on a residence and include purchase money, refinancing, secondary mortgages, and home equity loans and lines of credit. Public finance loans include loans to our charter school and municipal based customers. Consumer loans include direct consumer installment loans, credit card accounts, overdrafts and other revolving loans. Other loans consist of loans to nondepository financial institutions, lease financing receivables and loans for agricultural production. Maturities and Sensitivity of Loans to Changes in Interest Rates The information in the following tables is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because 75 Table of Contents borrowers have the right to prepay obligations with or without prepayment penalties. The following tables summarize the loan maturity distribution by type and related interest rate characteristics as of December 31, 2023: (In thousands) One year or less After one through five years After five through 15 years After 15 years Total Commercial and industrial $ 365,676 $ 1,758,252 $ 315,581 $ 28,179 $ 2,467,688 Commercial real estate 281,637 1,096,504 457,250 60,705 1,896,096 Residential real estate 130,501 36,257 73,939 869,913 1,110,610 Public finance 5,011 86,345 393,174 118,383 602,913 Consumer 7,973 8,962 19,223 213 36,371 Other 34,258 97,971 17,568 3,621 153,418 Total loans $ 825,056 $ 3,084,291 $ 1,276,735 $ 1,081,014 $ 6,267,096 (In thousands) One year or less After one through five years After five through 15 years After 15 years Total Total Loans Maturing After 1 Year Loans maturing with: Fixed interest rates Commercial and industrial $ 14,997 $ 301,557 $ 204,803 $ 550 $ 521,907 $ 506,910 Commercial real estate 141,231 675,340 96,524 2,665 915,760 774,529 Residential real estate 82,046 20,782 54,700 319,835 477,363 395,317 Public finance 5,011 83,294 389,521 118,383 596,209 591,198 Consumer 6,453 7,685 19,223 — 33,361 26,908 Other 8,992 23,390 17,560 3,621 53,563 44,571 Total fixed interest rate loans $ 258,730 $ 1,112,048 $ 782,331 $ 445,054 $ 2,598,163 $ 2,339,433 Floating or adjustable interest rates Commercial and industrial $ 350,679 $ 1,456,695 $ 110,778 $ 27,629 $ 1,945,781 $ 1,595,102 Commercial real estate 140,406 421,164 360,726 58,040 980,336 839,930 Residential real estate 48,455 15,475 19,239 550,078 633,247 584,792 Public finance — 3,051 3,653 — 6,704 6,704 Consumer 1,520 1,277 — 213 3,010 1,490 Other 25,266 74,581 8 — 99,855 74,589 Total floating or adjustable interest rate loans $ 566,326 $ 1,972,243 $ 494,404 $ 635,960 $ 3,668,933 $ 3,102,607 Total loans $ 825,056 $ 3,084,291 $ 1,276,735 $ 1,081,014 $ 6,267,096 $ 5,442,040 Allowance for Credit Losses We maintain the allowance for credit losses at a level we believe is sufficient to absorb expected losses in our loan portfolio given the conditions at the time and our estimates of future economic conditions. Events that are not within our control, such as changes in economic factors, could change subsequent to the reporting date and could cause increases or decreases to the allowance. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for credit losses charged to earnings, which increases the allowance. In determining the provision for credit losses, management monitors fluctuations in the allowance resulting from actual charge-offs and recoveries and reviews the size and composition of the loan portfolio in light of current and anticipated economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change. 76 Table of Contents The following table presents, by loan type, the changes in the allowance for credit losses for the years ended December 31,: (In thousands) 2023 2022 2021 Balance, beginning of period $ 65,917 $ 47,547 $ 47,766 Impact of adopting ASC 326 5,256 — — Adjusted beginning balance $ 71,173 $ 47,547 $ 47,766 Loan charge-offs: Commercial and industrial (9,242) (2,321) (4,296) Commercial real estate (83) — (375) Residential real estate (13) (122) (42) Public finance — — — Consumer (334) (144) (148) Other — — — Total loan charge-offs (9,672) (2,587) (4,861) Recoveries of loans previously charged-off: Commercial and industrial 1,118 2,236 1,547 Commercial real estate 12 388 28 Residential real estate 682 221 24 Public finance — — — Consumer 50 62 43 Other — — — Total loan recoveries 1,862 2,907 1,642 Net (charge-offs) recoveries (7,810) 320 (3,219) Provision for credit losses (1) 17,035 18,050 3,000 Balance, end of period $ 80,398 $ 65,917 $ 47,547 Allowance for credit losses to total loans 1.28 % 1.12 % 1.18 % Ratio of net charge-offs (recoveries) to average loans outstanding 0.13 % (0.01) % 0.09 % (1) For the years ended December 31, 2023, 2022 and 2021 we recorded a provision for credit losses on unfunded commitments of $1,212, $525 and $300, respectively. For further information, see Note 4 - Loans . The following table presents net charge-offs (recoveries) to average loans outstanding by loan category for the years ended December 31,: (In thousands) 2023 2022 2021 Commercial and industrial 0.30 % — % 0.19 % Commercial real estate — % (0.03) % 0.03 % Residential real estate (0.07) % (0.01) % — % Public finance — % — % — % Consumer 0.70 % 0.21 % 0.65 % Other — % — % — % 77 Table of Contents Allocation of Allowance for Credit Losses The following table presents the allocation of the allowance for credit losses by category and the percentage of the allocation of the allowance for credit losses by category to total loans listed as of December 31,: 2023 2022 (In thousands) Allowance Amount % of loans in each category to total loans Allowance Amount % of loans in each category to total loans Commercial and industrial $ 29,523 39.4 % $ 40,785 39.1 % Commercial real estate 27,546 30.3 % 19,754 31.2 % Residential real estate 16,345 17.7 % 2,963 17.0 % Public finance 5,337 9.6 % 1,664 10.0 % Consumer 717 0.6 % 352 0.7 % Other 930 2.4 % 399 2.0 % Total $ 80,398 100.0 % $ 65,917 100.0 % Nonperforming Assets We have established policies and procedures to guide us in originating, monitoring and maintaining the credit quality of our loan portfolio. These policies and procedures are expected to be followed by our bankers and underwriters and exceptions to these policies require elevated levels of approval and are reported to our board of directors. Nonperforming assets include all loans categorized as nonaccrual, accrual loans greater than 90 days past due, and other real estate owned and other repossessed assets. The accrual of interest on loans is discontinued, or the loan is placed on nonaccrual, when the full collection of principal and interest is in doubt. We do not generally accrue interest on loans that are 90 days or more past due. When a loan is placed on nonaccrual, previously accrued but unpaid interest is reversed and charged against interest income and future accruals of interest are discontinued. Payments by borrowers for loans on nonaccrual are applied to loan principal. Loans are returned to accrual status when, in our judgment, the borrower’s ability to satisfy principal and interest obligations under the loan agreement has improved sufficiently to reasonably assure recovery of principal and the borrower has demonstrated a sustained period of repayment performance. In general, we require a minimum of six consecutive months of timely payments in accordance with the contractual terms before returning a loan to accrual status. 78 Table of Contents The following table sets forth our nonperforming assets as of December 31,: (In thousands) 2023 2022 Nonaccrual loans: Commercial and industrial $ 8,004 $ 9,494 Commercial real estate 4,063 8,283 Residential real estate 22,413 10,628 Consumer 10 93 Other 2,837 471 Total nonaccrual loans 37,327 28,969 Accrual loans greater than 90 days past due (1) 25,816 98 Total nonperforming loans (2) 63,143 29,067 Other real estate owned and foreclosed assets, net 4,100 6,358 Total nonperforming assets $ 67,243 $ 35,425 Nonaccrual loans to total loans 0.60 % 0.49 % Nonperforming loans to total loans (3) 1.01 % 0.49 % Nonperforming assets to total assets (3) 0.85 % 0.48 % Allowance for credit losses to nonaccrual loans 215.39 % 227.54 % (1) Loans greater than 90 days past due, still accruing at December 31, 2023 relates primarily to one borrower relationship where interest was paid current in February 2024. Contractual principal payments related to this borrower relationship were deferred until March 15, 2024. (2) On January 1, 2023, we adopted ASU 2022-02, whereby we no longer recognize or account for TDRs. The loans previously classified as accrual TDRs are no longer considered nonperforming. We have adjusted prior periods to reflect this change in accounting. (3) Nonperforming loans include nonaccrual loans and accrual loans greater than 90 days past due. Deposits Deposits represent our primary source of funds. Total deposits increased by $0.6 billion to $6.4 billion at December 31, 2023, compared to December 31, 2022. We are focused on growing our core deposits through relationship-based banking with our business and consumer clients. The following table presents our deposits by customer type as of December 31,: ($ in thousands) December 31, 2023 December 31, 2022 Consumer Noninterest bearing deposit accounts $ 360,168 $ 416,709 Interest-bearing deposit accounts: Demand and NOW deposits 36,162 25,940 Savings deposits 343,291 418,101 Money market deposits 1,196,645 1,375,671 Certificates of deposits 1,437,537 662,831 Total interest-bearing deposit accounts 3,013,635 2,482,543 Total consumer deposits $ 3,373,803 $ 2,899,252 Business Noninterest bearing deposit accounts $ 1,170,338 $ 1,403,781 Interest-bearing deposit accounts: Demand and NOW deposits 555,197 236,641 Savings deposits 80,802 33,753 Money market deposits 825,811 907,379 Certificates of deposits 87,407 40,874 Total interest-bearing deposit accounts 1,549,217 1,218,647 Total business deposits $ 2,719,555 $ 2,622,428 Wholesale deposits (1) $ 280,745 $ 243,382 Total deposits $ 6,374,103 $ 5,765,062 (1) Wholesale deposits consist of brokered deposits included in our consolidated balance sheets within interest-bearing accounts and in Note 10 - Deposits within certificates of deposits and savings and money market accounts. 79 Table of Contents 2023 2022 (Dollars in thousands) Average Balance Average Rate Paid Average Balance Average Rate Paid Noninterest-bearing demand deposit accounts $ 1,678,240 — % $ 1,835,578 — % Interest-bearing deposit accounts: Interest-bearing demand accounts 344,242 3.26 % 171,009 0.96 % Savings accounts and money market accounts 2,576,064 1.20 % 3,024,439 0.25 % NOW accounts 41,182 0.82 % 43,507 0.32 % Certificate of deposit accounts 1,512,638 3.89 % 536,325 0.71 % Total interest-bearing deposit accounts 4,474,126 2.27 % 3,775,280 0.35 % Total deposits $ 6,152,366 1.65 % $ 5,610,858 0.23 % As of December 31, 2023 and December 31, 2022, approximately $2.0 billion or 31.2% and $2.4 billion or 41.6%, respectively, of our deposit portfolio was uninsured. As of December 31, 2023 and December 31, 2022, approximately $1.6 billion or 25.1% and $1.7 billion or 28.7%, respectively, of our deposit portfolio was uninsured and uncollateralized. The uninsured and uninsured and uncollateralized amounts are estimates based on the methodologies and assumptions used for the Bank's regulatory reporting requirements. We actively participate in the IntraFi Cash Service (“ICS”) / Certificate of Deposit Account Registry Service (“CDARS”) program which provides FDIC insurance coverage for clients that maintain larger deposit balances. Deposits in the ICS / CDARS program totaled $0.6 billion, or 9.2% of all deposits as of December 31, 2023, and $0.2 billion, or 4.1% of all deposits as of December 31, 2022. Maturities of certificates of deposit that are in excess of the FDIC insurance limit of $250,000, by remaining time to maturity are summarized as follows as of December 31,: (In thousands) 2023 2022 Three months or less $ 87,640 $ 22,451 Over three months through twelve months 396,834 310,694 Over twelve months through three years 36,673 75,804 Over three years 592 961 Total $ 521,739 $ 409,910 The following table sets forth the portion of the Bank's time deposits, by account, that are in excess of the FDIC insurance limit, by remaining time until maturity, as of December 31,: (In thousands) 2023 Three months or less $ 54,875 Over three months through six months 30,141 Over six through twelve months 173,642 Over twelve months through three years 20,957 Over three years 439 Total $ 280,054 Liquidity Liquidity refers to our ability to maintain cash flow that is adequate to fund operations, support asset growth, maintain reserve requirements and meet present and future obligations of deposit withdrawals, lending obligations and other contractual obligations. FirstSun (Parent Company) FirstSun has routine funding requirements consisting primarily of operating expenses, debt service, and funds used for acquisitions. FirstSun can obtain funding to meet its obligations from dividends collected from its subsidiaries, primarily the Bank, and through the issuance of varying forms of debt. At December 31, 2023, FirstSun had available cash and cash equivalents of $34.1 million and debt outstanding of $78.9 million. Management believes FirstSun has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term. 80 Table of Contents Federal banking laws regulate the amount of dividends that may be paid by banking subsidiaries without prior approval. The Bank may declare dividends without prior regulatory approval that do not exceed the total of retained net income for the current year combined with its retained net income for the preceding two years, subject to maintenance of minimum capital requirements. Prior regulatory approval to pay dividends was not required in 2022 or 2023 and is not currently required. At December 31, 2023, the Bank could pay dividends to FirstSun of approximately $199.0 million without prior regulatory approval. During the year ended December 31, 2023, the Bank paid dividends totaling $26.0 million to FirstSun. During the year ended December 31, 2023, Logia paid dividends totaling $0.6 million to FirstSun. Bank The Bank’s liquidity management policy and our asset and liability management policy, or ALM policy, provides the framework that we use to seek to maintain adequate liquidity and sources of available liquidity at levels that will enable us to meet all reasonably foreseeable short-term, long-term and strategic liquidity demands. Our Asset and Liability Management Committee, or ALCO, is responsible for oversight of our liquidity risk management activities in accordance with the provisions of our ALM Policy and applicable bank regulatory capital and liquidity laws and regulations. Our liquidity risk management process includes (i) ongoing analysis and monitoring of our funding requirements under various economic and interest rate scenarios, (ii) review and monitoring of lenders, depositors, brokers and other liability holders to ensure appropriate diversification of funding sources and (iii) liquidity contingency planning to address liquidity needs in the event of unforeseen market disruption, including appropriate allocation of funds to a liquid portfolio of marketable securities and investments. We continuously monitor our liquidity position in order for our assets and liabilities to be managed in a manner that we believe will meet our immediate and long-term funding requirements. We seek to manage our liquidity position to meet the daily cash flow needs of customers, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our stockholders. We also monitor our liquidity requirements in light of interest rate trends, changes in the economy, and the scheduled maturity and interest rate sensitivity of our securities and loan portfolios and deposits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control when we make investment decisions. Net deposit inflows and outflows, however, are far less predictable and are not subject to the same degree of certainty. Our liquidity position is supported by management of our liquid assets and liabilities and access to alternative sources of funds. Our short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers and capital expenditures. These liquidity requirements are met primarily through our deposits, FHLB advances and the principal and interest payments we receive on loans and investment securities. Cash, interest-bearing deposits in third-party banks, securities available for sale and maturing or prepaying balances in our investment and loan portfolios are our most liquid assets. Other sources of liquidity that are available to us include the sale of loans we hold for investment, the ability to acquire additional national market non-core deposits, borrowings through the Federal Reserve’s discount window and the issuance of debt or equity securities. At December 31, 2023, our liquid assets, which consist of cash and amounts due from banks and interest-bearing deposits in other financial institutions, amounted to $473.0 million, or 6.0% of total assets, compared to $307.9 million, or 4.1% of total assets, at December 31, 2022. The increase in our liquid assets was primarily due to an increase in cash held at the Federal Reserve. At December 31, 2023, approximately 85% of the investment securities portfolio was pledged as collateral to secure public deposits and repurchase agreements. Our unencumbered available-for-sale securities at December 31, 2023 were $81.5 million, or 1.0% of total assets, compared to $120.4 million, or 1.6% of total assets, at December 31, 2022. The liability portion of our balance sheet serves as a primary source of liquidity. We plan to meet our future cash needs primarily through the generation of deposits. Customer deposits have historically provided a sizeable source of relatively stable and low-cost funds. At December 31, 2023, loans as a percentage of customer deposits were 98.3%, compared with 102.5% at December 31, 2022. For additional information related to our deposits, see Deposits section above. We are also a member of the FHLB and FRB, from which we can borrow for leverage or liquidity purposes. The FHLB and FRB requires that securities and qualifying loans be pledged to secure any advances. Liquidity sources available to us for immediate funding at December 31, 2023, are as follows: FHLB borrowings available $ 706,367 Fed Funds lines 2,028,410 Unused lines with other financial institutions 309,917 Immediate funding availability $ 3,044,694 81 Table of Contents Management believes the Bank has the ability to generate and obtain adequate amounts of liquidity to meet its requirements in the short-term and the long-term. Capital Stockholders’ equity at December 31, 2023 was $877.2 million, compared to $774.5 million at 2022, an increase of $102.7 million, or 13.3%. The increase in stockholders’ equity relates primarily to net income for the year ended December 31, 2023. We did not pay a dividend to our common shareholders during the years ended December 31, 2023 or 2022. Capital Adequacy We are subject to various regulatory capital requirements administered by the federal banking agencies. Management routinely analyzes our capital to seek to ensure an optimized capital structure. For further information on capital adequacy see Note 19 - Regulatory Capital Matters to the consolidated financial statements. Material Contractual Obligations, Commitments, and Contingent Liabilities We have entered into contractual obligations in the normal course of business that involve elements of credit risk, interest rate risk and liquidity risk. The following table summarizes our material contractual obligations as of December 31, 2023. Further discussion of each obligation or commitment is included in the referenced note to the consolidated financial statements. (In thousands) Note Reference Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Deposits: Deposits without a stated maturity 10 $ 4,597,534 $ 4,597,534 $ — $ — $ — Certificates of deposit 10 1,776,569 1,347,310 418,262 8,038 2,959 Securities sold under agreements to repurchase 11 24,693 24,693 — — — Short-term debt: FHLB LOC 12 389,468 389,468 — — — Long-term debt: Subordinated debt 12 78,919 — — — 78,919 Operating leases 25 28,122 7,146 10,531 5,158 5,287 We are party to various derivative contracts as a means to manage the balance sheet and our related exposure to changes in interest rates, to manage our residential real estate loan origination and sale activity, and to provide derivative contracts to our clients. Since the derivative liabilities recorded on the balance sheet change frequently and do not represent the amounts that may ultimately be paid under these contracts, these liabilities are not included in the table of contractual obligations presented above. Further discussion of derivative instruments is included in Note 8 - Derivative Financial Instruments to the consolidated financial statements. In the normal course of business, various legal actions and proceedings are pending against us and our affiliates which are incidental to the business in which they are engaged. Further discussion of contingent liabilities is included in Note 24 - Commitments and Contingencies to the consolidated financial statements. We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial letters of credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual or notional amounts of those instruments reflect the extent of involvement we have in particular classes of financial instruments. Further discussion of contingent liabilities is included in Note 24 - Commitments and Contingencies to the consolidated financial statements. 82 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk is the risk of reduced earnings and/or declines in the net market value of the balance sheet due to changes in market rates. Our primary market risk is interest rate risk which impacts our net interest income, fee income related to interest sensitive activities such as mortgage origination and servicing income and loan and deposit demand. We are subject to interest rate risk due to: • the maturity or repricing of assets and liabilities at different times or for different amounts; • differences in short-term and long-term market interest rate changes; and • the remaining maturity of various assets or liabilities may shorten or lengthen as interest rates change. Our Asset Liability Committee, or ALCO, which is composed of our executive officers and certain other members of management, monitors interest rate risk on an ongoing basis in accordance with policies approved by our board of directors. The ALCO reviews interest rate positions and considers the impact projected interest rate scenarios have on earnings, liquidity, business strategies and other factors. However, management has the latitude to change interest rate positions within certain limits if, in management’s judgment, the change will enhance profitability or minimize risk. To assess and manage interest rate risk, sensitivity analysis is used to determine the impact on earnings and the net market value of the balance sheet across various interest rate scenarios, balance sheet trends, and strategies. Management uses a simulation model to analyze the sensitivity of net interest income to changes in interest rates across various interest rate scenarios, which seeks to demonstrate the level of interest rate risk inherent in the existing balance sheet. The analysis holds the current balance sheet values constant and does not take into account management intervention. Additionally our simulation model incorporates various key assumptions, which we believe are reasonable, but may have an impact on the results such as: (1) we assume certain correlation rates, often referred to as “deposit beta,” for interest-bearing deposits, wherein the rates paid to customers change relative to changes in benchmark interest rates, (2) cash flows and maturities of interest sensitive assets and liabilities, (3) re-pricing characteristics for market rate sensitive instruments, (4) prepayment rates and product mix of assets and liabilities, and (5) simulations do not contemplate any actions management may undertake in response to changes in interest rates. Because of limitations in any approach used to measure interest rate risk, simulation results are not intended to forecast actual results driven by the effect of a change in market rates but to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk. The primary impact of inflation on operations is reflected in increasing operating costs and non-interest expense. Our interest-bearing assets and liabilities are monetary in nature and changes in interest rates will impact our performance on net interest margin more than changes in the general rate of inflation. The effect on net interest income over a 12-month time horizon due to hypothetical changes in market interest rates is presented in the table below. In this interest rate shock simulation, as of the periods presented, interest rates have been adjusted by instantaneous parallel changes rather than in a ramp simulation, which applies interest rate changes over time. All rates, short-term and long-term, are changed by the same amount (e.g., plus or minus 100 basis points) resulting in the shape of the yield curve remaining unchanged. % Change in Net Interest Income As of December 31, % Change in Economic Value of Equity As of December 31, Changes in Interest Rate (Basis Points) 2023 2022 2023 2022 +300 4.3 % 6.8 % (13.2) % (10.3) % +200 2.9 % 4.6 % (8.9) % (6.8) % +100 1.3 % 2.2 % (4.7) % (3.5) % Base — % — % — % — % -100 0.3 % (0.3) % 3.5 % 2.8 % -200 0.7 % (4.9) % 6.4 % 3.4 % -300 (0.9) % (10.5) % 8.0 % 3.6 % 83 Table of Contents Item 8. Financial Statements Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 173 ) 85 Consolidated Balance Sheets 86 Consolidated Statements of Income and Comprehensive Income 87 Consolidated Statements of Stockholders' Equity 88 Consolidated Statements of Cash Flows 89 Notes to Consolidated Financial Statements 91 Note 1 - Basis of Presentation, Description of Business and Summary of Significant Accounting Policies 91 Note 2 - Merger with Pioneer Bancshares, Inc. 103 Note 3 - Securities 105 Note 4 - Loans 108 Note 5 - Mortgage Servicing Rights 117 Note 6 - Premises and Equipment 118 Note 7 - Core Deposits and Other Intangible Assets 118 Note 8 - Derivative Financial Instruments 119 Note 9 - Prepaid Expenses and Other Assets 121 Note 10 - Deposits 122 Note 11 - Securities Sold Under Agreements to Repurchase 123 Note 12 - Debt 123 Note 13 - Accrued Expenses and Other Liabilities 125 Note 14 - Earnings Per Share 126 Note 15 - Accumulated Other Comprehensive Income 126 Note 16 - Stockholders' Equity 127 Note 17 - Income Taxes 130 Note 18 - Other Noninterest Expenses 132 Note 19 - Regulatory Capital Matters 132 Note 20 - Transactions with Related Parties 134 Note 21 - Fair Value Measurements 134 Note 22 - Parent Company Only Condensed Financial Information 138 Note 23 - Segment Information 140 Note 24 - Commitments and Contingencies 144 Note 25 - Leases 146 Note 26 - Revenue from Contracts with Customers 147 Note 27 - Subsequent Events 148 84 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and the Board of Directors of FirstSun Capital Bancorp and Subsidiaries Denver, Colorado Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FirstSun Capital Bancorp and Subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Explanatory Paragraph - Change in Accounting Principle As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2023 due to the adoption of ASU 2016-13 Financial Instruments – Credit Losses (ASC Topic 326). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Crowe LLP Crowe LLP We have served as the Company's auditor since 2014. Dallas, Texas March 7, 2024 85 Table of Contents FIRSTSUN CAPITAL BANCORP and Subsidiaries Consolidated Balance Sheets As of December 31, (In thousands, except par and share amounts) 2023 2022 Assets Cash and cash equivalents $ 479,362 $ 343,526 Securities available-for-sale, at fair value 516,757 536,973 Securities held-to-maturity, fair value of $ 32,181 and $ 33,218 , respectively 36,983 38,901 Loans held-for-sale, at fair value 54,212 57,323 Loans, net of allowance for credit losses of $ 80,398 and $ 65,917 , respectively 6,186,698 5,845,915 Mortgage servicing rights, at fair value 76,701 74,097 Premises and equipment, net 84,842 88,114 Other real estate owned and foreclosed assets, net 4,100 6,358 Bank-owned life insurance 79,851 77,923 Restricted equity securities 38,072 50,215 Goodwill 93,483 93,483 Core deposits and other intangible assets, net 10,984 15,806 Accrued interest receivable 37,099 28,543 Deferred tax assets, net 46,259 48,355 Prepaid expenses and other assets 134,321 124,790 Total assets $ 7,879,724 $ 7,430,322 Liabilities and Stockholders’ Equity Liabilities: Deposits: Noninterest-bearing accounts $ 1,530,506 $ 1,820,490 Interest-bearing accounts 4,843,597 3,944,572 Total deposits 6,374,103 5,765,062 Securities sold under agreements to repurchase 24,693 36,721 Federal Home Loan Bank advances 389,468 643,885 Convertible notes payable, net — 5,355 Subordinated debt, net 75,313 74,880 Accrued interest payable 13,580 5,798 Accrued expenses and other liabilities 125,370 124,085 Total liabilities 7,002,527 6,655,786 Commitments and contingencies ( Note 24 ) Stockholders’ equity: Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized, none issued or outstanding, respectively — — Common stock, $ 0.0001 par value; 50,000,000 shares authorized; 24,960,639 and 24,920,984 shares issued; 24,960,639 and 24,920,984 shares outstanding, respectively 2 2 Additional paid-in capital 462,680 460,720 Retained earnings 457,522 357,797 Accumulated other comprehensive loss, net ( 43,007 ) ( 43,983 ) Total stockholders’ equity 877,197 774,536 Total liabilities and stockholders’ equity $ 7,879,724 $ 7,430,322 The accompanying notes are an integral part of these consolidated financial statements. 86 Table of Contents FIRSTSUN CAPITAL BANCORP and Subsidiaries Consolidated Statements of Income and Comprehensive Income For the years ended December 31, (In thousands, except per share amounts) 2023 2022 2021 Interest income: Interest and fee income on loans: Taxable $ 366,523 $ 228,967 $ 137,669 Tax exempt 19,114 19,021 21,634 Interest and dividend income on securities: Taxable 17,014 13,176 7,964 Tax exempt 18 9 15 Other interest income 11,015 5,644 2,072 Total interest income 413,684 266,817 169,354 Interest expense: Interest expense on deposits 101,355 13,154 8,544 Interest expense on securities sold under agreements to repurchase 225 119 59 Interest expense on other borrowed funds 18,673 11,912 5,518 Total interest expense 120,253 25,185 14,121 Net interest income 293,431 241,632 155,233 Provision for credit losses 18,247 18,050 3,000 Net interest income after credit loss expense 275,184 223,582 152,233 Noninterest income: Service charges on deposit accounts 21,345 18,211 12,504 Credit and debit card fees 12,000 11,511 9,596 Trust and investment advisory fees 5,693 6,806 7,795 Income from mortgage banking services, net 31,384 46,285 86,410 (Loss) gain on other real estate owned and foreclosed assets activity, net ( 106 ) 164 766 Other noninterest income 8,776 6,589 7,173 Total noninterest income 79,092 89,566 124,244 Noninterest expense: Salary and employee benefits 133,231 134,359 151,926 Occupancy and equipment 33,426 31,344 27,628 Amortization of intangible assets 4,822 4,215 1,417 Merger related expenses — 18,751 3,085 Other noninterest expenses 51,314 50,457 40,579 Total noninterest expense 222,793 239,126 224,635 Income before income taxes 131,483 74,022 51,842 Provision for income taxes 27,950 14,840 8,678 Net income $ 103,533 $ 59,182 $ 43,164 Other comprehensive income, net of tax: Gain (loss) on securities available-for-sale 758 ( 47,821 ) ( 7,455 ) Gain on fair value hedges of securities available-for-sale 218 2,174 — Other comprehensive income (loss), net of tax 976 ( 45,647 ) ( 7,455 ) Comprehensive income $ 104,509 $ 13,535 $ 35,709 Earnings per share: Net income available to common stockholders $ 103,533 $ 59,182 $ 43,164 Basic $ 4.15 $ 2.55 $ 2.36 Diluted $ 4.08 $ 2.48 $ 2.30 The accompanying notes are an integral part of these consolidated financial statements. 87 Table of Contents FIRSTSUN CAPITAL BANCORP and Subsidiaries Consolidated Statements of Stockholders’ Equity For the years ended December 31, (in thousands, except share amounts) Issued shares of common stock Common stock Additional paid-in capital Treasury stock Retained earnings Accumulated other comprehensive income (loss) Total stockholders’ equity Balance as of January 1, 2021 19,878,713 $ 2 $ 259,363 $ ( 38,148 ) $ 255,451 $ 9,119 $ 485,787 Issuance of common stock on restricted stock grants 24,629 — 812 — — — 812 Share-based compensation, net of forfeitures — — 1,730 — — — 1,730 Net income — — — — 43,164 — 43,164 Other comprehensive income — — — — — ( 7,455 ) ( 7,455 ) Balance as of December 31, 2021 19,903,342 $ 2 $ 261,905 $ ( 38,148 ) $ 298,615 $ 1,664 $ 524,038 Merger with Pioneer Bancshares, Inc. (Issuance of treasury stock ( 1,557,054 shares) 4,910,412 — 197,946 38,148 — — 236,094 Issuance of common stock on restricted stock grants 11,344 — 270 — — — 270 Stock option exercises 95,886 — ( 579 ) — — — ( 579 ) Share-based compensation, net of forfeitures — — 1,178 — — — 1,178 Net income — — — — 59,182 — 59,182 Other comprehensive loss — — — — — ( 45,647 ) ( 45,647 ) Balance as of December 31, 2022 24,920,984 $ 2 $ 460,720 $ — $ 357,797 $ ( 43,983 ) $ 774,536 Cumulative effect of accounting change — — — — ( 3,808 ) — ( 3,808 ) Adjusted beginning balance 24,920,984 2 460,720 — 353,989 ( 43,983 ) 770,728 Issuance of common stock on restricted stock grants 15,007 — 371 — — — 371 Stock option exercises 24,648 — ( 167 ) — — — ( 167 ) Share-based compensation, net of forfeitures — — 1,756 — — — 1,756 Net income — — — — 103,533 — 103,533 Other comprehensive income — — — — — 976 976 Balance as of December 31, 2023 24,960,639 $ 2 $ 462,680 $ — $ 457,522 $ ( 43,007 ) $ 877,197 The accompanying notes are an integral part of these consolidated financial statements. 88 Table of Contents FIRSTSUN CAPITAL BANCORP and Subsidiaries Consolidated Statements of Cash Flows For the year ended December 31, (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income $ 103,533 $ 59,182 $ 43,164 Adjustments to reconcile income to net cash provided by operating activities: Provision for credit losses 18,247 18,050 3,000 Depreciation and amortization on premises and equipment 7,420 7,953 7,181 Deferred tax expense 3,012 9,203 3,145 Amortization of net premium on securities 1,004 2,076 3,399 Accretion of net discount on acquired loans ( 3,204 ) ( 1,308 ) ( 1,142 ) Net change in deferred loan origination fees and costs ( 1,178 ) 1,182